What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-08 compared with 2023-02-09 · 271 added, 332 removed, 1050 unchanged (36% of the section changed)

16 unchanged sentences

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 8.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the

company are being made only in accordance with authorizations of management and directors of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements

in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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As described in Notes A and H to the consolidated financial statements, the Company’s consolidated goodwill balance was $604 million as of December 31, 2023.

Management performs an annual impairment test of goodwill in the fourth quarter of each year, or as events occur or circumstances change that would indicate the carrying value of goodwill may be impaired.

In connection with its annual assessment, management recorded a $19 million non-cash goodwill impairment charge within their Decorative Architectural Products segment.

Potential impairment is identified by comparing the fair value of a reporting unit to its carrying value, including goodwill.

Management estimates fair value by using a discounted cash flow model.

The determination of fair value using the discounted cash flow model requires management to make significant estimates and assumptions related to forecasted sales and operating profits, and the discount rate.

and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s discounted cash flow model, including significant assumptions related to forecasted sales, as applicable.

Management performs an annual impairment test of goodwill in the fourth quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Management compares the fair value of the reporting units to the carrying value of the reporting units for goodwill impairment testing.

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 carrying value exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit.

Management determines fair value using a discounted cash flow method, which requires management to make significant estimates and assumptions related to forecasted sales and operating profits, long-term assumed annual growth rate, and the discount rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting units and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumption related to forecasted sales for certain reporting units.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Company’s reporting units.

These procedures also included, among others, testing management’s process for developing the fair value estimates;

evaluating the appropriateness of the discounted cash flow model;

testing the completeness, accuracy, and relevance of underlying data used in the model;

and, evaluating the significant assumptions used by management related to forecasted sales, as applicable.

Evaluating management’s assumptions related to forecasted sales involved evaluating whether the assumptions used were reasonable considering (i) the current and past performance of the reporting units, (ii) the consistency with external market and industry data as it relates to forecasted sales, and (iii) whether they were consistent with evidence obtained in other areas of the audit.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the reporting units.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting units;

(ii) evaluating the appropriateness of the discounted cash flow method;

(iii) testing the completeness and accuracy of underlying data used in the discounted cash flow method;

and (iv) evaluating the reasonableness of the significant assumption used by management related to forecasted sales for certain reporting units.

Evaluating management’s assumption related to forecasted sales for certain reporting units involved evaluating whether the assumption used was reasonable considering (i) the current and past performance of certain reporting units;

(ii) the consistency with external market and industry data;

and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit.

/s/ PricewaterhouseCoopers LLP

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Total liabilities $ 5,247 $ 5,429

Commitments and contingencies (Note U)

Commitments and contingencies (Note T)

Redeemable noncontrolling interest 18 20

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See notes to consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION and Consolidated Subsidiaries

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( 110 ) ( 104 ) ( 717 )

Income from continuing operations before income taxes 1,193 688 1,131

Income before income taxes 1,238 1,193 688

Income tax expense 278 288 210

Income from continuing operations 905 478 862

Income from discontinued operations, net — — 414

Net income 960 905 478

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Income per common share attributable to Masco Corporation:

Income from continuing operations $ 3.65 $ 1.63 $ 3.05

Income from discontinued operations, net — — 1.55

Net income $ 4.03 $ 3.65 $ 1.63

Income from continuing operations $ 3.63 $ 1.62 $ 3.04

Income from discontinued operations, net — — 1.55

Net income $ 4.02 $ 3.63 $ 1.62

Amounts attributable to Masco Corporation:

Income from continuing operations $ 844 $ 410 $ 810

Income from discontinued operations, net — — 414

Net income $ 844 $ 410 $ 1,224

See notes to consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION and Consolidated Subsidiaries

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Net income attributable to Masco Corporation $ 908 $ 844 $ 410

Other comprehensive (loss) income, net of tax (Note P):

Other comprehensive income (loss), net of tax (Note O)

Cumulative translation adjustment $ 35 $ ( 60 ) $ ( 32 )

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Pension and other post-retirement benefits ( 8 ) 54 384

Other comprehensive (loss) income, net of tax ( 6 ) 359 55

Other comprehensive (loss) income attributable to the noncontrolling interest:

Other comprehensive income (loss), net of tax 27 ( 6 ) 359

Other comprehensive income (loss) attributable to noncontrolling interest:

Cumulative translation adjustment $ 5 $ ( 9 ) $ ( 19 )

Pension and other post-retirement benefits ( 2 ) 9 4

Other comprehensive (loss) income attributable to Masco Corporation $ ( 6 ) $ 374 $ 37

Other comprehensive income (loss) attributable to Masco Corporation $ 24 $ ( 6 ) $ 374

Total comprehensive income $ 987 $ 899 $ 837

2 unchanged sentences

See notes to consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION and Consolidated Subsidiaries

7 unchanged sentences

Fair value adjustment to contingent earnout obligation — ( 24 ) 16

Display amortization — — 2

Deferred income taxes ( 32 ) ( 15 ) ( 68 )

1 unchanged sentence

Loss (gain) on investments, net — 5 ( 25 )

Loss (gain) on disposition of businesses, net 1 18 ( 602 )

Loss on disposition of businesses, net — 1 18

Pension and other post-retirement benefits ( 6 ) ( 3 ) 312

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Dividends paid-in-kind — — ( 6 )

Increase in receivables ( 15 ) ( 64 ) ( 141 )

Increase in inventories ( 43 ) ( 350 ) ( 89 )

Decrease (increase) in receivables 42 ( 15 ) ( 64 )

Decrease (increase) in inventories 233 ( 43 ) ( 350 )

(Decrease) increase in accounts payable and accrued liabilities, net ( 34 ) ( 225 ) 190

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

Proceeds from short-term borrowings 77 — —

Payment of short-term borrowings ( 77 ) — —

Proceeds from term loan — 500 —

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Businesses, net of cash disposed — — 5

Property and equipment 1 — 1

Financial investments 2 1 171

Other, net ( 6 ) ( 7 ) ( 3 )

Net cash (for) from investing activities ( 230 ) ( 12 ) 531

Net cash for investing activities ( 383 ) ( 230 ) ( 12 )

Effect of exchange rate changes on cash and cash investments 6 ( 18 ) ( 20 )

CASH AND CASH INVESTMENTS:

(Decrease) increase for the year ( 474 ) ( 400 ) 629

Increase (decrease) for the year 182 ( 474 ) ( 400 )

At January 1 452 926 1,326

1 unchanged sentence

See notes to consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION and Consolidated Subsidiaries

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($ 1 par value)

Capital Retained

Earnings Accumulated

Comprehensive

(Loss) Income Noncontrolling

Capital Retained Earnings (Deficit) Accumulated Other Comprehensive (Loss) Income Noncontrolling

Balance, January 1, 2021 $ 421 $ 258 $ — $ 79 $ ( 142 ) $ 226

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Dividends declared to noncontrolling interest ( 43 ) — — — — ( 43 )

Redeemable noncontrolling interest - redemption adjustment ( 2 ) — — ( 2 ) — —

Stock-based compensation 55 — 55 — — —

Balance, December 31, 2021 $ 56 $ 241 $ — $ ( 652 ) $ 232 $ 235

Total comprehensive income 836 — — 410 374 52

Total comprehensive income (loss) 900 — — 844 ( 6 ) 62

Shares issued 1 1 — — — —

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Balance, December 31, 2022 $ ( 262 ) $ 225 $ 16 $ ( 947 ) $ 226 $ 218

Total comprehensive income (loss) 900 — — 844 ( 6 ) 62

Total comprehensive income 987 — — 908 24 55

Shares issued 27 2 25 — — —

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Dividends declared to noncontrolling interest ( 49 ) — — — — ( 49 )

Redeemable noncontrolling interest - redemption adjustment 2 — — 2 — —

Stock-based compensation 26 — 26 — — —

1 unchanged sentence

See notes to consolidated financial statements.

Amounts may not add due to rounding.

MASCO CORPORATION

1 unchanged sentence

ACCOUNTING POLICIES

Basis of Presentation.

The accompanying consolidated financial statements and footnotes have been prepared in accordance with accounting principles generally accepted ("GAAP") in the United States of America.

Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes.

Principles of Consolidation.

