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,~~June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number: 1-5794

Masco Corporation

(Exact name of Registrant as Specified in its Charter)


Delaware						38-1794485
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

17450 College Parkway,

Livonia,

Michigan

48152

(Address of Principal Executive Offices)

(Zip Code)

(313) 274-7400

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $1.00 par value	MAS	New York Stock Exchange

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. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ 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 ~~March 31,~~June 30, 2022
Common stock, par value $1.00 per share						~~235,940,440~~225,519,663

MASCO CORPORATION

INDEX


		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets — as ~~at March 31,~~of June 30, 2022 and December 31, 2021	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021	3
	Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2022 and 2021	4
	Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021	5
	Notes to Condensed Consolidated Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1821
Item 4.	Controls and Procedures	2731
PART II.	OTHER INFORMATION	2832
Item 1.	Legal Proceedings	2832
Item 1A.	Risk Factors	2832
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2832
Item 6.	Exhibits	2933
	Signature	3034

MASCO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

~~March 31,~~June 30, 2022 and December 31, 2021

(In Millions, Except Share Data)


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash and cash investments	Cash and cash investments	$	479	$	926	Cash and cash investments	$	440	$	926

Receivables	Receivables	1,502		1,171		Receivables	1,434		1,171

Prepaid expenses and other	Prepaid expenses and other	107		109		Prepaid expenses and other	131		109

Inventories:	Inventories:					Inventories:
Finished goods	Finished goods	809		702		Finished goods	823		702
Raw material	Raw material	409		383		Raw material	411		383
Work in process	Work in process	122		131		Work in process	120		131
		1,340		1,216			1,354		1,216
Total current assets	Total current assets	3,428		3,422		Total current assets	3,359		3,422
Property and equipment, net	Property and equipment, net	892		896		Property and equipment, net	884		896
Goodwill	Goodwill	565		568		Goodwill	554		568
Other intangible assets, net	Other intangible assets, net	379		388		Other intangible assets, net	369		388
Operating lease right-of-use assets	Operating lease right-of-use assets	195		187		Operating lease right-of-use assets	198		187
Other assets	Other assets	109		114		Other assets	103		114

Total assets	Total assets	$	5,568	$	5,575	Total assets	$	5,467	$	5,575

LIABILITIES	LIABILITIES					LIABILITIES
Current Liabilities:	Current Liabilities:					Current Liabilities:
Accounts payable	Accounts payable	$	1,114	$	1,045	Accounts payable	$	1,128	$	1,045
Notes payable	Notes payable	273		10		Notes payable	508		10
Accrued liabilities	Accrued liabilities	749		884		Accrued liabilities	831		884

Total current liabilities	Total current liabilities	2,136		1,939		Total current liabilities	2,467		1,939
Long-term debt	Long-term debt	2,946		2,949		Long-term debt	2,946		2,949
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	179		172		Noncurrent operating lease liabilities	185		172
Other liabilities	Other liabilities	407		437		Other liabilities	410		437

Total liabilities	Total liabilities	5,668		5,497		Total liabilities	6,008		5,497

Commitments and contingencies (Note P)	Commitments and contingencies (Note P)	0		0		Commitments and contingencies (Note P)	0		0
Redeemable noncontrolling interest	Redeemable noncontrolling interest	21		22		Redeemable noncontrolling interest	22		22

EQUITY	EQUITY					EQUITY
Masco Corporation's shareholders' equity:	Masco Corporation's shareholders' equity:					Masco Corporation's shareholders' equity:
Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2022 – 235,600,000; 2021 – 241,200,000		236		241
Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2022 – 225,200,000; 2021 – 241,200,000						Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2022 – 225,200,000; 2021 – 241,200,000	225		241
Preferred shares authorized: 1,000,000; Issued and outstanding: 2022 and 2021 – None	Preferred shares authorized: 1,000,000; Issued and outstanding: 2022 and 2021 – None	—		—		Preferred shares authorized: 1,000,000; Issued and outstanding: 2022 and 2021 – None	—		—
Paid-in capital	Paid-in capital	—		—		Paid-in capital	7		—
Retained deficit	Retained deficit	(833)		(652)		Retained deficit	(1,154)		(652)
Accumulated other comprehensive income	Accumulated other comprehensive income	226		232		Accumulated other comprehensive income	180		232
Total Masco Corporation's shareholders' deficit		(371)		(179)
Total Masco Corporation's shareholders' (deficit)						Total Masco Corporation's shareholders' (deficit)	(742)		(179)
Noncontrolling interest	Noncontrolling interest	250		235		Noncontrolling interest	179		235
Total equity	Total equity	(121)		56		Total equity	(563)		56
Total liabilities and equity	Total liabilities and equity	$	5,568	$	5,575	Total liabilities and equity	$	5,467	$	5,575

See notes to condensed consolidated financial statements.

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

For the Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021

(In Millions, Except Per Common Share Data)


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022		2021		2022		2021
Net sales	Net sales		$	2,201		$	1,970	Net sales	$	2,352	$	2,179	$	4,553	$	4,149
Cost of sales	Cost of sales		1,497			1,270		Cost of sales	1,583		1,388		3,080		2,658
Gross profit	Gross profit		704			700		Gross profit	769		791		1,473		1,491
Selling, general and administrative expenses	Selling, general and administrative expenses		351			335		Selling, general and administrative expenses	361		354		712		689

Operating profit	Operating profit		353			365		Operating profit	408		437		761		802
Other income (expense), net:	Other income (expense), net:							Other income (expense), net:
Interest expense	Interest expense		(25)			(202)		Interest expense	(28)		(25)		(53)		(227)
Other, net	Other, net		(1)			(6)		Other, net	17		(415)		16		(421)
			(26)			(208)			(11)		(440)		(37)		(648)
Income before income taxes			327			157
Income (loss) before income taxes								Income (loss) before income taxes	397		(3)		724		154
Income tax expense	Income tax expense		75			43		Income tax expense	103		12		178		55
Net income			252			114
Net income (loss)								Net income (loss)	294		(15)		546		99
Less: Net income attributable to noncontrolling interest	Less: Net income attributable to noncontrolling interest		19			20		Less: Net income attributable to noncontrolling interest	16		21		35		41
Net income attributable to Masco Corporation			$	233		$	94
Net income (loss) attributable to Masco Corporation								Net income (loss) attributable to Masco Corporation	$	278	$	(36)	$	511	$	58

Income per common share attributable to Masco Corporation:
Income (loss) per common share attributable to Masco Corporation:								Income (loss) per common share attributable to Masco Corporation:
Basic:	Basic:							Basic:
Net income			$	0.98		$	0.34
Net income (loss)								Net income (loss)	$	1.19	$	(0.14)	$	2.17	$	0.21
Diluted:	Diluted:							Diluted:
Net income			$	0.97		$	0.34
Net income (loss)								Net income (loss)	$	1.18	$	(0.14)	$	2.15	$	0.20

See notes to condensed consolidated financial statements.

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

For the Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021

(In Millions)


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022		2021		2022		2021
Net income			$	252		$	114
Net income (loss)								Net income (loss)	$	294	$	(15)	$	546	$	99
Less: Net income attributable to noncontrolling interest	Less: Net income attributable to noncontrolling interest		19			20		Less: Net income attributable to noncontrolling interest	16		21		35		41
Net income attributable to Masco Corporation			$	233		$	94
Other comprehensive income (loss), net of tax (Note L):
Net income (loss) attributable to Masco Corporation								Net income (loss) attributable to Masco Corporation	$	278	$	(36)	$	511	$	58
Other comprehensive (loss) income, net of tax (Note L):								Other comprehensive (loss) income, net of tax (Note L):
Cumulative translation adjustment	Cumulative translation adjustment		$	(11)		$	(36)	Cumulative translation adjustment	$	(55)	$	37	$	(66)	$	1
Interest rate swaps	Interest rate swaps		—			7		Interest rate swaps	—		—		—		7
Pension and other post-retirement benefits	Pension and other post-retirement benefits		1			5		Pension and other post-retirement benefits	1		358		2		363

Other comprehensive (loss), net of tax			(10)			(24)
Less: Other comprehensive (loss) attributable to noncontrolling interest			(4)			(12)
Other comprehensive (loss) attributable to Masco Corporation			$	(6)		$	(12)
Other comprehensive (loss) income, net of tax								Other comprehensive (loss) income, net of tax	(54)		395		(64)		371
Less: Other comprehensive (loss) income attributable to noncontrolling interest								Less: Other comprehensive (loss) income attributable to noncontrolling interest	(8)		2		(12)		(10)
Other comprehensive (loss) income attributable to Masco Corporation								Other comprehensive (loss) income attributable to Masco Corporation	$	(46)	$	393	$	(52)	$	381
Total comprehensive income	Total comprehensive income		$	242		$	90	Total comprehensive income	$	240	$	380	$	482	$	470
Less: Total comprehensive income attributable to noncontrolling interest	Less: Total comprehensive income attributable to noncontrolling interest		15			8		Less: Total comprehensive income attributable to noncontrolling interest	8		23		23		31
Total comprehensive income attributable to Masco Corporation	Total comprehensive income attributable to Masco Corporation		$	227		$	82	Total comprehensive income attributable to Masco Corporation	$	232	$	357	$	459	$	439

See notes to condensed consolidated financial statements.

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2022 and 2021

(In Millions)


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:	CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:					CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations	Cash provided by operations	$	334	$	323	Cash provided by operations	$	662	$	610
Increase in receivables	Increase in receivables	(349)		(195)		Increase in receivables	(296)		(238)
Increase in inventories	Increase in inventories	(127)		(78)		Increase in inventories	(159)		(147)
Decrease in accounts payable and accrued liabilities, net		(85)		(139)
Net cash for operating activities		(227)		(89)
(Decrease) increase in accounts payable and accrued liabilities, net						(Decrease) increase in accounts payable and accrued liabilities, net	(33)		14
Net cash from operating activities						Net cash from operating activities	174		239

CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:	CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:					CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:

Retirement of notes	Retirement of notes	—		(1,326)		Retirement of notes	—		(1,326)
Purchase of Company common stock	Purchase of Company common stock	(364)		(303)		Purchase of Company common stock	(914)		(750)
Proceeds from revolving credit borrowings, net		263		—

Cash dividends paid	Cash dividends paid	(67)		(36)		Cash dividends paid	(131)		(96)

Dividends paid to noncontrolling interest						Dividends paid to noncontrolling interest	—		(43)
Issuance of notes, net of issuance costs	Issuance of notes, net of issuance costs	—		1,481		Issuance of notes, net of issuance costs	—		1,481
Proceeds from term loan						Proceeds from term loan	500		—
Debt extinguishment costs	Debt extinguishment costs	—		(160)		Debt extinguishment costs	—		(160)
Proceeds from the exercise of stock options	Proceeds from the exercise of stock options	1		—		Proceeds from the exercise of stock options	1		1
Employee withholding taxes paid on stock-based compensation	Employee withholding taxes paid on stock-based compensation	(17)		(14)		Employee withholding taxes paid on stock-based compensation	(17)		(14)
Decrease in debt, net	Decrease in debt, net	(3)		(1)		Decrease in debt, net	(7)		(2)

Net cash for financing activities	Net cash for financing activities	(187)		(359)		Net cash for financing activities	(568)		(909)

CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:	CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:					CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures	Capital expenditures	(27)		(30)		Capital expenditures	(70)		(53)

Acquisition of businesses, net of cash acquired						Acquisition of businesses, net of cash acquired	—		(1)
Proceeds from disposition of:	Proceeds from disposition of:					Proceeds from disposition of:
Businesses, net of cash disposed	Businesses, net of cash disposed	2		—		Businesses, net of cash disposed	—		5

Other financial investments	Other financial investments	—		1		Other financial investments	1		168

Other, net	Other, net	(1)		4		Other, net	(5)		3
Net cash for investing activities		(26)		(25)
Net cash (for) from investing activities						Net cash (for) from investing activities	(74)		122

Effect of exchange rate changes on cash and cash investments	Effect of exchange rate changes on cash and cash investments	(7)		(13)		Effect of exchange rate changes on cash and cash investments	(18)		(9)

CASH AND CASH INVESTMENTS:	CASH AND CASH INVESTMENTS:					CASH AND CASH INVESTMENTS:
Decrease for the period	Decrease for the period	(447)		(486)		Decrease for the period	(486)		(557)
At January 1	At January 1	926		1,326		At January 1	926		1,326
At March 31		$	479	$	840
At June 30						At June 30	$	440	$	769

See notes to condensed consolidated financial statements.

