Masco (MAS) 10-K risk factor changes: FY2020 vs FY2019

Our business [removed: relies] [added: strategy is focused] on residential repair and remodeling activity and, to a lesser extent, on new home construction activity, both of which are impacted by a number of economic factors and [removed: the housing market.][added: other factors.]

[removed: | • |] [added: -] consumer confidence levels; [removed: |]

[removed: | • |] [added: -] fluctuations in home prices; [removed: |]

[removed: | • |] [added: -] existing home sales; [removed: |]

[removed: | • |] [added: -] unemployment and underemployment levels; [removed: |]

[removed: | • |] [added: -] consumer income and debt levels; [removed: |]

[removed: | • |] [added: -] household formation; [removed: |]

[removed: | • |] [added: -] the availability of home equity loans and mortgages and the interest rates for and tax deductibility of such loans; [removed: |]

[removed: | • |] [added: -] the availability of skilled tradespeople for repair and remodeling work; [removed: |]

[removed: | • |] [added: -] trends in lifestyle and housing design; and [removed: |]

Adverse changes or uncertainty involving the factors listed above or an economic [removed: downturn] [added: contraction] in the United States [removed: or] [added: and] worldwide could result in a decline in spending on residential repair and remodeling activity and a decline in demand for new home construction, which could adversely affect our results of operations and financial position.

If we do not timely and effectively identify and respond to changing consumer preferences, including a [added: continued] shift in consumer purchasing practices toward e-commerce, 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 adversely affected.

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 [added: a] negative [removed: publicity] [added: perception] regarding [added: our company practices, including regarding] disputes or legal action against us, even if unfounded.

In addition, home center retailers, which have historically concentrated their sales efforts on retail consumers and remodelers, are [removed: increasingly] selling directly to professional contractors and installers, which may adversely affect our margins on our products that contractors and installers would otherwise buy through our dealers and wholesalers.

Certain of our customers are [removed: increasingly] selling products sourced from [removed: low‑cost] [added: low-cost] foreign manufacturers under their own private label brands, which directly compete with our brands.

As this trend continues, we may experience lower demand for our products or a shift in the mix of some products we sell toward more [removed: value‑priced] [added: value-priced] or opening price point products, which may affect our profitability.

Further, the growing [removed: e‑commerce] [added: e-commerce] channel brings an increased number of competitors and greater pricing transparency for consumers, as well as conflicts between our existing distribution channels and a need for different distribution methods.

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

[removed: Our] [added: Our] sales are concentrated with two significant [removed: customers.][added: customers and this concentration may continue to increase.]

In [removed: 2019,] [added: 2020,] our net sales from our continuing operations to The Home Depot were [removed: $2.5] [added: $2.8] billion (approximately [removed: 37] [added: 39] percent of our consolidated net sales), and our net sales from our continuing operations to Lowe’s were less than 10 percent of our consolidated net sales.

[removed: In addition, these home center retailers are granted product] [added: The granting of] exclusivity [removed: from time to time, which] affects our ability to sell [added: those] products [added: and brands] to other customers and [removed: increases] [added: can increase] the complexity of our product offerings and [added: can increase] our costs.

Variability in the cost [added: and availability] of our raw materials, component parts and finished goods, including the imposition of tariffs could affect our results of operations and financial position.

Increases in the cost of the materials we purchase have in the past and may in the future increase the prices for our products, including as a result of new [removed: significant] tariffs.

For example, the [removed: recent] [added: continuing] trade dispute between the United States and China has resulted in [removed: increased] tariffs which raised the cost of certain of our materials.

We are dependent on [removed: third‑party] [added: 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 timely supply of these products and components.

Many of the suppliers we rely upon are located in foreign [removed: countries.][added: countries, primarily China.]

If we are unable to effectively manage our supply chain or if [removed: there is a] [added: we experience constraints to or] disruption in transporting the products or [added: components or we have to pay higher transportation costs for timely delivery of our products or] components, our results of operations and financial position could be adversely affected.

In [removed: 2019, 21] [added: 2020, 19] percent of our sales from continuing operations were made outside of North America (principally in Europe) and transacted in currencies other than the U.S. dollar.

We are also affected by domestic and international laws [added: and regulations] applicable to companies doing business abroad or importing and exporting goods and materials.

These include tax laws, laws regulating competition, [removed: anti‑bribery/anti‑corruption] [added: anti-bribery/anti-corruption] and other business practices, and trade regulations, including duties and tariffs.

Additionally, while it is difficult to assess what changes may occur and the relative effect on our international tax structure, significant changes in how U.S. and foreign jurisdictions tax [removed: cross‑border] [added: cross-border] transactions could adversely affect our results of operations and financial position.

Unfavorable currency exchange rates, particularly the Euro, the [removed: British pound sterling,] [added: Chinese Yuan Renminbi,] the Canadian dollar and the [removed: Chinese Yuan Renminbi,] [added: British pound sterling,] have in the past adversely affected us, and could adversely affect us in the future.

Additionally, [removed: as the situation involving] [added: following] the United [removed: Kingdom’s decision to] [added: Kingdom's] exit from the European [removed: Union continues to develop,] [added: Union,] we could experience volatility in the currency exchange rates or a change in the demand for our products and services, particularly in our U.K. and European markets, or there could be disruption of our operations and our customers’ and suppliers’ businesses.

These initiatives are designed to grow revenue, improve profitability and increase shareholder value over the [removed: mid‑] [added: mid-] to [removed: long‑term.][added: long-term.]

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

[removed: | • |] [added: -] difficulties realizing expected synergies and economies of scale; [removed: |]

[removed: | • |] [added: -] diversion of management attention and our resources; [removed: |]

[removed: | • |] [added: -] unforeseen liabilities; [removed: |]

[removed: | • |] [added: -] issues or conflicts with our new or existing customers or suppliers; and [removed: |]

[removed: | • |] [added: -] difficulties in retaining critical employees of the acquired businesses. [removed: |]

Coronavirus Disease 2019 Risks

The ongoing COVID-19 pandemic is disrupting our business, and has and may continue to impact our results of operations and financial condition.

The spread of COVID-19 has created a global health crisis that has resulted in widespread disruption to economic activity, both in the U.S. and globally.

We operate facilities in the United States and around the world which are being adversely affected by this pandemic.

The U.S. federal government and numerous state, local and foreign governments implemented certain measures to attempt to slow and limit the spread of COVID-19, including shelter-in-place and social distancing orders, which are subject to change and the respective governmental authorities may tighten such restrictions at any time.

Due to such measures we have experienced, and may continue to experience, the closure of certain of our facilities, delays or disruptions in the supply of raw materials, component parts and services and decreased employee availability, which has resulted and may continue to result in delays in our ability to produce and distribute our products.

In addition, COVID-19 has adversely affected and may continue to adversely affect domestic and international economic activity, including reduced consumer confidence, instability in the credit and financial markets and reduced business and consumer spending, which may adversely affect our results of operations.

Economic uncertainly as a result of COVID-19 may also make it difficult for us and our customers and suppliers to accurately forecast and plan future business activities and may weaken the financial position of some of our suppliers and customers.

Due to the uncertain nature and potential duration of the COVID-19 pandemic, we are unable to fully estimate the extent of the impact it may have on the markets in which we operate or our business at this time.

The extent of such impact will depend on a number of factors, including the duration and severity of the COVID-19 pandemic, its effect on our customers, suppliers and employees, its effect on domestic and international economies and markets, including consumer discretionary spending, and the response of governmental authorities.

We are continuing to take action to mitigate the impact of the COVID-19 pandemic on our business and operations, including through cost reduction measures and other initiatives, however the effectiveness of our mitigation efforts remains uncertain.

A continued disruption of our operations and an on-going slowdown in domestic and international economic activity could materially and adversely affect our results of operations and financial condition.

To the extent COVID-19 continues to impact our business, financial position and results of operations, it may also have the effect of heightening certain of the other risks described in this Annual Report on Form 10-K, such as those relating to our international operations and global strategies, our dependence on third-party suppliers, and compliance with covenants under our credit facility.

Strategic Risks

- natural disasters, terrorist acts, pandemics or other catastrophic events.

Business and Operational Risks

Risks associated with our international operations include:

- differences in culture, economic and labor conditions and practices;

- the policies of the U.S. and foreign governments;

- disruptions in trade relations and economic instability;

- differences in enforcement of contract and intellectual property rights;

- social and political unrest; and

- natural disasters, terrorist attacks, pandemics or other catastrophic events.

Competitive Risks

In addition, our Behr business grants Behr brand exclusivity in the retail sales channel in North America to The Home Depot, and from time to time, certain of our other businesses grant product and/or brand exclusivity to our customers.

Technology and Intellectual Property Risks

Litigation and Regulatory Risks

- climate change and protection of the environment.

| | |

| --- | --- |

| • | weather and natural disasters. |

As a result of the divestiture of our windows business in 2019 and the expected divestiture of our cabinetry business, the mix of our business operations has changed and the concentration of our sales to our two largest customers has increased and may continue to increase.

Risks associated with our international operations include changes in political, monetary and social environments, economic conditions, labor conditions and practices, the laws, regulations and policies of foreign governments, social and political unrest, terrorist attacks, cultural differences and differences in enforcement of contract and intellectual property rights.

financial position.

| • | climate change and environmental issues. |

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 residential repair and remodel [removed: activity] [added: activity,] and [added: to a lesser extent,] new home construction, our ability to maintain our strong brands and reputation and to develop innovative products, our ability to maintain our competitive position in our industries, our reliance on key customers, the [added: length and severity of the ongoing COVID-19 pandemic, including its impact on domestic and international economic activity, consumer confidence, our production capabilities, our employees and our supply chain, the] cost and availability of materials and the imposition of tariffs, our dependence on third-party suppliers, risks associated with our international operations and global strategies, our ability to achieve the anticipated benefits of our strategic initiatives, [removed: including the pending divestiture of] our [removed: Masco Cabinetry business, our] ability to successfully execute our acquisition strategy and integrate businesses that we have and may acquire, our ability to attract, develop and retain talented [added: and diverse] personnel, risks associated with our reliance on information systems and technology, and our ability to achieve the anticipated benefits from our investments in new technology.

These and other factors are discussed in detail in Item [removed: 1A "Risk Factors" of this Report.][added: 1A.]

