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Masco Builder Cabinet Group. December 11, 2006. Kickoff – Jay Potter Accounting – Doug Bennett Customer Financial Services – Jim Ramsey Cost Management – David Lahie Financial Planning & Analysis – Bob Turco Compliance – Mike McCullough. Agenda.

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Masco builder cabinet group

Masco Builder Cabinet Group

December 11, 2006


Agenda

Kickoff – Jay Potter

Accounting – Doug Bennett

Customer Financial Services – Jim Ramsey

Cost Management – David Lahie

Financial Planning & Analysis – Bob Turco

Compliance – Mike McCullough

Agenda


Finance vision strategy

Finance will be an integral part of the decision making processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.

From

To

Drive business results and financial

Measure and Report

thinking

Effective control processes

Control processes that eliminate waste

Financial analysis which provides

Financial information & justification

insight into opportunities, options, risk

and uncertainty

Accurate and actionable information,

Accurate data available upon request

accessible on demand

Talented, trained and highly motivated

Fully engaged team of leaders

team

Technology challenged

Technology enabled

Strategic Pillars

People

Processes

Performance

- Cohesive team

- Continuous improvement

- Insightful thinking

- Individual and team leadership

- Scalable, streamlined, world class processes

- Actionable information

- Continuous learning and development

- Transparent financial reporting and insight

- Proactive analytics

- Business team partnership

- Zero control deficiencies

Finance Vision & Strategy


Finance title standardization
Finance Title Standardization processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.

Sr. Financial Analyst

Sr. Pricing Analyst

Financial Analyst

Pricing Analyst

Accountant- Cost

Accountant- G/L

Accountant- Sr.

Accounting Clerk

Accounting Specialist

Plant Controller

Analyst

Sr. Analyst

Accountant

Clerk

Specialist

Regional Controller

Plant Controller

Simplified position titles to enable effective career pathing


Finance title standardization benefits

Simplifies record keeping process processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.

Conveys the message that employees have peers in other areas of the finance & accounting disciplines who are the same level

Creates a framework for Career Mapping

Allows employees to manage their own careers

Finance Title Standardization: Benefits


Degreed professional career path
Degreed Professional: Career Path processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.

Sr.

Acct.

Regional

Controller

Acct.

(Entry)

Acct. Mgr

Director

Sr.

Analyst

Plant

Controller

Analyst

(Entry)

Supervisor

Multiple Alternatives for Career Growth and Development


Career mapping customer care builder sales customer financial services
Career Mapping: processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.Customer Care, Builder Sales, Customer Financial Services

Minimum Time for Each Position

6 Months Each

12 Months Each

2 Years

5 Years

CCC Builder

BSC

7 Years

Team

Leader

Manager

Director

CCC Dist.

CFS

Sales

Associate’s

(Non-mgr Track)

Master’s

Bachelor’s

(Mgmt Track)

Minimum Educational Requirements


Accounting team

Accounting Team processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.

December 11, 2006


Introduction doug bennett

Masco Builder Cabinet Group - Director of Accounting processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.

Joined the BCG in May of 2004

Heavily involved in integration activities and responsible for Accounting functions

Building world-class finance organization with a great group of Finance Leaders

Elbit Systems of America (EFW) - VP of Finance and Contracts

Developed Finance organization through time of dramatic growth

Led forensic effort to uncover years of significant financial misstatement

Engaged in implementation of BaaN ERP

Slim-Fast - Master Planner / Materials Manager

Greenfield manufacturing environment

Led project to redeploy business systems (BPCS)

Led team to design standardized product roll-out strategy / project plans

The Dannon Company – Site Controller

Major turn-around project

Key drivers of success were Pay for Performance and training and development (funded through state grants)

TCBY / Americana Foods – Cost and Materials Accounting Supervisor

Developed within the company during a major growth cycle followed by sharp decline – increased focus on contract manufacturing

Financial support for retail product line introduction

Education

MBA – LeTourneau University

Bachelors of Science in Management – LeTourneau University

Introduction – Doug Bennett


Organization Chart processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.


Organization Profile processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.


Organization Work Profile processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.


Accounts payable consolidation strategy

Accounts Payable Consolidation Strategy processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.


Execute an accounts payable consolidation strategy

Current Situation processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.

Mixed organizational model

Merillat – decentralized processing with small corporate group doing centralized payments and scanning

Quality – central AP group in Duncanville processing all Quality AP, payments, and scanning

Implemented JDE AP across BCG

Results of Hackett Benchmark

BCG Cash disbursements processes are high cost compared to world class

Processes are highly manual

Opportunity of $720K annually between performance and world class

$1.2B * (.11%-.05%) = $720K

Execute an Accounts Payable Consolidation Strategy


Execute an accounts payable consolidation strategy1

Hackett Best Practices for Procure to Pay processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.

Implemented / In process

Purchasing cards with online management and approval, interface to GL, and centralized receipts file

Use low cost electronic methods to settle payments

Automate recurring payments

Centrally maintain enterprise wide supplier master

Imaging technology for document storage and retrieval

AP/AR netting processes for intra-company activity (opportunities to expand)

Planned

Clear and simple policies governing accounts payable

Automate electronic workflow of invoices for approval and managing discrepancies

Utilize OCR /ICR technology to capture paper invoice data and transmit to AP application

Payables processing is largely centralized or in shared services

Execute an Accounts Payable Consolidation Strategy


Execute an accounts payable consolidation strategy2

Quality Plants processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.

AP Merillat

Merillat Plants

Merillat Branches

Quality Branches

AP - Quality

Execute an Accounts Payable Consolidation Strategy

Current State

Future State

BCG Plants

AP BCG

BCG Branches

Legend

From vendor

Manual Approval

Internal move

Electronic Approval

Payments

Vendor invoice

Match PO / Invoice


Execute an accounts payable consolidation strategy3

Complete processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company.

functional

and technical

specs for

automation

Select software

partner and

build

solutions

Consolidate

all AP

processing

Implement

automation

solutions

Q4 2006 Q1 2007 Q2 2007 Q3 2007

Execute an Accounts Payable Consolidation Strategy

  • Future State Process Description

    • Invoices received from vendors and scanned into Optical Character Recognition (OCR) Tool

      • If match can occur automatically invoice will be processed automatically

      • Matching discrepancies will be placed in queue for resolution

      • Invoices for approval will be routed through workflow to appropriate individual

    • Benefits

      • Reduced headcount

      • Reduced paper-flow

      • Reduced errors

      • Increased visibility and compliance

    • Risks to manage

      • Technology must translate to new ERP

      • Must have clear policies and business rules to avoid automating chaos

  • Timeline


Integration progress challenges

Accounts Payable still being performed differently between the two brands

ERP systems for material management are different

All AP is processed in JD Edwards

Centralized in Quality brand

De-centralized in Merillat brand

Audit challenges with processes and timeliness for expense accrual

Plan to implement workflow system in 2007 and centralize function

Billing processes are very different between brands

Frontier ERP for Quality with no “progress bill”

JD Edwards ERP for Merillat

Integrating service system to invoicing – evaluating consolidation

Sales and Use Tax processes are highly manual

Developing integrated solutions

Staffing challenges due to turnover on both ends

Integration Progress / Challenges

May need to wait for ERP?


2007 key initiatives

Focus on development and retention of our employees (especially in the GL function)

Improve our compliance

Address with improved processes and systems where possible

Reduce Cost and Increase Efficiency

Increase automation

Centralize functions

Respond to market conditions

Support long-term solutions and strategies

ERP

One in Two

2007 Key Initiatives


Customer financial services cfs

Customer Financial Services (CFS) (especially in the GL function)

December 11, 2006


Cfs bio

Jim Ramsey - Director, Customer Financial Services (especially in the GL function)

Education: BBA – Marketing Management, University of Toledo

Experience:

MASCO: Director, Customer Financial Services since 1/7/2002

Non-MASCO experience: Owens Corning, 32 years

Manager, Customer Financial Services – Toledo, OH

Cost Control Manager, Resins/Coatings Division – Toledo, OH

Plant Cost/Administrative Supervisor, Resins/Coatings Division – Anderson, SC

Plant Cost Analyst, insulation & chemical plants – Newark, OH

Administrative Services – Toledo, OH

CFS Bio


CFS Organization Chart (especially in the GL function)


CFS Organization Profile (especially in the GL function)

25 Employees (Includes 5 temps - 4 Quality, 1 Merillat)

Education

2 bachelors degrees (2 - Marketing Management)

3 associates degrees (1 – four courses remaining to earn bachelor’s degree in business)

Work Experience

Average BCG experience 6.2 yrs.

