| --- | --- | --- | |--------------------------------------------------|-------|---------------------------------| | (in Millions) | | As Reported \nDecember 31, 2022 | | Receivables | | $ 1,149 | | Inventories | | 1,236 | | Less: Accounts payable | | (877) | | Working Capital | | $ 1,508 | | Working capital as a % of sales (last 12 months) | | 17.4% | | | | | February 9, 2023 Safe Harbor Statement 2 2 Financial/Operations Review John Sznewajs Summary of Results Keith Allman Fourth Quarter and Full Year 202 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (State or Other Jurisdiction of Incorporation or Organization) 17450 College Parkway, Livonia, Michigan 48152 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission file number: 1-57 ...

Masco Corporation (NYSE:MAS) Q3 2022 Earnings Conference Call October 26, 2022 8:00 AM ET Company Participants David Chaika - VP, Treasurer & IR Keith Allman - President & CEO John Sznewajs - VP & CFO Conference Call Participants Michael Rehaut - J.P. Morgan Adam Baumgarten - Zelman John Lovallo - UBS Matthew Bouley - Barclays Susan Maklari - Goldman Sachs Mike Dahl - RBC Capital Markets Truman Patterson - Wolfe Research Phil Ng - Jefferies Stephen Kim - Evercore ISI Operator Good morning, ladies and gentle ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission file number: 1-5794 Masco Corporation (Exact name of Registrant as Specified in its Charter) Delaware 38-1794485 (I.R.S. Employer Id ...

Masco Corporation (NYSE:MAS) Q2 2022 Earnings Conference Call July 28, 2022 8:00 AM ET Company Participants David Chaika - IR Keith Allman - CEO John Sznewajs - CFO Conference Call Participants Stephen Kim - Evercore ISI Matthew Bouley - Barclays Mike Dahl - RBC Capital John Lovallo - UBS Susan Maklari - Goldman Sachs Deepa Raghavan - Wells Fargo Securities Keith Hughes - Truist David MacGregor - Longbow Research LLC Adam Baumgarten - Zelman Phil Ing - Jefferies Garik Shmois - Loop Capital Kenneth Zener - K ...

[Corporate Information](index=1&type=section&id=Corporate%20Information) This section provides essential company identification, filing specifics, and details on outstanding common stock [Filing Details](index=1&type=section&id=Filing%20Details) This is a Quarterly Report on Form 10-Q for Masco Corporation, filed for the period ended March 31, 2022, classifying the company as a large accelerated filer and not a shell company - Filing type: **Quarterly Report on Form 10-Q** for the period ended **March 31, 2022**[2](index=2&type=chunk) - Registrant: **Masco Corporation**, incorporated in Delaware[2](index=2&type=chunk) - Classification: **Large accelerated filer**[5](index=5&type=chunk) [Shares Outstanding](index=1&type=section&id=Shares%20Outstanding) As of March 31, 2022, Masco Corporation had 235,940,440 shares of common stock outstanding Shares Outstanding at March 31, 2022 | Class | Shares Outstanding at March 31, 2022 | | :--- | :--- | | Common stock, par value $1.00 per share | 235,940,440 | [PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited financial statements, management's discussion and analysis, and details on internal controls and procedures [Item 1. Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Masco Corporation, including balance sheets, statements of operations, comprehensive income, cash flows, and shareholders' equity, along with detailed notes explaining accounting policies, acquisitions, divestitures, revenue, debt, and other financial components [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a slight decrease in total assets and an increase in total liabilities from December 31, 2021, to March 31, 2022, resulting in a shift from shareholders' equity to a deficit position Condensed Consolidated Balance Sheets (In Millions) | ASSETS (In Millions) | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash investments | $479 | $926 | | Receivables | $1,502 | $1,171 | | Inventories | $1,340 | $1,216 | | Total current assets | $3,428 | $3,422 | | Total assets | $5,568 | $5,575 | | LIABILITIES (In Millions) | | | | Accounts payable | $1,114 | $1,045 | | Notes payable | $273 | $10 | | Total current liabilities | $2,136 | $1,939 | | Total liabilities | $5,668 | $5,497 | | EQUITY (In Millions) | | | | Total Masco Corporation's shareholders' deficit | $(371) | $(179) | | Total equity | $(121) | $56 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2022, net sales increased by 11.7% year-over-year, and net income attributable to Masco Corporation significantly rose to $233 million from $94 million in the prior year, largely due to a substantial decrease in interest expense Condensed Consolidated Statements of Operations (In Millions, Except Per Common Share Data) | (In Millions, Except Per Common Share Data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net sales | $2,201 | $1,970 | | Gross profit | $704 | $700 | | Operating profit | $353 | $365 | | Interest expense | $(25) | $(202) | | Income before income taxes | $327 | $157 | | Net income attributable to Masco Corporation | $233 | $94 | | Diluted Net income per common share | $0.97 | $0.34 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive income attributable to Masco Corporation increased significantly to $227 million for the three months ended March 31, 2022, compared to $82 million in the prior year, primarily driven by higher net income and a reduced other comprehensive loss Condensed Consolidated Statements of Comprehensive Income (Loss) (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net income attributable to Masco Corporation | $233 | $94 | | Other comprehensive (loss) attributable to Masco Corporation | $(6) | $(12) | | Total comprehensive income attributable to Masco Corporation | $227 | $82 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended March 31, 2022, the company reported net cash used for operating activities of $227 million, an increase from the prior year, primarily due to higher receivables and inventories. Net cash used for financing activities decreased, while investing activities remained consistent Condensed Consolidated Statements of Cash Flows (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash for operating activities | $(227) | $(89) | | Net cash for financing activities | $(187) | $(359) | | Net cash for investing activities | $(26) | $(25) | | Cash and cash investments at March 31 | $479 | $840 | [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) The statements show a decrease in total equity from $56 million at January 1, 2022, to a deficit of $(121) million at March 31, 2022, primarily influenced by share repurchases and cash dividends declared Consolidated Statements of Shareholders' Equity (In Millions) | (In Millions) | Balance, January 1, 2022 | Balance, March 31, 2022 | | :--- | :--- | :--- | | Total equity | $56 | $(121) | | Shares repurchased | — | $(364) | | Cash dividends declared | — | $(67) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on the company's accounting policies, recent acquisitions and divestitures, revenue recognition, intangible assets, fair value measurements, debt structure, stock-based compensation, and other financial commitments, offering context to the condensed consolidated financial statements [A. ACCOUNTING POLICIES](index=8&type=section&id=A.