We sell our products through home center retailers, online retailers, [added: wholesalers and distributors,] mass merchandisers, hardware stores, [removed: homebuilders, distributors, and] direct to the [removed: consumer.][added: consumer and homebuilders.]

Net sales were positively impacted by increased [removed: net selling prices] [added: sales volume] across our two [removed: segments and the acquisition of The L.D. Kichler Co. ("Kichler") in March 2018.][added: segments.]

Such increases were partially offset by [removed: a decrease in volume, primarily] [added: unfavorable net selling prices] in our Decorative Architectural Products [removed: segment and unfavorable foreign currency translation.][added: segment.]

These [removed: negative] [added: positive] impacts were partially offset by [removed: increased] [added: unfavorable] net selling prices and [removed: the benefits associated with cost savings initiatives.][added: increased commodity costs, primarily attributable to tariffs.]

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

We regularly review our estimates and assumptions, which are based upon historical experience, as well as current economic conditions and various other factors [added: (including the anticipated impact of the COVID-19 pandemic)] that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities [added: and related disclosures, and future revenues and expenses,] that are not readily apparent from other sources.

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

Allowances are estimated based upon specific customer balances, where a risk of [removed: default] [added: loss] has been identified, and also include a provision for [removed: non-customer specific defaults] [added: losses] based upon historical [removed: collection, return] [added: collection] and write-off [removed: activity.][added: activity as well as reasonable and supportable forecast information that considers macro-economic factors and industry-specific trends associated with our businesses, among others.]

In the fourth quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, we [removed: primarily] complete the impairment testing of goodwill utilizing a discounted cash flow method.

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

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

Our assumptions included [removed: a relatively stable] U.S. Gross Domestic Product growing at approximately [removed: 1.9] [added: 4.2] percent [removed: per annum] [added: in 2021] and [added: develop into] a [added: relatively stable 2.8 percent each year thereafter, and a] eurozone Gross Domestic Product growing at approximately [removed: 1.0] [added: 5.2] percent [added: in 2021 and developing into a relatively stable 2.2 percent] per annum over the five-year forecast.

In [removed: 2019,] [added: 2020,] 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 10.0 percent to 12.0 percent for our reporting units.

In the fourth quarter of [removed: 2019,] [added: 2020,] 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 have resulted in a [removed: $35] [added: $6] million impairment to one of our reporting units.

In [removed: 2019,] [added: 2020,] based upon our assessment of the risks impacting each of our [removed: businesses,] [added: businesses and the nature of the trade name,] we applied a risk premium to increase the discount rate to a range of 11.0 percent to [removed: 13.0] [added: 12.5] percent for our other indefinite-lived intangible assets.

In the fourth quarter of [removed: 2019,] [added: 2020,] we estimated that future discounted cash flows projected for our other indefinite-lived intangible assets were greater than the carrying values.

Upon termination in 2021, we expect to recognize from accumulated other comprehensive loss approximately [removed: $420] [added: $450] million of pre-tax actuarial losses and approximately [removed: $90] [added: $95] million of income tax benefit, which includes approximately $11 million of tax expense from the elimination of a disproportionate tax effect.

In December [removed: 2019,] [added: 2020,] our discount rate for obligations decreased to a weighted average of [removed: 2.5] [added: 1.7] percent from [removed: 3.8] [added: 2.5] percent.

The discount rate for obligations is based primarily upon the expected duration of each defined-benefit pension plan's liabilities matched to the December 31, [removed: 2019] [added: 2020] Willis Towers Watson Rate Link Curve.

The discount rates we use for our defined-benefit pension plans ranged from [removed: 1.1] [added: 0.7] percent to [removed: 3.0] [added: 2.1] percent, with the most significant portion of the liabilities having a discount rate for obligations of [removed: 2.4] [added: 1.6] percent or [added: higher.]

The net underfunded amount for our qualified defined-benefit pension plans, which is the difference between the projected benefit obligation and plan assets, increased to [removed: $254] [added: $255] million at December 31, [removed: 2019] [added: 2020] from [removed: $226] [added: $254] million at December 31, [removed: 2018.][added: 2019.]

Our projected benefit obligation for our unfunded, non-qualified, defined-benefit pension plans increased to [removed: $161] [added: $162] million at December 31, [removed: 2019] [added: 2020] from [removed: $155] [added: $161] million at December 31, [removed: 2018.][added: 2019.]

In accordance with the Pension Protection Act, the Adjusted Funding Target Attainment Percentage for the various defined-benefit pension plans ranges from [removed: 90] [added: 113] percent to [removed: 119] [added: 117] percent.

During [removed: 2019,] [added: 2020,] we contributed [removed: $56] [added: $57] million to our qualified defined-benefit pension plans, and our qualified defined-benefit pension plan assets had a positive return of [removed: 17.7] [added: 9.7] percent.

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

We expect pension expense for our qualified defined-benefit pension plans to be [removed: $30] [added: $470] million in [removed: 2020] [added: 2021] compared with [removed: $16] [added: $30] million in [removed: 2019.][added: 2020.]

If we assumed that the future return on plan assets was 50 basis points lower than the assumed asset return and the discount rate decreased by 50 basis points, the [removed: 2020] [added: 2021] pension expense would increase by [removed: $5] [added: $60] million.

Assuming a 0 percent asset return for our qualified domestic defined-benefit pension plans, projected [removed: 2020] [added: 2021] total qualified defined-benefit pension plan expenses are expected to be approximately [removed: $37] [added: $474] million.

We expect pension expense for our non-qualified defined-benefit pension plans to be [removed: $8] [added: $6] million in [removed: 2020, consistent with the pension expense] [added: 2021, compared to $8 million] recognized in [removed: 2019.][added: 2020.]

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

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

The future realization of deferred tax [added: assets depends on the existence of sufficient taxable income in future periods.]

[added: Possible sources of taxable income] include taxable income in carryback periods, the future reversal of existing taxable temporary differences recorded as a deferred tax liability, tax-planning strategies that generate future income or gains in excess of anticipated losses in the carryforward period and projected future taxable income.

We maintain a valuation allowance on certain state and foreign deferred tax assets as of December 31, [removed: 2019.][added: 2020.]

Our total debt as a percent of total capitalization was [removed: 102] [added: 87] percent and [removed: 98] [added: 102] percent at December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively.

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

During 2019, [removed: including the accelerated stock repurchase agreement,] we repurchased [added: and retired] 20.1 million shares of our common stock [added: (including 0.6 million shares to offset the dilutive impact of long-term stock awards granted in 2019),] for [removed: cash aggregating] [added: approximately] $896 million.

"Risk Factors" of this Report.

2020 Results

Our Plumbing Products segment operating profit was positively impacted by cost saving initiatives, including actions taken to mitigate the COVID-19 pandemic impact, and higher sales volume.

Our Decorative Architectural Products segment operating profit benefited primarily from higher sales volume mostly due to paints and other coating products, as well as cost savings initiatives, including actions taken to mitigate the COVID-19 pandemic impact.

Additionally, operating profit was positively impacted by the non-recurrence of a 2019 non-cash impairment charge related to an other indefinite-lived intangible asset for a trademark associated with lighting products.

These positive impacts were partially offset by unfavorable net selling prices, higher fixed expenses in our lighting business, and an increase in other expenses (such as salaries, legal costs, and advertising).

COVID-19 Impact and Response

During 2020, certain aspects of our businesses were adversely affected by the COVID-19 pandemic.

Many, but not all, of our businesses remained operating in 2020 because the products we provide are critical to infrastructure sectors and the day-to-day operations of homes and businesses in our communities as defined by applicable local orders.

However, some of our facilities experienced reduced capacity due to social distancing requirements and/or full closures ranging from a few days to 6-8 weeks, and if certain governmental orders are reimposed or if we are required to close a facility for employee safety reasons, we could experience new or extended closures which might adversely impact our ability to produce and distribute our products.

Operational activity that was previously slowed at certain of our facilities, as a result of the pandemic and governmental orders, largely resumed operations at normal capacities by the third quarter of 2020 enabling them to progress on the fulfillment of production backlogs that developed in the first half of the year as well as to meet current consumer demand.

Finally, we may experience supply chain disruptions, particularly disruptions related to our ability to source plumbing, lighting and builders’ hardware products.

Given our portfolio of lower ticket, repair and remodel-oriented product and the increased demand for repair and remodel spending, we experienced strong consumer demand in 2020.

These levels of demand may or may not continue and we may experience an adverse impact in our 2021 results due to economic contraction as a result of continued high unemployment levels and remaining or potential renewed shelter-in-place and social distancing orders.

The COVID-19 pandemic and the mitigating measures taken by many countries have adversely impacted and could in the future materially adversely impact the Company’s business, results of operations and financial condition.

During 2020, we implemented mitigating efforts to manage operating spend and preserve cash and liquidity including the temporary suspension of our share repurchase activity beginning in the second quarter of 2020, which we resumed in the fourth quarter of 2020.

Currently, we have not identified, and will continue to monitor for, any substantive risk attributable to customer credit and have not experienced a significant impact from permanent store closures or retail bankruptcies.

We continue to be committed to the safety and well-being of our employees during this time, and, led by our cross-functional Infectious Illness Response Team, we have employed best practices and followed guidance from the World Health Organization and the Centers for Disease Control and Prevention.

We have implemented and are continuing to implement alternative work arrangements to support the health and safety of our employees, including working remotely and avoiding large gatherings.

In addition, we have modified work areas and workstations to provide protective measures for employees, are staggering shifts, requiring the use of face coverings, practicing social distancing and increasing the cleaning of our facilities, and in the event that we learn of an employee testing positive for COVID-19, we are completing contact tracing and requiring impacted employees to self-quarantine.

Our weighted average cost of capital in 2020 was consistent with 2019.

Due to the anticipated termination of our qualified domestic defined-benefit pension plans and the related plan assets comprised mostly of fixed income and cash, the assumed asset return for these assets was 2.0 percent.

The expected increase in pension expense is due to the anticipated termination of our qualified domestic defined-benefit pension plans and the recognition of losses currently reported in accumulated other comprehensive loss.

Consistent with our plan to terminate the qualified domestic defined-benefit pension plans, we currently anticipate contributing approximately $140 million in 2021.

During 2020, we completed the acquisitions of Kraus, Work Tools and SmarTap and signed an agreement to acquire majority interest in ESS.