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Use of Estimates and Assumptions in the Preparation of Financial Statements.

The preparation of financial statements in conformity with accounting principles generally accepted ("GAAP") in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results may differ from these estimates and assumptions.

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Maintenance and repair costs are charged against earnings as incurred.

We review our property and equipment as events occur or circumstances change that would more likely than not reduce the fair value of the property and equipment below its carrying amount.

At the asset group level, we review our property and equipment as events occur or circumstances change that would more likely than not reduce the fair value of the property and equipment below its carrying amount.

If the carrying amount of property and equipment is not recoverable from its undiscounted cash flows, then we would recognize an impairment loss for the difference between the carrying amount and the current fair value.

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Depreciation expense is computed principally using the straight-line method over the estimated useful lives of the assets.

Annual depreciation rates are as follows:

buildings and land improvements, 2 to 10 percent, computer hardware and software, 17 to 33 percent, and machinery and equipment, 5 to 33 percent.

Depreciation expense, including discontinued operations, was $ 112 million in 2022, $ 111 million in 2021 and $ 105 million in 2020.

The estimated useful lives of depreciable assets are as follows:

buildings and land improvements, 20 to 40 years, computer hardware and software, three to six years , and machinery and equipment, three to 25 years.

Depreciation expense was $ 115 million in 2023, $ 112 million in 2022 and $ 111 million in 2021.

We determine if an arrangement is a lease at inception.

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We currently do not have any derivative instruments for which we have designated hedge accounting.

Refer to Note I for additional information regarding fair value of financial instruments.

We offer limited warranties on certain products with warranty periods lasting up to the lifetime of the product to the original consumer purchaser.

We offer limited warranties on certain products with warranty periods that can last up to the lifetime of the product to the original purchaser.

At the time of sale, we accrue a warranty liability for the estimated future cost to provide products, parts or services to repair or replace products, or refunds to satisfy our warranty obligations.

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however, actual claims incurred could differ from our original estimates which would require us to adjust our previously established accruals.

Refer to Note U for additional information on our warranty accrual.

Refer to Note T for additional information on our warranty accrual.

A significant portion of our business is at the consumer retail level through home center retailers and other major retailers.

A consumer may return a product to a retail outlet that is a warranty return.

However, certain retail outlets do not distinguish between warranty and other types of returns when they claim a return deduction from us.

A consumer may return a product to a retailer that is a warranty return.

However, certain retailers do not distinguish between warranty and other types of returns when they claim a return deduction from us.

Our revenue recognition policy takes into account this type of return when recognizing revenue, and an estimate of these amounts is recorded as a deduction to net sales at the time of sale.

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We issue stock-based incentives in various forms to our employees and non-employee Directors.

Outstanding stock-based incentives were in the form of restricted stock units ("RSUs"), performance restricted stock units ("PRSUs"), stock options, long-term stock awards and phantom stock awards.

Outstanding stock-based incentives were in the form of restricted stock units ("RSUs"), performance restricted stock units ("PRSUs"), stock options, long-term stock awards, phantom stock awards, and stock appreciation rights ("SARs").

We measure compensation expense for RSUs and long-term stock awards at the market price of our common stock at the grant date.

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the liability is remeasured and adjusted at the end of each reporting period until the awards are fully-vested and paid to the employees.

In December 2019, our Compensation and Talent Committee of the Board of Directors (the "Compensation Committee") amended the terms of equity awards under our 2014 Long Term Stock Incentive Plan to provide that newly issued RSUs, stock options and phantom stock awards vest over a three-year period and redefined retirement-eligibility as age 65 or age 55 with at least 10 years of continuous service.

We measure compensation expense for SARs using a Black-Scholes option pricing model;

such expense is recognized ratably over the vesting period.

SARs are linked to the value of our common stock on the date of grant and are settled in cash upon exercise.

We account for SARs using the fair value method, which requires outstanding SARs to be classified as liability-based awards.

The liability is remeasured and adjusted at the end of each reporting period until the SARs are exercised and payment is made to the employees or the SARs expire.

In December 2019, our Compensation and Talent Committee of the Board of Directors (the "Compensation Committee") amended the terms of equity awards under our 2014 Long Term Stock Incentive Plan to provide that newly issued RSUs, stock options, phantom stock awards and SARs vest over a three-year period and redefined retirement-eligibility as age 65 or age 55 with at least 10 years of continuous service.

As such, compensation expense for equity awards granted in 2020 and thereafter is recognized ratably over the shorter of the vesting period, typically three years , or the length of time until the grantee becomes retirement eligible.

For prior year grants, expense was recognized ratably over the shorter of the vesting period of the long-term stock awards, stock options and phantom stock awards, typically five years , or the length of time until the grantee became retirement-eligible, generally at age 65.

For grants prior to 2020, expense was recognized ratably over the shorter of the vesting period of the long-term stock awards, stock options and phantom stock awards, typically five years , or the length of time until the grantee became retirement-eligible, generally at age 65.

Expense for PRSUs is recognized ratably over the three-year vesting period of the units.

Refer to Note M for additional information on stock-based compensation.

Refer to Note L for additional information on stock-based compensation.

Noncontrolling Interest.

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In our consolidated statements of cash flows, the cash flow from discontinued operations are not separately classified.

Refer to Note C for further information regarding our discontinued operations.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ACCOUNTING POLICIES (Concluded)

ACCOUNTING POLICIES (Continued)

Income Taxes.

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Recently Adopted Accounting Pronouncements.

In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock.

We adopted this standard for annual periods beginning January 1, 2022.

The adoption of this new standard did not impact our financial position or results of operations.

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805):

Accounting for Acquired Contract Assets and Contract Liabilities from Contracts with Customers.” ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with Topic 606 as if the acquirer had originated the contracts.

We adopted this standard for annual periods beginning January 1, 2022.

The adoption of this new standard did not impact our financial position or results of operations.

Recently Issued Accounting Pronouncements.

In September 2022, the FASB issued ASU 2022-04, "Liabilities – Supplier Finance Programs (Subtopic 405-50):

In September 2022, the Financial Accounting Standards Board ("FASB") issued ASU 2022-04, "Liabilities – Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations,” which requires that an entity that uses a supplier finance program in connection with the purchase of goods or services disclose information about the program’s nature, activity during the period, changes from period to period, and potential magnitude.

ASU 2022-04 is effective for annual periods on a retrospective basis, including interim periods within those annual periods, beginning January 1, 2023, except for the amendment on rollforward information, which is effective prospectively for annual periods beginning January 1, 2024.

The adoption of this guidance will modify our disclosures, but will not have a material impact on our financial statements.

We adopted this standard for annual periods on a retrospective basis, including interim periods within those annual periods, beginning January 1, 2023, except for the amendment on rollforward information, which is effective prospectively for annual periods beginning January 1, 2024 and will be adopted at that time.

The adoption of this guidance modified our disclosures, but did not have an impact on our financial position and results of operations.

Recently Issued Accounting Pronouncements.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which requires additional income tax disclosures, particularly regarding the effective tax rate reconciliation and income taxes paid.

ASU 2023-09 is effective on a prospective basis for annual periods beginning January 1, 2025, with early adoption permitted.

The adoption of this guidance will modify our disclosures, but will not have an impact on our financial position and results of operations.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” which requires additional disclosures regarding an entity's reportable segments, particularly regarding significant segment expenses, as well as information relating to the chief operating decision maker.

ASU 2023-07 is effective on a retrospective basis for annual periods beginning January 1, 2024, and interim periods within those annual periods beginning January 1, 2025, with early adoption permitted.

The adoption of this guidance will modify our disclosures, but will not have an impact on our financial position and results of operations.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ACCOUNTING POLICIES (Concluded)

In March 2023, the FASB issued ASU 2023-02, "Investments – Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method,” which permits an entity to elect to account for their tax equity investments using the proportional amortization method if certain conditions are met, regardless of the tax credit program from which the income tax credits are received.

ASU 2023-02 is effective for annual periods on either a modified retrospective or retrospective basis, including interim periods within those annual periods, beginning January 1, 2024.

Early adoption is permitted.

We plan to adopt this standard beginning January 1, 2024, and do not anticipate that the adoption of this new standard will have a material effect on our financial position or results of operations.

