MASCO CORP /DE/ - Quarter Report: 2024 September (Form 10-Q)

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 condensed consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION

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

For the Three and Nine Months Ended September 30, 2024 and 2023

(In Millions)


	Three Months Ended September 30,			Nine Months Ended September 30,
	2024	2023		2024		2023
Net income	$	$		$		$
Less: Net income attributable to noncontrolling interest
Net income attributable to Masco Corporation	$	$		$		$
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	$	$	()	$	()	$	()
Pension and other post-retirement benefits
Proceeds from short-term borrowings
Payment of short-term borrowings		()
Payment of term loan		()
Proceeds from the exercise of stock options
Employee withholding taxes paid on stock-based compensation	()	()
Decrease in debt, net	()	()
Net cash for financing activities	()	()

CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures	()	()
Acquisition of business, net of cash acquired	()	()
Proceeds from disposition of business, net of cash disposed
Other, net	()	()
Net cash from (for) investing activities		()

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

CASH AND CASH INVESTMENTS:
Increase for the period
At January 1
At September 30	$	$

See notes to condensed consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

For the Three and Nine Months Ended September 30, 2024 and 2023

(In Millions, Except Per Common Share Data)

Total

Common

($ par value)

Paid-In
Capital

Retained (Deficit) Earnings

Accumulated Other Comprehensive Income (Loss)

Noncontrolling
Interest

Balance, January 1, 2023

()

Total comprehensive income

—

Shares issued

—

Shares retired:

Repurchased

()

—

Surrendered (non-cash)

()

—

()

—

Cash dividends declared

()

—

()

—

Stock-based compensation

—

Balance, March 31, 2023

()

Total comprehensive income (loss)

—

()

Shares issued

—

Shares retired:

Repurchased

()

—

Cash dividends declared

()

—

()

—

Dividends declared to noncontrolling interest

()

—

()

Stock-based compensation

—

Balance, June 30, 2023

()

Total comprehensive income (loss)

—

()

Shares issued

—

Shares retired:

Repurchased

()

—

Cash dividends declared

()

—

()

—

Stock-based compensation

—

Balance, September 30, 2023

()

MASCO CORPORATION

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

For the Three and Nine Months Ended September 30, 2024 and 2023

(In Millions, Except Per Common Share Data)

Total

Common

($ par value)

Paid-In
Capital

Retained (Deficit) Earnings

Accumulated Other Comprehensive Income (Loss)

Noncontrolling
Interest

Balance, January 1, 2024

()

Total comprehensive income (loss)

—

()

Shares issued

—

Shares retired:

Repurchased

()

—

Surrendered (non-cash)

()

—

()

—

Cash dividends declared

()

—

()

—

Redemption of redeemable noncontrolling interest

—

Stock-based compensation

—

Balance, March 31, 2024

()

Total comprehensive income (loss)

—

()

Shares retired:

Repurchased

()

—

Cash dividends declared

()

—

()

—

Dividends declared to noncontrolling interest

()

—

()

Stock-based compensation

—

Balance, June 30, 2024

()

Total comprehensive income

—

Shares retired:

Repurchased

()

—

Cash dividends declared

()

—

()

—

Stock-based compensation

—

Balance, September 30, 2024

()

See notes to condensed consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (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 and third quarter of 2024, we updated the allocation of the purchase price to certain identifiable assets and liabilities based on analysis of information as of the acquisition date, which resulted in a $ million decrease and a $ million increase to goodwill, respectively.

In the first quarter of 2021, our Hansgrohe SE subsidiary acquired a percent equity interest in Easy Sanitary Solutions B.V. ("ESS"). The remaining 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 condensed consolidated balance sheets. We elected to adjust the redeemable noncontrolling interest to its full redemption amount directly into retained deficit.

In the first quarter of 2024, the sellers exercised their put option to sell the remaining percent equity interest in ESS for € million ($ million). The transaction was accounted for as an equity purchase transaction.

million, net of cash disposed, and subject to final closing adjustments. In connection with the divestiture, we recognized a preliminary loss of $ million for the three and nine months ended September 30, 2024, which is included in other, net in our condensed consolidated statements of operations. The sale of Kichler 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 Decorative Architectural Products segment.