%20ACCOUNTING%20POLICIES) The company's unaudited condensed consolidated financial statements are prepared in accordance with GAAP, and the adoption of new accounting standards ASU 2020-06 and ASU 2021-08 in January 2022 had no material impact on its financial position or results of operations - Adopted **ASU 2020-06** (convertible instruments) and **ASU 2021-08** (business combinations, contract assets/liabilities) for annual periods beginning **January 1, 2022**, with no impact on financial position or results[23](index=23&type=chunk)[24](index=24&type=chunk) [B. ACQUISITIONS](index=8&type=section&id=B.%20ACQUISITIONS) Masco Corporation completed several acquisitions, including Steamist (Q3 2021) and ESS (Q1 2021), both enhancing the Plumbing Products segment, and Kraus (Q4 2020), which expanded product offerings and online presence, recognizing significant intangible assets and goodwill from these transactions - Acquired **Steamist, Inc.** in **Q3 2021** for approximately **$56 million** in cash, adding **$31 million** in definite-lived intangible assets and **$29 million** in goodwill to the Plumbing Products segment[25](index=25&type=chunk) - Acquired a **75.1% equity interest** in **Easy Sanitary Solutions B.V. (ESS)** in **Q1 2021** for approximately **€47 million ($58 million)**, adding **$32 million** in definite-lived intangible assets and **$35 million** in goodwill to the Plumbing Products segment[26](index=26&type=chunk) - Acquired **Kraus USA Inc.** in **Q4 2020** for approximately **$103 million** plus up to **$50 million** contingent consideration, recognizing **$25 million** indefinite-lived and **$49 million** definite-lived intangible assets, and **$20 million** goodwill in the Plumbing Products segment[29](index=29&type=chunk) [C. DIVESTITURES](index=10&type=section&id=C.%20DIVESTITURES) The company completed the divestiture of its Hüppe GmbH business in May 2021, which was not classified as discontinued operations, and recognized a $2 million pre-tax post-closing gain in Q1 2022 related to working capital finalization - Divestiture of **Hüppe GmbH** completed on **May 31, 2021**, not presented as discontinued operations[30](index=30&type=chunk) - Recorded a **$2 million pre-tax post-closing gain** in **Q1 2022** related to the finalization of working capital items from the Hüppe divestiture[30](index=30&type=chunk) [D. REVENUE](index=10&type=section&id=D.%20REVENUE) Revenue is primarily derived from North America and International markets, with total net sales increasing to $2,201 million in Q1 2022. The contract liability balance decreased, while the allowance for credit losses increased during the period Net Sales (In Millions) | Net Sales (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | North America | $1,734 | $1,529 | | International, principally Europe | $467 | $441 | | Total | $2,201 | $1,970 | - Contract liability balance decreased from **$67 million** at **December 31, 2021**, to **$28 million** at **March 31, 2022**[31](index=31&type=chunk) - Allowance for credit losses increased from **$6 million** at **January 1, 2022**, to **$8 million** at **March 31, 2022**[33](index=33&type=chunk) [E. DEPRECIATION AND AMORTIZATION](index=11&type=section&id=E.%20DEPRECIATION%20AND%20AMORTIZATION) Depreciation and amortization expense decreased to $35 million for the three months ended March 31, 2022, from $43 million in the same period of 2021 Depreciation and Amortization Expense (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Depreciation and amortization expense | $35 | $43 | [F. GOODWILL AND OTHER INTANGIBLE ASSETS](index=11&type=section&id=F.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Total net goodwill slightly decreased to $565 million at March 31, 2022, primarily due to foreign currency translation effects, while definite-lived intangible assets also saw a minor reduction Goodwill (In Millions) | Goodwill (In Millions) | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Plumbing Products | $319 | $322 | | Decorative Architectural Products | $246 | $246 | | Total Net Goodwill | $565 | $568 | - Decrease in Plumbing Products goodwill primarily due to the effect of **foreign currency translation**[36](index=36&type=chunk) - Net definite-lived intangible assets were **$270 million** at **March 31, 2022**, down from **$279 million** at **December 31, 2021**[37](index=37&type=chunk) [G. FAIR VALUE OF FINANCIAL INSTRUMENTS](index=12&type=section&id=G.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) The fair value of the Kraus acquisition contingent consideration liability increased to $28 million at March 31, 2022, and the aggregate estimated market value of the company's short-term and long-term debt was approximately $3.1 billion - Kraus acquisition contingent consideration liability increased to **$28 million** at **March 31, 2022**, from **$24 million** at **December 31, 2021**[39](index=39&type=chunk) - Aggregate estimated market value of short-term and long-term debt was approximately **$3.1 billion** at **March 31, 2022**, compared to a carrying value of **$3.2 billion**[40](index=40&type=chunk) [H. WARRANTY LIABILITY](index=12&type=section&id=H.%20WARRANTY%20LIABILITY) The company's warranty liability increased to $82 million at March 31, 2022, from $80 million at January 1, 2022, primarily due to $9 million in accruals for new warranties issued during the period Warranty Liability (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | | :--- | :--- | | Balance at January 1 | $80 | | Accruals for warranties issued during the period | $9 | | Settlements made (in cash or kind) during the period | $(8) | | Balance at end of period | $82 | [I. DEBT](index=12&type=section&id=I.%20DEBT) In Q1 2021, Masco issued $1.5 billion in new notes and retired $1.326 billion in older debt, incurring a $168 million debt extinguishment loss. The 2019 Credit Agreement was amended in December 2021 to expand currencies and replace LIBOR. Post-quarter, a new $1.0 billion 2022 Credit Agreement and a $500 million term loan were established - Issued **$1.5 billion** in notes in **March 2021** and used proceeds to repay and early retire **$1.326 billion** in older notes, resulting in a **$168 million loss on debt extinguishment**[42](index=42&type=chunk) - Amended the **2019 Credit Agreement** in **December 2021** to include British Pounds Sterling and Canadian Dollars, and replace LIBOR with EURIBOR for Euro-denominated loans[44](index=44&type=chunk) - Subsequent to quarter-end (**April 26, 2022**), entered into a new **$1.0 billion revolving credit agreement** and a **364-day $500 million senior unsecured delayed draw term loan**[51](index=51&type=chunk)[52](index=52&type=chunk) [J. STOCK-BASED COMPENSATION](index=14&type=section&id=J.