MASCO CORP /DE/ - Annual Report: 2023 (Form 10-K)

These amounts were partially offset by:

•

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

Gross Profit and Gross Margin

Below is a summary of our gross profit, in millions, and gross margin for the years ended December 31, 2023 and 2022:


	Year Ended December 31,
	2023			2022			Favorable / (Unfavorable)
Gross profit	$	2,836		$	2,713		$	123
Gross margin	35.6		%	31.3		%	430 bps

Our 2023 gross profit margin was positively impacted by:

•

Higher net selling prices.

•

Cost savings initiatives.

•

Lower transportation costs.

•

Receipt of an insurance settlement payment.

•

Lower excess and obsolete inventory charges.

These amounts were partially offset by:

•

Lower sales volume.

•

Unfavorable sales mix.

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 years ended December 31, 2023 and 2022:


	Year Ended December 31,
	2023			2022			Favorable / (Unfavorable)
Selling, general and administrative expenses	$	(1,473)		$	(1,390)		$	(83)
Selling, general and administrative expenses as a percentage of net sales	(18.5)		%	(16.0)		%	(250) bps

Our 2023 selling, general and administrative expenses as a percentage of net sales was negatively impacted by:

•

Increased employee-related costs.

•

Increased marketing costs.

•

Lower net sales resulting from lower volumes.

Operating Profit

Below is a summary of our operating profit, in millions, and operating profit margins for the years ended December 31, 2023 and 2022:


	Year Ended December 31,
	2023			2022			Change
Operating profit, as reported	$	1,348		$	1,297		$	51
Rationalization charges	13			32			(19)
Impairment charges for goodwill and other intangible assets	15			26			(11)
Insurance settlement	(40)			—			(40)
Operating profit, excluding rationalization charges, impairment charges and insurance settlement	$	1,336		$	1,355		$	(19)
Operating profit margin, as reported	16.9		%	14.9		%	200 bps
Operating profit margin, excluding rationalization charges, impairment charges and insurance settlement	16.8		%	15.6		%	120 bps

Our 2023 operating profit was positively impacted by:

•

Higher net selling prices.

•

Cost savings initiatives.

•

Lower transportation costs.

•

Receipt of an insurance settlement payment.

•

Lower excess and obsolete inventory charges.

•

Lower goodwill and other intangible assets impairment charges in our lighting business.

These amounts were partially offset by:

•

Lower sales volume.

•

Increased employee-related costs.

•

Unfavorable sales mix.

•

Increased marketing costs.

•

Unfavorable foreign currency translation.

OTHER INCOME (EXPENSE), NET

Interest Expense

Below is a summary of our interest expense, in millions, for the years ended December 31, 2023 and 2022:


	Year Ended December 31,
	2023		2022		Favorable / (Unfavorable)
Interest expense	$	(106)	$	(108)	$	2

Other, net

Below is a summary of our other, net, in millions, for the years ended December 31, 2023 and 2022:


	Year Ended December 31,
	2023		2022		Favorable / (Unfavorable)
Other, net	$	(4)	$	4	$	(8)

Other, net, for 2022 included $24 million of income from the revaluation of contingent consideration related to the acquisition of Kraus USA Inc.

INCOME TAXES

Below is a summary of our income tax expense, in millions, and our effective tax rate for the years ended December 31, 2023 and 2022:


	Year Ended December 31,
	2023			2022			Favorable / (Unfavorable)
Income tax expense	$	(278)		$	(288)		$	10
Effective tax rate	(22)		%	(24)		%	2		%

Our 2023 income tax expense included a $29 million state income tax benefit, net of federal expense, from the recognition of certain state deferred tax assets due to a legal restructuring of certain U.S. businesses that will occur in early 2024.

Refer to Note R to the consolidated financial statements for additional information.

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

Below is a summary of our net income, in millions, and diluted income per common share for the years ended December 31, 2023 and 2022:


	Year Ended December 31,
	2023		2022		Favorable / (Unfavorable)
Net income	$	908	$	844	$	64
Diluted income per common share	$	4.02	$	3.63	$	0.39

Business Segment and Geographic Area Results

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


	Year Ended December 31,				Percent Change
	2023		2022		2023 vs. 2022
Net Sales:
Plumbing Products	$	4,842	$	5,252	(8)	%
Decorative Architectural Products	3,125		3,428		(9)	%
Total	$	7,967	$	8,680	(8)	%

North America	$	6,384	$	6,978	(9)	%
International, particularly Europe	1,583		1,702		(7)	%
Total	$	7,967	$	8,680	(8)	%


	Year Ended December 31,				Percent Change
	2023		2022		2023 vs. 2022
Operating Profit (A):
Plumbing Products	$	861	$	819	5	%
Decorative Architectural Products	578		565		2	%
Total	$	1,439	$	1,384	4	%

North America	$	1,210	$	1,116	8	%
International, particularly Europe	229		268		(15)	%
Total	1,439		1,384		4	%
General corporate expense, net	(91)		(87)		5	%
Total operating profit	$	1,348	$	1,297	4	%

(A)Before general corporate expense, net; refer to Note P to the consolidated financial statements for additional information.

BUSINESS SEGMENT RESULTS DISCUSSION

Changes in operating profit in the following Business Segment and Geographic Area Results discussion exclude general corporate expense, net, and compares each respective period to the same period of the immediately preceding year.

Plumbing Products

Sales

Net sales in the Plumbing Products segment decreased eight percent in 2023. In local currencies (including sales in currencies outside their respective functional currencies), net sales decreased seven percent in 2023. Lower sales volume decreased sales by 11 percent and unfavorable sales mix decreased sales by one percent. These amounts were partially offset by higher net selling prices, which increased sales by four percent and the acquisition of Sauna360 which increased sales by one percent.

Operating Results

Operating profit in the Plumbing Products segment in 2023 was positively impacted by higher net selling prices, lower transportation and commodity costs, cost savings initiatives, and lower excess and obsolete inventory charges. These amounts were partially offset by lower sales volume, increased employee-related costs, unfavorable sales mix, unfavorable foreign currency translation and increased marketing costs.

Decorative Architectural Products

Sales

Net sales in the Decorative Architectural Products segment decreased nine percent in 2023, primarily due to lower sales volume, partially offset by higher net selling prices.

Operating Results

Operating profit in the Decorative Architectural Products segment in 2023 was positively impacted by higher net selling prices, cost savings initiatives, receipt of an insurance settlement payment, lower transportation costs, lower excess and obsolete inventory charges, and lower goodwill and other intangible assets impairment charges in our lighting business. These amounts were partially offset by lower sales volume, increased commodity costs and increased employee-related costs.

GEOGRAPHIC AREA RESULTS DISCUSSION

North America

Sales

North America net sales decreased nine percent in 2023. Lower sales volume decreased sales by 11 percent and unfavorable sales mix decreased sales by one percent. These amounts were partially offset by higher net selling prices, which increased sales by two percent.

Operating Results

North America operating profit in 2023 was positively impacted by higher net selling prices, cost savings initiatives, lower transportation costs, receipt of an insurance settlement payment, lower excess and obsolete inventory charges, and lower goodwill and other intangible assets impairment charges in our lighting business. These amounts were partially offset by lower sales volume, increased employee-related costs, unfavorable sales mix and increased marketing costs.

International, Particularly Europe

Sales

International net sales decreased seven percent in 2023. In local currencies (including sales in currencies outside their respective functional currencies), net sales decreased six percent. Lower sales volume decreased sales by 11 percent and unfavorable sales mix decreased sales by one percent. These amounts were partially offset by higher net selling prices which increased sales by five percent.

Operating Results

International operating profit in 2023 was negatively impacted by lower sales volume, unfavorable sales mix and unfavorable foreign currency translation. These amounts were partially offset by higher net selling prices and lower transportation and commodity costs.

Liquidity and Capital Resources

Overview of Capital Structure

Historically, we have largely funded our growth through cash provided by our operations, the issuance of notes in the financial markets, bank borrowings and, to a lesser extent, the issuance of our common stock, including issuances for certain mergers and acquisitions. Maintaining high levels of liquidity and focusing on cash generation are among our financial strategies. Our capital allocation strategy includes reinvesting in our business, maintaining an investment grade credit rating, maintaining a relevant dividend and deploying excess free cash flow to share repurchases or acquisitions.

We had cash and cash investments of approximately $634 million and $452 million at December 31, 2023 and 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 December 31, 2023 and 2022, $323 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 1.7 to 1 and 1.6 to 1 at December 31, 2023 and 2022, respectively. The increase in our current ratio is primarily due to the repayment of the 364-day term loan during 2023.

Our total debt as a percent of total capitalization was 97 percent and 109 percent at December 31, 2023 and 2022, respectively. Refer to Note K to the consolidated financial statements for additional information.

We believe that our present cash balance and cash flows from operations, and borrowing availability under our revolving 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 that the changing market conditions may have on our future financial condition.