MASCO CORPORATION

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

$ $ International Total$ $ $ Nine Months Ended September 30, 2024Plumbing ProductsDecorative Architectural ProductsTotalPrimary geographic areas:North America$ $ $ International Total$ $ $

Three Months Ended September 30, 2023

Plumbing Products

Decorative Architectural Products

Total

Primary geographic areas:

North America

International

Total

Nine Months Ended September 30, 2023

Plumbing Products

Decorative Architectural Products

Total

Primary geographic areas:

North America

International

Total

We recognized $ million and $ million of revenue for the three months ended September 30, 2024 and 2023, respectively, related to performance obligations settled in previous quarters of the same year. We recognized $ million and $ million of revenue for the three and nine months ended September 30, 2024, respectively, and $ million and $ million of revenue for the three and nine months ended September 30, 2023, respectively, related to performance obligations settled in previous years.

Our contract asset balance was $ million and $ million at September 30, 2024 and December 31, 2023, respectively. Our contract liability balance was $ million and $ million at September 30, 2024 and December 31, 2023, respectively.

MASCO CORPORATION

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

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

(B) In the third quarter of 2024, we recognized $ million of goodwill in our Plumbing Products segment related to our acquisition of Sauna360 (refer to Note B for additional information). In the second quarter of 2024, we recognized $ million of goodwill in our Decorative Architectural Products segment related to an immaterial acquisition.

The carrying value of our other indefinite-lived intangible assets was $ million and $ million at September 30, 2024 and December 31, 2023, respectively, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $ million (net of accumulated amortization of $ million) at September 30, 2024 and $ million (net of accumulated amortization of $ million) at December 31, 2023, and principally included customer relationships. The decrease in our indefinite-lived intangible assets and definite-lived intangible assets is primarily a result of the divestiture of Kichler.

to days. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the program.

million and $ million at September 30, 2024 and December 31, 2023, respectively. Of the amounts confirmed as valid under the program, the amounts owed to participating financial institutions were $ million at both September 30, 2024 and December 31, 2023. All payments made under the program are recorded as a decrease in accounts payable and accrued liabilities, net, in our condensed consolidated statements of cash flows.

MASCO CORPORATION

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

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 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 September 30, 2024.

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 September 30, 2024.

On April 26, 2022, we entered into a -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 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 € million ($ million) remained borrowed and outstanding at a weighted average interest rate of % at September 30, 2023, and was fully repaid at December 31, 2023.

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, 2023 was approximately $ billion, compared with the aggregate carrying value of $ billion.

MASCO CORPORATION

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

$ $ $ $ $ $ $ Decorative Architectural Products Total$ $ $ $ $ $ $ $ Our operations by geographic area were:North America$ $ $ $ $ $ $ $ International Total, as above$ $ $ $ General corporate expense, net()()()()Operating profit Other income (expense), net()()()()Income before income taxes$ $ $ $

(A) Inter-segment sales were not material.

percent and percent for the three and nine months ended September 30, 2024, respectively, and was percent and percent for the three and nine months ended September 30, 2023, respectively. Our effective tax rate for the three months ended September 30, 2024 was unfavorably impacted primarily by $ million of income tax expense resulting from adjustments to reflect filed tax returns and an increase in the liability for uncertain tax positions.

MASCO CORPORATION

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

$ $ $ Less: Allocation to unvested restricted stock awards Net income attributable to common shareholders$ $ $ $ Denominator:Basic common shares (based upon weighted average) Add: Dilutive effect of stock options and other stock-based incentives Diluted common shares

For the three and nine months ended September 30, 2024 and 2023, we allocated dividends and undistributed earnings to the unvested restricted stock awards.

Number of restricted stock units Number of performance restricted stock units

Effective October 20, 2022, our Board of Directors authorized the repurchase, for retirement, of up to $ billion of shares of our common stock, exclusive of excise tax, in open-market transactions or otherwise. During the nine months ended September 30, 2024, we repurchased and retired approximately million shares of our common stock (including million shares to offset the dilutive impact of restricted stock units granted in the nine months ended September 30, 2024) for approximately $ million, inclusive of excise tax of $ million. At September 30, 2024, we had approximately $ billion remaining under the 2022 authorization.

and $ for the three and nine months ended September 30, 2024, respectively, and $ and $ for the three and nine months ended September 30, 2023, respectively.

MASCO CORPORATION

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

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

million for the three and nine months ended September 30, 2023.


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

Overview

Due to changing market conditions, we are experiencing, and may continue to experience, lower market demand for our products. We have been experiencing, and may continue to experience, elevated commodity and other input costs, as well as employee-related cost inflation. We aim to offset the potential unfavorable impact of our costs and lower demand for our products with productivity improvements, pricing, and other initiatives.

