What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-08 compared with 2023-02-09 · 122 added, 143 removed, 234 unchanged (53% of the section changed)

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See also “Cautionary Statement Concerning Forward-Looking Statements” at the beginning of this Report.

Amounts may not add due to rounding.

We design, manufacture and distribute branded home improvement and building products.

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We believe that our strong financial position and cash flow generation, together with our investments in our industry-leading branded building products, our continued focus on innovation and disciplined capital allocation, will allow us to drive long-term growth and create value for our shareholders.

We continue to leverage the Masco Operating System, our methodology to drive growth and productivity, and continuous improvement initiatives across our enterprise to identify additional opportunities to improve our business operations.

We continue to leverage the Masco Operating System, our approach to drive growth and productivity, and continuous improvement initiatives across our enterprise to identify additional opportunities to improve our business operations.

From time to time, we may take actions to drive efficiency in the business focused on the strategic rationalization of our businesses, including business consolidations, plant closures, headcount reductions and other cost savings initiatives.

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Due to changing market conditions, we are experiencing, and may continue to experience, lower market demand for our products.

We have been experiencing, and may continue to experience, elevated commodity and other input costs, elevated transportation costs and supply chain disruptions, particularly disruptions related to our ability to source products, components and raw materials.

We have also been experiencing, and may continue to experience, employee-related cost inflation and constraints in hiring qualified employees.

We have been experiencing, and may continue to experience, elevated commodity and other input costs, as well as employee-related cost inflation.

While still elevated, we have recently seen some reduction of certain costs, and we aim to offset the potential unfavorable impact of our costs and lower demand for our products with productivity improvement, pricing, and other initiatives.

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We discuss our consolidated results as well as our Business Segment and Geographic Area results of operations for the year ended December 31, 2023 versus December 31, 2022.

A detailed discussion of our consolidated, Business Segment and Geographic Area results of operations for the years ended December 31, 2021 compared to the year ended December 31, 2020 can be found under “Item 7.

A detailed discussion of our consolidated, Business Segment and Geographic Area results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 can be found under “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 9, 2023.

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Acquisitions (28) — (28)

Divestitures — (32) 32

Net sales, excluding acquisitions and divestitures 8,669 8,343 326

Net sales, excluding acquisitions 7,939 8,680 (741)

Currency translation 8 — 8

Net sales, excluding acquisitions, divestitures and the effect of currency translation $ 8,880 $ 8,343 $ 537

Net sales for 2022 were $8.7 billion, which increased four percent compared to 2021.

Excluding acquisitions, divestitures and the effect of currency translation, net sales increased six percent.

Net sales for 2022 increased primarily due to:

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

Net sales, excluding acquisitions and the effect of currency translation $ 7,947 $ 8,680 $ (733)

Our net sales for 2023 were $7,967 million, which decreased eight percent compared to 2022.

Excluding acquisitions and the effect of currency translation, net sales decreased eight percent.

Our net sales for 2023 decreased primarily due to:

Lower sales volume across the entire company which decreased sales by 11 percent.

Unfavorable sales mix of plumbing products which decreased sales by one percent.

These amounts were partially offset by:

• Lower sales volume which decreased sales by three percent.

• Unfavorable foreign currency translation which decreased sales by two percent.

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

Gross Profit and Gross Margin

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Gross margin 35.6 % 31.3 % 430 bps

The 2022 gross profit margin was negatively impacted by:

• Increased commodity and transportation costs.

• Higher costs due to production inefficiencies and related under absorption, as well as higher excess and obsolete inventory charges resulting from business rationalization activities.

Our 2023 gross profit margin was positively impacted by:

Higher net selling prices.

Cost savings initiatives.

Lower transportation costs.

Receipt of an insurance settlement payment.

Lower excess and obsolete inventory charges.

These amounts were partially offset by:

Lower sales volume.

Unfavorable sales mix.

These amounts were partially offset by:

• Higher net selling prices.