MASCO CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

For the Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021

(In Millions, Except Per Common Share Data)


		Total		Common Shares ($1 par value)		Paid-In Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interest			Total		Common Shares ($1 par value)		Paid-In Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interest
Balance, January 1, 2021	Balance, January 1, 2021	$	421	$	258	$	—	$	79		$	(142)	$	226	Balance, January 1, 2021	$	421	$	258	$	—	$	79	$	(142)	$	226
Total comprehensive income (loss)	Total comprehensive income (loss)	90		—		—		94			(12)		8		Total comprehensive income (loss)	90		—		—		94		(12)		8
Shares issued	Shares issued	—		1		(1)		—			—		—		Shares issued	—		1		(1)		—		—		—
Shares retired:	Shares retired:														Shares retired:
Repurchased	Repurchased	(303)		(6)		(27)		(270)			—		—		Repurchased	(303)		(6)		(27)		(270)		—		—
Surrendered (non-cash)	Surrendered (non-cash)	(13)		—		—		(13)			—		—		Surrendered (non-cash)	(13)		—		—		(13)		—		—

Redeemable noncontrolling interest - redemption adjustment	Redeemable noncontrolling interest - redemption adjustment	(6)		—		—		(6)		0	—		—		Redeemable noncontrolling interest - redemption adjustment	(6)		—		—		(6)		—		—

Stock-based compensation	Stock-based compensation	28		—		28		—			—		—		Stock-based compensation	28		—		28		—		—		—
Balance, March 31, 2021	Balance, March 31, 2021	$	217	$	253	$	—	$	(116)		$	(154)	$	234	Balance, March 31, 2021	$	217	$	253	$	—	$	(116)	$	(154)	$	234
Total comprehensive income (loss)															Total comprehensive income (loss)	380		—		—		(36)		393		23

Balance, January 1, 2022		$	56	$	241	$	—	$	(652)		$	232	$	235
Total comprehensive income (loss)		242		—		—		233			(6)		15
Shares issued		1		1		—		—			—		—
Shares retired:	Shares retired:														Shares retired:
Repurchased	Repurchased	(364)		(6)		(27)		(331)			—		—		Repurchased	(447)		(6)		(12)		(429)		—		—
Surrendered (non-cash)		(17)		—		—		(17)			—		—

Cash dividends declared	Cash dividends declared	(67)		—		—		(67)			—		—		Cash dividends declared	(59)		—		—		(59)		—		—
Dividends declared to noncontrolling interest															Dividends declared to noncontrolling interest	(43)		—		—		—		—		(43)

Redeemable noncontrolling interest - redemption adjustment		1		—		—		1			—		—
Stock-based compensation	Stock-based compensation	27		—		27		—			—		—		Stock-based compensation	12		—		12		—		—		—
Balance, March 31, 2022		$	(121)	$	236	$	—	$	(833)		$	226	$	250
Balance, June 30, 2021															Balance, June 30, 2021	$	60	$	247	$	—	$	(640)	$	239	$	214

MASCO CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Concluded)

For the Three and Six Months Ended June 30, 2022 and 2021

(In Millions, Except Per Common Share Data)


	Total		Common Shares ($1 par value)		Paid-In Capital		Retained (Deficit) Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest
Balance, January 1, 2022	$	56	$	241	$	—	$	(652)	$	232	$	235
Total comprehensive income (loss)	242		—		—		233		(6)		15
Shares issued	1		1		—		—		—		—
Shares retired:
Repurchased	(364)		(6)		(27)		(331)		—		—
Surrendered (non-cash)	(17)		—		—		(17)		—		—
Cash dividends declared	(67)		—		—		(67)		—		—

Redeemable noncontrolling interest - redemption adjustment	1		—		—		1		—		—
Stock-based compensation	27		—		27		—		—		—
Balance, March 31, 2022	$	(121)	$	236	$	—	$	(833)	$	226	$	250
Total comprehensive income (loss)	240		—		—		278		(46)		8

Shares retired:
Repurchased	(550)		(11)		(5)		(534)		—		—

Cash dividends declared	(64)		—		—		(64)		—		—
Dividends declared to noncontrolling interest	(79)		—		—		—		—		(79)
Redeemable noncontrolling interest - redemption adjustment	(1)		—		—		(1)		—		—
Stock-based compensation	12		—		12		—		—		—
Balance, June 30, 2022	$	(563)	$	225	$	7	$	(1,154)	$	180	$	179

See notes to condensed consolidated financial statements.

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A. ACCOUNTING POLICIES

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to fairly state our financial position at ~~March 31,~~June 30, 2022, ~~and~~ our results of operations and comprehensive income (loss), for the three and six months ended June 30, 2022 and 2021, cash flows for the six months ended June 30, 2022 and 2021 and changes in shareholders' equity for the ~~three-month periods~~three and six months ended ~~March 31,~~June 30, 2022 and 2021. The condensed consolidated balance sheet at December 31, 2021 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted ("GAAP") in the United States of America.

Recently Adopted Accounting Pronouncements. In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. We adopted this standard for annual periods beginning January 1, 2022. The adoption of this new standard did not impact our financial position or results of operations.

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities from Contracts with Customers.” ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with Topic 606 as if the acquirer had originated the contracts. We adopted this standard for annual periods beginning January 1, 2022. The adoption of this new standard did not impact our financial position or results of operations.

B. ACQUISITIONS

In the third quarter of 2021, we acquired all of the share capital of Steamist, Inc. ("Steamist") for approximately $56 million in cash. Steamist is a manufacturer of residential steam bath products that are complementary to many of our plumbing products. This business is included in our Plumbing Products segment. In connection with this acquisition, we recognized $31 million of definite-lived intangible assets, primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of 11 years. We also recognized $29 million of goodwill, which is not tax deductible, and is related primarily to the expected synergies from combining the operations into our business. Working capital and other adjustments were finalized with the seller in the fourth quarter of 2021, resulting in no significant changes.

In the first quarter of 2021, we acquired a 75.1 percent equity interest in Easy Sanitary Solutions B.V. ("ESS"), for approximately €47 million ($58 million), including $52 million of cash and $6 million of debt that will be paid out over two years less any pending or settled indemnity matters. The cash payment was made to a third-party notary on December 29, 2020 for the acquisition of this equity interest in advance of the transaction closing on January 4, 2021. ESS is a manufacturer of shower channel drains and offers a wide range of products for barrier-free showering and bathroom wall niches. This business is included in our Plumbing Products segment. In connection with this acquisition, we recognized $32 million of definite-lived intangible assets, primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of 10 years. We also recognized $35 million of goodwill, which is not tax deductible, and is related primarily to the expected synergies from combining the operations into our business.

The remaining 24.9 percent equity interest in ESS is subject to a call and put option that is exercisable by us or the sellers, respectively, any time after December 31, 2023. The redemption value of the call and put option is the same and based on a floating EBITDA value. The call and put options were determined to be embedded within the redeemable noncontrolling interest and ~~are~~were recorded as temporary equity in the condensed consolidated balance sheet. We elected to adjust the redeemable noncontrolling interest to its full redemption amount directly into retained deficit.

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

B. ACQUISITIONS, ~~(Concluded)~~Concluded

In the fourth quarter of 2020, we acquired substantially all of the net assets of Kraus USA Inc. ("Kraus"), a designer and distributor of sinks, faucets and accessories for the kitchen and bathroom, for approximately $103 million and an additional cash payment of up to $50 million to be paid in 2023, contingent upon the achievement of certain financial performance metrics for the year ending December 31, 2022. As of the closing date of the acquisition, the contingent consideration was assigned a fair value of approximately $8 million. Refer to Note G for additional information regarding the measurement of the contingent consideration liability. This business expands our product offerings to our customers and our online presence under the Kraus brand. This business is included in our Plumbing Products segment. In connection with this acquisition, we recognized $25 million of indefinite-lived intangible assets, which is related to trademarks, and $49 million of definite-lived intangible assets, primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of 10 years. We also recognized $20 million of goodwill, which is generally tax deductible, and is related primarily to the expected synergies from combining the operations into our business. During the first quarter of 2021, we revised the allocation of the purchase price to certain identifiable assets and liabilities based on analysis of information as of the acquisition date, which resulted in a $1 million decrease to goodwill.

C. DIVESTITURES

On May 31, 2021, we completed the divestiture of our Hüppe GmbH ("Hüppe") business, a manufacturer of shower enclosures and shower trays. In connection with the divestiture, we recognized a loss of $18 million for the three and six months ended June 30, 2021, which is included in other, net in our condensed consolidated statements of operations. This loss resulted primarily from the recognition of $23 million of currency translation losses that were previously included within accumulated other comprehensive income. During the six months ended June 30, 2022, we recorded a $2 million pre-tax post-closing gain related to the finalization of working capital items in other, net in our condensed consolidated statement of operations. The sale of Hüppe did not represent a strategic shift that will have a major effect on our operations and financial results and therefore was not presented as discontinued operations. Prior to the divestiture, the results of the business were included in our Plumbing Products segment. During the first quarter of 2022, we recorded a $2 million pre-tax post-closing gain related to the finalization of working capital items in other, net in our condensed consolidated statement of operations.

D. REVENUE

Our revenues are derived primarily from sales to customers in North America and Internationally, principally Europe. Net sales from these geographic markets, by segment, were as follows, in millions:

Three Months Ended March 31, 2022
Plumbing Products Decorative Architectural Products Total
Primary geographic markets:
North America $ 892 $ 842 $ 1,734
International, principally Europe 467 — 467
Total $ 1,359 $ 842 $ 2,201


		Three Months Ended March 31, 2021							Three Months Ended June 30, 2022
		Plumbing Products		Decorative Architectural Products		Total			Plumbing Products		Decorative Architectural Products		Total
Primary geographic markets:	Primary geographic markets:							Primary geographic markets:
North America	North America	$	808	$	721	$	1,529	North America	$	926	$	979	$	1,905
International, principally Europe	International, principally Europe	441		—		441		International, principally Europe	447		—		447
Total	Total	$	1,249	$	721	$	1,970	Total	$	1,373	$	979	$	2,352

Our contract asset balance was $2 million and $1 million at March 31, 2022 and December 31, 2021, respectively. Our contract liability balance was $28 million and $67 million at March 31, 2022 and December 31, 2021, respectively.


	Six Months Ended June 30, 2022
	Plumbing Products		Decorative Architectural Products		Total
Primary geographic markets:
North America	$	1,818	$	1,821	$	3,639
International, principally Europe	914		—		914
Total	$	2,732	$	1,821	$	4,553

~~We recognized $5 million and $1 million of revenue for the three-month periods ended March 31, 2022 and 2021, respectively, related to performance obligations settled in previous years.~~

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

D. REVENUE, ~~(Concluded)~~Concluded


	Three Months Ended June 30, 2021
	Plumbing Products		Decorative Architectural Products		Total
Primary geographic markets:
North America	$	867	$	850	$	1,717
International, principally Europe	462		—		462
Total	$	1,329	$	850	$	2,179


	Six Months Ended June 30, 2021
	Plumbing Products		Decorative Architectural Products		Total
Primary geographic markets:
North America	$	1,675	$	1,571	$	3,246
International, principally Europe	903		—		903
Total	$	2,578	$	1,571	$	4,149

Our contract asset balance was $2 million and $1 million at June 30, 2022 and December 31, 2021, respectively. Our contract liability balance was $25 million and $67 million at June 30, 2022 and December 31, 2021, respectively.

