UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
FORM 10-Q

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20222023
or
☐    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.)
Delaware38-1794485
(State or Other Jurisdiction of
Incorporation or Organization)		(I.R.S. Employer Identification No.)
17450 College Parkway,Livonia,Michigan48152
(Address of Principal Executive Offices)(Zip Code)
(313) 274-7400
(Registrant's telephone number, including area code)

Securities registered pursuantRegistered Pursuant to Section 12(b) of the Act:
Title of each classEach ClassTrading SymbolName of each exchange on which registeredEach Exchange
On Which Registered
Common Stock, $1.00 par valueMASNew York Stock Exchange

Indicate by check mark whether the registrantRegistrant: (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 ☐þ No

o
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 ☐þ No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “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. ☐o

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 
Class Shares Outstanding at March 31, 20222023
Common stock, par value $1.00 per share 235,940,440225,088,525


MASCO CORPORATION

INDEX

  Page No.
PART I.
 
1
Condensed Consolidated Balance Sheets —- as at of March 31, 20222023 and December 31, 20212022
1
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 20222023 and 20212022
2
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 20222023 and 20212022
3
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 20222023 and 20212022
4
Condensed Consolidated Statements of Shareholders’Shareholders' Equity for the Three Months Ended March 31, 20222023 and 20212022
5
Notes to Condensed Consolidated Financial Statements
6
1812
2720
PART II.
2821
2821
2821
2821
2922
3023




MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

March 31, 2022 and December 31, 2021
(In Millions, Except Share Data)
March 31, 2022December 31, 2021
ASSETS
Current Assets:  
Cash and cash investments$479 $926 
Receivables1,502 1,171 
Prepaid expenses and other107 109 
Inventories:  
Finished goods809 702 
Raw material409 383 
Work in process122 131 
 1,340 1,216 
Total current assets3,428 3,422 
Property and equipment, net892 896 
Goodwill565 568 
Other intangible assets, net379 388 
Operating lease right-of-use assets195 187 
Other assets109 114 
Total assets$5,568 $5,575 
LIABILITIES
Current Liabilities:  
Accounts payable$1,114 $1,045 
Notes payable273 10 
Accrued liabilities749 884 
Total current liabilities2,136 1,939 
Long-term debt2,946 2,949 
Noncurrent operating lease liabilities179 172 
Other liabilities407 437 
Total liabilities5,668 5,497 
Commitments and contingencies (Note P)00
Redeemable noncontrolling interest2122 
EQUITY
Masco Corporation's shareholders' equity:  
Common shares, par value $1 per share
  Authorized shares: 1,400,000,000;
  Issued and outstanding: 2022 – 235,600,000; 2021 – 241,200,000
236 241 
Preferred shares authorized: 1,000,000;
  Issued and outstanding: 2022 and 2021 – None
— — 
Paid-in capital— — 
Retained deficit(833)(652)
Accumulated other comprehensive income226 232 
Total Masco Corporation's shareholders' deficit(371)(179)
Noncontrolling interest250 235 
Total equity(121)56 
Total liabilities and equity$5,568 $5,575 
See notes to condensed consolidated financial statements.
1

MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

For the Three Months Ended March 31, 2022 and 2021
(In Millions, Except Per Common Share Data)
Three Months Ended March 31,
 20222021
Net sales$2,201 $1,970 
Cost of sales1,497 1,270 
Gross profit704 700 
Selling, general and administrative expenses351 335 
Operating profit353 365 
Other income (expense), net:  
Interest expense(25)(202)
Other, net(1)(6)
 (26)(208)
Income before income taxes327 157 
Income tax expense75 43 
Net income252 114 
Less: Net income attributable to noncontrolling interest19 20 
Net income attributable to Masco Corporation$233 $94 
Income per common share attributable to Masco Corporation:  
Basic:  
Net income$0.98 $0.34 
Diluted:  
Net income$0.97 $0.34 
See notes to condensed consolidated financial statements.
2

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

For the Three Months Ended March 31, 2022 and 2021
(In Millions)
Three Months Ended March 31,
 20222021
Net income$252 $114 
Less: Net income attributable to noncontrolling interest19 20 
Net income attributable to Masco Corporation$233 $94 
Other comprehensive income (loss), net of tax (Note L):  
Cumulative translation adjustment$(11)$(36)
Interest rate swaps— 7 
Pension and other post-retirement benefits1 5 
Other comprehensive (loss), net of tax(10)(24)
Less: Other comprehensive (loss) attributable to noncontrolling interest(4)(12)
Other comprehensive (loss) attributable to Masco Corporation$(6)$(12)
Total comprehensive income$242 $90 
Less: Total comprehensive income attributable to noncontrolling interest15 8 
Total comprehensive income attributable to Masco Corporation$227 $82 



See notes to condensed consolidated financial statements.
3

MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the Three Months Ended March 31, 2022 and 2021
(In Millions)
Three Months Ended March 31,
 20222021
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:  
Cash provided by operations$334 $323 
Increase in receivables(349)(195)
Increase in inventories(127)(78)
Decrease in accounts payable and accrued liabilities, net(85)(139)
Net cash for operating activities(227)(89)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:  
Retirement of notes— (1,326)
Purchase of Company common stock(364)(303)
Proceeds from revolving credit borrowings, net263 — 
Cash dividends paid(67)(36)
Issuance of notes, net of issuance costs— 1,481 
Debt extinguishment costs— (160)
Proceeds from the exercise of stock options1 — 
Employee withholding taxes paid on stock-based compensation(17)(14)
Decrease in debt, net(3)(1)
Net cash for financing activities(187)(359)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:  
Capital expenditures(27)(30)
Proceeds from disposition of:
Businesses, net of cash disposed2 — 
Other financial investments— 1 
Other, net(1)4 
Net cash for investing activities(26)(25)
Effect of exchange rate changes on cash and cash investments(7)(13)
CASH AND CASH INVESTMENTS:  
Decrease for the period(447)(486)
At January 1926 1,326 
At March 31$479 $840 
See notes to condensed consolidated financial statements.
4

MASCO CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

For the Three Months Ended March 31, 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)0— — 
Stock-based compensation28 — 28 — — — 
Balance, March 31, 2021$217 $253 $— $(116)$(154)$234 
Balance, January 1, 2022$56 $241 $— $(652)$232 $235 
Total comprehensive income (loss)242 — — 233 (6)15 
Shares issued1 1 — — — — 
Shares retired:
Repurchased(364)(6)(27)(331)— — 
Surrendered (non-cash)(17)— — (17)— — 
Cash dividends declared(67)— — (67)— — 
Redeemable noncontrolling interest - redemption adjustment1 — — 1 — — 
Stock-based compensation27 — 27 — — — 
Balance, March 31, 2022$(121)$236 $— $(833)$226 $250 
See notes to condensed consolidated financial statements.
5

MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A. ACCOUNTING POLICIES

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to fairly state our financial position at March 31, 2022 and our results of operations, comprehensive income (loss), cash flows and changes in shareholders' equity for the three-month periods ended March 31, 2022 and 2021. The condensed consolidated balance sheet at December 31, 2021 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted ("GAAP") in the United States of America.
Recently Adopted Accounting Pronouncements. In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. We adopted this standard for annual periods beginning January 1, 2022. The adoption of this new standard did not impact our financial position or results of operations.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities from Contracts with Customers.” ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with Topic 606 as if the acquirer had originated the contracts. We adopted this standard for annual periods beginning January 1, 2022. The adoption of this new standard did not impact our financial position or results of operations.

B. ACQUISITIONS

In the third quarter of 2021, we acquired all of the share capital of Steamist, Inc. ("Steamist") for approximately $56 million in cash. Steamist is a manufacturer of residential steam bath products that are complementary to many of our plumbing products. This business is included in our Plumbing Products segment. In connection with this acquisition, we recognized $31 million of definite-lived intangible assets, primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of 11 years. We also recognized $29 million of goodwill, which is not tax deductible, and is related primarily to the expected synergies from combining the operations into our business. Working capital and other adjustments were finalized with the seller in the fourth quarter of 2021, resulting in no significant changes.
In the first quarter of 2021, we acquired a 75.1 percent equity interest in Easy Sanitary Solutions B.V. ("ESS"), for approximately €47 million ($58 million), including $52 million of cash and $6 million of debt that will be paid out over two years less any pending or settled indemnity matters. The cash payment was made to a third-party notary on December 29, 2020 for the acquisition of this equity interest in advance of the transaction closing on January 4, 2021. ESS is a manufacturer of shower channel drains and offers a wide range of products for barrier-free showering and bathroom wall niches. This business is included in our Plumbing Products segment. In connection with this acquisition, we recognized $32 million of definite-lived intangible assets, primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of 10 years. We also recognized $35 million of goodwill, which is not tax deductible, and is related primarily to the expected synergies from combining the operations into our business.
The remaining 24.9 percent equity interest in ESS is subject to a call and put option that is exercisable by us or the sellers, respectively, any time after December 31, 2023. The redemption value of the call and put option is the same and based on a floating EBITDA value. The call and put options were determined to be embedded within the redeemable noncontrolling interest and are 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.





