SECOND QUARTER 2009 AND THE FIRST SIX MONTHS 2009 VERSUS
SECOND QUARTER 2008 AND THE FIRST SIX MONTHS 2008
                              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
                                             June 30,              (Decrease) Increase
                                         2009          2008           2009 vs. 2008
  Net Sales:
  Cabinets and Related Products       $      419      $   608                       (31 %)
  Plumbing Products                          654          857                       (24 %)
  Installation and Other Services            312          508                       (39 %)
  Decorative Architectural Products          505          476                         6 %
  Other Specialty Products                   146          194                       (25 %)

  Total                               $    2,036      $ 2,643                       (23 %)


  North America                       $    1,630      $ 2,067                       (21 %)
  International, principally Europe          406          576                       (30 %)

  Total                               $    2,036      $ 2,643                       (23 %)


                                         Six Months Ended
                                             June 30,
                                         2009          2008
  Net Sales:
  Cabinets and Related Products       $      814      $ 1,204                       (32 %)
  Plumbing Products                        1,260        1,678                       (25 %)
  Installation and Other Services            629          994                       (37 %)
  Decorative Architectural Products          891          855                         4 %
  Other Specialty Products                   261          362                       (28 %)

  Total                               $    3,855      $ 5,093                       (24 %)


  North America                       $    3,064      $ 3,960                       (23 %)
  International, principally Europe          791        1,133                       (30 %)

  Total                               $    3,855      $ 5,093                       (24 %)




                                                 Three Months Ended         Six Months Ended
                                                      June 30,                  June 30,
                                                  2009          2008        2009        2008
 Operating Profit (Loss) Margins: (A)
 Cabinets and Related Products                     (2.9 %)       6.1 %      (4.9 %)      5.4 %
 Plumbing Products                                 10.7 %       12.5 %       7.9 %      12.3 %
 Installation and Other Services                  (10.9 %)        .8 %     (11.1 %)      (.2 %)
 Decorative Architectural Products                 23.0 %       18.7 %      21.4 %      19.1 %
 Other Specialty Products                           4.8 %        6.7 %         - %       5.8 %

 North America                                      7.3 %        9.7 %       4.5 %       8.8 %
 International, principally Europe                  6.9 %        8.7 %       5.4 %       9.2 %
 Total                                              7.2 %        9.5 %       4.7 %       8.9 %

 Total operating profit margin, as reported         5.5 %        8.1 %       2.7 %       7.2 %

(A) Before general
corporate
expense, net,
the accelerated
stock
compensation
expense, the
charge for the
defined-benefit
plan
curtailment,
the (loss) on
corporate fixed
assets, net,
and the charge
for planned
disposition of
business; see
Note L to the
condensed
consolidated
financial
statements.

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 decreased for both the three-month and six-month periods ended
June 30, 2009 from the comparable periods of 2008. Excluding results from
acquisitions and the effect of currency translation, net sales decreased
20 percent and 21 percent, respectively, for the three-month and six-month
periods ended June 30, 2009. The following table reconciles reported net sales
to net sales, excluding acquisitions and the effect of currency translation, in
millions:

                                                  Three Months Ended                Six Months Ended
                                                       June 30,                         June 30,
                                                 2009             2008            2009            2008
Net sales, as reported                        $    2,036         $ 2,643        $   3,855        $ 5,093
Acquisitions                                          (3 )             -               (9 )            -


Net sales, excluding acquisitions                  2,033           2,643            3,846          5,093
Currency translation                                  80               -              165              -


Net sales, excluding acquisitions and
the effect of currency translation            $    2,113         $ 2,643        $   4,011        $ 5,093

Net sales from North American operations decreased in 2009, primarily due to the continuing decline in the new home construction market, which reduced sales by 14 percent in both the three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008 and a continued decline in consumer spending for home improvement products, which reduced sales by ten percent and 11 percent, respectively, in the three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. North American net sales for both the three-month and six-month periods ended June 30, 2009 were negatively affected by lower sales volume of installation and other services, plumbing products, cabinets and windows. Such sales declines were partially offset by increased sales of paints and stains and increased selling prices for certain products.
In local currencies, net sales from International operations decreased 17 percent in both the three-month and six-month periods ended June 30, 2009, primarily due to lower sales volume of International plumbing products, cabinets and windows, partially offset by selling price increases. Net sales from International operations decreased in 2009, due to a stronger U.S. dollar, which decreased International net sales by 12 percent and 13 percent in the three-month and six-month periods ended June 30, 2009, respectively, compared to the same periods of 2008.

