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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2007
Commission file number: 1-5794
Masco Corporation
(Exact name of Registrant as Specified in Charter)
 	 	 	
Delaware	 	38-1794485	
 	 	 	
(State or Other	 	(IRS Employer	
Jurisdiction	 	Identification No.)	
of Incorporation)	 	 	
 	 	 	
21001 Van Born Road, Taylor, Michigan	 	48180	
 	 	 	
(Address of Principal Executive Offices)	 	(Zip Code)	
(313) 274-7400
(Registrant’s telephone number, including area code)
     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
þ Yes       o No
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated þ       Accelerated o       Non-accelerated o
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes       þ No
     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 	 	 	
Class	 	Shares Outstanding at May 1, 2007	
 	 	 	
Common stock, par value $1.00 per share	 	377,700,000	

   

 

MASCO CORPORATION
INDEX
 	 	 	 	 	
 	 	Page No.	
PART I. FINANCIAL INFORMATION	 	 	 	 	
Item 1. Financial Statements:	 	 	 	 	
Condensed Consolidated Balance Sheets — March 31, 2007 and December 31, 2006	 	 	1	 	
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2007 and 2006	 	 	2	 	
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006	 	 	3	 	
Notes to Condensed Consolidated Financial Statements	 	 	4-13	 	
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	 	14-19	 	
Item 4. Controls and Procedures	 	 	20	 	
 	 	 	 	 	
PART II. OTHER INFORMATION	 	 	21-22	 	
Item 1. Legal Proceedings	 	 	 	 	
Item 1A. Risk Factors	 	 	 	 	
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	 	 	 	 	
Item 6. Exhibits	 	 	 	 	
Signature	 	 	 	 	
  Floating Rate Notes due 2010	
  5.85% Notes due 2017	
  Computation of Ratio of Earnings to Combined Fixed Charges & Preferred Stock Dividends	
  Section 302 Certification of Chief Executive Officer	
  Section 302 Certification of Chief Financial Officer	
  Section 906 Certification of Chief Executive Officer & Chief Financial Officer	

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MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, 2007 and December 31, 2006
(In Millions, Except Share Data)
 	 	 	 	 	 	 	 	 	
 	 	March 31,	 	 	December 31,	 	
 	 	2007	 	 	2006	 	
ASSETS	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	
Cash and cash investments	 	$	1,165	 	 	$	1,958	 	
Receivables	 	 	1,779	 	 	 	1,613	 	
Prepaid expenses and other	 	 	313	 	 	 	281	 	
Inventories:	 	 	 	 	 	 	 	 	
Finished goods	 	 	660	 	 	 	610	 	
Raw material	 	 	460	 	 	 	480	 	
Work in process	 	 	159	 	 	 	173	 	
 	 	 	 	 	 	 	
 	 	 	1,279	 	 	 	1,263	 	
 	 	 	 	 	 	 	
Total current assets	 	 	4,536	 	 	 	5,115	 	
 	 	 	 	 	 	 	 	 	
Property and equipment, net	 	 	2,351	 	 	 	2,363	 	
Goodwill	 	 	3,965	 	 	 	3,957	 	
Other intangible assets, net	 	 	304	 	 	 	306	 	
Other assets	 	 	529	 	 	 	584	 	
 	 	 	 	 	 	 	
Total assets	 	$	11,685	 	 	$	12,325	 	

LIABILITIES	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
Notes payable	 	$	323	 	 	$	1,446	 	
Accounts payable	 	 	890	 	 	 	815	 	
Accrued liabilities	 	 	1,126	 	 	 	1,128	 	
 	 	 	 	 	 	 	
Total current liabilities	 	 	2,339	 	 	 	3,389	 	
 	 	 	 	 	 	 	 	 	
Long-term debt	 	 	4,044	 	 	 	3,533	 	
Deferred income taxes and other	 	 	1,041	 	 	 	932	 	
 	 	 	 	 	 	 	
Total liabilities	 	 	7,424	 	 	 	7,854	 	

Commitments and contingencies	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
SHAREHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	
Common shares, par value $1 per share	 	 	 	 	 	 	 	 	
Authorized shares: 1,400,000,000; issued and outstanding: 2007 – 375,840,000; 2006 – 383,890,000	 	 	376	 	 	 	384	 	
Retained earnings	 	 	3,364	 	 	 	3,575	 	
Accumulated other comprehensive income	 	 	521	 	 	 	512	 	
 	 	 	 	 	 	 	
Total shareholders’ equity	 	 	4,261	 	 	 	4,471	 	
 	 	 	 	 	 	 	
Total liabilities and shareholders’ equity	 	$	11,685	 	 	$	12,325	 	
 	 	 	 	 	 	 	
See notes to condensed consolidated financial statements.
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MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Three Months Ended March 31, 2007 and 2006
(In Millions, Except Per Common Share Data)
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	 	
 	 	2007	 	 	2006	 	
Net sales	 	$	2,881	 	 	$	3,167	 	
Cost of sales	 	 	2,125	 	 	 	2,293	 	

Gross profit	 	 	756	 	 	 	874	 	
 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	499	 	 	 	519	 	

Operating profit	 	 	257	 	 	 	355	 	

Other income (expense), net:	 	 	 	 	 	 	 	 	
Interest expense	 	 	(63	)	 	 	(64	)	
Other, net	 	 	42	 	 	 	34	 	
 	 	 	 	 	 	 	
 	 	 	(21	)	 	 	(30	)	
 	 	 	 	 	 	 	
Income from continuing operations before income taxes, minority interest and cumulative effect of accounting change, net	 	 	236	 	 	 	325	 	
Income taxes	 	 	85	 	 	 	112	 	
 	 	 	 	 	 	 	
Income from continuing operations before minority interest and cumulative effect of accounting change, net	 	 	151	 	 	 	213	 	
Minority interest	 	 	9	 	 	 	6	 	
 	 	 	 	 	 	 	
Income from continuing operations before cumulative effect of accounting change, net	 	 	142	 	 	 	207	 	
 	 	 	 	 	 	 	 	 	
Income from discontinued operations, net	 	 	1	 	 	 	—	 	
Cumulative effect of accounting change, net	 	 	—	 	 	 	(3	)	

Net income	 	$	143	 	 	$	204	 	

Earnings per common share:	 	 	 	 	 	 	 	 	
Basic:	 	 	 	 	 	 	 	 	
Income from continuing operations before cumulative effect of accounting change, net	 	$	.37	 	 	$	.51	 	
Income from discontinued operations, net	 	 	—	 	 	 	—	 	
Cumulative effect of accounting change, net	 	 	—	 	 	 	(.01	)	
 	 	 	 	 	 	 	
Net income	 	$	.37	 	 	$	.50	 	

Diluted:	 	 	 	 	 	 	 	 	
Income from continuing operations before cumulative effect of accounting change, net	 	$	.37	 	 	$	.50	 	
Income from discontinued operations, net	 	 	—	 	 	 	—	 	
Cumulative effect of accounting change, net	 	 	—	 	 	 	(.01	)	
 	 	 	 	 	 	 	
Net income	 	$	.37	 	 	$	.50	 	

Cash dividends per common share:	 	 	 	 	 	 	 	 	
Declared	 	$	.23	 	 	$	.22	 	
 	 	 	 	 	 	 	
Paid	 	$	.22	 	 	$	.20	 	
 	 	 	 	 	 	 	
See notes to condensed consolidated financial statements.
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MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Three Months Ended March 31, 2007 and 2006
(In Millions)
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	
 	 	March 31,	 	
 	 	2007	 	 	2006	 	
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:	 	 	 	 	 	 	 	 	
Cash provided by operations	 	$	202	 	 	$	314	 	
(Increase) in receivables	 	 	(177	)	 	 	(256	)	
(Increase) in inventories	 	 	(19	)	 	 	(125	)	
Increase in accounts payable and accrued liabilities, net	 	 	82	 	 	 	98	 	

Net cash from operating activities	 	 	88	 	 	 	31	 	

CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:	 	 	 	 	 	 	 	 	
Increase in debt	 	 	1	 	 	 	39	 	
Payment of debt	 	 	(10	)	 	 	(12	)	
Retirement of notes	 	 	(1,125	)	 	 	(827	)	
Issuance of notes, net of issuance costs	 	 	596	 	 	 	—	 	
Purchase of Company common stock	 	 	(274	)	 	 	(324	)	
Issuance of Company common stock	 	 	12	 	 	 	7	 	
Cash dividends paid	 	 	(87	)	 	 	(84	)	

Net cash (for) financing activities	 	 	(887	)	 	 	(1,201	)	

CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	
Capital expenditures	 	 	(55	)	 	 	(110	)	
Purchases of marketable securities	 	 	—	 	 	 	(79	)	
Purchases of other financial investments, net	 	 	—	 	 	 	(1	)	
Proceeds from disposition of:	 	 	 	 	 	 	 	 	
Marketable securities	 	 	31	 	 	 	90	 	
Other financial investments, net	 	 	17	 	 	 	—	 	
Property and equipment	 	 	9	 	 	 	(1	)	
Acquisition of businesses, net of cash acquired	 	 	(3	)	 	 	—	 	
Other, net	 	 	5	 	 	 	(12	)	

Net cash from (for) investing activities	 	 	4	 	 	 	(113	)	

Effect of exchange rate changes on cash and cash investments	 	 	2	 	 	 	1	 	

CASH AND CASH INVESTMENTS:	 	 	 	 	 	 	 	 	
Decrease for the period	 	 	(793	)	 	 	(1,282	)	
At January 1	 	 	1,958	 	 	 	1,964	 	

At March 31	 	$	1,165	 	 	$	682	 	
 	 	 	 	 	 	 	
See notes to condensed consolidated financial statements.
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A.	 	In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to present fairly its financial position as at March 31, 2007 and the results of operations and changes in cash flows for the three months ended March 31, 2007 and 2006. The condensed consolidated balance sheet at December 31, 2006 was derived from audited financial statements.	
 		
 	 	Certain prior-year amounts have been reclassified to conform to the 2007 presentation in the condensed consolidated financial statements. The results of operations related to 2006 discontinued operations have been separately stated in the accompanying condensed consolidated statement of income for the three months ended March 31, 2006. In the Company’s condensed consolidated statement of cash flows for the three months ended March 31, 2006, cash flows of discontinued operations are not separately classified.	
 		
 	 	Recently Issued Accounting Pronouncements. In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of SFAS No. 115,” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The adoption of SFAS No. 159 is effective January 1, 2008. The Company is currently evaluating the impact that the provisions of SFAS No. 159 will have on its consolidated financial statements.	
 		