Capital Expenditures

We continue to invest in our manufacturing and distribution operations to increase our productivity, improve customer service and support product innovation. Capital expenditures for 2023 were $243 million, compared with $224 million for 2022. The increase in capital expenditures in 2023 was primarily due to capacity expansion plans in our Plumbing Products and Decorative Architectural Products segments. For 2024, capital expenditures, excluding any potential future acquisitions, are expected to be approximately $200 million. Depreciation and amortization expense for 2023 totaled $149 million, compared with $145 million for 2022. For 2024, depreciation and amortization expense, excluding any potential future acquisitions, is expected to be approximately $160 million. Amortization expense totaled $34 million in 2023, compared with $33 million in 2022.

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 K to the 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 no borrowings were outstanding under our 2022 Credit Agreement as of December 31, 2023.

Short-term Borrowings

On May 9, 2023, our Hansgrohe SE subsidiary entered into €70 million ($77 million) of short-term borrowings to support working capital needs. The loans contained no financial covenants and the entire balance was repaid as of December 31, 2023.

364-day Term Loan

On April 26, 2022, we entered into a 364-day $500 million senior unsecured delayed draw term loan (the "term loan") due April 26, 2023 with a syndicate of lenders. The term loan and commitments thereunder were subject to prepayment or termination at our option and the loans bore interest at SOFR plus a spread adjustment and 0.70%. The covenants, including the financial covenants, were substantially the same as those in the 2022 Credit Agreement. We repaid $300 million during 2022 and the remaining $200 million upon the maturity of the term loan on April 26, 2023.

Corporate Development Strategy

We expect to maintain a balanced growth strategy pursuing organic growth by maximizing the full potential of our existing businesses and, as appropriate, complementing our existing business with strategic acquisitions.

In addition, we actively manage our portfolio of companies by divesting those businesses that do not align with our long-term growth strategy. We will continue to review all of our businesses to determine which businesses, if any, may not align with our long-term growth strategy.

Acquisitions

In the third quarter of 2023, we acquired all of the share capital of Sauna360 for approximately €124 million ($136 million), net of cash acquired. Sauna360 has a portfolio of products that includes traditional, infrared, and wood-burning saunas as well as steam showers.

Share Repurchases

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, exclusive of excise tax, in open-market transactions or otherwise. We repurchased and retired 6.2 million shares of our common stock in 2023 for approximately $356 million, inclusive of excise tax of $3 million. This included 0.2 million shares to offset the dilutive impact of restricted stock units granted in 2023. At December 31, 2023, we had $1.6 billion remaining under the 2022 authorization. Consistent with past practice and as part of our long-term capital allocation strategy, outside of any potential acquisitions, we anticipate using approximately $600 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) in 2024. Refer to Note N to the consolidated financial statements for additional information.

During 2022, we repurchased and retired 16.6 million shares of our common stock (including 0.6 million shares to offset the dilutive impact of restricted stock units granted during the year), for approximately $914 million.

Dividend to holders of our Common Shares

We paid a quarterly dividend of $0.285 per common share for an annual dividend of $1.14 per share.

As part of our capital allocation strategy, the Board of Directors declared a quarterly dividend of $0.29 per share in the first quarter of 2024 with the intention to increase the annual dividend 2 percent to $1.16 per share.

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 confirmed as valid under the program and included in accounts payable were $53 million and $50 million at December 31, 2023 and 2022, respectively. Of the amounts confirmed as valid under the program, the amounts owed to participating financial institutions were $28 million and $29 million at December 31, 2023 and 2022, respectively. All payments made under the program are recorded as a decrease in accounts payable and accrued liabilities, net, in our 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 utilize derivative and hedging instruments to manage our exposure to currency fluctuations, primarily related to the European euro, British pound sterling, the Chinese renminbi and the U.S. dollar; occasionally, we have also used derivative and hedging instruments to manage interest rate fluctuations, primarily related to debt issuances. We review our hedging program, derivative positions and overall risk management on a regular basis. We currently do not have any derivative instruments for which we have designated hedge accounting.

Cash Flows

Significant sources and (uses) of cash for the years ended December 31, 2023 and 2022 are summarized as follows, in millions:


	2023		2022
Net cash from operating activities	$	1,413	$	840

Purchase of Company common stock	(353)		(914)
Cash dividends paid	(257)		(258)
Dividends paid to noncontrolling interest	(49)		(68)


Proceeds from short-term borrowings	77		—
Payment of short-term borrowings	(77)		—
Proceeds from term loan	—		500
Payment of term loan	(200)		(300)

Proceeds from the exercise of stock options	38		1
Employee withholding taxes paid on stock-based compensation	(29)		(17)

Payment of debt	(5)		(10)

Capital expenditures	(243)		(224)
Acquisition of business, net of cash acquired	(136)		—







Effect of exchange rate changes on cash and cash investments	6		(18)
Other, net	(4)		(6)
Cash increase (decrease)	$	182	$	(474)

Our working capital days were as follows:


	At December 31,
	2023		2022
Receivable days	52		53
Inventory days	77		80
Accounts payable days	70		68
Working capital (receivables plus inventories, less accounts payable) as a percentage of net sales	16.0	%	17.4	%

Operating Activities

Net cash provided by operations was $1,413 million, primarily driven by operating profit and changes in working capital, mostly attributable to lower inventory.

Financing Activities

Net cash used for financing activities was $854 million, primarily due to $353 million for the repurchase and retirement of our common stock (including 0.2 million shares repurchased to offset the dilutive impact of restricted stock units granted in 2023), $257 million for the payment of cash dividends, $200 million for the repayment of the 364-day term loan, $49 million for dividends paid to noncontrolling interest and $29 million for employee withholding taxes paid on stock-based compensation. These uses of cash were partially offset by $38 million of proceeds from the exercise of stock options.

Investing Activities

Net cash used for investing activities was $383 million, primarily driven by $243 million of capital expenditures and $136 million for the acquisition of Sauna360.

Commitments and Contingencies

Litigation

Information regarding our legal proceedings is set forth in Note T to the consolidated financial statements, which is incorporated herein by reference.

Other Commitments

We enter into contracts, which include reasonable and customary indemnifications that are standard for the industries in which we operate. Such indemnifications include claims made against builders by homeowners for issues relating to our products and workmanship. In conjunction with divestitures and other transactions, we occasionally provide reasonable and customary indemnifications. We have not paid a material amount related to these indemnifications, and we evaluate the probability that amounts may be incurred and record an estimated liability when probable and reasonably estimable.

Contractual Obligations

The following table provides payment obligations related to current contracts at December 31, 2023, in millions:


	Payments Due by Period
	2024		2025-2026		2027-2028		Beyond 2028		Other		Total
Debt (A)	$	3	$	5	$	904	$	2,042	$	—	$	2,954
Interest (A)	98		193		178		656		—		1,125
Operating leases	57		101		65		167		—		390
Currently payable income taxes	32		—		—		—		—		32
Purchase commitments (B)	327		81		4		—		—		412
Uncertain tax positions, including interest and penalties (C)	—		—		—		—		93		93
Total	$	517	$	379	$	1,152	$	2,866	$	93	$	5,006

______________________________

(A)We assume that all debt would be held to maturity. Amounts include finance lease obligations.

(B)Excludes contracts that do not require volume commitments and open or pending purchase orders.

(C)Due to the high degree of uncertainty regarding the timing of future cash outflows associated with uncertain tax positions, we are unable to make a reasonable estimate for the year in which cash settlements may occur with applicable tax authorities.

Refer to Note M to the consolidated financial statements for defined-benefit pension plan obligations.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make certain estimates and assumptions that affect or could have affected the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We regularly review our estimates and assumptions, which are based upon historical experience, as well as current economic conditions and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities and related disclosures, and future revenues and expenses, that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions.

Note A to the consolidated financial statements includes our accounting policies, estimates and methods used in the preparation of our consolidated financial statements.

We believe that the following critical accounting policies are affected by significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

We recognize revenue as control of our products is transferred to our customers, which is generally at the time of shipment or upon delivery based on the contractual terms with our customers. We provide customer programs and incentive offerings, including special pricing and co-operative advertising arrangements, promotions and other volume-based incentives. These customer programs and incentives are considered variable consideration. We include in revenue variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the variable consideration is resolved. This determination is made based upon known customer program and incentive offerings at the time of sale, and expected sales volume forecasts as it relates to our volume-based incentives. This determination is updated each reporting period.

Goodwill and Other Intangible Assets

We record the excess of purchase cost over the fair value of net tangible assets of acquired companies as goodwill or other identifiable intangible assets. In the fourth quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, we complete the impairment testing of goodwill utilizing a discounted cash flow method. We selected the discounted cash flow methodology because we believe that it is comparable to what would be used by market participants. We have defined our reporting units and completed the impairment testing of goodwill at the operating segment level.

Determining market values using a discounted cash flow method requires us to make significant estimates and assumptions, including long-term projections of cash flows, market conditions and appropriate discount rates. Our judgments are based upon historical experience, current market trends, consultations with external valuation specialists and other information. While we believe that the estimates and assumptions underlying the valuation methodology are reasonable, different estimates and assumptions could result in different outcomes. In estimating future cash flows, we rely on internally generated five-year forecasts for sales and operating profits, and, currently, a two percent to three percent long-term assumed annual growth rate of cash flows for periods after the five-year forecast. We generally develop these forecasts based upon, among other things, recent sales data for existing products, planned timing of new product launches, estimated repair and remodel activity and, to a lesser extent, estimated housing starts. Our assumptions included U.S. and Eurozone Gross Domestic Product both growing at approximately 1.0 percent in 2024, and 2.0 percent and 1.5 percent, respectively, per annum over the remainder of the five-year forecast.