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

THIRD QUARTER 2024 AND THE FIRST NINE MONTHS 2024 VERSUS
THIRD QUARTER 2023 AND THE FIRST NINE MONTHS 2023

Consolidated Results of Operations

We report our financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"). However, we believe that certain non-GAAP performance measures and ratios used in managing the business may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP performance measures and ratios should be viewed in addition to, and not as an alternative for, our reported results under GAAP. Within the tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes.

The following discussion of consolidated results of operations refers to the three and nine months ended September 30, 2024 compared to the same periods of 2023.

NET SALES

Below is a summary of our net sales, in millions, for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024		2023		Change		2024		2023		Change
Net sales, as reported	$	1,983	$	1,979	—	%	$	6,000	$	6,085	(1)	%
Acquisitions	(13)		—				(58)		—
Divestitures	—		(9)				—		(9)
Net sales, excluding acquisitions and divestitures	1,970		1,969		—	%	5,942		6,076		(2)	%
Currency translation	6		—				24		—
Net sales, excluding acquisitions, divestitures and the effect of currency translation	$	1,976	$	1,969	—	%	$	5,966	$	6,076	(2)	%

Our net sales for the three months ended September 30, 2024 were $1,983 million, which remained flat compared to the three months ended September 30, 2023. Excluding acquisitions, divestitures and the effect of currency translation, net sales remained flat primarily due to higher sales volume of plumbing products which increased sales by one percent, mostly offset by unfavorable sales mix of plumbing products which decreased sales by one percent.

Our net sales for the nine months ended September 30, 2024 were $6,000 million, which decreased one percent compared to the nine months ended September 30, 2023. Excluding acquisitions, divestitures and the effect of currency translation, net sales decreased two percent. Our net sales for the nine months ended September 30, 2024 decreased primarily due to lower sales volume across the entire company which decreased sales by two percent, lower net selling prices of decorative architectural products which decreased sales by one percent and unfavorable sales mix of plumbing products which decreased sales by one percent. These amounts were partially offset by higher net selling prices of plumbing products which increased sales by one percent.

RESULTS OF OPERATIONS

Below is a summary of our results of operations for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2024			2023			Favorable / (Unfavorable)		2024			2023			Favorable / (Unfavorable)
Net sales	$	1,983		$	1,979		—	%	$	6,000		$	6,085		(1)	%
Cost of sales	(1,258)			(1,235)			(2)	%	(3,805)			(3,903)			3	%
Gross profit	$	725		$	744		(3)	%	$	2,195		$	2,182		1	%
Gross margin	36.6		%	37.6		%	(100) bps		36.6		%	35.9		%	70 bps

Selling, general and administrative expenses	$	(368)		$	(361)		(2)	%	$	(1,123)		$	(1,081)		(4)	%
Selling, general and administrative expenses as a percent of net sales	(18.6)		%	(18.2)		%	(40) bps		(18.7)		%	(17.8)		%	(90) bps

Operating profit	$	357		$	383		(7)	%	$	1,073		$	1,101		(3)	%
Operating profit margin	18.0		%	19.4		%	(140) bps		17.9		%	18.1		%	(20) bps

Three Months Ended September 30, 2024

Our gross profit for the three months ended September 30, 2024 was $725 million, which decreased three percent, and was negatively impacted by five percent due to the non-recurrence of the receipt of an insurance settlement payment in 2023, as well as higher commodity costs and unfavorable sales mix, partially offset by cost savings initiatives.

Our selling, general and administrative expenses for the three months ended September 30, 2024 were $368 million, which increased two percent, and were primarily impacted by higher marketing costs.

Our operating profit for the three months ended September 30, 2024 was $357 million, which decreased seven percent, and was negatively impacted by decreased gross profit and higher selling, general and administrative expenses.

Nine Months Ended September 30, 2024

Our gross profit for the nine months ended September 30, 2024 was $2,195 million, which increased one percent, and was positively impacted by cost savings initiatives and one percent due to higher net selling prices. These amounts were partially offset by two percent due to the non-recurrence of the receipt of an insurance settlement payment in 2023, two percent due to lower sales volume, as well as unfavorable sales mix and one percent due to unfavorable foreign currency translation.

Our selling, general and administrative expenses for the nine months ended September 30, 2024 were $1,123 million, which increased four percent, and were primarily impacted by higher employee-related costs.

Our operating profit for the nine months ended September 30, 2024 was $1,073 million, which decreased three percent, and was negatively impacted by higher selling, general and administrative expenses, partially offset by increased gross profit.