Selling, General and Administrative Expenses

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Selling, general and administrative expenses $ (1,473) $ (1,390) $ (83)

Selling, general and administrative expenses as percentage of net sales 16.0 % 16.9 % (90) bps

Selling, general, and administrative expenses as a percentage of net sales in 2022 was positively impacted by:

• Higher net sales resulting from favorable net selling prices.

• Lower variable compensation.

These amounts were partially offset by:

Selling, general and administrative expenses as a percentage of net sales

(18.5) % (16.0) % (250) bps

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

Increased employee-related costs.

Increased marketing costs.

Lower net sales resulting from lower volumes.

Operating Profit

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Impairment charges for goodwill and other intangible assets 15 26 (11)

Operating profit, excluding rationalization charges and impairment charges $ 1,355 $ 1,454 $ (99)

Insurance settlement (40) — (40)

Operating profit, excluding rationalization charges, impairment charges and insurance settlement $ 1,336 $ 1,355 $ (19)

Operating profit margin, as reported 16.9 % 14.9 % 200 bps

Operating profit margin, excluding rationalization charges and impairment charges 15.6 % 17.4 % (180) bps

Operating profit in 2022 was negatively impacted by:

• Increased commodity and transportation costs.

• Higher costs due to production inefficiencies and related under absorption, as well as higher excess and obsolete inventory charges resulting from business rationalization activities.

• Lower sales volume.

• Unfavorable foreign currency translation.

• Increased marketing costs.

• Unfavorable sales mix.

These amounts were partially offset by:

Operating profit margin, excluding rationalization charges, impairment charges and insurance settlement 16.8 % 15.6 % 120 bps

Our 2023 operating profit was positively impacted by:

Higher net selling prices.

• Lower variable compensation.

Cost savings initiatives.

Lower transportation costs.

Receipt of an insurance settlement payment.

Lower excess and obsolete inventory charges.

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

These amounts were partially offset by:

Lower sales volume.

Increased employee-related costs.

Unfavorable sales mix.

Increased marketing costs.

Unfavorable foreign currency translation.

OTHER INCOME (EXPENSE), NET

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Interest expense $ (106) $ (108) $ 2

The decrease in interest expense is primarily due to the absence of the $168 million loss on debt extinguishment, which was recorded as additional interest expense in connection with the early retirement of debt in the first quarter of 2021.

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

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Other, net $ (4) $ 4 $ (8)

Other, net, for 2022 included:

• $24 million of income from the revaluation of contingent consideration related to a prior acquisition.

This amount was partially offset by:

• $10 million of net periodic pension and post-retirement benefit expense.

• $6 million of losses related to equity method investments.

Other, net, for 2021 included:

• $430 million of net periodic pension and post-retirement benefit expense, which includes $399 million of net settlement loss related to the termination of our qualified domestic defined-benefit pension plans.

• $18 million loss related to the divestiture of our Hüppe GmbH ("Hüppe") business.

• $16 million expense from the revaluation of contingent consideration related to a prior acquisition.

These amounts were partially offset by:

• $14 million gain recognized on the redemption of the preferred stock of ACProducts Holding, Inc.

and $6 million of related dividend income.

• $11 million of earnings related to equity method investments.

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

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

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Effective tax rate (22) % (24) % 2 %

Our 2021 income tax expense included $16 million due to the elimination of disproportionate tax effects from accumulated other comprehensive income related to our debt retirement and pension plan termination and $18 million due to losses providing no tax benefit in certain jurisdictions from our pension plan termination and a business divestiture.

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

INCOME AND INCOME PER COMMON SHARE FROM CONTINUING OPERATIONS- ATTRIBUTABLE TO MASCO CORPORATION

Below is a summary of our income and diluted income per common share from continuing operations, in millions, except per share data, for the years ended December 31, 2022 and 2021:

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

businesses that will occur in early 2024.

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

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

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

Year Ended December 31,

2023 2022 Favorable / (Unfavorable)

Income from continuing operations $ 844 $ 410 $ 434

Diluted income per common share from continuing operations $ 3.63 $ 1.62 $ 2.01

Net income $ 908 $ 844 $ 64

Diluted income per common share $ 4.02 $ 3.63 $ 0.39

Business Segment and Geographic Area Results

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

Year Ended December 31, Percent

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

Year Ended December 31, Percent Change

2023 2022 2023 vs.