We utilize our weighted average cost of capital of approximately 9.50 percent as the basis to determine the discount rate to apply to the estimated future cash flows. In 2023, based upon our assessment of the risks impacting each of our businesses, we applied a risk premium to increase the discount rate to a range of 11.50 percent to 13.50 percent for our reporting units.

If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized to the extent that a reporting unit's recorded carrying value exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit.

In the fourth quarter of 2023, we estimated that future discounted cash flows projected for all of our reporting units were greater than the carrying values. Accordingly, we did not recognize any impairment charges for goodwill. A 10 percent decrease in the estimated fair value of our reporting units would not have resulted in any goodwill impairment.

We utilize our weighted average cost of capital of approximately 9.50 percent as the basis to determine the discount rate to apply to the estimated future cash flows. In 2023, based upon our assessment of the risks impacting each of our businesses and the nature of the other indefinite-lived intangible assets (i.e., trade name), we applied a risk premium to increase the discount rate to a range of 12.25 percent to 14.50 percent for our other indefinite-lived intangible assets.

If the carrying amount of an other indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized to the extent that an other indefinite-lived intangible asset's recorded carrying value exceeds its fair value, not to exceed the carrying amount of the other indefinite-lived intangible asset.

In the fourth quarter of 2023, we recognized a $15 million non-cash impairment charge related to a registered trademark within our Decorative Architectural Products segment due to competitive market conditions and increased cost of capital in our lighting business. As of December 31, 2023, the impaired other indefinite-lived intangible asset had a remaining net carrying value of $28 million. A 10 percent decrease in the estimated fair value of our other indefinite-lived intangibles assets would have resulted in a $2 million impairment for another one of our other indefinite-lived intangible assets.

Refer to Note H for additional information.

Income Taxes

We record deferred taxes on the future tax consequences of differences between the financial statement carrying value of our assets and liabilities and their respective tax basis. The realization of deferred tax assets depends on sufficient sources of taxable income in future periods. Possible sources of taxable income include taxable income in carryback periods, the future reversal of existing taxable temporary differences recorded as a deferred tax liability, tax-planning strategies that generate future income or gains and projected future taxable income.

If, based upon all available evidence, both positive and negative, it is more likely than not such deferred tax assets will not be realized, a valuation allowance is recorded. Significant weight is given to evidence that is objectively verifiable such as cumulative losses in recent years, however, some evidence may be based on estimates and assumptions regarding potential sources of future taxable income. Changes in these estimates and assumptions may result in a change in judgment regarding the realizability of deferred tax assets.

We have loss carryforwards in certain state jurisdictions resulting from perpetual losses for which deferred tax assets were not recognized as the likelihood of utilization was remote. Due to a legal restructuring of certain U.S. businesses that will occur in early 2024, it is more likely than not a significant portion of these loss carryforwards will be utilized. As a result, we recognized a $29 million state income tax benefit, net of federal expense, in the fourth quarter of 2023.

Refer to Note R for additional information.

Recently Adopted and Issued Accounting Pronouncements

Refer to Note A to the consolidated financial statements for discussion of recently adopted and issued accounting pronouncements, which is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

We have considered the provisions of accounting guidance regarding disclosure of accounting policies for derivative financial instruments and disclosure of quantitative and qualitative information about market risk inherent in derivative financial instruments and other financial instruments.

We are exposed to the impact of changes in interest rates and foreign currency exchange rates, particularly changes between the U.S. dollar and the European euro, British pound sterling, Canadian dollar, Chinese renminbi, and Mexican peso, and to market price fluctuations related to our financial investments. We have insignificant involvement with derivative financial instruments and use such instruments to the extent necessary to manage exposure to foreign currency fluctuations.

At December 31, 2023, we performed sensitivity analyses to assess the potential loss in the fair values of market risk sensitive instruments resulting from a hypothetical change of 10 percent in foreign currency exchange rates, a 10 percent decline in the market value of our long-term investments, or a 100 basis point change in interest rates. Based upon the analyses performed, such changes would not be expected to materially affect our consolidated financial position, results of operations or cash flows.

Item 8.Financial Statements and Supplementary Data.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

We assessed the effectiveness of our internal control over financial reporting as of December 31, 2023 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control – Integrated Framework (2013). Based on this assessment, we have determined that our internal control over financial reporting was effective as of December 31, 2023.

(PCAOB ID ), an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2023, as stated in their report, which is presented herein. Their report expressed an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2023 and expressed an unqualified opinion on our 2023 consolidated financial statements. This report is included herein under the heading "Report of Independent Registered Public Accounting Firm."

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Masco Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Masco Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income (loss), of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 8. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements

in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessments

As described in Notes A and H to the consolidated financial statements, the Company’s consolidated goodwill balance was $604 million as of December 31, 2023. Management performs an annual impairment test of goodwill in the fourth quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Management compares the fair value of the reporting units to the carrying value of the reporting units for goodwill impairment testing. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized to the extent that a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit. Management determines fair value using a discounted cash flow method, which requires management to make significant estimates and assumptions related to forecasted sales and operating profits, long-term assumed annual growth rate, and the discount rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting units and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumption related to forecasted sales for certain reporting units.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the reporting units. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting units; (ii) evaluating the appropriateness of the discounted cash flow method; (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow method; and (iv) evaluating the reasonableness of the significant assumption used by management related to forecasted sales for certain reporting units. Evaluating management’s assumption related to forecasted sales for certain reporting units involved evaluating whether the assumption used was reasonable considering (i) the current and past performance of certain reporting units; (ii) the consistency with external market and industry data; and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit.

/s/ PricewaterhouseCoopers LLP

February 8, 2024

We have served as the Company’s auditor since 1959.

Financial Statements and Supplementary Data

MASCO CORPORATION and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS

December 31, 2023 and 2022

(In Millions, Except Share Data)


	2023	2022
ASSETS
Current assets:
Cash and cash investments	$	$

Receivables
Inventories
Prepaid expenses and other

Total current assets
Property and equipment, net
Goodwill
Other intangible assets, net
Operating lease right-of-use assets
Other assets

Total assets	$	$

LIABILITIES
Current liabilities:
Accounts payable	$	$
Notes payable
Accrued liabilities

Total current liabilities
Long-term debt
Noncurrent operating lease liabilities
Other liabilities

Total liabilities	$	$

Commitments and contingencies (Note T)
Redeemable noncontrolling interest

EQUITY
Masco Corporation's shareholders' equity:
Common shares, par value $ per share Authorized shares: ; Issued and outstanding: 2023 – ; 2022 –
Preferred shares authorized: ; Issued and outstanding: 2023 and 2022 –
Paid-in capital
Retained deficit	()	()
Accumulated other comprehensive income
Total Masco Corporation's shareholders' deficit	()	()
Noncontrolling interest
Total equity		()
Total liabilities and equity	$	$

See notes to consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2023, 2022 and 2021

(In Millions, Except Per Common Share Data)


	2023	2022	2021
Net sales	$	$	$
Cost of sales
Gross profit
Selling, general and administrative expenses

Impairment charges for goodwill and other intangible assets
Operating profit
Other income (expense), net:
Interest expense	()	()	()
Other, net	()		()
	()	()	()
Income before income taxes
Income tax expense
Net income


Less: Net income attributable to noncontrolling interest
Net income attributable to Masco Corporation	$	$	$

Income per common share attributable to Masco Corporation:
Basic:


Net income	$	$	$
Diluted:


Net income	$	$	$

See notes to consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Years Ended December 31, 2023, 2022 and 2021

(In Millions)


	2023	2022		2021
Net income	$	$		$
Less: Net income attributable to noncontrolling interest
Net income attributable to Masco Corporation	$	$		$
Other comprehensive income (loss), net of tax (Note O)
Cumulative translation adjustment	$	$	()	$	()
Interest rate swaps
Pension and other post-retirement benefits	()

Other comprehensive income (loss), net of tax		()
Less: Other comprehensive income (loss) attributable to noncontrolling interest:
Cumulative translation adjustment	$	$	()	$	()
Pension and other post-retirement benefits	()
				()
Other comprehensive income (loss) attributable to Masco Corporation	$	$	()	$
Total comprehensive income	$	$		$
Total comprehensive income attributable to noncontrolling interest
Total comprehensive income attributable to Masco Corporation	$	$		$

See notes to consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2023, 2022 and 2021

(In Millions)


	2023	2022	2021
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Net income	$	$	$
Depreciation and amortization
Fair value adjustment to contingent earnout obligation		()

Deferred income taxes	()	()	()
Employee withholding taxes paid on stock-based compensation
Loss (gain) on investments, net			()
Loss on disposition of businesses, net
Pension and other post-retirement benefits	()	()

Impairment of goodwill and other intangible assets
Stock-based compensation
Dividends paid-in-kind			()
Decrease (increase) in receivables		()	()
Decrease (increase) in inventories		()	()
(Decrease) increase in accounts payable and accrued liabilities, net	()	()
Debt extinguishment costs
Other, net			()
Net cash from operating activities

CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Retirement of notes			()
Purchase of Company common stock	()	()	()
Cash dividends paid	()	()	()
Dividends paid to noncontrolling interest	()	()	()
Issuance of notes, net of issuance costs

Proceeds from short-term borrowings
Payment of short-term borrowings	()
Proceeds from term loan
Payment of term loan	()	()
Debt extinguishment costs			()
Proceeds from the exercise of stock options
Employee withholding taxes paid on stock-based compensation	()	()	()

Payment of debt	()	()	()


Net cash for financing activities	()	()	()

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


Financial investments



Other, net	()	()	()
Net cash for investing activities	()	()	()

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

CASH AND CASH INVESTMENTS:
Increase (decrease) for the year		()	()
At January 1
At December 31	$	$	$

See notes to consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Years Ended December 31, 2023, 2022 and 2021

(In Millions, Except Per Common Share Data)

Total

Common

($ par value)

Paid-In
Capital

Retained Earnings (Deficit)

Accumulated Other Comprehensive (Loss) Income

Noncontrolling
Interest

Balance, January 1, 2021

()

Total comprehensive income

—

Shares issued

—

Shares retired:

Repurchased

()

—

Surrendered (non-cash)

()

—

()

—

Cash dividends declared

()

—

()

—

Dividends declared to noncontrolling interest

()

—

()

Redeemable noncontrolling interest - redemption adjustment

()

—

()

—

Stock-based compensation

—

Balance, December 31, 2021

()

Total comprehensive income (loss)

—

()

Shares issued

—

Shares retired:

Repurchased

()

—

Surrendered (non-cash)

()

—

()

—

Cash dividends declared

()

—

()

—

Dividends declared to noncontrolling interest

()

—

()

Redeemable noncontrolling interest - redemption adjustment

—

Stock-based compensation

—

Balance, December 31, 2022

()

Total comprehensive income

—

Shares issued

—

Shares retired:

Repurchased

()

—

Surrendered (non-cash)

()

—

()

—

Cash dividends declared

()

—

()

—

Dividends declared to noncontrolling interest

()

—

()

Stock-based compensation

—

Balance, December 31, 2023

()

See notes to consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to days.

We provide customer programs and incentive offerings, including special pricing and co-operative advertising arrangements, promotions and other volume-based incentives. These customer programs and incentives are considered variable consideration. We include in revenue variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the variable consideration is resolved. This determination is made based upon known customer program and incentive offerings at the time of sale and expected sales volume forecasts as it relates to our volume-based incentives. This determination is updated each reporting period.

Certain product sales include a right of return. We estimate future product returns at the time of sale based on historical experience and record a corresponding refund liability. We additionally record an asset, based on historical experience, for the amount of product we expect to return to inventory as a result of the return, which is recorded in prepaid expenses and other in the consolidated balance sheets.

We consider shipping and handling activities performed by us as activities to fulfill the sales of our products. Amounts billed for shipping and handling are included in net sales, while costs incurred for shipping and handling are included in cost of sales. We capitalize incremental costs of obtaining a contract and expense the costs on a straight-line basis over the contractual period if the cost is recoverable, the cost would not have been incurred without the contract and the term of the contract is greater than one year; otherwise, we expense the amounts as incurred. We do not adjust the promised amount of consideration for the effects of a financing component if the period between when we transfer our products or services and when our customers pay for our products or services is expected to be one year or less.

; related amortization expense is classified as a selling expense in the consolidated statements of operations.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

million and $ million at December 31, 2023 and 2022, respectively. Our receivables balances are generally due in less than one year.

to years, computer hardware and software, three to , and machinery and equipment, three to years. Depreciation expense was $ million in 2023, $ million in 2022 and $ million in 2021.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

percent to percent long-term assumed annual growth rate of cash flows for periods after the forecast. For 2023, we utilized a weighted average cost of capital of approximately percent as the basis to determine the discount rate to apply to the estimated future cash flows. Based upon our assessment of the risks impacting each of our businesses, we applied a risk premium to increase the discount rate to a range of percent to percent for our reporting units. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized to the extent that a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit.

We review our other indefinite-lived intangible assets for impairment annually in the fourth quarter, or as events occur or circumstances change that indicate the assets may be impaired without regard to the business unit. Potential impairment is identified by comparing the fair value of an other indefinite-lived intangible asset to its carrying value. We utilize a relief-from-royalty model to estimate the fair value of other indefinite-lived intangible assets. We consider the implications of both external (e.g., market growth, competition and local economic conditions) and internal (e.g., product sales and expected product growth) factors and their potential impact on cash flows related to the intangible asset in both the near- and long-term. We also consider the profitability of the business, among other factors, to determine the royalty rate for use in the impairment assessment. We utilize our weighted average cost of capital of approximately percent as the basis to determine the discount rate to apply to the estimated future cash flows. In 2023, based upon our assessment of the risks impacting each of our businesses and the nature of the other indefinite-lived intangible asset (i.e., trade name), we applied a risk premium to increase the discount rate to a range of percent to percent for our other indefinite-lived intangible assets.

While we believe that the estimates and assumptions underlying the valuation methodologies are reasonable, different estimates and assumptions could result in different outcomes.

Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives. We review our intangible assets with finite useful lives as events occur or circumstances change that would more likely than not reduce the fair value of the assets below its carrying amount. If the carrying amount of the assets is not recoverable from the undiscounted cash flows, then we would recognize an impairment loss for the difference between the carrying amount and the current fair value. We evaluate the remaining useful lives of amortizable intangible assets at each reporting period to determine whether events or circumstances warrant a revision to the remaining periods of amortization.

Refer to Note H for additional information regarding goodwill and other intangible assets.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

. period and redefined retirement-eligibility as age 65 or age 55 with at least years of continuous service. As such, compensation expense for equity awards granted in 2020 and thereafter is recognized ratably over the shorter of the vesting period, typically , or the length of time until the grantee becomes retirement eligible. For grants prior to 2020, expense was recognized ratably over the shorter of the vesting period of the long-term stock awards, stock options and phantom stock awards, typically , or the length of time until the grantee became retirement-eligible, generally at age 65. Expense for PRSUs is recognized ratably over the vesting period of the units.

Refer to Note L for additional information on stock-based compensation.

percent of Hansgrohe SE at both December 31, 2023 and 2022. The aggregate noncontrolling interest, net of dividends, at December 31, 2023 and 2022 has been recorded as a component of equity on our consolidated balance sheets.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

million ($ million), net of cash acquired. Sauna360 has a portfolio of products that includes traditional, infrared, and wood-burning saunas as well as steam showers. The business is included within the Plumbing Products segment. In connection with this acquisition, we recognized $ million of indefinite-lived intangible assets, which is related to trademarks, and $ 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 years. We also recognized $ million of goodwill, which is not tax deductible, and is related primarily to the expected synergies from combining the operations into our business. During the fourth quarter of 2023, we updated the allocation of the purchase price to certain identifiable assets and liabilities based on analysis of information as of the acquisition date that has been made available through December 31, 2023, which resulted in a $ million decrease to goodwill. The purchase price allocation for this acquisition is based on analysis of information as of the acquisition date that was available through December 31, 2023, and will be updated through the measurement period, if necessary.

In the third quarter of 2021, we acquired all of the share capital of Steamist, Inc. ("Steamist") for approximately $ 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 $ 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 years. We also recognized $ 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, our Hansgrohe SE subsidiary acquired a percent equity interest in Easy Sanitary Solutions B.V. ("ESS"), for approximately € million ($ million), including $ million of cash and $ million of debt that was paid out over 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 that 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 $ 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 years. We also recognized $ 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.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

percent equity interest in ESS was subject to a call and put option that was exercisable by Hansgrohe SE or the sellers, respectively, any time after December 31, 2023. The redemption value of the call and put option was the same and based on a floating EBITDA value. The call and put options were determined to be embedded within the redeemable noncontrolling interest and were recorded as temporary equity in the consolidated balance sheets. We elected to adjust the redeemable noncontrolling interest to its full redemption amount directly into retained deficit. On January 4, 2024, the sellers exercised their put option to sell the remaining percent equity interest in ESS for € million ($ million). This amount is based on information as of the date of this report and will be updated upon completion of the sale, if necessary.

million for the year ended December 31, 2021, which is included in other, net in our consolidated statement of operations. This loss resulted primarily from the recognition of $ million of currency translation losses that were previously included within accumulated other comprehensive income. During the first quarter of 2022, we recorded a $ million pre-tax post-closing gain related to the finalization of working capital items in other, net in our consolidated statement of operations. The sale of Hüppe did not represent a strategic shift that will have a major effect on our operations and financial results and therefore was not presented as discontinued operations. Prior to the divestiture, the results of the business were included in our Plumbing Products segment.

$ $ International, particularly Europe Total$ $ $

Year Ended December 31, 2022

Plumbing Products

Decorative Architectural Products

Total

Primary geographic areas:

North America

International, particularly Europe

Total

Year Ended December 31, 2021

Plumbing Products

Decorative Architectural Products

Total

Primary geographic areas:

North America

International, particularly Europe

Total

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

million, $ million, and $ million in 2023, 2022, and 2021, respectively, for variable consideration related to performance obligations settled in previous periods.

