2020 Annual Report
Masco Corporation is
a global leader in the
design, manufacture and
distribution of branded
home improvement and
building products. Our
portfolio of products
enhances the way
consumers all over the
world experience and
enjoy their living spaces.
On the Cover: Behr Paint Company offers its most popular colors and
painting kits delivered right to your door. Behr’s all-in-one painting kit
includes a paint tray, liner, roller frame, professional nap roller and thin
angled sash brush. For more information, visit behr.com/express.
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TO OUR
SHAREHOLDERS:
In early 2020, as COVID-19 started reshaping our
lives, our economy and our business, we were
completing the sale of our Cabinetry business
and focusing our efforts on our higher margin,
less cyclical Plumbing Products and Decorative
Architectural Products segments. To address the
global pandemic, we quickly pivoted and established
three priorities to guide us throughout the year:
1. Keep our employees safe;
2. Meet the needs of our customers; and
3. Position Masco to outperform the recovery.
In the midst of tremendous change and uncertainty,
our 18,000 employees across the globe worked
tirelessly to deliver on these priorities. I extend my
sincere thanks to them for their outstanding efforts.
Our performance during this challenging year was
a testament to their dedication and to our culture,
which leverages the Masco Operating System to
drive results, deliver better solutions and, ultimately,
provide better living possibilities.
4
Along with our employees’ resiliency and our
continued strategic focus, strong consumer
demand for lower-ticket repair and remodeling
products and increased spending on repair and
remodel activity enabled us to deliver exceptional
results in 2020. We delivered strong top-line
growth and gained share in both of our segments,
led by double-digit sales growth at Delta Faucet
Company, Behr Paint Company and Liberty
Hardware.
In our Decorative Architectural Products segment,
with our leading brands, Behr® and Kilz®, and
our strong channel partnerships, we capitalized
on the resurgence of do-it-yourself (DIY) paint
projects, resulting in full-year growth of over 20
percent in this end-user segment. While our pro
paint business declined slightly over the prior year,
we experienced solid improvement in demand
as the year ended. We expect pro paint demand
to continue in 2021 as professional contractors
increasingly re-enter homes and buildings to serve
their customers. Our builders’ hardware business
also benefited in 2020 from increased consumer
demand and contributed to the segment’s results
by delivering solid growth.
In our Plumbing Products segment, Delta Faucet
Company continued to drive robust consumer
demand across our wholesale, retail and
e-commerce customers, and Hansgrohe gained
share in Germany and China, two of its largest
markets. While Watkins Wellness, our spa business,
continues to operate at less than optimal capacity
due to government-mandated employee limitations,
it enters 2021 with record orders and continued
strength of new demand.
Our year-end balance sheet remained strong
and we ended the year with approximately $2.3
billion of balance sheet liquidity, including the full
availability under our credit facility. Our strong cash
generation allowed us to deploy nearly $1.1 billion
in capital toward share repurchases, dividends and
acquisitions.
During 2020, we
repurchased
18.8 million
outstanding
shares and
increased our
annual dividend
by 4% to $0.56
per share,
resulting in
the return of
approximately
$145 million in
dividends to
shareholders.
This marks the seventh consecutive year we have
increased our dividend.
We recently executed three bolt-on acquisitions,
which we expect to contribute to our top-line growth
in 2021:
• We completed the acquisition of Kraus USA,
an online plumbing fixture company focused
on modern, high-quality sinks, faucets and
related products. Kraus will operate as an
affiliate of Delta Faucet Company. Kraus®, a
leading digitally native brand, will complement
our online capabilities in the fast-growing
e-commerce channel.
• In our Decorative Architectural Products
segment, we completed the acquisition of Work
Tools International, a leading manufacturer
of high-quality precision paint tools and
accessories. Work Tools offers brushes, rollers
and mini rollers for both DIY and professional
painters under the Whizz® and Elder & Jenks®
brands.
• In our Plumbing Products segment, Hansgrohe
acquired an over 75% interest in Easy Sanitary
Solutions B.V. (ESS), a Netherlands-based
developer and manufacturer of high-style, linear
drain solutions, in early 2021. ESS shares
Hansgrohe’s focus on innovation and design
and will further expand our strong presence in
the shower space.
5
Underscoring our strong financial position and
our Board’s confidence in our future, we recently
announced our intention to increase our annual
dividend to $0.94 per share from $0.56 per share,
a 68 percent increase, beginning in the second
quarter of 2021. In addition, our Board approved
a new $2 billion share repurchase authorization
effective in early February 2021, replacing the
existing authorization. We are maintaining our
balanced capital allocation strategy to deploy our
free cash flow for dividends, share repurchases
and acquisitions. Based on our strong liquidity
position and our projected free cash flow,
we expect to deploy $800 million for share
repurchases and acquisitions in 2021.
I’m proud to say that in 2020 the Masco team
did everything it could to thrive, grow and develop
during this challenging time. In business and in
life, crisis reveals opportunities and forces us to
find new possibilities, and that was certainly the
case here at Masco.
Our results
demonstrate
the power
of our
differentiated
portfolio of
In this ever-changing environment, our employees
continued to meet the needs of our customers
and deliver long-term value for our shareholders.
Thanks to their dedicated efforts, we surpassed
our earnings per share goal for 2021 a full year
earlier than planned.
As we move forward in 2021, I believe we are well
positioned to continue our growth trajectory and
build on our success. While the recovery from the
pandemic is uncertain and some of its impacts
may last for the foreseeable future, I am confident
that our industry-leading brands, resilient teams
and the strength of the Masco Operating System
will fuel our future growth.
leading repair
Thank you for your continued support of Masco.
and remodel
brands, strong
cash generation
capabilities
and, most of
all, our ability
to execute
and move with
agility.
6
KEITH J. ALLMAN
President and Chief
Executive Officer
OUR BRAND SEGMENTS
P L U M B I N G
P R O D U C T S
We are a leading provider of decorative and
functional plumbing products with broad distribution
channels worldwide. Through our premier brands,
we offer an array of products, including faucets,
plumbing fittings and valves, showerheads and
handheld showers, bath hardware and accessories,
bathtubs, shower bases and enclosures, sinks,
toilets, spas, exercise pools and fitness systems,
and water handling systems.
KEY STRENGTHS
• Strong brands with industry-leading positions
• Broad product range with design and innovation
leadership
• Solid track record of execution
D E C O R AT I V E
A R C H I T E C T U R A L
P R O D U C T S
We are one of the largest suppliers of architectural
coatings and exterior wood care products to the
United States and Canadian do-it-yourself channels.
This segment also includes glass shower doors,
shower accessories, decorative and outdoor
lighting, cabinet, door and window hardware, and
functional hardware.
KEY STRENGTHS
• Behr Paint Company is a market leader with a
long record of innovation
• Comprehensive product and service offerings
for professional and do-it-yourself painters
• Finish, design and category management
expertise in builders’ hardware and lighting
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L E A D E R S H I P T E A M
B O A R D O F D I R E C T O R S
Front Row
Reginald M. Turner, Jr.1, 3
Attorney and Member,
Clark Hill PLC
Keith J. Allman
President and Chief
Executive Officer,
Masco Corporation
Richard A. Manoogian
Chairman Emeritus,
Masco Corporation
John C. Plant 1, 3
Chairman of the Board
and Co-Chief Executive
Officer,
Howmet Aerospace Inc.
Marie A. Ffolkes 1, 2
Chief Executive Officer,
TriMark USA, LLC
Donald R. Parfet 1, 2
Managing Director,
Apjohn Group, LLC
General Partner,
Apjohn Ventures Fund,
Limited Partnership
Back Row
J. Michael Losh 2, 3
Retired Chief Financial
Officer and Executive Vice
President,
General Motors Corporation
Chairman of the Board,
Masco Corporation
Lisa A. Payne 1, 2
Former Vice Chairman and
Chief Financial Officer,
Taubman Centers, Inc.
Charles K. Stevens, III1, 3
Retired Executive Vice
President and Chief
Financial Officer,
General Motors Company
Christopher A. O’Herlihy 1, 2
Vice Chairman,
Illinois Tool Works Inc.
Mark R. Alexander 1, 3
Chief Executive Officer,
Icelandic Provisions, Inc.
1 Member, Audit Committee 2 Member, Organization and Compensation Committee 3 Member, Corporate Governance and Nominating Committee
8
C O R P O R AT E O F F I C E R S
Keith J. Allman
President and
Chief Executive
Officer
David A. Chaika
Vice President,
Treasurer and
Investor Relations
Kenneth G. Cole
Vice President,
General Counsel and
Secretary
John P. Lindow
Vice President,
Controller and
Chief Accounting
Officer
Richard A. O’Reagan
Group President
Jai Shah
Group President
Renee Straber
Vice President, Chief
Human Resource
Officer
John G. Sznewajs
Vice President,
Chief Financial Officer
B U S I N E S S U N I T E X E C U T I V E S
Imran Ahmad
Masco Canada
Jeffrey D. Filley
Behr Paint Company
David B. Humenik
Vapor Technologies
Jeff Slutz
Hüppe GmbH
Thomas S. Assante
Brasscraft Manufacturing
Company
John V. Halso
Brasstech Inc.
Hans-Jürgen Kalmbach
Hansgrohe SE
Mark A. Stull
Liberty Hardware
Manufacturing
Jeffrey J. Burnett
Mercury Plastics LLC
Steven M. Hammock
Watkins Wellness
Kenneth W. Roberts
Delta Faucet Company
Irene Tasi
Kichler Lighting LLC
9
FORWARD-LOOKING STATEMENTS
This Annual Report contains statements that reflect
our views about our future performance and constitute
“forward-looking statements” under the Private
Securities Litigation Reform Act of 1995. Forward-
looking statements can be identified by words such
as “outlook,” “believe,” “anticipate,” “appear,” “may,”
“will,” “should,” “intend,” “plan,” “estimate,” “expect,”
“assume,” “seek,” “forecast,” and similar references
to future periods. Our views about future performance
involve risks and uncertainties that are difficult to
predict and, accordingly, our actual results may differ
materially from the results discussed in our forward-
looking statements. We caution you against relying on
any of these forward-looking statements.
Our future performance may be affected by the levels
of residential repair and remodel activity and, to a
lesser extent, new home construction, our ability to
maintain our strong brands and reputation and to
develop innovative products, our ability to maintain
our competitive position in our industries, our reliance
on key customers, the 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, 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 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 our most recent Annual Report on Form 10-
K, as well as in our Quarterly Reports on Form 10-Q
and in other filings we make with the Securities and
Exchange Commission. Any forward-looking statement
made by us speaks only as of the date on which it was
made. Factors or events that could cause our actual
results to differ may emerge from time to time, and
it is not possible for us to predict all of them. Unless
required by law, we undertake no obligation to update
publicly any forward-looking statements as a result of
new information, future events or otherwise.
10
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number: 1-5794
MASCO CORPORATION
(Exact name of Registrant as Specified in its Charter)
Delaware
(State of Incorporation)
38-1794485
(I.R.S. Employer Identification No.)
17450 College Parkway,
Livonia, Michigan
(Address of Principal Executive Offices)
48152
(Zip Code)
Registrant's telephone number, including area code: (313) 274-7400
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $1.00 par value
Trading Symbol
MAS
Name of Each Exchange
On Which Registered
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☑
☐
Accelerated filer
☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant 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. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
The aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant on June 30, 2020 (based on the
closing sale price of $50.21 of the Registrant's Common Stock, as reported by the New York Stock Exchange on such date) was
approximately $13,053,334,100.
Number of shares outstanding of the Registrant's Common Stock at January 31, 2021:
257,142,348 shares of Common Stock, par value $1.00 per share
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement to be filed for its 2021 Annual Meeting of Stockholders are incorporated by reference
into Part III of this Form 10-K.
Masco Corporation
2020 Annual Report on Form 10-K
TABLE OF CONTENTS
PART I
Item
1. Business
1A. Risk Factors
1B. Unresolved Staff Comments
2. Properties
3. Legal Proceedings
4. Mine Safety Disclosures
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
PART II
Equity Securities
6. Selected Financial Data
7. Management's Discussion and Analysis of Financial Condition and Results of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk
8. Financial Statements and Supplementary Data
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9A. Controls and Procedures
9B. Other Information
10. Directors, Executive Officers and Corporate Governance
11. Executive Compensation
PART III
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
13. Certain Relationships and Related Transactions, and Director Independence
14. Principal Accountant Fees and Services
15. Exhibits and Financial Statement Schedules
16. Form 10-K Summary
Signatures
PART IV
Page
2
6
12
12
13
13
14
16
17
34
35
82
82
82
83
83
83
83
83
84
87
88
1
Item 1. Business.
PART I
Masco Corporation is a global leader in the design, manufacture and distribution of branded home
improvement and building products. Our portfolio of industry-leading brands includes BEHR® paint; DELTA® and
HANSGROHE® faucets, bath and shower fixtures; KICHLER® decorative and outdoor lighting; LIBERTY® branded
decorative and functional hardware; and HOT SPRING® spas. We leverage our powerful brands across product
categories, sales channels and geographies to create value for our customers and shareholders.
We believe that our solid results of operations and financial position for 2020 resulted from strong consumer
demand for our 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:
•
•
•
drive the full potential of our core businesses;
leverage opportunities across our enterprise; and
actively manage our portfolio.
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. Additionally in
2020, we continued to return value to our shareholders by repurchasing approximately 18.8 million shares of our
common stock and increasing our quarterly dividend by approximately 4 percent.
Our Business Segments
We report our financial results in two segments, our Plumbing Products segment and our Decorative
Architectural Products segment, which are aggregated by product similarity. Our Decorative Architectural Products
segment is impacted by seasonality and normally experiences stronger sales during the second and third calendar
quarters, corresponding with the peak season for repair and remodel activity.
Plumbing Products
The businesses in our Plumbing Products segment sell a wide variety of products that are manufactured or
sourced by us.
• 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. The majority of our faucet, bathing
and showering products are sold primarily in North America and Europe under the brand names
DELTA®, BRIZO®, PEERLESS®, HANSGROHE®, AXOR®, KRAUS®, GINGER®, NEWPORT BRASS®,
BRASSTECH® and WALTEC®. 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
DELTA, PEERLESS and MIROLIN® products are sold primarily to home center retailers in North
America. 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. 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.
2
•
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. 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.
• 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.
We believe that our plumbing products are among the leaders in sales in North America and Europe.
Competitors of the majority of our products in this segment include 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. Competitors of our spas and exercise
pools and systems include Artesian Spas, Jacuzzi and Master Spas brands. Foreign manufacturers competing with
us are located primarily in Europe and China. We face significant competition from private label products and
digitally native brands. Many of the faucet and showering products with which our products compete are
manufactured by foreign manufacturers that contribute to price competition. The businesses in our Plumbing
Products segment manufacture products primarily in North America and Europe as well as in Asia and source
products from Asia and other regions. Competition for our plumbing products is based largely on brand reputation,
product features and innovation, product quality, customer service, breadth of product offering and price.
Many of our plumbing products contain brass, the major components of which are copper and zinc. We have
multiple sources, both domestic and foreign, for the raw materials used in this segment. We have encountered price
volatility for brass, brass components and any components containing copper and 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. In addition, some of the products in this segment that we import have been
and may in the future be subject to duties and tariffs.
Decorative Architectural Products
Our Decorative Architectural Products segment primarily includes architectural coatings, including paints,
primers, specialty coatings, stains and waterproofing products, as well as paint applicators and accessories. These
products are sold in North America, South America and China under the brand names BEHR®, 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 33 percent, 31 percent and 30
percent of our consolidated net sales from our continuing operations in 2020, 2019, and 2018, respectively. Our
BEHR products are sold through The Home Depot, our largest customer overall, as well as this segment’s largest
customer. Our Behr business grants Behr brand exclusivity in the retail sales channel in North America to The Home
Depot. The 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 Seal, Valspar and Purdy brands, RPM International, Inc.'s Rust-
Oleum and Zinsser 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 service, breadth of product offering
and price.
3
Titanium dioxide and acrylic resins are principal raw materials in the manufacture of architectural coatings.
The price for titanium dioxide can fluctuate as a result of global supply and demand dynamics and production
capacity limitations, which can have a material impact on our costs and results of operations in this segment. The
price of acrylic resins fluctuates based on the price of its components, which can also have a material impact on our
costs and results of operations in this segment. In addition, the prices of crude oil, natural gas and certain petroleum
by-products can impact our costs and results of operations in this segment. We have agreements with certain
significant suppliers for this segment that are intended to help assure continued supply.
Our Decorative Architectural Products segment includes branded cabinet and door hardware, functional
hardware, wall plates, hook and hook rail products, 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. These products are sold under the LIBERTY®,
BRAINERD®, FRANKLIN BRASS® and other trademarks. Our key competitors in North America include Amerock
Hardware, Richelieu Hardware Ltd., Top Knobs and private label brands. Decorative bath hardware, shower
accessories, mirrors and shower doors are sold under the brand names DELTA® and FRANKLIN BRASS® and other
trademarks to home center retailers, mass retailers, online retailers, other specialty retailers and wholesalers.
Competitors for these products include Fortune Brands Home & Security, Inc.'s Moen brand, Gatco Fine Bathware,
Kohler Co. and private label brands.
This segment also includes decorative indoor and outdoor lighting fixtures, ceiling fans, landscape lighting
and LED lighting systems. These products are sold to home center retailers, online retailers, electrical distributors,
landscape distributors and lighting showrooms under the brand names KICHLER® and ÉLAN® and under other
trademarks. Competitors of these products include Acuity, FX Luminaire, Generation Brands, Hinkley Lighting, Inc.,
Hubbell Incorporated's Progress Lighting brand, Hunter Fan Company and private label brands.
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 import certain materials and
products for this segment that have been and may in the future be subject to duties and tariffs.
Additional Information
Intellectual Property
We hold numerous U.S. and foreign patents, patent applications, licenses, trademarks, trade names, trade
secrets and proprietary manufacturing processes. We view our trademarks and other intellectual property rights as
important, but do not believe that there is any reasonable likelihood of a loss of such rights that would have a
material adverse effect on our present business as a whole.
Laws and Regulations Affecting Our Business
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.
We monitor applicable laws and regulations and incur ongoing expense relating to compliance, however we do
not expect that compliance with federal, state, local and foreign regulations, will result in material capital
expenditures or have a material adverse effect on our results of operations and financial position.
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.
4
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. In
2020, we established a global, enterprise DE&I Council and several local councils and employee resource groups at
our business units and our corporate headquarters to help implement action plans tailored to their specific needs
and challenges.
Future Workforce
We are consistently working to identify the critical capabilities our employees and the organization need to help
us achieve our businesses objectives. We leverage our Masco Operating System to ensure our businesses are
focused on the right capabilities and are providing the right tools, training and structure to building these new and
important skills.
Employee Health and Safety
The safety of our employees is integral to our company. In support of our safety efforts, we identify, assess and
investigate incidents and injury data, and each year set a goal to improve key safety performance indicators. We
train, promote, consult and communicate with our workforce in this process. In 2020, the Coronavirus Disease 2019
("COVID-19") pandemic highlighted the importance of employee welfare. Our cross-functional Infectious Illness
Response Team reacted quickly to keep our employees safe through the implementation of policies and safety
measures that adhered to best practices from the World Health Organization and the Centers for Disease Control.
Our Workforce
At December 31, 2020, we employed approximately 18,000 people.
Available Information
Our website is www.masco.com. Our periodic reports and all amendments to those reports required to be filed
or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 are available free of
charge through our website as soon as reasonably practicable after those reports are electronically filed with or
furnished to the Securities and Exchange Commission ("SEC"). This Report is being posted on our website
concurrently with its filing with the SEC. Material contained on our website is not incorporated by reference into this
Report. Our reports filed with the SEC also may be found on the SEC’s website at www.sec.gov.
5
Item 1A. Risk Factors.
There are a number of business risks and uncertainties that could affect our business. These risks and
uncertainties could cause our actual results to differ from past performance or expected results. We consider the
following risks and uncertainties to be most relevant to our specific business activities. Additional risks and
uncertainties not presently known to us, or that we currently believe to be immaterial, also may adversely impact our
business, results of operations and financial position.
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
Our business 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 other
factors.
Our business relies on residential repair and remodeling activity and, to a lesser extent, on new home
construction activity. A number of factors impact consumers’ spending on home improvement projects as well as
new home construction activity, including:
• consumer confidence levels;
• fluctuations in home prices;
• existing home sales;
• unemployment and underemployment levels;
• consumer income and debt levels;
6
• household formation;
• the availability of skilled tradespeople for repair and remodeling work;
• the availability of home equity loans and mortgages and the interest rates for and tax deductibility of such
loans;
• trends in lifestyle and housing design; and
• natural disasters, terrorist acts, pandemics or other catastrophic events.
The fundamentals driving our business are impacted by economic cycles. Adverse changes or uncertainty
involving the factors listed above or an economic contraction in the United States 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.
We may not achieve all of the anticipated benefits of our strategic initiatives.
We continue to pursue our strategic initiatives of investing in our brands, developing innovative products, and
focusing on operational excellence through the Masco Operating System, our methodology to drive growth and
productivity. These initiatives are designed to grow revenue, improve profitability and increase shareholder value
over the mid- to long-term. Our business performance and results could be adversely affected if we are unable to
successfully execute these initiatives or if we are unable to execute these initiatives in a timely and efficient manner.
We could also be adversely affected if we have not appropriately prioritized and balanced our initiatives or if we are
unable to effectively manage change throughout our organization.
We may not be able to successfully execute our acquisition strategy or integrate businesses that we
acquire.
Pursuing the acquisition of businesses complementary to our portfolio is a component of our strategy for future
growth. If we are not able to identify suitable acquisition candidates or consummate potential acquisitions within a
desired time frame or at acceptable terms and prices, our long-term competitive positioning may be affected. Even if
we are successful in acquiring businesses, the businesses we acquire may not be able to achieve the revenue,
profitability or growth we anticipate, or we may experience challenges and risks in integrating these businesses into
our existing business. Such risks include:
• difficulties realizing expected synergies and economies of scale;
• diversion of management attention and our resources;
• unforeseen liabilities;
• issues or conflicts with our new or existing customers or suppliers; and
• difficulties in retaining critical employees of the acquired businesses.
Future foreign acquisitions may also increase our exposure to foreign currency risks and risks associated with
interpretation and enforcement of foreign regulations. Our failure to address these risks could cause us to incur
additional costs and fail to realize the anticipated benefits of our acquisitions and could adversely affect our results
of operations and financial position.
Business and Operational Risks
Variability in the cost 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.
We purchase substantial amounts of raw materials, component parts and finished goods from outside sources,
including international sources, and we manufacture certain of our products outside of the United States. 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 tariffs. For example, the continuing trade dispute between the United States and China
has resulted in tariffs which raised the cost of certain of our materials. There is a risk that additional tariffs on
imports from China or new tariffs could be imposed, which could further increase the cost of the materials we
purchase or import or the products we manufacture internationally. Further, our production could be affected if we or
our suppliers are unable to procure our requirements for various commodities, including, among others, brass,
resins, titanium dioxide and zinc, or if a shortage of these commodities results in significantly increased costs.
Rising energy costs could also increase our production and transportation costs. In addition, water is a significant
component of our architectural coatings products and may be subject to restrictions in certain regions. These factors
could adversely affect our results of operations and financial position.
7
It can be difficult for us to pass on to customers our cost increases. Our existing arrangements with customers,
competitive considerations and customer resistance to price increases may delay or make us unable to adjust
selling prices. If we are not able to sufficiently increase the prices of our products or achieve cost savings to offset
increased material and production costs, including the impact of increasing tariffs, our results of operations and
financial position could be adversely affected. Increased selling prices for our products have and may in the future
lead to sales declines and loss of market share, particularly if those prices are not competitive. When our material
costs decline, we have experienced and may in the future receive pressure from our customers to reduce our
prices. Such reductions could adversely affect our results of operations and financial position.
From time to time we enter into long-term agreements with certain significant suppliers to help ensure
continued availability of the commodities we require to produce our products and to establish firm pricing, but at
times these contractual commitments may result in our paying above market prices for commodities during the term
of the contract. Occasionally, we may also use derivative instruments, including commodity futures and swaps. This
strategy increases the possibility that we may make commitments for these commodities at prices that subsequently
exceed their market prices, which has occurred and could occur in the future and may adversely affect our results of
operations and financial position.