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North America $ 6,384 $ 6,978 (9) %

International, principally Europe 1,702 1,751 (3) %

International, particularly Europe

1,583 1,702 (7) %

Total $ 7,967 $ 8,680 (8) %

Year Ended December 31, Percent

Year Ended December 31, Percent Change

2023 2022 2023 vs.

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North America $ 1,210 $ 1,116 8 %

International, principally Europe 268 296 (9) %

International, particularly Europe

229 268 (15) %

Total 1,439 1,384 4 %

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(A) Before general corporate expense, net;

refer to Note Q to the consolidated financial statements for additional information.

refer to Note P to the consolidated financial statements for additional information.

BUSINESS SEGMENT RESULTS DISCUSSION

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Plumbing Products

Net sales in the Plumbing Products segment increased two percent in 2022 due primarily to favorable net selling prices, which increased sales by seven percent, and higher international plumbing sales volume which increased sales by two percent.

These amounts were partially offset by unfavorable foreign currency translation which decreased sales by four percent, lower North America plumbing sales volume which decreased sales by two percent, and the divestiture of Hüppe which decreased sales by one percent.

Net sales in the Plumbing Products segment decreased eight percent in 2023.

In local currencies (including sales in currencies outside their respective functional currencies), net sales decreased seven percent in 2023.

Lower sales volume decreased sales by 11 percent and unfavorable sales mix decreased sales by one percent.

These amounts were partially offset by higher net selling prices, which increased sales by four percent and the acquisition of Sauna360 which increased sales by one percent.

Operating Results

Operating profit in the Plumbing Products segment in 2022 was negatively impacted by increased commodity and transportation costs, higher costs due to production inefficiencies and related under absorption, higher excess and obsolete inventory charges resulting from business rationalization activities, unfavorable foreign currency translation, increased marketing costs and unfavorable sales mix.

These amounts were partially offset by favorable net selling prices and, to a lesser extent, lower variable compensation.

Operating profit in the Plumbing Products segment in 2023 was positively impacted by higher net selling prices, lower transportation and commodity costs, cost savings initiatives, and lower excess and obsolete inventory charges.

These amounts were partially offset by lower sales volume, increased employee-related costs, unfavorable sales mix, unfavorable foreign currency translation and increased marketing costs.

Decorative Architectural Products

Net sales in the Decorative Architectural Products segment increased six percent in 2022, primarily due to favorable net selling prices across the segment.

These amounts were partially offset by lower sales volume across the segment.

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

Operating Results

Operating profit in the Decorative Architectural Products segment in 2022 was negatively impacted by increased commodity and transportation costs, lower sales volume, higher costs due to production inefficiencies and related under absorption, higher excess and obsolete inventory charges resulting from business rationalization activities, and increased marketing costs.

These amounts were partially offset by favorable net selling prices and lower goodwill and other intangible assets impairment charges in our lighting business.

Operating profit in the Decorative Architectural Products segment in 2023 was positively impacted by higher net selling prices, cost savings initiatives, receipt of an insurance settlement payment, lower transportation costs, lower excess and obsolete inventory charges, and lower goodwill and other intangible assets impairment charges in our lighting business.

These amounts were partially offset by lower sales volume, increased commodity costs and increased employee-related costs.

GEOGRAPHIC AREA RESULTS DISCUSSION

North America

North America net sales increased five percent in 2022.

Favorable net selling prices across all of our product categories increased sales by 10 percent.

These amounts were partially offset by lower sales volume, which decreased sales by five percent.

North America net sales decreased nine percent in 2023.

Lower sales volume decreased sales by 11 percent and unfavorable sales mix decreased sales by one percent.

These amounts were partially offset by higher net selling prices, which increased sales by two percent.