%20STOCK-BASED%20COMPENSATION) Total pre-tax stock-based compensation expense decreased slightly to $27 million in Q1 2022. The company granted restricted stock units, performance restricted stock units, and stock options, with unrecognized compensation expense remaining for unvested awards Total Pre-Tax Compensation Expense (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total pre-tax compensation expense | $27 | $30 | - Granted **581,660 restricted stock units** in **Q1 2022** with a weighted average grant date fair value of **$59 per share**[54](index=54&type=chunk) - Unrecognized compensation expense for unvested restricted stock units was **$30 million** at **March 31, 2022**, with a weighted average remaining vesting period of **two years**[56](index=56&type=chunk) - Granted **337,790 stock options** in **Q1 2022** with a weighted average exercise price of approximately **$59 per share**[60](index=60&type=chunk) [K. EMPLOYEE RETIREMENT PLANS](index=17&type=section&id=K.%20EMPLOYEE%20RETIREMENT%20PLANS) Net periodic pension cost for defined-benefit plans significantly decreased to $4 million in Q1 2022 from $13 million in Q1 2021, following the termination of qualified domestic defined-benefit pension plans in Q2 2021 Net Periodic Pension Cost (In Millions) | Net Periodic Pension Cost (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Qualified | $2 | $11 | | Non-Qualified | $2 | $2 | | Total | $4 | $13 | - Qualified domestic defined-benefit pension plans were terminated in the **second quarter of 2021**[66](index=66&type=chunk) [L. RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME](index=18&type=section&id=L.%20RECLASSIFICATIONS%20FROM%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME) Reclassifications from accumulated other comprehensive income to the condensed consolidated statements of operations included $1 million (net of tax) for actuarial losses in Q1 2022, a decrease from $5 million in Q1 2021. No interest rate swap reclassifications occurred in Q1 2022, compared to $7 million (net of tax) in Q1 2021 Reclassifications (In Millions, Net of Tax) | Reclassifications (In Millions, Net of Tax) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Amortization of defined-benefit pension and other post-retirement benefits: Actuarial losses | $1 | $5 | | Interest rate swaps | $0 | $7 | [M. SEGMENT INFORMATION](index=18&type=section&id=M.%20SEGMENT%20INFORMATION) For Q1 2022, Plumbing Products net sales increased by 9% and Decorative Architectural Products net sales increased by 17% year-over-year. Total operating profit, however, decreased by 3% due to a decline in Plumbing Products' operating profit, despite growth in Decorative Architectural Products Segment Performance (In Millions) | (In Millions) | Net Sales (Q1 2022) | Net Sales (Q1 2021) | Operating Profit (Q1 2022) | Operating Profit (Q1 2021) | | :--- | :--- | :--- | :--- | :--- | | Plumbing Products | $1,359 | $1,249 | $228 | $252 | | Decorative Architectural Products | $842 | $721 | $155 | $142 | | Total | $2,201 | $1,970 | $383 | $394 | - North America net sales increased to **$1,734 million** (Q1 2022) from **$1,529 million** (Q1 2021), while International net sales increased to **$467 million** (Q1 2022) from **$441 million** (Q1 2021)[69](index=69&type=chunk) [N. OTHER INCOME (EXPENSE), NET](index=19&type=section&id=N.%20OTHER%20INCOME%20(EXPENSE),%20NET) Total 'other, net' improved to a $(1) million expense in Q1 2022 from $(6) million in Q1 2021, driven by foreign currency transaction gains and a gain on the Hüppe divestiture, partially offset by contingent consideration revaluation expense and pension costs Other Income (Expense), Net (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total other, net | $(1) | $(6) | | Foreign currency transaction gains | $4 | $0 | | Contingent consideration | $(4) | $0 | | Gain on sale of business | $2 | $0 | | Net periodic pension and post-retirement benefit cost | $(2) | $(11) | [O. INCOME PER COMMON SHARE](index=19&type=section&id=O.%20INCOME%20PER%20COMMON%20SHARE) Net income attributable to common shareholders significantly increased to $234 million in Q1 2022, leading to diluted EPS of $0.97, up from $0.34 in Q1 2021. The company repurchased 6.1 million shares for $364 million and increased cash dividends per common share Income Per Common Share (In Millions, Except Per Share Data) | (In Millions, Except Per Share Data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net income attributable to common shareholders | $234 | $88 | | Diluted common shares | 241 | 257 | | Diluted income per common share | $0.97 | $0.34 | - Repurchased and retired **6.1 million shares** of common stock for approximately **$364 million** in **Q1 2022**[75](index=75&type=chunk) - Cash dividends per common share were **$0.280** in **Q1 2022**, compared to **$0.140** in **Q1 2021**[76](index=76&type=chunk) [P. OTHER COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=P.%20OTHER%20COMMITMENTS%20AND%20CONTINGENCIES) Masco Corporation is involved in various claims and litigation arising in the ordinary course of business, including product liability and environmental matters, but believes the likelihood of a material adverse effect on its financial results is remote - Involved in claims and litigation, including class actions, mass torts, and regulatory proceedings, covering areas like **product liability, employment, and environmental issues**[77](index=77&type=chunk) - Believes the likelihood that the outcome of these matters would have a **material adverse effect is remote**[77](index=77&type=chunk) [Q. INCOME TAXES](index=20&type=section&id=Q.%20INCOME%20TAXES) The effective tax rate decreased to 23% for Q1 2022 from 27% in Q1 2021. This reduction was primarily due to the absence of a $5 million income tax expense from the elimination of a disproportionate tax effect related to interest rate swaps and a $5 million increase to income tax expense from a pension plan termination loss, both occurring in Q1 2021 Income Taxes (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Income tax expense | $75 | $43 | | Effective tax rate | 23% | 27% | - The decrease in the effective tax rate was primarily due to the absence of a **$5 million income tax expense** from interest rate swap elimination and a **$5 million increase** to income tax expense from a pension plan termination loss in **Q1 2021**[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, discussing recent trends, consolidated results, segment and geographic performance, liquidity, and capital resources, along with cautionary statements regarding forward-looking information [Recent Trends](index=21&type=section&id=Recent%20Trends) Masco Corporation is currently facing challenges such as higher commodity and transportation costs, supply chain disruptions, and employee-related cost inflation, alongside ongoing uncertainty from the COVID-19 pandemic. The company is focused on productivity improvements and leveraging its strong brands and operating system to drive long-term value - Experiencing **higher commodity and transportation costs, supply chain disruptions, and employee-related cost inflation**[81](index=81&type=chunk) - Ongoing uncertainty regarding the **COVID-19 pandemic's impact** on operations and financial results[82](index=82&type=chunk) - Strategies include leveraging **strong brand portfolio, industry-leading positions, Masco Operating System, innovation, and disciplined capital allocation** to drive long-term growth[83](index=83&type=chunk) [Consolidated Results of Operations](index=21&type=section&id=Consolidated%20Results%20of%20Operations) The company's