MAS 10-Q Quarterly Report Sept. 30, 2023 | Alphaminr
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MAS 10-Q Quarter ended Sept. 30, 2023

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number: 1-5794

Masco Corporation
(Exact name of Registrant as Specified in its Charter)

Delaware 38-1794485
(State or Other Jurisdiction of
Incorporation or Organization) 		(I.R.S. Employer Identification No.)
17450 College Parkway, Livonia, Michigan 48152
(Address of Principal Executive Offices) (Zip Code)
( 313 ) 274-7400
(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol Name of Each Exchange
On Which Registered
Common Stock, $1.00 par value MAS New York Stock Exchange
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class Shares Outstanding at September 30, 2023
Common stock, par value $1.00 per share 224,500,911


MASCO CORPORATION

INDEX

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MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30, 2023 and December 31, 2022
(In Millions, Except Share Data)
September 30, 2023 December 31, 2022
ASSETS
Current assets:
Cash and cash investments $ 560 $ 452
Receivables 1,245 1,149
Inventories 1,046 1,236
Prepaid expenses and other 113 109
Total current assets 2,964 2,946
Property and equipment, net 1,077 975
Goodwill 593 537
Other intangible assets, net 395 350
Operating lease right-of-use assets 270 266
Other assets 72 113
Total assets $ 5,371 $ 5,187
LIABILITIES
Current liabilities:
Accounts payable $ 844 $ 877
Notes payable 66 205
Accrued liabilities 752 807
Total current liabilities 1,662 1,889
Long-term debt 2,946 2,946
Noncurrent operating lease liabilities 260 255
Other liabilities 336 339
Total liabilities $ 5,204 $ 5,429
Commitments and contingencies (Note M)
Redeemable noncontrolling interest 19 20
EQUITY
Masco Corporation's shareholders' equity:
Common shares, par value $ 1 per share
Authorized shares: 1,400,000,000 ;
Issued and outstanding: 2023 – 224,400,000 ; 2022 – 225,300,000
224 225
Preferred shares authorized: 1,000,000 ;
Issued and outstanding: 2023 and 2022 – None
— —
Paid-in capital 4 16
Retained deficit ( 507 ) ( 947 )
Accumulated other comprehensive income 223 226
Total Masco Corporation's shareholders' deficit ( 56 ) ( 480 )
Noncontrolling interest 204 218
Total equity 148 ( 262 )
Total liabilities and equity $ 5,371 $ 5,187
See notes to condensed consolidated financial statements.
1
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three and Nine Months Ended September 30, 2023 and 2022
(In Millions, Except Per Common Share Data)
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Net sales $ 1,979 $ 2,204 $ 6,085 $ 6,757
Cost of sales 1,235 1,509 3,903 4,589
Gross profit 744 695 2,182 2,168
Selling, general and administrative expenses 361 344 1,081 1,056
Operating profit 383 351 1,101 1,112
Other income (expense), net:
Interest expense ( 26 ) ( 29 ) ( 82 ) ( 82 )
Other, net ( 11 ) ( 12 ) ( 14 ) 4
( 37 ) ( 41 ) ( 96 ) ( 78 )
Income before income taxes 346 310 1,005 1,034
Income tax expense 86 77 246 255
Net income 260 233 759 779
Less: Net income attributable to noncontrolling interest 11 15 42 50
Net income attributable to Masco Corporation $ 249 $ 218 $ 717 $ 729
Income per common share attributable to Masco Corporation:
Basic:
Net income $ 1.11 $ 0.97 $ 3.19 $ 3.14
Diluted:
Net income $ 1.10 $ 0.97 $ 3.17 $ 3.13






See notes to condensed consolidated financial statements.
2
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
For the Three and Nine Months Ended September 30, 2023 and 2022
(In Millions)
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Net income $ 260 $ 233 $ 759 $ 779
Less: Net income attributable to noncontrolling interest 11 15 42 50
Net income attributable to Masco Corporation $ 249 $ 218 $ 717 $ 729
Other comprehensive loss, net of tax
Cumulative translation adjustment $ ( 25 ) $ ( 54 ) $ ( 10 ) $ ( 120 )
Pension and other post-retirement benefits 1 1 1 3
Other comprehensive loss, net of tax ( 24 ) ( 53 ) ( 9 ) ( 117 )
Less: Other comprehensive loss attributable to noncontrolling interest ( 6 ) ( 14 ) ( 6 ) ( 26 )
Other comprehensive loss attributable to Masco Corporation $ ( 18 ) $ ( 39 ) $ ( 3 ) $ ( 91 )
Total comprehensive income $ 236 $ 180 $ 750 $ 662
Total comprehensive income attributable to noncontrolling interest 5 1 36 24
Total comprehensive income attributable to Masco Corporation $ 231 $ 179 $ 714 $ 638




























See notes to condensed consolidated financial statements.
3
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 30, 2023 and 2022
(In Millions)
Nine Months Ended September 30,
2023 2022
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations $ 954 $ 954
Increase in receivables ( 120 ) ( 207 )
Decrease (increase) in inventories 199 ( 164 )
Decrease in accounts payable and accrued liabilities, net ( 105 ) ( 63 )
Net cash from operating activities 928 520
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Purchase of Company common stock ( 126 ) ( 914 )
Cash dividends paid ( 193 ) ( 195 )
Dividends paid to noncontrolling interest ( 49 ) ( 68 )
Proceeds from short-term borrowings 77 —
Payment of short-term borrowings ( 11 ) —
Proceeds from term loan — 500
Payment of term loan ( 200 ) ( 100 )
Proceeds from the exercise of stock options 37 1
Employee withholding taxes paid on stock-based compensation ( 29 ) ( 17 )
Decrease in debt, net ( 4 ) ( 9 )
Net cash for financing activities ( 498 ) ( 802 )
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures ( 181 ) ( 137 )
Acquisition of business, net of cash acquired ( 136 ) —
Other, net ( 4 ) ( 7 )
Net cash for investing activities ( 321 ) ( 144 )
Effect of exchange rate changes on cash and cash investments ( 1 ) ( 36 )
CASH AND CASH INVESTMENTS:
Increase (decrease) for the period 108 ( 462 )
At January 1 452 926
At September 30 $ 560 $ 464

See notes to condensed consolidated financial statements.
4
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
For the Three and Nine Months Ended September 30, 2023 and 2022
(In Millions, Except Per Common Share Data)
Total
Common
Shares
($ 1 par value)
Paid-In
Capital 		Retained (Deficit) Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolling
Interest
Balance, January 1, 2022 $ 56 $ 241 $ — $ ( 652 ) $ 232 $ 235
Total comprehensive income (loss) 242 — — 233 ( 6 ) 15
Shares issued 1 1 — — — —
Shares retired:
Repurchased ( 364 ) ( 6 ) ( 27 ) ( 331 ) — —
Surrendered (non-cash) ( 17 ) — — ( 17 ) — —
Cash dividends declared ( 67 ) — — ( 67 ) — —
Redeemable noncontrolling interest - redemption adjustment 1 — — 1 — —
Stock-based compensation 27 — 27 — — —
Balance, March 31, 2022 $ ( 121 ) $ 236 $ — $ ( 833 ) $ 226 $ 250
Total comprehensive income (loss) 240 — — 278 ( 46 ) 8
Shares retired:
Repurchased ( 550 ) ( 11 ) ( 5 ) ( 534 ) — —
Cash dividends declared ( 64 ) — — ( 64 ) — —
Dividends declared to noncontrolling interest ( 79 ) — — — — ( 79 )
Redeemable noncontrolling interest - redemption adjustment ( 1 ) — — ( 1 ) — —
Stock-based compensation 12 — 12 — — —
Balance, June 30, 2022 $ ( 563 ) $ 225 $ 7 $ ( 1,154 ) $ 180 $ 179
Total comprehensive income (loss) 181 — — 218 ( 39 ) 2
Cash dividends declared ( 64 ) — — ( 64 ) — —
Redeemable noncontrolling interest - redemption adjustment 2 — — 2 — —
Stock-based compensation 8 — 8 — — —
Balance, September 30, 2022 $ ( 436 ) $ 225 $ 15 $ ( 998 ) $ 141 $ 181


















5
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Concluded)
For the Three and Nine Months Ended September 30, 2023 and 2022
(In Millions, Except Per Common Share Data)
Total
Common
Shares
($ 1 par value)
Paid-In
Capital 		Retained (Deficit) Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolling
Interest
Balance, January 1, 2023 $ ( 262 ) $ 225 $ 16 $ ( 947 ) $ 226 $ 218
Total comprehensive income 243 — — 205 17 21
Shares issued 6 1 5 — — —
Shares retired:
Repurchased ( 56 ) ( 1 ) ( 32 ) ( 23 ) — —
Surrendered (non-cash) ( 17 ) — — ( 17 ) — —
Cash dividends declared ( 65 ) — — ( 65 ) — —
Stock-based compensation 11 — 11 — — —
Balance, March 31, 2023 $ ( 140 ) $ 225 $ — $ ( 847 ) $ 243 $ 239
Total comprehensive income (loss) 270 — — 263 ( 2 ) 9
Shares issued 11 1 10 — — —
Shares retired:
Repurchased ( 25 ) ( 1 ) ( 1 ) ( 23 ) — —
Cash dividends declared ( 64 ) — — ( 64 ) — —
Dividends declared to noncontrolling interest ( 49 ) — — — — ( 49 )
Stock-based compensation 4 — 4 — — —
Balance, June 30, 2023 $ 7 $ 225 $ 13 $ ( 671 ) $ 241 $ 199
Total comprehensive income (loss) 236 — — 249 ( 18 ) 5
Shares issued 9 — 9 — — —
Shares retired:
Repurchased ( 45 ) ( 1 ) ( 23 ) ( 21 ) — —
Cash dividends declared ( 64 ) — — ( 64 ) — —
Stock-based compensation 5 — 5 — — —
Balance, September 30, 2023 $ 148 $ 224 $ 4 $ ( 507 ) $ 223 $ 204
See notes to condensed consolidated financial statements.
6
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A. ACCOUNTING POLICIES

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to fairly state our financial position at September 30, 2023, our results of operations and comprehensive income (loss) for the three and nine months ended September 30, 2023 and 2022, cash flows for the nine months ended September 30, 2023 and 2022 and changes in shareholders' equity for the three and nine months ended September 30, 2023 and 2022. The condensed consolidated balance sheet at December 31, 2022 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted ("GAAP") in the United States of America.
Recently Adopted Accounting Pronouncements. 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. 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 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.

B. ACQUISITIONS

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. The purchase price allocation for this acquisition is based on analysis of information as of the acquisition date that was available through September 30, 2023, and will be updated through the measurement period, if necessary.












7
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
C. REVENUE

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:
Three Months Ended September 30, 2023
Plumbing Products Decorative Architectural Products Total
Primary geographic markets:
North America $ 814 $ 788 $ 1,602
International, principally Europe 377 — 377
Total $ 1,191 $ 788 $ 1,979
Nine Months Ended September 30, 2023
Plumbing Products Decorative Architectural Products Total
Primary geographic markets:
North America $ 2,428 $ 2,447 $ 4,875
International, principally Europe 1,210 — 1,210
Total $ 3,638 $ 2,447 $ 6,085
Three Months Ended September 30, 2022
Plumbing Products Decorative Architectural Products Total
Primary geographic markets:
North America $ 912 $ 880 $ 1,792
International, principally Europe 412 — 412
Total $ 1,324 $ 880 $ 2,204
Nine Months Ended September 30, 2022
Plumbing Products Decorative Architectural Products Total
Primary geographic markets:
North America $ 2,730 $ 2,701 $ 5,431
International, principally Europe 1,326 — 1,326
Total $ 4,056 $ 2,701 $ 6,757
We recognized $ 8 million of revenue for both the three months ended September 30, 2023 and 2022, related to performance obligations settled in previous quarters of the same year. We recognized $ 6 million and $ 11 million of revenue for the three and nine months ended September 30, 2023, respectively, and $ 5 million and $ 18 million of revenue for the three and nine months ended September 30, 2022, respectively, related to performance obligations settled in previous years.
Our contract asset balance was $ 2 million and $ 1 million at September 30, 2023 and December 31, 2022, respectively. Our contract liability balance was $ 15 million and $ 61 million at September 30, 2023 and December 31, 2022, respectively.



8
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
C. REVENUE (Concluded)

Changes in the allowance for credit losses deducted from accounts receivable were as follows, in millions:
Nine Months Ended September 30, 2023 Twelve Months Ended December 31, 2022
Balance at January 1 $ 8 $ 6
Provision for expected credit losses during the period 4 5
Write-offs charged against the allowance ( 4 ) ( 4 )
Recoveries of amounts previously written off 1 1
Balance at end of period $ 9 $ 8


D. DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense was $ 107 million and $ 105 million for the nine months ended September 30, 2023 and 2022, respectively.

E. INVENTORIES

The components of inventory were as follows, in millions:
At September 30, 2023 At December 31, 2022
Finished goods $ 651 $ 715
Raw materials 300 408
Work in process 95 113
Total $ 1,046 $ 1,236

F. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill at September 30, 2023, by segment, was as follows, in millions:
Gross Goodwill At September 30, 2023 Accumulated Impairment Losses Net Goodwill At September 30, 2023
Plumbing Products $ 667 $ ( 301 ) $ 366
Decorative Architectural Products 366 ( 139 ) 227
Total $ 1,033 $ ( 440 ) $ 593
The changes in the carrying amount of goodwill for the nine months ended September 30, 2023, by segment, were as follows, in millions:
Gross Goodwill At December 31, 2022 Accumulated Impairment Losses Net Goodwill At December 31, 2022 Acquisitions (A) Foreign Currency Translation Net Goodwill At September 30, 2023
Plumbing Products $ 611 $ ( 301 ) $ 310 $ 60 $ ( 4 ) $ 366
Decorative Architectural Products 366 ( 139 ) 227 — — 227
Total $ 977 $ ( 440 ) $ 537 $ 60 $ ( 4 ) $ 593
(A) In the third quarter of 2023, we acquired Sauna360. Refer to Note B for additional information.




9
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
F. GOODWILL AND OTHER INTANGIBLE ASSETS (Concluded)

The carrying value of our other indefinite-lived intangible assets were $ 123 million and $ 102 million at September 30, 2023 and December 31, 2022, respectively, and principally included registered trademarks. The carrying value of our definite-lived intangible assets wa s $ 272 million (net of accumulated amortization o f $ 110 million) at September 30, 2023 and $ 248 million (net of accumulated amortization of $ 94 million) at December 31, 2022, and principally included customer relationships. The increase in our indefinite-lived and definite-lived intangible assets is primarily a result of our acquisition of Sauna360.

G. 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 condensed consolidated balance sheets. The amounts confirmed as valid under the program and included in accounts payable were $ 60 million and $ 50 million at September 30, 2023 and December 31, 2022, respectively. Of the amounts confirmed as valid under the program, the amounts owed to participating financial institutions were $ 21 million and $ 29 million at September 30, 2023 and December 31, 2022, respectively. All payments made under the program are recorded as a decrease in accounts payable and accrued liabilities, net, in our condensed consolidated statements of cash flows.

H. DEBT

On April 26, 2022, we entered into a revolving credit agreement (the “2022 Credit Agreement”) with an aggregate commitment of $ 1.0 billion and a maturity date of April 26, 2027. Under the 2022 Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $ 500 million with the current lenders or new lenders.
The 2022 Credit Agreement provides for an unsecured revolving credit facility available to us and one of our foreign subsidiaries in U.S. dollars, European euros, British pounds sterling, Canadian dollars and certain other currencies for revolving credit loans, swingline loans and letters of credit. Borrowings under the revolving credit loans denominated in any agreed upon currency other than U.S. dollars are limited to the equivalent of $ 500 million. 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 under the 2022 Credit Agreement at September 30, 2023.
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.
In order for us to borrow under the 2022 Credit Agreement, there must not be any default in our covenants in the 2022 Credit Agreement (i.e., in addition to the two financial covenants described above, principally limitations on subsidiary debt, negative pledge restrictions, and requirements relating to legal compliance, maintenance of our properties and insurance) and our representations and warranties in the 2022 Credit Agreement must be true in all material respects on the date of borrowing (i.e., principally no material adverse change or litigation likely to result in a material adverse change, since December 31, 2021, no material ERISA or environmental non-compliance, and no material tax deficiency). We were in compliance with all covenants and no borrowings were outstanding at September 30, 2023.


10
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
H. DEBT (Concluded)

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 May 9, 2023, our Hansgrohe SE subsidiary entered into € 70 million ($ 77 million) of short-term borrowings to support working capital needs. The loans contain no financial covenants and € 60 million ($ 63 million) remained borrowed and outstanding at a weighted average interest rate of 4.807 % at September 30, 2023.
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 aggregate estimated market value of our short-term and long-term debt at September 30, 2023 was approximately $ 2.5 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.

I. SEGMENT INFORMATION

Information by segment and geographic area was as follows, in millions:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022 2023 2022 2023 2022
Net Sales (A) Operating Profit Net Sales (A) Operating Profit
Our operations by segment were:
Plumbing Products $ 1,191 $ 1,324 $ 223 $ 220 $ 3,638 $ 4,056 $ 673 $ 686
Decorative Architectural Products 788 880 181 151 2,447 2,701 493 498
Total $ 1,979 $ 2,204 $ 404 $ 371 $ 6,085 $ 6,757 $ 1,166 $ 1,184
Our operations by geographic area were:
North America $ 1,602 $ 1,792 $ 348 $ 305 $ 4,875 $ 5,431 $ 972 $ 961
International, principally Europe 377 412 56 66 1,210 1,326 194 223
Total, as above $ 1,979 $ 2,204 404 371 $ 6,085 $ 6,757 1,166 1,184
General corporate expense, net ( 21 ) ( 20 ) ( 65 ) ( 72 )
Operating profit 383 351 1,101 1,112
Other income (expense), net ( 37 ) ( 41 ) ( 96 ) ( 78 )
Income before income taxes $ 346 $ 310 $ 1,005 $ 1,034
(A) Inter-segment sales were not material.







11
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
J. OTHER INCOME (EXPENSE), NET

Other, net, which is included in other income (expense), net, was as follows, in millions:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Foreign currency transaction losses $ ( 7 ) $ ( 4 ) $ ( 7 ) $ ( 6 )
Net periodic pension and post-retirement benefit expense ( 3 ) ( 2 ) ( 9 ) ( 7 )
Income from cash and cash investments 3 1 5 2
Equity investment loss, net ( 1 ) ( 6 ) ( 1 ) ( 6 )
Realized gains from private equity funds — — 1 —
Contingent consideration (A)
— — — 24
Loss on sale of businesses, net — — — ( 1 )
Other items, net ( 3 ) ( 1 ) ( 3 ) ( 2 )
Total other, net $ ( 11 ) $ ( 12 ) $ ( 14 ) $ 4
(A) In the nine months ended September 30, 2022 we recognized $ 24 million of income from the revaluation of contingent consideration related to our acquisition of Kraus USA Inc.


K. INCOME TAXES

Our effective tax rate was 25 percent and 24 percent for the three and nine months ended September 30, 2023, respectively, and was 25 percent for both the three and nine months ended September 30, 2022. Our effective tax rate for the nine months ended September 30, 2023 and 2022 was favorably impacted by $ 14 million and $ 10 million of income tax benefits, respectively. For both periods, the income tax benefits primarily resulted from a reduction in the liability for uncertain tax positions resulting from the expiration of statutes of limitation and stock-based compensation.

























12
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
L. INCOME PER COMMON SHARE

Reconciliations of the numerators and denominators used in the computations of basic and diluted income per common share were as follows, in millions:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Numerator (basic and diluted):
Net income $ 249 $ 218 $ 717 $ 729
Less: Allocation to redeemable noncontrolling interest — ( 2 ) — ( 2 )
Less: Allocation to unvested restricted stock awards — — — 3
Net income attributable to common shareholders $ 249 $ 220 $ 717 $ 728
Denominator:
Basic common shares (based upon weighted average) 225 226 225 232
Add: Stock option dilution 1 1 1 1
Diluted common shares 226 227 226 233
For the three and nine months ended September 30, 2023 and 2022, we allocated dividends and undistributed earnings to the unvested restricted stock awards.
The following stock options, restricted stock units and performance restricted stock units were excluded from the computation of weighted-average diluted common shares outstanding due to their anti-dilutive effect, in thousands:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Number of stock options 392 670 861 623
Number of restricted stock units 8 4 4 22
Number of performance restricted stock units 15 — 15 —
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. We repurchased and retired approximately 2.4 million shares of our common stock in the nine months ended September 30, 2023 for approximately $ 126 million. This included 0.2 million shares to offset the dilutive impact of restricted stock units granted in the nine months ended September 30, 2023. At September 30, 2023, we had approximately $ 1.9 billion remaining under the 2022 authorization.
We have declared and paid cash dividends per common share of $ 0.285 and $ 0.855 for the three and nine months ended September 30, 2023, respectively, and $ 0.280 and $ 0.840 for the three and nine months ended September 30, 2022, respectively.


13
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Concluded)
M. OTHER COMMITMENTS AND CONTINGENCIES

Litigation. We are involved in claims and litigation, including class actions, mass torts and regulatory proceedings, which arise in the ordinary course of our business. The types of matters may include, among others: advertising, competition, contract, data privacy, employment, environmental, insurance coverage, intellectual property, personal injury, product compliance, product liability, securities and warranty. We believe we have adequate defenses in these matters. We are also subject to product safety regulations, product recalls and direct claims for product liabilities. We believe the likelihood that the outcome of these claims, litigation and product safety matters would have a material adverse effect on us is remote. However, there is no assurance that we will prevail in these matters, and we could, in the future, incur judgments or penalties, enter into settlements of claims or revise our expectations regarding the outcome of these matters, which could materially impact our results of operations.
Warranty. Changes in our warranty liability were as follows, in millions:
Nine Months Ended September 30, 2023 Twelve Months Ended December 31, 2022
Balance at January 1 $ 80 $ 80
Accruals for warranties issued during the period 29 40
Accruals related to pre-existing warranties 3 ( 3 )
Settlements made (in cash or kind) during the period ( 30 ) ( 34 )
Other, net (including currency translation and acquisitions) 1 ( 3 )
Balance at end of period $ 83 $ 80

N. INSURANCE SETTLEMENT

During the three months ended September 30, 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 three and nine months ended September 30, 2023.
14


MASCO CORPORATION
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

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, 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.
We continue to execute our strategies of leveraging our strong brand portfolio, industry-leading positions and the Masco Operating System, our methodology to drive growth and productivity, to create long-term shareholder value. We remain confident in the fundamentals of our business and long-term strategy. 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.

THIRD QUARTER 2023 AND THE FIRST NINE MONTHS 2023 VERSUS
THIRD QUARTER 2022 AND THE FIRST NINE MONTHS 2022

Consolidated Results of Operations

We report our financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"). However, we believe that certain non-GAAP performance measures and ratios used in managing the business may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP performance measures and ratios should be viewed in addition to, and not as an alternative for, our reported results under GAAP.
The following discussion of consolidated results of operations refers to the three and nine months ended September 30, 2023 compared to the same periods of 2022.

SALES AND OPERATIONS

Net Sales
Below is a summary of our net sales, in millions, for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 Change 2023 2022 Change
Net sales, as reported $ 1,979 $ 2,204 $ (225) $ 6,085 $ 6,757 $ (672)
Acquisitions (6) — (6) (6) — (6)
Net sales, excluding acquisitions 1,973 2,204 (231) 6,079 6,757 (678)
Currency translation (14) — (14) 20 — 20
Net sales, excluding acquisitions and the effect of currency translation $ 1,959 $ 2,204 $ (245) $ 6,099 $ 6,757 $ (658)


15


Net sales for the three months ended September 30, 2023 were $2.0 billion, which decreased 10 percent compared to the three months ended September 30, 2022. Excluding acquisitions and the effect of currency translation, net sales decreased 11 percent. Net sales for the nine months ended September 30, 2023 were $6.1 billion, which decreased 10 percent compared to the nine months ended September 30, 2022. Excluding acquisitions and the effect of currency translation, net sales decreased 10 percent.
Net sales decreased primarily due to:
•
Lower sales volume which decreased sales by 12 percent and 13 percent for the three and nine months ended September 30, 2023, respectively.
•
Unfavorable sales mix of plumbing products which decreased sales by one percent for the nine months ended September 30, 2023.
These amounts were partially offset by:
•
Higher net selling prices driven by plumbing products which increased sales by one percent for the three months ended September 30, 2023 and higher net selling prices across the entire company which increased sales by four percent for the nine months ended September 30, 2023.

Gross Profit and Gross Margin
Below is a summary of our gross profit, in millions, and gross margin for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 Favorable / (Unfavorable) 2023 2022 Favorable / (Unfavorable)
Gross profit $ 744 $ 695 $ 49 $ 2,182 $ 2,168 $ 14
Gross margin 37.6 % 31.5 % 610 bps 35.9 % 32.1 % 380 bps
Gross profit margin was positively impacted by:
•
Higher net selling prices for both periods.
•
Receipt of an insurance settlement payment for both periods.
•
Cost savings initiatives for both periods.
•
Lower commodity costs for the three months ended September 30, 2023.
•
Lower transportation costs for both periods.
These amounts were partially offset by:
•
Lower sales volume for both periods.
•
Unfavorable sales mix for the nine months ended September 30, 2023.














16


Selling, General and Administrative Expenses
Below is a summary of our selling, general and administrative expenses, in millions, and selling, general and administrative expenses as a percentage of net sales for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 (Favorable) / Unfavorable 2023 2022 (Favorable) / Unfavorable
Selling, general and administrative expenses $ 361 $ 344 $ 17 $ 1,081 $ 1,056 $ 25
Selling, general and administrative expenses as percentage of net sales 18.2 % 15.6 % 260 bps 17.8 % 15.6 % 220 bps
Selling, general and administrative expenses as percentage of net sales was negatively impacted by:
•
Increased employee-related costs for both periods.
•
Increased marketing costs for the nine months ended September 30, 2023.
•
Lower net sales resulting from lower volumes for both periods.

Operating Profit
Below is a summary of our operating profit, in millions, and operating profit margin for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 Favorable / (Unfavorable) 2023 2022 Favorable / (Unfavorable)
Operating profit $ 383 $ 351 $ 32 $ 1,101 $ 1,112 $ (11)
Operating profit margin 19.4 % 15.9 % 350 bps 18.1 % 16.5 % 160 bps
For the three months ended September 30, 2023, operating profit was positively impacted by:
•
Lower transportation and commodity costs.
•
Receipt of an insurance settlement payment.
•
Cost savings initiatives.
•
Higher net selling prices.
These amounts were partially offset by:
•
Lower sales volume.
•
Increased employee-related costs.
For the nine months ended September 30, 2023, operating profit was negatively impacted by:
•
Lower sales volume.
•
Increased employee-related costs.
•
Unfavorable sales mix.
•
Increased marketing costs.
•
Unfavorable foreign currency translation.
17


These amounts were partially offset by:
•
Higher net selling prices.
•
Cost savings initiatives.
•
Receipt of an insurance settlement payment.
•
Lower transportation costs.

OTHER INCOME (EXPENSE), NET

Interest Expense

Below is a summary of our interest expense, in millions, for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 Favorable / (Unfavorable) 2023 2022 Favorable / (Unfavorable)
Interest expense $ (26) $ (29) $ 3 $ (82) $ (82) $ —
Other, net

Below is a summary of our other, net, in millions, for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 Favorable / (Unfavorable) 2023 2022 Favorable / (Unfavorable)
Other, net $ (11) $ (12) $ 1 $ (14) $ 4 $ (18)
For the nine months ended September 30, 2022, other, net included $24 million of income from the revaluation of contingent consideration related to our acquisition of Kraus USA Inc.

INCOME TAXES

Below is a summary of our income tax expense, in millions, and our effective tax rate for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 (Favorable) / Unfavorable 2023 2022 (Favorable) / Unfavorable
Income tax expense $ 86 $ 77 $ 9 $ 246 $ 255 $ (9)
Effective tax rate 25 % 25 % — % 24 % 25 % (1) %
Our effective tax rate for the nine months ended September 30, 2023 and 2022 was favorably impacted by $14 million and $10 million of income tax benefits, respectively. For both periods, the income tax benefits primarily resulted from a reduction in the liability for uncertain tax positions resulting from the expiration of statutes of limitation and stock-based compensation.









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

Below is a summary of our net income and diluted income per common share, in millions, except per share data, for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 Favorable / (Unfavorable) 2023 2022 Favorable / (Unfavorable)
Net income $ 249 $ 218 $ 31 $ 717 $ 729 $ (12)
Diluted income per common share $ 1.10 $ 0.97 $ 0.13 $ 3.17 $ 3.13 $ 0.04
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Business Segment and Geographic Area Results

The following tables set forth our net sales and operating profit information by business segment and geographic area, dollars in millions.
Three Months Ended September 30, Percent
Change 		Nine Months Ended September 30, Percent
Change
2023 2022
2023 vs. 2022
2023 2022
2023 vs. 2022
Net Sales:
Plumbing Products $ 1,191 $ 1,324 (10) % $ 3,638 $ 4,056 (10) %
Decorative Architectural Products 788 880 (10) % 2,447 2,701 (9) %
Total $ 1,979 $ 2,204 (10) % $ 6,085 $ 6,757 (10) %
North America $ 1,602 $ 1,792 (11) % $ 4,875 $ 5,431 (10) %
International, principally Europe 377 412 (8) % 1,210 1,326 (9) %
Total $ 1,979 $ 2,204 (10) % $ 6,085 $ 6,757 (10) %
Three Months Ended September 30, Percent
Change 		Nine Months Ended September 30, Percent
Change
2023 2022
2023 vs. 2022
2023 2022
2023 vs. 2022
Operating Profit (A):
Plumbing Products $ 223 $ 220 1 % $ 673 $ 686 (2) %
Decorative Architectural Products 181 151 20 % 493 498 (1) %
Total $ 404 $ 371 9 % $ 1,166 $ 1,184 (2) %
North America $ 348 $ 305 14 % $ 972 $ 961 1 %
International, principally Europe 56 66 (15) % 194 223 (13) %
Total 404 371 9 % 1,166 1,184 (2) %
General corporate expense, net (21) (20) 5 % (65) (72) (10) %
Total operating profit $ 383 $ 351 9 % $ 1,101 $ 1,112 (1) %
(A) Before general corporate expense, net; refer to Note I to the condensed consolidated financial statements.
















20


The following discussion of business segment and geographic area results refers to the three and nine months ended September 30, 2023 compared to the same periods of 2022. Changes in operating profit in the following business segment and geographic area results discussion exclude general corporate expense, net.

BUSINESS SEGMENT RESULTS DISCUSSION

Plumbing Products
Sales
Net sales in the Plumbing Products segment decreased 10 percent for both the three and nine months ended September 30, 2023. In local currencies (including sales in currencies outside their respective functional currencies), net sales decreased 11 percent and 10 percent for the three and nine months ended September 30, 2023, respectively. Lower sales volume decreased sales by 14 percent and 13 percent for the three and nine months ended September 30, 2023, respectively. Unfavorable sales mix decreased sales by one percent for both the three and nine months ended September 30, 2023. These amounts were partially offset by higher net selling prices which increased sales by three percent and four percent for the three and nine months ended September 30, 2023, respectively.
Operating Results
Operating profit in the Plumbing Products segment for the three months ended September 30, 2023 was positively impacted by higher net selling prices, lower transportation and commodity costs and cost savings initiatives. These amounts were mostly offset by lower sales volume, unfavorable foreign currency translation and increased employee-related costs. Operating profit for the nine months ended September 30, 2023 was negatively impacted by lower sales volume, increased employee-related costs, unfavorable foreign currency translation, unfavorable sales mix and increased marketing costs. These amounts were partially offset by higher net selling prices, lower transportation and commodity costs and cost savings initiatives.
Decorative Architectural Products
Sales
Net sales in the Decorative Architectural Products segment decreased 10 percent and nine percent for the three and nine months ended September 30, 2023, respectively. For the three months ended September 30, 2023 this decrease was due primarily to lower sales volume and lower net selling prices. For the nine months ended September 30, 2023 this decrease was due primarily to lower sales volume, partially offset by higher net selling prices.
Operating Results
Operating profit in the Decorative Architectural Products segment for the three months ended September 30, 2023 was positively impacted by the receipt of an insurance settlement payment and cost savings initiatives, partially offset by lower sales volume and lower net selling prices. Operating profit for the nine months ended September 30, 2023 was negatively impacted by lower sales volume and increased commodity costs, mostly offset by higher net selling prices, receipt of an insurance settlement payment and cost saving initiatives.













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GEOGRAPHIC AREA RESULTS DISCUSSION

North America
Sales
North America net sales decreased 11 percent and 10 percent for the three and nine months ended September 30, 2023, respectively. Lower sales volume across all product categories decreased sales by 11 percent and 13 percent for the three and nine months ended September 30, 2023, respectively. Unfavorable sales mix decreased sales by one percent for both the three and nine months ended September 30, 2023. These amounts were partially offset by higher net selling prices which increased sales by one percent and three percent for the three and nine months ended September 30, 2023, respectively.
Operating Results
North America operating profit for the three months ended September 30, 2023 was positively impacted by lower transportation and commodity costs, receipt of an insurance settlement payment and cost savings initiatives. These amounts were partially offset by lower sales volume and higher employee-related costs. North America operating profit for the nine months ended September 30, 2023 was positively impacted by higher net selling prices, cost savings initiatives, receipt of an insurance settlement payment and lower transportation costs. These amounts were mostly offset by lower sales volume, higher employee-related costs and higher marketing costs.
International, Principally Europe
Sales
International net sales decreased eight percent and nine percent for the three and nine months ended September 30, 2023, respectively. In local currencies (including sales in currencies outside their respective functional currencies), net sales decreased 11 percent and seven percent for the three and nine months ended September 30, 2023, respectively. Lower sales volume decreased sales by 16 percent and 12 percent for the three and nine months ended September 30, 2023, respectively. Unfavorable sales mix decreased sales by one percent for the nine months ended September 30, 2023. These amounts were partially offset by higher net selling prices which increased sales by four percent and six percent for the three and nine months ended September 30, 2023, respectively.
Operating Results
International operating profit for the three and nine months ended September 30, 2023 was negatively impacted by lower sales volume and unfavorable foreign currency translation. For the nine months ended September 30, 2023 operating profit was also negatively impacted by unfavorable sales mix. These amounts were partially offset by higher net selling prices and lower transportation and commodity costs.

Liquidity and Capital Resources

Overview of Capital Structure
We had cash and cash investments of approximately $560 million and $452 million at September 30, 2023 and December 31, 2022, respectively. Our cash and cash investments consist of overnight interest bearing money market demand accounts, time deposit accounts, and money market mutual funds containing government securities and treasury obligations. While we attempt to diversify these investments in a prudent manner to minimize risk, it is possible that future changes in the financial markets could affect the security or availability of these investments. Of the cash and cash investments we held at September 30, 2023 and December 31, 2022, $274 million and $321 million, respectively, was held in our foreign subsidiaries. If these funds were needed for our operations in the U.S., their repatriation into the U.S. would not result in significant additional U.S. income tax or foreign withholding tax, as we have recorded such taxes on substantially all undistributed foreign earnings, except for those that are legally restricted.
Our current ratio was 1.8 to 1 and 1.6 to 1 at September 30, 2023 and December 31, 2022, respectively. The increase in our current ratio is primarily due to the repayment of the 364-day term loan during 2023.
22


We believe that our present cash balance and cash flows from operations, and borrowing availability under our revolving credit agreement, are sufficient to fund our near-term working capital and other investment needs. We believe that our longer-term working capital and other general corporate requirements will be satisfied through cash flows from operations and, to the extent necessary, from bank borrowings and future financial market activities. However, due to the changing market conditions and its impact on our customers and suppliers, we are unable to fully estimate the extent of the impact that the changing market conditions may have on our future financial condition.
Credit Agreement
On April 26, 2022, we entered into a revolving credit agreement (the “2022 Credit Agreement”) with an aggregate commitment of $1.0 billion and a maturity date of April 26, 2027.
Under the 2022 Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $500 million with the current lenders or new lenders. See Note H to the condensed consolidated financial statements for additional information.
The 2022 Credit Agreement contains financial covenants requiring us to maintain (A) a net leverage ratio, as adjusted for certain items, not exceeding 4.0 to 1.0, and (B) an interest coverage ratio, as adjusted for certain items, not less than 2.5 to 1.0. We were in compliance with all covenants and no borrowings were outstanding at September 30, 2023.
364-day Term Loan
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.
Other Liquidity and Capital Resource Activities
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 contain no financial covenants and €60 million ($63 million) remained borrowed and outstanding at a weighted average interest rate of 4.807% at September 30, 2023.
As part of our ongoing efforts to improve our cash flow and related liquidity, we work with suppliers to optimize our terms and conditions, including extending payment terms. We also facilitate a voluntary supply chain finance program (the "program") to provide certain of our suppliers with the opportunity to sell receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. The amounts confirmed as valid under the program and included in accounts payable were $60 million and $50 million at September 30, 2023 and December 31, 2022, respectively. Of the amounts confirmed as valid under the program, the amounts owed to participating financial institutions were $21 million and $29 million at September 30, 2023 and December 31, 2022, respectively. All payments made under the program are recorded as a decrease in accounts payable and accrued liabilities, net, in our condensed consolidated statements of cash flows. A downgrade in our credit rating or changes in the financial markets could limit the financial institutions’ willingness to commit funds to, and participate in, the program. We do not believe such risk would have a material impact on our working capital or cash flows, as substantially all of our payments are made outside of the program.
Acquisitions
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.