We recognized $8 million of revenue for the three months ended June 30, 2022 and we reversed $1 million of revenue for the three months ended June 30, 2021 related to performance obligations settled in previous quarters of the same year. We recognized $8 million and $13 million of revenue for the three and six months ended June 30, 2022, respectively, and $3 million and $4 million of revenue for the three and six months ended June 30, 2021, respectively, related to performance obligations settled in previous years.

Changes in the allowance for credit losses deducted from accounts receivable were as follows, in millions:


		Three Months Ended March 31, 2022		Twelve Months Ended December 31, 2021			Six Months Ended June 30, 2022		Twelve Months Ended December 31, 2021
Balance at January 1	Balance at January 1	$	6	$	7	Balance at January 1	$	6	$	7
Provision for expected credit losses during the period	Provision for expected credit losses during the period	2		1		Provision for expected credit losses during the period	2		1
Write-offs charged against the allowance	Write-offs charged against the allowance	(1)		(2)		Write-offs charged against the allowance	(1)		(2)
Recoveries of amounts previously written off	Recoveries of amounts previously written off	1		1		Recoveries of amounts previously written off	1		1
Other (A)	Other (A)	—		(1)		Other (A)	—		(1)
Balance at end of period	Balance at end of period	$	8	$	6	Balance at end of period	$	8	$	6

(A) As a result of Hüppe being divested in May 2021, $1 million for the year ~~end~~ended December 31, 2021 was removed from allowance for credit losses.

E. DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense was ~~$35~~$71 million and ~~$43~~$78 million for the ~~three-month periods~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

F. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill at ~~March 31,~~June 30, 2022, by segment, was as follows, in millions:


		Gross Goodwill At March 31, 2022		Accumulated Impairment Losses		Net Goodwill At March 31, 2022			Gross Goodwill At June 30, 2022		Accumulated Impairment Losses		Net Goodwill At June 30, 2022
Plumbing Products	Plumbing Products	$	620	$	(301)	$	319	Plumbing Products	$	609	$	(301)	$	308
Decorative Architectural Products	Decorative Architectural Products	366		(120)		246		Decorative Architectural Products	366		(120)		246

Total	Total	$	986	$	(421)	$	565	Total	$	975	$	(421)	$	554

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

F. GOODWILL AND OTHER INTANGIBLE ASSETS, Concluded

The changes in the carrying amount of goodwill for the ~~three-month period~~six months ended ~~March 31,~~June 30, 2022, by segment, were as follows, in millions:


		Gross Goodwill At December 31, 2021		Accumulated Impairment Losses		Net Goodwill At December 31, 2021		Other (B)		Net Goodwill At March 31, 2022			Gross Goodwill At December 31, 2021		Accumulated Impairment Losses		Net Goodwill At December 31, 2021		Other (B)		Net Goodwill At June 30, 2022
Plumbing Products (A)	Plumbing Products (A)	$	623	$	(301)	$	322	$	(3)	$	319	Plumbing Products (A)	$	623	$	(301)	$	322	$	(14)	$	308
Decorative Architectural Products	Decorative Architectural Products	366		(120)		246		—		246		Decorative Architectural Products	366		(120)		246		—		246

Total	Total	$	989	$	(421)	$	568	$	(3)	$	565	Total	$	989	$	(421)	$	568	$	(14)	$	554

(A)As a result of Hüppe being divested in May 2021, both gross goodwill and accumulated impairment losses for the Plumbing Products segment were reduced by $39 million.

(B)Other consists of the effect of foreign currency translation.

The carrying value of our other indefinite-lived intangible assets was $108 million and $109 million at ~~both March 31,~~June 30, 2022 and December 31, 2021, respectively, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was ~~$270~~$261 million (net of accumulated amortization of ~~$83~~$79 million) and $279 million (net of accumulated amortization of $75 million) at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, and principally included customer relationships.

~~MASCO CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)~~

G. FAIR VALUE OF FINANCIAL INSTRUMENTS

Kraus Acquisition Contingent Consideration. As described in Note B, we may be obligated to pay up to an additional $50 million in 2023 for the Kraus acquisition contingent upon the achievement of certain financial performance metrics for the year ending December 31, 2022. The measurement of the liability for contingent consideration is based on significant inputs that are not observable in the market, and are therefore classified as Level 3 inputs. Examples of utilized unobservable inputs are estimated future revenues and earnings of the acquired business and an applicable discount rate. The estimate of the liability may fluctuate if there are changes in the forecast of the acquired business' future revenues and earnings, as a result of actual levels achieved, or in the discount rate used to determine the present value of contingent future cash flows. All subsequent remeasurements from the initial estimate at the time of acquisition are recorded in other, net in our condensed consolidated statements of operations, as described in Note N. ~~The~~As of June 30, 2022, we do not believe the financial performance metrics will be met and the fair value of the liability was estimated to be ~~$28 million and $24 million as of March 31, 2022 and December 31, 2021, respectively,~~nil, using probability weighted discounted cash flows and a discount rate that reflects the uncertainty surrounding the expected outcomes, which we believe is appropriate and representative of a market participant assumption. The fair value of the liability was estimated to be $24 million as of December 31, 2021.

Fair Value of Debt. The fair value of our short-term and long-term fixed-rate debt instruments is based principally upon modeled market prices for the same or similar issues, which are Level 1 inputs. The 364-day term loan has an interest rate that resets monthly and the fair value of this instrument approximates the carrying value at June 30, 2022. The aggregate estimated market value of our short-term and long-term debt at ~~March 31,~~June 30, 2022 was approximately $3.1 billion, compared with the aggregate carrying value of ~~$3.2~~$3.5 billion. The aggregate estimated market value of our short-term and long-term debt at December 31, 2021 was approximately $3.2 billion, compared with the aggregate carrying value of $3.0 billion.

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

H. WARRANTY LIABILITY

Changes in our warranty liability were as follows, in millions:


		Three Months Ended March 31, 2022		Twelve Months Ended December 31, 2021			Six Months Ended June 30, 2022		Twelve Months Ended December 31, 2021
Balance at January 1	Balance at January 1	$	80	$	83	Balance at January 1	$	80	$	83
Accruals for warranties issued during the period	Accruals for warranties issued during the period	9		38		Accruals for warranties issued during the period	19		38
Accruals related to pre-existing warranties	Accruals related to pre-existing warranties	1		(8)		Accruals related to pre-existing warranties	2		(8)
Settlements made (in cash or kind) during the period	Settlements made (in cash or kind) during the period	(8)		(31)		Settlements made (in cash or kind) during the period	(16)		(31)
Other, net (including currency translation and acquisitions)	Other, net (including currency translation and acquisitions)	—		(2)		Other, net (including currency translation and acquisitions)	(2)		(2)
Balance at end of period	Balance at end of period	$	82	$	80	Balance at end of period	$	83	$	80

I. DEBT

On April 26, 2022, we entered into a revolving credit agreement (the “2022 Credit Agreement”) with an aggregate commitment of $1.0 billion and a maturity date of April 26, 2027. Under the 2022 Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $500 million with the current lenders or new lenders. Upon entry into the 2022 Credit Agreement, our credit agreement dated March 13, 2019, as amended, with an aggregate commitment of $1.0 billion, was terminated.

The 2022 Credit Agreement provides for an unsecured revolving credit facility available to us and one of our foreign subsidiaries, in U.S. dollars, European euros, British Pounds Sterling, Canadian dollars and certain other currencies for revolving credit loans, swingline loans and letters of credit. Borrowings under the revolving credit loans denominated in any agreed upon currency other than U.S. dollars are limited to the equivalent of $500 million. We can also borrow swingline loans up to $125 million and obtain letters of credit of up to $25 million. Outstanding letters of credit under the 2022 Credit Agreement reduce our borrowing capacity and we had no outstanding letters of credit at June 30, 2022.

Revolving credit loans denominated in U.S. dollars bear interest under the 2022 Credit Agreement at our option, at (A) SOFR rate for the interest period in effect for the borrowing, plus 0.1%, plus an applicable margin based upon our then-applicable corporate credit ratings; or (B) a rate per annum equal to the greatest of (i) the U.S. prime rate, (ii) the Federal Reserve Bank of New York effective rate plus 0.50% and (iii) the adjusted term SOFR rate for a one month interest period, plus 1.0%; plus an applicable margin based upon our then-applicable corporate credit ratings. Foreign currency revolving credit loans denominated in Canadian dollars bear interest at a rate per annum equal to the greater of (i) the rate equal to the PRIMCAN Index rate and (ii) the CDOR rate for a one month interest period, plus 1.0%; plus an applicable margin based upon our then-applicable corporate credit ratings. Foreign currency revolving credit loans denominated in British Pounds Sterling bear interest at a rate per annum equal to the Daily Simple SONIA, plus an applicable margin based upon our then-applicable corporate credit ratings. Foreign currency revolving credit loans denominated in European euros bear interest at the adjusted EURIBOR rate, plus an applicable margin based upon our then-applicable corporate credit ratings. The various benchmarks are subject to applicable floors.

In order for us to borrow under the 2022 Credit Agreement, there must not be any default in our covenants in the 2022 Credit Agreement (i.e., in addition to the two financial covenants described above, principally limitations on subsidiary debt, negative pledge restrictions, and requirements relating to legal compliance, maintenance of our properties and insurance) and our representations and warranties in the 2022 Credit Agreement must be true in all material respects on the date of borrowing (i.e., principally no material adverse change or litigation likely to result in a material adverse change, since December 31, 2021, no material ERISA or environmental non-compliance, and no material tax deficiency). We were in compliance with all covenants and no borrowings were outstanding at June 30, 2022.

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

I. DEBT, Concluded

On April 26, 2022, we entered into a 364-day $500 million senior unsecured delayed draw term loan due April 26, 2023 with a syndicate of lenders. The senior unsecured term loan and commitments thereunder are subject to prepayment or termination at our option and the loans will bear interest at SOFR plus a spread adjustment and 0.70%. The covenants, including the financial covenants, are substantially the same as those in the 2022 Credit Agreement.

On March 4, 2021, we issued $600 million of 1.500% Notes due February 15, 2028, $600 million of 2.000% Notes due February 15, 2031 and $300 million of 3.125% Notes due February 15, 2051. We received proceeds of $1,495 million, net of discount, for the issuance of these Notes. The Notes are senior indebtedness and are redeemable at our option at the applicable redemption price. On March 22, 2021, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire our $326 million 5.950% Notes due March 15, 2022, $500 million 4.450% Notes due April 1, 2025, and $500 million 4.375% Notes due April 1, 2026. In connection with these early retirements, we incurred a loss on debt extinguishment of $168 million for the ~~three-month period~~six months ended ~~March 31,~~June 30, 2021, which was recorded as interest expense in the condensed consolidated statement of operations.

~~MASCO CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)~~

~~I. DEBT (Continued)~~

On March 13, 2019, we entered into a credit agreement (the “2019 Credit Agreement”) with an aggregate commitment of $1.0 billion and a maturity date of March 13, 2024. On December 22, 2021, we amended the 2019 Credit Agreement with the bank group (the "Amended Credit Agreement"). The 2019 Credit Agreement was amended to (i) expand the “Agreed Currencies” for which loans thereunder may be denominated outside of the swingline facility to include British Pounds Sterling and Canadian Dollars, together with their applicable interest rate benchmark, (ii) replace the London Interbank Offering Rate (“LIBOR”) with the Euro Interbank Offered Rate (“EURIBOR”) as the interest rate benchmark for purposes of loans denominated in Euros and (iii) provide mechanics for the replacement of a benchmark for an applicable Agreed Currency upon the occurrence of certain specified events. Under the Amended Credit Agreement, the replacement reference interest rate benchmark for loans denominated in U.S. dollars upon the eventual discontinuation of LIBOR will have a benchmark adjustment applied based on its historical relationship to LIBOR, which can be either the term Secured Overnight Financing Rate (“SOFR”) plus a spread, daily simple SOFR plus a spread, or another alternative interest rate index selected by the Administrative Agent and us.