In the third quarter of 2023, we acquired all of the share capital of Sauna360 Group Oy (“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.

The business is included within the Plumbing Products segment.

In connection with this acquisition, we recognized $ 22 million of indefinite-lived intangible assets, which is related to trademarks, and $ 45 million of definite-lived intangible assets, primarily related to customer relationships.

The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of 16 years.

We also recognized $ 60 million of goodwill, which is not tax deductible, and is related primarily to the expected synergies from combining the operations into our business.

During the fourth quarter of 2023, we updated the allocation of the purchase price to certain identifiable assets and liabilities based on analysis of information as of the acquisition date that has been made available through December 31, 2023, which resulted in a $ 1 million decrease to goodwill.

The purchase price allocation for this acquisition is based on analysis of information as of the acquisition date that was available through December 31, 2023, and will be updated through the measurement period, if necessary.

In the third quarter of 2021, we acquired all of the share capital of Steamist, Inc.

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In the first quarter of 2021, our Hansgrohe SE subsidiary acquired a 75.1 percent equity interest in Easy Sanitary Solutions B.V.

("ESS"), for approximately € 47 million ($ 58 million), including $ 52 million of cash and $ 6 million of debt that will be paid out over two years less any pending or settled indemnity matters.

("ESS"), for approximately € 47 million ($ 58 million), including $ 52 million of cash and $ 6 million of debt that was paid out over two years less any pending or settled indemnity matters.

The cash payment was made to a third-party notary on December 29, 2020 for the acquisition of this equity interest in advance of the transaction closing on January 4, 2021.

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Working capital and other adjustments were finalized with the seller in the fourth quarter of 2021, resulting in no significant changes.

The remaining 24.9 percent equity interest in ESS is subject to a call and put option that is exercisable by Hansgrohe SE or the sellers, respectively, any time after December 31, 2023.

The redemption value of the call and put option is the same and based on a floating EBITDA value.

The call and put options were determined to be embedded within the redeemable noncontrolling interest and were recorded as temporary equity in the consolidated balance sheets.

We elected to adjust the redeemable noncontrolling interest to its full redemption amount directly into retained deficit.

In the fourth quarter of 2020, we acquired substantially all of the net assets of Kraus USA Inc.

("Kraus"), a designer and distributor of sinks, faucets and accessories for the kitchen and bathroom, for approximately $ 103 million and an additional cash payment of up to $ 50 million to be paid in 2023, contingent upon the achievement of certain financial performance metrics for the year ending December 31, 2022.

As of the closing date of the acquisition, the contingent consideration was assigned a fair value of approximately $ 8 million.

Refer to Note I for additional information regarding the measurement of the contingent consideration liability.

This business expands our product offerings to our customers and our online presence under the Kraus brand.

This business is included in our Plumbing Products segment.

In connection with this acquisition, we recognized $ 25 million of indefinite-lived intangible assets, which is related to trademarks, and $ 49 million of definite-lived intangible assets, primarily related to customer relationships.

The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of 10 years.

We also recognized $ 20 million of goodwill, which is generally tax deductible, and is related primarily to the expected synergies from combining the operations into our business.

During the first quarter of 2021, we revised the allocation of the purchase price to certain identifiable assets and liabilities based on analysis of information as of the acquisition date, which resulted in a $ 1 million decrease to goodwill.

The working capital adjustments were finalized with the seller in the second quarter of 2021, resulting in no significant changes.

MASCO CORPORATION

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ACQUISITIONS (Concluded)

In the fourth quarter of 2020, we acquired substantially all of the net assets of Work Tools International Inc.

and Elder & Jenks, LLC (collectively, "Work Tools") for approximately $ 53 million, including $ 48 million of cash and $ 5 million of debt that was paid out in 18 months less any pending or settled indemnity matters.

Work Tools expands our product offering to our customers as it is a leading manufacturer of high-quality precision painting tools and accessories including brushes, rollers and mini rollers for DIY and professionals.

This business is included in our Decorative Architectural Products segment.

In connection with this acquisition, we recognized $ 7 million of indefinite-lived intangible assets, which is related to trademarks, and $ 27 million of definite-lived intangible assets, primarily related to customer relationships.

The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of 12 years.

We also recognized $ 7 million of goodwill, which is generally tax deductible, and is related primarily to the expected synergies from combining the operations into our business.

The working capital adjustments were finalized with the seller in the first quarter of 2021, resulting in no significant changes.

In the first quarter of 2020, we acquired all of the share capital of SmarTap A.Y Ltd.

("SmarTap") for approximately $ 24 million in cash.

SmarTap is a developer of a smart bathing system that monitors and controls the temperature and flow of water.

This acquisition provides an adaptable solution for a wide range of products as it is compatible with showerheads, hand showers, spouts and shower jets.

This business is included in our Plumbing Products segment.

In connection with this acquisition, we recognized $ 10 million of definite-lived intangible assets, primarily related to technology, which is being amortized on a straight-line basis over a weighted average amortization period of 5 years.

We also recognized $ 14 million of goodwill, which is not tax deductible, and is related primarily to the expected synergies from combining the operations into our business.

The remaining 24.9 percent equity interest in ESS was subject to a call and put option that was exercisable by Hansgrohe SE or the sellers, respectively, any time after December 31, 2023.

The redemption value of the call and put option was the same and based on a floating EBITDA value.

The call and put options were determined to be embedded within the redeemable noncontrolling interest and were recorded as temporary equity in the consolidated balance sheets.

We elected to adjust the redeemable noncontrolling interest to its full redemption amount directly into retained deficit.

On January 4, 2024, the sellers exercised their put option to sell the remaining 24.9 percent equity interest in ESS for € 12 million ($ 14 million).

This amount is based on information as of the date of this report and will be updated upon completion of the sale, if necessary.

On May 31, 2021, we completed the divestiture of our Hüppe GmbH ("Hüppe") business, a manufacturer of shower enclosures and shower trays.

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Prior to the divestiture, the results of the business were included in our Plumbing Products segment.

On November 6, 2019, we completed the divestiture of our Milgard Windows and Doors business ("Milgard"), a manufacturer and distributor of windows and doors for proceeds of approximately $ 720 million, net of cash disposed.

During the second quarter of 2020, a $ 17 million pre-tax post-closing adjustment related to the finalization of working capital items was recorded to income from discontinued operations, net in the consolidated statement of operations, as a gain on the divestiture of Milgard.

As of December 31, 2020, we received $ 17 million in cash, which was presented in investing activities on the consolidated statement of cash flow as proceeds from disposition of businesses, net of cash disposed.

All post-closing adjustments related to our divestiture of Milgard were finalized with the buyer in the second quarter of 2020.

On November 14, 2019, we entered into a definitive agreement to sell Masco Cabinetry LLC ("Cabinetry"), a manufacturer of cabinetry products.

We completed the divestiture of Cabinetry on February 18, 2020 for proceeds of approximately $ 989 million, including $ 853 million, net of cash disposed.

The remaining $ 136 million was accounted for as preferred stock issued by ACProducts Holding, Inc., a holding company of the buyer;

refer to Note R for additional information.

The working capital adjustment was finalized with the buyer in the second quarter of 2020, resulting in no significant changes to net proceeds.

In connection with the sale, we recognized a gain on the divestiture of $ 585 million for the year ended December 31, 2020, which was included in income from discontinued operations, net in the consolidated statement of operations.

We determined that the previously reported Cabinetry Products segment met the criteria to be classified as a discontinued operation as Cabinetry represented all of our cabinet businesses and all remaining businesses in the Cabinetry Products segment.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DIVESTITURES (Concluded)

As the sale of Milgard and Cabinetry represented a strategic shift that will have a major effect on our operations and financial results, these businesses were presented in discontinued operations separate from continuing operations for all periods presented.

In addition, depreciation and amortization, capital expenditures, and significant non-cash operating and investing activities related to discontinued operations were separately disclosed.

The results of Milgard recorded in income from discontinued operations before income tax was income of $ 2 million for the year ended December 31, 2020.

The results of Cabinetry recorded in income from discontinued operations before income tax was a loss of $ 7 million for the year ended December 31, 2020.