We are dependent on third-party suppliers.
We are dependent on third-party suppliers for many of our products and components, and our ability to offer a
wide variety of products depends on our ability to obtain an adequate and timely supply of these products and
components. Failure of our suppliers to timely provide us quality products on commercially reasonable terms, or to
comply with applicable legal and regulatory requirements, or our policies regarding our supplier business practices,
could have a material adverse effect on our results of operations and financial position or could damage our
reputation. Sourcing these products and components from alternate suppliers, including suppliers from new
geographic regions, is time-consuming and costly and could result in inefficiencies or delays in our business
operations. Accordingly, the loss of critical suppliers, or a substantial decrease in the availability of products or
components from our suppliers, could disrupt our business and adversely affect our results of operations and
financial position.
Many of the suppliers we rely upon are located in foreign countries, primarily China. The differences in
business practices, shipping and delivery requirements, changes in economic conditions and trade policies and
laws and regulations, together with the limited number of suppliers, have increased the complexity of our supply
chain logistics and the potential for interruptions in our production scheduling. If we are unable to effectively manage
our supply chain or if we experience constraints to or disruption in transporting the products or 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.
There are risks associated with our international operations and global strategies.
In 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. In addition to our European operations, we
manufacture products in Asia and source products and components from third parties globally. 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.
We are also affected by domestic and international laws and regulations applicable to companies doing
business abroad or importing and exporting goods and materials. These include tax laws, laws regulating
competition, anti-bribery/anti-corruption and other business practices, and trade regulations, including duties and
tariffs. Compliance with these laws is costly, and future changes to these laws may require significant management
attention and disrupt our operations. 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 cross-
border transactions could adversely affect our results of operations and financial position.
8
Our results of operations and financial position are also impacted by changes in currency exchange rates.
Unfavorable currency exchange rates, particularly the Euro, the Chinese Yuan Renminbi, the Canadian dollar and
the British pound sterling, have in the past adversely affected us, and could adversely affect us in the future.
Fluctuations in currency exchange rates may present challenges in comparing operating performance from period to
period.
Additionally, following the United Kingdom's exit from the European 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.
The long-term performance of our businesses relies on our ability to attract, develop and retain talented
and diverse personnel.
To be successful, we must invest significant resources to attract, develop and retain highly qualified, talented
and diverse employees at all levels, who have the experience, knowledge and expertise to implement our strategic
initiatives. We compete for employees with a broad range of employers in many different industries, including large
multinational firms, and we may fail in recruiting, developing, motivating and retaining them, particularly when there
are low unemployment levels. From time to time, we have been affected by a shortage of qualified personnel in
certain geographic areas. Our growth, competitive position and results of operations and financial position could be
adversely affected by our failure to attract, develop and retain key employees and diverse talent, to build strong
leadership teams, or to develop effective succession planning to assure smooth transitions of those employees and
the knowledge and expertise they possess, or by a shortage of qualified employees.
Restrictive covenants in our credit agreement could limit our financial flexibility.
We must comply with both financial and nonfinancial covenants in our credit agreement, and in order to borrow
under it, we cannot be in default with any of those provisions. Our ability to borrow under the credit agreement could
be affected if our earnings significantly decline to a level where we are not in compliance with the financial
covenants or if we default on any nonfinancial covenants. In the past, we have been able to amend the covenants in
our credit agreement, but there can be no assurance that in the future we would be able to further amend them. If
we were unable to borrow under our credit agreement, our financial flexibility could be restricted.
Competitive Risks
We could lose market share if we do not maintain our strong brands, develop innovative products or
respond to changing purchasing practices and consumer preferences or if our reputation is damaged.
Our competitive advantage is due, in part, to our ability to maintain our strong brands and to develop and
introduce innovative new and improved products. Our initiatives to invest in brand building, brand awareness and
product innovation may not be successful. The uncertainties associated with developing and introducing innovative
and improved products, such as gauging changing consumer demands and preferences and successfully
developing, manufacturing, marketing and selling these products, may impact the success of our product
introductions. If the products we introduce do not gain widespread acceptance or if our competitors improve their
products more rapidly or effectively than we do, we could lose market share or be required to reduce our prices,
which could adversely impact our results of operations and financial position.
In recent years, consumer purchasing practices and preferences have shifted and our customers’ business
models and strategies have changed. As our customers execute their strategies to reach end consumers through
multiple channels, they rely on us to support their efforts with our infrastructure, including maintaining robust and
user-friendly websites with sufficient content for consumer research and providing comprehensive supply chain
solutions and differentiated product development. If we are unable to successfully provide this support to our
customers or if our customers are unable to successfully execute their strategies, our brands may lose market
share.
If we do not timely and effectively identify and respond to changing consumer preferences, including a
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.
9
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 a negative perception regarding our company practices, including regarding disputes or legal action against us,
even if unfounded. Damage to our public image or reputation could adversely affect our sales and results of
operations and financial position.
We face significant competition and operate in an evolving competitive landscape.
Our products face significant competition. We believe that brand reputation is an important factor affecting
product selection and that we compete on the basis of product features, innovation, quality, customer service,
warranty and price. We sell many of our products through home center retailers, online retailers, distributors and
independent dealers and rely on these customers to market and promote our products to consumers. Our success
with our customers is dependent on our ability to provide quality products and timely delivery. In addition, home
center retailers, which have historically concentrated their sales efforts on retail consumers and remodelers, are
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 selling products sourced from 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 value-priced or opening price
point products, which may affect our profitability.
In addition, we face competitive pricing pressure in the marketplace, including sales promotion programs, that
could affect our market share or result in price reductions, which could adversely impact our results of operations
and financial position.
Further, the growing 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. These factors could affect our results of operations and financial position. In addition, our
relationships with our customers, including our home center customers, may be affected if we increase the amount
of business we transact in the e-commerce channel.
If we are unable to maintain our competitive position in our industries, our results of operations and
financial position could be adversely affected.
Our sales are concentrated with two significant customers and this concentration may continue to increase. In
2020, our net sales from our continuing operations to The Home Depot were $2.8 billion (approximately 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. These home center retailers can significantly affect the prices we receive for our
products and the terms and conditions on which we do business with them. Additionally, these home center retailers
may reduce the number of vendors from which they purchase and could make significant changes in their volume of
purchases from us. Although other retailers, dealers, distributors and homebuilders represent other channels of
distribution for our products and services, we might not be able to quickly replace, if at all, the loss of a substantial
portion of our sales to The Home Depot or the loss of all of our sales to Lowe’s, and any such loss would have a
material adverse effect on our business, results of operations and financial position.
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. The granting of exclusivity affects our ability to sell those products and brands to other customers and
can increase the complexity of our product offerings and can increase our costs.
Technology and Intellectual Property Risks
We rely on information systems and technology, and a breakdown of these systems could adversely affect
our results of operations and financial position.
We rely on many information systems and technology to process, transmit, store and manage information to
support our business activities. We may be adversely affected if our information systems breakdown, fail, or are no
longer supported. In addition to the consequences that may occur from interruptions in our systems, global
cybersecurity vulnerabilities, threats and more sophisticated and targeted attacks pose a risk to our information
technology systems.
10
We have implemented security policies, processes and layers of defense designed to help identify and protect
against intentional and unintentional misappropriation or corruption of our systems and information and disruption of
our operations. Despite these efforts, our systems have been and may in the future be damaged, disrupted, or shut
down due to cybersecurity attacks by unauthorized access, malware, ransomware, undetected intrusion, hardware
failures, or other events, and in these circumstances our disaster recovery plans may be ineffective or inadequate.
These breaches or intrusions have led and could in the future lead to business interruption, production or
operational downtime, product shipment delays, exposure or loss of proprietary, confidential, personal or financial
information, data corruption, an inability to report our financial results in a timely manner, damage to the reputation
of our brands, damage to our relationships with our customers and suppliers, exposure to litigation, and increased
costs associated with the remediation and mitigation of such attacks. Such events could adversely affect our results
of operations and financial position. In addition, we could be adversely affected if any of our significant customers or
suppliers experiences any similar events that disrupt their business operations or damage their reputation.
We may not experience the anticipated benefits from our investments in new technology.
We continue to invest in new technology systems throughout our company, including implementations of and
upgrades to Enterprise Resource Planning (“ERP”) systems at our business units. ERP implementations and
upgrades are complex and require significant management oversight, and we have experienced, and may continue
to experience, unanticipated expenses and interruptions to our operations during these implementations. Our
results of operations and financial position, as well as the effectiveness of our internal controls over financial
reporting, could be adversely affected if we do not appropriately select, implement and upgrade our technology
systems in a timely manner or if we experience significant unanticipated expenses or disruptions in connection with
the implementation and upgrade of ERP systems.
We may not be able to adequately protect or prevent the unauthorized use of our intellectual property.
Protecting our intellectual property is important to our growth and innovation efforts. We own a number of
patents, trade names, brand names and other forms of intellectual property in our products and manufacturing
processes throughout the world. There can be no assurance that our efforts to protect our intellectual property rights
will prevent violations. Our intellectual property has been and may again be challenged or infringed upon by third
parties, particularly in countries where property rights are not highly developed or protected. In addition, the global
nature of our business increases the risk that we may be unable to obtain or maintain our intellectual property rights
on reasonable terms. Furthermore, others may assert intellectual property infringement claims against us. Current
and former employees, contractors, customers or suppliers have or may have had access to proprietary or
confidential information regarding our business operations that could harm us if used by them, or disclosed to
others, including our competitors. Protecting and defending our intellectual property could be costly, time consuming
and require significant resources. If we are not able to protect our existing intellectual property rights, or prevent
unauthorized use of our intellectual property, sales of our products may be affected and we may experience
reputational damage to our brand names, increased litigation costs and adverse impact to our competitive position,
which could adversely affect our results of operations and financial position.
Litigation and Regulatory Risks
Claims and litigation could be costly.
We are involved in various claims and litigation, including class actions, mass torts and regulatory proceedings,
that arise in the ordinary course of our business and that could have a material adverse effect on us. The types of
matters may include, among others: competition, product liability, employment, warranty, advertising, contract,
personal injury, environmental, intellectual property, product compliance and insurance coverage. The outcome and
effect of these matters are inherently unpredictable, and defending and resolving them can be costly and can divert
management’s attention. We have and may continue to incur significant costs as a result of claims and litigation.
We are also subject to product safety regulations, product recalls and direct claims for product liability that can
result in significant costs and, regardless of the ultimate outcome, create adverse publicity and damage the
reputation of our brands and business. Also, we rely on other manufacturers to provide products or components for
products that we sell. Due to the difficulty of controlling the quality of products and components we source from
other manufacturers, we are exposed to risks relating to the quality of such products and to limitations on our
recourse against such suppliers.
11
We maintain insurance against some, but not all, of the risks of loss resulting from claims and litigation. The
levels of insurance we maintain may not be adequate to fully cover our losses or liabilities. If any significant
accident, judgment, claim or other event is not fully insured or indemnified against, it could adversely affect our
results of operations and financial position.
Refer to Note U to the consolidated financial statements included in Item 8 of this Report for additional
information about litigation involving our businesses.
Compliance with laws, government regulation and industry standards is costly, and our failure to comply
could adversely affect our results of operations and financial position.
We are subject to a wide variety of federal, state, local and foreign laws and regulations pertaining to:
• securities matters;
• taxation;
• anti-bribery/anti-corruption;
• employment matters;
• minimum wage requirements;
• environment, health and safety matters;
• the protection of employees and consumers;
• product compliance;
• competition practices;
• trade, including duties and tariffs;
• data privacy and the collection and storage of information; and
• climate change and protection of the environment.
In addition to complying with current requirements and known future requirements, even more stringent
requirements could be imposed on us in the future.
As we sell new types of products or existing products in new geographic areas or channels or for new
applications, we are subject to the requirements applicable to those sales. Additionally, some of our products must
be certified by industry organizations. Compliance with new or changed laws, regulations and industry standards
may require us to alter our product designs, our manufacturing processes, our packaging or our sourcing. These
compliance activities are costly and require significant management attention and resources. If we do not effectively
and timely comply with such regulations and industry standards, our results of operations and financial position
could be adversely affected.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
The table below lists principal North American properties as of December 31, 2020.
Business Segment
Plumbing Products
Decorative Architectural Products
Totals
Manufacturing
21
8
29
Warehouse and
Distribution
8
18
26
Most of our North American facilities range from single warehouse buildings to complex manufacturing
facilities. We own most of our North American manufacturing facilities, none of which is subject to significant
encumbrances. A substantial number of our warehouse and distribution facilities are leased.
12
The table below lists principal properties outside of North America as of December 31, 2020.
Business Segment
Plumbing Products
Decorative Architectural Products
Totals
Manufacturing
10
—
10
Warehouse and
Distribution
16
—
16
Most of our international facilities are in China, Germany and the United Kingdom. We own most of our
international manufacturing facilities, none of which is subject to significant encumbrances. A substantial number of
our international warehouse and distribution facilities are leased.
We lease our corporate headquarters in Livonia, Michigan, and we own a building in Taylor, Michigan that is
used by our Masco Technical Services (research and development) department. We also lease an office facility in
Luxembourg, which serves as a headquarters for most of our foreign operations.
Each of our operating divisions assesses the manufacturing, distribution and other facilities needed to meet its
operating requirements. Our buildings, machinery and equipment have been generally well maintained and are in
good operating condition. We believe our facilities have sufficient capacity and are adequate for our production and
distribution requirements.
Item 3. Legal Proceedings.
Information regarding legal proceedings involving us is set forth in Note U to the consolidated financial
statements included in Item 8 of this Report and is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
Not applicable.
13
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
The New York Stock Exchange is the principal market on which our common stock is traded, under the ticker
symbol MAS. On January 31, 2021, there were approximately 2,900 holders of record of our common stock.
We expect that our practice of paying quarterly dividends on our common stock will continue, although the
payment of future dividends is at the discretion of our Board of Directors and will depend upon our earnings, capital
requirements, financial condition and other factors. 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.
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 otherwise. 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. At December 31, 2020, we had $774 million
remaining under the 2019 authorization. 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.
The following table provides information regarding the repurchase of our common stock for the three-month
period ended December 31, 2020.
Period
10/1/20 - 10/31/20
11/1/20 - 11/30/20
12/1/20 - 12/31/20
Total for the quarter
Total Number
of Shares
Purchased
Average Price
Paid Per
Common Share
Total Number of
Shares Purchased
as Part of
Publicly Announced
Plans or Programs
Maximum Value of
Shares That May
Yet Be Purchased
Under the Plans
or Programs
93,847 $
921,892 $
1,315,241 $
2,330,980
53.28
54.99
53.23
93,847 $
894,936,955
921,892 $
844,243,773
1,315,241 $
774,230,631
2,330,980 $
774,230,631
14
Performance Graph
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, 2015 through December 31, 2020, when the
closing price of our common stock was $54.93. The graph assumes investments of $100 on December 31, 2015 in
our common stock and in each of the three indices and the reinvestment of dividends.
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, 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.
Masco
S&P 500 Index
S&P Industrials Index
2016
2017
2018
2019
2020
$
$
$
111.73 $
155.27 $
103.32 $
169.58 $
194.10
109.54 $
130.81 $
122.65 $
158.07 $
183.77
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
15
INDEXED VALUEPERFORMANCE GRAPHMascoS&P 500 IndexS&P Industrials IndexS&P Consumer Durables & Apparel Index201520162017201820192020$80.00$100.00$120.00$140.00$160.00$180.00$200.00$220.00$240.00$260.00 Item 6. Selected Financial Data.
Net sales (1)
$
7,188 $
6,707 $
6,654 $
6,014 $
5,754
Dollars in Millions (Except Per Common Share Data)
2020
2019
2018
2017
2016
Operating profit (1)
Income from continuing operations attributable
to Masco Corporation (1)
Income per common share from continuing
operations (1):
1,295
1,088
1,077
1,029
810
639
636
426
Basic
Diluted
Dividends declared
Dividends paid
At December 31:
Total assets
Long-term debt
Shareholders' equity (deficit)
______________________________
$
3.05 $
2.21 $
2.06 $
1.34 $
3.04
0.550
0.545
2.20
0.510
0.495
2.05
0.450
0.435
1.33
0.410
0.405
$
5,777 $
5,027 $
5,393 $
5,534 $
5,164
2,792
421
2,771
(56)
2,971
69
2,969
183
2,995
(96)
986
426
1.29
1.28
0.390
0.385
(1) Amounts exclude discontinued operations for all periods presented. Refer to Note C to the consolidated
financial statements for further details.
16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The financial and business analysis below provides information which we believe is relevant to an assessment
and understanding of our consolidated financial position, results of operations and cash flows. This financial and
business analysis should be read in conjunction with the consolidated financial statements and related notes.
The following discussion and certain other sections of this Report contain statements that reflect our views
about our future performance and constitute "forward-looking statements" under the Private Securities Litigation
Reform Act of 1995. Forward-looking statements can be identified by words such as "outlook," "believe,"
"anticipate," "appear," "may," "will," "should," "intend," "plan," "estimate," "expect," "assume," "seek," "forecast," and
similar references to future periods. Our views about future performance involve risks and uncertainties that are
difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-
looking statements. We caution you against relying on any of these forward-looking statements.
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 activity, and 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 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, 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 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 1A. "Risk Factors" of this Report. Any forward-looking statement made by us speaks only as of the
date on which it was made. Factors or events that could cause our actual results to differ may emerge from time to
time, and it is not possible for us to predict all of them. Unless required by law, we undertake no obligation to update
publicly any forward-looking statements as a result of new information, future events or otherwise.
Executive Level Overview
We design, manufacture and distribute branded home improvement and building products. These products are
sold primarily for repair and remodeling activity and, to a lesser extent, new home construction. We sell our products
through home center retailers, online retailers, wholesalers and distributors, mass merchandisers, hardware stores,
direct to the consumer and homebuilders.
2020 Results
Net sales were positively impacted by increased sales volume across our two segments. Such increases were
partially offset by unfavorable net selling prices in our Decorative Architectural Products segment.
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. These positive impacts were
partially offset by increased commodity costs, including tariffs, and an increase in other expenses (such as salaries
and legal costs). 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).
17
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.
18
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our
consolidated financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America ("GAAP"). The preparation of these financial statements requires us to
make certain estimates and assumptions that affect 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 (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 and related disclosures, and future revenues and expenses, that are not readily apparent from other
sources. Actual results may differ from these estimates and assumptions.
Note A to the consolidated financial statements includes our accounting policies, estimates and methods used
in the preparation of our consolidated financial statements.
We believe that the following critical accounting policies are affected by significant judgments and estimates
used in the preparation of our consolidated financial statements.
Revenue Recognition and Receivables
We recognize revenue as control of our products is transferred to our customers, which is generally at the time
of shipment or upon delivery based on the contractual terms with our customers. We provide customer programs
and incentive offerings, including special pricing and co-operative advertising arrangements, promotions and other
volume-based incentives. These customer programs and incentives are considered variable consideration. We
include in revenue variable consideration only to the extent that it is probable that a significant reversal in the
amount of cumulative revenue recognized will not occur when the variable consideration is resolved. This
determination is made based upon known customer program and incentive offerings at the time of sale, and
expected sales volume forecasts as it relates to our volume-based incentives. This determination is updated each
reporting period.
We monitor our exposure for credit losses on customer receivable balances and the credit worthiness of
customers on an on-going basis and maintain allowances for doubtful accounts receivable for estimated losses
resulting from the inability of our customers to make required payments. Allowances are estimated based upon
specific customer balances, where a risk of loss has been identified, and also include a provision for losses based
upon historical collection and write-off activity as well as reasonable and supportable forecast information that
considers macro-economic factors and industry-specific trends associated with our businesses, among others. A
separate allowance is recorded for customer incentive rebates and is generally based upon sales activity.
Goodwill and Other Intangible Assets
We record the excess of purchase cost over the fair value of net tangible assets of acquired companies as
goodwill or other identifiable intangible assets. 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 complete the impairment testing of goodwill utilizing a discounted cash flow method. We selected the
discounted cash flow methodology because we believe that it is comparable to what would be used by market
participants. We have defined our reporting units and completed the impairment testing of goodwill at the operating
segment level.
19
Determining market values using a discounted cash flow method requires us to make significant estimates
and assumptions, including long-term projections of cash flows, market conditions and appropriate discount rates.
Our judgments are based upon historical experience, current market trends, consultations with external valuation
specialists and other information. While we believe that the estimates and assumptions underlying the valuation
methodology are reasonable, different estimates and assumptions could result in different outcomes. In estimating
future cash flows, we rely on internally generated five-year forecasts for sales and operating profits, and, currently, a
two 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 and, to a lesser extent,
estimated housing starts. Our assumptions included U.S. Gross Domestic Product growing at approximately 4.2
percent in 2021 and develop into a relatively stable 2.8 percent each year thereafter, and a eurozone Gross
Domestic Product growing at approximately 5.2 percent in 2021 and developing into a relatively stable 2.2 percent
per annum over the five-year forecast.
We utilize our weighted average cost of capital of approximately 8.0 percent as the basis to determine the
discount rate to apply to the estimated future cash flows. Our weighted average cost of capital in 2020 was
consistent with 2019. In 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.
If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized to the extent
that a reporting unit's recorded carrying value exceeds its fair value, not to exceed the carrying amount of goodwill
in that reporting unit.
In the fourth quarter of 2020, we estimated that future discounted cash flows projected for all of our reporting
units were greater than the carrying values. Accordingly, we did not recognize any impairment charges for goodwill.
A 10 percent decrease in the estimated fair value of our reporting units would have resulted in a $6 million
impairment to one of our reporting units.
We review our other indefinite-lived intangible assets for impairment annually, in the fourth quarter, or as
events occur or circumstances change that indicate the assets may be impaired without regard to the business unit.
Potential impairment is identified by comparing the fair value of an other indefinite-lived intangible asset to its
carrying value. We utilize a relief-from-royalty model to estimate the fair value of other indefinite-lived intangible
assets. We consider the implications of both external (e.g., market growth, competition and local economic
conditions) and internal (e.g., product sales and expected product growth) factors and their potential impact on cash
flows related to the intangible asset in both the near- and long-term. We also consider the profitability of the
business, among other factors, to determine the royalty rate for use in the impairment assessment.
We utilize our weighted average cost of capital of approximately 8.0 percent as the basis to determine the
discount rate to apply to the estimated future cash flows. In 2020, based upon our assessment of the risks
impacting each of our 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 12.5 percent for our other indefinite-lived intangible assets.
In the fourth quarter of 2020, we estimated that future discounted cash flows projected for our other indefinite-
lived intangible assets were greater than the carrying values. Accordingly, we did not recognize any impairment
charges for other indefinite-lived intangible assets. A 10 percent decrease in the estimated fair value of our other
indefinite-lived intangible assets would have resulted in a $3 million impairment for one of our trade names.
Employee Retirement Plans
As of January 1, 2010, substantially all our domestic and foreign qualified and domestic non-qualified defined-
benefit pension plans were frozen to future benefit accruals.
Accounting for defined-benefit pension plans involves estimating the cost of benefits to be provided in the
future, based upon vested years of service, and attributing those costs over the time period each employee works.
We develop our pension costs and obligations from actuarial valuations. Inherent in these valuations are key
assumptions regarding expected return on plan assets, mortality rates and discount rates for obligations and
expenses. We consider current market conditions, including changes in interest rates, in selecting these
assumptions. While we believe that the estimates and assumptions underlying the valuation methodology are
reasonable, different estimates and assumptions could result in different reported pension costs and obligations
within our consolidated financial statements.
20
In December 2019, our Board of Directors approved the termination of our qualified domestic defined-benefit
pension plans. As a result of this decision, the projected benefit obligations for these plans were increased to reflect
the incremental costs to terminate the plans. Upon termination in 2021, we expect to recognize from accumulated
other comprehensive loss approximately $450 million of pre-tax actuarial losses and approximately $95 million of
income tax benefit, which includes approximately $11 million of tax expense from the elimination of a
disproportionate tax effect.