B.	 	The Company’s 2005 Long Term Stock Incentive Plan (the “2005 Plan”) replaced the 1991 Long Term Stock Incentive Plan (the “1991 Plan”) in May 2005 and provides for the issuance of stock-based incentives in various forms. At March 31, 2007, outstanding stock-based incentives were in the form of restricted long-term stock awards, stock options, phantom stock awards and stock appreciation rights. Additionally, the Company’s 1997 Non-Employee Directors Stock Plan (the “1997 Plan”) provides for the payment of part of the compensation to non-employee Directors in Company common stock. Pre-tax compensation expense (income) and the related income tax benefit, related to these stock-based incentives, were as follows, in millions:	
 	 	 	 	 	 	 	 	 	
 	 	Three months ended	 	
 	 	March 31,	 	
 	 	2007	 	 	2006	 	
Restricted long-term stock awards	 	$	16	 	 	$	18	 	
Stock options	 	 	9	 	 	 	9	 	
Phantom stock awards and stock appreciation rights	 	 	(5	)	 	 	2	 	

Total	 	$	20	 	 	$	29	 	

Income tax benefit	 	$	7	 	 	$	11	 	
 	 	 	 	 	 	 	
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note B – concluded:
Restricted Long-Term Stock Awards
Long-term stock awards are granted to key employees and non-employee Directors of the Company and do not cause net share dilution inasmuch as the Company continues the practice of repurchasing and retiring an equal number of shares on the open market.
The Company’s long-term stock award activity was as follows, shares in millions:
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	
 	 	March 31,	
 	 	2007	 	2006	
Unvested stock award shares at January 1	 	 	9	 	 	 	9	 	
Weighted average grant date fair value	 	$	27	 	 	$	25	 	
 	 	 	 	 	 	 	 	 	
Stock award shares granted	 	 	1	 	 	 	1	 	
Weighted average grant date fair value	 	$	33	 	 	$	30	 	
 	 	 	 	 	 	 	 	 	
Stock award shares vested	 	 	(1	)	 	 	(1	)	
Weighted average grant date fair value	 	$	26	 	 	$	24	 	
 	 	 	 	 	 	 	 	 	
Stock award shares forfeited	 	 	—	 	 	 	—	 	
Weighted average grant date fair value	 	$	28	 	 	$	25	 	
 	 	 	 	 	 	 	 	 	
Unvested stock award shares at March 31	 	 	9	 	 	 	9	 	
Weighted average grant date fair value	 	$	27	 	 	$	26	 	
At March 31, 2007, there was $200 million of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of seven years.
The total market value (at the vesting date) of stock award shares which vested during the three months ended March 31, 2007 was $32 million.
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

C.	 	The changes in the carrying amount of goodwill for the three months ended March 31, 2007, by segment, were as follows, in millions:	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	At	 	 	 	 	 	 	 	 	 	 	At	 	
 	 	Dec. 31, 2006	 	 	Additions (A)	 	 	Other(B)	 	 	Mar. 31, 2007	 	
Cabinets and Related Products	 	$	288	 	 	$	—	 	 	$	1	 	 	$	289	 	
Plumbing Products	 	 	504	 	 	 	—	 	 	 	2	 	 	 	506	 	
Installation and Other Services	 	 	1,740	 	 	 	4	 	 	 	(1	)	 	 	1,743	 	
Decorative Architectural Products	 	 	300	 	 	 	—	 	 	 	—	 	 	 	300	 	
Other Specialty Products	 	 	1,125	 	 	 	1	 	 	 	1	 	 	 	1,127	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	3,957	 	 	$	5	 	 	$	3	 	 	$	3,965	 	

			
(A)	 	Additions include acquisitions.	
 		
(B)	 	Other principally includes the effect of foreign currency translation and purchase price adjustments related to prior-year acquisitions.	

 	 	Other indefinite-lived intangible assets were $246 million at both March 31, 2007 and December 31, 2006, and principally included registered trademarks. The carrying value of the Company’s definite-lived intangible assets was $58 million (net of accumulated amortization of $54 million) at March 31, 2007 and $60 million (net of accumulated amortization of $51 million) at December 31, 2006, and principally included customer relationships and non-compete agreements.	
 		
D.	 	Depreciation and amortization expense was $59 million and $63 million for the three months ended March 31, 2007 and 2006, respectively.	
 		
E.	 	The Company has maintained investments in marketable securities and a number of private equity funds, principally as part of its tax planning strategies, as any gains enhance the utilization of any current and future tax capital losses. Financial investments included in other assets were as follows, in millions:	
 	 	 	 	 	 	 	 	 	
 	 	March 31,	 	 	December 31,	 	
 	 	2007	 	 	2006	 	
Marketable securities	 	$	41	 	 	$	72	 	
Asahi Tec Corporation – common and preferred stock	 	 	53	 	 	 	—	 	
Private equity funds	 	 	204	 	 	 	211	 	
Metaldyne Corporation	 	 	—	 	 	 	57	 	
TriMas Corporation	 	 	34	 	 	 	30	 	
Other investments	 	 	18	 	 	 	9	 	
 	 	 	 	 	 	 	
Total	 	$	350	 	 	$	379	 	

 	 	The Company’s investments in available-for-sale securities at March 31, 2007 (including the Asahi Tec Corporation common and preferred stock) and December 31, 2006 were as follows, in millions:	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Pre-tax	 	 	
 	 	 	 	 	 	Unrealized	 	Unrealized	 	Recorded	
 	 	Cost Basis	 	Gains	 	Losses	 	Basis	
March 31, 2007	 	$	96	 	 	$	4	 	 	$	(6	)	 	$	94	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2006	 	$	67	 	 	$	9	 	 	$	(4	)	 	$	72	 	
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note E – concluded:
Income from financial investments, net, included in other, net, within other income (expense), net, was as follows, in millions:
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	
 	 	March 31,	 	
 	 	2007	 	 	2006	 	
Realized gains from marketable securities	 	$	7	 	 	$	8	 	
Realized losses from marketable securities	 	 	—	 	 	 	(3	)	
Dividend income from marketable securities	 	 	1	 	 	 	1	 	
Income from other investments, net	 	 	15	 	 	 	1	 	
Dividend income from other investments	 	 	4	 	 	 	5	 	
 	 	 	 	 	 	 	
Income from financial investments, net	 	$	27	 	 	$	12	 	

 	 	On January 11, 2007, the acquisition of Metaldyne by Asahi Tec Corporation (“Asahi Tec”), a Japanese automotive supplier, was finalized. The combined fair value of the Asahi Tec common and preferred stock, as well as the derivative related to the conversion feature on the preferred stock received in exchange for the Company’s investment in Metaldyne, was $72 million. The Asahi Tec common and preferred stock are restricted from sale for up to 24 months from the transaction date. The preferred stock accrues dividends at an annual rate of 3.75% pay-in-kind or 1.75% cash at the discretion of Asahi Tec; the Company has elected to record such dividends when cash proceeds are received. As a result of the transaction, the Company recognized a gain of $14 million, net of transaction fees, included in the Company’s consolidated statement of income, in income from other investments, net. Any unrealized gains or losses related to the change in fair value of the Asahi Tec common and preferred stock at March 31, 2007 have been recognized, net of tax, through shareholders’ equity, as a component of other comprehensive income in the Company’s consolidated balance sheet. The unrealized loss of $10 million, related to the fair value of the derivative related to the conversion feature on the preferred stock, has been included in the Company’s consolidated statement of income, in income from other investments, net. At March 31, 2007, the Company had a net investment in Asahi Tec of $62 million, including $53 million of common and preferred stock and $9 million, included in other investments, related to the conversion derivative.	
 		
 	 	In addition, immediately prior to its sale, Metaldyne Corporation distributed shares of TriMas Corporation common stock as a dividend to the holders of Metaldyne common stock; the Company recognized $4 million included in the Company’s consolidated statement of income in dividend income from other investments.	
 		
 	 	The private equity investments at March 31, 2007 and December 31, 2006, with an aggregate carrying value of $204 million and $211 million, respectively, were not evaluated for impairment, as there were no indicators of impairment or identified events or changes in circumstances that would have a significant adverse effect on the fair value of the investments.	
 		
F.	 	On January 20, 2007, holders of $1.8 billion (94 percent) principal amount at maturity of the Zero Coupon Convertible Senior Notes (“Notes”) required the Company to repurchase their Notes at a cash value of $825 million. As a result of this repurchase, a $93 million deferred income tax liability will be payable in 2007. Subsequent to the repurchase, there were outstanding $108 million principal amount at maturity of such Notes, with an accreted value of $51 million, which has been included in long-term debt at March 31, 2007, as the next put option date is July 20, 2011. The Company may at any time redeem all or part of the Notes at their then accreted value.	
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note F – concluded:

 	 	In the first quarter of 2007, the Company also retired $300 million of floating-rate notes due March 9, 2007. On March 14, 2007, the Company issued $300 million of floating-rate notes due 2010; the interest rate is calculated based upon the three-month LIBOR plus .30 percent per year. On March 14, 2007, the Company also issued $300 million of fixed-rate 5.85% notes due 2017. These debt issuances provided net proceeds of $596 million and were in consideration of the March 2007 and upcoming August 2007 debt maturities.	
 		
G.	 	At March 31, 2007 and December 31, 2006, the Company did not have a balance in paid-in capital due to the repurchases of Company common stock. The Company’s activity in retained earnings and paid-in capital was as follows, in millions:	
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	 	Twelve Months Ended	 	
 	 	March 31, 2007	 	 	December 31, 2006	 	
Balance at January 1	 	$	3,575	 	 	$	4,286	 	
Net income	 	 	143	 	 	 	488	 	
Shares issued	 	 	11	 	 	 	56	 	
Shares retired:	 	 	 	 	 	 	 	 	
Repurchased	 	 	(265	)	 	 	(825	)	
Surrendered (non-cash)	 	 	(9	)	 	 	(19	)	
Cash dividends declared	 	 	(86	)	 	 	(352	)	
Stock-based compensation	 	 	21	 	 	 	117	 	
Cumulative effect of accounting change regarding income tax uncertainties (Note O)	 	 	(26	)	 	 	—	 	
Reclassification of stock award activity	 	 	—	 	 	 	(176	)	
 	 	 	 	 	 	 	
Balance at end of period	 	$	3,364	 	 	$	3,575	 	
 	 	 	 	 	 	 	
The Company’s total comprehensive income was as follows, in millions:
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	
 	 	March 31,	 	
 	 	2007	 	 	2006	 	
Net income	 	$	143	 	 	$	204	 	
Other comprehensive income (loss):	 	 	 	 	 	 	 	 	
Cumulative translation adjustments, net	 	 	12	 	 	 	20	 	
Unrealized (loss) gain on marketable securities, net	 	 	(4	)	 	 	2	 	
Prior service cost and net loss, net	 	 	1	 	 	 	—	 	
 	 	 	 	 	 	 	
Total comprehensive income	 	$	152	 	 	$	226	 	
 	 	 	 	 	 	 	
The unrealized (loss) gain on marketable securities, net, is net of income tax (benefit) of $(4) million and $1 million for the three months ended March 31, 2007 and 2006, respectively.
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note G – concluded:
The components of accumulated other comprehensive income were as follows, in millions:
 	 	 	 	 	 	 	 	 	
 	 	March 31,	 	 	December 31,	 	
 	 	2007	 	 	2006	 	
Cumulative translation adjustments	 	$	639	 	 	$	627	 	
Unrealized (loss) gain on marketable securities, net	 	 	(1	)	 	 	3	 	
Unrecognized prior service cost and net loss, net	 	 	(117	)	 	 	(118	)	
 	 	 	 	 	 	 	
Accumulated other comprehensive income	 	$	521	 	 	$	512	 	

 	 	The unrealized (loss) gain on marketable securities, net, is reported net of income tax (benefit) of $(2) million and $2 million at March 31, 2007 and December 31, 2006, respectively. The unrecognized prior service cost and net loss, net, is reported net of income tax benefit of $66 million at both March 31, 2007 and December 31, 2006.	
 		
H.	 	The Company owns 64 percent of Hansgrohe AG. The aggregate minority interest, net of dividends, of $117 million and $108 million at March 31, 2007 and December 31, 2006, respectively, was recorded in the caption deferred income taxes and other liabilities on the Company’s condensed consolidated balance sheets.	
 		