~~Under the Amended Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $500 million with the current lenders or new lenders.~~

The Amended Credit Agreement provides for an unsecured revolving credit facility available to us and one of our foreign subsidiaries, in U.S. dollars, European euros, British Pounds Sterling, Canadian dollars and certain other currencies for revolving credit loans, swingline loans and letters of credit. Borrowings under the revolving credit loans denominated in any agreed upon currency other than U.S. dollars are limited to $500 million, equivalent. We can also borrow swingline loans up to $100 million and obtain letters of credit of up to $25 million; outstanding letters of credit under the Amended Credit Agreement reduce our borrowing capacity. At March 31, 2022, we had no outstanding standby letters of credit under the Amended Credit Agreement.

Revolving credit loans denominated in U.S. Dollars bear interest under the Amended Credit Agreement at a rate per annum equal to the greater of (i) the JPMorgan Chase Bank, N.A. prime rate, (ii) the Federal Reserve Bank of New York effective rate plus 0.50% and (iii) adjusted LIBO Rate plus 1.0%; plus an applicable margin based upon our then-applicable corporate credit ratings. Foreign currency revolving credit loans denominated in Canadian Dollars bear interest under the Amended Credit Agreement at a rate per annum equal to the greater of (i) the rate equal to the PRIMCAN Index rate and (ii) the CDOR Rate for a one month interest period, plus 1.0%; plus an applicable margin based upon our then-applicable corporate credit ratings. Foreign currency revolving credit loans denominated in Pounds Sterling bear interest under the Amended Credit Agreement at a rate per annum equal to the Daily Simple SONIA plus 0.0326%. Foreign currency revolving credit loans denominated in Euros bear interest at the adjusted EURIBOR Rate, plus an applicable margin based upon our then-applicable corporate credit ratings. The various benchmarks are subject to applicable floors as specified in the Amended Credit Agreement. The Amended Credit Agreement also provides mechanics for the replacement of a benchmark upon the occurrence of certain specified events.

In order for us to borrow under the Amended Credit Agreement, there must not be any default in our covenants in the Amended Credit Agreement (i.e., in addition to the two financial covenants, principally limitations on subsidiary debt, negative pledge restrictions, legal compliance requirements and maintenance of properties and insurance) and our representations and warranties in the Amended Credit Agreement must be true in all material respects on the date of borrowing (i.e., principally no material adverse change or litigation likely to result in a material adverse change, since December 31, 2018, no material ERISA or environmental non-compliance, and no material tax deficiency). We were in compliance with all covenants and $263 million was borrowed and outstanding at a weighted average interest rate of 1.5798% at March 31, 2022.

~~MASCO CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)~~

~~I. DEBT (Concluded)~~

~~Subsequent Events~~

On April 26, 2022, we entered into a revolving credit agreement (the “2022 Credit Agreement”) with an aggregate commitment of $1.0 billion and a maturity date of April 26, 2027. Under the 2022 Credit Agreement, the swingline loans borrowing capacity increased to $125 million. All other material terms are substantially the same as the Amended Credit Agreement as described above, including the two financial covenants. Upon entry into the 2022 Credit Agreement, our 2019 Credit Agreement dated March 13, 2019, as amended, with an aggregate commitment of $1.0 billion, was terminated.

On April 26, 2022, we entered into a 364-day $500 million senior unsecured delayed draw term loan due April 26, 2023 with a syndicate of lenders. The senior unsecured term loan and commitments thereunder are subject to prepayment or termination at our option and the loans will bear interest at SOFR plus a spread adjustment and 0.70%. The covenants are substantially the same as those in the 2022 Credit Agreement.

J. STOCK-BASED COMPENSATION

Our 2014 Long Term Stock Incentive Plan provides for the issuance of stock-based incentives in various forms to our employees and non-employee Directors. At ~~March 31,~~June 30, 2022, outstanding stock-based incentives were in the form of restricted stock units, performance restricted stock units, stock options, long-term stock awards and phantom stock awards.

Pre-tax compensation expense for these stock-based incentives was as follows, in millions:


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022		2021		2022		2021
Restricted stock units	Restricted stock units		$	19		$	19	Restricted stock units	$	6	$	4	$	25	$	23
Performance restricted stock units	Performance restricted stock units		1			2		Performance restricted stock units	3		4		4		6
Stock options	Stock options		5			4		Stock options	1		1		6		5
Long-term stock awards	Long-term stock awards		2			3		Long-term stock awards	2		3		4		6
Phantom stock awards	Phantom stock awards		—			2		Phantom stock awards	—		—		—		2
Total	Total		$	27		$	30	Total	$	12	$	12	$	39	$	42

Restricted Stock Units. Restricted stock units are granted to our key employees and non-employee Directors. These grants did not cause net share dilution due to our practice of repurchasing and retiring an equal number of shares in the open market.

We granted ~~581,660~~605,100 restricted stock units in the ~~three-month period~~six months ended ~~March 31,~~June 30, 2022 with a weighted average grant date fair value of $59 per share.

1112

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

J. STOCK-BASED COMPENSATION, ~~(Continued)~~Continued

Our restricted stock unit activity was as follows, units in millions:


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
Unvested restricted stock units at January 1	Unvested restricted stock units at January 1	1		—		Unvested restricted stock units at January 1	1		—
Weighted average grant date fair value	Weighted average grant date fair value	$	54	$	47	Weighted average grant date fair value	$	54	$	47

Restricted stock units granted	Restricted stock units granted	1		1		Restricted stock units granted	1		1
Weighted average grant date fair value	Weighted average grant date fair value	$	59	$	56	Weighted average grant date fair value	$	59	$	57

Restricted stock units vested	Restricted stock units vested	1		—		Restricted stock units vested	1		—
Weighted average grant date fair value	Weighted average grant date fair value	$	53	$	48	Weighted average grant date fair value	$	53	$	47

Restricted stock units forfeited	Restricted stock units forfeited	—		—		Restricted stock units forfeited	—		—
Weighted average grant date fair value	Weighted average grant date fair value	$	55	$	53	Weighted average grant date fair value	$	56	$	54

Unvested restricted stock units at March 31		1		1
Unvested restricted stock units at June 30						Unvested restricted stock units at June 30	1		1
Weighted average grant date fair value	Weighted average grant date fair value	$	57	$	53	Weighted average grant date fair value	$	57	$	54

At ~~March 31,~~June 30, 2022 and 2021, there was ~~$30~~$25 million and ~~$23~~$20 million, respectively, of unrecognized compensation expense related to unvested restricted stock units; such units had a weighted average remaining vesting period of two years at both ~~March 31,~~June 30, 2022 and 2021.

The total market value (at the vesting date) of restricted stock units which vested was ~~$18~~$19 million and $7 million during the ~~three-month periods~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

Performance Restricted Stock Units. Under our Long Term Incentive Program, we grant performance restricted stock units to certain senior executives. These performance restricted stock units will vest and share awards will be issued at no cost to the employees, subject to our achievement of specified performance metrics established by our Compensation Committee over a three-year performance period and the recipient's continued employment through the share award date.

During the ~~three-month period~~six months ended ~~March 31,~~June 30, 2022, we granted 91,820 performance restricted stock units with a grant date fair value of approximately $55 per share and 167,903 shares were issued. No performance restricted stock units were forfeited during the ~~three-month period~~six months ended ~~March 31,~~June 30, 2022. During the ~~three-month period~~six months ended ~~March 31,~~June 30, 2021, we granted 85,360 performance restricted stock units with a grant date fair value of approximately $53 per share and 104,757 shares were issued. No performance restricted stock units were forfeited during the ~~three-month period~~six months ended ~~March 31,~~June 30, 2021.

Stock Options. Stock options are granted to certain key employees.

We granted 337,790 shares of stock options in the ~~three-month period~~six months ended ~~March 31,~~June 30, 2022 with a grant date weighted average exercise price of approximately $59 per share.

1213

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

J. STOCK-BASED COMPENSATION, ~~(Continued)~~Continued

Our stock option activity was as follows, shares in millions:


		Three Months Ended March 31,						Six Months Ended June 30,
		2022		2021				2022		2021
Option shares outstanding, January 1	Option shares outstanding, January 1	3		2		Option shares outstanding, January 1		3		2
Weighted average exercise price	Weighted average exercise price	$	37	$	33	Weighted average exercise price	$	37	$	33

Option shares granted	Option shares granted	—		1		Option shares granted		—		1
Weighted average exercise price	Weighted average exercise price	$	59	$	56	Weighted average exercise price	$	59	$	56

Option shares exercised	Option shares exercised	—		—		Option shares exercised		—		—
Aggregate intrinsic value on date of exercise (A)	Aggregate intrinsic value on date of exercise (A)	$	—	$	—	Aggregate intrinsic value on date of exercise (A)	$	—	$	1 million
Weighted average exercise price	Weighted average exercise price	$	38	$	—	Weighted average exercise price	$	38	$	20

Option shares forfeited	Option shares forfeited	—		—		Option shares forfeited		—		—
Weighted average exercise price	Weighted average exercise price	$	37	$	11	Weighted average exercise price	$	37	$	11

Option shares outstanding, March 31		3		3
Option shares outstanding, June 30						Option shares outstanding, June 30		3		3
Weighted average exercise price	Weighted average exercise price	$	39	$	36	Weighted average exercise price	$	39	$	36
Weighted average remaining option term (in years)	Weighted average remaining option term (in years)	6		7		Weighted average remaining option term (in years)		6		6

Option shares vested and expected to vest, March 31		3		3
Option shares vested and expected to vest, June 30						Option shares vested and expected to vest, June 30		3		3
Weighted average exercise price	Weighted average exercise price	$	39	$	36	Weighted average exercise price	$	39	$	36
Aggregate intrinsic value (A)	Aggregate intrinsic value (A)	$	40 million	$	65 million	Aggregate intrinsic value (A)	$	39 million	$	62 million
Weighted average remaining option term (in years)	Weighted average remaining option term (in years)	6		6		Weighted average remaining option term (in years)		6		6

Option shares exercisable (vested), March 31		2		2
Option shares exercisable (vested), June 30						Option shares exercisable (vested), June 30		2		2
Weighted average exercise price	Weighted average exercise price	$	34	$	30	Weighted average exercise price	$	34	$	30
Aggregate intrinsic value (A)	Aggregate intrinsic value (A)	$	36 million	$	51 million	Aggregate intrinsic value (A)	$	35 million	$	49 million
Weighted average remaining option term (in years)	Weighted average remaining option term (in years)	5		5		Weighted average remaining option term (in years)		5		5

(A) Aggregate intrinsic value is calculated using our stock price at each respective date, less the exercise price (grant date price), multiplied by the number of shares.

At ~~March 31,~~June 30, 2022 and 2021, there was $4$3 million and $6$5 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model at the grant date) related to unvested stock options; such options had a weighted average remaining vesting period of two years at both ~~March 31,~~June 30, 2022 and 2021.

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

J. STOCK-BASED COMPENSATION, Concluded

The weighted average grant date fair value of option shares granted and the assumptions used to estimate those values using a Black-Scholes option pricing model were as follows:


		Three Months Ended March 31,							Six Months Ended June 30,
		2022			2021				2022			2021
Weighted average grant date fair value	Weighted average grant date fair value	$	14.66		$	13.61		Weighted average grant date fair value	$	14.66		$	13.61
Risk-free interest rate	Risk-free interest rate	1.90		%	0.75		%	Risk-free interest rate	1.90		%	0.75		%
Dividend yield	Dividend yield	1.89		%	1.67		%	Dividend yield	1.89		%	1.67		%
Volatility factor	Volatility factor	29.00		%	30.00		%	Volatility factor	29.00		%	30.00		%
Expected option life	Expected option life	6 years			6 years			Expected option life	6 years			6 years

~~MASCO CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)~~

~~J. STOCK-BASED COMPENSATION (Concluded)~~

Long-Term Stock Awards. Prior to the amendment of our 2014 Long Term Stock Incentive Plan in December 2019, we granted long-term stock awards to our key employees and non-employee Directors. We did not grant shares of long-term stock awards in the ~~three-month periods~~six months ended ~~March 31,~~June 30, 2022 and 2021.