Operating Results

North America operating profit in 2022 was negatively impacted by increased commodity and transportation costs, lower sales volume, higher costs due to production inefficiencies and related under absorption, higher excess and obsolete inventory charges resulting from business rationalization activities, and increased marketing costs.

These amounts were partially offset by favorable net selling prices, and to a lesser extent, lower variable compensation and lower goodwill and other intangible assets impairment charges in our lighting business.

International, Principally Europe

International net sales decreased three percent in 2022.

In local currencies (including sales in currencies outside their respective functional currencies), net sales increased eight percent.

Favorable net selling prices of plumbing products increased sales by six percent.

Higher sales volume of plumbing products increased sales by five percent.

These amounts were partially offset by the divestiture of our Hüppe business which decreased sales by two percent and unfavorable sales mix which decreased sales by two percent.

North America operating profit in 2023 was positively impacted by higher net selling prices, cost savings initiatives, lower transportation costs, receipt of an insurance settlement payment, lower excess and obsolete inventory charges, and lower goodwill and other intangible assets impairment charges in our lighting business.

These amounts were partially offset by lower sales volume, increased employee-related costs, unfavorable sales mix and increased marketing costs.

International, Particularly Europe

International net sales decreased seven percent in 2023.

In local currencies (including sales in currencies outside their respective functional currencies), net sales decreased six percent.

Lower sales volume decreased sales by 11 percent and unfavorable sales mix decreased sales by one percent.

These amounts were partially offset by higher net selling prices which increased sales by five percent.

Operating Results

International operating profit in 2022 was negatively impacted by increased commodity and transportation costs, unfavorable foreign currency translation, wage inflation, and unfavorable sales mix.

These amounts were partially offset by favorable net selling prices and higher sales volume of plumbing products.

International operating profit in 2023 was negatively impacted by lower sales volume, unfavorable sales mix and unfavorable foreign currency translation.

These amounts were partially offset by higher net selling prices and lower transportation and commodity costs.

Liquidity and Capital Resources

Overview of Capital Structure

Historically, we have largely funded our growth through cash provided by our operations, the issuance of notes in the financial markets, bank borrowings and the issuance of our common stock, including issuances for certain mergers and acquisitions.

Historically, we have largely funded our growth through cash provided by our operations, the issuance of notes in the financial markets, bank borrowings and, to a lesser extent, the issuance of our common stock, including issuances for certain mergers and acquisitions.

Maintaining high levels of liquidity and focusing on cash generation are among our financial strategies.

Our capital allocation strategy includes reinvesting in our business, balancing share repurchases with potential acquisitions and maintaining a relevant dividend.

Our capital allocation strategy includes reinvesting in our business, maintaining an investment grade credit rating, maintaining a relevant dividend and deploying excess free cash flow to share repurchases or acquisitions.

We had cash and cash investments of approximately $634 million and $452 million at December 31, 2023 and 2022, respectively.

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Our current ratio was 1.7 to 1 and 1.6 to 1 at December 31, 2023 and 2022, respectively.

The decrease in our current ratio is primarily due to the 364-day $500 million term loan that we entered into on April 26, 2022.

The increase in our current ratio is primarily due to the repayment of the 364-day term loan during 2023.

Our total debt as a percent of total capitalization was 97 percent and 109 percent at December 31, 2023 and 2022, respectively.

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

We believe that our present cash balance and cash flows from operations, and borrowing availability under our 2022 Credit Agreement, are sufficient to fund our near-term working capital and other investment needs.

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

We believe that our present cash balance and cash flows from operations, and borrowing availability under our revolving credit agreement, are sufficient to fund our near-term working capital and other investment needs.

We believe that our longer-term working capital and other general corporate requirements will be satisfied through cash flows from operations and, to the extent necessary, from bank borrowings and future financial market activities.

However, due to the changing market conditions and its impact on our customers and suppliers, we are unable to fully estimate the extent of the impact it may have on our future financial condition.

However, due to the changing market conditions and its impact on our customers and suppliers, we are unable to fully estimate the extent of the impact that the changing market conditions may have on our future financial condition.