We record contract assets for items for which we have satisfied our performance obligation but our receipt of payment is contingent upon delivery or other circumstances other than the passage of time. Our contract assets are recorded in prepaid expenses and other in our consolidated balance sheets. Our contract assets generally become unconditional and are reclassified to receivables in the quarter subsequent to each balance sheet date. Our contract asset balance was $ million and $ million at December 31, 2023 and 2022, respectively.

We record contract liabilities primarily for deferred revenue. Our contract liabilities are recorded in accrued liabilities in our consolidated balance sheets. Our contract liabilities are generally recognized to net sales in the immediately subsequent reporting period. Our contract liability balance was $ million and $ million at December 31, 2023 and 2022, respectively.

$ Provision for expected credit losses during the period Write-offs charged against the allowance()()Recoveries of amounts previously written off ()$

(A) In the third quarter of 2023, we acquired Sauna360. Refer to Note B for additional information.

Other indefinite-lived intangible assets were $ million and $ million at December 31, 2023 and 2022, respectively, and principally included registered trademarks.

We completed our annual impairment testing of goodwill and other indefinite-lived intangible assets in the fourth quarters of 2023, 2022 and 2021. We recognized a $ million non-cash impairment charge within our Decorative Architectural Products segment to other indefinite-lived intangible assets in the fourth quarter of 2023 due to competitive market conditions and increased cost of capital in our lighting business. We recognized a $ million and $ million non-cash impairment charge within our Decorative Architectural Products segment to goodwill and other indefinite-lived intangible assets, respectively, in the fourth quarter of 2022 due to competitive market conditions, higher inflationary costs and increased cost of capital in our lighting business. We recognized a $ million non-cash goodwill impairment charge within our Decorative Architectural Products segment in the fourth quarter of 2021 due to competitive market conditions and higher inflationary costs in our lighting business. There was impairment of goodwill for any of our reporting units or of our other indefinite-lived intangible assets in any of these years, other than as disclosed above.

The carrying value of our definite-lived intangible assets was $ million (net of accumulated amortization of $ million) at December 31, 2023 and $ million (net of accumulated amortization of $ million) at December 31, 2022 and principally included customer relationships with a weighted average amortization period of years in 2023 and years in 2022. Amortization expense related to the definite-lived intangible assets was $ million, $ million and $ million in 2023, 2022 and 2021, respectively.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

million; 2025 – $ million; 2026 – $ million; 2027 – $ million and 2028 – $ million.

The increase in our indefinite-lived and definite-lived intangible assets is primarily a result of our acquisition of Sauna360.

million and $ million at December 31, 2023 and 2022, respectively. Of the amounts confirmed as valid under the program, the amounts owed to participating financial institutions were $ million and $ million at December 31, 2023 and 2022, respectively. All payments made under the program are recorded as a decrease in accounts payable and accrued liabilities, net, in our consolidated statements of cash flows.

$ Salaries, wages and commissions Employee retirement plans Deferred revenue Operating lease liabilities (Note F) Warranty (Note T) Income taxes payable Product returns Interest Property, payroll and other taxes Insurance reserves Other Total$ $

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

%, due November 15, 2027$ $

%, due February 15, 2028

%, due August 1, 2029

%, due October 1, 2030

%, due February 15, 2031

%, due August 15, 2032

%, due May 15, 2047

%, due February 15, 2051

364-day term loan, due April 26, 2023 Other Prepaid debt issuance costs()() Less: Current portion Total long-term debt$ $

All of the notes and debentures above are senior indebtedness and, other than the % Notes due 2029, are redeemable at our option.

At December 31, 2023, the debt maturities during each of the next five years were as follows: 2024 – $ million; 2025 – $ million; 2026 – $ million; 2027 – $ million and 2028 – $ million.

On April 26, 2022, we entered into a revolving credit agreement (the “2022 Credit Agreement”) with an aggregate commitment of $ 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 $ 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 $ million. We can also borrow swingline loans up to $ million and obtain letters of credit of up to $ million. Outstanding letters of credit under the 2022 Credit Agreement reduce our borrowing capacity and we had outstanding letters of credit under the 2022 Credit Agreement at December 31, 2023.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

The 2022 Credit Agreement contains financial covenants requiring us to maintain (A) a net leverage ratio, as adjusted for certain items, not exceeding to 1.0, and (B) an interest coverage ratio, as adjusted for certain items, not less than 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 borrowings were outstanding at December 31, 2023.

On May 9, 2023, our Hansgrohe SE subsidiary entered into € million ($ million) of short-term borrowings to support working capital needs. The loans contained no financial covenants and the entire balance was repaid as of December 31, 2023.

On April 26, 2022, we entered into a 364-day $ million senior unsecured delayed draw term loan (the "term loan") due April 26, 2023 with a syndicate of lenders. The term loan and commitments thereunder were subject to prepayment or termination at our option and the loans bore interest at SOFR plus a spread adjustment and %. The covenants, including the financial covenants, were substantially the same as those in the 2022 Credit Agreement. We repaid $ million during 2022 and the remaining $ million upon the maturity of the term loan on April 26, 2023.

On March 4, 2021, we issued $ million of % Notes due February 15, 2028, $ million of % Notes due February 15, 2031 and $ million of % Notes due February 15, 2051. We received proceeds of $ 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 $ million % Notes due March 15, 2022, $ million % Notes due April 1, 2025, and $ million % Notes due April 1, 2026. In connection with these early retirements, we incurred a loss on debt extinguishment of $ million for the year ended December 31, 2021, which was recorded as interest expense in the consolidated statement of operations.

Interest paid was $ million in both 2023 and 2022 and $ million in 2021. The 2021 amount excludes $ million of debt extinguishment costs related to the early retirement of debt, which was recorded as interest expense and paid in 2021.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

billion, compared with the aggregate carrying value of $ billion. The aggregate estimated market value of our short-term and long-term debt at December 31, 2022 was approximately $ billion, compared with the aggregate carrying value of $ billion.

$ $ Performance restricted stock units Stock options Long-term stock awards Phantom stock awards and stock appreciation rights Total$ $ $

At December 31, 2023, million shares of our common stock were available under the 2014 Plan for the granting of restricted stock units, performance restricted stock units, stock options and long-term stock awards.

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.

$ $ $ Granted Vested() () () Forfeited() () () Unvested restricted stock units at December 31 $ $ $

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

million, $ million, and $ million, respectively, of unrecognized compensation expense related to unvested restricted stock units; such units had a weighted average remaining vesting period of at December 31, 2023, 2022, and 2021.

The total market value (at the vesting date) of restricted stock units which vested was $ million, $ million and $ million during 2023, 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 over a three-year period of specified return on invested capital performance goals, an earning per share metric, and, beginning with the 2023 grant, a relative total shareholder return metric that have been established by our Compensation Committee for the performance period. To receive the award, the recipient must be employed through the share award date. Performance restricted stock units are granted at a target number; based on our performance, the number of performance restricted stock units that vest can be adjusted downward to and upward to a maximum of percent of the target number.

During 2023, we granted approximately performance restricted stock units with a grant date fair value of approximately $ per share, approximately performance restricted stock units were issued and no performance restricted stock units were forfeited. At December 31, 2023, there were approximately shares vested but unissued. During 2022, we granted approximately performance restricted stock units with a grant date fair value of approximately $ per share, approximately performance restricted stock units were issued and no performance restricted stock units were forfeited. At December 31, 2022, there were approximately shares vested but unissued. During 2021, we granted approximately performance restricted stock units with a grant date fair value of approximately $ per share, approximately performance restricted stock units were issued and performance restricted stock units were forfeited. At December 31, 2021, there were approximately shares vested but unissued.

Stock Options. Stock options are granted to certain key employees. The exercise price equals the market price of our common stock at the grant date and the stock options expire no later than years after the grant date.

$ $ $ Granted Exercised() () () Forfeited() () Outstanding stock options at December 31 $ $ $

The 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. The aggregate intrinsic value for options exercised during 2023, 2022 and 2021 was $ million, $ million and $ million, respectively. The weighted-average remaining term for options outstanding at December 31, 2023, 2022 and 2021 was , and , respectively.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Weighted average exercise price$$$$$$Aggregate intrinsic value$ million$ million$ million$ million$ million$ millionWeighted-average remaining term years years years years years years

At December 31, 2023, 2022 and 2021, there was $ million, $ million and $ 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 , and at December 31, 2023, 2022 and 2021, respectively.

$ $ Risk-free interest rate % % %Dividend yield % % %Volatility factor % % %Expected option life years years years

- $$$

$$$

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$ $ $ Vested() () () Forfeited() () () Unvested stock award shares at December 31 $ $ $

At December 31, 2023, the total unrecognized compensation expense related to unvested stock awards was insignificant and the unvested stock awards will vest in 2024. At December 31, 2022 and 2021, there was $ million and $ million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period at December 31, 2022 and 2021 of and , respectively.