Longest BCG Service – 20 yrs.


CFS Organization Work Profile (especially in the GL function)

Management Workload

  • Credit Assessment for New Accounts - 20%

  • Financial Analysis and Review of Existing Accounts - 15%

  • Customer Consulting – 5%

    • key ratio, industry comparisons, cash flow analysis, financial projections, issues & opportunities

  • Collection of Past due Amounts including problem resolution - 30%

  • Standards Updates/maintenance - 10%

  • Twice monthly A/R reviews – 10%

    • CFS & field sales teams participate

  • Monthly Reporting - 6%

  • Other SOX - 2%

  • Other Admin - 2%


Cfs organization work profile

CFS Team Workload (especially in the GL function)

Quality

Cash Application - 60%

Collections & problem resolution - 30%

Other Admin - 10%

Merillat

Collections, cash application & problem resolution - 60%

Other Cash Activities - 20%

Other Admin - 10%

Monthly Reporting - 5%

Annual File Reviews/maintenance - 5%

Customer Master Set-ups

Merillat, Quality, DCD, Parrish, Quality Doors

CFS Organization Work Profile


Cfs integration challenges

Quality and Merillat have different Accounts Receivable systems and procedures.

Merillat – JDE; Quality – Friedman/Frontier

Example: Cash application

Merillat – auto cash application

Quality – manual cash application

Cash Application & Collection procedures are different due to availability / timing of data and significant differences in how the systems process cash transactions

Prior account administration caused significant aging issues, which now require extensive forensic accounting to resolve.

CFS Integration Challenges


Cfs 2007 key initiatives

Address procedural differences and employ Merillat best practices where possible.

Implement auto cash for Quality/Frontier system to increase efficiency and allow additional time for research of unpaid balances.

Begin implementation of MASCO initiative to go paperless for Merillat cash management.

Accomplished by implementing new payments terms and utilization of M2OE for electronic ordering and payments.

Implement D&B “Decision Express” risk assessment/credit scoring tool

Implement new distributor terms for electronic ordering & payment

Eliminate paper credit files

Electronic files on secured public drive

Western Contact Center

CFS - 2007 Key Initiatives


Cost management

Cost Management practices where possible.

December 11, 2006


Organization Chart practices where possible.


Organization Profile practices where possible.

9 Employees

Education

10 bachelors degrees (7 accounting)

3 MBA’s - - 2 more in process

2 Masters degrees (non-MBA)

4 CPA’s

Work Experience

Average Years 17

Average Years BCG 6 (3 with less than 2 and 2 with more than 10)


Organization Work Profile practices where possible.

Primary Customers

Operations (plant management, capital evaluation)

Marketing (product costing, new product)

Masco

Workload (excluding Plant Finance Managers)

Monthly close 20%

Monthly Reporting 20%

Standards Updates/maintenance 20%

Budget 15%

Inventory 6%

Other (incl. SOX) 4%

Decision Support 15%


Integration challenges

Quality and Merillat have different costing systems and methodologies (configuration/ non-configuration)

Accounting close methods are different due to availability / timing of data and number of business units supported

Inventory methods are different (cycle counting vs physical)

Integration Challenges


2007 key initiatives1

Address internal control weaknesses; primarily inventory related cycle count

- Scanning at Quality

- Tightening cycle count process at Merillat plants

Commonize and improve Merillat/Quality plant performance tracking and forecasting

Support development of a common ERP system

2007 Key Initiatives


Financial planning analysis and pricing

Financial Planning & Analysis and Pricing related cycle count

December 11, 2006


Fp a personnel summary

Bob Turco, Director FP&A and Pricing related cycle count

Education:

MBA – Finance, University of Toledo;

Bachelor of Arts – Finance and Accounting, Rutgers University.

Experience:

Masco: Director, FP&A and Pricing, one-year.

Non-Masco experience: Owens Corning, 26 years.

Business Unit Controller: Roofing Solutions, HOMExperts.

Manufacturing Controller – Insulation North America.

Financial Manager - Composites Global Sales.

Pricing: Residential Roofing, Composite Reinforcements, Roofing Solutions.