I.	 	Net periodic pension cost for the Company’s defined-benefit pension plans was as follows, in millions:	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	 	
 	 	2007	 	 	2006	 	
 	 	Qualified	 	 	Non-Qualified	 	 	Qualified	 	 	Non-Qualified	 	
Service cost	 	$	5	 	 	$	1	 	 	$	5	 	 	$	1	 	
Interest cost	 	 	12	 	 	 	2	 	 	 	11	 	 	 	2	 	
Expected return on plan assets	 	 	(13	)	 	 	—	 	 	 	(12	)	 	 	—	 	
Amortization of net loss	 	 	1	 	 	 	1	 	 	 	2	 	 	 	1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net periodic pension cost	 	$	5	 	 	$	4	 	 	$	6	 	 	$	4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
The Company recognized $2 million pre-tax of net loss from accumulated other comprehensive income for the three months ended March 31, 2007.
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

J.	 	Information about the Company by segment and geographic area was as follows, in millions:	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
 	 	Net Sales(A)	 	 	Operating Profit	 	
The Company’s operations by segment were:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cabinets and Related Products	 	$	691	 	 	$	852	 	 	$	72	 	 	$	121	 	
Plumbing Products	 	 	853	 	 	 	797	 	 	 	77	 	 	 	66	 	
Installation and Other Services	 	 	638	 	 	 	806	 	 	 	30	 	 	 	95	 	
Decorative Architectural Products	 	 	436	 	 	 	409	 	 	 	93	 	 	 	77	 	
Other Specialty Products	 	 	263	 	 	 	303	 	 	 	33	 	 	 	44	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	2,881	 	 	$	3,167	 	 	$	305	 	 	$	403	 	

The Company’s operations by geographic area were:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
North America	 	$	2,258	 	 	$	2,650	 	 	$	242	 	 	$	346	 	
International, principally Europe	 	 	623	 	 	 	517	 	 	 	63	 	 	 	57	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	2,881	 	 	$	3,167	 	 	 	305	 	 	 	403	 	

General corporate expense, net	 	 	 	 	 	 	 	 	 	 	(51	)	 	 	(48	)	
Gain on sale of corporate fixed assets, net	 	 	 	 	 	 	 	 	 	 	3	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating profit	 	 	 	 	 	 	 	 	 	 	257	 	 	 	355	 	
Other income (expense), net	 	 	 	 	 	 	 	 	 	 	(21	)	 	 	(30	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations before income taxes, minority interest and cumulative effect of accounting change, net	 	 	 	 	 	 	 	 	 	$	236	 	 	$	325	 	

			
(A)	 	Inter-segment sales were not material.	

K.	 	Other, net, which is included in other income (expense), net, was as follows, in millions:	
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	
 	 	March 31,	 	
 	 	2007	 	 	2006	 	
Income from cash and cash investments	 	$	14	 	 	$	14	 	
Other interest income	 	 	—	 	 	 	1	 	
Income from financial investments, net (Note E)	 	 	27	 	 	 	12	 	
Other items, net	 	 	1	 	 	 	7	 	
 	 	 	 	 	 	 	
Total other, net	 	$	42	 	 	$	34	 	
 	 	 	 	 	 	 	
Other items, net, for the first quarter of 2006 included $4 million of currency transaction gains.
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

L.	 	Reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share were as follows, in millions:	
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	
 	 	March 31,	 	
 	 	2007	 	 	2006	 	
Numerator (basic and diluted):	 	 	 	 	 	 	 	 	
Income from continuing operations before cumulative effect of accounting change, net	 	$	142	 	 	$	207	 	
Income from discontinued operations, net	 	 	1	 	 	 	—	 	
Cumulative effect of accounting change, net	 	 	—	 	 	 	(3	)	
 	 	 	 	 	 	 	
Net income	 	$	143	 	 	$	204	 	

Denominator:	 	 	 	 	 	 	 	 	
Basic common shares (based upon weighted average)	 	 	382	 	 	 	406	 	
Add:	 	 	 	 	 	 	 	 	
Contingent common shares	 	 	4	 	 	 	3	 	
Stock option dilution	 	 	2	 	 	 	2	 	
 	 	 	 	 	 	 	
Diluted common shares	 	 	388	 	 	 	411	 	

 	 	At March 31, 2007 and 2006, the Company did not include any common shares related to the Zero Coupon Convertible Senior Notes (“Notes”) in the calculation of diluted earnings per common share, as the price of the Company’s common stock at March 31, 2007 and 2006 did not exceed the equivalent accreted value of the Notes.	
 		
 	 	Additionally, 15 million common shares and 13 million common shares for the three months ended March 31, 2007 and 2006, respectively, related to stock options were excluded from the computation of diluted earnings per common share due to their antidilutive effect.	
 		
 	 	In the first quarter of 2007, the Company repurchased and retired approximately 9 million shares of Company common stock, for cash aggregating $274 million. At March 31, 2007, the Company had 27 million shares of its common stock remaining under the May 2006 Board of Directors repurchase authorization.	
 		
M.	 	The Company is subject to lawsuits and pending or asserted claims with respect to matters generally arising in the ordinary course of business.	
 		
 	 	As previously disclosed, a lawsuit has been brought against the Company and a number of its insulation installation companies in the federal court in Atlanta, Georgia alleging that certain practices violate provisions of the federal antitrust laws; the complaint requests class action certification. Consistent with its position regarding several similar lawsuits that have been dismissed, the Company is vigorously defending this lawsuit as well as several other similar lawsuits that were recently filed. The Company believes that the conduct of the Company and its insulation installation companies, which have been the subject of these lawsuits, has not violated any antitrust laws. The Company is unable at this time to reliably estimate any potential liability which might occur from an adverse judgment but does not believe that any adverse judgment would have a material adverse effect on its businesses or the methods used by its insulation installation companies in doing business.	
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note M – concluded:

 	 	As previously disclosed, a lawsuit has been brought against the Company’s Milgard Manufacturing subsidiary alleging design defects in certain Milgard aluminum windows. Plaintiffs are appealing the trial court’s August 2006 denial of their motion for class certification. The Company is vigorously defending the case and believes that its window products have not been manufactured with the alleged design defects. The Company believes that it will not incur material liability as a result of this lawsuit.	
 		
 	 	As previously disclosed, European governmental authorities are investigating possible anticompetitive business practices relating to the plumbing and heating industries in Europe. The investigations involve a number of European companies, including certain of the Company’s European manufacturing divisions and a number of other large businesses. The Company believes that it will not incur material liability as a result of the matters that are subject to these investigations.	
 		
N.	 	Changes in the Company’s warranty liability were as follows, in millions:	
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	 	Twelve Months Ended	 	
 	 	March 31, 2007	 	 	December 31, 2006	 	
Balance at January 1	 	$	120	 	 	$	105	 	
Accruals for warranties issued during the period	 	 	14	 	 	 	69	 	
Accruals related to pre-existing warranties	 	 	2	 	 	 	7	 	
Settlements made (in cash or kind) during the period	 	 	(15	)	 	 	(62	)	
Other, net	 	 	(4	)	 	 	1	 	
 	 	 	 	 	 	 	
Balance at end of period	 	$	117	 	 	$	120	 	

O.	 	In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement 109,” (“FIN No. 48”). FIN No. 48 allows the recognition of only those tax benefits that the Company estimates have a greater than 50 percent likelihood of being sustained upon examination by the taxing authorities. FIN No. 48 also provides guidance on financial statement classification and disclosure, and the accounting for interest, penalties, interim periods and transition.	
 		
 	 	Historically, the Company has established reserves for tax contingencies in accordance with SFAS No. 5, “Accounting for Contingencies,” (“SFAS No. 5”). Under this standard, accounting reserves for tax contingencies are established when it is probable that an additional tax may be owed and the amount can be reasonably estimated. FIN No. 48 establishes a threshold for recognizing accounting reserves for income tax contingencies on uncertain tax positions lower than the threshold under SFAS No. 5. Therefore, as a result of adopting FIN No. 48, the Company has increased its accounting reserves for income tax contingencies (referred to by FIN No. 48 as “unrecognized tax benefits”) to approximately $91 million as of January 1, 2007, the date of adoption. If recognized, approximately $62 million, net of any federal tax benefit, would affect the Company’s effective tax rate. The cumulative effect of adopting FIN No. 48 resulted in a reduction to beginning retained earnings of approximately $26 million, net of any federal tax benefit, as of January 1, 2007, and the majority of the Company’s unrecognized tax benefits were reclassified from current to non-current liabilities in accordance with the provisions of FIN No. 48.	
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (concluded)
Note O – concluded:
The Company files income tax returns in the U.S. Federal jurisdiction, and various local, state and foreign jurisdictions. The Internal Revenue Service (“IRS”) has substantially completed their examination of the Company’s consolidated U.S. Federal tax returns through 2005. The proposed adjustments by the IRS are not material. Beginning with the 2006 consolidated U.S. Federal tax return, the Company has been selected by the IRS to participate in the Compliance Assurance Program (“CAP”). CAP, a pilot program of the IRS, is a real-time audit of the Federal tax return that allows the IRS, working in conjunction with the Company, to determine tax return compliance with the Federal tax law prior to filing the return. This program provides the Company with greater certainty about its tax liability for a given year within months, rather than years, of filing its annual tax return and greatly reduces the need for recording Federal unrecognized tax benefits. With few exceptions, the Company is no longer subject to state or foreign income tax examinations on filed returns for years before 2002.
The Company records interest and penalties on its unrecognized tax benefits in income tax expense. As of January 1, 2007, the Company had accrued approximately $19 million for interest and penalties.
During the first quarter of 2007, no material change in the unrecognized tax benefits or related accrued interest and penalties was recorded, and the Company does not anticipate that it is reasonably possible that any material increase or decrease in its unrecognized tax benefits will occur within twelve months.
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MASCO CORPORATION
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER 2007 VERSUS FIRST QUARTER 2006
SALES AND OPERATIONS
     The following table sets forth the Company’s net sales and operating profit margins by business segment and geographic area, dollars in millions:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	 	Percent Increase	 	
 	 	March 31,	 	 	(Decrease)	 	
 	 	2007	 	 	2006	 	 	2007 vs. 2006	 	
Net Sales:	 	 	 	 	 	 	 	 	 	 	 	 	
Cabinets and Related Products	 	$	691	 	 	$	852	 	 	 	(19	%)	
Plumbing Products	 	 	853	 	 	 	797	 	 	 	7	%	
Installation and Other Services	 	 	638	 	 	 	806	 	 	 	(21	%)	
Decorative Architectural Products	 	 	436	 	 	 	409	 	 	 	7	%	
Other Specialty Products	 	 	263	 	 	 	303	 	 	 	(13	%)	
 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	2,881	 	 	$	3,167	 	 	 	(9	%)	

North America	 	$	2,258	 	 	$	2,650	 	 	 	(15	%)	
International, principally Europe	 	 	623	 	 	 	517	 	 	 	21	%	
 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	2,881	 	 	$	3,167	 	 	 	(9	%)	

 	 	Three Months Ended	
 	 	March 31,	
 	 	2007	 	2006	
Operating Profit Margins: (A)	 	 	 	 	 	 	 	 	
Cabinets and Related Products	 	 	10.4	%	 	 	14.2	%	
Plumbing Products	 	 	9.0	%	 	 	8.3	%	
Installation and Other Services	 	 	4.7	%	 	 	11.8	%	
Decorative Architectural Products	 	 	21.3	%	 	 	18.8	%	
Other Specialty Products	 	 	12.5	%	 	 	14.5	%	
 	 	 	 	 	 	 	 	 	
North America	 	 	10.7	%	 	 	13.1	%	
International, principally Europe	 	 	10.1	%	 	 	11.0	%	
Total	 	 	10.6	%	 	 	12.7	%	
 	 	 	 	 	 	 	 	 	
Operating profit margins, as reported	 	 	8.9	%	 	 	11.2	%	

(A)	 	Before general corporate expense, net, of $51 million and $48 million for the three months ended March 31, 2007 and 2006, respectively.	
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MASCO CORPORATION
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”) in the United States. However, the Company believes that certain non-GAAP performance measures and ratios, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP performance measures and ratios should be viewed in addition to, and not as an alternative for, the Company’s reported results.
NET SALES
     Net sales in the first quarter of 2007 decreased nine percent from the comparable period in 2006. Excluding results from acquisitions, net sales decreased ten percent (including a two percent increase relating to the effect of currency translation) compared with 2006. The following table reconciles reported net sales to net sales excluding acquisitions and the effect of currency translation, in millions:
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	
 	 	March 31,	 	
 	 	2007	 	 	2006	 	
Net sales, as reported	 	$	2,881	 	 	$	3,167	 	
Acquisitions	 	 	(18	)	 	 	—	 	