The total market value (at the vesting date) of stock award shares which vested was $ million, $ million and $ million during 2023, 2022 and 2021, respectively.

Phantom Stock Awards and Stock Appreciation Rights. Certain non-U.S. employees are granted phantom stock awards and SARs.

We recognized expense of $ million, $ million and $ million in 2023, 2022 and 2021, respectively, related to phantom stock awards. In 2023, 2022 and 2021, we granted approximately , , and shares, respectively, of phantom stock awards with an aggregate fair value of $ million, $ million and $ million in 2023, 2022 and 2021, respectively, and paid cash of $ million in 2023, $ million in 2022 and $ million in 2021 to settle phantom stock awards.

$ Unrecognized compensation cost$ $ Equivalent common shares

shares of SARs in 2023, and the associated expense recognized in 2023 was insignificant. SARs were granted in 2022 or 2021, and no expense was recognized in either year.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$ $ Defined-benefit pension plans $ $ $

As of January 1, 2010, substantially all our domestic and foreign qualified and domestic non-qualified defined-benefit pension plans were frozen to future benefit accruals. In December 2019, our Board of Directors approved a resolution to terminate our qualified domestic defined-benefit pension plans. In the second quarter of 2021, we settled these plans and made a final contribution of $ million. The settlement loss included $ million of pre-tax actuarial losses that were reclassified out of accumulated other comprehensive income for the year ended December 31, 2021. In the fourth quarter of 2021, we recognized a $ million reduction in pension expense related to the reversion of excess pension plan assets for the settlement of such plans.

$ $ $ Service cost Interest cost Actuarial loss (gain), net ()()Foreign currency exchange () Benefit payments()()()()Projected benefit obligation at December 31$ $ $ $ Changes in fair value of plan assets: Fair value of plan assets at January 1$ $ $ $ Actual return on plan assets () Foreign currency exchange () Company contributions Benefit payments()()()()Fair value of plan assets at December 31$ $ $ $ Funded status at December 31$()$()$()$()

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$ $ $ Accrued liabilities () ()Other liabilities()()()()Total net liability$()$()$()$() $ $ $

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$ Purchases Fair value, December 31$ $

Assumptions.

% % %Expected return on plan assets % % %Rate of compensation increase % % %Discount rate for net periodic pension cost % % %

The discount rate for obligations for 2023, 2022 and 2021 is based primarily upon the expected duration of each defined-benefit pension plan's liabilities matched to the December 31, 2023, 2022 and 2021 Willis Towers Watson Rate Link Curve. At December 31, 2023, such rates for our defined-benefit pension plans ranged from percent to percent, with the most significant portion of the liabilities having a discount rate for obligations of percent or higher. At December 31, 2022, such rates for our defined-benefit pension plans ranged from percent to percent, with the most significant portion of the liabilities having a discount rate for obligations of percent or higher. At December 31, 2021, such rates for our defined‑benefit pension plans ranged from percent to percent, with the most significant portion of the liabilities having a discount rate for obligations of percent or higher. The decrease in the weighted average discount rate from 2022 to 2023 is principally due to lower long-term interest rates in the bond markets. The increase in the weighted average discount rate from 2021 to 2022 is principally due to higher long-term interest rates in the bond markets.

Our weighted average projected long-term rate of return on plan assets for the foreign qualified defined-benefit pension plans was percent, percent and percent for 2023, 2022 and 2021, respectively.

The asset allocation of the investment portfolio was developed with the objective of achieving our expected rate of return and reducing volatility of asset returns, and considered the freezing of future benefits. The fixed-income portfolio is invested in corporate bonds, bond index funds and U.S. Treasury securities. Although we would expect alternative investments to yield a higher rate of return than the targeted overall long-term return, these investments are subject to greater volatility and would be less liquid than financial instruments that trade on public markets.

The fair value of our plan assets is subject to risk including significant concentrations of risk in our plan assets related to equity, interest rate and operating risk. In order to ensure plan assets are sufficient to pay benefits, a portion of our foreign qualified plans' assets are allocated to equity investments and real assets that are expected, over time, to earn higher returns with more volatility than fixed-income investments which more closely match pension liabilities. Within equity, risk is mitigated by targeting a portfolio that is broadly diversified by geography, market capitalization, manager mandate size, investment style and process.

In order to minimize asset volatility relative to the liabilities, a significant portion of plan assets are allocated to fixed-income investments that are exposed to interest rate risk. Rate increases generally will result in a decline in fixed-income assets, while reducing the present value of the liabilities. Conversely, rate decreases will increase fixed income assets, partially offsetting the related increase in the liabilities.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

million at both December 31, 2023 and 2022.

Cash Flows. At December 31, 2023, we expect to contribute approximately $ million in 2024 to our non-qualified (domestic) defined-benefit pension plans.

$ 2025 2026 2027 2028 2029 - 2033

billion of shares of our common stock, exclusive of excise tax, in open-market transactions or otherwise. During 2023, we repurchased and retired million shares of our common stock (including million shares to offset the dilutive impact of restricted stock units granted in 2023), for $ million, inclusive of excise tax of $ million. At December 31, 2023, we had $ billion remaining under the 2022 authorization.

During 2022, we repurchased and retired million shares of our common stock (including million shares to offset the dilutive impact of restricted stock units granted in 2022), for cash aggregating $ million.

During 2021, we repurchased and retired million shares of our common stock (including million shares to offset the dilutive impact of restricted stock units granted in 2021) for cash aggregating $ million.

On the basis of amounts paid (declared), cash dividends per common share were $ ($) in 2023, $ ($) in 2022 and $ ($) in 2021.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$ Unrecognized net loss and prior service cost, net()()Accumulated other comprehensive income$ $

million and $ million at December 31, 2023 and 2022, respectively. The unrecognized net loss and prior service cost, net, is reported net of income tax benefit of $ million and $ million at December 31, 2023 and 2022, respectively.

$ $ Other, netSettlement loss Other, netTax expense (benefit) ()()Net of tax$ $ $

Interest rate swaps (B):

$ $ $ Interest expenseTax expense Net of tax$ $ $

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

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

million of currency translation losses from accumulated other comprehensive income to the consolidated statement of operations in conjunction with the divestiture of Hüppe in the second quarter of 2021.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$ $ $ $ $ $ $ $ Decorative Architectural Products Total$ $ $ $ $ $ $ $ $ Our operations by geographic area were:North America$ $ $ $ $ $ $ $ $ International, particularly Europe Total, as above$ $ $

General corporate expense, net (E)

()()()Operating profit Other income (expense), net()()()Income before income taxes$ $ $ Corporate assets Total assets $ $ $


	Year Ended December 31,
	Property Additions (G)			Depreciation and Amortization
	2023	2022	2021	2023	2022	2021
Our operations by segment were:
Plumbing Products	$	$	$	$	$	$
Decorative Architectural Products

Unallocated amounts, principally related to corporate assets

(A)In the second quarter of 2021, we settled our qualified domestic defined-benefit pension plans and recognized $ million of additional pension expense. In the fourth quarter of 2021, we recognized a $ million reduction in pension expense related to the reversion of excess pension plan assets for the settlement of such plans. Refer to Note M for additional information.

(B)We recognized $ million of income in 2022 and $ million of expense in 2021 from the revaluation of contingent consideration related to our acquisition of Kraus USA Inc. in the fourth quarter of 2020.

million for the redemption of the ACProducts Holding, Inc. preferred stock, including all accrued but unpaid dividends, and recognized a gain of $ million.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$ $ Foreign $ $ $ Income tax expense:Currently payable:U.S. Federal$ $ $ State and local Foreign Deferred:U.S. Federal ()()State and local() ()Foreign ()()$ $ $ Deferred tax assets at December 31:Receivables$ $ Inventories Other assets, including stock-based compensation Accrued liabilities Noncurrent operating lease liabilities Other long-term liabilities Capitalized research expenditures Net operating loss carryforward Tax credit carryforward Valuation allowance()() Deferred tax liabilities at December 31:Property and equipment Operating lease right-of-use assets Intangibles Investment in foreign subsidiaries Other Net deferred tax asset at December 31$ $

The net deferred tax asset consisted of net deferred tax assets (included in other assets) of $ million and $ million, and net deferred tax liabilities (included in other liabilities) of $ million and $ million, at December 31, 2023 and 2022, respectively.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

million state income tax benefit, net of federal expense, in the fourth quarter of 2023.

We continue to maintain a valuation allowance of $ million and $ million on certain state and foreign deferred tax assets as of December 31, 2023 and 2022, respectively, due primarily to cumulative loss positions in those jurisdictions.

Our capital allocation strategy includes reinvesting in our business, maintaining an investment grade credit rating, maintaining a relevant dividend and deploying excess free cash flow to share repurchases or acquisitions. In order to provide greater flexibility in the execution of our capital allocation strategy, we may repatriate earnings from certain foreign subsidiaries. Our deferred tax balance on investment in foreign subsidiaries reflects the impact of all taxable temporary differences, including those related to substantially all undistributed foreign earnings, except those that are legally restricted, and consists primarily of foreign withholding taxes.

Of the $ million and $ million deferred tax assets related to the net operating loss and tax credit carryforwards at December 31, 2023 and 2022, respectively, $ million and $ million, respectively, will expire within approximately years and $ million and $ million, respectively, have no expiration.

