Masco (MAS) 10-K risk factor changes: FY2017 vs FY2016

Our business relies on [removed: home improvement] [added: residential repair and remodeling activity] and, to a lesser extent, on new home construction activity, both of which are cyclical.

Our business relies on [removed: home improvement activity, including] [added: residential] repair and remodeling [removed: projects,] [added: activity] and, to a lesser extent, on new home construction activity.

The fundamentals driving our business are cyclical, and adverse changes or uncertainty [removed: regarding macroeconomic conditions, including an economic slowdown or increased interest rates,] [added: involving the factors listed above] could result in a decline in spending on [removed: home improvement projects] [added: residential repair] and [added: remodeling activity and] a decline in demand for new home construction, which could adversely affect our results of operations and financial position.

[removed: If] [added: We could lose market share if] we do not maintain our strong brands, develop new products or respond to changing purchasing practices and consumer [removed: preferences, we could lose market share.][added: preferences or if our reputation is damaged.]

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 market share, which could [removed: negatively] [added: adversely] impact our results of operations and financial position.

If we do not timely and effectively identify and respond to these changing purchasing 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 and financial position could be [removed: negatively] [added: adversely] affected.

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

We sell many of our products through home center retailers, [added: online retailers,] distributors and independent dealers and rely on these customers to market and promote our products to consumers.

In addition, home 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 [removed: impact] [added: affect] our margins on our products that contractors and installers would otherwise buy through our dealers and wholesalers.

We also compete with low‑cost foreign manufacturers and private label brands [added: sold by our customers] in a variety of our product groups.

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

If we are unable to maintain our competitive position in our [removed: industries] [added: industries,] our results of operations and financial position could be adversely affected.

In [removed: 2016,] [added: 2017,] our net sales to The Home Depot were $2.5 billion (approximately [removed: 34] [added: 33] percent of our consolidated net sales), and our net sales to Lowe’s were less than [removed: ten] [added: 10] percent of our consolidated net sales.

Further, as these home center retailers expand their markets and targeted 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 [removed: impact] [added: affect] our results of operations and financial position.

Our relationships with these customers may be [removed: impacted] [added: affected] if we increase the amount of business we transact directly with [removed: consumers.][added: consumers and professionals.]

In addition, these home center retailers [removed: request] [added: are granted] product exclusivity from time to time, which [added: increases the complexity of our product offerings and our costs and] may affect our ability to offer products to other [removed: customers and may diminish our ability to leverage economies of scale.][added: customers.]

We continue to pursue our strategic initiatives of investing in our brands, developing innovative products, and focusing on operational excellence through our continued deployment of the Masco Operating System, our methodology to drive growth and [removed: productivity.][added: productivity into our business units.]

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

If we are not able to identify suitable acquisition candidates or consummate potential acquisitions at acceptable terms and prices, our long‑term competitive positioning may be [removed: impacted.][added: affected.]

[removed: Our actions] [added: We may not be able] to [removed: improve] [added: sustain] the [added: improved] results of our U.S. window [removed: business may not be successful.][added: business.]

Our U.S. window business, Milgard Manufacturing Incorporated (“Milgard”), [removed: is experiencing] [added: has experienced] operational issues and production [removed: inefficiencies, including difficulty in hiring and retaining qualified labor.][added: inefficiencies.]

In addition, [removed: Milgard has begun a] [added: Milgard’s] phased deployment of a new [removed: Enterprise Resource Planning (“ERP”)] [added: ERP] system to improve its business [removed: processes.][added: processes has been complex and requires significant management oversight and resources.]

If [removed: we experience] [added: Milgard experiences] unanticipated [removed: expenses] [added: expenses, setbacks] or additional disruptions to [removed: Milgard’s] [added: its] operations, our results of operations and financial position [removed: may] [added: could] be [removed: negatively impacted.][added: adversely affected.]

Variability in commodity costs or limited availability of commodities could [removed: impact us.][added: affect our results of operations and financial position.]

[removed: We buy various commodities to produce our products,] [added: Various commodities,] including, among others, brass, resins, titanium dioxide, zinc, wood and [removed: glass.][added: glass, are used to produce our products.]

Fluctuations in the availability and prices of these commodities could increase [removed: our] [added: the] costs [removed: to produce] [added: of] our products.

Our production of products could also be [removed: impacted] [added: affected] if we [added: or our suppliers] are unable to procure our requirements for these commodities or if a shortage of these commodities drives their prices to levels that are not commercially feasible.

Further, increases in energy costs could increase our production and transportation [removed: costs, which could also negatively affect our results of operations and financial position.][added: costs.]

If we are not able to increase the prices of our products or achieve cost savings to offset increased commodity and production costs, our results of operations and financial position could be [removed: negatively impacted.][added: adversely affected.]

Such reductions could [removed: impact] [added: adversely affect] our results of operations and financial position.

[removed: We have entered] [added: From time to time we enter] into long-term agreements with certain significant suppliers to help ensure continued availability of key commodities and to establish firm pricing, but at times these contractual commitments may result in our paying above market prices for commodities during the term of the contract.

[removed: From time to time,] [added: Occasionally,] we also may use derivative instruments, including commodity futures and swaps.

This strategy increases the possibility that we may make commitments for these commodities at prices that subsequently exceed their market prices, which has [added: occurred] and [added: could occur in the future and] may [removed: continue to] adversely affect our results of operations and financial position.

We [removed: rely heavily] [added: are dependent] 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 and/or timely supply of these products and components.

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

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

If we are unable to effectively manage our supply chain or if there is a disruption in transporting the products or components, our results of operations and financial position could be [removed: negatively] [added: adversely] affected.

Our results of operations and financial position are also [removed: impacted] [added: affected] by international economic conditions, primarily in Europe.

[removed: We continue to be negatively impacted by] [added: Unfavorable] currency conversion rates, particularly the Euro, the British pound sterling, the Canadian dollar and the Chinese Yuan Renminbi, [removed: due to] [added: have in] the [removed: strength of] [added: past adversely affected us, and could adversely affect us in] the [removed: U.S. dollar compared to these currencies.][added: future.]

[removed: U.S. laws and regulations regarding activities of U.S. companies doing business abroad, including] [added: These include] tax laws, laws regulating competition, anti‑bribery/anti‑corruption and other business practices, and trade regulations, which may include duties and [removed: tariffs, can also affect us.][added: tariffs.]

A number of factors affect consumers’ spending on home improvement projects as well as new home construction activity, including:

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| • | consumer confidence levels; |

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| • | fluctuations in home prices; |

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| --- | --- |

| • | existing home sales; |

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| --- | --- |

| • | unemployment and underemployment levels; |

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| --- | --- |

| • | consumer income and debt levels; |

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| --- | --- |

| • | household formation; |

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| --- | --- |

| • | the availability of home equity loans and mortgages and the interest rates for and tax deductibility of such loans; |

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| --- | --- |

| • | the availability of skilled tradespeople for repair and remodeling work; |

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| --- | --- |

| • | trends in lifestyle and housing design; and |

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| --- | --- |

| • | weather and natural disasters. |

Our public image and reputation are important to maintaining our strong brands and could be adversely affected by various factors, including product quality and service, claims and comments in social media or the press, or negative publicity regarding disputes or legal action against us, even if unfounded.

Damage to our public image or reputation could adversely affect our sales and results of operations and financial position.

These factors could adversely affect our results of operations and financial position.

We are also affected by laws applicable to U.S. companies doing business abroad or importing goods and materials.

We may not be able to successfully execute our acquisition strategy or integrate businesses that we acquire.

We have been affected by a shortage of qualified personnel in certain geographic areas.

We may not experience the anticipated benefits from our investments in new technology.

We are making significant investments in new technology systems throughout our company, including concurrent implementations of Enterprise Resource Planning (“ERP”) systems at our larger business units.

ERP implementations are complex and require significant management oversight.

Macroeconomic conditions in North America and Europe, including consumer confidence levels, fluctuations in home prices, unemployment and underemployment levels, 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.

Although credit availability has improved and financing rates remain low, consumer spending for big ticket remodeling projects and new home construction continues to be below historic levels.

The implementation of this ERP system is complex and expensive and will require significant oversight and resources.

While we have implemented plans to address the operational and ERP issues challenging Milgard, there is no assurance that our plans will be successful.

In certain areas of the U.S., we have experienced and may continue to experience difficulty in recruiting, training and retaining sufficient skilled and unskilled labor, resulting in additional costs related to labor inefficiencies.

We have plans to make significant investments in new technology systems throughout our company over the next several years.

We are also in the process of implementing ERP systems at select business units.

If we were unable to borrow under our credit agreement, our financial flexibility would be restricted if we were also unable to obtain alternative financing on acceptable terms and at acceptable rates or if we were not permitted to obtain alternative financing under the terms of our existing financing arrangements.

The TopBuild spin off could result in substantial tax liability to us and our stockholders.

We received an opinion of tax counsel substantially to the effect that, for U.S. Federal income tax purposes, the spin off of TopBuild Corp. ("TopBuild") in 2015 and certain related transactions qualify for tax‑free treatment under certain sections of the Internal Revenue Code.

However, if the factual assumptions or representations made by us in connection with the delivery of the opinion are inaccurate or incomplete in any material respect, including those relating

to the past and future conduct of our business, we will not be able to rely on the opinion.

Furthermore, the opinion is not binding on the Internal Revenue Service or the courts.

If, notwithstanding receipt of the opinion, the spin off transaction and certain related transactions are determined to be taxable, we would be subject to a substantial tax liability.

In addition, if the spin off transaction is taxable, each holder of our common stock who received shares of TopBuild in connection with the spin off would generally be treated as receiving a taxable distribution of property in an amount equal to the fair market value of the shares received, thereby potentially increasing such holder’s tax liability.

Even if the spin off otherwise qualifies as a tax‑free transaction, the distribution could be taxable to us (but not to our stockholders) in certain circumstances if future significant acquisitions of our stock or the stock of TopBuild are deemed to be part of a plan or series of related transactions that included the spin off.

In this event, the resulting tax liability could be substantial.

In connection with the spin off, we entered into a tax matters agreement with TopBuild, pursuant to which TopBuild agreed to not enter into any transaction that could cause any portion of the spin off to be taxable to us without our consent and to indemnify us for any tax liability resulting from any such transaction.

These obligations and potential tax liabilities may discourage, delay or prevent a change of control of us.

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 the levels of [removed: home improvement] [added: residential repair and remodel] activity and new home construction, our ability to maintain our strong brands and [added: reputation and] to develop [removed: and introduce] new [removed: and improved] products, our ability to maintain our competitive position in our industries, our reliance on key customers, [added: the cost and availability of raw materials,] our [added: dependence on third-party suppliers, risks associated with international operations and global strategies, our] ability to achieve the anticipated benefits of our strategic initiatives, our ability to [removed: improve] [added: successfully execute] our [removed: under-performing U.S. window business, the cost] [added: acquisition strategy] and [removed: availability of raw materials,] [added: integrate businesses that we have and may acquire,] our [removed: dependence on third party suppliers,] [added: ability to attract, develop] and [added: retain talented personnel, our ability to achieve the anticipated benefits from our investments in new technology,] risks associated with [removed: international operations] [added: our reliance on information systems] and [removed: global strategies.][added: technology, and our ability to sustain the improved results of our U.S. window business.]

