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, 2019
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________

Commission file number: 1-5794
MASCO CORPORATION
(Exact name of Registrant as Specified in its Charter)

					
Delaware	 	38-1794485	
(State of Incorporation)	 	(I.R.S. Employer Identification No.)	
17450 College Parkway,	 Livonia, 	Michigan	 	48152	
(Address of Principal Executive Offices)	 	(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	 	Trading Symbol	 	Name of Each Exchange
On Which Registered	
Common Stock, $1.00 par value	 	MAS	 	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	☑	 	Accelerated filer	☐	
Non-accelerated filer	☐	 	Smaller reporting company	☐	
 	 	 	Emerging growth company	☐	
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
The aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant on June 30, 2019 (based on the closing sale price of $39.24 of the Registrant's Common Stock, as reported by the New York Stock Exchange on such date) was approximately $11,280,228,700.
Number of shares outstanding of the Registrant's Common Stock at January 31, 2020:
277,735,100 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 2020 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

	

Masco Corporation
2019 Annual Report on Form 10-K

TABLE OF CONTENTS

					
Item	 	 	 	Page	
 	 	PART I	 	 	
1.	 	Business	 	2	
1A.	 	Risk Factors	 	5	
1B.	 	Unresolved Staff Comments	 	10	
2.	 	Properties	 	10	
3.	 	Legal Proceedings	 	11	
4.	 	Mine Safety Disclosures	 	11	
 	 	PART II	 	 	
5.	 	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	 	12	
6.	 	Selected Financial Data	 	14	
7.	 	Management's Discussion and Analysis of Financial Condition and Results of Operations	 	15	
7A.	 	Quantitative and Qualitative Disclosures About Market Risk	 	30	
8.	 	Financial Statements and Supplementary Data	 	31	
9.	 	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	 	75	
9A.	 	Controls and Procedures	 	75	
9B.	 	Other Information	 	75	
 	 	PART III	 	 	
10.	 	Directors, Executive Officers and Corporate Governance	 	76	
11.	 	Executive Compensation	 	76	
12.	 	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	 	76	
13.	 	Certain Relationships and Related Transactions, and Director Independence	 	76	
14.	 	Principal Accountant Fees and Services	 	76	
 	 	PART IV	 	 	
15.	 	Exhibits and Financial Statement Schedules	 	77	
16.	 	Form 10-K Summary	 	80	
 	 	Signatures	 	81	

1

PART I
		
Item 1.	Business.	
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 associated with our continuing operations includes BEHR® paint; DELTA® and HANSGROHE® faucets and bath and shower fixtures; KICHLER® decorative and outdoor lighting; 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 2019 resulted from our 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 2019, we also continued to focus on our capital allocation strategy to enhance shareholder value by repurchasing over 20 million shares of our common stock and increasing our quarterly dividend by 12.5 percent. We will continue the disciplined execution of our strategy in 2020.
In addition, in 2019, we completed the divestitures of our Milgard Windows and Doors business ("Milgard") and our UK Windows Group business ("UKWG"), and in November we entered into a definitive agreement to sell our Masco Cabinetry business, which we expect to close in the first quarter of 2020. As a result, our Windows and Other Specialty Products segment and our Cabinetry Products segment are accounted for as discontinued operations in our consolidated financial statements. The following discussion in this "Item 1." relates only to our continuing operations unless otherwise noted.
Masco was incorporated under the laws of Michigan in 1929 and was reincorporated under the laws of Delaware in 1968.
Our Business Segments
We report our financial results from continuing operations 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 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 in North America and Europe under the brand names DELTA®, BRIZO®, PEERLESS®, HANSGROHE®, AXOR®, GINGER®, NEWPORT BRASS®, BRASSTECH® and WALTEC®. Our BRISTAN™ and HERITAGE™ products are sold primarily in the United Kingdom.	

•	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

		
•	Also 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.	

•	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 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. Many of the faucet and showering products with which our products compete are manufactured by foreign manufacturers that are putting pressure on price. The businesses in our Plumbing Products segment manufacture products in North America, Europe and Asia and source products from Asia and other regions. Competition for our plumbing products is based largely on 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, and sufficient raw materials have been available for our needs. 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
We produce architectural coatings, including paints, primers, specialty coatings, stains and waterproofing products. These products are sold in North America, South America and China under the brand names BEHR®, KILZ® and other trademarks to “do‑it‑yourself” and professional customers through home center retailers and other retailers. Net sales of architectural coatings comprised approximately 31 percent , 30 percent and 32 percent of our consolidated net sales from our continuing operations in 2019, 2018, and 2017, respectively. Our BEHR products are sold through The Home Depot, our largest customer overall, as well as this segment’s largest customer. 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 and Valspar brands and RPM International, Inc.'s Rust-Oleum and Zinsser brands, 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 and price.
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.

3

Our Decorative Architectural Products segment includes branded cabinet and door hardware, functional hardware, wall plates, hook and hook rail products, 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, and shower doors are sold under the brand names DELTA® and FRANKLIN BRASS® and other trademarks to wholesalers, home center retailers, mass retailers and other specialty retailers. 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 FX Luminaire, Generation Brands, Hinkley Lighting, Inc., Hubbell Incorporated's Progress Lighting brand, Hunter Fan Company and private label brands.
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.
Environmental Laws and Regulations Affecting Our Business
We are subject to federal, state, local and foreign government regulations regarding the protection of the environment, and we have certain responsibilities for environmental remediation. We monitor applicable laws and regulations relating to the protection of the environment and incur ongoing expense relating to compliance. Compliance with these laws and regulations may affect our product and production costs.

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

•	Our Decorative Architectural Products segment is subject to requirements relating to the emission of volatile organic compounds, which has required us to reformulate paint products and may require further reformulation in the future.	
We do not expect that compliance with the federal, state, local and foreign regulations relating to the discharge of materials into the environment, or otherwise relating to the protection of the environment, will result in material capital expenditures or have a material adverse effect on our competitive position or results of operations and financial position.
Backlog
We do not consider backlog orders to be material in either of our segments.
Employees
At December 31, 2019, our continuing operations employed approximately 18,000 people. In addition, our Masco Cabinetry business employed approximately 4,000 people whose employment with us will terminate upon completion of the divestiture. We have generally experienced satisfactory relations with our employees.
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.

4

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.
Our business relies 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 the housing market.
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;	
		
•	household formation;	
		
•	the availability of home equity loans and mortgages and the interest rates for and tax deductibility of such loans;	
		
•	the availability of skilled tradespeople for repair and remodeling work;	
		
•	trends in lifestyle and housing design; and	
		
•	weather and natural disasters.	
The fundamentals driving our business are impacted by economic cycles. Adverse changes or uncertainty involving the factors listed above or an economic downturn in the United States or 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 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 shift in consumer purchasing practices toward e-commerce, our relationships with our customers and with consumers could be harmed, the demand for our brands and products could be reduced and our results of operations and financial position could be adversely affected.
Our public image and reputation are important to maintaining our strong brands and could be adversely affected by various factors, including product quality and service, claims and comments in social media or the press, or negative publicity regarding disputes or legal action against us, even if unfounded. Damage to our public image or reputation could adversely affect our sales and results of operations and financial position.

5

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 increasingly selling directly to professional contractors and installers, which may adversely affect our margins on our products that contractors and installers would otherwise buy through our dealers and wholesalers.
Certain of our customers are increasingly 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.
As a result of the divestiture of our windows business in 2019 and the expected divestiture of our cabinetry business, the mix of our business operations has changed and the concentration of our sales to our two largest customers has increased and may continue to increase. In 2019, our net sales from our continuing operations to The Home Depot were $2.5 billion (approximately 37 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, these home center retailers are granted product exclusivity from time to time, which affects our ability to sell products to other customers and increases the complexity of our product offerings and our costs.
Variability in the cost 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 significant tariffs. For example, the recent trade dispute between the United States and China has resulted in increased 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.

6

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. 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 there is a disruption in transporting the 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 2019, 21 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 changes in political, monetary and social environments, economic conditions, labor conditions and practices, the laws, regulations and policies of foreign governments, social and political unrest, terrorist attacks, cultural differences and differences in enforcement of contract and intellectual property rights.
We are also affected by domestic and international laws 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.
Our results of operations and financial position are also impacted by changes in currency exchange rates. Unfavorable currency exchange rates, particularly the Euro, the British pound sterling, the Canadian dollar and the Chinese Yuan Renminbi, 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, as the situation involving the United Kingdom’s decision to exit from the European Union continues to develop, 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.

7

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.
The long-term performance of our businesses relies on our ability to attract, develop and retain talented 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 with low unemployment levels in the United States. 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, 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.
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, increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted attacks pose a risk to our information technology systems.
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

8

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 Enterprise Resource Planning (“ERP”) systems at our business units. ERP implementations 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 and implement our new technology systems in a timely manner or if we experience significant unanticipated expenses or disruptions in connection with the implementation of ERP systems.
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.
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 T 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;	
		
•	health and safety;	
		
•	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 environmental issues.	
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.

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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.
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.

Item 1B.    Unresolved Staff Comments.
None.

Item 2.	Properties.	
The table below lists principal North American properties used by our continuing operations.

							
Business Segment	 	Manufacturing	 	Warehouse and
Distribution	
Plumbing Products	 	20		 	7		
Decorative Architectural Products	 	8		 	16		
Totals	 	28		 	23		
Most of our North American facilities used by our continuing operations 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.
Our Masco Cabinetry business uses 8 manufacturing facilities and 3 warehouse buildings, each located within North America.
The table below lists principal properties used by our continuing operations outside of North America.

							
Business Segment	 	Manufacturing	 	Warehouse and
Distribution	
Plumbing Products	 	10		 	18		
Decorative Architectural Products	 	—		 	—		
Totals	 	10		 	18		
Most of our international facilities used by our continuing operations 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.
There are no international properties associated with our Masco Cabinetry business.

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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 continue to 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 T 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.

11

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, 2020, there were approximately 3,100 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.
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, replacing the previous authorization established by our Board of Directors in 2017. 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 during the year), for approximately $896 million. At December 31, 2019, we had $1.5 billion remaining under the 2019 authorization. The following table provides information regarding the repurchase of our common stock for the three-month period ended December 31, 2019.

														
Period	Total Number
of Shares
Purchased	 	Average Price
Paid Per
Common Share	 	Total Number of
Shares Purchased
as Part of
Publicly Announced
Plans or Programs	 	Maximum Value of
Shares That May
Yet Be Purchased
Under the Plans
or Programs	
10/1/19 - 10/31/19	726,500		 	$	42.52		 	726,500		 	$	1,926,741,040		
11/1/19 - 11/30/19 (A)	7,869,212		 	$	54.03		 	7,869,212		 	$	1,501,539,755		
12/1/19 - 12/31/19	—		 	$	—		 	—		 	$	1,501,539,755		
Total for the quarter	8,595,712		 	 	 	8,595,712		 	$	1,501,539,755		
_____________________________

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

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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, 2014 through December 31, 2019, when the closing price of our common stock was $47.99. The graph assumes investments of $100 on December 31, 2014 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, 2014 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.

																				
 	2015	 	2016	 	2017	 	2018	 	2019	
Masco	$	129.60		 	$	146.62		 	$	206.07		 	$	138.69		 	$	230.60		
S&P 500 Index	$	101.38		 	$	113.51		 	$	138.29		 	$	132.23		 	$	173.86		
S&P Industrials Index	$	97.47		 	$	115.85		 	$	140.22		 	$	121.58		 	$	157.29		
S&P Consumer Durables & Apparel Index	$	99.25		 	$	93.48		 	$	110.85		 	$	97.60		 	$	131.17		

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Item 6.	Selected Financial Data.	

																				
 	Dollars in Millions (Except Per Common Share Data)	
 	2019	 	2018	 	2017	 	2016	 	2015	
Net sales (1)(2)	$	6,707		 	$	6,654		 	$	6,014		 	$	5,754		 	$	5,513		
Operating profit (1)(2)(3)	1,088		 	1,077		 	1,029		 	986		 	798		
Income from continuing operations attributable to Masco Corporation (1)(2)	639		 	636		 	426		 	426		 	282		
Income per common share from continuing operations (1)(2):	 		 	 		 	 		 	 		 	 		
Basic	$	2.21		 	$	2.06		 	$	1.34		 	$	1.29		 	$	0.82		
Diluted	2.20		 	2.05		 	1.33		 	1.28		 	0.81		
Dividends declared	0.510		 	0.450		 	0.410		 	0.390		 	0.370		
Dividends paid	0.495		 	0.435		 	0.405		 	0.385		 	0.365		
At December 31:	 		 	 		 	 		 	 		 	 		
Total assets (2)	$	5,027		 	$	5,393		 	$	5,534		 	$	5,164		 	$	5,664		
Long-term debt	2,771		 	2,971		 	2,969		 	2,995		 	2,403		
Shareholders' (deficit) equity (2)	(56	)	 	69		 	183		 	(96	)	 	58		

		
(1)	Amounts exclude discontinued operations for all periods presented. Refer to Note B to the consolidated financial statements for further details.	

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

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

14

		
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 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 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, including the pending divestiture of our Masco Cabinetry business, our ability to successfully execute our acquisition strategy and integrate businesses that we have and may acquire, our ability to attract, develop and retain talented 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, mass merchandisers, hardware stores, homebuilders, distributors, and direct to the consumer.
2019 Results
Net sales were positively impacted by increased net selling prices across our two segments and the acquisition of The L.D. Kichler Co. ("Kichler") in March 2018. Such increases were partially offset by a decrease in volume, primarily in our Decorative Architectural Products segment and unfavorable foreign currency translation.
Our Plumbing Products segment was negatively impacted by an increase in other expenses (such as salaries, marketing spend and severance charges), an increase in commodity costs, unfavorable foreign currency translation, and higher depreciation expense. These negative impacts were partially offset by increased net selling prices and the benefits associated with cost savings initiatives. Our Decorative Architectural Products segment was positively impacted by increased net selling prices across the segment, the absence of the recognition of the inventory step-up adjustment established as part of the 2018 Kichler acquisition, and the benefits associated with cost savings initiatives. These positive impacts were partially offset by an increase in commodity costs and lower sales volume across the segment, an increase in strategic growth investments and a non-cash impairment charge related to an other indefinite-lived intangible asset for a trademark associated with lighting products.

15

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 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 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 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 our customers on an on-going basis and maintain allowances for doubtful accounts receivable for estimated losses resulting from the inability of customers to make required payments. Allowances are estimated based upon specific customer balances, where a risk of default has been identified, and also include a provision for non-customer specific defaults based upon historical collection, return and write-off activity. 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 primarily 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. For our Masco Cabinetry reporting unit, we utilized a market approach to determine its fair value instead of the discounted cash flow method, as we were actively marketing the Masco Cabinetry business for sale and on November 14, 2019 we entered into a definitive agreement to sell the business. We have defined our reporting units and completed the impairment testing of goodwill at the operating segment level.
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 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 estimated housing starts. Our assumptions included a relatively stable U.S. Gross Domestic Product growing at approximately 1.9 percent per annum and a eurozone Gross Domestic Product growing at approximately 1.0 percent per annum over the five-year forecast.

16

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 decreased in 2019 as compared to 2018, primarily due to declining interest rates and lower long-term market growth outlooks. In 2019, 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 2019, 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 $35 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 2019, 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 11.0 percent to 13.0 percent for our other indefinite-lived intangible assets.
In the fourth quarter of 2019, 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.
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 $420 million of pre-tax actuarial losses and approximately $90 million of income tax benefit, which includes approximately $11 million of tax expense from the elimination of a disproportionate tax effect.
In December 2019, our discount rate for obligations decreased to a weighted average of 2.5 percent from 3.8 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, 2019 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 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

17

higher. The assumed asset return was primarily 3.0 percent, reflecting the expected long-term return on plan assets based upon an analysis of expected and historical rates of return of various asset classes utilizing the current and long-term target asset allocation of the plan assets.
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 $254 million at December 31, 2019 from $226 million at December 31, 2018. Our projected benefit obligation for our unfunded, non-qualified, defined-benefit pension plans increased to $161 million at December 31, 2019 from $155 million at December 31, 2018. 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 90 percent to 119 percent.
The increase in our qualified defined-benefit pension plan projected benefit obligation was primarily impacted by a decrease in the discount rate. During 2019, we contributed $56 million to our qualified defined-benefit pension plans, and our qualified defined-benefit pension plan assets had a positive return of 17.7 percent. Refer to Note M to the consolidated financial statements for additional information.
We expect pension expense for our qualified defined-benefit pension plans to be $30 million in 2020 compared with $16 million in 2019. 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 2020 pension expense would increase by $5 million. Assuming a 0 percent asset return for our qualified domestic defined-benefit pension plans, projected 2020 total qualified defined-benefit pension plan expenses are expected to be approximately $37 million. We expect pension expense for our non-qualified defined-benefit pension plans to be $8 million in 2020, consistent with the pension expense recognized in 2019.
We anticipate that we will be required to contribute approximately $23 million in 2020 to our qualified and non-qualified defined-benefit plans; however, we currently anticipate contributing approximately $64 million in 2020. Refer to Note M 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.
We maintain a valuation allowance on certain state and foreign deferred tax assets as of December 31, 2019. 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.
The comprehensive U.S. tax reform, which generally became effective in 2018, has had a significant impact on our effective tax rate and taxes paid primarily due to the reduction in the U.S. Federal corporate tax rate from 35 percent to 21 percent and the additional U.S. taxes on our foreign earnings. The continued impact from U.S. tax reform may differ from our current estimates due to the issuance and finalization of future regulatory guidance.

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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. In addition, we actively manage our portfolio of companies by divesting of those businesses that do not align with our long-term growth strategy.
During 2019, we completed the divestitures of our UKWG and Milgard businesses and entered into a definitive agreement to sell our Masco Cabinetry business. 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
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.
Our total debt as a percent of total capitalization was 102 percent and 98 percent at December 31, 2019 and 2018, respectively. Refer to Note K to the consolidated financial statements for additional information.
During 2019, we completed the divestitures of our UKWG and Milgard businesses and entered into a definitive agreement to sell our Masco Cabinetry business. With the combined proceeds of $722 million for the UKWG and Milgard divestitures, we executed an accelerated stock repurchase agreement to repurchase $400 million of our common stock. This repurchase is under Masco's existing share repurchase authorization of $2.0 billion of shares of our common stock, which was approved in September 2019. During 2019, including the accelerated stock repurchase agreement, we repurchased 20.1 million shares of our common stock for cash aggregating $896 million.
Additionally, we redeemed and retired $201 million of our 7.125% Notes due March 15, 2020 on December 19, 2019. 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.
In the third quarter of 2019, we increased our quarterly dividend to $.135 per common share from $.12 per common share.
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. See Note K 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, 2019.
On March 9, 2018, we acquired substantially all of the net assets of Kichler. The purchase price, net of $2 million cash acquired, consisted of $549 million paid with cash on hand.
On April 16, 2018, we repaid and retired all of our $114 million, 6.625% Notes on the scheduled repayment date.
On June 21, 2017, we issued $300 million of 3.5% Notes due November 15, 2027 and $300 million of 4.5% Notes due May 15, 2047. We received proceeds of $599 million, net of discount, for the issuance of these Notes. The Notes are senior indebtedness and are redeemable at our option at the applicable redemption price. On June 27, 2017, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire $299 million of our 7.125% Notes due March 15, 2020, $74 million of our 5.95% Notes due March 15, 2022, $62 million of our 7.75% Notes due August 1, 2029, and $100 million of our 6.5% Notes due August 15, 2032. In connection with these early retirements, we incurred a loss on debt extinguishment of $107 million, which was recorded as interest expense.

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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 $29 million and $35 million at December 31, 2019 and 2018, respectively. We account for all payments made under the program as a reduction to our cash flows from operations and reported within our (decrease) increase 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 $164 million, $117 million, and $186 million for our continuing operations during the years ended December 31, 2019, 2018, and 2017, 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 had cash and cash investments of approximately $697 million at December 31, 2019. 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 $697 million and $552 million of cash and cash investments we held at December 31, 2019 and 2018, respectively, $297 million and $270 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.
We utilize derivative and hedging instruments to manage our exposure to currency fluctuations, primarily related to the European euro, British pound 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.
Our current ratio was 1.8 to 1 and 1.6 to 1 at December 31, 2019 and 2018, respectively. The increase in our current ratio is due primarily to the cash received from the divestiture of our Milgard business less cash used for the accelerated stock repurchase agreement and to repay and retire our 7.125% Notes due March 15, 2020.

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Cash Flows
Significant sources and (uses) of cash in the past three years are summarized as follows, in millions:

												
 	2019	 	2018	 	2017	
Net cash from operating activities	$	833		 	$	1,032		 	$	751		
Retirement of notes	(201	)	 	(114	)	 	(535	)	
Purchase of Company common stock	(896	)	 	(654	)	 	(331	)	
Cash dividends paid	(144	)	 	(134	)	 	(129	)	
Dividends paid to noncontrolling interest	(42	)	 	(89	)	 	(35	)	
Capital expenditures	(162	)	 	(219	)	 	(173	)	
Debt extinguishment costs	(2	)	 	—		 	(104	)	
Acquisition of businesses, net of cash acquired	—		 	(549	)	 	(89	)	
Issuance of notes, net of issuance costs	—		 	—		 	593		
Employee withholding taxes paid on stock-based compensation	(23	)	 	(42	)	 	(33	)	
Proceeds from disposition of:	 		 	 		 	 		
Businesses, net of cash disposed	722		 	—		 	128		
Property and equipment	34		 	14		 	24		
Financial investments	1		 	5		 	7		
Decrease in debt, net	(8	)	 	(1	)	 	(3	)	
Proceeds of short-term bank deposits, net	—		 	108		 	112		
Effect of exchange rate changes on cash and cash investments	14		 	4		 	55		
Other, net	12		 	4		 	(34	)	
Cash increase (decrease)	$	138		 	$	(635	)	 	$	204		
Our working capital days were as follows:

						
 	At December 31,	
 	2019	 	2018	
Receivable days	54		 	54		
Inventory days	67		 	71		
Accounts Payable days	68		 	69		
Working capital (receivables plus inventories, less accounts payable) as a percentage of net sales	15.7	%	 	15.8	%	
Net cash provided by operations of $833 million consisted primarily of net income adjusted for certain non-cash items, including depreciation and amortization expense of $159 million, stock-based compensation expense and amortization expense related to in-store displays, as well as 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 Milgard and UKWG as well as contributions to our defined-benefit pension plans.
Net cash used for financing activities was $1,291 million, primarily due to $896 million for the repurchase and retirement of Company common stock (as part of our strategic initiative to drive shareholder value), $201 million for the early retirement of our 7.125% Notes due March 15, 2020, $144 million for the payment of cash dividends, $42 million for dividends paid to noncontrolling interests and $23 million for employee withholding taxes paid on stock-based compensation. These uses of cash were slightly offset by $27 million of proceeds from the exercise of stock options.

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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, replacing the previous authorization established by our Board of Directors in 2017. During 2019, we repurchased and retired 20.1 million shares of our common stock, (including 0.6 million shares repurchased to offset the dilutive impact of long-term stock awards granted in 2019). At December 31, 2019, we had $1.5 billion remaining under the authorization. Consistent with past practice and as part of our strategic initiative to drive shareholder value, we anticipate using approximately $1.2 billion of cash for share repurchases (including shares which will be purchased to offset any dilution from long-term stock awards granted as part of our compensation programs) in 2020.
Net cash provided by investing activities was $582 million, primarily driven by $720 million of proceeds from the sale of Milgard, net of cash disposed, partially offset by $162 million for capital expenditures.
We continue to invest in our manufacturing and distribution operations to increase our productivity, improve customer service and support product innovation. Capital expenditures for 2019 were $162 million, compared with $219 million for 2018 and $173 million for 2017. For 2020, capital expenditures of our continuing operations, excluding any potential acquisitions, are expected to be approximately $150 million. Depreciation and amortization expense for 2019 totaled $159 million, compared with $156 million for 2018 and $127 million for 2017. For 2020, depreciation and amortization expense of our continuing operations, excluding any potential 2020 acquisitions, is expected to be approximately $140 million. Amortization expense totaled $27 million in 2019, compared with $24 million and $11 million in 2018 and 2017, 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 our ability to utilize 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.
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 each respective period to the same period of the immediately preceding year.

Sales and Operations
Net sales for 2019 were $6.7 billion, which increased one percent compared to 2018. Excluding acquisitions and the effect of currency translation, net sales increased one percent. The following table reconciles reported net sales to net sales excluding acquisitions and the effect of currency translation, in millions:

								
 	Year Ended
December 31	
 	2019	 	2018	
Net sales, as reported	$	6,707		 	$	6,654		
Acquisitions	(65	)	 	—		
Net sales, excluding acquisitions	6,642		 	6,654		
Currency translation	77		 	—		
Net sales, excluding acquisitions and the effect of currency translation	$	6,719		 	$	6,654		

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Net sales for 2019 increased one percent primarily due to increased net selling prices of our plumbing products and paints and other coating products, which, in aggregate, increased sales by two percent. The acquisition of Kichler in March 2018 increased sales by one percent. Net sales for 2019 were negatively impacted by decreased sales volume of our lighting products which decreased sales by one percent. Foreign currency translation also decreased sales by one percent.
Net sales for 2018 increased 11 percent primarily due to the acquisition of Kichler in March 2018 and Mercury Plastics, Inc. ("Mercury") in December 2017, which increased sales by six percent. Net sales were also positively impacted by increased sales volume of plumbing products, which increased sales by three percent, and net selling price increases of paints and other coating products, and plumbing products, which, in aggregate, increased sales by two percent. Foreign currency translation also increased sales by one percent. Net sales for 2018 were negatively affected by the divestiture of our Arrow Fastener Co., LLC ("Arrow") and Moores Furniture Group Limited ("Moores") businesses, which, in aggregate, decreased sales by one percent.
Our gross profit margins were 35.4 percent, 35.0 percent and 36.9 percent in 2019, 2018 and 2017, respectively. The 2019 gross profit margin was positively impacted by increased net selling prices and the absence of the recognition of the inventory step up adjustment established as part of the acquisition of Kichler. Such increases were partially offset by an increase in commodity costs including tariffs. The 2018 gross profit margin was negatively impacted by an increase in commodity costs, the recognition of the inventory step up adjustment established as a part of the acquisition of Kichler, an increase in other expenses (such as salaries and logistics costs) and unfavorable sales mix. These negative impacts were partially offset by an increase in net selling prices, increased sales volume, and the benefits associated with cost savings initiatives.
Selling, general and administrative expenses as a percent of sales were 19.0 percent in 2019 compared with 18.8 percent in 2018 and 19.8 percent in 2017. The increase in selling, general, and administrative expenses as a percentage of sales in 2019 was primarily driven by an increase in marketing spend. The decrease in selling, general, and administrative expenses as a percentage of sales in 2018 was driven by leverage of fixed expenses, due primarily to increased sales volume and improved cost control.
The following table reconciles reported operating profit to operating profit, as adjusted to exclude certain items, dollars in millions:

												
 	2019	 	2018	 	2017	
Operating profit, as reported	$	1,088		 	$	1,077		 	$	1,029		
Rationalization charges	13		 	9		 	2		
Kichler inventory step up adjustment	—		 	40		 	—		
Impairment charge for other intangible assets	9		 	—		 	—		
Operating profit, as adjusted	$	1,110		 	$	1,126		 	$	1,031		
Operating profit margins, as reported	16.2	%	 	16.2	%	 	17.1	%	
Operating profit margins, as adjusted	16.5	%	 	16.9	%	 	17.1	%	
Operating profit in 2019 was positively affected by increased net selling prices, the absence of the recognition of the Kichler inventory step up adjustment and benefits associated with cost savings initiatives. These positive impacts were partially offset by an increase in commodity costs including tariffs and an increase in other expenses (such as salaries). Operating profit in 2018 was positively affected by increased net selling prices, increased sales volume, and benefits associated with cost savings initiatives. These positive impacts were partially offset by an increase in commodity costs, the recognition of the Kichler inventory step up adjustment and an increase in other expenses (such as salaries, logistics costs, and ERP costs).
Other Income (Expense), Net
Other, net, for 2019 included $21 million of net periodic pension and post-retirement benefit cost, partially offset by $2 million of realized foreign currency transaction gains and $1 million of earnings related to equity method investments.
Other, net, for 2018 included $14 million of net periodic pension and post-retirement benefit cost and $8 million of realized foreign currency transaction losses. These expenses were partially offset by $3 million of earnings related to equity method investments and $1 million related related to distributions from private equity funds.