Our long-term stock award activity was as follows, shares in millions:


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
Unvested stock award shares at January 1	Unvested stock award shares at January 1	1		1		Unvested stock award shares at January 1	1		1
Weighted average grant date fair value	Weighted average grant date fair value	$	37	$	36	Weighted average grant date fair value	$	37	$	36

Stock award shares vested	Stock award shares vested	1		—		Stock award shares vested	1		—
Weighted average grant date fair value	Weighted average grant date fair value	$	37	$	34	Weighted average grant date fair value	$	37	$	34

Stock award shares forfeited	Stock award shares forfeited	—		—		Stock award shares forfeited	—		—
Weighted average grant date fair value	Weighted average grant date fair value	$	37	$	37	Weighted average grant date fair value	$	37	$	37

Unvested stock award shares at March 31		—		1
Unvested stock award shares at June 30						Unvested stock award shares at June 30	—		1
Weighted average grant date fair value	Weighted average grant date fair value	$	38	$	37	Weighted average grant date fair value	$	38	$	37

At ~~March 31,~~June 30, 2022 and 2021, there was $8$6 million and ~~$18~~$15 million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of one year and two years at ~~both March 31,~~June 30, 2022 and ~~2021.~~2021, respectively.

The total market value (at the vesting date) of stock award shares which vested was ~~$20~~$21 million and ~~$26~~$27 million during the ~~three-month periods~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

K. EMPLOYEE RETIREMENT PLANS

Net periodic pension cost for our defined-benefit pension plans, with the exception of service cost, is recorded in other, net, in our condensed consolidated statements of operations. Net periodic pension cost for our defined-benefit pension plans was as follows, in millions:


		Three Months Ended March 31,									Three Months Ended June 30,
		2022				2021					2022				2021
		Qualified		Non-Qualified		Qualified		Non-Qualified			Qualified		Non-Qualified		Qualified		Non-Qualified
Service cost	Service cost	$	1	$	—	$	1	$	—	Service cost	$	—	$	—	$	1	$	—
Interest cost	Interest cost	1		1		8		1		Interest cost	—		1		5		—
Expected return on plan assets	Expected return on plan assets	(1)		—		(4)		—		Expected return on plan assets	—		—		(3)		—
Settlement loss										Settlement loss	—		—		406		—
Amortization of net loss	Amortization of net loss	1		1		6		1		Amortization of net loss	1		—		5		1
Net periodic pension cost	Net periodic pension cost	$	2	$	2	$	11	$	2	Net periodic pension cost	$	1	$	1	$	414	$	1


	Six Months Ended June 30,
	2022				2021
	Qualified		Non-Qualified		Qualified		Non-Qualified
Service cost	$	1	$	—	$	2	$	—
Interest cost	1		2		13		1
Expected return on plan assets	(1)		—		(7)		—
Settlement loss	—		—		406		—
Amortization of net loss	2		1		11		2
Net periodic pension cost	$	3	$	3	$	425	$	3

In December 2019, our Board of Directors approved the termination of our qualified domestic defined-benefit pension ~~plans and in~~plans. In the second quarter of 2021, we settled these ~~pension plans.~~plans and made a final contribution of $101 million. The settlement loss included $447 million of pre-tax actuarial losses that were reclassified out of accumulated other comprehensive income during both the three and six months ended June 30, 2021.

1416

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

L. RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME

The reclassifications from accumulated other comprehensive income to the condensed consolidated statements of operations were as follows, in millions:


		Amounts Reclassified						Amounts Reclassified
Accumulated Other Comprehensive Income	Accumulated Other Comprehensive Income	Three Months Ended March 31,			Statement of Operations Line Item		Accumulated Other Comprehensive Income	Three Months Ended June 30,					Six Months Ended June 30,				Statement of Operations Line Item
			2022					2021		Accumulated Other Comprehensive Income	2022		2021		2022				Statement of Operations Line Item
Amortization of defined-benefit pension and other post-retirement benefits:
Settlement and amortization of defined-benefit pension and other post-retirement benefits (A):										Settlement and amortization of defined-benefit pension and other post-retirement benefits (A):
Actuarial losses, net	Actuarial losses, net		$	2	$	7			Other, net	Actuarial losses, net	$	1	$	9	$	3	$	16	Other, net
Settlement loss										Settlement loss	—		447		—		447		Other, net
Tax (benefit)	Tax (benefit)		(1)		(2)					Tax (benefit)	—		(98)		(1)		(100)
Net of tax	Net of tax		$	1	$	5				Net of tax	$	1	$	358	$	2	$	363

Interest rate swaps (A)			$	—	$	2			Interest expense
Interest rate swaps (B)										Interest rate swaps (B)	$	—	$	—	$	—	$	2	Interest expense
Tax expense	Tax expense		—		5					Tax expense	—		—		—		5
Net of tax	Net of tax		$	—	$	7				Net of tax	$	—	$	—	$	—	$	7

(A) In the second quarter of 2021, we settled our qualified domestic defined-benefit pension plans and recognized $447 million of pre-tax actuarial losses from accumulated other comprehensive income and $96 million of income tax benefit, which included $11 million of related disproportionate tax expense. Additionally, the amortization of defined-benefit pension and other post-retirement benefits included $3 million, net of tax, due to the disposition of pension plans in connection with the divestiture of Hüppe.

(B) Upon full repayment and retirement of the 5.950% Notes due March 15, 2022 in the first quarter of 2021, we recognized the remaining interest rate swap loss and related disproportionate tax expense.

~~M. SEGMENT INFORMATION~~In addition to the above amounts, we reclassified $23 million of currency translation losses from accumulated other comprehensive income to the condensed consolidated statements of operations in conjunction with the divestiture of Hüppe in the second quarter of 2021.

~~Information by segment and geographic area was as follows, in millions:~~

Three Months Ended March 31,
2022 2021 2022 2021
Net Sales (A)
Operating Profit
Operations by segment:
Plumbing Products $ 1,359 $ 1,249 $ 228 $ 252
Decorative Architectural Products 842 721 155 142
Total $ 2,201 $ 1,970 $ 383 $ 394
Operations by geographic area:
North America $ 1,734 $ 1,529 $ 300 $ 308
International, principally Europe 467 441 83 86
Total $ 2,201 $ 1,970 383 394
General corporate expense, net (30) (29)
Operating profit 353 365
Other income (expense), net (26) (208)
Income before income taxes $ 327 $ 157

~~(A)~~

~~Inter-segment sales were not material.~~

1517

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

M. SEGMENT INFORMATION

Information by segment and geographic area was as follows, in millions:


	Three Months Ended June 30,								Six Months Ended June 30,
	2022		2021		2022		2021		2022		2021		2022		2021
	Net Sales (A)				Operating Profit				Net Sales (A)				Operating Profit
Operations by segment:
Plumbing Products	$	1,373	$	1,329	$	238	$	273	$	2,732	$	2,578	$	466	$	525
Decorative Architectural Products	979		850		192		188		1,821		1,571		347		330


Total	$	2,352	$	2,179	$	430	$	461	$	4,553	$	4,149	$	813	$	855
Operations by geographic area:
North America	$	1,905	$	1,717	$	356	$	370	$	3,639	$	3,246	$	656	$	678
International, principally Europe	447		462		74		91		914		903		157		177
Total	$	2,352	$	2,179	430		461		$	4,553	$	4,149	813		855
General corporate expense, net					(22)		(24)						(52)		(53)
Operating profit					408		437						761		802
Other income (expense), net					(11)		(440)						(37)		(648)
Income (loss) before income taxes					$	397	$	(3)					$	724	$	154

(A) Inter-segment sales were not material.

N. OTHER INCOME (EXPENSE), NET

Other, net, which is included in other income (expense), net, was as follows, in millions:


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022		2021		2022		2021

Foreign currency transaction gains			$	4		$	—
Contingent consideration (A)	Contingent consideration (A)		(4)			—		Contingent consideration (A)	$	28	$	—	$	24	$	—
Gain on sale of business (B)			2			—
Net periodic pension and post-retirement benefit cost			(2)			(11)
Dividend income			—			3

Equity investment income, net			—			2
Foreign currency transaction (losses) gains								Foreign currency transaction (losses) gains	(6)		2		(2)		2
Net periodic pension and post-retirement benefit expense (B)								Net periodic pension and post-retirement benefit expense (B)	(3)		(415)		(5)		(426)
Loss on sale of businesses, net								Loss on sale of businesses, net	(3)		(18)		(1)		(18)
Income from cash and cash investments								Income from cash and cash investments	1		—		1		—
Gain on preferred stock redemption (C)								Gain on preferred stock redemption (C)	—		14		—		14

Dividend income								Dividend income	—		3		—		6
Equity investment income, net								Equity investment income, net	—		—		—		2
Other items, net	Other items, net		(1)			—		Other items, net	—		(1)		(1)		(1)
Total other, net	Total other, net		$	(1)		$	(6)	Total other, net	$	17	$	(415)	$	16	$	(421)

(A)In the ~~first quarter of~~three and six months ended June 30, 2022 we recognized $4$28 million and $24 million, respectively, of ~~expense~~income from the revaluation of contingent consideration related to a prior acquisition. Refer to Note G for additional information.

(B) ~~Represents~~In the second quarter of 2021, we settled our qualified domestic defined-benefit pension plans and recognized $406 million of additional pension expense.

(C) In May 2021, we received, in cash, $166 million for the redemption of the AC Products Holding, Inc. preferred stock, including all accrued but unpaid dividends, and recognized a ~~pre-tax post-closing~~ gain ~~related to the finalization~~ of ~~working capital items related to the divestiture of Hüppe.~~$14 million.

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

O. INCOME (LOSS) PER COMMON SHARE

Reconciliations of the numerators and denominators used in the computations of basic and diluted income (loss) per common share were as follows, in millions:


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022		2021		2022		2021
Numerator (basic and diluted):	Numerator (basic and diluted):							Numerator (basic and diluted):
Net income			$	233		$	94
Net income (loss)								Net income (loss)	$	278	$	(36)	$	511	$	58
Less: Allocation to redeemable noncontrolling interest	Less: Allocation to redeemable noncontrolling interest		(1)			6		Less: Allocation to redeemable noncontrolling interest	1		—		—		6
Less: Allocation to unvested restricted stock awards	Less: Allocation to unvested restricted stock awards		—			—		Less: Allocation to unvested restricted stock awards	1		—		2		—

Net income attributable to common shareholders			$	234		$	88
Net income (loss) attributable to common shareholders								Net income (loss) attributable to common shareholders	$	276	$	(36)	$	509	$	52

Denominator:	Denominator:							Denominator:
Basic common shares (based upon weighted average)	Basic common shares (based upon weighted average)		239			256		Basic common shares (based upon weighted average)	231		252		235		254
Add: Stock option dilution	Add: Stock option dilution		2			1		Add: Stock option dilution	2		—		2		2
Diluted common shares	Diluted common shares		241			257		Diluted common shares	233		252		237		256

For the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2022, we allocated dividends and undistributed earnings to the unvested restricted stock awards. For the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2021, we allocated ~~undistributed earnings~~dividends to the unvested restricted stock awards.

~~Additionally, 265,000~~

The following stock options and ~~188,000 common shares for the three-month periods ended March 31, 2022 and 2021, respectively, related to~~restricted stock ~~options~~units were excluded from the computation of weighted-average diluted ~~income per~~ common ~~share~~shares outstanding due to their ~~antidilutive effect.~~anti-dilutive effect, in thousands:


	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Number of stock options	670	2,802	599	260
Number of restricted stock units	249	464	17	1

Effective February 10, 2021, our Board of Directors authorized the repurchase, for retirement, of up to $2.0 billion of shares of our common stock in open-market transactions or ~~otherwise, replacing~~otherwise. In May 2022, we entered into an accelerated stock repurchase transaction whereby we agreed to repurchase a total of $500 million of our common stock with an initial delivery of approximately 7.9 million shares. This transaction was completed on June 28, 2022, at which time we received, at no additional cost, approximately 1.6 million additional shares of our common stock resulting from changes in the ~~previous Board~~volume weighted average stock price of ~~Directors authorization established in 2019. We~~our common stock over the term of the transaction, less a discount. In total, we repurchased and retired ~~6.1~~approximately 16.6 million shares of our common stock in the ~~three-month period~~six months ended ~~March 31,~~June 30, 2022 for approximately ~~$364~~$914 million. This included 0.6 million shares to offset the dilutive impact of restricted stock units granted in the ~~three-month period~~six months ended ~~March 31,~~June 30, 2022. At ~~March 31,~~June 30, 2022, we had ~~$764~~$214 million remaining under the 2021 authorization.

On the basis of amounts paid (declared), cash dividends per common share were $0.280 ($0.280) and $0.560 ($0.560) for the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2022, respectively, and ~~$0.140~~$0.235 ($0.235) and $0.375 ($0.235) for the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2021, respectively.

1619

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Concluded)

P. OTHER COMMITMENTS AND CONTINGENCIES

We are involved in claims and litigation, including class actions, mass torts and regulatory proceedings, which arise in the ordinary course of our business. The types of matters may include, among others: competition, product liability, employment, warranty, advertising, contract, personal injury, environmental, intellectual property, product compliance and insurance coverage. We believe we have adequate defenses in these matters. We are also subject to product safety regulations, product recalls and direct claims for product liabilities. We believe the likelihood that the outcome of these claims, litigation and product safety matters would have a material adverse effect on us is remote. However, there is no assurance that we will prevail in these matters, and we could, in the future, incur judgments or penalties, enter into settlements of claims or revise our expectations regarding the outcome of these matters, which could materially impact our results of operations.

Q. INCOME TAXES

Our ~~effective tax rate was 23 percent and 27 percent for the three-month periods ended March 31, 2022 and~~ 2021 ~~respectively. The decrease in the rate was primarily due to a $5 million~~ income tax expense ~~from~~was impacted by the elimination of a disproportionate tax ~~effect~~effects from accumulated other comprehensive income ~~relating to our interest rate swap, following the retirement of the related debt~~resulting in ~~March 2021 and a $5 million increase to~~ income tax expense ~~from a loss on~~of $5 million in the first quarter and $11 million in the second quarter, related to our debt retirement and pension plan termination, ~~of our qualified domestic defined-benefit pension plans in 2021 providing no tax benefit in certain jurisdictions.~~respectively.

1720


~~Item 2.~~						MASCO CORPORATION
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Recent Trends

We are experiencing, and may continue to experience, higher commodity and other input costs, higher transportation costs and supply chain disruptions, particularly disruptions related to our ability to source products, components and raw materials. We are also experiencing and may continue to experience employee-related cost inflation and constraints in hiring qualified employees. We aim to offset the potential unfavorable impact of these items with productivity improvement and other initiatives.

In addition, the COVID-19 pandemic ~~has significantly disrupted~~continues to disrupt global economic activity, including our workforce and operations, as well as the operations of our customers and suppliers. There ~~continues to be~~remains uncertainty regarding the ongoing COVID-19 pandemic and the resulting impact on our future operations and financial results.

We continue to execute our strategies of leveraging our strong brand portfolio, industry-leading positions and the Masco Operating System, our methodology to drive growth and productivity, to create long-term shareholder value. We remain confident in the fundamentals of our business and long-term strategy. We believe that our strong financial position and cash flow generation, together with our investments in our industry-leading branded building products, our continued focus on innovation and disciplined capital allocation, will allow us to drive long-term growth and create value for our shareholders.

~~FIRST~~SECOND QUARTER 2022 ~~VERSUS~~AND THE FIRST SIX MONTHS 2022 VERSUS

SECOND QUARTER 2021 AND THE FIRST SIX MONTHS 2021

Consolidated Results of Operations

We report our financial results in accordance with generally accepted accounting principles in the United States of America ("GAAP"). However, we believe 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, our reported results under GAAP.

The following discussion of consolidated results of operations refers to the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2022 compared to the same ~~period~~periods of 2021.

~~SALES AND OPERATIONS~~

~~Net Sales~~

~~Below is a summary of our net sales, in millions, for the three-month periods ended March 31, 2022 and 2021:~~

Three Months Ended March 31,
2022 2021 Favorable / (Unfavorable)
Net sales, as reported $ 2,201 $ 1,970 $ 231
Acquisitions (6) — (6)
Divestitures — (20) 20
Net sales, excluding acquisitions and divestitures 2,195 1,950 245
Currency translation 31 — 31
Net sales, excluding acquisitions, divestitures and the effect of currency translation $ 2,226 $ 1,950 $ 276

SALES AND OPERATIONS

Net Sales

Below is a summary of our net sales, in millions, for the three and six months ended June 30, 2022 and 2021:


	Three Months Ended June 30,					Six Months Ended June 30,
		2022		2021		Change		2022		2021		Change
Net sales, as reported		$	2,352	$	2,179	$	173	$	4,553	$	4,149	$	404
Acquisitions		(5)		—		(5)		(11)		—		(11)
Divestitures		—		(12)		12		—		(32)		32
Net sales, excluding acquisitions and divestitures		2,347		2,167		180		4,542		4,117		425
Currency translation		57		—		57		88		—		88
Net sales, excluding acquisitions, divestitures and the effect of currency translation		$	2,404	$	2,167	$	237	$	4,630	$	4,117	$	513

Net sales for the ~~three-month period~~three months ended ~~March 31,~~June 30, 2022 were ~~$2.2~~$2.4 billion, which increased 12eight percent compared to the ~~three-month period~~three months ended ~~March 31,~~June 30, 2021. Excluding acquisitions, divestitures and the effect of currency translation, net sales increased 1411 percent. Net sales for the six months ended June 30, 2022 were $4.6 billion, which increased 10 percent compared to the six months ended June 30, 2021. Excluding acquisitions, divestitures and the effect of currency translation, net sales increased 12 percent.

Net sales for the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2022 increased primarily due to:

•Higher net selling prices across the entire company which increased sales by 10 percent and nine ~~percent.~~percent for the three and six months ended June 30, 2022, respectively.

•Higher sales volume of plumbing products and paints and other coating products which increased sales by ~~five percent.~~two percent and four percent for the three and six months ended June 30, 2022, respectively.

These amounts were ~~slightly~~partially offset by:

•Unfavorable foreign currency translation which decreased sales by three percent and two percent for the three and six months ended June 30, 2022, respectively.

•Lower sales volume of lighting and builders' hardware products which decreased sales one ~~percent.~~percent for both periods.

•The divestiture of our Hüppe business which decreased sales one ~~percent.~~percent for both periods.

Gross Profit and Gross Margin

Below is a summary of our gross profit, in millions, and gross margin for the ~~three-month periods~~three and six months ended ~~March 31,~~June 30, 2022 and 2021:


		Three Months Ended March 31,									Three Months Ended June 30,								Six Months Ended June 30,
		2022			2021			Favorable / (Unfavorable)			2022			2021			Favorable / (Unfavorable)		2022			2021			Favorable / (Unfavorable)
Gross profit	Gross profit	$	704		$	700		$	4	Gross profit	$	769		$	791		$	(22)	$	1,473		$	1,491		$	(18)

Gross margin	Gross margin	32.0		%	35.5		%	(350) bps		Gross margin	32.7		%	36.3		%	(360) bps		32.4		%	35.9		%	(350) bps

~~Gross~~

For the three and six months ended June 30, 2022, gross profit margin was negatively impacted by:

•Increased commodity and other input costs and transportation costs.

These amounts were partially offset by:

•Favorable net selling prices.

•Increased sales volume.

Selling, General and Administrative Expenses

Below is a summary of our selling, general and administrative expenses, in millions, and selling, general and administrative expenses as a percentage of net sales for the ~~three-month periods~~three and six months ended ~~March 31,~~June 30, 2022 and 2021:

Three Months Ended March 31,
2022 2021 (Favorable) / Unfavorable
Selling, general and administrative expenses $ 351 $ 335 $ 16
Selling, general and administrative expenses as percentage of net sales 15.9 % 17.0 % (110) bps


	Three Months Ended June 30,								Six Months Ended June 30,
	2022			2021			(Favorable) / Unfavorable		2022			2021			(Favorable) / Unfavorable
Selling, general and administrative expenses	$	361		$	354		$	7	$	712		$	689		$	23



Selling, general and administrative expenses as percentage of net sales	15.3		%	16.2		%	(90) bps		15.6		%	16.6		%	(100) bps

~~Selling,~~For the three and six months ended June 30, 2022, selling, general and administrative expense as a percentage of sales was positively impacted by:

• ~~Leverage~~Higher net selling prices and the leverage of fixed expenses due primarily to increased sales volume.

These amounts were partially offset by:

•Increased ~~other expenses including~~ marketing and employee-related costs.

Operating Profit

Below is a summary of our operating profit, in millions, and operating profit margin for the ~~three-month periods~~three and six months ended ~~March 31,~~June 30, 2022 and 2021:


		Three Months Ended March 31,									Three Months Ended June 30,								Six Months Ended June 30,
		2022			2021			Favorable / (Unfavorable)			2022			2021			Favorable / (Unfavorable)		2022			2021			Favorable / (Unfavorable)
Operating profit	Operating profit	$	353		$	365		$	(12)	Operating profit	$	408		$	437		$	(29)	$	761		$	802		$	(41)
Operating profit margin	Operating profit margin	16.0		%	18.5		%	(250) bps		Operating profit margin	17.3		%	20.1		%	(280) bps		16.7		%	19.3		%	(260) bps

~~Operating~~For the three and six months ended June 30, 2022, operating profit was negatively affected by:

•Increased commodity and other input costs and transportation costs.

•Increased ~~other expenses including~~ marketing and employee-related costs.

•Unfavorable foreign currency translation.

These amounts were partially offset by:

•Favorable net selling prices.

•Increased sales volume.

OTHER INCOME (EXPENSE), NET

Interest Expense

Below is a summary of our interest expense, in millions, for the ~~three-month periods~~three and six months ended ~~March 31,~~June 30, 2022 and 2021:

Three Months Ended March 31,
2022 2021 Favorable / (Unfavorable)
Interest expense $ (25) $ (202) $ 177


	Three Months Ended June 30,						Six Months Ended June 30,
	2022		2021		Favorable / (Unfavorable)		2022		2021		Favorable / (Unfavorable)
Interest expense	$	(28)	$	(25)	$	(3)	$	(53)	$	(227)	$	174

~~The~~For the six months ended June 30, 2022, the decrease in interest expense is primarily due to the absence of the $168 million loss on debt extinguishment which was recorded as additional interest expense in connection with the early retirement of debt in the first quarter of 2021. ~~To a lesser extent, the decrease was also attributable to interest savings related to debt refinancing in the first quarter of 2021.~~

Other, net

Below is a summary of our other, net, in millions, for the ~~three-month periods~~three and six months ended ~~March 31,~~June 30, 2022 and 2021:

Three Months Ended March 31,
2022 2021 Favorable / (Unfavorable)
Other, net $ (1) $ (6) $ 5


	Three Months Ended June 30,						Six Months Ended June 30,
	2022		2021		Favorable / (Unfavorable)		2022		2021		Favorable / (Unfavorable)
Other, net	$	17	$	(415)	$	432	$	16	$	(421)	$	437

Other, net, for the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2022 included:

•$428 million and $24 million, respectively, of ~~expense~~income from the revaluation of contingent consideration related to a prior acquisition.

These amounts were partially offset by:

•$26 million and $2 million, respectively, of realized foreign currency transaction losses.

•$3 million and $5 million, respectively, of net periodic pension and post-retirement benefit expense.

~~These amounts were largely offset by:~~

•~~$4 million of realized foreign currency transaction gains.~~

•~~$2 million of gain related to the finalization of working capital items related to the divestiture of Hüppe.~~

Other, net, for the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2021 included:

•$11415 million and $426 million, respectively, of net periodic pension and post-retirement benefit ~~expense.~~expense, which includes $406 million of settlement loss related to the termination of our qualified domestic defined-benefit pension plans for both periods.

•$18 million loss related to the divestiture of Hüppe for both periods.

~~This amount was~~These amounts were partially offset by:

•$314 million gain recognized on the redemption of ~~dividend income related to~~the preferred stock of ACProducts Holding, Inc.

•$2 for both periods and $3 million and $6 million, respectively, of ~~earnings~~ related ~~to equity method investments.~~

~~INCOME TAXES~~

~~Below is a summary of our income tax expense, in millions, and our effective tax rate for the three-month periods ended March 31, 2022 and 2021:~~

Three Months Ended March 31,
2022 2021 (Favorable) / Unfavorable
Income tax expense $ 75 $ 43 $ 32
Effective tax rate 23 % 27 % (4) %

~~Our effective tax rate of 23 percent for the three-month period ended March 31, 2022 was lower than our normalized tax rate of 25 percent primarily due to:~~

•~~$5 million of additional state income tax benefit from a reduction in the liability for uncertain tax positions resulting from the expiration of statutes of limitation in the first quarter of 2022.~~

~~Our effective tax rate of 27 percent for the three-month period ended March 31, 2021 was higher than our normalized tax rate of 25 percent primarily due to:~~

•$5 million of income tax expense from the elimination of a disproportionate tax effect from accumulated other comprehensive income, relating to our interest rate swap, following the retirement of the related debt in March 2021.

•~~$5 million increase to income tax expense from a loss on the termination of our qualified domestic defined-benefit pension plans in 2021 providing no tax benefit in certain jurisdictions.~~

~~The increased income tax expense was partially offset by:~~

2124

INCOME TAXES

Below is a summary of our income tax expense, in millions, and our effective tax rate for the three and six months ended June 30, 2022 and 2021:


	Three Months Ended June 30,							Six Months Ended June 30,
	2022			2021		(Favorable) / Unfavorable		2022			2021			(Favorable) / Unfavorable
Income tax expense	$	103		$	12	$	91	$	178		$	55		$	123



Effective tax rate	26		%	Not Meaningful		Not Meaningful		25		%	36		%	(11)		%

Our 2021 income tax expense was impacted by the elimination of disproportionate tax effects from accumulated other comprehensive income resulting in income tax expense of $5 million in the first quarter and $11 million in the second quarter, related to our debt retirement and pension plan termination, respectively.

NET INCOME (LOSS) AND INCOME (LOSS) PER COMMON SHARE — ATTRIBUTABLE TO MASCO CORPORATION

Below is a summary of our net income (loss) and diluted income (loss) per common share, in millions, except per share data, for the ~~three-month periods~~three and six months ended ~~March 31,~~June 30, 2022 and 2021:

Three Months Ended March 31,
2022 2021 Favorable / (Unfavorable)
Net income $ 233 $ 94 $ 139
Diluted income per common share $ 0.97 $ 0.34 $ 0.63


	Three Months Ended June 30,						Six Months Ended June 30,
	2022		2021		Favorable / (Unfavorable)		2022		2021		Favorable / (Unfavorable)
Net income (loss)	$	278	$	(36)	$	314	$	511	$	58	$	453



Diluted income (loss) per common share	$	1.18	$	(0.14)	$	1.32	$	2.15	$	0.20	$	1.95

Business Segment and Geographic Area Results

The following table sets forth our net sales and operating profit information by Business Segment and Geographic Area, dollars in millions.

Three Months Ended March 31, Percent Change
2022 2021 2022 vs 2021
Net Sales:
Plumbing Products $ 1,359 $ 1,249 9 %
Decorative Architectural Products 842 721 17 %
Total $ 2,201 $ 1,970 12 %
North America $ 1,734 $ 1,529 13 %
International, principally Europe 467 441 6 %
Total $ 2,201 $ 1,970 12 %


		Three Months Ended March 31,			Percent Change		Three Months Ended June 30,						Percent Change				Six Months Ended June 30,				Percent Change
			2022		2021			2022 vs 2021			2022		2021		2022	vs.	2021		2022		2021		2022	vs.	2021
Operating Profit: (A)
Net Sales:										Net Sales:
Plumbing Products	Plumbing Products		$	228	$	252		(10)	%	Plumbing Products	$	1,373	$	1,329	3			%	$	2,732	$	2,578	6			%
Decorative Architectural Products	Decorative Architectural Products		155		142			9	%	Decorative Architectural Products	979		850		15			%	1,821		1,571		16			%

Total	Total		$	383	$	394		(3)	%	Total	$	2,352	$	2,179	8			%	$	4,553	$	4,149	10			%

North America	North America		$	300	$	308		(3)	%	North America	$	1,905	$	1,717	11			%	$	3,639	$	3,246	12			%
International, principally Europe	International, principally Europe		83		86			(3)	%	International, principally Europe	447		462		(3)			%	914		903		1			%
Total	Total		383		394			(3)	%	Total	$	2,352	$	2,179	8			%	$	4,553	$	4,149	10			%
General corporate expense, net			(30)		(29)			3	%
Total operating profit			$	353	$	365		(3)	%


	Three Months Ended June 30,				Percent Change				Six Months Ended June 30,				Percent Change
	2022		2021		2022	vs.	2021		2022		2021		2022	vs.	2021
Operating Profit: (A)
Plumbing Products	$	238	$	273	(13)			%	$	466	$	525	(11)			%
Decorative Architectural Products	192		188		2			%	347		330		5			%

Total	$	430	$	461	(7)			%	$	813	$	855	(5)			%

North America	$	356	$	370	(4)			%	$	656	$	678	(3)			%
International, principally Europe	74		91		(19)			%	157		177		(11)			%
Total	430		461		(7)			%	813		855		(5)			%
General corporate expense, net	(22)		(24)		(8)			%	(52)		(53)		(2)			%
Total operating profit	$	408	$	437	(7)			%	$	761	$	802	(5)			%

(A) Before general corporate expense, net; see Note M to the condensed consolidated financial statements.

BUSINESS SEGMENT RESULTS DISCUSSION

The following discussion of Business Segment and Geographic Area Results discussion refers to the three and six months ended June 30, 2022 compared to the same periods of 2021. Changes in operating profit in the following Business Segment and Geographic Area Results discussion exclude general corporate expense, net.

2226

~~BUSINESS SEGMENT RESULTS DISCUSSION~~

The following discussion of Business Segment and Geographic Area Results discussion refers to the three-month period ended March 31, 2022 compared to the same period of 2021. Changes in operating profit in the following Business Segment and Geographic Area Results discussion exclude general corporate expense, net.

Plumbing Products

Sales

Net sales in the Plumbing Products segment increased ~~nine~~three percent and six percent for the ~~three-month period~~three and six months ended ~~March 31, 2022.~~June 30, 2022, respectively. Favorable net selling prices ~~and higher sales volume both~~ increased sales by seven percent for both periods. Higher sales volume increased sales by one percent and three percent for the three and six ~~percent.~~months ended June 30, 2022, respectively. Such increases were partially offset by unfavorable foreign currency translation which decreased sales by four percent and three percent for the three and six months ended June 30, 2022, respectively, and the divestiture of Hüppe, which ~~each~~ decreased sales by ~~two percent.~~one percent in both periods.

Operating Results

Operating profit in the Plumbing Products segment for the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2022 was negatively impacted by increased commodity and other input costs, transportation, employee-related and marketing ~~costs.~~costs as well as unfavorable foreign currency translation. These amounts were partially offset by favorable net selling prices and to a lesser extent increased sales volume.

Decorative Architectural Products

Sales

Net sales in the Decorative Architectural Products segment increased 1715 percent and 16 percent for the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2022, respectively. This increase was due primarily to favorable net selling prices of paints and other coating products, lighting products, and builders' hardware products as well as higher sales volume of paints and other coating products and favorable sales mix of lighting products. These positive impacts were slightly offset by lower sales volume of lighting products and builders' hardware products.

Operating Results

Operating profit in the Decorative Architectural Products segment for the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2022 was positively impacted by favorable net selling prices and increased sales volume. These positive impacts were partially offset by increased commodity and other input costs, transportation and marketing costs.

GEOGRAPHIC AREA RESULTS DISCUSSION

North America

Sales

North American net sales increased 1311 percent and 12 percent for the ~~three-month period~~three and six months ended ~~March 31, 2022.~~June 30, 2022, respectively. Favorable net selling prices across all of ~~paints and other coating products and plumbing products increased sales by nine percent~~our product categories and higher sales volume of paints and other coating products increased sales by 13 percent and 12 percent for the three and six months ended June 30, 2022, respectively. Additionally, higher sales volume of plumbing products increased sales by ~~four percent.~~one percent for only the six months ended June 30, 2022. These positive impacts were slightly offset by lower sales volume in lighting products and builders' hardware products, which decreased sales by two percent and one ~~percent.~~percent for the three and six months ended June 30, 2022, respectively.

Operating Results

Operating profit in North America for the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2022 was negatively impacted by increased commodity and other input costs, transportation, ~~marketing~~ and ~~employee-related~~marketing costs. These amounts were partially offset by favorable net selling prices and increased sales volume.

2327

International, Principally Europe

Sales

International net sales ~~increased six~~decreased three percent for the ~~three-month period~~three months ended ~~March 31,~~June 30, 2022 and increased one percent for the six months ended June 30, 2022. In local currencies (including sales in currencies outside their respective functional currencies), net sales increased 12eight percent and 10 percent for the ~~three-month period~~three and six months ended ~~March 31, 2022. Higher sales volume of plumbing products increased sales by nine percent, favorable~~June 30, 2022, respectively. Favorable net selling prices of plumbing products increased sales by seven percent for both the three and ~~favorable~~six months ended June 30, 2022. Higher sales ~~mix~~volume of plumbing products increased sales by ~~one percent.~~four percent and seven percent for the three and six months ended June 30, 2022, respectively. These positive impacts were partially offset by the divestiture of our Hüppe business, which decreased sales ~~five percent.~~three percent and four percent for the three and six months ended June 30, 2022, respectively.

Operating Results

International operating profit for the ~~three-month period~~three and six months ended ~~March 31,~~June 30, 2022 was negatively impacted by increased commodity and other input costs, transportation, and employee-related ~~and marketing costs.~~costs as well as unfavorable foreign currency translation. These amounts were partially offset by favorable net selling prices and increased sales volume.

Liquidity and Capital Resources

Our current ratio was ~~1.6~~1.4 to 1 and 1.8 to 1 at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. The decrease in our current ratio is primarily due to the ~~$263~~364-day $500 million ~~of revolving credit~~term loan ~~borrowings at March 31,~~that we entered into on April 26, 2022.

For the ~~three-month period~~six months ended ~~March 31,~~June 30, 2022, net cash ~~used for~~provided by operating activities was ~~$227~~$174 million. ~~Cash~~Our cash flows from operations primarily benefited from operating ~~activities was affected~~profit, partially offset by ~~an increase~~changes in ~~accounts receivable~~working capital, primarily higher receivables and ~~inventories due to expected and annually recurring first quarter seasonality and increased net selling prices and commodity costs, respectively, compared with the fourth quarter 2021.~~inventory balances.

For the ~~three-month period~~six months ended ~~March 31,~~June 30, 2022, net cash used for financing activities was ~~$187~~$568 million, primarily due to ~~$364~~$914 million for the repurchase and retirement of our common stock (including 0.6 million shares repurchased to offset the dilutive impact of restricted stock units granted in 2022), ~~$67~~$131 million for the payment of cash dividends, and $17 million for employee withholding taxes paid on stock-based compensation. These uses of cash were partially offset by ~~$263~~$500 million in ~~net~~ proceeds from ~~revolving credit loan borrowings.~~the 364-day term loan.