consolidated results for Q1 2022 show a 12% increase in net sales, but a 3% decrease in operating profit due to increased costs. Net income and diluted EPS significantly improved year-over-year, largely driven by reduced interest expense from prior-year debt extinguishment [Net Sales](index=21&type=section&id=Net%20Sales) Net sales for Q1 2022 increased by 12% to $2.2 billion, or 14% excluding acquisitions, divestitures, and currency effects. This growth was primarily driven by higher net selling prices (9%) and increased sales volume (5%), partially offset by unfavorable foreign currency translation and the Hüppe divestiture Net Sales (In Millions) | Net Sales (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Favorable / (Unfavorable) | | :--- | :--- | :--- | :--- | | Net sales, as reported | $2,201 | $1,970 | $231 | | Net sales, excluding acquisitions, divestitures and the effect of currency translation | $2,226 | $1,950 | $276 | - Net sales increased **12%** (**14%** excluding acquisitions, divestitures, and currency translation) for **Q1 2022** compared to **Q1 2021**[88](index=88&type=chunk) - Primary drivers: **Higher net selling prices (9% increase)** and **higher sales volume (5% increase)**. Offsets: **Unfavorable foreign currency translation (1% decrease)** and **Hüppe divestiture (1% decrease)**[91](index=91&type=chunk) [Gross Profit and Gross Margin](index=22&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Gross profit slightly increased to $704 million in Q1 2022, but gross margin decreased by 350 basis points to 32.0%. This decline was primarily due to increased commodity and transportation costs, partially offset by favorable net selling prices and increased sales volume Gross Profit and Gross Margin (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Favorable / (Unfavorable) | | :--- | :--- | :--- | :--- | | Gross profit | $704 | $700 | $4 | | Gross margin | 32.0% | 35.5% | (350) bps | - Gross profit margin negatively impacted by **increased commodity and transportation costs**, partially offset by **favorable net selling prices and increased sales volume**[89](index=89&type=chunk)[92](index=92&type=chunk) [Selling, General and Administrative Expenses](index=22&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) Selling, general and administrative (SG&A) expenses increased to $351 million in Q1 2022, but decreased as a percentage of net sales by 110 basis points to 15.9%. This improvement was driven by leverage of fixed expenses due to increased sales volume, despite higher marketing and employee-related costs Selling, General and Administrative Expenses (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | (Favorable) / Unfavorable | | :--- | :--- | :--- | :--- | | Selling, general and administrative expenses | $351 | $335 | $16 | | Selling, general and administrative expenses as percentage of net sales | 15.9% | 17.0% | (110) bps | - SG&A as a percentage of sales positively impacted by **leverage of fixed expenses due to increased sales volume**, partially offset by **increased marketing and employee-related costs**[90](index=90&type=chunk) [Operating Profit](index=24&type=section&id=Operating%20Profit) Operating profit decreased by 3% to $353 million in Q1 2022, and operating profit margin declined by 250 basis points to 16.0%. This was primarily due to increased commodity, transportation, marketing, and employee-related costs, partially offset by favorable net selling prices and increased sales volume Operating Profit (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Favorable / (Unfavorable) | | :--- | :--- | :--- | :--- | | Operating profit | $353 | $365 | $(12) | | Operating profit margin | 16.0% | 18.5% | (250) bps | - Operating profit negatively affected by **increased commodity, transportation, marketing, and employee-related costs**, partially offset by **favorable net selling prices and increased sales volume**[94](index=94&type=chunk) [Other Income (Expense), Net](index=24&type=section&id=Other%20Income%20(Expense),%20Net) Interest expense significantly decreased by $177 million in Q1 2022 due to the absence of a prior-year debt extinguishment loss and debt refinancing savings. 'Other, net' improved to a $(1) million expense, benefiting from foreign currency gains and a divestiture gain, offsetting contingent consideration revaluation expense and pension costs Other Income (Expense), Net (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Favorable / (Unfavorable) | | :--- | :--- | :--- | :--- | | Interest expense | $(25) | $(202) | $177 | | Other, net | $(1) | $(6) | $5 | - Decrease in interest expense primarily due to the absence of a **$168 million loss on debt extinguishment** in **Q1 2021** and **interest savings from debt refinancing**[96](index=96&type=chunk) - Q1 2022 'Other, net' included **$4 million foreign currency transaction gains** and a **$2 million gain on the Hüppe divestiture**, largely offsetting a **$4 million contingent consideration revaluation expense** and **$2 million net periodic pension cost**[98](index=98&type=chunk)[102](index=102&type=chunk) [Income Taxes](index=26&type=section&id=Income%20Taxes) Income tax expense increased to $75 million in Q1 2022, but the effective tax rate decreased to 23% from 27% in Q1 2021. This rate reduction was mainly due to the absence of specific tax expenses from the prior year related to interest rate swaps and pension plan termination losses Income Taxes (In Millions) | (In Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | (Favorable) / Unfavorable | | :--- | :--- | :--- | :--- | | Income tax expense | $75 | $43 | $32 | | Effective tax rate | 23% | 27% | (4)% | - Q1 2022 effective tax rate was lower due to a **$5 million state income tax benefit** from a reduction in uncertain tax positions[101](index=101&type=chunk) - Q1 2021 effective tax rate was higher due to a **$5 million income tax expense** from interest rate swap elimination and a **$5 million increase** from a pension plan termination loss[103](index=103&type=chunk) [Net Income and Income Per Common Share — Attributable to Masco Corporation](index=28&type=section&id=Net%20Income%20and%20Income%20Per%20Common%20Share%20%E2%80%94%20Attributable%20to%20Masco%20Corporation) Net income attributable to Masco Corporation significantly increased to $233 million in Q1 2022, up from $94 million in Q1 2021. Consequently, diluted income per common share rose to $0.97 from $0.34 in the prior year Net Income and Income Per Common Share (In Millions, Except Per Share Data) | (In Millions, Except Per Share Data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Favorable / (Unfavorable) | | :--- | :--- | :--- | :--- | | Net income | $233 | $94 | $139 | | Diluted income per common share | $0.97 | $0.34 | $0.63 | [Business Segment and Geographic Area Results](index=28&type=section&id=Business%20Segment%20and%20Geographic%20Area%20Results) This section details the performance of Masco's two business segments, Plumbing Products and Decorative Architectural Products, and its two primary geographic areas, North America and International. While both segments and regions saw sales growth, operating profit was negatively impacted by increased costs across the board Segment and