Masco (MAS) 10-K risk factor changes: FY2015 vs FY2014

[removed: A significant portion of our] [added: _Our] business relies on home improvement and new home construction activity, both of which are [removed: cyclical.][added: cyclical._]

Macroeconomic [removed: conditions,] [added: conditions in the U.S. and Europe,] including consumer confidence levels, fluctuations in home prices, unemployment and underemployment levels, [removed: student loan debt,] [added: consumer income and debt levels,] household formation and the availability of home equity loans and mortgages and the interest rates for such loans, affect both consumers' discretionary spending on home improvement projects as well as new home construction activity.

While improving, both [removed: new home construction and] consumer spending for big ticket remodeling projects [added: and new home construction] continue to be below historic average levels.

[removed: If] [added: _If] we do not maintain strong [removed: brands] [added: brands, develop new products] or respond to changing [added: purchasing practices and] consumer preferences [removed: and purchasing practices,] we could lose [removed: share and our results could be adversely affected.][added: market share._]

If we do not introduce new or improved products in a timely manner or if these products do not gain widespread acceptance, we could lose [added: market] share, which could negatively impact our operating results.

[removed: The challenging economic environment of] [added: In] recent [removed: years has caused shifts in] [added: years,] consumer [removed: preferences and] purchasing practices and [removed: changes in the] [added: preferences have shifted and our customers'] business models and strategies [removed: of our customers.][added: have changed.]

E-business is a rapidly developing area, and [removed: development] [added: the refinement and execution] of a successful e-business strategy involves significant time, investment and resources.

If we are unable to successfully execute our e-business strategy, our brands may lose [added: market] share.

If we do not timely and effectively identify and respond to these changing [removed: consumer preferences and] purchasing [removed: practices,] [added: practices and consumer preferences,] our relationships with our customers and with consumers could be harmed, the demand for our brands and products could be reduced and our results of operations could be negatively affected.

[removed: We] [added: _We] may not achieve all of the anticipated benefits of our strategic [removed: and operational initiatives or our actions to improve our underperforming cabinetry businesses.][added: initiatives._]

[removed: In 2014, we announced new] [added: We continue to pursue our] strategic initiatives, which are designed to increase shareholder value over the mid- to long-term.

[removed: Our business performance and results could be adversely affected if we are] unable to [added: successfully] execute these [removed: strategic] initiatives, or if we are unable to execute them in a timely and efficient manner.

Our initiatives to improve our cabinetry [removed: operations, including rationalizing our businesses, closing plants and reducing headcount,] [added: operations] have been complex, time-consuming and expensive.

[removed: Our] [added: _Our] sales are concentrated with two significant [removed: customers.][added: customers._]

In [removed: 2014,] [added: 2015,] net sales to our largest customer, The Home Depot, were [removed: $2.3] [added: $2.4] billion (approximately [removed: 27] [added: 33] percent of [added: our] consolidated net sales).

In [removed: 2014,] [added: 2015, net] sales to [removed: Lowe's] [added: Lowe's, our second largest customer,] were less than ten percent of our consolidated net sales.

[removed: These] [added: Additionally, these] home center customers may reduce the number of vendors [added: from which] they purchase [removed: from] and [removed: can] [added: could] make significant changes in their volume of purchases.

[removed: Additionally,] [added: These] home [removed: centers] [added: center retailers] can significantly affect the prices we receive for our products and [removed: services, our cost of doing business with them and] the terms and conditions on which we do [removed: business.][added: business with them.]

If the mix of our business operations [removed: significantly changes,] [added: continues to change,] including as a result of acquisitions or divestitures, our reliance on these significant customers may [added: further] increase.

Although [removed: homebuilders, dealers and] other [removed: retailers] [added: retailers, dealers, distributors and homebuilders] represent other channels of distribution for our products and services, the loss of a substantial portion of our sales to The Home Depot or the loss of [added: all of] our sales to Lowe's would have a material adverse effect on our business.

Further, as some of [removed: our customers] [added: these home center retailers] expand their markets and [removed: their] targeted [removed: customers,] [added: customers and as consumer purchasing practices change and e-commerce increases,] conflicts between our existing distribution channels have and will continue to occur, which could impact our results of operations.

[removed: We may undermine the business] [added: Our] relationships [removed: we have] with our [removed: current] customers [added: may be impacted] if we increase the amount of business we transact directly with consumers.

In addition, our large retail customers [removed: are increasingly requesting] [added: request] product [removed: exclusivity,] [added: exclusivity from time to time,] which may affect our ability to offer products to other customers and may diminish our ability to leverage economies of scale.

[removed: We] [added: _We] face significant [removed: competition.][added: competition._]

Our products [removed: and services] face significant competition.

We believe that [added: brand reputation is an important factor impacting product selection and that] we compete on the basis of [removed: price,] product [added: features] and [removed: service] [added: innovation, product] quality, [removed: brand reputation,] customer [removed: service and product features] [added: service, warranty] and [removed: innovation.][added: price.]

Home [removed: centers] [added: center retailers] continue to purchase [removed: select] products in our segments directly from low-cost foreign manufacturers for sale as private label [removed: and house brand] merchandise.

Additionally, home [removed: centers,] [added: center retailers,] which have historically concentrated their sales efforts on retail consumers and remodelers, are increasingly marketing directly to professional contractors and installers, which may impact our margins on our products that contractors and installers would otherwise buy through our dealers and wholesalers.

[removed: In our other distribution channels,] [added: Additionally, in these channels as well as at home center retailers,] we compete with foreign manufacturers in a variety of our product groups.

[removed: These] [added: Some of these] foreign manufacturers are putting downward pressures on price.

[removed: In some of our segments,] [added: As market dynamics change,] we [removed: are continuing to] [added: may] experience a shift in the mix of some products we sell toward more value-priced or opening price point products, which may impact our ability to maintain or gain [added: market] share [removed: and] [added: and/or] our profitability.

Our ability to maintain our competitive position in our industries [removed: and to grow our businesses] depends upon [removed: successfully] maintaining [removed: our relationships with major customers, implementing growth strategies and entering new geographic areas, including successful international penetration,] [added: strong brands,] developing [removed: a successful e-business strategy,] [added: and innovating products,] maintaining strong [removed: brands,] [added: relationships with our customers,] managing our cost structure, [added: executing a successful e-business strategy,] accommodating [removed: shorter life-cycles] [added: customer demands] for [removed: our products,] [added: new] and [removed: developing] [added: improved products on a shorter cycle, implementing growth strategies] and [removed: innovating products,] [added: entering new domestic and international areas,] none of which is assured.

We buy various commodities to manufacture our products, including, among others, [removed: wood, brass (made of copper and zinc),] [added: brass, resins,] titanium [removed: dioxide] [added: dioxide, zinc, wood] and [removed: resins.][added: glass.]

If we are able to increase our selling prices, sustained price increases for our products may lead to sales declines and loss of [added: market] share, particularly if our competitors do not increase their prices.

When commodity prices decline, we [added: have experienced and] may [added: in the future] receive pressure from our customers to reduce our prices.

This strategy [removed: may increase] [added: increases] the possibility that we may make commitments to purchase these commodities at prices that subsequently exceed their market prices, which [removed: could] [added: has and may continue to] adversely affect our financial condition and operating results.

[removed: Our] [added: We rely heavily on third-party suppliers for many of our products and components, and our] ability to offer a wide variety of products depends on our ability to obtain an adequate supply of [added: these] products and [removed: components from manufacturers and other suppliers.][added: components.]

Failure by our suppliers to provide us quality products on commercially reasonable terms, or to comply with applicable legal [added: and regulatory] requirements, could have a material adverse effect on our financial condition or operating results.

Resourcing these products and components to another supplier could take time and involve significant [added: costs.]

Accordingly, the loss of [removed: a key supplier,] [added: critical suppliers,] or a substantial decrease in the availability of products or components from our suppliers, could disrupt our business and adversely impact our operating results.

A significant portion of our business relies on home improvement, including repair and remodeling projects, of which our reliance has increased following the spin off of TopBuild Corp. ("TopBuild") in 2015.

Our business also relies on new home construction activity.

While U.S. demand for single-family houses is increasing, the demand for multi-family housing units such as apartments and condominiums continues to be elevated compared to historic levels.

Multi-family units typically are smaller than single-family houses and require fewer kitchen and bathroom cabinets than single-family houses.

If this demand mix remains, it may limit our growth opportunities.

We sell many of our products through distributors and independent dealers and we rely on these customers to market and promote our products to consumers.

Our success with these customers is dependent on our ability to provide quality products and timely delivery.

As a result of the spin off of TopBuild in 2015, the mix of our business operations has changed and the concentration of our sales to our two largest customers has increased and may continue to increase.

Our business performance and results could be adversely affected if we are

We could also be adversely affected if we are unable to effectively manage change throughout our organization.

Pursuing the acquisition of businesses complementary to our portfolio is a component of our strategy for future growth.

If we are not able to identify suitable acquisition candidates or consummate potential acquisitions, our long-term competitive positioning may be impacted.

Even if we are successful in acquiring businesses, we may experience risks in integrating these businesses into our existing business.

Such risks include difficulties realizing expected synergies and economies of scale, diversion of our resources, unforeseen liabilities, issues with the new or existing customers or suppliers, and difficulties in retaining critical employees of the acquired businesses.

Future foreign acquisitions may also increase our exposure to foreign currency risks and risks associated with interpretation and enforcement of foreign regulations.

Our failure to address these risks could cause us to incur additional costs and/or fail to realize the anticipated benefits of our acquisitions and could adversely affect our results of operations.

_We may not be able to sustain the turnaround in our cabinetry businesses._

Although the operating results of our cabinetry businesses improved in 2015, we continue to focus on obtaining profitable sales, reducing our cost structure and improving production efficiencies.

Our strategies in these areas require time to implement, execute and assess and may not be successful.

If the improvement in our cabinetry businesses cannot be sustained or if the pace of the improvement slows, our results of operations may be negatively impacted.

_Variability in commodity costs or limited availability of commodities could impact us._

In addition, water is a significant component of many of our architectural coatings products and may be subject to restrictions in certain regions.

Such reductions could impact our operating results.

We also have agreements with certain significant suppliers to help assure continued availability.

_We are dependent on third-party suppliers._

Many of the suppliers upon whom we rely are located in foreign countries.

_There are risks associated with international operations and global strategies._

As our sales made outside of the U.S. have increased, we have experienced a greater negative impact from currency conversion rates, particularly the Euro, the Canadian dollar and the British pound sterling, on our results of operations due to the strength of the U.S. dollar compared to foreign currencies.

Fluctuations in currency exchange rates may present challenges in comparing operating performance from period to period.

While it is difficult to assess what changes may occur and the relative impact on our international tax structure, it is possible that significant changes in how U.S. and foreign jurisdictions tax cross-border transactions could adversely impact our financial results.

Protecting and defending our intellectual property could be costly, time consuming and require significant resources.

If we are not able to protect our existing

If we are unable to recruit, train and retain sufficient skilled and unskilled labor, we may not be able to adequately satisfy increased demand for our products and services, and our operating results could be adversely affected.

We may also experience increased costs for insurance coverage that could impact our financial results.

Further, compliance activities are costly and require significant management attention and resources.

_We rely on information systems and technology, and disruptions to these systems could impact our operating results._

We may be adversely impacted if our information systems are disrupted or fail, or if we do not appropriately select and implement our new technology systems in a timely manner.

_Restrictive covenants in our credit agreement could limit our financial flexibility._

We must comply with both financial and nonfinancial covenants in our credit agreement, and in order to borrow under it, we cannot be in default with any of those provisions.

Our ability to borrow under the credit agreement could be impacted if our earnings significantly decline to a level where we are not in compliance with the financial covenants or if we default on any nonfinancial covenants.

_Risks Related to our Business_

A significant portion of our business relies on home improvement, including spending on repair and remodeling projects, and new home construction activity, principally in North America and Europe.

Similarly, the quantity, type and prices of products demanded by consumers and our customers have shifted.

For example, demand has increased for multi-family housing units such as apartments and condominiums, which typically have smaller kitchens and smaller and fewer bathrooms, each with fewer cabinets and faucets, as well as less insulation, than single-family houses.

While the economy is recovering, we are experiencing growth in certain channels for lower price point products.

In some of our segments, these shifts have negatively impacted our sales and/or our profitability, and it is uncertain whether these shifts represent long-term changes in consumer preferences.

We have also identified a number of operational initiatives, which include making significant investments in technology systems that are key to managing our business.

We could be adversely affected if we do not effectively implement our operational initiatives in a timely manner.

The downturn in home improvement and new home construction activity during the recent recession impacted our results, particularly at our cabinetry businesses.

In response, we have implemented initiatives to reduce costs and increase sales; however, there is no assurance that our efforts will yield all of the anticipated benefits.

The consolidation of our North American Cabinet businesses, in particular, involved the integration of multiple manufacturing processes and information technology platforms and continues to affect our operations.

Our strategy to increase our cabinetry businesses' sales through brand building, enhanced customer relationships and new product introductions requires time to implement, execute and assess.

Further, these businesses continue to face pricing pressures, competition from low-cost manufacturers and a shift in the mix of products in certain channels to more value-priced products.

If our strategy to increase our sales is not successful, our results of operations may continue to be negatively impacted.

The size and importance of individual customers to our businesses continues to increase.

Lowe's is our second largest customer.

If we experience increased commodity costs or limited availability of commodities, our operating results could be negatively impacted.

We are dependent on third-party suppliers and manufacturers, and the loss of a key supplier or manufacturer could negatively affect our operating results.

We rely heavily or, in certain cases, exclusively, on third-party suppliers for some of our products and key components.

costs.

International political, monetary, economic and social developments affect our business.

In addition, we manufacture products in Asia and source products, components and raw materials from third parties in Asia.

In addition, our financial results could be adversely affected by the currency conversion rate if the U.S. dollar strengthens in value relative to foreign currencies, particularly the Euro, and fluctuations in currency exchange rates may present challenges in comparing operating performance from period to period.

Further, as the economy continues to recover, if we are unable to recruit, train and retain sufficient skilled labor, we may not be able to

adequately satisfy increased demand for our products and services, which could impact our operating results.

Our homebuilder customers are subject to construction defect and home warranty claims in the ordinary course of their business.

Our contractual arrangements with these customers may include our agreement to defend and indemnify them against various liabilities.

These claims, often asserted several years after completion of construction, can result in complex lawsuits or claims against the homebuilders and many of their subcontractors, including us, and may require us to incur defense and indemnity costs even when our products or services are not the principal basis for the claims.

If we are required to take additional significant non-cash charges, our financial resources could be reduced and our financial flexibility may be negatively affected.

We have recorded significant goodwill and other intangible assets related to prior business combinations on our balance sheet.

The valuation of these assets is largely dependent upon the expectations for future performance of our businesses.

Expectations about the growth of new home construction and home improvement activity may impact whether we are required to recognize additional non-cash, pre-tax impairment charges for goodwill and other indefinite-lived intangible assets or other long-lived assets.

If the value of our goodwill or other intangible assets is further impaired, our earnings and shareholders' equity would be adversely affected.

Further, our credit agreement contains financial covenants we must comply with, including covenants regarding limits on our debt to total capitalization ratio.

If we are required to record additional non-cash impairment charges, our shareholders' equity would be reduced, and our borrowing capacity under our credit agreement may be limited.

We have negotiated amendments to our credit agreement to allow for the add-back to shareholders' equity for impairment charges we have taken.

Such actions could divert our attention and resources to compliance activities, and could cause us to incur higher costs.

Our operations may be adversely affected by information systems interruptions or intrusions.

_Risks Related to our Proposed Spin-off Transaction_

We are pursuing a plan to spin-off our Installation and Other Services segment (our "Services Business").

The following discussion and certain other sections of this Report contain statements [removed: reflecting] [added: that reflect] our views about our future performance and constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995.

[removed: These] [added: Our] views [added: 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 [removed: such] [added: our] forward-looking statements.

In addition to the various factors included in the "Executive Level Overview," "Critical Accounting Policies and Estimates" and "Outlook for the Company" sections, our future performance may be affected by [removed: our reliance on new home construction and home improvement, our reliance on key customers,] the [removed: cost and availability] [added: levels] of [removed: raw materials, uncertainty in the international economy, shifts in consumer preferences] [added: home improvement activity] and [removed: purchasing practices,] [added: new home construction,] our ability to [removed: improve] [added: maintain] our [removed: underperforming businesses,] [added: strong brands and to develop and introduce new and improved products,] our ability to maintain our competitive position in our industries, [removed: risks associated with the proposed spin-off of] our [removed: Installation and Other Services businesses,] [added: reliance on key customers,] our ability to [removed: realize] [added: achieve] the [removed: expected] [added: anticipated] benefits of [added: our strategic initiatives, our ability to sustain] the [removed: spin-off,] [added: performance of our cabinetry businesses,] the [removed: timing] [added: cost] and [removed: the terms] [added: availability] of [added: raw materials,] our [removed: share repurchase program,] [added: dependence on third party suppliers,] and [removed: our ability to reduce corporate expense] [added: risks associated with international operations] and [removed: simplify our organizational structure.][added: global strategies.]

We [added: design,] manufacture, [removed: distribute] [added: market] and [removed: install] [added: distribute branded] home improvement and building products.

These products are sold for home improvement and new home construction through [added: home center retailers,] mass merchandisers, hardware stores, [removed: home centers,] homebuilders, distributors and other outlets for consumers and contractors and direct to the consumer.

Net sales were positively affected by increased [removed: new home construction and] repair and remodel activity [added: and new home construction] in the U.S. and [removed: Europe.][added: Europe, favorable product mix, net selling price increases and acquisitions.]

[removed: Our results of] [added: Operating margins from North American] operations [added: in 2015] were positively affected by increased sales volume, as well as a more favorable relationship between selling prices and commodity [removed: costs, except in paints and stains.][added: costs.]

[removed: Our Plumbing] [added: The Decorative Architectural] Products segment benefited from increased sales volume of [removed: North American] [added: paints] and [removed: International operations, as well as] [added: stains and builders' hardware,] a more favorable relationship between selling prices and commodity [removed: costs.][added: costs in]

[removed: commercial activity and] [added: Operating margins were also positively affected by] a more favorable relationship between selling prices and commodity [removed: costs.][added: costs and a favorable product mix.]

[removed: The] [added: Operating margins in the] Decorative Architectural Products segment [removed: benefited from] increased [removed: sales volume of paints and stains and builders' hardware, which was offset by] [added: in 2015, reflecting operational efficiencies due to benefits associated with cost savings initiatives,] a [removed: less] [added: more] favorable relationship between selling prices and commodity costs [removed: in] [added: and increased sales volume of] paints and [removed: stains.][added: stains and builders' hardware.]

Our Other Specialty Products segment benefited from [added: increased volume,] a more favorable [added: product mix of U.S. windows and a more favorable] relationship between selling prices and commodity costs [removed: and a more favorable product mix] of [added: windows in the] U.S. and [added: the] U.K. [removed: windows, as well as increased sales volume.]

We [added: monitor our customer receivable balances and the credit worthiness of our customers on an on-going basis and] maintain allowances for doubtful accounts receivable for estimated losses resulting from the inability of customers to make required payments.

We have defined our reporting units and completed the impairment testing of goodwill at the operating segment level, as defined by [removed: accounting guidance.][added: GAAP.]

Determining market values using a discounted cash flow method requires us to make significant estimates and assumptions, including long-term projections of cash flows, market conditions and [added: appropriate discount rates.]

In estimating future cash flows, we rely on internally generated five-year forecasts for sales and operating profits, including capital expenditures, [removed: and generally] [added: and, currently,] a one to three percent long-term assumed annual growth rate of cash flows for periods after the five-year forecast.

[removed: We generally develop these forecasts based upon, among other things, recent sales] data for existing products, planned timing of new product launches, estimated [removed: housing starts and estimated] repair and remodel [removed: activity.][added: activity and estimated housing starts.]

We utilize our weighted average cost of capital of approximately [removed: 9] [added: 8.5] percent as the basis to determine the discount rate to apply to the estimated future cash flows.

Our weighted average cost of capital decreased in [removed: 2014] [added: 2015 as compared to 2014,] primarily due to [removed: lower bond rates.][added: less risk associated with our stock in relation to the capital markets.]

In [removed: 2014,] [added: 2015,] based upon our assessment of the risks impacting each of our businesses, we applied a risk premium to increase the discount rate to a range of [removed: 11.0] [added: 10.5] percent to [removed: 14.0] [added: 12.5] percent for our reporting units.

In the fourth quarter of [removed: 2014,] [added: 2015,] we estimated that future discounted cash flows projected for all of our reporting units were greater than the carrying values.

A 10 percent decrease in the estimated fair value of our reporting units at December 31, [removed: 2014] [added: 2015] would not have resulted in any additional analysis of goodwill impairment for any [removed: additional] reporting unit.

In [removed: 2014,] [added: 2015,] we [removed: recognized an insignificant] [added: did not recognize any] impairment [removed: charge] [added: charges] for other indefinite-lived intangible assets.

[removed: Changes in] [added: While we believe that the estimates and] assumptions [removed: used] [added: underlying the valuation methodology are reasonable, different estimates and assumptions] could result in [removed: changes to] [added: different] reported pension costs and obligations within our consolidated financial statements.

In December [removed: 2014,] [added: 2015,] our discount rate [removed: decreased] [added: increased] for obligations to an average of [removed: 3.80] [added: 4.0] percent from [removed: 4.40] [added: 3.8] percent.

The discount rate for obligations is based upon the expected duration of each [removed: defined-][added: defined-benefit pension plan's liabilities matched to the December 31, 2015 Towers Watson Rate Link curve.]

The discount rates we use for our defined-benefit pension plans ranged from [removed: 2.00] [added: 2.0] percent to [removed: 4.00] [added: 4.3] percent, with the most significant portion of the liabilities having a discount rate for obligations of [removed: 3.70] [added: 4.0] percent or higher.

Our net underfunded amount for our qualified defined-benefit pension plans, which is the difference between the projected benefit obligation and plan assets, [removed: increased] [added: decreased] to [removed: $454] [added: $401] million at December 31, [removed: 2014] [added: 2015] from [removed: $324] [added: $454] million at December 31, [removed: 2013.][added: 2014.]

Our projected benefit obligation for our unfunded non-qualified defined-benefit pension plans was [removed: $190] [added: $174] million at December 31, [removed: 2014] [added: 2015] compared with [removed: $163] [added: $190] million at December 31, [removed: 2013.][added: 2014.]

The [removed: increase] [added: decrease] in the projected benefit obligations was primarily due to lower bond rates and a change to the [removed: RP 2014] [added: MP 2015] Mortality [removed: tables] [added: Improvement Scale] issued by the U.S. Society of Actuaries, which [removed: increased] [added: decreased] our long-term pension liabilities.

At December 31, [removed: 2014,] [added: 2015,] we reported a net liability of [removed: $644] [added: $575] million, of which [removed: $190] [added: $174] million was related to our non-qualified, supplemental retirement plans, which are not subject to the funding requirements of the Pension Protection Act of 2006.

In accordance with the Pension Protection Act, the Adjusted Funding Target Attainment Percentage for the various defined-benefit pension plans ranges from [removed: 79] [added: 78] percent to [removed: 90] [added: 114] percent.

We expect pension expense for our qualified defined-benefit pension plans to be [removed: $23] [added: $24] million in [removed: 2015] [added: 2016] compared with [removed: $16] [added: $22] million in [removed: 2014.][added: 2015.]

If we assumed that the future return on plan assets was one-half percent lower than the assumed asset return and the discount rate decreased by 50 basis points, the [removed: 2015] [added: 2016] pension expense would increase by $5 million.

We expect pension expense for our non-qualified defined-benefit pension plans to be [removed: $10] [added: $9] million in [removed: 2015] [added: 2016,] compared [removed: with $9] [added: to $10] million in [removed: 2014.][added: 2015.]

We anticipate that we will be required to contribute approximately [removed: $55 million to $65] [added: $25] million in [removed: 2015] [added: 2016] to our qualified and non-qualified defined-benefit plans.

The [removed: accounting guidance for income taxes requires that the] future realization of deferred tax assets depends on the existence of sufficient taxable income in future periods.

A company's three-year cumulative loss position is significant negative evidence in considering whether deferred tax assets are [removed: realizable] [added: realizable,] and the accounting guidance restricts the amount of reliance we can place on projected taxable income to support the recovery of the deferred tax assets.

During 2012 and 2011, objective and verifiable negative evidence, such as U.S. operating losses and significant impairment charges for U.S. goodwill [removed: in 2011] and other intangible assets, continued to [added: outweigh positive evidence necessary to reduce the valuation allowance.]

As a result, we recorded increases of $65 million and $87 million in the valuation allowance related to our U.S. Federal deferred tax assets [removed: as a non-cash charge to income tax expense] in 2012 and 2011, respectively.

We continue to maintain a valuation allowance on certain state and foreign deferred tax assets as of December 31, [removed: 2014.][added: 2015.]

2015 Results

Such increases were partially offset by foreign currency translation, primarily due to the stronger U.S. dollar compared to the Euro.

Our Cabinets and Related Products segment was positively affected by operational efficiencies due to benefits resulting from business rationalization activities and other cost saving initiatives and decreased business rationalization expenses.

Our Plumbing Products segment benefited from increased sales volume and a favorable relationship between selling prices and commodity costs and was negatively impacted by unfavorable product mix and an increase in certain variable expenses.

paints and stains and operational efficiencies due to benefits associated with cost savings initiatives.

We generally develop these forecasts based upon, among other things, recent sales

Our assumptions included a relatively stable U.S. Gross Domestic Product ranging from 2.4 percent to 2.9 percent and a euro zone Gross Domestic Product ranging from 1.5 percent to 1.8 percent over the five-year forecast.

Our qualified domestic pension plan assets in 2015 had a net loss of 1.8 percent.

Refer to Footnote M for further information regarding the funding of our plans.

Deferred taxes are recognized based on the future tax consequences of differences between the financial statement carrying value of assets and liabilities and their respective tax basis.

amounts are recorded as charges to earnings.

We expect to maintain a balanced growth strategy pursuing organic growth by maximizing the full potential of our existing core businesses and complementing our existing business with smaller, strategic acquisitions.

We acquired two businesses in 2015, Endless Pools and Evolution Manufacturing.

Endless Pools expanded our product offering and distribution channels into the aquatic fitness category.

Evolution Manufacturing expanded our offering of fiberglass and composite windows in the United Kingdom.

We believe these acquisitions will accelerate the growth of, and complement, our current businesses, Watkins Manufacturing and our UK-based window company, respectively.

Longer-term, we may seek larger, strategic acquisitions as our company continues to grow.

In addition, during the financial recession of the last decade, we actively managed our portfolio of companies by divesting of those businesses that did not align with our long-term growth strategy, including, in 2015, the spin off of our Installation and Other Services businesses into an independent, publicly-traded company named TopBuild.

We also intend to pay down between $300 million and $500 million of our debt over the next several quarters.

On June 15, 2015, we repaid and retired all of our $500 million, 4.8% Notes on the scheduled retirement date.

On March 24, 2015, we issued $500 million of 4.45% Notes due April 1, 2025.

These Notes are senior indebtedness and are redeemable at our option.

On May 29, 2015 and August 28, 2015, we amended the Credit Agreement with the bank group (the "Amended Credit Agreement").

The Amended Credit Agreement reduces the aggregate commitment to $750 million and extends the maturity date to May 29, 2020.

Under the Amended Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $375 million with the current bank group or new lenders.

See Note K to the consolidated financial statements.

| Cash distributed to TopBuild Corp. | | | (63 | ) | | — | | | — | |

| Issuance of TopBuild Corp. debt | | | 200 | | | — | | | — | |

| | | 2015 | | | 2014 | | |

Other financing activities include the issuance of $497 million of notes, $75 million tax benefit from stock-based compensation, and $200 million of cash received from TopBuild as a result of its new debt financing agreement, offset by $63 million of cash distributed to TopBuild.

Consistent with past practice, we anticipate repurchasing shares in 2016 as part of our strategic initiative.

Excluding acquisitions and the unfavorable effect of currency translation, net sales increased five percent compared to 2014.

| | | 2015 | | | 2014 | | |

Net sales for 2015 were also positively affected by selling price increases of plumbing products, cabinets and windows, which, in aggregate, increased sales approximately one percent.

| Operating profit, as reported | | $ | 914 | | $ | 721 | | $ | 612 | |

| Gain from sales of property and equipment | | | (5 | ) | | — | | | — | |

| Operating profit, as adjusted | | $ | 927 | | $ | 776 | | $ | 659 | |

Operating profit in 2015 was negatively affected by foreign currency translation.

The TopBuild deferred tax assets have been impaired by our decision to spin off TopBuild into a separate company that on a stand-alone basis as of June 30, 2015, the spin off date, will unlikely be able to realize the value of such deferred tax assets as a result of its history of losses.

The 2015 effective tax rate also includes a $19 million charge to income tax expense to recognize the required taxes on substantially all undistributed foreign earnings, except for those that are legally restricted.

2014 Results

Such increases were partially offset by decreased sales volume in our North American cabinetry business.

Our results of operations were negatively affected by increased business rationalization costs and costs associated with our proposed spin-off transaction.

Most of our business segments also benefited from the business rationalizations and cost savings initiatives we have undertaken over the last several years.

Our Cabinets and Related Products segment was negatively affected by lower sales volume of our North American operations, which completely offset a more favorable relationship between selling prices and commodity costs and any increased sales volume by our U.K. cabinet business.

The Installation and Other Services segment benefited from increased new home construction and

We record revenue for unbilled services performed based upon estimates of material and labor incurred in the Installation and Other Services segment; such amounts are recorded in Receivables.

Receivables include unbilled revenue related to the Installation and Other Services segment of $24 million at both December 31, 2014 and 2013.

In addition, we monitor our customer receivable balances and the credit worthiness of our customers on an on-going basis.

appropriate discount rates.

In 2014, we utilized estimated housing starts, from independent industry sources, growing from current levels to 1.45 million units in 2019 (terminal growth year) and operating profit margins improving to approximate historical levels for those business units by 2019 (terminal growth year).

benefit pension plan's liabilities matched to the December 31, 2014 Towers Watson Rate Link curve.

Our qualified domestic pension plan assets in 2014 had a net gain of 3.6 percent compared to average gains of 9.5 percent for the InvestorForce Defined Benefit Plan Universe.

outweigh positive evidence necessary to reduce the valuation allowance.

It is reasonably possible that the continued improvements in certain of our businesses located in the U.S. could result in the objective positive evidence necessary to warrant the additional reversal of all or a portion of the valuation allowance, up to approximately $27 million, by the end of 2015.

Our business strategy includes expanding our product leadership and implementing lean principles and product process improvements across our business units.

Going forward, we expect to maintain a balanced growth strategy with emphasis on cash flow, organic growth with smaller acquisitions and growth through new product development.

On September 30, 2014, we announced a plan to spin off 100 percent of our Installation and Other Services businesses into an independent, publicly-traded company through a tax-free stock distribution to our shareholders.

The transaction is expected to be completed in mid-2015.

The debt to total capitalization ratio allows the add-back, if incurred, of up to the first $250 million of certain non-cash charges, including goodwill and other intangible asset impairment charges, occurring from and after January 1, 2012 that would negatively impact shareholders' equity.

At December 31, 2014, we had additional borrowing capacity, subject to availability, of up to $1.2 billion.

Alternatively, at December 31, 2014, we could absorb a reduction to shareholders' equity of approximately $747 million and remain in compliance with the debt to total capitalization covenant.

The amount of such taxes is dependent on the income tax laws and circumstances at the time of distribution.

| Payment for settlement of swaps | | | — | | | — | | | (25 | ) |

Our cash provided by operations was positively affected by increased sales and more effective accounts payable management.

During the fourth quarter of 2014, we repurchased and retired 5 million common shares for cash of $119 million.

Cash provided by investing activities included primarily $63 million from the net sale of financial investments and $16 million of net proceeds from the disposition of property and equipment.

The effect of currency translation and acquisitions was insignificant compared with 2013.

Net sales for 2012 were negatively affected by the planned exit of certain cabinet and window product lines in certain geographic areas.

Both 2014 and 2013 also reflect the benefits associated with our business rationalizations and other cost savings initiatives.

| Operating profit, as reported | | $ | 788 | | $ | 673 | | $ | 302 | |

| Costs related to spin-off of Services Business | | | 6 | | | — | | | — | |

| Impairment charges for other intangible assets | | | — | | | — | | | 42 | |

| Gains from sales of fixed assets, net | | | — | | | — | | | (8 | ) |

| Operating profit, as adjusted | | $ | 851 | | $ | 721 | | $ | 488 | |

During 2012, we recognized non-cash, pre-tax impairment charges aggregating $2 million for an investment in a private equity fund.

(Loss) from continuing operations for 2012 included non-cash, pre-tax impairment charges for other intangible assets of $42 million ($27 million or $.08 per common share, after tax).

In 2015, we expect new home construction and repair and remodel activity to show continued improvement in North American and internationally.

Our focus will be to continue to maximize the benefits of this activity and maintain the positive momentum.

We are well positioned to grow our key brands and to gain share in our channels in 2015.

At December 31, [removed: 2014,] [added: 2015,] we performed sensitivity analyses to assess the potential loss in the fair values of market risk sensitive instruments resulting from a hypothetical change of 10 percent in foreign currency exchange rates, a 10 percent decline in the market value of our long-term investments, a 10 percent change in commodity costs, or a 10 percent change in interest rates.

[removed: Throughout 2014,] [added: During 2015,] we [removed: continued the execution of] [added: further advanced] our strategy to position the Company for future [removed: growth,] [added: growth by] focusing on three strategic pillars: [removed: leveraging opportunities across our businesses,] driving the full potential of our core [removed: businesses] [added: businesses, leveraging opportunities across our businesses,] and actively managing our portfolio.

[removed: In September 2014,] [added: On June 30, 2015,] we [removed: announced a plan to] [added: completed the] spin off [removed: 100 percent] of our Installation and Other Services businesses into an independent, [removed: publicly-traded company] [added: publicly-traded, company, TopBuild Corp.,] through a tax-free [removed: stock] distribution to our shareholders.

To further [removed: drive] [added: enhance] value creation for our shareholders, [removed: our Board of Directors approved the repurchase of an aggregate 50] [added: during 2015 we repurchased over 17] million shares of our common stock and increased our [added: quarterly] dividend by [removed: 20] [added: approximately 6] percent.

We believe that the actions we took during [removed: 2014 help provide the foundation] [added: 2015 have positioned our company] for [removed: us to enhance future] [added: further enhancement of] shareholder value.

We also believe that [removed: the spin-off] [added: completion] of [removed: our Installation and Other Services businesses will allow] [added: the spin off allows] us to pursue a more focused strategy of [removed: growth through the innovation and manufacturing of][added: growth.]

We [removed: plan to] [added: will] continue to actively manage our portfolio, identify growth opportunities in key industries and produce new products that differentiate us in the [removed: marketplace.][added: marketplace by combining design and innovation.]

By continuing our disciplined execution of our strategy, we believe that we will increase shareholder [removed: value by enhancing our customer experience and improving our efficiencies.][added: value.]

We report our financial results in [removed: five] [added: four] business segments aggregated by similarity in products and services.

The following table sets forth the contribution of our segments to net sales and operating profit (loss) for the three years ended December 31, [removed: 2014.][added: 2015.]

[removed: Additional financial information concerning our operations by segment and by geographic regions, as well as general corporate expense, net, as of and] for the three years ended December 31, [removed: 2014,] [added: 2015,] is set forth in Note P to our consolidated financial statements included in Item 8 of this Report.

| | | [removed: 2014] [added: 2015] | | | [removed: 2013] [added: 2014] | | | [removed: 2012] [added: 2013] | | |

| Cabinets and Related Products | | $ | [removed: 999] [added: 1,025] | | $ | [removed: 1,014] [added: 999] | | $ | [removed: 939] [added: 1,014] | |

| Plumbing Products | | | [removed: 3,308] [added: 3,341] | | | [removed: 3,183] [added: 3,308] | | | [removed: 2,955] [added: 3,183] | |

| Decorative Architectural Products | | | [removed: 1,998] [added: 2,020] | | | [removed: 1,927] [added: 1,998] | | | [removed: 1,818] [added: 1,927] | |

| Other Specialty Products | | | [removed: 701] [added: 756] | | | [removed: 637] [added: 701] | | | [removed: 574] [added: 637] | |

| | | Operating Profit (Loss) [removed: (1)(2)(3)(4)] [added: (1)(2)(3)] | | | | | | | | |

| | | [removed: 2014] [added: 2015] | | | [removed: 2013] [added: 2014] | | | [removed: 2012] [added: 2013] | | |

| Cabinets and Related Products | | $ | [removed: (62] [added: 51] | [removed: )] | $ | [removed: (10] [added: (62] | ) | $ | [removed: (89] [added: (10] | ) |

| Plumbing Products | | | 512 | | | [removed: 394] [added: 512] | | | [removed: 307] [added: 394] | |

| Decorative Architectural Products | | | [removed: 360] [added: 403] | | | [removed: 351] [added: 360] | | | [removed: 329] [added: 351] | |

| Other Specialty Products | | | [removed: 47] [added: 57] | | | [removed: 35] [added: 47] | | | [removed: (31] [added: 35] | [removed: )] |

Operating profit (loss) is before general corporate expense, [removed: net, and gain on sale of fixed assets,] net.

Operating profit (loss) is before income of $9 million regarding the 2014 litigation settlement in the Decorative Architectural Products [removed: segment and before net charges of $77 million regarding the 2012 litigation settlement, primarily in the Installation and Other Services] segment.

All of our operating segments, except the Plumbing Products segment, normally experience stronger sales during the second and third calendar quarters, corresponding with the peak season for [removed: new home construction and] repair and remodel [removed: activity.][added: activity and new home construction.]

[removed: We have also expanded our] [added: Our] product offerings in this segment [removed: to] [added: also] include the [removed: manufacture] [added: fabrication] and sale of [removed: kitchen countertops, as well as an] integrated bathroom vanity and countertop [removed: solution.][added: products.]

In the United Kingdom, we manufacture and sell [removed: assembled and ready-to-assemble] kitchen, bath, and storage cabinetry.

Our KRAFTMAID® brand is sold primarily to [removed: dealers, home centers] [added: dealers] and [removed: mass merchants] [added: home center retailers,] and our MERILLAT®, [added: QUALITY CABINETS™,] MOORES™ and [removed: QUALITY CABINETS™] [added: CARDELL®] brands are sold primarily to dealers and homebuilders for both home improvement and new home construction.

Cabinet sales are significantly affected by levels of activity in both [added: retail consumers spending and] new home [removed: construction and retail consumer spending,] [added: construction,] particularly spending for major kitchen and bathroom renovation projects.

Our Cabinets and Related Products segment was particularly affected by the economic downturn and decline in new home construction and repair and remodel [removed: activity.][added: activity that began in 2008.]

[removed: While improving, consumer] [added: Consumer] spending for big ticket remodeling [removed: projects,] [added: projects is improving,] including large kitchen and bath remodeling projects, [added: but] continues to be below normal levels, which impacts our profitability.

[removed: Although home construction is improving and is expected to continue to improve, the demand for new homes remains below the historic average and demand] [added: Demand] has increased for multi-family housing units, which are [added: generally] smaller [removed: than single-family housing units] and require fewer [removed: cabinets for the] kitchen and [removed: bathrooms.][added: bathroom cabinets than single-family housing units.]

[removed: In addition, our] [added: Our] initiatives to improve this [removed: segment, including rationalizing our businesses, closing plants and reducing headcount,] [added: segment] have been complex, time-consuming and expensive.

[removed: We continue to] focus on [added: obtaining profitable sales, reducing] our cost structure [removed: in this segment] and improving cabinet production efficiencies.

The cabinet manufacturing industry in the United States and the United Kingdom includes several large competitors and numerous local and regional [removed: competitors.][added: competitors, and in the United Kingdom, foreign manufacturers.]

In recent years, we have experienced significant competition in the form of [removed: discounts and] new product offerings by our competitors, which have impacted the segment's results of operations.

[removed: Our] [added: Some of our] North American competitors include American Woodmark Corporation, Fortune Brands Home & Security, Inc. and [removed: Norcraft Companies, Inc.][added: Elkay.]

The businesses in our Plumbing Products segment sell a wide variety of [removed: faucet, bathing and showering devices] [added: products] that are manufactured [removed: by] or [removed: for] [added: sourced by] us.

The majority of our [removed: plumbing products] [added: faucet, bathing and showering devices] are sold in North America and Europe under the brand names DELTA®, PEERLESS®, HANSGROHE®, AXOR®, BRIZO®, [removed: BRASSTECH®, BRISTAN™,] GINGER®, [removed: HERITAGE™,] NEWPORT [removed: BRASS®] [added: BRASS®, BRASSTECH®] and PLUMB SHOP®.

These [added: plumbing] products [added: include faucets, showerheads, handheld showers, valves, bathing units, shower enclosures and toilets and] are sold to [removed: major retail accounts] [added: home center retailers] and to wholesalers and distributors that, in turn, sell [removed: our products] [added: them] to plumbers, building contractors, remodelers, smaller retailers and [removed: others.][added: consumers.]

Our spas [added: and exercise pools] are manufactured and sold under HOT SPRING®, CALDERA®, [removed: FREEFLOW®] [added: FREEFLOW SPAS®, FANTASY SPAS®, ENDLESS POOLS®] and other [removed: trademarks directly to independent specialty retailers as well as through online mass merchant retailers.][added: trademarks.]

Masco Corporation is a global leader in the design, manufacture, marketing and distribution of branded home improvement and building products.

Our portfolio of industry-leading brands includes KRAFTMAID® and MERILLAT® cabinets; DELTA®, PEERLESS®, and HANSGROHE® faucets, bath and shower fixtures; HOT SPRING® and CALDERA® spas; BEHR® paint, primer and stain; KILZ® primer; LIBERTY® and BRAINERD® decorative hardware; and MILGARD® windows and doors.

We leverage our powerful brands across product categories, sales channels and geographies to create value for our customers and shareholders.

First, to drive the full potential of our core businesses, we pursued sales growth opportunities in adjacent markets and products, continued the deployment of standardized operating tools across the enterprise, executed cost saving initiatives and expanded our implementation of lean principles and process improvements in many areas, including production and functional support processes.

We also continued to leverage the collective strength of our enterprise, the second pillar of our strategy.

We provided new assignments to selected leaders across our business units to further develop talent and facilitate operational improvements.

We continued to realize supply chain efficiencies through strategic sourcing, and we continued to share best practices across all of our functional departments to enhance productivity.

As a result, our operating results (excluding the impact of foreign currency translation) improved across all of our segments, particularly at our U.S. cabinets business.

As a result of the spin off, our business has become less dependent on new home construction, and is, therefore, less cyclical, and a greater portion of our sales are derived from international markets.

In addition, we acquired two businesses in 2015 that complement our existing portfolio.

First, we expanded our product offering and distribution channels into the aquatic fitness category with the acquisition of the ENDLESS POOLS® brand.

We also acquired Evolution Manufacturing, which expands our offering of fiberglass and composite windows in the United Kingdom.

Additional financial information concerning our operations by segment and by geographic regions, as well as general corporate expense, net, as of and

| Total | | $ | 7,142 | | $ | 7,006 | | $ | 6,761 | |

| | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Total | | $ | 1,023 | | $ | 857 | | $ | 770 | |

Home construction is also improving and is expected to continue to improve.

Although the operating results of our cabinetry businesses improved in 2015, we continue to

We are pursuing strategies to increase sales through new product introductions and enhanced customer service, and to rationalize a portion of our customer base in our builder channel to focus on opportunities that offer more profitable growth.

Additional local and regional competitors may enter this industry as conditions improve.

Our BRISTAN™ and HERITAGE™ products are principally sold in the United Kingdom.

Our MIROLIN products are also sold to wholesalers and distributors in Canada.

Spa products are sold to independent specialty retailers or online mass merchant retailers, while exercise pools are available on a consumer direct basis.

Our major competitors include Lixil Group Corporation's American Standard Brands and Grohe products, Kohler Co., Fortune Brands Home & Security Inc. and Spectrum Brands Holdings, LLC's Pfister faucets.

In addition to price, we believe that brand reputation is an important factor in consumer

selection.

In 2015, we introduced a new BEHR® COLOR SOLUTIONS® Center, designed to enhance the color selection process and overall shopping experience, in all North American The Home Depot stores.

Fluctuations in raw material costs can have a material impact on our operating results in this segment.

Titanium dioxide and acrylic resins derived from crude oil and natural gas are used in the manufacturing of architectural coatings.

These products are sold under the LIBERTY® and BRAINERD® brands.

Competitors include Moen, Gatco and private label brands.

We manufacture and sell a complete line of manual and electric heavy duty staple guns, hammer tackers, glue guns and rivet tools as well as the staples, glue and rivets that complement our products.

_Intellectual Property_

_Laws and Regulations Affecting Our Business_

Our Decorative Architectural Products segment is also subject to the requirements relating to the emission of volatile organic compounds, which may require us to reformulate paint products.

_Backlog_

_Employees_

Masco Corporation manufactures, distributes and installs home improvement and building products, with an emphasis on brand-name consumer products and services holding leadership positions.

We are among the largest manufacturers in North America of a number of home improvement and building products, including faucets, cabinets, architectural coatings and windows, and we are a leading provider of services that include the installation of insulation and other building products.

We provide broad product offerings in a variety of styles and price points and distribute products through multiple channels, including directly to homebuilders and wholesale and retail channels.

Approximately 81 percent of our 2014 sales were generated by our North American operations.

The market for home improvement and building products at retailers increased by approximately four percent during 2014, despite continued economic uncertainties and modest consumer spending.

Housing starts increased approximately ten percent during 2014.

First, we leveraged our product leadership positions by expanding our brands and introducing innovative new and improved products.

We believe that we gained share in our North American plumbing business with our DELTA®, PEERLESS®, and BRIZO® brands, and internationally with our HANSGROHE® products.

In addition to its strong position with the "do-it-yourself" consumer, our decorative architectural products businesses continued to focus on the professional segment with BEHRPRO® paint and KILZ® PRO-X product lines.

BEHR® paint expanded its MARQUEE® product line from exterior paint to interior paint and continued to pursue international opportunities.

Milgard Manufacturing, our manufacturer of windows in the western U.S., and our U.K. Window Group continued to gain share.

To help drive the full potential of our core businesses, the second pillar of our strategy, we adopted a leaner operating model.

We are transforming our corporate structure to a center-led model.

We believe this model will increase our business units' efficiencies and our overall effectiveness as an organization.

This change will align our corporate structure to support our strategy to drive the full potential of our businesses.

In addition, we continued reducing costs and implementing lean principles and production process improvements.

Our Installation and Other Services segments saw progress toward its goals during 2014 through incremental new home construction activity, cost reductions from lean processes and leveraging our ERP system and supply chain savings.

During 2014, we remained focused on improvements at our Cabinets and Related Products businesses, which continued to face challenges.

We believe that these businesses will be better positioned to operate as a separate company that will focus on growth by capitalizing on new home construction in the United States as well as further expanding into commercial and retrofit categories.

The transaction is expected to be completed in mid-2015.

During 2014, we repurchased 7 million shares (including 1.7 million shares repurchased in the first quarter of 2014 to offset the dilutive impact of long-term stock awards) of our common stock.

At December 31, 2014, we had approximately $1.7 billion of cash, cash investments and short-term bank deposits.

branded building products.

| Installation and Other Services | | | 1,515 | | | 1,412 | | | 1,209 | |

| Total | | $ | 8,521 | | $ | 8,173 | | $ | 7,495 | |

| Installation and Other Services | | | 58 | | | 37 | | | (19 | ) |

| Total | | $ | 915 | | $ | 807 | | $ | 497 | |

(4)

Operating profit (loss) includes impairment charges for other intangible assets as follows: For 2012 – Other Specialty Products – $42 million.

The consolidation of our North American cabinet businesses has involved the integration of multiple manufacturing processes and information technology platforms and continues to affect our operations.

Although faced with challenges, we are continuing to pursue our strategy to increase sales in this segment through brand building, new product introductions aimed to provide differentiated products to our multiple sales channels, and product innovation.

We also face competition from foreign manufacturers.

Our products include single-handle and double-handle faucets, showerheads, handheld showers, valves, bathing units and toilets.

HERITAGE™ ceramic and acrylic bath fixtures and faucets are principally sold in the United Kingdom directly to select retailers.

In 2014, we completed the process of integrating our plumbing products sold under our AQUA GLASS® and AMERICAN SHOWER & BATH™ brands into the DELTA and PEERLESS brands.

Federal legislation mandating a national standard for lead content in plumbing products used to convey drinking water became effective in January 2014.

Faucet and water supply valve manufacturers, including our plumbing product companies, are required to obtain adequate supplies of lead-free brass or suitable alternative materials for continued production of faucets and certain of our other plumbing products.

Our plumbing products that are affected by this legislation meet the federal standards, including our Delta Faucet products that use DIAMOND™ SEAL TECHNOLOGY, which also reduces the number of potential leak points in a faucet and simplifies installation.

Installation and Other Services

Our Installation and Other Services segment sells installed building products and distributes building products primarily for new home construction, and, to a lesser extent, retrofit and commercial construction, throughout the United States.

For the Fiscal Year Ended December 31, [removed: 2014] [added: 2015] Commission File Number 1-5794

| Large accelerated filer þ | | Accelerated filer o | | Non-accelerated filer o [added: (Do not check if a smaller reporting company)] | | Smaller reporting company o |

The aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant on June 30, [removed: 2014] [added: 2015] (based on the closing sale price of [removed: $22.20] [added: $26.67] of the Registrant's Common Stock, as reported by the New York Stock Exchange on such date) was approximately [removed: $7,790,502,000.][added: $9,059,896,000.]

Number of shares outstanding of the Registrant's Common Stock at January 31, [removed: 2015:][added: 2016:]

[removed: 349,544,600] [added: 333,931,600] shares of Common Stock, par value $1.00 per share

Portions of the Registrant's definitive Proxy Statement to be filed for its [removed: 2015] [added: 2016] Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

[removed: 2014] [added: 2015] Annual Report on Form [removed: 10-K][added: 10-K]

| [removed: [1.](#da77001_item_1._business.)] [added: [1.](#da40101_item_1._business.)] | | [removed: [Business](#da77001_item_1._business.)] [added: [Business](#da40101_item_1._business.)] | | [removed: [2](#da77001_item_1._business.)] [added: [2](#da40101_item_1._business.)] |

| [removed: [1A.](#dc77001_item_1a._risk_factors.)] [added: [1A.](#dc40101_item_1a._risk_factors.)] | | [Risk [removed: Factors](#dc77001_item_1a._risk_factors.)] [added: Factors](#dc40101_item_1a._risk_factors.)] | | [removed: [8](#dc77001_item_1a._risk_factors.)] [added: [8](#dc40101_item_1a._risk_factors.)] |

| [removed: [1B.](#dc77001_item_1b._unresolved_staff_comments.)] [added: [1B.](#dc40101_item_1b._unresolved_staff_comments.)] | | [Unresolved Staff [removed: Comments](#dc77001_item_1b._unresolved_staff_comments.)] [added: Comments](#dc40101_item_1b._unresolved_staff_comments.)] | | [removed: [14](#dc77001_item_1b._unresolved_staff_comments.)] [added: [14](#dc40101_item_1b._unresolved_staff_comments.)] |

| [removed: [2.](#de77001_item_2._properties.)] [added: [2.](#dc40101_item_2._properties.)] | | [removed: [Properties](#de77001_item_2._properties.)] [added: [Properties](#dc40101_item_2._properties.)] | | [removed: [15](#de77001_item_2._properties.)] [added: [14](#dc40101_item_2._properties.)] |

| [removed: [3.](#de77001_item_3._legal_proceedings.)] [added: [3.](#dc40101_item_3._legal_proceedings.)] | | [Legal [removed: Proceedings](#de77001_item_3._legal_proceedings.)] [added: Proceedings](#dc40101_item_3._legal_proceedings.)] | | [removed: [15](#de77001_item_3._legal_proceedings.)] [added: [15](#dc40101_item_3._legal_proceedings.)] |

| [removed: [4.](#de77001_item_4._mine_safety_disclosures.)] [added: [4.](#dc40101_item_4._mine_safety_disclosures.)] | | [Mine Safety [removed: Disclosures](#de77001_item_4._mine_safety_disclosures.)] [added: Disclosures](#dc40101_item_4._mine_safety_disclosures.)] | | [removed: [15](#de77001_item_4._mine_safety_disclosures.)] [added: [15](#dc40101_item_4._mine_safety_disclosures.)] |

| [removed: [5.](#de77001_item_5._market_for_registrant___ite04647)] [added: [5.](#de40101_item_5._market_for_registrant___ite04647)] | | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#de77001_item_5._market_for_registrant___ite04647)] [added: Securities](#de40101_item_5._market_for_registrant___ite04647)] | | [removed: [16](#de77001_item_5._market_for_registrant___ite04647)] [added: [16](#de40101_item_5._market_for_registrant___ite04647)] |

| [removed: [6.](#de77001_item_6._selected_financial_data.)] [added: [6.](#de40101_item_6._selected_financial_data.)] | | [Selected Financial [removed: Data](#de77001_item_6._selected_financial_data.)] [added: Data](#de40101_item_6._selected_financial_data.)] | | [removed: [18](#de77001_item_6._selected_financial_data.)] [added: [18](#de40101_item_6._selected_financial_data.)] |

| [removed: [7.](#dg77001_item_7._management_s_discussio__ite03649)] [added: [7.](#dg40101_item_7._management_s_discussio__ite03649)] | | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#dg77001_item_7._management_s_discussio__ite03649)] [added: Operations](#dg40101_item_7._management_s_discussio__ite03649)] | | [removed: [19](#dg77001_item_7._management_s_discussio__ite03649)] [added: [19](#dg40101_item_7._management_s_discussio__ite03649)] |

| [removed: [7A.](#dm77001_item_7a._quantitative_and_qual__ite02650)] [added: [7A.](#dk40101_item_7a._quantitative_and_qual__ite02650)] | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#dm77001_item_7a._quantitative_and_qual__ite02650)] [added: Risk](#dk40101_item_7a._quantitative_and_qual__ite02650)] | | [removed: [38](#dm77001_item_7a._quantitative_and_qual__ite02650)] [added: [38](#dk40101_item_7a._quantitative_and_qual__ite02650)] |

| [removed: [8.](#AFA)] [added: [8.](#item8)] | | [Financial Statements and Supplementary [removed: Data](#AFA)] [added: Data](#item8)] | | [removed: [39](#AFA)] [added: [39](#item8)] |

| [removed: [9.](#gi77001_item_9._changes_in_and_disagre__ite03557)] [added: [9.](#ge40101_item_9._changes_in_and_disagre__ite03557)] | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#gi77001_item_9._changes_in_and_disagre__ite03557)] [added: Disclosure](#ge40101_item_9._changes_in_and_disagre__ite03557)] | | [removed: [85](#gi77001_item_9._changes_in_and_disagre__ite03557)] [added: [85](#ge40101_item_9._changes_in_and_disagre__ite03557)] |

| [removed: [9A.](#gi77001_item_9a._controls_and_procedures.)] [added: [9A.](#ge40101_item_9a._controls_and_procedures.)] | | [Controls and [removed: Procedures](#gi77001_item_9a._controls_and_procedures.)] [added: Procedures](#ge40101_item_9a._controls_and_procedures.)] | | [removed: [85](#gi77001_item_9a._controls_and_procedures.)] [added: [85](#ge40101_item_9a._controls_and_procedures.)] |

| [removed: [9B.](#gi77001_item_9b._other_information.)] [added: [9B.](#ge40101_item_9b._other_information.)] | | [Other [removed: Information](#gi77001_item_9b._other_information.)] [added: Information](#ge40101_item_9b._other_information.)] | | [removed: [85](#gi77001_item_9b._other_information.)] [added: [85](#ge40101_item_9b._other_information.)] |

| | | [PART [removed: III](#ja77001_part_iii)] [added: III](#ja40101_part_iii)] | | |

| [removed: [10.](#ja77001_item_10._directors,_executive___ite02317)] [added: [10.](#ja40101_item_10._directors,_executive___ite02317)] | | [Directors, Executive Officers and Corporate [removed: Governance](#ja77001_item_10._directors,_executive___ite02317)] [added: Governance](#ja40101_item_10._directors,_executive___ite02317)] | | [removed: [86](#ja77001_item_10._directors,_executive___ite02317)] [added: [86](#ja40101_item_10._directors,_executive___ite02317)] |

| [removed: [11.](#ja77001_item_11._executive_compensation.)] [added: [11.](#ja40101_item_11._executive_compensation.)] | | [Executive [removed: Compensation](#ja77001_item_11._executive_compensation.)] [added: Compensation](#ja40101_item_11._executive_compensation.)] | | [removed: [86](#ja77001_item_11._executive_compensation.)] [added: [86](#ja40101_item_11._executive_compensation.)] |

| [removed: [12.](#ja77001_item_12._security_ownership_of__ite03985)] [added: [12.](#ja40101_item_12._security_ownership_of__ite03985)] | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#ja77001_item_12._security_ownership_of__ite03985)] [added: Matters](#ja40101_item_12._security_ownership_of__ite03985)] | | [removed: [86](#ja77001_item_12._security_ownership_of__ite03985)] [added: [86](#ja40101_item_12._security_ownership_of__ite03985)] |

| [removed: [13.](#ja77001_item_13._certain_relationships__ite03048)] [added: [13.](#ja40101_item_13._certain_relationships__ite03048)] | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#ja77001_item_13._certain_relationships__ite03048)] [added: Independence](#ja40101_item_13._certain_relationships__ite03048)] | | [removed: [86](#ja77001_item_13._certain_relationships__ite03048)] [added: [86](#ja40101_item_13._certain_relationships__ite03048)] |

| [removed: [14.](#ja77001_item_14._principal_accountant_fees_and_services.)] [added: [14.](#ja40101_item_14._principal_accountant_fees_and_services.)] | | [Principal [removed: Accounting] [added: Accountant] Fees and [removed: Services](#ja77001_item_14._principal_accountant_fees_and_services.)] [added: Services](#ja40101_item_14._principal_accountant_fees_and_services.)] | | [removed: [86](#ja77001_item_14._principal_accountant_fees_and_services.)] [added: [86](#ja40101_item_14._principal_accountant_fees_and_services.)] |

| [removed: [15.](#jb77001_item_15._exhibits_and_financial_statement_schedules.)] [added: [15.](#jb40101_item_15._exhibits_and_financial_statement_schedules.)] | | [Exhibits and Financial Statement [removed: Schedule](#jb77001_item_15._exhibits_and_financial_statement_schedules.)] [added: Schedules](#jb40101_item_15._exhibits_and_financial_statement_schedules.)] | | [removed: [87](#jb77001_item_15._exhibits_and_financial_statement_schedules.)] [added: [87](#jb40101_item_15._exhibits_and_financial_statement_schedules.)] |

10-K 1 a2227221z10-k.htm 10-K

[PART IV](#jb40101_part_iv)

| | | [PART I](#da40101_part_i) | | |

| | | [PART II](#de40101_part_ii) | | |

| | | [PART IV](#jb40101_part_iv) | | |

| | | [Signatures](#jc40101_signatures) | | [88](#jc40101_signatures) |

10-K 1 a2222936z10-k.htm 10-K

[PART IV](#jb77001_part_iv)

| | | | | (Do not check if a smaller reporting company) | | |

| | | [PART I](#da77001_part_i) | | |

| | | [PART II](#de77001_part_ii) | | |

| | | [PART IV](#jb77001_part_iv) | | |

| | | [Signatures](#jc77001_signatures) | | [88](#jc77001_signatures) |

The table below lists our principal North American [removed: properties for segments other than Installation and Other Services.][added: properties.]

| Cabinets and Related Products | | | 8 | | | [removed: 7] [added: 8] | |

| Plumbing Products | | | [removed: 18] [added: 19] | | | [removed: 5] [added: 4] | |

| Decorative Architectural Products | | | 8 | | | [removed: 8] [added: 9] | |

| Other Specialty Products | | | [removed: 10] [added: 11] | | | [removed: 5] [added: 6] | |

| Totals | | | [removed: 44] [added: 46] | | | [removed: 25] [added: 27] | |

| Other Specialty Products | | | [removed: 7] [added: 8] | | | — | |

| Totals | | | [removed: 19] [added: 20] | | | 23 | |

We own our corporate headquarters in Taylor, Michigan.

We have entered into a contract to lease a new corporate headquarters in Livonia, Michigan, which we expect to occupy beginning in 2017.

Our Installation and Other Services segment operates approximately 190 installation branch locations and approximately 75 distribution centers in the United States, most of which are leased.

Our corporate headquarters are located in Taylor, Michigan and are owned by us.

On January 31, [removed: 2015,] [added: 2016,] there were approximately [removed: 4,500] [added: 4,200] holders of record of our common stock.

During [removed: 2014,] [added: 2015,] we repurchased and retired [removed: 7] [added: 17] million shares of our common stock [removed: (including 1.7 million shares repurchased in the first quarter of 2014 to offset the dilutive impact of long-term stock awards)] for cash aggregating [removed: $158] [added: $456] million.

The following table provides information regarding the repurchase of our common stock for the three months ended December 31, [removed: 2014:][added: 2015.]

| [removed: 10/1/14] [added: 12/1/15] - [removed: 10/31/14] [added: 12/31/15] | | | — | | $ | — | | | — | | | [removed: 50,000,000] [added: 27,773,000] | |

| Total for the quarter | | | [removed: 5,000,000] [added: 1,760,000] | | $ | [removed: 23.71] [added: 27.81] | | | [removed: 5,000,000] [added: 1,760,000] | | | [removed: 45,000,000] [added: 27,773,000] | |

The table below compares the cumulative total shareholder return on our common stock with the cumulative total return of (i) the Standard & Poor's 500 Composite Stock Index ("S&P 500 Index"), (ii) The Standard & Poor's Industrials Index ("S&P Industrials Index") and (iii) the Standard & Poor's Consumer Durables & Apparel Index ("S&P Consumer Durables & Apparel Index"), from December 31, [removed: 2009] [added: 2010] through December 31, [removed: 2014,] [added: 2015,] when the closing price of our common stock was [removed: $25.20.][added: $28.30.]

The graph assumes investments of $100 on December 31, [removed: 2009] [added: 2010] in our common stock and in each of the three indices and the reinvestment of dividends.

[removed: ][added: ]

The table below sets forth the value, as of December 31 for each of the years indicated, of a $100 investment made on December 31, [removed: 2009] [added: 2010] in each of our common stock, the S&P 500 Index, the S&P Industrials Index and the S&P Consumer Durables & Apparel Index and includes the reinvestment of dividends.

| | | [removed: 2010 | | |] 2011 | | | 2012 | | | 2013 | | | 2014 | | | [added: 2015 | | |]

| 2015 | | | | | | | | | | |

| Fourth | | $ | 30.61 | | $ | 24.89 | | $ | .095 | |

| Third | | | 28.59 | | | 22.52 | | | .095 | |

| Second | | | 28.38 | | | 25.47 | | | .09 | |

| First | | | 27.40 | | | 23.23 | | | .09 | |

| Total | | | | | | | | $ | .370 | |

| 10/1/15 - 10/31/15 | | | 960,000 | | $ | 26.63 | | | 960,000 | | | 28,573,000 | |

| 11/1/15 - 11/30/15 | | | 800,000 | | $ | 29.23 | | | 800,000 | | | 27,773,000 | |

| Masco | | $ | 85.15 | | $ | 137.80 | | $ | 190.82 | | $ | 213.95 | | $ | 276.69 | |

| S&P 500 Index | | $ | 102.09 | | $ | 118.30 | | $ | 156.21 | | $ | 177.32 | | $ | 179.76 | |

| S&P Industrials Index | | $ | 99.39 | | $ | 114.48 | | $ | 160.47 | | $ | 175.98 | | $ | 171.52 | |

| S&P Consumer Durables & Apparel Index | | $ | 107.71 | | $ | 130.87 | | $ | 177.77 | | $ | 194.10 | | $ | 192.67 | |

| 2013 | | | | | | | | | | |

| Fourth | | $ | 22.90 | | $ | 19.11 | | $ | .075 | |

| Third | | | 22.94 | | | 18.27 | | | .075 | |

| Second | | | 22.83 | | | 18.43 | | | .075 | |

| First | | | 21.07 | | | 16.91 | | | .075 | |

| Total | | | | | | | | $ | .30 | |

| 11/1/14 - 11/30/14 | | | 2,600,000 | | $ | 22.86 | | | 2,600,000 | | | 47,400,000 | |

| 12/1/14 - 12/31/14 | | | 2,400,000 | | $ | 24.63 | | | 2,400,000 | | | 45,000,000 | |

| Masco | | $ | 93.85 | | $ | 79.91 | | $ | 129.32 | | $ | 179.07 | | $ | 200.78 | |

| S&P 500 Index | | $ | 114.82 | | $ | 117.22 | | $ | 135.83 | | $ | 179.36 | | $ | 203.60 | |

| S&P Industrials Index | | $ | 126.37 | | $ | 125.60 | | $ | 144.66 | | $ | 202.79 | | $ | 222.39 | |

| S&P Consumer Durables & Apparel Index | | $ | 130.54 | | $ | 140.61 | | $ | 170.84 | | $ | 232.06 | | $ | 253.37 | |

| | | [added: 2015 | | |] 2014 | | | 2013 | | | 2012 | | | 2011 | | | [removed: 2010 | | |]

| Income (loss) from continuing operations attributable to Masco Corporation [removed: (1)(2)(3)(4)(5)] [added: (1)(2)(3)(4)] | | [removed: $] | [removed: 861] [added: 357] | | [removed: $] | [removed: 298] [added: 821] | | [removed: $] | [removed: (53] [added: 259] | [removed: )] | [removed: $] | [removed: (385] [added: 54] | [removed: )] | [removed: $] | [removed: (1,028] [added: (297] | ) |

| Dividends declared | | [removed: $] | [removed: .345] [added: .370] | | [removed: $] | [removed: .30] [added: .345] | | [removed: $] | [removed: .30] [added: .300] | | [removed: $] | [removed: .30] [added: .300] | | [removed: $] | [removed: .30] [added: .300] | |

| Long-term debt | | | [added: 2,418 | | |] 2,919 | | | 3,421 | | | 3,422 | | | 3,222 | | [removed: | 4,032 | |]

| Shareholders' equity [added: (5)] | | | [added: 58 | | |] 1,128 | | | 787 | | | 542 | | | 750 | | [removed: | 1,581 | |]

| Net Sales (1) | | $ | 7,142 | | $ | 7,006 | | $ | 6,761 | | $ | 6,286 | | $ | 6,093 | |

| Operating profit (loss) (1)(3)(4) | | | 914 | | | 721 | | | 612 | | | 384 | | | (153 | ) |

| Basic | | $ | 1.04 | | $ | 2.31 | | $ | .72 | | $ | .15 | | $ | (.86 | ) |

| Diluted | | | 1.03 | | | 2.28 | | | .72 | | | .15 | | | (.86 | ) |

| Dividends paid | | | .365 | | | .330 | | | .300 | | | .300 | | | .300 | |

| Total assets | | $ | 5,680 | | $ | 7,208 | | $ | 6,885 | | $ | 6,842 | | $ | 7,294 | |

The decrease in shareholder's equity from 2014 to 2015 relates primarily to the spin off of TopBuild Corp.

| Net Sales (1) | | $ | 8,521 | | $ | 8,173 | | $ | 7,495 | | $ | 7,170 | | $ | 7,183 | |

| Operating profit (loss) (1)(3)(4)(5) | | $ | 788 | | $ | 673 | | $ | 302 | | $ | (215 | ) | $ | (466 | ) |

| Basic | | $ | 2.42 | | $ | .83 | | $ | (.16 | ) | $ | (1.11 | ) | $ | (2.95 | ) |

| Diluted | | $ | 2.39 | | $ | .83 | | $ | (.16 | ) | $ | (1.11 | ) | $ | (2.95 | ) |

| Dividends paid | | $ | .33 | | $ | .30 | | $ | .30 | | $ | .30 | | $ | .30 | |

| Total assets | | $ | 7,167 | | $ | 6,957 | | $ | 6,883 | | $ | 7,305 | | $ | 8,139 | |

The year 2010 includes non-cash impairment charges for goodwill and other intangible assets aggregating $586 million after tax ($698 million pre-tax).

The year 2010 also includes a $372 million non-cash charge to income tax expense to establish a valuation allowance on deferred tax assets.

The management of Masco Corporation assessed the effectiveness of the Company's internal control over financial reporting as of December 31, [removed: 2014] [added: 2015] using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control – Integrated Framework." Based on this assessment, management has determined that the Company's internal control over financial reporting was effective as of December 31, [removed: 2014.][added: 2015.]

PricewaterhouseCoopers LLP, an independent registered public accounting firm, performed an audit of the Company's consolidated financial statements and of the effectiveness of Masco Corporation's internal control over financial reporting as of December 31, [removed: 2014.][added: 2015.]

Their report expressed an unqualified opinion on the effectiveness of Masco Corporation's internal control over financial reporting as of December 31, [removed: 2014] [added: 2015] and expressed an unqualified opinion on the Company's [removed: 2014] [added: 2015] consolidated financial statements.

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a) (1) present fairly, in all material respects, the financial position of Masco Corporation and its subsidiaries at December 31, [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] and the results of their operations and their cash flows for each of the three years in the period ended December 31, [removed: 2014] [added: 2015] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2014,] [added: 2015,] based on criteria established in _Internal Control – Integrated Framework (2013)_ issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

at December 31, [removed: 2014] [added: 2015] and [removed: 2013][added: 2014]

| | | [added: 2015 | | |] 2014 | | | 2013 | | |

| Cash and cash investments | | $ | [removed: 1,383] [added: 1,468] | | $ | [removed: 1,223] [added: 1,379] | |

| Short-term bank deposits | | | [removed: 306] [added: 248] | | | [removed: 321] [added: 306] | |

| Deferred income taxes | | | [removed: 244] [added: —] | | | [removed: 73] [added: 129] | |

| Prepaid expenses and other | | | [removed: 71] [added: 72] | | | [removed: 82] [added: 68] | |

| Total current assets | | | [removed: 3,863] [added: 3,328] | | | [removed: 3,468] [added: 3,620] | |

| Property and equipment, net | | | [removed: 1,139] [added: —] | | | [removed: 1,252] [added: 93] | |

| Other intangible assets, net | | | [removed: 145] [added: —] | | | [removed: 149] [added: 3] | |

| Other assets | | | [removed: 136] [added: —] | | | [removed: 185] [added: 1] | |

| Accounts payable | | [removed: $] | [removed: 950] [added: —] | | $ | [removed: 902] [added: 229] | |

| Notes payable | | | [removed: 505] [added: 1,005] | | | [removed: 6] [added: 505] | |

| Accrued liabilities | | | [removed: 756] [added: —] | | | [removed: 778] [added: 71] | |

| Total current liabilities | | | [removed: 2,211] [added: 2,506] | | | [removed: 1,686] [added: 2,211] | |

| Long-term debt | | | [removed: 2,919] [added: 2,418] | | | [removed: 3,421] [added: 2,919] | |

| Other liabilities | | | [removed: 803] [added: —] | | | [removed: 666] [added: 40] | |

| Deferred income taxes | | | [removed: 106] [added: 212] | | | [removed: 397] [added: (406] | [added: )] | [added: | 42 | |]

| Commitments and contingencies [added: (Note U)] | | | | | | | |

| Masco Corporation's shareholders' equity Common shares authorized: 1,400,000,000; issued and outstanding: [removed: 2014] [added: 2015] – [removed: 345,000,000; 2013] [added: 330,500,000; 2014] – [removed: 349,500,000] [added: 345,000,000] | | | [removed: 345] [added: 330] | | | [removed: 349] [added: 345] | |

| Preferred shares authorized: 1,000,000; issued and outstanding: [removed: 2014] [added: 2015] and [removed: 2013] [added: 2014] – None | | | — | | | — | |

| Paid-in capital | | | — | | | [removed: 16] [added: —] | |

| Retained [added: (deficit)] earnings | | | [removed: 690] [added: (300] | [added: )] | | [removed: 79] [added: 690] | |

| Accumulated other comprehensive [removed: (loss) income] [added: loss] | | | [removed: (111] [added: (165] | ) | | [removed: 115] [added: (111] | [added: )] |

| Total Masco Corporation's shareholders' [added: (deficit)] equity | | | [removed: 924] [added: (135] | [added: )] | | [removed: 559] [added: 924] | |

| Noncontrolling interest | | | [removed: 204] [added: 193] | | | [removed: 228] [added: 204] | |

| Total Equity | | | [removed: 1,128] [added: 58] | | | [removed: 787] [added: 1,128] | |

| Total Liabilities and Equity | | $ | [removed: 7,167] [added: 5,680] | | $ | [removed: 6,957] [added: 7,208] | |

for the years ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012][added: 2013]

| | | [removed: 2014] [added: 2015] | | | [removed: 2013] [added: 2014] | | | [removed: 2012] [added: 2013] | | |

| Selling, general and administrative expenses | | | [removed: 1,607] [added: 1,339] | | | [removed: 1,582] [added: 1,347] | | | [removed: 1,535] [added: 1,347] | |

| [removed: (Income) charge for] [added: Income from] litigation settlements | | | [removed: (9] [added: —] | [removed: )] | | [removed: —] [added: (9] | [added: )] | | [removed: 77] [added: —] | |

| Impairment charge for other intangible assets | | | [removed: 1] [added: —] | | | [removed: —] [added: 1] | | | [removed: 42] [added: —] | |

| Interest expense | | | (225 | ) | | [removed: (235] [added: (225] | ) | | [removed: (254] [added: (235] | ) |

| Other, net | | | [removed: 12] [added: —] | | | [removed: 12] [added: 11] | | | [removed: 25] [added: 9] | |

| Income from continuing operations before income [removed: taxes] [added: taxes:] | | | [removed: 575] | | | [removed: 450] | | | [removed: 73] | |

February 12, 2016

| Receivables | | | 853 | | | 820 | |

| Inventories | | | 687 | | | 712 | |

| Property and equipment, net | | | 1,027 | | | 1,046 | |

| Goodwill | | | 839 | | | 840 | |

| Other intangible assets, net | | | 160 | | | 142 | |

| Other assets | | | 326 | | | 419 | |

| Assets held for sale | | | — | | | 1,141 | |

| Accounts payable | | $ | 749 | | $ | 721 | |

| Liabilities held for sale | | | — | | | 300 | |

| Other liabilities | | | 698 | | | 781 | |

| Liabilities held for sale | | | — | | | 169 | |

| Total Liabilities | | | 5,622 | | | 6,080 | |

| Net sales | | $ | 7,142 | | $ | 7,006 | | $ | 6,761 | |

| Cost of sales | | | 4,889 | | | 4,946 | | | 4,802 | |

| Gross profit | | | 2,253 | | | 2,060 | | | 1,959 | |

| Operating profit | | | 914 | | | 721 | | | 612 | |

| | | | (225 | ) | | (214 | ) | | (226 | ) |

| (Loss) income from discontinued operations, net | | | (.01 | ) | | .10 | | | .08 | |

| Income from continuing operations | | $ | 357 | | $ | 821 | | $ | 259 | |

for the years ended December 31, 2015, 2014 and 2013

| Less: Net income attributable to noncontrolling interest | | | 39 | | | 47 | | | 41 | |

| Net income attributable to Masco Corporation | | $ | 355 | | $ | 856 | | $ | 288 | |

| Pension and other post-retirement benefits | | | 26 | | | (140 | ) | | 138 | |

| Pension and other post-retirement benefits | | | 2 | | | (6 | ) | | 1 | |

| | | | (14 | ) | | (37 | ) | | 9 | |

for the years ended December 31, 2015, 2014 and 2013

| Net income | | $ | 394 | | $ | 903 | | $ | 329 | |

| Display amortization | | | 20 | | | 15 | | | 19 | |

| Pension and other postretirement benefits | | | (18 | ) | | (36 | ) | | (23 | ) |

| Cash distributed to TopBuild Corp. | | | (63 | ) | | — | | | — | |

| Issuance of TopBuild Corp. debt | | | 200 | | | — | | | — | |

for the years ended December 31, 2015, 2014 and 2013

| Total comprehensive income (loss) | | | 326 | | | | | | | | | 355 | | | (54 | ) | | 25 | |

| Repurchased | | | (456 | ) | | (17 | ) | | (65 | ) | | (374 | ) | | | | | | |

| Separation of TopBuild Corp. | | | (828 | ) | | | | | | | | (828 | ) | | | | | | |

| Balance, December 31, 2015 | | $ | 58 | | $ | 330 | | $ | — | | $ | (300 | ) | $ | (165 | ) | $ | 193 | |

While we believe that the estimates and assumptions underlying the valuation methodology are reasonable, different estimates and assumptions could result in different outcomes.

Our weighted average cost of capital decreased in 2015 as compared to 2014 due to less risk associated with our stock in relation to the capital markets.

We adopted this guidance beginning January 1, 2015.

February 13, 2015

| Receivables | | | 1,040 | | | 1,004 | |

| Inventories | | | 819 | | | 765 | |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| Goodwill | | | 1,884 | | | 1,903 | |

| Total Assets | | $ | 7,167 | | $ | 6,957 | |

| Total Liabilities | | | 6,039 | | | 6,170 | |

| Net sales | | $ | 8,521 | | $ | 8,173 | | $ | 7,495 | |

| Cost of sales | | | 6,134 | | | 5,918 | | | 5,539 | |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| Gross profit | | | 2,387 | | | 2,255 | | | 1,956 | |

| Operating profit | | | 788 | | | 673 | | | 302 | |

| | | | (213 | ) | | (223 | ) | | (229 | ) |

| Income (loss) from continuing operations | | $ | 2.39 | | $ | .83 | | $ | (.16 | ) |

| Unrecognized pension prior service cost and net gain (loss) | | | (6 | ) | | 1 | | | (7 | ) |

| | | | (37 | ) | | 9 | | | 2 | |

| | | (In Millions) | | | | | | | | |

| Deferred income taxes | | | (406 | ) | | 42 | | | 50 | |

| Impairment charges: | | | | | | | | | | |

| Payment for settlement of swaps | | | — | | | — | | | (25 | ) |

| Balance, January 1, 2012 | | $ | 750 | | $ | 348 | | $ | 65 | | $ | 46 | | $ | 76 | | $ | 215 | |

| Repurchased | | | (8 | ) | | (1 | ) | | (7 | ) | | | | | | | | | |

| Total comprehensive income | | | 394 | | | | | | | | | 288 | | | 56 | | | 50 | |

A.

We record revenue for unbilled services performed based upon material and labor incurred in the Installation and Other Services segment; such amounts are recorded in receivables.

ACCOUNTING POLICIES (Continued)

Receivables include unbilled revenue related to the Installation and Other Services segment of $24 million at both December 31, 2014 and 2013.

appropriate discount rates.

Our weighted average cost of capital decreased in 2014 due to lower bond rates.

Revision of Previously Issued Financial Statements. During the fourth quarter ended December 31, 2014, we identified an error related to the classification of our insurance reserves.

We have revised previously reported balances on our consolidated balance sheet as of December 31, 2013 to correct for claims not expected to be settled within the next year.

Accrued liabilities decreased from the amounts previously reported by $96 million.

Other liabilities increased from the amounts previously reported by $96 million.

This revision had no effect on our consolidated statements of operations or consolidated statements of cash flows.

This error is not considered material to any prior period financial statement.

During the quarter ended March 31, 2014, we identified an error in the accounting for certain of our investments in private equity limited partnership funds.

The investments were inappropriately accounted for under the cost basis versus the equity method.

The impact of the error was to under report the investment value (included in other assets on the consolidated balance sheets) and to over (under) state equity investment earnings (loss) (included in other income (expense), net in the consolidated statements of operations).

We have revised our December 31, 2013 and 2012 consolidated statement of operations and consolidated balance sheet as of December 31, 2013 in these financial statements to reflect the investment accounted for as an equity investment.

The [removed: Company, with the participation of the Chief Executive Officer] [added: Company's principal executive officer] and [removed: Chief Financial Officer, conducted] [added: principal financial officer have concluded, based on] an evaluation of [removed: its] [added: the Company's] disclosure controls and procedures [added: (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e))] as required by [added: paragraph (b) of] Exchange Act Rules [removed: 13a-15(b) and 15d-15(b)] [added: 13a-15 or 15d-15 that,] as of December 31, [removed: 2014.][added: 2015, the Company's disclosure controls and procedures were effective.]

In connection with the evaluation of the Company's "internal control over financial reporting" that occurred during the quarter ended December 31, [removed: 2014,] [added: 2015,] 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.

During the first quarter of 2016, we started a phased deployment of a new Enterprise Resource Planning ("ERP") system at Milgard.

The system implementation is designed, in part, to enhance the overall system of internal control over financial reporting through further automation and improve business processes and is not in response to any identified deficiency or weakness in the Company's internal control over financial reporting.

However, this system implementation is significant in scale and complexity and will result in modification to certain Milgard internal controls.

Based on this evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective.

Other information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2015] [added: 2016] Annual Meeting of Stockholders, to be filed on or before April [removed: 30, 2015,] [added: 29, 2016,] and such information is incorporated herein by reference.

Information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2015] [added: 2016] Annual Meeting of Stockholders, to be filed on or before April [removed: 30, 2015,] [added: 29, 2016,] and such information is incorporated herein by reference.

The following table sets forth information as of December 31, [removed: 2014] [added: 2015] concerning the [removed: 2014] [added: 2015] Plan, which was approved by our stockholders.

The remaining information required by this Item will be contained in our definitive Proxy Statement for our [removed: 2015] [added: 2016] Annual Meeting of Stockholders, to be filed on or before April [removed: 30, 2015,] [added: 29, 2016,] and such information is incorporated herein by reference.

| Equity compensation plans approved by stockholders | | | 12,278,037 | | $ | 17.44 | | | 17,126,332 | |

| Equity compensation plans approved by stockholders | | | 18,201,674 | | $ | 20.98 | | | 12,193,137 | |

Information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2015] [added: 2016] Annual Meeting of Stockholders, to be filed on or before April [removed: 30, 2015,] [added: 29, 2016,] and such information is incorporated herein by reference.

Information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2015] [added: 2016] Annual Meeting of Stockholders, to be filed on or before April [removed: 30, 2015,] [added: 29, 2016,] and such information is incorporated herein by reference.

_Financial Statements._ Our consolidated financial statements included in Item 8 hereof, as required at December 31, [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] and for the years ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012,] [added: 2013,] consist of the following:

| [removed: [](#fe77001_financial_statements_and_suppl__fin05321)] [added: [](#fe40101_financial_statements_and_suppl__fin05323)] [Consolidated Balance [removed: Sheets](#fe77001_financial_statements_and_suppl__fin05321)] [added: Sheets](#fe40101_financial_statements_and_suppl__fin05323)] | | [removed: [41](#fe77001_financial_statements_and_suppl__fin05321)] [added: [41](#fe40101_financial_statements_and_suppl__fin05323)] |

| [removed: [](#fg77001_masco_corporation_and_consolid__mas04632)] [added: [](#fg40101_masco_corporation_and_consolid__mas04635)] [Consolidated Statements of [removed: Operations](#fg77001_masco_corporation_and_consolid__mas04632)] [added: Operations](#fg40101_masco_corporation_and_consolid__mas04635)] | | [removed: [42](#fg77001_masco_corporation_and_consolid__mas04632)] [added: [42](#fg40101_masco_corporation_and_consolid__mas04635)] |

| [removed: [](#fi77001_masco_corporation_and_consolid__mas05190)] [added: [](#fi40101_masco_corporation_and_consolid__mas05193)] [Consolidated Statements of Comprehensive Income [removed: (Loss)](#fi77001_masco_corporation_and_consolid__mas05190)] [added: (Loss)](#fi40101_masco_corporation_and_consolid__mas05193)] | | [removed: [43](#fi77001_masco_corporation_and_consolid__mas05190)] [added: [43](#fi40101_masco_corporation_and_consolid__mas05193)] |

| [removed: [](#fk77001_masco_corporation_and_consolid__mas04605)] [added: [](#fk40101_masco_corporation_and_consolid__mas04608)] [Consolidated Statements of Cash [removed: Flows](#fk77001_masco_corporation_and_consolid__mas04605)] [added: Flows](#fk40101_masco_corporation_and_consolid__mas04608)] | | [removed: [44](#fk77001_masco_corporation_and_consolid__mas04605)] [added: [44](#fk40101_masco_corporation_and_consolid__mas04608)] |

| [removed: [](#fm77001_masco_corporation_and_consolid__mas05037)] [added: [](#fm40101_masco_corporation_and_consolid__mas05040)] [Consolidated Statements of Shareholders' [removed: Equity](#fm77001_masco_corporation_and_consolid__mas05037)] [added: Equity](#fm40101_masco_corporation_and_consolid__mas05040)] | | [removed: [45](#fm77001_masco_corporation_and_consolid__mas05037)] [added: [45](#fm40101_masco_corporation_and_consolid__mas05040)] |

| [removed: [](#fo77001_masco_corporation_note__fo702526)] [added: [](#fo40101_masco_corporation_note__fo402517)] [Notes to Consolidated Financial [removed: Statements](#fo77001_masco_corporation_note__fo702526)] [added: Statements](#fo40101_masco_corporation_note__fo402517)] | | [removed: [46](#fo77001_masco_corporation_note__fo702526)] [added: [46](#fo40101_masco_corporation_note__fo402517)] |

Our Financial Statement Schedule appended hereto, as required for the years ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012,] [added: 2013,] consists of the following:

See separate Exhibit Index beginning on page [removed: 92.][added: 91.]

[removed: February 13, 2015][added: | 2015 | | $ | 14 | | $ | 4 | | $ | — | | | | | $ | (7 | ) | | (a | ) | $ | 11 | |]

| /s/ [removed: VERNE G. ISTOCK Verne G. Istock] [added: J. MICHAEL LOSH J. Michael Losh] | | _Chairman of the Board_ | | | | |

| /s/ DENNIS W. ARCHER Dennis W. Archer | | _Director_ | | | | _February [removed: 13, 2015_] [added: 12, 2016_] |

| [removed: _/s/] [added: /s/] CHRISTOPHER A. O'HERLIHY [removed: __Christopher] [added: Christopher] A. [removed: O'Herlihy_] [added: O'Herlihy] | | [removed: _ Director_] [added: _Director_] | | | | |

for the years ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012][added: 2013]

| Allowances for doubtful accounts, deducted from accounts receivable in the balance [removed: sheet:] [added: sheet (e):] | | | | | | | | | | | | | | | | | | | | | | |

| 2014 | | $ | [removed: 27] [added: 22] | | $ | [removed: 6] [added: 3] | | $ | — | | | | | $ | [removed: (15] [added: (11] | ) | | (a | ) | $ | [removed: 18] [added: 14] | |

| 2013 | | $ | [removed: 31] [added: 26] | | $ | [removed: 8] [added: 5] | | $ | — | | | | | $ | [removed: (12] [added: (9] | ) | | (a | ) | $ | [removed: 27] [added: 22] | |

| 2014 | | $ | 662 | | $ | (539 | ) | $ | (57 | ) | | [removed: (b] [added: (c] | ) | $ | — | | | | | $ | 66 | |

| 2013 | | $ | 785 | | $ | (36 | ) | $ | (87 | ) | | [removed: (c] [added: (d] | ) | $ | — | | | | | $ | 662 | |

| Exhibit No. | | | | | | | | Filed [removed: Here-with] [added: Herewith] | | | | | | | |

| 3.i | | Restated Certificate of Incorporation of Masco Corporation. | | | | | | [removed: 2010 10-K] | | [removed: 3.i] | | | [removed: 02/18/2011] | | [added: X] |

| 4.a.i | | Indenture dated as of December 1, 1982 between Masco Corporation and [added: The] Bank of New York [added: Mellon] Trust Company, N.A., as successor trustee under agreement originally with Morgan Guaranty Trust Company of New York, as Trustee and Directors' resolutions establishing Masco Corporation's: | | | | | | 2011 10-K | | 4.a.i | | | 02/21/2012 | | |

| | | (ii) | | 73/4% Debentures Due August 1, 2029. | | | | [added: 2014 10-K] | | [added: 4.a.i(ii)] | | | [added: 02/13/2015] | | [removed: X] |

| 4.a.ii | | Supplemental Indenture dated as of July 26, 1994 between Masco Corporation and [added: The] Bank of New York [added: Mellon] Trust Company, N.A., as successor trustee under agreement originally with The First National Bank of Chicago, as Trustee. | | | | | | [added: 2014 10-K] | | [added: 4.a.ii] | | | [added: 02/13/2015] | | [removed: X] |

| 4.b.i | | Indenture dated as of February 12, 2001 between Masco Corporation and [added: The] Bank of New York [added: Mellon] Trust Company, N.A., as successor trustee under agreement originally with Bank One Trust Company, National Association, as Trustee and Directors' Resolutions establishing Masco Corporation's: | | | | | | 2011 10-K | | 4.b.i | | | 02/21/2012 | | |

| | | [removed: (iii)] [added: (ii)] | | 6.125% Notes Due October 3, 2016; | | | | 2011 10-K | | 4.b.i(iv) | | | 02/21/2012 | | |

| | | [removed: (iv)] [added: (iii)] | | 5.85% Notes Due [added: March 15,] 2017; | | | | 2011 10-K | | 4.b.i(v) | | | 02/21/2012 | | |

| | | [removed: (v)] [added: (iv)] | | 7.125% Notes Due [added: March 15,] 2020; [removed: and] | | | | [removed: 2010 10-K] | | [removed: 4.b.i(vi)] | | | [removed: 02/18/2011] | | [added: X] |

| | | [removed: (vi)] [added: (v)] | | 5.95% Notes Due [removed: 2022.] [added: March 15, 2022; and] | | | | 10-Q | | 4.b | | | 05/02/2012 | | |

| 4.b.ii | | Supplemental Indenture dated as of November 30, 2006 to the Indenture dated February 12, 2001 by and between Masco Corporation and [added: The] Bank of New York [added: Mellon] Trust Corporation N.A., as Trustee. | | | | | | 2011 10-K | | 4.b.ii | | | 02/21/2012 | | |

| [removed: 10.a] [added: 10.a.i] | | Credit Agreement dated as of March 28, 2013 by and among Masco Corporation and Masco Europe S.à.r.l. as borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A. as Administrative Agent, Citibank, N.A. as Syndication Agent, and Royal Bank of Canada, Deutsche Bank Securities, Inc., PNC Bank, National Association, and SunTrust Bank as Co-Documentation Agents. | | | | | | 8-K | | 10 | | | 04/03/2013 | | |

| Note 2: | | Exhibits 10.b through [removed: 10.n] [added: 10.m] constitute the management contracts and executive compensatory plans or arrangements in which certain of the Directors and executive officers of the Company participate. | | | | | | | | | | | | | |

| 10.b.i | | Masco Corporation [removed: 1991] [added: 2005] Long Term Stock Incentive Plan [removed: (as amended] [added: (Amended] and [removed: restated October 26, 2006):] [added: Restated May 11, 2010):] | | | | | | [removed: 2011 10-K] | | [removed: 10.a] | | | [removed: 02/21/2012] | | [added: X] |

| | | [removed: (ii)] [added: (i)] | | Form of [removed: Restoration] Stock [removed: Option;] [added: Option Grant.] | | | | | | | | | | | X |

| | | [removed: (iii)] [added: (i)] | | Form of Stock Option [removed: Grant;] [added: Grant Agreement.] | | | | [added: 2012 10-K] | | [added: 10.b.iv(ii)] | | | [added: 02/15/2013] | | [removed: X] |

| | | [removed: (iv)] [added: (iii)] | | Form of Stock Option Grant for [removed: Non-Employee Directors; and] [added: Non- Employee Directors.] | | | | [added: 2014 10-K] | | [added: 10.c.i.iv] | | | [added: 02/13/2015] | | [removed: X] |

| [removed: 10.b.ii] [added: 10.c.ii] | | [removed: Masco Corporation 2004 Restricted Stock Award] [added: Non-Employee Directors Equity] Program [removed: (under the 1991] [added: under Masco Corporation's 2014] Long Term Stock Incentive [removed: Plan).] [added: Plan:] | | | | | | [added: 10-Q] | | [added: 10] | | | [added: 10/28/2014] | | [removed: X] |