6


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. The sale of Hüppe did not represent a strategic shift that will have a major effect on our operations and financial results and therefore was not presented as discontinued operations. Prior to the divestiture, the results of the business were included in our Plumbing Products segment. During the first quarter of 2022, we recorded a $2 million pre-tax post-closing gain related to the finalization of working capital items in other, net in our condensed consolidated statement of operations.

D. REVENUE

Our revenues are derived primarily from sales to customers in North America and Internationally, principally Europe. Net sales from these geographic markets, by segment, were as follows, in millions:
Three Months Ended March 31, 2022
Plumbing ProductsDecorative Architectural ProductsTotal
Primary geographic markets:
North America$892 $842 $1,734 
International, principally Europe467 — 467 
Total$1,359 $842 $2,201 
Three Months Ended March 31, 2021
Plumbing ProductsDecorative Architectural ProductsTotal
Primary geographic markets:
North America$808 $721 $1,529 
International, principally Europe441 — 441 
Total$1,249 $721 $1,970 

Our contract asset balance was $2 million and $1 million at March 31, 2022 and December 31, 2021, respectively. Our contract liability balance was $28 million and $67 million at March 31, 2022 and December 31, 2021, respectively.
We recognized $5 million and $1 million of revenue for the three-month periods ended March 31, 2022 and 2021, respectively, related to performance obligations settled in previous years.


7


MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
D. REVENUE (Concluded)

Changes in the allowance for credit losses deducted from accounts receivable were as follows, in millions: 
Three Months Ended
March 31, 2022		Twelve Months Ended December 31, 2021
Balance at January 1$6 $7 
Provision for expected credit losses during the period2 1 
Write-offs charged against the allowance(1)(2)
Recoveries of amounts previously written off1 1 
Other (A)
— (1)
Balance at end of period$8 $6 
(A)    As a result of Hüppe being divested in May 2021, $1 million for the year end December 31, 2021 was removed from allowance for credit losses.

E. DEPRECIATION AND AMORTIZATION

 Depreciation and amortization expense was $35 million and $43 million for the three-month periods ended March 31, 2022 and 2021, respectively.

F. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill at March 31, 2022, by segment, was as follows, in millions: 
Gross Goodwill At March 31, 2022Accumulated
Impairment
Losses		Net Goodwill At March 31, 2022
Plumbing Products$620 $(301)$319 
Decorative Architectural Products366 (120)246 
Total$986 $(421)$565 

The changes in the carrying amount of goodwill for the three-month period ended March 31, 2022, by segment, were as follows, in millions:
 Gross Goodwill At December 31, 2021Accumulated
Impairment
Losses		Net Goodwill At December 31, 2021Other (B)Net Goodwill At March 31, 2022
Plumbing Products (A)
$623 $(301)$322 $(3)$319 
Decorative Architectural Products366 (120)246 — 246 
Total$989 $(421)$568 $(3)$565 
(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 $109 million at both March 31, 2022 and December 31, 2021, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $270 million (net of accumulated amortization of $83 million) and $279 million (net of accumulated amortization of $75 million) at March 31, 2022 and December 31, 2021, respectively, and principally included customer relationships.








8


MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
G. FAIR VALUE OF FINANCIAL INSTRUMENTS

Kraus Acquisition Contingent Consideration. As described in Note B, we may be obligated to pay up to an additional $50 million in 2023 for the Kraus acquisition contingent upon the achievement of certain financial performance metrics for the year ending December 31, 2022. The measurement of the liability for contingent consideration is based on significant inputs that are not observable in the market, and are therefore classified as Level 3 inputs. Examples of utilized unobservable inputs are estimated future revenues and earnings of the acquired business and an applicable discount rate. The estimate of the liability may fluctuate if there are changes in the forecast of the acquired business' future revenues and earnings, as a result of actual levels achieved, or in the discount rate used to determine the present value of contingent future cash flows. All subsequent remeasurements from the initial estimate at the time of acquisition are recorded in other, net in our condensed consolidated statements of operations, as described in Note N. The fair value of the liability was estimated to be $28 million and $24 million as of March 31, 2022 and December 31, 2021, respectively, 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.
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 aggregate estimated market value of our short-term and long-term debt at March 31, 2022 was approximately $3.1 billion, compared with the aggregate carrying value of $3.2 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.

H. WARRANTY LIABILITY

Changes in our warranty liability were as follows, in millions: 
Three Months Ended
March 31, 2022		Twelve Months Ended December 31, 2021
Balance at January 1$80 $83 
Accruals for warranties issued during the period9 38 
Accruals related to pre-existing warranties1 (8)
Settlements made (in cash or kind) during the period(8)(31)
Other, net (including currency translation and acquisitions)— (2)
Balance at end of period$82 $80 

I. DEBT

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







9


MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
I. DEBT (Continued)

On March 13, 2019, we entered into a credit agreement (the “2019 Credit Agreement”) with an aggregate commitment of $1.0 billion and a maturity date of March 13, 2024. On December 22, 2021, we amended the 2019 Credit Agreement with the bank group (the "Amended Credit Agreement"). The 2019 Credit Agreement was amended to (i) expand the “Agreed Currencies” for which loans thereunder may be denominated outside of the swingline facility to include British Pounds Sterling and Canadian Dollars, together with their applicable interest rate benchmark, (ii) replace the London Interbank Offering Rate (“LIBOR”) with the Euro Interbank Offered Rate (“EURIBOR”) as the interest rate benchmark for purposes of loans denominated in Euros and (iii) provide mechanics for the replacement of a benchmark for an applicable Agreed Currency upon the occurrence of certain specified events. Under the Amended Credit Agreement, the replacement reference interest rate benchmark for loans denominated in U.S. dollars upon the eventual discontinuation of LIBOR will have a benchmark adjustment applied based on its historical relationship to LIBOR, which can be either the term Secured Overnight Financing Rate (“SOFR”) plus a spread, daily simple SOFR plus a spread, or another alternative interest rate index selected by the Administrative Agent and us.
Under the Amended Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $500 million with the current lenders or new lenders.
The Amended Credit Agreement provides for an unsecured revolving credit facility available to us and one of our foreign subsidiaries, in U.S. dollars, European euros, British Pounds Sterling, Canadian dollars and certain other currencies for revolving credit loans, swingline loans and letters of credit. Borrowings under the revolving credit loans denominated in any agreed upon currency other than U.S. dollars are limited to $500 million, equivalent. We can also borrow swingline loans up to $100 million and obtain letters of credit of up to $25 million; outstanding letters of credit under the Amended Credit Agreement reduce our borrowing capacity. At March 31, 2022, we had no outstanding standby letters of credit under the Amended Credit Agreement.
Revolving credit loans denominated in U.S. Dollars bear interest under the Amended Credit Agreement at a rate per annum equal to the greater of (i) the JPMorgan Chase Bank, N.A. prime rate, (ii) the Federal Reserve Bank of New York effective rate plus 0.50% and (iii) adjusted LIBO Rate plus 1.0%; plus an applicable margin based upon our then-applicable corporate credit ratings. Foreign currency revolving credit loans denominated in Canadian Dollars bear interest under the Amended Credit Agreement at a rate per annum equal to the greater of (i) the rate equal to the PRIMCAN Index rate and (ii) the CDOR Rate for a one month interest period, plus 1.0%; plus an applicable margin based upon our then-applicable corporate credit ratings. Foreign currency revolving credit loans denominated in Pounds Sterling bear interest under the Amended Credit Agreement at a rate per annum equal to the Daily Simple SONIA plus 0.0326%. Foreign currency revolving credit loans denominated in Euros bear interest at the adjusted EURIBOR Rate, plus an applicable margin based upon our then-applicable corporate credit ratings. The various benchmarks are subject to applicable floors as specified in the Amended Credit Agreement. The Amended Credit Agreement also provides mechanics for the replacement of a benchmark upon the occurrence of certain specified events.
The Amended Credit Agreement contains financial covenants requiring us to maintain (A) a net leverage ratio, as adjusted for certain items, not exceeding 4.0 to 1.0, and (B) a minimum interest coverage ratio, as adjusted for certain items, not less than 2.5 to 1.0.
In order for us to borrow under the Amended Credit Agreement, there must not be any default in our covenants in the Amended Credit Agreement (i.e., in addition to the two financial covenants, principally limitations on subsidiary debt, negative pledge restrictions, legal compliance requirements and maintenance of properties and insurance) and our representations and warranties in the Amended Credit Agreement must be true in all material respects on the date of borrowing (i.e., principally no material adverse change or litigation likely to result in a material adverse change, since December 31, 2018, no material ERISA or environmental non-compliance, and no material tax deficiency). We were in compliance with all covenants and $263 million was borrowed and outstanding at a weighted average interest rate of 1.5798% at March 31, 2022.