Overview of Capital Structure

Senior Indebtedness

Also on September 18, 2020, we issued an incremental $100 million on our existing 4.5% Notes due May 15, 2047 (the "2047 Notes") and received proceeds of $119 million, including a premium, for the issuance of the 2047 Notes.

The incremental $100 million formed a single series with the existing $300 million of 4.5% Notes due May 15, 2047.

Credit Agreement

During 2020, we acquired substantially all of the net assets of Kraus and Work Tools, and all of the share capital of SmarTap for a combined $175 million of cash and $5 million of debt.

Additionally, we entered into an agreement to acquire a 75.1% equity interest in ESS for approximately €45 million ($55 million) subject to working capital and other adjustments.

A cash payment was made to a third-party notary for $52 million on December 29, 2020 for the acquisition of this equity interest in advance of the transaction closing on January 4, 2021.

Divestitures

During 2020, we completed the divestiture of our Cabinetry business for proceeds of $853 million, net of cash disposed.

During 2019, we completed the divestitures of our Milgard Windows and Doors business ("Milgard") and our UK Window Group business ("UKWG") for combined proceeds of $722 million.

Share Repurchases

During 2020, we repurchased and retired 18.8 million shares of our common stock (including 0.4 million shares to offset the dilutive impact of restricted stock units granted during the year), for approximately $727 million.

Our Board of Directors authorized the repurchase, for retirement, of up to $2.0 billion shares of our common stock in open-market transactions or otherwise, effective February 10, 2021, replacing the 2019 authorization.

Dividend to holder of Common Shares

2019 Results

Our Plumbing Products segment was negatively impacted by an increase in other expenses (such as salaries, marketing spend and severance charges), an increase in commodity costs, unfavorable foreign currency translation, and higher depreciation expense.

Our Decorative Architectural Products segment was positively impacted by increased net selling prices across the segment, the absence of the recognition of the inventory step-up adjustment established as part of the 2018 Kichler acquisition, and the benefits associated with cost savings initiatives.

These positive impacts were partially offset by an increase in commodity costs and lower sales volume across the segment, an increase in strategic growth investments and a non-cash impairment charge related to an other indefinite-lived intangible asset for a trademark associated with lighting products.

For our Masco Cabinetry reporting unit, we utilized a market approach to determine its fair value instead of the discounted cash flow method, as we were actively marketing the Masco Cabinetry business for sale and on November 14, 2019 we entered into a definitive agreement to sell the business.

Our weighted average cost of capital decreased in 2019 as compared to 2018, primarily due to declining interest rates and lower long-term market growth outlooks.

higher.

The assumed asset return was primarily 3.0 percent, reflecting the expected long-term return on plan assets based upon an analysis of expected and historical rates of return of various asset classes utilizing the current and long-term target asset allocation of the plan assets.

We anticipate that we will be required to contribute approximately $23 million in 2020 to our qualified and non-qualified defined-benefit plans; however, we currently anticipate contributing approximately $64 million in 2020.

statement carrying value of assets and liabilities and their respective tax basis.

assets depends on the existence of sufficient taxable income in future periods.

Possible sources of taxable income

The comprehensive U.S. tax reform, which generally became effective in 2018, has had 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. taxes on our foreign earnings.

The continued impact from U.S. tax reform may differ from our current estimates due to the issuance and finalization of future regulatory guidance.

During 2019, we completed the divestitures of our UKWG and Milgard businesses and entered into a definitive agreement to sell our Masco Cabinetry business.

With the combined proceeds of $722 million for the UKWG and Milgard divestitures, we executed an accelerated stock repurchase agreement to repurchase $400 million of our common stock.

This repurchase is under Masco's existing share repurchase authorization of $2.0 billion of shares of our common stock, which was approved in September 2019.

Upon entry into the Credit Agreement, our credit agreement dated March 28, 2013, as amended, with an aggregate commitment of $750 million, was terminated.

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.

The increase in our current ratio is due primarily to the cash received from the divestiture of our Milgard business less cash used for the accelerated stock repurchase agreement and to repay and retire our 7.125% Notes due March 15, 2020.

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

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

| Decrease in debt, net | (8 | | ) | | (1 | | ) | | (3 | | ) |

| | | | | | |

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

These uses of cash were slightly offset by $27 million of proceeds from the exercise of stock options.

| | | | | | | | |

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

| Net sales, excluding acquisitions | 6,642 | | | | 6,654 | | |

The acquisition of Kichler in March 2018 increased sales by one percent.

Net sales for 2019 were negatively impacted by decreased sales volume of our lighting products which decreased sales by one percent.

Net sales for 2018 increased 11 percent primarily due to the acquisition of Kichler in March 2018 and Mercury Plastics, Inc. ("Mercury") in December 2017, which increased sales by six percent.

Foreign currency translation also increased sales by one percent.

Net sales for 2018 were negatively affected by the divestiture of our Arrow Fastener Co., LLC ("Arrow") and Moores Furniture Group Limited ("Moores") businesses, which, in aggregate, decreased sales by one percent.

The 2019 gross profit margin was positively impacted by increased net selling prices and the absence of the recognition of the inventory step up adjustment established as part of the acquisition of Kichler.

The 2018 gross profit margin was negatively impacted by an increase in commodity costs, the recognition of the inventory step up adjustment established as a part of the acquisition of Kichler, an increase in other expenses (such as salaries and logistics costs) and unfavorable sales mix.

These negative impacts were partially offset by an increase in net selling prices, increased sales volume, and the benefits associated with cost savings initiatives.

The increase in selling, general, and administrative expenses as a percentage of sales in 2019 was primarily driven by an increase in marketing spend.

Operating profit in 2019 was positively affected by increased net selling prices, the absence of the recognition of the Kichler inventory step up adjustment and benefits associated with cost savings initiatives.

Operating profit in 2018 was positively affected by increased net selling prices, increased sales volume, and benefits associated with cost savings initiatives.

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

At December 31, [removed: 2019,] [added: 2020,] 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, or a 100 basis point change in interest rates.

| | |

| --- | --- |

Our portfolio of industry-leading brands [removed: associated with our continuing operations] includes BEHR® paint; DELTA® and HANSGROHE® [removed: faucets and] [added: faucets,] bath and shower fixtures; KICHLER® decorative and outdoor lighting; [added: LIBERTY® branded decorative] and [added: functional hardware; and] HOT SPRING® spas.

We believe that our solid results of operations and financial position for [removed: 2019] [added: 2020] resulted from [added: strong consumer demand for] our [added: lower ticket, repair and remodel-oriented products and increased spending on repair and remodel activity, along with our continued] focus on our three strategic pillars:

[removed: | • |] [added: -] drive the full potential of our core businesses; [removed: |]

[removed: | • |] [added: -] leverage opportunities across our enterprise; and [removed: |]

[removed: | • |] [added: -] actively manage our portfolio. [removed: |]

[removed: In 2019,] [added: Additionally in 2020,] we [removed: also] continued to [removed: focus on our capital allocation strategy to enhance shareholder] [added: return] value [added: to our shareholders] by repurchasing [removed: over 20] [added: approximately 18.8] million shares of our common stock and increasing our quarterly dividend by [removed: 12.5] [added: approximately 4] percent.

We report our financial results [removed: from continuing operations] in two segments, our Plumbing Products segment and our Decorative Architectural Products segment, which are aggregated by product similarity.

[removed: Plumbing Products][added: *Plumbing Products*]

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

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

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

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

[removed: | • |] [added: -] We also supply high-quality, custom thermoplastic solutions, extruded plastic profiles and specialized fabrications, as well as PEX tubing, to manufacturers, distributors and wholesalers for use in diverse applications that include faucets and plumbing supplies, appliances, oil and gas equipment, building products and automotive components. [removed: |]

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

We face significant competition from private label [removed: products.][added: products and digitally native brands.]

Many of the faucet and showering products with which our products compete are manufactured by foreign manufacturers that [removed: are putting pressure on price.][added: contribute to price competition.]

The businesses in our Plumbing Products segment manufacture products [added: primarily] in North [removed: America, Europe] [added: America] and [added: Europe as well as in] Asia and source products from Asia and other regions.

We have multiple sources, both domestic and foreign, for the raw materials used in this [removed: segment, and sufficient raw materials have been available for our needs.][added: segment.]

[removed: Decorative] [added: *Decorative] Architectural [removed: Products][added: Products*]

[removed: We produce] [added: Our Decorative Architectural Products segment primarily includes] architectural coatings, including paints, primers, specialty coatings, stains and waterproofing [removed: products.][added: products, as well as paint applicators and accessories.]

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

Net sales of architectural coatings comprised approximately [added: 33 percent,] 31 percent [removed: , 30 percent] and [removed: 32] [added: 30] percent of our consolidated net sales from our continuing operations in [added: 2020,] 2019, [removed: 2018,] and [removed: 2017,] [added: 2018,] respectively.

The [added: granting of exclusivity affects our ability to sell those products and brands to other customers and the] loss of this segment’s sales to The Home Depot would have a material adverse effect on this segment’s business and on our consolidated business as a whole.

Our competitors in this segment include large national and international brands such as Benjamin Moore & Co., PPG Industries, Inc.'s Glidden, Olympic, Pittsburgh Paints and PPG brands, The Sherwin‑Williams Company's Minwax, Sherwin-Williams, Thompson’s Water [removed: Seal and] [added: Seal,] Valspar [removed: brands] and [added: Purdy brands,] RPM International, Inc.'s Rust-Oleum and Zinsser [removed: brands,] [added: brands and the Wooster Brush Company,] as well as many regional and other national brands.

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

Our Decorative Architectural Products segment includes branded cabinet and door hardware, functional hardware, wall plates, hook and hook rail products, [added: closet organization systems] and picture hanging accessories, which are manufactured for us and sold to home center retailers, mass retailers, online retailers, other specialty retailers, original equipment manufacturers and wholesalers.

Decorative bath hardware, shower accessories, [added: mirrors] and shower doors are sold under the brand names DELTA® and FRANKLIN BRASS® and other trademarks to [removed: wholesalers,] home center retailers, mass [removed: retailers and] [added: retailers, online retailers,] other specialty [removed: retailers.][added: retailers and wholesalers.]

Competitors of these products include [added: Acuity,] FX Luminaire, Generation Brands, Hinkley Lighting, Inc., Hubbell Incorporated's Progress Lighting brand, Hunter Fan Company and private label brands.