% % %State and local taxes, net of U.S. Federal tax benefit Higher taxes on foreign earnings Valuation allowances() Stock-based compensation() ()Business divestiture with no tax impact Disproportionate tax effects Other, net()() Effective tax rate % % %

We incurred a $ million state income tax expense in 2021 resulting from the loss on the termination of our qualified domestic defined-benefit pension plans providing no tax benefit in certain state jurisdictions.

The loss from the divestiture of Hüppe provided no tax benefit in certain foreign jurisdictions resulting in a $ million foreign income tax expense in 2021.

We recorded a $ million income tax expense due to the elimination of disproportionate tax effects from accumulated other comprehensive income relating to our interest rate swap following the retirement of the related debt and the termination of our qualified domestic defined-benefit pension plans in 2021.

Income taxes paid were $ million, $ million and $ million in 2023, 2022 and 2021, respectively.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$ Current year tax positions:Additions Reductions()()Prior year tax positions:Additions Reductions ()Lapse of applicable statutes of limitation()()Settlement with tax authorities() Balance at December 31$ $ Liability for interest and penalties Balance at December 31, including interest and penalties$ $

If recognized, $ million of the liability for uncertain tax positions at both December 31, 2023 and 2022, net of any U.S. Federal tax benefit, would impact our effective tax rate.

Interest and penalties recognized in income tax expense were insignificant in years ended December 31, 2023, 2022 and 2021.

Of the $ million and $ million total liability for uncertain tax positions (including related interest and penalties) at December 31, 2023 and 2022, respectively, $ million and $ million are recorded in other liabilities, respectively, and $ million and $ million are recorded as a net offset to other assets, respectively.

We file income tax returns in the U.S. Federal jurisdiction, and various local, state and foreign jurisdictions. We continue to participate in the Compliance Assurance Process ("CAP"). CAP is a real-time audit of the U.S. Federal income tax return that allows the Internal Revenue Service ("IRS"), working in conjunction with us, to determine tax return compliance with the U.S. Federal tax law prior to filing the return. This program provides us with greater certainty about our tax liability for a given year within months, rather than years, of filing our annual tax return and greatly reduces the need for recording a liability for U.S. Federal uncertain tax positions. The IRS has completed their examination of our consolidated U.S. Federal tax returns through 2022. With few exceptions, we are no longer subject to state or foreign income tax examinations on filed returns for years before 2018.

As a result of tax audit closings, settlements and the expiration of applicable statutes of limitation in various jurisdictions within the next 12 months, we anticipate that it is reasonably possible the liability for uncertain tax positions could be reduced by approximately $ million.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$ $ Less: Allocation to redeemable noncontrolling interest () Less: Allocation to unvested restricted stock awards Net income attributable to common shareholders$ $ $ Denominator:Basic common shares (based upon weighted average) Add: Stock option dilution Diluted common shares

We follow accounting guidance regarding determining whether instruments granted in share-based payment transactions are participating securities. This accounting guidance clarifies that share-based payment awards that entitle their holders to receive non-forfeitable dividends prior to vesting should be considered participating securities. The dividends associated with the unvested restricted stock units are forfeitable, and consequently, the restricted stock units are not considered a participating security and are not accounted for under the two-class method. We have also granted restricted stock awards that contain non-forfeitable rights to dividends on unvested shares; such unvested restricted stock awards are considered participating securities. As participating securities, the unvested shares are required to be included in the calculation of our basic income per common share, using the two-class method. The two-class method of computing income per common share is an allocation method that calculates income per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. For the years ended December 31, 2023, 2022 and 2021, we allocated dividends and undistributed earnings to the participating securities.

Number of restricted stock units Number of performance restricted stock units

Common shares outstanding included on our balance sheet and for the calculation of income per common share do not include unvested stock awards ( and common shares at December 31, 2023 and 2022, respectively). Shares outstanding for legal requirements included all common shares that have voting rights (including unvested stock awards).

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)

$ Accruals for warranties issued during the year Accruals related to pre-existing warranties ()Settlements made (in cash or kind) during the year()()Other, net (including currency translation and acquisitions) ()Balance at December 31$ $

Other Matters. We enter into contracts, which include reasonable and customary indemnifications that are standard for the industries in which we operate. Such indemnifications include claims made against builders by homeowners for issues relating to our products and workmanship. In conjunction with divestitures and other transactions, we occasionally provide reasonable and customary indemnifications. We have not paid a material amount related to these indemnifications, and we evaluate the probability that amounts may be incurred and record an estimated liability when it is probable and reasonably estimable.

million for the year ended December 31, 2023.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

a.Evaluation of Disclosure Controls and Procedures.

The Company's Principal Executive Officer and Principal Financial Officer have concluded, based on an evaluation of the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15 that, as of December 31, 2023, the Company's disclosure controls and procedures were effective.

b.Management's Report on Internal Control over Financial Reporting.

Management's report on the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) is included in this Report under Item 8. Financial Statements and Supplementary Data, under the heading, "Management's Report on Internal Control over Financial Reporting" and is incorporated herein by reference. The report of our independent registered public accounting firm is also included under Item 8, under the heading, "Report of Independent Registered Public Accounting Firm" and is incorporated herein by reference.

c.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 December 31, 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.

Item 9B. Other Information.

Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements

, , our , a new 10b5-1 Trading Plan that is intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act (the "Plan"). Trades under the Plan are permitted to begin on March 6, 2024 and the Plan's maximum duration is until October 31, 2024. The Plan is intended to allow for: (i) the sale of shares, (ii) the exercise and sale of up to stock options, and (iii) the sale of shares acquired by Mr. Allman upon the vesting of performance restricted stock units ("PRSUs") granted to him under our 2021-2023 Long Term Incentive Program (the number of PRSUs that vest is subject to certain performance conditions under the Long Term Incentive Program, with a maximum of PRSUs).

During the three months ended December 31, 2023, none of our other officers or directors or any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Our Code of Ethics applies to all employees, officers and directors including our Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer, and is posted on our website at www.masco.com. Amendments to or waivers of our Code of Ethics for directors and executive officers, if any, will be posted on our website.

Other information required by this Item will be contained in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, to be filed before April 30, 2024, and such information is incorporated herein by reference.

Item 11. Executive Compensation.

Information required by this Item will be contained in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, to be filed before April 30, 2024, and such information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Equity Compensation Plan Information

We grant equity under our 2014 Long Term Stock Incentive Plan (the "2014 Plan"). The following table sets forth information as of December 31, 2023 concerning the 2014 Plan, which was approved by our stockholders. We do not have any equity compensation plans that have not been approved by our stockholders.


Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column)
Equity compensation plans approved by stockholders	2,253,588	$	45.43	11,292,779

The remaining information required by this Item will be contained in our definitive Proxy Statement for our 2024 Annual Meeting of Stockholders, to be filed before April 30, 2024, and such information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accountant Fees and Services.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

a. Listing of Documents.

(1)Financial Statements. Our consolidated financial statements included in Item 8 hereof, as required at December 31, 2023 and 2022, and for the years ended December 31, 2023, 2022 and 2021, consist of the following:


Consolidated Balance Sheets			36
Consolidated Statements of Operations			37
Consolidated Statements of Comprehensive Income (Loss)			38
Consolidated Statements of Cash Flows			39
Consolidated Statements of Shareholders' Equity			40
Notes to Consolidated Financial Statements			41

(2)Financial Statement Schedule.

a. Our Financial Statement Schedule appended hereto, as required for the years ended December 31, 2023, 2022 and 2021, consists of the following:


II. Valuation and Qualifying Accounts			83

(3)Exhibits.

Exhibit
No.

Incorporated By Reference

Filed
Herewith

Exhibit Description

Form

Exhibit

Filing Date

3.a

Restated Certificate of Incorporation of Masco Corporation.

2015 10-K

3.i

02/12/2016

3.b

Bylaws of Masco Corporation, as Amended and Restated on February 5, 2021.

2020 10-K

3.b

02/09/2021

4.a

Indenture dated as of December 1, 1982 between Masco Corporation and The Bank of New York Mellon Trust Company, N.A., as successor trustee under agreement originally with Morgan Guaranty Trust Company of New York, as Trustee, and Supplemental Indenture thereto dated as of July 26, 1994; and Directors' resolutions establishing Masco Corporation's:

2016 10-K

4.a

02/09/2017

4.a.i

7-3/4% Debentures Due August 1, 2029.

2014 10-K

4.a.i(ii)

02/13/2015

4.b

Indenture dated as of February 12, 2001 between Masco Corporation and The Bank of New York Mellon Trust Company, N.A., as successor trustee under agreement originally with Bank One Trust Company, National Association, as Trustee, and Supplemental Indenture thereto dated as of November 30, 2006; and Directors' Resolutions establishing Masco Corporation's:

2016 10-K

4.b

02/09/2017

4.b.i

6-1/2% Notes Due August 15, 2032;

2017 10-K

4.b.i

02/08/2018

4.b.ii

3.500% Notes Due November 15, 2027; and

8-K

4.1

06/15/2017

4.b.iii

4.500% Notes Due May 15, 2047.