10


MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
I. DEBT (Concluded)

Subsequent Events

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

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

J. STOCK-BASED COMPENSATION
Our 2014 Long Term Stock Incentive Plan provides for the issuance of stock-based incentives in various forms to our employees and non-employee Directors. At March 31, 2022, outstanding stock-based incentives were in the form of restricted stock units, performance restricted stock units, stock options, long-term stock awards and phantom stock awards.
Pre-tax compensation expense for these stock-based incentives was as follows, in millions: 
Three Months Ended March 31,
 20222021
Restricted stock units$19 $19 
Performance restricted stock units1 2 
Stock options5 4 
Long-term stock awards2 3 
Phantom stock awards— 2 
Total$27 $30 
Restricted Stock Units. Restricted stock units are granted to our key employees and non-employee Directors. These grants did not cause net share dilution due to our practice of repurchasing and retiring an equal number of shares in the open market.
We granted 581,660 restricted stock units in the three-month period ended March 31, 2022 with a weighted average grant date fair value of $59 per share.

11


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: 
Three Months Ended March 31,
 20222021
Unvested restricted stock units at January 11 — 
Weighted average grant date fair value$54 $47 
Restricted stock units granted1 1 
Weighted average grant date fair value$59 $56 
Restricted stock units vested1 — 
Weighted average grant date fair value$53 $48 
Restricted stock units forfeited— — 
Weighted average grant date fair value$55 $53 
Unvested restricted stock units at March 311 1 
Weighted average grant date fair value$57 $53 

At March 31, 2022 and 2021, there was $30 million and $23 million, respectively, of unrecognized compensation expense related to unvested restricted stock units; such units had a weighted average remaining vesting period of two years at both March 31, 2022 and 2021.
The total market value (at the vesting date) of restricted stock units which vested was $18 million and $7 million during the three-month periods ended March 31, 2022 and 2021, respectively.

Performance Restricted Stock Units. Under our Long Term Incentive Program, we grant performance restricted stock units to certain senior executives. These performance restricted stock units will vest and share awards will be issued at no cost to the employees, subject to our achievement of specified performance metrics established by our Compensation Committee over a three-year performance period and the recipient's continued employment through the share award date.
During the three-month period ended March 31, 2022, we granted 91,820 performance restricted stock units with a grant date fair value of approximately $55 per share and 167,903 shares were issued. No performance restricted stock units were forfeited during the three-month period ended March 31, 2022. During the three-month period ended March 31, 2021, we granted 85,360 performance restricted stock units with a grant date fair value of approximately $53 per share and 104,757 shares were issued. No performance restricted stock units were forfeited during the three-month period ended March 31, 2021.
Stock Options. Stock options are granted to certain key employees.
We granted 337,790 shares of stock options in the three-month period ended March 31, 2022 with a grant date weighted average exercise price of approximately $59 per share.

12


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: 
Three Months Ended March 31,
 20222021
Option shares outstanding, January 132
Weighted average exercise price$37$33
Option shares granted—1
Weighted average exercise price$59$56
Option shares exercised——
Aggregate intrinsic value on date of exercise (A)
$—$—
Weighted average exercise price$38$—
Option shares forfeited——
Weighted average exercise price$37$11
Option shares outstanding, March 3133
Weighted average exercise price$39$36
Weighted average remaining option term (in years)67
Option shares vested and expected to vest, March 3133
Weighted average exercise price$39$36
Aggregate intrinsic value (A)
$40 million$65 million
Weighted average remaining option term (in years)66
Option shares exercisable (vested), March 3122
Weighted average exercise price$34$30
Aggregate intrinsic value (A)
$36 million$51 million
Weighted average remaining option term (in years)55
(A)    Aggregate intrinsic value is calculated using our stock price at each respective date, less the exercise price (grant date price), multiplied by the number of shares.

At March 31, 2022 and 2021, there was $4 million and $6 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model at the grant date) related to unvested stock options; such options had a weighted average remaining vesting period of two years at both March 31, 2022 and 2021.
The weighted average grant date fair value of option shares granted and the assumptions used to estimate those values using a Black-Scholes option pricing model were as follows: 
Three Months Ended March 31,
 20222021
Weighted average grant date fair value$14.66 $13.61 
Risk-free interest rate1.90 %0.75 %
Dividend yield1.89 %1.67 %
Volatility factor29.00 %30.00 %
Expected option life6 years6 years

13


MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
J. STOCK-BASED COMPENSATION (Concluded)
Long-Term Stock Awards. Prior to the amendment of our 2014 Long Term Stock Incentive Plan in December 2019, we granted long-term stock awards to our key employees and non-employee Directors. We did not grant shares of long-term stock awards in the three-month periods ended March 31, 2022 and 2021.
Our long-term stock award activity was as follows, shares in millions: 
Three Months Ended March 31,
 20222021
Unvested stock award shares at January 11 1 
Weighted average grant date fair value$37 $36 
Stock award shares vested1 — 
Weighted average grant date fair value$37 $34 
Stock award shares forfeited— — 
Weighted average grant date fair value$37 $37 
Unvested stock award shares at March 31— 1 
Weighted average grant date fair value$38 $37 

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

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

K. EMPLOYEE RETIREMENT PLANS

Net periodic pension cost for our defined-benefit pension plans, with the exception of service cost, is recorded in other, net, in our condensed consolidated statements of operations. Net periodic pension cost for our defined-benefit pension plans was as follows, in millions: 
 Three Months Ended March 31,
 20222021
 QualifiedNon-QualifiedQualifiedNon-Qualified
Service cost$1 $— $1 $— 
Interest cost1 1 8 1 
Expected return on plan assets(1)— (4)— 
Amortization of net loss1 1 6 1 
Net periodic pension cost$2 $2 $11 $2 

In December 2019, our Board of Directors approved the termination of our qualified domestic defined-benefit pension plans and in the second quarter of 2021, we settled these pension plans.









14

MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
L. RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME
March 31, 2023 and December 31, 2022
The reclassifications from accumulated other comprehensive income to the condensed consolidated statements of operations were as follows, in millions: 
 Amounts Reclassified 
Accumulated Other Comprehensive IncomeThree Months Ended March 31,Statement of Operations Line Item
20222021
Amortization of defined-benefit pension and other post-retirement benefits:   
Actuarial losses, net$2 $7 Other, net
Tax (benefit)(1)(2) 
Net of tax$1 $5  
Interest rate swaps (A)
$— $2 Interest expense
Tax expense— 5  
Net of tax$— $7  
(In Millions, Except Share Data)
(A)    Upon full repayment
 March 31, 2023December 31, 2022
ASSETS
Current assets:  
Cash and cash investments$510 $452 
Receivables1,329 1,149 
Inventories1,196 1,236 
Prepaid expenses and other113 109 
Total current assets3,148 2,946 
Property and equipment, net1,019 975 
Goodwill540 537 
Other intangible assets, net344 350 
Operating lease right-of-use assets266 266 
Other assets113 113 
Total assets$5,430 $5,187 
LIABILITIES
Current liabilities:
Accounts payable$913 $877 
Notes payable413 205 
Accrued liabilities692 807 
Total current liabilities2,018 1,889 
Long-term debt2,946 2,946 
Noncurrent operating lease liabilities254 255 
Other liabilities332 339 
Total liabilities$5,550 $5,429 
Commitments and contingencies (Note L)
Redeemable noncontrolling interest20 20 
EQUITY
Masco Corporation's shareholders' equity:
Common shares, par value $1 per share
   Authorized shares: 1,400,000,000;
   Issued and outstanding: 2023 – 225,000,000; 2022 – 225,300,000
225 225 
Preferred shares authorized: 1,000,000;
   Issued and outstanding: 2023 and 2022 – None
— — 
Paid-in capital— 16 
Retained deficit(847)(947)
Accumulated other comprehensive income243 226 
Total Masco Corporation's shareholders' deficit(379)(480)
Noncontrolling interest239 218 
Total equity(140)(262)
Total liabilities and equity$5,430 $5,187 
See notes to condensed consolidated financial statements.
1
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended March 31, 2023 and retirement of the 5.950% Notes due March 15, 2022 in the first quarter of 2021, we recognized the remaining interest rate swap loss and related disproportionate tax expense.