Net sales, excluding acquisitions	 	 	2,863	 	 	 	3,167	 	
Currency translation	 	 	(55	)	 	 	—	 	

Net sales, excluding acquisitions and the effect of currency translation	 	$	2,808	 	 	$	3,167	 	
 	 	 	 	 	 	 	
     Net sales from North American operations decreased in the first quarter of 2007, primarily due to the continued decline in the new home construction market and a moderation in consumer spending. North American net sales for the first quarter of 2007 were negatively affected by lower sales volume of installation and other services, assembled cabinets and windows and doors in the new home construction market. In addition, net sales were negatively affected by lower retail sales volume of ready-to-assemble and assembled cabinets, partially offset by increased retail sales volume of paints and stains and plumbing products.
     Net sales from International operations increased in the first quarter of 2007, due to a weaker U.S. dollar, which increased International net sales by 11 percent. In local currencies, net sales from International operations increased 10 percent, primarily due to increased sales of plumbing products.
     Net sales of Cabinets and Related Products decreased in the first quarter of 2007, primarily due to lower sales volume of assembled cabinets in the new home construction market and lower sales volume of ready-to-assemble and assembled cabinets in the North American retail market. These results are partially offset by a weaker U.S. dollar, which had a positive effect on the translation of local currencies of European operations included in this segment.
     Net sales of Plumbing Products increased in the first quarter of 2007, due to increased sales volume of certain European operations and increased selling prices, as well as a weaker U.S. dollar, which had a positive effect on the translation of local currencies of European operations included in this segment.
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MASCO CORPORATION
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     Net sales of Installation and Other Services decreased in the first quarter of 2007, primarily due to lower sales volume related to the continued slowdown in the new home construction market.
     Net sales of Decorative Architectural Products increased in the first quarter of 2007, primarily due to higher retail sales volume of paints and stains and builders’ hardware.
     Net sales of Other Specialty Products decreased in the first quarter of 2007, primarily due to lower sales volume of windows and doors related to the continued slowdown in the new home construction market, particularly in the western United States, offset in part by a weaker U.S. dollar, which had a positive effect on the translation of local currencies of European operations included in this segment.
OPERATING MARGINS
     The Company’s gross profit margin was 26.2 percent for the first quarter of 2007 compared with 27.6 percent for the comparable period in 2006. Selling, general and administrative expenses as a percentage of sales were 17.3 percent for the first quarter of 2007 and 16.4 percent for the comparable period of the prior year. First quarter 2007 operating profit margins were negatively affected by lower sales volume of installation and other services, assembled cabinets and windows and doors in the new home construction market, lower retail sales volume of ready-to-assemble and assembled cabinets, a less favorable product mix and increased commodity costs, partially offset by increased retail sales volume of paints and stains and increased sales from International operations, particularly plumbing products.
     As part of its profit improvement programs, the Company has been focused on the rationalization of its businesses, including sourcing programs, business consolidations, plant closures, headcount reductions and other initiatives. During the first quarters of 2007 and 2006, the Company incurred costs and charges of $25 million and $17 million, respectively, related to profit improvement programs.
     The decline in operating profit margin for the Cabinets and Related Products segment for the first quarter of 2007 reflects lower sales volume in the new home construction and retail markets and increased commodity costs, as well as severance and plant start-up costs.
     In the first quarter of 2006, the operating profit margin for the Plumbing Products segment included $17 million of costs and charges related to profit improvement programs; excluding such charges, operating profit margin in this segment would have been 10.4 percent for the first quarter of 2006. The decline in operating profit margin for the Plumbing Products segment for the first quarter of 2007, compared with 10.4 percent for the first quarter of 2006, reflects increased commodity costs, as well as a less favorable product mix and severance costs.
     The decline in operating profit margin for the Installation and Other Services segment for the first quarter of 2007 is primarily due to lower sales volume related to the continued slowdown in the new home construction market, as well as costs related to systems implementations and severance.
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MASCO CORPORATION
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     The increase in operating profit margin for the Decorative Architectural Products segment for the first quarter of 2007 is primarily due to increased sales of paints and stains and builders' hardware.
     The decline in operating profit margin for the Other Specialty Products segment for the first quarter of 2007 reflects lower sales volume of windows and doors, partially offset by a more favorable product mix.
OTHER INCOME (EXPENSE), NET
     Other, net, for the first quarter of 2007 included $7 million of realized gains, net, from marketable securities, $5 million of dividend income and $15 million of income from other investments, net.
     On January 11, 2007, the acquisition of Metaldyne by Asahi Tec Corporation (“Asahi Tec”), a Japanese automotive supplier, was finalized. The combined fair value of the Asahi Tec common and preferred stock, as well as the derivative related to the conversion feature on the preferred stock, received in exchange for the Company’s investment in Metaldyne, was $72 million. At March 31, 2007, the Company has recognized a combined net gain of $4 million (including the transaction gain and the subsequent valuation of the derivative) in income from financial investments, net.
     In addition, immediately prior to its sale, Metaldyne Corporation distributed shares of TriMas Corporation common stock as a dividend to the holders of Metaldyne common stock; the Company recognized $4 million of dividend income from other investments.
     Other, net, for the first quarter of 2006 included $5 million of realized gains, net, from the sale of marketable securities, $6 million of dividend income and $1 million of income from other investments, net. Other, net, also included currency transaction gains of $4 million for the first quarter of 2006.
     Interest expense for the first quarter of 2007 decreased $1 million to $63 million compared with $64 million for the first quarter of 2006.
INCOME AND EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS
     Income and diluted earnings per common share from continuing operations before the cumulative effect of accounting change, net, for the first quarter of 2007 were $142 million and $.37 per common share compared with $207 million and $.50 per common share for the comparable period of 2006. The Company’s effective tax rate for the three months ended March 31, 2007 was 36.0 percent compared with 34.5 percent for the same period in 2006. The Company estimates that its effective tax rate for the full-year 2007 should approximate 35 to 36 percent.
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MASCO CORPORATION
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OTHER FINANCIAL INFORMATION
     The Company’s current ratio was 1.9 to 1 and 1.5 to 1 at March 31, 2007 and December 31, 2006, respectively. The improvement in the current ratio was primarily due to the payment of $825 million of Zero Coupon Convertible Senior Notes and $300 million of floating-rate notes in the first quarter of 2007.
     For the three months ended March 31, 2007, cash of $88 million was provided by operating activities. Cash used for financing activities was $887 million, and included $87 million for the payment of cash dividends, $274 million for the acquisition of Company common stock in open-market transactions, $300 million for the retirement of floating-rate notes due March 9, 2007 and $825 million related to the Zero Coupon Convertible Senior Notes put option. Cash provided by financing activities included $12 million from the issuance of Company common stock, primarily for the exercise of stock options and $596 million from the issuance of notes (net of issuance costs). Net cash used for investing activities included $55 million for capital expenditures, offset in part by $48 million of net proceeds from the sale of financial investments.
     First quarter 2007 cash from operations was affected by an expected and annually recurring first quarter increase in accounts receivable and inventories compared with December 31, 2006.
     The Company is subject to lawsuits and claims pending or asserted with respect to matters generally arising in the ordinary course of business. Note M to the Condensed Consolidated Financial Statements discusses certain specific claims pending against the Company.
     The Company believes that its present cash balance, cash flows from operations and, to the extent necessary, bank borrowings and future financial market activities, are sufficient to fund its working capital and other investment needs.
OUTLOOK FOR THE COMPANY
     New home construction has declined dramatically in the last 12 months due to previous excessive speculative buying, rapidly rising home prices in recent years reducing the affordability and less attractive mortgage terms. Housing starts declined by 13 percent in 2006 compared with 2005 to approximately 1.8 million units. In the first quarter 2007, actual housing starts declined approximately 30 percent from the first quarter of 2006 to an annualized rate of approximately 1.4 million to 1.5 million units. Even with the recent decline in new home construction, the inventory of unsold new and existing homes has increased to unprecedented levels.
     The Company is proactively managing its business for the current difficult economic times in our markets by pursuing a variety of initiatives to further reduce costs and improve operating profits. Initiatives already started include headcount reductions, sourcing programs, restructuring of certain businesses including consolidations, manufacturing rationalization and other profit improvement programs. While the Company’s earnings outlook for 2007 includes costs related to these initiatives, as well as start-up costs related to plant capacity additions, systems implementations costs, higher interest expense and as yet unrecovered commodity cost increases, the Company believes that implementing these initiatives should improve the Company’s earnings outlook for 2008 and beyond.
     The Company remains committed to its long-term growth strategy, concentrating on organic sales growth, improving return on invested capital and generating significant returns to shareholders. We continue to drive our growth initiatives including leveraging installation services, developing new channels of distribution, pursuing new markets in emerging economies and emphasizing new product development.
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MASCO CORPORATION
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
     Certain sections of this Quarterly Report contain statements reflecting the Company’s views about its future performance and constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These views involve risks and uncertainties that are difficult to predict and, accordingly, the Company’s actual results may differ materially from the results discussed in such forward-looking statements. Readers should consider that various factors, including those discussed in Item 1A, “Risk Factors,” the “Executive Level Overview,” and “Critical Accounting Policies and Estimates” sections in the Company’s Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission may affect the Company’s performance. The Company undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise.
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MASCO CORPORATION
Item 4. CONTROLS AND PROCEDURES

 	a.	 	Evaluation of Disclosure Controls and Procedures.	
 		
 	 	 	The Company’s principal executive officer and principal financial officer have concluded, based on an evaluation of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)), as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, that, as of March 31, 2007, the Company’s disclosure controls and procedures were effective.	
 		
 	b.	 	Changes in Internal Control Over Financial Reporting.	
 		
 	 	 	In connection with the evaluation of the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2007, which is required under the Securities Exchange Act of 1934 by paragraph (d) of Exchange Rules 13a-15 or 15d-15, (as defined in paragraph (f) of Rule 13a-15), management determined that there was no change that has materially affected or is reasonably likely to materially affect internal control over financial reporting.	
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MASCO CORPORATION
PART II. OTHER INFORMATION
Item 1 . Legal Proceedings
     Information regarding certain legal proceedings involving the Company is set forth in Note M to the Company’s Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.
Item 1A . Risk Factors
     Information regarding risk factors of the Company is set forth in Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.
Item 2 . Unregistered Sales of Equity Securities and Use of Proceeds
     The following table provides information regarding the repurchase of Company common stock for the three months ended March 31, 2007, shares in millions:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  	 	 	 	 	 	 	 	 	 	Total Number of	 	Maximum Number of	
 	 	 	 	 	 	 	 	 	 	Shares Purchased	 	Shares That May	
 	 	Total Number	 	Average Price	 	as Part of	 	Yet Be Purchased	
 	 	of Shares	 	Paid Per	 	Publicly Announced	 	Under the Plans	
Period	 	Purchased (A)	 	Common Share	 	Plans or Programs	 	or Programs	
1/1/07- 1/31/07	 	 	2	 	 	$	30.87	 	 	 	1	 	 	 	35	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2/1/07- 2/28/07	 	 	1	 	 	$	31.11	 	 	 	1	 	 	 	34	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
3/1/07- 3/31/07	 	 	7	 	 	$	28.14	 	 	 	7	 	 	 	27	 	

Total for the quarter	 	 	10	 	 	$	29.12	 	 	 	9	 	 	 	 	 	

(A)	 	Includes one million shares (i) surrendered for the exercise of stock options or (ii) withheld for the payment of taxes upon the vesting of stock awards or the exercise of stock options.	
Items 3 through 5 are not applicable.
Item 6 . Exhibits
 	 	 	
4bi —	 	Floating Rate Notes due 2010	
 	 	 	
4bii —	 	5.85% Notes due 2017	
 	 	 	
12 —	 	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends	
 	 	 	
31a —	 	Certification by Chief Executive Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934	
 	 	 	