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Interest expense was $159 million, $156 million and $279 million in 2019, 2018 and 2017, respectively. The decrease in interest expense from 2017 to 2018 is primarily the result of a loss on debt extinguishment of $107 million, which was recorded as additional interest expense in connection with the early retirement of debt in 2017, the discharge of indebtedness in 2018 and refinancing certain debt at more favorable interest rates in 2017.
Income and Income Per Common Share from Continuing Operations (Attributable to Masco Corporation)
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. Income and diluted income per common share from continuing operations for 2017 were $426 million and $1.33 per common share, respectively.
Our effective tax rate was 25 percent, 24 percent and 34 percent in 2019, 2018 and 2017, respectively. U.S. tax reform, which generally became effective in 2018, reduced the U.S. Federal tax rate from 35 percent to 21 percent. Additionally, effective January 1, 2017 we adopted ASU 2016-09, which requires the tax effects related to employee stock-based payments to be recorded to income tax expense, thus increasing the volatility in our effective tax rate. Our normalized tax rate was 26 percent for both 2019 and 2018 and 34 percent for 2017.
Our effective tax rate in 2019 and 2018 was lower than our normalized of 26 percent due primarily to a $3 million income tax benefit from a change in judgment regarding the realizability of certain deferred tax assets in our state and foreign jurisdictions recognized in 2019 and a $4 million and $14 million tax benefit from stock-based compensation payments recognized in 2019 and 2018, respectively.
The 2017 effective tax rate was impacted by divestiture of businesses with no tax impact. This impact was offset by a $17 million net tax benefit from the impact of changes in U.S. Federal tax law and a $18 million tax benefit from stock-based compensation payments recognized in 2017.
Refer to Note R to the consolidated financial statements for additional information.
Outlook for the Company

We continue to execute our long-term growth strategies by leveraging our strong brand portfolio, industry-leading positions and Masco Operating System, our methodology to drive growth and productivity. We remain confident in the fundamentals of our business and will continue to execute on our strategies to create shareholder value. We believe that our strong financial position and cash flow generation, together with our current strategy of investing in our industry-leading branded building products, our continued focus on innovation and our commitment to operational excellence, the active management of our portfolio and disciplined capital allocation, will allow us to drive long-term growth and create value for shareholders. Additionally, we completed the divestitures of Milgard and UKWG, as well as, entered into a definitive agreement to sell our Masco Cabinetry business. The closing of the sale of our Masco Cabinetry business is expected during the first quarter of 2020, subject to customary closing conditions.

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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.

																		
 	 	 	 	 	 	 	Percent
Change	
 	2019	 	2018	 	2017	 	2019 vs.
2018	 	2018 vs.
2017	
Net Sales:	 		 	 		 	 		 	 		 	 		
Plumbing Products	$	3,984		 	$	3,998		 	$	3,732		 	—	 %	 	7	%	
Decorative Architectural Products	2,723		 	2,656		 	2,206		 	3	 %	 	20	%	
Total	$	6,707		 	$	6,654		 	$	5,938		 	1	 %	 	12	%	
North America	$	5,328		 	$	5,208		 	$	4,568		 	2	 %	 	14	%	
International, principally Europe	1,379		 	1,446		 	1,370		 	(5	)%	 	6	%	
Total	$	6,707		 	$	6,654		 	$	5,938		 	1	 %	 	12	%	
Divestitures not included in discontinued operations (A)	—		 	—		 	76		 	 	 	 	
Total net sales	$	6,707		 	$	6,654		 	$	6,014		 	1	 %	 	11	%	

												
 	2019	 	2018	 	2017	
Operating Profit: (B)	 		 	 		 	 		
Plumbing Products	$	708		 	$	715		 	$	702		
Decorative Architectural Products	480		 	456		 	438		
Total	$	1,188		 	$	1,171		 	$	1,140		
 	 	 	 	 	 	
North America	$	987		 	$	954		 	$	924		
International, principally Europe	201		 	217		 	216		
Total	1,188		 	1,171		 	1,140		
General corporate expense, net	(100	)	 	(94	)	 	(105	)	
Divestitures not included in discontinued operations (A)	—		 	—		 	(6	)	
Total operating profit	$	1,088		 	$	1,077		 	$	1,029		

	

(A)	Divestitures not included in discontinued operations, refer to Note P to the consolidated financial statements for additional information.	

(B)	Before general corporate expense, net; refer to Note P to the consolidated financial statements for additional information.	

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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 2018 and 2017 for the Plumbing Products and Decorative Architectural Products segments were excluded as there were no changes from what was disclosed in the December 31, 2018 Form 10-K.
Plumbing Products
Sales
Net sales in the Plumbing Products segment were flat in 2019. Net selling price increases of North American operations increased sales by two percent. This increase was offset by foreign currency translation, which decreased sales by two percent.
Operating Results
Operating profit in the Plumbing Products segment in 2019 was negatively impacted by an increase in other expenses (such as salaries, marketing spend and severance charges), an increase in commodity costs including tariffs, unfavorable foreign currency translation, and unfavorable mix. These negative impacts were partially offset by increased net selling prices and benefits associated with cost savings initiatives.
Decorative Architectural Products
Sales
Net sales of Decorative Architectural Products increased three percent in 2019. The acquisition of Kichler increased sales by two percent. Net selling price increases of paints and other coating products and to a lesser extent, lighting products and builders' hardware also increased sales. Such increases were partially offset by lower sales volume, primarily related to our lighting products.
Operating Results
Operating profit in the Decorative Architectural Products segment in 2019 was positively impacted by increased net selling prices, the absence of the recognition of the Kichler inventory step up adjustment, and the benefits associated with cost savings initiatives. These positive impacts were partially offset by an increase in commodity costs including tariffs, lower sales volume, an increase in strategic growth investments and a non-cash impairment charge related to an other indefinite-lived intangible asset for a trademark associated with lighting products.
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 2019, 2018 and 2017, we incurred net pre-tax costs and charges related to these initiatives of $13 million, $9 million, and $2 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, although we do not anticipate that the related costs will be as significant as they have been historically.
During 2019, 2018 and 2017, our Plumbing Products segment incurred costs and charges of $13 million, $9 million and $2 million, respectively. The 2019 costs primarily related to severance and plant consolidation costs in North America. The 2018 costs primarily related to plant closure costs in North America.

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Geographic Area Results Discussion

North America
Sales
North American net sales in 2019 increased two percent. Net selling price increases of plumbing products and paints and other coating products, in aggregate, increased sales by two percent. The acquisition of Kichler in March 2018 increased sales by one percent. Such increases were partially offset by lower sales volume of lighting products, which decreased sales by one percent.
North American net sales in 2018 increased 14 percent. Net sales were positively impacted by the acquisitions of Kichler and Mercury which, in aggregate, increased sales by eight percent. Net sales were also positively impacted by increased sales volume of plumbing products, which increased sales by four percent, and increased net selling prices of paints and other coating products, which increased sales by two percent.
Operating Results
Operating profit from North American operations in 2019 was positively affected by net selling price increases of plumbing products and paints and other coating products, the absence of the Kichler inventory step-up adjustment, and benefits associated with cost savings initiatives. The positive impacts were partially offset by increased commodity costs and lower volume.
Operating profit from North American operations in 2018 was positively affected by increased net selling prices, higher sales volume, and the benefits associated with cost savings initiatives. These positive impacts were partially offset by an increase in commodity costs, the recognition of the Kichler inventory step up adjustment and an increase in other expenses (such as salaries, logistics costs, and ERP costs).
International, Principally Europe
Sales
Net sales from International operations in 2019 decreased five percent. In local currencies (including sales in foreign currencies outside their respective functional currencies), net sales were flat with favorable net selling prices of plumbing products being offset by unfavorable sales mix.
Net sales from International operations in 2018 increased six percent. In local currencies, net sales increased two percent, primarily due to higher sales volume of plumbing products, which increased sales by two percent, and net selling price increases, which increased sales by two percent. Such increases were partially offset by an unfavorable sales mix, which decreased sales by one percent.
Operating Results
Operating profit from International operations in 2019 was negatively impacted by other expenses (such as salaries and marketing spend), unfavorable foreign currency translation and an increase in commodity costs, partially offset by increased net selling prices.
Operating profit from International operations in 2018 was positively impacted by increased net selling prices, higher sales volume and favorable foreign currency translation, mostly offset by an increase in other expenses (such as salaries and logistic costs), an increase in commodity costs and unfavorable sales mix.

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Other Matters

Commitments and Contingencies

Litigation
Information regarding our legal proceedings is set forth in Note T 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.

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Contractual Obligations
The following table provides payment obligations related to current contracts at December 31, 2019, in millions:

																								
 	Payments Due by Period	
 	2020	 	2021-2022	 	2023-2024	 	Beyond
2024	 	Other	 	Total	
Debt (A)	$	2		 	$	731		 	$	5		 	$	2,052		 	$	—		 	$	2,790		
Interest (A)	134		 	236		 	200		 	576		 	—		 	1,146		
Operating leases	45		 	70		 	37		 	101		 	—		 	253		
Currently payable income taxes	10		 	—		 	—		 	—		 	—		 	10		
Private equity funds (B)	—		 	—		 	—		 	—		 	4		 	4		
Purchase commitments (C)	240		 	1		 	—		 	—		 	—		 	241		
Uncertain tax positions, including interest and penalties (D)	—		 	—		 	—		 	—		 	73		 	73		
Total	$	431		 	$	1,038		 	$	242		 	$	2,729		 	$	77		 	$	4,517		

(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 M to the consolidated financial statements for defined-benefit pension plan obligations.

29

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, and Canadian dollar, 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, 2019, 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.

30

		
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, 2019 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, 2019.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2019, 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, 2019 and expressed an unqualified opinion on our 2019 consolidated financial statements. This report appears under 'Item 8. Financial Statements and Supplementary Data' under the heading "Report of Independent Registered Public Accounting Firm."

31

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, 2019 and 2018, 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, 2019, 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, 2019, 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, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 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, 2019, 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

32

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 $509 million as of December 31, 2019. 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 or a market approach. 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 there was significant judgment by management when developing the fair value measurements of the reporting units. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s discounted cash flow model, including significant assumptions related to forecasted sales and the discount rates. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

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 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 11, 2020
We have served as the Company’s auditor since 1959.  

33

Financial Statements and Supplementary Data

MASCO CORPORATION and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS

December 31, 2019 and 2018
(In Millions, Except Share Data)

								
 	2019	 	2018	
ASSETS	 		 	 		
Current Assets:	 		 	 		
Cash and cash investments	$	697		 	$	552		
Receivables	997		 	990		
Inventories	754		 	798		
Prepaid expenses and other	90		 	84		
Assets held for sale	173		 	342		
Total current assets	2,711		 	2,766		
Property and equipment, net	878		 	885		
Goodwill	509		 	511		
Other intangible assets, net	259		 	288		
Operating lease right-of-use assets	176		 	—		
Other assets	139		 	90		
Assets held for sale	355		 	853		
Total assets	$	5,027		 	$	5,393		
 	 	 	 	
LIABILITIES	 	 	 	
Current Liabilities:	 	 	 	
Accounts payable	$	697		 	$	736		
Notes payable	2		 	8		
Accrued liabilities	700		 	645		
Liabilities held for sale	149		 	295		
Total current liabilities	1,548		 	1,684		
Long-term debt	2,771		 	2,971		
Other liabilities	751		 	549		
Liabilities held for sale	13		 	120		
Total liabilities	5,083		 	5,324		
 	 	 	 	
Commitments and contingencies (Note T)		 		
 	 	 	 	
EQUITY	 	 	 	
Masco Corporation's shareholders' equity:	 	 	 	
 Common shares, par value $1 per share
    Authorized shares: 1,400,000,000;
    Issued and outstanding: 2019 – 275,600,000; 2018 – 293,900,000	276		 	294		
  Preferred shares authorized: 1,000,000;
    Issued and outstanding: 2019 and 2018 – None	—		 	—		
  Paid-in capital	—		 	—		
  Retained deficit	(332	)	 	(278	)	
  Accumulated other comprehensive loss	(179	)	 	(127	)	
Total Masco Corporation's shareholders' deficit	(235	)	 	(111	)	
  Noncontrolling interest	179		 	180		
Total equity	(56	)	 	69		
Total liabilities and equity	$	5,027		 	$	5,393		

See notes to consolidated financial statements.
34

MASCO CORPORATION and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2019, 2018 and 2017
(In Millions, Except Per Common Share Data)

												
 	2019	 	2018	 	2017	
Net sales	$	6,707		 	$	6,654		 	$	6,014		
Cost of sales	4,336		 	4,327		 	3,794		
Gross profit	2,371		 	2,327		 	2,220		
Selling, general and administrative expenses	1,274		 	1,250		 	1,191		
Impairment charge for other intangible assets	9		 	—		 	—		
Operating profit	1,088		 	1,077		 	1,029		
Other income (expense), net:	 		 	 		 	 		
Interest expense	(159	)	 	(156	)	 	(279	)	
Other, net	(15	)	 	(14	)	 	(32	)	
 	(174	)	 	(170	)	 	(311	)	
Income from continuing operations before income taxes	914		 	907		 	718		
Income tax expense	230		 	221		 	245		
Income from continuing operations	684		 	686		 	473		
Income from discontinued operations, net	296		 	98		 	107		
Net income	980		 	784		 	580		
Less: Net income attributable to noncontrolling interest	45		 	50		 	47		
Net income attributable to Masco Corporation	$	935		 	$	734		 	$	533		
 	 	 	 	 	 	
Income per common share attributable to Masco Corporation:	 	 		 	 		
Basic:	 		 	 		 	 		
Income from continuing operations	$	2.21		 	$	2.06		 	$	1.34		
Income from discontinued operations, net	1.03		 	0.32		 	0.34		
Net income	$	3.24		 	$	2.38		 	$	1.68		
Diluted:	 		 	 		 	 		
Income from continuing operations	$	2.20		 	$	2.05		 	$	1.33		
Income from discontinued operations, net	1.02		 	0.32		 	0.33		
Net income	$	3.22		 	$	2.37		 	$	1.66		
 	 	 	 	 	 	
Amounts attributable to Masco Corporation:	 		 	 		 	 		
Income from continuing operations	$	639		 	$	636		 	$	426		
Income from discontinued operations, net	296		 	98		 	107		
Net income	$	935		 	$	734		 	$	533		

See notes to consolidated financial statements.
35

MASCO CORPORATION and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Years Ended December 31, 2019, 2018 and 2017
(In Millions)

												
 	2019	 	2018	 	2017	
Net income	$	980		 	$	784		 	$	580		
Less: Net income attributable to noncontrolling interest	45		 	50		 	47		
Net income attributable to Masco Corporation	$	935		 	$	734		 	$	533		
Other comprehensive (loss) income, net of tax (Note O):	 		 	 		 	 		
Cumulative translation adjustment	$	6		 	$	(31	)	 	$	133		
Interest rate swaps	2		 	2		 	3		
Pension and other post-retirement benefits	(64	)	 	9		 	63		
Other comprehensive (loss) income, net of tax	(56	)	 	(20	)	 	199		
Less: Other comprehensive (loss) income attributable to the noncontrolling interest:	 		 	 		 	 		
Cumulative translation adjustment	$	(1	)	 	$	(15	)	 	$	28		
Pension and other post-retirement benefits	(3	)	 	(2	)	 	1		
 	(4	)	 	(17	)	 	29		
Other comprehensive (loss) income attributable to Masco Corporation	$	(52	)	 	$	(3	)	 	$	170		
Total comprehensive income	$	924		 	$	764		 	$	779		
Less: Total comprehensive income attributable to noncontrolling interest          	41		 	33		 	76		
Total comprehensive income attributable to Masco Corporation	$	883		 	$	731		 	$	703		

See notes to consolidated financial statements.
36

MASCO CORPORATION and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2019, 2018 and 2017
(In Millions)

												
 	2019	 	2018	 	2017	
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:	 		 	 		 	 		
Net income	$	980		 	$	784		 	$	580		
Depreciation and amortization	159		 	156		 	127		
Display amortization	12		 	21		 	25		
Deferred income taxes	(41	)	 	4		 	13		
Employee withholding taxes paid on stock-based compensation	23		 	42		 	33		
Gain on disposition of investments, net	(1	)	 	(4	)	 	(4	)	
(Gain) loss on disposition of businesses, net	(298	)	 	—		 	13		
Pension and other postretirement benefits	(45	)	 	(47	)	 	(38	)	
Impairment of financial investments	—		 	—		 	2		
Impairment of goodwill and other intangible assets	16		 	—		 	—		
Stock-based compensation	35		 	27		 	38		
Increase in receivables	(37	)	 	(46	)	 	(140	)	
Decrease (increase) in inventories	58		 	(11	)	 	(78	)	
(Decrease) increase in accounts payable and accrued liabilities, net	(27	)	 	108		 	67		
Debt extinguishment costs	2		 	—		 	104		
Other, net	(3	)	 	(2	)	 	9		
Net cash from operating activities	833		 	1,032		 	751		
 	 	 	 	 	 	
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:	 		 	 		 	 		
Retirement of notes	(201	)	 	(114	)	 	(535	)	
Purchase of Company common stock	(896	)	 	(654	)	 	(331	)	
Cash dividends paid	(144	)	 	(134	)	 	(129	)	
Dividends paid to noncontrolling interest	(42	)	 	(89	)	 	(35	)	
Issuance of notes, net of issuance costs	—		 	—		 	593		
Debt extinguishment costs	(2	)	 	—		 	(104	)	
Increase in debt	—		 	—		 	2		
Proceeds from the exercise of stock options	27		 	14		 	—		
Employee withholding taxes paid on stock-based compensation	(23	)	 	(42	)	 	(33	)	
Payment of debt	(8	)	 	(1	)	 	(5	)	
Credit Agreement and other financing costs	(2	)	 	—		 	—		
Net cash for financing activities	(1,291	)	 	(1,020	)	 	(577	)	
 	 	 	 	 	 	
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:			 	 		 	 		
Capital expenditures	(162	)	 	(219	)	 	(173	)	
Acquisition of businesses, net of cash acquired	—		 	(549	)	 	(89	)	
Proceeds from disposition of:	 	 	 	 	 	
Businesses, net of cash disposed	722		 	—		 	128		
Short-term bank deposits	—		 	108		 	218		
Property and equipment	34		 	14		 	24		
Other financial investments	1		 	5		 	7		
Purchases of short-term bank deposits	—		 	—		 	(106	)	
Other, net	(13	)	 	(10	)	 	(34	)	
Net cash from (for) investing activities	582		 	(651	)	 	(25	)	
Effect of exchange rate changes on cash and cash investments	14		 	4		 	55		
 	 	 	 	 	 	
CASH AND CASH INVESTMENTS:	 		 	 		 	 		
Increase (decrease) for the year	138		 	(635	)	 	204		
At January 1	559		 	1,194		 	990		
At December 31	$	697		 	$	559		 	$	1,194		

See notes to consolidated financial statements.
37

MASCO CORPORATION and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Years Ended December 31, 2019, 2018 and 2017
(In Millions, Except Per Common Share Data)

																								
 	Total	 	Common
Shares
($1 par value)	 	Paid-In
Capital	 	Retained
(Deficit)
Earnings	 	Accumulated
Other
Comprehensive
(Loss) Income	 	Noncontrolling
Interest	
Balance, January 1, 2017	$	(96	)	 	$	318		 	$	—		 	$	(374	)	 	$	(235	)	 	$	195		
Total comprehensive income	779		 	 		 	 		 	533		 	170		 	76		
Shares issued	(19	)	 	2		 	(21	)	 	 		 	 		 	 		
Shares retired:	 	 			 			 			 			 			
Repurchased	(331	)	 	(9	)	 	(8	)	 	(314	)	 	 		 	 		
Surrendered (non-cash)	(15	)	 	(1	)	 	 		 	(14	)	 	 		 	 		
Cash dividends declared	(129	)	 	 		 	 		 	(129	)	 	 		 	 		
Dividends paid to noncontrolling interest	(35	)	 	 		 	 		 			 	 		 	(35	)	
Stock-based compensation	29		 			 	29		 			 			 			
Balance, December 31, 2017	$	183		 	$	310		 	$	—		 	$	(298	)	 	$	(65	)	 	$	236		
Reclassification of disproportionate tax effects (Refer to Note O)	—		 	 	 	 	 	59		 	(59	)	 	 	
Total comprehensive income (loss)	764		 	 		 	 		 	734		 	(3	)	 	33		
Shares issued	(9	)	 	3		 	(4	)	 	(8	)	 	 		 	 		
Shares retired:	 		 	 		 	 		 	 		 	 		 	 		
Repurchased	(654	)	 	(19	)	 	(26	)	 	(609	)	 	 		 	 		
Surrendered (non-cash)	(19	)	 			 	 		 	(19	)	 	 		 	 		
Cash dividends declared	(137	)	 	 		 	 		 	(137	)	 	 		 	 		
Dividends paid to noncontrolling interest	(89	)	 	 		 	 		 	 		 	 		 	(89	)	
Stock-based compensation	30		 	 		 	30		 	 		 	 		 	 		
Balance, December 31, 2018	$	69		 	$	294		 	$	—		 	$	(278	)	 	$	(127	)	 	$	180		
Total comprehensive income (loss)	924		 	 		 	 		 	935		 	(52	)	 	41		
Shares issued	15		 	3		 	12		 			 			 			
Shares retired:	 		 			 			 			 			 			
Repurchased	(896	)	 	(20	)	 	(42	)	 	(834	)	 			 			
Surrendered (non-cash)	(10	)	 	(1	)	 			 	(9	)	 			 			
Cash dividends declared	(146	)	 			 			 	(146	)	 			 			
Dividends paid to noncontrolling interest	(42	)	 			 			 			 			 	(42	)	
Stock-based compensation	30		 			 	30		 			 			 			
Balance, December 31, 2019	$	(56	)	 	$	276		 	$	—		 	$	(332	)	 	$	(179	)	 	$	179		

See notes to consolidated financial statements.
38

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 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 statement 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.
Short-Term Bank Deposits.    Occasionally, we invest a portion of our foreign excess cash in short-term bank deposits. These highly liquid investments have original maturities between three and twelve months and are valued at cost, which approximate their fair value. These short-term bank deposits are classified in the current assets section of our consolidated balance sheets, and interest income related to short-term bank deposits is recorded in our consolidated statements of operations in other income (expense), net.

39

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A. ACCOUNTING POLICIES (Continued)
Receivables.    We do significant business with a number of customers, including certain home center retailers. We monitor our exposure for credit losses on our customer receivable balances and the credit worthiness of our customers on an on-going basis and record related allowances for doubtful accounts 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 default has been identified, and also include a provision for non-customer specific defaults based upon historical collection, return and write-off activity. 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 $36 million and $33 million at December 31, 2019 and 2018, respectively.
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 $132 million in 2019 and 2018 and $116 million in 2017.
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 other 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.
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.

40

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A. ACCOUNTING POLICIES (Continued)
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 primarily 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. 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 2019, 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. For our Masco Cabinetry reporting unit, we utilized a market approach to determine its fair value instead of the discounted cash flow method, as we were actively marketing the Masco Cabinetry business for sale and on November 14, 2019 we entered into a definitive agreement to sell the business. 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 2019, 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 11.0 percent to 13.0 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.
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.

41

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A. ACCOUNTING POLICIES (Continued)
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 T 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.
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"), phantom stock awards and stock appreciation rights ("SARs"). We measure compensation expense for stock awards at the market price of our common stock at the grant date. Such expense is recognized ratably over the shorter of the vesting period of the stock awards, typically five years, or the length of time until the grantee becomes retirement-eligible, generally at age 65. We measure compensation expense for stock options using a Black-Scholes option pricing model. Such expense is recognized ratably over the shorter of the vesting period of the stock options, typically five years, or the length of time until the grantee becomes retirement-eligible, generally at age 65. We measure compensation expense for RSUs at the expected payout of the awards. Such expense is recognized ratably over the three-year vesting period of the units. We recognize forfeitures related to stock awards, stock options and RSUs as they occur.
We initially measure compensation expense for phantom stock awards at the market price of our common stock at the grant date. Such expense is recognized ratably over the vesting period, typically five years. 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. We measure compensation expense for SARs using a Black-Scholes option pricing model; such expense is recognized ratably over the vesting period, typically five years. SARs are linked to the value of our common stock on the date of grant and are settled in cash upon exercise. We account for SARs using the fair value method, which requires outstanding SARs to be classified as liability-based awards. The liability is remeasured and adjusted at the end of each reporting period until the SARs are exercised and payment is made to the employees or the SARs expire. Refer to Note L for additional information on stock-based compensation.
Noncontrolling Interest.    We owned 68 percent of Hansgrohe SE at both December 31, 2019 and 2018. The aggregate noncontrolling interest, net of dividends, at December 31, 2019 and 2018 has been recorded as a component of equity on our consolidated balance sheets.

42

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A. ACCOUNTING POLICIES (Continued)
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 B for further information regarding our discontinued operations.
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 2019 presentation in the consolidated financial statements.