M. SEGMENT INFORMATION

Information by segment and geographic area was as follows, in millions: 
 Three Months Ended March 31,
 2022202120222021
 Net Sales (A)
Operating Profit
Operations by segment:    
Plumbing Products$1,359 $1,249 $228 $252 
Decorative Architectural Products842 721 155 142 
Total$2,201 $1,970 $383 $394 
Operations by geographic area:
North America$1,734 $1,529 $300 $308 
International, principally Europe467 441 83 86 
Total$2,201 $1,970 383 394 
General corporate expense, net(30)(29)
Operating profit353 365 
Other income (expense), net(26)(208)
Income before income taxes$327 $157 
(In Millions, Except Per Common Share Data)
(A)    Inter-segment sales were not material.
Three Months Ended March 31,
 20232022
Net sales$1,979 $2,201 
Cost of sales1,310 1,497 
Gross profit669 704 
Selling, general and administrative expenses354 351 
Operating profit315 353 
Other income (expense), net:  
Interest expense(28)(25)
Other, net(2)(1)
(30)(26)
Income before income taxes285 327 
Income tax expense64 75 
Net income221 252 
Less: Net income attributable to noncontrolling interest16 19 
Net income attributable to Masco Corporation$205 $233 
Income per common share attributable to Masco Corporation: 
Basic:  
Net income$0.91 $0.98 
Diluted:  
Net income$0.90 $0.97 








See notes to condensed consolidated financial statements.
15

2

MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (Continued)
N. OTHER INCOME (EXPENSE), NETFor the Three Months Ended March 31, 2023 and 2022
Other, net, which is included in other income (expense), net, was as follows, in millions:
Three Months Ended March 31,
 20222021
Foreign currency transaction gains$4 $— 
Contingent consideration (A)
(4)— 
Gain on sale of business (B)
2 — 
Net periodic pension and post-retirement benefit cost(2)(11)
Dividend income— 3 
Equity investment income, net— 2 
Other items, net(1)— 
Total other, net$(1)$(6)
(In Millions)
(A) In the first quarter of 2022, we recognized $4 million of expense from the revaluation of contingent consideration related to a prior acquisition. Refer to Note G for additional information.
(B) Represents a pre-tax post-closing gain related to the finalization of working capital items related to the divestiture of Hüppe.

O. INCOME PER COMMON SHARE
Three Months Ended March 31,
 20232022
Net income$221 $252 
Less: Net income attributable to noncontrolling interest16 19 
Net income attributable to Masco Corporation$205 $233 
Other comprehensive income (loss), net of tax:  
Cumulative translation adjustment$22 $(11)
Pension and other post-retirement benefits— 1 
Other comprehensive income (loss), net of tax22 (10)
Less: Other comprehensive income (loss) attributable to the noncontrolling interest5 (4)
Other comprehensive income (loss) attributable to Masco Corporation$17 $(6)
Total comprehensive income$243 $242 
Less: Total comprehensive income attributable to noncontrolling interest          21 15 
Total comprehensive income attributable to Masco Corporation$222 $227 
   
Reconciliations of the numerators and denominators used in the computations of basic and diluted income per common share were as follows, in millions: 
Three Months Ended March 31,
 20222021
Numerator (basic and diluted):  
Net income$233 $94 
Less: Allocation to redeemable noncontrolling interest(1)6 
Less: Allocation to unvested restricted stock awards— — 
Net income attributable to common shareholders$234 $88 
Denominator:  
Basic common shares (based upon weighted average)239 256 
Add: Stock option dilution2 1 
Diluted common shares241 257 
For the three-month period ended March 31, 2022, we allocated dividends and undistributed earnings to the unvested restricted stock awards. For the three-month period ended March 31, 2021, we allocated undistributed earnings to the unvested restricted stock awards.
Additionally, 265,000 and 188,000 common shares for the three-month periods ended March 31, 2022 and 2021, respectively, related to stock options were excluded from the computation of diluted income per common share due to their antidilutive effect.
Effective February 10, 2021, our Board of Directors authorized the repurchase, for retirement, of up to $2.0 billion of shares of our common stock in open-market transactions or otherwise, replacing the previous Board of Directors authorization established in 2019. We repurchased and retired 6.1 million shares of our common stock in the three-month period ended March 31, 2022 for approximately $364 million. This included 0.6 million shares to offset the dilutive impact of restricted stock units granted in the three-month period ended March 31, 2022. At March 31, 2022, we had $764 million remaining under the 2021 authorization.
On the basis of amounts paid (declared), cash dividends per common share were $0.280 ($0.280) for the three-month period ended March 31, 2022 and $0.140 for the three-month period ended March 31, 2021, respectively.


16


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

Q. INCOME TAXES

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


































See notes to condensed consolidated financial statements.
17

3

MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Three Months Ended March 31, 2023 and 2022
(In Millions)
Three Months Ended March 31,
 20232022
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:  
Cash provided by operations$286 $334 
Increase in receivables(194)(349)
Decrease (increase) in inventories45 (127)
Decrease in accounts payable and accrued liabilities, net(104)(85)
Net cash from (for) operating activities33 (227)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES: 
Purchase of Company common stock(53)(364)
Proceeds from revolving credit borrowings, net210 263 
Cash dividends paid(65)(67)
Proceeds from the exercise of stock options9 1 
Employee withholding taxes paid on stock-based compensation(20)(17)
Decrease in debt, net(3)(3)
Net cash from (for) financing activities78 (187)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures(61)(27)
Other, net2 1 
Net cash for investing activities(59)(26)
Effect of exchange rate changes on cash and cash investments6 (7)
CASH AND CASH INVESTMENTS: 
Increase (decrease) for the period58 (447)
At January 1452 926 
At March 31$510 $479 

See notes to condensed consolidated financial statements.
4
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
For the Three Months Ended March 31, 2023 and 2022
(In Millions, Except Per Common Share Data)
Item 2.MASCO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Total
Common
Shares
($1 par value)
Paid-In
Capital		Retained
(Deficit)
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Noncontrolling
Interest
Balance, January 1, 2022$56 $241 $— $(652)$232 $235 
Total comprehensive income (loss)242 — — 233 (6)15 
Shares issued1 1 — — — — 
Shares retired:
Repurchased(364)(6)(27)(331)— — 
Surrendered (non-cash)(17)— — (17)— — 
Cash dividends declared(67)— — (67)— — 
Redeemable noncontrolling interest - redemption adjustment1 — — 1 — — 
Stock-based compensation27 — 27 — — — 
Balance, March 31, 2022$(121)$236 $— $(833)$226 $250 

Recent Trends
Balance, January 1, 2023$(262)$225 $16 $(947)$226 $218 
Total comprehensive income243 — — 205 17 21 
Shares issued6 1 5 — — — 
Shares retired:
Repurchased(56)(1)(32)(23)— — 
Surrendered (non-cash)(17)— — (17)— — 
Cash dividends declared(65)— — (65)— — 
Stock-based compensation11 — 11 — — — 
Balance, March 31, 2023$(140)$225 $— $(847)$243 $239 

See notes to condensed consolidated financial statements.
We are experiencing, and may continue to experience, higher commodity and transportation costs and supply chain disruptions, particularly disruptions related to our ability to source products, components and raw materials. We are also experiencing and may continue to experience employee-related cost inflation and constraints in hiring qualified employees. We aim to offset the potential unfavorable impact of these items with productivity improvement and other initiatives.5
In addition, the COVID-19 pandemic has significantly disrupted global economic activity, including our workforce and operations, as well as the operations of our customers and suppliers. There continues to be uncertainty regarding the ongoing COVID-19 pandemic and the resulting impact on our future operations and financial results.
MASCO CORPORATION
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.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

FIRST QUARTER 2022 VERSUS FIRST QUARTER 2021A. ACCOUNTING POLICIES

Consolidated ResultsIn our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of Operations

We reporta normal recurring nature, necessary to fairly state our financial position at March 31, 2023, and our results of operations, comprehensive income (loss), cash flows and changes in accordance withshareholders' equity for the three months ended March 31, 2023 and 2022. The condensed consolidated balance sheet at December 31, 2022 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted accounting principles("GAAP") in the United States of AmericaAmerica.
Recently Adopted Accounting Pronouncements. In September 2022, the Financial Accounting Standards Board ("GAAP"FASB"). However, we believe issued ASU 2022-04, "Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations,” which requires that certain non-GAAP performance measuresan 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 ratios used in managingpotential magnitude. We adopted this standard for annual periods on a retrospective basis, including interim periods within those annual periods, beginning January 1, 2023, except for the business may provide usersamendment on rollforward information, which is effective prospectively for annual periods beginning January 1, 2024 and will be adopted at that time. The adoption of this guidance modified our disclosures, but did not have an impact on our financial information with additional meaningful comparisons between current resultsposition and results of operations.
Recently Issued Accounting Pronouncements. In March 2023, the FASB issued ASU 2023-02, "Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in prior periods. Non-GAAP performance measuresTax Credit Structures Using the Proportional Amortization Method,” which permits an entity to elect to account for their tax equity investments using the proportional amortization method if certain conditions are met, regardless of the tax credit program from which the income tax credits are received. ASU 2023-02 is effective for annual periods on either a modified retrospective or retrospective basis, including interim periods within those annual periods, beginning January 1, 2024. Early adoption is permitted. We plan to adopt this standard beginning January 1, 2024, and ratios should be viewed in addition to,we are currently reviewing the provisions of this standard and not as an alternative for,the impact, if any, the adoption of this guidance will have on our reported results under GAAP.
The following discussion of consolidatedfinancial position and results of operations refers to the three-month period ended March 31, 2022 compared to the same period of 2021.