Net sales of Cabinets and Related Products decreased in 2009, due to lower sales volume of cabinets in the new home construction and retail markets, as well as a less favorable product mix, which, combined, reduced sales in this segment by 25 percent and 27 percent, respectively, in the three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. A stronger U.S. dollar decreased sales by three percent in both the three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. In local currencies, net sales of International operations reduced sales in this segment by six percent and five percent, respectively, in the three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. Segment sales declines were partially offset by selling price increases and acquisitions.
Net sales of Plumbing Products decreased in 2009, due to lower sales volume to North American retailers and wholesalers, which reduced sales by 14 percent and 13 percent, respectively, in the three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. A stronger U.S. dollar decreased sales by six percent and seven percent, respectively, in the three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. In local currencies, net sales of International operations reduced sales in this segment by eight percent in both the three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. Segment sales declines were partially offset by selling price increases.
Net sales of Installation and Other Services decreased for both the three-month and six-month periods ended June 30, 2009, primarily due to significantly lower sales volume related to the continuing slowdown in the new home construction market.
Net sales of Decorative Architectural Products increased in 2009, primarily due to increased retail sales volume and late 2008 selling price increases related to paints and stains, which offset lower retail sales volume of builders' hardware. Sales of paints and stains benefited from new product introductions and promotional activities.
Net sales of Other Specialty Products decreased in 2009, primarily due to lower sales volume of windows related to the continued slowdown in the new home construction market, particularly in the western United States, and selling price decreases which, on a combined basis, decreased sales in this segment by 13 percent and 17 percent, respectively, in the three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. Net sales in this segment also decreased by three percent in both the three-month and six-month periods ended June 30, 2009, compared to the same periods in 2008, due to a decline in retail sales of staple gun tackers and other fastening tools. A stronger U.S. dollar decreased sales by five percent and six percent, respectively, in the three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. In local currencies, net sales of International operations reduced sales in this segment by two percent and three percent, respectively, in the three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008.

The increase in operating profit margins for the Decorative Architectural Products segment for both the three-month and six-month periods ended June 30, 2009 is primarily due to increased sales volume and selling price increases related to paints and stains which offset increased material costs and lower advertising costs related to builders' hardware and lower sales volume of builders' hardware.
The decrease in operating profit margins for the Other Specialty Products segment for both the three-month and six-month periods ended June 30, 2009 reflects lower sales volume of windows and staple gun tackers and other fastening tools and the related under-absorption of fixed costs, as well as increased severance and plant closure costs and a less favorable product mix.
OTHER INCOME (EXPENSE), NET Other items, net, for the three-month and six-month periods ended June 30, 2009 included $11 million and $9 million, respectively, of currency gains.
For the three-month and six-month periods ended June 30, 2009, the Company recognized non-cash, pre-tax impairment charges of $7 million and $10 million, respectively, related to financial investments in private equity funds.
Other, net, for the six-month period ended June 30, 2008 included $3 million of realized losses, net, from the sale of marketable securities. Other, net, for both the three-month and six-month periods ended June 30, 2008 also included $3 million of income from other investments, net. Other items, net, for the three-month and six-month periods ended June 30, 2008 included $4 million and $15 million, respectively, of currency losses.
For the three-month and six-month periods ended June 30, 2008, the Company recognized a non-cash, pre-tax impairment charge of $3 million and $7 million, respectively, related to financial investments in private equity funds. For the six-month period ended June 30, 2008, the Company recognized a non-cash, pre-tax impairment charge of $22 million related to its investment in a marketable security.
Interest expense was $57 million for both the three-month period ended June 30, 2009 and 2008. Interest expense was $113 million for both the six-month periods ended June 30, 2009 and 2008.
INCOME (LOSS) AND EARNINGS (LOSS) PER COMMON SHARE FROM CONTINUING OPERATIONS Income (loss) from continuing operations (attributable to Masco Corporation) for the three-month and six-month periods ended June 30, 2009 was $54 million and $(27) million, respectively, compared with $72 million and $90 million, respectively, for the comparable periods of 2008. Diluted earnings (loss) per common share from continuing operations (attributable to Masco Corporation) for the three-month and six-month periods ended June 30, 2009 were $.15 per common share and $(.08) per common share, respectively, compared with $.20 per common share and $.24 per common share, respectively, for the comparable periods of 2008.