In December 2020, our discount rate for obligations decreased to a weighted average of 1.7 percent from
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, 2020 Willis Towers Watson Rate Link Curve. For our qualified
domestic defined-benefit pension plans, the projected benefit obligations include the estimated incremental cost
related to the termination. For these plans, the discount rate was then set equal to the discount rate that results in
the same projected benefit obligation resulting from the normal projected benefit obligation calculation plus the
estimated incremental cost to terminate. The discount rates we use for our defined-benefit pension plans ranged
from 0.7 percent to 2.1 percent, with the most significant portion of the liabilities having a discount rate for
obligations of 1.6 percent or higher. 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 net underfunded amount for our qualified defined-benefit pension plans, which is the difference between
the projected benefit obligation and plan assets, increased to $255 million at December 31, 2020 from $254 million
at December 31, 2019. Our projected benefit obligation for our unfunded, non-qualified, defined-benefit pension
plans increased to $162 million at December 31, 2020 from $161 million at December 31, 2019. These unfunded
plans are not subject to the funding requirements of the Pension Protection Act of 2006. In accordance with the
Pension Protection Act, the Adjusted Funding Target Attainment Percentage for the various defined-benefit pension
plans ranges from 113 percent to 117 percent.
The increase in our qualified defined-benefit pension plan projected benefit obligation was primarily impacted
by a decrease in the discount rate. During 2020, we contributed $57 million to our qualified defined-benefit pension
plans, and our qualified defined-benefit pension plan assets had a positive return of 9.7 percent. Refer to Note N to
the consolidated financial statements for additional information.
We expect pension expense for our qualified defined-benefit pension plans to be $470 million in 2021
compared with $30 million in 2020. 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. 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 2021 pension expense
would increase by $60 million. Assuming a 0 percent asset return for our qualified domestic defined-benefit pension
plans, projected 2021 total qualified defined-benefit pension plan expenses are expected to be approximately $474
million. We expect pension expense for our non-qualified defined-benefit pension plans to be $6 million in 2021,
compared to $8 million recognized in 2020.
Consistent with our plan to terminate the qualified domestic defined-benefit pension plans, we currently
anticipate contributing approximately $140 million in 2021. Refer to Note N to the consolidated financial statements
for further information regarding the funding of our plans.
Income Taxes
Deferred taxes are recognized based on the future tax consequences of differences between the financial
statement carrying value of assets and liabilities and their respective tax basis. The future realization of deferred tax
assets depends on the existence of sufficient taxable income in future periods. 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.
If, based upon all available evidence, both positive and negative, it is more likely than not (more than 50
percent likely) such deferred tax assets will not be realized, a valuation allowance is recorded. Significant weight is
given to positive and negative evidence that is objectively verifiable. A company's three-year cumulative loss
position is significant negative evidence in considering whether deferred tax assets are realizable, and the
accounting guidance restricts the amount of reliance we can place on projected taxable income to support the
recovery of the deferred tax assets.
21
We maintain a valuation allowance on certain state and foreign deferred tax assets as of December 31, 2020.
Should we determine that we would not be able to realize our remaining deferred tax assets in these jurisdictions in
the future, an adjustment to the valuation allowance would be recorded in the period such determination is made.
The need to maintain a valuation allowance against deferred tax assets may cause greater volatility in our effective
tax rate.
Corporate Development Strategy
We expect to maintain a balanced growth strategy pursuing organic growth by maximizing the full potential of
our existing businesses and, as appropriate, complementing our existing business with strategic acquisitions.
During 2020, we completed the acquisitions of Kraus, Work Tools and SmarTap and signed an agreement to acquire
majority interest in ESS.
In addition, we actively manage our portfolio of companies by divesting of those businesses that do not align
with our long-term growth strategy. We will continue to review all of our businesses to determine which businesses,
if any, may not align with our long-term growth strategy.
Liquidity and Capital Resources
Overview of Capital Structure
Historically, we have largely funded our growth through cash provided by our operations, the issuance of notes
in the financial markets, bank borrowings and the issuance of our common stock, including issuances for certain
mergers and acquisitions. Maintaining high levels of liquidity and focusing on cash generation are among our
financial strategies. Our capital allocation strategy includes reinvesting in our business, balancing share
repurchases with potential acquisitions and maintaining an appropriate dividend.
We had cash and cash investments of approximately $1.3 billion at December 31, 2020. Our cash and cash
investments consist of overnight interest bearing money market demand accounts, time deposit accounts, and
money market mutual funds containing government securities and treasury obligations. While we attempt to
diversify these investments in a prudent manner to minimize risk, it is possible that future changes in the financial
markets could affect the security or availability of these investments.
Of the $1.3 billion and $697 million of cash and cash investments we held at December 31, 2020 and 2019,
respectively, $385 million and $297 million, respectively, was held in our foreign subsidiaries. If these funds were
needed for our operations in the U.S., their repatriation into the U.S. would not result in significant additional U.S.
income tax or foreign withholding tax, as we have recorded such taxes on substantially all undistributed foreign
earnings, except for those that are legally restricted.
Our current ratio was 1.8 to 1 at both December 31, 2020 and 2019.
Our total debt as a percent of total capitalization was 87 percent and 102 percent at December 31, 2020 and
2019, respectively. Refer to Note L to the consolidated financial statements for additional information.
Senior Indebtedness
On September 18, 2020, we issued $300 million of 2.0% Notes due October 1, 2030 (the "2030 Notes") and
received proceeds of $300 million, net of discount, for the issuance of the 2030 Notes. Also on September 18, 2020,
we issued an incremental $100 million 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. The 2030 Notes and
2047 Notes are senior indebtedness and are redeemable at our option at the applicable redemption price. On
September 29, 2020, proceeds from the debt issuances were used to repay and early retire $400 million of our
3.5% Notes due April 1, 2021. In connection with this early retirement, we incurred a loss on debt extinguishment of
$6 million, which was recorded as interest expense in our consolidated statement of operations.
On December 19, 2019, we redeemed and retired $201 million of our 7.125% Notes due March 15, 2020. In
connection with this early retirement, we incurred a loss on debt extinguishment of $2 million, which was recorded
as interest expense in our consolidated statement of operations.
On April 16, 2018, we repaid and retired all of our $114 million, 6.625% Notes on the scheduled repayment
date.
22
Credit Agreement
On March 13, 2019, we entered into a credit agreement (the "Credit Agreement") with an aggregate
commitment of $1.0 billion and a maturity date of March 13, 2024. Under the Credit Agreement, at our request and
subject to certain conditions, we can increase the aggregate commitment up to an additional $500 million with the
current lenders or new lenders. See Note L to the consolidated financial statements.
The Credit Agreement contains financial covenants requiring us to maintain (A) a net leverage ratio, as
adjusted for certain items, not exceeding 4.0 to 1.0, and (B) a minimum interest coverage ratio, as adjusted for
certain items, not less than 2.5 to 1.0. We were in compliance with all covenants and no borrowings were
outstanding under our Credit Agreement at December 31, 2020.
Acquisitions
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.
On March 9, 2018, we acquired substantially all of the net assets of the L.D. Kichler Co. ("Kichler"). The
purchase price, net of $2 million cash acquired, consisted of $549 million paid with cash on hand.
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
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 otherwise.
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.
At December 31, 2020, we had $774 million remaining under the 2019 authorization. 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.
During 2019, we repurchased and retired 20.1 million shares of our common stock (including 0.6 million
shares to offset the dilutive impact of long-term stock awards granted in 2019), for approximately $896 million.
During 2018, we repurchased and retired 18.6 million shares of our common stock (including 0.7 million
shares to offset the dilutive impact of long-term stock awards granted in 2018) for approximately $654 million.
Consistent with past practice and as part of our strategic initiative to drive shareholder value, we anticipate
using approximately $800 million of cash for share repurchases (including shares which will be purchased to offset
any dilution from restricted stock units granted as part of our compensation programs) in 2021.
Dividend to holder of Common Shares
In the third quarter of 2020, we increased our quarterly dividend to $0.14 per common share from $0.135 per
common share.
As part of our capital allocation strategy and 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.
23
Other Liquidity and Capital Resource Activities
As part of our ongoing efforts to improve our cash flow and related liquidity, we work with suppliers to optimize
our terms and conditions, including extending payment terms. We also facilitate a voluntary supply chain finance
program (the "program") to provide certain of our suppliers with the opportunity to sell receivables due from us to
participating financial institutions at the sole discretion of both the suppliers and the financial institutions. A third
party administers the program; our responsibility is limited to making payment on the terms originally negotiated with
our supplier, regardless of whether the supplier sells its receivable to a financial institution. We do not enter into
agreements with any of the participating financial institutions in connection with the program. The range of payment
terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the program.
All outstanding payments owed under the program are recorded within accounts payable in our consolidated
balance sheets. The amounts owed to participating financial institutions under the program and included in accounts
payable for our continuing operations were $45 million and $29 million at December 31, 2020 and 2019,
respectively. We account for all payments made under the program as a reduction to our cash flows from operations
and reported within our increase (decrease) in accounts payable and accrued liabilities, net, line within our
consolidated statements of cash flows. The amounts settled through the program and paid to participating financial
institutions were $146 million, $164 million, and $117 million for our continuing operations during the years ended
December 31, 2020, 2019, and 2018, respectively. A downgrade in our credit rating or changes in the financial
markets could limit the financial institutions’ willingness to commit funds to, and participate in, the program. We do
not believe such risk would have a material impact on our working capital or cash flows, as substantially all of our
payments are made outside of the program.
We utilize derivative and hedging instruments to manage our exposure to currency fluctuations, primarily
related to the European euro, British pound, the Chinese renminbi and the U.S. dollar; occasionally, we have also
used derivative and hedging instruments to manage our exposure to commodity cost fluctuations, primarily zinc and
copper, and interest rate fluctuations, primarily related to debt issuances. We review our hedging program,
derivative positions and overall risk management on a regular basis. We currently do not have any derivative
instruments for which we have designated hedge accounting.
24
Cash Flows
Significant sources and (uses) of cash in the past three years are summarized as follows, in millions:
Net cash from operating activities
Retirement of notes
Purchase of Company common stock
Cash dividends paid
Dividends paid to noncontrolling interest
Capital expenditures
Debt extinguishment costs
Acquisition of businesses, net of cash acquired
Issuance of notes, net of issuance costs
Employee withholding taxes paid on stock-based compensation
Proceeds from disposition of:
Businesses, net of cash disposed
Short-term bank deposits, net
Property and equipment
Financial investments
Payment of debt
Effect of exchange rate changes on cash and cash investments
Other, net
2020
2019
2018
$
953 $
833 $
1,032
(400)
(727)
(145)
(23)
(114)
(5)
(227)
415
(25)
870
—
1
3
(2)
31
24
(201)
(896)
(144)
(42)
(162)
(2)
—
—
(23)
722
—
34
1
(8)
14
12
(114)
(654)
(134)
(89)
(219)
—
(549)
—
(42)
—
108
14
5
(1)
4
4
Cash increase (decrease)
$
629 $
138 $
(635)
Our working capital days were as follows:
Receivable days
Inventory days
Accounts Payable days
Working capital (receivables plus inventories, less accounts payable) as a
percentage of net sales
At December 31,
2020
2019
54
72
71
54
67
68
15.6 %
15.7 %
Net cash provided by operations of $953 million consisted primarily of net income adjusted for certain non-
cash items, including depreciation and amortization expense of $133 million and stock-based compensation
expense, as well as changes in working capital amounts and employee withholding taxes paid on stock-based
compensation, which is classified as a financing activity. These amounts were partially offset by the net gain on the
sale of Cabinetry as well as contributions to our defined-benefit pension plans.
Net cash used for financing activities was $886 million, primarily due to $727 million for the repurchase and
retirement of Company common stock (as part of our strategic initiative to drive shareholder value), $400 million for
the early retirement of our 3.5% Notes due April 1, 2021, $145 million for the payment of cash dividends, $25 million
for employee withholding taxes paid on stock-based compensation and $23 million for dividends paid to
noncontrolling interests. These uses of cash were partially offset by the issuances of $300 million of 2.0% Notes due
October 1, 2030 and an incremental $100 million on our existing 4.5% Notes due May 15, 2047 that was issued at a
premium of $19 million, and $26 million of proceeds from the exercise of stock options.
Net cash provided by investing activities was $531 million, primarily driven by $870 million of proceeds from
the sale of Cabinetry, net of cash disposed. These proceeds were partially offset by $175 million for the 2020
acquisitions, net of cash acquired, $114 million for capital expenditures and the $52 million advance payment for the
acquisition of ESS that closed on January 4, 2021.
25
We continue to invest in our manufacturing and distribution operations of those businesses that align with our
long-term growth strategy to increase our productivity, improve customer service and support product innovation.
Capital expenditures for 2020 were $114 million, compared with $162 million for 2019 and $219 million for 2018.
For 2021, capital expenditures, excluding any potential 2021 acquisitions, are expected to be approximately
$150 million. Depreciation and amortization expense for 2020 totaled $133 million, compared with $159 million for
2019 and $156 million for 2018. For 2021, depreciation and amortization expense, excluding any potential 2021
acquisitions, is expected to be approximately $155 million. Amortization expense totaled $28 million in 2020,
compared with $27 million and $24 million in 2019 and 2018, respectively.
Costs of environmental responsibilities and compliance with existing environmental laws and regulations have
not had, nor do we expect them to have, a material effect on our capital expenditures, financial position or results of
operations.
We believe that our present cash balance and cash flows from operations, and borrowing availability under our
Credit Agreement are sufficient to fund our near-term working capital and other investment needs. We believe that
our longer-term working capital and other general corporate requirements will be satisfied through cash flows from
operations and, to the extent necessary, from bank borrowings and future financial market activities. However, due
to the highly uncertain nature, severity and duration or resurgence of the COVID-19 pandemic and its impact on our
customer, suppliers and employees, we are unable to fully estimate the extent of the impact it may have on our
future financial condition.
Consolidated Results of Operations
We report our financial results in accordance with GAAP in the United States. However, we believe that certain
non-GAAP performance measures and ratios, used in managing the business, may provide users of this financial
information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP
performance measures and ratios should be viewed in addition to, and not as an alternative for, our reported results
under GAAP.
The following discussion of consolidated results of operations compares 2020 and 2019. Descriptions of
changes between 2019 and 2018 were excluded as there were no changes from what was disclosed in the
"Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the December
31, 2019 Form 10-K.
Sales and Operations
Net sales for 2020 were $7.2 billion, which increased seven percent compared to 2019. Excluding the effect of
currency translation, net sales increased seven percent. The following table reconciles reported net sales to net
sales excluding the effect of currency translation, in millions:
Net sales, as reported
Currency translation
Net sales, excluding the effect of currency translation
Year Ended
December 31
2020
2019
$
$
7,188 $
6,707
(13)
—
7,175 $
6,707
Net sales for 2020 increased seven percent primarily due to higher sales volume of our paints and other
coating products, plumbing products, and to a lesser extent, builders' hardware, which, in aggregate, increased
sales by eight percent. This increase was slightly offset by unfavorable net selling prices of paints and other coating
products, which decreased sales by one percent.
Our gross profit margins were 36.0 percent, 35.4 percent and 35.0 percent in 2020, 2019 and 2018,
respectively. The 2020 gross profit margin was positively impacted by increased sales volume and cost savings
initiatives, including actions taken to mitigate the COVID-19 pandemic impact. Such increases were slightly offset by
unfavorable net selling prices and increased commodity costs, partially attributed to tariffs.
26
Selling, general and administrative expenses as a percent of sales were 18.0 percent in 2020 compared with
19.0 percent in 2019 and 18.8 percent in 2018. The decrease in selling, general, and administrative expenses as a
percentage of sales in 2020 was primarily driven by cost containment activities including those actions taken to
mitigate the COVID-19 pandemic impact and leverage of fixed expenses due primarily to increased sales volume.
This improvement was partially offset by an increase in other expenses (such as salaries, legal costs and
advertising).
The following table reconciles reported operating profit to operating profit, as adjusted to exclude certain items,
dollars in millions:
Operating profit, as reported
Rationalization charges
Kichler inventory step up adjustment
Impairment charge for other intangible assets
Operating profit, as adjusted
Operating profit margins, as reported
Operating profit margins, as adjusted
2020
2019
2018
$
1,295
$
1,088
$
1,077
11
—
—
13
—
9
9
40
—
$
1,306
$
1,110
$
1,126
18.0 %
18.2 %
16.2 %
16.5 %
16.2 %
16.9 %
Operating profit in 2020 was positively affected by increased sales volume and cost savings initiatives,
including actions taken to mitigate the COVID-19 pandemic impact. These positive impacts were partially offset by
unfavorable net selling prices, increased commodity costs, partially attributed to tariffs, higher fixed expenses in our
lighting business, and an increase in other expenses (such as salaries, legal cost and advertising).
Other Income (Expense), Net
Interest expense was $144 million, $159 million and $156 million in 2020, 2019 and 2018, respectively.
Other, net, for 2020 included $35 million of net periodic pension and post-retirement benefit cost and $10
million of realized foreign currency transaction losses, partially offset by $10 million of dividend income related to
preferred stock of ACProducts Holding, Inc. and $9 million of income due from an escrow settlement.
Income Taxes
Our effective tax rate on income from continuing operations was 24 percent, 25 percent and 24 percent in
2020, 2019 and 2018, respectively. As a result of IRS guidance issued in the third quarter of 2020 that allows us to
retroactively exclude certain high-taxed foreign income from the U.S. tax effects on Global Intangible Low-taxed
Income ("GILTI") back to 2018, we lowered our normalized tax rate from 26 percent to 25 percent for 2020, 2019
and 2018.
Our effective tax rate in 2020 was lower than our normalized tax rate of 25 percent due primarily to a $5 million
income tax benefit from a change in judgment regarding the realizability of certain deferred tax assets in our foreign
jurisdictions, an additional $4 million tax benefit from stock-based compensation payments and a $6 million tax
benefit due to an anticipated refund claim from the retroactive application of the exclusion of certain high-taxed
foreign income from the U.S. tax effects on GILTI back to 2018.
Our effective tax rate in 2018 was lower than our normalized tax rate of 25 percent due primarily to an
additional $14 million tax benefit from stock-based compensation payments, partially offset by a $6 million tax
expense recognized on GILTI, prior to the retroactive exclusion of certain high-taxed foreign income as allowed
under the recently issued IRS guidance in 2020.
Refer to Note S to the consolidated financial statements for additional information.
Income and Income Per Common Share from Continuing Operations (Attributable to Masco
Corporation)
Income and diluted income per common share from continuing operations for 2020 were $810 million and
$3.04 per common share, respectively. Income and diluted income per common share from continuing operations
for 2019 were $639 million and $2.20 per common share, respectively. Income and diluted income per common
share from continuing operations for 2018 were $636 million and $2.05 per common share, respectively.
27
Outlook for the Company
We continue to execute our strategies of leveraging our strong brand portfolio, industry-leading positions and
the Masco Operating System, our methodology to drive growth and productivity, to create long-term shareholder
value. We believe that our strong financial position and cash flow generation, together with our investments in our
industry-leading branded building products, our continued focus on innovation and disciplined capital allocation, will
allow us to drive long-term growth and create value for our shareholders. While we continue to remain uncertain
regarding the short-term impact that the COVID-19 pandemic may have on our businesses, we remain confident in
the fundamentals of our businesses and long-term strategy.
28
Business Segment and Geographic Area Results
The following table sets forth our net sales and operating profit information for our continuing operations by
business segment and geographic area, dollars in millions.
Net Sales:
Plumbing Products
Decorative Architectural Products
Total
North America
International, principally Europe
Total
Operating Profit: (A)
Plumbing Products
Decorative Architectural Products
Total
North America
International, principally Europe
Total
General corporate expense, net
Total operating profit
2020
2019
2018
Percent
Change
2020 vs.
2019
2019 vs.
2018
$
4,136 $
3,984 $
3,052
2,723
$
7,188 $
6,707 $
$
5,805 $
5,328 $
1,383
1,379
$
7,188 $
6,707 $
3,998
2,656
6,654
5,208
1,446
6,654
4 %
12 %
7 %
9 %
— %
7 %
— %
3 %
1 %
2 %
(5) %
1 %
2020
2019
2018
$
$
$
806 $
708 $
583
480
715
456
1,389 $
1,188 $
1,171
1,167 $
987 $
222
1,389
201
1,188
(94)
(100)
954
217
1,171
(94)
$
1,295 $
1,088 $
1,077
(A) Before general corporate expense, net; refer to Note Q to the consolidated financial statements for additional
information.
29
Business Segment Results Discussion
Changes in operating profit in the following Business Segment and Geographic Area Results discussion
exclude general corporate expense, net, and compares each respective period to the same period of the
immediately preceding year.
Description of changes to sales and operating profit between 2019 and 2018 for the Plumbing Products and
Decorative Architectural Products segments, as well as geographic areas, were excluded as there were no changes
from what was disclosed in the "Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of the December 31, 2019 Form 10-K.
Plumbing Products
Sales
Net sales in the Plumbing Products segment increased four percent in 2020 due primarily to higher sales
volume of North American operations, which increased sales by three percent. Favorable foreign currency
translation further increased sales by one percent.
Operating Results
Operating profit in the Plumbing Products segment in 2020 was positively impacted by cost savings initiatives,
including actions taken to mitigate the COVID-19 pandemic impact, higher sales volume and favorable net selling
prices. These positive impacts were partially offset by increased commodity costs, including tariffs, and an increase
in other expenses (such as salaries and legal costs).
Decorative Architectural Products
Sales
Net sales in the Decorative Architectural Products segment increased 12 percent in 2020, due mostly to higher
sales volume of paints and other coating products, and to a lesser extent, builders' hardware products. Such
increases were slightly offset by unfavorable net selling prices of paints and other coating products.
Operating Results
Operating profit in the Decorative Architectural Products segment in 2020 benefited primarily from higher sales
volume, as well as cost savings initiatives, including actions taken to mitigate the COVID-19 pandemic impact, and
decreased commodity costs. 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).
Business Rationalizations and Other Initiatives
Over the last several years, we have taken several actions focused on the strategic rationalization of our
businesses including business consolidations, plant closures, headcount reductions and other cost savings
initiatives. In 2020, 2019 and 2018, we incurred net pre-tax costs and charges related to these initiatives of $11
million, $13 million, and $9 million, respectively.
We continue to realize the benefits of our business rationalizations and continuous improvement initiatives
across our enterprise and expect to identify additional opportunities to improve our business operations.
During 2020, 2019 and 2018, our Plumbing Products segment incurred costs and charges of $7 million, $13
million and $9 million, respectively and our Decorative Architectural Products segment incurred costs and charges
of $4 million in 2020. The 2020 costs primarily related to business and plant consolidation and severance costs in
North America.
30
Geographic Area Results Discussion
North America
Sales
North American net sales in 2020 increased nine percent. Higher sales volume of paints and other coating
products, plumbing products, and to a lesser extent, builders' hardware, in aggregate, increased sales by 10
percent. Such increases were slightly offset by unfavorable net selling prices of paints and other coating products,
which decreased sales by one percent.
Operating Results
Operating profit from North American operations in 2020 was positively affected by higher sales volume, cost
savings initiatives, including actions taken to mitigate the COVID-19 pandemic impact and favorable sales mix of
plumbing products. 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 and increased commodity
costs, primarily attributable to tariffs. Additionally, operating profit was adversely impacted by higher fixed expenses
in our lighting business, and an increase in other expenses (such as salaries, legal costs and advertising).
International, Principally Europe
Sales
Net sales from International operations in 2020 were flat. In local currencies (including sales in foreign
currencies outside their respective functional currencies), net sales decreased one percent due to unfavorable sales
mix of plumbing products that was partially offset by favorable net selling prices of plumbing products.
Operating Results
Operating profit from International operations in 2020 was positively impacted by cost savings initiatives,
including actions taken to mitigate the COVID-19 pandemic impact, and favorable net selling prices. These positive
impacts were partially offset by unfavorable sales mix.
31
Other Matters
Commitments and Contingencies
Litigation
Information regarding our legal proceedings is set forth in Note U to the consolidated financial statements,
which is incorporated herein by reference.