Plant Controller: Newark, OH – Insulation; Kansas City, KS – Insulation; Huntington, PA – Composite Textiles & Reinforcements.

FP&A Personnel Summary


Organization chart
Organization Chart related cycle count


Organization profile

Six FP&A employees and one intern related cycle count

Education

6 Bachelor degrees

5 MBA’s

1 recommended to the next Masco MBA Program session

Finance-related work experience

Average Years = 14

Average Years with MBCG = 2

(four employees with less than 2 years, two employees with more than 2 years)

Organization Profile


Fp a key responsibilities

Business performance reporting and analysis related cycle count

Demand forecasting

Financial forecasting

Regional & business segment financial leadership

Internal control (SOX) and SOP compliance

Actionable information and analysis

Decision support

Business team partnership

Business planning and budgeting

Month-end activities

Rebates and branch accounting

Branch, market, business segment financial statements

FP&A Key Responsibilities


Regional controller accountabilities

Internal Control and SOP Compliance related cycle count

Ensure actions are in place to drive 100% certified & compliant locations

Financial Reporting

Supply accurate, timely and actionable information

Provide insightful and forward thinking analysis of results

Deliver in a user-friendly and efficient manner

Business Forecasting

Collaborative and drives actions

Business Partnership

Finance is a fully participating & contributing member of the business team

Finance provides input and financial thinking to business decisions

Decision Support

Provides tools, improves processes, drives out waste and complexity

Teaches and trains financial and non-financial personnel

Focus on helping Branch Managers become more financially adept at managing their business

Contributes to recruiting, staffing, succession planning and retention

Recruiting and mentoring junior members of the finance team

Regional Controller Accountabilities


2007 priorities

People related cycle count

Regional Controller structure implementation

Finance 101 training for non-financial (expand S/E Region work)

Process

Reduce reliance on “Excel on Steroids” and leverage data warehouse “foundation” created in 2006

Metreo “Vision” implementation: pricing tools including customer, channel and regional profitability

Forecasting tools

Budgeting tools and reduction in process complexity

DWH governance (data accuracy, training, expansion)

ERP implementation support

Drive Pricing-Finance synergies – bid profitability, pricing analytics that identify opportunities in the market

Performance

Implement improved market and branch reporting - much more actionable and proactive

Leverage the new Regional Controller structure to drive results

Develop tight partnership with business teams – fully participating members

Proactively drive results and an acceptable internal control environment

2007 Priorities


Metreo pricing vision overview

Metreo Pricing Vision Overview related cycle count


Metreo overview

Sample RPM Platform Customers and Solutions related cycle count

Global Commodity Management

Actuarial Modeling

Shopper Insights

Continuous Sales & Operations Planning

Publishing Forecasting

Basel II

Asset Management

Assortment Management

SKU Optimization

Product Quality Management

Price Management

Metreo Overview

Despite the diversity of customers, verticals, functions, solutions and provider, there is not a single line of code or scripting that is different across all of these implementations


Metreo performance management suite product view
Metreo Performance Management Suite: Product View related cycle count

Metreo Decision Management Suite

Vision

InLine

InSight

Predict

BPM

  • Enterprise

  • Pricing

  • Sales & Marketing

  • Product

  • Operations

  • Finance

  • Deal Desk Workbench

  • Sales Force Workbench

  • Guideline Workbench

  • Win / Loss

  • Price Indexing

  • Elasticity

  • Product Mix+

  • New Product+

  • Price Structure+

  • Demand Forecast

  • Contribution Margin Forecast

  • Demand Mgt.

  • Margin Mgt.

  • Price Mgt.

  • Product Mix Mgt.

  • FS&OP

Metreo Decision Management Platform

Metreo Smart Pricing Suite

Target

(Setting)

Target

(Management)

Response

Segmentation Study

Metreo Data Management Layer


Metreo analytics
Metreo Analytics related cycle count

Pricing Intelligence – Sample Waterfall

A Price Waterfall analysis helps you identify the true cost of price concessions. It starts with the list price, and deducts from that visually all adjustments (i.e. discounts, rebates, freight costs) that leak margin until reaching the true pocket price and the margin.