[removed: *Environmental Laws] [added: *Laws] and Regulations Affecting Our Business*

We [added: monitor applicable laws and regulations and incur ongoing expense relating to compliance, however we] do not expect that compliance with [removed: the] federal, state, local and foreign [removed: regulations relating to the discharge of materials into the environment, or otherwise relating to the protection of the environment,] [added: regulations,] will result in material capital expenditures or have a material adverse effect on our [removed: competitive position or] results of operations and financial position.

At December 31, [removed: 2019, our continuing operations] [added: 2020, we] employed approximately 18,000 people.

In 2020, we completed the divestiture of our Masco Cabinetry business ("Cabinetry"), and completed the acquisitions of Kraus USA Inc. ("Kraus"), Work Tools International Inc. and Elder & Jenks, LLC (collectively "Work Tools"), and SmarTap A.Y Ltd. ("SmarTap").

We also entered into an agreement in November 2020 to purchase a majority stake in Easy Sanitary Solutions B.V. ("ESS").

This transaction closed on January 4, 2021.

- Our plumbing products include faucets, showerheads, handheld showers, valves, bath hardware and accessories, bathing units, shower bases and enclosures, sinks and toilets.

We sell these products to home center and online retailers and to wholesalers and distributors that, in turn, sell them to plumbers, building contractors, remodelers, smaller retailers and consumers.

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

- We manufacture acrylic tubs, bath and shower enclosure units, and shower bases and trays.

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

Our HÜPPE® shower enclosures and shower trays are sold through wholesale channels primarily in Europe.

- Our spas, exercise pools and fitness systems are manufactured and sold under our HOT SPRING®, CALDERA®, FREEFLOW SPAS®, FANTASY SPAS® and ENDLESS POOLS® brands, as well as under other trademarks.

Our spa and exercise pools are sold worldwide to independent specialty retailers and distributors and to online mass merchant retailers.

These products are marketed primarily in North America under our BRASSCRAFT®, PLUMB SHOP®, COBRA®, COBRA PRO™ and MASTER PLUMBER® brands and are also sold under private label.

- Within our Plumbing Products segment we develop connected water products that enhance the experience with water in homes and businesses.

These systems include touchless activation, voice activation, controlled volume dispensing and provide for monitoring and controlling the temperature and flow of water and are compatible with a wide range of faucets, showerheads and other showering components.

Our Behr business grants Behr brand exclusivity in the retail sales channel in North America to The Home Depot.

Certain products in our Decorative Architectural Products segment contain propylene, methyl methacrylate (MMA), titanium dioxide and zinc.

We have multiple sources, both domestic and foreign, for the raw materials used in this segment.

We have encountered price volatility for propylene and MMA and, to a lesser extent in this segment, zinc.

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

We are subject to federal, state, local and foreign government laws and regulations.

For a more detailed description of the various laws and regulations that impact our business, see Item 1A.

Risk Factors.

*Human Capital Management*

We believe that the performance of our Company is impacted by our human capital management, and as a result we consistently work to attract, select, develop, engage and retain strong, diverse talent.

We are focused on three key strategic talent priorities: leadership, diversity, equity and inclusion, and our future workforce.

Our Chief Human Resources Officer is responsible for developing and executing our human capital strategy and provides regular updates to our Board of Directors’ Organization and Compensation Committee on our progress toward the achievement of our strategic initiatives.

We believe that all of our human capital initiatives work together to assure we have an environment where our employees are engaged, feel a sense of belonging, and can reach their full potential.

Leadership

We support and grow our employees by providing continuous development practices and tools that build and strengthen leadership capabilities.

Our leadership framework is designed to serve as the foundation for how we select, develop and measure the performance of our leaders.

We have also placed a specific focus on building a coaching culture by enabling frequent and candid feedback discussions about performance and development between employees and their managers, across peers, and within teams.

Diversity, Equity and Inclusion ("DE&I")

We believe a workplace that encourages different voices, perspectives and backgrounds creates better teams, better solutions and more innovation.

For the past several years, we have strived to create a culture of inclusion, reduce bias in our talent practices, and invest in and engage with our communities.

We are focused on the following three key areas:

- Our workplace: who we are and how it feels to work at Masco

- Our communities: how we can help increase access, equity, and inclusion with our diverse community partners

- Our marketplace: how we represent our consumers and use our buying power to support advancing economic equity

We are refining strategic objectives and expectations within each of these focus areas.

We are also developing multiple internal channels to increase communication and opportunity for engagement among our employees.

| | |

| --- | --- |

We will continue the disciplined execution of our strategy in 2020.

In addition, in 2019, we completed the divestitures of our Milgard Windows and Doors business ("Milgard") and our UK Windows Group business ("UKWG"), and in November we entered into a definitive agreement to sell our Masco Cabinetry business, which we expect to close in the first quarter of 2020.

As a result, our Windows and Other Specialty Products segment and our Cabinetry Products segment are accounted for as discontinued operations in our consolidated financial statements.

The following discussion in this "Item 1." relates only to our continuing operations unless otherwise noted.

Masco was incorporated under the laws of Michigan in 1929 and was reincorporated under the laws of Delaware in 1968.

We are subject to federal, state, local and foreign government regulations regarding the protection of the environment, and we have certain responsibilities for environmental remediation.

We monitor applicable laws and regulations relating to the protection of the environment and incur ongoing expense relating to compliance.

Compliance with these laws and regulations may affect our product and production costs.

| • | Many products in our Plumbing Products segment are subject to restrictions on the amount of certain materials and chemicals, including lead and mercury, that can be in the product, and on water flow rates. |

| • | Our Decorative Architectural Products segment is subject to requirements relating to the emission of volatile organic compounds, which has required us to reformulate paint products and may require further reformulation in the future. |

*Backlog*

We do not consider backlog orders to be material in either of our segments.

*Employees*

In addition, our Masco Cabinetry business employed approximately 4,000 people whose employment with us will terminate upon completion of the divestiture.

We have generally experienced satisfactory relations with our employees.

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

| | |

| --- | --- |

[removed: FORM 10-K][added: FORM 10-K]

[removed: ☒ANNUAL] [added: ☒ ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, [removed: 2019][added: 2020]

[removed: ☐TRANSITION] [added: ☐ TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file [removed: number: 1-5794][added: number: 1-5794]

| Delaware | | | | [added: | | | | | | | |] 38-1794485 | [added: | |]

| (State of Incorporation) | | | | [added: | | | | | | | |] (I.R.S. Employer Identification No.) | [added: | |]

| 17450 College Parkway, | [added: | |] Livonia, | [added: | |] Michigan | | [added: | | | |] 48152 | [added: | |]

| (Address of Principal Executive Offices) | | | | [added: | | | | | | | |] (Zip Code) | [added: | |]

Registrant's telephone number, including area code: [removed: (313) 274-7400][added: (313) 274-7400]

| Title of Each Class | | [added: | | | |] Trading Symbol | | [added: | | | |] Name of Each [removed: Exchange On] [added: Exchange On] Which Registered | [added: | |]

| Common Stock, $1.00 par value | | [added: | | | |] MAS | | [added: | | | |] New York Stock Exchange | [added: | |]

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

| Large accelerated filer | [added: | |] ☑ | | [added: | | | |] Accelerated filer | [added: | |] ☐ | [added: | |]

| Non-accelerated filer | [added: | |] ☐ | | [added: | | | |] Smaller reporting company | [added: | |] ☐ | [added: | |]

| | | | [added: | | | | | |] Emerging growth company | [added: | |] ☐ | [added: | |]

The aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant on June 30, [removed: 2019] [added: 2020] (based on the closing sale price of [removed: $39.24] [added: $50.21] of the Registrant's Common Stock, as reported by the New York Stock Exchange on such date) was approximately [removed: $11,280,228,700.][added: $13,053,334,100.]

Number of shares outstanding of the Registrant's Common Stock at January 31, [removed: 2020:][added: 2021:]

[removed: 277,735,100] [added: 257,142,348] shares of Common Stock, par value $1.00 per share

Portions of the Registrant's definitive Proxy Statement to be filed for its [removed: 2020] [added: 2021] Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

[removed: 2019 Annual] [added: 2020 Annual] Report on Form 10-K

| Item | | | | [added: | | | | | | | |] Page | [added: | |]

| [removed: [1A.](#sF07E12EED73D5C12975F8B00C82F5112)] [added: [1A.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_16)] | | [added: | | | |] [Risk [removed: Factors](#sF07E12EED73D5C12975F8B00C82F5112)] [added: Factors](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_16)] | | [removed: [5](#sF07E12EED73D5C12975F8B00C82F5112)] | [added: | | | [6](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_16) | | |]

| [removed: [1B.](#sD4D7787A4CD956AA91863CB9AFBD8797)] [added: [1B.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_19)] | | [added: | | | |] [Unresolved Staff [removed: Comments](#sD4D7787A4CD956AA91863CB9AFBD8797)] [added: Comments](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_19)] | | [removed: [10](#sD4D7787A4CD956AA91863CB9AFBD8797)] | [added: | | | [12](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_19) | | |]

| [removed: [3.](#s8E1F1976BF6A503FA68EEB7E2602DCB1)] [added: [3.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_25)] | | [added: | | | |] [Legal [removed: Proceedings](#s8E1F1976BF6A503FA68EEB7E2602DCB1)] [added: Proceedings](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_25)] | | [removed: [11](#s8E1F1976BF6A503FA68EEB7E2602DCB1)] | [added: | | | [13](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_25) | | |]

| [removed: [4.](#sDF25189917DB5718B681778FF072565D)] [added: [4.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_28)] | | [added: | | | |] [Mine Safety [removed: Disclosures](#sDF25189917DB5718B681778FF072565D)] [added: Disclosures](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_28)] | | [removed: [11](#sDF25189917DB5718B681778FF072565D)] | [added: | | | [13](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_28) | | |]

| [removed: [5.](#s93BFE852F5FC5D78A21E1D227CC770FE)] [added: [5.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_34)] | | [added: | | | |] [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s93BFE852F5FC5D78A21E1D227CC770FE)] [added: Securities](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_34)] | | [removed: [12](#s93BFE852F5FC5D78A21E1D227CC770FE)] | [added: | | | [14](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_34) | | |]

| [removed: [6.](#s2A10B5C13C785387843E165A844B3B89)] [added: [6.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_37)] | | [added: | | | |] [Selected Financial [removed: Data](#s2A10B5C13C785387843E165A844B3B89)] [added: Data](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_37)] | | [removed: [14](#s2A10B5C13C785387843E165A844B3B89)] | [added: | | | [16](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_37) | | |]

| [removed: [7.](#s9333B743C4825CBB8E0091FB8B1BCCEC)] [added: [7.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_40)] | | [added: | | | |] [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s9333B743C4825CBB8E0091FB8B1BCCEC)] [added: Operations](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_40)] | | [removed: [15](#s9333B743C4825CBB8E0091FB8B1BCCEC)] | [added: | | | [17](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_40) | | |]

| [removed: [7A.](#s00C5508AC726500E8B5E5596E4551EC4)] [added: [7A.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_79)] | | [added: | | | |] [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s00C5508AC726500E8B5E5596E4551EC4)] [added: Risk](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_79)] | | [removed: [30](#s00C5508AC726500E8B5E5596E4551EC4)] | [added: | | | [34](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_79) | | |]

| [removed: [8.](#sB84F7C313B3051DF96EE053FC67BD110)] [added: [8.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_85)] | | [added: | | | |] [Financial Statements and Supplementary [removed: Data](#sB84F7C313B3051DF96EE053FC67BD110)] [added: Data](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_85)] | | [removed: [31](#s83902A214C8C5454A7679AA5772AF2D7)] | [added: | | | [35](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_82) | | |]

| [removed: [9.](#s54B6136861D753978BC8D0F0F88EF9B8)] [added: [9.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_205)] | | [added: | | | |] [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s54B6136861D753978BC8D0F0F88EF9B8)] [added: Disclosure](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_205)] | | [removed: [75](#s54B6136861D753978BC8D0F0F88EF9B8)] | [added: | | | [82](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_205) | | |]

| [removed: [9A.](#sC68D60F86D705396A62D6EECBD18CAFC)] [added: [9A.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_208)] | | [added: | | | |] [Controls and [removed: Procedures](#sC68D60F86D705396A62D6EECBD18CAFC)] [added: Procedures](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_208)] | | [removed: [75](#sC68D60F86D705396A62D6EECBD18CAFC)] | [added: | | | [82](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_208) | | |]

| [removed: [9B.](#sD0C49AB940D45E3C9F9595FD11F60221)] [added: [9B.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_214)] | | [added: | | | |] [Other [removed: Information](#sD0C49AB940D45E3C9F9595FD11F60221)] [added: Information](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_214)] | | [removed: [75](#sD0C49AB940D45E3C9F9595FD11F60221)] | [added: | | | [82](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_214) | | |]

| | | [removed: [PART III](#s9925167D500A51B797C3AE084A014D17)] | | | [added: | [PART III](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_217) | | | | | | | | |]

| [removed: [10.](#sF5039FEEE81F504BA6C025821E5F7AB9)] [added: [10.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_220)] | | [added: | | | |] [Directors, Executive Officers and Corporate [removed: Governance](#sF5039FEEE81F504BA6C025821E5F7AB9)] [added: Governance](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_220)] | | [removed: [76](#sF5039FEEE81F504BA6C025821E5F7AB9)] | [added: | | | [83](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_220) | | |]

| [removed: [11.](#s5FE9710AA0AD53EF8BF3B419C25A5A43)] [added: [11.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_223)] | | [added: | | | |] [Executive [removed: Compensation](#s5FE9710AA0AD53EF8BF3B419C25A5A43)] [added: Compensation](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_223)] | | [removed: [76](#s5FE9710AA0AD53EF8BF3B419C25A5A43)] | [added: | | | [83](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_223) | | |]

| [removed: [12.](#sA94D995A28DB536282865D593DEA7833)] [added: [12.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_226)] | | [added: | | | |] [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#sA94D995A28DB536282865D593DEA7833)] [added: Matters](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_226)] | | [removed: [76](#sA94D995A28DB536282865D593DEA7833)] | [added: | | | [83](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_226) | | |]

| [removed: [13.](#sF31DE7CACC0F5D04BD550D5B09D17505)] [added: [13.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_229)] | | [added: | | | |] [Certain Relationships and Related Transactions, and Director [removed: Independence](#sF31DE7CACC0F5D04BD550D5B09D17505)] [added: Independence](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_229)] | | [removed: [76](#sF31DE7CACC0F5D04BD550D5B09D17505)] | [added: | | | [83](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_229) | | |]

| [removed: [14.](#s9CCD27462F9C501B98316EF7A28114C7)] [added: [14.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_232)] | | [added: | | | |] [Principal Accountant Fees and [removed: Services](#s9CCD27462F9C501B98316EF7A28114C7)] [added: Services](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_232)] | | [removed: [76](#s9CCD27462F9C501B98316EF7A28114C7)] | [added: | | | [83](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_232) | | |]

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

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

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

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

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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

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

| | | | | | | [PART I](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_10) | | | | | | | | |

| [1.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_13) | | | | | | [Business](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_13) | | | | | | [2](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_13) | | |

| [2.](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_22) | | | | | | [Properties](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_22) | | | | | | [12](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_22) | | |

| | | | | | | [PART II](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_31) | | | | | | | | |

| | | | | | | [PART IV](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_235) | | | | | | | | |

| | | | | | | [Signatures](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_244) | | | | | | [88](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_244) | | |

| | | | | |

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

| | | [PART I](#s6ACE788B22505EA985BCD9DE2C69314F) | | |

| [1.](#s41244AAE978A5CEE957AC19097C083DF) | | [Business](#s41244AAE978A5CEE957AC19097C083DF) | | [2](#s41244AAE978A5CEE957AC19097C083DF) |

| [2.](#sAFA9C1D5DD0F5B61A62F08EEE1249D11) | | [Properties](#sAFA9C1D5DD0F5B61A62F08EEE1249D11) | | [10](#sAFA9C1D5DD0F5B61A62F08EEE1249D11) |

| | | [PART II](#s783F0AD7A9205C6787CC8F24F1CBC35B) | | |

| | | [PART IV](#s06B4512914925EB2B679B21DBAE3563C) | | |

| | | [Signatures](#s4B7DF6852FE05833BDBA69617DDFA3F9) | | [81](#s4B7DF6852FE05833BDBA69617DDFA3F9) |

| | |

| --- | --- |

| | |

| --- | --- |

The table below lists principal North American properties [removed: used by our continuing operations.][added: as of December 31, 2020.]

| Business Segment | | [added: | | | |] Manufacturing | | | [added: | | |] Warehouse [removed: and Distribution] [added: and Distribution] | | [added: |]

| Plumbing Products | | [removed: 20] | | | [removed: 7] | [added: 21] | [added: | | | | | 8 | | |]

| Decorative Architectural Products | | [added: | | | |] 8 | | | [removed: 16] | | [added: | 18 | | |]

| Totals | | [removed: 28] | | | [removed: 23] | [added: 29] | [added: | | | | | 26 | | |]

Most of our North American facilities [removed: used by our continuing operations] range from single warehouse buildings to complex manufacturing facilities.

The table below lists principal properties [removed: used by our continuing operations] outside of North [removed: America.][added: America as of December 31, 2020.]

| Plumbing Products | | [added: | | | |] 10 | | | [removed: 18] | | [added: | 16 | | |]

| Decorative Architectural Products | | [added: | | | |] — | | | [added: | | |] — | | [added: |]

| Totals | | [added: | | | |] 10 | | | [removed: 18] | | [added: | 16 | | |]

Most of our international facilities [removed: used by our continuing operations] are in China, Germany and the United Kingdom.

We [removed: continue to] [added: also] lease an office facility in Luxembourg, which serves as a headquarters for most of our foreign operations.

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

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

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

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

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

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

| Business Segment | | | | | | Manufacturing | | | | | | Warehouse and Distribution | | |

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

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

| | | | | | | |

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

Our Masco Cabinetry business uses 8 manufacturing facilities and 3 warehouse buildings, each located within North America.

There are no international properties associated with our Masco Cabinetry business.

| | |

| --- | --- |

| | |

| --- | --- |

On January 31, [removed: 2020,] [added: 2021,] there were approximately [removed: 3,100] [added: 2,900] holders of record of our common stock.

In September 2019, our Board of Directors authorized the repurchase, for retirement, of up to $2.0 billion of shares of our common stock in open-market transactions or [removed: otherwise, replacing the previous authorization established by our Board of Directors in 2017.][added: otherwise.]

During [removed: 2019,] [added: 2020,] we repurchased and retired [removed: 20.1] [added: 18.8] million shares of our common stock (including [removed: 0.6] [added: 0.4] million shares to offset the dilutive impact of [removed: long-term] [added: restricted] stock [removed: awards] [added: units] granted during the year), for approximately [removed: $896] [added: $727] million.

At December 31, [removed: 2019,] [added: 2020,] we had [removed: $1.5 billion] [added: $774 million] remaining under the 2019 authorization.

The following table provides information regarding the repurchase of our common stock for the three-month period ended December 31, [removed: 2019.][added: 2020.]

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

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: 2014] [added: 2015] through December 31, [removed: 2019,] [added: 2020,] when the closing price of our common stock was [removed: $47.99.][added: $54.93.]

The graph assumes investments of $100 on December 31, [removed: 2014] [added: 2015] 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: 2014] [added: 2015] 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: 2015] | | [added: 2016] | | [removed: 2016] | | | | 2017 | | | | [added: | |] 2018 | | | | [added: | |] 2019 | | | [added: | | | 2020 | | |]

Subject to declaration by our Board of Directors, we intend to increase the annual dividend to $0.94 per share, beginning in the second quarter of 2021.

Our Board of Directors authorized the repurchase, for retirement, of up to $2.0 billion shares of our common stock in open-market transactions or otherwise, effective February 10, 2021, replacing the 2019 authorization.