43

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A. ACCOUNTING POLICIES (Concluded)
Recently Adopted Accounting Pronouncements. In February 2016, the Financial Accounting Standards Board ("FASB") issued a new standard for leases, ASC 842, which changes the accounting model for identifying and accounting for leases. We adopted ASC 842 on January 1, 2019 using the optional transition method, which allows for initial application of the new standard beginning at the adoption date. We elected the package of practical expedients that allows us to forgo reassessing a) whether any existing contracts are or contain leases, b) the lease classification for any existing leases, and c) whether initial direct costs for any existing leases are capitalized. We also elected the practical expedient to use hindsight with respect to lease renewals, terminations, and purchase options when determining the lease term and in assessing impairment of the assets related to leases existing at the time of adoption. As a result of the standard, we recorded $236 million of operating lease ROU assets, $45 million of short-term operating lease liabilities, and $214 million of long-term operating lease liabilities on the date of adoption which includes assets and liabilities that have subsequently been reclassified as held for sale or disposed of. Our accounting for finance leases remained unchanged. The standard did not impact our consolidated statements of operations or statements of cash flows.
In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which improves and simplifies accounting rules around hedge accounting and better portrays the economic results of an entity's risk management activities in its financial statements. We adopted ASU 2017-12 on January 1, 2019. The adoption of the standard did not impact our financial position or results of operations.
In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting," which modifies the accounting for share-based payment awards issued to nonemployees to largely align it with the accounting for share-based payment awards issued to employees. We adopted ASU 2018-07 on January 1, 2019. The adoption of the standard did not impact our financial position or results of operations.
Recently Issued 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. ASU 2016-13 is effective for us for annual periods beginning January 1, 2020. This standard will impact the valuation of our credit losses relating to our receivables, however, we do not expect the standard to have a material impact 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. ASU 2018-15 allows for either retrospective adoption or prospective adoption to all implementation costs incurred after the date of adoption. We plan to adopt this standard prospectively effective for annual periods beginning January 1, 2020 and do not expect that the adoption of this new standard will have a material impact on our financial position or results of operations.
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. ASU 2019-12 is effective for us for annual periods beginning January 1, 2021. Early adoption is permitted. We are currently reviewing the provisions of this new pronouncement and the impact, if any, the adoption of this guidance has on our financial position and results of operations.

44

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

B. 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 the next two years. 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, subject to final working capital adjustments. 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.
Additionally, on November 14, 2019, we entered into a definitive agreement to sell Masco Cabinetry LLC ("Cabinetry"), a manufacturer of cabinetry products, for approximately $1.0 billion, consisting of $850 million in cash at closing and preferred stock issued by a holding company of the buyer with a liquidation preference of $150 million. The preferred stock will have a coupon of 8 percent until the first anniversary of issuance, 9 percent after the first anniversary and until the second anniversary of issuance,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 period occurring during and after the seventh anniversary until all shares have been redeemed in full. The closing of the sale is expected during the first quarter of 2020, subject to customary closing conditions, and we expect to recognize a gain on the divestiture of approximately $600 million. We determined that the previously reported Cabinetry Products segment met the criteria to be classified as a discontinued operation as Cabinetry represents 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. Accordingly, these businesses' held for sale assets and liabilities were reclassified in the consolidated balance sheets at December 31, 2019 and 2018 to assets held for sale or liabilities held for sale. 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 planned disposition 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 income from discontinued operations before income tax was a loss of $1 million for the year ended December 31, 2019 and income of $40 million and $57 million for the years ended December 31, 2018 and 2017, respectively. The results of the cabinetry business recorded in income from discontinued operations before income tax were income of $107 million, $95 million and $109 million for the years ended December 31, 2019, 2018 and 2017, respectively.

45

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

B. DIVESTITURES (Continued)
The major classes of line items constituting income from discontinued operations, net, in millions:

												
 	For the Years Ended December 31,	
 	2019	 	2018	 	2017	
Net sales	$	1,528		 	$	1,705		 	$	1,628		
Cost of sales	1,184		 	1,343		 	1,236		
Gross profit	344		 	362			392		
Selling, general and administrative expenses	232		 	228		 	227		
Impairment charge for goodwill (A)	7		 	—		 	—		
Other income (expense), net	1		 	1		 	1		
Income from discontinued operations	106		 	135		 	166		
Gain on disposal of discontinued operations, net	298		 	—		 	—		
Income before income tax	404		 	135		 	166		
Income tax expense	(108	)	 	(37	)	 	(59	)	
Income from discontinued operations, net	$	296		 	$	98		 	$	107		

	

(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.	
The windows businesses included assets classified as held for sale of $660 million and liabilities classified as held for sale of $257 million in the consolidated balance sheet at December 31, 2018. The cabinetry business included assets classified as held for sale of $528 million and $535 million and liabilities classified as held for sale of $162 million and $158 million in the consolidated balance sheets at December 31, 2019 and 2018, respectively.
The carrying amount of major classes of assets and liabilities included as part of the Cabinetry, Milgard, and UKWG discontinued operations, were as follows, in millions:

								
 	December 31, 2019	 	December 31, 2018	
Cash and cash investments	$	—		 	$	7		
Receivables	76		 	163		
Prepaid expenses and other	7		 	24		
Inventories	90		 	148		
Property and equipment, net	157		 	338		
Operating lease right-of-use assets	4		 	—		
Goodwill	181		 	387		
Other intangible assets, net	1		 	118		
Other assets	12		 	10		
Total assets classified as held for sale	$	528		 	$	1,195		
 	 	 	 	
Accounts payable	$	103		 	$	190		
Accrued liabilities	46		 	105		
Other liabilities	13		 	120		
Total liabilities classified as held for sale	$	162		 	$	415		

46

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

B. DIVESTITURES (Concluded)
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:

												
 	For the Years Ended December 31,	
 	2019	 	2018	 	2017	
Depreciation and amortization	$	29		 	$	36		 	$	34		
Capital expenditures	34		 	38		 	26		
ROU assets obtained in exchange for new lease obligations	3		 	—		 	—		

In conjunction with the divestiture of Milgard, we have entered into a Transition Services Agreement to provide administrative services subsequent to the separation. The fees for services rendered under the Transition Services Agreement are not expected to be material to our results of operations.     
In the fourth quarter of 2017, we divested Moores Furniture Group Limited ("Moores"), a manufacturer of kitchen and bathroom furniture in the United Kingdom. In connection with the divestiture we recognized a loss of $64 million for the year ended December 31, 2017, included in other, net, within other income (expense), net in our consolidated statement of operations. This loss resulted primarily from the recognition of $58 million of defined-benefit pension plan actuarial losses, net of tax, that were previously included within accumulated other comprehensive loss, due to the transfer of the plan assets and obligations to the purchaser in connection with the sale of the business. Prior to divestiture, the results of this business are included within income before income taxes in the consolidated statement of operations. This divestiture was not accounted for as a discontinued operation.
In the second quarter of 2017, we divested Arrow Fastener Co., LLC ("Arrow"), a manufacturer and distributor of fastening tools, for proceeds of $128 million. In connection with the divestiture we recognized a gain of $51 million for the year ended December 31, 2017, included in other, net, within other income (expense), net in our consolidated statement of operations. Prior to divestiture, the results of this business are included within income before income taxes in the consolidated statement of operations. This divestiture was not accounted for as a discontinued operation.

47

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

C. ACQUISITIONS
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.

								
 	Initial	 	Final	
Receivables	$	101		 	$	100		
Inventories	173		 	166		
Prepaid expenses and other	5		 	5		
Property and equipment	33		 	33		
Goodwill	46		 	64		
Other intangible assets	243		 	240		
Accounts payable	(24	)	 	(24	)	
Accrued liabilities	(25	)	 	(30	)	
Other liabilities	(4	)	 	(5	)	
Total	$	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.
In the fourth quarter of 2017, we acquired Mercury Plastics, Inc., a plastics processor and manufacturer of water handling systems for appliance and faucet applications, for approximately $89 million in cash. This business is included in the Plumbing Products segment. This acquisition enhances our ability to develop faucet technology and provides continuity of supply of quality faucet components. In connection with this acquisition, we recognized $38 million of goodwill, which is tax deductible, and is related primarily to the expected synergies from combining the operations into our business.

48

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:

												
 	Year Ended December 31, 2019	
 	Plumbing Products	 	Decorative Architectural Products	 	Total	
Primary geographic markets:	 	 	 	 	 	
North America	$	2,605		 	$	2,723		 	$	5,328		
International, principally Europe	1,379		 	—		 	1,379		
Total	$	3,984		 	$	2,723		 	$	6,707		

												
 	Year Ended December 31, 2018	
 	Plumbing Products	 	Decorative Architectural Products	 	Total	
Primary geographic markets:	 	 	 	 	 	
North America	$	2,552		 	$	2,656		 	$	5,208		
International, principally Europe	1,446		 	—		 	1,446		
Total	$	3,998		 	$	2,656		 	$	6,654		

												
 	Year Ended December 31, 2017	
 	Plumbing Products	 	Decorative Architectural Products	 	Total (A)	
Primary geographic markets:	 	 	 	 	 	
North America	$	2,362		 	$	2,206		 	$	4,568		
International, principally Europe	1,370		 	—		 	1,370		
Total	$	3,732		 	$	2,206		 	$	5,938		

	

		
(A)	Total net sales for 2017 excludes net sales of $76 million relating to divestitures not included in discontinued operations. Divestitures not included in discontinued operations consists of our previously owned Arrow and Moores businesses which were disposed of in 2017.	

We recognized increases to revenue of $2 million, $4 million, and $9 million in 2019, 2018, and 2017, 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, 2019 and 2018.

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 $40 million and $39 million at December 31, 2019 and 2018, respectively.

49

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

E. INVENTORIES

								
 	(In Millions)
At December 31	
 	2019	 	2018	
Finished goods	$	485		 	$	508		
Raw materials	211		 	237		
Work in process	58		 	53		
Total	$	754		 	$	798		

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 23 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:

				
 	2019	
Operating lease cost	$	49		
Short-term lease cost	6		
Variable lease cost	3		
Finance lease cost:	 	
Amortization of right-of-use assets	3		
Interest on lease liabilities	1		

Supplemental cash flow information related to leases was as follows, in millions:

				
 	2019	
Cash paid for amounts included in the measurement of lease liabilities:	 	
Operating cash flows for operating leases	$	58		
Operating cash flows for finance leases	1		
Financing cash flows for finance leases	8		
 	 	
ROU assets obtained in exchange for new lease obligations:	 	
Operating leases	27		
Finance leases	—		

Certain other information related to leases was as follows:

			
 	At December 31, 2019	
Weighted-average remaining lease term:	 	
Operating leases	10 years		
Finance leases	11 years		
 	 	
Weighted-average discount rate:	 	
Operating leases	4.6	%	
Finance leases	3.4	%	

50

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

F. LEASES (Concluded)
Supplemental balance sheet information related to leases was as follows, in millions:

								
 	At December 31, 2019	
 	Operating Leases	 	Finance Leases	
Property and equipment, net	$	—		 	$	29		
Notes payable	—		 	2		
Accrued liabilities	38		 	—		
Long-term debt	—		 	28		
Other liabilities	162		 	—		

Gross ROU assets under finance leases recorded within property and equipment, net were $42 million, and accumulated amortization associated with these leases was $13 million, at December 31, 2019.

At December 31, 2019, future maturities of lease liabilities (under ASC 842) were as follows, in millions:

								
 	Operating Leases	 	Finance Leases	
Year ending December 31,	 	 	 	
2020	$	45		 	$	3		
2021	39		 	3		
2022	31		 	3		
2023	21		 	3		
2024	16		 	4		
Thereafter	101		 	20		
Total lease payments	253		 	36		
Less: imputed interest	(53	)	 	(6	)	
Total	$	200		 	$	30		

Rental expense (under ASC 840) recorded in the consolidated statements of operations totaled approximately $63 million and $49 million during 2018 and 2017, respectively.
At December 31, 2018, future minimum operating lease payments (under ASC 840), including discontinued operations, were as follows, in millions: 2019 – $55 million; 2020 – $47 million; 2021 – $40 million; 2022 – $30 million; 2023 – $20 million; 2024 and beyond – $99 million.

G. PROPERTY AND EQUIPMENT

								
 	(In Millions)
At December 31	
 	2019	 	2018	
Land and improvements	$	64		 	$	64		
Buildings	497		 	470		
Computer hardware and software	232		 	220		
Machinery and equipment	1,103		 	1,088		
 	1,896		 	1,842		
Less: Accumulated depreciation	(1,018	)	 	(957	)	
Total	$	878		 	$	885		

51

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:

												
 	Gross Goodwill At December 31, 2019	 	Accumulated
Impairment
Losses	 	Net Goodwill At December 31, 2019	
Plumbing Products	$	566		 	$	(340	)	 	$	226		
Decorative Architectural Products	358		 	(75	)	 	283		
Total	$	924		 	$	(415	)	 	$	509		

																								
 	Gross Goodwill At December 31, 2018	 	Accumulated
Impairment
Losses	 	Net Goodwill At December 31, 2018	 	Additions (A)	 	Other (B)	 	Net Goodwill At December 31, 2019	
Plumbing Products	$	568		 	$	(340	)	 	$	228		 	$	—		 	$	(2	)	 	$	226		
Decorative Architectural Products	358		 	(75	)	 	283		 	—		 	—		 	283		
Total	$	926		 	$	(415	)	 	$	511		 	$	—		 	$	(2	)	 	$	509		

																								
 	Gross Goodwill At December 31, 2017	 	Accumulated
Impairment
Losses	 	Net Goodwill At December 31, 2017	 	Additions (A)	 	Other (B)	 	Net Goodwill At December 31, 2018	
Plumbing Products	$	574		 	$	(340	)	 	$	234		 	$	—		 	$	(6	)	 	$	228		
Decorative Architectural Products	294		 	(75	)	 	219		 	64		 	—		 	283		
Total	$	868		 	$	(415	)	 	$	453		 	$	64		 	$	(6	)	 	$	511		

(A)	Additions consist of acquisitions.	
(B)Other consists of the effect of foreign currency translation.
Other indefinite-lived intangible assets were $76 million and $86 million at December 31, 2019 and 2018, respectively, and principally included registered trademarks. 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. As a result of our 2018 acquisition, other indefinite-lived intangible assets increased by $59 million as of the acquisition date.
We completed our annual impairment testing of goodwill and other indefinite-lived intangible assets in the fourth quarters of 2019, 2018 and 2017. 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 $183 million (net of accumulated amortization of $48 million) at December 31, 2019 and $202 million (net of accumulated amortization of $26 million) at December 31, 2018 and principally included customer relationships with a weighted average amortization period of 17 years in 2019 and 16 years in 2018. Amortization expense, including discontinued operations, related to the definite-lived intangible assets was $23 million, $20 million and $4 million in 2019, 2018 and 2017, respectively. As a result of our 2018 acquisition, definite-lived intangible assets increased by $181 million, as of the acquisition date.
At December 31, 2019, amortization expense related to the definite-lived intangible assets during each of the next five years was as follows: 2020 – $24 million; 2021 – $16 million; 2022 – $12 million, 2023 – $11 million and 2024 –$11 million.

52

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

I. OTHER ASSETS

								
 	(In Millions)
At December 31	
 	2019	 	2018	
Equity method investments	$	11		 	$	11		
Private equity funds	—		 	1		
In-store displays, net	5		 	10		
Deferred tax assets (Note R)	99		 	42		
Other	24		 	26		
Total	$	139		 	$	90		

We recognized amortization expense, including discontinued operations, related to in-store displays of $12 million, $21 million and $25 million in 2019, 2018 and 2017, respectively. Cash spent for displays was $11 million, $10 million and $14 million in 2019, 2018 and 2017, respectively, and is included in other, net within investing activities on the consolidated statements of cash flows.

J. ACCRUED LIABILITIES

								
 	(In Millions)
At December 31	
 	2019	 	2018	
Salaries, wages and commissions	$	141		 	$	143		
Advertising and sales promotion	189		 	170		
Interest	36		 	40		
Warranty (Note T)	31		 	29		
Employee retirement plans	41		 	40		
Insurance reserves	37		 	31		
Property, payroll and other taxes	18		 	14		
Dividends payable	37		 	36		
Deferred revenue	40		 	39		
Product returns	25		 	22		
Operating lease liabilities	38		 	—		
Other	67		 	81		
Total	$	700		 	$	645		

53

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

K. DEBT

								
 	(In Millions)
At December 31	
 	2019	 	2018	
Notes and debentures:	 		 	 		
7.125%, due March 15, 2020	$	—		 	$	201		
3.500%, due April 1, 2021	399		 	399		
5.950%, due March 15, 2022	326		 	326		
4.450%, due April 1, 2025	500		 	500		
4.375%, due April 1, 2026	498		 	498		
3.500%, due November 15, 2027	300		 	300		
7.750%, due August 1, 2029	235		 	235		
6.500%, due August 15, 2032	200		 	200		
4.500%, due May 15, 2047	299		 	299		
Other	30		 	38		
Prepaid debt issuance costs	(14	)	 	(17	)	
 	2,773		 	2,979		
Less: Current portion	2		 	8		
Total long-term debt	$	2,771		 	$	2,971		

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 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 2019, which was recorded in interest expense.
On April 16, 2018, we repaid and retired all of our $114 million, 6.625% Notes on the scheduled repayment date.
On June 21, 2017, we issued $300 million of 3.5% Notes due November 15, 2027 and $300 million of 4.5% Notes due May 15, 2047. We received proceeds of $599 million, net of discount, for the issuance of these Notes. The Notes are senior indebtedness and are redeemable at our option at the applicable redemption price. On June 27, 2017, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire $299 million of our 7.125% Notes due March 15, 2020, $74 million of our 5.95% Notes due March 15, 2022, $62 million of our 7.75% Notes due August 1, 2029, and $100 million of our 6.5% Notes due August 15, 2032. In connection with these early retirements, we incurred a loss on debt extinguishment of $107 million, which was recorded as interest expense.    
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, 2019, we had no outstanding standby letters of credit under the Credit Agreement.

54

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

K. 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, 2019. 
At December 31, 2019, the debt maturities during each of the next five years were as follows: 2020 – $2 million; 2021– $402 million; 2022 – $329 million; 2023 – $3 million and 2024 – $3 million.
Interest paid was $157 million, $155 million and $175 million in 2019, 2018 and 2017, respectively. These amounts exclude $2 million and $104 million of debt extinguishment costs related to the early retirement of debt, which were recorded as interest expense and paid in 2019 and 2017, respectively.
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, 2019 was approximately $3.0 billion, compared with the aggregate carrying value of $2.8 billion. The aggregate estimated market value was approximately $3.0 billion, at December 31, 2018, which equaled the aggregate carrying value of short-term and long-term debt at that date.

L. 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, 2019, outstanding stock-based incentives were in the form of long-term stock awards, stock options, 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:

												
 	2019	 	2018	 	2017	
Long-term stock awards	$	20		 	$	20		 	$	21		
Stock options	4		 	3		 	3		
Restricted stock units	3		 	4		 	2		
Phantom stock awards and stock appreciation rights	4		 	(2	)	 	8		
Total	$	31		 	$	25		 	$	34		

At December 31, 2019, 13.9 million shares of our common stock were available under the 2014 Plan for the granting of long-term stock awards, stock options and restricted stock units.

55

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

L. STOCK-BASED COMPENSATION (Continued)
Long-Term Stock Awards.    Long-term stock awards are granted to our key employees and non-employee Directors and do not cause net share dilution, as we repurchase and retire at least an equal number of shares in the open market. We granted 636,030 shares of long-term stock awards during 2019.
Our long-term stock award activity was as follows, shares in millions:

												
 	2019	 	2018	 	2017	
Unvested stock award shares at January 1	2		 	3		 	4		
Weighted average grant date fair value	$	30		 	$	24		 	$	20		
Stock award shares granted	1		 	1		 	1		
Weighted average grant date fair value	$	36		 	$	41		 	$	34		
Stock award shares vested	1		 	2		 	2		
Weighted average grant date fair value	$	25		 	$	21		 	$	18		
Stock award shares forfeited	—		 	—		 	—		
Weighted average grant date fair value	$	35		 	$	31		 	$	24		
Unvested stock award shares at December 31	2		 	2		 	3		
Weighted average grant date fair value	$	34		 	$	30		 	$	24		

At December 31, 2019, 2018 and 2017, there was $41 million, $46 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 three years at December 31, 2019, 2018 and 2017.
The total market value (at the vesting date) of stock award shares which vested during 2019, 2018 and 2017 was $31 million, $56 million and $45 million, respectively.
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. These options generally become exercisable (vest ratably) over five years beginning on the first anniversary from the date of grant and expire no later than 10 years after the grant date.
We granted 561,280 shares of stock options during 2019 with a grant date weighted-average exercise price of approximately $36 per share. During 2019, 108,086 stock option shares were forfeited (including options that expired unexercised).

56

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

L. STOCK-BASED COMPENSATION (Continued)

Our stock option activity was as follows, shares in millions:

												
 	2019	 	2018	 	2017	
Option shares outstanding, January 1	4		 	5		 	7		
Weighted average exercise price	$	21		 	$	16		 	$	15		
Option shares granted	1		 	—		 	—		
Weighted average exercise price	$	36		 	$	42		 	$	34		
Option shares exercised	2		 	1		 	2		
Aggregate intrinsic value on date of exercise (A)	$	33	 million	 	$	55	 million	 	$	47	 million	
Weighted average exercise price	$	13		 	$	11		 	$	15		
Option shares forfeited	—		 	—		 	—		
Weighted average exercise price	$	34		 	$	31		 	$	—		
Option shares outstanding, December 31	3		 	4		 	5		
Weighted average exercise price	$	27		 	$	21		 	$	16		
Weighted average remaining option term (in years)	6	 	5	 	4	
Option shares vested and expected to vest, December 31	3		 	4		 	5		
Weighted average exercise price	$	27		 	$	21		 	$	16		
Aggregate intrinsic value (A)	$	63	 million	 	$	36	 million	 	$	147	 million	
Weighted average remaining option term (in years)	6	 	5	 	4	
Option shares exercisable (vested), December 31	2		 	3		 	4		
Weighted average exercise price	$	21		 	$	16		 	$	13		
Aggregate intrinsic value (A)	$	47	 million	 	$	34	 million	 	$	123	 million	
Weighted average remaining option term (in years)	4	 	4	 	3	

(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, 2019, 2018 and 2017, there was $9 million, $8 million and $7 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 three years at December 31, 2019, 2018 and 2017.
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:

												
 	2019	 	2018	 	2017	
Weighted average grant date fair value	$	8.81		 	$	12.34		 	$	9.68		
Risk-free interest rate	2.57	%	 	2.72	%	 	2.16	%	
Dividend yield	1.35	%	 	1.02	%	 	1.19	%	
Volatility factor	25.00	%	 	29.00	%	 	30.00	%	
Expected option life	6 years		 	6 years		 	6 years		

57

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

L. STOCK-BASED COMPENSATION (Concluded)
The following table summarizes information for stock option shares outstanding and exercisable at December 31, 2019, shares in millions:

												
 	Option Shares Outstanding	 	Option Shares Exercisable	
 	Range of
Prices	 	Number of
Shares	 	Weighted
Average
Remaining
Option Term	 	Weighted
Average
Exercise
Price	 	Number of
Shares	 	Weighted
Average
Exercise
Price	
$	10 - 12	 	—	 	1 year	 	$11	 	—	 	$11	
$	18 - 26	 	2	 	4 years	 	$21	 	2	 	$20	
$	30 - 42	 	1	 	8 years	 	$37	 	—	 	$36	
$	10 - 42	 	3	 	6 years	 	$27	 	2	 	$21	

Restricted Stock Units. Under our Long Term Incentive Program, we grant restricted stock units to certain senior executives. These 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 over a three-year period that have been established by our Organization and Compensation Committee of the Board of Directors ("Compensation Committee") for the performance period and the recipient's continued employment through the share award date. Restricted stock units are granted at a target number; based on our performance, the number of restricted stock units that vest can be adjusted downward to zero and upward to a maximum of 200% of the target number. During 2019, we granted 126,680 restricted stock units with a grant date fair value of approximately $39 per share, and 15,600 restricted stock units were forfeited. At December 31, 2019, there were 147,199 shares vested, but unissued. During 2018, we granted 113,260 restricted stock units with a grant date fair value of approximately $42 per share, and 11,600 restricted stock units were forfeited. During 2017, we granted 124,780 restricted stock units with a grant date fair value of approximately $34 per share.

