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2: EX-10 Material Contract HTML 28K
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14: R3 Condensed Consolidated Balance Sheets (Unaudited) HTML 35K
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Comprehensive Loss
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(Exact name of Registrant as Specified in its Charter)
iDelaware
i38-1794485
(State
or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
i17450 College Parkway,
iLivonia,
iMichigan
i48152
(Address
of Principal Executive Offices)
(Zip Code)
(i313) i274-7400
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title
of each class
Trading Symbol
Name of each exchange on which registered
iCommon Stock, $1.00 par value
iMAS
iNew
York Stock Exchange
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. ☒iYes☐ No
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). ☒iYes☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
iLarge
accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging
growth company
i☐
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. ☐
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
i☐ Yes ☒ No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
See
notes to condensed consolidated financial statements.
6
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
A. iACCOUNTING
POLICIES
In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to fairly state our financial position at June 30, 2021, our results of operations and comprehensive income (loss) for the three and six months ended June 30, 2021 and 2020, cash flows for the six months ended June 30, 2021 and 2020 and changes in shareholders' equity for the three and six months ended June 30, 2021 and 2020. The condensed consolidated balance sheet at December
31, 2020 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted ("GAAP") in the United States of America.
i
Recently Adopted Accounting Pronouncements. In January 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-01, "Investments—Equity Securities (Topic 321),""Investments—Equity Method and Joint Ventures (Topic 323)," and "Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321,
Topic 323, and Topic 815," which clarifies that an entity should consider observable transactions when either applying or discontinuing the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321. ASU 2020-01 clarifies that for certain forward contracts or purchased options to acquire investments, an entity should not consider whether, upon settlement of the forward contract or exercise of the purchased option, the underlying securities would be accounted for under the equity method or the fair value option. We adopted ASU 2020-01 prospectively beginning on January 1, 2021. The adoption of the standard did not have a material effect on our financial position or results of operations.
Recently
Issued Accounting Pronouncements. In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. ASU 2020-06 is effective for us for annual periods beginning January 1, 2022. We are currently reviewing the provisions of this pronouncement and the impact, if any, the adoption of this guidance has on our financial position or results of operations. The
effect will largely depend on the composition and terms of the financial instruments at the time of adoption.
B. iACQUISITIONS
In the first quarter of 2021, we acquired a i75.1%
equity interest in Easy Sanitary Solutions B.V. ("ESS"), for approximately €i47 million ($i58 million),
including $i52 million of cash and $i6 million of debt that will be paid out
over itwo years less any pending or settled indemnity matters. These amounts are subject to working capital and other adjustments. The cash payment was made to a third-party notary on December 29, 2020 for the acquisition of this equity interest in advance of the transaction closing on January 4, 2021. ESS is a manufacturer of shower channel drains and offers a wide range of products for barrier-free showering and bathroom wall niches. This
business is included in our Plumbing Products segment. In connection with this acquisition, we recognized $i32 million of definite-lived intangible assets, primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of i10
years. We also recognized $i35 million of goodwill, which is not tax deductible, and is related primarily to the expected synergies from combining the operations into our business.
The remaining i24.9%
equity interest in ESS is subject to a call and put option that is exercisable by us or the sellers, respectively, any time after December 31, 2023. The redemption value of the call and put option is the same and based on a floating EBITDA value. The call and put options were determined to be embedded within the redeemable noncontrolling interest and were recorded as temporary equity in the condensed consolidated balance sheet at June 30, 2021. We elected to adjust the redeemable noncontrolling interest to its full redemption amount directly into retained (deficit) earnings.
7
MASCO
CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
B. ACQUISITIONS (Concluded)
In the fourth quarter of 2020, we acquired substantially all of the net assets of Kraus USA Inc. ("Kraus"), a designer and distributor of sinks, faucets and accessories for the kitchen and bathroom, for approximately $i103 million
and an additional cash payment of up to $i50 million, contingent upon the achievement of certain financial performance metrics for the year ending December 31, 2022. As of the closing date of the acquisition, the contingent consideration was assigned a fair value of approximately $i8 million.
This business expands our product offerings to our customers and our online presence under the Kraus brand. This business is included in our Plumbing Products segment. In connection with this acquisition, we recognized $i25 million of indefinite-lived intangible assets, which is related to trademarks, and $i49 million
of definite-lived intangible assets, primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of i10 years. We also recognized $i20 million
of goodwill, which is generally tax deductible, and is related primarily to the expected synergies from combining the operations into our business. During the first quarter of 2021, we revised the allocation of the purchase price to certain identifiable assets and liabilities based on analysis of information as of the acquisition date, which resulted in a $i1 million decrease to goodwill. The working capital adjustments were finalized with the seller in the second quarter of 2021, resulting in no significant changes.
In
the fourth quarter of 2020, we acquired substantially all of the net assets of Work Tools International Inc. and Elder & Jenks, LLC (collectively, "Work Tools") for approximately $i53 million, including $i48 million
of cash and $i5 million of debt that will be paid out in i18 months
less any pending or settled indemnity matters. Work Tools will expand our product offering to our customers as it is a leading manufacturer of high-quality precision painting tools and accessories including brushes, rollers and mini rollers for DIY and professionals. This business is included in our Decorative Architectural Products segment. In connection with this acquisition, we recognized $i7 million of indefinite-lived intangible assets, which is related to trademarks, and $i27 million
of definite-lived intangible assets, primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of i12 years. We also recognized $i7 million
of goodwill, which is generally tax deductible, and is related primarily to the expected synergies from combining the operations into our business. The working capital adjustments were finalized with the seller in the first quarter of 2021, resulting in ino significant changes.
In the first quarter of 2020, we acquired all of the share capital of SmarTap A.Y Ltd. ("SmarTap") for approximately $i24
million in cash. SmarTap is a developer of a smart bathing system that monitors and controls the temperature and flow of water. This acquisition provides an adaptable solution for a wide range of products as it is compatible with showerheads, hand showers, spouts and shower jets. This business is included in our Plumbing Products segment. In connection with this acquisition, we recognized $i10 million of definite-lived intangible assets, primarily related to technology, which is being amortized on a straight-line basis over a weighted average amortization
period of i5 years. We also recognized $i14 million of goodwill, which is not tax deductible, and is related primarily to the expected synergies from combining
the operations into our business.
8
MASCO
CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
C. iDIVESTITURES
On May 31, 2021, we completed the divestiture of our Hüppe GmbH ("Hüppe") business, a manufacturer of shower enclosures and shower trays. In connection with the divestiture, we recognized
a loss of $ii18/ million
for the three and six months ended June 30, 2021, which is included in other, net in our condensed consolidated statements of operations. This loss resulted primarily from the recognition of $ii23/ million
of currency translation losses that were previously included within accumulated other comprehensive income (loss). The sale of Hüppe does not represent a strategic shift that will have a major effect on our operations and financial results and therefore was not presented as discontinued operations. Prior to the divestiture, the results of the business were included in our Plumbing Products segment.
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 $i720 million,
net of cash disposed. During the three and six months ended June 30, 2020, a $ii17/ million
pre-tax post-closing adjustment related to the finalization of working capital items was recorded to income from discontinued operations, net in the condensed consolidated statements of operations, as a gain on the divestiture of Milgard. Of the $i17 million, we received $i12 million
in cash as of June 30, 2020, which is presented in investing activities on the condensed consolidated statement of cash flow as proceeds from disposition of businesses, net of cash disposed. The remaining $i5 million was received in ifive
monthly installments throughout the remainder of 2020.
On November 14, 2019, we entered into a definitive agreement to sell Masco Cabinetry LLC ("Cabinetry"), a manufacturer of cabinetry products. We completed the divestiture of Cabinetry on February 18, 2020 for proceeds of approximately $i989 million, including $i853
million, net of cash disposed. The remaining $i136 million was accounted for as preferred stock issued by a holding company of the buyer; refer to Note G for additional information. In connection with the sale, we recognized a gain on the divestiture of $i585
million for the six months ended June 30, 2020, which is included in income from discontinued operations, net in the condensed consolidated statement of operations.
As the sale of Milgard and Cabinetry represented a strategic shift having a major effect on our operations and financial results, these businesses were presented in discontinued operations separate from continuing operations for the three and six months ended June 30, 2020, as applicable.
i
The
major classes of line items constituting income from discontinued operations, net, in millions:
(A) In
the second quarter of 2020, certain remaining liabilities were adjusted to reflect current activity related to sold businesses.
/
9
MASCO
CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
D. iREVENUE
i
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:
We reversed $i1 million and $i3 million
of revenue for the three months ended June 30, 2021 and 2020, respectively, related to performance obligations settled in previous quarters of the same year. We recognized $i3 million and $i4 million
of revenue for the three and six months ended June 30, 2021, respectively, and $i2 million and $i5 million
of revenue for the three and six months ended June 30, 2020, respectively, related to performance obligations settled in previous years.
10
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
D. REVENUE (Concluded)
i
Changes
in the allowance for credit losses deducted from accounts receivable were as follows, in millions:
(A) As
a result of Hüppe being divested in May 2021, both gross goodwill and accumulated impairment losses for the Plumbing Products segment were reduced by $i39 million.
The changes in the carrying amount of goodwill for the six months ended June 30, 2021, by segment, were as follows, in millions:
(B) Other
consists of the effect of foreign currency translation.
/
The carrying value of our other indefinite-lived intangible assets was $ii109/
million at both June 30, 2021 and December 31, 2020 and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $i263 million (net of accumulated amortization of $i59
million) and $i248 million (net of accumulated amortization of $i73 million) at June
30, 2021 and December 31, 2020, respectively, and principally included customer relationships. The increase in our definite-lived intangible assets is primarily a result of our acquisition of ESS.
11
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
G. iFAIR
VALUE OF FINANCIAL INVESTMENTS
Preferred Stock of ACProducts Holding, Inc. In conjunction with our divestiture of Cabinetry, we received preferred stock of ACProducts Holding, Inc., the holding company of the buyer, with a liquidation preference of $i150 million. We did not have the ability to exercise significant influence, and the fair value of this security was not readily available. We elected to measure this investment at cost (less impairment, if any) adjusted for observable
price changes in orderly transactions for identical or similar investments of the same issuer for subsequent measurements of fair value. As the preferred stock was received in conjunction with the sale of Cabinetry, we determined the cost to be the fair value of the preferred stock at the time of sale, which was determined to be $i136 million and was included in other assets in our condensed consolidated balance sheet.