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

Net sales were positively affected by increased sales volume resulting from increased repair and remodel activity and new home construction, [added: net selling price increases in Europe] and [added: the U.S., and] favorable [removed: product] [added: sales] mix in the U.S. [added: Such increases were partially offset by the divestitures of Arrow] and [added: Moores, and unfavorable sales mix in] Europe.

Such increases were partially offset by foreign currency translation, primarily due to the stronger U.S. dollar [removed: compared to the British Pound] and [removed: Euro and] [added: lower] net selling [removed: price decreases in North America.][added: prices of paints and other coating products.]

Our results of operations were positively affected by increased sales volume, [added: cost savings initiatives and] a more favorable relationship between [added: net] selling prices and commodity [removed: costs, operational efficiencies, and cost savings initiatives.][added: costs in Europe.]

Our Plumbing Products segment benefited from increased sales volume, [added: cost savings initiatives and] a favorable relationship between [added: net] selling prices and commodity [removed: costs and benefits associated with cost savings initiatives,] [added: costs,] and was negatively impacted by an increase in [removed: certain variable expenses, such as] [added: investments in] strategic growth [removed: investments] [added: initiatives] and [removed: higher insurance costs, as well as unfavorable product mix.][added: certain other expenses (including trade show costs and increased head count).]

[removed: The Decorative Architectural Products] [added: Operating margins in this] segment [removed: benefited from] [added: in 2016 reflect] increased sales volume of paints and other coating products and [removed: builder's] [added: builders'] hardware, partially offset by an unfavorable relationship [removed: betwen] [added: between net] selling prices and commodity costs of paints and other coating products.

[removed: Our Cabinetry Products] [added: Operating margins in this] segment [removed: benefited from] [added: in 2016 were positively affected by] operational efficiencies [removed: resulting from] [added: due to the benefits associated with] business rationalization activities and other cost savings initiatives, a [removed: positive product mix] [added: favorable sales mix,] and a more favorable relationship between [added: net] selling prices and commodity costs, [removed: and was negatively impacted by decreased sales volume.][added: primarily at our North American cabinets business.]

The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and [added: liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.]

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

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

Our assumptions included a relatively stable U.S. Gross Domestic Product growing at [added: approximately] 2.3 percent [added: per annum] and a euro zone Gross Domestic Product growing at [removed: 1.4] [added: approximately 1.5 to 1.7] percent [removed: annually] [added: per annum] over the five-year forecast.

We utilize our weighted average cost of capital of approximately [removed: 8.5] [added: 8.0] percent as the basis to determine the discount rate to apply to the estimated future cash flows.

In [removed: 2016,] [added: 2017,] 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: 10.5] [added: 10.0] percent to [removed: 13.5] [added: 13.0] percent for our reporting units.

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

In the fourth quarter of [removed: 2016,] [added: 2017,] 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 would not have resulted in [removed: any additional analysis of goodwill] [added: an] impairment for any reporting unit.

In [removed: 2016,] [added: 2017,] we did not recognize any impairment charges for other indefinite-lived intangible assets.

[removed: We froze all future benefit accruals under] [added: As of January 1, 2010,] substantially all of our domestic and foreign qualified and domestic non-qualified defined-benefit pension plans [removed: several years ago.][added: were frozen to future benefit accruals.]

Inherent in these valuations are key assumptions regarding [removed: inflation,] expected return on plan assets, mortality rates and discount rates for obligations and expenses.

In December [removed: 2016,] [added: 2017,] our discount rate [removed: decreased] for obligations [added: decreased] to [removed: an] [added: a weighted] average of [removed: 3.5] [added: 3.3] percent from [removed: 4.0] [added: 3.5] percent.

The discount rate for obligations is based upon the expected duration of each defined-benefit pension plan's liabilities matched to the December 31, [removed: 2016] [added: 2017 Willis] Towers Watson Rate Link curve.

The discount rates we use for our defined-benefit pension plans ranged from 1.5 percent to [removed: 4.0] [added: 3.6] percent, with the most significant portion of the liabilities having a discount rate for obligations of [removed: 3.8] [added: 3.4] 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, decreased to [removed: $338] [added: $266] million at December 31, [removed: 2016] [added: 2017] from [removed: $401] [added: $338] million at December 31, [removed: 2015.][added: 2016.]

Our projected benefit obligation for our unfunded, non-qualified, defined-benefit pension plans was $170 million at [removed: December 31, 2016 compared with $174 million at] [added: both] December 31, [removed: 2015.][added: 2017 and 2016.]

In accordance with the Pension Protection Act, the Adjusted Funding Target Attainment Percentage for the various defined-benefit pension plans ranges from [removed: 76] [added: 80] percent to [removed: 109] [added: 108] percent.

During [removed: 2016,] [added: 2017,] we contributed [removed: $100] [added: $52] million to our qualified defined-benefit pension [removed: plans, including $51 million to a previously unfunded pension plan.][added: plans.]

Additionally, our qualified defined-benefit pension plan assets had a net gain of [removed: 8.3] [added: 13.9] percent in [removed: 2016.][added: 2017.]

Refer to Note [removed: M] [added: L] to the consolidated financial statements for additional information.

We expect pension expense for our qualified defined-benefit pension plans to be [removed: $22] [added: $12] million in [removed: 2017] [added: 2018] compared with [removed: $25] [added: $20] million in [removed: 2016.][added: 2017.]

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: 2017] [added: 2018] pension expense would increase by $4 million.

We expect pension expense for our non-qualified defined-benefit pension plans to be $8 million in [removed: 2017,] [added: 2018,] compared to $9 million in [removed: 2016.][added: 2017.]

We anticipate that we will be required to contribute approximately [removed: $21] [added: $25] million in [removed: 2017] [added: 2018] to our qualified and non-qualified defined-benefit [removed: plans.][added: plans; however, we currently anticipate contributing approximately $61 million in 2018.]

Refer to Note [removed: M] [added: L] to the consolidated financial statements for further information regarding the funding of our plans.

We [removed: continue to] maintain a valuation allowance on certain state and foreign deferred tax assets as of December 31, [removed: 2016.][added: 2017.]

We offer full and limited warranties on certain [removed: products] [added: products,] with warranty periods ranging up to the lifetime of the product to the original consumer purchaser.

At the time of sale, we accrue a warranty liability for the estimated future cost to provide products, parts or services to repair or replace products [removed: in satisfaction of] [added: to satisfy our] warranty obligations.

Certain factors and related assumptions in determining our warranty liability involve judgments and estimates and are sensitive to changes in the [removed: aforementioned factors.][added: factors described above.]

We believe that the warranty accrual is appropriate; however, actual claims incurred could differ from [removed: the] [added: our] original [removed: estimates thereby requiring adjustments] [added: estimates, which would require us] to [added: adjust our] previously established accruals.

Refer to Note [removed: U] [added: J] to the consolidated financial statements for additional information.

2017 Results

Such increases were partially offset by an increase in strategic growth investments and certain other expenses, including stock-based compensation, health insurance costs, trade show costs and increased head count.

Our Decorative Architectural Products segment was negatively affected by an unfavorable relationship between net selling prices and commodity costs of paints and other coating products, and an increase in strategic growth investments to support the expansion of pro paint sales and new programs in builder's hardware, and was positively impacted by increased sales volume and cost savings initiatives.

Our Cabinetry Products segment was positively affected by cost savings initiatives as well as favorable sales mix and was negatively affected by decreased sales volume, costs to support new product launches in North America, anti-dumping and countervailing duties, and an unfavorable relationship between net selling prices and commodity costs.

Our Windows and Other Specialty Products segment benefited from a decrease in warranty adjustments, as well as cost savings initiatives and a favorable relationship between net selling prices and commodity costs.

During downturns in our markets, declines in the financial condition and creditworthiness of customers impact the credit risk of the receivables involved, and we have incurred additional bad debt expense related to customer defaults.

Our weighted average cost of capital decreased in 2017 as compared to 2016, primarily due to reductions in the risk free rate.

The decrease in our qualified defined-benefit pension plan projected benefit obligation was impacted primarily by the divestiture of Moores, due to the transfer of $144 million of plan obligations to the purchaser in connection with the sale of the business.

A change to the MP 2017 Mortality Improvement Scale also decreased our long-term pension liabilities.

The comprehensive U.S. tax reform, which is generally effective in 2018, is expected to have a significant impact on our effective tax rate and taxes paid primarily due to the reduction in the U.S. Federal corporate tax rate from 35 percent to 21 percent and the additional U.S. and foreign taxes on our foreign earnings.

The impact from U.S. tax reform may differ from our current estimates due to the issuance of future regulatory guidance that differs from our current interpretation.

As a result of this new legislation, we currently anticipate our effective tax rate in 2018 to be approximately 26 percent.

We intend to allocate the benefit from lower cash tax payments to our existing capital allocation strategy.

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

On June 21, 2017, we issued $300 million of 3.5% Notes due November 15, 2027 and $300 million of 4.5% Notes due May 15, 2047.

We received proceeds of $599 million, net of discount, for the issuance of these Notes.

On June 27, 2017, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire $299 million of our 7.125% Notes due March 15, 2020, $74 million of our 5.95% Notes due March 15, 2022, $62 million of our 7.75% Notes due August 1, 2029, and $100 million of our 6.5% Notes due August 15, 2032.

In connection with these early retirements, we incurred a loss on debt extinguishment of $107 million, which was recorded as interest expense.

Amended Credit Agreement at December 31, 2017.

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

In December 2017, we signed a definitive agreement to acquire The L.D. Kichler Co. ("Kichler"), a leader in decorative residential and light commercial lighting products, ceiling fans and LED lighting systems.

This business will expand our product offerings to repair and remodel customers.

We expect this transaction to close in the first quarter of 2018, at which time we expect to pay approximately $550 million for the business, using cash on hand.

We intend to report this business in our Decorative Architectural Products segment.

| Employee withholding taxes paid on stock-based compensation | (33 | | ) | | (40 | | ) | | (36 | | ) |

| Businesses, net of cash disposed | 128 | | | | — | | | | — | | |

| | 2017 | | | 2016 | |

These amounts were partially offset by changes in working capital, resulting primarily from an increase in inventory levels to support our growth and new programs and changes in contract terms with certain customers.

Net cash provided by operations was also impacted by contributions to our defined-benefit pension plans.

Net cash used for financing activities was $577 million, primarily due to the early retirement of $299 million of our 7.125% Notes due March 15, 2020, $74 million of our 5.95% Notes due March 15, 2022, $62 million of our 7.75% Notes due August 1, 2029, and $100 million of our 6.5% Notes due August 15, 2032, and related extinguishment costs of $104 million.

Net cash used for financing activities was also impacted by $331 million for the repurchase and retirement of Company common stock (as part of our strategic initiative to drive shareholder value), $129 million for cash dividends paid, $35 million for dividends paid to noncontrolling interests and $33 million for employee withholding taxes paid on stock-based compensation.

These amounts were partially offset by the issuance of $300 million of 3.5% Notes due November 15, 2027 and $300 million of 4.5% Notes due May 15, 2047.