OTHER INCOME (EXPENSE), NET

Below is a summary of our other income (expense), net, in millions, for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024		2023		Favorable / (Unfavorable)		2024		2023		Favorable / (Unfavorable)
Interest expense	$	(25)	$	(26)	4	%	$	(75)	$	(82)	9	%
Other, net	(85)		(11)		(673)	%	(95)		(14)		(579)	%
Other income (expense), net	$	(109)	$	(37)	(195)	%	$	(170)	$	(96)	(77)	%

Other, net included a preliminary loss on the sale of Kichler Lighting ("Kichler") of $81 million for the three and nine months ended September 30, 2024.

INCOME TAXES

Below is a summary of our income tax expense, in millions, and our effective tax rate for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,							Nine Months Ended September 30,
	2024			2023			Favorable / (Unfavorable)	2024			2023			Favorable / (Unfavorable)
Income tax expense	$	(68)		$	(86)		21%	$	(222)		$	(246)		10%
Effective tax rate	(27)		%	(25)		%	(200) bps	(25)		%	(24)		%	(100) bps

Our effective tax rate for the three months ended September 30, 2024 was unfavorably impacted primarily by $4 million of income tax expense resulting from adjustments to reflect filed tax returns and an increase in the liability for uncertain tax positions.

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 three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024		2023		Favorable / (Unfavorable)		2024		2023		Favorable / (Unfavorable)
Net income	$	167	$	249	(33)	%	$	640	$	717	(11)	%
Diluted income per common share	$	0.77	$	1.10	(30)	%	$	2.91	$	3.17	(8)	%

Business Segment and Geographic Area Results

The following tables set forth our net sales and operating profit information by business segment and geographic area, dollars in millions.


	Three Months Ended September 30,				Percent Change		Nine Months Ended September 30,				Percent Change
	2024		2023		2024 vs. 2023		2024		2023		2024 vs. 2023
Net Sales:
Plumbing Products	$	1,219	$	1,191	2	%	$	3,665	$	3,638	1	%
Decorative Architectural Products	764		788		(3)	%	2,336		2,447		(5)	%
Total	$	1,983	$	1,979	—	%	$	6,000	$	6,085	(1)	%

North America	$	1,595	$	1,602	—	%	$	4,815	$	4,875	(1)	%
International	388		377		3	%	1,185		1,210		(2)	%
Total	$	1,983	$	1,979	—	%	$	6,000	$	6,085	(1)	%


	Three Months Ended September 30,				Percent Change		Nine Months Ended September 30,				Percent Change
	2024		2023		2024 vs. 2023		2024		2023		2024 vs. 2023
Operating Profit:
Plumbing Products	$	240	$	223	8	%	$	713	$	673	6	%
Decorative Architectural Products	138		181		(24)	%	436		493		(12)	%
Total	$	378	$	404	(6)	%	$	1,149	$	1,166	(1)	%

North America	$	322	$	348	(7)	%	$	967	$	972	(1)	%
International	56		56		—	%	182		194		(6)	%
Total	378		404		(6)	%	1,149		1,166		(1)	%
General corporate expense, net	(21)		(21)		—	%	(76)		(65)		17	%
Total operating profit	$	357	$	383	(7)	%	$	1,073	$	1,101	(3)	%

The following discussion of business segment and geographic area results refers to the three and nine months ended September 30, 2024 compared to the same periods of 2023. Changes in operating profit in the following business segment and geographic area results discussion exclude general corporate expense, net.

BUSINESS SEGMENT RESULTS DISCUSSION

Plumbing Products

Sales

Net sales in the Plumbing Products segment increased two percent and one percent for the three and nine months ended September 30, 2024, respectively. In local currencies (including sales in currencies outside their respective functional currencies), net sales increased two percent and one percent for the three and nine months ended September 30, 2024, respectively. For the three months ended September 30, 2024, higher sales volume increased sales by two percent and the acquisition of Sauna360 Group Oy ("Sauna360") increased sales by one percent. These increases were partially offset by unfavorable sales mix which decreased sales by one percent. For the nine months ended September 30, 2024, higher net selling prices and the acquisition of Sauna360 each increased sales by two percent. These increases were partially offset by lower sales volume and an unfavorable sales mix which each decreased sales by one percent.