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 2019, income of $1 million in 2018, and expense of $6 million in 2017 related to phantom stock awards. In 2019, 2018 and 2017, we granted 79,500, 98,140, and 104,580 shares, respectively, of phantom stock awards with an aggregate fair value of $3 million in 2019 and $4 million in both 2018 and 2017, and paid cash of $3 million in 2019, $6 million in 2018, and $5 million in 2017 to settle phantom stock awards.
We recognized income of $1 million in 2018 and expense of $2 million in 2017 related to SARs. During 2019, 2018 and 2017, we did not grant any SARs. We paid cash of $2 million, $5 million, and $4 million in 2019, 2018, and 2017, respectively, to settle SARs. At December 31, 2019, there were no outstanding SARs.
Information related to phantom stock awards and SARs was as follows, in millions:

																
 	Phantom Stock Awards	 	Stock Appreciation Rights	
 	At December 31,	 	At December 31,	
 	2019	 	2018	 	2019	 	2018	
Accrued compensation cost liability	$	5		 	$	4		 	$	—		 	$	2		
Unrecognized compensation cost	$	3		 	$	2		 	$	—		 	$	—		
Equivalent common shares	—		 	—		 	—		 	—		

58

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

M. 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, 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:

												
 	2019	 	2018	 	2017	
Defined-contribution plans	$	40		 	$	37		 	$	43		
Defined-benefit pension plans	24		 	17		 	29		
 	$	64		 	$	54		 	$	72		

In addition to the pre-tax expense related to our defined-benefit pension plans, in 2017 we recognized $58 million of actuarial losses, net of tax, that were previously included within accumulated other comprehensive loss due to the disposition of a pension plan in connection with the divestiture of Moores, which was recorded within other income (expense), net.
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:

																
 	2019	 	2018	
 	Qualified	 	Non-Qualified	 	Qualified	 	Non-Qualified	
Changes in projected benefit obligation:	 		 	 		 	 		 	 		
Projected benefit obligation at January 1	$	896		 	$	155		 	$	961		 	$	170		
Service cost	3		 	—		 	3		 	—		
Interest cost	33		 	6		 	30		 	6		
Actuarial loss (gain), net	149		 	13		 	(48	)	 	(9	)	
Foreign currency exchange	(3	)	 	—		 	(7	)	 	—		
Benefit payments	(44	)	 	(13	)	 	(43	)	 	(12	)	
Projected benefit obligation at December 31	$	1,034		 	$	161		 	$	896		 	$	155		
Changes in fair value of plan assets:	 		 	 		 	 		 	 		
Fair value of plan assets at January 1	$	670		 	$	—		 	$	695		 	$	—		
Actual return on plan assets	105		 	—		 	(25	)	 	—		
Foreign currency exchange	(1	)	 	—		 	(4	)	 	—		
Company contributions	56		 	13		 	52		 	12		
Expenses, other	(6	)	 	—		 	(5	)	 	—		
Benefit payments	(44	)	 	(13	)	 	(43	)	 	(12	)	
Fair value of plan assets at December 31	$	780		 	$	—		 	$	670		 	$	—		
Funded status at December 31	$	(254	)	 	$	(161	)	 	$	(226	)	 	$	(155	)	

59

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

M. EMPLOYEE RETIREMENT PLANS (Continued)
Amounts in our consolidated balance sheets were as follows, in millions:

																
 	At December 31, 2019	 	At December 31, 2018	
 	Qualified	 	Non-Qualified	 	Qualified	 	Non-Qualified	
Other assets	$	1		 	$	—		 	$	1		 	$	—		
Accrued liabilities	(1	)	 	(13	)	 	(1	)	 	(13	)	
Other liabilities	(254	)	 	(148	)	 	(226	)	 	(142	)	
Total net liability	$	(254	)	 	$	(161	)	 	$	(226	)	 	$	(155	)	

Unrealized loss included in accumulated other comprehensive loss before income taxes was as follows, in millions:

																
 	At December 31, 2019	 	At December 31, 2018	
 	Qualified	 	Non-Qualified	 	Qualified	 	Non-Qualified	
Net loss	$	520		 	$	57		 	$	448		 	$	47		
Net prior service cost	4		 	—		 	3		 	—		
Total	$	524		 	$	57		 	$	451		 	$	47		

Information for defined-benefit pension plans with an accumulated benefit obligation in excess of plan assets was as follows, in millions:

																
 	At December 31	
 	2019	 	2018	
 	Qualified	 	Non-Qualified	 	Qualified	 	Non-Qualified	
Projected benefit obligation	$	1,019		 	$	161		 	$	882		 	$	155		
Accumulated benefit obligation	1,019		 	161		 	882		 	155		
Fair value of plan assets	763		 	—		 	655		 	—		

The projected benefit obligation was in excess of plan assets for all of our qualified defined-benefit pension plans at December 31, 2019 and 2018 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:

																								
 	2019	 	2018	 	2017	
 	Qualified	 	Non-Qualified	 	Qualified	 	Non-Qualified	 	Qualified	 	Non-Qualified	
Service cost	$	3		 	$	—		 	$	3		 	$	—		 	$	3		 	$	—		
Interest cost	39		 	6		 	36		 	6		 	44		 	6		
Expected return on plan assets	(44	)	 	—		 	(48	)	 	—		 	(46	)	 	—		
Recognized net loss	18		 	2		 	17		 	3		 	19		 	3		
Net periodic pension cost	$	16		 	$	8		 	$	8		 	$	9		 	$	20		 	$	9		

We expect to recognize $26 million of pre-tax net loss from accumulated other comprehensive loss into net periodic pension cost in 2020 related to our defined-benefit pension plans. 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.

60

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

M. EMPLOYEE RETIREMENT PLANS (Continued)
Plan Assets.    Our qualified defined-benefit pension plan weighted average asset allocation, which is based upon fair value, was as follows:

						
 	2019	 	2018	
Equity securities	41	%	 	34	%	
Debt securities	54	%	 	49	%	
Other	5	%	 	17	%	
Total	100	%	 	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, 2019 compared to December 31, 2018.
        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. Certain investments are valued based on NAV, which approximates fair value. Such basis is determined by referencing the respective fund's underlying assets. As there are no remaining investments valued at NAV, there are no unfunded commitments or other restrictions associated with these investments.
        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.
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, 2019 and 2018, as well as those valued at NAV using the practical expedient, which approximates fair value, in millions.

61

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

M. EMPLOYEE RETIREMENT PLANS (Continued)

																				
 	At December 31, 2019	
 	Level 1	 	Level 2	 	Level 3	 	Valued at NAV	 	Total	
Plan Assets	 	 	 	 	 	 	 	 	 	
Common and Preferred Stocks:	 	 	 	 	 	 	 	 	 	
United States	$	85		 	$	—		 	$	—		 	$	82		 	$	167		
International	47		 	—		 	—		 	110		 	157		
Private Equity and Hedge Funds:	 	 	 	 	 	 	 	 	 	
United States	—		 	—		 	2		 	—		 	2		
International	—		 	—		 	17		 	—		 	17		
Corporate Debt Securities:	 	 	 	 	 	 	 	 	 	
United States	74		 	—		 	—		 	124		 	198		
International	—		 	1		 	—		 	—		 	1		
Government and Other Debt Securities:	 	 	 	 	 	 	 	 	 	
United States	—		 	3		 	—		 	148		 	151		
International	29		 	38		 	—		 	—		 	67		
Common Collective Trust Fund – United States	—		 	4		 	—		 	—		 	4		
Buy-in Annuity - International	—		 	12		 	—		 	—		 	12		
Short-Term and Other Investments:	 	 	 	 	 	 	 	 	 	
United States	2		 	—		 	—		 	—		 	2		
International	2		 	—		 	—		 	—		 	2		
Total Plan Assets	$	239		 	$	58		 	$	19		 	$	464		 	$	780		

																				
 	At December 31, 2018	
 	Level 1	 	Level 2	 	Level 3	 	Valued at NAV	 	Total	
Plan Assets	 	 	 	 	 	 	 	 	 	
Common and Preferred Stocks:	 	 	 	 	 	 	 	 	 	
United States	$	81		 	$	—		 	$	—		 	$	21		 	$	102		
International	37		 	—		 	—		 	89		 	126		
Private Equity and Hedge Funds:	 	 	 	 	 	 	 	 	 	
United States	—		 	—		 	32		 	—		 	32		
International	—		 	—		 	27		 	34		 	61		
Corporate Debt Securities:	 	 	 	 	 	 	 	 	 	
United States	34		 	—		 	—		 	102		 	136		
International	—		 	1		 	—		 	—		 	1		
Government and Other Debt Securities:	 	 	 	 	 	 	 	 	 	
United States	—		 	2		 	—		 	130		 	132		
International	29		 	33		 	—		 	—		 	62		
Common Collective Trust Fund – United States	—		 	4		 	—		 	—		 	4		
Buy-in Annuity - International	—		 	11		 	—		 	—		 	11		
Short-Term and Other Investments:	 	 	 	 	 	 	 	 	 		
United States	1		 	—		 	—		 	—		 	1		
International	2		 	—		 	—		 	—		 	2		
Total Plan Assets	$	184		 	$	51		 	$	59		 	$	376		 	$	670		

62

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

M. EMPLOYEE RETIREMENT PLANS (Continued)
Changes in the fair value of the qualified defined-benefit pension plan Level 3 assets, were as follows, in millions:

								
 	2019	 	2018	
Fair Value, January 1	$	59		 	$	60		
Purchases	4		 	6		
Sales	(41	)	 	(12	)	
Unrealized (losses) gains	(3	)	 	5		
Fair Value, December 31	$	19		 	$	59		

Assumptions.    Weighted average major assumptions used in accounting for our defined-benefit pension plans were as follows:

									
 	2019	 	2018	 	2017	
Discount rate for obligations	2.50	%	 	3.80	%	 	3.30	%	
Expected return on plan assets	3.00	%	 	7.00	%	 	7.25	%	
Rate of compensation increase	—	%	 	—	%	 	—	%	
Discount rate for net periodic pension cost	3.80	%	 	3.30	%	 	3.50	%	

The discount rate for obligations for 2019, 2018 and 2017 is based primarily upon the expected duration of each defined-benefit pension plan's liabilities matched to the December 31, 2019, 2018 and 2017 Willis Towers Watson Rate Link Curve. 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. At December 31, 2017, such rates for our defined‑benefit pension plans ranged from 1.5 percent to 3.6 percent, with the most significant portion of the liabilities having a discount rate for obligations of 3.4 percent or higher. The decrease in the weighted average discount rate from 2019 to 2018 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. The increase in the weighted average discount rate from 2017 to 2018 is principally the result of higher long-term interest rates in the bond markets.
For 2019, we determined the expected long-term rate of return on plan assets of 3.00 percent for our domestic qualified defined-benefit pension plans based upon an analysis of expected and historical rates of return of various asset classes utilizing the current and long-term target asset allocation of the plan assets and the decision to terminate these plans in 2021. For 2019 our weighted average projected long-term rate of return on plan assets for the foreign qualified defined-benefit pension plans was 3.9 percent. For 2018 and 2017, our projected long-term rate of return on plan assets were 7.00 percent and 7.25 percent, respectively. The projected asset return at December 31, 2019, 2018 and 2017 considered near term returns, including current market conditions as well as that pension assets are long-term in nature. The actual annual rate of return on our pension plan assets was positive 17.7 percent, negative 4.9 percent and positive 13.9 percent in 2019, 2018 and 2017, respectively. For the 10-year period ended December 31, 2019, the actual annual rate of return on our pension plan assets was 7.4 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 2019, we made substantial progress toward achieving our targeted asset allocation: 30 percent equities, 65 percent fixed-income, and 5 percent alternative investments (such as private equity, commodities and hedge funds).

63

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

M. 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 equity portfolios are invested in individual securities or funds that are expected to mirror broad market returns for equity securities. The fixed-income portfolio is invested in corporate bonds, bond index funds and U.S. Treasury securities. It is expected that the alternative investments would have a higher rate of return than the targeted overall long-term return of 3.00 percent. However, these investments are subject to greater volatility, due to their nature, than a portfolio of equities and fixed-income investments, and would be less liquid than financial instruments that trade on public markets. In anticipation of our decision to terminate the domestic qualified defined-benefit pension plans, we sold the majority of our alternative investments. Plan assets associated with private equity and hedge funds were $19 million at December 31, 2019, compared to $93 million at December 31, 2018.
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 plan assets is 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 and $9 million at December 31, 2019 and 2018, respectively.
Cash Flows.    At December 31, 2019, we expect to contribute approximately $50 million to our domestic qualified defined-benefit pension plans in 2020, which will exceed ERISA requirements. We also expect to contribute approximately $1 million and $13 million in 2020 to our foreign and non-qualified (domestic) defined-benefit pension plans, respectively.
At December 31, 2019, 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:

								
 	Qualified
Plans	 	Non-Qualified
Plans	
2020	$	49		 	$	13		
2021	834		 	12		
2022	5		 	12		
2023	5		 	12		
2024	6		 	12		
2025 - 2029	32		 	53		

64

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

N. 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, replacing the previous authorization established by our Board of Directors in 2017. In November 2019, we entered into an accelerated stock repurchase transaction whereby we agreed to repurchase a total of $400 million of our common stock with an initial delivery of 7.3 million shares. This transaction will be completed in February 2020, at which time we anticipate we will receive, at no additional cost, 1.2 million additional shares of our common stock resulting from expected changes in the volume weighted average stock price of our common stock over the term of the transaction.
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. At December 31, 2019, we had $1.5 billion remaining under the 2019 authorization. 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. During 2017, we repurchased and retired 9.2 million shares of our common stock (including 0.9 million shares to offset the dilutive impact of long-term stock awards granted in 2017) for cash aggregating $331 million.
On the basis of amounts paid (declared), cash dividends per common share were $0.495 ($0.510) in 2019, $0.435 ($0.450) in 2018 and $0.405 ($0.410) in 2017.
Accumulated Other Comprehensive Loss.    The components of accumulated other comprehensive loss attributable to Masco Corporation were as follows, in millions:

								
 	At December 31	
 	2019	 	2018	
Cumulative translation adjustments, net	$	273		 	$	266		
Unrealized loss on interest rate swaps, net	(8	)	 	(10	)	
Unrecognized net loss and prior service cost, net	(444	)	 	(383	)	
Accumulated other comprehensive loss	$	(179	)	 	$	(127	)	

The cumulative translation adjustment, net, is reported net of income tax benefit of $1 million and $2 million at December 31, 2019 and 2018, respectively. The unrealized loss on interest rate swaps, net, is reported net of income tax expense of $4 million at both December 31, 2019 and 2018. The unrecognized net loss and prior service cost, net, is reported net of income tax benefit of $117 million and $98 million at December 31, 2019 and 2018, respectively.

65

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

O. 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	 	2019	 	2018	 	2017	 	Statement of Operations Line Item	
Amortization of defined-benefit pension and other postretirement benefits:	 	 	 	 	 	 	 	 	
Actuarial losses, net	 	$	20		 	$	20		 	$	86		 	Other income (expense), net	
Tax (benefit)	 	(5	)	 	(5	)	 	(13	)	 	 	
Net of tax (A)	 	$	15		 	$	15		 	$	73		 	 	
 	 	 	 	 	 	 	 	 	
Interest rate swaps	 	$	2		 	$	2		 	$	4		 	Interest expense	
Tax (benefit)	 	—		 	—		 	(1	)	 	 	
Net of tax	 	$	2		 	$	2		 	$	3		 	 	

		
(A)	The 2017 amortization of defined-benefit pension and other postretirement benefits includes $58 million, net of tax, due to the disposition of a pension plan in connection with the divestiture of Moores.	
In addition to the above amounts, 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 deficit.

P. SEGMENT INFORMATION
Our reportable segments are as follows:
Plumbing Products –  principally includes faucets, plumbing system components and valves, showerheads and handheld showers, tubs and shower bases and enclosures, toilets, spas, exercise pools and water handling systems.
Decorative Architectural Products –  principally includes paints and other coating products, lighting fixtures 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, mass merchandisers, hardware stores, homebuilders, distributors and direct to the customer.
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 B, our previously reported Windows and Other Specialty Products as well as Cabinetry Products segments have been classified as discontinued operations, which required retrospective application to the balance sheets and statements of operations, as well as, additional disclosures of certain cash flow financial information for all periods presented. Amounts for shared general and administrative operating expenses that were allocated to these businesses in prior periods have been re-allocated to general corporate expense.

66

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

P. SEGMENT INFORMATION (Continued)
Divestitures not included in discontinued operations consists of our previously owned Arrow and Moores businesses which were disposed of in 2017, but were not accounted for as discontinued operations.
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)	
 	2019	 	2018	 	2017	 	2019	 	2018	 	2017	 	2019	 	2018	 	2017	
Our operations by segment were:	 	 	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 		
Plumbing Products	$	3,984		 	$	3,998		 	$	3,732		 	$	708		 	$	715		 	$	702		 	$	2,375		 	$	2,253		 	$	2,298		
Decorative Architectural Products	2,723		 	2,656		 	2,206		 	480		 	456		 	438		 	1,526		 	1,534		 	965		
Total	$	6,707		 	$	6,654		 	$	5,938		 	$	1,188		 	$	1,171		 	$	1,140		 	$	3,901		 	$	3,787		 	$	3,263		
Our operations by geographic area were:	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 		
North America	$	5,328		 	$	5,208		 	$	4,568		 	$	987		 	$	954		 	$	924		 	$	2,785		 	$	2,729		 	$	2,131		
International, principally Europe	1,379		 	1,446		 	1,370		 	201		 	217		 	216		 	1,116		 	1,058		 	1,132		
Total, as above	6,707		 	6,654		 	5,938		 	1,188		 	1,171		 	1,140		 	3,901		 	3,787		 	3,263		
Divestitures not included in discontinued operations	—		 	—		 	76		 	—		 	—		 	(6	)	 	 	 	 	 	 	
Net sales, as reported	$	6,707		 	$	6,654		 	$	6,014		 	 	 	 	 	 	 	 	 	 	 	 	
General corporate expense, net (5)	 	 	 	 	 	 	(100	)	 	(94	)	 	(105	)	 	 		 	 		 	 		
Operating profit, as reported	 	 	 	 	 	 	1,088		 	1,077		 	1,029		 	 		 	 		 	 		
Other income (expense), net	 	 	 	 	 	 	(174	)	 	(170	)	 	(311	)	 	 		 	 		 	 		
Income from continuing operations before income taxes	 	 	 	 	 	 	$	914		 	$	907		 	$	718		 	 		 	 		 	 		
Corporate assets	 	 	 	 	 	 	 		 	 		 	 		 	598		 	411		 	1,069		
Assets held for sale	 	 	 	 	 	 	 	 	 	 	 	 	528		 	1,195		 	1,202		
Total assets	 	 	 	 	 	 	 		 	 		 	 		 	$	5,027		 	$	5,393		 	$	5,534		

67

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

P. SEGMENT INFORMATION (Concluded)

																								
 	Property Additions (7)	 	Depreciation and
Amortization	
 	2019	 	2018	 	2017	 	2019	 	2018	 	2017	
Our operations by segment were:	 	 	 	 	 	 	 	 	 	 	 	
Plumbing Products	$	108		 	$	120		 	$	115		 	$	80		 	$	77		 	$	63		
Decorative Architectural Products	18		 	54		 	19		 	41		 	35		 	16		
 	126		 	174		 	134		 	121		 	112		 	79		
Unallocated amounts, principally related to corporate assets	2		 	7		 	12		 	9		 	8		 	13		
Divestitures not included in discontinued operations	—		 	—		 	1		 	—		 	—		 	1		
Discontinued operations	34		 	38		 	26		 	29		 	36		 	34		
Total	$	162		 	$	219		 	$	173		 	$	159		 	$	156		 	$	127		

(1)	Included in net sales were export sales from the U.S. of $244 million, $237 million and $207 million in 2019, 2018 and 2017, respectively.	
		
(2)	Excluded from net sales were intra-company sales between segments of less than one percent in 2019, 2018 and 2017.	
		
(3)	Included in net sales were sales to one customer of $2,481 million, $2,457 million and $2,341 million in 2019, 2018 and 2017, respectively. Such net sales were included in each of our segments.	
		
(4)	Net sales from our operations in the U.S. were $5,127 million, $5,034 million and $4,352 million in 2019, 2018 and 2017, respectively.	
		
(5)	General corporate expense, net included those expenses not specifically attributable to our segments.	
		
(6)	Long-lived assets of our operations in the U.S. and Europe were $1,198 million and $470 million, $1,119 million and $446 million, and $777 million and $431 million at December 31, 2019, 2018 and 2017, respectively.	
		
(7)	Property additions exclude amounts paid for long-lived assets as part of acquisitions. Refer to Note C for further information.	

Q. OTHER INCOME (EXPENSE), NET
Other, net, which is included in other income (expense), net, was as follows, in millions:

												
 	2019	 	2018	 	2017	
Loss on sales of businesses, net (A)	$	—		 	$	—		 	$	(13	)	
Income from cash and cash investments and short-term bank deposits	3		 	5		 	4		
Equity investment income, net	1		 	3		 	1		
Realized gains from private equity funds	—		 	1		 	3		
Impairment of private equity funds	—		 	—		 	(2	)	
Foreign currency transaction gains (losses)	2		 	(8	)	 	—		
Net periodic pension and post-retirement benefit cost	(21	)	 	(14	)	 	(26	)	
Other items, net	—		 	(1	)	 	1		
Total other, net	$	(15	)	 	$	(14	)	 	$	(32	)	

(A) Included in loss on sales of businesses, net for 2017 is a loss of $64 million related to the divestiture of Moores and a gain of$51 million related to the divestiture of Arrow.

68

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

R. INCOME TAXES

												
 	 	 	 	 	(In Millions)		
 	2019	 	2018	 	2017	
Income from continuing operations before income taxes:	 	 	 	 	 	
U.S. 	$	684		 	$	670		 	$	562		
Foreign	230		 	237		 	156		
 	$	914		 	$	907		 	$	718		
Income tax expense:	 	 	 	 	 	
Currently payable:	 	 	 	 	 	
U.S. Federal	$	155		 	$	115		 	$	142		
State and local	46		 	29		 	22		
Foreign	70		 	74		 	67		
Deferred:	 	 	 	 	 	
U.S. Federal	(23	)	 	12		 	12		
State and local	(15	)	 	—		 	—		
Foreign	(3	)	 	(9	)	 	2		
 	$	230		 	$	221		 	$	245		
Deferred tax assets at December 31:	 	 	 	 	 	
Receivables	$	7		 	$	3		 	 	
Inventories	15		 	16		 	 	
Other assets, including stock-based compensation	15		 	23		 	 	
Accrued liabilities	48		 	58		 	 	
Long-term liabilities	176		 	149		 	 	
Net operating loss carryforward	63		 	51		 	 	
Tax credit carryforward	9		 	9		 	 	
 	333		 	309		 	 	
Valuation allowance	(38	)	 	(43	)	 	 	
 	295		 	266		 	 	
Deferred tax liabilities at December 31:	 	 	 	 	 	
Property and equipment	73		 	87		 	 	
Operating lease right-of-use assets	42		 	—		 	 	
Intangibles	71		 	139		 	 	
Investment in foreign subsidiaries	10		 	9		 	 	
Other	22		 	14		 	 	
 	218		 	249		 	 	
Net deferred tax asset at December 31	$	77		 	$	17		 	 	

The net deferred tax asset consisted of net deferred tax assets (included in other assets) of $99 million and $42 million, and net deferred tax liabilities (included in other liabilities) of $22 million and $25 million, at December 31, 2019 and 2018, respectively.
We continue to maintain a valuation allowance on certain state and foreign deferred tax assets as of December 31, 2019. 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.

69

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

R. INCOME TAXES (Continued)
The current portion of the state and local income tax includes an $8 million, $8 million and $5 million tax benefit from the reversal of an accrual for uncertain tax positions resulting primarily from the expiration of applicable statutes of limitations in 2019, 2018 and 2017, respectively. The deferred portion of the state and local taxes includes a $1 million tax benefit in 2019, 2018 and 2017, resulting from changes in valuation allowances against state and local deferred tax assets. The deferred portion of the foreign taxes includes a $4 million and $2 million tax benefit in 2019 and 2018, respectively, from a change in the valuation allowances against foreign deferred tax assets.
Due to the enactment of the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act") on December 22, 2017, we recorded a $20 million tax benefit from the elimination of a deferred tax liability previously recorded on undistributed foreign earnings as a result of the change from a worldwide to a territorial system of taxation. This tax benefit was offset by a $3 million tax charge resulting from the re-measurement of our remaining net deferred tax assets due to a reduction in the U.S. Federal corporate tax rate from 35 percent to 21 percent.
In addition, the 2017 Tax Act requires a mandatory deemed repatriation of undistributed foreign earnings resulting in a toll charge of 15.5 percent on earnings related to cash and liquid assets and 8 percent on earnings for non-liquid assets. Due to the ability to offset positive foreign earnings with existing foreign deficits, we did not pay any toll charge related to our undistributed foreign earnings.
The $64 million loss from the divestiture of Moores that was recorded in the fourth quarter of 2017 provided no tax benefit.
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. As a result of the enactment of the 2017 Tax Act, our deferred tax balance on investment in foreign subsidiaries consists primarily of foreign withholding taxes.
Of the $72 million and $60 million deferred tax assets related to the net operating loss and tax credit carryforwards at December 31, 2019 and 2018, respectively, $44 million and $32 million, respectively, will expire between 2021 and 2036 and $28 million has 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:

									
 	2019	 	2018	 	2017	
U.S. Federal statutory tax rate	21	 %	 	21	 %	 	35	 %	
State and local taxes, net of U.S. Federal tax benefit	3		 	3		 	2		
Higher (lower) taxes on foreign earnings	2		 	2		 	(1	)	
U.S. and foreign taxes on distributed and undistributed foreign earnings	1		 	1		 	1		
Domestic production deduction	—		 	—		 	(1	)	
Stock-based compensation	(1	)	 	(2	)	 	(3	)	
Business divestitures with no tax impact	—		 	—		 	5		
Change in U.S. Federal tax law	—		 	—		 	(3	)	
Other, net	(1	)	 	(1	)	 	(1	)	
Effective tax rate	25	 %	 	24	 %	 	34	 %	

Income taxes paid were $384 million, $231 million and $258 million in 2019, 2018 and 2017, respectively.

70

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

R. 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:

												
 	Uncertain
Tax Positions	 	Interest and
Penalties	 	Total	
Balance at January 1, 2018	$	54		 	$	8		 	$	62		
Current year tax positions:	 	 	 	 	 	
Additions	13		 	—		 	13		
Reductions	(1	)	 	—		 	(1	)	
Prior year tax positions:	 	 	 	 	 	
Additions	1		 	—		 	1		
Reductions	(1	)	 	—		 	(1	)	
Lapse of applicable statute of limitations	(8	)	 	—		 	(8	)	
Interest and penalties recognized in income tax expense	—		 	1		 	1		
Balance at December 31, 2018	$	58		 	$	9		 	$	67		
Current year tax positions:	 	 	 	 	 	
Additions	14		 	—		 	14		
Reductions	(1	)	 	—		 	(1	)	
Prior year tax positions:	 	 	 	 	 	
Additions	1		 	—		 	1		
Lapse of applicable statute of limitations	(9	)	 	—		 	(9	)	
Interest and penalties recognized in income tax expense	—		 	1		 	1		
Balance at December 31, 2019	$	63		 	$	10		 	$	73		

If recognized, $50 million and $46 million of the liability for uncertain tax positions at December 31, 2019 and 2018, respectively, net of any U.S. Federal tax benefit, would impact our effective tax rate.
Of the $73 million and $67 million total liability for uncertain tax positions (including related interest and penalties) at December 31, 2019 and 2018, respectively, $68 million and $64 million are recorded in other liabilities, respectively, and $5 million and $3 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 2018. 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 limitations 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.

71

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

S. 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:

												
 	2019	 	2018	 	2017	
Numerator (basic and diluted):	 	 	 	 	 	
Income from continuing operations	$	639		 	$	636		 	$	426		
Less: Allocation to unvested restricted stock awards	4		 	6		 	4		
Income from continuing operations attributable to common shareholders          	635		 	630		 	422		
Income from discontinued operations, net	296		 	98		 	107		
Less: Allocation to unvested restricted stock awards	2		 	1		 	1		
Income from discontinued operations, net attributable to common shareholders	294		 	97		 	106		
Net income attributable to common shareholders	$	929		 	$	727		 	$	528		
 	 	 	 	 	 	
Denominator:	 	 	 	 	 	
Basic common shares (based upon weighted average)	287		 	305		 	314		
Add: Stock option dilution	1		 	2		 	4		
Diluted common shares	288		 	307		 	318		

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. We have 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, 2019, 2018 and 2017, we allocated dividends and undistributed earnings to the participating securities.
Additionally, 854,000, 710,000 and 354,000 common shares for 2019, 2018 and 2017, respectively, related to stock options and 20,000 common shares for 2018, related to 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 (2 million common shares at both December 31, 2019 and 2018); shares outstanding for legal requirements included all common shares that have voting rights (including unvested stock awards).

