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

))) $ ()$ )) Proceeds from revolving credit borrowings, net Proceeds from the exercise of stock options Employee withholding taxes paid on stock-based compensation()()Decrease in debt, net()()Net cash (for) from financing activities() CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:Capital expenditures()()Other, net() Net cash for investing activities()()Effect of exchange rate changes on cash and cash investments() CASH AND CASH INVESTMENTS: (Decrease) increase for the period() At January 1 At March 31$ $

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 Months Ended March 31, 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

()

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

()

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, 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 to goodwill. The purchase price allocation for this acquisition is based on analysis of information as of the acquisition date that was available through March 31, 2024, and will be updated through the measurement period, if necessary.

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.

$ $ International Total$ $ $

Three Months Ended March 31, 2023

Plumbing Products

Decorative Architectural Products

Total

Primary geographic areas:

North America

International

Total

We recognized an increase to revenue of $ million for the three months ended March 31, 2023 related to performance obligations settled in previous years.

MASCO CORPORATION

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

million at both March 31, 2024 and December 31, 2023. Our contract liability balance was $ million and $ million at March 31, 2024 and December 31, 2023, respectively. $ Provision for expected credit losses during the period Write-offs charged against the allowance()()Recoveries of amounts previously written off ) ) $ $ — (22)1,908 $1,979 $(71)

Our net sales for the three months ended March 31, 2024 were $1,926 million, which decreased three percent compared to the three months ended March 31, 2023. Excluding acquisitions and the effect of currency translation, net sales decreased four percent.

Our net sales for the three months ended March 31, 2024 decreased primarily due to:

•

Lower sales volume which decreased sales by four percent, primarily driven by plumbing products.

This amount was partially offset by:

•

Higher net selling prices which increased sales by one percent, primarily driven by plumbing products.

%33.8 %180 bps

Our gross profit margin for the three months ended March 31, 2024 was positively impacted by:

•

Cost savings initiatives.

•

Higher net selling prices.

These amounts were partially offset by:

•

Lower sales volume.

%(17.9)%(120) bps

Our selling, general and administrative expenses as a percentage of net sales for the three months ended March 31, 2024 was negatively impacted by:

•

Lower net sales resulting from lower volumes.

%15.9 %60 bps

Our operating profit for the three months ended March 31, 2024 was positively impacted by:

•

Cost savings initiatives.

•

Higher net selling prices.

These amounts were partially offset by:

•

Lower sales volume.

Percent Change

318 $315 1 %

The following discussion of business segment and geographic area results refers to the three months ended March 31, 2024 compared to the same period 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 decreased two percent for the three months ended March 31, 2024. In local currencies (including sales in currencies outside their respective functional currencies), net sales decreased two percent. Lower sales volume decreased sales by six percent and unfavorable sales mix decreased sales by one percent. These amounts were partially offset by higher net selling prices which increased sales by three percent and the acquisition of Sauna360 Group Oy ("Sauna360") which increased sales by two percent.

Operating Results

Operating profit in the Plumbing Products segment for the three months ended March 31, 2024 was positively impacted by higher net selling prices and cost savings initiatives. These amounts were partially offset by lower sales volume.

Decorative Architectural Products

Sales

Net sales in the Decorative Architectural Products segment decreased three percent for the three months ended March 31, 2024 due primarily to lower net selling prices across all product categories and lower sales volume in builders' hardware and lighting products. These amounts were partially offset by higher volume in paints and other coating products.

Operating Results

Operating profit in the Decorative Architectural Products segment for the three months ended March 31, 2024 was negatively impacted by lower net selling prices, partially offset by cost savings initiatives.

GEOGRAPHIC AREA RESULTS DISCUSSION

North America

Sales

North America net sales decreased two percent for the three months ended March 31, 2024. Lower sales volume decreased sales by three percent. This was partially offset by the acquisition of Sauna360 which increased sales by one percent and higher net selling prices which increased sales by one percent, primarily driven by plumbing products.

Operating Results

North America operating profit for the three months ended March 31, 2024 was positively impacted by cost savings initiatives, partially offset by lower sales volume.

International

Sales

International net sales decreased six percent for the three months ended March 31, 2024. In local currencies (including sales in currencies outside their respective functional currencies), net sales decreased five percent. Lower sales volume decreased sales by five percent and unfavorable sales mix decreased sales by one percent. These amounts were partially offset by higher net selling prices which increased sales by one percent.

Operating Results

International operating profit for the three months ended March 31, 2024 was negatively impacted by lower sales volume.

Liquidity and Capital Resources

Overview of Capital Structure

We had cash and cash investments of approximately $368 million and $634 million at March 31, 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 March 31, 2024 and December 31, 2023, $278 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.

Our current ratio was 1.7 to 1 at both March 31, 2024 and December 31, 2023.

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 H 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 $49 million was borrowed and outstanding at a weighted average interest rate of 6.560% at March 31, 2024.

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 $59 million and $53 million at March 31, 2024 and December 31, 2023, respectively. Of the amounts confirmed as valid under the program, the amounts owed to participating financial institutions were $35 million and $28 million at March 31, 2024 and December 31, 2023, respectively. 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.

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 approximately 2.1 million shares of our common stock in the three months ended March 31, 2024 for approximately $148 million. These share repurchases included 0.4 million shares to offset the dilutive impact of restricted stock units granted in the three months ended March 31, 2024. Cash paid for share repurchases was approximately $145 million in the three months ended March 31, 2024. At March 31, 2024, we had approximately $1.5 billion remaining under the 2022 authorization.

Cash Flows

For the three months ended March 31, 2024, net cash used for operations was $94 million, primarily driven by changes in working capital, partially offset by operating profit.

For the three months ended March 31, 2024, net cash used for financing activities was $134 million, primarily due to $145 million for the repurchase and retirement of our common stock, $64 million for the payment of cash dividends, $33 million for employee withholding taxes paid on stock-based compensation 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 $75 million of proceeds from the exercise of stock options and $49 million of net proceeds from revolving credit loan borrowings.

For the three months ended March 31, 2024, net cash used for investing activities was $33 million, primarily driven by $31 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 March 31, 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 March 31, 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 L 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 March 31, 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
1/1/24 - 1/31/24	895,221	$	67.03	895,221	$	1,586,905,163
2/1/24 - 2/29/24	585,072	$	72.48	585,072	$	1,544,500,033
3/1/24 - 3/31/24	590,207	$	76.25	590,207	$	1,499,494,970
Total for the quarter	2,070,500	$	71.20	2,070,500	$	1,499,494,970

Item 5. Other Information

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

During the three months ended March 31, 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 March 31, 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

April 24, 2024

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

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