During 2017, we repurchased and retired 9.2 million shares of our common stock, (including 0.9 million shares repurchased to offset the dilutive impact of long-term stock awards granted in 2017).

At December 31, 2017, we had approximately $1.3 billion remaining under the 2017 authorization.

Consistent with past practice and as part of our strategic initiative, we anticipate using $200 to $300 million of cash for share repurchases (including shares which will be purchased to offset any dilution from long-term stock awards granted as part of our compensation programs) or acquisitions in 2018, in addition to our expected acquisition of Kichler in the first quarter of 2018.

| | 2017 | | | | 2016 | | |

| Divestitures | — | | | | (44 | | ) |

Net sales for 2017 were negatively

affected by lower sales volume of cabinets, the divestiture of our Arrow and Moores businesses, and an unfavorable sales mix of international plumbing products, which, in aggregate, decreased sales by approximately two percent compared to 2016.

Operating profit margin in 2017 was negatively impacted by an increase in strategic growth investments and certain other expenses, including stock-based compensation, health insurance costs, trade show costs and increased head count.

2016 Results

Such increases were partially offset by an increase in warranty costs resulting from a change in our estimate of expected future warranty claim costs and an increase in certain variable expenses, such as strategic growth investments, as well as ERP system implementation and higher insurance costs.

Our Windows and Other Specialty Products segment was negatively affected by increased warranty costs and certain other expenses, such as higher labor costs and ERP system implementation costs, and was positively impacted by a more favorable relationship between selling prices and commodity costs of windows.

liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Our weighted average cost of capital is unchanged as compared to 2015.

If the carrying amount of a reporting unit exceeds its fair value, we measure the possible goodwill impairment based upon an allocation of the estimate of fair value of the reporting unit to all of the underlying assets and liabilities of the reporting unit, including any previously unrecognized intangible assets (Step Two Analysis).

The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill.

The decrease in our projected benefit obligations was partially driven by lump sum payouts of certain long-term qualified pension obligations as well as a change to the MP 2016 Mortality Improvement Scale, which decreased our long-term pension liabilities.

In the third quarter of 2014, we recorded a $517 million tax benefit from the release of the valuation allowance against our U.S. Federal and certain state deferred tax assets due primarily to a return to sustainable profitability in our U.S. operations.

In reaching this conclusion, we considered the continued improvement in both the new home construction market and repair and remodel activity in the U.S. and our progress on strategic initiatives to reduce costs and expand our product leadership positions which contributed to the continued improvement in our U.S. operations over the past few years.

In the fourth quarter of 2014, we recorded an additional $12 million tax benefit from the release of the valuation allowances against certain U.K. and Mexican deferred tax assets primarily resulting from a return to sustainable profitability in these jurisdictions.

The potential for comprehensive tax reform in 2017, if implemented, may have a significant impact on our effective tax rate or taxes paid due to certain business provisions such as the denial of net interest expense deductions or the imposition of a tax on imports.

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

Beginning in 2016, we decided to significantly reduce our utilization of derivative and hedging activity for commodity cost fluctuations by settling positions at their scheduled maturity while not entering into new transactions.

The increase in the current ratio was due to the net debt reduction of $400 million during 2016 resulting from the refinancing of our debt, which reduced current liabilities by approximately $1 billion at December 31, 2016 compared to December 31, 2015.

Net cash used for financing activities was $1,046 million, primarily due to the early retirement of all of our $1 billion, 6.125% Notes which were due October 3, 2016 and all of our $300 million, 5.85% Notes which were due March 15, 2017, $459 million for the repurchase and retirement of Company common stock (as part of our strategic initiative to drive shareholder value, and includes 1.1 million shares repurchased to offset the dilutive impact of long-term stock awards granted in 2016), $128 million for cash dividends paid, $40 million for debt extinguishment costs and $31 million for dividends paid to noncontrolling interest.

This usage was partially offset by the issuance of $400 million of 3.5% Notes due April 1, 2021 and $500 million of 4.375% Notes due April 1, 2026.

At December 31, 2016, we had remaining authorization from our Board of Directors to repurchase up to an additional 12.9 million shares of our common stock.

Consistent with past practice and as part of our strategic initiative, we expect to repurchase the remainder of these shares in 2017.

The timing of these share repurchases will depend on market conditions.

Some of these shares will be purchased to offset any dilution from long-term stock awards granted as part of our compensation programs.

Net sales for 2014 were negatively affected by lower sales volume of cabinets and by lower net selling prices of paints and other coating products.

| Income from litigation settlements | — | | | | — | | | | (9 | | ) |

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

Other, net, for 2014 included net gains of $4 million from distributions from private equity funds and realized foreign currency gains of $5 million and other miscellaneous items.

Income from financial investments, net, for 2014 included losses from equity investments, net, of $2 million.

This charge was

The variance from our normalized tax rate in 2014 is due primarily to changes in the U.S. Federal valuation allowance and reversal of an accrual for uncertain tax positions.

We believe we will continue to see strong demand for our market-leading products, as the fundamentals for long-term demand in both repair and remodel and new home construction continue to be positive.

| Income from litigation settlements | — | | | | — | | | | 9 | | |

During 2014, our North American cabinet business incurred costs and charges of $31 million primarily related to actions taken to sell two previously idled manufacturing facilities.

Our corporate office incurred $27 million in costs primarily related to severance actions.

Finally, we incurred $6 million of costs and charges across our business units related to other cost savings initiatives.

Excluding the impact of foreign currency translation, segment sales increased by eight percent in 2015 compared to 2014.

This segment was also positively affected by increased net selling prices of International plumbing products.

Although operating margins were not

Net sales in this segment increased in 2014, primarily due to increased sales volume of paints and other coating products related to new product introductions and other growth initiatives and increased sales volume of builders' hardware, partially offset by lower net selling prices of paints and other coating products.

Operating margins in this segment in 2015 reflect operational efficiencies due to benefits associated with cost savings initiatives, a more favorable relationship between selling prices and commodity costs and increased sales volume of paints and other coating products and builders' hardware.

Operating margins in this segment in 2014 reflect a less favorable relationship between selling prices and commodity costs, a less favorable product mix of paints and other coating products and costs for new product introductions and advertising.

Such decreases more than offset the benefits associated with cost savings initiatives.

We have considered the provisions of accounting guidance regarding disclosure of accounting policies for derivative financial instruments and [removed: derivative commodity instruments, and] disclosure of quantitative and qualitative information about market risk inherent in derivative financial [removed: instruments, other financial] instruments and [removed: derivative commodity] [added: other financial] instruments.

We are exposed to the impact of changes in interest [removed: rates,] [added: rates and] foreign currency exchange [removed: rates] [added: rates, particularly changes between the U.S. dollar] and [removed: commodity costs in] the [removed: normal course of business] [added: European euro, British pound,] and [added: Canadian dollar, and] to market price fluctuations related to our financial investments.

We have involvement with derivative financial instruments and use such instruments to the extent necessary to manage exposure to foreign currency [removed: fluctuations and commodity] fluctuations.

Refer to Note [removed: F] [added: E] to the consolidated financial statements for additional information regarding our derivative instruments.

At December 31, [removed: 2016,] [added: 2017,] 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, [removed: a 10 percent change in commodity costs,] or a [removed: 10 percent] [added: 100 basis point] change in interest rates.

Our portfolio of industry-leading brands includes BEHR® paint; DELTA® and HANSGROHE® [removed: faucets,] [added: faucets and] bath and shower fixtures; KRAFTMAID® and MERILLAT® cabinets; MILGARD® windows and doors; and HOT SPRING® spas.

We believe that our solid results of operations and financial position for [removed: 2016] [added: 2017] resulted from our continued focus on our three strategic pillars: driving the full potential of our core businesses, leveraging opportunities across our businesses, and actively managing our portfolio.

To drive the full potential of our core businesses during [removed: 2016,] [added: 2017,] we continued to pursue sales growth opportunities by introducing new products, enhancing services and penetrating adjacent markets.

As a result, we [removed: achieved] [added: grew] both [added: our] top and bottom [removed: line growth.][added: lines.]

[removed: We also] [added: Additionally, we] continued to actively manage our portfolio, the third pillar of our strategy, and remain committed to making selective acquisitions in attractive end markets.

In addition, [removed: during 2016] we repurchased [removed: nearly 15] [added: over 9] million shares of our common stock and increased our quarterly dividend by [removed: approximately] 5 percent, which further enhanced value for our shareholders.

We believe that the actions we have taken over the last few [removed: years] [added: years, combined with the Masco Operating System, our methodology to drive growth and productivity,] have positioned [removed: our company for] [added: us to] further [removed: enhancement of] [added: enhance] shareholder value [removed: with] [added: through] strong and consistent growth.

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

The following [removed: table sets] [added: tables set] forth the contribution of our segments to net sales and operating profit (loss) for the [removed: three years] [added: three-year period] ended December 31, [removed: 2016.][added: 2017.]

Additional financial information concerning our operations by segment and by geographic regions, as well as general corporate expense, net, as of and for the [removed: three years] [added: three-year period] ended December 31, [removed: 2016,] [added: 2017,] is set forth in Note [removed: P] [added: O] to the consolidated financial statements included in Item 8 of this Report.

| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Plumbing Products | $ | [removed: 3,526] [added: 3,735] | | | $ | [removed: 3,341] [added: 3,526] | | | $ | [removed: 3,308] [added: 3,341] | |

| Decorative Architectural Products | [removed: 2,092] [added: 2,205] | | | | [removed: 2,020] [added: 2,092] | | | | [removed: 1,998] [added: 2,020] | | |

| Cabinetry Products | [removed: 970] [added: 934] | | | | [removed: 1,025] [added: 970] | | | | [removed: 999] [added: 1,025] | | |

| Windows and Other Specialty Products | [removed: 769] [added: 770] | | | | [removed: 756] [added: 769] | | | | [removed: 701] [added: 756] | | |

| Total | $ | [removed: 7,357] [added: 7,644] | | | $ | [removed: 7,142] [added: 7,357] | | | $ | [removed: 7,006] [added: 7,142] | |