31b —	 	Certification by Chief Financial Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934	
 	 	 	
32 —	 	Certification Required by Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code	
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MASCO CORPORATION
PART II. OTHER INFORMATION, concluded
SIGNATURE
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 	 	 	 	 	
 	MASCO CORPORATION
 	 	
 	By:  	/s/ Timothy Wadhams	 	
 	Name:  Timothy Wadhams 	 	
 	Title:  Senior Vice President and	 	
 	 	    Chief Financial Officer 	 	
 	
May 3, 2007
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MASCO CORPORATION
EXHIBIT INDEX
 	 	 	
Exhibit	 	 	
Exhibit 4bi	 	Floating Rate Notes due 2010	
 	 	 	
Exhibit 4bii	 	5.85% Notes due 2017	
 	 	 	
Exhibit 12	 	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends	
 	 	 	
Exhibit 31a	 	Certification by Chief Executive Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934	
 	 	 	
Exhibit 31b	 	Certification by Chief Financial Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934	
 	 	 	
Exhibit 32	 	Certification Required by Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code	
 23 

Exhibit 4.b.i.
RESOLUTIONS OF THE PRICING COMMITTEE
OF THE BOARD OF DIRECTORS OF
MASCO CORPORATION
March 9, 2007
     WHEREAS, Masco Corporation, a Delaware corporation (the “Company”) the Company has filed a Registration Statement (No. 333-140970) on Form S-3 with the Securities and Exchange Commission, which is in effect;
     WHEREAS, the Company desires to create two series of securities under the Indenture dated as of February 12, 2001, as supplemented by the Supplemental Indenture dated as of November 30, 2006 (the “Indenture”), with The Bank of New York Trust Company, N. A. (as successor trustee under agreement originally with Bank One Trust Company, National Association) (the “Trustee”), providing for the issuance from time to time of unsecured debentures, notes or other evidences of indebtedness of this Company (“Securities”) in one or more series under such Indenture; and
     WHEREAS, capitalized terms used in these resolutions and not otherwise defined are used with the same meaning ascribed to such terms in the Indenture;
     THEREFORE, BE IT RESOLVED, that there is established a series of Securities under the Indenture, the terms of which shall be as follows:
2010 Notes

 	1.	 	The Securities of one series shall be designated as the “Floating Rate Notes Due 2010.”	
 		
 	2.	 	The aggregate principal amount of Securities of such series which may be authenticated and delivered under the Indenture is limited to Three Hundred Million Dollars ($300,000,000), except for Securities of such series authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of, other Securities of such series pursuant to Sections 3.04, 3.05, 3.06, 9.06 or 11.07 of the Indenture.	
 		
 	3.	 	The date on which the principal of the Securities of such series shall be payable is March 12, 2010. Such Securities are not subject to any sinking fund.	
 		
 	4.	 	The Securities of such series shall bear interest at a floating rate equal to three month USD LIBOR plus 0.30% per annum, payable quarterly in arrears on March 12, June 12, September 12 and December 12 of each year, commencing on June 12, 2007 to the person in whose names the notes are registered at the close of business on the 15th day preceding the interest payment	

 

date (other than in the case of maturity, in which case interest will be payable to the person to whom the principal shall be payable). The interest determination date for an interest period will be the second London business day preceding that interest period.
        5.        The Securities of such series shall be issued initially in the form of global securities registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), and will be held by the Trustee as custodian for DTC. The Securities shall be subject to the procedures of DTC and will not be issued in definitive registered form.
        6.        The principal of and interest on the Securities of such series shall be payable at the office or agency of this Company maintained for such purpose in Chicago, Illinois or at any other office or agency designated by the Company for such purpose pursuant to the Indenture.
        7.        The Securities of such series shall be issuable in denominations of One Thousand Dollars ($1,000) and any integral multiples thereof.
        8.        The Securities of such series shall be issuable at a purchase price of 99.6% of the principal amount thereof, plus accrued interest, if any, from March 14, 2007, such that this Company shall receive Two Hundred Ninety Eight Million Eight Hundred Thousand Dollars ($298,800,000) after an underwriting discount of One Million Two Hundred Thousand Dollars ($1,200,000).
        9.        The Securities of such series shall be subject to Defeasance and discharge pursuant to Section 4.02 of the Indenture and to Covenant Defeasance pursuant to Section 10.06 of the Indenture with respect to any term, provision or condition set forth in any negative or restrictive covenant of the Company applicable to the Securities.
         10.        The Securities of such series shall be subject to the following change of control repurchase event:
        If a Change of Control Repurchase Event occurs, the Company will make an offer to each holder of Securities to repurchase all or any part (in integral multiples of $1,000) of that holders’ Securities at a repurchase price in cash equal to 101% of the aggregate principal amount of Securities repurchased plus any accrued and unpaid interest on the Securities repurchased to the date of purchase. Within 30 days following any Change of Control Repurchase Event or, at the Company’s option, prior to any Change of Control, but after the public announcement of the Change of Control, the Company will mail a notice to each holder, with a copy to the Trustee, describing the transaction or transactions that constitute or may constitute the Change of Control Repurchase Event and offering to repurchase Securities on the payment date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice

 

is mailed. The notice shall, if mailed prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Repurchase Event occurring on or prior to the payment date specified in the notice. The Company will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Securities as a result of a Change of Control Repurchase Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Repurchase Event provisions of the Securities, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control Repurchase Event provisions of the Securities by virtue of such conflict.

 	 	 	On the Change of Control Repurchase Event payment date, the Company will, to the extent lawful:	

 	1.	 	accept for payment all Securities or portions of Securities properly tendered pursuant to the Company’s offer;	
 		
 	2.	 	deposit with the paying agent an amount equal to the aggregate purchase price in respect of all Securities or portions of Securities properly tendered; and	
 		
 	3.	 	deliver or cause to be delivered to the Trustee the Securities properly accepted, together with an officers’ certificate stating the aggregate principal amount of Securities being purchased by the Company.	
The paying agent will promptly mail to each holder of Securities properly tendered the purchase price for the Securities, and the Trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each holder a new Security equal in principal amount to any unpurchased portion of any Securities surrendered; provided that each new Security will be in a principal amount of $1,000 or an integral multiple of $1,000.
              The Company will not be required to make an offer to repurchase the Securities upon a Change of Control Repurchase Event if a third party makes an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by the Company and such third party purchases all Securities properly tendered and not withdrawn under it offer.
              “Below Investment Grade Rating Event” means the Securities are rated below investment grade by both Rating Agencies on any date from the date of the public notice of an arrangement that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of a Change of

 

Control (which period shall be extended so long as the rating of the Securities is under publicly announced consideration for possible downgrade by either of the Rating Agencies); provided that a Below Investment Grade Rating Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of Change of Control Repurchase Event hereunder) if the rating agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the Trustee in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Below Investment Grade rating Event).
     “Change of Control” means the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act), becomes the beneficial owner, directly or indirectly, of more than 50% of the Company’s voting stock, measured by voting power rather than number of shares.
     “Change of Control Repurchase Event” means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.
     “Investment Grade” means a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating categories of Moody’s); a rating of BBB- or better by S&P (or its equivalent under any successor rating categories of S&P); and the equivalent investment grade credit rating from any additional rating agency or rating agencies selected by the Company.
     “Moody’s” means Moody’s Investors Service Inc.
     “Rating Agency” means (1) each of Moody’s and S&P; and (2) if either of Moody’s or S&P ceases to rate the Securities or fails to make a rating of the Securities publicly available for reasons outside of its control, a “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by the Company (as certified by a resolution of the Board of Directors) as a replacement agency for Moody’s or S&P, or both, as the case may be.
     “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc..
     “Voting Stock” of any specified person (as that term is used in Section 13(d)(3) of the Exchange Act) as of any date means the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person.

 

     (....)
     FURTHER RESOLVED, that the Securities of each such series are declared to be issued under the Indenture and subject to the provisions hereof;
     FURTHER RESOLVED, that the Chairman of the Board, the President or any Vice President of the Company is authorized to execute, on the Company’s behalf and in its name, and the Secretary or any Assistant Secretary of the Company is authorized to attest to such execution and under the Company’s seal (which may be in the form of a facsimile of the Company’s seal), $300,000,000 aggregate principal amount of the Floating Rate Notes Due 2010 (the “2010 Notes”) and $300,000,000 of the 5.85% Notes Due 2017 (the “2017 Notes”) (and in addition, in each case, Securities to replace lost, stolen, mutilated or destroyed Securities and Securities required for exchange, substitution or transfer, all as provided in the Indenture) and to deliver such Securities to the Trustee for authentication, and the Trustee is authorized and directed thereupon to authenticate and deliver the same to or upon the written order of this Company as provided in the Indenture;
     FURTHER RESOLVED, that the signatures of the Company officers so authorized to execute the Securities of such series may be the manual or facsimile signatures of the present or any future authorized officers and may be imprinted or otherwise reproduced thereon, and the Company for such purpose adopts each facsimile signature as binding upon it notwithstanding the fact that at the time the respective Securities shall be authenticated and delivered or disposed of, the individual so signing shall have ceased to hold such office;
     FURTHER RESOLVED, that Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are appointed joint book-running managers of the underwriters for the issuance and sale of the Securities of such series, and the Chairman of the Board, the President or any Vice President of the Company is authorized, in the Company’s name and on its behalf, to execute and deliver an Underwriting Agreement, substantially in the form heretofore approved by the Company’s Board of Directors, with the underwriters, with such changes and insertions therein as are appropriate to conform such Underwriting Agreement to the terms set forth herein or otherwise as the officer executing such Underwriting Agreement shall approve and as are not inconsistent with these resolutions, such approval to be conclusively evidenced by such officer’s execution and delivery of the Underwriting Agreement;
     FURTHER RESOLVED, that The Bank of New York Trust Company, N. A., the Trustee under the Indenture, is appointed trustee for Securities of such series, and as Agent of this Company for the purpose of effecting the registration, transfer and exchange of the Securities of such series as provided in the Indenture, and the corporate trust office of The Bank of New York Trust Company, N. A., in Chicago, Illinois is designated pursuant to the Indenture as the office or agency of the Company where such

 

Securities may be presented for registration, transfer and exchange and where notices and demands to or upon this Company in respect of the Securities and the Indenture may be served;
     FURTHER RESOLVED, that The Bank of New York Trust Company, N. A. is appointed Paying Agent of this Company for the payment of interest on and principal of the Securities of such series, and Calculation Agent for the purpose of calculating the applicable interest rate or rates of the 2010 Notes in accordance with the terms of such Securities and the Indenture, and the corporate trust office of The Bank of New York Trust Company, N. A., is designated, pursuant to the Indenture, as the office or agency of the Company where Securities may be presented for payment; and
     FURTHER RESOLVED, that each of the Company’s officers is authorized and directed, on behalf of the Company and in its name, to do or cause to be done everything such officer deems advisable to effect the sale and delivery of the Securities of such series pursuant to the Underwriting Agreement and otherwise to carry out the Company’s obligations under the Underwriting Agreement, and to do or cause to be done everything and to execute and deliver all documents as such officer deems advisable in connection with the execution and delivery of the Underwriting Agreement and the execution, authentication and delivery of such Securities (including, without limiting the generality of the foregoing, delivery to the Trustee of the Securities for authentication and of requests or orders for the authentication and delivery of Securities).