Other Commitments
We enter into contracts, which include reasonable and customary indemnifications that are standard for the
industries in which we operate. Such indemnifications include claims made against builders by homeowners for
issues relating to our products and workmanship. In conjunction with divestitures and other transactions, we
occasionally provide reasonable and customary indemnifications. We have never had to pay a material amount
related to these indemnifications, and we evaluate the probability that amounts may be incurred and record an
estimated liability when probable and reasonably estimable.
Recently Adopted and Issued Accounting Pronouncements
Refer to Note A to the consolidated financial statements for discussion of recently adopted and issued
accounting pronouncements, which is incorporated herein by reference.
32
Contractual Obligations
The following table provides payment obligations related to current contracts at December 31, 2020, in
millions:
2021
2022-2023
2024-2025
Beyond
2025
Other
Total
Payments Due by Period
Debt (A)
Interest (A)
Operating leases
Currently payable income taxes
Private equity funds (B)
Purchase commitments (C)
Uncertain tax positions, including
interest and penalties (D)
$
3 $
337 $
506 $
1,948 $
— $
130
46
16
—
307
—
231
209
614
64
—
—
—
—
36
—
—
—
—
89
—
—
—
—
—
—
—
4
—
84
2,794
1,184
235
16
4
307
84
Total
$
502 $
632 $
751 $
2,651 $
88 $
4,624
______________________________
(A) We assume that all debt would be held to maturity. Amounts include finance lease obligations.
(B) There is no schedule for the capital commitments to the private equity funds; accordingly, we are unable to
make a reasonable estimate as to when capital commitments may be paid.
(C) Excludes contracts that do not require volume commitments and open or pending purchase orders.
(D) Due to the high degree of uncertainty regarding the timing of future cash outflows associated with uncertain tax
positions, we are unable to make a reasonable estimate for the year in which cash settlements may occur with
applicable tax authorities.
Refer to Note N to the consolidated financial statements for defined-benefit pension plan obligations.
33
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We have considered the provisions of accounting guidance regarding disclosure of accounting policies for
derivative financial instruments and disclosure of quantitative and qualitative information about market risk inherent
in derivative financial instruments and other financial instruments.
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, Canadian dollar, and Chinese renminbi,
and to market price fluctuations related to our financial investments. We have insignificant involvement with
derivative financial instruments and use such instruments to the extent necessary to manage exposure to foreign
currency fluctuations.
At December 31, 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. Based upon the analyses performed, such changes would not be expected to materially affect our
consolidated financial position, results of operations or cash flows.
34
Item 8. Financial Statements and Supplementary Data.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of America.
We assessed the effectiveness of our internal control over financial reporting as of December 31, 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, 2020.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness
of our internal control over financial reporting as of December 31, 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, 2020 and expressed an unqualified opinion on our 2020 consolidated financial
statements. This report appears under 'Item 8. Financial Statements and Supplementary Data' under the heading
"Report of Independent Registered Public Accounting Firm."
35
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Masco Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Masco Corporation and its subsidiaries (the
“Company”) as of December 31, 2020 and 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, 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, 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, 2020 and 2019, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 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, 2020, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's
internal control over financial reporting based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
36
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i)
relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Goodwill Impairment Assessments
As described in Notes A and H to the consolidated financial statements, the Company’s consolidated goodwill
balance was $563 million as of December 31, 2020. Management performs an annual impairment test of goodwill in
the fourth quarter of each year, or as events occur or circumstances change that would indicate the carrying value
of goodwill may be impaired. Potential impairment is identified by comparing the fair value of a reporting unit to its
carrying value, including goodwill. Management estimates fair value by using a discounted cash flow model. The
determination of fair value using the discounted cash flow model requires management to make significant
estimates and assumptions related to forecasted sales and operating profits, and the discount rate.
The principal considerations for our determination that performing procedures relating to the goodwill impairment
assessments is a critical audit matter are (i) the significant judgment by management when developing the fair value
measurements of the reporting 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.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of
controls relating to management’s goodwill impairment assessments, including controls over the valuation of the
Company’s reporting units. These procedures also included, among others, testing management’s process for
developing the fair value estimates; evaluating the appropriateness of the discounted cash flow model; testing the
completeness, accuracy, and relevance of underlying data used in the model; and, evaluating the significant
assumptions used by management, including forecasted sales and the discount rates. Professionals with
specialized skill and knowledge were used to assist in evaluating the Company’s discount rate assumptions.
Evaluating management’s assumption related to forecasted sales involved evaluating whether the assumptions
used were reasonable considering (i) the current and past performance of the reporting units, (ii) the consistency
with external market and industry data as relates to forecasted sales, and (iii) whether they were consistent with
evidence obtained in other areas of the audit.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
February 9, 2021
We have served as the Company’s auditor since 1959.
37
Financial Statements and Supplementary Data
MASCO CORPORATION and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31, 2020 and 2019
(In Millions, Except Share Data)
ASSETS
2020
2019
Current Assets:
Cash and cash investments
Receivables
Inventories
Prepaid expenses and other
Assets held for sale
Total current assets
Property and equipment, net
Goodwill
Other intangible assets, net
Operating lease right-of-use assets
Other assets
Assets held for sale
Total assets
Current Liabilities:
Accounts payable
Notes payable
Accrued liabilities
Liabilities held for sale
Total current liabilities
Long-term debt
Noncurrent operating lease liabilities
Other liabilities
Liabilities held for sale
Total liabilities
LIABILITIES
Commitments and contingencies (Note U)
EQUITY
Masco Corporation's shareholders' equity:
Common shares, par value $1 per share
Authorized shares: 1,400,000,000;
Issued and outstanding: 2020 – 258,200,000; 2019 – 275,600,000
Preferred shares authorized: 1,000,000;
Issued and outstanding: 2020 and 2019 – None
Paid-in capital
Retained earnings (deficit)
Accumulated other comprehensive loss
Total Masco Corporation's shareholders' equity (deficit)
Noncontrolling interest
Total equity
Total liabilities and equity
$
$
$
$
1,326 $
1,138
876
149
—
3,489
908
563
357
166
294
—
5,777 $
893 $
3
1,038
—
1,934
2,792
149
481
—
5,356
697
997
754
90
173
2,711
878
509
259
176
139
355
5,027
697
2
700
149
1,548
2,771
162
589
13
5,083
258
276
—
—
79
(142)
195
226
421
5,777 $
—
—
(332)
(179)
(235)
179
(56)
5,027
See notes to consolidated financial statements.
38
MASCO CORPORATION and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2020, 2019 and 2018
(In Millions, Except Per Common Share Data)
2020
2019
2018
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Impairment charge for other intangible assets
Operating profit
Other income (expense), net:
Interest expense
Other, net
Income from continuing operations before income taxes
Income tax expense
Income from continuing operations
Income from discontinued operations, net
Net income
Less: Net income attributable to noncontrolling interest
$
7,188 $
6,707 $
4,601
2,587
1,292
—
1,295
(144)
(20)
(164)
1,131
269
862
414
1,276
52
4,336
2,371
1,274
9
1,088
(159)
(15)
(174)
914
230
684
296
980
45
Net income attributable to Masco Corporation
$
1,224 $
935 $
Income per common share attributable to Masco Corporation:
Basic:
Income from continuing operations
Income from discontinued operations, net
Net income
Diluted:
Income from continuing operations
Income from discontinued operations, net
Net income
Amounts attributable to Masco Corporation:
Income from continuing operations
Income from discontinued operations, net
Net income
$
$
$
$
$
$
3.05 $
2.21 $
1.55
1.03
4.60 $
3.24 $
3.04 $
2.20 $
1.55
1.02
4.59 $
3.22 $
810 $
639 $
414
296
1,224 $
935 $
6,654
4,327
2,327
1,250
—
1,077
(156)
(14)
(170)
907
221
686
98
784
50
734
2.06
0.32
2.38
2.05
0.32
2.37
636
98
734
See notes to consolidated financial statements.
39
MASCO CORPORATION and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31, 2020, 2019 and 2018
(In Millions)
Net income
Less: Net income attributable to noncontrolling interest
Net income attributable to Masco Corporation
Other comprehensive income (loss), net of tax (Note P):
Cumulative translation adjustment
Interest rate swaps
Pension and other post-retirement benefits
Other comprehensive income (loss), net of tax
Less: Other comprehensive income (loss) attributable to the
noncontrolling interest:
Cumulative translation adjustment
Pension and other post-retirement benefits
Other comprehensive income (loss) attributable to Masco
Corporation
Total comprehensive income
Less: Total comprehensive income attributable to noncontrolling
interest
Total comprehensive income attributable to Masco Corporation
$
$
$
$
$
$
$
2020
2019
2018
1,276 $
980 $
52
45
1,224 $
935 $
72 $
1
(18)
55
20 $
(2)
18
37 $
1,331 $
6 $
2
(64)
(56)
(1) $
(3)
(4)
(52) $
924 $
70
41
1,261 $
883 $
784
50
734
(31)
2
9
(20)
(15)
(2)
(17)
(3)
764
33
731
See notes to consolidated financial statements.
40
MASCO CORPORATION and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2020, 2019 and 2018
(In Millions)
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Net income
Depreciation and amortization
Display amortization
Deferred income taxes
Employee withholding taxes paid on stock-based compensation
Gain on disposition of investments, net
Gain on disposition of businesses, net
Pension and other post-retirement benefits
Impairment of goodwill and other intangible assets
Stock-based compensation
Dividends paid-in-kind
Increase in receivables
(Increase) decrease in inventories
Increase (decrease) in accounts payable and accrued liabilities, net
Other, net
Net cash from operating activities
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Retirement of notes
Purchase of Company common stock
Cash dividends paid
Dividends paid to noncontrolling interest
Issuance of notes, net of issuance costs
Debt extinguishment costs
Proceeds from the exercise of stock options
Employee withholding taxes paid on stock-based compensation
Payment of debt
Credit Agreement and other financing costs
Net cash for financing activities
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures
Acquisition of businesses, net of cash acquired
Proceeds from disposition of:
Businesses, net of cash disposed
Short-term bank deposits
Property and equipment
Other financial investments
Other, net
Net cash from (for) investing activities
Effect of exchange rate changes on cash and cash investments
CASH AND CASH INVESTMENTS:
Increase (decrease) for the year
At January 1
At December 31
$
2020
2019
2018
1,276 $
133
2
(3)
25
(3)
(602)
(32)
—
45
(10)
(141)
(89)
332
20
953
(400)
(727)
(145)
(23)
415
(5)
26
(25)
(2)
—
(886)
(114)
(227)
870
—
1
3
(2)
531
31
980 $
159
12
(41)
23
(1)
(298)
(45)
16
35
—
(37)
58
(27)
(1)
833
(201)
(896)
(144)
(42)
—
(2)
27
(23)
(8)
(2)
(1,291)
(162)
—
722
—
34
1
(13)
582
14
784
156
21
4
42
(4)
—
(47)
—
27
—
(46)
(11)
108
(2)
1,032
(114)
(654)
(134)
(89)
—
—
14
(42)
(1)
—
(1,020)
(219)
(549)
—
108
14
5
(10)
(651)
4
629
697
1,326 $
$
138
559
697 $
(635)
1,194
559
See notes to consolidated financial statements.
41
MASCO CORPORATION and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 2020, 2019 and 2018
(In Millions, Except Per Common Share Data)
Balance, January 1, 2018
Reclassification of disproportionate
tax effects (Refer to Note P)
Total comprehensive income (loss)
Shares issued
Shares retired:
Repurchased
Common
Shares
($1 par value)
Paid-In
Capital
Retained
(Deficit)
Earnings
Total
Accumulated
Other
Comprehensive
(Loss) Income
Noncontrolling
Interest
$
183 $
310 $
— $
(298) $
(65) $
236
—
764
(9)
3
(4)
(654)
(19)
(26)
(59)
(3)
33
59
734
(8)
(609)
(19)
(137)
Surrendered (non-cash)
Cash dividends declared
Dividends paid to noncontrolling
interest
Stock-based compensation
(19)
(137)
(89)
30
30
Balance, December 31, 2018
$
69 $
294 $
— $
(278) $
(127) $
Total comprehensive income (loss)
Shares issued
Shares retired:
Repurchased
Surrendered (non-cash)
Cash dividends declared
Dividends paid to noncontrolling
interest
Stock-based compensation
924
15
(896)
(10)
(146)
(42)
30
3
12
935
(52)
(20)
(1)
(42)
(834)
(9)
(146)
30
Balance, December 31, 2019
$
(56) $
276 $
— $
(332) $
(179) $
179
Cumulative effect of adoption of new
credit loss standard (refer to
Note A)
(1)
(1)
Balance, January 1, 2020
$
(57) $
276 $
— $
(333) $
(179) $
Total comprehensive income
Shares issued
Shares retired:
Repurchased
Surrendered (non-cash)
Cash dividends declared
Dividends paid to noncontrolling
interest
Stock-based compensation
Balance, December 31, 2020
1,331
14
(727)
(14)
(144)
(23)
41
1,224
37
2
12
(19)
(1)
(53)
(655)
(13)
(144)
$
421 $
258 $
41
— $
79 $
(142) $
226
(89)
180
41
(42)
179
70
(23)
See notes to consolidated financial statements.
42
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include the accounts of Masco
Corporation and all majority-owned subsidiaries. All significant intercompany transactions have been eliminated. We
consolidate the assets, liabilities and results of operations of variable interest entities for which we are the primary
beneficiary.
Use of Estimates and Assumptions in the Preparation of Financial Statements. The preparation of
financial statements in conformity with accounting principles generally accepted ("GAAP") in the United States of
America requires us to make certain estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates and
assumptions.
Revenue Recognition. We recognize revenue as control of our products is transferred to our customers,
which is generally at the time of shipment or upon delivery based on the contractual terms with our customers. Our
customers' payment terms generally range from 30 to 65 days of fulfilling our performance obligations and
recognizing revenue.
We provide customer programs and incentive offerings, including special pricing and co-operative advertising
arrangements, promotions and other volume-based incentives. These customer programs and incentives are
considered variable consideration. We include in revenue variable consideration only to the extent that it is probable
that a significant reversal in the amount of cumulative revenue recognized will not occur when the variable
consideration is resolved. This determination is made based upon known customer program and incentive offerings
at the time of sale, and expected sales volume forecasts as it relates to our volume-based incentives. This
determination is updated each reporting period.
Certain product sales include a right of return. We estimate future product returns at the time of sale based on
historical experience and record a corresponding refund liability. We additionally record an asset, based on historical
experience, for the amount of product we expect to return to inventory as a result of the return, which is recorded in
prepaid expenses and other in the consolidated balance sheets.
We consider shipping and handling activities performed by us as activities to fulfill the sales of our products.
Amounts billed for shipping and handling are included in net sales, while costs incurred for shipping and handling
are included in cost of sales. We capitalize incremental costs of obtaining a contract and expense the costs on a
straight-line basis over the contractual period if the cost is recoverable, the cost would not have been incurred
without the contract and the term of the contract is greater than one year; otherwise, we expense the amounts as
incurred. We do not adjust the promised amount of consideration for the effects of a financing component if the
period between when we transfer our products or services and when our customers pay for our products or services
is expected to be one year or less.
Customer Displays. In-store displays that are owned by us and used to market our products are included in
other assets in the consolidated balance sheets and are amortized using the straight-line method over the expected
useful life of three to five years; related amortization expense is classified as a selling expense in the consolidated
statements of operations.
Foreign Currency. The financial statements of our foreign subsidiaries are measured using the local
currency as the functional currency. Assets and liabilities of these subsidiaries are translated at exchange rates as
of the balance sheet dates. Revenues and expenses are translated at average exchange rates in effect during the
year. The resulting cumulative translation adjustments have been recorded in the accumulated other comprehensive
loss component of shareholders' equity. Realized foreign currency transaction gains and losses are included in the
consolidated statements of operations in other income (expense), net.
Cash and Cash Investments. We consider all highly liquid investments with an initial maturity of three
months or less to be cash and cash investments.
43
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A. ACCOUNTING POLICIES (Continued)
Receivables. We do business with a number of customers, including certain home center retailers. 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. We record allowances
for doubtful accounts for estimated losses resulting from the inability of our customers to fulfill their
required payment obligation to us. Allowances are estimated based upon specific customer balances, where a risk
of loss has been identified, and also include a provision for losses based upon historical collection experience and
write-off activity as well as reasonable and supportable forecast information that considers macro-economic factors
and industry-specific trends associated with our businesses, among others. A separate allowance is recorded for
customer incentive rebates and is generally based upon sales activity. Receivables are presented net of certain
allowances (including allowances for doubtful accounts) of $48 million and $36 million at December 31, 2020 and
2019, respectively. Our receivables balances are generally due in less than one year.
Property and Equipment. Property and equipment, including significant improvements to existing facilities,
are recorded at cost. Upon retirement or disposal, the cost and accumulated depreciation are removed from the
accounts and any gain or loss is included in the consolidated statements of operations. Maintenance and repair
costs are charged against earnings as incurred.
We review our property and equipment as events occur or circumstances change that would more likely than
not reduce the fair value of the property and equipment below its carrying amount. If the carrying amount of property
and equipment is not recoverable from its undiscounted cash flows, then we would recognize an impairment loss for
the difference between the carrying amount and the current fair value. Further, we evaluate the remaining useful
lives of property and equipment at each reporting period to determine whether events and circumstances warrant a
revision to the remaining depreciation periods.
Depreciation. Depreciation expense is computed principally using the straight-line method over the
estimated useful lives of the assets. Annual depreciation rates are as follows: buildings and land improvements, 2 to
10 percent, computer hardware and software, 17 to 33 percent, and machinery and equipment, 5 to 33 percent.
Depreciation expense, including discontinued operations, was $105 million in 2020 and $132 million in both 2019
and 2018.
Leases. We determine if an arrangement is a lease at inception. Operating leases are included in operating
lease right-of-use assets (“ROU assets”), accrued liabilities and noncurrent operating lease liabilities on our
consolidated balance sheet. Finance lease ROU assets are included in property and equipment, net, notes payable,
and long-term debt on our consolidated balance sheet.
ROU assets represent our right to use an underlying asset for the duration of the lease term while lease
liabilities represent our obligation to make lease payments in exchange for the right to use an underlying asset.
ROU assets and lease liabilities are measured based on the present value of fixed lease payments over the lease
term at the commencement date. The ROU asset also includes any lease payments made prior to the
commencement date and initial direct costs incurred, and is reduced by any lease incentives received. We review
our ROU assets as events occur or circumstances change that would indicate the carrying amount of the ROU
assets are not recoverable and exceed their fair values. If the carrying amount of the ROU asset is not recoverable
from its undiscounted cash flows, then we would recognize an impairment loss for the difference between the
carrying amount and the current fair value.
As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate on the
commencement date of the lease as the discount rate in determining the present value of future lease payments.
We determine the incremental borrowing rate for each lease by using the current yields of our uncollateralized,
publicly traded debts with maturity periods similar to the respective lease term, adjusted to a collateralized basis
based on third-party data. Our lease terms may include options to extend or terminate the lease when there are
relevant economic incentives present that make it reasonably certain that we will exercise that option. We account
for any non-lease components separately from lease components.
44
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A. ACCOUNTING POLICIES (Continued)
For operating leases, lease expense for future fixed lease payments is recognized on a straight-line basis over
the lease term. For finance leases, lease expense for future fixed lease payments is recognized using the effective
interest rate method over the lease term. Variable lease payments are recognized as lease expense in the period
incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease
expense for these leases on a straight-line basis over the lease term.
Goodwill and Other Intangible Assets. We perform our annual impairment testing of goodwill in the fourth
quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair
value of a reporting unit below its carrying amount. We have defined our reporting units and completed the
impairment testing of goodwill at the operating segment level. Our operating segments are reporting units that
engage in business activities, for which discrete financial information, including five-year forecasts, are available.
We compare the fair value of the reporting units to the carrying value of the reporting units for goodwill impairment
testing. Fair value is determined using a discounted cash flow method, which includes significant unobservable
inputs (Level 3 inputs), and requires us to make significant estimates and assumptions, including long-term
projections of cash flows, market conditions and appropriate discount rates. Our judgments are based upon
historical experience, current market trends, consultations with external valuation specialists and other information.
In estimating future cash flows, we rely on internally generated five-year forecasts for sales and operating profits,
and, currently, a two percent to three percent long-term assumed annual growth rate of cash flows for periods after
the five-year forecast. For 2020, we utilized a weighted average cost of capital of approximately 8.0 percent as the
basis to determine the discount rate to apply to the estimated future cash flows. 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. If the carrying amount of a reporting unit exceeds its fair value, an
impairment loss is recognized to the extent that a reporting unit's carrying value exceeds its fair value, not to exceed
the carrying amount of goodwill in that reporting unit.
We review our other indefinite-lived intangible assets for impairment annually in the fourth quarter, or as
events occur or circumstances change that indicate the assets may be impaired without regard to the business unit.
Potential impairment is identified by comparing the fair value of an other indefinite-lived intangible asset to its
carrying value. We utilize a relief-from-royalty model to estimate the fair value of other indefinite-lived intangible
assets. We consider the implications of both external (e.g., market growth, competition and local economic
conditions) and internal (e.g., product sales and expected product growth) factors and their potential impact on cash
flows related to the intangible asset in both the near- and long-term. We also consider the profitability of the
business, among other factors, to determine the royalty rate for use in the impairment assessment. We utilize our
weighted average cost of capital of approximately 8.0 percent as the basis to determine the discount rate to apply to
the estimated future cash flows. In 2020, based upon our assessment of the risks impacting each of our 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 12.5 percent for our other indefinite-lived intangible assets.
While we believe that the estimates and assumptions underlying the valuation methodologies are reasonable,
different estimates and assumptions could result in different outcomes.
Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful
lives. We review our intangible assets with finite useful lives as events occur or circumstances change that would
more likely than not reduce the fair value of the assets below its carrying amount. If the carrying amount of the
assets is not recoverable from the undiscounted cash flows, then we would recognize an impairment loss for the
difference between the carrying amount and the current fair value. We evaluate the remaining useful lives of
amortizable intangible assets at each reporting period to determine whether events or circumstances warrant a
revision to the remaining periods of amortization.
Refer to Note H for additional information regarding goodwill and other intangible assets.
45
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A. ACCOUNTING POLICIES (Continued)
Acquisitions. In accordance with accounting guidance for the provisions in Financial Accounting Standards
Board ("FASB") ASC 805, "Business Combinations," we allocate the purchase price of an acquired business to its
identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the amount
allocated to the assets and liabilities, if any, is recorded as goodwill. In addition, any contingent consideration is fair
valued as of the date of the acquisition and is recorded as part of the purchase price. This estimate is updated in
future periods and any changes in the estimate, which are not considered an adjustment to the purchase price, are
recorded in our consolidated statements of operations.
We use all available information to estimate fair values. We typically engage external valuation specialists to
assist in the fair value determination of identifiable intangible assets and any other significant assets or liabilities.
We adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date
as we obtain more information regarding assets acquired and liabilities assumed based on facts and circumstances
that existed as of the acquisition date.
Our purchase price allocation methodology contains uncertainties because it requires us to make assumptions
and to apply judgment to estimate the fair value of acquired assets and assumed liabilities. We estimate the fair
value of assets and liabilities based upon the carrying value of the acquired assets and assumed liabilities and
widely accepted valuation techniques, including discounted cash flows. Unanticipated events or circumstances may
occur which could affect the accuracy of our fair value estimates, including assumptions regarding industry
economic factors and business strategies.
Other estimates used in determining fair value include, but are not limited to, future cash flows or income
related to intangibles, market rate assumptions and appropriate discount rates. Our estimates of fair value are
based upon assumptions believed to be reasonable, but that are inherently uncertain, and therefore, may not be
realized. Accordingly, there can be no assurance that the estimates, assumptions, and values reflected in the
valuations will be realized, and actual results could vary materially.
Refer to Note B for additional information regarding acquisitions.