72

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

T. 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 and that the likelihood that the outcome of these 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, 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:

								
 	2019	 	2018	
Balance at January 1	$	81		 	$	78		
Accruals for warranties issued during the year	34		 	34		
Accruals related to pre-existing warranties	1		 	(2	)	
Settlements made (in cash or kind) during the year	(31	)	 	(29	)	
Other, net (including currency translation)	(1	)	 	—		
Balance at December 31	$	84		 	$	81		

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.

73

MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)

U. 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	
2019	 	 	 	 		 	 		 	 		 	 		
Net sales	 	$	6,707		 	$	1,639		 	$	1,716		 	$	1,839		 	$	1,513		
Gross profit	 	$	2,371		 	$	565		 	$	611		 	$	673		 	$	522		
Income from continuing operations	 	$	639		 	$	158		 	$	163		 	$	211		 	$	107		
Net income (1)	 	$	935		 	$	453		 	$	126		 	$	240		 	$	116		
Income per common share:	 	 	 	 	 	 	 	 	 	 	
Basic:	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations          	 	$	2.21		 	$	0.56		 	$	0.57		 	$	0.73		 	$	0.36		
Net income	 	$	3.24		 	$	1.60		 	$	0.44		 	$	0.82		 	$	0.39		
Diluted:	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations          	 	$	2.20		 	$	0.56		 	$	0.56		 	$	0.72		 	$	0.36		
Net income	 	$	3.22		 	$	1.59		 	$	0.44		 	$	0.82		 	$	0.39		
2018	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	6,654		 	$	1,635		 	$	1,665		 	$	1,838		 	$	1,516		
Gross profit	 	$	2,327		 	$	568		 	$	570		 	$	648		 	$	541		
Income from continuing operations	 	$	636		 	$	172		 	$	150		 	$	178		 	$	136		
Net income	 	$	734		 	$	194		 	$	180		 	$	211		 	$	149		
Income per common share:	 	 	 	 	 	 	 	 	 	 	
Basic:	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations          	 	$	2.06		 	$	0.57		 	$	0.49		 	$	0.58		 	$	0.43		
Net income	 	$	2.38		 	$	0.65		 	$	0.59		 	$	0.69		 	$	0.48		
Diluted:	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations          	 	$	2.05		 	$	0.57		 	$	0.49		 	$	0.57		 	$	0.43		
Net income	 	$	2.37		 	$	0.64		 	$	0.58		 	$	0.68		 	$	0.47		

		
(1)	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, 2019 and 2018 may not total to the income per common share amounts for the years ended December 31, 2019 and 2018 due to the allocation of income to participating securities.

74

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, 2019, 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, 2019, 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.

75

PART III
Item 10. Directors, Executive Officers and Corporate Governance.
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 Business Ethics for directors and executive officers, if any, will be posted on our website.
Other information required by this Item will be contained in our definitive Proxy Statement for the 2020 Annual Meeting of Stockholders, to be filed before April 29, 2020, 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 2020 Annual Meeting of Stockholders, to be filed before April 29, 2020 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, 2019 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	3,005,824		 	$	26.84		 	13,913,842		
The remaining information required by this Item will be contained in our definitive Proxy Statement for our 2020 Annual Meeting of Stockholders, to be filed before April 29, 2020, 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 2020 Annual Meeting of Stockholders, to be filed before April 29, 2020, 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 2020 Annual Meeting of Stockholders, to be filed before April 29, 2020, and such information is incorporated herein by reference.

76

PART IV
Item 15. Exhibits and Financial Statement Schedules.
a.    Listing of Documents.

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

		
Consolidated Balance Sheets	34	
Consolidated Statements of Operations	35	
Consolidated Statements of Comprehensive Income (Loss)	36	
Consolidated Statements of Cash Flows	37	
Consolidated Statements of Shareholders' Equity	38	
Notes to Consolidated Financial Statements	39	

(2)	Financial Statement Schedule.	
a. Our Financial Statement Schedule appended hereto, as required for the years ended December 31, 2019, 2018 and 2017, consists of the following:

		
                II.  Valuation and Qualifying Accounts	83	

(3)	Exhibits.	

													
Exhibit
No.	 	 	 	 	 	Incorporated By Reference	 	Filed
Herewith	
	 	Exhibit Description	 	Form	 	Exhibit	 	Filing Date	 		
2.a	 	Stock Purchase Agreement, dated September 29, 2019, by and between Masco Corporation and MIWD Holding Company LLC.	 	8-K	 	2.1	 	10/03/2019	 	 	
2.b	 	Securities Purchase Agreement, dated November 14, 2019, by and between Masco Corporation and ACP Products, Inc.	 	8-K	 	2.1	 	11/18/2019	 	 	
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	 	Restated Certificate of Incorporation of Masco Corporation.	 	2015 10-K	 	3.i	 	02/12/2016	 	 	
3.b	 	Bylaws of Masco Corporation, as Amended and Restated May 8, 2012.	 	2016 10-K	 	3.b	 	02/09/2017	 	 	
4.a	 	Indenture dated as of December 1, 1982 between Masco Corporation and The Bank of New York Mellon Trust Company, N.A., as successor trustee under agreement originally with Morgan Guaranty Trust Company of New York, as Trustee, and Supplemental Indenture thereto dated as of July 26, 1994; and Directors' resolutions establishing Masco Corporation's:	 	2016 10-K	 	4.a	 	02/09/2017	 	 	
4.a.i	 	 	 	7-3/4% Debentures Due August 1, 2029.	 	2014 10-K	 	4.a.i(ii)	 	02/13/2015	 	 	

77

	
														
Exhibit
No.	 	 	 	 	 	 	Incorporated By Reference	 	Filed
Herewith	
	 	Exhibit Description	 	Form	 	Exhibit	 	Filing Date	 		
4.b	 	Indenture dated as of February 12, 2001 between Masco Corporation and The Bank of New York Mellon Trust Company, N.A., as successor trustee under agreement originally with Bank One Trust Company, National Association, as Trustee, and Supplemental Indenture thereto dated as of November 30, 2006; and Directors' Resolutions establishing Masco Corporation's:	 	2016 10-K	 	4.b	 	02/09/2017	 	 	
4.b.i	 	 	 	6-1/2% Notes Due August 15, 2032;	 	2017 10-K	 	4.b.i	 	02/08/2018	 	 	
4.b.ii	 	 	 	5.950% Notes Due March 15, 2022;	 	2016 10-K	 	4.b(iii)	 	02/09/2017	 	 	
4.b.iii	 	 	 	4.450% Notes Due April 1, 2025;	 	8-K	 	4.1	 	03/23/2015	 	 	
4.b.iv	 	 	 	3.500% Notes Due April 1, 2021;	 	8-K	 	4.1	 	03/16/2016	 	 	
4.b.v	 	 	 	4.375% Notes Due April 1, 2026;	 	8-K	 	4.2	 	03/16/2016	 	 	
4.b.vi	 	 	 	3.500% Notes Due November 15, 2027; and	 	8-K	 	4.1	 	06/15/2017	 	 	
4.b.vii	 	 	 	4.500% Notes Due May 15, 2047.	 	8-K	 	4.2	 	06/15/2017	 	 	
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.	
4.c	 	Description of securities.	 	 	 	 	 	 	 	X	
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.l constitute the management contracts and executive compensatory plans or arrangements in which certain of the directors and executive officers of the Company participate.	
10.b	 	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:	 	 	 	 	 	 	 	 	
10.b.i	 	 	 	for grants on or after January 1, 2013;	 	2017 10-K	 	10.b.iii	 	02/08/2018	 	 	
10.b.ii	 	 	 	for grants during 2012; and	 	2017 10-K	 	10.b.iv	 	02/08/2018	 	 	
10.b.iii	 	 	 	for grants prior to 2012.	 	2015 10-K	 	10.b.i(ii)(C)	 	02/12/2016	 	 	

78

	
													
Exhibit
No.	 	 	 	 	 	Incorporated By Reference	 	Filed
Herewith	
	 	Exhibit Description	 	Form	 	Exhibit	 	Filing Date	 		
10.c	 	Masco Corporation 2014 Long Term Stock Incentive Plan (Amended and Restated May 9, 2016):	 	10-Q	 	10.a	 	07/26/2016	 	 	
 	 	Form of Restricted Stock Award Agreements:	 	 	 	 	 	 	 	 	
10.c.i	 	 	 	for awards prior to July 1, 2018; and	 	8-K	 	10.b	 	05/06/2014	 	 	
10.c.ii	 	 	 	for awards on or after July 1, 2018.	 	2018 10-K	 	10.c.ii	 	02/07/2019	 	 	
10.c.iii	 	Form of Restricted Stock Unit Award Agreement for awards granted on or after December 17, 2019.	 	 	 	 	 	 	 	X	
 	 	Form of Stock Option Grant Agreements:	 	 	 	 	 	 	 	 	
10.c.iv	 	 	 	for grants prior to July 1, 2018;	 	8-K	 	10.d	 	05/06/2014	 	 	
10.c.v	 	 	 	for grants between July 1, 2018 and December 17, 2019; and	 	2018 10-K	 	10.c.iv	 	02/07/2019	 	 	
10.c.vi	 	 	 	for grants on or after December 17, 2019.	 	 	 	 	 	 	 	X	
10.c.vii	 	Form of Long Term Incentive Program Award Agreement for awards prior to December 17, 2019.	 	2018	 	10.c.v	 	02/07/2019	 	 	
10.c.viii	 	Long-Term Incentive Program under Masco Corporation's 2014 Long Term Stock Incentive Plan (December 17, 2019).	 	 	 	 	 	 	 	X	
10.c.ix	 	Form of Performance Restricted Stock Unit Award Agreement for awards on or after December 17, 2019.	 	 	 	 	 	 	 	X	
10.c.x	 	Non-Employee Directors Equity Program under Masco Corporation's 2014 Long Term Stock Incentive Plan (Amended and Restated May 9, 2016).	 	10-Q	 	10.b	 	07/26/2016	 	 	
 	 	Form of Restricted Stock Award Agreement for Non-Employee Directors:	 	 	 	 	 	 	 	 	
10.c.xi	 	 	 	for Non-Employee Directors for awards prior to July 1, 2018; and	 	8-K	 	10.c	 	05/06/2014	 	 	
10.c.xii	 	 	 	for Non-Employee Directors for awards after July 1, 2018.	 	2018 10-K	 	10.c.viii	 	02/07/2019	 	 	
10.c.xiii	 	Non-Employee Directors Equity Program under Masco Corporation's 2014 Long Term Stock Incentive Plan (Amended and Restated February 7, 2020).	 	 	 	 	 	 	 	X	
10.c.xiv	 	Form of Restricted Stock Unit Award Agreement for Non-Employee Directors for grants on or after February 7, 2020.	 	 	 	 	 	 	 	X	
10.d	 	Form of Masco Corporation Supplemental Executive Retirement and Disability Plan and amendments thereto for Richard A. Manoogian.	 	2015 10-K	 	10.d.i(i)	 	02/12/2016	 	 	
10.e	 	Form of Masco Corporation Supplemental Executive Retirement and Disability Plan and amendments thereto (includes amendment freezing benefit accruals) for John G. Sznewajs.	 	2015 10-K	 	10.d.i(ii)	 	02/12/2016	 	 	
10.f	 	Other compensatory arrangements for executive officers.	 	2016 10-K	 	10.f	 	02/09/2017	 	 	
10.g	 	Compensation of Non-Employee Directors.	 	 	 	 	 	 	 	X	
10.h	 	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.	 	2016 10-K	 	10.i	 	02/09/2017	 	 	
10.i.i	 	Letter Agreement dated June 29, 2009 between Richard A. Manoogian and Masco Corporation.	 	2014 10-K	 	10.k.i	 	02/13/2015	 	 	
10.i.ii	 	Aircraft Time Sharing Agreement dated June 26, 2019 between Richard A. Manoogian and Masco Corporation.	 	 	 	 	 	 	 	X	

79

	
											
Exhibit
No.	 	 	 	Incorporated By Reference	 	Filed
Herewith	
	 	Exhibit Description	 	Form	 	Exhibit	 	Filing Date	 		
10.j	 	Employment Offer Letter dated July 27, 2018 between Scott McDowell and Masco Corporation.	 	10-Q	 	10	 	10/30/2018	 	 	
10.k	 	Agreement dated June 18, 2019 between Joe Gross and Masco Corporation.	 	10-Q	 	10	 	07/25/2019	 	 	
10.l	 	Separation and Release Agreement dated July 19, 2019, between Amit Bhargava and Masco Corporation.	 	10-Q	 	10	 	10/30/2019	 	 	
21	 	List of Subsidiaries.	 	 	 	 	 	 	 	X	
23	 	Consent of Independent Registered Public Accounting Firm relating to Masco Corporation's Consolidated Financial Statements and Financial Statement Schedule.	 	 	 	 	 	 	 	X	
31.a	 	Certification by Chief Executive Officer required by Rule 13a-14(a)/15d-14(a).	 	 	 	 	 	 	 	X	
31.b	 	Certification by Chief Financial Officer required by Rule 13a-14(a)/15d-14(a).	 	 	 	 	 	 	 	X	
32	 	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.	 	 	 	 	 	 	 	X	
101	 	The following financial information from Masco Corporation's Annual Report on Form 10-K for the year ended December 31, 2019, 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.	 	 	 	 	 	 	 	X	
104	 	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)	 	 	 	 	 	 	 	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.

80

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 11, 2020

81

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	 	President and Chief Executive
Officer and Director	 	 	
Keith J. Allman	 		 	 	
Principal Financial Officer:	 	 	 	 	
/s/ John G. Sznewajs	 	Vice President, Chief
Financial Officer	 	 	
John G. Sznewajs	 		 	 	
Principal Accounting Officer:	 	 	 	 	
/s/ John P. Lindow	 	Vice President, Controller
and Chief Accounting Officer
	 	 	
John P. Lindow	 		 	 	
/s/ J. Michael Losh	 	Chairman of the Board	 	 	
J. Michael Losh	 		 	 	
/s/ Richard A. Manoogian	 	Chairman Emeritus	 	 	
Richard A. Manoogian	 		 	 	
/s/ Mark R. Alexander	 	Director	 	 	
Mark R. Alexander	 		 	February 11, 2020	
/s/ Marie A. Ffolkes	 	Director	 	 	
Marie A. Ffolkes	 		 	 	
/s/ Christopher A. O'Herlihy	 	Director	 	 	
Christopher A. O'Herlihy	 		 	 	
/s/ Donald R. Parfet	 	Director	 	 	
Donald R. Parfet	 		 	 	
/s/ Lisa A. Payne	 	Director	 	 	
Lisa A. Payne	 		 	 	
/s/ John C. Plant	 	Director	 	 	
John C. Plant	 		 	 	
/s/ Charles K. Stevens, III	 	 	 	 	
Charles K. Stevens, III	 	Director	 	 	
/s/ Reginald M. Turner, Jr.	 	Director	 	 	
Reginald M. Turner, Jr.	 		 	 	

82

MASCO CORPORATION

SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2019, 2018 and 2017

																							
 	 	(In Millions)	 	
Column A	 	Column B	 	Column C	 	 	Column D	 	 	Column E	
 	 	 	 	Additions	 	 	 	 	 	 	
Description	 	Balance at
Beginning
of Period	 	Charged to
Costs and
Expenses	 	Charged
to Other
Accounts	 	 	Deductions	 	 	Balance at
End of
Period	
Allowances for doubtful accounts, deducted from accounts receivable in the balance sheet (d):	 	 		 	 		 	 		 	 	 		 	 	 		
2019	 	$	5		 	$	1		 	$	—		 	 	$	(2	)	 	(a)	$	4		
2018	 	$	4		 	$	3		 	$	—		 	 	$	(2	)	 	(a)	$	5		
2017	 	$	5		 	$	1		 	$	—		 	 	$	(2	)	 	(a)	$	4		
Valuation allowance on deferred tax assets:	 	 		 	 		 	 		 	 	 		 	 	 		
2019	 	$	43		 	$	—		 	$	—		 	 	$	(5	)	 	(b)	$	38		
2018	 	$	47		 	$	—		 	$	—		 	 	$	(4	)	 	(c)	$	43		
2017	 	$	45		 	$	—		 	$	2		 	(d)	$	—		 	 	$	47		

(a)	Deductions, representing uncollectible accounts written off, less recoveries of accounts written off in prior years.	

(b)	$5 million net reduction to valuation allowance recorded as an income tax benefit.	

(c)	$3 million net reduction to valuation allowance recorded as an income tax benefit and $1 million reduction recorded primarily in other comprehensive income (loss).	

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

83

Exhibit 4.c

DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

Masco Corporation (“Masco,” “we,” “us” and “our”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended; our common stock.

DESCRIPTION OF OUR CAPITAL STOCK

Following is a summary of the terms of our capital stock. This summary is not complete and is subject to and qualified by reference to our Restated Certificate of Incorporation and our Bylaws, as amended and restated as of May 8, 2012, each of which is filed as an exhibit to our Annual Report on Form 10-K. We encourage you to read our Restated Certificate of Incorporation, our Bylaws and the applicable provisions of the General Corporation Law of the State of Delaware (the “DCGL”) for additional information.

Authorized Shares

Our Restated Certificate of Incorporation authorizes the issuance of:

•	1,400,000,000 shares of common stock, par value $1.00 per share; and	

•	1,000,000 shares of preferred stock, par value $1.00 per share.	

Our preferred stock is issuable in one or more series. Our Board of Directors has the authority to divide the shares of preferred stock into series and fix, from time to time, before issuance, the number of shares to be included in any series and the designation, relative rights, preference and limitations of all shares of such series. There are currently no shares of preferred stock outstanding.

Voting Rights

Holders of our common stock are entitled to one vote per share on all matters voted on by shareholders. If issued, our Board of Directors will determine the voting rights of our preferred stock.

Dividend Rights

Holders of our common stock are entitled to receive dividends, if any, when declared by our Board of Directors in its discretion out of legally available funds, and subject to rights of any holders of preferred stock. Dividends on any outstanding shares of preferred stock must be declared and paid, or set aside for payment, before any dividends can be declared and paid, or set aside for payment, on the shares of our common stock with respect to the same dividend period.

301444.3

Exhibit 4.c

Liquidation Rights

Upon any liquidation or dissolution of Masco, holders of our common stock are entitled to receive pro rata all assets remaining after payment of all liabilities and the liquidation of any shares of any preferred stock at the time outstanding.

Other Rights and Preferences

Holders of our common stock have no preemptive or other subscription rights, and there are no conversion rights or redemption or sinking fund provisions with respect to our common stock.

Certain Provisions of Our Restated Certificate of Incorporation and Bylaws

Under both our Restated Certificate of Incorporation and Bylaws members of our Board of Directors are divided into three classes. The members of each class are elected for a period of three years and the term of one class will expire each year. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting our entire Board of Directors. The classified board could have the effect of making the removal of incumbent directors more time consuming and difficult, which could discourage a third party from attempting to take control of Masco.

Our Bylaws vest the power to call special meetings of stockholders in our Chair of the Board, our CEO, our President or majority of our Board of Directors, subject to the rights of holders of any one or more classes or series of preferred stock or any other class of stock issued by us which shall have the right, voting separately by class or series, to elect directors. Stockholders are not permitted under our Restated Certificate of Incorporation or Bylaws to act by written consent in lieu of a meeting.

To be properly brought before an annual meeting, a stockholder’s notice shall be delivered to our Secretary not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting (provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by us). Such notice shall set forth: a brief description of the business desired to be brought before the meeting, the text of the proposal or business, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; information about the stockholder making the nomination or proposal and the beneficial owner, if any, on behalf of whom the nomination or proposal is made, including name and address, class and number of shares owned, and representations regarding the intention to make such a proposal or nomination and to solicit proxies in support of it.

301444.3

Exhibit 4.c

Our Restated Certificate of Incorporation requires that business combinations between us and another entity who is the beneficial owner of 30% or more of our outstanding shares of stock entitled to vote in election of directors must be approved by 95% of our outstanding shares of stock entitled to vote in elections of directors. Relatedly, holders of 95% of our outstanding shares of stock entitled to vote in elections of directors must approve any amendment or repeal of such provision. Our Restated Certificate of Incorporation also provides that, in addition to any affirmative vote required by law, any amendment of, repeal of, or adoption of any provision inconsistent with the article relating to the number of directors, the establishment of classes of directors for purposes of director elections, the nominations for election of directors, stockholders acting by written consent, and the calling of special meetings requires the affirmative vote of the holders of at least 80% of the voting power of our outstanding capital stock entitled to vote, voting together as a single class.

Certain Anti-Takeover Effects of Delaware Law

We are subject to Section 203 of the DGCL (“Section 203”). In general, Section 203 prohibits a publicly held Delaware corporation from engaging in various “business combination” transactions with any interested stockholder for a period of three years following the date of the transactions in which the person became an interested stockholder, unless:

•	the transaction is approved by the board of directors prior to the date the interested stockholder obtained such status;	

•	upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or	

•	on or subsequent to such date the business combination is approved by the board and authorized at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.	

A “business combination” is defined to include mergers, asset sales, and other transactions resulting in financial benefit to a stockholder. In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years, did own) 15% or more of a corporation’s voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts with respect to Masco and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

Listing

Our common stock is listed on The New York Stock Exchange under the trading symbol “MAS.”

301444.3

Exhibit 10.g

MASCO CORPORATION 
 COMPENSATION OF NON-EMPLOYEE DIRECTORS

Our non-employee directors receive an annual retainer of $270,000, of which $130,000 is paid in cash and the remainder is paid in the form of equity granted under our Non-Employee Directors Equity Program.

The Company pays additional retainers of $200,000 to the Chair of the Board, $22,000 to the Chair of the Audit Committee, and $20,000 to the Chair of the Organization and Compensation Committee. The additional retainer for the Chair of the Corporate Governance and Nominating Committee is $15,000; however, this retainer is not presently paid so long as our current Chair of the Board continues to serve in both capacities. No meeting attendance fees are paid, with the exception that the Board may in its discretion approve the payment of meeting fees to directors in the following circumstances: (i) if a director is serving on three or more standing committees, he or she may receive meeting fees for attendance at meetings held by one of the three committees on which the director serves; and (ii) if a director is serving as a member of a special committee constituted by the Board, he or she may receive meeting fees for attendance at meetings held by such special committee.

Non-employee directors are eligible to participate in the Company’s matching gifts program until December 31 of the year in which their service as a director ends. Under this program, the Company will match up to $5,000 of a director’s contributions to eligible 501(c)(3) tax-exempt organizations each year. Directors are also eligible to participate in the Company’s employee purchase program, which enables them to obtain rebates on the Company’s products that they purchase for their personal use. Each of these programs is available to all of our employees. In addition, if space is available, a director’s spouse is permitted to accompany a director who travels on Company aircraft to attend Board or committee meetings.

226754.4

Exhibit 10.c.xiii

MASCO CORPORATION
NON-EMPLOYEE DIRECTORS EQUITY PROGRAM
UNDER THE 2014 LONG TERM STOCK INCENTIVE PLAN 
(Amended and Restated February 7, 2020)
Non-employee directors of Masco Corporation (the “Company”) are eligible to receive an annual retainer, of which a portion is paid in cash and the remainder is paid in the form of a Restricted Stock Unit (“RSU”) Award granted pursuant to this Masco Corporation Non-Employee Directors Equity Program (the “Program”). Under this Program, an “Eligible Director” is any director of the Company who is not an employee of the Company and who receives a fee for services as a director. RSUs are bookkeeping entries that give the Eligible Director the right to receive shares of Company common stock (“Shares”) upon vesting. Terms not defined herein have the meaning given to them in the Company’s 2014 Long Term Stock Incentive Plan, as amended from time to time (the “Plan”).

Section 1. Restricted Stock Unit (RSU) Award
(a)Eligibility for Award. On the date of each of the Company’s annual stockholders’ meetings (the “Annual Meeting”), each person who is or becomes an Eligible Director at such meeting and whose service on the Board is expected to continue following such meeting shall be granted an RSU Award. The grant entitles an Eligible Director to receive Shares on a one-to-one RSU-to-Share basis upon vesting as set forth in the vesting schedule in the Award Agreement, subject to the terms and conditions set forth herein and in the Award Agreement.
(b)(i)  Amount of Award.  The number of RSUs awarded shall be determined by the Board of Directors from time to time (the “Equity Retainer”). If an Eligible Director begins serving as a director other than as of the date of an Annual Meeting, the RSU Award granted hereunder shall be granted at the meeting of the Board of Directors that takes place on or after the date such Eligible Director is first elected or appointed to the Board, and such Award shall be pro-rated to reflect the partial service provided by such Eligible Director in the period between Annual Meetings.
(ii) Adjustment to Amount or Terms of Award. The Board shall have sole discretion to adjust the amount of the Equity Retainer to be paid in the form of RSUs and the terms of any such RSU Award. Except as the Board may otherwise determine, any increase or decrease in an Eligible Director’s Annual Retainer during a period with respect to which such Eligible Director has already been granted an RSU Award shall be implemented by increasing or decreasing the cash portion of such Eligible Director’s annual retainer.
(iii) Limitation on Equity Retainer. Notwithstanding the foregoing or anything to the contrary herein, the maximum Equity Retainer granted to an Eligible Director during the annual director compensation period (as defined in the Plan) shall not exceed the limit set forth in Section 4(b)(ii) of the Plan.
(c)  Vesting. Subject to the provisions of Section 2 below, each RSU Award granted hereunder shall vest with respect to one-third of the RSUs (disregarding fractional RSUs) on May 15 of each of the three consecutive calendar years following the year in which such Award is granted; provided, however, that if an Award is granted between the Annual Meeting and December 31 pursuant to Section 1(b)(i), the first vesting shall occur on May 15 of the second calendar year following the year in which such Award is granted. Shares issued upon vesting will be registered in the Eligible Director’s name in book-entry form. RSUs that do not vest into Shares will be forfeited.

1
302715

Exhibit 10.c.xiii

(d)  Effective Grant Date. The price of the Shares used in determining the number of RSUs granted hereunder shall be the fair market value of the Shares as determined by the Board on the effective grant date of such Award (the “Grant Date”); provided that if an Award granted in accordance with Section 1(a) of this Program falls within seven days prior to the release of the Company’s quarterly or annual financial results, then the effective grant date for such Award will be the first trading day after the date on which such financial results are released.
(e)  Dividend Equivalents. Promptly after each date on which the RSUs vest, the Company will pay to the Eligible Director an amount in cash (subject to any applicable taxes or charges) equal to the sum of the regular quarterly per share cash dividends, if any, paid by the Company to holders of record on or after the Grant Date (the “Dividend Equivalent”) multiplied by the number of RSUs then vesting in Shares. If, prior to the final vesting date of an Award hereunder (the “Final Vesting Date”), there is a record date for the Company’s regularly quarterly cash dividend that will be payable after the Final Vesting Date, then as soon as practicable after the later of the date the RSUs are settled in Shares or the date the declared dividend is paid to shareholders generally, the Company shall pay the Eligible Director the Dividend Equivalent on the RSUs that were held by such Eligible Director on such record date, calculated as provided above. Except for the payment of Dividend Equivalents, an Eligible Director shall have no right to receive any payment on account of any dividend or other distribution on the underlying Shares.
(f)No Voting or Other Rights. Until the RSUs vest and are settled as Shares, an Eligible Director shall not have voting rights with respect to the RSUs or the underlying Shares, and an Eligible Director will not be able to sell, encumber or otherwise transfer the RSUs or the underlying Shares except in accordance with the terms of the Plan.
Section 2. Termination of Services as a Director
(a)Retirement. If an Eligible Director’s term of service as a director is terminated by reason of retirement on or after normal retirement age for a director as set forth in the Company’s Corporate Governance Guidelines (“Retirement”), any RSU Award held by such Eligible Director shall continue to vest in the same manner as if such Eligible Director’s term of service had not terminated.
(b)Death or Disability. If an Eligible Director’s term of service as a director is terminated by reason of death or permanent and total disability or, if following termination or Retirement as a director, a former director dies while continuing to have rights under any RSU Awards, upon such death or termination by reason of permanent and total disability, any such RSUs shall immediately vest and be settled in Shares.
(c)Forfeiture.
(i) If an Eligible Director’s term of service as a director terminates for any reason other than as a result of death, permanent and total disability or Retirement, all RSUs held by such Eligible Director that remain subject to restrictions shall be forfeited and transferred back to the Company on the date of such termination; provided, however, that any RSUs that remain subject to restrictions but that would have vested on May 15 following such Eligible Director’s termination shall vest pro rata on the date of termination based upon that portion of the year between annual vesting dates in which the termination occurred during which such Eligible Director served as a director.

2
302715

Exhibit 10.c.xiii

(ii) Notwithstanding anything to the contrary herein, if, following termination of service as a director for any reason other than death (including due to Retirement), a former director continues to hold RSUs, the Board, in its sole judgment, may cause all RSUs to be forfeited and transferred back to the Company concurrently with, or at any time following, such termination if the Board determines that such former director has engaged in any activity detrimental to the interests of the Company, a subsidiary or an affiliated company. In such circumstances, the Board may also determine not to pay any Dividend Equivalent that has accrued and has not been paid with respect to any RSUs.
(d)No Acceleration. The provisions of Section 6(d)(v) of the Plan shall not apply to RSU Awards granted to Eligible Directors.
Section 3. Section 409 of the Internal Revenue Code

This Program and any Award Agreement hereunder are intended to comply with or be exempt from the requirements of Section 409A of the Internal Revenue Code (“Section 409A of the Code”), and the provisions of this Award Agreement and the Program shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code. If any term or condition of this Award Agreement or any provision of the Program would otherwise frustrate or conflict with this intent, the term or condition or provision shall be interpreted and deemed amended so as to avoid this conflict. Notwithstanding anything in the Program to the contrary, if the Board considers an Eligible Director to be a “specified employee” under Section 409A of the Code at the time of such Eligible Director’s “separation from service” (as defined in Section 409A of the Code), and any amount hereunder is “deferred compensation” subject to Section 409A of the Code, any distribution of such amount that otherwise would be made to such Eligible Director with respect to an Award as a result of such “separation from service” shall not be made until the date that is six months after such “separation from service,” except to the extent that earlier distribution would not result in such Eligible Director incurring interest or additional tax under Section 409A of the Code. The right to any “dividend equivalents” (within the meaning of Section 1.409A-3(e) of the Treasury Regulations) shall be treated separately from the right to other amounts under the Award. To the extent an Award includes a “series of installment payments” (within the meaning of Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), such Eligible Director’s right to such series of installment payments shall be treated as a right to a series of separate payments and not as a right to a single payment. Notwithstanding the foregoing, the tax treatment of the benefits provided under this Program or any Award Agreement hereunder is not warranted or guaranteed, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by an Eligible Director on account of noncompliance with Section 409A of the Code.

Section 4. Termination, Modification or Suspension
The Board may terminate, modify or suspend the Program at any time as it may deem advisable.
Section 5. Governing Law
The Program shall be governed by and interpreted in accordance with Michigan law.

3
302715

Exhibit 10.c.iii

Restricted Stock Unit Award Agreement

Dear __(Participant Name)__:

This letter is to inform you that the Organization and Compensation Committee (the “Committee”) of the Board of Directors of Masco Corporation (the “Company”) has granted you the following award (the “Award”) of Restricted Stock Units (“RSUs”) under the Masco Corporation 2014 Long Term Stock Incentive Plan (the “Plan”):

	
			
Grant Date	RSUs Awarded	Vesting Schedule	
(Grant Date)	(# of RSUs Granted)	(Vesting Schedule Dates & Quantities)	

This Award entitles you to receive shares of Company common stock (“Shares”) upon vesting of the RSUs, subject to the terms and conditions of this Award Agreement. You must accept this Award within 30 days of this notification, or it will be canceled without consideration and will be of no further force and effect. By accepting this Award, you voluntarily agree to the Terms and Conditions attached to this Award Agreement as Annex A (the “Terms and Conditions”) and to the provisions of the Plan, and acknowledge that:

•	You have read and understand the Terms and Conditions and the Plan and agree that all of your rights to this Award are embodied therein.	

•	You have received or have access to all of the documents referred to in the Terms and Conditions and the Plan prospectus. Copies of the Company’s latest annual report to stockholders and proxy statement are available in the “Plan & Grant Document” section of NetBenefits.com.	

•	There are no other commitments or understandings currently outstanding with respect to any other grants of restricted stock units, restricted stock, options, phantom stock or stock appreciation rights, except as may be evidenced by a written agreement between you and the Company.	
Please contact Stock Plan Services at (313) 792-6667 or at StockPlanServices@mascohq.com if you have any questions or concerns regarding this information.

Sincerely,

MASCO CORPORATION

302754

ANNEX A

MASCO CORPORATION

TERMS AND CONDITIONS OF
RESTRICTED STOCK UNITS GRANTED UNDER THE
MASCO CORPORATION 2014 LONG TERM STOCK INCENTIVE PLAN
December 17, 2019

Terms not defined in these Terms and Conditions shall have the meanings given to them in the Masco Corporation (the “Company”) 2014 Long Term Incentive Plan (the “Plan”).

You have been granted an Award of Restricted Stock Units.

Restricted Stock Units (“RSUs”) are bookkeeping entries that give you the right to receive shares of Company common stock (“Shares”) on a one-for-one RSU-to-Share basis upon vesting. Shares issued upon vesting will be registered in your name in book-entry form. RSUs that do not vest into Shares will lapse and be forfeited. Until the RSUs vest and are settled in Shares, you will not have voting rights with respect to the RSUs or the underlying Shares, and you will not be able to sell, encumber or otherwise transfer the RSUs or the underlying Shares except in accordance with the Plan.
        
Provided that you have been continuously employed by the Company following the date the Award is granted (the “Grant Date”), and subject to the other terms and conditions of the Award, the restrictions on the RSUs will lapse in accordance with the vesting schedule set forth in the Award Agreement until all the RSUs have vested into Shares.

“Employment” or “employed” shall be deemed to refer to employment by the Company and its subsidiaries and shall not include employment by an Affiliate that is not a subsidiary of the Company unless the Committee so determines at the time such employment commences.

You will be paid a Dividend Equivalent when the RSUs vest into Shares.

Promptly after each date on which the RSUs vest, you will be paid an amount in cash (subject to any applicable taxes or charges) equal to the sum of the regular quarterly per share cash dividends, if any, paid by the Company to holders of record on or after the Grant Date (the “Dividend Equivalent”) multiplied by the number of RSUs then vesting into Shares. If, prior to the final vesting date of an Award hereunder (the “Final Vesting Date”), there is a record date for the Company’s regularly quarterly cash dividend that will be payable after the Final Vesting Date, then as soon as practicable after the later of the date the RSUs are settled in Shares or the date the declared dividend is paid to shareholders generally, you will be paid the Dividend Equivalent on the RSUs that were held by you on such record date, calculated as provided above. Except for the payment of Dividend Equivalents, you shall have no right to receive any payment on account of any dividend or other distribution on the underlying Shares.

Certain provisions apply if your employment is terminated.

In accordance with Section 6(d)(iv) of the Plan, if your employment with the Company is terminated by reason of your permanent and total disability or if you die while RSUs remain unvested, the restrictions on all RSUs will lapse and your rights to the Shares will become vested on the date of such termination or death. If you retire as an employee of the Company and your retirement occurs on or after you attain (i) age 65, or (ii) age 55 and have at least 10 years of continuous employment with the Company, then the RSUs will continue to vest in the same manner as though your employment had not been terminated, subject to the other provisions of the Award Agreement and the Plan.

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If your employment is terminated for any reason, with or without cause, while restrictions remain in effect, other than for a reason referred to above, all RSUs that have not vested will be automatically forfeited to the Company.

You agree not to engage in certain activities.

Notwithstanding the foregoing provisions, if at any time you engage in an activity following your termination of employment which in the sole judgment of the Committee is detrimental to the interests of the Company, a subsidiary on Affiliate, all RSUs that have not vested will be forfeited to the Company. You acknowledge that such activity includes, but is not limited to, “Business Activities.”

You agree, in consideration for this Award, and regardless of whether any RSUs have vested, while you are employed or retained as a consultant by the Company or any of its subsidiaries and for a period of one year following any termination of your employment and, if applicable, any consulting relationship with the Company or any of its subsidiaries other than a termination in connection with a Change in Control, not to engage in, and not to become associated in a “Prohibited Capacity” with any other entity engaged in, any Business Activities and not to encourage or assist others in encouraging any employee of the Company or any of its subsidiaries to terminate employment or to become engaged in any such Prohibited Capacity with an entity engaged in any Business Activities. “Business Activities” shall mean the design, development, manufacture, sale, marketing or servicing of any product or providing of services competitive with the products or services of (x) the Company or any subsidiary if you are employed by or consulting with the Company at any time while this Award is outstanding, or (y) the subsidiary employing or retaining you at any time while this Award is outstanding, to the extent such competitive products or services are distributed or provided either (1) in the same geographic area as are such products or services of the Company or any of its subsidiaries, or (2) to any of the same customers as such products or services of the Company or any of its subsidiaries are distributed or provided. “Prohibited Capacity” shall mean being associated with an entity as an employee, consultant, investor or another capacity where (1) confidential business information of the Company or any of its subsidiaries could be used in fulfilling any of your duties or responsibilities with such other entity, (2) any of your duties or responsibilities are similar to or include any of those you had while employed or retained as a consultant by the Company or any of its subsidiaries, or (3) an investment by you in such other entity represents more than 1% of such other entity’s capital stock, partnership or other ownership interests.

Should you breach any of the restrictions contained in the preceding paragraph, by accepting this Award you agree, independent of any equitable or legal remedies that the Company may have and without limiting the Company’s right to any other equitable or legal remedies, to pay to the Company in cash immediately upon the demand of the Company (1) the amount of income realized for income tax purposes from this Award, net of all federal, state and other taxes payable on the amount of such income, but only to the extent such income is realized from the vesting of RSUs on or after your termination of employment or, if applicable, any consulting relationship with the Company or its subsidiary or within the two year period prior to the date of such termination, plus (2) all costs and expenses of the Company in any effort to enforce its rights under this or the preceding paragraph. To the extent permitted under applicable law, the Company shall have the right to set off or withhold any amount owed to you by the Company or any of its subsidiaries or affiliates for any amount owed to the Company by you under this Award Agreement.

You agree to the Committee’s authority with respect to the Award and to the application of the Company’s Dispute Resolution Policy.

Section 3 of the Plan provides, in part, that the Committee shall have the authority to interpret the Plan, the Award Agreement, this Award and any related document and decide all questions and settle all controversies and disputes relating thereto. It further provides that the determinations, interpretations and decisions of the Committee are within its sole discretion and are final, conclusive and binding on all persons.

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In addition, you and the Company agree that if for any reason a claim is asserted against the Company or any of its subsidiaries or affiliated companies or any officer, employee or agent of the foregoing (other than a claim involving non‑competition restrictions or the Company’s, a subsidiary’s or an affiliated company’s trade secrets, confidential information or intellectual property rights) which (1) is within the scope of the Company’s Dispute Resolution Policy (the terms of which are incorporated herein, as it shall be amended from time to time); (2) subverts the provisions of Section 3 of the Plan; or (3) involves any of the provisions of the Award Agreement or the Plan or the provisions of any equity award or other agreements relating to Company common stock or the claims of yourself or any persons to the benefits thereof, in order to provide a more speedy and economical resolution, the Dispute Resolution Policy shall be the sole and exclusive remedy to resolve all disputes, claims or controversies which are set forth above, except as otherwise agreed in writing by you and the Company or a subsidiary of the Company. It is our mutual intention that any arbitration award entered under the Dispute Resolution Policy will be final and binding and that a judgment on the award may be entered in any court of competent jurisdiction. Notwithstanding the provisions of the Dispute Resolution Policy, however, the parties specifically agree that any mediation or arbitration required by this paragraph shall take place at the offices of the American Arbitration Association located in the metropolitan Detroit area or such other location in the metropolitan Detroit area as the parties might agree. The provisions of this paragraph: (a) shall survive the termination or expiration of the Award Agreement, (b) shall be binding upon the Company’s and your respective successors, heirs, personal representatives, designated beneficiaries and any other person asserting a claim based upon the Award Agreement, (c) shall supersede the provisions of any prior agreement between you and the Company or its subsidiaries or affiliated companies with respect to any of the Company’s restricted stock unit, restricted stock, stock option or other stock-based incentive plans to the extent the provisions of such other agreement requires arbitration between you and your employer, and (d) may not be modified without the consent of the Company. Subject to the exception set forth above, you and the Company acknowledge that neither of us nor any other person asserting a claim described above has the right to resort to any federal, state or local court or administrative agency concerning any such claim and the decision of the arbitrator shall be a complete defense to any action or proceeding instituted in any tribunal or agency with respect to any dispute.

This Award grant does not imply any employment or consulting commitment by the Company.

You agree that the grant of this Award and acceptance of this Award does not imply any commitment by the Company, a subsidiary or affiliated company to your continued employment or consulting relationship, and that your employment status is that of an employee‑at‑will and in particular that the Company, its subsidiary or affiliated company has a continuing right with or without cause (unless otherwise specifically agreed to in writing executed by you and the Company) to terminate your employment or other relationship at any time. You agree that your acceptance represents your agreement not to terminate voluntarily your current employment (or consulting arrangement, if applicable) for at least one year from the Grant Date of this Award unless you have already agreed in writing to a longer period.

This Award and the Plan are intended to comply with Section 409A of the Internal Revenue Code.

This Award Agreement and the Plan are intended to comply with or be exempt from the requirements of Section 409A of the Internal Revenue Code (“Section 409A of the Code”), and the provisions of this Award Agreement and the Plan shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code. If any term or condition of this Award Agreement or any provision of the Plan would otherwise frustrate or conflict with this intent, the term or condition or provision shall be interpreted and deemed amended so as to avoid this conflict. Notwithstanding anything in the Plan to the contrary, if the Committee considers you to be a “specified employee” under Section 409A of the Code at the time of your “separation from service” (as defined in Section 409A of the Code), and any amount hereunder is “deferred compensation” subject to Section 409A of the Code, any distribution of such amount that otherwise would be made to you with respect to this Award as a result of such “separation from service” shall not be made until the date that is six months after such “separation from service,” except to the extent that earlier distribution would not result in you incurring interest or additional tax under Section 409A of the Code. Your right to any “dividend equivalents” (within the meaning of Section 1.409A-3(e) of the Treasury Regulations) shall be treated separately from the right to other amounts under this Award. To the extent this Award includes a “series of installment payments” (within the meaning of Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), your

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right to such series of installment payments shall be treated as a right to a series of separate payments and not as a right to a single payment. Notwithstanding the foregoing, the tax treatment of the benefits provided under this Award Agreement or the Plan is not warranted or guaranteed, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of non-compliance with Section 409A of the Code.

You agree to comply with applicable tax requirements and to provide information as requested.

You agree to comply with the requirements of applicable federal and other laws with respect to withholding or providing for the payment of required taxes. You also agree to promptly provide such information with respect to RSUs or the underlying Shares acquired pursuant to this Award, as may be requested by the Company or any of its subsidiaries or affiliated companies.
 
The Award Agreement shall be governed by and interpreted in accordance with Michigan law.

The headings set forth herein are for informational purposes only and are not a substantive part of these Terms and Conditions.

These Terms and Conditions are effective for grants made on or after the date hereof.

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Exhibit 10.c.xiv

Restricted Stock Unit Award Agreement
For Non-Employee Directors

Dear __(Participant Name)__:

This letter is to inform you that the Board of Directors of Masco Corporation (the “Company”) has granted you the following award (the “Award”) of Restricted Stock Units (“RSUs”) pursuant to the Non-Employee Directors Equity Program (the “Program”) under the Masco Corporation 2014 Long Term Stock Incentive Plan (the “Plan”):

	
			
Grant Date	Shares Awarded	Vesting Schedule	
(Grant Date)	(# of RSUs Granted)	(Vesting Schedule Dates & Quantities)	

This Award entitles you to receive shares of Company common stock (“Shares”) upon vesting of the RSUs, subject to the terms and conditions of the Program and this Award Agreement. You must accept this Award within 30 days of this notification, or it will be canceled without consideration and will be of no further force and effect. By accepting this Award, you voluntarily agree to the Terms and Conditions attached to this letter as Annex A (the “Terms and Conditions”) and to the provisions of the Program and Plan, and acknowledge that:

•	You have read and understand the Terms and Conditions, the Program and the Plan, and agree that all of your rights to this Award are embodied therein.	
		
•	You have received or have access to all of the documents referred to in the Terms and Conditions and the Plan prospectus. Copies of the Company’s latest annual report to stockholders and proxy statement are available in the “Plan & Grant Document” section of NetBenefits.com.	
		
•	There are no other commitments or understandings currently outstanding with respect to any other grants of restricted stock units, restricted stock, options, phantom stock or stock appreciation rights, except as may be evidenced by a written agreement between you and the Company.	

Please contact Stock Plan Services at (313) 792-6667 or at StockPlanServices@mascohq.com if you have any questions or concerns regarding this information.

Sincerely,

MASCO CORPORATION

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ANNEX A

MASCO CORPORATION

TERMS AND CONDITIONS OF
RESTRICTED STOCK UNITS FOR NON-EMPLOYEE
DIRECTORS GRANTED UNDER THE
MASCO CORPORATION 2014 LONG TERM STOCK INCENTIVE PLAN

Restricted Stock Units (“RSUs”) are bookkeeping entries that give you the right to receive Shares on a one-for-one RSU-to-Share basis upon vesting. Shares issued upon vesting will be registered in your name in book-entry form. RSUs that do not vest into Shares will be forfeited. Until the RSUs vest and are settled in Shares, you will not have voting rights with respect to the RSUs or the underlying Shares, and you will not be able to sell, encumber or otherwise transfer the RSUs or the underlying Shares except in accordance with the Company’s 2014 Long Term Stock Incentive Plan (the “Plan”). Terms not defined herein have the meaning given to them in the Non-Employee Directors Equity Program (the “Program”) or the Plan.
        
Provided that, since the date that this Award is granted you have continuously served as an Eligible Director, the restrictions on the RSUs will lapse in installments as provided in the vesting schedule in the Award Agreement until all the RSUs have vested into Shares free of restrictions, based on the initial number of RSUs granted.

The Company will pay a Dividend Equivalent on the RSUs that vest as provided in the Program.

You agree not to engage in certain activities.

Notwithstanding the foregoing, if at any time you engage in an activity following your termination of service which in the sole judgment of the Board is detrimental to the interests of the Company, a subsidiary or affiliated company, all RSUs that have not vested into Shares will be forfeited to the Company. You acknowledge that such activity includes, but is not limited to, “Business Activities” (as defined below).

You agree, in consideration for this Award, and regardless of whether any RSUs have vested, while you are a Director of the Company and for a period of one year following the later of the last date of any vesting of any RSUs or the termination of your term as a Director of the Company, other than a termination following a Change in Control, not to engage in, and not to become associated in a “Prohibited Capacity” with any other entity engaged in, any Business Activities and not to encourage or assist others in encouraging any employee of the Company or any of its subsidiaries to terminate employment or to become engaged in any such Prohibited Capacity with an entity engaged in any Business Activities. “Business Activities” shall mean the design, development, manufacture, sale, marketing or servicing of any product or providing of services competitive with the products or services of the Company or any subsidiary at any time while this Award is outstanding, to the extent such competitive products or services are distributed or provided either (1) in the same geographic area as are such products or services of the Company or any of its subsidiaries, or (2) to any of the same customers as such products or services of the Company or any of its subsidiaries are distributed or provided. “Prohibited Capacity” shall mean being associated with an entity as a director, employee, consultant, investor or another capacity where (1) confidential business information of the Company or any of its subsidiaries could be used in fulfilling any of your duties or responsibilities with such other entity, or (2) an investment by you in such other entity represents more than 1% of such other entity’s capital stock, partnership or other ownership interests.

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Should you breach any of the restrictions contained in the preceding paragraph, by accepting this Award you agree, independent of any equitable or legal remedies that the Company may have and without limiting the Company’s right to any other equitable or legal remedies, to pay to the Company in cash immediately upon the demand of the Company (1) the amount of income realized for income tax purposes from this Award, net of all federal, state and other taxes payable on the amount of such income, but only to the extent such income is realized from the vesting of RSUs on or after the termination of your term as a Director of the Company or within the two year period prior to the date of such termination, plus (2) all costs and expenses of the Company in any effort to enforce its rights under this or the preceding paragraph. To the extent permitted by applicable law, the Company shall have the right to set off or withhold any amount owed to you by the Company or any of its subsidiaries or affiliates for any amount owed to the Company by you under this Award Agreement.

You agree to resolve any disputes through mediation and, if necessary, binding arbitration.

Section 3 of the Plan provides, in part, that the Committee appointed by the Board to administer the Plan shall have the authority to interpret the Plan, the Award Agreements, this Award and any related document and decide all questions and settle all controversies and disputes relating thereto. It further provides that the determinations, interpretations and decisions of the Committee are within its sole discretion and are final, conclusive and binding on all persons. In addition, you and the Company agree that if for any reason a claim is asserted against the Company or any of its subsidiaries or affiliated companies or any officer, employee or agent of the foregoing (other than a claim involving non‑competition restrictions or the Company’s, a subsidiary’s or an affiliated company’s trade secrets, confidential information or intellectual property rights) which (1) subverts the provisions of Section 3 of the Plan; or (2) involves any of the provisions of the Award Agreement or the Plan or the provisions of any equity award or other agreements relating to Company Common Stock or the claims of yourself or any persons to the benefits thereof, in order to provide a more speedy and economical resolution, you and the Company will resolve any dispute through mediation, and, if necessary, final and binding arbitration before a neutral arbitrator instead of in a court by a judge or jury. The mediation and arbitration will be administered by the American Arbitration Association (“AAA”) under its Commercial Arbitration Rules. The decision of the arbitrator will be final and binding. The award rendered by the arbitrator may be confirmed and enforced in any court having jurisdiction thereof. The parties shall bear their own legal fees in any arbitration and shall split the fees of the AAA and the arbitrator. Notwithstanding the provisions contained herein, however, the parties specifically agree that any mediation or arbitration required by this paragraph shall take place at the offices of the American Arbitration Association located in the metropolitan Detroit area or such other location in the metropolitan Detroit area as the parties might agree. Except as otherwise required under applicable law, you and the Company agree that class action, collective action and representative action procedures shall not be asserted, nor will they apply in any proceeding governed by the Program. Neither the Company nor you will assert any class action or representative claims; each shall only submit their own individual claims and will not seek to represent the interests of any other person or entity. The provisions of this paragraph: (a) shall survive the termination or expiration of the Award Agreement, (b) shall be binding upon the Company’s and your respective successors, heirs, personal representatives, designated beneficiaries and any other person asserting a claim based upon the Award Agreement, (c) shall supersede the provisions of any prior agreement between you and the Company with respect to any of the Company’s restricted stock unit, restricted stock or other stock-based incentive plans to the extent the provisions of such other agreement requires arbitration between you and the Company, and (d) may not be modified without the consent of the Company. Subject to the exception set forth above, you and the Company acknowledge that neither of us nor any other person asserting a claim described above has the right to resort to any federal, state or local court or administrative agency concerning any such claim and the decision of the arbitrator shall be a complete defense to any action or proceeding instituted in any tribunal or agency with respect to any dispute.

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You agree to comply with applicable tax requirements and to provide information as requested.

You agree to comply with the requirements of applicable federal and other laws with respect to withholding or providing for the payment of required taxes. You also agree to promptly provide such information with respect to RSUs or the underlying Shares acquired pursuant to this Award, as may be requested by the Company or any of its subsidiaries or affiliated companies.
This Award is, in all respects, subject to the documents referenced in this Award Agreement and is intended to comply with, or be exempt from, as the case may be, the provisions of Internal Revenue Code Section 409A.

The Award Agreement shall be governed by and interpreted in accordance with Michigan law.

The headings set forth herein are for informational purposes only and are not a substantive part of these Terms and Conditions.

These Terms and Conditions are effective for grants made on or after February 7, 2020.

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Exhibit 10.c.vi

Stock Option Award Agreement

Dear __(Participant Name)__:

This letter is to inform you that the Organization and Compensation Committee (the “Committee”) of the Board of Directors of Masco Corporation (the “Company”) has granted you the following Stock Option Award (the “Option”) under the Masco Corporation 2014 Long Term Stock Incentive Plan (the “Plan”):

	
					
Grant Date	Option Shares Awarded	Grant Price Per Share	Vesting Schedule	Expiration Date	
(Grant Date)	(# of Awards Granted)	 	(Vesting Schedule Dates & Quantities)	(10 Years from Grant Date)	

You must accept this grant within 30 days of this notification, or it will be canceled without consideration and will be of no further force or effect. By accepting this Option, you voluntarily agree to the Terms and Conditions attached to this letter as Annex A (the “Terms and Conditions”) and to the provisions of the Plan, and acknowledge that:

•	You have read and understand the Terms and Conditions and the Plan and agree that all of your rights to this Award are embodied therein.	

•	You have received or have access to all of the documents referred to in the Terms and Conditions and the Plan prospectus. Copies of the Company’s latest annual report to stockholders and proxy statement are available in the “Plan & Grant Document” section of NetBenefits.com.	

•	There are no other commitments or understandings currently outstanding with respect to any other grants of options, restricted stock, restricted stock units, phantom stock or stock appreciation rights, except as may be evidenced by a written agreement between you and the Company.	

Please contact Stock Plan Services at (313) 792-6667 or at StockPlanServices@mascohq.com if you have any questions or concerns regarding this information.

Sincerely,

MASCO CORPORATION

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ANNEX A

MASCO CORPORATION

TERMS AND CONDITIONS OF
NON-QUALIFIED STOCK OPTIONS GRANTED
UNDER THE MASCO CORPORATION
2014 LONG TERM STOCK INCENTIVE PLAN
December 17, 2019

Terms not defined in these Terms and Conditions have the meanings given to them in the Masco Corporation (the “Company”) 2014 Long Term Incentive Plan (the “Plan”).

You have been granted a stock option.

This Option grants you the right to purchase shares of Company common stock (“Share”), at a price per Share which shall not be less than 100% of the fair market value of a Share on the date the Award is granted (“Grant Date”), subject to the terms and conditions of the Option.

“Employment” or “employed” shall be deemed to refer to employment by the Company and its subsidiaries and shall not include employment by an Affiliate that is not a subsidiary of the Company unless the Committee so determines at the time such employment commences.
 
This Option is exercisable as provided in this Award Agreement.

This Option is exercisable cumulatively in installments as set forth in this Award Agreement, provided that, subject to the paragraph immediately below, on each date of exercise you qualify to exercise such Option under the provisions of this Award Agreement and the Plan. All installments of this Option must be exercised no later than ten years after the Grant Date (the “Option Exercise Period”); all unexercised installments or portions thereof shall lapse and the right to purchase Shares pursuant to this Option shall be of no further effect after such date.

Certain provisions apply if your employment is terminated.

If you have remained employed by the Company for one year after the Grant Date and if you retire as an employee of the Company and your retirement occurs on or after you attain (i) age 65, or (ii) age 55 and have at least 10 years of continuous employment with the Company, then this Option shall continue and shall become exercisable as though your employment had not been terminated, subject to the other provisions of this Award Agreement and the Plan. If, your employment is terminated for any reason during the Option Exercise Period, other than retirement at least one year after the Grant Date and as otherwise provided in the preceding sentence, this Option shall terminate in accordance with Section 6(a)(ii)(E) of the Plan.

If your employment with the Company is terminated for any reason, other than death, permanent and total disability, retirement from the Company on or after you attain (i) age 65, or (ii) age 55 and have at least 10 years of continuous employment with the Company, or the sale or other disposition of the business or subsidiary employing you, and other than a termination of employment in connection with a Change in Control, and if any installments of this Option became exercisable within the two year period prior to the date of such termination (such installments being referred to as the “Subject Options”), by accepting this Option you agree that the following provisions will apply:

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(1)	Upon the demand of the Company you will pay to the Company in cash within 30 days after the date of such termination the amount of income realized for income tax purposes from the exercise of any Subject Options prior to the date of such termination, net of all federal, state and other taxes payable on the amount of such income, plus all costs and expenses of the Company in any effort to enforce its rights hereunder; and	

(2)	Any right you would otherwise have, pursuant to the terms of this Award Agreement, including these Terms and Conditions, or the Plan to exercise any Subject Options on or after the date of such termination, shall be extinguished as of the date of such termination.	

To the extent permitted under applicable law, the Company shall have the right to set off or withhold any amount owed to you by the Company or any of its subsidiaries or affiliates for any amount owed to the Company by you under this Award Agreement.

You agree not to engage in certain activities.

Notwithstanding the foregoing, if at any time you engage in an activity following your termination of employment which in the sole judgment of the Committee is detrimental to the interests of the Company, a subsidiary or an Affiliate, all unexercised installments of this Option or portions thereof will be forfeited to the Company. You acknowledge that such activity includes, but is not limited to, Business Activities.

You agree, in consideration for the grant of this Option and regardless of whether this Option becomes exercisable or is exercised, while you are employed or retained as a consultant by the Company or any of its subsidiaries and for a period of one year following any termination of your employment and, if applicable, any consulting relationship with the Company or any of its subsidiaries other than a termination in connection with a Change in Control, not to engage in, and not to become associated in a “Prohibited Capacity” (as defined below) with any other entity engaged in, any Business Activities and not to encourage or assist others in encouraging any employee of the Company or any of its subsidiaries to terminate employment or to become engaged in any such Prohibited Capacity with an entity engaged in any Business Activities. “Business Activities” shall mean the design, development, manufacture, sale, marketing or servicing of any product or providing of services competitive with the products or services of (x) the Company or any subsidiary if you are employed by or consulting with the Company at any time while this Option is outstanding, or (y) the subsidiary employing or retaining you at any time while this Option is outstanding, to the extent such competitive products or services are distributed or provided either (1) in the same geographic area as are such products or services of the Company or any of its subsidiaries, or (2) to any of the same customers as such products or services of the Company or any of its subsidiaries are distributed or provided. “Prohibited Capacity” shall mean being associated with an entity as an employee, consultant, investor or another capacity where (1) confidential business information of the Company or any of its subsidiaries could be used in fulfilling any of your duties or responsibilities with such other entity, (2) any of your duties or responsibilities are similar to or include any of those you had while employed or retained as a consultant by the Company or any of its subsidiaries, or (3) an investment by you in such other entity represents more than 1% of such other entity’s capital stock, partnership or other ownership interests.

Should you breach any of the restrictions contained in the preceding paragraph, by accepting this Option you agree, independent of any equitable or legal remedies that the Company may have and without limiting the Company’s right to any other equitable or legal remedies, to pay to the Company in cash immediately upon the demand of the Company (1) the amount of income realized for income tax purposes from the exercise of any portion of this Option, net of all federal, state and other taxes payable on the amount of such income, but only to the extent such exercises occurred on or after your termination of employment or, if applicable, any consulting relationship with the Company or its subsidiary or within the two year period prior to the date of such termination, plus (2) all costs and expenses of the Company in any effort to enforce its rights under this or the preceding paragraph. To the extent permitted under applicable law, the Company shall have the right to set off or withhold any amount owed to you by the Company or any of its subsidiaries or affiliates for any amount owed to the Company by you under this Award Agreement.

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You agree to the Committee’s authority with respect to the Award and to the application of the Company’s Dispute Resolution Policy.

Section 3 of the Plan provides, in part, that the Committee shall have the authority to interpret the Plan, the Award Agreement, this Option and any related document and decide all questions and settle all controversies and disputes relating thereto. It further provides that the determinations, interpretations and decisions of the Committee are within its sole discretion and are final, conclusive and binding on all persons.

In addition, you and the Company agree that if for any reason a claim is asserted against the Company or any of its subsidiaries or affiliated companies or any officer, employee or agent of the foregoing which (1) is within the scope of the Company’s Dispute Resolution Policy (the terms of which are incorporated herein, as it shall be amended from time to time); (2) subverts the provisions of Section 3 of the Plan; or (3) involves any of the provisions of the Award Agreement or the Plan or the provisions of any equity awards or other agreements relating to Company common stock or the claims of yourself or any persons to the benefits thereof, in order to provide a more speedy and economical resolution, the Dispute Resolution Policy shall be the sole and exclusive remedy to resolve all disputes, claims or controversies which are set forth above, except as otherwise agreed in writing by you and the Company or a subsidiary of the Company. It is our mutual intention that any arbitration award entered under the Dispute Resolution Policy will be final and binding and that a judgment on the award may be entered in any court of competent jurisdiction. Notwithstanding the provisions of the Dispute Resolution Policy, however, the parties specifically agree that any mediation or arbitration required by this paragraph shall take place at the offices of the American Arbitration Association located in the metropolitan Detroit area or such other location in the metropolitan Detroit area as the parties might agree. The provisions of this paragraph: (a) shall survive the termination or expiration of the Award Agreement, (b) shall be binding upon the Company’s and your respective successors, heirs, personal representatives, designated beneficiaries and any other person asserting a claim based upon the Award Agreement, (c) shall supersede the provisions of any prior agreement between you and the Company or its subsidiaries or affiliated companies with respect to any of the Company’s stock option, restricted stock, restricted stock unit or other stock-based incentive plans to the extent the provisions of such other agreement requires arbitration between you and your employer, and (d) may not be modified without the consent of the Company. Subject to the exception set forth above, you and the Company acknowledge that neither of us nor any other person asserting a claim described above has the right to resort to any federal, state or local court or administrative agency concerning any such claim and the decision of the arbitrator shall be a complete defense to any action or proceeding instituted in any tribunal or agency with respect to any dispute.

This Option grant does not imply any employment or consulting commitment by the Company.

You agree that the grant of this Option and acceptance of this Option does not imply any commitment by the Company, a subsidiary or affiliated company to your continued employment or consulting relationship, and that your employment status is that of an employee‑at‑will and in particular that the Company, its subsidiary or affiliated company has a continuing right with or without cause (unless otherwise specifically agreed to in writing executed by you and the Company) to terminate your employment or other relationship at any time. You agree that your acceptance represents your agreement not to terminate voluntarily your current employment (or consulting arrangement, if applicable) for at least one year from the Grant Date unless you have already agreed in writing to a longer period.

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You agree to comply with applicable tax requirements and to provide information as requested.

You agree to comply with the requirements of applicable federal and other laws with respect to withholding or providing for the payment of required taxes. You also agree to promptly provide such information with respect to Shares acquired pursuant to this Option, as may be requested by the Company or any of its subsidiaries or affiliated companies.

The Award Agreement shall be governed by and interpreted in accordance with Michigan law.

The headings set forth herein are for informational purposes only and are not a substantive part of these Terms and Conditions.

These Terms and Conditions are effective for grants made on or after the date hereof.

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Exhibit 10.c.ix

[MASCO CORPORATION LETTERHEAD]

[Date]

[Executive Name]

		
RE:	PRSU Award under the [Insert Performance Period] Program	

Dear [Executive Name]:

You have been designated to be a participant in Masco Corporation’s [insert Performance Period] Long-Term Incentive Program (the “Program”) by the Organization and Compensation Committee (the “Committee”) of the Board of Directors of Masco Corporation (the “Company”). This award agreement (“Award Agreement”) contains terms and conditions that apply to your award (the “Award”) of Performance Restricted Stock Units (“PRSUs”). You must accept this Award within 30 days of this notification, or it will be canceled without consideration and will be of no further force and effect.

This Award entitles you to receive Shares as a share award (“Share Award”), if certain conditions are satisfied, including approval of the Share Award by the Committee following the Performance Period. All of your rights to this Award are described in this Award Agreement, in the Program and in the Plan, which, together, constitute your performance award agreement (the “Agreement”). Terms not otherwise defined in this Award Agreement have the meanings ascribed to them in the Program or the Plan.

Your Award

You have been granted ______ PRSUs for the three-year period that begins on January 1, ____, and ends on December 31, ____ (the “Performance Period”). Subject to the terms of the Agreement, if the Committee determines (following the end of the Performance Period), that an average ROIC and the cumulative EPS was achieved by the Company at the Threshold Performance Score Percentage or greater, then a Share Award will be made to you on the Share Award Date.

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Exhibit 10.c.ix

Performance Metrics

The Committee has established the following performance metrics that will be measured during the Performance Period.

[Insert performance metrics.]

Goals for the Performance Period

The following Performance Score Percentages and performance goals have been established by the Committee for the Performance Period:

	
				
 	Performance Score Percentages	
 	Threshold
40%	Target
100%	Maximum
200%	
[Insert Performance Goal(s)]	 	 	 	

For purposes of determining the number of PRSUs that would vest into Shares, subject to the Committee’s right to exercise negative discretion, the overall Performance Score Percentage will be calculated [insert weighting if more than one Performance Goal].

Your Acceptance    

By accepting this Award, you voluntarily agree to the terms and conditions of this Award Agreement and acknowledge that:

•	You have read and you understand this Award Agreement, the Program and the Plan;	

•	You have received or have access to all of the documents referred to in this Award Agreement;	

•	The terms and conditions contained in the Program, including without limitation, the terms under the caption “Participant’s Further Acknowledgements,” are incorporated into this Award Agreement and are binding on you;	

•	There are no other commitments or understandings currently outstanding with respect to any other grants of options, restricted stock, restricted stock units, phantom stock, stock appreciation rights, or performance awards, except as may be evidenced by other written agreements entered into by you and the Company or the Committee;	

•	You may be required to accept certain terms and conditions at the end of the Performance Period with respect to any Share Award that may be issued to you;	

•	This Award Agreement will be governed by and interpreted in accordance with Michigan law, unless preempted by applicable Federal law; and	

•	This Award is, in all respects, subject to the documents referenced in this Award Agreement and the Committee’s application of its negative discretion, and is intended to comply with, or be exempt from, as the case may be, the provisions of Internal Revenue Code Section 409A.	

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Exhibit 10.c.ix

Upon your acceptance of this this Award, the Agreement will be effective as of the date hereof.

Very truly yours,
                            
Masco Corporation

By: ___________________
Keith J. Allman
Its:     Chief Executive Officer

[SIGNATURE BLOCK FOR THE CEO’S AWARD AGREEMENT:

Very truly yours,
                            
The Organization and Compensation
Committee of Masco Corporation

By: ___________________
Donald R. Parfet
Its:     Chairman]

AGREED TO THE FOREGOING:

_______________________________________
[Executive]

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302760

Exhibit 10.c.viii

MASCO CORPORATION

LONG-TERM INCENTIVE PROGRAM
under the 2014 Long Term Stock Incentive Plan
December 17, 2019
(for Performance Awards granted on or after the date hereof)

Purpose of the Program

The purpose of the Long-Term Incentive Program (the “Program”) is to provide an additional incentive for a Participant (as defined below) designated by the Organization and Compensation Committee (the “Committee”) of the Board of Directors of Masco Corporation (the “Company”) to contribute to the achievement of the Company’s long-term growth and profitability goals established by the Committee at the beginning of a three-year period designated by the Committee (the “Performance Period”), and to align the Participant’s efforts with stockholder interests. The Committee will set the Performance Goals (as defined below) at levels that are consistent with the Company’s long-range business plan, and the achievement of these goals will require a high level of performance over the Performance Period.

Summary of the Program

Awards under this Program are made granted pursuant to the 2014 Long Terms Stock Incentive Plan (the “Plan”). Terms not otherwise defined herein have the meanings given to them in the Plan.

“Participants” in the Program are typically members of the Company’s executive officer group. An individual’s eligibility to be a Participant in the Program is determined by the Committee at the beginning of the Performance Period. The Committee will specify the performance metric(s) to be measured during the Performance Period (the “Performance Metric(s)”) and the minimum (the “Threshold”), the target (the “Target”) and the maximum (the “Maximum”) achievement of the Performance Metric(s) (each, a “Performance Goal”) at the beginning of each Performance Period. The Performance Metric(s) and Performance Goals will be set forth in an award agreement (the “Award Agreement”) between the Participant and the Company. The Company’s performance during the Performance Period will be evaluated against such Performance Goals.

Following the completion of each year during the Performance Period, the Company will certify that year’s financial results to the Committee. At the end of the Performance Period, the Committee will then calculate the Company’s three-year performance achieved for each Performance Metric, and if at least the Threshold Performance Goal is attained, the PRSUs will be redeemed in favor of a Share Award after the end of the Performance Period, as provided in the Award Agreement. Any Share Award is subject to the Committee’s right to exercise negative discretion (to reduce or eliminate an award at any time) and to the provisions of this Program. The definitions, procedures, and timing of the Program are described in more detail below.

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Exhibit 10.c.viii

An Award under the Program will be designated as a Performance Restricted Stock Unit (“PRSU”), which is a bookkeeping entry that may convert to a share of Company common stock (a “Share”) under certain circumstances, including approval of a share award (“Share Award”) by the Committee. PRSUs are recorded on a one-for-one PRSU-to-Share basis. However, a PRSU can result in more or less Shares depending on the achievement level of the Performance Goals. If a PRSU does not convert to a Share at the conclusion of the Performance Period as provided in the Program, it will lapse and be forfeited without further consideration.

The calculation of the Company’s actual performance of the Performance Metric(s) designated by the Committee will be construed consistent with generally accepted accounting principles, where applicable. In addition to the adjustments referred to above, the Committee will also make adjustments as provided in the Plan and as otherwise specified in the Award Agreement to exclude, as applicable, the certain unusual items or other non-recurring items that may be separately identified and reported.
 
Determination of Achieved Performance Score Percentage and Amount of Share Award

Following the completion of each year during the Performance Period, the Company will certify that year’s financial results to the Committee and, at the end of the Performance Period, the Committee will then determine the achieved “Performance Score Percentage” for the Performance Period as described in the Award Agreement.

If the achieved overall Performance Score Percentage for the Performance Metrics is less than the Threshold Performance Score Percentage, no Share Award will be made and the PRSUs will be forfeited. If the Threshold Performance Score Percentage is achieved, subject to the Committee’s right to exercise negative discretion, a Share Award will be determined by multiplying the achieved overall Performance Score Percentage by the number of PRSUs in the Participant’s Award, and rounded to the nearest whole Share.

Continued Employment for Share Award and Timing of Shares

Except as described below, to qualify for a Share Award, a Participant must be employed by the Company on the Share Award Date (as defined below). If a Participant’s employment is transferred within the Company, even if to a position in which the Participant is no longer eligible to participate in the Program, the Participant will continue to be eligible for a Share Award (prorated or not, as the case may be) following the Committee’s approval of that Share Award, as if the employment transfer had not occurred (unless the Committee determines that there was another reason for the transfer that violates, or is subject to, another provision of the Agreement). The use of the words “employment” or “employed” shall be deemed to refer to employment by the Company and its subsidiaries.

Once a Share Award is approved by the Committee in the year following the end of the Performance Period, the Shares will be issued to the Participant between February 15 and March 15 of the year following the end of the Performance Period (the distribution date being the “Share Award Date”). A Participant may be required to accept certain terms and conditions after the end of the Performance Period with respect to any Shares that may be issued to the Participant.

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Exhibit 10.c.viii

Promptly after each Share Award Date, a Participant will also be paid an amount in cash (subject to any applicable taxes or charges) equal to the sum of the regular quarterly per share cash dividends, if any, paid by the Company to holders of record on or after the Grant Date (the “Dividend Equivalent”) multiplied by the number of PRSUs then vesting into Shares. If, prior to the Share Award Date, there is a record date for the Company’s regularly quarterly cash dividend, which dividend will be payable after the Share Award Date, then as soon as practicable after the later of the Share Award Date or the date the declared dividend is paid to shareholders generally, a Participant will be paid the Dividend Equivalent on the PRSUs that were held by such Participant on such record date and vested into Shares, calculated as provided above. Except for the payment of Dividend Equivalents, a Participant shall have no right to receive any payment on account of any dividend or other distribution on the underlying Shares.
Special Circumstances
Notwithstanding the foregoing, there are certain other employment situations in which the terms of an Award may be modified, including the following:

•	If, prior to the Share Award Date, a Participant retires as an employee of the Company and such retirement occurs on or after the Participant attains (i) age 65, or (ii) age 55 and has at least 10 years of continuous employment with the Company, then, in the discretion of the Committee, the Participant may receive a cash payment equal to the value of a prorated Share Award (where the prorated amount is determined by the Committee and may be based, in part, on the length of the Participant’s service during the Performance Period) that would otherwise have been made. Such cash payment would be made at the same time as Share Awards are made to other Participants; and	

•	If, prior to the Share Award Date, (1) there is a Change in Control of the Company and the Participant is terminated from employment at the time of the Change in Control or within a specified period after the Change in Control (as determined by the Committee) or the Participant resigns from employment for Good Reason (as determined by the Committee) within that specified period, or (2) the Participant dies, or (3) the Participant becomes permanently and totally disabled (as determined by the Committee), then, in the discretion of the Committee, a cash payment equal to the value of a prorated Share Award (where the prorated amount is determined by the Committee and may be based, in part, on the length of the Participant’s service during the Performance Period) that would otherwise have been made. Such cash payment may be made at the same time as Share Awards are made to other Participants.	

Participant’s Further Agreements

In consideration of the Award, each Participant agrees to the following terms.

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Exhibit 10.c.viii

The Participant agrees not to engage in certain activities

Notwithstanding anything contained in the Award Agreement, if at any time the Participant engages in an activity following the Participant’s termination of employment, which in the sole judgment of the Committee is detrimental to the interests of the Company, including a subsidiary or affiliated company, all rights to any portion of the Award will be forfeited. Such activity includes, but is not limited to, “Business Activities.”

In addition, the Participant agrees, in consideration for an Award, and regardless of whether any Shares have been issued, while a Participant is employed or retained as a consultant by the Company or any of its subsidiaries or affiliates and for a period of one year following any termination of such employment and, if applicable, any consulting relationship with the Company or any of its subsidiaries or affiliates other than a termination in connection with a Change in Control, the Participant agrees not to engage in, and not to become associated in a “Prohibited Capacity” with any other entity engaged in, any Business Activities and not to encourage or assist others in encouraging any employee of the Company or any of its subsidiaries to terminate employment or to become engaged in any such Prohibited Capacity with an entity engaged in any Business Activities. “Business Activities” shall mean the design, development, manufacture, sale, marketing or servicing of any product or providing of services competitive with the products or services of (x) the Company or any subsidiary if the Participant is employed by or consulting with the Company at any time while the Award is outstanding, or (y) the subsidiary employing or retaining the Participant at any time while the Award is outstanding, to the extent such competitive products or services are distributed or provided either (1) in the same geographic area as are such products or services of the Company or any of its subsidiaries, or (2) to any of the same customers as such products or services of the Company or any of its subsidiaries are distributed or provided. “Prohibited Capacity” shall mean being associated with an entity as an employee, consultant, investor or another capacity where (1) confidential business information of the Company or any of its subsidiaries could be used in fulfilling any of the Participant’s duties or responsibilities with such other entity, (2) any of the Participant’s duties or responsibilities are similar to or include any of those the Participant had while employed or retained as a consultant by the Company or any of its subsidiaries, or (3) an investment by the Participant in such other entity represents more than 1% of such other entity’s capital stock, partnership or other ownership interests.

If a Participant breaches the restrictions contained in the preceding paragraph, independent of any equitable or legal remedies that the Company may have and without limiting the Company’s right to any other equitable or legal remedies, then the Participant shall pay to the Company in cash immediately upon the demand of the Company (1) the amount of income realized for income tax purposes from the Award, net of all federal, state and other taxes payable on the amount of such income, but only to the extent such income is realized from any Award under the Program received on or after the Participant’s termination of employment or, if applicable, any consulting relationship with the Company or its subsidiary or within the two-year period prior to the date of such termination, plus (2) all costs and expenses of the Company in any effort to enforce its rights under this or the preceding paragraph. To the extent permitted by applicable law, the Company shall have the right to set off or withhold any amount owed to a Participant by the Company or any of its subsidiaries or affiliates for any amount owed to the Company by such Participant hereunder. The Plan also has specific provisions regarding the consequences that must follow certain types of restatements of the Company’s financial statements, and those provisions can apply even if the Participant has not breached any part of this Program.

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Exhibit 10.c.viii

The Participant agrees to the Committee’s authority with respect to the Award and to the application of the Company’s Dispute Resolution Policy

Section 3 of the Plan provides, in part, that the Committee shall have the authority to interpret the Plan, Award Agreement, Awards and any related agreements, and decide all questions and settle all controversies and disputes relating thereto. It further provides that the determinations, interpretations and decisions of the Committee are within its sole discretion and are final, conclusive and binding on all persons.

In addition, the Participant and the Company agree that if, for any reason, a claim is asserted against the Company or any of its subsidiaries or affiliated companies or any officer, employee or agent of the foregoing (other than a claim involving non‑competition restrictions or the Company’s, a subsidiary’s or an affiliated company’s trade secrets, confidential information or intellectual property rights) which (1) are within the scope of the Company’s Dispute Resolution Policy (the terms of which are incorporated herein, as it shall be amended from time to time); (2) subverts the provisions of Section 3 of the Plan; or (3) involves any of the provisions of the Program, the Plan or the provisions of any Award or other agreements, including those related to the restricted stock units and related Shares or the claims of the Participant or any persons to the benefits thereof, then in order to provide a more speedy and economical resolution, the Dispute Resolution Policy shall be the sole and exclusive remedy to resolve all disputes, claims or controversies which are set forth above, except as otherwise agreed in writing by the Participant and the Company or a subsidiary or affiliate of the Company.

It is our mutual intent that any arbitration award entered into under the Dispute Resolution Policy will be final and binding and that a judgment on the award may be entered in any court of competent jurisdiction. Notwithstanding the provisions of the Dispute Resolution Policy, however, the parties specifically agree that any mediation or arbitration required by the provisions of this Program shall take place at the offices of the American Arbitration Association located in the metropolitan Detroit area or such other location in the metropolitan Detroit area as the parties might agree. These provisions: (a) shall survive the termination or expiration of the Agreement, (b) shall be binding upon the Company’s and the Participant’s respective successors, heirs, personal representatives, designated beneficiaries and any other person asserting a claim based upon the Agreement, (c) shall supersede the provisions of any prior agreement between the Participant and the Company or its subsidiaries or affiliated companies with respect to any portion of the Program or other stock-based incentive plans to the extent the provisions of such other agreement requires arbitration between the Participant and the Participant’s employer, and (d) may not be modified without the consent of the Company. Subject to the exception set forth above, the Participant and the Company acknowledge that neither of the Participant nor the Company nor any other person asserting a claim described above has the right to resort to any federal, state or local court or administrative agency concerning any such claim and the decision of the arbitrator shall be a complete defense to any action or proceeding instituted in any tribunal or agency with respect to any dispute.

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Exhibit 10.c.viii

Nothing in the Agreement or otherwise limits the Participant’s ability to communicate directly with and provide information, including documents, not otherwise protected from disclosure by any applicable law or privilege to any federal, state or local governmental agency or commission (“Government Agency”) regarding possible legal violations, without disclosure to the Company. The Company may not retaliate against a Participant for any of these activities, and nothing in the Agreement requires a Participant to waive any monetary award or other payment that the Participant might become entitled to from any Government Agency. Further, nothing in the Agreement precludes a Participant from filing a charge of discrimination with the Equal Employment Opportunity Commission or a like charge or complaint with a state or local fair employment practice agency. By accepting the Award, the Participant agrees to waive the right to receive future monetary recovery directly from the Company, including payments by the Company that result from any complaint or charges that a Participant files with any Governmental Agency or that are filed on a Participant’s behalf.  