 

FACE OF GLOBAL SECURITY
     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, 55 WATER STREET, NEW YORK, NEW YORK (THE “DEPOSITARY”), TO MASCO CORPORATION OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

MASCO CORPORATION
Floating Rate Notes Due 2010
 	 	 	 	 	
CUSIP No. 574599BE5	 	$	300,000,000	 	
No. R-1	 	 	 	 	
     Masco Corporation, a corporation duly organized and existing under the laws of Delaware (herein called the “ Company ,” which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO. or registered assigns, the principal sum of Three Hundred Million Dollars on March 12, 2010 (the “ Maturity Date ”), and to pay a floating interest rate, subject to adjustment as provided herein, quarterly in arrears on March 12, June 12, September 12 and December 12 (each an “ Interest Payment Date ”), and on the Maturity Date. If any of the Interest Payment Dates listed above falls on a day that is not a LIBOR Business Day, as defined herein, the Company will postpone the Interest Payment Date to the next succeeding LIBOR Business Day unless that LIBOR Business Day is in the next succeeding calendar month, in which case the Interest Payment Date will be the immediately preceding LIBOR Business Day. Interest on the Securities will be computed on the basis of a 360 day year for the actual number of days elapsed. Payment of the principal of and interest on this Security will be made at the office or agency of the Company maintained for that purpose, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. At the option of the Company, interest may be paid by check to the registered holder hereof entitled thereto at his last address as it appears on the registry books, and principal may be paid by check to the registered holder or other person entitled thereto against surrender of this Security.
     Interest on the Securities will accrue from, and including March 14, 2007, to, and excluding, the first Interest Payment Date and then from, and including, the immediately preceding Interest Payment Date to which interest has been paid or duly provided for to, but excluding, the next Interest Payment Date or the Maturity Date, as the case may be. Each of these periods is referred to herein as an “ Interest Period .” The amount of accrued interest that the Company will pay for any Interest Period will be calculated by multiplying the face amount of the Security by the accrued interest factor. The accrued interest factor is computed by adding the interest factor calculated for each day from March 14, 2007, or from the last date the Company paid interest, to the date for which accrued interest is calculated. The interest factor for each day will be computed by dividing the interest rate applicable to that day by 360.
 2 

 

     If the Maturity Date of the Securities falls on a day that is not a LIBOR Business Day, the Company will pay principal and interest on the next succeeding LIBOR Business Day, and that payment will be deemed as made on the date that the payment was due. No interest will accrue on the payment for the period from and after the Maturity Date to the date the Company makes the payment on the next succeeding LIBOR Business Day.
     The interest payable by the Company on a Security on any Interest Payment Date, subject to certain exceptions, will be paid to the person in whose name the Security is registered at the close of business on the fifteenth calendar day, whether or not a LIBOR Business Day, immediately preceding the Interest Payment Date (the “ Regular Record Date ”). Interest that the Company pays on the Maturity Date, will be payable to the person to whom the principal will be payable.
     “ LIBOR Business Day ” means any day except a Saturday, a Sunday or a legal holiday in The City of New York on which banking institutions are authorized or required by law, regulation or executive order to close; provided that the day is also a London Business Day. “ London Business Day ” means any day on which dealings in United States dollars are transacted in the London interbank market.
     The interest rate on the Securities will be calculated by the calculation agent appointed by the Company and will be equal to LIBOR plus 0.30%. The calculation agent will reset the interest rate on each Interest Payment Date, and on March 14, 2007, each of which is referred to herein as an interest reset date (“ Interest Reset Date ”). The second London Business Day preceding an Interest Reset Date will be the interest determination date (“ Interest Determination Dat e”) for that Interest Reset Date. The interest rate in effect on each day that is not an Interest Reset Date will be the interest rate determined as of the Interest Determination Date pertaining to the immediately preceding Interest Reset Date. The interest rate in effect on any day that is an Interest Reset Date will be the interest rate determined as of the Interest Determination Date pertaining to that Interest Reset Date.
     “ LIBOR ” will be determined by the calculation agent in accordance with the following provisions:
     (a) With respect to any Interest Determination Date, LIBOR will be the rate for deposits in the United States dollars having a maturity of three months commencing on the first day of the applicable interest period that appears on the Reuters Page LIBOR01 as of 11:00 A.M., London time, on the Interest Determination Date. If no rate appears, LIBOR, in respect to that Interest Determination Date, will be determined in accordance with the provisions described in (b) below.
 3 

 

     (b) With respect to an Interest Determination Date on which no rate appears on Reuters Page LIBOR01, as specified in (a) above, the calculation agent (after consultation with the Company) will request the principal London offices of each of four major reference banks in the London interbank market, as selected by the calculation agent, to provide the calculation agent with its offered quotation for deposits in United States dollars for the period of three months, commencing on the first day of the applicable interest period, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on that Interest Determination Date and in a principal amount that is representative for a single transaction in United States dollars in that market at that time. If at least two quotations are provided, then LIBOR on the Interest Determination Date will be the arithmetic mean of those quotations. If fewer than two quotations are provided, then LIBOR on the Interest Determination Date will be the arithmetic mean of the rates quoted at approximately 11:00 A.M., in The City of New York, on the Interest Determination Date by three major banks (which may include Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc.) in The City of New York selected by the calculation agent for loans in United States dollars to leading European banks, having a three-month maturity and in a principal amount that is representative for a single transaction in United States dollars in that market at that time; provided, however, that if the banks selected by the calculation agent are not providing quotations in the manner described by this sentence, LIBOR determined as of that Interest Determination Date will be LIBOR in effect on that Interest Determination Date.
     “ Reuters Page LIBOR01 ” means the display designated as “LIBOR01” on Reuters 3000 Xtra (or any successor service) (or such other page as may replace Page LIBOR01 on Reuters 3000 Xtra) or any successor service, for the purpose of displaying the London interbank rates of major banks for United States dollars.
     Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.
     The Securities will constitute part of the Company’s senior debt and will rank on a parity with all of its other unsecured and unsubordinated debt.
 4 

 

     Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
     Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
 5 

 

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.
Dated: March 14, 2007
 	 	 	 	 	
 	MASCO CORPORATION
 	 	
 	By:  	 	 	
 	 	Richard A. Manoogian 	 	
 	 	Chairman of the Board and Chief Executive Officer 	 	

Attest:	 	 	 	 	
 	 	 
Eugene A. Gargaro, Jr.
Vice President and Secretary	 	 	
 6 

 

FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION
     This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
Date of Authentication: March 14, 2007
 	 	 	 	 	
 	The Bank of New York Trust Company, N.A.
 	 	
 	By:  	 	 	
 	 	Authorized Officer 	 	

 7 

 

REVERSE OF SECURITY
     This Security is one of a duly authorized issue of securities of the Company (herein called the “ Securities ”), issued and to be issued in one or more series under an Indenture, dated as of February 12, 2001 as supplemented by the Supplemental Indenture dated as of November 30, 2006 (herein called the “ Indenture ”), between the Company and The Bank of New York Trust Company, N.A. (as successor under agreement originally with Bank One Trust Company, National Association), as Trustee (herein called the “ Trustee ,” which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of a series designated on the face hereof, initially limited in aggregate principal amount to $300,000,000.
     If a Change of Control Repurchase Event occurs, the Company will make an offer to the Holders of Securities to repurchase all or any part (in integral multiples of $1,000) of that Holders’ Securities at a repurchase price in cash equal to 101% of the aggregate principal amount of Securities repurchased plus any accrued and unpaid interest on the Securities repurchased to the date of purchase. Within 30 days following any Change of Control Repurchase Event or, at the Company’s option, prior to any Change of Control, but after the public announcement of the Change of Control, the Company will mail a notice to each Holder, with a copy to the Trustee, describing the transaction or transactions that constitute or may constitute the Change of Control Repurchase Event and offering to repurchase Securities on the Payment Date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed. The notice shall, if mailed prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Repurchase Event occurring on or prior to the Payment Date specified in the notice. The Company will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Securities as a result of a Change of Control Repurchase Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Repurchase Event provisions of the Securities, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control Repurchase Event provisions of the Securities by virtue of such conflict.
     On the Change of Control Repurchase Event Payment Date, the Company will, to the extent lawful:
 8 

 

 	1.	 	accept for payment all Securities or portions of Securities properly tendered pursuant to the Company’s offer;	
 		
 	2.	 	deposit with the Paying Agent an amount equal to the aggregate purchase price in respect of all Securities or portions of Securities properly tendered; and	
 		
 	3.	 	deliver or cause to be delivered to the Trustee the Securities properly accepted, together with an officers’ certificate stating the aggregate principal amount of Securities being purchased by the Company.	
               The Paying Agent will promptly mail to each Holder of Securities properly tendered the purchase price for the Securities, and the Trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each holder a new Security equal in principal amount to any unpurchased portion of any Securities surrendered; provided that each new Security will be in a principal amount of $1,000 or an integral multiple of $1,000.
               The Company will not be required to make an offer to repurchase the Securities upon a Change of Control Repurchase Event if a third party makes such an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by the Company and such third party purchases all Securities properly tendered and not withdrawn under its offer.
               “ Below Investment Grade Rating Event ” means the Securities are rated below investment grade by both Rating Agencies on any date from the date of the public notice of an arrangement that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of a Change of Control (which period shall be extended so long as the rating of the Securities is under publicly announced consideration for possible downgrade by either of the rating agencies); provided that a below investment grade rating event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of Change of Control Repurchase Event hereunder) if the rating agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the Trustee in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Below Investment Grade Rating Event).
               “ Change of Control ” means the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act),
 9 

 

becomes the beneficial owner, directly or indirectly, of more than 50% of the Company’s voting stock, measured by voting power rather than number of shares.
     “ Change of Control Repurchase Event ” means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.
      “Investment Grade ” means a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating categories of Moody’s); a rating of BBB- or better by S&P (or its equivalent under any successor rating categories of S&P); and the equivalent investment grade credit rating from any additional Rating Agency or Rating Agencies selected by the Company.
     “ Moody’s ” means Moody’s Investors Service Inc.
     “ Paying Agent ” means The Bank of New York Trust Company, N.A.
     “ Rating Agency ” means (1) each of Moody’s and S&P; and (2) if either of Moody’s or S&P ceases to rate the Securities or fails to make a rating of the Securities publicly available for reasons outside of the Company’s control, a “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by the Company (as certified by a resolution of the Company’s board of directors) as a replacement agency for Moody’s or S&P, or both, as the case may be.
     “ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.
     “ Voting Stock ” of any specified “person” (as that term is used in Section 13(d)(3) of the Exchange Act) as of any date means the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person.
     This Security will be subject to defeasance and discharge and to defeasance of certain obligations as set forth in the Indenture.
     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be
 10 

 

conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
     As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.
     No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security herein provided, and at the times, place and rate, and in the coin or currency, herein prescribed.
     As provided in the Indenture and subject to certain limitations set forth therein and on the face of this Security, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
     The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series of a different authorized denomination, as requested by the Holder surrendering the same.
 11 

 

     No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
     Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
     All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
 12 

Exhibit 4.b.ii.
RESOLUTIONS OF THE PRICING COMMITTEE
OF THE BOARD OF DIRECTORS OF
MASCO CORPORATION
March 9, 2007
     WHEREAS, Masco Corporation, a Delaware corporation (the “Company”) the Company has filed a Registration Statement (No. 333-140970) on Form S-3 with the Securities and Exchange Commission, which is in effect;
     WHEREAS, the Company desires to create two series of securities under the Indenture dated as of February 12, 2001, as supplemented by the Supplemental Indenture dated as of November 30, 2006 (the “Indenture”), with The Bank of New York Trust Company, N. A. (as successor trustee under agreement originally with Bank One Trust Company, National Association) (the “Trustee”), providing for the issuance from time to time of unsecured debentures, notes or other evidences of indebtedness of this Company (“Securities”) in one or more series under such Indenture; and
     WHEREAS, capitalized terms used in these resolutions and not otherwise defined are used with the same meaning ascribed to such terms in the Indenture;
     THEREFORE, BE IT RESOLVED, that there is established a series of Securities under the Indenture, the terms of which shall be as follows:
     (....)
      2017 Notes
     1. The Securities of one series shall be designated as the “5.85% Notes Due 2017.”
     2. The aggregate principal amount of Securities of such series which may be authenticated and delivered under the Indenture is limited to Three Hundred Million ($300,000,000), except for Securities of such series authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of, other Securities of such series pursuant to Sections 3.04, 3.05, 3.06, 9.06 or 11.07 of the Indenture.
     3. The date on which the principal of the Securities of such series shall be payable is March 15, 2017. Such Securities are not subject to any sinking fund.
     4. The Securities of such series shall bear interest from March 14, 2007 at the rate of 5.85% per annum, payable semi-annually in arrears on March 15 and September 15 of each year commencing on September 15, 2007 until the