Operating Results

Operating profit in the Plumbing Products segment for the three months ended September 30, 2024 was positively impacted by cost savings initiatives and higher sales volume, partially offset by higher commodity and transportation costs and unfavorable sales mix. Operating profit for the nine months ended September 30, 2024 was positively impacted by cost savings initiatives and higher net selling prices, partially offset by unfavorable sales mix and increased employee-related costs.

Decorative Architectural Products

Sales

Net sales in the Decorative Architectural Products segment decreased three percent and five percent for the three and nine months ended September 30, 2024, respectively. For the three months ended September 30, 2024, the decrease was due primarily to the divestiture of our Kichler business and lower sales volume of builders' hardware and lighting products. For the nine months ended September 30, 2024, the decrease was due primarily to lower sales volume and lower net selling prices across the segment.

Operating Results

Operating profit in the Decorative Architectural Products segment for the three months ended September 30, 2024 was negatively impacted by the non-recurrence of the receipt of an insurance settlement payment in 2023, higher marketing costs, and lower sales volume, partially offset by cost savings initiatives. Operating profit for the nine months ended September 30, 2024 was negatively impacted by the non-recurrence of the receipt of an insurance settlement payment in 2023, lower net selling prices, and lower sales volume, partially offset by cost savings initiatives.

GEOGRAPHIC AREA RESULTS DISCUSSION

North America

Sales

North America net sales were flat for the three months ended September 30, 2024 and decreased one percent for the nine months ended September 30, 2024. For the three months ended September 30, 2024, sales increased one percent due to the acquisition of Sauna360, mostly offset by one percent due to the divestiture of Kichler. For the nine months ended September 30, 2024, lower sales volume decreased sales by two percent and lower net selling prices of decorative architectural products decreased sales by one percent, partially offset by the acquisition of Sauna360 and higher net selling prices of plumbing products which each increased sales by one percent.

Operating Results

North America operating profit for the three months ended September 30, 2024 was negatively impacted by the non-recurrence of the receipt of an insurance settlement payment in 2023 and higher marketing costs, partially offset by cost savings initiatives. For the nine months ended September 30, 2024, operating profit was negatively impacted by the non-recurrence of the receipt of an insurance settlement payment in 2023, lower sales volume, unfavorable sales mix and higher employee-related costs, partially offset by cost savings initiatives and higher net selling prices.

International

Sales

International net sales increased three percent for the three months ended September 30, 2024, and in local currencies (including sales in currencies outside their respective functional currencies), net sales increased three percent. Higher sales volume increased sales by five percent and higher net selling prices increased sales by one percent, partially offset by unfavorable sales mix which decreased sales by three percent. International net sales decreased two percent for the nine months ended September 30, 2024, and in local currencies, net sales decreased one percent. Unfavorable sales mix decreased sales two percent, partially offset by higher net selling prices which increased sales by one percent.

Operating Results

International operating profit for the three months ended September 30, 2024 increased primarily due to higher sales volume, mostly offset by unfavorable sales mix. For the nine months ended September 30, 2024, operating profit was negatively impacted by unfavorable sales mix, higher employee-related costs and unfavorable foreign currency translation, partially offset by cost savings initiatives and higher net selling prices.

Liquidity and Capital Resources

Overview of Capital Structure

We had cash and cash investments of approximately $646 million and $634 million at September 30, 2024 and December 31, 2023, 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 September 30, 2024 and December 31, 2023, $332 million and $323 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.

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.

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 I to the condensed consolidated financial statements for additional information.

The 2022 Credit Agreement contains financial covenants requiring us to maintain (A) a net leverage ratio, as adjusted for certain items, not exceeding 4.0 to 1.0, and (B) an interest coverage ratio, as adjusted for certain items, not less than 2.5 to 1.0. We were in compliance with all covenants and no borrowings were outstanding at September 30, 2024.

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.

Other Liquidity and Capital Resource Activities

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 €60 million ($63 million) remained borrowed and outstanding at a weighted average interest rate of 4.807% at September 30, 2023, and was fully repaid at December 31, 2023.

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 $52 million and $53 million at September 30, 2024 and December 31, 2023, respectively. Of the amounts confirmed as valid under the program, the amounts owed to participating financial institutions were $28 million at both September 30, 2024 and December 31, 2023. All payments made under the program are recorded as a decrease in accounts payable and accrued liabilities, net, in our condensed consolidated statements of cash flows. A downgrade in our credit rating or changes in the financial markets could limit the financial institutions’ willingness to commit funds to, and participate in, the program. We do not believe such risk would have a material impact on our working capital or cash flows, as substantially all of our payments are made outside of the program.