Capital Expenditures

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Amortization expense totaled $34 million in 2023, compared with $33 million in 2022.

Senior Indebtedness

On March 4, 2021, we issued $600 million of 1.500% Notes due February 15, 2028, $600 million of 2.000% Notes due February 15, 2031 and $300 million of 3.125% Notes due February 15, 2051.

We received proceeds of $1,495 million, net of discount, for the issuance of these Notes.

The Notes are senior indebtedness and are redeemable at our option at the applicable redemption price.

On March 22, 2021, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire our $326 million 5.950% Notes due March 15, 2022, $500 million 4.450% Notes due April 1, 2025, and $500 million 4.375% Notes due April 1, 2026.

In connection with these early retirements, we incurred a loss on debt extinguishment of $168 million, which was recorded as interest expense in the consolidated statement of operations.

Credit Agreement

On April 26, 2022, we entered into a revolving credit agreement (the “2022 Credit Agreement”) with an aggregate commitment of $1.0 billion and a maturity date of April 26, 2027.

Upon entry into the 2022 Credit Agreement, our credit agreement dated March 13, 2019, as amended, with an aggregate commitment of $1.0 billion, was terminated.

Under the 2022 Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $500 million with the current lenders or new lenders.

See Note L to the consolidated financial statements for additional information.

See Note K to the consolidated financial statements for additional information.

The 2022 Credit Agreement contains financial covenants requiring us to maintain (A) a net leverage ratio, as adjusted for certain items, not exceeding 4.0 to 1.0, and (B) an interest coverage ratio, as adjusted for certain items, not less than 2.5 to 1.0.

We were in compliance with all covenants and no borrowings were outstanding under our 2022 Credit Agreement at December 31, 2022.

As of the date of this report, $69 million was borrowed and outstanding at a weighted average interest rate of 5.800%.

We were in compliance with all covenants and no borrowings were outstanding under our 2022 Credit Agreement as of December 31, 2023.

Short-term Borrowings

On May 9, 2023, our Hansgrohe SE subsidiary entered into €70 million ($77 million) of short-term borrowings to support working capital needs.

The loans contained no financial covenants and the entire balance was repaid as of December 31, 2023.

364-day Term Loan

On April 26, 2022, we entered into a 364-day $500 million senior unsecured delayed draw term loan due April 26, 2023 with a syndicate of lenders.

The senior unsecured term loan and commitments thereunder are subject to prepayment or termination at our option and the loans will bear interest at SOFR plus a spread adjustment and 0.70%.

The covenants, including the financial covenants, are substantially the same as those in the 2022 Credit Agreement.

We repaid $300 million during 2022.

On April 26, 2022, we entered into a 364-day $500 million senior unsecured delayed draw term loan (the "term loan") due April 26, 2023 with a syndicate of lenders.

The term loan and commitments thereunder were subject to prepayment or termination at our option and the loans bore interest at SOFR plus a spread adjustment and 0.70%.

The covenants, including the financial covenants, were substantially the same as those in the 2022 Credit Agreement.

We repaid $300 million during 2022 and the remaining $200 million upon the maturity of the term loan on April 26, 2023.

Corporate Development Strategy

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We will continue to review all of our businesses to determine which businesses, if any, may not align with our long-term growth strategy.

During 2021, our Hansgrohe SE subsidiary acquired a 75.1 percent equity interest in Easy Sanitary Solutions B.V., a manufacturer of shower channel drains that offers a wide range of products for barrier-free showering and bathroom wall niches, for approximately €47 million ($58 million), including $52 million of cash and $6 million of debt that will be paid out over two years.

During 2021, we also acquired all of the share capital of Steamist, Inc., a manufacturer of residential steam bath products that are complementary to many of our plumbing products, for approximately $56 million in cash.

During 2021, we completed the divestiture of Hüppe, a manufacturer of shower enclosures and shower trays.

In connection with the divestiture, we recognized a loss of $18 million.

During 2022, we recorded a $2 million pre-tax post-closing gain related to the finalization of working capital items in connection with the divestiture.