 

principal there of is paid or made available for payment. The March 1 and September 1 (whether or not a business day), as the case may be, next preceding each such interest payment date shall be the “record date” for the determination of holders to who interest is payable
     5. The Securities of such series shall be issued initially in the form of global securities registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), and will be held by the Trustee as custodian for DTC. The Securities shall be subject to the procedures of DTC and will not be issued in definitive registered form.
     6. The principal of and interest on the Securities of such series shall be payable at the office or agency of this Company maintained for such purpose in Chicago, Illinois or at any other office or agency designated by the Company for such purpose pursuant to the Indenture.
     7. The Securities of such series shall be subject to redemption in whole or in part prior to maturity, at the Company’s option, at a redemption price established in accordance with current market practice, substantially as follows: the redemption price shall be equal to the greater of (i) 100% of the principal amount of the Securities plus accrued interest to the redemption date, or (ii) the sum of the present values of the remaining principal amount and scheduled payments of interest on the Securities of such series to be redeemed (other than accrued interest to the redemption date), discounted to the redemption date on a semi-annual basis at the appropriate treasury rate plus 20 basis points plus accrued interest to the redemption date.
     8. The Securities of such series shall be issuable in denominations of One Thousand Dollars ($1,000) and any integral multiples thereof.
     9. The Securities of such series of shall be issuable at a price such that this Company shall receive Two Hundred Ninety Six Million Nine Hundred Ninety Four Thousand Dollars ($296,994,000) after an underwriting discount of One Million Nine Hundred Fifty Thousand Dollars ($1,950,000).
     10. The Securities of such series shall be subject to Defeasance and discharge pursuant to Section 4.02 of the Indenture and to Covenant Defeasance pursuant to Section 10.06 of the Indenture with respect to any term, provision or condition set forth in any negative or restrictive covenant of the Company applicable to the Securities.
     11. The Securities shall be subject to the following change of control repurchase event:
            If a Change of Control Repurchase Event occurs, the Company will make an offer to each holder of Securities to repurchase all or any part (in

 

integral multiples of $1,000) of that holders’ Securities at a repurchase price in cash equal to 101% of the aggregate principal amount of Securities repurchased plus any accrued and unpaid interest on the Securities repurchased to the date of purchase. Within 30 days following any Change of Control Repurchase Event or, at the Company’s option, prior to any Change of Control, but after the public announcement of the Change of Control, the Company will mail a notice to each holder, with a copy to the Trustee, describing the transaction or transactions that constitute or may constitute the Change of Control Repurchase Event and offering to repurchase Securities on the payment date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed. The notice shall, if mailed prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Repurchase Event occurring on or prior to the payment date specified in the notice. The Company will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Securities as a result of a Change of Control Repurchase Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Repurchase Event provisions of the Securities, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control Repurchase Event provisions of the Securities by virtue of such conflict.
     On the Change of Control Repurchase Event payment date, the Company will, to the extent lawful:

 	1.	 	accept for payment all Securities or portions of Securities properly tendered pursuant to the Company’s offer;	
 		
 	2.	 	deposit with the paying agent an amount equal to the aggregate purchase price in respect of all Securities or portions of Securities properly tendered; and	
 		
 	3.	 	deliver or cause to be delivered to the Trustee the Securities properly accepted, together with an officers’ certificate stating the aggregate principal amount of Securities being purchased by the Company.	
The paying agent will promptly mail to each holder of Securities properly tendered the purchase price for the Securities, and the Trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each holder a new Security equal in principal amount to any unpurchased portion of any Securities surrendered; provided that each new Security will be in a principal amount of $1,000 or an integral multiple of $1,000.

 

     The Company will not be required to make an offer to repurchase the Securities upon a Change of Control Repurchase Event if a third party makes an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by the Company and such third party purchases all Securities properly tendered and not withdrawn under it offer.
     “Below Investment Grade Rating Event” means the Securities are rated below investment grade by both Rating Agencies on any date from the date of the public notice of an arrangement that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of a Change of Control (which period shall be extended so long as the rating of the Securities is under publicly announced consideration for possible downgrade by either of the Rating Agencies); provided that a Below Investment Grade Rating Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of Change of Control Repurchase Event hereunder) if the rating agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the Trustee in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Below Investment Grade rating Event).
     “Change of Control” means the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act), becomes the beneficial owner, directly or indirectly, of more than 50% of the Company’s voting stock, measured by voting power rather than number of shares.
     “Change of Control Repurchase Event” means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.
     “Investment Grade” means a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating categories of Moody’s); a rating of BBB- or better by S&P (or its equivalent under any successor rating categories of S&P); and the equivalent investment grade credit rating from any additional rating agency or rating agencies selected by the Company.
     “Moody’s” means Moody’s Investors Service Inc.
     “Rating Agency” means (1) each of Moody’s and S&P; and (2) if either of Moody’s or S&P ceases to rate the Securities or fails to make a rating of the Securities publicly available for reasons outside of its control, a “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by the Company (as certified by a

 

resolution of the Board of Directors) as a replacement agency for Moody’s or S&P, or both, as the case may be.
     “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.
     “Voting Stock” of any specified person (as that term is used in Section 13(d)(3) of the Exchange Act) as of any date means the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person.
     FURTHER RESOLVED, that the Securities of each such series are declared to be issued under the Indenture and subject to the provisions hereof;
     FURTHER RESOLVED, that the Chairman of the Board, the President or any Vice President of the Company is authorized to execute, on the Company’s behalf and in its name, and the Secretary or any Assistant Secretary of the Company is authorized to attest to such execution and under the Company’s seal (which may be in the form of a facsimile of the Company’s seal), $300,000,000 aggregate principal amount of the Floating Rate Notes Due 2010 (the “2010 Notes”) and $300,000,000 of the 5.85% Notes Due 2017 (the “2017 Notes”) (and in addition, in each case, Securities to replace lost, stolen, mutilated or destroyed Securities and Securities required for exchange, substitution or transfer, all as provided in the Indenture) and to deliver such Securities to the Trustee for authentication, and the Trustee is authorized and directed thereupon to authenticate and deliver the same to or upon the written order of this Company as provided in the Indenture;
     FURTHER RESOLVED, that the signatures of the Company officers so authorized to execute the Securities of such series may be the manual or facsimile signatures of the present or any future authorized officers and may be imprinted or otherwise reproduced thereon, and the Company for such purpose adopts each facsimile signature as binding upon it notwithstanding the fact that at the time the respective Securities shall be authenticated and delivered or disposed of, the individual so signing shall have ceased to hold such office;
     FURTHER RESOLVED, that Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are appointed joint book-running managers of the underwriters for the issuance and sale of the Securities of such series, and the Chairman of the Board, the President or any Vice President of the Company is authorized, in the Company’s name and on its behalf, to execute and deliver an Underwriting Agreement, substantially in the form heretofore approved by the Company’s Board of Directors, with the underwriters, with such changes and insertions therein as are appropriate to conform such Underwriting Agreement to the terms set forth herein or otherwise as the officer executing such Underwriting Agreement shall approve and as are not inconsistent with these resolutions, such approval to be

 

conclusively evidenced by such officer’s execution and delivery of the Underwriting Agreement;
     FURTHER RESOLVED, that The Bank of New York Trust Company, N. A., the Trustee under the Indenture, is appointed trustee for Securities of such series, and as Agent of this Company for the purpose of effecting the registration, transfer and exchange of the Securities of such series as provided in the Indenture, and the corporate trust office of The Bank of New York Trust Company, N. A., in Chicago, Illinois is designated pursuant to the Indenture as the office or agency of the Company where such Securities may be presented for registration, transfer and exchange and where notices and demands to or upon this Company in respect of the Securities and the Indenture may be served;
     FURTHER RESOLVED, that The Bank of New York Trust Company, N. A. is appointed Paying Agent of this Company for the payment of interest on and principal of the Securities of such series, and Calculation Agent for the purpose of calculating the applicable interest rate or rates of the 2010 Notes in accordance with the terms of such Securities and the Indenture, and the corporate trust office of The Bank of New York Trust Company, N. A., is designated, pursuant to the Indenture, as the office or agency of the Company where Securities may be presented for payment; and
     FURTHER RESOLVED, that each of the Company’s officers is authorized and directed, on behalf of the Company and in its name, to do or cause to be done everything such officer deems advisable to effect the sale and delivery of the Securities of such series pursuant to the Underwriting Agreement and otherwise to carry out the Company’s obligations under the Underwriting Agreement, and to do or cause to be done everything and to execute and deliver all documents as such officer deems advisable in connection with the execution and delivery of the Underwriting Agreement and the execution, authentication and delivery of such Securities (including, without limiting the generality of the foregoing, delivery to the Trustee of the Securities for authentication and of requests or orders for the authentication and delivery of Securities).

 

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, 55 WATER STREET, NEW YORK, NEW YORK (THE “DEPOSITARY”), TO MASCO CORPORATION OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
MASCO CORPORATION
5.85% Notes Due 2017
 	 	 	 	 	
CUSIP No. 574599BF2	 	$	300,000,000	 	
No. R-1	 	 	 	 	
     Masco Corporation, a corporation duly organized and existing under the laws of Delaware (herein called the “ Company ,” which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO. or registered assigns, the principal sum of Three Hundred Million Dollars on March 15, 2017, and to pay interest thereon from March 14, 2007 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on September 15 and March 15 in each year, commencing September 15, 2007, at the rate of 5.85% per annum, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the March 1 or September 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date; provided, however, that interest payable at maturity will be payable to the person to whom the principal hereof will be payable. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any

 

other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Interest on the Securities shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
     Payment of the principal of (and premium, if any) and any such interest on this Security will be made at the office or agency of the Company maintained for that purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register.
     The Securities will constitute part of the Company’s senior debt and will rank on a parity with all of its other unsecured and unsubordinated debt.
     Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
     Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
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     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.
Dated: March 14, 2007
 	 	 	 	 	 	 	
 	 	MASCO CORPORATION	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	 	 	 	
 	 	 	 	 
Richard A. Manoogian	 	  	
 	 	 	 	Chairman of the Board and Chief Executive Officer	 	 	
 	 	 	 	 	
Attest:	 	 	 	 	
 	 	 
Eugene A. Gargaro, Jr.	 	  	
 	 	Vice President and Secretary	 	 	
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FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION
     This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
Date of Authentication: March 14, 2007
 	 	 	 	 	 	 	
 	 	The Bank of New York Trust Company, N.A.	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	 	 	 	
 	 	 	 	 