SALES AND OPERATIONS
Net Sales

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

Three Months Ended March 31,
 20222021Favorable / (Unfavorable)
Net sales, as reported$2,201 $1,970 $231 
Acquisitions(6)— (6)
Divestitures— (20)20 
Net sales, excluding acquisitions and divestitures2,195 1,950 245 
Currency translation31 — 31 
Net sales, excluding acquisitions, divestitures and the effect of currency translation$2,226 $1,950 $276 


18


operations.


B. REVENUE





Our revenues are derived from sales to customers in North America and Internationally, principally Europe. Net sales from these geographic markets, by segment, were as follows, in millions:
Three Months Ended March 31, 2023
Plumbing ProductsDecorative Architectural ProductsTotal
Primary geographic markets:
North America$798 $757 $1,555 
International, principally Europe424 — 424 
Total$1,222 $757 $1,979 
Three Months Ended March 31, 2022
Plumbing ProductsDecorative Architectural ProductsTotal
Primary geographic markets:
North America$892 $842 $1,734 
International, principally Europe467 — 467 
Total$1,359 $842 $2,201 
We recognized $1 million and $5 million of revenue for the three-month periodthree months ended March 31, 2023 and 2022, were $2.2 billion, which increased 12 percent comparedrespectively, related to the three-month period ended March 31, 2021. Excluding acquisitions, divestitures and the effect of currency translation, net sales increased 14 percent.

Net sales for the three-month period ended March 31, 2022 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 five percent.

These amounts were slightly offset by:

•Unfavorable foreign currency translation which decreased sales by one percent.
•The divestiture of our Hüppe business which decreased sales one percent.

Gross Profit and Gross Margin

Below is a summary of our gross profit,performance obligations settled in millions, and gross margin for the three-month periods ended March 31, 2022 and 2021:
 Three Months Ended March 31,
 20222021Favorable / (Unfavorable)
Gross profit$704$700 $4
Gross margin32.0 %35.5 %(350) bps
Gross profit margin was negatively impacted by:

•Increased commodity and transportation costs.

These amounts were partially offset by:

•Favorable net selling prices.
•Increased sales volume.

Selling, General and Administrative Expenses

Below is a summary of our selling, general and administrative expenses, in millions, and selling, general and administrative expenses as a percentage of net sales for the three-month periods ended March 31, 2022 and 2021:
 Three Months Ended March 31,
 20222021(Favorable) / Unfavorable
Selling, general and administrative expenses$351$335 $16
Selling, general and administrative expenses as percentage of net sales15.9 %17.0 %(110) bps

Selling, general and administrative expense as a percentage of sales was positively impacted by:

• Leverage of fixed expenses due primarily to increased sales volume.

These amounts were partially offset by:

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



6
MASCO CORPORATION
19NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
B. REVENUE (Concluded)

Our contract asset balance was $2 million and $1 million at March 31, 2023 and December 31, 2022, respectively. Our contract liability balance was $24 million and $61 million at March 31, 2023 and December 31, 2022, respectively.
Changes in the allowance for credit losses deducted from accounts receivable were as follows, in millions:

Three Months Ended March 31, 2023Twelve Months Ended December 31, 2022
Balance at January 1$8 $6 
Provision for expected credit losses during the period— 5 
Write-offs charged against the allowance(1)(4)
Recoveries of amounts previously written off1 1 
Balance at end of period$8 $8 



C. DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense was $35 million for both the three months ended March 31, 2023 and 2022.




Operating Profit

Below is a summary of our operating profit, in millions, and operating profit margin for the three-month periods ended March 31, 2022 and 2021:
Three Months Ended March 31,
20222021Favorable / (Unfavorable)
Operating profit$353$365$(12)
Operating profit margin16.0 %18.5 %(250) bps
Operating profit was negatively affected by:
•Increased commodity and transportation costs.
•Increased other expenses including marketing and employee-related costs.

These amounts were partially offset by:
•Favorable net selling prices.
•Increased sales volume.

OTHER INCOME (EXPENSE), NET

Interest Expense

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

 Three Months Ended March 31,
 20222021Favorable / (Unfavorable)
Interest expense$(25)$(202)$177 
D. INVENTORIES

The decreasecomponents of inventory were as follows, in interest expense is primarily due to the absence of the $168 million loss on debt extinguishment which was recorded as additional interest expense in connection with the early retirement of debt in the first quarter of 2021. To a lesser extent, the decrease was also attributable to interest savings related to debt refinancing in the first quarter of 2021.millions:

Other, net

Below is a summary of our other, net, in millions, for the three-month periods ended March 31, 2022 and 2021:
 Three Months Ended March 31,
 20222021Favorable / (Unfavorable)
Other, net$(1)$(6)$5 
 At March 31, 2023At December 31, 2022
Finished goods$750 $715 
Raw materials338 408 
Work in process108 113 
Total$1,196 $1,236 

Other, net,E. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill at March 31, 2023, by segment, was as follows, in millions:
 Gross Goodwill At March 31, 2023Accumulated Impairment LossesNet Goodwill At March 31, 2023
Plumbing Products$614 $(301)$313 
Decorative Architectural Products366 (139)227 
Total$980 $(440)$540 
The changes in the carrying amount of goodwill for the three-month periodthree months ended March 31, 2022 included:2023, by segment, were as follows, in millions:

•$4 million of expense from the revaluation of contingent consideration related to a prior acquisition.
•$2 million of net periodic pension and post-retirement benefit expense.

 Gross Goodwill At December 31, 2022Accumulated Impairment LossesNet Goodwill At December 31, 2022Foreign Currency TranslationNet Goodwill At March 31, 2023
Plumbing Products$611 $(301)$310 $3 $313 
Decorative Architectural Products366 (139)227 — 227 
Total$977 $(440)$537 $3 $540 




20

7

MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
E. GOODWILL AND OTHER INTANGIBLE ASSETS (Concluded)







These amounts were largely offset by:

•$4The carrying value of our other indefinite-lived intangible assets was $102 million of realized foreign currency transaction gains.
•$2 million of gain related to the finalization of working capital items related to the divestiture of Hüppe.

Other, net, for the three-month period endedat both March 31, 2021 included:

•$11 million of net periodic pension2023 and post-retirement benefit expense.

This amount was partially offset by:

•$3 million of dividend income related to preferred stock of ACProducts Holding, Inc.
•$2 million of earnings related to equity method investments.

INCOME TAXES

Below is a summary of our income tax expense, in millions, and our effective tax rate for the three-month periods ended MarchDecember 31, 2022 and 2021:
 Three Months Ended March 31,
 20222021(Favorable) / Unfavorable
Income tax expense$75$43$32
Effective tax rate23 %27 %(4)%


Our effective tax rateprincipally included registered trademarks. The carrying value of 23 percent for the three-month period endedour definite-lived intangible assets was $242 million (net of accumulated amortization of $100 million) at March 31, 2022 was lower than our normalized tax rate2023 and $248 million (net of 25 percent primarily due to:

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

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

•$5 million of income tax expense from the elimination of a disproportionate tax effect from accumulated other comprehensive income, relating to our interest rate swap, following the retirement of the related debt in March 2021.
•$5 million increase to income tax expense from a loss on the termination of our qualified domestic defined-benefit pension plans in 2021 providing no tax benefit in certain jurisdictions.

The increased income tax expense was partially offset by:

•$5 million of additional state income tax benefit from a reduction in the liability for uncertain tax positions resulting from the expiration of statutes of limitation in the first quarter of 2021.












21









NET INCOME AND INCOME PER COMMON SHARE — ATTRIBUTABLE TO MASCO CORPORATION

Below is a summary of our net income and diluted income per common share, in millions, except per share data, for the three-month periods ended March$94 million) at December 31, 2022, and 2021:
 Three Months Ended March 31,
 20222021Favorable / (Unfavorable)
Net income$233 $94 $139 
Diluted income per common share$0.97 $0.34 $0.63 

principally included customer relationships.