For the three months and six months ended June 30, 2009, the Company reported tax expense of $1 million and $9 million, respectively. Compared to a normal tax rate of approximately 36 percent, the tax rate in the second quarter of 2009 had a positive impact of $.06 per common share. A discrete calculation was used to report tax expense rather than an estimated annual tax rate, as the estimated range of the annual loss for the Company in 2009 produces significant variability and makes it difficult to reasonably estimate the annual effective tax rate. While the Company expects a full-year loss, the Company expects to have tax expense for the year primarily due to losses in certain jurisdictions providing no tax benefit. The Company's effective tax rate was 47 percent and 50 percent, respectively, for the three-month and six-month periods ended June 30, 2008.
OTHER FINANCIAL INFORMATION The Company's current ratio was 1.8 to 1 and 2.1 to 1, respectively, at June 30, 2009 and December 31, 2008.
For the six months ended June 30, 2009, cash of $110 million was provided by operating activities. Net cash used for financing activities was $142 million, and included $112 million for the payment of cash dividends and $11 million for the acquisition of Company common stock in open-market transactions to offset the dilutive impact of stock awards. Net cash used for investing activities was $61 million and included $50 million for capital expenditures.
First six months 2009 cash from operations was affected by an expected and annually recurring first half increase in accounts receivable compared with December 31, 2008.
The Company's cash and cash investments decreased to $926 million at June 30, 2009 from $1,028 million at December 31, 2008. The Company's cash and cash investments consist of overnight interest bearing money market demand and time deposit accounts, money market mutual funds and government securities. While the Company attempts to diversify these investments in a prudent manner to minimize risk, it is possible that the continuing global turmoil in the financial markets could result in failures of additional financial institutions or other events and thereby affect the security or availability of these investments.
At June 30, 2009, the Amended Five-Year Revolving Credit Agreement contains limitations on additional borrowings. Under the terms of the Amended Credit Facility, any outstanding Letters of Credit reduce the Company's borrowing capacity. At June 30, 2009, the Company had $57 million of unused Letters of Credit; accordingly, the Company's remaining borrowing capacity is approximately $1.2 billion. At June 30, 2009, the Amended Five-Year Revolving Credit Agreement also contains a requirement for maintaining a certain level of net worth; the Company's net worth exceeded such requirement by $1.0 billion.
The Company also announced the reduction of its quarterly dividend to $.075 per common share ($.30 per common share annually) from $.235 per common share ($.94 per common share annually).
The Company is subject to lawsuits and claims pending or asserted with respect to matters generally arising in the ordinary course of business. Note O 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 Business conditions remain difficult in the Company's markets. The Company continues to estimate that 2009 housing starts will decline 40 percent to approximately 550,000 units. The Company also anticipates that consumer spending for home improvement products in North American and International markets will continue at depressed levels in the near term.
Although the Company is confident that the long-term fundamentals for the new home construction and home improvement markets are positive, the Company expects that market conditions will be extremely challenging over the next several quarters, given the continued uncertainty in the global economic and financial markets. Accordingly, the Company will focus on liquidity preservation to ensure its ability to fund its business operations, growth opportunities that may arise and a relatively modest debt maturity due in early 2010.
The Company believes that its strong financial position (including cash of over $900 million at June 30, 2009, its ability to generate positive cash flow during 2009 and unused bank lines) together with its current strategy of re-aligning its cost structure, investing in leadership brands, driving innovation and re-engineering its supply chains, will allow it to drive long-term growth and create value for its shareholders.
FORWARD-LOOKING STATEMENTS Certain sections of this Quarterly Report contain statements reflecting the Company's views about its future performance which may 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 the Company's results may differ materially from the results discussed in such forward-looking statements. For further information, readers should refer to the Company's most recent Annual Report on Form 10-K ("Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections) and to any subsequent Quarterly Reports on Form 10-Q, all of which are on file with the Securities and Exchange Commission. The Company undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise.