Masco(MAS) - 2022 Q1 - Quarterly Report

Corporate Information This section provides essential company identification, filing specifics, and details on outstanding common stock Filing Details 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] - Registrant: Masco Corporation, incorporated in Delaware[2] - Classification: Large accelerated filer[5] Shares Outstanding 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 This section presents the unaudited financial statements, management's discussion and analysis, and details on internal controls and procedures Item 1. Financial Statements (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 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 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) 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 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 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 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 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][24] B. ACQUISITIONS 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] - 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] - 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] C. DIVESTITURES 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] - 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] D. REVENUE 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] - Allowance for credit losses increased from $6 million at January 1, 2022, to $8 million at March 31, 2022[33] E. DEPRECIATION AND AMORTIZATION 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 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] - Net definite-lived intangible assets were $270 million at March 31, 2022, down from $279 million at December 31, 2021[37] G. FAIR VALUE OF FINANCIAL INSTRUMENTS 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] - 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] H. WARRANTY LIABILITY 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 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] - 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] - 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][52] J. STOCK-BASED COMPENSATION 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] - 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] - Granted 337,790 stock options in Q1 2022 with a weighted average exercise price of approximately $59 per share[60] K. EMPLOYEE RETIREMENT PLANS 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] L. RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME 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 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] N. OTHER INCOME (EXPENSE), NET 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 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] - Cash dividends per common share were $0.280 in Q1 2022, compared to $0.140 in Q1 2021[76] P. OTHER COMMITMENTS AND CONTINGENCIES 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] - Believes the likelihood that the outcome of these matters would have a material adverse effect is remote[77] Q. INCOME TAXES 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - Ongoing uncertainty regarding the COVID-19 pandemic's impact on operations and financial results[82] - Strategies include leveraging strong brand portfolio, industry-leading positions, Masco Operating System, innovation, and disciplined capital allocation to drive long-term growth[83] Consolidated Results of Operations 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 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] - 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] Gross Profit and Gross Margin 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][92] Selling, General and Administrative Expenses 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] Operating Profit 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] Other Income (Expense), Net 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] - 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][102] Income Taxes 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] - 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] Net Income and Income Per Common Share — Attributable to Masco Corporation 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 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 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] - Sales were partially offset by unfavorable foreign currency translation and the Hüppe divestiture, each decreasing sales by 2%[111] - Operating profit was negatively impacted by increased commodity, transportation, employee-related, and marketing costs[112] Decorative Architectural Products 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] - Operating profit was positively impacted by favorable net selling prices and increased sales volume, partially offset by increased commodity, transportation, and marketing costs[114] North America 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] - 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] International, Principally Europe 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] - Sales drivers: Higher sales volume (9% increase), favorable net selling prices (7% increase), and favorable sales mix (1% increase) of plumbing products[119] - Sales were partially offset by the divestiture of the Hüppe business, which decreased sales by 5%[119] - 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] Liquidity and Capital Resources 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] - Net cash used for operating activities was $227 million in Q1 2022, impacted by increases in receivables and inventories[122] - 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] - Cash and cash investments decreased to $479 million at March 31, 2022, from $926 million at December 31, 2021[125] - 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][132] - Anticipates using approximately $900 million of cash for share repurchases during 2022[133] Cautionary Statement Concerning Forward-Looking Statements 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] - 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] Item 4. Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2022[143] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, exhibits, and the official signature for the report Item 1. Legal Proceedings 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] - The company believes the likelihood of a material adverse effect from these claims and litigation is remote[77] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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 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][151] - Certifications by the Chief Executive Officer and Chief Financial Officer are included[151] - Financial information for the quarter ended March 31, 2022, is formatted in Inline XBRL[151] 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] - Date of signature: April 27, 2022[153]