Business Segment and Geographic Area ResultsF. SUPPLIER FINANCE PROGRAM

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

Three Months Ended March 31,Percent Change
 202220212022 vs 2021
Net Sales:  
Plumbing Products$1,359 $1,249 9 %
Decorative Architectural Products842 721 17 %
Total$2,201 $1,970 12 %
North America$1,734 $1,529 13 %
International, principally Europe467 441 6 %
Total$2,201 $1,970 12 %
 Three Months Ended March 31,Percent Change
 202220212022 vs 2021
Operating Profit: (A)
Plumbing Products$228 $252 (10)%
Decorative Architectural Products155 142 9 %
Total$383 $394 (3)%
North America$300 $308 (3)%
International, principally Europe83 86 (3)%
Total383 394 (3)%
General corporate expense, net(30)(29)3 %
Total operating profit$353 $365 (3)%

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










22









BUSINESS SEGMENT RESULTS DISCUSSION

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

Plumbing Products

Sales

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

Operating Results

Operating profit in the Plumbing Products segment for the three-month period ended March 31, 2022 was negatively impacted by increased commodity, transportation, employee-related and marketing costs. These amounts were partially offset by favorable net selling prices and increased sales volume.

Decorative Architectural Products

Sales

Net sales in the Decorative Architectural Products segment increased 17 percent for the three-month period ended March 31, 2022 due primarily to favorable net selling prices of paints and other coating products, lighting products and builders' hardware products as well as higher sales volume of paints and other coating products and favorable sales mix of lighting products. These positive impacts were slightly offset by lower sales volume of lighting products.

Operating Results

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

GEOGRAPHIC AREA RESULTS DISCUSSION

North America

Sales

North American net sales increased 13 percent for the three-month period ended March 31, 2022. Favorable net selling prices of paints and other coating products and plumbing products increased sales by nine percent and higher sales volume of paints and other coating products and plumbing products increased sales by four percent. These positive impacts were slightly offset by lower sales volume in lighting products, which decreased sales by one percent.

Operating Results

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




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International, Principally Europe

Sales

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

Operating Results

International operating profit for the three-month period ended March 31, 2022 was negatively impacted by increased commodity, transportation, employee-related and marketing costs. These amounts were partially offset by favorable net selling prices and increased sales volume.

Liquidity and Capital Resources
Our current ratio was 1.6 to 1 and 1.8 to 1 at March 31, 2022 and December 31, 2021, respectively. The decrease in our current ratio is primarily due to the $263 million of revolving credit loan borrowings at March 31, 2022.
For the three-month period ended March 31, 2022, net cash used for operating activities was $227 million. Cash flows from operating activities was affected by an increase in accounts receivable and inventories due to expected and annually recurring first quarter seasonality and increased net selling prices and commodity costs, respectively, compared with the fourth quarter 2021.
For the three-month period ended March 31, 2022, net cash used for financing activities was $187 million, primarily due to $364 million for the repurchase and retirement of our common stock (including 0.6 million shares repurchased to offset the dilutive impact of restricted stock units granted in 2022), $67 million for the payment of cash dividends, and $17 million for employee withholding taxes paid on stock-based compensation. These uses of cash were partially offset by $263 million in net proceeds from revolving credit loan borrowings.
For the three-month period ended March 31, 2022, net cash used for investing activities was $26 million, comprised primarily of $27 million for capital expenditures.
Our cash and cash investments were $479 million and $926 million at March 31, 2022 and December 31, 2021, respectively. Our cash and cash investments consist of overnight interest-bearing money market demand accounts, time deposit accounts, and money market mutual funds containing government securities and treasury obligations. While we attempt to diversify these investments in a prudent manner to minimize risk, it is possible that future changes in the financial markets could affect the security or availability of these investments. Of the cash and cash investments held at March 31, 2022 and December 31, 2021, $411 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.
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.



24









On March 13, 2019, we entered into a credit agreement (the "2019 Credit Agreement") with an aggregate commitment of $1.0 billion and a maturity date of March 13, 2024.  On December 22, 2021, we amended the 2019 Credit Agreement with the bank group (the "Amended Credit Agreement"). The 2019 Credit Agreement was amended to (i) expand the “Agreed Currencies” for which loans thereunder may be denominated outside of the swingline facility to include British Pounds Sterling and Canadian Dollars, together with their applicable interest rate benchmark, (ii) replace the London Interbank Offering Rate (“LIBOR”) with the Euro Interbank Offered Rate (“EURIBOR”) as the interest rate benchmark for purposes of loans denominated in Euros and (iii) provide mechanics for the replacement of a benchmark for an applicable Agreed Currency upon the occurrence of certain specified events.
Under the Amended Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $500 million with the current lenders or new lenders. See Note I to the condensed consolidated financial statements.
The Amended Credit Agreement contains financial covenants requiring us to maintain (A) a net leverage ratio, as adjusted for certain items, not exceeding 4.0 to 1.0, and (B) a minimum interest coverage ratio, as adjusted for certain items, not less than 2.5 to 1.0.  We were in compliance with all covenants and $263 million was borrowed and outstanding at a weighted average interest rate of 1.5798% under our Amended Credit Agreement at March 31, 2022.
On April 26, 2022, we entered into a revolving credit agreement (the “2022 Credit Agreement”) with an aggregate commitment of $1.0 billion and a maturity date of April 26, 2027. Under the 2022 Credit Agreement, the swingline loans borrowing capacity increased to $125 million. All other material terms are substantially the same as the Amended Credit Agreement as described in Note I, including the two financial covenants. Upon entry into the 2022 Credit Agreement, our 2019 Credit Agreement dated March 13, 2019, as amended, with an aggregate commitment of $1.0 billion, was terminated.
On April 26, 2022, we entered into a 364-day $500 million senior unsecured delayed draw term loan due April 26, 2023 with a syndicate of lenders. The senior unsecured term loan and commitments thereunder are subject to prepayment or termination at our option and the loans will bear interest at SOFR plus a spread adjustment and 0.70%. The covenants are substantially the same as those in the 2022 Credit Agreement.
During 2022, we anticipate using approximately $900 million of cash for share repurchases (including shares which will be purchased to offset any dilution from restricted stock units granted as part of our compensation programs).
As part of our ongoing efforts to improve our cash flow and related liquidity, we work with suppliers to optimize our terms and conditions, including extending payment terms. We also facilitate a voluntary supply chain finance program (the "program") to provide certain of our suppliers with the opportunity to sell receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. A third party administers the program; our responsibility is limited to making payment on the terms originally negotiated with our supplier, regardless of whether the supplier sells its receivable to a financial institution. We do not enter into agreements with any of the participating financial institutions in connection with the program. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the program.
All outstanding payments owed under the program are recorded within accounts payable in our condensed consolidated balance sheets. The amounts owed to participating financial institutionsconfirmed as valid under the program and included in accounts payable were $52 million and $43$50 million at March 31, 20222023 and December 31, 2021,2022, respectively. We account for allOf the amounts confirmed as valid under the program, the amounts owed to participating financial institutions were $26 million and $29 million at March 31, 2023 and December 31, 2022, respectively. All payments made under the program are recorded as a reduction to our cash flows from operations and reported within our decrease in accounts payable and accrued liabilities, net, line withinin our condensed consolidated statements of cash flows.

G. 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.
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 under the 2022 Credit Agreement at March 31, 2023.
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.
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 $210 million was borrowed and outstanding at an interest rate of 5.974% at March 31, 2023. 




8
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
G. 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 $300 million during 2022.
Subsequent to March 31, 2023, we increased our borrowing under the 2022 Credit Agreement to $266 million at a weighted average interest rate of 6.190%, and repaid the remaining $200 million outstanding under the term loan.
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 March 31, 2023. The aggregate estimated market value of our short-term and long-term debt at March 31, 2023 was approximately $3.0 billion, compared with the aggregate carrying value of $3.4 billion. The aggregate estimated market value of our short-term and long-term debt at December 31, 2022 was approximately $2.7 billion, compared with the aggregate carrying value of $3.2 billion.

H. SEGMENT INFORMATION

Information by segment and geographic area was as follows, in millions:
Three Months Ended March 31,
2023202220232022
 Net Sales (A)Operating Profit
Our operations by segment were:   
Plumbing Products$1,222 $1,359 $206 $228 
Decorative Architectural Products757 842 132 155 
Total$1,979 $2,201 $338 $383 
Our operations by geographic area were:    
North America$1,555 $1,734 $266 $300 
International, principally Europe424 467 72 83 
Total, as above$1,979 $2,201 338 383 
General corporate expense, net(23)(30)
Operating profit315 353 
Other income (expense), net(30)(26)
Income before income taxes$285 $327 
(A) Inter-segment sales were not material.










9
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
I. OTHER INCOME (EXPENSE), NET

Other, net, which is included in other income (expense), net, was as follows, in millions:
Three Months Ended March 31,
 20232022
Net periodic pension and post-retirement benefit expense$(3)$(2)
Foreign currency transaction gains1 4 
Income from cash and cash investments1 — 
Realized gains from private equity funds1 — 
Contingent consideration (A)
— (4)
Gain on sale of business (B)
— 2 
Other items, net(2)(1)
Total other, net$(2)$(1)
(A)In the first quarter of 2022, we recognized $4 million of expense from the revaluation of contingent consideration related to our acquisition of Kraus USA Inc.
(B)In the first quarter of 2022, we recognized a pre-tax post-closing gain related to the finalization of working capital items related to the divestiture of Hüppe GmbH.


J. INCOME TAXES

Our effective tax rate was 22 percent and 23 percent for the three months ended March 31, 2023 and 2022, respectively. Our tax rate in each period was favorably impacted by $11 million of income tax benefits. For both periods, the income tax benefits resulted from a reduction in the liability for uncertain tax positions resulting from the expiration of statutes of limitation and stock-based compensation.

K. INCOME PER COMMON SHARE

Reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share were as follows, in millions:
Three Months Ended March 31,
 20232022
Numerator (basic and diluted):
Net income$205 $233 
Less: Allocation to redeemable noncontrolling interest— (1)
Less: Allocation to unvested restricted stock awards— — 
Net income attributable to common shareholders          $205 $234 
Denominator:
Basic common shares (based upon weighted average)226 239 
Add: Stock option dilution1 2 
Diluted common shares227 241 
For the three months ended March 31, 2023 and 2022, we allocated dividends and undistributed earnings to the unvested restricted stock awards.


10
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Concluded)
K. INCOME PER COMMON SHARE (Concluded)

The following stock options, restricted stock units and performance 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 March 31,
 20232022
Number of stock options789265
Number of restricted stock units272— 
Number of performance restricted stock units15— 
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. We repurchased and retired approximately 1.1 million shares of our common stock in the three months ended March 31, 2023 for approximately $56 million, of which approximately $53 million was paid in cash. This included 0.1 million shares to offset the dilutive impact of restricted stock units granted in the three months ended March 31, 2023. At March 31, 2023, we had approximately $1.9 billion remaining under the 2022 authorization.
We have declared and paid cash dividends per common share of $0.285 for the three months ended March 31, 2023 and $0.280 for the three months ended March 31, 2022.

L. OTHER COMMITMENTS AND CONTINGENCIES

Litigation.    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: advertising, competition, contract, data privacy, employment, environmental, insurance coverage, intellectual property, personal injury, product compliance, product liability, securities and warranty. 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.
Warranty.    Changes in our warranty liability were as follows, in millions:
 Three Months Ended March 31, 2023Twelve Months Ended December 31, 2022
Balance at January 1$80 $80 
Accruals for warranties issued during the period10 40 
Accruals related to pre-existing warranties1 (3)
Settlements made (in cash or kind) during the period(10)(34)
Other, net (including currency translation)— (3)
Balance at end of period$81 $80 

11


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

Overview

Due to changing market conditions, we are experiencing, and may continue to experience, lower market demand for our products. We have been experiencing, and may continue to experience, elevated commodity and other input costs, as well as employee-related cost inflation. While still elevated, we have recently seen some reduction of certain costs, and we aim to offset the potential unfavorable impact of our costs and lower demand for our products with productivity improvement, pricing, and other initiatives.
We continue to execute our strategies of leveraging our strong brand portfolio, industry-leading positions and the Masco Operating System, our methodology to drive growth and productivity, to create long-term shareholder value. We remain confident in the fundamentals of our business and long-term strategy. We believe that our strong financial position and cash flow generation, together with our investments in our industry-leading branded building products, our continued focus on innovation and disciplined capital allocation, will allow us to drive long-term growth and create value for our shareholders.

FIRST QUARTER 2023 VERSUS FIRST QUARTER 2022

Consolidated Results of Operations

We report our financial results in accordance with accounting principles generally accepted 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 months ended March 31, 2023 compared to the same period of 2022.

SALES AND OPERATIONS

Net Sales
Below is a summary of our net sales, in millions, for the three months ended March 31, 2023 and 2022:
 Three Months Ended March 31,
 20232022Change
Net sales, as reported$1,979 $2,201 $(222)
Currency translation30 — 30 
Net sales, excluding the effect of currency translation$2,009 $2,201 $(192)
Net sales for the three months ended March 31, 2023 were $2.0 billion, which decreased 10 percent compared to the three months ended March 31, 2022. Excluding the effect of currency translation, net sales decreased nine percent.





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Net sales for the three months ended March 31, 2023 decreased primarily due to:
•Lower sales volume across the entire company which decreased sales by 14 percent.
•Unfavorable foreign currency translation which decreased sales by one percent.
These amounts were partially offset by:
•Higher net selling prices across the entire company which increased sales by six percent.

Gross Profit and Gross Margin
Below is a summary of our gross profit, in millions, and gross margin for the three months ended March 31, 2023 and 2022:
 Three Months Ended March 31,
 20232022Favorable / (Unfavorable)
Gross profit$669$704$(35)
Gross margin33.8 %32.0 %180 bps
For the three months ended March 31, 2023, gross profit margin was positively impacted by:
•Higher net selling prices.
•Cost savings initiatives.
These amounts were partially offset by:
•Lower sales volume.
•Increased commodity and other input costs.

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 months ended March 31, 2023 and 2022:
 Three Months Ended March 31,
 20232022(Favorable) / Unfavorable
Selling, general and administrative expenses$354$351$3
Selling, general and administrative expenses as percentage of net sales17.9 %15.9 %200 bps
For the three months ended March 31, 2023, selling, general, and administrative expenses as a percentage of net sales was negatively impacted by:
•Lower net sales resulting from lower volumes.
•Increased marketing costs.












13


Operating Profit
Below is a summary of our operating profit, in millions, and operating profit margin for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
20232022Favorable / (Unfavorable)
Operating profit$315$353$(38)
Operating profit margin15.9 %16.0 %(10) bps
For the three months ended March 31, 2023, operating profit was negatively impacted by:
•Lower sales volume.
•Increased commodity and other input costs.
•Increased marketing costs.
These amounts were partially offset by:
•Higher net selling prices.
•Cost savings initiatives.

OTHER INCOME (EXPENSE), NET

Interest Expense

Below is a summary of our interest expense, in millions, for the three months ended March 31, 2023 and 2022:
 Three Months Ended March 31,
 20232022Favorable / (Unfavorable)
Interest expense$(28)$(25)$(3)
Other, net

Below is a summary of our other, net, in millions, for the three months ended March 31, 2023 and 2022:
 Three Months Ended March 31,
 20232022Favorable / (Unfavorable)
Other, net$(2)$(1)$(1)















14


INCOME TAXES

Below is a summary of our income tax expense, in millions, and our effective tax rate for the three months ended March 31, 2023 and 2022:
 Three Months Ended March 31,
 20232022(Favorable) / Unfavorable
Income tax expense$64$75$(11)
Effective tax rate22 %23 %(1)%
Our tax rate in each period was favorably impacted by $11 million of income tax benefits. For both periods, the income tax benefits resulted from a reduction in the liability for uncertain tax positions resulting from the expiration of statutes of limitation and stock-based compensation.

NET INCOME AND INCOME PER COMMON SHARE - ATTRIBUTABLE TO MASCO CORPORATION

Below is a summary of our net income and diluted income per common share, in millions, except per share data, for the three months ended March 31, 2023 and 2022:
 Three Months Ended March 31,
 20232022Favorable / (Unfavorable)
Net income$205 $233 $(28)
Diluted income per common share$0.90 $0.97 $(0.07)
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Business Segment and Geographic Area Results

The following tables set forth our net sales and operating profit information by business segment and geographic area, dollars in millions.
 Three Months Ended March 31,
Percent
Change
 202320222023 vs. 2022
Net Sales:   
Plumbing Products$1,222 $1,359 (10)%
Decorative Architectural Products757 842 (10)%
Total$1,979 $2,201 (10)%
North America$1,555 $1,734 (10)%
International, principally Europe424 467 (9)%
Total$1,979 $2,201 (10)%
Three Months Ended March 31,
Percent
Change
 202320222023 vs. 2022
Operating Profit (A):  
Plumbing Products$206 $228 (10)%
Decorative Architectural Products132 155 (15)%
Total$338 $383 (12)%
North America$266 $300 (11)%
International, principally Europe72 83 (13)%
Total338 383 (12)%
General corporate expense, net(23)(30)(23)%
Total operating profit$315 $353 (11)%
(A)Before general corporate expense, net; refer to Note H to the condensed consolidated financial statements.