The major classes of line items constituting income from discontinued operations, net, in millions:

Year Ended December 31,

2022 2021 2020

Net sales $ — $ — $ 101

Cost of sales — — 78

Gross profit — — 23

Selling, general and administrative expenses — — 28

Loss from discontinued operations — — ( 5 )

Gain on disposal of discontinued operations, net — — 602

Income before income tax — — 597

Income tax expense — — ( 183 )

Income from discontinued operations, net $ — $ — $ 414

Our revenues are derived from sales to customers in North America and Internationally, principally Europe.

Net sales from these geographic markets, by segment, were as follows, in millions:

Our revenues are derived from sales to customers in North America and Internationally, particularly Europe.

Net sales from these geographic areas, by segment, were as follows, in millions:

Year Ended December 31, 2023

Plumbing Products Decorative Architectural Products Total

Primary geographic markets:

Primary geographic areas:

North America $ 3,259 $ 3,125 $ 6,384

International, principally Europe 1,702 — 1,702

International, particularly Europe 1,583 — 1,583

Total $ 4,842 $ 3,125 $ 7,967

1 unchanged sentence

Plumbing Products Decorative Architectural Products Total

Primary geographic markets:

Primary geographic areas:

North America $ 3,550 $ 3,428 $ 6,978

International, principally Europe 1,751 — 1,751

International, particularly Europe 1,702 — 1,702

Total $ 5,252 $ 3,428 $ 8,680

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

REVENUE (Concluded)

Year Ended December 31, 2021

Plumbing Products Decorative Architectural Products Total

Primary geographic markets:

Primary geographic areas:

North America $ 3,384 $ 3,240 $ 6,624

International, principally Europe 1,383 — 1,383

International, particularly Europe 1,751 — 1,751

Total $ 5,135 $ 3,240 $ 8,375

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

REVENUE (Concluded)

We recognized increases t o revenue o f $ 12 million, $ 20 million, and $ 9 million in 2023, 2022, and 2021, respectively, for variable consideration related to performance obligations settled in previous periods.

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Our contract assets generally become unconditional and are reclassified to receivables in the quarter subsequent to each balance sheet date.

Our contract asset balance was $ 1 million at both December 31, 2022 and 2021.

Our contract asset balance was $ 3 million and $ 1 million at December 31, 2023 and 2022, respectively.

We record contract liabilities primarily for deferred revenue.

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Recoveries of amounts previously written off 1 1

Balance at end of year $ 8 $ 6

______________________________

(A) As a result of Hüppe being divested in May 2021, $ 1 million for the year ended December 31, 2021 was removed from allowance for credit losses.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Balance at December 31 $ 11 $ 8

The components of inventory were as follows, in millions:

5 unchanged sentences

Inventories, which include purchased parts, materials, direct labor and applied overhead, are stated at the lower of cost or net realizable value, with cost determined primarily by use of the first-in, first-out method, and to a lesser extent the average cost method.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

We have operating and finance leases primarily for corporate offices, manufacturing facilities, warehouses, vehicles, and equipment.

Our leases have remaining lease terms up to 19 years, some of which may include one or more renewal options with terms to extend the lease for up to an additional 15 years, and some of which may include options to terminate the leases prior to their expiration.

The components of lease cost included in income from continuing operations were as follows, in millions:

The components of lease cost included in net income were as follows, in millions:

Year Ended December 31,

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______________________________

(A) Includes $ 2 million of ROU assets obtained in exchange for new lease obligations related to the acquisitions of ESS and Steamist in 2021.

Includes $ 9 million of ROU assets obtained in exchange for new lease obligations related to the acquisitions of Kraus and Work Tools in the fourth quarter of 2020.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

LEASES (Concluded)

(A) Includes $ 6 million and $ 2 million of ROU assets obtained in exchange for new lease obligations related to the acquisitions of Sauna360 in 2023 and ESS and Steamist in 2021, respectively.

Certain other information related to leases was as follows:

7 unchanged sentences

Finance leases 3.3 % 3.3 % 3.3 %

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

LEASES (Concluded)

Supplemental balance sheet information related to leases was as follows, in millions:

5 unchanged sentences

Long-term debt — 17 — 20

Gross ROU assets under finance leases recorded within property and equipment, net was $ 41 million and $ 42 million at December 31, 2022 and 2021, respectively, and accumulated amortization associated with these leases was $ 20 million and $ 18 million, at December 31, 2022 and 2021, respectively.

Gross ROU assets under finance leases recorded within property and equipment, net was $ 41 million at both December 31, 2023 and 2022, and accumulated amortization associated with these leases was $ 23 million and $ 20 million, at December 31, 2023 and 2022, respectively.

At December 31, 2023, future maturities of lease liabilities were as follows, in millions:

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Total $ 302 $ 20

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

PROPERTY AND EQUIPMENT

7 unchanged sentences

Total $ 1,121 $ 975

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill at December 31, 2023, by segment, was as follows, in millions:

Gross Goodwill At December 31, 2022 Accumulated

Losses Net Goodwill At December 31, 2022

Gross Goodwill At December 31, 2023 Accumulated Impairment Losses Net Goodwill At December 31, 2023

Plumbing Products $ 677 $ ( 301 ) $ 377

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The changes in the carrying amount of goodwill for years ended December 31, 2023 and 2022, by segment, were as follows, in millions:

Gross Goodwill At December 31, 2021 Accumulated

Losses Net Goodwill At December 31, 2021 Acquisitions Pre-tax

Charge Other (B) Net Goodwill At December 31, 2022

Plumbing Products (A)

$ 623 $ ( 301 ) $ 322 $ — $ — $ ( 12 ) $ 310

Gross Goodwill At December 31, 2022 Accumulated Impairment Losses Net Goodwill At December 31, 2022 Acquisitions (A) Pre-tax Impairment Charge Foreign Currency Translation Net Goodwill At December 31, 2023

Plumbing Products $ 611 $ ( 301 ) $ 310 $ 59 $ — $ 7 $ 377

Decorative Architectural Products 366 ( 139 ) 227 — — — 227

366 ( 120 ) 246 — ( 19 ) — 227

Total $ 977 $ ( 440 ) $ 537 $ 59 $ — $ 7 $ 604

Gross Goodwill At December 31, 2020 Accumulated

Losses Net Goodwill At December 31, 2020 Acquisitions Pre-tax

Charge Other (B) Net Goodwill At December 31, 2021

Gross Goodwill At December 31, 2021 Accumulated Impairment Losses Net Goodwill At December 31, 2021 Acquisitions Pre-tax Impairment Charge Foreign Currency Translation Net Goodwill At December 31, 2022

Plumbing Products $ 623 $ ( 301 ) $ 322 $ — $ — $ ( 12 ) $ 310

Decorative Architectural Products 366 ( 120 ) 246 — ( 19 ) — 227

365 ( 75 ) 290 1 ( 45 ) — 246

Total $ 989 $ ( 421 ) $ 568 $ — $ ( 19 ) $ ( 12 ) $ 537

______________________________

(A) As a result of Hüppe being divested in May 2021, both gross goodwill and accumulated impairment losses for the Plumbing Products segment were reduced by $ 39 million.

(B) Other consists of the effect of foreign currency translation.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

GOODWILL AND OTHER INTANGIBLE ASSETS (Concluded)

(A) In the third quarter of 2023, we acquired Sauna360.

Refer to Note B for additional information.

Other indefinite-lived intangible assets were $ 108 million and $ 102 million at December 31, 2023 and 2022, respectively, and principally included registered trademarks.

We completed our annual impairment testing of goodwill and other indefinite-lived intangible assets in the fourth quarters of 2023, 2022 and 2021.

We recognized a $ 15 million non-cash impairment charge within our Decorative Architectural Products segment to other indefinite-lived intangible assets in the fourth quarter of 2023 due to competitive market conditions and increased cost of capital in our lighting business.

We recognized a $ 19 million and $ 7 million non-cash impairment charge within our Decorative Architectural Products segment to goodwill and other indefinite-lived intangible assets, respectively, in the fourth quarter of 2022 due to competitive market conditions, higher inflationary costs and increased cost of capital in our lighting business.

1 unchanged sentence

There was no impairment of goodwill for any of our reporting units or of our other indefinite-lived intangible assets in any of these years, other than as disclosed above.

The carrying value of our definite-lived intangible assets wa s $ 248 million (net of accumulated amortization o f $ 94 million) at December 31, 2022 and $ 279 million (net of accumulated amortization of $ 75 million) at December 31, 2021 and principally included customer relationships with a weighted average amortization period of 15 years in both 2022 and 2021.

Amortization expense, including discontinued operations, related to the definite-lived intangible assets wa s $ 29 million, $ 31 million and $ 24 million in 2022, 2021 and 2020, respectively.

The carrying value of our definite-lived intangible assets wa s $ 269 million (net of accumulated amortization o f $ 120 million) at December 31, 2023 and $ 248 million (net of accumulated amortization of $ 94 million) at December 31, 2022 and principally included customer relationships with a weighted average amortization period of 16 years in 2023 and 15 years in 2022.

Amortization expense related to the definite-lived intangible assets wa s $ 31 million, $ 29 million and $ 31 million in 2023, 2022 and 2021, respectively.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

GOODWILL AND OTHER INTANGIBLE ASSETS (Concluded)

At December 31, 2023, amortization expense related to the definite-lived intangible assets during each of the next five years will be as follows:

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2025 – $ 26 million;

2025 – $ 23 million, 2026 – $ 21 million and 2027 – $ 21 million.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Kraus Acquisition Contingent Consideration.

As described in Note B, an additional cash payment of up to $ 50 million related to the Kraus acquisition was contingent upon the achievement of certain financial performance metrics for the year ended December 31, 2022.

The measurement of the liability for contingent consideration was based on significant inputs that were not observable in the market, and were therefore classified as Level 3 inputs.

Examples of utilized unobservable inputs were estimated future revenues and earnings of the acquired business and an applicable discount rate.

The estimate of the liability fluctuated for changes in the forecast of the acquired business' future revenues and earnings, as a result of actual levels achieved, or in the discount rate used to determine the present value of contingent future cash flows.

All subsequent remeasurements from the initial estimate at the time of acquisition were recorded in other, net in the consolidated statements of operations, as described in Note R.

The financial performance metrics were not met and the fair value of the liability was nil as of December 31, 2022.

The fair value of the liability was estimated to be $ 24 million as of December 31, 2021, using probability weighted discounted cash flows and a discount rate that reflected the uncertainty surrounding the expected outcomes, which we believe was appropriate and representative of a market participant assumption.

Fair Value of Debt.

The fair value of our short-term and long-term fixed-rate debt instruments is based principally upon modeled market prices for the same or similar issues, which are Level 1 inputs.

The 364-day term loan has an interest rate that resets monthly and the fair value of this instrument approximates the carrying value at December 31, 2022.

The aggregate estimated market value of our short-term and long-term debt at December 31, 2022 was approximately $ 2.7 billion, compared with the aggregate carrying value of $ 3.2 billion.

The aggregate estimated market value of our short-term and long-term debt at December 31, 2021 was approximately $ 3.2 billion, compared with the aggregate carrying value of $ 3.0 billion.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The components of other assets were as follows, in millions:

At December 31,

Deferred tax assets (Note S) $ 60 $ 57

Equity method investments 10 18

Other investments 12 7

Total $ 113 $ 114

2026 – $ 25 million;

2027 – $ 24 million and 2028 – $ 21 million.

The increase in our indefinite-lived and definite-lived intangible assets is primarily a result of our acquisition of Sauna360.

SUPPLIER FINANCE PROGRAM

We 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 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.

ACCRUED LIABILITIES

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Salaries, wages and commissions 189 136

Deferred revenue 61 67

Income taxes payable 48 34

Employee retirement plans 66 41

Deferred revenue 45 61

Operating lease liabilities (Note F) 44 39

Warranty (Note U) 34 31

Interest 30 29

Warranty (Note T) 42 34

Income taxes payable 32 48

Product returns 30 25

Insurance reserves 20 27

Interest 29 30

Property, payroll and other taxes 22 16

Insurance reserves 20 20

Total $ 852 $ 807

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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.

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.

The 2022 Credit Agreement provides for an unsecured revolving credit facility available to us and one of our foreign subsidiaries in U.S.

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We can also borrow swingline loans up to $ 125 million and obtain letters of credit of up to $ 25 million.

Outstanding letters of credit under the 2022 Credit Agreement reduce our borrowing capacity and we had no outstanding letters of credit at December 31, 2022.

Outstanding letters of credit under the 2022 Credit Agreement reduce our borrowing capacity and we had no outstanding letters of credit under the 2022 Credit Agreement at December 31, 2023.

MASCO CORPORATION

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We were in compliance with all covenants and no borrowings were outstanding at December 31, 2023.

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

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 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.

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.

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.

3 unchanged sentences

In connection with these early retirements, we incurred a loss on debt extinguishment of $ 168 million for the year ended December 31, 2021, which was recorded as interest expense in the consolidated statement of operations.

On September 18, 2020, we issued $ 300 million of 2.000 % Notes due October 1, 2030 (the "2030 Notes") and received proceeds of $ 300 million, net of discount, for the issuance of the 2030 Notes.

Also on September 18, 2020, we issued an incremental $ 100 million of our existing 4.500 % Notes due May 15, 2047 (the "2047 Notes") and received proceeds of $ 119 million, including a premium, for the issuance of the 2047 Notes.

The incremental $ 100 million formed a single series with the existing $ 300 million of 4.500 % Notes due May 15, 2047.

The 2030 Notes and 2047 Notes are senior indebtedness and are redeemable at our option at the applicable redemption price.

On September 29, 2020, proceeds from the debt issuances were used to repay and early retire our $ 400 million 3.500 % Notes due April 1, 2021.

In connection with this early retirement, we incurred a loss on debt extinguishment of $ 6 million, which was recorded as interest expense in our consolidated statements of operations.

Interest paid was $ 107 million in both 2023 and 2022 and $ 114 million in 2021.

The 2021 amount excludes $ 160 million of debt extinguishment costs related to the early retirement of debt, which was recorded as interest expense and paid in 2021.

MASCO CORPORATION

1 unchanged sentence

DEBT (Concluded)

Interest paid was $ 107 million , $ 114 million and $ 136 million in 2022, 2021 and 2020, respectively.

These amounts exclude $ 160 million and $ 5 million of debt extinguishment costs related to the early retirement of debt, which were recorded as interest expense and paid in 2021 and 2020, respectively.

Fair Value of Debt.

The fair value of our short-term and long-term fixed-rate debt instruments is based principally upon modeled market prices for the same or similar issues, which are Level 1 inputs.

The term loan had an interest rate that reset monthly and the fair value of the instrument approximated the carrying value at December 31, 2022.

The aggregate estimated market value of our short-term and long-term debt at December 31, 2023 was approximately $ 2.6 billion, compared with the aggregate carrying value of $ 3.0 billion.

The aggregate estimated market value of our short-term and long-term debt at December 31, 2022 was approximately $ 2.7 billion, compared with the aggregate carrying value of $ 3.2 billion.

STOCK-BASED COMPENSATION

Our 2014 Long Term Stock Incentive Plan (the "2014 Plan") provides for the issuance of stock-based incentives in various forms to our employees and non-employee Directors.

At December 31, 2022, outstanding stock-based incentives were in the form of restricted stock units, performance restricted stock units, stock options, long-term stock awards and phantom stock awards.

Pre-tax compensation expense included in income from continuing operations for these stock-based incentives was as follows, in millions:

At December 31, 2023, outstanding stock-based incentives were in the form of restricted stock units, performance restricted stock units, stock options, long-term stock awards, phantom stock awards and stock appreciation rights ("SARs").

Pre-tax compensation expense included in income before income taxes for these stock-based incentives was as follows, in millions:

Year Ended December 31,

4 unchanged sentences

Long-term stock awards 3 6 10

Phantom stock awards 1 6 4

Phantom stock awards and stock appreciation rights 5 1 6

Total $ 31 $ 49 $ 61

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Unvested restricted stock units at December 31 796 $ 57 1,154 $ 57 934 $ 54

At December 31, 2022, 2021, and 2020 there was $ 17 million, $ 15 million, and $ 7 million, respectively, of unrecognized compensation expense related to unvested restricted stock units;

such units had a weighted average remaining vesting period of two years at December 31, 2022, 2021, and 2020.

The total market value (at the vesting date) of restricted stock units which vested was $ 20 million and $ 8 million during 2022 and 2021, respectively.