8-K

4.2

06/15/2017

4.b.iv

Second Supplemental Indenture, dated as of September 18, 2020, between Masco Corporation and The Bank of New York Mellon Trust Company, N.A., as successor trustee.

8-K

4.3

09/18/2020

Exhibit
No.

Incorporated By Reference

Filed
Herewith

Exhibit Description

Form

Exhibit

Filing Date

4.b.v

4.500% Notes Due May 15, 2047

8-K

4.2

09/18/2020

4.b.vi

2.000% Notes Due October 1, 2030

8-K

4.1

09/18/2020

4.b.vii

1.500% Notes Due February 15, 2028

8-K

4.1

03/04/2021

4.b.viii

2.000% Notes Due February 15, 2031

8-K

4.2

03/04/2021

4.b.ix

3.125% Notes Due February 15, 2051

8-K

4.3

03/04/2021

Note 2:

Other instruments, notes or extracts from agreements defining the rights of holders of long-term debt of Masco Corporation or its subsidiaries have not been filed since (i) in each case the total amount of long-term debt permitted thereunder does not exceed 10 percent of Masco Corporation's consolidated assets, and (ii) such instruments, notes and extracts will be furnished by Masco Corporation to the Securities and Exchange Commission upon request.

4.c

Description of securities.

10.a

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.

10-Q

10a

04/27/2022

Note 3:

Exhibits 10.b through 10.m constitute the management contracts and executive compensatory plans or arrangements in which certain of the directors and executive officers of the Company participate.

10.b

Masco Corporation 2014 Long Term Stock Incentive Plan (Amended and Restated May 9, 2016):

10-Q

10.a

07/26/2016

10.b.i

Form of Restricted Stock Award Agreements

2018 10-K

10.c.ii

02/07/2019

Form of Restricted Stock Unit Award Agreements:

10.b.ii

for awards between December 17, 2019 and February 2, 2022

2019 10-K

10.c.iii

02/11/2020

10.b.iii

for awards on or after February 3, 2022

2021 10-K

10.c.iv

02/08/2022

Form of Stock Option Grant Agreements:

10.b.iv

for grants prior to July 1, 2018

8-K

10.d

05/06/2014

10.b.v

for grants between July 1, 2018 and December 17, 2019

2018 10-K

10.c.iv

02/07/2019

10.b.vi

for grants between December 17, 2019 and February 3, 2022

2019 10-K

10.c.vi

02/11/2020

10.b.vii

for grants on or after February 3, 2022

2021 10-K

10.c.viii

02/08/2022

10.b.viii

Form of Long Term Incentive Program Award Agreement for awards prior to December 17, 2019.

2018 10-K

10.c.v

02/07/2019

10.b.ix

Long-Term Incentive Program under Masco Corporation's 2014 Long Term Stock Incentive Plan (December 17, 2019) and form of Performance Restricted Stock Unit Award Agreement thereunder.

10-Q

10.a

04/29/2020

10.b.x

Long-Term Incentive Program under Masco Corporation's 2014 Long Term Stock Incentive Plan (Amended and Restated February 3, 2022) and form of Performance Restricted Stock Unit Award Agreement thereunder.

2021 10-K

10.c.xi

02/08/2022

Exhibit
No.

Incorporated By Reference

Filed
Herewith

Exhibit Description

Form

Exhibit

Filing Date

10.b .x i

Non-Employee Directors Equity Program under Masco Corporation's 2014 Long Term Stock Incentive Plan (Amended and Restated May 9, 2016).

10-Q

10.b

07/26/2016

10.b.xii

Form of Restricted Stock Award Agreement for Non-Employee Directors

2018 10-K

10.c.viii

02/07/2019

10.b.xiii

Non-Employee Directors Equity Program under Masco Corporation's 2014 Long Term Stock Incentive Plan (Amended and Restated February 7, 2020).

2019 10-K

10.c.xiii

02/11/2020

Form of Restricted Stock Unit Award Agreement for Non-Employee Directors:

10.b .i x

for awards between February 7, 2020 and February 3, 2022

2019 10-K

10.c.xiv

02/11/2020

10.b.x

for awards on or after February 4, 2022

2021 10-K

10.c.xvii

02/08/2022

10.c

Form of Masco Corporation Supplemental Executive Retirement and Disability Plan and amendments thereto (includes amendment freezing benefit accruals) for John G. Sznewajs.

2015 10-K

10.d.i(ii)

02/12/2016

10.d

Other compensatory arrangements for executive officers.

2016 10-K

10.f

02/09/2017

10.e

Compensation of Non-Employee Directors.

10.f

Masco Corporation Retirement Benefit Restoration Plan effective January 1, 1995 (as amended and restated December 22, 2010), and amendments thereto effective February 6, 2012 and January 1, 2014.

2016 10-K

10.i

02/09/2017

10.g

Employment Offer Letter dated May 3, 2021 between Richard Marshall and Masco Corporation

10-Q

07/29/2021

10.h

Employment Offer Letter dated January 6, 2022 between Robin Zondervan and Masco Corporation

8-K

02/07/2022

10.i

Employment Offer Letter dated August 28, 2023 between Richard Westenberg and Masco Corporation

10-Q

10.a

10/26/2023

10.j

Agreement dated May 31, 2023 between Masco Corporation and John G. Sznewajs

10-Q

10.b

07/27/2023

10.k

Amended and Restated Severance and Release Agreement dated December 21, 2023 between Masco Corporation and John G. Sznewajs

10.l

Amended and Restated Severance and Release Agreement dated December 30, 2023 between Masco Corporation and Richard A. O'Reagan

10.m

Amended and Restated Transition and Severance Agreement and Release of All Liability dated October 25, 2023 between Masco Corporation and David A. Chaika.

10-Q

10.b

10/26/2023

Exhibit
No.

Incorporated By Reference

Filed
Herewith

Exhibit Description

Form

Exhibit

Filing Date

List of Subsidiaries.

Consent of Independent Registered Public Accounting Firm relating to Masco Corporation's Consolidated Financial Statements and Financial Statement Schedule.

31.a

Certification by Chief Executive Officer required by Rule 13a-14(a)/15d-14(a).

31.b

Certification by Chief Financial Officer required by Rule 13a-14(a)/15d-14(a).

Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Policy Relating to Recovery of Erroneously Awarded Compensation

101

The following financial information from Masco Corporation's Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity, and (vi) Notes to Consolidated Financial Statements.

104

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

The Company will furnish to its stockholders a copy of any of the above exhibits not included herein upon the written request of such stockholder and the payment to the Company of the reasonable expenses incurred by the Company in furnishing such copy or copies.

Item 16. Form 10-K Summary.

The optional summary in Item 16 has not been included in this Form 10-K.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


			MASCO CORPORATION
			By:			/s/ Richard J. Westenberg
						Richard J. Westenberg Vice President, Chief Financial Officer

February 8, 2024

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

Principal Executive Officer:

/s/ Keith J. Allman

President and Chief Executive
Officer and Director

Keith J. Allman

Principal Financial Officer:

/s/ Richard J. Westenberg

Vice President, Chief
Financial Officer

Richard J. Westenberg

Principal Accounting Officer:

/s/ Robin L. Zondervan

Vice President, Controller
and Chief Accounting Officer

Robin L. Zondervan

/s/ Lisa A. Payne

Chair of the Board

Lisa A. Payne

/s/ Mark R. Alexander

Director

Mark R. Alexander

/s/ Aine L. Denari

Director

Aine L. Denari

/s/ Marie A. Ffolkes

Director

Marie A. Ffolkes

/s/ Jonathon J. Nudi

Director

Jonathon J. Nudi

/s/ Christopher A. O'Herlihy

Director

Christopher A. O'Herlihy

/s/ Donald R. Parfet

Director

Donald R. Parfet

/s/ John C. Plant

Director

John C. Plant

/s/ Sandeep Reddy

Director

Sandeep Reddy

/s/ Charles K. Stevens, III

Director

Charles K. Stevens, III

February 8, 2024

MASCO CORPORATION

$ $ $()(a)$ 2022$ $ $ $()(a)$ 2021$ $ $ $()(a) (b)$ Valuation allowance on deferred tax assets: 2023$ $ $

$()

(e)

$ 2022$ $ $ $()

(f)

$ 2021$ $ $ $()

(b)

______________________________

(a)Deductions, representing uncollectible accounts written off, less recoveries of accounts written off in prior years.

(b)As a result of the Hüppe divestiture in May 2021, $ million was removed from allowance for credit losses and $ million was removed from valuation allowance on deferred tax assets.

(c)As a result of the acquisition of Sauna360 Group Oy in the third quarter of 2023, $ million was added to valuation allowance on deferred tax assets.

(d)$ million was added to valuation allowance resulting from the establishment of certain state deferred tax assets for which the likelihood of utilization is no longer considered remote.

(e)Due to a legal restructuring of certain U.S. businesses that will occur in early 2024, a $ million reduction in valuation allowance was recorded as a $ million state income tax benefit, net of federal expense.

(f)Net reduction to valuation allowance recorded as an income tax benefit.

MASCO CORP /DE/ - Annual Report: 2023 (Form 10-K)

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