The following discussion of business segment and geographic area results refers to the three months ended March 31, 2023 compared to the same period of 2022. Changes in operating profit in the following business segment and geographic area results discussion exclude general corporate expense, net.
BUSINESS SEGMENT RESULTS DISCUSSION

Plumbing Products
Sales
Net sales in the Plumbing Products segment decreased 10 percent for the three months ended March 31, 2023 due primarily to lower sales volume which decreased sales by 12 percent, unfavorable foreign currency translation which decreased sales by two percent, and unfavorable sales mix which decreased sales by one percent. These amounts were partially offset by higher net selling prices which increased sales by five percent.
Operating Results
Operating profit in the Plumbing Products segment for the three months ended March 31, 2023 was negatively impacted by lower sales volume, increased marketing costs, unfavorable sales mix and unfavorable foreign currency translation. These amounts were partially offset by higher net selling prices and, to a lesser extent, cost savings initiatives.
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Decorative Architectural Products
Sales
Net sales in the Decorative Architectural Products segment decreased 10 percent for the three months ended March 31, 2023 due primarily to lower sales volume across the segment, partially offset by higher net selling prices across the segment.
Operating Results
Operating profit in the Decorative Architectural Products segment for the three months ended March 31, 2023 was negatively impacted by lower sales volume and higher commodity and other input costs and marketing costs. These amounts were partially offset by higher net selling prices.

GEOGRAPHIC AREA RESULTS DISCUSSION

North America
Sales
North America net sales decreased 10 percent for the three months ended March 31, 2023. Lower sales volume across all product categories decreased sales by 15 percent, partially offset by higher net selling prices across all product categories which increased sales by five percent.
Operating Results
North America operating profit for the three months ended March 31, 2023 was negatively impacted by lower sales volume and higher commodity and other input costs and marketing costs. These amounts were partially offset by higher net selling prices and, to a lesser extent, cost savings initiatives.
International, Principally Europe
Sales
International net sales decreased nine percent for the three months ended March 31, 2023. In local currencies (including sales in currencies outside their respective functional currencies), net sales decreased three percent. Lower sales volume decreased sales by nine percent and unfavorable sales mix decreased sales by one percent. These amounts were partially offset by higher net selling prices which increased sales by six percent.
Operating Results
International operating profit for the three months ended March 31, 2023 was negatively impacted by lower sales volume, unfavorable sales mix and increased marketing costs. These amounts were partially offset by higher net selling prices.

Liquidity and Capital Resources

Overview of Capital Structure
We had cash and cash investments of approximately $510 million and $452 million at March 31, 2023 and December 31, 2022, 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 we held at March 31, 2023 and December 31, 2022, $304 million and $321 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.
Our current ratio was 1.6 to 1 at both March 31, 2023 and December 31, 2022.
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We believe that our present cash balance and 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. However, due to the changing market conditions and its impact on our customers and suppliers, we are unable to fully estimate the extent of the impact it may have on our future financial condition.
Credit Agreement
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. See Note G to the condensed consolidated financial statements for additional information.
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 $210 million was borrowed and outstanding at an interest rate of 5.974% at March 31, 2023.
364-day Term Loan
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 $300 million during 2022.
Subsequent to March 31, 2023, we increased our borrowing under the 2022 Credit Agreement to $266 million at a weighted average interest rate of 6.190%, and repaid the remaining $200 million outstanding under the term loan.
Other Liquidity and Capital Resource Activities
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. The amounts settled throughconfirmed as valid under the program and paidincluded in accounts payable were $52 million and $50 million at March 31, 2023 and December 31, 2022, respectively. Of the amounts confirmed as valid under the program, the amounts owed to participating financial institutions were $47$26 million and $46$29 million during the three-month periods endedat March 31, 2023 and December 31, 2022, respectively. All payments made under the program are recorded as a decrease in accounts payable and 2021, respectively.accrued liabilities, net, in our condensed consolidated statements of cash flows. 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 Flows
For the three months ended March 31, 2023, net cash balance, cash flows fromprovided by operations and borrowing availability under our 2022 Credit Agreement are sufficient to fund our near-termwas $33 million, primarily driven by operating profit, partially offset by changes in working capital, due mostly to higher receivables and other investment needs. We believe thatlower accounts payable and accrued liabilities balances.
For the three months ended March 31, 2023, net cash provided by financing activities was $78 million, primarily due to $210 million in net proceeds from revolving credit loan borrowings. These cash proceeds were partially offset by $65 million for the payment of cash dividends, $53 million for the repurchase and retirement of our longer-term working capitalcommon stock (including 0.1 million shares repurchased to offset the dilutive impact of restricted stock units granted in 2023), 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.$20 million for employee withholding taxes paid on stock-based compensation.

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For the three months ended March 31, 2023, net cash used for investing activities was $59 million, primarily driven by $61 million of capital expenditures.

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 public reputation, 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 acquired and may in the future acquire, our ability to attract, develop and retain a talented and diverse personnel,workforce, risks associated with cybersecurity vulnerabilities, threats and attacks, risks associated with our reliance on information systems and technology and risks associated with cybersecurity vulnerabilities, threatsthe impact of the ongoing COVID-19 pandemic on our business and attacks.operations.

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.

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MASCO CORPORATION
Item 4.
CONTROLS AND PROCEDURES

a.Evaluation of Disclosure Controls and Procedures.
The Company’s principal executive officerCompany's Principal Executive Officer and principal financial officerPrincipal Financial Officer have concluded, based on an evaluation of the Company’sCompany's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15 that, as of March 31, 2022,2023, the Company's disclosure controls and procedures were effective.

b. Changes in Internal Control over Financial Reporting.
In connection with the evaluation of the Company's internal control over financial reporting that occurred during the quarter ended March 31, 2022,2023, 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.

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MASCO CORPORATION
 
PART II.  OTHER INFORMATION


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

Item 1A. Risk Factors

There have been no material changes to the risk factors of the Company set forth in Item 1A.1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.

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

The following table provides information regarding the repurchase of our common stock for the three-month periodthree months ended March 31, 20222023 under the 20212022 share repurchase authorization:
PeriodTotal Number 
Of Shares
Purchased		Average Price
Paid Per
Common Share		Total Number Of
Shares Purchased
As Part Of
Publicly Announced
Plans or Programs		Maximum Value Of
Shares That May
Yet Be Purchased
Under The Plans Or Programs
1/1/23 - 1/31/23268,947 $49.71 268,947 $1,986,629,339 
2/1/23 - 2/28/23160,658 $53.41 160,658 $1,978,048,307 
3/1/23 - 3/31/23669,352 $50.09 669,352 $1,944,521,964 
Total for the quarter1,098,957 $50.48 1,098,957 $1,944,521,964 

PeriodTotal Number 
Of Shares
Purchased		Average Price
Paid Per
Common Share		Total Number Of
Shares Purchased
As Part Of
Publicly Announced
Plans or Programs		Maximum Value Of
Shares That May
Yet Be Purchased
Under The Plans Or Programs
1/1/22 - 1/31/221,814,981 $66.33 1,814,981 $1,008,051,714 
2/1/22 - 2/28/221,962,034 $58.44 1,962,034 $893,395,061 
3/1/22 - 3/31/222,364,872 $54.51 2,364,872 $764,476,342 
Total for the quarter6,141,887 $59.26 6,141,887 $764,476,342 






























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MASCO CORPORATION
 
PART II.  OTHER INFORMATION, Continued

Item 66.. Exhibits 
10a–
Credit Agreement dated as of April 26, 2022 by and among Masco Corporation and Masco Europe S.à r.l. as borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A. and PNC Bank, National Association, as Co-Syndication Agents, and Deutsche Bank Securities, Inc., Royal Bank of Canada, Truist Bank, Bank of America, N.A., Fifth Third Bank and Wells Fargo Bank, National Association, as Co-Documentation Agents
10b–
Term Loan Credit Agreement dated as of April 26, 2022 by and among Masco Corporation as borrower, the lenders party thereto, PNC Bank, National Association, as Administrative Agent and PNC Capital Markets LLC as Sole Bookrunner and Sole Lead Arranger
31a–
Certification by Chief Executive Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
31b–
Certification by Chief Financial Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
32–
Certification Required by Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code
101–
The following financial information from Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
104–Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
Certifications required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101
The following financial information from Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, 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 Condensed Consolidated Statements of Shareholders' Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

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MASCO CORPORATION
 
PART II.  OTHER INFORMATION, Concluded


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this reportReport to be signed on its behalf by the undersigned thereunto duly authorized.
 MASCO CORPORATION
By:/s/ John G. Sznewajs
 Name:
John G. Sznewajs
Title:
Vice President, Chief Financial Officer
April 27, 202226, 2023

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