The Award does not imply any employment or consulting commitment by the Company

Neither the Award nor the acceptance of the Award shall imply any commitment by the Company, a subsidiary or affiliated company to the Participant’s continued employment or any consulting relationship, and that a Participant’s employment status is that of an “employee‑at‑will” and, in particular, that the Company, its subsidiary or affiliated company has a continuing right with or without cause (unless otherwise specifically agreed to in writing executed by the Participant and the Company) to terminate a Participant’s employment or other relationship at any time. The Participant’s acceptance of an Award represents the Participant’s agreement not to terminate voluntarily the Participant’s current employment (or consulting arrangement, if applicable) for at least one year from the date of the Award unless the Participant has already agreed in writing to a longer period.

The Participant agrees to comply with applicable tax requirements

The Participant agrees to comply with the requirements of applicable federal, state, and other applicable laws with respect to withholding or providing for the payment of required taxes and that the Participant will provide related information as reasonably requested.

Section 409A of the Internal Revenue Code

The Program, the Plan and any Award granted hereunder are intended to comply with or be exempt from the requirements of Section 409A of the Internal Revenue Code (“Section 409A of the Code”), and the provisions of this Program, the Plan and any Award granted hereunder shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code. If any provision of this Program or the Plan or any term or condition of any Award granted hereunder would otherwise frustrate or conflict with this intent, the provision or the term or condition shall be interpreted and deemed amended so as to avoid this conflict. Notwithstanding anything in the Plan to the contrary, if the Committee considers a Participant to be a “specified employee” under Section 409A of the Code at the time of such Participant’s “separation from service” (as defined in Section 409A of the Code), and any amount hereunder is “deferred compensation” subject to Section 409A of the Code, any distribution of such amount that otherwise would be made to the Participant with respect to an Award as a result of such “separation from service” shall not be made until the date that is six months after such “separation from service,” except to the extent that earlier distribution would not result in the Participant incurring interest or additional tax under Section 409A of the

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Exhibit 10.c.viii

Code. A Participant’s right to any “dividend equivalents” (within the meaning of Section 1.409A-3(e) of the Treasury Regulations) shall be treated separately from the right to other amounts under the Award. To the extent this Award includes a “series of installment payments” (within the meaning of Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), the Participant’s right to such series of installment payments shall be treated as a right to a series of separate payments and not as a right to a single payment. Notwithstanding the foregoing, the tax treatment of the benefits provided under this Program, the Plan or any Award granted hereunder is not warranted or guaranteed, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Section 409A of the Code.

Administration, Amendment, and Termination of the Program

The Committee has the sole authority and discretion to interpret the Program and its related documents and to administer the Program. The Committee may amend or terminate the Program at any time. Neither the Company nor the Committee is obligated to make the Program (in whole or in part), or any other program, available to a Participant or to any other employee at any time. The Committee may suspend, eliminate, or reduce an Award, Share Award, or Shares for any Participant who fails to achieve an acceptable level of personal performance and professionalism.

The headings in this Program are for information purposes only and are not a substantive part of the operative Agreement.

Governing Law

The Program shall be governed by and interpreted in accordance with Michigan law.

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302758

Exhibit 10.i.ii

SECOND AMENDED AND RESTATED AIRCRAFT TIME SHARING AGREEMENT

THIS AIRCRAFT TIME SHARING AGREEMENT is made and entered into this 26th day of June, 2019, by and between MASCO CORPORATION, a corporation organized and existing under the laws of the State of Delaware (“TIMESHAROR”), and RICHARD A. MANOOGIAN (“TIMESHAREE”).

WITNESSETH:

WHEREAS, TIMESHAROR and TIMESHAREE entered into that certain Aircraft Time Sharing Agreement dated October 1, 2017, pursuant to §91.501(c)(1) of the Federal Aviation Regulations (“FARs”); and

WHEREAS, on April 4, 2019, TIMESHAROR and TIMESHAREE amended and restated such agreement to reflect changes in Operator’s ownership of certain aircraft.

WHEREAS, TIMESHAROR and TIMESHAREE desire to further amend and restate such agreement to reflect changes in Operator’s ownership of certain aircraft.

WHEREAS, TIMESHAROR is the operator of the aircraft listed on attached Schedule I (the “Aircraft”); and

WHEREAS, TIMESHAREE desires use of the Aircraft from time to time; and

WHEREAS, TIMESHAROR desires to make the Aircraft available to TIMESHAREE for the above operations on a time sharing basis in accordance with § 91.501 of the Federal Aviation Regulations (“FARs”).

NOW THEREFORE, in consideration of the mutual covenants herein set forth, the parties agree as follows:

1.    Provision of Aircraft. TIMESHAROR agrees to provide the Aircraft to TIMESHAREE on a time sharing basis in accordance with the provisions of Sections 91.501(b)(6), 91.501(c)(1) and 91.501(d) of the FARs for the period commencing upon execution of this Agreement and continuing until terminated pursuant to Paragraph 15 below or by mutual agreement of the parties.

2.    Reimbursement of Expenses. For each flight conducted under this Agreement, TIMESHAREE shall pay TIMESHAROR the amount billed by TIMESHAROR, which shall be an amount equal to the sum of the expenses of operating such flight to the extent prescribed by FAR 91.501(d), i.e. the sum of the expenses set forth in subparagraphs (a)-(j) below:

(a)    fuel, oil, lubricants and other additives;
		
(b)	travel expenses of the crew, including food, lodging and ground transportation;	
		
(c)	hangar and tie-down costs away from the Aircraft’s base of operation;	
		
(d)	insurance obtained for the specific flight;	
		
(e)	landing fees, airport taxes and similar assessments;	
		
(f)	customs, foreign permit and similar fees directly related to the flight;	

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Exhibit 10.i.ii

(g)	in-flight food and beverages;	
		
(h)	passenger ground transportation;	
(i)    flight planning and weather contract services; and
		
(j)	an additional charge equal to one hundred percent (100%) of the expenses listed in subparagraph (a) above.	

3.    Invoicing and Payment. All payments to be made to TIMESHAROR by TIMESHAREE hereunder shall be paid in the manner set forth in this Paragraph 3. TIMESHAROR will pay to suppliers, employees, contractors and government entities all expenses related to the operations of the Aircraft hereunder in the ordinary course. As to each flight operated hereunder, TIMESHAROR shall provide to TIMESHAREE an invoice for the charges specified in Paragraph 2 of this Agreement (plus domestic or international air transportation excise taxes, as applicable, imposed by the Internal Revenue Code and collected by TIMESHAROR), such invoice to be issued as agreed to by the parties. TIMESHAREE shall pay TIMESHAROR the full amount of such invoice on terms agreeable to TIMESHAROR. Invoices shall be prepared by TIMESHAROR in a format reasonably acceptable to TIMESHAREE.

4.    Flight Requests. TIMESHAREE will provide TIMESHAROR with flight requests and proposed flight schedules as far in advance as possible. Flight requests shall be in a form, whether oral or written, mutually convenient to and agreed upon by the parties. In addition to proposed schedules and departure times, TIMESHAREE shall provide at least the following information for each proposed flight reasonably in advance of the desired departure time as required by TIMESHAROR or its flight crew.

(a)    departure point;
(b)    destination;
(c)    date and time of flight;
(d)    number and identity of anticipated passengers;
(e)    nature and extent of luggage and/or cargo to be carried;
(f)    date and time of return flight, if any, and
		
(g)	any other information concerning the proposed flight that may be pertinent to or reasonably required by TIMESHAROR or its flight crew.	

5.    Aircraft Scheduling. TIMESHAROR shall have final authority over all scheduling of the Aircraft; provided, however, that TIMESHAROR will use reasonable efforts to accommodate TIMESHAREE’s requests.

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Exhibit 10.i.ii

6.    Aircraft Maintenance. TIMESHAROR shall be solely responsible for securing scheduled and unscheduled maintenance, preventive maintenance and required or otherwise necessary inspections of the Aircraft and shall take such requirements into account in scheduling the operation of the Aircraft. Performance of maintenance, preventive maintenance or inspection shall not be delayed or postponed due to any scheduled operation of the Aircraft unless such maintenance or inspection can safely be conducted at a later time in compliance with the sound discretion of the pilot-in-command.

7.    Flight Crew. TIMESHAROR shall employ, pay for and provide a qualified flight crew for all flight operations under this Agreement.

8.    Operational Authority and Control. TIMESHAROR shall be responsible for the physical and technical operation of the Aircraft and the safe performance of all flights and shall retain full authority and control, including exclusive operational control, and possession of the Aircraft at all times during the term of this Agreement. In accordance with applicable FARs, the qualified flight crew provided by TIMESHAROR will exercise all required and/or appropriate duties and responsibilities in regard to the safety of each flight conducted hereunder. The pilot-in-command shall have absolute discretion in all matters concerning the preparation of the Aircraft for flight and the flight itself, the load carried and its distribution, the decision whether or not a flight shall be undertaken, the route to be flown, the place where landings shall be made and all other matters relating to operation of the Aircraft. TIMESHAREE specifically agrees that the flight crew shall have final and complete authority to delay or cancel any flight for any reason or condition which, in sole judgment of the pilot-in-command, could compromise the safety of the flight and to take any other action which, in the sole judgment of the pilot-in-command, is necessitated by considerations of safety. No such action of the pilot-in-command shall create or support any liability to TIMESHAREE or any other person for loss, injury, damages or delay. The parties further agree that TIMESHAROR shall not be liable for delay or failure to furnish the Aircraft and crew pursuant to this Agreement where such failure is caused by government regulation or authority, mechanical difficulty or breakdown, war, civil commotion, strikes or labor disputes, weather conditions, acts of God or other circumstances beyond TIMESHAROR’s reasonable control.

9.    Insurance.

(a)    TIMESHAROR will maintain or cause to be maintained in full force and effect, throughout the term of this Agreement, aircraft liability insurance in respect to the Aircraft, naming TIMESHAREE as an additional insured, in an amount at least equal to $100,000,000 combined single limit for bodily injury to or death of persons (including passengers) and property damage liability. Such insurance shall include: (i) provision for thirty (30) days’ prior written notice to TIMESHAREE before any lapse, alteration, termination or cancellation of insurance shall be effective as to TIMESHAREE; (ii) provisions whereby the insurer(s) irrevocably and unconditionally waive all rights of subrogation which they may have or acquire against TIMESHAREE; and (iii) a cross-liability clause to the effect that such insurance, except for the limits of liability, shall operate to give TIMESHAREE the same protection as if there were a separate policy issued to him.

(b)     TIMESHAROR shall use its reasonable best efforts to procure such additional insurance coverage as TIMESHAREE may reasonably request naming TIMESHAREE as an insured; provided that the costs of such additional insurance shall be borne by TIMESHAREE pursuant to Paragraph 2(d) hereof.

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Exhibit 10.i.ii

		
10.	Warranties.     TIMESHAREE warrants that:	

(a)he will use the Aircraft under this Agreement for his personal or business use, including the carriage of his guests, and will not use the Aircraft for purposes of providing transportation of passengers or cargo in air commerce for compensation or hire as an air carrier or commercial operator;

(b)he will not permit any lien, security interest or other charge or encumbrance to attach against the Aircraft as a result of his actions or inactions and shall not convey, mortgage, assign, lease or in any way alienate the Aircraft or TIMESHAROR's rights hereunder; and

(c)during the term of this Agreement, he will abide by and conform to all laws, orders, rules and regulations as are, from time to time, in effect and which relate in any way to the operation or use of the Aircraft under a time sharing arrangement.

11.     Base of Operations. For purposes of this Agreement, the base of operation of the Aircraft is Romulus, Michigan, Detroit Metropolitan Airport (DTW); provided that such base may be changed permanently upon notice from TIMESHAROR to TIMESHAREE.

12.     Notices and Communications. All notices, requests, demands and other communications required or desired to be given hereunder shall be in writing (except as permitted pursuant to Paragraph 4) and shall be deemed to be given: (i) if personally delivered, upon such delivery; (ii) if mailed by certified mail, return receipt requested, postage pre-paid, addressed as follows (to the extent applicable for mailing), upon the earlier to occur of actual receipt, refusal to accept receipt or three (3) days after such mailing; (iii) if sent by regularly scheduled overnight delivery carrier with delivery fees either prepaid or an arrangement, satisfactory with such carrier, made for the payment of such fees, addressed (to the extent applicable for overnight delivery) as follows, upon the earlier to occur of actual receipt or the next "Business Day" (as hereafter defined) after being sent by such delivery; or (iv) upon actual receipt when sent by fax:

If to TIMESHAROR:
MASCO CORPORATION
Attn: Jay Orwin
30100 Northline Road
Romulus, MI 48174

If to TIMESHAREE:
RICHARD A. MANOOGIAN
21001 Van Born Road
Taylor, MI  48180

Notices given by other means shall be deemed to be given only upon actual receipt. Addresses may be changed by written notice given as provided herein and signed by the party giving the notice.

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Exhibit 10.i.ii

13.     Further Acts. TIMESHAROR and TIMESHAREE shall from time to time perform such other and further acts and execute such other and further instruments as may be required by law or may be reasonably necessary to: (a) carry out the intent and purpose of this Agreement; and (b) establish, maintain and protect the respective rights and remedies of the other party.

14.     Successors and Assigns. Neither this Agreement nor either party's interest herein shall be assignable by either party without the written consent of the other party hereto. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives and successors.

15.     Termination. Either party may terminate this Agreement for any reason upon written notice to the other, such termination to become effective ten (10) days from the date of the notice; provided that this Agreement may be terminated on such shorter notice as may be required to comply with applicable laws, regulations or insurance requirements.

16.     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan without regard to any conflicts of law provisions or principles to the contrary. The parties hereby consent and agree to the nonexclusive jurisdiction and to the venue of any state or federal court for the State of Michigan in any proceedings hereunder and hereby waive any objection to any such proceedings based on improper venue or forum non conveniens. The parties hereby further consent and agree to the exercise of such personal jurisdiction over them by such courts with respect to any such proceedings, waive any objection to the assertion or exercise of such jurisdiction and consent to process being served in any such proceedings in the manner provided for the giving of notices in Paragraph 12.

17.     Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions shall not be affected or impaired.

18.     Amendment or Modification. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and it is not intended to confer upon any person or entity any rights or remedies hereunder which are not expressly granted herein. This Agreement may be amended or supplemented only by a writing signed by the party against whom such amendment or supplement is sought to be enforced.

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Exhibit 10.i.ii

19. TRUTH IN LEASING STATEMENT PURSUANT TO SECTION 91.23 OF THE FEDERAL AVIATION REGULATIONS.

(a)     TIMESHAROR CERTIFIES THAT THE AIRCRAFT HAS BEEN INSPECTED AND MAINTAINED WITHIN THE 12-MONTH PERIOD PRECEDING THE DATE OF THIS AGREEMENT IN ACCORDANCE WITH THE PROVISIONS OF PART 91 OF THE FEDERAL AVIATION REGULATIONS AND THAT ALL APPLICABLE REQUIREMENTS FOR THE AIRCRAFT'S MAINTENANCE AND INSPECTION THEREUNDER HAVE BEEN MET AND ARE VALID FOR THE OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT.

(b)     TIMESHAROR, WHOSE ADDRESS APPEARS IN PARAGRAPH 12 ABOVE AND WHOSE AUTHORIZED SIGNATURE APPEARS BELOW, AGREES, CERTIFIES AND ACKNOWLEDGES THAT WHENEVER THE AIRCRAFT IS OPERATED UNDER THIS AGREEMENT, TIMESHAROR SHALL BE KNOWN AS, CONSIDERED AND SHALL IN FACT BE THE OPERATOR OF THE AIRCRAFT AND THAT TIMESHAROR UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.

TIMESHAROR: MASCO CORPORATION

	
		
By:	/s/Jay Orwin	
Name: Jay Orwin
Title: Director of Aviation
 
(c) THE PARTIES UNDERSTAND THAT AN EXPLANATION OF FACTORS AND PERTINENT FEDERAL AVIATION REGULATIONS BEARING ON OPERATIONAL CONTROL CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE. TIMESHAROR FURTHER CERTIFIES THAT IT WILL SEND, OR CAUSE TO BE SENT, A TRUE COPY OF THIS AGREEMENT TO, FEDERAL AVIATION ADMINISTRATION, AIRCRAFT REGISTRATIONS BRANCH, ATTN. TECHNICAL SECTION, P.O. BOX 25724, OKLAHOMA CITY, OKLAHOMA 73125, WITHIN 24 HOURS AFTER ITS EXECUTION, AS REQUIRED BY SECTION 91.23(c)(1) OF THE FEDERAL AVIATION REGULATIONS.

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Exhibit 10.i.ii

IN WITNESS WHEREOF, the parties hereto have caused this Aircraft Time Sharing Agreement to be duly executed on the date first above written. The persons signing below warrant their authority to sign.

		
TIMESHAROR:	TIMESHAREE:	
MASCO CORPORATION                 RICHARD MANOOGIAN

		
By:	/s/Jay Orwin	
Jay Orwin	
Director of Aviation	

		
By:	/s/Richard Manoogian	
Printed Name: Richard Manoogian	

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Exhibit 10.i.ii

SCHEDULE I

N90MC    Falcon 2000LXS            s/n 322
N175MC    Embraer Phenom 300E        s/n 000526

N195MC     Embraer Phenom 300E        s/n 000535

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Exhibit 21

MASCO CORPORATION
(a Delaware corporation)

Subsidiaries as of December 31, 2019

Directly owned subsidiaries are located at the left margin; each subsidiary tier thereunder is indented. Subsidiaries are listed under the names of their respective parent entities. Unless otherwise noted, the subsidiaries are wholly-owned. Certain of these entities may also use trade names or other assumed names in the conduct of their business.

	
		
NAME	JURISDICTION OF FORMATION	
Airex 3, LLC	Michigan	
Behr Holdings Corporation	Delaware	
Behr Process Corporation (1)	California	
BEHR PAINTS IT!, INC.	California	
Behr Process Canada Ltd.	Canada	
Behr Sales Inc.	California	
Masterchem Industries LLC	Missouri	
ColorAxis, Inc.	California	
Behr Process Paints (India) Private Limited	India	
BrassCraft Manufacturing Company (2)	Michigan	
Brasstech, Inc. (3)	California	
Delta Faucet (China) Co. Ltd.	China	
Delta Faucet Company Mexico, S. de R.L. de C.V.	Mexico	
Kichler Lighting LLC	Delaware	
L.D. Kichler Lighting Services (Shanghai) Co., Ltd.	China	
Landex of Wisconsin, Inc.	Wisconsin	
Liberty Hardware Mfg. Corp.	Florida	
Masco Asia (Shenzhen) Co. Ltd.	China	
Masco Building Products Corp.	Delaware	
Masco Cabinetry LLC (4)	Delaware	
KraftMaid Services India Private Limited	India	
Masco Cabinetry Middlefield LLC	Ohio	
Masco Cabinetry Hong Kong Limited	Hong Kong	
Masco Capital Corporation	Delaware	
Masco Chile Limitada (5)	Chile	
Masco Corporation of Indiana	Indiana	
Delta Faucet Company (6)	Indiana	
Delta Faucet Company of Tennessee	Delaware	
Masco Europe, Inc.	Delaware	
Masco Europe SCS	Luxembourg	
Masco Europe S. á r.l.	Luxembourg	
Behr (Beijing) Paint Company Limited	China	
Behr Paint (Beijing) Commercial Co., Ltd.	China	
Masco Canada Limited	Canada	
Masco Corporation Limited	United Kingdom	
Bristan Group Limited	United Kingdom	
(1) Also conducts business under the assumed names Behr Paint Company, Behr Pro and Masco Coatings Group.
(2) Also conducts business under the assumed name Cobra Products, Inc. and Plumbers Quality Tool Mfg. Co., Inc.
(3) Also conducts business under the assumed names Ginger, Motiv, Newport Brass and Newport Metal Finishing, Inc.
(4) Also conducts business under the assumed names KraftMaid Cabinetry, Merillat and Quality Cabinets.
(5) Masco Corporation’s ownership is 99.99%.
(6) Also conducts business under the assumed names Brizo Kitchen & Bath, Masco Bathing Company and Peerless Faucet Company.
(7) Also conducts business under the assumed name Delta Faucet Canada.	

291234

Exhibit 21

	
		
NAME	JURISDICTION OF FORMATION	
Duraflex Limited	United Kingdom	
Watkins Distribution UK Limited	United Kingdom	
Masco Germany Holding GmbH	Germany	
Hüppe GmbH	Germany	
Hüppe Belgium S.A.	Belgium	
Hüppe s.r.o.	Czech Republic	
Hüppe S. á r.l.	France	
Hüppe B.V.	Netherlands	
Hüppe Spólka z.o.o.	Poland	
Hüppe S.L.	Spain	
Hüppe Insaat Sanayi ve Ticaret A.S.	Turkey	
Masco Beteiligungsgesellschaft mbH	Germany	
Hansgrohe SE (8)	Germany	
Hansgrohe Deutschland Vertriebs GmbH	Germany	
Hansgrohe International GmbH	Germany	
Hansgrohe S.A.	Argentina	
Hansgrohe Pty Ltd	Australia	
Hansgrohe Handelsges.mbH	Austria	
Hansgrohe N.V.	Belgium	
Hansgrohe Brasil Metals Santitários Ltda.	Brazil	
Hansgrohe Sanitary Products (Shanghai) Co. Ltd.	China	
Hansgrohe d.o.o.	Croatia	
Hansgrohe CS, s.r.o.	Czech Republic	
Hansgrohe A/S	Denmark	
Hansgrohe Wasselonne, S.A.	France	
Hansgrohe S. á r.l.	France	
Hansgrohe, Inc.	Georgia	
Hansgrohe Kft.	Hungary	
Hansgrohe India Private Ltd.	India	
Hansgrohe s.r.l.	Italy	
Hansgrohe Japan K.K	Japan	
Hansgrohe S. de R. L. de C. V.	Mexico	
Hansgrohe B.V. 	Netherlands	
Hansgrohe Sp. z.o.o.	Poland	
Hansgrohe Sanitary Products W.L.L. (9)	Qatar	
Hansgrohe SA (Pty) Ltd.	Republic of South Africa	
Hansgrohe ooo	Russia	
Hans Grohe Pte. Ltd.	Singapore	
Hansgrohe S.A.U.	Spain	
Hansgrohe A.B.	Sweden	
Hansgrohe AG	Switzerland	
Hansgrohe Armature Sanayi ve Ticaret Limited Sirketi	Turkey	
Hansgrohe Ltd.	United Kingdom	
Hansgrohe SUCC	Morocco	
Mirolin Industries Corp.	Ontario	
(8) Masco Beteiligungsgesellschaft mbH owns 68.35%
(9) Hansgrohe International Gmbh owns 49%	

291234

Exhibit 21

	
		
NAME	JURISDICTION OF FORMATION	
Tempered Products Inc.	Taiwan	
Watkins Europe BVBA	Belgium	
Peerless Sales Corporation	Delaware	
Masco Framing Corp.	Delaware	
Masco Home Products S. á r.l.	Luxembourg	
Masco Home Products Private Limited	India	
Masco Singapore Pte. Ltd.	Singapore	
Delta Faucet Company India Private Limited	India	
Masco Retail Sales Support, Inc.	Delaware	
Liberty Hardware Retail & Design Services LLC	Delaware	
Masco HD Support Services, LLC	Delaware	
Masco WM Support Services, LLC	Delaware	
Mascomex S.A. de C.V.	Mexico	
Mercury Plastics LLC	Delaware	
My Service Center, Inc. (10)	Delaware	
NCFII Holdings Inc.	Delaware	
Vapor Technologies, Inc.	Delaware	
Vapor Technologies Shenzhen Co. Ltd.	China	
Watkins Manufacturing Corporation (11)	California	
Hot Spring Spa Australasia Pty Ltd (12)	Australia	
Hot Spring Spas New Zealand Limited (13)	New Zealand	
Tapicerias Pacifico, SA de CV	Mexico	
Wellness Marketing Corporation (14)	Delaware	
(10) Also conducts business under the assumed name Masco Service Center
(11) Also conducts business under the assumed names Caldera Spas, Custom Fiber Engineering, Inc., Hot Spring Spas and Watkins Wellness.
(12) Masco Corporation effective ownership is 51.00% of which Watkins Manufacturing Corporation owns 50.00%.
(13) Masco Corporation effective ownership is 51.00% of which Watkins Manufacturing Corporation owns 50.00%.
(14) Also conducts business under the assumed name Endless Pools.

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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-229556) and Form S-8 (Nos. 33-42229, 333-64573, 333-74815, 333-37338, 333-110102, 333-126888, 333-162766, 333-168827, 333-168829, 333-195713 and 333-211493) of Masco Corporation of our report dated February 11, 2020 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
February 11, 2020

Exhibit 31.a
 
MASCO CORPORATION
Certification Required by Rule 13a-14(a) or 15d-14(a)
of the Securities Exchange Act of 1934
 
I, Keith J. Allman, certify that:
 
1.              I have reviewed this annual report on Form 10-K of Masco Corporation (“the registrant”);
 
2.              Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.              Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.              The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)             designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)             designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
 
c)              evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)             disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.              The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)             all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	
			
Date: February 11, 2020	By:	/s/ Keith J. Allman	
 	 	Keith J. Allman	
 	 	President and Chief Executive Officer	

Exhibit 31.b
 
MASCO CORPORATION
Certification Required by Rule 13a-14(a) or 15d-14(a)
of the Securities Exchange Act of 1934
 
I, John G. Sznewajs, certify that:
 
1.              I have reviewed this annual report on Form 10-K of Masco Corporation (“the registrant”);
 
2.              Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.              Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.              The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)             designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)             designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
 
c)              evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)             disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.              The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)             all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	
			
Date: February 11, 2020	By:	/s/ John G. Sznewajs	
 	 	John G. Sznewajs	
 	 	Vice President, Chief Financial Officer	

Exhibit 32
 
MASCO CORPORATION
Certification Required by Rule 13a-14(b) or 15d-14(b)
of the Securities Exchange Act of 1934 and
Section 1350 of Chapter 63 of Title 18 of the
United States Code
 
The certification set forth below is being submitted in connection with the Masco Corporation Annual Report on Form 10-K for the period ended December 31, 2019 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
 
Keith J. Allman, the President and Chief Executive Officer, and John G. Sznewajs, the Vice President, Chief Financial Officer, of Masco Corporation, each certifies that, to the best of his knowledge:
 
1.              The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
2.              The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of Masco Corporation.

	
					
Date:	February 11, 2020	 	/s/ Keith J. Allman	
 	Name:	Keith J. Allman	
 	Title:	President and Chief Executive Officer	
Date:	February 11, 2020	 	/s/ John G. Sznewajs	
 	Name:	John G. Sznewajs	
 	Title:	Vice President, Chief Financial Officer