MASCO CORPORATION

1 unchanged sentence

STOCK-BASED COMPENSATION (Continued)

At December 31, 2023, 2022, and 2021 there was $ 11 million, $ 17 million, and $ 15 million, respectively, of unrecognized compensation expense related to unvested restricted stock units;

such units had a weighted average remaining vesting period of two years at December 31, 2023, 2022, and 2021.

The total market value (at the vesting date) of restricted stock units which vested was $ 28 million, $ 20 million and $ 8 million during 2023, 2022 and 2021 respectively.

Performance Restricted Stock Units.

Under our Long Term Incentive Program, we grant performance restricted stock units to certain senior executives.

These performance restricted stock units will vest and share awards will be issued at no cost to the employees, subject to our achievement of specified return on invested capital performance goals, and beginning with the 2020 grant, an additional earning per share metric over a three -year period that have been established by our Compensation Committee for the performance period.

These performance restricted stock units will vest and share awards will be issued at no cost to the employees, subject to our achievement over a three -year period of specified return on invested capital performance goals, an earning per share metric, and, beginning with the 2023 grant, a relative total shareholder return metric that have been established by our Compensation Committee for the performance period.

To receive the award, the recipient must be employed through the share award date.

1 unchanged sentence

based on our performance, the number of performance restricted stock units that vest can be adjusted downward to zero and upward to a maximum of 200 percent of the target number.

During 2022, we granted approximately 92,000 performance restricted stock units with a grant date fair value of approximately $ 55 per share, approximately 168,000 performance restricted stock units were issued.

No performance restricted stock units were forfeited.

During 2023, we granted approximately 99,000 performance restricted stock units with a grant date fair value of approximately $ 52 per share, approximately 253,000 performance restricted stock units were issued and no performance restricted stock units were forfeited.

At December 31, 2023, there were approximately 59,000 shares vested but unissued.

1 unchanged sentence

At December 31, 2022, there were approximately 255,000 shares vested but unissued.

During 2020, we granted approximately 133,000 performance restricted stock units with a grant date fair value of approximately $ 34 per share, approximately 152,000 performance restricted stock units were issued and approximately 11,000 performance restricted stock units were forfeited.

During 2021, we granted approximately 85,000 performance restricted stock units with a grant date fair value of approximately $ 53 per share, approximately 105,000 performance restricted stock units were issued and no performance restricted stock units were forfeited.

At December 31, 2021, there were approximately 186,000 shares vested but unissued.

11 unchanged sentences

Outstanding stock options at December 31 2,254 $ 45 2,988 $ 39 2,692 $ 37

Vested and expected to vest stock options at December 31 2,966 $ 39 2,617 $ 36 2,338 $ 33

Exercisable (vested) stock options at December 31 2,051 $ 34 1,606 $ 31 1,283 $ 28

The aggregate intrinsic value is calculated using our stock price at each respective date, less the exercise price (grant date price) multiplied by the number of shares.

The aggregate intrinsic value for options exercised during 2023, 2022 and 2021 was $ 26 million, $ 1 million and $ 5 million, respectively.

The aggregate intrinsic value for options vested and expected to vest at December 31, 2022, 2021 and 2020 was $ 30 million, $ 89 million and $ 51 million, respectively.

The aggregate intrinsic value for options exercisable (vested) at December 31, 2022, 2021 and 2020 was $ 28 million, $ 63 million and $ 35 million, respectively.

The weighted-average remaining term for options outstanding was 5 years at December 31, 2022 and 6 years at both December 31, 2021 and 2020.

The weighted-average remaining term for options vested and expected to vest was 5 years at December 31, 2022 and 6 years at both December 31, 2021 and 2020.

The weighted-average remaining term for options exercisable (vested) was 4 years at December 31, 2022 and 5 years at both December 31, 2021 and 2020.

The weighted-average remaining term for options outstanding at December 31, 2023, 2022 and 2021 was six years , five years and six years , respectively.

MASCO CORPORATION

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STOCK-BASED COMPENSATION (Continued)

The following table summarizes information for stock options vested and expected to vest and exercisable (vested) stock options, shares in thousands:

Year Ended December 31,

2023 2022 2021

Vested and Expected to Vest Stock Options

Exercisable (Vested) Stock Options

Vested and Expected to Vest Stock Options

Exercisable (Vested) Stock Options

Vested and Expected to Vest Stock Options

Exercisable (Vested) Stock Options

Number of shares 2,248 1,621 2,966 2,051 2,617 1,606

Weighted average exercise price $ 45 $ 42 $ 39 $ 34 $ 36 $ 31

Aggregate intrinsic value $ 48 million $ 41 million $ 30 million $ 28 million $ 89 million $ 63 million

Weighted-average remaining term 6 years 5 years 5 years 4 years 6 years 5 years

At December 31, 2023, 2022 and 2021, there was $ 1 million, $ 1 million and $ 4 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model at the grant date) related to unvested stock options;

such options had a weighted average remaining vesting period of one year at December 31, 2022 and two years at both December 31, 2021 and 2020.

such options had a weighted average remaining vesting period of two years , one year and two years at December 31, 2023, 2022 and 2021, respectively.

The weighted average grant date fair value of option shares granted and the assumptions used to estimate those values using a Black-Scholes option pricing model were as follows:

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Option Shares Outstanding Option Shares Exercisable

Prices Number of

Shares Weighted

Option Term Weighted

Price Number of

Shares Weighted

191 1 $ 20 191 $ 20

Range of Prices Number of Shares Weighted Average Remaining Option Term Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price

256 2 $ 25 256 $ 25

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2,254 6 $ 45 1,621 $ 42

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

STOCK-BASED COMPENSATION (Concluded)

Long-Term Stock Awards.

8 unchanged sentences

Unvested stock award shares at December 31 79 $ 36 273 $ 38 608 $ 37

At December 31, 2022, 2021 and 2020, there was $ 3 million, $ 10 million and $ 21 million, respectively, of total unrecognized compensation expense related to unvested stock awards;

such awards had a weighted average remaining vesting period of one year at December 31, 2022 and two years at both December 31, 2021 and 2020.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

STOCK-BASED COMPENSATION (Concluded)

At December 31, 2023, the total unrecognized compensation expense related to unvested stock awards was insignificant and the unvested stock awards will vest in 2024.

At December 31, 2022 and 2021, there was $ 3 million and $ 10 million, respectively, of total unrecognized compensation expense related to unvested stock awards;

such awards had a weighted average remaining vesting period at December 31, 2022 and 2021 of one year and two years , respectively.

The total market value (at the vesting date) of stock award shares which vested was $ 10 million, $ 21 million and $ 28 million during 2023, 2022 and 2021, respectively.

Phantom Stock Awards.

Phantom Stock Awards and Stock Appreciation Rights.

Certain non-U.S.

employees are granted phantom stock awards.

employees are granted phantom stock awards and SARs.

We recognized expense of $ 5 million, $ 1 million and $ 6 million in 2023, 2022 and 2021, respectively, related to phantom stock awards.

In 2022, 2021 and 2020, we granted approximately 74,000 , 82,000 , and 83,000 shares, respectively, of phantom stock awards with an aggregate fair value of $ 4 million, $ 5 million and $ 3 million in 2022, 2021 and 2020, respectively, and paid cash of $ 4 million in 2022 and $ 3 million in both 2021 and 2020, to settle phantom stock awards.

In 2023, 2022 and 2021, we granted approximately 57,000 , 74,000 , and 82,000 shares, respectively, of phantom stock awards with an aggregate fair value of $ 3 million, $ 4 million and $ 5 million in 2023, 2022 and 2021, respectively, and paid cash of $ 4 million in 2023, $ 4 million in 2022 and $ 3 million in 2021 to settle phantom stock awards.

Information related to phantom stock awards was as follows, dollars in millions and shares in thousands:

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Equivalent common shares 126 149

We granted 22,000 shares of SARs in 2023, and the associated expense recognized in 2023 was insignificant.

No SARs were granted in 2022 or 2021, and no expense was recognized in either year.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

EMPLOYEE RETIREMENT PLANS

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We also sponsor qualified defined-benefit and non-qualified defined-benefit pension plans covering certain employees and former employees.