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

| Plumbing Products | $ | [removed: 642] [added: 698] | | | $ | [removed: 512] [added: 642] | | | $ | 512 | |

| Decorative Architectural Products | [removed: 430] [added: 434] | | | | [removed: 403] [added: 430] | | | | [removed: 360] [added: 403] | | |

| Cabinetry Products | [removed: 93] [added: 90] | | | | [removed: 51] [added: 93] | | | | [removed: (62] [added: 51] | | [removed: )] |

| Windows and Other Specialty Products | [removed: (3] [added: 52] | | [removed: )] | | [removed: 57] [added: (3] | | [added: )] | | [removed: 47] [added: 57] | | |

| Total | $ | [removed: 1,162] [added: 1,274] | | | $ | [removed: 1,023] [added: 1,162] | | | $ | [removed: 857] [added: 1,023] | |

| (2) | Operating profit (loss) is before general corporate expense, net. [added: Refer to Note O to the consolidated financial statements for additional information.] |

| • | The majority of our faucet, [added: sink,] bathing and showering products are sold in North America and Europe under the brand names DELTA®, BRIZO®, PEERLESS®, HANSGROHE®, AXOR®, GINGER®, NEWPORT BRASS®, BRASSTECH® and WALTEC®. Our BRISTAN™ and HERITAGE™ products are sold primarily in the United Kingdom. These plumbing products include faucets, showerheads, handheld showers, valves, [added: bath hardware and accessories,] bathing units, shower enclosures and [removed: toilets and are sold] [added: toilets. We sell these products] to home center [added: and online] retailers and to wholesalers and distributors that, in turn, sell them to plumbers, building contractors, remodelers, smaller retailers and consumers. |

| • | [removed: Our] [added: We manufacture] acrylic tubs, bath and shower enclosure [removed: units] [added: units,] and shower [removed: trays are manufactured and sold under the] [added: trays. Our] DELTA, [removed: PEERLESS,] [added: PEERLESS] and MIROLIN® [removed: brand names. These] products are sold primarily to home center [removed: retailers.] [added: retailers in North America.] Our MIROLIN products are also sold to wholesalers and distributors in Canada. Our HÜPPE® shower enclosures [added: and shower trays] are sold through wholesale channels [added: primarily] in [removed: Europe and China.] [added: Europe.] |

| • | Our spas and exercise pools and systems are manufactured and sold under [added: our] HOT SPRING®, CALDERA®, FREEFLOW SPAS®, FANTASY [removed: SPAS®,] [added: SPAS® and] ENDLESS POOLS® [removed: and] [added: brands, as well as under] other trademarks. Our spa products [added: and exercise pools] are sold [added: worldwide] to independent specialty retailers [removed: or] [added: and distributors and to] online mass merchant retailers. [removed: Our] [added: Certain] exercise pools are [added: also] available on a consumer-direct [removed: basis,] [added: basis in North America and Europe,] while our fitness systems are sold through independent specialty retailers as well as on a consumer-direct basis. |

| • | Also included in our Plumbing Products segment are [removed: brass and] [added: brass,] copper [added: and composite] plumbing system components and other non-decorative plumbing [removed: products, which] [added: products that] are sold to plumbing, heating and hardware wholesalers, home center [added: and e-commerce] retailers, hardware stores, building supply outlets and other mass merchandisers. These products are marketed [added: primarily] in North [removed: and South] America under our BRASSCRAFT®, PLUMB SHOP®, COBRA®, [added: COBRA PRO™,] and MASTER PLUMBER® [removed: trademarks,] [added: brands] and are also sold under private label. |

[removed: Our major competitors] [added: Competitors] of [added: the majority of] our [removed: other] products in this segment include Lixil Group Corporation’s American Standard Brands and Grohe products, Kohler Co., Fortune Brands Home & Security Inc.'s [removed: Moen] [added: Moen, Rohl and Riobel] brands and Spectrum Brands Holdings, LLC’s Pfister faucets.

The businesses in [removed: our Plumbing]

[added: our Plumbing] Products segment manufacture products in North America, Europe and Asia and source products from Asia and other regions.

Competition for our plumbing products is based largely on [removed: customer service, product quality,] [added: brand reputation,] product features and [removed: innovation and] [added: innovation, product quality, customer service,] breadth of product [removed: offering.][added: offering and price.]

To help reduce the impact of this volatility, from time to time we may enter into long-term agreements with certain significant suppliers [removed: or] [added: or, occasionally,] use derivative instruments.

These products are sold in North America, South America and China under the brand names BEHR®, KILZ® and other [removed: sub-brands] [added: trademarks] to “do‑it‑yourself” and professional customers through home center retailers and other retailers.

Net sales of architectural coatings comprised approximately 25 percent of our consolidated net sales in [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014.][added: 2015.]

Our BEHR products are sold through The Home Depot, our largest customer [removed: and] [added: overall, as well as] this segment’s largest customer.

Our competitors [added: in this segment] include large national and international brands such as Benjamin Moore, Glidden, Olympic, PPG, Sherwin‑Williams, Valspar and Zinsser, as well as many regional and other national brands.

[removed: In addition to price, we] [added: We] believe that brand reputation is an important factor in consumer selection, and that competition in this industry is [added: also] based largely on product [removed: quality,] features and innovation, [removed: and] [added: product quality,] customer [removed: service.][added: service and price.]

[removed: To help assure continued availability of the major raw materials used in this segment we] [added: We] have [removed: entered into] agreements with certain significant [removed: suppliers.][added: suppliers for this segment that are intended to help assure continued supply.]

Our Decorative Architectural Products segment also includes branded [removed: cabinet] [added: cabinet, door and window] hardware, functional hardware, [added: glass shower doors,] wall plates, hook and rail products, and picture hanging accessories, which are manufactured for us and sold to home center retailers, mass retailers, [added: e-commerce retailers,] other specialty retailers, original equipment manufacturers and wholesalers.

These products are sold under the LIBERTY®, BRAINERD® and other trademarks, and [removed: the] [added: our] key competitors in North America include Amerock, Top Knobs, Richelieu and private label brands.

During 2017, we acquired a U.S. plastics processor and manufacturer of water handling systems in our Plumbing Products segment and signed a definitive agreement to acquire The L.D. Kichler Co., a leader in decorative residential and light commercial lighting products, ceiling fans and LED lighting systems, which is expected to close in the first quarter of 2018.

We also divested our U.S. fastener and tool business and our U.K. manufacturer of kitchen and bathroom furniture business.

| | 2017 | | | | 2016 | | | | 2015 | | |

___________________________________

In the fourth quarter of 2017, we acquired Mercury Plastics, Inc. ("Mercury"), a U.S. plastics processor and manufacturer of water handling systems.

This acquisition enhances our ability to develop faucet technology and provides continuity of supply of quality faucet components.

Titanium dioxide is a major ingredient in the manufacture of architectural coatings.

The price for titanium dioxide can fluctuate as a result of global supply and demand dynamics and production capacity limitations, which can have a material impact on our costs and results of operations in this segment.

Natural gas derivatives and acrylic resins derived from crude oil are also used in the manufacture of architectural coatings.

Significant price fluctuations in either natural gas derivatives or crude oil can also impact our costs in this segment.

Some of the materials we import may be subject to customs duties.

In the fourth quarter of 2017, we divested Moores Furniture Group Limited ("Moores"), a manufacturer of kitchen and bathroom furniture in the United Kingdom.

The raw materials used in this segment are available from multiple sources.

In the second quarter of 2017, we divested Arrow Fastener Co., LLC ("Arrow"), a manufacturer and distributor of fastening tools.

Our reports filed with the SEC also may be found on the SEC’s website at www.sec.gov.

____________________________________

| | |

| --- | --- |

| (3) | Operating profit (loss) is before income of $9 million regarding the 2014 litigation settlement in the Decorative Architectural Products segment. |

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

Fluctuations in raw material costs can have a material impact on this segment’s results of operations.

Significant increases in the cost of crude oil and natural gas, both of which are used to produce the acrylic resins we purchase for our architectural coatings, can adversely affect our costs.

The prices of titanium dioxide used in architectural coatings as well as acrylic resins can fluctuate based on global supply and demand dynamics and production capacity limitations.

In the United Kingdom, we manufacture and sell kitchen, bath and storage cabinetry.

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

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.

We sell these products primarily in North America under the brand names ARROW®, POWERSHOT® and EASYSHOT® to professional contractors and do‑it‑yourself consumers through various distribution channels, including home center and other retailers and wholesalers.

Our principal North American competitor in this product line is Stanley Black & Decker.

The raw materials used in this segment have been available from multiple sources, although our U.S. window business has, at times, experienced allocation of glass from its suppliers.

We are subject to U.S. and foreign government regulations, particularly those pertaining to health and safety (including protection of employees and consumers), climate change and environmental issues.

the protection of the environment and worker health and safety, will result in material capital expenditures or have a material adverse effect on our competitive position or results of operations and financial position.

Information regarding legal proceedings involving us is set forth in Note [removed: U] [added: S] to the consolidated financial statements included in Item 8 of this Report and is incorporated herein by reference.

For the Fiscal Year Ended December 31, [removed: 2016] [added: 2017] Commission File Number 1-5794

Securities Registered Pursuant to Section 12(g) of the Act: [added: None]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [removed: o]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or] a smaller reporting [added: company, or emerging growth] company.

See the definitions of [removed: "large] [added: “large] accelerated [removed: filer," "accelerated filer" and "smaller] [added: filer,” “accelerated filer,” “smaller] reporting [added: company,”and "emerging growth] company" in Rule 12b-2 of the Exchange Act.

| [removed: Large accelerated filer þ | | Accelerated filer o | |] Non-accelerated filer o [removed: (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: 2016] [added: 2017] (based on the closing sale price of [removed: $30.94] [added: $38.21] of the Registrant's Common Stock, as reported by the New York Stock Exchange on such date) was approximately [removed: $10,158,793,000.][added: $12,100,656,000.]

Number of shares outstanding of the Registrant's Common Stock at January 31, [removed: 2017:][added: 2018:]

[removed: 320,320,300] [added: 313,391,500] shares of Common Stock, par value $1.00 per share

Portions of the Registrant's definitive Proxy Statement to be filed for its [removed: 2017] [added: 2018] Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

[removed: 2016] [added: 2017] Annual Report on Form 10-K

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| [removed: [10.](#s1310C9F19410F4FA1FBD3020B91208F5)] [added: [10.](#s8C2555572EEA521A95BFFEB982B5FB18)] | | [Directors, Executive Officers and Corporate [removed: Governance](#s1310C9F19410F4FA1FBD3020B91208F5)] [added: Governance](#s8C2555572EEA521A95BFFEB982B5FB18)] | | [removed: [76](#s1310C9F19410F4FA1FBD3020B91208F5)] [added: [76](#s8C2555572EEA521A95BFFEB982B5FB18)] |

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| [removed: [12.](#sE427E740E9F543C479BC3020B9693F79)] [added: [12.](#sAA5A84A485D55DB7999877F6DE404735)] | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#sE427E740E9F543C479BC3020B9693F79)] [added: Matters](#sAA5A84A485D55DB7999877F6DE404735)] | | [removed: [76](#sE427E740E9F543C479BC3020B9693F79)] [added: [76](#sAA5A84A485D55DB7999877F6DE404735)] |

| [removed: [13.](#s7409970308DFBA2107E33020B98B9961)] [added: [13.](#s9109F49405075B02BE7CDCAA7CD490C9)] | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s7409970308DFBA2107E33020B98B9961)] [added: Independence](#s9109F49405075B02BE7CDCAA7CD490C9)] | | [removed: [76](#s7409970308DFBA2107E33020B98B9961)] [added: [76](#s9109F49405075B02BE7CDCAA7CD490C9)] |

| [removed: [14.](#s1E1F9E3F68CD817CC67C3020B9B668E1)] [added: [14.](#sF433005FB29F50FC97C88286D5A76273)] | | [Principal Accountant Fees and [removed: Services](#s1E1F9E3F68CD817CC67C3020B9B668E1)] [added: Services](#sF433005FB29F50FC97C88286D5A76273)] | | [removed: [76](#s1E1F9E3F68CD817CC67C3020B9B668E1)] [added: [76](#sF433005FB29F50FC97C88286D5A76273)] |

| [removed: [15.](#s3D4A083BB9F197E812603020BA0AC33D)] [added: [15.](#s65DF204714D25FB7A844116350F13FC6)] | | [Exhibits and Financial Statement [removed: Schedules](#s3D4A083BB9F197E812603020BA0AC33D)] [added: Schedules](#s65DF204714D25FB7A844116350F13FC6)] | | [removed: [77](#s3D4A083BB9F197E812603020BA0AC33D)] [added: [77](#s65DF204714D25FB7A844116350F13FC6)] |

| [removed: [16.](#s041a2ac14f644b70b2ccba2905924c5e)] [added: [16.](#s1A37830BF829561A924AC88636D9B8CF)] | | [Form 10-K [removed: Summary](#s041a2ac14f644b70b2ccba2905924c5e)] [added: Summary](#s1A37830BF829561A924AC88636D9B8CF)] | | [removed: [77](#s3D4A083BB9F197E812603020BA0AC33D)] [added: [80](#s1A37830BF829561A924AC88636D9B8CF)] |

10-K 1 mas_20171231x10k.htm 10-K

| 17450 College Parkway, Livonia, Michigan | | 48152 |

| | | |

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

| | | |

| Large accelerated filer x | | Accelerated filer o |

| (Do not check if a smaller reporting company) | | Emerging growth company o |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

| | | [PART I](#sA451A154B5345530AC656ADBD7768325) | | |

| [1.](#sF917BF6645DD5288963EF4231A6C6C77) | | [Business](#sF917BF6645DD5288963EF4231A6C6C77) | | [2](#sF917BF6645DD5288963EF4231A6C6C77) |

| [2.](#s44BAD1F74F2254908E0B51551A68AD9A) | | [Properties](#s44BAD1F74F2254908E0B51551A68AD9A) | | [12](#s44BAD1F74F2254908E0B51551A68AD9A) |

| | | [PART II](#sDD6FDC5E38A457768BA7BBC3103A0C29) | | |

| | | [PART IV](#sFD75F2D71E7D56099F6E4EDB3B4137EF) | | |

| | | [Signatures](#sC5BCA78295D85EEABBEFFEB071E24318) | | [81](#sC5BCA78295D85EEABBEFFEB071E24318) |

10-K 1 mas_20161231x10k.htm 10-K

| 21001 Van Born Road, Taylor, Michigan | | 48180 |

None

(Check one):

| | | | | | | |

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

| | | [PART I](#sBDA5743CD637A1C45F4F3020A91B1108) | | |

| [1.](#sF04E89B76999F1A2EA9B3020A2742E4B) | | [Business](#sF04E89B76999F1A2EA9B3020A2742E4B) | | [2](#sF04E89B76999F1A2EA9B3020A2742E4B) |

| [2.](#sA2F281FECFBD6FEA4FC33020A9C8084C) | | [Properties](#sA2F281FECFBD6FEA4FC33020A9C8084C) | | [12](#sA2F281FECFBD6FEA4FC33020A9C8084C) |

| | | [PART II](#sFB7A69388F39C81CFB6B3020AA45315E) | | |

| | | [PART IV](#s9EC19A58F2BAF010C89E3020B9D91634) | | |

| | | [Signatures](#s3D9C2CD552DBE79E4C043020BA31EC55) | | [78](#s3D9C2CD552DBE79E4C043020BA31EC55) |

| Plumbing Products | | [removed: 20] [added: 22] | | | [removed: 5] [added: 7] | |

| Cabinetry Products | | 8 | | | [removed: 8] [added: 4] | |

| Windows and Other Specialty Products | | [removed: 11] [added: 10] | | | [removed: 5] [added: 3] | |

| Totals | | [removed: 47] [added: 48] | | | [removed: 29] [added: 25] | |

We own most of our North American manufacturing facilities, none of which [removed: are] [added: is] subject to significant encumbrances.

| Plumbing Products | | 11 | | | [removed: 22] [added: 20] | |

| Cabinetry Products | | [removed: 1] [added: —] | | | [removed: 1] [added: —] | |

| Totals | | [removed: 21] [added: 20] | | | [removed: 23] [added: 20] | |

We own most of our international manufacturing facilities, none of which [removed: are] [added: is] subject to significant encumbrances.

We [removed: own an additional building near] [added: lease] our corporate headquarters [added: in Livonia, Michigan, and we own a building in Taylor, Michigan] that is used by our Masco Technical Services (research and development) department.

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 in 2017.

On January 31, [removed: 2017,] [added: 2018,] there were approximately [removed: 4,000] [added: 3,700] holders of record of our common stock.

In [removed: September 2014,] [added: May 2017,] our Board of Directors authorized the [removed: purchase] [added: repurchase, for retirement,] of up to [removed: 50 million shares, for retirement] [added: $1.5 billion] of [added: shares of] our common stock in open-market transactions or otherwise, replacing the previous [added: Board of Directors] authorization established in [removed: 2007.][added: 2014.]

The following table provides information regarding the repurchase of our common stock for the [removed: three months] [added: three-month period] ended December 31, [removed: 2016.][added: 2017.]

| Period | Total Number of Shares Purchased | | | Average Price Paid Per Common Share | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | Maximum [removed: Number] [added: Value] of Shares That May Yet Be Purchased Under the Plans or Programs | | [added: |]

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: 2011] [added: 2012] through December 31, [removed: 2016,] [added: 2017,] when the closing price of our common stock was [removed: $31.62.][added: $43.94.]

The graph assumes investments of $100 on December 31, [removed: 2011] [added: 2012] 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: 2011] [added: 2012] 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: 2012 | | | |] 2013 | | | | 2014 | | | | 2015 | | | | 2016 | | | [added: | 2017 | | |]

| 2017 | | | | | | | | | | | |

| Fourth | $ | 44.44 | | | $ | 38.34 | | | $ | 0.105 | |

| Third | 39.15 | | | | 36.08 | | | | 0.105 | | |

| Second | 39.37 | | | | 32.97 | | | | 0.100 | | |

| First | 34.92 | | | | 31.29 | | | | 0.100 | | |

| Total | | | | | | | | | $ | 0.410 | |

During 2017, we repurchased and retired 9.2 million shares of our common stock (including 0.9 million shares to offset the dilutive impact of long-term stock awards granted during the year), for approximately $331 million.

At December 31, 2017, we had approximately $1.3 billion remaining under the 2017 authorization.

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

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

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

| 10/1/17 - 10/31/17 (A) | 718,997 | | | — | | | | 718,997 | | | $ | 1,308,607,235 | |

| 11/1/17 - 11/30/17 | 487,316 | | | $ | 39.04 | | | 487,316 | | | $ | 1,289,581,762 | |

| 12/1/17 - 12/31/17 | — | | | — | | | | — | | | $ | 1,289,581,762 | |

| Total for the quarter | 1,206,313 | | | | | | | 1,206,313 | | | $ | 1,289,581,762 | |

| (A) | In August 2017, we entered into an accelerated stock repurchase transaction whereby we agreed to repurchase a total of $150 million of our common stock with an immediate delivery of 3.3 million shares. This transaction was completed in October 2017, at which time we received, at no additional cost, 0.7 million additional shares of our common stock resulting from changes in the volume weighted average stock price of our common stock over the term of the transaction. |

| Masco | $ | 138.48 | | | $ | 155.26 | | | $ | 200.79 | | | $ | 227.08 | | | $ | 318.46 | |

| S&P 500 Index | $ | 132.04 | | | $ | 149.89 | | | $ | 151.94 | | | $ | 169.82 | | | $ | 206.49 | |

| S&P Industrials Index | $ | 140.18 | | | $ | 153.73 | | | $ | 149.83 | | | $ | 177.65 | | | $ | 214.55 | |

| S&P Consumer Durables & Apparel Index | $ | 135.84 | | | $ | 148.31 | | | $ | 147.23 | | | $ | 138.82 | | | $ | 164.39 | |

| | |

| --- | --- |

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

| Fourth | $ | 30.61 | | | $ | 24.89 | | | $ | 0.095 | |

| Third | 28.59 | | | | 22.52 | | | | 0.095 | | |

| Second | 28.38 | | | | 25.47 | | | | 0.090 | | |

| First | 27.40 | | | | 23.23 | | | | 0.090 | | |

| Total | | | | | | | | | $ | 0.370 | |

During 2016, we repurchased and retired nearly 15 million shares of our common stock for cash aggregating $459 million.

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

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

| 10/1/16 - 10/31/16 | 3,633,200 | | | $ | 32.00 | | | 3,633,200 | | | 15,809,196 | |

| 11/1/16 - 11/30/16 | 2,335,200 | | | $ | 30.62 | | | 2,335,200 | | | 13,473,996 | |

| 12/1/16 - 12/31/16 | 604,318 | | | $ | 30.79 | | | 604,318 | | | 12,869,678 | |

| Total for the quarter | 6,572,718 | | | | | | | 6,572,718 | | | 12,869,678 | |

| Masco | $ | 161.83 | | | $ | 224.10 | | | $ | 251.26 | | | $ | 324.95 | | | $ | 367.49 | |

| S&P 500 Index | $ | 115.88 | | | $ | 153.01 | | | $ | 173.69 | | | $ | 176.07 | | | $ | 196.78 | |

| S&P Industrials Index | $ | 115.17 | | | $ | 161.45 | | | $ | 177.05 | | | $ | 172.56 | | | $ | 204.60 | |

| S&P Consumer Durables & Apparel Index | $ | 121.50 | | | $ | 165.04 | | | $ | 180.20 | | | $ | 178.88 | | | $ | 168.67 | |

| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| Net Sales (1) | $ | [removed: 7,357] [added: 7,644] | | | $ | [removed: 7,142] [added: 7,357] | | | $ | [removed: 7,006] [added: 7,142] | | | $ | [removed: 6,761] [added: 7,006] | | | $ | [removed: 6,286] [added: 6,761] | |

| Operating profit [removed: (1)(3)] [added: (1)] | [removed: 1,053] [added: 1,169] | | | | [removed: 914] [added: 1,053] | | | | [removed: 721] [added: 914] | | | | [removed: 612] [added: 721] | | | | [removed: 384] [added: 612] | | |

| Income from continuing operations attributable to Masco Corporation [removed: (1)(2)(3)] [added: (1)(2)] | [removed: 491] [added: 533] | | | | [removed: 357] [added: 491] | | | | [removed: 821] [added: 357] | | | | [removed: 259] [added: 821] | | | | [removed: 54] [added: 259] | | |

| Basic | $ | [removed: 1.49] [added: 1.68] | | | $ | [removed: 1.04] [added: 1.49] | | | $ | [removed: 2.31] [added: 1.04] | | | $ | [removed: 0.72] [added: 2.31] | | | $ | [removed: 0.15] [added: 0.72] | |

| Diluted | [removed: 1.47] [added: 1.66] | | | | [removed: 1.03] [added: 1.47] | | | | [removed: 2.28] [added: 1.03] | | | | [removed: 0.72] [added: 2.28] | | | | [removed: 0.15] [added: 0.72] | | |

| Dividends declared | [removed: 0.390] [added: 0.410] | | | | [removed: 0.370] [added: 0.390] | | | | [removed: 0.345] [added: 0.370] | | | | [removed: 0.300] [added: 0.345] | | | | 0.300 | | |

| Dividends paid | [removed: 0.385] [added: 0.405] | | | | [removed: 0.365] [added: 0.385] | | | | [removed: 0.330] [added: 0.365] | | | | [removed: 0.300] [added: 0.330] | | | | 0.300 | | |

| Total assets [removed: (4)] [added: (3)] | $ | [removed: 5,137] [added: 5,488] | | | $ | [removed: 5,664] [added: 5,137] | | | $ | [removed: 7,208] [added: 5,664] | | | $ | [removed: 6,885] [added: 7,208] | | | $ | [removed: 6,842] [added: 6,885] | |

| Long-term debt [removed: (4)] [added: (3)] | [removed: 2,995] [added: 2,969] | | | | [removed: 2,403] [added: 2,995] | | | | [removed: 2,919] [added: 2,403] | | | | [removed: 3,421] [added: 2,919] | | | | [removed: 3,422] [added: 3,421] | | |

| Shareholders' [removed: (deficit)] equity [removed: (5)] [added: (deficit) (4)] | [added: 176 | | | |] (103 | | ) | | 58 | | | | 1,128 | | | | 787 | | | [removed: | 542 | | |]

| (2) | The year 2014 includes a $529 million tax benefit from the release of the valuation allowance on deferred tax assets. [removed: Refer to Note S to the consolidated financial statements for additional information.] |

| [removed: (4)] [added: (3)] | Total assets and long-term debt for the years [removed: 2012-2014] [added: 2013 and 2014] have not been recasted for the impact of the adoption of Accounting Standards Update [removed: 2015-03,] [added: 2015‑03 “Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs,”] as amended by Accounting Standards Update 2015-15, which required the reclassification of certain debt issuance costs from an asset to a liability. [removed: Refer to Note A to the consolidated financial statements for additional information.] |

| [removed: (5)] [added: (4)] | The decrease in shareholder's [removed: (deficit)] equity [added: (deficit)] from 2014 to 2015 relates primarily to the spin off of [removed: TopBuild.] [added: TopBuild Corp.] |

| | |

| --- | --- |

| (3) | The year 2012 includes non-cash impairment charges for other intangible assets aggregating $27 million after tax ($42 million pre-tax). |

The management of Masco Corporation assessed the effectiveness of the Company's internal control over financial reporting as of December 31, [removed: 2016] [added: 2017] 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: 2016.][added: 2017.]

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: 2016.][added: 2017.]

Their report expressed an unqualified opinion on the effectiveness of Masco Corporation's internal control over financial reporting as of December 31, [removed: 2016] [added: 2017] and expressed an unqualified opinion on the Company's [removed: 2016] [added: 2017] consolidated financial statements.

In our opinion, the consolidated financial statements [removed: listed in the index appearing under Item 15(a) (1)] [added: referred to above] present fairly, in all material respects, the financial position of [removed: Masco Corporation and its subsidiaries at] [added: the Company as of] December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the results of their operations and their cash flows for each of the three years in the period ended December 31, [removed: 2016] [added: 2017] 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: 2016,] [added: 2017,] based on criteria established in Internal [removed: Control – Integrated] [added: Control-Integrated] Framework (2013) issued by the [removed: Committee of Sponsoring Organizations of the Treadway Commission (COSO).][added: COSO.]

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

Our responsibility is to express opinions on [removed: these financial statements, on] the [added: Company’s consolidated] financial [removed: statement schedule,] [added: statements] and on the Company's internal control over financial reporting based on our [removed: integrated] audits.

We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the [added: consolidated] financial statements are free of material [removed: misstatement] [added: misstatement, whether due to error or fraud,] and whether effective internal control over financial reporting was maintained in all material respects.

Our audits [removed: of the financial statements] [added: also] included [removed: examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing] [added: evaluating] the accounting principles used and significant estimates made by management, [removed: and] [added: as well as] evaluating the overall [added: presentation of the consolidated] financial [removed: statement presentation.][added: statements.]

A [removed: company's] [added: company’s] internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding [removed: prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.]

[removed: at] December 31, [removed: 2016] [added: 2017] and [removed: 2015][added: 2016]

[removed: | |] (In Millions, Except Share Data) [removed: | | | | | | |]

| | [added: 2017 | | | |] 2016 | | | | 2015 | | |

| Cash and cash investments | $ | [removed: 990] [added: 1,194] | | | $ | [removed: 1,468] [added: 990] | |

| Short-term bank deposits | [removed: 201] [added: 108] | | | | [removed: 248] [added: 201] | | |

| Receivables | [removed: 917] [added: 1,021] | | | | [removed: 853] [added: 917] | | |

| Inventories | [removed: 712] [added: 796] | | | | [removed: 687] [added: 712] | | |

| Prepaid expenses and other | [removed: 114] [added: 96] | | | | [removed: 72] [added: 114] | | |

| Total current assets | [removed: 2,934] [added: 3,215] | | | | [removed: 3,328] [added: 2,934] | | |

| Property and equipment, net | [removed: 1,060] [added: 1,129] | | | | [removed: 1,027] [added: 1,060] | | |

| Goodwill | [removed: 832] [added: 841] | | | | [removed: 839] [added: 832] | | |

| Other intangible assets, net | [removed: 154] [added: 187] | | | | [removed: 160] [added: 154] | | |

| Other assets | [removed: 157] [added: 116] | | | | [removed: 310] [added: 157] | | |

| Total [removed: Assets] [added: assets] | [added: | | | | | | | | | | | | | | | | | | | | | | | |] $ | [added: 5,488 | | | $ |] 5,137 | | | $ | 5,664 | |

| [removed: LIABILITIES] [added: Total liabilities] and [removed: EQUITY] [added: equity] | [added: $] | [added: 5,488] | | | [added: $] | [added: 5,137] | |

| Accounts payable | $ | [removed: 800] [added: 824] | | | $ | [removed: 749] [added: 800] | |

| Notes payable | [removed: 2] [added: 116] | | | | [removed: 1,004] [added: 2] | | |

| Accrued liabilities | [removed: 658] [added: 688] | | | | [removed: 650] [added: 658] | | |

| Total current liabilities | [removed: 1,460] [added: 1,628] | | | | [removed: 2,403] [added: 1,460] | | |

| Long-term debt | [removed: 2,995] [added: 2,969] | | | | [removed: 2,403] [added: 2,995] | | |

| Other liabilities | [removed: 785] [added: 715] | | | | [removed: 800] [added: 785] | | |

| Total [removed: Liabilities] [added: liabilities] | [removed: 5,240] [added: 5,312] | | | | [removed: 5,606] [added: 5,240] | | |

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

| [removed: Equity:] [added: EQUITY] | | | | | | | |

| Masco Corporation's shareholders' [removed: equity] [added: equity:] Common [removed: shares authorized:] [added: shares, par value $1 per share Authorized shares:] 1,400,000,000; [removed: issued] [added: Issued] and outstanding: [removed: 2016] [added: 2017] – [removed: 318,000,000; 2015] [added: 310,400,000; 2016] – [removed: 330,500,000] [added: 318,000,000] | [removed: 318] [added: 310] | | | | [removed: 330] [added: 318] | | |

| Preferred shares authorized: 1,000,000; [removed: issued] [added: Issued] and outstanding: [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] – None | — | | | | — | | |

| Retained deficit | [removed: (381] [added: (305] | | ) | | [removed: (300] [added: (381] | | ) |

| Accumulated other comprehensive loss | [removed: (235] [added: (65] | | ) | | [removed: (165] [added: (235] | | ) |

| Total Masco Corporation's shareholders' deficit | [removed: (298] [added: (60] | | ) | | [removed: (135] [added: (298] | | ) |

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Masco Corporation and its subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income (loss), cash flows, and shareholders’ equity for each of the three years in the period ended December 31, 2017, including the related notes and the financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Basis for Opinions

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Definition and Limitations of Internal Control over Financial Reporting

prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

PricewaterhouseCoopers LLP

February 8, 2018

We have served as the Company’s auditor since 1959.

| LIABILITIES | | | | | | | |

| Loss from discontinued operations, net | — | | | | — | | | | (0.01 | | ) |

| Less: Net income attributable to noncontrolling interest | 47 | | | | 43 | | | | 39 | | |

| Net income attributable to Masco Corporation | $ | 533 | | | $ | 491 | | | $ | 355 | |

| | 29 | | | | (10 | | ) | | (14 | | ) |

For the Years Ended December 31, 2017, 2016 and 2015

(In Millions)

| Net income | $ | 580 | | | $ | 534 | | | $ | 394 | |

| Employee withholding taxes paid on stock-based compensation | 33 | | | | 40 | | | | 36 | | |

| Loss on disposition of businesses, net | 13 | | | | — | | | | — | | |

| Debt extinguishment costs | (104 | | ) | | (40 | | ) | | — | | |

| Employee withholding taxes paid on stock-based compensation | (33 | | ) | | (40 | | ) | | (36 | | ) |

| Businesses, net of cash disposed | 128 | | | | — | | | | — | | |

For the Years Ended December 31, 2017, 2016 and 2015

| Total comprehensive income | 779 | | | | | | | | | | | | 533 | | | | 170 | | | | 76 | | |

| Repurchased | (331 | | ) | | (9 | | ) | | (8 | | ) | | (314 | | ) | | | | | | | | |

| Balance, December 31, 2017 | $ | 176 | | | $ | 310 | | | $ | — | | | $ | (305 | ) | | $ | (65 | ) | | $ | 236 | |

We recognize forfeitures related to stock awards and stock options as they occur.

Accounting for Global Intangible Low-taxed Income ("GILTI").

We record the tax effects of GILTI related to our foreign operations as a component of income tax expense (benefit) in the period the tax arises.

In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory," which requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value, as opposed to the lower of cost or market.

We adopted ASU 2016-09 on January 1, 2017, using the retrospective options for reclassifying excess tax benefit from stock-based compensation and employee withholding taxes paid on stock-based compensation within our statements of cash flows.

The adoption of the remaining requirements did not have an impact on our financial position or results of operations.

Subsequent to adoption, tax effects related to employee share-based payments were recorded to income tax expense, thus increasing the volatility in our effective tax rate.

In January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business," which narrows the definition of what constitutes a business for acquisition and divestiture purposes.

We early adopted ASU 2017-01 effective October 1, 2017.

The adoption of the new standard did not have an impact on our financial position or results of operations.

We early adopted ASU 2017-04 effective January 1, 2017.

In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

February 9, 2017

| | | | | | | | |

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

| Total Liabilities and Equity | $ | 5,137 | | | $ | 5,664 | |

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

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

| Income from litigation settlements | — | | | | — | | | | (9 | | ) |

| Impairment charge for other intangible assets | — | | | | — | | | | 1 | | |

| | (10 | | ) | | (14 | | ) | | (37 | | ) |

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

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

| Balance, January 1, 2014 | $ | 787 | | | $ | 349 | | | $ | 16 | | | $ | 79 | | | $ | 115 | | | $ | 228 | |

| Total comprehensive income (loss) | 640 | | | | | | | | | | | | 856 | | | | (226 | | ) | | 10 | | |

| Repurchased | (158 | | ) | | (7 | | ) | | (28 | | ) | | (123 | | ) | | | | | | | | |

MASCO CORPORATION

During downturns in our markets, declines in the financial condition and creditworthiness of customers impacts the credit risk of the receivables involved and we have incurred additional bad debt expense related to customer defaults.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

If the carrying amount of a reporting unit exceeds its fair value, we measure the possible goodwill impairment based upon an allocation of the estimate of fair value of the reporting unit to all of the underlying assets and liabilities of the reporting unit, including any previously unrecognized intangible assets (Step Two Analysis).

The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill.

We follow accounting guidance for our financial investments and liabilities, which defines fair value, establishes a framework for measuring fair value and prescribes disclosures about fair value measurements.

We also follow this guidance for our non-financial investments and liabilities.

The fair value of financial investments and liabilities is determined at each balance sheet date and future declines in market conditions, the future performance of the underlying investments or new information could affect the recorded values of our investments in available-for-sale securities, private equity funds and other investments.

We utilize the shortcut method to determine the tax windfall pool associated with stock options.

Revision of Previously Issued Financial Statements.

We have revised the previously reported balances on our consolidated balance sheet as of December 31, 2015 to correct the classification for warranty claims not expected to be settled within the next year.

Accrued liabilities decreased and other liabilities increased from the amounts previously reported by $102 million.

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

This revision is not considered material to our prior period financial statements.

In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-02 (“ASU 2015-02”) “Consolidation (Topic 810) — Amendments to the Consolidations Analysis,” which modifies certain aspects of both the variable interest entities and voting interest entities models.

In April 2015, the FASB issued Accounting Standards Update 2015‑03 (“ASU 2015-03”) “Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs,” which requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt.

In August 2015, the FASB issued ASU 2015-15 to clarify that debt issuance costs related to line-of-credit arrangements may remain classified as an asset.

We retrospectively adopted both ASU 2015-03 and ASU 2015-15 on January 1, 2016.

As a result of the retrospective adoption of the standards, we reclassified $15 million of debt issuance costs from other assets to long-term debt, and $1 million of debt issuance costs from other assets to notes payable, as of December 31, 2015.

In May 2015, the FASB issued Accounting Standards Update 2015-07 (“ASU 2015-07”), “Fair Value Measurement (Topic 820) Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent),” in which investments measured at fair value using the net asset value ("NAV") per share method (or its equivalent) as a practical expedient are removed from the fair value hierarchy and are separately presented to permit reconciliation of total pension plan assets.

We retrospectively adopted ASU 2015-07 on December 31, 2016.

As a result of the adoption, we have removed from the fair value hierarchies (in Note M) the defined-benefit pension plan assets valued using the NAV per share method (or its equivalent) as a practical expedient as of December 31, 2016 and 2015.

We have separately presented the value of these assets to permit reconciliation to total pension assets.

In August 2016, the FASB issued Accounting Standards Update 2016-15 (“ASU 2016-15”), “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments,” which is intended to reduce diversity in practice as to how certain transactions are classified in the statement of cash flows.

We retrospectively adopted this guidance on December 31, 2016.

The Company's [removed: principal executive officer] [added: Principal Executive Officer] and [removed: principal financial officer] [added: Principal Financial Officer] have concluded, based on an evaluation of the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15 that, as of December 31, [removed: 2016,] [added: 2017,] 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: 2016,] [added: 2017,] 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 second quarter of 2018, we will implement a new Enterprise Resource Planning (“ERP”) system at Delta Faucet Company ("Delta").

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 internal controls at Delta.

Other information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2017] [added: 2018] Annual Meeting of Stockholders, to be filed on or before May 1, [removed: 2017,] [added: 2018,] and such information is incorporated herein by reference.

Information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2017] [added: 2018] Annual Meeting of Stockholders, to be filed on or before May 1, [removed: 2017] [added: 2018] and such information is incorporated herein by reference.

The following table sets forth information as of December 31, [removed: 2016] [added: 2017] concerning the 2014 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: 2017] [added: 2018] Annual Meeting of Stockholders, to be filed on or before May 1, [removed: 2017,] [added: 2018,] and such information is incorporated herein by reference.

| Equity compensation plans approved by stockholders | 5,275,505 | | | $ | 16.10 | | | 15,389,166 | |

| Equity compensation plans approved by stockholders | 7,024,915 | | | $ | 14.85 | | | 16,333,266 | |

Information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2017] [added: 2018] Annual Meeting of Stockholders, to be filed on or before May 1, [removed: 2017,] [added: 2018,] and such information is incorporated herein by reference.

Information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2017] [added: 2018] Annual Meeting of Stockholders, to be filed on or before May 1, [removed: 2017,] [added: 2018,] and such information is incorporated herein by reference.

| (1) | Financial Statements. Our consolidated financial statements included in Item 8 hereof, as required at December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014,] [added: 2015,] consist of the following: |

| [Consolidated Balance [removed: Sheets](#s656A00392445F4F84F6B3020985D5419)] [added: Sheets](#sDC02C7AE3947533088FFB0675B2F8FD7)] | [removed: [37](#s656A00392445F4F84F6B3020985D5419)] [added: [38](#sDC02C7AE3947533088FFB0675B2F8FD7)] |

| [Consolidated Statements of [removed: Operations](#s91B4C71BA9A185864FA630209884D0E1)] [added: Operations](#s4D910CBCB77C58C48C3EB34EB00AB2EA)] | [removed: [38](#s91B4C71BA9A185864FA630209884D0E1)] [added: [39](#s4D910CBCB77C58C48C3EB34EB00AB2EA)] |

| [Consolidated Statements of Comprehensive Income [removed: (Loss)](#s36B739E0981F2DB02526302098B1B25A)] [added: (Loss)](#s95075B0941D15987BBB0F194558CBC1B)] | [removed: [39](#s36B739E0981F2DB02526302098B1B25A)] [added: [40](#s95075B0941D15987BBB0F194558CBC1B)] |

| [Consolidated Statements of Cash [removed: Flows](#s965FF9F8DB1DE75A07A7302098C7FB5D)] [added: Flows](#s20FC209F2EB154C49F9559193A358289)] | [removed: [40](#s965FF9F8DB1DE75A07A7302098C7FB5D)] [added: [41](#s20FC209F2EB154C49F9559193A358289)] |

| [Consolidated Statements of Shareholders' [removed: Equity](#s0C0D8FEAB8F041EADC8A3020993F1D0F)] [added: Equity](#s71B44C8F3DB259EDBC58B21506590096)] | [removed: [41](#s0C0D8FEAB8F041EADC8A3020993F1D0F)] [added: [42](#s71B44C8F3DB259EDBC58B21506590096)] |

| [Notes to Consolidated Financial [removed: Statements](#s22D9E1AC8DCE512DF1863020AFADC5A2)] [added: Statements](#sCF3971EB505853F7A0EBAC9474D3CC2D)] | [removed: [42](#s22D9E1AC8DCE512DF1863020AFADC5A2)] [added: [43](#sCF3971EB505853F7A0EBAC9474D3CC2D)] |

Our Financial Statement Schedule appended hereto, as required for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014,] [added: 2015,] consists of the following:

[added: | [II.] Valuation and Qualifying [removed: Accounts][added: Accounts](#sA7E96B6A3346556EAF94B1E1B470950A) | [83](#sA7E96B6A3346556EAF94B1E1B470950A) |]

| | |

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

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

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

| Exhibit No. | | | | | | Incorporated By Reference | | | | | | Filed Herewith |

| | Exhibit Description | | | | Form | | Exhibit | | Filing Date | | | |

| [2](http://www.sec.gov/Archives/edgar/data/62996/000110465915049824/a15-15043_1ex2d1.htm) | | Separation and Distribution Agreement dated June 29, 2015.1 | | | | 8-K | | 2.1 | | 07/06/2015 | | |

| [3.a](http://www.sec.gov/Archives/edgar/data/62996/000104746916010135/a2227221zex-3_i.htm) | | Restated Certificate of Incorporation of Masco Corporation. | | | | 2015 10-K | | 3.i | | 02/12/2016 | | |

| [3.b](http://www.sec.gov/Archives/edgar/data/62996/000006299617000008/exhibit3b.htm) | | Bylaws of Masco Corporation, as Amended and Restated May 8, 2012. | | | | 2016 10-K | | 3.b | | 02/09/2017 | | |

| [4.a](http://www.sec.gov/Archives/edgar/data/62996/000006299617000008/exhibit4a.htm) | | Indenture dated as of December 1, 1982 between Masco Corporation and The Bank of New York Mellon Trust Company, N.A., as successor trustee under agreement originally with Morgan Guaranty Trust Company of New York, as Trustee, and Supplemental Indenture thereto dated as of July 26, 1994; and Directors' resolutions establishing Masco Corporation's: | | | | 2016 10-K | | 4.a | | 02/09/2017 | | |

| [4.a.i](http://www.sec.gov/Archives/edgar/data/62996/000104746914000923/a2218121zex-4_aii.htm) | | | | 6.625% Debentures Due April 15, 2018; and | | 2013 10-K | | 4.a.i(i) | | 02/14/2014 | | |

| [4.a.ii](http://www.sec.gov/Archives/edgar/data/62996/000104746915000803/a2222936zex-4_aiii.htm) | | | | 7-3/4% Debentures Due August 1, 2029. | | 2014 10-K | | 4.a.i(ii) | | 02/13/2015 | | |

| | |

| --- | --- |

| 1 | The schedules to this agreement are omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to supplementally furnish to the Securities and Exchange Commission, upon request, a copy of any omitted schedule. |

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

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

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

| Exhibit No. | | | | | | | Incorporated By Reference | | | | | | Filed Herewith |

| | Exhibit Description | | | | | Form | | Exhibit | | Filing Date | | | |

| [4.b](http://www.sec.gov/Archives/edgar/data/62996/000006299617000008/exhibit4b.htm) | | Indenture dated as of February 12, 2001 between Masco Corporation and The Bank of New York Mellon Trust Company, N.A., as successor trustee under agreement originally with Bank One Trust Company, National Association, as Trustee, and Supplemental Indenture thereto dated as of November 30, 2006; and Directors' Resolutions establishing Masco Corporation's: | | | | | 2016 10-K | | 4.b | | 02/09/2017 | | |

| [4.b.i](https://www.sec.gov/Archives/edgar/data/62996/000006299618000015/exhibit4bi.htm) | | | | 6-1/2% Notes Due August 15, 2032; | | | | | | | | | X |

| [4.b.ii](http://www.sec.gov/Archives/edgar/data/62996/000104746916010135/a2227221zex-4_biiv.htm) | | | | 7.125% Notes Due March 15, 2020; | | | 2015 10-K | | 4.b.i(iv) | | 02/12/2016 | | |

| [4.b.iii](http://www.sec.gov/Archives/edgar/data/62996/000006299617000008/exhibit4biii.htm) | | | | 5.950% Notes Due March 15, 2022; | | | 2016 10-K | | 4.b(iii) | | 02/09/2017 | | |

| [4.b.iv](http://www.sec.gov/Archives/edgar/data/62996/000119312515101336/d897462dex41.htm) | | | | 4.450% Notes Due April 1, 2025; | | | 8-K | | 4.1 | | 03/23/2015 | | |

| [4.b.v](http://www.sec.gov/Archives/edgar/data/62996/000119312516506430/d157077dex41.htm) | | | | 3.500% Notes Due April 1, 2021; | | | 8-K | | 4.1 | | 03/16/2016 | | |

| [4.b.vi](http://www.sec.gov/Archives/edgar/data/62996/000119312516506430/d157077dex42.htm) | | | | 4.375% Notes Due April 1, 2026; | | | 8-K | | 4.2 | | 03/16/2016 | | |

| [4.b.vii](http://www.sec.gov/Archives/edgar/data/62996/000119312517204719/d397593dex41.htm) | | | | 3.500% Notes Due November 15, 2027; and | | | 8-K | | 4.1 | | 06/15/2017 | | |

| [4.b.viii](http://www.sec.gov/Archives/edgar/data/62996/000119312517204719/d397593dex42.htm) | | | | 4.500% Notes Due May 15, 2047. | | | 8-K | | 4.2 | | 06/15/2017 | | |

| Note 1: | | Other instruments, notes or extracts from agreements defining the rights of holders of long-term debt of Masco Corporation or its subsidiaries have not been filed since (i) in each case the total amount of long-term debt permitted thereunder does not exceed 10 percent of Masco Corporation's consolidated assets, and (ii) such instruments, notes and extracts will be furnished by Masco Corporation to the Securities and Exchange Commission upon request. | | | | | | | | | | | |

| [10.a](https://www.sec.gov/Archives/edgar/data/62996/000006299618000015/exhibit10ai.htm) | | 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, as amended by Amendment No. 1 dated as of May 29, 2015, and Amendment No. 2 dated as of August 28, 2015. | | | | | | | | | | | X |

| Note 2: | | Exhibits 10.b through 10.l 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](http://www.sec.gov/Archives/edgar/data/62996/000104746916010135/a2227221zex-10_bi.htm) | | Masco Corporation 2005 Long Term Stock Incentive Plan (Amended and Restated May 11, 2010): | | | | | 2015 10-K | | 10.b.i | | 02/12/2016 | | |

| | | Form of Restricted Stock Award Agreements: | | | | | | | | | | | |

| [10.b.i](https://www.sec.gov/Archives/edgar/data/62996/000006299618000015/exhibit10bi.htm) | | | | for awards on or after January 1, 2013; and | | | | | | | | | X |

| [10.b.ii](http://www.sec.gov/Archives/edgar/data/62996/000104746916010135/a2227221zex-10_biic.htm) | | | | for awards prior to 2012. | | | 2015 10-K | | 10.b.i(i)(C) | | 02/12/2016 | | |

| | | Form of Stock Option Grant Agreements: | | | | | | | | | | | |

| [10.b.iii](https://www.sec.gov/Archives/edgar/data/62996/000006299618000015/exhibit10biii.htm) | | | | for grants on or after January 1, 2013; | | | | | | | | | X |

| [10.b.iv](https://www.sec.gov/Archives/edgar/data/62996/000006299618000015/exhibit10biv.htm) | | | | for grants during 2012; and | | | | | | | | | X |

| [10.b.v](http://www.sec.gov/Archives/edgar/data/62996/000104746916010135/a2227221zex-10_biiic.htm) | | | | for grants prior to 2012. | | | 2015 10-K | | 10.b.i(ii)(C) | | 02/12/2016 | | |

II.

See separate Exhibit Index beginning on page 81.

| | | John G. Sznewajs Vice [removed: President and] [added: President,] Chief Financial Officer |

[removed: February 9,] [added: |] 2017 [added: | | $ | 11 | | | $ | 5 | | | $ | — | | | | $ | (3 | ) | | (a) | $ | 13 | |]

| /s/ Keith Allman | | President, [added: and] Chief Executive Officer and Director | | |

| /s/ John G. Sznewajs | | Vice [removed: President and] [added: President,] Chief Financial Officer | | |

| Mark R. Alexander | | | February [removed: 9, 2017] [added: 8, 2018] | |

[removed: for] [added: For] the [removed: years ended] [added: Years Ended] December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014][added: 2015]

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

| 2016 | | $ | 49 | | | $ | 11 | | | $ | [removed: (15] [added: —] | [removed: )] | | [removed: (b)] | $ | [removed: —] [added: (15] | [added: )] | | [added: (c)] | $ | 45 | |

| 2015 | | $ | 66 | | | $ | 36 | | | $ | [removed: (53] [added: —] | [removed: )] | | [removed: (c)] | $ | [removed: —] [added: (53] | [added: )] | | [added: (d)] | $ | 49 | |

| [removed: (b)] [added: (c)] | Write off $13 million [removed: and $55 million] of deferred tax assets on certain state and local net operating loss carryforwards against the valuation allowance, [removed: during 2016 and 2014, respectively,] as it was determined that there was only a remote likelihood that such carryforwards could be utilized; [removed: and] [added: and,] $2 million adjustment to the valuation allowance was recorded primarily in other comprehensive income [removed: (loss) in both 2016 and 2014.] [added: (loss).] |

| [removed: (c)] [added: (d)] | Valuation allowance on deferred tax assets allocated to TopBuild due to its spin off into a separate stand-alone company on June 30, 2015. |

| [removed: (d)] [added: (e)] | Amounts exclude discontinued operations. |

February 8, 2018

| /s/ Marie A. Ffolkes | | Director | | |

| Marie A. Ffolkes | | | | |

| /s/ Charles K. Stevens, III | | | | |

| Charles K. Stevens, III | | Director | | |

| 2017 | | $ | 45 | | | $ | — | | | $ | 2 | | | (b) | $ | — | | | | $ | 47 | |

| (b) | $2 million adjustment to the valuation allowance was recorded primarily in other comprehensive income (loss). |

| 2014 | | $ | 22 | | | $ | 3 | | | $ | — | | | | $ | (11 | ) | | (a) | $ | 14 | |

| 2014 | | $ | 662 | | | $ | (539 | ) | | $ | (57 | ) | | (b) | $ | — | | | | $ | 66 | |

EXHIBIT INDEX

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

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

| Exhibit No. | | | | | | Incorporated By Reference | | | | | | Filed Herewith |

| | Exhibit Description | | | | Form | | Exhibit | | Filing Date | | | |

| 2 | | Separation and Distribution Agreement dated June 29, 2015.1 | | | | 8-K | | 2.1 | | 07/06/2015 | | |

| 3.a | | Restated Certificate of Incorporation of Masco Corporation. | | | | 2015 10-K | | 3.i | | 02/12/2016 | | |

| 3.b | | Bylaws of Masco Corporation, as Amended and Restated May 8, 2012. | | | | | | | | | | X |

| 4.a | | Indenture dated as of December 1, 1982 between Masco Corporation and The Bank of New York Mellon Trust Company, N.A., as successor trustee under agreement originally with Morgan Guaranty Trust Company of New York, as Trustee, and Supplemental Indenture thereto dated as of July 26, 1994; and Directors' resolutions establishing Masco Corporation's: | | | | | | | | | | X |

| | | (i) | | 6.625% Debentures Due April 15, 2018; and | | 2013 10-K | | 4.a.i(i) | | 02/14/2014 | | |

| | | (ii) | | 7-3/4% Debentures Due August 1, 2029. | | 2014 10-K | | 4.a.i(ii) | | 02/13/2015 | | |

| 4.b | | Indenture dated as of February 12, 2001 between Masco Corporation and The Bank of New York Mellon Trust Company, N.A., as successor trustee under agreement originally with Bank One Trust Company, National Association, as Trustee, and Supplemental Indenture thereto dated as of November 30, 2006; and Directors' Resolutions establishing Masco Corporation's: | | | | | | | | | | X |

| | | (i) | | 6-1/2% Notes Due August 15, 2032; | | 2012 10-K | | 4.b.i(i) | | 02/15/2013 | | |

| | | (ii) | | 7.125% Notes Due March 15, 2020; | | 2015 10-K | | 4.b.i(iv) | | 02/12/2016 | | |

| | | (iii) | | 5.950% Notes Due March 15, 2022; | | | | | | | | X |

| | | (iv) | | 4.450% Notes Due April 1, 2025; | | 8-K | | 4.1 | | 03/23/2015 | | |

| | | (v) | | 3.500% Notes Due April 1, 2021; and | | 8-K | | 4.1 | | 03/16/2016 | | |

| | | (vi) | | 4.375% Notes Due April 1, 2026. | | 8-K | | 4.2 | | 03/16/2016 | | |

| Note 1: | | Other instruments, notes or extracts from agreements defining the rights of holders of long-term debt of Masco Corporation or its subsidiaries have not been filed since (i) in each case the total amount of long-term debt permitted thereunder does not exceed 10 percent of Masco Corporation's consolidated assets, and (ii) such instruments, notes and extracts will be furnished by Masco Corporation to the Securities and Exchange Commission upon request. | | | | | | | | | | |

| 1 | The schedules to this agreement are omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to supplementally furnish to the Securities and Exchange Commission, upon request, a copy of any omitted schedule. |

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| Exhibit No. | | | | | | | Incorporated By Reference | | | | | | Filed Herewith |

| | Exhibit Description | | | | | Form | | Exhibit | | Filing Date | | | |

| 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 | | |

| 10.a.ii | | Amendment No. 1 dated as of May 29, 2015 to Credit Agreement dated as of March 28, 2013 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 | | 06/04/2015 | | |

| 10.a.iii | | Amendment No. 2 dated as of August 28, 2015 to Credit Agreement dated as of March 28, 2013 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. | | | | | 10-Q | | 10 | | 10/27/2015 | | |

| Note 2: | | Exhibits 10.b through 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 2005 Long Term Stock Incentive Plan (Amended and Restated May 11, 2010): | | | | | 2015 10-K | | 10.b.i | | 02/12/2016 | | |

| | | (i) | | Form of Restricted Stock Award Agreements: | | | | | | | | | |

| | | | | (A) | for awards on or after January 1, 2013; | | 2012 10-K | | 10.b.i(i)(A) | | 02/15/2013 | | |

| | | | | (B) | for awards during 2012; | | 2012 10-K | | 10.b.i(i)(B) | | 02/15/2013 | | |

| | | | | (C) | for awards prior to 2012; | | 2015 10-K | | 10.b.i(i)(C) | | 02/12/2016 | | |

| | | (ii) | | Form of Stock Option Grant Agreements: | | | | | | | | | |

| | | | | (A) | for grants on or after January 1, 2013; | | 2012 10-K | | 10.b.i(ii)(A) | | 02/15/2013 | | |

| | | | | (B) | for grants during 2012; | | 2012 10-K | | 10.b.i(ii)(B) | | 02/15/2013 | | |

| | | | | (C) | for grants prior to 2012; and | | 2015 10-K | | 10.b.i(ii)(C) | | 02/12/2016 | | |

| | | (iii) | | Form of Stock Option Grant for Non- Employee Directors. | | | 2014 10-K | | 10.c.i.iv | | 02/13/2015 | | |