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.

Divestitures

In the third quarter of 2024, we sold our Kichler business, a provider of decorative residential and light commercial lighting products, ceiling fans, and LED lighting systems, for preliminary consideration of $125 million, net of cash disposed, and subject to final closing adjustments.

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. During the nine months ended September 30, 2024, we repurchased and retired approximately 6.6 million shares of our common stock (including 0.5 million shares to offset the dilutive impact of restricted stock units granted in the nine months ended September 30, 2024) for approximately $486 million, inclusive of excise tax of $3 million. At September 30, 2024, we had approximately $1.2 billion remaining under the 2022 authorization. Consistent with our past practice and as part of our long-term capital allocation strategy, outside of any potential acquisitions, we anticipate using approximately $750 million of cash for share repurchases in 2024.

Cash Flows

For the nine months ended September 30, 2024, net cash provided by operations was $668 million, primarily driven by operating profit, partially offset by changes in working capital.

For the nine months ended September 30, 2024, net cash used for financing activities was $673 million, primarily due to $482 million for the repurchase and retirement of our common stock, $191 million for the payment of cash dividends, $34 million for employee withholding taxes paid on stock-based compensation, $25 million for dividends paid to noncontrolling interest, and $15 million for the purchase of the remaining equity interest in Easy Sanitary Solutions B.V. These uses of cash were partially offset by $76 million of proceeds from the exercise of stock options.

For the nine months ended September 30, 2024, net cash provided by investing activities was $12 million, primarily driven by $131 million of proceeds from the sale of Kichler, net of cash disposed, partially offset by $112 million of capital expenditures.

Cautionary Statement Concerning Forward-Looking Statements

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

Our future performance may be affected by the levels of residential repair and remodel activity, and to a lesser extent, new home construction, our ability to maintain our strong brands, to develop innovative products and respond to changing consumer purchasing practices and preferences, our ability to maintain our public image and reputation, our ability to maintain our competitive position in our industries, our reliance on key customers, the cost and availability of materials, our dependence on suppliers and service providers, extreme weather events and changes in climate, risks associated with our international operations and global strategies, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to successfully execute our acquisition strategy and integrate businesses that we have acquired and may in the future acquire, our ability to attract, develop and retain a talented and diverse workforce, risks associated with cybersecurity vulnerabilities, threats and attacks and risks associated with our reliance on information systems and technology.

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


MASCO CORPORATION
Item 4.
CONTROLS AND PROCEDURES

a.Evaluation of Disclosure Controls and Procedures.

The Company's Principal Executive Officer and Principal Financial Officer have concluded, based on an evaluation of the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15 that, as of September 30, 2024, the Company's disclosure controls and procedures were effective.

b. Changes in Internal Control over Financial Reporting.

In connection with the evaluation of the Company's internal control over financial reporting that occurred during the quarter ended September 30, 2024, which is required under the Securities Exchange Act of 1934 by paragraph (d) of Exchange Rules 13a-15 or 15d-15 (as defined in paragraph (f) of Rule 13a-15), management determined that there was no change that materially affected or is reasonably likely to materially affect internal control over financial reporting.

MASCO CORPORATION

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes to the risk factors of the Company set forth in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.

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

The following table provides information regarding the repurchase of our common stock for the three months ended September 30, 2024 under the 2022 share repurchase authorization:


Period	Total Number Of Shares Purchased	Average Price Paid Per Common Share		Total Number Of Shares Purchased As Part Of Publicly Announced Plans or Programs	Maximum Value Of Shares That May Yet Be Purchased Under The Plans Or Programs
7/1/24 - 7/31/24	763,419	$	70.74	763,419	$	1,302,670,493
8/1/24 - 8/31/24	866,003	$	76.22	866,003	$	1,236,663,318
9/1/24 - 9/30/24	893,300	$	80.61	893,300	$	1,164,655,516
Total for the quarter	2,522,722	$	76.12	2,522,722	$	1,164,655,516

Item 5. Other Information

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

During the three months ended September 30, 2024, none of our officers or directors or any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.

MASCO CORPORATION

PART II. OTHER INFORMATION, Continued

Item 6. Exhibits


31.a						Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
31.b						Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
32						Certifications required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101						The following financial information from Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders' Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
104						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

MASCO CORPORATION

PART II. OTHER INFORMATION, Concluded

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


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

October 29, 2024

MASCO CORP /DE/ - Quarter Report: 2024 September (Form 10-Q)

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