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

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

| 10/1/20 - 10/31/20 | | | 93,847 | | | | | | $ | 53.28 | | | | | 93,847 | | | | | | $ | 894,936,955 | |

| 11/1/20 - 11/30/20 | | | 921,892 | | | | | | $ | 54.99 | | | | | 921,892 | | | | | | $ | 844,243,773 | |

| 12/1/20 - 12/31/20 | | | 1,315,241 | | | | | | $ | 53.23 | | | | | 1,315,241 | | | | | | $ | 774,230,631 | |

| Total for the quarter | | | 2,330,980 | | | | | | | | | | | | 2,330,980 | | | | | | $ | 774,230,631 | |

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

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

| Masco | | | $ | 111.73 | | | | | $ | 155.27 | | | | | $ | 103.32 | | | | | $ | 169.58 | | | | | $ | 194.10 | |

| S&P 500 Index | | | $ | 109.54 | | | | | $ | 130.81 | | | | | $ | 122.65 | | | | | $ | 158.07 | | | | | $ | 183.77 | |

| S&P Industrials Index | | | $ | 116.08 | | | | | $ | 137.60 | | | | | $ | 116.96 | | | | | $ | 148.34 | | | | | $ | 161.70 | |

| S&P Consumer Durables & Apparel Index | | | $ | 92.67 | | | | | $ | 108.05 | | | | | $ | 93.67 | | | | | $ | 123.90 | | | | | $ | 146.71 | |

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

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

| 10/1/19 - 10/31/19 | 726,500 | | | $ | 42.52 | | | 726,500 | | | $ | 1,926,741,040 | |

| 11/1/19 - 11/30/19 (A) | 7,869,212 | | | $ | 54.03 | | | 7,869,212 | | | $ | 1,501,539,755 | |

| 12/1/19 - 12/31/19 | — | | | $ | — | | | — | | | $ | 1,501,539,755 | |

| Total for the quarter | 8,595,712 | | | | | | | 8,595,712 | | | $ | 1,501,539,755 | |

_____________________________

| | |

| --- | --- |

| (A) | In November 2019, we entered into an accelerated stock repurchase transaction whereby we agreed to repurchase a total of $400 million of our common stock with an initial delivery of 7.3 million shares. This transaction will be completed in February 2020, at which time we anticipate we will receive, at no additional cost, 1.2 million additional shares of our common stock resulting from expected changes in the volume weighted average stock price of our common stock over the term of the transaction. The average price paid per common share does not reflect the holdback shares that we expect to receive upon completion of the accelerated stock repurchase transaction. If we had received the expected additional 1.2 million shares at inception of the accelerated stock repurchase transaction, the total number of shares purchased under this transaction would have been approximately 8.5 million with an average price paid per common share of approximately $47.25. |

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

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

| Masco | $ | 129.60 | | | $ | 146.62 | | | $ | 206.07 | | | $ | 138.69 | | | $ | 230.60 | |

| S&P 500 Index | $ | 101.38 | | | $ | 113.51 | | | $ | 138.29 | | | $ | 132.23 | | | $ | 173.86 | |

| S&P Industrials Index | $ | 97.47 | | | $ | 115.85 | | | $ | 140.22 | | | $ | 121.58 | | | $ | 157.29 | |

| S&P Consumer Durables & Apparel Index | $ | 99.25 | | | $ | 93.48 | | | $ | 110.85 | | | $ | 97.60 | | | $ | 131.17 | |

| | [added: | |] Dollars in Millions (Except Per Common Share Data) | | | | | | | | | | | | | | | | | | | [added: | | | | | | | |]

| | [added: | | 2020 | | | | | |] 2019 | | | | [added: | |] 2018 | | | | [removed: 2017] | | [added: 2017] | | [removed: 2016] | | | | [removed: 2015] [added: 2016] | | |

| Net sales [removed: (1)(2)] [added: (1)] | [added: | |] $ | [removed: 6,707] [added: 7,188] | | | [added: | |] $ | [removed: 6,654] [added: 6,707] | | | [added: | |] $ | [removed: 6,014] [added: 6,654] | | | [added: | |] $ | [removed: 5,754] [added: 6,014] | | | [added: | |] $ | [removed: 5,513] [added: 5,754] | |

| Operating profit [removed: (1)(2)(3)] [added: (1)] | [added: | | 1,295 | | | | | |] 1,088 | | | | [added: | |] 1,077 | | | | [removed: 1,029] | | [added: 1,029] | | [removed: 986] | | | | [removed: 798] [added: 986] | | |

| Income from continuing operations attributable to Masco Corporation [removed: (1)(2)] [added: (1)] | [added: | | 810 | | | | | |] 639 | | | | [removed: 636] | | [added: 636] | | [removed: 426] | | | | 426 | | | | [removed: 282] | | [added: 426] | [added: | |]

| Income per common share from continuing operations [removed: (1)(2):] [added: (1):] | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Basic | [added: | |] $ | [removed: 2.21] [added: 3.05] | | | [added: | |] $ | [removed: 2.06] [added: 2.21] | | | [added: | |] $ | [removed: 1.34] [added: 2.06] | | | [added: | |] $ | [removed: 1.29] [added: 1.34] | | | [added: | |] $ | [removed: 0.82] [added: 1.29] | |

| Diluted | [added: | | 3.04 | | | | | |] 2.20 | | | | [added: | |] 2.05 | | | | [removed: 1.33] | | [added: 1.33] | | [removed: 1.28] | | | | [removed: 0.81] [added: 1.28] | | |

| Dividends declared | [added: | | 0.550 | | | | | |] 0.510 | | | | [added: | |] 0.450 | | | | [removed: 0.410] | | [added: 0.410] | | [removed: 0.390] | | | | [removed: 0.370] [added: 0.390] | | |

| Dividends paid | [added: | | 0.545 | | | | | |] 0.495 | | | | [added: | |] 0.435 | | | | [removed: 0.405] | | [added: 0.405] | | [removed: 0.385] | | | | [removed: 0.365] [added: 0.385] | | |

| At December 31: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Total assets [removed: (2)] | [added: | |] $ | [removed: 5,027] [added: 5,777] | | | [added: | |] $ | [removed: 5,393] [added: 5,027] | | | [added: | |] $ | [removed: 5,534] [added: 5,393] | | | [added: | |] $ | [removed: 5,164] [added: 5,534] | | | [added: | |] $ | [removed: 5,664] [added: 5,164] | |

| Long-term debt | [added: | | 2,792 | | | | | |] 2,771 | | | | [added: | |] 2,971 | | | | [removed: 2,969] | | [added: 2,969] | | [removed: 2,995] | | | | [removed: 2,403] [added: 2,995] | | |

| Shareholders' [removed: (deficit)] equity [removed: (2)] [added: (deficit)] | [removed: (56] | | [removed: )] [added: 421] | | [added: | | | | (56) | | | | | |] 69 | | | | [removed: 183] | | [added: 183] | | [removed: (96] | | [removed: )] | | [removed: 58] [added: (96)] | | |

[removed: | (1) | Amounts exclude discontinued operations for all periods presented.] Refer to Note [removed: B] [added: C] to the consolidated financial statements for further details. [removed: |]

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

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

______________________________

(1)Amounts exclude discontinued operations for all periods presented.

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

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

| | |

| --- | --- |

| (2) | Net sales, operating profit, income from continuing operations attributable to Masco Corporation, income per common share from continuing operations, total assets and shareholders' equity for 2015 has not been recast for the impact of the adoption of Accounting Standards Codification 606. |

| (3) | Operating profit for 2015 has not been recast for the impact of the adoption of Accounting Standards Update 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." |

We assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2019] [added: 2020] using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in *Internal Control – Integrated Framework* (2013).

Based on this assessment, we have determined that our internal control over financial reporting was effective as of December 31, [removed: 2019.][added: 2020.]

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] as stated in their report, which is presented herein.

Their report expressed an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, [removed: 2019] [added: 2020] and expressed an unqualified opinion on our [removed: 2019] [added: 2020] consolidated financial statements.

We have audited the accompanying consolidated balance sheets of Masco Corporation and its subsidiaries (the “Company”) as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the related consolidated statements of operations, of comprehensive income (loss), of shareholders' equity and of cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] including the related notes and 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, [removed: 2019,] [added: 2020,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2019] [added: 2020] 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: 2019,] [added: 2020,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the COSO.

As described in Notes A and H to the consolidated financial statements, the Company’s consolidated goodwill balance was [removed: $509] [added: $563] million as of December 31, [removed: 2019.][added: 2020.]

Management estimates fair value by using a discounted cash flow [removed: model or a market approach.][added: model.]

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments is a critical audit matter are [removed: there was] [added: (i) the] significant judgment by management when developing the fair value measurements of the reporting [removed: units.][added: units; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s discounted cash flow model, including significant assumptions related to forecasted sales and the discount rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.]

These procedures also included, among others, testing management’s process for developing the fair value estimates; evaluating the appropriateness of the [added: discounted cash flow] model; testing the completeness, accuracy, and relevance of underlying data used in the model; and, evaluating the significant assumptions used by management, including forecasted sales and the discount rates.

December [removed: 31, 2019 and 2018][added: 31, 2020 and 2019]

| | [added: | | 2020 | | | | | |] 2019 | | | | [added: | |] 2018 | | |

| ASSETS | | | | | | | | [added: | | | |]

| Current Assets: | | | | | | | | [added: | | | |]

| Cash and cash investments | [added: | |] $ | [removed: 697] [added: 1,326] | | | [added: | |] $ | [removed: 552] [added: 697] | |

| Receivables | [removed: 997] | | [added: 1,138] | | [removed: 990] | | | [added: | 997 | | |]

| Inventories | [removed: 754] | | [added: 876] | | [removed: 798] | | | [added: | 754 | | |]

| Prepaid expenses and other | [removed: 90] | | [added: 5] | | [removed: 84] | | | [added: | 5 | | |]

| Assets held for sale | [removed: 173] | | [added: —] | | [removed: 342] | | | [added: | 173 | | |]

| Total current assets | [removed: 2,711] | | [added: 3,489] | | [removed: 2,766] | | | [added: | 2,711 | | |]

| Property and equipment, net | [removed: 878] | | [added: 908] | | [removed: 885] | | | [added: | 878 | | |]

| Goodwill | [removed: 509] | | [added: 563] | | [removed: 511] | | | [added: | 509 | | |]

| Other intangible assets, net | [removed: 259] | | [added: 357] | | [removed: 288] | | | [added: | 259 | | |]

| Operating lease right-of-use assets | [removed: 176] | | [added: 166] | | [removed: —] | | | [added: | 176 | | |]

| Other assets | [removed: 139] | | [added: 294] | | [removed: 90] | | | [added: | 139 | | |]

| Assets held for sale | [removed: 355] | | [added: —] | | [removed: 853] | | | [added: | 355 | | |]

| Total assets | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |] $ | [added: 5,777 | | | | | $ |] 5,027 | | | [added: | |] $ | 5,393 | |

| LIABILITIES | | | | | | | | [added: | | | |]

| Current Liabilities: | | | | | | | | [added: | | | |]

| Accounts payable | [added: | |] $ | [removed: 697] [added: 893] | | | [added: | |] $ | [removed: 736] [added: 697] | |

| Notes payable | [removed: 2] | | [added: 3] | | [removed: 8] | | | [added: | 2 | | |]

| Accrued liabilities | [removed: 700] | | [added: 1,038] | | [removed: 645] | | | [added: | 700 | | |]

| Liabilities held for sale | [removed: 149] | | [added: —] | | [removed: 295] | | | [added: | 149 | | |]

| Total current liabilities | [removed: 1,548] | | [added: 1,934] | | [removed: 1,684] | | | [added: | 1,548 | | |]

| Long-term debt | [removed: 2,771] | | [added: 2,792] | | [removed: 2,971] | | | [added: | 2,771 | | |]

| Other liabilities | [removed: 751] | | [added: (4)] | | [removed: 549] | | | [added: | (5) | | |]

| Liabilities held for sale | [removed: 13] | | [added: —] | | [removed: 120] | | | [added: | 13 | | |]

| Total liabilities | [removed: 5,083] | | [added: 5,356] | | [removed: 5,324] | | | [added: | 5,083 | | |]