Pre-tax expense included in income from continuing operations related to our retirement plans was as follows, in millions:

Pre-tax expense included in income before income taxes related to our retirement plans was as follows, in millions:

Year Ended December 31,

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In the fourth quarter of 2021, we recognized a $ 7 million reduction in pension expense related to the reversion of excess pension plan assets for the settlement of such plans.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

EMPLOYEE RETIREMENT PLANS (Continued)

Changes in the projected benefit obligation and fair value of plan assets, and the funded status of our defined-benefit pension plans were as follows, in millions:

Year Ended December 31,

At Year Ended December 31,

Qualified Non-Qualified Qualified Non-Qualified

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Interest cost 4 6 2 3

Actuarial (gain), net ( 54 ) ( 27 ) ( 105 ) ( 6 )

Actuarial loss (gain), net 15 2 ( 54 ) ( 27 )

Foreign currency exchange 4 — ( 11 ) —

Benefit payments ( 4 ) ( 12 ) ( 3 ) ( 12 )

Divestitures — — ( 14 ) —

Settlements — — ( 594 ) —

Projected benefit obligation at December 31 $ 136 $ 108 $ 115 $ 112

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Benefit payments ( 4 ) ( 12 ) ( 3 ) ( 12 )

Settlements — — ( 594 ) —

Fair value of plan assets at December 31 $ 90 $ — $ 78 $ —

Funded status at December 31 $ ( 46 ) $ ( 108 ) $ ( 37 ) $ ( 112 )

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

EMPLOYEE RETIREMENT PLANS (Continued)

Amounts in our consolidated balance sheets were as follows, in millions:

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Total net liability $ ( 46 ) $ ( 108 ) $ ( 37 ) $ ( 112 )

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

EMPLOYEE RETIREMENT PLANS (Continued)

Unrealized loss included in accumulated other comprehensive income before income taxes was as follows, in millions:

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Net periodic pension cost $ 3 $ 7 $ 6 $ 6 $ 429 $ 6

We expect to recognize $ 1 million of pre-tax net loss from accumulated other comprehensive income into net periodic pension cost in 2023 related to our defined-benefit pension plans.

For plans in which almost all of the plan's participants are inactive, pre-tax net loss within accumulated other comprehensive income is amortized using the straight-line method over the remaining life expectancy of the inactive plan participants.

For plans which do not have almost all inactive participants, pre-tax net loss within accumulated other comprehensive income is amortized using the straight-line method over the average remaining service period of the active employees expected to receive benefits from the plan.

MASCO CORPORATION

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EMPLOYEE RETIREMENT PLANS (Continued)

We expect to recognize $ 4 million of pre-tax net loss from accumulated other comprehensive income into net periodic pension cost in 2024 related to our defined-benefit pension plans.

Our qualified defined-benefit pension plan weighted average asset allocation, which is based upon fair value, was as follows:

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There have been no changes in the methodologies used at December 31, 2023 compared to December 31, 2022.

Common and Preferred Stocks and Short-Term and Other Investments:

Common and preferred stocks and s hort-term and other investments:

Valued at the closing price reported on the active market on which the individual securities are traded.

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Due to the significant unobservable inputs, the fair value measurements used to estimate fair value are a Level 3 input.

Buy-in annuity :

Valued based on the associated benefit obligation for which the buy-in annuity covers the benefits, which approximates fair value.

Such basis is determined based on various assumptions, including the discount rate and mortality rate.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.

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International 2 — 12 14

Short-Term and Other Investments – International

Buy-in annuity:

International — 3 — 3

Short-term and other investments:

International 2 17 — 19

Total plan assets

$ 32 $ 46 $ 12 $ 90

At December 31, 2022

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International 2 — 12 14

Short-Term and Other Investments – International

Short-term and other investments:

International 1 7 — 8

Total plan assets $ 29 $ 37 $ 12 $ 78

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At December 31, 2021, such rates for our defined‑benefit pension plans ranged from 0.8 percent to 2.6 percent, with the most significant portion of the liabilities having a discount rate for obligations of 1.2 percent or higher.

The increase in the weighted average discount rate from 2021 to 2022 and the increase in the weighted average discount rate from 2020 to 2021 is principally the result of higher long-term interest rates in the bond markets.

The decrease in the weighted average discount rate from 2022 to 2023 is principally due to lower long-term interest rates in the bond markets.

The increase in the weighted average discount rate from 2021 to 2022 is principally due to higher long-term interest rates in the bond markets.

Our weighted average projected long-term rate of return on plan assets for the foreign qualified defined-benefit pension plans was 5.5 percent, 4.5 percent and 3.0 percent for 2023, 2022 and 2021, respectively.

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Substantially all of these plans were frozen as of January 1, 2010.

The aggregate present value of the unfunded accumulated post-retirement benefit obligation was $ 7 million and $ 9 million at December 31, 2022 and 2021, respectively.

The aggregate present value of the unfunded accumulated post-retirement benefit obligation was $ 7 million at both December 31, 2023 and 2022.

At December 31, 2023, we expect to contribute approximately $ 12 million in 2024 to our non-qualified (domestic) defined-benefit pension plans.

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SHAREHOLDERS' EQUITY

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 in 2022), for cash aggregating $ 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 in open-market transactions or otherwise, replacing the previous Board of Directors authorization established in 2021.

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

During 2023, we repurchased and retired 6.2 million shares of our common stock (including 0.2 million shares to offset the dilutive impact of restricted stock units granted in 2023), for $ 356 million, inclusive of excise tax of $ 3 million.

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

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Settlement loss — — 451 Other, net

Tax (benefit) ( 2 ) ( 104 ) ( 7 )

Tax expense (benefit) — ( 2 ) ( 104 )

Net of tax $ 1 $ 4 $ 365

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$ — $ — $ 2 Interest expense

Tax expense (benefit) — 5 ( 1 )

Tax expense — — 5

Net of tax $ — $ — $ 7

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In addition to the above amounts, we reclassified $ 23 million of currency translation losses from accumulated other comprehensive income to the consolidated statement of operations in conjunction with the divestiture of Hüppe in the second quarter of 2021.

Also, we reclassified $ 9 million of deferred currency translation losses from accumulated other comprehensive income to the consolidated statement of operations in conjunction with the liquidation of certain UK dormant entities upon receiving final regulatory approval in 2020.

MASCO CORPORATION

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Our reportable segments are as follows:

Plumbing Products – principally includes faucets, plumbing system components and valves, showerheads and handheld showers, bath hardware and accessories, bath units, tubs and shower bases and enclosures, shower drains, steam shower systems, sinks, kitchen accessories, toilets, spas, exercise pools and fitness systems and water handling systems.

Decorative Architectural Products – principally includes paints and other coating products, paint applicators and accessories, lighting fixtures, ceiling fans, landscape lighting and LED lighting systems, and cabinet and other hardware.

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North America $ 6,384 $ 6,978 $ 6,624 $ 1,210 $ 1,116 $ 1,214 $ 3,538 $ 3,552 $ 3,510

International, principally Europe 1,702 1,751 1,383 268 296 222 1,324 1,466 1,354

International, particularly Europe 1,583 1,702 1,751 229 268 296 1,299 1,324 1,466

Total, as above $ 7,967 $ 8,680 $ 8,375 1,439 1,384 1,510 4,837 4,876 4,976

General corporate expense, net (5)

General corporate expense, net (E)

( 91 ) ( 87 ) ( 105 )

Operating profit, as reported 1,297 1,405 1,295

Operating profit 1,348 1,297 1,405

Other income (expense), net ( 110 ) ( 104 ) ( 717 )

Income from continuing operations before income taxes $ 1,193 $ 688 $ 1,131

Income before income taxes $ 1,238 $ 1,193 $ 688

Corporate assets 527 311 599

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Year Ended December 31,

Property Additions

(7) Depreciation and

Property Additions (G)

Depreciation and Amortization

2023 2022 2021 2023 2022 2021

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Unallocated amounts, principally related to corporate assets 6 6 3 7 8 13

Discontinued operations

Total $ 243 $ 224 $ 128 $ 149 $ 145 $ 151

______________________________

(1) Included in net sales were export sales from the U.S.

(A) Included in net sales were export sales from the U.S.

of $ 253 million, $ 337 million and $ 322 million in 2023, 2022 and 2021, respectively.