In May 2021, we received, in cash, $i166 million
for the redemption of the preferred stock, including all accrued but unpaid dividends, and recognized a gain of $i14 million which was included within other, net in our condensed consolidated statements of operations.
Prior to the redemption, dividends earned on this investment were included within other, net in our condensed consolidated statements of operations with a corresponding increase to our basis in the investment. We had dividend income of $i3 million
and $i6 million for the three and six months ended June 30, 2021, respectively, and $i4 million for both the three and six months
ended June 30, 2020. The preferred stock was reported at the carrying value of $i146 million in other assets in our condensed consolidated balance sheet at December 31, 2020.
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 June 30, 2021 was approximately $i3.2 billion, compared with the aggregate carrying value of $i3.0
billion. The aggregate estimated market value of our short-term and long-term debt at December 31, 2020 was approximately $i3.3 billion, compared with the aggregate carrying value of $i2.8
billion.
H. iWARRANTY LIABILITY
i
Changes
in our warranty liability were as follows, in millions:
Settlements
made (in cash or kind) during the period
(i15)
(i33)
Other,
net (including currency translation and acquisitions)
(i1)
i1
Balance
at end of period
$
i85
$
i83
/
12
MASCO
CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
I. iDEBT
On March 4, 2021, we issued $i600 million
of i1.500% Notes due February 15, 2028, $i600 million of i2.000%
Notes due February 15, 2031 and $i300 million of i3.125% Notes due February 15, 2051. We received proceeds of $i1,495 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 March 22, 2021, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire our $i326 million i5.950%
Notes due March 15, 2022, $i500 million i4.450% Notes due April 1, 2025, and $i500 million
i4.375% Notes due April 1, 2026. In connection with these early retirements, we incurred a loss on debt extinguishment of $i168 million
for the six months ended June 30, 2021, which was recorded as interest expense in the condensed consolidated statement of operations.
On March 13, 2019, we entered into a credit agreement (the “Credit Agreement”) with an aggregate commitment of $i1.0 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 $i500 million with the current lenders or new lenders.
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 $i500 million, equivalent. We can also borrow swingline loans up to $i100
million and obtain letters of credit of up to $i25 million; outstanding letters of credit under the Credit Agreement reduce our borrowing capacity. At June 30, 2021, we had ino
outstanding standby letters of credit under the Credit Agreement.
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 i0.50% and (iii) if available, adjusted LIBO Rate plus i1.0%
(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 i4.0
to 1.0, and (B) a minimum interest coverage ratio, as adjusted for certain items, not less than i2.5 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 ino borrowings were outstanding at June 30, 2021.
13
MASCO
CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
J. iSTOCK-BASED COMPENSATION
Our 2014 Long Term Stock Incentive Plan provides for the issuance of stock-based incentives in various forms to our employees and non-employee Directors. At June
30, 2021, outstanding stock-based incentives were in the form of long-term stock awards, stock options, restricted stock units, performance restricted stock units and phantom stock awards.
i
Pre-tax compensation expense included in (loss) income from continuing operations for these stock-based incentives was as follows, in millions:
Long-Term
Stock Awards. Prior to the amendment of our 2014 Long Term Stock Incentive Plan in December 2019, we granted long-term stock awards to our key employees and non-employee Directors. We did not grant shares of long-term stock awards in the six months ended June 30, 2021 and 2020.
i
Our long-term stock award activity
was as follows, shares in millions:
At
June 30, 2021 and 2020, there was $i15 million and $i28
million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of itwo years and ithree
years at June 30, 2021 and 2020, respectively.
The total market value (at the vesting date) of stock award shares which vested was $i27 million and $i30
million during the six months ended June 30, 2021 and 2020, respectively.
14
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
J. STOCK-BASED
COMPENSATION (Continued)
Stock Options. Stock options are granted to certain key employees.
We granted i331,970 shares of stock options in the six months ended June 30, 2021 with a grant date weighted average exercise price of approximately
$i56 per share.
i
Our
stock option activity was as follows, shares in millions:
Option
shares vested and expected to vest, June 30
i3
i3
Weighted
average exercise price
$
i36
$
i33
Aggregate
intrinsic value (A)
$
i62 million
$
i46
million
Weighted average remaining option term (in years)
i6
i7
Option
shares exercisable (vested), June 30
i2
i1
Weighted
average exercise price
$
i30
$
i27
Aggregate
intrinsic value (A)
$
i49 million
$
i34
million
Weighted average remaining option term (in years)
i5
i5
(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 June 30, 2021 and 2020, there was $i5
million and $i8 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 itwo
years and ithree years at June 30, 2021 and 2020, respectively.
15
MASCO
CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
J. STOCK-BASED COMPENSATION (Concluded)
i
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:
Restricted Stock Units. Restricted stock units are granted to our key employees and non-employee Directors. These grants did not cause net share dilution due to our practice of repurchasing and retiring an equal number of shares in the open market.
We granted i660,980
restricted stock units in the six months ended June 30, 2021 with a weighted average grant date fair value of $i57 per share. In the six months ended June 30, 2021, i137,995
shares were issued and i13,330 restricted stock units were forfeited. During the six months ended June 30, 2020, we granted i432,170
restricted stock units with a grant date fair value of approximately $i47 per share and i5,870
restricted stock units were forfeited.
At June 30, 2021 and 2020, there was $i20 million and $i9
million, respectively, of unrecognized compensation expense related to unvested restricted stock units; such units had a weighted average remaining vesting period of itwo years at both June 30, 2021 and 2020.
The total market value (at the vesting date) of restricted
stock units which vested was $i7 million during the six months ended June 30, 2021.
Performance Restricted Stock Units. Under our Long Term Incentive Program, we grant performance restricted stock units to certain
senior executives. These performance restricted stock units will vest and share awards will be issued at no cost to the employees, subject to our achievement of specified performance metrics established by our Compensation Committee over a ithree-year performance period and the recipient's continued employment through the share award date.
During the six months ended June
30, 2021, we granted i85,360 performance restricted stock units with a grant date fair value of approximately $i53
per share and i104,757 shares were issued. iNo
performance restricted stock units were forfeited during the six months ended June 30, 2021. During the six months ended June 30, 2020, we granted i133,390 performance restricted stock units with a grant date fair value of approximately $i34
per share and i151,724 shares were issued.
16
MASCO
CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
K. iEMPLOYEE RETIREMENT PLANS
i
Net
periodic pension cost for our defined-benefit pension plans, with the exception of service cost, is recorded in other, net, in our condensed consolidated statements of operations. Net periodic pension cost for our defined-benefit pension plans was as follows, in millions:
As
of January 1, 2010, substantially all of 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 the termination of our qualified domestic defined-benefit pension plans. In the second quarter of 2021, we settled these plans and made a final contribution of $i101 million. The settlement loss included $i447 million
of pre-tax actuarial losses that were reclassified out of accumulated other comprehensive income (loss) during both the three and six months ended June 30, 2021.
17
MASCO
CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
L. iRECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
i
The
reclassifications from accumulated other comprehensive income (loss) to the condensed consolidated statements of operations were as follows, in millions:
Amounts Reclassified
Accumulated
Other Comprehensive (Income) Loss
Three Months Ended June 30,
Six Months Ended June 30,
Statement of Operations Line Item
2021
2020
2021
2020
Settlement and amortization of defined-benefit pension and other post-retirement benefits (A):
Actuarial
losses, net
$
i9
$
i6
$
i16
$
i13
Other,
net
Settlement loss
i447
i—
i447
i—
Tax
(benefit)
(i98)
(i1)
(i100)
(i3)
Net
of tax
$
i358
$
i5
$
i363
$
i10
Interest
rate swaps (B)
$
i—
$
i1
$
i2
$
i1
Interest
expense
Tax expense
i—
i—
i5
i—
Net
of tax
$
i—
$
i1
$
i7
$
i1
(A) In
the second quarter of 2021, we settled our qualified domestic defined-benefit pension plans and recognized $i447 million of pre-tax actuarial losses from accumulated other comprehensive income (loss) and $i96 million
of income tax benefit, which included $i11 million of related disproportionate tax expense. Additionally, the amortization of defined-benefit pension and post-retirement benefits included $i3 million,
net of tax, due to the disposition of pension plans in connection with the divestiture of Hüppe.
(B) Upon full repayment and retirement of the i5.950% Notes due March 15, 2022 in the first quarter of 2021, we recognized the remaining interest rate swap loss and related disproportionate tax expense.
In addition to the above amounts, we reclassified $i23 million
of currency translation losses from accumulated other comprehensive income (loss) to the condensed consolidated statements of operations in conjunction with the divestiture of Hüppe in the second quarter of 2021.
/
18
MASCO
CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
M. iSEGMENT INFORMATION
i
Information
by segment and geographic area was as follows, in millions:
Net
periodic pension and post-retirement benefit cost (A)
(i415)
(i8)
(i426)
(i16)
Gain
on preferred stock redemption
i14
i—
i14
i—
Dividend
income
i3
i4
i6
i4
Other
items, net
(i1)
(i1)
(i1)
(i1)
Total
other, net
$
(i415)
$
(i2)
$
(i421)
$
(i18)
(A) In
the second quarter of 2021, we settled our qualified domestic defined-benefit pension plans and recognized $i406 million of additional pension expense.
/
19
MASCO
CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
O. i(LOSS) INCOME PER COMMON SHARE
i
Reconciliations
of the numerators and denominators used in the computations of basic and diluted (loss) income per common share were as follows, in millions:
Less:
Allocation to redeemable noncontrolling interest
i—
i—
i6
i—
Less:
Allocation to unvested restricted stock awards
i—
i2
i—
i3
(Loss)
income from continuing operations attributable to common shareholders
(i36)
i208
i52
i340
Income
from discontinued operations, net
i—
i14
i—
i411
Less:
Allocation to unvested restricted stock awards
i—
i—
i—
i3
Income
from discontinued operations, net attributable to common shareholders
i—
i14
i—
i408
Net
(loss) income attributable to common shareholders
$
(i36)
$
i222
$
i52
$
i748
Denominator:
Basic
common shares (based upon weighted average)
i252
i262
i254
i267
Add:
Stock option dilution
i—
i1
i2
i1
Diluted
common shares
i252
i263
i256
i268
/
For
the three and six months ended June 30, 2021, we allocated dividends to the unvested restricted stock awards. For the three and six months ended June 30, 2020, we allocated dividends and undistributed earnings to the unvested restricted stock awards.
Additionally, i2.8 million and i260,000
common shares for the three and six months ended June 30, 2021, respectively, and i762,000 and i672,000
common shares for the three and six months ended June 30, 2020, respectively, related to stock options and i464,000 and i1,000
restricted stock units for the three and six months ended June 30, 2021, respectively, were excluded from the computation of diluted (loss) income per common share due to their antidilutive effect.
Effective February 10, 2021, our Board of Directors authorized the repurchase, for retirement, of up to $i2.0 billion of shares of our common stock in open-market transactions
or otherwise, replacing the previous Board of Directors authorization established in 2019. In June 2021, we entered into an accelerated stock repurchase transaction whereby we agreed to repurchase a total of $i350 million of our common stock with an initial delivery of approximately i5.1 million
shares. This transaction was completed on July 29, 2021, at which time we received, at no additional cost, i0.9 million additional shares of our common stock resulting from changes in the volume weighted average stock price of our common stock over the term of the transaction, less a discount. In total, excluding the incremental shares we received in July 2021 from the accelerated stock repurchase transaction, we repurchased and retired i12.2 million
shares of our common stock in the six months ended June 30, 2021 for approximately $i750 million. This included i0.7 million
shares to offset the dilutive impact of restricted stock units granted in the six months ended June 30, 2021. At June 30, 2021, we had $i1.4 billion remaining under the 2021 authorization.
On the basis of amounts paid (declared), cash dividends per common share were $i0.235
($i0.235) and $i0.375 ($i0.235)
for the three and six months ended June 30, 2021, respectively, and $i0.135 ($i0.135) and $i0.270
($i0.270) for the three and six months ended June 30, 2020, respectively.
20
MASCO CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Concluded)
P. iOTHER COMMITMENTS AND CONTINGENCIES
We are involved in claims and litigation, including class actions, mass torts and regulatory proceedings, which arise in the ordinary course of our business. The types of matters may include, among others: competition, product liability, employment, warranty, advertising, contract,
personal injury, environmental, intellectual property and insurance coverage. We believe we have adequate defenses in these matters. We are also subject to product safety regulations, product recalls and direct claims for product liabilities. We believe the likelihood that the outcome of these claims, litigation and product safety matters would have a material adverse effect on us is remote. However, there is no assurance that we will prevail in these matters, and we could, in the future, incur judgments or penalties, enter into settlements of claims or revise our expectations regarding the outcome of these matters, which could materially impact our results of operations.
Q. iINCOME
TAXES
We recorded a $i12 million income tax expense on a $i3
million loss from continuing operations for the three months ended June 30, 2021. The unusual relationship between income tax expense and the loss from continuing operations was due primarily to an $i11 million income tax expense from the elimination of a disproportionate tax effect from accumulated other comprehensive income (loss), relating to the termination of our qualified domestic defined-benefit pension plans.
Our
effective tax rate was i36 percent for the six months ended June 30, 2021. The tax expense for the six months ended June 30, 2021 includes a $i5
million and $i11 million income tax expense from the elimination of disproportionate tax effects from accumulated other comprehensive income (loss) relating to our interest rate swap following the retirement of the related debt, and the termination of our qualified domestic defined-benefit pension plans, respectively.
Our effective tax rate was i27
percent and i24 percent for the three months and six months ended June 30, 2020. The tax expense for the three months ended June 30, 2020 was impacted by the recording of a $i2
million valuation allowance against deferred tax assets in certain jurisdictions. The tax expense for the six months ended June 30, 2020 also includes a $i7 million income tax benefit on stock-based compensation and a $i6
million state income tax benefit from a reduction in the liability for uncertain tax positions resulting from the expiration of statutes of limitation.
R. iSUBSEQUENT EVENT
In July 2021, we acquired all of the share capital of Steamist, Inc., a manufacturer of residential steam bath products, for approximately $i56 million
in cash. This business will be included in the Plumbing Products segment. In connection with this acquisition, we currently anticipate recognizing approximately $i30 million of definite-lived intangible assets, primarily related to customer relationships. We also anticipate recognizing approximately $i30 million
of goodwill, which is not tax deductible and is related primarily to the expected synergies from combining the operations into our business. These amounts are subject to changes due to working capital and other adjustments, including completing our initial purchase accounting.
21
MASCO
CORPORATION
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER 2021 AND THE FIRST SIX MONTHS 2021 VERSUS SECOND QUARTER 2020 AND THE FIRST SIX MONTHS 2020
SALES AND OPERATIONS
The following table sets forth our net sales and operating profit (loss) by business segment and geographic area, dollars in millions:
(A) Before
general corporate expense, net; see Note M to the condensed consolidated financial statements.
22
We report our financial results in accordance with generally accepted accounting principles ("GAAP") in the United States of America. 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 and segment and geographic results refers to the three and six months ended June 30, 2021 compared to the same periods of 2020.
NET SALES
Net sales increased 24 percent for both the three and six months ended June 30, 2021. Excluding acquisitions, divestitures and the effect of currency translation, net sales increased 18 percent for both the three and six months ended June 30, 2021. The following table reconciles reported
net sales to net sales, excluding acquisitions, divestitures and the effect of currency translation, in millions:
Net
sales, excluding acquisitions and divestitures
2,125
1,758
4,038
3,339
Currency translation
(52)
—
(90)
—
Net
sales, excluding acquisitions, divestitures and the effect of currency translation
$
2,073
$
1,758
$
3,948
$
3,339
North American net sales increased 16 percent for the three months ended June 30, 2021. Higher sales volume of plumbing products, and to a lesser extent, higher net selling prices of paints and other coating
products, higher sales volume of builders' hardware products and favorable sales mix of plumbing products, in aggregate, increased sales by 19 percent. The acquisitions of Kraus and Work Tools increased sales by three percent and favorable currency translation increased sales by one percent. Such increases were offset by lower sales volume of paints and other coating products, which decreased sales by seven percent. North American net sales increased 19 percent for the six months ended June 30, 2021. Higher sales volume of plumbing products, and to a lesser extent, higher sales volume of builders' hardware products and favorable sales mix of plumbing products, in aggregate, increased sales by 16 percent. The acquisitions of Kraus and Work Tools increased sales by three percent and favorable currency translation increased sales by one percent. Such increases were slightly offset by lower sales volume of paints and other
coating products, which decreased sales by one percent.
International net sales increased 63 percent and 49 percent for the three and six months ended June 30, 2021, respectively. In local currencies (including sales in currencies outside their respective functional currencies), net sales increased 50 percent and 38 percent for the three and six months ended June 30, 2021, respectively. Higher sales volume and, to a lesser extent, favorable sales mix and net selling prices of plumbing products increased sales by 48 percent and 35 percent for the three and six months ended June 30, 2021, respectively. The acquisition of ESS increased sales by four percent for both the three and six months ended June
30, 2021. These increases were slightly offset by the divestiture of Hüppe which decreased sales by two percent and one percent for the three and six months ended June 30, 2021, respectively.
Net sales in the Plumbing Products segment increased 53 percent and 41 percent for the three and six months ended June 30, 2021, respectively. Higher sales volume increased sales by 40 percent and 30 percent, and favorable sales mix increased sales by three percent for both the three and six months ended June 30, 2021. The acquisitions of Kraus and ESS increased sales by five percent for both the three and six months ended June 30, 2021. Favorable foreign currency translation increased sales by five
percent and four percent for the three and six months ended June 30, 2021, respectively. These increases for the three months ended June 30, 2021 were slightly offset by the divestiture of Hüppe which decreased sales by one percent.
23
Net sales in the Decorative Architectural Products segment decreased five percent for the three months ended June 30, 2021 primarily due to lower sales volume of paints and other coating products. Such
decrease was partially offset by higher sales volume of builders' hardware products and favorable net selling prices of paints and other coating products. Net sales in the Decorative Architectural Products segment increased three percent for the six months ended June 30, 2021 due to higher sales volume of builders' hardware and lighting products and favorable net selling prices of paints and other coating products. Such increase was partially offset by lower sales volume of paints and other coating products. The Work Tools acquisition increased sales by one percent for both the three and six months ended June 30, 2021.
OPERATING PROFIT
Our
gross profit margin was 36.3 percent and 35.9 percent for the three and six months ended June 30, 2021, respectively, compared to 35.6 percent and 35.1 percent for the comparable period of 2020. Gross profit margins for the three and six months ended June 30, 2021 were positively impacted by increased sales volume and cost savings initiatives. Such increases were partially offset by increased commodity and transportation costs.
Selling, general and administrative expenses, as a percentage of sales, was 16.2 percent and 16.6 percent for the three and six months ended June 30, 2021, respectively, compared to 16.4 percent and 18.3 percent for the comparable period of 2020. Selling, general and administrative expenses for the three months ended
June 30, 2021 were positively impacted by leverage of fixed expenses due primarily to increased sales volume, partially offset by increased other expenses (such as salaries, marketing and travel and entertainment costs). Selling, general and administrative expenses for the six months ended June 30, 2021 were positively impacted by leverage of fixed expenses due primarily to increased sales volume and cost containment activities.
Operating profit in the Plumbing Products segment for the three and six months ended June 30, 2021 was positively impacted by increased sales volume, favorable sales mix, as well as cost savings initiatives and favorable foreign currency translation. These positive impacts were partially offset by increased commodity
costs, transportation costs and salaries.
Operating profit in the Decorative Architectural Products segment for the three months ended June 30, 2021 was negatively impacted by lower sales volume and increased commodity and transportation costs. These negative impacts were partially offset by higher net selling prices and cost savings initiatives. Operating profit in the Decorative Architectural Products segment for the six months ended June 30, 2021 benefited primarily from cost savings initiatives and favorable sales mix. These positive impacts were partially offset by increased commodity and transportation costs. Additionally, operating profit was positively impacted by lower fixed expenses in our lighting business for the three and six-month periods.
OTHER
INCOME (EXPENSE), NET
Interest expense for the three and six months ended June 30, 2021 was $25 million and $227 million, respectively, compared to $35 million and $70 million for the three and six months ended June 30, 2020, respectively. The decrease in interest expense for the three months ended June 30, 2021 as compared to the same period in the prior year is due to interest savings related to debt refinancing in the first quarter of 2021. The increase in interest expense for the six months ended June 30, 2021 as compared to the same period in the prior year is due to the $168 million loss on debt extinguishment which was recorded as additional interest expense in connection with the early
retirement of debt in the first quarter of 2021.
24
Other, net, for the three and six months ended June 30, 2021 was $415 million and $421 million, respectively, compared to $2 million and $18 million for the
three and six months ended June 30, 2020, respectively. Other, net, for the three and six months ended June 30, 2021 included $415 million and $426 million of net periodic pension and post-retirement benefit cost, respectively, which includes $406 million of settlement loss related to the termination of our qualified domestic defined-benefit pension plans, and a loss of $18 million related to the divestiture of Hüppe for both periods. These amounts were partially offset by a $14 million gain recognized on the redemption of the preferred stock of ACProducts Holding, Inc. for the three and six months ended June 30, 2021, and $3 million and $6 million of related dividend income for the three and six months ended June 30, 2021, respectively. Other, net, for the three and six
months ended June 30, 2020 included $8 million and $16 million, respectively, of net periodic pension and post-retirement benefit cost, $2 million of foreign currency transaction gains for the three-month period and $7 million of foreign currency transaction losses for the six-month period and $4 million of dividend income related to preferred stock of ACProducts Holding, Inc. for both periods.
INCOME TAXES
We recorded a $12 million income tax expense on a $3 million loss from continuing operations for the three months ended June 30, 2021. The difference between our recorded income tax expense and the expected income tax benefit, based on our normalized rate of 25 percent, was due primarily to an $11 million
income tax expense from the elimination of a disproportionate tax effect from accumulated other comprehensive income (loss), relating to the termination of our qualified domestic defined-benefit pension plans.
Our effective tax rate of 36 percent for the six months ended June 30, 2021 was higher than our normalized tax rate of 25 percent. The increase was due primarily to a $5 million and $11 million income tax expense from the elimination of disproportionate tax effects from accumulated other comprehensive income (loss) relating to our interest rate swap following the retirement of the related debt, and the termination of our qualified domestic defined-benefit pension plans, respectively.
Our effective tax rate was 27 percent and 24 percent for the three and six
months ended June 30, 2020, respectively. Our three month rate was higher than our normalized tax rate of 25 percent due primarily to losses in certain foreign jurisdictions providing no income tax benefit and the recording of a $2 million valuation allowance against deferred tax assets in certain jurisdictions. Our six month rate was lower than our normalized tax rate due primarily to an additional $5 million income tax benefit on stock-based compensation and an additional $3 million state income tax benefit from a reduction in the liability for uncertain tax positions resulting from the expiration of statutes of limitation in the first quarter of 2020.
(LOSS) INCOME AND (LOSS) INCOME PER COMMON SHARE FROM CONTINUING OPERATIONS
— ATTRIBUTABLE TO MASCO CORPORATION
(Loss) income from continuing operations for the three and six months ended June 30, 2021 was $(36) million and $58 million, respectively, compared to $210 million and $343 million for the comparable periods of 2020. Diluted (loss) income per common share from continuing operations for the three and six months ended June 30, 2021 was $(0.14) and $0.20, respectively, per common share, compared with $0.80 and $1.27, respectively, per common share for the comparable periods of 2020.
For the six months ended June 30, 2021, net cash provided by operating activities was $239 million. Our cash flows from operations benefited from higher operating profit, offset by changes in working capital and pension contributions related to the settlement of our qualified domestic defined-benefit pension plans.
25
For
the six months ended June 30, 2021, net cash used for financing activities was $909 million, primarily due to $1,326 million for the early retirement of our 5.950% Notes due March 15, 2022, 4.450% Notes due April 1, 2025, and 4.375% Notes due April 1, 2026 and $160 million of related debt extinguishment costs. Net cash used for financing activities was also impacted by $750 million for the repurchase and retirement of our common stock (including 0.7 million shares repurchased to offset the dilutive impact of restricted stock units granted in 2021), $96 million for the payment of cash dividends, $43 million for dividends paid to noncontrolling interest and $14 million for employee withholding taxes paid on stock-based compensation. These uses of cash were partially offset
by proceeds, net of issuance costs, of $1,481 million due to the issuances of $600 million of 1.500% Notes due February 15, 2028, $600 million of 2.000% Notes due February 15, 2031 and $300 million of 3.125% Notes due February 15, 2051.
For the six months ended June 30, 2021, net cash provided by investing activities was $122 million, primarily due to the $166 million received, in cash, for the redemption of the preferred stock of ACProducts Holding Inc., partially offset by $53 million of capital expenditures.
Our cash and cash investments were $769 million and $1.3 billion at June 30, 2021 and December
31, 2020, respectively. 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.
Of the $769 million and $1.3 billion of cash and cash investments held at June 30, 2021 and December 31, 2020, $319 million and $385 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.
On March 4, 2021, we issued $600 million of 1.500% Notes due February 15, 2028, $600 million of 2.000% Notes due February 15, 2031 and $300 million of 3.125% Notes due February 15, 2051. We received proceeds of $1,495 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 March 22, 2021, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire our $326 million 5.950% Notes due March 15, 2022, $500 million 4.450% Notes due April
1, 2025, and $500 million 4.375% Notes due April 1, 2026. In connection with these early retirements, we incurred a loss on debt extinguishment of $168 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. See Note I to the condensed 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 June 30, 2021.
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.