February 9, 2021

| Noncurrent operating lease liabilities | | | 149 | | | | | | 162 | | |

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

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

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

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

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

For the Years Ended December 31, 2020, 2019 and 2018

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

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

| Less: Net income attributable to noncontrolling interest | | | 52 | | | | | | 45 | | | | | | 50 | | |

| Net income attributable to Masco Corporation | | | $ | 1,224 | | | | | $ | 935 | | | | | $ | 734 | |

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

| | | | 18 | | | | | | (4) | | | | | | (17) | | |

For the Years Ended December 31, 2020, 2019 and 2018

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

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

| Net income | | | $ | 1,276 | | | | | $ | 980 | | | | | $ | 784 | |

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

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

| Dividends paid-in-kind | | | (10) | | | | | | — | | | | | | — | | |

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

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

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

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

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

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

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

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

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

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

For the Years Ended December 31, 2020, 2019 and 2018

| Shares retired: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Cumulative effect of adoption of new credit loss standard (refer to Note A) | | | (1) | | | | | | | | | | | | | | | | | | (1) | | | | | | | | | | | | | | |

| Balance, January 1, 2020 | | | $ | (57) | | | | | $ | 276 | | | | | $ | — | | | | | $ | (333) | | | | | $ | (179) | | | | | $ | 179 | |

| Total comprehensive income | | | 1,331 | | | | | | | | | | | | | | | | | | 1,224 | | | | | | 37 | | | | | | 70 | | |

| Shares retired: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Repurchased | | | (727) | | | | | | (19) | | | | | | (53) | | | | | | (655) | | | | | | | | | | | | | | |

| Balance, December 31, 2020 | | | $ | 421 | | | | | $ | 258 | | | | | $ | — | | | | | $ | 79 | | | | | $ | (142) | | | | | $ | 226 | |

We monitor our exposure for credit losses on customer receivable balances and other financial investments measured at amortized cost and the credit worthiness of customers on an on-going basis, including requiring the completion of credit applications and performing periodic reviews of our open accounts receivable.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s discounted cash flow model, including significant assumptions related to forecasted sales and the discount rates.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

February 11, 2020

| | | | | | | | |

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

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

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

| | (4 | | ) | | (17 | | ) | | 29 | | |

| Debt extinguishment costs | (2 | | ) | | — | | | | (104 | | ) |

| Increase in debt | — | | | | — | | | | 2 | | |

| Purchases of short-term bank deposits | — | | | | — | | | | (106 | | ) |

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

| Balance, January 1, 2017 | $ | (96 | ) | | $ | 318 | | | $ | — | | | $ | (374 | ) | | $ | (235 | ) | | $ | 195 | |

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

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

Short-Term Bank Deposits. Occasionally, we invest a portion of our foreign excess cash in short-term bank deposits.

These highly liquid investments have original maturities between three and twelve months and are valued at cost, which approximate their fair value.

These short-term bank deposits are classified in the current assets section of our consolidated balance sheets, and interest income related to short-term bank deposits is recorded in our consolidated statements of operations in other income (expense), net.

For our Masco Cabinetry reporting unit, we utilized a market approach to determine its fair value instead of the discounted cash flow method, as we were actively marketing the Masco Cabinetry business for sale and on November 14, 2019 we entered into a definitive agreement to sell the business.

Such expense is recognized ratably over the vesting period, typically five years.

We measure compensation expense for SARs using a Black-Scholes option pricing model; such expense is recognized ratably over the vesting period, typically five years.

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

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

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

Recently Adopted Accounting Pronouncements. In February 2016, the Financial Accounting Standards Board ("FASB") issued a new standard for leases, ASC 842, which changes the accounting model for identifying and accounting for leases.

We adopted ASC 842 on January 1, 2019 using the optional transition method, which allows for initial application of the new standard beginning at the adoption date.

We elected the package of practical expedients that allows us to forgo reassessing a) whether any existing contracts are or contain leases, b) the lease classification for any existing leases, and c) whether initial direct costs for any existing leases are capitalized.

We also elected the practical expedient to use hindsight with respect to lease renewals, terminations, and purchase options when determining the lease term and in assessing impairment of the assets related to leases existing at the time of adoption.

As a result of the standard, we recorded $236 million of operating lease ROU assets, $45 million of short-term operating lease liabilities, and $214 million of long-term operating lease liabilities on the date of adoption which includes assets and liabilities that have subsequently been reclassified as held for sale or disposed of.

Our accounting for finance leases remained unchanged.

The standard did not impact our consolidated statements of operations or statements of cash flows.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which improves and simplifies accounting rules around hedge accounting and better portrays the economic results of an entity's risk management activities in its financial statements.

We adopted ASU 2017-12 on January 1, 2019.

In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting," which modifies the accounting for share-based payment awards issued to nonemployees to largely align it with the accounting for share-based payment awards issued to employees.

ASU 2018-15 allows for either retrospective adoption or prospective adoption to all implementation costs incurred after the date of adoption.

ASU 2019-12 is effective for us for annual periods beginning January 1, 2021.

We are currently reviewing the provisions of this new pronouncement and the impact, if any, the adoption of this guidance has on our financial position and results of operations.

B.

Additionally, on November 14, 2019, we entered into a definitive agreement to sell Masco Cabinetry LLC ("Cabinetry"), a manufacturer of cabinetry products, for approximately $1.0 billion, consisting of $850 million in cash at closing and preferred stock issued by a holding company of the buyer with a liquidation preference of $150 million.

The closing of the sale is expected during the first quarter of 2020, subject to customary closing conditions, and we expect to recognize a gain on the divestiture of approximately $600 million.

The Company's Principal Executive Officer and Principal Financial Officer have concluded, based on an evaluation of the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15 that, as of December 31, [removed: 2019,] [added: 2020,] 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: 2019,] [added: 2020,] 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.

Amendments to or waivers of our Code of [removed: Business] Ethics for directors and executive officers, if any, will be posted on our website.

Other information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders, to be filed before April [removed: 29, 2020,] [added: 28, 2021,] and such information is incorporated herein by reference.

Information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders, to be filed before April [removed: 29, 2020] [added: 28, 2021] and such information is incorporated herein by reference.

The following table sets forth information as of December 31, [removed: 2019] [added: 2020] concerning the 2014 Plan, which was approved by our stockholders.

| Plan Category | [added: | |] Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | | | [added: | | |] Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | | | [added: | |] Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) | | [added: |]

The remaining information required by this Item will be contained in our definitive Proxy Statement for our [removed: 2020] [added: 2021] Annual Meeting of Stockholders, to be filed before April [removed: 29, 2020,] [added: 28, 2021,] and such information is incorporated herein by reference.

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

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

| Equity compensation plans approved by stockholders | | | 2,487,725 | | | | | | $ | 33.44 | | | | | 13,353,205 | | |

| | | | | | | | | | |

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

| Equity compensation plans approved by stockholders | 3,005,824 | | | $ | 26.84 | | | 13,913,842 | |

Information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders, to be filed before April [removed: 29, 2020,] [added: 28, 2021,] and such information is incorporated herein by reference.

Information required by this Item will be contained in our definitive Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders, to be filed before April [removed: 29, 2020,] [added: 28, 2021,] and such information is incorporated herein by reference.

[removed: | (1) | *Financial] [added: (1)*Financial] Statements.* Our consolidated financial statements included in Item 8 hereof, as required at December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017,] [added: 2018,] consist of the following: [removed: |]

| [Consolidated Balance [removed: Sheets](#s7E9821A830B1576D822E2101E54D9161)] [added: Sheets](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_91)] | [removed: [34](#s7E9821A830B1576D822E2101E54D9161)] | [added: | [38](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_91) | | |]

| [Consolidated Statements of [removed: Operations](#s462A67605FEF5D25A816343B8FB21B56)] [added: Operations](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_97)] | [removed: [35](#s462A67605FEF5D25A816343B8FB21B56)] | [added: | [39](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_97) | | |]

| [Consolidated Statements of Comprehensive Income [removed: (Loss)](#s5C66B1588E255A64BEB77D793CAE1622)] [added: (Loss)](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_100)] | [removed: [36](#s5C66B1588E255A64BEB77D793CAE1622)] | [added: | [40](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_100) | | |]

| [Consolidated Statements of Cash [removed: Flows](#s283657D3016D5A41BFB17F85B3DCA9C6)] [added: Flows](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_103)] | [removed: [37](#s283657D3016D5A41BFB17F85B3DCA9C6)] | [added: | [41](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_103) | | |]

| [Consolidated Statements of Shareholders' [removed: Equity](#s60CFC770A3315AC0B04964C1AFFEFA2F)] [added: Equity](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_106)] | [removed: [38](#s60CFC770A3315AC0B04964C1AFFEFA2F)] | [added: | [42](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_106) | | |]

| [Notes to Consolidated Financial [removed: Statements](#s4B418D4AEADC5F58AB4F41D7DA8AB507)] [added: Statements](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_112)] | [removed: [39](#s4B418D4AEADC5F58AB4F41D7DA8AB507)] | [added: | [43](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_112) | | |]