(2) Excluded from net sales were intra-company sales between segments of less than one percent in 2022, 2021 and 2020.

(3) Included in net sales were sales to one customer of $ 3,298 million, $ 3,037 million and $ 2,812 million in 2022, 2021 and 2020, respectively.

(B) Excluded from net sales were intra-company sales between segments of less than one percent in 2023, 2022 and 2021.

(C) Included in net sales were sales to one customer of $ 3,070 million, $ 3,298 million and $ 3,037 million in 2023, 2022 and 2021, respectively.

Such net sales were included in each of our segments.

(4) Net sales from our operations in the U.S.

(D) Net sales from our operations in the U.S.

were $ 6,140 million, $ 6,756 million and $ 6,387 million in 2023, 2022 and 2021, respectively.

(5) General corporate expense, net included those expenses not specifically attributable to our segments.

(6) Long-lived assets of our operations in the U.S.

(E) General corporate expense, net included those expenses not specifically attributable to our segments.

(F) Long-lived assets of our operations in the U.S.

and Europe were $ 1,459 million and $ 677 million, $ 1,372 million and $ 548 million, and $ 1,332 million and $ 546 million at December 31, 2023, 2022 and 2021, respectively.

(7) Property additions exclude amounts paid for long-lived assets as part of acquisitions.

(G) Property additions exclude amounts paid for long-lived assets as part of acquisitions.

MASCO CORPORATION

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2023 2022 2021

Contingent consideration (A)

$ 24 $ ( 16 ) $ —

Net periodic pension and post-retirement benefit expense (B)

Income from cash and cash investments $ 9 $ 2 $ 1

Net periodic pension and post-retirement benefit expense (A)

( 8 ) ( 10 ) ( 430 )

Equity investment (loss) income, net ( 1 ) ( 6 ) 11

Foreign currency transaction losses (C)

Foreign currency transaction losses ( 1 ) ( 3 ) ( 4 )

Realized gains from private equity funds

Contingent consideration (B)

Loss on sale of businesses, net

— ( 1 ) ( 18 )

Income from cash and cash investments 2 1 3

Loss on sale of business, net ( 1 ) ( 18 ) —

Gain on preferred stock redemption (D)

Gain on preferred stock redemption (C)

Dividend income — — 6

Other items, net (E)

( 2 ) ( 3 ) 9

Other items, net ( 4 ) ( 2 ) ( 3 )

Total other, net $ ( 4 ) $ 4 $ ( 439 )

_________________________________________________

(A) We recognized $ 24 million of income in 2022 and $ 16 million of expense in 2021 from the revaluation of contingent consideration related to a prior acquisition.

Refer to Note I for additional information.

(B) In the second quarter of 2021, we settled our qualified domestic defined-benefit pension plans and recognized $ 406 million of additional pension expense.

(A) In the second quarter of 2021, we settled our qualified domestic defined-benefit pension plans and recognized $ 406 million of additional pension expense.

In the fourth quarter of 2021, we recognized a $ 7 million reduction in pension expense related to the reversion of excess pension plan assets for the settlement of such plans.

Refer to Note N for additional information.

(C) Included in foreign currency transaction losses for 2020 was a $ 9 million deferred currency translation loss reclassified from accumulated other comprehensive income in conjunction with the liquidation of certain UK dormant entities upon receiving final regulatory approval in 2020.

(D) In May 2021, we received, in cash, $ 166 million for the redemption of the ACProducts Holding, Inc.

Refer to Note M for additional information.

(B) We recognized $ 24 million of income in 2022 and $ 16 million of expense in 2021 from the revaluation of contingent consideration related to our acquisition of Kraus USA Inc.

in the fourth quarter of 2020.

preferred stock, including all accrued but unpaid dividends, and recognized a gain of $ 14 million.

Refer to Note C for additional information.

(E) Included in other items, net for 2020 was $ 9 million of miscellaneous income related to an escrow settlement.

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Components of income taxes on income from continuing operations and the components of deferred tax assets and liabilities were as follows, in millions:

Components of income taxes on income before income taxes and the components of deferred tax assets and liabilities were as follows, in millions:

2023 2022 2021

Income from continuing operations before income taxes:

Income before income taxes:

$ 968 $ 873 $ 374

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Investment in foreign subsidiaries 11 10

Other investments — 3

Net deferred tax asset at December 31 $ 56 $ 33

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INCOME TAXES (Continued)

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.

We continue to maintain a valuation allowance of $ 33 million and $ 15 million on certain state and foreign deferred tax assets as of December 31, 2023 and 2022, respectively, due primarily to cumulative loss positions in those jurisdictions.

We recorded a $ 5 million income tax benefit in 2020 due to changes in judgment regarding the realizability of deferred tax assets in certain foreign jurisdictions.

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.

In order to provide greater flexibility in the execution of our capital allocation strategy, we may repatriate earnings from certain foreign subsidiaries.

Our deferred tax balance on investment in foreign subsidiaries reflects the impact of all taxable temporary differences, including those related to substantially all undistributed foreign earnings, except those that are legally restricted, and consists primarily of foreign withholding taxes.

Of the $ 32 million and $ 37 million deferred tax assets related to the net operating loss and tax credit carryforwards at December 31, 2022 and 2021, respectively, $ 20 million and $ 25 million, respectively, will expire within approximately 15 years and $ 12 million, for both years, have no expiration.

Of the $ 84 million and $ 32 million deferred tax assets related to the net operating loss and tax credit carryforwards at December 31, 2023 and 2022, respectively, $ 62 million and $ 20 million, respectively, will expire within approximately 18 years and $ 22 million and $ 12 million, respectively, have no expiration.

A reconciliation of the U.S.

Federal statutory tax rate to the income tax expense on income from continuing operations before income taxes was as follows:

Federal statutory tax rate to the income tax expense on income before income taxes was as follows:

Year Ended December 31,

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Higher taxes on foreign earnings 2 2 3

Valuation allowances ( 2 ) — —

Stock-based compensation ( 1 ) — ( 1 )

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Lapse of applicable statutes of limitation ( 12 ) ( 11 )

Settlement with tax authorities ( 5 ) —

Balance at December 31 $ 84 $ 83

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Balance at December 31, including interest and penalties $ 97 $ 94

If recognized, $ 66 million and $ 64 million of the liability for uncertain tax positions at December 31, 2022 and 2021, respectively, net of any U.S.

If recognized, $ 66 million of the liability for uncertain tax positions at both December 31, 2023 and 2022, net of any U.S.

Federal tax benefit, would impact our effective tax rate.

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INCOME PER COMMON SHARE

Reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share were as follows, in millions:

Reconciliations of the numerators and denominators used in the computations of basic and diluted income per common share were as follows, in millions:

Year Ended December 31,

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Numerator (basic and diluted):

Income from continuing operations $ 844 $ 410 $ 810

Net income $ 908 $ 844 $ 410

Allocation to redeemable noncontrolling interest — ( 2 ) 2

Allocation to unvested restricted stock awards — 4 2

Income from continuing operations attributable to common shareholders

Income from discontinued operations, net — — 414

Allocation to unvested restricted stock awards — — 3

Income from discontinued operations, net attributable to common shareholders

Net income attributable to common shareholders $ 908 $ 842 $ 406

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Number of performance restricted stock units — 15 —

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)

INCOME PER COMMON SHARE (Concluded)

Common shares outstanding included on our balance sheet and for the calculation of income per common share do not include unvested stock awards ( 79,000 and 273,000 common shares at December 31, 2023 and 2022, respectively).

Shares outstanding for legal requirements included all common shares that have voting rights (including unvested stock awards).

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)

OTHER COMMITMENTS AND CONTINGENCIES

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We have not paid a material amount related to these indemnifications, and we evaluate the probability that amounts may be incurred and record an estimated liability when it is probable and reasonably estimable.

INSURANCE SETTLEMENT

During the third quarter of 2023, we received an insurance settlement payment in our Decorative Architectural Products segment related to lost sales resulting from a weather event that occurred in Texas in 2021 which impacted the operations of a resin supplier and interrupted our ability to manufacture certain paints and other coating products.

The insurance settlement payment increased gross profit and operating profit by $ 40 million for the year ended December 31, 2023.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

1 unchanged sentence

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 8. Financial Statements and Supplementary Data