MAS Masco Corp

Management Discussion

• Net sales were positively impacted by increased net selling prices across our two segments and the acquisition of The L.D. Kichler Co. ("Kichler") in March 2018. Such increases were partially offset by a decrease in volume, primarily in our Decorative Architectural Products segment and unfavorable foreign currency translation.
• Our Plumbing Products segment was negatively impacted by an increase in other expenses (such as salaries, marketing spend and severance charges), an increase in commodity costs, unfavorable foreign currency translation, and higher depreciation expense. These negative impacts were partially offset by increased net selling prices and the benefits associated with cost savings initiatives. Our Decorative Architectural Products segment was positively impacted by increased net selling prices across the segment, the absence of the recognition of the inventory step-up adjustment established as part of the 2018 Kichler acquisition, and the benefits associated with cost savings initiatives. These positive impacts were partially offset by an increase in commodity costs and lower sales volume across the segment, an increase in strategic growth investments and a non-cash impairment charge related to an other indefinite-lived intangible asset for a trademark associated with lighting products.
• Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We regularly review our estimates and assumptions, which are based upon historical experience, as well as current economic conditions and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions.