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 ~~June~~September 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 ~~June~~September 30, 2022
Common stock, par value $1.00 per share						~~225,519,663~~225,529,123

MASCO CORPORATION

INDEX


		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets — as of ~~June~~September 30, 2022 and December 31, 2021	1
	Condensed Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2022 and 2021	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2022 and 2021	3
	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2022 and 2021	4
	Consolidated Statements of Shareholders’ Equity for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2022 and 2021	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 4.	Controls and Procedures	31
PART II.	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	32
Item 6.	Exhibits	33
	Signature	34

~~MASCO CORPORATION~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)~~

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

~~(In Millions, Except Share Data)~~

June 30, 2022 December 31, 2021
ASSETS
Current Assets:
Cash and cash investments $ 440 $ 926
Receivables 1,434 1,171
Prepaid expenses and other 131 109
Inventories:
Finished goods 823 702
Raw material 411 383
Work in process 120 131
1,354 1,216
Total current assets 3,359 3,422
Property and equipment, net 884 896
Goodwill 554 568
Other intangible assets, net 369 388
Operating lease right-of-use assets 198 187
Other assets 103 114
Total assets $ 5,467 $ 5,575
LIABILITIES
Current Liabilities:
Accounts payable $ 1,128 $ 1,045
Notes payable 508 10
Accrued liabilities 831 884
Total current liabilities 2,467 1,939
Long-term debt 2,946 2,949
Noncurrent operating lease liabilities 185 172
Other liabilities 410 437
Total liabilities 6,008 5,497
Commitments and contingencies (Note P) 0 0
Redeemable noncontrolling interest 22 22
EQUITY
Masco Corporation's shareholders' equity:
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
— —
Paid-in capital 7 —
Retained deficit (1,154) (652)
Accumulated other comprehensive income 180 232
Total Masco Corporation's shareholders' (deficit) (742) (179)
Noncontrolling interest 179 235
Total equity (563) 56
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 June 30, 2022 and 2021~~

~~(In Millions, Except Per Common Share Data)~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net sales $ 2,352 $ 2,179 $ 4,553 $ 4,149
Cost of sales 1,583 1,388 3,080 2,658
Gross profit 769 791 1,473 1,491
Selling, general and administrative expenses 361 354 712 689
Operating profit 408 437 761 802
Other income (expense), net:
Interest expense (28) (25) (53) (227)
Other, net 17 (415) 16 (421)
(11) (440) (37) (648)
Income (loss) before income taxes 397 (3) 724 154
Income tax expense 103 12 178 55
Net income (loss) 294 (15) 546 99
Less: Net income attributable to noncontrolling interest 16 21 35 41
Net income (loss) attributable to Masco Corporation $ 278 $ (36) $ 511 $ 58
Income (loss) per common share attributable to Masco Corporation:
Basic:
Net income (loss) $ 1.19 $ (0.14) $ 2.17 $ 0.21
Diluted:
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 June 30, 2022 and 2021~~

~~(In Millions)~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net income (loss) $ 294 $ (15) $ 546 $ 99
Less: Net income attributable to noncontrolling interest 16 21 35 41
Net income (loss) attributable to Masco Corporation $ 278 $ (36) $ 511 $ 58
Other comprehensive (loss) income, net of tax (Note L):
Cumulative translation adjustment $ (55) $ 37 $ (66) $ 1
Interest rate swaps — — — 7
Pension and other post-retirement benefits 1 358 2 363
Other comprehensive (loss) income, net of tax (54) 395 (64) 371
Less: Other comprehensive (loss) income attributable to noncontrolling interest (8) 2 (12) (10)
Other comprehensive (loss) income attributable to Masco Corporation $ (46) $ 393 $ (52) $ 381
Total comprehensive income $ 240 $ 380 $ 482 $ 470
Less: Total comprehensive income attributable to noncontrolling interest 8 23 23 31
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 Six Months Ended June 30, 2022 and 2021~~

~~(In Millions)~~

Six Months Ended June 30,
2022 2021
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations $ 662 $ 610
Increase in receivables (296) (238)
Increase in inventories (159) (147)
(Decrease) increase in accounts payable and accrued liabilities, net (33) 14
Net cash from operating activities 174 239
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Retirement of notes — (1,326)
Purchase of Company common stock (914) (750)
Cash dividends paid (131) (96)
Dividends paid to noncontrolling interest — (43)
Issuance of notes, net of issuance costs — 1,481
Proceeds from term loan 500 —
Debt extinguishment costs — (160)
Proceeds from the exercise of stock options 1 1
Employee withholding taxes paid on stock-based compensation (17) (14)
Decrease in debt, net (7) (2)
Net cash for financing activities (568) (909)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures (70) (53)
Acquisition of businesses, net of cash acquired — (1)
Proceeds from disposition of:
Businesses, net of cash disposed — 5
Other financial investments 1 168
Other, net (5) 3
Net cash (for) from investing activities (74) 122
Effect of exchange rate changes on cash and cash investments (18) (9)
CASH AND CASH INVESTMENTS:
Decrease for the period (486) (557)
At January 1 926 1,326
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 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
Balance, January 1, 2021 $ 421 $ 258 $ — $ 79 $ (142) $ 226
Total comprehensive income (loss) 90 — — 94 (12) 8
Shares issued — 1 (1) — — —
Shares retired:
Repurchased (303) (6) (27) (270) — —
Surrendered (non-cash) (13) — — (13) — —
Redeemable noncontrolling interest - redemption adjustment (6) — — (6) — —
Stock-based compensation 28 — 28 — — —
Balance, March 31, 2021 $ 217 $ 253 $ — $ (116) $ (154) $ 234
Total comprehensive income (loss) 380 — — (36) 393 23
Shares retired:
Repurchased (447) (6) (12) (429) — —
Cash dividends declared (59) — — (59) — —
Dividends declared to noncontrolling interest (43) — — — — (43)
Stock-based compensation 12 — 12 — — —
Balance, June 30, 2021 $ 60 $ 247 $ — $ (640) $ 239 $ 214

MASCO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30, 2022 and December 31, 2021

(In Millions, Except Share Data)


	September 30, 2022		December 31, 2021
ASSETS
Current Assets:
Cash and cash investments	$	464	$	926

Receivables	1,330		1,171

Prepaid expenses and other	131		109

Inventories:
Finished goods	807		702
Raw material	417		383
Work in process	115		131
	1,339		1,216
Total current assets	3,264		3,422
Property and equipment, net	902		896
Goodwill	544		568
Other intangible assets, net	359		388
Operating lease right-of-use assets	263		187
Other assets	85		114

Total assets	$	5,417	$	5,575

LIABILITIES
Current Liabilities:
Accounts payable	$	1,048	$	1,045
Notes payable	405		10
Accrued liabilities	771		884

Total current liabilities	2,224		1,939
Long-term debt	2,946		2,949
Noncurrent operating lease liabilities	253		172
Other liabilities	410		437

Total liabilities	5,833		5,497

Commitments and contingencies (Note P)
Redeemable noncontrolling interest	20		22

EQUITY
Masco Corporation's shareholders' equity:
Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2022 – 225,300,000; 2021 – 241,200,000	225		241
Preferred shares authorized: 1,000,000; Issued and outstanding: 2022 and 2021 – None	—		—
Paid-in capital	15		—
Retained deficit	(998)		(652)
Accumulated other comprehensive income	141		232
Total Masco Corporation's shareholders' (deficit)	(617)		(179)
Noncontrolling interest	181		235
Total equity	(436)		56
Total liabilities and equity	$	5,417	$	5,575

See notes to condensed consolidated financial statements.

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

(In Millions, Except Per Common Share Data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net sales	$	2,204	$	2,204	$	6,757	$	6,353
Cost of sales	1,509		1,451		4,589		4,109
Gross profit	695		753		2,168		2,244
Selling, general and administrative expenses	344		368		1,056		1,057

Operating profit	351		385		1,112		1,187
Other income (expense), net:
Interest expense	(29)		(26)		(82)		(253)
Other, net	(12)		(17)		4		(438)
	(41)		(43)		(78)		(691)
Income before income taxes	310		342		1,034		496
Income tax expense	77		103		255		158
Net income	233		239		779		338
Less: Net income attributable to noncontrolling interest	15		19		50		60
Net income attributable to Masco Corporation	$	218	$	220	$	729	$	278

Income per common share attributable to Masco Corporation:
Basic:
Net income	$	0.97	$	0.89	$	3.14	$	1.08
Diluted:
Net income	$	0.97	$	0.89	$	3.13	$	1.07

See notes to condensed consolidated financial statements.

MASCO CORPORATION

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

For the Three and Nine Months Ended September 30, 2022 and 2021

(In Millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	233	$	239	$	779	$	338
Less: Net income attributable to noncontrolling interest	15		19		50		60
Net income attributable to Masco Corporation	$	218	$	220	$	729	$	278
Other comprehensive (loss) income, net of tax (Note L):
Cumulative translation adjustment	$	(54)	$	(20)	$	(120)	$	(19)
Interest rate swaps	—		—		—		7
Pension and other post-retirement benefits	1		2		3		365

Other comprehensive (loss) income, net of tax	(53)		(18)		(117)		353
Less: Other comprehensive (loss) attributable to noncontrolling interest	(14)		(5)		(26)		(15)
Other comprehensive (loss) income attributable to Masco Corporation	$	(39)	$	(13)	$	(91)	$	368
Total comprehensive income	$	180	$	221	$	662	$	691
Less: Total comprehensive income attributable to noncontrolling interest	1		14		24		45
Total comprehensive income attributable to Masco Corporation	$	179	$	207	$	638	$	646

See notes to condensed consolidated financial statements.

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the Nine Months Ended September 30, 2022 and 2021

(In Millions)


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations	$	954	$	904
Increase in receivables	(207)		(219)
Increase in inventories	(164)		(237)
(Decrease) increase in accounts payable and accrued liabilities, net	(63)		147
Net cash from operating activities	520		595

CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:


Retirement of notes	—		(1,326)
Purchase of Company common stock	(914)		(878)

Cash dividends paid	(195)		(154)
Dividends paid to noncontrolling interest	(68)		(43)
Issuance of notes, net of issuance costs	—		1,481
Proceeds from term loan	500		—
Payment of term loan	(100)		—
Debt extinguishment costs	—		(160)
Proceeds from the exercise of stock options	1		1
Employee withholding taxes paid on stock-based compensation	(17)		(14)
Decrease in debt, net	(9)		(2)


Net cash for financing activities	(802)		(1,095)

CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures	(137)		(82)
Acquisition of businesses, net of cash acquired	—		(57)
Proceeds from disposition of:
Businesses, net of cash disposed	—		5

Other financial investments	1		170



Other, net	(8)		7
Net cash (for) from investing activities	(144)		43

Effect of exchange rate changes on cash and cash investments	(36)		(15)

CASH AND CASH INVESTMENTS:
Decrease for the period	(462)		(472)
At January 1	926		1,326
At September 30	$	464	$	854

See notes to condensed consolidated financial statements.

MASCO CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

For the Three and Nine Months Ended September 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
Balance, January 1, 2021	$	421	$	258	$	—	$	79	$	(142)	$	226
Total comprehensive income (loss)	90		—		—		94		(12)		8
Shares issued	—		1		(1)		—		—		—
Shares retired:
Repurchased	(303)		(6)		(27)		(270)		—		—
Surrendered (non-cash)	(13)		—		—		(13)		—		—

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

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

Shares retired:
Repurchased	(447)		(6)		(12)		(429)		—		—

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

Stock-based compensation	12		—		12		—		—		—
Balance, June 30, 2021	$	60	$	247	$	—	$	(640)	$	239	$	214
Total comprehensive income (loss)	220		—		—		220		(13)		13

Shares retired:
Repurchased	(128)		(4)		(8)		(116)		—		—

Cash dividends declared	(59)		—		—		(59)		—		—
Stock-based compensation	8		—		8		—		—		—
Balance, September 30, 2021	$	101	$	243	$	—	$	(595)	$	226	$	227

MASCO CORPORATION

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

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

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

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

Cash dividends declared	Cash dividends declared	(64)		—		—		(64)		—		—		Cash dividends declared	(64)		—		—		(64)		—		—
Dividends declared to noncontrolling interest	Dividends declared to noncontrolling interest	(79)		—		—		—		—		(79)		Dividends declared to noncontrolling interest	(79)		—		—		—		—		(79)
Redeemable noncontrolling interest - redemption adjustment	Redeemable noncontrolling interest - redemption adjustment	(1)		—		—		(1)		—		—		Redeemable noncontrolling interest - redemption adjustment	(1)		—		—		(1)		—		—
Stock-based compensation	Stock-based compensation	12		—		12		—		—		—		Stock-based compensation	12		—		12		—		—		—
Balance, June 30, 2022	Balance, June 30, 2022	$	(563)	$	225	$	7	$	(1,154)	$	180	$	179	Balance, June 30, 2022	$	(563)	$	225	$	7	$	(1,154)	$	180	$	179
Total comprehensive income (loss)														Total comprehensive income (loss)	181		—		—		218		(39)		2

Cash dividends declared														Cash dividends declared	(64)		—		—		(64)		—		—

Redeemable noncontrolling interest - redemption adjustment														Redeemable noncontrolling interest - redemption adjustment	2		—		—		2		—		—
Stock-based compensation														Stock-based compensation	8		—		8		—		—		—
Balance, September 30, 2022														Balance, September 30, 2022	$	(436)	$	225	$	15	$	(998)	$	141	$	181

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 ~~June~~September 30, 2022, our results of operations and comprehensive income (loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, cash flows for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 and changes in shareholders' equity for the three and ~~six~~nine months ended ~~June~~September 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.

Recently Issued Accounting Pronouncements. In September 2022, the FASB issued ASU 2022-04, "Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations,” which requires that an entity that uses a supplier finance program in connection with the purchase of goods or services disclose information about the program’s nature, activity during the period, changes from period to period, and potential magnitude. ASU 2022-04 is effective for annual periods on a retrospective basis, including interim periods within those annual periods, beginning January 1, 2023, except for the amendment on rollforward information, which is effective prospectively for annual periods beginning January 1, 2024. Early adoption is permitted. The adoption of this guidance will modify our disclosures, but will not have a material impact on our financial statements.

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, weour Hansgrohe SE subsidiary 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.

MASCO CORPORATION

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

B. ACQUISITIONS, Concluded

The remaining 24.9 percent equity interest in ESS is subject to a call and put option that is exercisable by usHansgrohe SE 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 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~~

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~~nine months ended ~~June~~September 30, 2021, which is included in other, net in our condensed consolidated ~~statements~~statement 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~~nine months ended ~~June~~September 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.

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 June 30, 2022							Three Months Ended September 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	$	926	$	979	$	1,905	North America	$	912	$	880	$	1,792
International, principally Europe	International, principally Europe	447		—		447		International, principally Europe	412		—		412
Total	Total	$	1,373	$	979	$	2,352	Total	$	1,324	$	880	$	2,204

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

MASCO CORPORATION

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

D. REVENUE, Concluded


		Three Months Ended June 30, 2021							Nine Months Ended September 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	$	867	$	850	$	1,717	North America	$	2,730	$	2,701	$	5,431
International, principally Europe	International, principally Europe	462		—		462		International, principally Europe	1,326		—		1,326
Total	Total	$	1,329	$	850	$	2,179	Total	$	4,056	$	2,701	$	6,757


		Six Months Ended June 30, 2021							Three Months Ended September 30, 2021
		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	$	1,675	$	1,571	$	3,246	North America	$	878	$	875	$	1,753
International, principally Europe	International, principally Europe	903		—		903		International, principally Europe	451		—		451
Total	Total	$	2,578	$	1,571	$	4,149	Total	$	1,329	$	875	$	2,204


	Nine Months Ended September 30, 2021
	Plumbing Products		Decorative Architectural Products		Total
Primary geographic markets:
North America	$	2,553	$	2,446	$	4,999
International, principally Europe	1,354		—		1,354
Total	$	3,907	$	2,446	$	6,353

Our contract asset balance was $2 million and $1 million at ~~June~~September 30, 2022 and December 31, 2021, respectively. Our contract liability balance was ~~$25~~$19 million and $67 million at ~~June~~September 30, 2022 and December 31, 2021, respectively.

We recognized $8 million of revenue for the three months ended ~~June~~September 30, 2022 and we reversed $1 million of revenue for the three months ended ~~June~~September 30, 2021 related to performance obligations settled in previous quarters of the same year. We recognized $8$5 million and ~~$13~~$18 million of revenue for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and $3 million and $4$7 million of revenue for the three and ~~six~~nine months ended ~~June~~September 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:


		Six Months Ended June 30, 2022		Twelve Months Ended December 31, 2021			Nine Months Ended September 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	3		1
Write-offs charged against the allowance	Write-offs charged against the allowance	(1)		(2)		Write-offs charged against the allowance	(2)		(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 ended December 31, 2021 was removed from allowance for credit losses.

E. DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense was ~~$71~~$105 million and ~~$78~~$114 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

~~F. GOODWILL AND OTHER INTANGIBLE ASSETS~~

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

Gross Goodwill At June 30, 2022 Accumulated
Impairment
Losses Net Goodwill At June 30, 2022
Plumbing Products $ 609 $ (301) $ 308
Decorative Architectural Products 366 (120) 246
Total $ 975 $ (421) $ 554

MASCO CORPORATION

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

F. GOODWILL AND OTHER INTANGIBLE ASSETS ~~Concluded~~

Goodwill at September 30, 2022, by segment, was as follows, in millions:


	Gross Goodwill At September 30, 2022		Accumulated Impairment Losses		Net Goodwill At September 30, 2022
Plumbing Products	$	599	$	(301)	$	298
Decorative Architectural Products	366		(120)		246


Total	$	965	$	(421)	$	544

The changes in the carrying amount of goodwill for the ~~six~~nine months ended ~~June~~September 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 June 30, 2022			Gross Goodwill At December 31, 2021		Accumulated Impairment Losses		Net Goodwill At December 31, 2021		Other (B)		Net Goodwill At September 30, 2022
Plumbing Products (A)	Plumbing Products (A)	$	623	$	(301)	$	322	$	(14)	$	308	Plumbing Products (A)	$	623	$	(301)	$	322	$	(24)	$	298
Decorative Architectural Products	Decorative Architectural Products	366		(120)		246		—		246		Decorative Architectural Products	366		(120)		246		—		246

Total	Total	$	989	$	(421)	$	568	$	(14)	$	554	Total	$	989	$	(421)	$	568	$	(24)	$	544

(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 ~~June~~September 30, 2022 and December 31, 2021, respectively, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was ~~$261~~$251 million (net of accumulated amortization of ~~$79~~$85 million) and $279 million (net of accumulated amortization of $75 million) at ~~June~~September 30, 2022 and December 31, 2021, respectively, and principally included customer relationships.

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. As of ~~June~~September 30, 2022, we do not believe the financial performance metrics will be met and the fair value of the liability was estimated to be 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~~September 30, 2022. The aggregate estimated market value of our short-term and long-term debt at ~~June~~September 30, 2022 was approximately ~~$3.1~~$2.8 billion, compared with the aggregate carrying value of ~~$3.5~~$3.4 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:


		Six Months Ended June 30, 2022		Twelve Months Ended December 31, 2021			Nine Months Ended September 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	19		38		Accruals for warranties issued during the period	31		38
Accruals related to pre-existing warranties	Accruals related to pre-existing warranties	2		(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	(16)		(31)		Settlements made (in cash or kind) during the period	(24)		(31)
Other, net (including currency translation and acquisitions)	Other, net (including currency translation and acquisitions)	(2)		(2)		Other, net (including currency translation and acquisitions)	(4)		(2)
Balance at end of period	Balance at end of period	$	83	$	80	Balance at end of period	$	85	$	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~~September 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~~September 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. We repaid $100 million during the three months ended September 30, 2022. We repaid an additional $65 million subsequent to September 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 for the ~~six~~nine months ended ~~June~~September 30, 2021, which was recorded as interest expense in the condensed consolidated statement of operations.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Restricted stock units	$	4	$	3	$	29	$	26
Performance restricted stock units	1		2		5		8
Stock options	1		1		7		6
Long-term stock awards	2		2		6		8
Phantom stock awards	—		1		—		3
Total	$	8	$	9	$	47	$	51

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 ~~605,100~~approximately 608,000 restricted stock units in the ~~six~~nine months ended ~~June~~September 30, 2022 with a weighted average grant date fair value of approximately $59 per share.

MASCO CORPORATION

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

J. STOCK-BASED COMPENSATION, Continued

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


		Six Months Ended June 30,					Nine Months Ended September 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	934		435
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	608		663
Weighted average grant date fair value	Weighted average grant date fair value	$	59	$	57	Weighted average grant date fair value	$	59	$	57

Restricted stock units vested	Restricted stock units vested	1		—		Restricted stock units vested	350		141
Weighted average grant date fair value	Weighted average grant date fair value	$	53	$	47	Weighted average grant date fair value	$	53	$	47

Restricted stock units forfeited	Restricted stock units forfeited	—		—		Restricted stock units forfeited	16		16
Weighted average grant date fair value	Weighted average grant date fair value	$	56	$	54	Weighted average grant date fair value	$	56	$	54

Unvested restricted stock units at June 30		1		1
Unvested restricted stock units at September 30						Unvested restricted stock units at September 30	1,176		941
Weighted average grant date fair value	Weighted average grant date fair value	$	57	$	54	Weighted average grant date fair value	$	57	$	54

At ~~June~~September 30, 2022 and 2021, there was ~~$25~~$21 million and ~~$20~~$18 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 ~~June~~September 30, 2022 and 2021.

The total market value (at the vesting date) of restricted stock units which vested was ~~$19~~$20 million and $7$8 million during the ~~six~~nine months ended ~~June~~September 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 ~~six~~nine months ended ~~June~~September 30, 2022, we granted ~~91,820~~approximately 92,000 performance restricted stock units with a grant date fair value of approximately $55 per share and ~~167,903~~approximately 168,000 shares were issued. No performance restricted stock units were forfeited during the ~~six~~nine months ended ~~June~~September 30, 2022. During the ~~six~~nine months ended ~~June~~September 30, 2021, we granted ~~85,360~~approximately 85,000 performance restricted stock units with a grant date fair value of approximately $53 per share and ~~104,757~~approximately 105,000 shares were issued. No performance restricted stock units were forfeited during the ~~six~~nine months ended ~~June~~September 30, 2021.

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

We granted ~~337,790~~approximately 338,000 shares of stock options in the ~~six~~nine months ended ~~June~~September 30, 2022 with a grant date weighted average exercise price of approximately $59 per share.

MASCO CORPORATION

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

J. STOCK-BASED COMPENSATION, Continued

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


			Six Months Ended June 30,					Nine Months Ended September 30,
			2022		2021			2022		2021
Option shares outstanding, January 1	Option shares outstanding, January 1		3		2	Option shares outstanding, January 1		2,692		2,488
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		338		332
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		32		18
Aggregate intrinsic value on date of exercise (A)	Aggregate intrinsic value on date of exercise (A)	$	—	$	1 million	Aggregate intrinsic value on date of exercise (A)	$	1 million	$	1 million
Weighted average exercise price	Weighted average exercise price	$	38	$	20	Weighted average exercise price	$	34	$	20

Option shares forfeited	Option shares forfeited		—		—	Option shares forfeited		10		—
Weighted average exercise price	Weighted average exercise price	$	37	$	11	Weighted average exercise price	$	37	$	11

Option shares outstanding, June 30			3		3
Option shares outstanding, September 30						Option shares outstanding, September 30		2,988		2,802
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		6	Weighted average remaining option term (in years)		6		6

Option shares vested and expected to vest, June 30			3		3
Option shares vested and expected to vest, September 30						Option shares vested and expected to vest, September 30		2,928		2,687
Weighted average exercise price	Weighted average exercise price	$	39	$	36	Weighted average exercise price	$	39	$	36
Aggregate intrinsic value (A)	Aggregate intrinsic value (A)	$	39 million	$	62 million	Aggregate intrinsic value (A)	$	30 million	$	53 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), June 30			2		2
Option shares exercisable (vested), September 30						Option shares exercisable (vested), September 30		2,051		1,717
Weighted average exercise price	Weighted average exercise price	$	34	$	30	Weighted average exercise price	$	34	$	30
Aggregate intrinsic value (A)	Aggregate intrinsic value (A)	$	35 million	$	49 million	Aggregate intrinsic value (A)	$	28 million	$	43 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 ~~June~~September 30, 2022 and 2021, there was $3$2 million and $5$4 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 ~~June~~September 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:


		Six Months Ended June 30,							Nine Months Ended September 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

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 ~~six~~nine months ended ~~June~~September 30, 2022 and 2021.

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


		Six Months Ended June 30,					Nine Months Ended September 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	608		1,125
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	324		491
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	10		18
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 June 30		—		1
Unvested stock award shares at September 30						Unvested stock award shares at September 30	274		616
Weighted average grant date fair value	Weighted average grant date fair value	$	38	$	37	Weighted average grant date fair value	$	38	$	37

At ~~June~~September 30, 2022 and 2021, there was $6$4 million and ~~$15~~$12 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 ~~June~~September 30, 2022 and 2021, respectively.

The total market value (at the vesting date) of stock award shares which vested was $21 million and ~~$27~~$28 million during the ~~six~~nine months ended ~~June~~September 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 June 30,									Three Months Ended September 30,
		2022				2021					2022				2021
		Qualified		Non-Qualified		Qualified		Non-Qualified			Qualified		Non-Qualified		Qualified		Non-Qualified
Service cost	Service cost	$	—	$	—	$	1	$	—	Service cost	$	1	$	—	$	1	$	—
Interest cost	Interest cost	—		1		5		—		Interest cost	—		1		1		2
Expected return on plan assets	Expected return on plan assets	—		—		(3)		—		Expected return on plan assets	(1)		—		(1)		—
Settlement loss		—		—		406		—

Amortization of net loss	Amortization of net loss	1		—		5		1		Amortization of net loss	1		—		2		—
Net periodic pension cost	Net periodic pension cost	$	1	$	1	$	414	$	1	Net periodic pension cost	$	1	$	1	$	3	$	2


		Six Months Ended June 30,									Nine Months Ended September 30,
		2022				2021					2022				2021
		Qualified		Non-Qualified		Qualified		Non-Qualified			Qualified		Non-Qualified		Qualified		Non-Qualified
Service cost	Service cost	$	1	$	—	$	2	$	—	Service cost	$	2	$	—	$	3	$	—
Interest cost	Interest cost	1		2		13		1		Interest cost	1		3		14		3
Expected return on plan assets	Expected return on plan assets	(1)		—		(7)		—		Expected return on plan assets	(2)		—		(8)		—
Settlement loss	Settlement loss	—		—		406		—		Settlement loss	—		—		406		—
Amortization of net loss	Amortization of net loss	2		1		11		2		Amortization of net loss	3		1		13		2
Net periodic pension cost	Net periodic pension cost	$	3	$	3	$	425	$	3	Net periodic pension cost	$	4	$	4	$	428	$	5

In December 2019, our Board of Directors approved the termination of our qualified domestic defined-benefit pension plans. In the second quarter of 2021, we settled these pension 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~~nine months ended ~~June~~September 30, 2021.

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 June 30,				Six Months Ended June 30,				Statement of Operations Line Item	Accumulated Other Comprehensive Income	Three Months Ended September 30,				Nine Months Ended September 30,				Statement of Operations Line Item
		2022		2021		2022		2021				2022		2021		2022		2021
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):										Settlement and amortization of defined-benefit pension and other post-retirement benefits (A):
Actuarial losses, net	Actuarial losses, net	$	1	$	9	$	3	$	16	Other, net	Actuarial losses, net	$	1	$	2	$	4	$	18	Other, net
Settlement loss	Settlement loss	—		447		—		447		Other, net	Settlement loss	—		—		—		447		Other, net
Tax (benefit)	Tax (benefit)	—		(98)		(1)		(100)			Tax (benefit)	—		—		(1)		(100)
Net of tax	Net of tax	$	1	$	358	$	2	$	363		Net of tax	$	1	$	2	$	3	$	365

Interest rate swaps (B)	Interest rate swaps (B)	$	—	$	—	$	—	$	2	Interest expense	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.

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

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,									Three Months Ended September 30,								Nine Months Ended September 30,
		2022		2021		2022		2021		2022		2021		2022		2021			2022		2021		2022		2021		2022		2021		2022		2021
		Net Sales (A)				Operating Profit				Net Sales (A)				Operating Profit					Net Sales (A)				Operating Profit				Net Sales (A)				Operating Profit
Operations by segment:	Operations by segment:																	Operations by segment:
Plumbing Products	Plumbing Products	$	1,373	$	1,329	$	238	$	273	$	2,732	$	2,578	$	466	$	525	Plumbing Products	$	1,324	$	1,329	$	220	$	248	$	4,056	$	3,907	$	686	$	773
Decorative Architectural Products	Decorative Architectural Products	979		850		192		188		1,821		1,571		347		330		Decorative Architectural Products	880		875		151		166		2,701		2,446		498		496

Total	Total	$	2,352	$	2,179	$	430	$	461	$	4,553	$	4,149	$	813	$	855	Total	$	2,204	$	2,204	$	371	$	414	$	6,757	$	6,353	$	1,184	$	1,269
Operations by geographic area:	Operations by geographic area:																	Operations by geographic area:
North America	North America	$	1,905	$	1,717	$	356	$	370	$	3,639	$	3,246	$	656	$	678	North America	$	1,792	$	1,753	$	305	$	332	$	5,431	$	4,999	$	961	$	1,010
International, principally Europe	International, principally Europe	447		462		74		91		914		903		157		177		International, principally Europe	412		451		66		82		1,326		1,354		223		259
Total	Total	$	2,352	$	2,179	430		461		$	4,553	$	4,149	813		855		Total	$	2,204	$	2,204	371		414		$	6,757	$	6,353	1,184		1,269
General corporate expense, net	General corporate expense, net					(22)		(24)						(52)		(53)		General corporate expense, net					(20)		(29)						(72)		(82)
Operating profit	Operating profit					408		437						761		802		Operating profit					351		385						1,112		1,187
Other income (expense), net	Other income (expense), net					(11)		(440)						(37)		(648)		Other income (expense), net					(41)		(43)						(78)		(691)
Income (loss) before income taxes						$	397	$	(3)					$	724	$	154
Income before income taxes																		Income before income taxes					$	310	$	342					$	1,034	$	496

(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 June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Contingent consideration (A)	Contingent consideration (A)	$	28	$	—	$	24	$	—	Contingent consideration (A)	$	—	$	(14)	$	24	$	(14)
Foreign currency transaction (losses) gains		(6)		2		(2)		2
Equity investment (loss) income, net										Equity investment (loss) income, net	(6)		5		(6)		7
Net periodic pension and post-retirement benefit expense (B)	Net periodic pension and post-retirement benefit expense (B)	(3)		(415)		(5)		(426)		Net periodic pension and post-retirement benefit expense (B)	(2)		(4)		(7)		(430)
Foreign currency transaction losses										Foreign currency transaction losses	(4)		(4)		(6)		(2)
Income from cash and cash investments										Income from cash and cash investments	1		—		2		—
Loss on sale of businesses, net	Loss on sale of businesses, net	(3)		(18)		(1)		(18)		Loss on sale of businesses, net	—		—		(1)		(18)
Income from cash and cash investments		1		—		1		—
Gain on preferred stock redemption (C)	Gain on preferred stock redemption (C)	—		14		—		14		Gain on preferred stock redemption (C)	—		—		—		14

Dividend income	Dividend income	—		3		—		6		Dividend income	—		—		—		6
Equity investment income, net		—		—		—		2
Other items, net	Other items, net	—		(1)		(1)		(1)		Other items, net	(1)		—		(2)		(1)
Total other, net	Total other, net	$	17	$	(415)	$	16	$	(421)	Total other, net	$	(12)	$	(17)	$	4	$	(438)

(A) InWe recognized $24 million of income for the nine months ended September 30, 2022, and we recognized $14 million of expense for the three and ~~six~~nine months ended ~~June~~September 30, ~~2022 we recognized $28 million and $24 million, respectively, of income~~2021, from the revaluation of contingent consideration related to a prior acquisition. Refer to Note G for additional information.

(B) 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 gain of $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 June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Numerator (basic and diluted):	Numerator (basic and diluted):									Numerator (basic and diluted):
Net income (loss)		$	278	$	(36)	$	511	$	58
Net income										Net income	$	218	$	220	$	729	$	278
Less: Allocation to redeemable noncontrolling interest	Less: Allocation to redeemable noncontrolling interest	1		—		—		6		Less: Allocation to redeemable noncontrolling interest	(2)		—		(2)		6
Less: Allocation to unvested restricted stock awards	Less: Allocation to unvested restricted stock awards	1		—		2		—		Less: Allocation to unvested restricted stock awards	—		1		3		1
Net income (loss) attributable to common shareholders		$	276	$	(36)	$	509	$	52
Net income attributable to common shareholders										Net income attributable to common shareholders	$	220	$	219	$	728	$	271

Denominator:	Denominator:									Denominator:
Basic common shares (based upon weighted average)	Basic common shares (based upon weighted average)	231		252		235		254		Basic common shares (based upon weighted average)	226		246		232		251
Add: Stock option dilution	Add: Stock option dilution	2		—		2		2		Add: Stock option dilution	1		1		1		2
Diluted common shares	Diluted common shares	233		252		237		256		Diluted common shares	227		247		233		253

For the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, we allocated dividends and undistributed earnings ~~to the unvested restricted stock awards. For the three and six months ended June 30, 2021, we allocated dividends~~ to the unvested restricted stock awards.

The following stock options and restricted stock units were excluded from the computation of weighted-average diluted common shares outstanding due to their anti-dilutive effect, in thousands:


		Three Months Ended June 30,		Six Months Ended June 30,			Three Months Ended September 30,		Nine Months Ended September 30,
		2022	2021	2022	2021		2022	2021	2022	2021
Number of stock options	Number of stock options	670	2,802	599	260	Number of stock options	670	70	623	285
Number of restricted stock units	Number of restricted stock units	249	464	17	1	Number of restricted stock units	4	—	22	—

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. 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. In total, weWe repurchased and retired approximately 16.6 million shares of our common stock in the ~~six~~nine months ended ~~June~~September 30, 2022 for approximately $914 million. This included 0.6 million shares to offset the dilutive impact of restricted stock units granted in the ~~six~~nine months ended ~~June~~September 30, 2022. At ~~June~~September 30, 2022, we had $214 million remaining under the 2021 authorization. Effective October 20, 2022, 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 the previous Board of Directors authorization established in 2021.

On the basis of amounts paid (declared), cash dividends per common share were $0.280 ($0.280) and ~~$0.560~~$0.840 ($~~0.560)~~0.840) for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and $0.235 ($0.235) and ~~$0.375~~$0.610 ($~~0.235)~~0.470) for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.

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 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$16 million infor the ~~first quarter and $11 million in the second quarter,~~nine months ended September 30, 2021, related to our debt retirement and pension plan termination. Our 2021 income tax expense was also impacted by losses providing no tax benefit in certain jurisdictions from our pension plan termination and a business divestiture resulting in income tax expense of $10 million and $15 million for the three and nine months ended September 30, 2021, respectively.

R. SUPPLEMENTAL CASH FLOW INFORMATION

Right-of-use assets obtained in exchange for new lease obligations were $116 million and $40 million for the nine months ended September 30, 2022 and 2021, respectively.


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

Recent Trends

WeDue to changing market conditions, we are experiencing, and may continue to experience, ~~higher~~lower market demand for our products. We have been experiencing, and may continue to experience, elevated commodity and other input costs, ~~higher~~elevated transportation costs and supply chain disruptions, particularly disruptions related to our ability to source products, components and raw materials. We ~~are~~have also been experiencing, and may continue to experience, employee-related cost inflation and constraints in hiring qualified employees. WeWhile still elevated, we have recently seen some reduction of certain costs, and we aim to offset the potential unfavorable impact of these ~~items~~costs and lower demand for our products with productivity improvement, pricing, and other initiatives.

In addition, the COVID-19 pandemic continues to disrupt global economic activity, including our workforce and operations, as well as the operations of our customers and suppliers. There 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.

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

~~SECOND~~THIRD QUARTER 2021 AND THE FIRST ~~SIX~~NINE 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 and ~~six~~nine months ended ~~June~~September 30, 2022 compared to the same periods of 2021.

SALES AND OPERATIONS

Net Sales

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


		Three Months Ended June 30,					Six Months Ended June 30,									Three Months Ended September 30,			Nine Months Ended September 30,
			2022		2021		Change		2022		2021		Change				2022		2021		Change		2022		2021		Change
Net sales, as reported	Net sales, as reported		$	2,352	$	2,179	$	173	$	4,553	$	4,149	$	404	Net sales, as reported		$	2,204	$	2,204	$	—	$	6,757	$	6,353	$	404
Acquisitions	Acquisitions		(5)		—		(5)		(11)		—		(11)		Acquisitions		—		—		—		(11)		—		(11)
Divestitures	Divestitures		—		(12)		12		—		(32)		32		Divestitures		—		—		—		—		(32)		32
Net sales, excluding acquisitions and divestitures	Net sales, excluding acquisitions and divestitures		2,347		2,167		180		4,542		4,117		425		Net sales, excluding acquisitions and divestitures		2,204		2,204		—		6,746		6,321		425
Currency translation	Currency translation		57		—		57		88		—		88		Currency translation		67		—		67		155		—		155
Net sales, excluding acquisitions, divestitures and the effect of currency translation	Net sales, excluding acquisitions, divestitures and the effect of currency translation		$	2,404	$	2,167	$	237	$	4,630	$	4,117	$	513	Net sales, excluding acquisitions, divestitures and the effect of currency translation		$	2,271	$	2,204	$	67	$	6,901	$	6,321	$	580

Net sales for the three months ended ~~June~~September 30, 2022 were ~~$2.4~~$2.2 billion, which ~~increased eight~~matched ~~percent compared to~~ the three months ended ~~June~~September 30, 2021. Excluding acquisitions, divestitures and the effect of currency translation, net sales increased 11three percent. Net sales for the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$4.6~~$6.8 billion, which increased 10six percent compared to the ~~six~~nine months ended ~~June~~September 30, 2021. Excluding acquisitions, divestitures and the effect of currency translation, net sales increased 12nine percent.

Net sales for the three ~~and six~~ months ended ~~June~~September 30, 2022 increased primarily due to:

•Higher net selling prices across the entire company which increased sales by ~~10 percent and~~ nine ~~percent~~ percent.

These amounts were offset by:

•Lower sales volume which decreased sales by six percent.

•Unfavorable foreign currency translation which decreased sales by three percent.

Net sales for the ~~three and six~~ nine months ended ~~June~~September 30, 2022 ~~respectively.~~increased primarily due to:

•Higher net selling prices across the entire company which increased sales by nine percent.

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

These amounts were 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.~~percent.

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

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

Gross Profit and Gross Margin

Below is a summary of our gross profit, in millions, and gross margin for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2022			2021			Favorable / (Unfavorable)		2022			2021			Favorable / (Unfavorable)			2022			2021			Favorable / (Unfavorable)		2022			2021			Favorable / (Unfavorable)
Gross profit	Gross profit	$	769		$	791		$	(22)	$	1,473		$	1,491		$	(18)	Gross profit	$	695		$	753		$	(58)	$	2,168		$	2,244		$	(76)

Gross margin	Gross margin	32.7		%	36.3		%	(360) bps		32.4		%	35.9		%	(350) bps		Gross margin	31.5		%	34.2		%	(270) bps		32.1		%	35.3		%	(320) bps

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

•Increased commodity and other input costs and transportation ~~costs.~~costs for both periods.

•Lower sales volume for the three months ended September 30, 2022.

These amounts were partially offset by:

•Favorable net selling ~~prices.~~

•~~Increased sales volume.~~prices for both periods.

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 and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2022			2021			(Favorable) / Unfavorable		2022			2021			(Favorable) / Unfavorable			2022			2021			(Favorable) / Unfavorable		2022			2021			(Favorable) / Unfavorable
Selling, general and administrative expenses	Selling, general and administrative expenses	$	361		$	354		$	7	$	712		$	689		$	23	Selling, general and administrative expenses	$	344		$	368		$	(24)	$	1,056		$	1,057		$	(1)

Selling, general and administrative expenses as percentage of net sales	Selling, general and administrative expenses as percentage of net sales	15.3		%	16.2		%	(90) bps		15.6		%	16.6		%	(100) bps		Selling, general and administrative expenses as percentage of net sales	15.6		%	16.7		%	(110) bps		15.6		%	16.6		%	(100) bps

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

•Lower variable compensation.

This amount was partially offset by:

•Increased marketing costs.

For the nine months ended September 30, 2022, selling, general and administrative expenses as a percentage of sales was positively impacted by:

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

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

•Increased marketing ~~and employee-related~~ costs.

Operating Profit

Below is a summary of our operating profit, in millions, and operating profit margin for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2022			2021			Favorable / (Unfavorable)		2022			2021			Favorable / (Unfavorable)			2022			2021			Favorable / (Unfavorable)		2022			2021			Favorable / (Unfavorable)
Operating profit	Operating profit	$	408		$	437		$	(29)	$	761		$	802		$	(41)	Operating profit	$	351		$	385		$	(34)	$	1,112		$	1,187		$	(75)
Operating profit margin	Operating profit margin	17.3		%	20.1		%	(280) bps		16.7		%	19.3		%	(260) bps		Operating profit margin	15.9		%	17.5		%	(160) bps		16.5		%	18.7		%	(220) bps

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

•Increased commodity and other input costs and transportation ~~costs.~~

•~~Increased marketing and employee-related costs.~~costs for both periods.

•Unfavorable foreign currency ~~translation.~~translation for both periods.

•Increased marketing costs for both periods.

•Lower sales volume for the three months ended September 30, 2022.

These amounts were partially offset by:

•Favorable net selling ~~prices.~~prices for both periods.

•~~Increased sales volume.~~Lower variable compensation for the three months ended September 30, 2022.

OTHER INCOME (EXPENSE), NET

Interest Expense

Below is a summary of our interest expense, in millions, for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Favorable / (Unfavorable)		2022		2021		Favorable / (Unfavorable)
Interest expense	$	(29)	$	(26)	$	(3)	$	(82)	$	(253)	$	171

For the ~~six~~nine months ended ~~June~~September 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.

Other, net

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

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Favorable / (Unfavorable)		2022		2021		Favorable / (Unfavorable)
Other, net	$	(12)	$	(17)	$	5	$	4	$	(438)	$	442

Other, net, for the three and ~~six~~nine months ended ~~June~~September 30, 2022 included:

•$284 million and ~~$24~~$6 million, respectively, of realized foreign currency transaction losses.

•$2 million and $7 million, respectively, of net periodic pension and post-retirement benefit expense.

•$6 million of losses related to equity method investments for both periods.

For the nine months ended September 30, 2022 these amounts were more than offset by:

•$24 million of income from the revaluation of contingent consideration related to a prior acquisition.

~~These amounts were partially offset by:~~

•~~$6 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.~~

Other, net, for the three and ~~six~~nine months ended ~~June~~September 30, 2021 included:

•$~~415~~4 million and ~~$426~~$430 million, respectively, of net periodic pension and post-retirement benefit expense, which includes $406 million of settlement loss related to the termination of our qualified domestic defined-benefit pension plans for ~~both periods.~~the nine months ended September 30, 2021.

•$18 million loss related to the divestiture of Hüppe for the nine months ended September 30, 2021.

•$14 million of expense from the revaluation of contingent consideration related to a prior acquisition for both periods.

These amounts were partially offset by:

•$14 million gain recognized on the redemption of the preferred stock of ACProducts Holding, Inc. ~~for both periods and $3 million~~ and $6 million ~~respectively,~~ of related dividend ~~income.~~income for the nine months ended September 30, 2021.

•$5 million and $7 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 and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:


		Three Months Ended June 30,							Six Months Ended June 30,										Three Months Ended September 30,									Nine Months Ended September 30,
		2022			2021		(Favorable) / Unfavorable		2022			2021			(Favorable) / Unfavorable				2022			2021			(Favorable) / Unfavorable			2022			2021			(Favorable) / Unfavorable
Income tax expense	Income tax expense	$	103		$	12	$	91	$	178		$	55		$	123		Income tax expense	$	77		$	103		$	(26)		$	255		$	158		$	97

Effective tax rate	Effective tax rate	26		%	Not Meaningful		Not Meaningful		25		%	36		%	(11)		%	Effective tax rate	25		%	30		%	(5)		%	25		%	32		%	(7)		%

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 and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Favorable / (Unfavorable)		2022		2021		Favorable / (Unfavorable)
Net income	$	218	$	220	$	(2)	$	729	$	278	$	451



Diluted income per common share	$	0.97	$	0.89	$	0.08	$	3.13	$	1.07	$	2.06

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 June 30,				Percent Change				Six Months Ended June 30,				Percent Change					Three Months Ended September 30,				Percent Change				Nine Months Ended September 30,				Percent Change
		2022		2021		2022	vs.	2021		2022		2021		2022	vs.	2021			2022		2021		2022	vs.	2021		2022		2021		2022	vs.	2021
Net Sales:	Net Sales:																	Net Sales:
Plumbing Products	Plumbing Products	$	1,373	$	1,329	3			%	$	2,732	$	2,578	6			%	Plumbing Products	$	1,324	$	1,329	—			%	$	4,056	$	3,907	4			%
Decorative Architectural Products	Decorative Architectural Products	979		850		15			%	1,821		1,571		16			%	Decorative Architectural Products	880		875		1			%	2,701		2,446		10			%

Total	Total	$	2,352	$	2,179	8			%	$	4,553	$	4,149	10			%	Total	$	2,204	$	2,204	—			%	$	6,757	$	6,353	6			%

North America	North America	$	1,905	$	1,717	11			%	$	3,639	$	3,246	12			%	North America	$	1,792	$	1,753	2			%	$	5,431	$	4,999	9			%
International, principally Europe	International, principally Europe	447		462		(3)			%	914		903		1			%	International, principally Europe	412		451		(9)			%	1,326		1,354		(2)			%
Total	Total	$	2,352	$	2,179	8			%	$	4,553	$	4,149	10			%	Total	$	2,204	$	2,204	—			%	$	6,757	$	6,353	6			%


		Three Months Ended June 30,				Percent Change				Six Months Ended June 30,				Percent Change					Three Months Ended September 30,				Percent Change				Nine Months Ended September 30,				Percent Change
		2022		2021		2022	vs.	2021		2022		2021		2022	vs.	2021			2022		2021		2022	vs.	2021		2022		2021		2022	vs.	2021
Operating Profit: (A)	Operating Profit: (A)																	Operating Profit: (A)
Plumbing Products	Plumbing Products	$	238	$	273	(13)			%	$	466	$	525	(11)			%	Plumbing Products	$	220	$	248	(11)			%	$	686	$	773	(11)			%
Decorative Architectural Products	Decorative Architectural Products	192		188		2			%	347		330		5			%	Decorative Architectural Products	151		166		(9)			%	498		496		—			%

Total	Total	$	430	$	461	(7)			%	$	813	$	855	(5)			%	Total	$	371	$	414	(10)			%	$	1,184	$	1,269	(7)			%

North America	North America	$	356	$	370	(4)			%	$	656	$	678	(3)			%	North America	$	305	$	332	(8)			%	$	961	$	1,010	(5)			%
International, principally Europe	International, principally Europe	74		91		(19)			%	157		177		(11)			%	International, principally Europe	66		82		(20)			%	223		259		(14)			%
Total	Total	430		461		(7)			%	813		855		(5)			%	Total	371		414		(10)			%	1,184		1,269		(7)			%
General corporate expense, net	General corporate expense, net	(22)		(24)		(8)			%	(52)		(53)		(2)			%	General corporate expense, net	(20)		(29)		(31)			%	(72)		(82)		(12)			%
Total operating profit	Total operating profit	$	408	$	437	(7)			%	$	761	$	802	(5)			%	Total operating profit	$	351	$	385	(9)			%	$	1,112	$	1,187	(6)			%

(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~~nine months ended ~~June~~September 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.

Plumbing Products

Sales

Net sales in the Plumbing Products segment were flat to prior year for the three months ended September 30, 2022, and increased ~~three percent and six~~four percent for the ~~three and six~~nine months ended ~~June~~September 30, ~~2022, respectively.~~2022. Favorable net selling prices increased sales by seven percent for both periods. ~~Higher sales volume increased sales by one percent and three percent for the three and six months ended June 30, 2022, respectively. Such increases~~These amounts were partially offset by unfavorable foreign currency translation which decreased sales by ~~four~~five percent and ~~three~~four percent for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, ~~and~~as well as the divestiture of our Hüppe business, which decreased sales by one percent ~~in both periods.~~for the nine months ended September 30, 2022. Lower sales volume decreased sales by two percent for the three months ended September 30, 2022 and higher sales volume increased sales by one percent for the nine months ended September 30, 2022.

Operating Results

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

Decorative Architectural Products

Sales

Net sales in the Decorative Architectural Products segment increased 15one percent and 1610 percent for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively. ~~This increase was~~These increases were due primarily to favorable net selling prices of paints and other coating products, lighting products, and builders' hardware ~~products as well as higher~~products. These amounts were partially offset by lower sales volume of paints and other coating products in the three months ended September 30, 2022 and ~~favorable sales mix of lighting products. These positive impacts were slightly offset~~ by lower sales volume of lighting products and builders' hardware ~~products.~~products in both periods.

Operating Results

Operating profit in the Decorative Architectural Products segment for the three ~~and six~~ months ended ~~June~~September 30, 2022 was negatively impacted by increased commodity and other input costs, transportation and marketing costs, as well as decreased sales volume. These amounts were partially offset by favorable net selling prices. Operating profit for the nine months ended September 30, 2022 was positively impacted by favorable net selling ~~prices and increased sales volume.~~prices. These ~~positive impacts~~amounts 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 11two percent and 12nine percent for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively. Favorable net selling prices across all of our product categories ~~and higher sales volume of paints and other coating products~~ increased sales by 1311 percent and 1210 percent for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively. ~~Additionally, higher~~These amounts were partially offset by lower sales volume across all of ~~plumbing products increased~~our product categories, which decreased sales by ~~one~~eight percent for ~~only~~ the ~~six~~three months ended ~~June~~September 30, ~~2022. These positive impacts were slightly offset by~~2022 and lower sales volume in lighting products, ~~and~~ builders' hardware products, and plumbing products, which decreased sales by two percent ~~and one percent~~ for ~~the three and six~~nine months ended ~~June~~September 30, ~~2022, respectively.~~2022.

Operating Results

Operating profit in North America ~~for the three and six months ended June 30, 2022~~ was negatively impacted by increased commodity and other input costs, transportation and marketing ~~costs.~~costs, as well as decreased sales volume for the three and nine months ended September 30, 2022. These amounts were partially offset by favorable net selling prices and ~~increased sales volume.~~

lower variable compensation in both periods.

International, Principally Europe

Sales

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

Operating Results

International operating profit ~~for the three and six months ended June 30, 2022~~ was negatively impacted by increased commodity and other input costs, ~~transportation,~~unfavorable foreign currency translation and increased employee-related costs for both periods, as well as ~~unfavorable foreign currency translation.~~increased transportation costs for the nine months ended September 30, 2022. These amounts were partially offset by favorable net selling prices and ~~increased~~higher sales ~~volume.~~volume of plumbing products for both periods.

Liquidity and Capital Resources

Our current ratio was ~~1.4~~1.5 to 1 and 1.8 to 1 at ~~June~~September 30, 2022 and December 31, 2021, respectively. The decrease in our current ratio is primarily due to the 364-day $500 million term loan that we entered into on April 26, 2022.

For the ~~six~~nine months ended ~~June~~September 30, 2022, net cash provided by operating activities was ~~$174~~$520 million. Our cash flows from operations primarily benefited from operating profit, partially offset by changes in working capital, primarily higher receivables and inventory balances.

For the ~~six~~nine months ended ~~June~~September 30, 2022, net cash used for financing activities was ~~$568~~$802 million, primarily due to $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), ~~$131~~$195 million for the payment of cash dividends, $100 million for the partial payment of the 364-day term loan, $68 million for dividends paid to noncontrolling interest, and $17 million for employee withholding taxes paid on stock-based compensation. These uses of cash were partially offset by $500 million in proceeds from the 364-day term loan.

For the ~~six~~nine months ended ~~June~~September 30, 2022, net cash used for investing activities was ~~$74~~$144 million, comprised primarily of ~~$70~~$137 million of capital expenditures.

Our cash and cash investments were ~~$440~~$464 million and $926 million at ~~June~~September 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 ~~June~~September 30, 2022 and December 31, 2021, ~~$330~~$297 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~~September 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.

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 ~~$56~~$36 million and $43 million at ~~June~~September 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) 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 ~~$108~~$153 million and ~~$93~~$170 million during the ~~six~~nine months ended ~~June~~September 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.

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.


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 ~~June~~September 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 ~~June~~September 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.

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, “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 months ended 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)~~ 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.

MASCO CORPORATION

PART II. OTHER INFORMATION, Continued

Item 6. Exhibits

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)







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 September 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)

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

~~July 28,~~October 26, 2022


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

Receivables	1,434		1,171

Prepaid expenses and other	131		109

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

Total assets	$	5,467	$	5,575

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

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

Total liabilities	6,008		5,497

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

EQUITY
Masco Corporation's shareholders' equity:
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	—		—
Paid-in capital	7		—
Retained deficit	(1,154)		(652)
Accumulated other comprehensive income	180		232
Total Masco Corporation's shareholders' (deficit)	(742)		(179)
Noncontrolling interest	179		235
Total equity	(563)		56
Total liabilities and equity	$	5,467	$	5,575


	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


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


Total	$	975	$	(421)	$	554


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