[removed: | (2) | *Financial] [added: (2)*Financial] Statement Schedule.* [removed: |]

Our Financial Statement Schedule appended hereto, as required for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017,] [added: 2018,] consists of the following:

| [II. Valuation and Qualifying [removed: Accounts](#s9CBC58FC68FF54E483A348703FC9EC63)] [added: Accounts](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_247)] | [removed: [83](#s9CBC58FC68FF54E483A348703FC9EC63)] | [added: | [90](#i7cc3216c0a7f4e7fa4182f913d4e3dcd_247) | | |]

[removed: | (3) | *Exhibits.* |][added: (3)*Exhibits.*]

| Exhibit No. | | | | | | [added: | | | | | | | | | | | |] Incorporated By Reference | | | | | | [removed: Filed Herewith] | [added: | | | | | | | | | | | Filed Herewith | | |]

| | [added: | |] Exhibit Description | | | | [added: | | | | | | | |] Form | | [added: | | | |] Exhibit | | [added: | | | |] Filing Date | | | | [added: | | | | | | | |]

| [2.a](http://www.sec.gov/Archives/edgar/data/62996/000095010319013600/dp113801_ex0201.htm) | | [added: | | | |] Stock Purchase Agreement, dated September 29, 2019, by and between Masco Corporation and MIWD Holding Company LLC. | | | | [added: | | | | | | | |] 8-K | | [added: | | | |] 2.1 | | [added: | | | |] 10/03/2019 | | | [added: | | | | | |]

| [2.b](http://www.sec.gov/Archives/edgar/data/62996/000095010319015540/dp115905_ex0201.htm) | | [added: | | | |] Securities Purchase Agreement, dated November 14, 2019, by and between Masco Corporation and ACP Products, Inc. | | | | [added: | | | | | | | |] 8-K | | [added: | | | |] 2.1 | | [added: | | | |] 11/18/2019 | | | [added: | | | | | |]

| Note 1: | | [added: | | | |] Disclosure schedules and certain exhibits have been omitted from Exhibit No. 2.a and 2.b pursuant to Item 601(b)(2) of Regulation S-K. Each Agreement as filed identifies such schedules and exhibits, including the general nature of their contents. Masco agrees to furnish a copy of any omitted attachment to the Securities Exchange Commission on a confidential basis upon request. | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | |]

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

| [removed: [3.b](http://www.sec.gov/Archives/edgar/data/62996/000006299617000008/exhibit3b.htm)] [added: [3.b](https://www.sec.gov/Archives/edgar/data/62996/000006299621000008/exhibit3b.htm)] | | [added: | | | |] Bylaws of Masco Corporation, as Amended and Restated [removed: May 8, 2012.] [added: on February 5, 2021.] | | | | [removed: 2016 10-K] | | [removed: 3.b] | | [removed: 02/09/2017] | | | [added: | | | | | | | | | | | | | | | | | | | X | | |]

| [4.a](http://www.sec.gov/Archives/edgar/data/62996/000006299617000008/exhibit4a.htm) | | [added: | | | |] 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: | | | | [added: | | | | | | | |] 2016 10-K | | [added: | | | |] 4.a | | [added: | | | |] 02/09/2017 | | | [added: | | | | | |]

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

| [removed: Exhibit No.] [added: Exhibit No.] | | | | | | | [added: | | | | | | | | | | | | | |] Incorporated By Reference | | | | | | [removed: Filed Herewith] | [added: | | | | | | | | | | | Filed Herewith | | |]

| | [added: | |] Exhibit Description | | | | | [added: | | | | | | | | | |] Form | | [added: | | | |] Exhibit | | [added: | | | |] Filing Date | | | | [added: | | | | | | | |]

| [4.b](http://www.sec.gov/Archives/edgar/data/62996/000006299617000008/exhibit4b.htm) | | [added: | | | |] 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: | | | | | [added: | | | | | | | | | |] 2016 10-K | | [added: | | | |] 4.b | | [added: | | | |] 02/09/2017 | | | [added: | | | | | |]

| [4.b.i](http://www.sec.gov/Archives/edgar/data/62996/000006299618000015/exhibit4bi.htm) | | | | [added: | | | | | | | |] 6-1/2% Notes Due August 15, 2032; | | | [added: | | | | | |] 2017 10-K | | [added: | | | |] 4.b.i | | [added: | | | |] 02/08/2018 | | | [added: | | | | | |]

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

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

| [removed: [4.b.iv](http://www.sec.gov/Archives/edgar/data/62996/000119312516506430/d157077dex41.htm)] [added: [4.b.](http://www.sec.gov/Archives/edgar/data/62996/000119312516506430/d157077dex42.htm)[i](http://www.sec.gov/Archives/edgar/data/62996/000119312516506430/d157077dex42.htm)[v](http://www.sec.gov/Archives/edgar/data/62996/000119312516506430/d157077dex42.htm)] | | | | [removed: 3.500%] [added: | | | | | | | | 4.375%] Notes Due April 1, [removed: 2021;] [added: 2026;] | | | [added: | | | | | |] 8-K | | [removed: 4.1] | | [added: | | 4.2 | | | | | |] 03/16/2016 | | | [added: | | | | | |]

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

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

| Note 2: | | [added: | | | |] 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. | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: [4.c](https://www.sec.gov/Archives/edgar/data/62996/000006299620000006/exhibit4c.htm)] [added: [4.c](http://www.sec.gov/Archives/edgar/data/62996/000006299620000006/exhibit4c.htm)] | | [added: | | | |] Description of securities. | | | | | | | | | | | [removed: X] | [added: | | | 2019 10-K | | | | | | 4.c | | | | | | 02/11/2020 | | | | | | | | |]

| [10.a](http://www.sec.gov/Archives/edgar/data/62996/000006299619000017/exhibit10-creditagreement.htm) | | [added: | | | |] Credit Agreement dated as of March 13, 2019 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. and PNC Bank, National Association, as Co-Syndication Agents, and Deutsche Bank Securities, Inc., Royal Bank of Canada, SunTrust Bank, Bank of America, N.A., Fifth Third Bank and Wells Fargo Bank, National Association, as Co-Documentation Agents. | | | | | [added: | | | | | | | | | |] 8-K | | [added: | | | |] 10 | | [added: | | | |] 03/19/2019 | | | [added: | | | | | |]

| Note 3: | | [added: | | | |] Exhibits 10.b through [removed: 10.l] [added: 10.k] constitute the management contracts and executive compensatory plans or arrangements in which certain of the directors and executive officers of the Company participate. | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | |]

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

| | | [added: | | | |] Form of Stock Option Grant Agreements: | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | |]

| [10.b.i](http://www.sec.gov/Archives/edgar/data/62996/000006299618000015/exhibit10biii.htm) | | | | [added: | | | | | | | |] for grants on or after January 1, 2013; | | | [added: | | | | | |] 2017 10-K | | [added: | | | |] 10.b.iii | | [added: | | | |] 02/08/2018 | | | [added: | | | | | |]

| [10.b.ii](http://www.sec.gov/Archives/edgar/data/62996/000006299618000015/exhibit10biv.htm) | | | | [added: | | | | | | | |] for grants during 2012; and | | | [added: | | | | | |] 2017 10-K | | [added: | | | |] 10.b.iv | | [added: | | | |] 02/08/2018 | | | [added: | | | | | |]

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

| [10.c](http://www.sec.gov/Archives/edgar/data/62996/000006299616000041/exhibit10a63016.htm) | | [added: | | | |] Masco Corporation 2014 Long Term Stock Incentive Plan (Amended and Restated May 9, 2016): | | | | [added: | | | | | | | |] 10-Q | | [added: | | | |] 10.a | | [added: | | | |] 07/26/2016 | | | [added: | | | | | |]

| | | [added: | | | |] Form of Restricted Stock Award Agreements: | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | |]

| | | | | | |

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

| | | | | | |

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

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

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

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

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

| [4.b.vii](http://www.sec.gov/Archives/edgar/data/62996/000095010320018348/dp136804_ex0403.htm) | | | | | | Second Supplemental Indenture, dated as of September 18, 2020, between Masco Corporation and The Bank of New York Mellon Trust Company, N.A., as successor trustee. | | | | | | | | | | | | | | | 8-K | | | | | | 4.3 | | | | | | 09/18/2020 | | | | | | | | |

| [4.b.viii](http://www.sec.gov/Archives/edgar/data/62996/000095010320018348/dp136804_ex0402.htm) | | | | | | | | | | | | 4.500% Notes Due May 15, 2047 | | | | | | | | | 8-K | | | | | | 4.2 | | | | | | 09/18/2020 | | | | | | | | |

| [4.b.i](http://www.sec.gov/Archives/edgar/data/62996/000095010320018348/dp136804_ex0401.htm)x | | | | | | | | | | | | 2.000% Notes Due October 1, 2030 | | | | | | | | | 8-K | | | | | | 4.1 | | | | | | 09/18/2020 | | | | | | | | |

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

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

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

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

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

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

| | |

| --- | --- |

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

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

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

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

| [4.b.v](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 | | |

| [10.c.xiv](https://www.sec.gov/Archives/edgar/data/62996/000006299620000006/exhibit10cxiv.htm) | | Form of Restricted Stock Unit Award Agreement for Non-Employee Directors for grants on or after February 7, 2020. | | | | | | | | | | X |

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

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

| [10.l](http://www.sec.gov/Archives/edgar/data/62996/000006299619000063/exhibit10093019.htm) | | Separation and Release Agreement dated July 19, 2019, between Amit Bhargava and Masco Corporation. | | 10-Q | | 10 | | 10/30/2019 | | |

| | [added: | |] MASCO CORPORATION | | [added: | | | |]

| | [added: | |] By: | [added: | |] /s/ John G. Sznewajs | [added: | |]

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

[removed: February 11, 2020][added: | 2020 | | | | | | $ | 5 | | (a) | | | $ | 3 | | | | | $ | — | | | | | | | | $ | (1) | | | | | (b) | | | $ | 7 | |]

| Principal Executive Officer: | | | | | [added: | | | | | | | | | |]

| /s/ Keith J. Allman | | [added: | | | |] *President and Chief [removed: Executive* *Officer] [added: Executive Officer] and Director* | | | [added: | | | | | |]

| Keith J. Allman | | | | | [added: | | | | | | | | | |]

| Principal Financial Officer: | | | | | [added: | | | | | | | | | |]