For the ~~three-month period~~six months ended ~~March 31,~~June 30, 2022, net cash used for investing activities was ~~$26~~$74 million, comprised primarily of ~~$27~~$70 million ~~for~~of capital expenditures.

Our cash and cash investments were ~~$479~~$440 million and $926 million at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. Our cash and cash investments consist of overnight interest-bearing money market demand accounts, time deposit accounts and money market mutual funds containing government securities and treasury obligations. While we attempt to diversify these investments in a prudent manner to minimize risk, it is possible that future changes in the financial markets could affect the security or availability of these investments. Of the cash and cash investments held at ~~March 31,~~June 30, 2022 and December 31, 2021, ~~$411~~$330 million and $490 million, respectively, was held in our foreign subsidiaries. If these funds were needed for our operations in the U.S., their repatriation into the U.S. would not result in significant additional U.S. income tax or foreign withholding tax, as we have recorded such taxes on substantially all undistributed foreign earnings, except for those that are legally restricted.

During the three months ended June 30, 2022, we declared a cash dividend to a noncontrolling interest of $79 million that will be paid in the second half of 2022.

The 2022 Credit Agreement contains financial covenants requiring us to maintain (A) a net leverage ratio, as adjusted for certain items, not exceeding 4.0 to 1.0, and (B) an interest coverage ratio, as adjusted for certain items, not less than 2.5 to 1.0. We were in compliance with all covenants and no borrowings were outstanding under our 2022 Credit Agreement at June 30, 2022.

On March 4, 2021, we issued $600 million of 1.500% Notes due February 15, 2028, $600 million of 2.000% Notes due February 15, 2031 and $300 million of 3.125% Notes due February 15, 2051. We received proceeds of $1,495 million, net of discount, for the issuance of these Notes. The Notes are senior indebtedness and are redeemable at our option at the applicable redemption price. On March 22, 2021, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire our $326 million 5.950% Notes due March 15, 2022, $500 million 4.450% Notes due April 1, 2025, and $500 million 4.375% Notes due April 1, 2026. In connection with these early retirements, we incurred a loss on debt extinguishment of $168 million, which was recorded as interest expense in the condensed consolidated statement of operations.

On March 13, 2019, we entered into a credit agreement (the "2019 Credit Agreement") with an aggregate commitment of $1.0 billion and a maturity date of March 13, 2024. On December 22, 2021, we amended the 2019 Credit Agreement with the bank group (the "Amended Credit Agreement"). The 2019 Credit Agreement was amended to (i) expand the “Agreed Currencies” for which loans thereunder may be denominated outside of the swingline facility to include British Pounds Sterling and Canadian Dollars, together with their applicable interest rate benchmark, (ii) replace the London Interbank Offering Rate (“LIBOR”) with the Euro Interbank Offered Rate (“EURIBOR”) as the interest rate benchmark for purposes of loans denominated in Euros and (iii) provide mechanics for the replacement of a benchmark for an applicable Agreed Currency upon the occurrence of certain specified events.

Under the Amended Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $500 million with the current lenders or new lenders. See Note I to the condensed consolidated financial statements.

The Amended Credit Agreement contains financial covenants requiring us to maintain (A) a net leverage ratio, as adjusted for certain items, not exceeding 4.0 to 1.0, and (B) a minimum interest coverage ratio, as adjusted for certain items, not less than 2.5 to 1.0. We were in compliance with all covenants and $263 million was borrowed and outstanding at a weighted average interest rate of 1.5798% under our Amended Credit Agreement at March 31, 2022.

On April 26, 2022, we entered into a revolving credit agreement (the “2022 Credit Agreement”) with an aggregate commitment of $1.0 billion and a maturity date of April 26, 2027. Under the 2022 Credit Agreement, the swingline loans borrowing capacity increased to $125 million. All other material terms are substantially the same as the Amended Credit Agreement as described in Note I, including the two financial covenants. Upon entry into the 2022 Credit Agreement, our 2019 Credit Agreement dated March 13, 2019, as amended, with an aggregate commitment of $1.0 billion, was terminated.

On April 26, 2022, we entered into a 364-day $500 million senior unsecured delayed draw term loan due April 26, 2023 with a syndicate of lenders. The senior unsecured term loan and commitments thereunder are subject to prepayment or termination at our option and the loans will bear interest at SOFR plus a spread adjustment and 0.70%. The covenants are substantially the same as those in the 2022 Credit Agreement.

During 2022, we anticipate using approximately $900 million of cash for share repurchases (including shares which will be purchased to offset any dilution from restricted stock units granted as part of our compensation programs).

As part of our ongoing efforts to improve our cash flow and related liquidity, we work with suppliers to optimize our terms and conditions, including extending payment terms. We also facilitate a voluntary supply chain finance program (the "program") to provide certain of our suppliers with the opportunity to sell receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. A third party administers the program; our responsibility is limited to making payment on the terms originally negotiated with our supplier, regardless of whether the supplier sells its receivable to a financial institution. We do not enter into agreements with any of the participating financial institutions in connection with the program. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the program.

All outstanding payments owed under the program are recorded within accounts payable in our condensed consolidated balance sheets. The amounts owed to participating financial institutions under the program and included in accounts payable were ~~$52~~$56 million and $43 million at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. We account for all payments made under the program as a reduction to our cash flows from operations and reported within our ~~decrease~~(decrease) increase in accounts payable and accrued liabilities, net, line within our condensed consolidated statements of cash flows. The amounts settled through the program and paid to participating financial institutions were ~~$47~~$108 million and ~~$46~~$93 million during the ~~three-month periods~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively. A downgrade in our credit rating or changes in the financial markets could limit the financial institutions’ willingness to commit funds to, and participate in, the program. We do not believe such risk would have a material impact on our working capital or cash flows, as substantially all of our payments are made outside of the program.

We believe that our present cash balance, cash flows from operations, and borrowing availability under our 2022 Credit Agreement are sufficient to fund our near-term working capital and other investment needs. We believe that our longer-term working capital and other general corporate requirements will be satisfied through cash flows from operations and, to the extent necessary, from bank borrowings and future financial market activities.

2529

Cautionary Statement Concerning Forward-Looking Statements

This Report contains statements that reflect our views about our future performance and constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "outlook," "believe," "anticipate," "appear," "may," "will," "should," "intend," "plan," "estimate," "expect," "assume," "seek," "forecast," and similar references to future periods. Our views about future performance involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. We caution you against relying on any of these forward-looking statements.

Our future performance may be affected by the levels of residential repair and remodel activity, and to a lesser extent, new home construction, our ability to maintain our strong brands and reputation and to develop innovative products, our ability to maintain our competitive position in our industries, our reliance on key customers, the duration of the ongoing COVID-19 pandemic, including its impact on domestic and international economic activity, consumer discretionary spending, our employees and our supply chain, the cost and availability of materials, our dependence on third-party suppliers and service providers, extreme weather events and changes in climate, risks associated with our international operations and global strategies, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to successfully execute our acquisition strategy and integrate businesses that we have and may acquire, our ability to attract, develop and retain talented and diverse personnel, risks associated with our reliance on information systems and technology and risks associated with cybersecurity vulnerabilities, threats and attacks.

These and other factors are discussed in detail in Item 1A. "Risk Factors" in our most recent Annual Report on Form 10-K, as well as in other filings we make with the Securities and Exchange Commission. Any forward-looking statement made by us speaks only as of the date on which it was made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise.

2630


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,~~June 30, 2022, 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,~~June 30, 2022, 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 materially affected or is reasonably likely to materially affect internal control over financial reporting.

2731

MASCO CORPORATION

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information regarding legal proceedings involving us is set forth in Note P to our condensed consolidated financial statements included in Part I, Item 1 of this Report and is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes to the risk factors of the Company set forth in Item ~~1A.~~1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding the repurchase of our common stock for the ~~three-month period~~three months ended ~~March 31,~~June 30, 2022 under the 2021 share repurchase authorization:


Period	Total Number Of Shares Purchased	Average Price Paid Per Common Share		Total Number Of Shares Purchased As Part Of Publicly Announced Plans or Programs	Maximum Value Of Shares That May Yet Be Purchased Under The Plans Or Programs
4/1/22 - 4/30/22	984,503	$	50.80	984,503	$	714,466,545
5/1/22 - 5/31/22 (A)	7,905,506	$	63.28	7,905,506	$	214,216,545
6/1/22 - 6/30/22 (A)	1,545,468	$	—	1,545,468	$	214,216,545
Total for the quarter	10,435,477	$	52.73	10,435,477	$	214,216,545

(A)

Period Total Number
Of Shares
Purchased Average Price
Paid Per
Common Share Total Number Of
Shares Purchased
As Part Of
Publicly Announced
Plans or Programs Maximum Value Of
Shares That May
Yet Be Purchased
Under The Plans Or Programs
1/1/22 - 1/31/22 1,814,981 $ 66.33 1,814,981 $ 1,008,051,714
2/1/22 - 2/28/22 1,962,034 $ 58.44 1,962,034 $ 893,395,061
3/1/22 - 3/31/22 2,364,872 $ 54.51 2,364,872 $ 764,476,342
Total for the quarter 6,141,887 $ 59.26 6,141,887 $ 764,476,342

In May 2022, we entered into an accelerated stock repurchase transaction whereby we agreed to repurchase a total of $500 million of our common stock with an initial delivery of approximately 7.9 million shares. This transaction was completed on June 28, 2022, at which time we received, at no additional cost, approximately 1.6 million additional shares of our common stock resulting from changes in the volume weighted average stock price of our common stock over the term of the transaction, less a discount. The average price paid per common share in May 2022 does not reflect the holdback shares that we received upon completion of the accelerated stock repurchase transaction. If we had received the additional approximately 1.6 million shares at inception of the accelerated stock repurchase transaction, the total number of shares purchased under this transaction would have been approximately 9.5 million with an average price paid per common share of approximately $52.93.

2832

MASCO CORPORATION

PART II. OTHER INFORMATION, Continued

Item 6. Exhibits

10a –
Credit Agreement dated as of April 26, 2022 by and among Masco Corporation and Masco Europe S.à r.l. as borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A. and PNC Bank, National Association, as Co-Syndication Agents, and Deutsche Bank Securities, Inc., Royal Bank of Canada, Truist Bank, Bank of America, N.A., Fifth Third Bank and Wells Fargo Bank, National Association, as Co-Documentation Agents
10b –
Term Loan Credit Agreement dated as of April 26, 2022 by and among Masco Corporation as borrower, the lenders party thereto, PNC Bank, National Association, as Administrative Agent and PNC Capital Markets LLC as Sole Bookrunner and Sole Lead Arranger
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
101 –
The following financial information from Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
104 – Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)







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

101	–	The following financial information from Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity, and (vi) Notes to Condensed Consolidated Financial Statements.

104	–	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

2933

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/ John G. Sznewajs
			Name:			John G. Sznewajs
			Title:			Vice President, Chief Financial Officer

~~April 27,~~July 28, 2022

3034


	Three Months Ended March 31, 2022
	Plumbing Products		Decorative Architectural Products		Total
Primary geographic markets:
North America	$	892	$	842	$	1,734
International, principally Europe	467		—		467
Total	$	1,359	$	842	$	2,201


10a	–	Credit Agreement dated as of April 26, 2022 by and among Masco Corporation and Masco Europe S.à r.l. as borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A. and PNC Bank, National Association, as Co-Syndication Agents, and Deutsche Bank Securities, Inc., Royal Bank of Canada, Truist Bank, Bank of America, N.A., Fifth Third Bank and Wells Fargo Bank, National Association, as Co-Documentation Agents

10b	–	Term Loan Credit Agreement dated as of April 26, 2022 by and among Masco Corporation as borrower, the lenders party thereto, PNC Bank, National Association, as Administrative Agent and PNC Capital Markets LLC as Sole Bookrunner and Sole Lead Arranger

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

101	–	The following financial information from Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity, and (vi) Notes to Condensed Consolidated Financial Statements.

104	–	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)