Geographic Performance (In Millions) | (In Millions) | Net Sales (Q1 2022) | Net Sales (Q1 2021) | Operating Profit (Q1 2022) | Operating Profit (Q1 2021) | | :--- | :--- | :--- | :--- | :--- | | Plumbing Products | $1,359 | $1,249 | $228 | $252 | | Decorative Architectural Products | $842 | $721 | $155 | $142 | | North America | $1,734 | $1,529 | $300 | $308 | | International, principally Europe | $467 | $441 | $83 | $86 | | Total Operating Profit | $353 | $365 | | | [Plumbing Products](index=30&type=section&id=Plumbing%20Products) Net sales in the Plumbing Products segment increased by 9% in Q1 2022, driven by favorable net selling prices and higher sales volume. However, operating profit decreased by 10% due to increased commodity, transportation, employee-related, and marketing costs, partially offset by pricing and volume gains - Net sales increased **9%** in **Q1 2022**, with **favorable net selling prices** and **higher sales volume** each contributing **6%** to sales growth[111](index=111&type=chunk) - Sales were partially offset by **unfavorable foreign currency translation** and the **Hüppe divestiture**, each decreasing sales by **2%**[111](index=111&type=chunk) - Operating profit was negatively impacted by **increased commodity, transportation, employee-related, and marketing costs**[112](index=112&type=chunk) [Decorative Architectural Products](index=30&type=section&id=Decorative%20Architectural%20Products) Net sales in the Decorative Architectural Products segment increased by 17% in Q1 2022, primarily due to favorable net selling prices and higher sales volume across paints, lighting, and builders' hardware. Operating profit also increased by 9%, benefiting from these factors despite higher commodity, transportation, and marketing costs - Net sales increased **17%** in **Q1 2022**, driven by **favorable net selling prices of paints, lighting, and builders' hardware**, and **higher sales volume of paints**[113](index=113&type=chunk) - Operating profit was positively impacted by **favorable net selling prices and increased sales volume**, partially offset by **increased commodity, transportation, and marketing costs**[114](index=114&type=chunk) [North America](index=31&type=section&id=North%20America) North American net sales increased by 13% in Q1 2022, with favorable net selling prices (9%) and higher sales volume (4%) in paints and plumbing products being the main drivers. Operating profit decreased by 3% due to increased commodity, transportation, marketing, and employee-related costs, partially offset by pricing and volume gains - North American net sales increased **13%** in **Q1 2022**, with **favorable net selling prices (9% increase)** and **higher sales volume (4% increase)** in paints and plumbing products[116](index=116&type=chunk) - Operating profit was negatively impacted by **increased commodity, transportation, marketing, and employee-related costs**, partially offset by **favorable net selling prices and increased sales volume**[117](index=117&type=chunk) [International, Principally Europe](index=32&type=section&id=International,%20Principally%20Europe) International net sales increased by 6% in Q1 2022 (12% in local currencies), driven by higher sales volume, favorable net selling prices, and sales mix of plumbing products, partially offset by the Hüppe divestiture. Operating profit decreased by 3% due to increased costs, despite these positive sales factors - International net sales increased **6%** (**12% in local currencies**) in **Q1 2022**[119](index=119&type=chunk) - Sales drivers: **Higher sales volume (9% increase)**, **favorable net selling prices (7% increase)**, and **favorable sales mix (1% increase)** of plumbing products[119](index=119&type=chunk) - Sales were partially offset by the **divestiture of the Hüppe business**, which decreased sales by **5%**[119](index=119&type=chunk) - Operating profit was negatively impacted by **increased commodity, transportation, employee-related, and marketing costs**, partially offset by **favorable net selling prices and increased sales volume**[120](index=120&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Masco's cash and cash investments decreased to $479 million at March 31, 2022, with net cash used for operating activities increasing. The company engaged in significant share repurchases and dividend payments. Post-quarter, new credit agreements were established, and the company anticipates using approximately $900 million for share repurchases in 2022, confident in its ability to fund future needs - Current ratio decreased to **1.6 to 1** at **March 31, 2022**, from **1.8 to 1** at **December 31, 2021**, primarily due to revolving credit loan borrowings[121](index=121&type=chunk) - Net cash used for operating activities was **$227 million** in **Q1 2022**, impacted by increases in receivables and inventories[122](index=122&type=chunk) - Net cash used for financing activities was **$187 million**, including **$364 million** for common stock repurchases and **$67 million** for cash dividends, partially offset by **$263 million** from revolving credit borrowings[123](index=123&type=chunk) - Cash and cash investments decreased to **$479 million** at **March 31, 2022**, from **$926 million** at **December 31, 2021**[125](index=125&type=chunk) - On **April 26, 2022**, entered into a new **$1.0 billion revolving credit agreement** and a **$500 million senior unsecured delayed draw term loan**[131](index=131&type=chunk)[132](index=132&type=chunk) - Anticipates using approximately **$900 million** of cash for share repurchases during **2022**[133](index=133&type=chunk) [Cautionary Statement Concerning Forward-Looking Statements](index=36&type=section&id=Cautionary%20Statement%20Concerning%20Forward-Looking%20Statements) This section advises that the report contains forward-looking statements, and actual future performance may differ materially due to various risks and uncertainties. Key factors include residential repair and remodel activity, brand strength, competitive position, reliance on key customers, the ongoing impact of COVID-19, material costs, supply chain issues, international operations, strategic initiatives, acquisitions, personnel, and cybersecurity risks - Report contains **forward-looking statements**, and actual results may differ materially due to difficult-to-predict risks and uncertainties[137](index=137&type=chunk) - Key risk factors include: **residential repair and remodel activity, new home construction, ability to maintain strong brands, competitive position, reliance on key customers, duration and impact of COVID-19, cost and availability of materials, supply chain dependence, international operations, strategic initiatives, acquisitions, personnel, and cybersecurity vulnerabilities**[138](index=138&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of March 31, 2022, and there were no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were **effective** as of **March 31, 2022**[142](index=142&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended **March 31, 2022**[143](index=143&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, exhibits, and the official signature for the report [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note P to the condensed consolidated financial statements, where the company states it is involved in various claims and litigation but believes the likelihood of a material adverse effect is remote - Information on legal proceedings is detailed in **Note P** to the condensed consolidated financial statements[146](index=146&type=chunk) - The company believes the likelihood of a **material adverse effect** from these claims and litigation is remote[77](index=77&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to the risk factors set forth in **Item 1A. 