Fair Value Accounting. We use derivative financial instruments to manage certain exposure to fluctuations
in earnings and cash flows resulting from changes in foreign currency exchange rates, and occasionally from
changes in commodity costs and interest rate exposures. Derivative financial instruments are recorded in the
consolidated balance sheets as either an asset or liability measured at fair value, netted by counterparty, where the
right of offset exists. The gain or loss is recognized in determining current earnings during the period of the change
in fair value. We currently do not have any derivative instruments for which we have designated hedge accounting.
Refer to Note I for additional information regarding fair value of financial instruments.
Warranty. We offer limited warranties on certain products with warranty periods ranging up to the lifetime of
the product to the original consumer purchaser. At the time of sale, we accrue a warranty liability for the estimated
future cost to provide products, parts or services to repair or replace products to satisfy our warranty obligations.
Our estimate of future costs to service our warranty obligations is based upon the information available and includes
a number of factors, such as the warranty coverage, the warranty period, historical experience specific to the
nature, frequency and average cost to service the claim, along with industry and demographic trends.
Certain factors and related assumptions in determining our warranty liability involve judgments and estimates
and are sensitive to changes in the factors described above. We believe that the warranty accrual is appropriate;
however, actual claims incurred could differ from our original estimates which would require us to adjust our
previously established accruals. Refer to Note U for additional information on our warranty accrual.
A significant portion of our business is at the consumer retail level through home center retailers and other
major retailers. A consumer may return a product to a retail outlet that is a warranty return. However, certain retail
outlets do not distinguish between warranty and other types of returns when they claim a return deduction from us.
Our revenue recognition policy takes into account this type of return when recognizing revenue, and an estimate of
these amounts is recorded as a deduction to net sales at the time of sale.
46
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A. ACCOUNTING POLICIES (Continued)
Insurance Reserves. We provide for expenses associated with workers' compensation and product liability
obligations when such amounts are probable and can be reasonably estimated. The accruals are adjusted as new
information develops or circumstances change that would affect the estimated liability. Any obligations expected to
be settled within 12 months are recorded in accrued liabilities; all other obligations are recorded in other liabilities.
Litigation. We are involved in claims and litigation, including class actions, mass torts and regulatory
proceedings, which arise in the ordinary course of our business. Liabilities and costs associated with these matters
require estimates and judgments based upon our professional knowledge and experience and that of our legal
counsel. When a liability is probable of being incurred and our exposure in these matters is reasonably estimable,
amounts are recorded as charges to earnings. The ultimate resolution of these exposures may differ due to
subsequent developments.
Stock-Based Compensation. We issue stock-based incentives in various forms to our employees and non-
employee Directors. Outstanding stock-based incentives were in the form of long-term stock awards, stock options,
restricted stock units ("RSUs"), performance restricted stock units ("PRSUs") and phantom stock awards.
We measure compensation expense for stock awards and RSUs at the market price of our common stock at
the grant date. We measure compensation expense for stock options using a Black-Scholes option pricing model.
We measure compensation expense for PRSUs at the expected payout of the awards. We recognize forfeitures
related to stock awards, stock options, RSUs and PRSUs as they occur.
We initially measure compensation expense for phantom stock awards at the market price of our common
stock at the grant date. Phantom stock awards are linked to the value of our common stock on the date of grant and
are settled in cash upon vesting. We account for phantom stock awards as liability-based awards; the liability is
remeasured and adjusted at the end of each reporting period until the awards are fully-vested and paid to the
employees.
In December 2019, our Organization and Compensation Committee of the Board of Directors (the
"Compensation Committee") amended the terms of equity awards under our 2014 Long Term Stock Incentive
Plan to provide that newly issued stock options, RSUs and phantom stock awards vest over a three-year
period and redefined retirement-eligibility as age 65 or age 55 with at least 10 years of continuous service. As such,
compensation expense for equity awards granted in 2020 and thereafter is recognized ratably over the
shorter of the vesting period, typically three years, or the length of time until the grantee becomes retirement
eligible. For prior year grants, expense was recognized ratably over the shorter of the vesting period of the stock
awards, stock options and phantom stock awards, typically five years, or the length of time until the grantee became
retirement-eligible, generally at age 65. Expense for PRSUs is recognized ratably over the three-year vesting period
of the units.
Refer to Note M for additional information on stock-based compensation.
Noncontrolling Interest. We owned 68 percent of Hansgrohe SE at both December 31, 2020 and 2019.
The aggregate noncontrolling interest, net of dividends, at December 31, 2020 and 2019 has been recorded as a
component of equity on our consolidated balance sheets.
Discontinued Operations. We report financial results for discontinued operations separately from continuing
operations to distinguish the financial impact of disposal transactions from ongoing operations. Discontinued
operations reporting occurs only when the disposal of a component or a group of components represents a strategic
shift that will have a major effect on our operations and financial results. In our consolidated statements of cash
flows, the cash flow from discontinued operations are not separately classified. Refer to Note C for further
information regarding our discontinued operations.
47
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A. ACCOUNTING POLICIES (Continued)
Income Taxes. Deferred taxes are recognized based on the future tax consequences of differences between
the financial statement carrying value of assets and liabilities and their respective tax basis. The future realization of
deferred tax assets depends on the existence of sufficient taxable income in future periods. 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.
If, based upon all available evidence, both positive and negative, it is more likely than not (more than 50
percent likely) such deferred tax assets will not be realized, a valuation allowance is recorded. Significant weight is
given to positive and negative evidence that is objectively verifiable. A company's three-year cumulative loss
position is significant negative evidence in considering whether deferred tax assets are realizable, and the
accounting guidance restricts the amount of reliance we can place on projected taxable income to support the
recovery of the deferred tax assets.
The current accounting guidance allows the recognition of only those income tax positions that have a greater
than 50 percent likelihood of being sustained upon examination by the taxing authorities. We believe that there is an
increased potential for volatility in our effective tax rate because this threshold allows for changes in the income tax
environment and, to a greater extent, the inherent complexities of income tax law in a substantial number of
jurisdictions, which may affect the computation of our liability for uncertain tax positions.
We record interest and penalties on our uncertain tax positions in income tax expense.
The accounting guidance for income taxes requires us to allocate our provision for income taxes between
continuing operations and other categories of earnings, such as other comprehensive income (loss). Subsequent
adjustments to deferred taxes originally recorded to other comprehensive income (loss) may reverse in a different
category of earnings, such as continuing operations, resulting in a disproportionate tax effect within accumulated
other comprehensive income (loss). Generally, a disproportionate tax effect will be eliminated and recognized in
income tax expense when the circumstances upon which it is premised cease to exist.
The disproportionate tax effect related to various defined-benefit pension plans will be eliminated from
accumulated other comprehensive income (loss) at the termination of the related pension plans. The
disproportionate tax effect relating to our interest rate swap hedge, which was terminated in 2012, will be eliminated
from accumulated other comprehensive income (loss) upon the maturity of the related debt in March 2022.
We record the tax effects of Global Intangible Low-taxed Income related to our foreign operations as a
component of income tax expense in the period the tax arises.
Reclassifications. Certain prior year amounts have been reclassified to conform to the 2020 presentation in
the consolidated financial statements.
Recently Adopted Accounting Pronouncements. In June 2016, the FASB issued ASU 2016-13, "Financial
Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which modifies
the methodology for recognizing loss impairments on certain types of financial instruments, including receivables.
The new methodology requires an entity to estimate the credit losses expected over the life of an exposure.
Additionally, ASU 2016-13 amends the current available-for-sale security other-than-temporary impairment model
for debt securities. We adopted ASU 2016-13 and recorded a cumulative-effect adjustment to opening retained
earnings on January 1, 2020. The adoption of the standard did not have a material effect on our financial position or
results of operations.
In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software
(Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement
That Is a Service Contract," which allows for the capitalization of certain implementation costs incurred in a hosting
arrangement that is a service contract. We adopted ASU 2018-15 prospectively beginning on January 1, 2020. The
adoption of the standard did not have an impact on our financial position or results of operations.
48
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A. ACCOUNTING POLICIES (Concluded)
In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes," which simplifies the accounting for income taxes by removing certain exceptions to the general
principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas
of Topic 740 by clarifying and amending existing guidance. We early adopted ASU 2019-12 on January 1, 2020.
The adoption of the standard did not have an impact on our financial position or results of operations.
Recently Issued Accounting Pronouncements. In January 2020, the FASB issued ASU 2020-01,
"Investments—Equity Securities (Topic 321)," "Investments—Equity Method and Joint Ventures (Topic 323)," and
"Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815,"
which clarifies that an entity should consider observable transactions when either applying or discontinuing the
equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic
321. ASU 2020-01 clarifies that for certain forward contracts or purchased options to acquire investments, an entity
should not consider whether, upon settlement of the forward contract or exercise of the purchased option, the
underlying securities would be accounted for under the equity method or the fair value option. ASU 2020-01 is
effective for us for annual periods beginning January 1, 2021. Early adoption is permitted. We plan to adopt this
standard for annual periods beginning January 1, 2021 and do not anticipate that the adoption of this new standard
will have a material impact on our financial position or results of operations.
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects
of Reference Rate Reform on Financial Reporting," which provides optional guidance and expedients for applying
GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria
are met. The amendments are intended to ease the potential burden in accounting for (or recognizing the effects of)
reference rate reform on financial reporting. The amendments in this update are elective and are effective upon
issuance. As of December 31, 2020 we have not elected any of the expedients set out in ASU 2020-04. To the
extent we modify a contract going forward during the transition period we would consider applying the new
standard.
We consider the applicability and impact of all ASUs. ASUs not listed above were assessed and determined
not to be applicable.
49
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
B. ACQUISITIONS
In the first quarter of 2020, we acquired all of the share capital of SmarTap A.Y Ltd. ("SmarTap") for
approximately $24 million in cash. SmarTap is a developer of a smart bathing system that monitors and controls the
temperature and flow of water. This acquisition provides an adaptable solution for a wide range of products as it is
compatible with showerheads, hand showers, spouts and shower jets. This business is included in the Plumbing
Products segment. In connection with this acquisition, we recognized $10 million of definite-lived intangible assets,
primarily related to technology, which is being amortized on a straight-line basis over a weighted average
amortization period of 5 years. We also recognized $14 million of goodwill, which is not tax deductible, and is
related primarily to the expected synergies from combining the operations into our business.
In the fourth quarter of 2020, we acquired substantially all of the net assets of Kraus USA Inc. ("Kraus"), a
designer and distributor of sinks, faucets and accessories for the kitchen and bathroom, for approximately
$103 million and an additional cash payment of up to $50 million contingent upon the achievement of certain
financial performance metrics for the year ending December 31, 2022. The range of the undiscounted amounts we
could be required to pay is between $0 and $50 million. As of the closing date of the acquisition, the contingent
consideration was assigned a fair value of approximately $8 million. Refer to Note I for additional information
regarding the measurement of the contingent consideration liability. This business expands our product offerings to
our customers and our online presence under the Kraus brand. This business is included in the Plumbing Products
segment. In connection with this acquisition, we recognized $25 million of indefinite-lived intangible assets, which is
related to trademarks, and $49 million of definite-lived intangible assets, primarily related to customer relationships.
The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average
amortization period of 10 years. We also recognized $20 million of goodwill, which is generally tax deductible, and is
related primarily to the expected synergies from combining the operations into our business.
In the fourth quarter of 2020, we acquired substantially all of the net assets of Work Tools International Inc. and
Elder & Jenks, LLC (collectively, "Work Tools") for approximately $53 million, including $48 million of cash and
$5 million of debt that will be paid out in 18 months less any pending or settled indemnity matters. Work Tools will
expand our product offering to our customers as it is a leading manufacturer of high-quality precision painting tools
and accessories including brushes, rollers and mini rollers for DIY and professionals. This business is included in
the Decorative Architectural Products segment. In connection with this acquisition, we recognized $7 million of
indefinite-lived intangible assets, which is related to trademarks, and $27 million of definite-lived intangible assets,
primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line
basis over a weighted average amortization period of 12 years. We also recognized $7 million of goodwill, which is
generally tax deductible, and is related primarily to the expected synergies from combining the operations into our
business.
On November 10, 2020, we entered into an agreement to acquire a 75.1% equity interest in Easy Sanitary
Solutions B.V. ("ESS"), for approximately €45 million ($55 million) subject to working capital and other adjustments.
ESS is the inventor, developer and manufacturer of Easy Drain shower channels and offers a wide range of
products for barrier-free showering and bathroom wall niches. 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. The cash payment was accounted for as prepaid expenses and other in the consolidated balance
sheet and included in investing cash flows for the year ended December 31, 2020.
50
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
B. ACQUISITIONS (Concluded)
On March 9, 2018, we acquired substantially all of the net assets of The L.D. Kichler Co. ("Kichler"), a leader in
decorative residential and light commercial lighting products, ceiling fans and LED lighting systems. This business
expands our product offerings to our customers. The results of this acquisition for the period from the acquisition
date are included in the consolidated financial statements and are reported in the Decorative Architectural Products
segment. The purchase price, net of $2 million cash acquired, consisted of $549 million paid with cash on hand.
Since the acquisition, we have revised the allocation of the purchase price to identifiable assets and liabilities based
on analysis of information as of the acquisition date that has been made available in the year after acquisition. The
initial and final allocations of the fair value of the acquisition of Kichler is summarized in the following table, in
millions.
Receivables
Inventories
Prepaid expenses and other
Property and equipment
Goodwill
Other intangible assets
Accounts payable
Accrued liabilities
Other liabilities
Total
Initial
Final
$
101 $
173
5
33
46
243
(24)
(25)
(4)
100
166
5
33
64
240
(24)
(30)
(5)
$
548 $
549
The goodwill acquired, which is generally tax deductible, is related primarily to the operational and financial
synergies we expect to derive from combining Kichler's operations into our business, as well as the assembled
workforce. The other intangible assets acquired consist of $59 million of indefinite-lived intangible assets, which is
related to trademarks, and $181 million of definite-lived intangible assets. The definite-lived intangible assets consist
of $145 million related to customer relationships, which is being amortized on a straight-line basis over 20 years,
and $36 million of other definite-lived intangible assets, which is being amortized over a weighted average
amortization period of three years.
C. DIVESTITURES
On September 6, 2019, we completed the divestiture of our UK Window Group business ("UKWG"), a
manufacturer and distributor of windows and doors, for proceeds of approximately $8 million, of which $2 million net
of cash disposed was received upon sale. The remaining $6 million was accounted for as a note receivable that is
expected to be collected within two years of the divestiture. In connection with the sale, we recognized a loss of
$70 million for the year ended December 31, 2019, which is included in income from discontinued operations, net in
the consolidated statements of operations.
On November 6, 2019, we completed the divestiture of our Milgard Windows and Doors business ("Milgard"), a
manufacturer and distributor of windows and doors for proceeds of approximately $720 million, net of cash
disposed. In connection with the sale, we recognized a gain on the divestiture of $368 million for the year ended
December 31, 2019, which is included in income from discontinued operations, net in the consolidated statement of
operations.
In 2019, we determined that the previously reported Windows and Other Specialty Products segment met the
criteria to be classified as a discontinued operation as a result of the combined sale of UKWG and Milgard. These
businesses represented all of our windows businesses and all remaining businesses in the Windows and Other
Specialty Products segment.
51
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
C. DIVESTITURES (Continued)
During the second quarter of 2020, a $17 million pre-tax post-closing adjustment related to the finalization of
working capital items was recorded to income from discontinued operations, net in the consolidated statement of
operations, as a gain on the divestiture of Milgard. As of December 31, 2020, we have received the $17 million in
cash, which is presented in investing activities on the consolidated statement of cash flow as proceeds from
disposition of businesses, net of cash disposed. All post-closing adjustments related to our divestiture of Milgard
were finalized with the buyer in the second quarter of 2020.
On November 14, 2019, we entered into a definitive agreement to sell Masco Cabinetry LLC ("Cabinetry"), a
manufacturer of cabinetry products. We completed the divestiture of Cabinetry on February 18, 2020 for proceeds
of approximately $989 million, including $853 million, net of cash disposed. The remaining $136 million was
accounted for as preferred stock issued by a holding company of the buyer; refer to Note I for additional information.
The working capital adjustment was finalized with the buyer in the second quarter of 2020, resulting in no significant
changes to net proceeds. In connection with the sale, we recognized a gain on the divestiture of $585 million for the
year ended December 31, 2020, which is included in income from discontinued operations, net in the consolidated
statement of operations. We determined that the previously reported Cabinetry Products segment met the criteria to
be classified as a discontinued operation as Cabinetry represented all of our cabinet businesses and all remaining
businesses in the Cabinetry Products segment.
We determined that the assets and liabilities for Cabinetry, Milgard and UKWG met the held for sale criteria in
accordance with ASC 205-20, Discontinued Operations, during 2019. We ceased recording depreciation and
amortization for the held for sale assets upon meeting the held for sale criteria.
As the combined sale of UKWG and Milgard and the sale of Cabinetry each represented a strategic shift that
will have a major effect on our operations and financial results, these businesses were presented in discontinued
operations separate from continuing operations for all periods presented. In addition, depreciation and amortization,
capital expenditures, and significant non-cash operating and investing activities related to discontinued operations
were separately disclosed.
The results of the windows businesses recorded in (loss) income from discontinued operations before income
tax was income of $2 million and $40 million for the years ended December 31, 2020 and 2018, respectively and a
loss of $1 million for the year ended December 31, 2019. The results of the cabinetry business recorded in (loss)
income from discontinued operations before income tax was a loss of $7 million for the year ended December 31,
2020 and income of $107 million and $95 million for the years ended December 31, 2019 and 2018, respectively.
The major classes of line items constituting income from discontinued operations, net, in millions:
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Impairment charge for goodwill (A)
Other income (expense), net
(Loss) income from discontinued operations
Gain on disposal of discontinued operations, net
Income before income tax
Income tax expense
Income from discontinued operations, net
$
For the Years Ended December 31,
2020
2019
2018
$
101 $
1,528 $
78
23
28
—
—
(5)
602
597
(183)
414 $
1,184
344
232
7
1
106
298
404
(108)
296 $
1,705
1,343
362
228
—
1
135
—
135
(37)
98
(A)
In the first quarter of 2019, we recognized a $7 million non-cash goodwill impairment charge related to a decline in the
long-term outlook of our windows and doors business in the United Kingdom.
52
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
C. DIVESTITURES (Concluded)
The carrying amount of major classes of assets and liabilities included as part of the Cabinetry discontinued
operations and reported as held for sale, were as follows, in millions:
Receivables
Prepaid expenses and other
Inventories
Property and equipment, net
Operating lease right-of-use assets
Goodwill
Other intangible assets, net
Other assets
Total assets classified as held for sale
Accounts payable
Accrued liabilities
Noncurrent operating lease liabilities
Other liabilities
Total liabilities classified as held for sale
December 31, 2019
$
$
$
$
76
7
90
157
4
181
1
12
528
103
46
3
10
162
Assets and liabilities classified as held for sale were required to be recorded at the lower of its carrying value or
fair value less costs to sell. The estimated fair value less costs to sell of the held for sale businesses exceeded their
carrying value, and therefore no adjustment to these long-lived assets was necessary.
Other selected financial information for Cabinetry, Milgard and UKWG during the period owned by us, were as
follows, in millions:
Depreciation and amortization
Capital expenditures
ROU assets obtained in exchange for new lease obligations
For the Years Ended December 31,
2020
2019
2018
$
— $
29 $
1
—
34
3
36
38
—
In conjunction with the divestiture of Milgard and Cabinetry, we entered into Transition Services Agreements to
provide administrative services to the buyers. As of December 31, 2020, our Transition Service Agreement with
Milgard and Cabinetry concluded. The fees for services rendered under each of the Transition Service Agreements
were not material to our results of operations.
53
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
D. REVENUE
Our revenues are derived primarily from sales to customers in North America and Internationally, principally
Europe. Net sales from these geographic markets, by segment, were as follows, in millions:
Primary geographic markets:
North America
International, principally Europe
Total
Primary geographic markets:
North America
International, principally Europe
Total
Primary geographic markets:
North America
International, principally Europe
Total
Year Ended December 31, 2020
Plumbing Products
Decorative
Architectural
Products
Total
$
$
2,753 $
1,383
4,136 $
3,052 $
—
3,052 $
5,805
1,383
7,188
Year Ended December 31, 2019
Plumbing Products
Decorative
Architectural
Products
Total
$
$
2,605 $
1,379
3,984 $
2,723 $
—
2,723 $
5,328
1,379
6,707
Year Ended December 31, 2018
Plumbing Products
Decorative
Architectural
Products
Total
$
$
2,552 $
1,446
3,998 $
2,656 $
—
2,656 $
5,208
1,446
6,654
We recognized increases to revenue of $7 million, $2 million, and $4 million in 2020, 2019, and 2018,
respectively, for variable consideration related to performance obligations settled in previous periods.
We record contract assets for items for which we have satisfied our performance obligation but our receipt of
payment is contingent upon delivery or other circumstances other than the passage of time. Our contract assets are
recorded in prepaid expenses and other in our consolidated balance sheets. Our contract assets generally become
unconditional and are reclassified to receivables in the quarter subsequent to each balance sheet date. Our contract
asset balance was $2 million at both December 31, 2020 and 2019.
We record contract liabilities primarily for deferred revenue. Our contract liabilities are recorded in accrued
liabilities in our consolidated balance sheets. Our contract liabilities are generally recognized to net sales in the
immediately subsequent reporting period. Our contract liability balance was $62 million and $40 million at
December 31, 2020 and 2019, respectively.
Changes in the allowance for credit losses deducted from accounts receivable were as follows, in millions:
Balance at January 1 (after adopting ASU 2016-13)
Provision for expected credit losses during the period
Write-offs charged against the allowance
Recoveries of amounts previously written off
Balance at end of year
54
Year Ended
December 31, 2020
$
$
5
3
(2)
1
7
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
E. INVENTORIES
Finished goods
Raw materials
Work in process
Total
(In Millions)
At December 31
2020
2019
$
$
552 $
242
82
876 $
485
211
58
754
Inventories, which include purchased parts, materials, direct labor and applied overhead, are stated at the
lower of cost or net realizable value, with cost determined by use of the first-in, first-out method.
F. LEASES
We have operating and finance leases primarily for corporate offices, manufacturing facilities, warehouses,
vehicles, and equipment. Our leases have remaining lease terms up to 22 years, some of which may include one or
more renewal options with terms to extend the lease for up to an additional 20 years, and some of which may
include options to terminate the leases prior to their expiration.
The components of lease cost included in income from continuing operations were as follows, in millions:
Operating lease cost
Short-term lease cost
Variable lease cost
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
2020
2019
$
47 $
7
3
3
1
Supplemental cash flow information related to leases was as follows, in millions
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
Operating cash flows for finance leases
Financing cash flows for finance leases
$
ROU assets obtained in exchange for new lease obligations:
Operating leases (A)
Finance leases
______________________________
2020
2019
47 $
1
2
27
—
49
6
3
3
1
58
1
8
27
—
(A)
Includes $9 million of ROU assets obtained in exchange for new lease obligations related to the acquisitions of Kraus and
Work Tools in the fourth quarter of 2020.
55
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
F. LEASES (Concluded)
Certain other information related to leases was as follows:
Weighted-average remaining lease term:
Operating leases
Finance leases
Weighted-average discount rate:
Operating leases
Finance leases
At December 31
2020
2019
10 years
10 years
10 years
11 years
4.4 %
3.3 %
4.6 %
3.4 %
Supplemental balance sheet information related to leases was as follows, in millions:
At December 31, 2020
At December 31, 2019
Operating Leases
Finance Leases
Operating Leases
Finance Leases
Property and equipment, net
Notes payable
Accrued liabilities
Long-term debt
$
— $
—
39
—
27 $
2
—
26
— $
—
38
—
29
2
—
28
Gross ROU assets under finance leases recorded within property and equipment, net were $42 million at both
December 31, 2020 and 2019, and accumulated amortization associated with these leases was $15 million and $13
million, at December 31, 2020 and 2019, respectively.
At December 31, 2020, future maturities of lease liabilities were as follows, in millions:
Operating Leases
Finance Leases
Year ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: imputed interest
Total
$
$
46 $
37
27
20
16
89
235
(47)
188 $
3
3
3
4
4
16
33
(5)
28
Rental expense (under ASC 840) recorded in the consolidated statement of operations totaled approximately
$63 million during 2018.
G. PROPERTY AND EQUIPMENT
Land and improvements
Buildings
Computer hardware and software
Machinery and equipment
Less: Accumulated depreciation
Total
(In Millions)
At December 31
2020
2019
$
66 $
522
249
1,184
2,021
64
497
232
1,103
1,896
(1,113)
(1,018)
$
908 $
878
56
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
H. GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill, by segment, were as follows, in millions:
Plumbing Products
Decorative Architectural Products
Total
Gross Goodwill At
December 31, 2020
Accumulated
Impairment
Losses
Net Goodwill At
December 31, 2020
$
$
613 $
365
978 $
(340) $
(75)
(415) $
273
290
563
Gross
Goodwill At
December
31, 2019
Accumulated
Impairment
Losses
Net Goodwill
At December
31, 2019
Acquisitions
Other (A)
Net Goodwill
At December
31, 2020
Plumbing Products
Decorative Architectural
Products
Total
$
$
566 $
(340) $
226 $
34 $
13 $
273
358
924 $
(75)
(415) $
283
509 $
7
41 $
—
13 $
290
563
Gross
Goodwill At
December
31, 2018
Accumulated
Impairment
Losses
Net Goodwill
At December
31, 2018
Acquisitions
Other (A)
Net Goodwill
At December
31, 2019
Plumbing Products
Decorative Architectural
Products
Total
$
$
______________________________
568 $
(340) $
228 $
— $
(2) $
226
358
(75)
283
926 $
(415) $
511 $
—
— $
—
(2) $
283
509
(A)
Other consists of the effect of foreign currency translation.
Other indefinite-lived intangible assets were $109 million and $76 million at December 31, 2020 and 2019,
respectively, and principally included registered trademarks. As a result of our 2020 acquisitions, other indefinite-
lived intangible assets increased by $32 million as of the acquisition dates. During the first quarter of 2019, we
recognized a $9 million impairment charge related to a registered trademark in our Decorative Architectural
Products segment due to a change in the long-term net sales projections of lighting products.
We completed our annual impairment testing of goodwill and other indefinite-lived intangible assets in the
fourth quarters of 2020, 2019 and 2018. There was no impairment of goodwill for any of our reporting units or of our
other indefinite-lived intangible assets in any of these years, other than as disclosed above.
The carrying value of our definite-lived intangible assets was $248 million (net of accumulated amortization of
$73 million) at December 31, 2020 and $183 million (net of accumulated amortization of $48 million) at
December 31, 2019 and principally included customer relationships with a weighted average amortization period of
15 years in 2020 and 17 years in 2019. Amortization expense, including discontinued operations, related to the
definite-lived intangible assets was $24 million, $23 million and $20 million in 2020, 2019 and 2018, respectively. As
a result of our 2020 acquisitions, definite-lived intangible assets increased by $86 million, as of the acquisition
dates.
At December 31, 2020, amortization expense related to the definite-lived intangible assets during each of the
next five years was as follows: 2021 – $27 million; 2022 – $23 million; 2023 – $22 million, 2024 – $22 million and
2025 –$17 million.
57
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
I. FAIR VALUE OF FINANCIAL INSTRUMENTS
Preferred Stock of ACProducts Holding, Inc. In conjunction with our divestiture of Cabinetry, we received
preferred stock of ACProducts Holding, Inc., the holding company of the buyer, with a liquidation preference of
$150 million. The preferred stock has a coupon of 8 percent until the first anniversary of issuance, 9 percent after
the first anniversary and until the second anniversary of issuance, and 10 percent after the second anniversary of
issuance and until the seventh anniversary of issuance. After which, the rate will increase by 50 basis points up to a
maximum of 15 percent for each annual period occurring during and after the seventh anniversary until all shares
have been redeemed in full.
We do not have the ability to exercise significant influence, and the fair value of the preferred stock is not
readily available. We elected to measure this investment at cost (less impairment, if any) adjusted for observable
price changes in orderly transactions for the identical or similar investments of the same issuer for subsequent
measurements of fair value. As the preferred stock was received in conjunction with the sale of Cabinetry, we
determined the cost to be the fair value of the preferred stock at the time of sale.
The fair value of the preferred stock was measured on a non-recurring basis, and estimated using discounted
cash flow and option pricing models (Level 3 inputs). The significant unobservable inputs used to value the
preferred stock included: time to exit (deemed maturity) since the preferred stock is not mandatorily redeemable,
discount rate used to determine the present value of expected cash flows, which included the spread on company
specific debt and the risk-free rate of return, the liquidation preference and the coupon rate. On the date of
acquisition, the fair value of this investment was determined to be $136 million and was included in other assets in
our consolidated balance sheet.
Dividends earned on this investment are included within other income (expense), net in our consolidated
statement of operations with a corresponding increase to our basis in the investment. We had dividend income of
$10 million for the year ended December 31, 2020. As such, the preferred stock was reported at the carrying value
of $146 million in other assets in our consolidated balance sheet at December 31, 2020.
Kraus Acquisition Contingent Consideration. As described in Note B, we may be obligated to pay up to an
additional $50 million for the Kraus acquisition. The fair value of the liability was estimated to be $8 million as of
December 31, 2020, the acquisition date, using probability weighted discounted cash flows and a discount rate that
reflects the uncertainty surrounding the expected outcomes, which we believe is appropriate and representative of a
market participant assumption. This amount was included within the purchase consideration and will be remeasured
at fair value as of each reporting date until the obligation is settled. The measurement of the liability for contingent
consideration is based on significant inputs that are not observable in the market, and is therefore classified as
Level 3 inputs. Examples of utilized unobservable inputs are estimated future revenues and earnings of the
acquired business and an applicable discount rate. The estimate of the liability may fluctuate if there are changes in
the forecast of the acquired business' future revenues and earnings, as a result of actual levels achieved or in the
discount rate used to determine the present value of contingent future cash flows. Any subsequent remeasurement
of the estimate will be recorded in other, net within other income (expense), net in the consolidated statement of
operations.
Fair Value of Debt. The fair value of our short-term and long-term fixed-rate debt instruments is based
principally upon modeled market prices for the same or similar issues, which are Level 1 inputs. The aggregate
estimated market value of our short-term and long-term debt at December 31, 2020 was approximately $3.3 billion,
compared with the aggregate carrying value of $2.8 billion. The aggregate estimated market value of our short-term
and long-term debt at December 31, 2019 was approximately $3.0 billion, compared with the aggregate carrying
value of $2.8 billion.
58
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
J. OTHER ASSETS
Preferred stock of ACProducts Holding, Inc. (Note I)
Equity method investments
In-store displays, net
Deferred tax assets (Note S)
Other
Total
(In Millions)
At December 31
2020
2019
$
146 $
11
1
109
27
—
11
5
99
24
$
294 $
139
We recognized amortization expense, including discontinued operations, related to in-store displays of $2
million, $12 million and $21 million in 2020, 2019 and 2018, respectively. Cash spent for displays was $11 million
and $10 million in 2019 and 2018, respectively, and is included in other, net within investing activities on the
consolidated statements of cash flows.
K. ACCRUED LIABILITIES
Salaries, wages and commissions
Advertising and sales promotion
Interest
Warranty (Note U)
Employee retirement plans
Insurance reserves
Property, payroll and other taxes
Dividends payable
Deferred revenue
Product returns
Operating lease liabilities (Note F)
Other
Total
(In Millions)
At December 31
2020
2019
$
193 $
293
35
34
182
29
32
36
62
23
39
80
141
189
36
31
41
37
18
37
40
25
38
67
$
1,038 $
700
59
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
L. DEBT
Notes and debentures:
3.500%, due April 1, 2021
5.950%, due March 15, 2022
4.450%, due April 1, 2025
4.375%, due April 1, 2026
3.500%, due November 15, 2027
7.750%, due August 1, 2029
2.000%, due October 1, 2030
6.500%, due August 15, 2032
4.500%, due May 15, 2047
Other
Prepaid debt issuance costs
Less: Current portion
Total long-term debt
(In Millions)
At December 31
2020
2019
$
— $
326
500
498
300
235
300
200
418
33
(15)
2,795
3
399
326
500
498
300
235
—
200
299
30
(14)
2,773
2
$
2,792 $
2,771
All of the notes and debentures above are senior indebtedness and, other than the 7.75% Notes due 2029,
are redeemable at our option.
On September 18, 2020, we issued $300 million of 2.0% Notes due October 1, 2030 (the "2030 Notes") and
received proceeds of $300 million, net of discount, for the issuance of the 2030 Notes. Also on September 18, 2020,
we issued an incremental $100 million of our existing 4.5% 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. The 2030 Notes
and 2047 Notes are senior indebtedness and are redeemable at our option at the applicable redemption price. On
September 29, 2020, proceeds from the debt issuances were used to repay and early retire $400 million of our
3.5% Notes due April 1, 2021. In connection with this early retirement, we incurred a loss on debt extinguishment of
$6 million, which was recorded as interest expense in our consolidated statement of operations.
On December 19, 2019, proceeds from the UKWG and Milgard divestitures were used to repay and early retire
$201 million of our 7.125% Notes due March 15, 2020. In connection with this early retirement, we incurred a loss
on debt extinguishment of $2 million for the year ended December 31, 2019, which was recorded as interest
expense in our consolidated statement of operations.
On April 16, 2018, we repaid and retired all of our $114 million, 6.625% Notes on the scheduled repayment
date.
On March 13, 2019, we entered into a credit agreement (the “Credit Agreement”) with an aggregate
commitment of $1.0 billion and a maturity date of March 13, 2024. Under the Credit Agreement, at our request and
subject to certain conditions, we can increase the aggregate commitment up to an additional $500 million with the
current lenders or new lenders. Upon entry into the Credit Agreement, our credit agreement dated March 28, 2013,
as amended, with an aggregate commitment of $750 million, was terminated.
The Credit Agreement provides for an unsecured revolving credit facility available to us and one of our foreign
subsidiaries, in U.S. dollars, European euros, British Pounds Sterling, Canadian dollars and certain other currencies
for revolving credit loans, swingline loans and letters of credit. Borrowings under the revolving credit loans
denominated in any agreed upon currency other than U.S. dollars are limited to $500 million, equivalent. We can
also borrow swingline loans up to $100 million and obtain letters of credit of up to $25 million; outstanding letters of
credit under the Credit Agreement reduce our borrowing capacity. At December 31, 2020, we had no outstanding
standby letters of credit under the Credit Agreement.
60
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
L. DEBT (Concluded)
Revolving credit loans bear interest under the Credit Agreement, at our option, at (A) a rate per annum equal to
the greater of (i) the JPMorgan Chase Bank, N.A. prime rate, (ii) the Federal Reserve Bank of New York effective
rate plus 0.50% and (iii) if available, adjusted LIBO Rate plus 1.0% (the "Alternative Base Rate"); plus an applicable
margin based upon our then-applicable corporate credit ratings; or (B) if available, adjusted LIBO Rate plus an
applicable margin based upon our then-applicable corporate credit ratings. The foreign currency revolving credit
loans bear interest at a rate equal to adjusted LIBO Rate, if available, plus an applicable margin based upon our
then-applicable corporate credit ratings.
The Credit Agreement contains financial covenants requiring us to maintain (A) a net leverage ratio, as
adjusted for certain items, not exceeding 4.0 to 1.0, and (B) a minimum interest coverage ratio, as adjusted for
certain items, not less than 2.5 to 1.0.
In order for us to borrow under the Credit Agreement, there must not be any default in our covenants in the
Credit Agreement (i.e., in addition to the two financial covenants, principally limitations on subsidiary debt, negative
pledge restrictions, legal compliance requirements and maintenance of properties and insurance) and our
representations and warranties in the Credit Agreement must be true in all material respects on the date of
borrowing (i.e., principally no material adverse change or litigation likely to result in a material adverse change,
since December 31, 2018, no material ERISA or environmental non-compliance, and no material tax deficiency).
We were in compliance with all covenants and no borrowings were outstanding at December 31, 2020.
At December 31, 2020, the debt maturities during each of the next five years were as follows: 2021 – $3
million; 2022– $334 million; 2023 – $3 million; 2024 – $3 million and 2025 – $503 million.
Interest paid was $136 million, $157 million and $155 million in 2020, 2019 and 2018, respectively. These
amounts exclude $5 million and $2 million of debt extinguishment costs related to the early retirement of debt, which
were recorded as interest expense and paid in 2020 and 2019, respectively.
M. STOCK-BASED COMPENSATION
Our 2014 Long Term Stock Incentive Plan (the "2014 Plan") provides for the issuance of stock-based
incentives in various forms to our employees and non-employee Directors. At December 31, 2020, outstanding
stock-based incentives were in the form of long-term stock awards, stock options, restricted stock units,
performance restricted stock units and phantom stock awards.
Pre-tax compensation expense (income) included in income from continuing operations for these stock-based
incentives was as follows, in millions:
Long-term stock awards
Stock options
Restricted stock units
Performance restricted stock units
Phantom stock awards and stock appreciation rights
2020
2019
2018
$
14 $
20 $
7
13
5
4
4
—
3
4
Total
$
43 $
31 $
20
3
—
4
(2)
25
At December 31, 2020, 13.4 million shares of our common stock were available under the 2014 Plan for the
granting of long-term stock awards, stock options, restricted stock units and performance restricted stock units.
61
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
M. STOCK-BASED COMPENSATION (Continued)
Long-Term Stock Awards. Prior to the amendment of our 2014 Plan in December 2019, we granted long-
term stock awards to our key employees and non-employee Directors. These grants did not cause net share dilution
due to our practice of repurchasing and retiring an equal number of shares in the open market. We did not grant
shares of long-term stock awards during 2020.
Our long-term stock award activity was as follows, shares in millions:
Unvested stock award shares at January 1
Weighted average grant date fair value
Stock award shares granted
Weighted average grant date fair value
Stock award shares vested
Weighted average grant date fair value
Stock award shares forfeited
Weighted average grant date fair value
Unvested stock award shares at December 31
Weighted average grant date fair value
2020
2019
2018
2
34 $
—
— $
1
32 $
—
35 $
1
36 $
2
30 $
1
36 $
1
25 $
—
35 $
2
34 $
3
24
1
41
2
21
—
31
2
30
$
$
$
$
$
At December 31, 2020, 2019 and 2018, there was $21 million, $41 million and $46 million, respectively, of total
unrecognized compensation expense related to unvested stock awards; such awards had a weighted average
remaining vesting period of two years at December 31, 2020 and three years at both December 31, 2019 and 2018.
The total market value (at the vesting date) of stock award shares which vested during both 2020 and 2019
was $31 million and during 2018 was $56 million.
62
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
M. STOCK-BASED COMPENSATION (Continued)
Stock Options. Stock options are granted to certain key employees. The exercise price equals the market
price of our common stock at the grant date and expire no later than 10 years after the grant date.
We granted 420,840 shares of stock options during 2020 with a grant date weighted-average exercise price of
approximately $48 per share. During 2020, 60,838 stock option shares were forfeited (including options that expired
unexercised).
Our stock option activity was as follows, shares in millions:
Option shares outstanding, January 1
Weighted average exercise price
Option shares granted
Weighted average exercise price
Option shares exercised
Aggregate intrinsic value on date of exercise (A)
Weighted average exercise price
Option shares forfeited
Weighted average exercise price
Option shares outstanding, December 31
Weighted average exercise price
Weighted average remaining option term (in years)
Option shares vested and expected to vest, December 31
Weighted average exercise price
Aggregate intrinsic value (A)
Weighted average remaining option term (in years)
Option shares exercisable (vested), December 31
Weighted average exercise price
Aggregate intrinsic value (A)
Weighted average remaining option term (in years)
______________________________
2020
3
$ 27
1
$ 48
2
2019
4
$ 21
1
$ 36
2
2018
5
$ 16
—
$ 42
1
$ 29 million $ 33 million $ 55 million
$ 17
$ 11
$ 13
—
$ 40
2
$ 33
6
2
—
$ 34
3
$ 27
6
3
—
$ 31
4
$ 21
5
4
$ 33
$ 27
$ 21
$ 51 million $ 63 million $ 36 million
6
1
6
2
5
3
$ 28
$ 21
$ 16
$ 35 million $ 47 million $ 34 million
5
4
4
(A) Aggregate intrinsic value is calculated using our stock price at each respective date, less the exercise price (grant date
price) multiplied by the number of shares.
At December 31, 2020, 2019 and 2018, there was $6 million, $9 million and $8 million, respectively, of
unrecognized compensation expense (using the Black-Scholes option pricing model at the grant date) related to
unvested stock options; such options had a weighted average remaining vesting period of two years at
December 31, 2020 and three years at both December 31, 2019 and 2018.
The weighted average grant date fair value of option shares granted and the assumptions used to estimate
those values using a Black-Scholes option pricing model were as follows:
Weighted average grant date fair value
Risk-free interest rate
Dividend yield
Volatility factor
Expected option life
2020
2019
2018
$
10.67
$
8.81
$
12.34
1.53 %
1.14 %
24.00 %
6 years
2.57 %
1.35 %
25.00 %
6 years
2.72 %
1.02 %
29.00 %
6 years
63
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
M. STOCK-BASED COMPENSATION (Concluded)
The following table summarizes information for stock option shares outstanding and exercisable at
December 31, 2020, shares in millions:
Option Shares Outstanding
Option Shares Exercisable
Range of
Prices
10 - 18
19 - 34
35 - 48
10 - 48
$
$
$
$
Number of
Shares
—
1
1
2
Weighted
Average
Remaining
Option Term
2 years
5 years
8 years
6 years
Weighted
Average
Exercise
Price
$18
$26
$41
$33
Number of
Shares
—
1
—
1
Weighted
Average
Exercise
Price
$18
$25
$39
$28
Restricted Stock Units. Restricted stock units are granted to our key employees and non-employee
Directors. These grants did not cause net share dilution due to our practice of repurchasing and retiring an equal
number of shares in the open market. The grant date fair value is based on the fair value of our common stock. We
granted 445,670 restricted stock units during 2020 with a weighted average grant date fair value of $47 per share.
In 2020, 11,100 restricted stock units were forfeited.
At December 31, 2020, there was $7 million of unrecognized compensation expense related to unvested
restricted stock units; such units had a weighted average remaining vesting period of two years.
Performance Restricted Stock Units. Under our Long Term Incentive Program, we grant performance
restricted stock units to certain senior executives. These performance restricted stock units will vest and share
awards will be issued at no cost to the employees, subject to our achievement of specified return on invested capital
performance goals, and beginning with the 2020 grant, an additional earning per share metric over a three-year
period that have been established by our Compensation Committee for the performance period. To receive the
award, the recipient must be employed through the share award date. Performance restricted stock units are
granted at a target number; based on our performance, the number of performance restricted stock units that vest
can be adjusted downward to zero and upward to a maximum of 200% of the target number.
During 2020, we granted 133,390 performance restricted stock units with a grant date fair value of
approximately $34 per share, 151,724 performance restricted stock units were issued and 10,680 performance
restricted stock units were forfeited. At December 31, 2020, there were 102,990 shares vested, but unissued.
During 2019, we granted 126,680 performance restricted stock units with a grant date fair value of approximately
$39 per share, and 15,600 performance restricted stock units were forfeited. During 2018, we granted 113,260
performance restricted stock units with a grant date fair value of approximately $42 per share, and 11,600
performance restricted stock units were forfeited.
Phantom Stock Awards and Stock Appreciation Rights. Certain non-U.S. employees are granted
phantom stock awards and historically have been granted SARs.
We recognized expense of $4 million in both 2020 and 2019, and income of $1 million in 2018 related to
phantom stock awards. In 2020, 2019 and 2018, we granted 82,630, 79,500, and 98,140 shares, respectively, of
phantom stock awards with an aggregate fair value of $3 million in both 2020 and 2019 and $4 million in 2018, and
paid cash of $3 million in both 2020 and 2019, and $6 million in 2018 to settle phantom stock awards.
Information related to phantom stock awards was as follows, in millions:
Accrued compensation cost liability
Unrecognized compensation cost
Equivalent common shares
At December 31,
2020
2019
$
$
6 $
4 $
—
5
3
—
We recognized income of $1 million in 2018 related to SARs. During 2020, 2019 and 2018, we did not grant
any SARs. We paid cash of $2 million, and $5 million in 2019, and 2018, respectively, to settle SARs. At December
31, 2020 and 2019, there were no outstanding SARs.
64
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
N. EMPLOYEE RETIREMENT PLANS
We sponsor qualified defined-benefit and defined-contribution retirement plans for most of our employees. In
addition to our qualified defined-benefit pension plans, we have unfunded non-qualified defined-benefit pension
plans covering certain employees and former employees, which provide for benefits in addition to those provided by
the qualified pension plans. Substantially all salaried employees participate in non-contributory defined-contribution
retirement plans, to which payments are determined annually by the Compensation Committee.
Pre-tax expense included in income from continuing operations related to our retirement plans was as follows,
in millions:
Defined-contribution plans
Defined-benefit pension plans
2020
2019
2018
$
$
46 $
38
84 $
40 $
24
64 $
37
17
54
As of January 1, 2010, substantially all our domestic and foreign qualified and domestic non-qualified defined-
benefit pension plans were frozen to future benefit accruals. In December 2019, our Board of Directors approved a
resolution to terminate our qualified domestic defined-benefit pension plans. As a result of this decision, the
projected benefit obligations for these plans were increased to reflect the incremental cost to terminate the plans.
Changes in the projected benefit obligation and fair value of plan assets, and the funded status of our defined-
benefit pension plans were as follows, in millions:
Changes in projected benefit obligation:
Projected benefit obligation at January 1
$
1,034 $
161 $
896 $
155
2020
2019
Qualified
Non-Qualified
Qualified
Non-Qualified
Service cost
Interest cost
Actuarial loss, net
Foreign currency exchange
Benefit payments
Divestitures
Projected benefit obligation at December 31
Changes in fair value of plan assets:
Fair value of plan assets at January 1
Actual return on plan assets
Foreign currency exchange
Company contributions
Expenses, other
Benefit payments
Fair value of plan assets at December 31
Funded status at December 31
3
23
85
18
(45)
—
—
5
10
—
(13)
(1)
3
33
149
(3)
(44)
—
1,118 $
162 $
1,034 $
780 $
— $
670 $
67
8
57
(4)
(45)
863 $
(255) $
—
—
13
—
(13)
— $
(162) $
105
(1)
56
(6)
(44)
780 $
(254) $
—
6
13
—
(13)
—
161
—
—
—
13
—
(13)
—
(161)
$
$
$
$
65
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
N. EMPLOYEE RETIREMENT PLANS (Continued)
Amounts in our consolidated balance sheets were as follows, in millions:
Other assets
Accrued liabilities (A)
Other liabilities (A)
Total net liability
______________________________
At December 31, 2020
At December 31, 2019
Qualified
Non-Qualified
Qualified
Non-Qualified
$
$
1 $
(135)
(121)
(255) $
— $
(12)
(150)
(162) $
1 $
(1)
(254)
(254) $
—
(13)
(148)
(161)
(A)
As a result of the planned termination of the qualified domestic defined-benefit pension plans in 2021, the liabilities
associated with these plans have been reported as current liabilities at December 31, 2020.
Unrealized loss included in accumulated other comprehensive loss before income taxes was as follows, in
millions:
Net loss
Net prior service cost
Total
At December 31, 2020
At December 31, 2019
Qualified
Non-Qualified
Qualified
Non-Qualified
$
$
540 $
65 $
520 $
3
—
4
543 $
65 $
524 $
57
—
57
Information for defined-benefit pension plans with an accumulated benefit obligation in excess of plan assets
was as follows, in millions:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
At December 31
2020
2019
Qualified
Non-Qualified
Qualified
Non-Qualified
$
1,100 $
162 $
1,019 $
1,100
844
162
—
1,019
763
161
161
—
The projected benefit obligation was in excess of plan assets for all of our qualified defined-benefit pension
plans at December 31, 2020 and 2019 which had an accumulated benefit obligation in excess of plan assets.