Authorized Officer	 	  	
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REVERSE OF SECURITY
     This Security is one of a duly authorized issue of securities of the Company (herein called the “ Securities ”), issued and to be issued in one or more series under an Indenture, dated as of February 12, 2001 as supplemented by the Supplemental Indenture dated as of November 30, 2006 (herein called the “ Indenture ”), between the Company and The Bank of New York Trust Company, N.A. (as successor under agreement originally with Bank One Trust Company, National Association), as Trustee (herein called the “ Trustee ,” which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, initially limited in aggregate principal amount to $300,000,000.
     The Securities will be redeemable at the option of the Company, in whole at any time or in part from time to time (each, a “ Redemption Date ”) at a redemption price equal to the greater of (i) 100% of their principal amount plus accrued interest to the Redemption Date and (ii) the sum, as determined by the Independent Investment Banker, of the present values of the principal amount and the remaining scheduled payments of interest on the Securities to be redeemed (exclusive of interest accrued to such Redemption Date), discounted from the scheduled payment dates to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 25 basis points plus accrued but unpaid interest thereon to the Redemption Date. Notwithstanding the foregoing, installments of interest on Securities that are due and payable on an interest payment date falling on or prior to the relevant Redemption Date will be payable to the holders of such Securities registered as such at the close of business on the relevant record date according to their terms and the provisions of the Indenture.
     If a Change of Control Repurchase Event occurs, unless the Company has exercised its right to redeem the Securities, the Company will make an offer to the Holders of Securities to repurchase all or any part (in integral multiples of $1,000) of that Holders’ Securities at a repurchase price in cash equal to 101% of the aggregate principal amount of Securities repurchased plus any accrued and unpaid interest on the Securities repurchased to the date of purchase. Within 30 days following any Change of Control Repurchase Event or, at the Company’s option, prior to any Change of Control, but after the public announcement of the Change of Control, the Company will mail a notice to each Holder, with a copy to the Trustee, describing the transaction or transactions that constitute or may constitute the Change of Control Repurchase Event and offering to repurchase Securities on the Payment Date specified in the notice, which date will be no earlier than
 5 

 

30 days and no later than 60 days from the date such notice is mailed. The notice shall, if mailed prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Repurchase Event occurring on or prior to the Payment Date specified in the notice. The Company will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Securities as a result of a Change of Control Repurchase Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Repurchase Event provisions of the Securities, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control Repurchase Event provisions of the Securities by virtue of such conflict.
     On the Change of Control Repurchase Event Payment Date, the Company will, to the extent lawful:

 	1.	 	accept for payment all Securities or portions of Securities properly tendered pursuant to the Company’s offer;	
 		
 	2.	 	deposit with the Paying Agent an amount equal to the aggregate purchase price in respect of all Securities or portions of Securities properly tendered; and	
 		
 	3.	 	deliver or cause to be delivered to the Trustee the Securities properly accepted, together with an officers’ certificate stating the aggregate principal amount of Securities being purchased by the Company.	
     The Paying Agent will promptly mail to each Holder of Securities properly tendered the purchase price for the Securities, and the Trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each holder a new Security equal in principal amount to any unpurchased portion of any Securities surrendered; provided that each new Security will be in a principal amount of $1,000 or an integral multiple of $1,000.
     The Company will not be required to make an offer to repurchase the Securities upon a Change of Control Repurchase Event if a third party makes such an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by the Company and such third party purchases all Securities properly tendered and not withdrawn under its offer.
     “ Below Investment Grade Rating Event ” means the Securities are rated below investment grade by both Rating Agencies on any date from the date of the public notice of an arrangement that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of a Change of
 6 

 

Control (which period shall be extended so long as the rating of the Securities is under publicly announced consideration for possible downgrade by either of the rating agencies); provided that a below investment grade rating event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of Change of Control Repurchase Event hereunder) if the rating agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the Trustee in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Below Investment Grade Rating Event).
     “ Change of Control ” means the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act), becomes the beneficial owner, directly or indirectly, of more than 50% of the Company’s voting stock, measured by voting power rather than number of shares.
     “ Change of Control Repurchase Event ” means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.
     “ Comparable Treasury Issue ” means the United States Treasury security selected by the Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities to be redeemed.
     “ Comparable Treasury Price ” means, with respect to any Redemption Date, the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.
     “ Independent Investment Banker ” means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company.
     “I nvestment Grade ” means a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating categories of Moody’s); a rating of BBB- or better by S&P (or its equivalent under any successor rating categories of S&P); and the equivalent investment grade credit rating from any additional Rating Agency or Rating Agencies selected by the Company.
 7 

 

     “ Moody’s ” means Moody’s Investors Service Inc.
     “ Paying Agent ” means the The Bank of New York Trust Company, N.A.
     “ Rating Agency ” means (1) each of Moody’s and S&P; and (2) if either of Moody’s or S&P ceases to rate the Securities or fails to make a rating of the Securities publicly available for reasons outside of the Company’s control, a “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by the Company (as certified by a resolution of the Company’s board of directors) as a replacement agency for Moody’s or S&P, or both, as the case may be.
     “ Reference Treasury Dealer ” means (a) each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and their respective successors, unless either of them ceases to be a primary U.S. Government securities dealer in New York City (a “Primary Treasury Dealer”), in which case the Company shall substitute another Primary Treasury Dealer; and (b) any other Primary Treasury Dealer selected by the Company.
     “ Reference Treasury Dealer Quotations ” means, with respect to each Reference Treasury Dealer and any Redemption Date for the Securities, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. New York City time, on the third Business Day preceding such Redemption Date.
     “ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.
     “ Treasury Rate ” means, with respect to any Redemption Date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated on the third Business Day preceding such Redemption Date using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury price for such Redemption Date.
     “ Voting Stock ” of any specified “person” (as that term is used in Section 13(d)(3) of the Exchange Act) as of any date means the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person.
     This Security will be subject to defeasance and discharge and to defeasance of certain obligations as set forth in the Indenture.
 8 

 

     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
     As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.
     No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security herein provided, and at the times, place and rate, and in the coin or currency, herein prescribed.
     As provided in the Indenture and subject to certain limitations therein and on face of this Security, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly
 9 

 

authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
     The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series of a different authorized denomination, as requested by the Holder surrendering the same.
     No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
     Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
     All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
 10 

Exhibit 12
MASCO CORPORATION
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	(Dollars in Millions)	 	
 	 	Three	 	 	 	 	
 	 	Months	 	 	 	 	
 	 	Ended	 	 	 	 	
 	 	March 31,	 	 	Year Ended December 31,  	 	
 	 	2007  	 	 	2006	 	 	2005 	 	 	2004	 	 	2003	 	 	2002	 	
Earnings Before Income Taxes, Preferred Stock Dividends and Fixed Charges:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Income from continuing operations before income taxes, minority interest and cumulative effect of accounting change, net	 	$	236	 	 	$	900	 	 	$	1,402	 	 	$	1,534	 	 	$	1,243	 	 	$	927	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Deduct equity in undistributed (earnings) of fifty-percent-or- less-owned companies	 	 	—	 	 	 	(1	)	 	 	(1	)	 	 	(1	)	 	 	—	 	 	 	(10	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add interest on indebtedness, net	 	 	64	 	 	 	241	 	 	 	246	 	 	 	214	 	 	 	252	 	 	 	226	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add amortization of debt expense	 	 	1	 	 	 	4	 	 	 	6	 	 	 	6	 	 	 	13	 	 	 	13	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add estimated interest factor for rentals	 	 	14	 	 	 	53	 	 	 	40	 	 	 	34	 	 	 	31	 	 	 	24	 	

  Earnings before income taxes, minority interest, cumulative effect of accounting change, net, fixed charges and preferred stock dividends 	 	$	315	 	 	$	1,197	 	 	$	1,693	 	 	$	1,787	 	 	$	1,539	 	 	$	1,180	 	

Fixed Charges:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Interest on indebtedness	 	$	65	 	 	$	241	 	 	$	244	 	 	$	214	 	 	$	253	 	 	$	225	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Amortization of debt expense	 	 	1	 	 	 	4	 	 	 	6	 	 	 	6	 	 	 	13	 	 	 	13	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Estimated interest factor for rentals	 	 	14	 	 	 	53	 	 	 	40	 	 	 	34	 	 	 	31	 	 	 	24	 	

Total fixed charges       	 	$	80	 	 	$	298	 	 	$	290	 	 	$	254	 	 	$	297	 	 	$	262	 	

Preferred stock dividends(a)	 	$	—	 	 	$	—	 	 	$	—	 	 	$	8	 	 	$	16	 	 	$	14	 	

Combined fixed charges and preferred stock dividends	 	$	80	 	 	$	298	 	 	$	290	 	 	$	262	 	 	$	313	 	 	$	276	 	

Ratio of earnings to fixed charges	 	 	3.9	 	 	 	4.0	 	 	 	5.8	 	 	 	7.0	 	 	 	5.2	 	 	 	4.5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ratio of earnings to combined fixed charges and preferred stock dividends	 	 	3.9	 	 	 	4.0	 	 	 	5.8	 	 	 	6.8	 	 	 	4.9	 	 	 	4.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ratio of earnings to combined fixed charges and preferred stock dividends excluding certain items (b)	 	 	3.9	 	 	 	5.5	 	 	 	6.2	 	 	 	7.2	 	 	 	4.9	 	 	 	4.8	 	

			
(a)	 	Represents amount of income before provision for income taxes required to meet the preferred stock dividend requirements of the Company.	
 		
(b)	 	Excludes the 2006 non-cash, pre-tax impairment charges for goodwill and financial investments of $331 million and $101 million, respectively, and the pre-tax income related to the Behr litigation settlement of $1 million; the 2005 pre-tax income related to the Behr litigation settlement of $6 million, the non-cash, pre-tax impairment charges for goodwill and financial investments of $69 million and $45 million, respectively; the 2004 pre-tax income related to the Behr litigation settlement of $30 million, the non-cash, pre-tax impairment charges for goodwill of $112 million and the pre-tax impairment charge of $21 million related to a marketable security; the 2003 pre-tax income related to the Behr litigation settlement of $72 million and the non-cash, pre-tax goodwill impairment charges of $53 million; and the 2002 pre-tax net charge of $147 million related to the Behr litigation settlement.	
 24 

Exhibit 31a
MASCO CORPORATION
Certification Required by Rule 13a-14(a) or 15d-14(a)
of the Securities Exchange Act of 1934
I, Richard A. Manoogian, certify that:

1.	 	I have reviewed this quarterly report on Form 10-Q of Masco Corporation (the Registrant);	
 		
2.	 	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 		
3.	 	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 		
4.	 	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	a)	 	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 		
 	b)	 	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 		
 	c)	 	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and	
 		
 	d)	 	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	 	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	a)	 	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 		
 	b)	 	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

Date: May 3, 2007 	By:  	/s/ Richard A. Manoogian	 	
 	 	Richard A. Manoogian 	 	
 	 	Chief Executive Officer 	 	

 

 	 	 	 	 	
Exhibit 31b
MASCO CORPORATION
Certification Required by Rule 13a-14(a) or 15d-14(a)
of the Securities Exchange Act of 1934
I, Timothy Wadhams, certify that:

1.	 	I have reviewed this quarterly report on Form 10-Q of Masco Corporation (the Registrant);	
 		
2.	 	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 		
3.	 	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 		
4.	 	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	a)	 	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 		
 	b)	 	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 		
 	c)	 	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and	
 		
 	d)	 	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	 	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	a)	 	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 		
 	b)	 	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

Date: May 3, 2007 	By:  	/s/ Timothy Wadhams	 	
 	 	Timothy Wadhams 	 	
 	 	Senior Vice President and
Chief Financial Officer 	 	

 

 	 	 	 	 	
Exhibit 32
MASCO CORPORATION
Certification Required by Rule 13a-14(b) or 15d-14(b)
of the Securities Exchange Act of 1934 and
Section 1350 of Chapter 63 of Title 18 of the
United States Code
     The certification set forth below is being submitted in connection with the Masco Corporation Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
     Richard A. Manoogian, the Chief Executive Officer, and Timothy Wadhams, the Senior Vice President and Chief Financial Officer, of Masco Corporation, each certifies that, to the best of his knowledge:

 	1.	 	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
 		
 	2.	 	The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of Masco Corporation.	
 	 	 	 	 	
Date: May 3, 2007	 	/s/ Richard A. Manoogian
 
Name: Richard A. Manoogian
Title: Chief Executive Officer	 	 	
 	 	 	 	 	
Date: May 3, 2007	 	/s/ Timothy Wadhams
 
Name: Timothy Wadhams
Title: Senior Vice President and
Chief Financial Officer