'Risk Factors'** in the **Annual Report on Form 10-K** for the year ended **December 31, 2021**[147](index=147&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2022, Masco Corporation repurchased 6,141,887 shares of common stock for approximately $364 million under its 2021 share repurchase authorization, with $764.5 million remaining under the program at quarter-end Unregistered Sales of Equity Securities and Use of Proceeds | Period | Total Number Of Shares Purchased | Average Price Paid Per Common Share | Maximum Value Of Shares That May Yet Be Purchased Under The Plans Or Programs | | :--- | :--- | :--- | :--- | | 1/1/22 - 1/31/22 | 1,814,981 | $66.33 | $1,008,051,714 | | 2/1/22 - 2/28/22 | 1,962,034 | $58.44 | $893,395,061 | | 3/1/22 - 3/31/22 | 2,364,872 | $54.51 | $764,476,342 | | Total for the quarter | 6,141,887 | $59.26 | $764,476,342 | [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including new credit agreements dated April 26, 2022, certifications by the CEO and CFO, and financial information formatted in Inline XBRL - Includes the **Credit Agreement** and **Term Loan Credit Agreement**, both dated **April 26, 2022**[150](index=150&type=chunk)[151](index=151&type=chunk) - Certifications by the **Chief Executive Officer** and **Chief Financial Officer** are included[151](index=151&type=chunk) - Financial information for the quarter ended **March 31, 2022**, is formatted in **Inline XBRL**[151](index=151&type=chunk) [Signature](index=40&type=section&id=Signature) The report was officially signed on April 27, 2022, by John G. Sznewajs, Vice President and Chief Financial Officer of Masco Corporation - Report signed by **John G. Sznewajs, Vice President, Chief Financial Officer**[153](index=153&type=chunk) - Date of signature: **April 27, 2022**[153](index=153&type=chunk)

Masco Corporation (NYSE:MAS) Q1 2022 Earnings Conference Call April 27, 2022 8:00 AM ET Company Participants David Chaika - Vice President, Treasurer & IR Keith Allman - President & CEO John Sznewajs - Vice President & CFO Conference Call Participants Stephen Kim - Evercore ISI Matthew Bouley - Barclays John Lovallo - UBS Mike Dahl - RBC Capital Markets Michael Rehaut - JP Morgan Susan Maklari - Goldman Sachs Deepa Raghavan - Wells Fargo Securities Keith Hughes - Truist Securities Garik Shmois - Loop Capita ...

STAIN REPELLENO First Quarter 2022 Earnings Presentation April 27, 2022 Safe Harbor Statement This presentation 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 reference ...

PART I [Business](index=3&type=section&id=Item%201.%20Business) Masco Corporation is a global leader in branded home improvement and building products, focusing on strategic portfolio management and shareholder returns - Masco Corporation is a global leader in branded home improvement and building products, with a portfolio including brands like **BEHR®**, **DELTA®**, **HANSGROHE®**, **KICHLER®**, and **HOT SPRING®**[13](index=13&type=chunk) - The company's strategic pillars are: driving the full potential of core businesses, leveraging enterprise opportunities, and **actively managing its portfolio**[15](index=15&type=chunk) - In 2021, the company **acquired a majority stake in Easy Sanitary Solutions B.V. (ESS) and all of Steamist, Inc**, while divesting its Hüppe GmbH business[14](index=14&type=chunk) - Masco returned value to shareholders in 2021 by repurchasing approximately **17.6 million shares** and increasing its quarterly dividend by about **68%**[14](index=14&type=chunk) [Our Business Segments](index=4&type=section&id=Our%20Business%20Segments) The company operates through Plumbing Products and Decorative Architectural Products segments, with key brands and seasonal sales patterns - The Plumbing Products segment manufactures and sells faucets, showerheads, bathing units, spas, and plumbing components under brands such as **DELTA®**, **HANSGROHE®**, and **BRASSCRAFT®**[17](index=17&type=chunk)[18](index=18&type=chunk) - The Decorative Architectural Products segment primarily includes architectural coatings like paints and primers (BEHR®, KILZ®), which accounted for approximately **30% of consolidated net sales in 2021**[21](index=21&type=chunk)[23](index=23&type=chunk) - **The Home Depot** is the largest customer for the Decorative Architectural Products segment and Masco's largest customer overall[21](index=21&type=chunk) [Human Capital Management](index=6&type=section&id=Human%20Capital%20Management) The company's human capital strategy prioritizes leadership, diversity, equity & inclusion, and the future workforce - The company's human capital strategy is built on three pillars: **leadership, diversity, equity and inclusion (DE&I), and future workforce**[27](index=27&type=chunk) U.S. Workforce Representation Statistics (as of Dec 31, 2021) | Workforce Category | Women | Racially/Ethnically Diverse | | :--- | :--- | :--- | | Leadership Team | 31% | 26% | | Salaried Workforce | 36% | 29% | | Hourly Workforce | 38% | 53% | - Masco employed approximately **20,000 people** as of December 31, 2021[36](index=36&type=chunk) - The company has implemented extensive health and safety protocols in response to the **COVID-19 pandemic**, following guidelines from the WHO and CDC[35](index=35&type=chunk) [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from the COVID-19 pandemic, market cyclicality, supply chain disruptions, customer concentration, and cybersecurity threats - The ongoing **COVID-19 pandemic** poses risks of operational disruption, supply chain delays, and constraints in sourcing materials and labor[40](index=40&type=chunk)[41](index=41&type=chunk) - The business is heavily reliant on **residential repair and remodeling activity**, which is influenced by economic factors like consumer confidence and interest rates[43](index=43&type=chunk)[44](index=44&type=chunk) - Significant operational risks include **volatility in raw material costs**, dependence on third-party suppliers, and complexities of international operations[47](index=47&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) - Sales are highly concentrated with key customers, with **The Home Depot accounting for approximately 36% of consolidated net sales in 2021**[67](index=67&type=chunk) - The company faces technology risks from potential **cybersecurity attacks** and reliance on information systems, including complex ERP system implementations[69](index=69&type=chunk)[71](index=71&type=chunk) [Properties](index=16&type=section&id=Item%202.%20Properties) The company operates numerous manufacturing and warehouse facilities globally, owning most manufacturing sites while leasing many distribution centers Principal Properties by Segment (as of Dec 31, 2021) | Location/Segment | Manufacturing | Warehouse & Distribution | | :--- | :--- | :--- | | **North America** | | | | Plumbing Products | 22 | 11 | | Decorative Architectural Products | 8 | 19 | | **Total North America** | **30** | **30** | | **International** | | | | Plumbing Products | 10 | 17 | | Decorative Architectural Products | — | — | | **Total International** | **10** | **17** | - The company **owns most of its manufacturing facilities**, both in North America and internationally, while a substantial number of warehouse and distribution facilities are leased[81](index=81&type=chunk)[83](index=83&type=chunk) [Legal Proceedings](index=17&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note U to the consolidated financial statements - Details on legal proceedings are provided in **Note U** to the consolidated financial statements[86](index=86&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=18&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company actively repurchased shares, increased dividends, and its stock performance outpaced major indices from 2016 to 2021 - In February 2021, the Board authorized a **$2.0 billion share repurchase program**, and for the year, the company repurchased **17.6 million shares for approximately $1.026 billion**[91](index=91&type=chunk) - As of December 31, 2021, **$1.128 billion remained available** under the 2021 share repurchase authorization[91](index=91&type=chunk) - The Board of Directors declared a quarterly dividend of **$0.28 per share in Q1 2022**, with the intention to increase the annual dividend to $1.12 per share[90](index=90&type=chunk) Cumulative Total Shareholder Return (2016-2021) | Index | 2016 (Base) | 2021 (End Value) | | :--- | :--- | :--- | | Masco | $100.00 | $222.07 | | S&P 500 Index | $100.00 | $212.89 | | S&P Industrials Index | $100.00 | $166.33 | | S&P Consumer Durables & Apparel Index | $100.00 | $191.45 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Sales grew in 2021, but margins contracted due to cost inflation, while capital was allocated to acquisitions, share repurchases, and dividends - The company is experiencing **higher commodity and transportation costs**, supply chain disruptions, and labor cost inflation[103](index=103&type=chunk) - Net sales for 2021 **increased 17% to $8.4 billion** compared to 2020; excluding acquisitions, divestitures, and currency effects, net sales increased 13%[107](index=107&type=chunk) - **Gross margin decreased from 36.0% in 2020 to 34.2% in 2021**, negatively impacted by increased commodity, transportation, and labor costs[110](index=110&type=chunk) - **Operating profit margin decreased from 18.0% in 2020 to 16.8% in 2021**, partially due to a $45 million goodwill impairment charge[114](index=114&type=chunk)[116](index=116&type=chunk) - The company's capital allocation strategy includes reinvesting in the business, balancing share repurchases with potential acquisitions, and maintaining a meaningful dividend[135](index=135&type=chunk) [Consolidated Results of Operations](index=21&type=section&id=Consolidated%20Results%20of%20Operations) Net sales grew 17% in 2021, but gross and operating margins declined, while debt extinguishment and pension charges significantly reduced net income Net Sales Change (2020 vs 2021, in millions) | Description | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net sales, as reported | $8,375 | $7,188 | $1,187 | | Net sales, excluding acquisitions, divestitures and currency | $8,046 | $7,145 | $901 | Profitability Metrics (2020 vs 2021) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Gross Profit | $2,863M | $2,587M | +$276M | | Gross Margin | 34.2% | 36.0% | -180 bps | | Operating Profit | $1,405M | $1,295M | +$110M | | Operating Margin | 16.8% | 18.0% | -120 bps | - Interest expense increased significantly to **$278 million in 2021** from $144 million in 2020, primarily due to a **$168 million loss on debt extinguishment**[115](index=115&type=chunk) - Other expenses surged to **$439 million in 2021**, mainly due to a **$430 million charge** related to the termination of domestic defined-benefit pension plans[117](index=117&type=chunk)[118](index=118&type=chunk) Income from Continuing Operations (2020 vs 2021) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Income from continuing operations | $410M | $810M | ($400M) | | Diluted EPS from continuing operations | $1.62 | $3.04 | ($1.42) | [Business Segment and Geographic Area Results](index=26&type=section&id=Business%20Segment%20and%20Geographic%20Area%20Results) The Plumbing segment drove sales and profit growth in 2021, while the Decorative Architectural segment's profit was flat due to cost pressures Net Sales by Segment (2021 vs 2020, in millions) | Segment | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Plumbing Products | $5,135 | $4,136 | 24% | | Decorative Architectural Products | $3,240 | $3,052 | 6% | | **Total** | **$8,375** | **$7,188** | **17%** | Operating Profit by Segment (2021 vs 2020, in millions) | Segment | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Plumbing Products | $929 | $806 | 15% | | Decorative Architectural Products | $581 | $583 | 0% | | **Total** | **$1,510** | **$1,389** | **9%** | - Plumbing Products sales growth was primarily driven by a **15% increase in sales volume** and a 5% increase from acquisitions[127](index=127&type=chunk) - Decorative Architectural Products operating profit was negatively impacted by **higher commodity costs**, increased transportation expenses, and a goodwill impairment charge[130](index=130&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) The company managed its liquidity through debt refinancing, acquisitions, and significant share repurchases, ending 2021 with $926 million in cash - Cash and cash investments **decreased to $926 million** at year-end 2021 from $1.3 billion at year-end 2020[136](index=136&type=chunk) - In March 2021, the company issued **$1.5 billion of new notes** and used proceeds to retire $1.326 billion of existing notes, resulting in a **$168 million loss on debt extinguishment**[141](index=141&type=chunk)[160](index=160&type=chunk) - Capital expenditures were **$128 million in 2021**, with plans to increase to approximately $250 million in 2022[140](index=140&type=chunk) - The company repurchased **17.6 million shares for $1.026 billion in 2021** and anticipates repurchasing approximately $600 million of shares in 2022[151](index=151&type=chunk) [Cash Flows](index=32&type=section&id=Cash%20Flows) Cash from operations remained stable, while significant financing activities, including debt refinancing and share buybacks, led to a net decrease in cash Summary of Cash Flows (in millions) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $930 | $953 | | Net cash (for) from financing activities | ($1,298) | ($886) | | Net cash (for) from investing activities | ($12) | $531 | | **Cash (decrease) increase** | **($400)** | **$629** | - Financing activities were dominated by debt refinancing (issuing **$1.48B**, retiring **$1.33B**) and share repurchases (**$1.03B**)[160](index=160&type=chunk) - Working capital as a percentage of net sales increased slightly from **15.6% in 2020 to 16.0% in 2021**, driven by an increase in inventory days[158](index=158&type=chunk) [Critical Accounting Policies and Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting judgments relate to revenue recognition, goodwill impairment testing, and income tax asset valuation - Critical policies include **Revenue Recognition, Goodwill and Other Intangible Assets, and Income Taxes**[168](index=168&type=chunk) - For goodwill impairment testing, the company uses a discounted cash flow method with a long-term assumed annual growth rate of **2% to 3%** and a weighted average cost of capital of approximately **7.5%**[173](index=173&type=chunk)[174](index=174&type=chunk) - In Q4 2021, a **$45 million non-cash goodwill impairment charge** was recognized for the lighting business[176](index=176&type=chunk) - The company maintains a **$17 million valuation allowance** against certain state and foreign deferred tax assets as of December 31, 2021[183](index=183&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate and foreign currency risks, but sensitivity analyses indicate these exposures are not material - The company is exposed to market risk from interest rate changes and foreign currency fluctuations, especially the **euro, British pound, Canadian dollar, and Chinese renminbi**[187](index=187&type=chunk) - Sensitivity analyses indicate that hypothetical adverse changes in foreign currency rates, investment values, or interest rates **would not have a material effect** on the company's financial position[188](index=188&type=chunk) [Financial Statements and Supplementary Data](index=38&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements, on which management and the independent auditor concluded internal controls were effective - Management assessed its internal control over financial reporting as **effective** as of December 31, 2021, based on the COSO framework[191](index=191&type=chunk) - PricewaterhouseCoopers LLP issued an **unqualified opinion** on the consolidated financial statements and the effectiveness of internal controls[192](index=192&type=chunk)[195](index=195&type=chunk) - The auditor identified the **Goodwill Impairment Assessment** as a Critical Audit Matter due to the significant management judgment involved[202](index=202&type=chunk)[204](index=204&type=chunk) [Consolidated Financial Statements](index=41&type=section&id=Consolidated%20Financial%20Statements) The financial statements detail the company's financial position, showing total assets of $5.6 billion and net income of $410 million for 2021 Consolidated Balance Sheet Highlights (in millions) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $3,422 | $3,489 | | Total Assets | $5,575 | $5,777 | | Total Current Liabilities | $1,939 | $1,934 | | Long-Term Debt | $2,949 | $2,792 | | Total Liabilities | $5,497 | $5,356 | | Total Equity | $56 | $421 | Consolidated Statement of Operations Highlights (in millions) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net Sales | $8,375 | $7,188 | $6,707 | | Gross Profit | $2,863 | $2,587 | $2,371 | | Operating Profit | $1,405 | $1,295 | $1,088 | | Net Income Attributable to Masco | $410 | $1,224 | $935 | Consolidated Statement of Cash Flows Highlights (in millions) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $930 | $953 | $833 | | Net cash for financing activities | ($1,298) | ($886) | ($1,291) | | Net cash (for) from investing activities | ($12) | $531 | $582 | | (Decrease) increase in cash | ($400) | $629 | $138 | [Notes to Consolidated Financial Statements](index=46&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail key financial events, including acquisitions, divestitures, a goodwill impairment charge, debt refinancing, and a pension plan settlement - In 2021, the company acquired **Steamist for ~$56M cash** and a **75.1% interest in ESS for ~$58M**[284](index=284&type=chunk)[285](index=285&type=chunk)[287](index=287&type=chunk)[290](index=290&type=chunk) - The company completed the divestiture of its Hüppe business in May 2021, recognizing an **$18 million loss**[292](index=292&type=chunk)[300](index=300&type=chunk)[302](index=302&type=chunk) - A **$45 million non-cash goodwill impairment charge** was recognized in Q4 2021 related to the lighting business[328](index=328&type=chunk) - In Q2 2021, the company settled its qualified domestic defined-benefit pension plans, reclassifying a **$447 million pre-tax actuarial loss** from AOCI to earnings[384](index=384&type=chunk) - The **effective tax rate for 2021 was 31%**, higher than the U.S. statutory rate of 21%, due to state taxes and taxes on foreign earnings[454](index=454&type=chunk) [Controls and Procedures](index=84&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of year-end 2021 - The company's management, including the CEO and CFO, concluded that **disclosure controls and procedures were effective** as of December 31, 2021[468](index=468&type=chunk) - **No material changes** occurred during the fourth quarter that affected the company's internal control over financial reporting[468](index=468&type=chunk) PART III [Directors, Executive Officers, Corporate Governance, Compensation, and Security Ownership](index=85&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information on governance, compensation, and ownership is incorporated by reference from the company's 2022 Proxy Statement - Information for Items 10 through 14 is **incorporated by reference** from the company's definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[473](index=473&type=chunk)[474](index=474&type=chunk)[476](index=476&type=chunk)[477](index=477&type=chunk)[478](index=478&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2021) | Description | Value | | :--- | :--- | | Securities to be issued upon exercise of outstanding options, warrants and rights | 2,691,956 | | Weighted-average exercise price of outstanding options, warrants and rights | $36.67 | | Securities remaining available for future issuance | 12,923,217 | PART IV [Exhibits and Financial Statement Schedules](index=86&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits, including key agreements and certifications, filed with the Form 10-K - This section provides a comprehensive list of all financial statements, schedules, and exhibits filed with the **10-K report**[481](index=481&type=chunk) - **Financial Statement Schedule II**, detailing Valuation and Qualifying Accounts for 2019-2021, is included[482](index=482&type=chunk)[493](index=493&type=chunk) - Exhibits filed include the company's **credit agreement, indentures for its notes, and various executive and director compensation plans**[483](index=483&type=chunk)[485](index=485&type=chunk)[486](index=486&type=chunk)

Masco Corporation (NYSE:MAS) Q4 2021 Earnings Conference Call February 8, 2022 8:00 AM ET Company Participants David Chaika - Vice President, Treasurer and Investor Relations Keith Allman - President and Chief Executive Officer John Sznewajs - Vice President and Chief Financial Officer Conference Call Participants Kenneth Zener - Keybanc Capital Markets Michael Rehaut - J.P. Morgan Adam Baumgarten - Zelman & Associates Mike Dahl - RBC Capital Markets John Lovallo - UBS Susan Maklari - Goldman Sachs Phil Ng ...