Net periodic pension cost for our defined-benefit pension plans, with the exception of service cost, is recorded
in other income (expense), net, in our consolidated statement of operations. Net periodic pension cost for our
defined-benefit pension plans was as follows, in millions:
2020
2019
2018
Qualified
Non-Qualified
Qualified
Non-Qualified
Qualified
Non-Qualified
Service cost
Interest cost
Expected return on plan assets
Recognized prior service cost
Recognized net loss
$
3 $
— $
3 $
— $
3 $
28
(24)
1
22
5
—
—
3
39
(44)
—
18
6
—
—
2
36
(48)
—
17
Net periodic pension cost
$
30 $
8 $
16 $
8 $
8 $
66
—
6
—
—
3
9
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
N. EMPLOYEE RETIREMENT PLANS (Continued)
We expect to recognize $464 million of pre-tax net loss from accumulated other comprehensive loss into net
periodic pension cost in 2021 related to our defined-benefit pension plans. This includes the full recognition of
accumulated actuarial losses for our qualified domestic defined-benefit pension plans upon its expected termination.
For plans in which almost all of the plan's participants are inactive, pre-tax net loss within accumulated other
comprehensive loss is amortized using the straight-line method over the remaining life expectancy of the inactive
plan participants. For plans which do not have almost all inactive participants, pre-tax net loss within accumulated
other comprehensive loss is amortized using the straight-line method over the average remaining service period of
the active employees expected to receive benefits from the plan.
Plan Assets. Our qualified defined-benefit pension plan weighted average asset allocation, which is based
upon fair value, was as follows:
Equity securities
Debt securities
Other
Total
2020
2019
15 %
49 %
36 %
100 %
41 %
54 %
5 %
100 %
For our qualified defined-benefit pension plans, we have adopted accounting guidance that defines fair value,
establishes a framework for measuring fair value and prescribes disclosures about fair value measurements.
Accounting guidance defines fair value as "the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date."
Following is a description of the valuation methodologies used for assets measured at fair value. There have
been no changes in the methodologies used at December 31, 2020 compared to December 31, 2019.
Common and Preferred Stocks and Short-Term and Other Investments: Valued at the closing price reported
on the active market on which the individual securities are traded or based on the active market for similar
securities. Certain investments are valued based on net asset value ("NAV"), which approximates fair value. Such
basis is determined by referencing the respective fund's underlying assets. There are no unfunded commitments or
other restrictions associated with these investments.
Private Equity and Hedge Funds: Valued based on an estimated fair value using either a market approach or
an income approach, both of which require a significant degree of judgment. There is no active trading market for
these investments and they are generally illiquid. Due to the significant unobservable inputs, the fair value
measurements used to estimate fair value are a Level 3 input.
Corporate, Government and Other Debt Securities: Valued based on either the closing price reported on the
active market on which the individual securities are traded or using pricing models maximizing the use of observable
inputs for similar securities. This includes basing value on yields currently available on comparable securities of
issuers with similar credit ratings. Certain investments are valued based on NAV, which approximates fair value.
Such basis is determined by referencing the respective fund's underlying assets. There are no unfunded
commitments or other restrictions associated with these investments.
Common Collective Trust Fund: Valued based on an amortized cost basis, which approximates fair value.
Such basis is determined by reference to the respective fund's underlying assets, which are primarily cash
equivalents. There are no unfunded commitments or other restrictions associated with this fund.
Buy-in Annuity: Valued based on the associated benefit obligation for which the buy-in annuity covers the
benefits, which approximates fair value. Such basis is determined based on various assumptions, including the
discount rate, long-term rate of return on plan assets and mortality rate.
The methods described above may produce a fair value calculation that may not be indicative of net realizable
value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and
consistent with other market participants, the use of different methodologies or assumptions to determine the fair
value of certain financial instruments could result in a different fair value measurement at the reporting date.
67
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
N. EMPLOYEE RETIREMENT PLANS (Continued)
The following tables set forth, by level within the fair value hierarchy, the qualified defined-benefit pension plan
assets at fair value as of December 31, 2020 and 2019, as well as those valued at NAV using the practical
expedient, which approximates fair value, in millions.
Plan Assets
Common and Preferred Stocks:
United States
International
Private Equity and Hedge Funds –
International
Corporate Debt Securities:
United States
International
Government and Other Debt Securities:
United States
International
Common Collective Trust Fund – United
States
Buy-in Annuity - International
Short-Term and Other Investments –
International
Total Plan Assets
Plan Assets
Common and Preferred Stocks:
United States
International
Private Equity and Hedge Funds:
United States
International
Corporate Debt Securities:
United States
International
Government and Other Debt Securities:
United States
International
Common Collective Trust Fund – United
States
Buy-in Annuity - International
Short-Term and Other Investments:
United States
International
Total Plan Assets
At December 31, 2020
Level 1
Level 2
Level 3
Valued at
NAV
Total
$
26 $
15
— $
—
— $
—
87 $
—
—
—
—
—
—
—
—
2
$
43 $
—
143
23
214
46
292
14
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
732 $
—
1 $
—
87 $
113
15
1
143
23
214
46
292
14
2
863
At December 31, 2019
Level 1
Level 2
Level 3
Valued at
NAV
Total
$
85 $
— $
— $
82 $
47
—
—
74
—
—
29
—
—
2
2
—
—
—
—
1
3
38
4
12
—
—
—
2
17
—
—
—
—
—
—
—
—
110
—
—
124
—
148
—
—
—
—
—
167
157
2
17
198
1
151
67
4
12
2
2
$
239 $
58 $
19 $
464 $
780
68
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
N. EMPLOYEE RETIREMENT PLANS (Continued)
Changes in the fair value of the qualified defined-benefit pension plan Level 3 assets, were as follows, in
millions:
Fair Value, January 1
Purchases
Sales
Unrealized losses
Fair Value, December 31
2020
2019
$
19 $
—
(18)
—
$
1 $
59
4
(41)
(3)
19
Assumptions. Weighted average major assumptions used in accounting for our defined-benefit pension
plans were as follows:
Discount rate for obligations
Expected return on plan assets
Rate of compensation increase
Discount rate for net periodic pension cost
2020
2019
2018
1.70 %
2.00 %
— %
2.50 %
2.50 %
3.00 %
— %
3.80 %
3.80 %
7.00 %
— %
3.30 %
The discount rate for obligations for 2020, 2019 and 2018 is based primarily upon the expected duration of
each defined-benefit pension plan's liabilities matched to the December 31, 2020, 2019 and 2018 Willis Towers
Watson Rate Link Curve. At December 31, 2020, such rates for our defined-benefit pension plans ranged from 0.7
percent to 2.1 percent, with the most significant portion of the liabilities having a discount rate for obligations of 1.6
percent or higher. At December 31, 2019, such rates for our defined-benefit pension plans ranged from 1.1 percent
to 3.0 percent, with the most significant portion of the liabilities having a discount rate for obligations of 2.4 percent
or higher. At December 31, 2018, such rates for our defined‑benefit pension plans ranged from 1.5 percent to 4.2
percent, with the most significant portion of the liabilities having a discount rate for obligations of 4.1 percent or
higher. The decrease in the weighted average discount rate from 2019 to 2020 is principally due to lower long-term
interest rates in the bond markets. The decrease in the weighted average discount rate from 2018 to 2019 is
principally the corresponding cost to terminate the domestic qualified defined-benefit pension plans, as well as,
lower long-term interest rates in the bond markets.
For 2020, we chose to set the expected long-term rate of return on plan assets equal to the discount rate for
each domestic qualified defined-benefit pension plan, net of investment fees but not administrative expenses. The
discount rate approximated the long-term expected rate of return provided by our investment consultants as a result
of the decision to terminate these plans in 2021 and the plan assets comprised mostly of fixed income and cash.
For 2020 our weighted average projected long-term rate of return on plan assets for the foreign qualified defined-
benefit pension plans was 2.9 percent. For 2019 and 2018, our projected long-term rate of return on plan assets
were 3.00 percent and 7.00 percent, respectively. The actual annual rate of return on our pension plan assets was
positive 9.7 percent, positive 17.7 percent and negative 4.9 percent in 2020, 2019 and 2018, respectively. For the
10-year period ended December 31, 2020, the actual annual rate of return on our pension plan assets was 7.2
percent.
The investment objectives seek to minimize the volatility of the value of our plan assets relative to pension
liabilities and to ensure plan assets are sufficient to pay plan benefits. In 2020, we made substantial progress
toward achieving our targeted asset allocation: 60 percent fixed-income and 40 percent cash, as we prepare to
distribute funds for the upcoming settlement of the qualified domestic defined-benefit pension plans. In the first
quarter of 2021 we anticipate that a lump sum payment window will open and following that any remaining liabilities
of the plan are anticipated to be transferred to an insurer through the purchase of an annuity contract by a third
party administrator.
69
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
N. EMPLOYEE RETIREMENT PLANS (Concluded)
The asset allocation of the investment portfolio was developed with the objective of achieving our expected
rate of return and reducing volatility of asset returns, and considered the freezing of future benefits. The fixed-
income portfolio is invested in corporate bonds, bond index funds and U.S. Treasury securities. Although we would
expect alternative investments to yield a higher rate of return than the targeted overall long-term return, these
investments are subject to greater volatility and would be less liquid than financial instruments that trade on public
markets. As such, and as a result of the decision to terminate the domestic qualified defined-benefit pension plans,
we sold most of our alternative investments.
The fair value of our plan assets is subject to risk including significant concentrations of risk in our plan assets
related to equity, interest rate and operating risk. In order to ensure plan assets are sufficient to pay benefits, a
portion of our foreign qualified plans' assets are allocated to equity investments that are expected, over time, to earn
higher returns with more volatility than fixed-income investments which more closely match pension liabilities. Within
equity, risk is mitigated by targeting a portfolio that is broadly diversified by geography, market capitalization,
manager mandate size, investment style and process.
In order to minimize asset volatility relative to the liabilities, a significant portion of plan assets are allocated to
fixed-income investments that are exposed to interest rate risk. Rate increases generally will result in a decline in
fixed-income assets, while reducing the present value of the liabilities. Conversely, rate decreases will increase
fixed income assets, partially offsetting the related increase in the liabilities.
Potential events or circumstances that could have a negative effect on estimated fair value include the risks of
inadequate diversification and other operating risks. To mitigate these risks, investments are diversified across and
within asset classes in support of investment objectives. Policies and practices to address operating risks include
ongoing manager oversight, plan and asset class investment guidelines and instructions that are communicated to
managers, and periodic compliance and audit reviews to ensure adherence to these policies. In addition, we
periodically seek the input of our independent advisor to ensure the investment policy is appropriate.
Other. We sponsor certain post-retirement benefit plans that provide medical, dental and life insurance
coverage for eligible retirees and dependents based upon age and length of service. Substantially all of these plans
were frozen as of January 1, 2010. The aggregate present value of the unfunded accumulated post-retirement
benefit obligation was $10 million at both December 31, 2020 and 2019.
Cash Flows. At December 31, 2020, we expect to contribute approximately $140 million to our domestic
qualified defined-benefit pension plans in 2021, which will exceed ERISA requirements and effectively settle these
plans. We also expect to contribute approximately $1 million and $12 million in 2021 to our foreign and non-qualified
(domestic) defined-benefit pension plans, respectively.
At December 31, 2020, the benefits expected to be paid in each of the next five years, and in aggregate for
the five years thereafter, relating to our defined-benefit pension plans, were as follows, in millions:
2021 (A)
2022
2023
2024
2025
2026 - 2030
$
Qualified
Plans
Non-Qualified
Plans
895 $
5
6
6
6
38
12
12
12
12
12
50
_______________________
(A)
The qualified benefit payments include the projected benefit obligations of the qualified domestic defined-benefit pension
plans we plan to settle in 2021.
70
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SHAREHOLDERS' EQUITY
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 otherwise. 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 in 2020), for cash aggregating $727 million. At December 31, 2020, we had $774 million remaining
under the 2019 authorization. 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.
During 2019, we repurchased and retired 20.1 million shares of our common stock (including 0.6 million
shares to offset the dilutive impact of long-term stock awards granted in 2019) for cash aggregating $896 million.
During 2018, we repurchased and retired 18.6 million shares of our common stock (including 0.7 million shares to
offset the dilutive impact of long-term stock awards granted in 2018) for cash aggregating $654 million.
On the basis of amounts paid (declared), cash dividends per common share were $0.545 ($0.550) in 2020,
$0.495 ($0.510) in 2019 and $0.435 ($0.450) in 2018.
Accumulated Other Comprehensive Loss. The components of accumulated other comprehensive loss
attributable to Masco Corporation were as follows, in millions:
Cumulative translation adjustments, net
Unrealized loss on interest rate swaps, net
Unrecognized net loss and prior service cost, net
Accumulated other comprehensive loss
At December 31
2020
2019
$
$
325 $
(7)
(460)
(142) $
273
(8)
(444)
(179)
The cumulative translation adjustment, net, is reported net of income tax benefit of $1 million at both
December 31, 2020 and 2019. The unrealized loss on interest rate swaps, net, is reported net of income tax
expense of $5 million and $4 million at December 31, 2020 and 2019, respectively. The unrecognized net loss and
prior service cost, net, is reported net of income tax benefit of $124 million and $117 million at December 31, 2020
and 2019, respectively.
71
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
P. RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE LOSS
The reclassifications from accumulated other comprehensive loss to the consolidated statements of
operations were as follows, in millions:
Accumulated Other
Comprehensive Loss
Amortization of defined-benefit pension and
other post-retirement benefits:
Actuarial losses, net and prior service cost
Tax (benefit)
Net of tax
Interest rate swaps
Tax (benefit)
Net of tax
2020
2019
2018
Statement of Operations Line
Item
$
$
$
$
26 $
(7)
19 $
2 $
(1)
1 $
20 $
(5)
15 $
2 $
—
2 $
20 Other income (expense), net
(5)
15
Interest expense
2
—
2
In addition to the above amounts, we reclassified $9 million of deferred currency translation losses from
accumulated other comprehensive loss to the consolidated statement of operations in conjunction with the
liquidation of certain UK dormant entities upon receiving final regulatory approval in 2020. Additionally, we
reclassified $14 million of deferred currency translation losses from accumulated other comprehensive loss to the
consolidated statement of operations in conjunction with the disposition of UKWG in September 2019. In addition,
as of March 31, 2018, we adopted ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic
220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." As a result of the
adoption, we reclassified $59 million of the disproportionate tax benefit related to various defined-benefit plans from
accumulated other comprehensive loss to retained earnings (deficit).
Q. SEGMENT INFORMATION
Our reportable segments are as follows:
Plumbing Products – principally includes faucets, plumbing system components and valves, showerheads
and handheld showers, bath hardware and accessories, bath units, tubs and shower bases and enclosures, sinks,
toilets, spas, exercise pools and fitness systems and water handling systems.
Decorative Architectural Products – principally includes paints and other coating products, paint applicators
and accessories, lighting fixtures, ceiling fans, landscape lighting and LED lighting systems, and cabinet and other
hardware.
The above products are sold to the residential repair and remodel and to a lesser extent the new home
construction markets through home center retailers, online retailers, wholesalers and distributors, mass
merchandisers, hardware stores, direct to the consumer and homebuilders.
Our operations are principally located in North America and Europe. Our country of domicile is the United
States of America.
Other than those assets specifically identified within a segment, corporate assets consist primarily of property
and equipment, right-of-use assets, deferred tax assets, cash and cash investments and other investments.
Our segments are based upon similarities in products and represent the aggregation of operating units, for
which financial information is regularly evaluated by our corporate operating executive in determining resource
allocation and assessing performance, and is periodically reviewed by the Board of Directors. Accounting policies
for the segments are the same as those for us. We primarily evaluate performance based upon operating profit and,
other than general corporate expense, allocate specific corporate overhead to each segment.
As described in Note C, our previously reported Windows and Other Specialty Products as well as Cabinetry
Products segments were classified as discontinued operations in 2019.
72
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Q. SEGMENT INFORMATION (Concluded)
Information by segment and geographic area was as follows, in millions:
Net Sales
(1)(2)(3)(4)
Operating Profit
(5)
Assets at
December 31 (6)
2020
2019
2018
2020
2019
2018
2020
2019
2018
Our operations by segment were:
Plumbing Products
$ 4,136 $ 3,984 $ 3,998 $ 806 $ 708 $ 715 $ 2,822 $ 2,375 $ 2,253
Decorative Architectural Products 3,052
2,723
2,656
583
480
456
1,633
1,526
1,534
Total
$ 7,188 $ 6,707 $ 6,654 $ 1,389 $ 1,188 $ 1,171 $ 4,455 $ 3,901 $ 3,787
Our operations by geographic area
were:
North America
$ 5,805 $ 5,328 $ 5,208 $ 1,167 $ 987 $ 954 $ 3,101 $ 2,785 $ 2,729
International, principally Europe
1,383
1,379
1,446
222
201
217
1,354
1,116
1,058
Total, as above
$ 7,188 $ 6,707 $ 6,654
1,389
1,188
1,171
4,455
3,901
3,787
General corporate expense, net (5)
Operating profit, as reported
Other income (expense), net
Income from continuing operations
before income taxes
Corporate assets
Assets held for sale
Total assets
Our operations by segment were:
Plumbing Products
Decorative Architectural Products
Unallocated amounts, principally related to corporate assets
Discontinued operations
Total
______________________________
(94)
(100)
(94)
1,295
1,088
1,077
(164)
(174)
(170)
$ 1,131 $ 914 $ 907
1,322
598
411
—
528
1,195
$ 5,777 $ 5,027 $ 5,393
Property Additions (7)
Depreciation and
Amortization
2020
2019
2018
2020
2019
2018
$
86 $
108 $
120 $
84 $
80 $
25
111
2
1
18
126
2
34
54
174
7
38
41
125
8
—
41
121
9
29
77
35
112
8
36
$
114 $
162 $
219 $
133 $
159 $
156
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Included in net sales were export sales from the U.S. of $274 million, $244 million and $237 million in 2020, 2019 and
2018, respectively.
Excluded from net sales were intra-company sales between segments of less than one percent in 2020, 2019 and 2018.
Included in net sales were sales to one customer of $2,812 million, $2,481 million and $2,457 million in 2020, 2019 and
2018, respectively. Such net sales were included in each of our segments.
Net sales from our operations in the U.S. were $5,592 million, $5,127 million and $5,034 million in 2020, 2019 and 2018,
respectively.
General corporate expense, net included those expenses not specifically attributable to our segments.
Long-lived assets of our operations in the U.S. and Europe were $1,301 million and $522 million, $1,198 million and $470
million, and $1,119 million and $446 million at December 31, 2020, 2019 and 2018, respectively.
Property additions exclude amounts paid for long-lived assets as part of acquisitions. Refer to Note B for further
information.
73
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
R. OTHER INCOME (EXPENSE), NET
Other, net, which is included in other income (expense), net, was as follows, in millions:
Income from cash and cash investments and short-term bank
deposits
$
3 $
3 $
2020
2019
2018
Equity investment income, net
Realized gains from private equity funds
Foreign currency transaction (losses) gains (1)
Net periodic pension and post-retirement benefit cost
Dividend income
Other items, net (2)
Total other, net
_________________________________________________
3
—
(10)
(35)
10
9
1
—
2
(21)
—
—
$
(20) $
(15) $
5
3
1
(8)
(14)
—
(1)
(14)
(1)
Included in foreign currency transaction (losses) gains for 2020 was a $9 million deferred currency translation loss
reclassified from accumulated other comprehensive loss in conjunction with the liquidation of certain UK dormant entities
upon receiving final regulatory approval in 2020.
(2)
Included in other items, net for 2020 was $9 million of miscellaneous income related to an escrow settlement.
74
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
S. INCOME TAXES
$
$
$
$
$
Income from continuing operations before income taxes:
U.S.
Foreign
Income tax expense:
Currently payable:
U.S. Federal
State and local
Foreign
Deferred:
U.S. Federal
State and local
Foreign
Deferred tax assets at December 31:
Receivables
Inventories
Other assets, including stock-based compensation
Accrued liabilities
Noncurrent operating lease liabilities
Other long-term liabilities
Net operating loss carryforward
Tax credit carryforward
Valuation allowance
Deferred tax liabilities at December 31:
Property and equipment
Operating lease right-of-use assets
Intangibles
Investment in foreign subsidiaries
Other investments
Other
2020
2019
2018
(In Millions)
892 $
684 $
239
230
1,131 $
914 $
170 $
155 $
33
69
(9)
11
(5)
46
70
(23)
(15)
(3)
670
237
907
115
29
74
12
—
(9)
269 $
230 $
221
9 $
17
17
82
35
96
56
9
321
(35)
286
67
39
74
10
3
4
197
7
15
15
48
39
137
63
9
333
(38)
295
73
42
71
10
—
22
218
77
Net deferred tax asset at December 31
$
89 $
The net deferred tax asset consisted of net deferred tax assets (included in other assets) of $109 million and
$99 million, and net deferred tax liabilities (included in other liabilities) of $20 million and $22 million, at
December 31, 2020 and 2019, respectively.
We continue to maintain a valuation allowance on certain state and foreign deferred tax assets as of
December 31, 2020. Should we determine that we would not be able to realize our remaining deferred tax assets, or
the deferred tax assets that currently have a valuation allowance become realizable in these jurisdictions in the
future, an adjustment to the valuation allowance would be recorded in the period such determination is made.
75
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
S. INCOME TAXES (Continued)
The current portion of the state and local income tax includes a $9 million, $8 million and $8 million tax benefit
from the reversal of an accrual for uncertain tax positions resulting primarily from the expiration of applicable
statutes of limitations in 2020, 2019 and 2018, respectively. The deferred portion of the state and local taxes
includes a $1 million tax benefit in 2019 and 2018, resulting from changes in valuation allowances against state and
local deferred tax assets. The deferred portion of the foreign taxes includes a $5 million, $4 million and $2 million
tax benefit in 2020, 2019 and 2018, respectively, from a change in the valuation allowances against foreign deferred
tax assets.
Our capital allocation strategy includes reinvesting in our business, balancing share repurchases with potential
acquisitions and maintaining an appropriate dividend. In order to provide greater flexibility in the execution of our
capital allocation strategy, we may repatriate earnings from certain foreign subsidiaries. Our deferred tax balance on
investment in foreign subsidiaries reflects the impact of all taxable temporary differences, including those related to
substantially all undistributed foreign earnings, except those that are legally restricted, and consists primarily of
foreign withholding taxes.
Of the $65 million and $72 million deferred tax assets related to the net operating loss and tax credit
carryforwards at December 31, 2020 and 2019, respectively, $35 million and $44 million, respectively, will expire
between 2021 and 2036 and $30 million and $28 million, respectively, have no expiration.
A reconciliation of the U.S. Federal statutory tax rate to the income tax expense on income from continuing
operations before income taxes was as follows:
U.S. Federal statutory tax rate
State and local taxes, net of U.S. Federal tax benefit
Higher taxes on foreign earnings
U.S. and foreign taxes on distributed and undistributed foreign
earnings
Stock-based compensation
Other, net
Effective tax rate
2020
2019
2018
21 %
21 %
21 %
3
1
—
(1)
—
24 %
3
2
1
(1)
(1)
25 %
3
2
1
(2)
(1)
24 %
Income taxes paid were $442 million, $384 million and $231 million in 2020, 2019 and 2018, respectively.
76
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
S. INCOME TAXES (Concluded)
A reconciliation of the beginning and ending liability for uncertain tax positions, including related interest and
penalties, is as follows, in millions:
Balance at January 1, 2019
Current year tax positions:
Additions
Reductions
Prior year tax positions:
Additions
Lapse of applicable statute of limitations
Interest and penalties recognized in income tax expense
Balance at December 31, 2019
Current year tax positions:
Additions
Reductions
Prior year tax positions:
Additions
Reductions
Lapse of applicable statute of limitations
Balance at December 31, 2020
Uncertain
Tax Positions
Interest and
Penalties
Total
$
58 $
9 $
14
(1)
1
(9)
—
—
—
—
—
1
$
63 $
10 $
22
(2)
2
(2)
(9)
—
—
—
—
—
$
74 $
10 $
67
14
(1)
1
(9)
1
73
22
(2)
2
(2)
(9)
84
If recognized, $58 million and $50 million of the liability for uncertain tax positions at December 31, 2020 and
2019, respectively, net of any U.S. Federal tax benefit, would impact our effective tax rate.