Compliance risk management

Compliance & Risk Management related cycle count

December 11, 2006


Personal bio

28 years with the BCG related cycle count

All in the Finance Department

B.A. degree in Accounting

Six Sigma Green Belt

Personal Bio


Risk Management – Organization Chart related cycle count

Contract Organization to Support BCG and MCS


Contract review center bcg

All BCG agreements – eliminate killer clauses, mitigating the risk for BCG/Masco

Builder subcontracts

Distributor/Dealer agreements

Vendor agreements

Leases

Insurance certificates, licensing, fleet

Lawsuits

Conflict of interest questionnaire

Contract Review Center - BCG


Contract review center mcs

All MCS builder agreements the risk for BCG/Masco

All 300 branches send their builder subcontracts through the Contract Review Center

The CRC eliminates killer clauses, mitigating the risk for MCS/Masco

The CRC handles the negotiation of contract changes

The CRC enters the agreements into MCAT then forwards them to Michael Wade’s team for accounting review

Contract Review Center - MCS


Contract review center 2007 initiatives

BCG the risk for BCG/Masco

Work on getting national subcontract agreements in place with the top builders to eliminate the need to have multiple subcontracts for every market.

Leverage these across the Masco BU’s that sell to the top builders.

MCS

Build branch confidence in the CRC

Integrate the insurance certificates into the CRC

Get all branches onto the scan and drop system

Contract Review Center – 2007 Initiatives


Compliance

Compliance the risk for BCG/Masco

December 11, 2006


Compliance - Organization Chart the risk for BCG/Masco

SOX Organization to Support BCG


Key staff bios

Bobbie Wilson – SOX Manager the risk for BCG/Masco

2 years with BCG

Previous experience as Accounting Supervisor (4)

PPD-Greensburg

12 years of Finance experience

MBA with a BS degree in Accounting

Key Staff Bios


Key staff bios1

Rhonda Chiki – Compliance Analyst (Nov 1, 2006) the risk for BCG/Masco

6 years with BCG

Previous experience as I.S. Analyst (6), Auditor (7)

7 years of Finance experience

BA degree in Accounting

Karen McMillen – Compliance analyst (July 10, 2006)

0 years with BCG

Previous experience as PwC Intern (.5)

BA degree in Accounting

Key Staff Bios


Key staff bios2

Colleen Heraty – Compliance Analyst (Aug 5, 2006) the risk for BCG/Masco

6 years with BCG

Previous experience as CFS Specialist (6)

BS degree in Accounting

Bill Davis – Road Warrior

1 year with BCG

Previous experience as Controller

AlliedSignal, Ford, Dexter Axle

MBA with a BA degree in Accounting

Key Staff Bios


Current enterprise architecture

Facts & Figures the risk for BCG/Masco

One Company

Business

Countries

Locations

Divisions

1

32

4

Site Operations

45

Require

Require

Functional Process Groups

Information Technology

BCG

Function

Supported

Unique

Business

Process

Use

Support

Users

Areas

Instances

Apps

Processes

Instances

1,700

13

826

147

64

611

External

Users

1,300

Portal (Est)

2,500

Current Enterprise Architecture

Highly Complex Controls Environment…Clearly a Case for ERP


Sarbanes-Oxley Update – 2005 Items the risk for BCG/Masco

  • 17 total items 8 waiting MIAD action

  • 9 open items waiting BCG action in Issue Track as of November 8, 2006

57 New 2006 Deficiencies were added December 7, 2006 and 25 Documentation Gaps


Sarbanes-Oxley Update – 2006 Items the risk for BCG/Masco

  • Summary of 2006 SAD-total 66 new deficiencies

    • 3 Repeats

    • 29 MIAD

    • 30 PwC

  • Categories based on remediation status

In excess of 70% of new items are addressed with 4 that should be removed.


Sarbanes oxley update 2006 items
Sarbanes-Oxley Update – 2006 Items the risk for BCG/Masco

Turnover and Merging Staffs Resulted in Weaknesses


Integration challenges1

Quality and Merillat have different costing systems and methodologies (configuration/ non-configuration)

Accounting close methodologies are different due to availability / timing of data and number of business units supported

Inventory methodologies are different (cycle counting vs physical)

Integration Challenges


2007 key initiatives2

Implement Open Pages methodologies (configuration/ non-configuration)

Drive SOX compliance from multiple directions

Increase training and communication

Focus on moving manual controls to application controls

2007 Key Initiatives


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