26
All outstanding payments owed under the program are recorded within accounts payable in our condensed
consolidated balance sheets. The amounts owed to participating financial institutions under the program and included in accounts payable for our continuing operations were $43 million and $45 million at June 30, 2021 and December 31, 2020, respectively. We account for all payments made under the program as a reduction to our cash flows from operations and reported within our increase in accounts payable and accrued liabilities, net, line within our condensed consolidated statements of cash flows. The amounts settled through the program and paid to participating financial institutions were $93 million and $60 million for our continuing operations during the six months ended June 30, 2021 and 2020, 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 believe that our present cash balance, cash flows from operations, and borrowing availability under our Credit Agreement are sufficient to fund our near-term working capital and other investment needs. We believe that our longer-term working capital and other general corporate requirements will be satisfied through cash flows from operations and, to the extent necessary, from bank borrowings and future financial market activities.
COVID-19 IMPACT AND GENERAL BUSINESS CONDITIONS
During
2020, certain aspects of our businesses were adversely affected by the COVID-19 pandemic. Many, but not all, of our businesses remained operating because the products we provide are critical to infrastructure sectors and day-to-day operations of homes and businesses in our communities as defined by applicable local orders. Operational activity that was previously slowed at certain of our facilities as a result of the pandemic and governmental orders, largely resumed normal capacity by the third quarter of 2020. This has enabled us to progress on fulfilling production backorders that developed, as well as to meet current consumer demand, which has continued to be strong in the first half of 2021.
We continue to be committed to the safety and well-being of our employees during this time, and, led by our cross-functional Infectious Illness Response Team, we are employing best practices
and following guidance from the World Health Organization, the Centers for Disease Control and Prevention and local authorities, including offering paid leave for many COVID-related absences and requiring unvaccinated employees to wear face coverings and practice social distancing.
Finally, we are experiencing and may continue to experience higher commodity and transportation costs, and supply chain disruptions, particularly disruptions related to our ability to source products, components and raw materials. We are also experiencing and may continue to experience labor cost inflation and constraints in hiring qualified employees. We plan to offset the potential unfavorable impact of these items with productivity improvement and other initiatives.
We continue to execute our strategies of leveraging our strong brand portfolio, industry-leading positions and the Masco Operating System, our methodology to drive growth and productivity, to create long-term shareholder value. We remain confident in the fundamentals of our business and long-term strategy. We believe that our strong financial position and cash flow generation, together with our investments in our industry-leading branded building products, our continued focus on innovation and disciplined capital allocation, will allow us to drive long-term growth and create value for our shareholders.
27
FORWARD-LOOKING
STATEMENTS
This report contains statements that reflect our views about our future performance and constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "outlook,""believe,""anticipate,""appear,""may,""will,""should,""intend,""plan,""estimate,""expect,""assume,""seek,""forecast," and similar references to future periods. Our views about future performance involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. We caution you against relying on any of these forward-looking statements. Our future performance may be affected by the levels of residential
repair and remodel activity, and to a lesser extent, new home construction, our ability to maintain our strong brands and reputation and to develop innovative products, our ability to maintain our competitive position in our industries, our reliance on key customers, the length and severity of the ongoing COVID-19 pandemic, including its impact on domestic and international economic activity, consumer confidence, our production capabilities, our employees and our supply chain, the cost and availability of materials and the imposition of tariffs, our dependence on third-party suppliers, risks associated with our international operations and global strategies, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to successfully execute our acquisition strategy and integrate businesses that we have and may acquire, our ability to attract, develop and retain talented and diverse personnel, risks associated with our reliance on information
systems and technology, and our ability to achieve the anticipated benefits from our investments in new technology. These and other factors are discussed in detail in Item 1A, "Risk Factors" in our most recent Annual Report on Form 10-K, as well as in other filings we make with the Securities and Exchange Commission. The forward-looking statements in this report speak only as of the date of this report. 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.
28
MASCO
CORPORATION
Item 4.
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 June 30, 2021, the
Company's disclosure controls and procedures were effective.
b. 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 June 30, 2021, 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.
29
MASCO
CORPORATION
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
Information regarding legal proceedings involving us is set forth in Note P to our condensed consolidated financial statements included in Part I, Item 1 of this Report and is incorporated herein by reference.
Item
1A. Risk Factors
There have been no material changes to the risk factors of the Company set forth in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information regarding the repurchase of our common stock for the three months ended June
30, 2021 under the 2021 share repurchase authorization:
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
4/1/21 - 4/30/21
5,696
$
59.89
5,696
$
1,850,419,705
5/1/21 - 5/31/21
1,210,000
$
62.69
1,210,000
$
1,774,569,967
6/1/21
- 6/30/21 (A)
5,427,806
$
68.19
5,427,806
$
1,404,421,924
Total for the quarter
6,643,502
$
67.18
6,643,502
$
1,404,421,924
(A) In
June 2021, we entered into an accelerated stock repurchase transaction whereby we agreed to repurchase a total of $350 million of our common stock with an initial delivery of approximately 5.1 million shares. This transaction was completed on July 29, 2021, at which time we received, at no additional cost, 0.9 million additional shares of our common stock resulting from changes in the volume weighted average stock price of our common stock over the term of the transaction, less a discount. The average price paid per common share does not reflect the holdback shares that we received upon completion of the accelerated stock repurchase transaction. If we had received the additional 0.9 million shares at inception of the accelerated stock repurchase transaction, the total number of shares purchased under this transaction would have been approximately 6.0 million with an average price paid per common share of approximately
$58.27.
The following financial information from Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders'
Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
104
–
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
31
MASCO CORPORATION
PART II.
OTHER INFORMATION, Concluded
SIGNATURE
Pursuant to the requirements 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.