In the third quarter of 2023, we acquired all of the share capital of Sauna360 for approximately €124 million ($136 million), net of cash acquired.

Sauna360 has a portfolio of products that includes traditional, infrared, and wood-burning saunas as well as steam showers.

Share Repurchases

We repurchased and retired 16.6 million shares of our common stock in 2022 for approximately $914 million.

Effective October 20, 2022, our Board of Directors authorized the repurchase, for retirement, of up to $2.0 billion of shares of our common stock, exclusive of excise tax, in open-market transactions or otherwise.

We repurchased and retired 6.2 million shares of our common stock in 2023 for approximately $356 million, inclusive of excise tax of $3 million.

This included 0.2 million shares to offset the dilutive impact of restricted stock units granted in 2023.

Effective October 20, 2022, our Board of Directors authorized the repurchase, for retirement, of up to $2.0 billion of shares of our common stock in open-market transactions or otherwise, replacing the previous Board of Directors authorization established in 2021.

At December 31, 2023, we had $1.6 billion remaining under the 2022 authorization.

Consistent with past practice and as part of our long-term capital allocation strategy, we anticipate using approximately $500 million of cash for share repurchases (including shares which will be purchased to offset any dilution from restricted stock units granted as part of our compensation programs) in 2023.

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

Consistent with past practice and as part of our long-term capital allocation strategy, outside of any potential acquisitions, we anticipate using approximately $600 million of cash for share repurchases (including shares which will be purchased to offset any dilution from restricted stock units granted as part of our compensation programs) in 2024.

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

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

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

As part of our capital allocation strategy, the Board of Directors declared a quarterly dividend of $0.285 per share in the first quarter of 2023 with the intention to increase the annual dividend to $1.14 per share.

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

Other Liquidity and Capital Resource Activities

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We also facilitate a voluntary supply chain finance program (the "program") to provide certain of our suppliers with the opportunity to sell receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions.

A third party administers the program;

our responsibility is limited to making payment on the terms originally negotiated with our supplier, regardless of whether the supplier sells its receivable to a financial institution.

We do not enter into agreements with any of the participating financial institutions in connection with the program.

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

All outstanding payments owed under the program are recorded within accounts payable in our consolidated balance sheets.

The amounts owed to participating financial institutions under the program and included in accounts payable for our continuing operations were $29 million and $43 million at December 31, 2022 and 2021, respectively.

We account for all payments made under the program as a reduction to our cash flows from operations and reported within our (decrease) increase in accounts payable and accrued liabilities, net, line within our consolidated statements of cash flows.

The amounts settled through the program and paid to participating financial institutions were $188 million and $220 million for our continuing operations during 2022 and 2021, respectively.

The amounts confirmed as valid under the program and included in accounts payable were $53 million and $50 million at December 31, 2023 and 2022, respectively.

Of the amounts confirmed as valid under the program, the amounts owed to participating financial institutions were $28 million and $29 million at December 31, 2023 and 2022, respectively.

All payments made under the program are recorded as a decrease in accounts payable and accrued liabilities, net, in our consolidated statements of cash flows.

A downgrade in our credit rating or changes in the financial markets could limit the financial institutions’ willingness to commit funds to, and participate in, the program.

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Net cash from operating activities $ 1,413 $ 840

Retirement of notes — (1,326)

Purchase of Company common stock (353) (914)

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Dividends paid to noncontrolling interest (49) (68)

Capital expenditures (224) (128)

Proceeds from short-term borrowings 77 —

Payment of short-term borrowings (77) —

Proceeds from term loan — 500

Payment of term loan (200) (300)

Debt extinguishment costs — (160)

Proceeds from the exercise of stock options 38 1

Acquisition of businesses, net of cash acquired — (57)

Issuance of notes, net of issuance costs — 1,481

Employee withholding taxes paid on stock-based compensation (29) (17)

Proceeds from disposition of:

Businesses, net of cash disposed — 5

Property and equipment 1 —

Financial investments 1 171

Payment of debt (5) (10)

Capital expenditures (243) (224)

Acquisition of business, net of cash acquired

Effect of exchange rate changes on cash and cash investments 6 (18)

Other, net (4) (6)

Cash decrease $ (474) $ (400)

Cash increase (decrease) $ 182 $ (474)

Our working capital days were as follows:

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Operating Activities

Net cash provided by operations of $840 million primarily benefited from operating profit, partially offset by changes in working capital, primarily lower accounts payable and accrued liabilities balances.