Of the $84 million and $73 million total liability for uncertain tax positions (including related interest and
penalties) at December 31, 2020 and 2019, respectively, $81 million and $68 million are recorded in other liabilities,
respectively, and $3 million and $5 million are recorded as a net offset to other assets, respectively.
We file income tax returns in the U.S. Federal jurisdiction, and various local, state and foreign jurisdictions. We
continue to participate in the Compliance Assurance Process ("CAP"). CAP is a real-time audit of the U.S. Federal
income tax return that allows the Internal Revenue Service ("IRS"), working in conjunction with us, to determine tax
return compliance with the U.S. Federal tax law prior to filing the return. This program provides us with greater
certainty about our tax liability for a given year within months, rather than years, of filing our annual tax return and
greatly reduces the need for recording a liability for U.S. Federal uncertain tax positions. The IRS has completed
their examination of our consolidated U.S. Federal tax returns through 2019. With few exceptions, we are no longer
subject to state or foreign income tax examinations on filed returns for years before 2016.
As a result of tax audit closings, settlements and the expiration of applicable statutes of limitation in various
jurisdictions within the next 12 months, we anticipate that it is reasonably possible the liability for uncertain tax
positions could be reduced by approximately $9 million.
77
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
T. INCOME PER COMMON SHARE
Reconciliations of the numerators and denominators used in the computations of basic and diluted earnings
per common share were as follows, in millions:
Numerator (basic and diluted):
Income from continuing operations
2020
2019
2018
$
810 $
639 $
Less: Allocation to unvested restricted stock awards
Income from continuing operations attributable to common
shareholders
Income from discontinued operations, net
Less: Allocation to unvested restricted stock awards
Income from discontinued operations, net attributable to common
shareholders
6
804
414
3
411
4
635
296
2
294
Net income attributable to common shareholders
$
1,215 $
929 $
Denominator:
Basic common shares (based upon weighted average)
Add: Stock option dilution
Diluted common shares
264
—
264
287
1
288
636
6
630
98
1
97
727
305
2
307
We follow accounting guidance regarding determining whether instruments granted in share-based payment
transactions are participating securities. This accounting guidance clarifies that share-based payment awards that
entitle their holders to receive non-forfeitable dividends prior to vesting should be considered participating securities.
In 2020, we began granting restricted stock units. The dividends associated with the unvested restricted stock units
are forfeitable, and consequently, the restricted stock units are not considered a participating security and are not
accounted for under the two-class method. We have also granted restricted stock awards that contain non-
forfeitable rights to dividends on unvested shares; such unvested restricted stock awards are considered
participating securities. As participating securities, the unvested shares are required to be included in the calculation
of our basic income per common share, using the two-class method. The two-class method of computing income
per common share is an allocation method that calculates income per share for each class of common stock and
participating security according to dividends declared and participation rights in undistributed earnings. For the
years ended December 31, 2020, 2019 and 2018, we allocated dividends and undistributed earnings to the
participating securities.
Additionally, 374,000, 854,000 and 710,000 common shares for 2020, 2019 and 2018, respectively, related to
stock options and 20,000 common shares for 2018 related to performance restricted stock units were excluded from
the computation of diluted income per common share due to their antidilutive effect.
Common shares outstanding included on our balance sheet and for the calculation of income per common
share do not include unvested stock awards (1 million and 2 million common shares at December 31, 2020 and
2019, respectively); shares outstanding for legal requirements included all common shares that have voting rights
(including unvested stock awards).
78
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
U. OTHER COMMITMENTS AND CONTINGENCIES
Litigation. We are involved in claims and litigation, including class actions, mass torts and regulatory
proceedings, which arise in the ordinary course of our business. The types of matters may include, among others:
competition, product liability, employment, warranty, advertising, contract, personal injury, environmental, intellectual
property, and insurance coverage. We believe we have adequate defenses in these matters. We are also subject to
product safety regulations, product recalls and direct claims for product liabilities. We believe the likelihood that the
outcome of these claims, litigation and product safety matters would have a material adverse effect on us is remote.
However, there is no assurance that we will prevail in these matters, and we could, in the future, incur judgments or
penalties, enter into settlements of claims or revise our expectations regarding the outcome of these matters, which
could materially impact our results of operations.
Warranty. Changes in our warranty liability were as follows, in millions:
Balance at January 1
Accruals for warranties issued during the year
Accruals related to pre-existing warranties
Settlements made (in cash or kind) during the year
Other, net (including currency translation and acquisitions)
2020
2019
$
84 $
34
(3)
(33)
1
Balance at December 31
$
83 $
81
34
1
(31)
(1)
84
Other Matters. We enter into contracts, which include reasonable and customary indemnifications that are
standard for the industries in which we operate. Such indemnifications include claims made against builders by
homeowners for issues relating to our products and workmanship. In conjunction with divestitures and other
transactions, we occasionally provide reasonable and customary indemnifications. We have never had to pay a
material amount related to these indemnifications, and we evaluate the probability that amounts may be incurred
and record an estimated liability when it is probable and reasonably estimable.
79
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
V. INTERIM FINANCIAL INFORMATION (UNAUDITED)
Our quarterly results attributable to Masco Corporation were as follows:
Quarters Ended
(In Millions, Except Per Common Share Data)
Total Year
December 31 September 30
June 30
March 31
2020
Net sales
Gross profit
Income from continuing operations
Net income (1)
Income per common share:
Basic:
$
$
$
$
Income from continuing operations $
Net income
Diluted:
$
Income from continuing operations $
Net income
2019
Net sales
Gross profit
Income from continuing operations
Net income (2)
Income per common share:
Basic:
$
$
$
$
$
7,188 $
1,860 $
1,983 $
1,764 $
1,581
2,587 $
810 $
1,224 $
660 $
192 $
195 $
752 $
275 $
275 $
628 $
210 $
224 $
3.05 $
4.60 $
0.74 $
0.75 $
1.05 $
1.05 $
0.80 $
0.85 $
3.04 $
4.59 $
0.73 $
0.74 $
1.05 $
1.05 $
0.80 $
0.85 $
547
133
530
0.49
1.93
0.48
1.92
6,707 $
1,639 $
1,716 $
1,839 $
1,513
2,371 $
639 $
935 $
565 $
158 $
453 $
611 $
163 $
126 $
673 $
211 $
240 $
Income from continuing operations $
Net income
Diluted:
$
2.21 $
3.24 $
0.56 $
1.60 $
0.57 $
0.44 $
0.73 $
0.82 $
Income from continuing operations $
Net income
______________________________
$
2.20 $
3.22 $
0.56 $
1.59 $
0.56 $
0.44 $
0.72 $
0.82 $
(1)
(2)
Net income includes $397 million of income from discontinued operations, net for the quarter ended March 31, 2020,
which includes the gain on the sale of the Cabinetry divestiture.
Net income includes $295 million and $(37) million of income (loss) from discontinued operations, net for the quarters
ended December 31, 2019 and September 30, 2019, respectively, which includes the gain (loss) on the sale of the Milgard
and UKWG divestitures, respectively.
Income per common share amounts for the four quarters of December 31, 2020 and 2019 may not total to the
income per common share amounts for the years ended December 31, 2020 and 2019 due to the allocation of
income to participating securities.
80
522
107
116
0.36
0.39
0.36
0.39
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
W. SUBSEQUENT EVENTS
On January 4, 2021, we acquired a 75.1% equity interest in ESS, for approximately €45 million ($55 million),
including $52 million of cash and $6 million of debt that will be paid out over two years less any pending or settled
indemnity matters. These amounts are subject to working capital and other adjustments. This business will be
included in the Plumbing Products segment. In connection with this acquisition, we currently anticipate recognizing
approximately $30 million of definite-lived intangible assets, primarily related to customer relationships. We also
anticipate recognizing approximately $25 million of goodwill, which is not tax deductible and is related primarily to
the expected synergies from combining the operations into our business. Refer to Note B for further information
related to this acquisition.
81
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
a.
Evaluation of Disclosure Controls and Procedures.
The Company's Principal Executive Officer and Principal Financial Officer have concluded, based on an
evaluation of the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of
1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15
that, as of December 31, 2020, the Company's disclosure controls and procedures were effective.
b.
Management's Report on Internal Control over Financial Reporting.
Management's report on the Company's internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) is included in this Report under Item 8. Financial
Statements and Supplementary Data, under the heading, "Management's Report on Internal Control over
Financial Reporting" and is incorporated herein by reference. The report of our independent registered public
accounting firm is also included under Item 8, under the heading, "Report of Independent Registered Public
Accounting Firm" and is incorporated herein by reference.
c.
Changes in Internal Control over Financial Reporting.
In connection with the evaluation of the Company's internal control over financial reporting that occurred during
the quarter ended December 31, 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.
Item 9B. Other Information.
Not applicable.
82
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Our Code of Ethics applies to all employees, officers and directors including our Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer, and is posted on our website at www.masco.com.
Amendments to or waivers of our Code of 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 2021 Annual
Meeting of Stockholders, to be filed before April 28, 2021, and such information is incorporated herein by reference.
Item 11. Executive Compensation.
Information required by this Item will be contained in our definitive Proxy Statement for the 2021 Annual
Meeting of Stockholders, to be filed before April 28, 2021 and such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Equity Compensation Plan Information
We grant equity under our 2014 Long Term Stock Incentive Plan (the "2014 Plan"). The following table sets
forth information as of December 31, 2020 concerning the 2014 Plan, which was approved by our stockholders. We
do not have any equity compensation plans that have not been approved by our stockholders.
Plan Category
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
Number of
Securities
Remaining
Available for Future
Issuance Under
Equity
Compensation
Plans (Excluding
Securities Reflected
in the First Column)
Equity compensation plans approved by stockholders
2,487,725 $
33.44
13,353,205
The remaining information required by this Item will be contained in our definitive Proxy Statement for our
2021 Annual Meeting of Stockholders, to be filed before April 28, 2021, and such information is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information required by this Item will be contained in our definitive Proxy Statement for the 2021 Annual
Meeting of Stockholders, to be filed before April 28, 2021, and such information is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
Information required by this Item will be contained in our definitive Proxy Statement for the 2021 Annual
Meeting of Stockholders, to be filed before April 28, 2021, and such information is incorporated herein by reference.
83
Item 15. Exhibits and Financial Statement Schedules.
PART IV
a. Listing of Documents.
(1) Financial Statements. Our consolidated financial statements included in Item 8 hereof, as required at
December 31, 2020 and 2019, and for the years ended December 31, 2020, 2019 and 2018, consist of the
following:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
38
39
40
41
42
43
(2) Financial Statement Schedule.
a. Our Financial Statement Schedule appended hereto, as required for the years ended December 31,
2020, 2019 and 2018, consists of the following:
II. Valuation and Qualifying Accounts
(3) Exhibits.
Exhibit
No.
2.a
2.b
Exhibit Description
Stock Purchase Agreement, dated September 29,
2019, by and between Masco Corporation and
MIWD Holding Company LLC.
Securities Purchase Agreement, dated November
14, 2019, by and between Masco Corporation and
ACP Products, Inc.
Incorporated By Reference
Form
Exhibit
8-K
8-K
2.1
2.1
Filing Date
10/03/2019
11/18/2019
90
Filed
Herewith
Note 1: 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.
3.a
3.b
4.a
Restated Certificate of Incorporation of Masco
Corporation.
Bylaws of Masco Corporation, as Amended and
Restated on February 5, 2021.
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:
2015 10-K 3.i
02/12/2016
2016 10-K 4.a
02/09/2017
X
4.a.i
7-3/4% Debentures Due August 1, 2029.
2014 10-K 4.a.i(ii)
02/13/2015
84
Exhibit
No.
4.b
4.b.i
4.b.ii
4.b.iii
4.b.iv
4.b.v
4.b.vi
4.b.vii
Exhibit Description
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:
6-1/2% Notes Due August 15, 2032;
5.950% Notes Due March 15, 2022;
4.450% Notes Due April 1, 2025;
4.375% Notes Due April 1, 2026;
3.500% Notes Due November 15, 2027; and
4.500% Notes Due May 15, 2047.
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.
Incorporated By Reference
Form
Exhibit
2016 10-K 4.b
Filing Date
02/09/2017
Filed
Herewith
2017 10-K 4.b.i
2016 10-K 4.b(iii)
8-K
8-K
8-K
8-K
8-K
4.1
4.2
4.1
4.2
4.3
02/08/2018
02/09/2017
03/23/2015
03/16/2016
06/15/2017
06/15/2017
09/18/2020
4.b.viii
4.500% Notes Due May 15, 2047
8-K
4.2
09/18/2020
2.000% Notes Due October 1, 2030
4.b.ix
Note 2: 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.
Description of securities.
2019 10-K 4.c
09/18/2020
02/11/2020
8-K
4.1
4.c
10.a
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.
8-K
10
03/19/2019
Note 3: Exhibits 10.b through 10.k constitute the management contracts and executive compensatory plans or
10.b
10.b.i
10.b.ii
10.b.iii
arrangements in which certain of the directors and executive officers of the Company participate.
Masco Corporation 2005 Long Term Stock
Incentive Plan (Amended and Restated May 11,
2010):
2015 10-K 10.b.i
02/12/2016
Form of Stock Option Grant Agreements:
for grants on or after January 1, 2013;
for grants during 2012; and
for grants prior to 2012.
2017 10-K 10.b.iii
2017 10-K 10.b.iv
02/08/2018
02/08/2018
2015 10-K 10.b.i(ii)(C)
02/12/2016
85
Exhibit
No.
10.c
10.c.i
10.c.ii
10.c.iii
10.c.iv
10.c.v
10.c.vi
10.c.vii
Exhibit Description
Masco Corporation 2014 Long Term Stock Incentive
Plan (Amended and Restated May 9, 2016):
Form of Restricted Stock Award Agreements:
for awards prior to July 1, 2018; and
for awards on or after July 1, 2018.
Form of Restricted Stock Unit Award Agreement for
awards granted on or after December 17, 2019.
Form of Stock Option Grant Agreements:
for grants prior to July 1, 2018;
for grants between July 1, 2018 and
December 17, 2019; and
for grants on or after December 17, 2019.
Form of Long Term Incentive Program Award
Agreement for awards prior to December 17, 2019.
Incorporated By Reference
Form
Exhibit
10-Q
10.a
Filing Date
07/26/2016
Filed
Herewith
10.b
8-K
2018 10-K 10.c.ii
2019 10-K 10.c.iii
05/06/2014
02/07/2019
02/11/2020
8-K
2018 10-K 10.c.iv
10.d
2019 10-K 10.c.vi
2018 10-K 10.c.v
05/06/2014
02/07/2019
02/11/2020
02/07/2019
10.c.viii Long-Term Incentive Program under Masco
10-Q
10.a
04/29/2020
Corporation's 2014 Long Term Stock Incentive Plan
(December 17, 2019) and form of Performance
Restricted Stock Unit Award Agreement thereunder.
10.c.ix
Non-Employee Directors Equity Program under
Masco Corporation's 2014 Long Term Stock
Incentive Plan (Amended and Restated May 9,
2016).
Form of Restricted Stock Award Agreement for Non-
Employee Directors:
10-Q
10.b
07/26/2016
10.c.x
10.c.xi
for Non-Employee Directors for awards prior to July 1, 2018;
and
for Non-Employee Directors for awards after
July 1, 2018.
10.c
05/06/2014
2018 10-K 10.c.viii
02/07/2019
10.c.xii Non-Employee Directors Equity Program under
2019 10-K 10.c.xiii
02/11/2020
Masco Corporation's 2014 Long Term Stock
Incentive Plan (Amended and Restated February 7,
2020).
10.c.xiii Form of Restricted Stock Unit Award Agreement for
2019 10-K 10.c.xiv
02/11/2020
10.d
10.e
10.f
10.g
10.h
10.i.i
10.i.ii
Non-Employee Directors for grants on or after
February 7, 2020.
Form of Masco Corporation Supplemental Executive
Retirement and Disability Plan and amendments
thereto for Richard A. Manoogian.
Form of Masco Corporation Supplemental Executive
Retirement and Disability Plan and amendments
thereto (includes amendment freezing benefit
accruals) for John G. Sznewajs.
Other compensatory arrangements for executive
officers.
Compensation of Non-Employee Directors.
Masco Corporation Retirement Benefit Restoration
Plan effective January 1, 1995 (as amended and
restated December 22, 2010), and amendments
thereto effective February 6, 2012 and January 1,
2014.
Letter Agreement dated June 29, 2009 between
Richard A. Manoogian and Masco Corporation.
Second Amended and Restated Aircraft Time
Sharing Agreement dated June 26, 2019 between
Richard A. Manoogian and Masco Corporation.
2015 10-K 10.d.i(i)
02/12/2016
2015 10-K 10.d.i(ii)
02/12/2016
2016 10-K 10.f
02/09/2017
2019 10-K 10.g
2016 10-K 10.i
02/11/2020
02/09/2017
2014 10-K 10.k.i
02/13/2015
2019 10-K 10.i.ii
02/11/2020
86
Exhibit
No.
10.j
10.k
21
23
31.a
31.b
32
101
104
Exhibit Description
Agreement dated June 18, 2019 between Joe Gross
and Masco Corporation.
Severance and Release Agreement dated February
21, 2020, between Masco Corporation and Joseph B.
Gross.
List of Subsidiaries.
Form
10-Q
10-Q
Consent of Independent Registered Public
Accounting Firm relating to Masco Corporation's
Consolidated Financial Statements and Financial
Statement Schedule.
Certification by Chief Executive Officer required by
Rule 13a-14(a)/15d-14(a).
Certification by Chief Financial Officer required by
Rule 13a-14(a)/15d-14(a).
Certifications required by Rule 13a-14(b) or
Rule 15d-14(b) and Section 1350 of Chapter 63 of
Title 18 of the United States Code.
The following financial information from Masco
Corporation's Annual Report on Form 10-K for the
year ended December 31, 2020, formatted in Inline
XBRL: (i) the Consolidated Balance Sheets, (ii) the
Consolidated Statements of Operations, (iii) the
Consolidated Statements of Comprehensive Income
(Loss), (iv) the Consolidated Statements of Cash
Flows, (v) the Consolidated Statements of
Shareholders' Equity, and (vi) Notes to Consolidated
Financial Statements.
Cover Page Interactive Data File (formatted in Inline
XBRL and contained in Exhibit 101)
Incorporated By Reference
Exhibit
10
10.b
Filing Date
07/25/2019
04/29/2020
Filed
Herewith
X
X
X
X
X
X
X
The Company will furnish to its stockholders a copy of any of the above exhibits not included herein upon
the written request of such stockholder and the payment to the Company of the reasonable expenses
incurred by the Company in furnishing such copy or copies.
Item 16. Form 10-K Summary
The optional summary in Item 16 has not been included in this Form 10-K.
87
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
MASCO CORPORATION
By:
/s/ John G. Sznewajs
John G. Sznewajs
Vice President, Chief Financial Officer
February 9, 2021
88
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on the date indicated.
Principal Executive Officer:
/s/ Keith J. Allman
Keith J. Allman
President and Chief Executive
Officer and Director
Principal Financial Officer:
/s/ John G. Sznewajs
John G. Sznewajs
Vice President, Chief
Financial Officer
Principal Accounting Officer:
/s/ John P. Lindow
John P. Lindow
/s/ J. Michael Losh
J. Michael Losh
/s/ Richard A. Manoogian
Richard A. Manoogian
/s/ Mark R. Alexander
Mark R. Alexander
/s/ Marie A. Ffolkes
Marie A. Ffolkes
Vice President, Controller
and Chief Accounting Officer
Chairman of the Board
Chairman Emeritus
Director
Director
/s/ Christopher A. O'Herlihy
Christopher A. O'Herlihy
Director
February 9, 2021
/s/ Donald R. Parfet
Donald R. Parfet
/s/ Lisa A. Payne
Lisa A. Payne
/s/ John C. Plant
John C. Plant
/s/ Charles K. Stevens, III
Charles K. Stevens, III
/s/ Reginald M. Turner, Jr.
Reginald M. Turner, Jr.
Director
Director
Director
Director
Director
89
MASCO CORPORATION
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2020, 2019 and 2018
Column A
Description
Allowances for doubtful accounts,
deducted from accounts receivable
in the balance sheet:
2020
2019
2018
Valuation allowance on deferred
tax assets:
2020
2019
2018
______________________________
Column B
Balance at
Beginning
of Period
Column C
Additions
Charged to
Costs and
Expenses
Charged
to Other
Accounts
Column D
Deductions
(In Millions)
Column E
Balance at
End of
Period
$
$
$
$
$
$
5 (a) $
5
4
38
43
47
$
$
$
$
$
3 $
1 $
3 $
— $
— $
— $
—
—
—
$
$
$
(1) (b) $
(2) (b) $
(2) (b) $
2
—
—
(c) $
$
$
(5) (d) $
(5) (d) $
(4) (e) $
7
4
5
35
38
43
(a) Includes a $1 million adjustment related to the cumulative effect of adoption of the new credit loss standard
(refer to Note A).
(b) Deductions, representing uncollectible accounts written off, less recoveries of accounts written off in prior years.
(c) $2 million net increase in valuation allowance due to currency translation recorded in other comprehensive
income (loss).
(d) $5 million net reduction to valuation allowance recorded as an income tax benefit.
(e) $3 million net reduction to valuation allowance recorded as an income tax benefit and $1 million reduction
recorded primarily in other comprehensive income (loss).
90
TRANSFER AGENT, REGISTRAR AND DIVIDEND
DISBURSING AGENT
Answers to many of your shareholder questions
and requests for forms are available by visiting
the Computershare website at:
www.computershare.com/investor
Certificates for transfer, inquiries about our
Dividend Reinvestment Plan, inquiries regarding lost
certificates, address changes and all other general
shareholder correspondence should be mailed to:
Computershare
P.O. Box 505000
Louisville, KY 40233
Overnight correspondence should be sent to:
Computershare
462 South 4th Street
Louisville, KY 40202
Phone:
866-230-0666 (in the U.S.)
201-680-6578 (outside the U.S.)
800-231-5469 (hearing impaired–TTD phone)
E-mail Address:
shareholder@computershare.com
Shareholder Online Inquiries:
www-us.computershare.com/investor/contact
EXECUTIVE OFFICE
Masco Corporation
17450 College Parkway
Livonia, MI 48152
Phone: 313-274-7400
Fax: 313-792-4177
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PricewaterhouseCoopers LLP
500 Woodward Avenue
Detroit, MI 48226
STOCK EXCHANGE INFORMATION
Masco Corporation’s common stock is traded on the New
York Stock Exchange under the symbol MAS.
INTERNET CONTACT
Current information about Masco Corporation can be
found by visiting our website at masco.com, or you may
contact us via e-mail at webmaster@mascohq.com.
INVESTOR RELATIONS CONTACT
Additional information about the Company is available
without charge to shareholders who direct a request to:
David A. Chaika, Investor Relations
Masco Corporation
17450 College Parkway
Livonia, MI 48152
Phone: 313-792-5500
ANNUAL MEETING OF SHAREHOLDERS
The 2021 Annual Meeting of Shareholders of Masco
Corporation will take place on Wednesday, May 12, 2021
at 9:30 a.m. EDT. Details regarding our 2021 Annual
Meeting can be found in our current Proxy Statement.
DUPLICATE MAILINGS AND OTHER INQUIRIES
Multiple shareholders residing at one address and
holding shares through a bank or broker may receive
only one Annual Report and Proxy Statement. This
“householding” procedure reduces duplicate mailings
and Company expenses. Shareholders who wish to opt
out of householding should contact their bank or broker.
Shares owned by one person, but held in different forms
of the same name, may result in duplicate mailings of
shareholder information at added expense to us. Please
notify Computershare to eliminate such duplication.
11
1 7 4 5 0 C O L L E G E PA R K W AY, L I V O N I A , M I 4 8 1 5 2
3 1 3 . 2 7 4 . 7 4 0 0
www.masco.com