23


Share Repurchases
Effective October 20, 2022, our Board of Directors authorized the repurchase, for retirement, of up to $2.0 billion of shares of our common stock in open-market transactions or otherwise, replacing the previous Board of Directors authorization established in 2021. We repurchased and retired approximately 2.4 million shares of our common stock in the nine months ended September 30, 2023 for approximately $126 million. This included 0.2 million shares to offset the dilutive impact of restricted stock units granted in the nine months ended September 30, 2023. At September 30, 2023, we had approximately $1.9 billion remaining under the 2022 authorization. Consistent with our past practice and as part of our long-term capital allocation strategy, we anticipate using approximately $350 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 program) in 2023.
Cash Flows
For the nine months ended September 30, 2023, net cash provided by operations was $928 million, primarily driven by operating profit.
For the nine months ended September 30, 2023, net cash used for financing activities was $498 million, primarily due to $200 million for the repayment of the 364-day term loan, $193 million for the payment of cash dividends, $126 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), and $49 million for dividends paid to noncontrolling interest. These uses of cash were partially offset by $66 million of net proceeds from short-term debt borrowings.
For the nine months ended September 30, 2023, net cash used for investing activities was $321 million, primarily driven by $181 million of capital expenditures and $136 million for the acquisition of Sauna360.

24

Cautionary Statement Concerning Forward-Looking Statements

This Report contains statements that reflect our views about our future performance and constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "outlook," "believe," "anticipate," "appear," "may," "will," "should," "intend," "plan," "estimate," "expect," "assume," "seek," "forecast," and similar references to future periods. Our views about future performance involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. We caution you against relying on any of these forward-looking statements.

Our future performance may be affected by the levels of residential repair and remodel activity, and to a lesser extent, new home construction, our ability to maintain our strong brands and to develop innovative products, our ability to maintain our public reputation, our ability to maintain our competitive position in our industries, our reliance on key customers, the cost and availability of materials, our dependence on suppliers and service providers, extreme weather events and changes in climate, risks associated with our international operations and global strategies, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to successfully execute our acquisition strategy and integrate businesses that we have acquired and may in the future acquire, our ability to attract, develop and retain a talented and diverse workforce, risks associated with cybersecurity vulnerabilities, threats and attacks, risks associated with our reliance on information systems and technology and the impact of the ongoing COVID-19 pandemic on our business and operations.

These and other factors are discussed in detail in Item 1A. "Risk Factors" in our most recent Annual Report on Form 10-K, as well as in other filings we make with the Securities and Exchange Commission. Any forward-looking statement made by us speaks only as of the date on which it was made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise.
25

MASCO CORPORATION
Item 4.
CONTROLS AND PROCEDURES

a. Evaluation of Disclosure Controls and Procedures.
The Company's Principal Executive Officer and Principal Financial Officer have concluded, based on an evaluation of the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15 that, as of September 30, 2023, the Company's disclosure controls and procedures were effective.

b. Changes in Internal Control over Financial Reporting.
In connection with the evaluation of the Company's internal control over financial reporting that occurred during the quarter ended September 30, 2023, which is required under the Securities Exchange Act of 1934 by paragraph (d) of Exchange Rules 13a-15 or 15d-15 (as defined in paragraph (f) of Rule 13a-15), management determined that there was no change that materially affected or is reasonably likely to materially affect internal control over financial reporting.

26

MASCO CORPORATION
PART II.  OTHER INFORMATION


Item 1 . Legal Proceedings
Information regarding legal proceedings involving us is set forth in Note M to our condensed consolidated financial statements included in Part I, Item 1 of this Report and is incorporated herein by reference.

Item 1A . Risk Factors

There have been no material changes to the risk factors of the Company set forth in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2 . Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding the repurchase of our common stock for the three months ended September 30, 2023 under the 2022 share repurchase authorization:
Period Total Number
Of Shares
Purchased 		Average Price
Paid Per
Common Share 		Total Number Of
Shares Purchased
As Part Of
Publicly Announced
Plans or Programs 		Maximum Value Of
Shares That May
Yet Be Purchased
Under The Plans Or Programs
7/1/23 - 7/31/23 773,051 $ 58.22 773,051 $ 1,873,997,902
8/1/23 - 8/31/23 — $ — — $ 1,873,997,902
9/1/23 - 9/30/23 — $ — — $ 1,873,997,902
Total for the quarter 773,051 $ 58.22 773,051 $ 1,873,997,902

Item 5 . Other Information

Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the three months ended September 30, 2023, none of our officers or directors adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.





















27

MASCO CORPORATION
PART II.  OTHER INFORMATION, Continued
Item 6. Exhibits

Employment Offer Letter dated August 28, 2023 between Richard Westenberg and Masco Corporation.
Amended and Restated Transition and Severance Agreement and Release of All Liability with David A. Chaika.
Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
Certifications required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101
The following financial information from Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders' Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)



28

MASCO CORPORATION
PART II.  OTHER INFORMATION, Concluded

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
MASCO CORPORATION
By:
/s/ Richard J. Westenberg
Richard Westenberg
Vice President, Chief Financial Officer
October 26, 2023
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