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

Financing Activities

Net cash used for financing activities was $1,066 million, primarily due to $914 million for the repurchase and retirement of our common stock (including 0.6 million shares repurchased to offset the dilutive impact of restricted stock units granted in 2022), $300 million for the partial payment of the 364-day term loan, $258 million for the payment of cash dividends, $68 million for dividends paid to noncontrolling interest and $17 million for employee withholding taxes paid on stock-based compensation.

These uses of cash were partially offset by $500 million in proceeds from the 364-day term loan.

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

These uses of cash were partially offset by $38 million of proceeds from the exercise of stock options.

Investing Activities

Net cash used for investing activities was $230 million, primarily driven by $224 million of capital expenditures.

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

Commitments and Contingencies

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

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

Other Commitments

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Payments Due by Period

2023 2024-2025 2026-2027 Beyond

2027 Other Total

2024 2025-2026 2027-2028 Beyond 2028 Other Total

$ 3 $ 5 $ 904 $ 2,042 $ — $ 2,954

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

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

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

Critical Accounting Policies and Estimates

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Our assumptions included U.S.

and Eurozone Gross Domestic Product growing at approximately 1.3 percent and 1.5 percent, respectively, in 2023, and 2.0 percent and 1.5 percent, respectively, per annum over the remainder of the five-year forecast.

and Eurozone Gross Domestic Product both growing at approximately 1.0 percent in 2024, and 2.0 percent and 1.5 percent, respectively, per annum over the remainder of the five-year forecast.

We utilize our weighted average cost of capital of approximately 9.50 percent as the basis to determine the discount rate to apply to the estimated future cash flows.

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

In the fourth quarter of 2022, we recognized a $19 million non-cash goodwill impairment charge related to a reporting unit within our Decorative Architectural Products segment due to competitive market conditions, higher inflationary costs and increased cost of capital in our lighting business.

There is no remaining goodwill associated with the impaired reporting unit.

A 10 percent decrease in the estimated fair value of our other reporting units would not have resulted in any additional goodwill impairment.

In the fourth quarter of 2023, we estimated that future discounted cash flows projected for all of our reporting units were greater than the carrying values.

Accordingly, we did not recognize any impairment charges for goodwill.

A 10 percent decrease in the estimated fair value of our reporting units would not have resulted in any goodwill impairment.

We review our other indefinite-lived intangible assets for impairment annually in the fourth quarter, or as events occur or circumstances change that indicate the assets may be impaired without regard to the business unit.

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As of December 31, 2023, the impaired other indefinite-lived intangible asset had a remaining net carrying value of $28 million.

A 10 percent decrease in the estimated fair value of our other indefinite-lived intangibles assets would not have resulted in an impairment for any of our other indefinite-lived intangible assets.

A 10 percent decrease in the estimated fair value of our other indefinite-lived intangibles assets would have resulted in a $2 million impairment for another one of our other indefinite-lived intangible assets.

Refer to Note H for additional information.

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Changes in these estimates and assumptions may result in a change in judgment regarding the realizability of deferred tax assets.

Refer to Note S for additional information.

We have loss carryforwards in certain state jurisdictions resulting from perpetual losses for which deferred tax assets were not recognized as the likelihood of utilization was remote.

Due to a legal restructuring of certain U.S.

businesses that will occur in early 2024, it is more likely than not a significant portion of these loss carryforwards will be utilized.

As a result, we recognized a $29 million state income tax benefit, net of federal expense, in the fourth quarter of 2023.

Refer to Note R for additional information.

Recently Adopted and Issued Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis