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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549 
FORM 10-Q

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
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 or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer Identification No.)
17450 College Parkway,Livonia,Michigan48152
(Address of Principal Executive Offices)(Zip Code)
(313) 274-7400
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $1.00 par valueMASNew 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.   Yes    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).   Yes    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.
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.
    
    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
     Yes    No

    Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 
Class Shares Outstanding at September 30, 2021
Common stock, par value $1.00 per share 244,087,493



MASCO CORPORATION

INDEX

  Page No.
 
 
 
 
 
 
 
 
 





MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30, 2021 and December 31, 2020
(In Millions, Except Share Data)
September 30, 2021December 31, 2020
ASSETS  
Current Assets:  
Cash and cash investments$854 $1,326 
Receivables1,330 1,138 
Prepaid expenses and other113 149 
Inventories:  
Finished goods
642 552 
Raw material
357 242 
Work in process
108 82 
 1,107 876 
Total current assets3,404 3,489 
Property and equipment, net887 908 
Operating lease right-of-use assets171 166 
Goodwill617 563 
Other intangible assets, net395 357 
Other assets121 294 
Total assets$5,595 $5,777 
LIABILITIES  
Current Liabilities:  
Accounts payable$1,037 $893 
Notes payable10 3 
Accrued liabilities832 1,038 
Total current liabilities1,879 1,934 
Long-term debt2,950 2,792 
Noncurrent operating lease liabilities155 149 
Other liabilities485 481 
Total liabilities5,469 5,356 
Commitments and contingencies (Note P)
Redeemable noncontrolling interest25 
EQUITY  
Masco Corporation's shareholders' equity:  
Common shares, par value $1 per share
  Authorized shares: 1,400,000,000;
  Issued and outstanding: 2021 – 243,500,000; 2020 – 258,200,000
243 258 
Preferred shares authorized: 1,000,000;
  Issued and outstanding: 2021 and 2020 – None
  
Paid-in capital  
Retained (deficit) earnings(595)79 
Accumulated other comprehensive income (loss)226 (142)
Total Masco Corporation's shareholders' (deficit) equity(126)195 
Noncontrolling interest227 226 
Total equity101 421 
Total liabilities and equity$5,595 $5,777 
See notes to condensed consolidated financial statements.
1


MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

For the Three and Nine Months Ended September 30, 2021 and 2020
(In Millions, Except Per Common Share Data)
Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Net sales$2,204 $1,983 $6,353 $5,328 
Cost of sales1,451 1,231 4,109 3,401 
Gross profit753 752 2,244 1,927 
Selling, general and administrative expenses368 328 1,057 939 
Operating profit385 424 1,187 988 
Other income (expense), net:    
Interest expense(26)(40)(253)(110)
Other, net(17)(4)(438)(22)
 (43)(44)(691)(132)
Income from continuing operations before income taxes342 380 496 856 
Income tax expense 103 87 158 202 
Income from continuing operations239 293 338 654 
Income from discontinued operations, net   411 
Net income239 293 338 1,065 
Less: Net income attributable to noncontrolling interest19 18 60 36 
Net income attributable to Masco Corporation$220 $275 $278 $1,029 
Income per common share attributable to Masco Corporation:   
Basic:    
Income from continuing operations$0.89 $1.05 $1.08 $2.31 
Income from discontinued operations, net   1.54 
Net income$0.89 $1.05 $1.08 $3.85 
Diluted:    
Income from continuing operations$0.89 $1.05 $1.07 $2.31 
Income from discontinued operations, net   1.54 
Net income$0.89 $1.05 $1.07 $3.85 
Amounts attributable to Masco Corporation:    
Income from continuing operations$220 $275 $278 $618 
Income from discontinued operations, net   411 
Net income$220 $275 $278 $1,029 
See notes to condensed consolidated financial statements.
2


MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

For the Three and Nine Months Ended September 30, 2021 and 2020
(In Millions)
Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Net income$239 $293 $338 $1,065 
Less: Net income attributable to noncontrolling interest
19 18 60 36 
Net income attributable to Masco Corporation$220 $275 $278 $1,029 
Other comprehensive (loss) income, net of tax (Note L):    
Cumulative translation adjustment$(20)$32 $(19)$15 
Interest rate swaps  7 1 
Pension and other post-retirement benefits2 5 365 15 
Other comprehensive (loss) income, net of tax(18)37 353 31 
Less: Other comprehensive (loss) income attributable to noncontrolling interest(5)9 (15)8 
Other comprehensive (loss) income attributable to Masco Corporation$(13)$28 $368 $23 
Total comprehensive income$221 $330 $691 $1,096 
Less: Total comprehensive income attributable to noncontrolling interest
14 27 45 44 
Total comprehensive income attributable to Masco Corporation
$207 $303 $646 $1,052 
 



See notes to condensed consolidated financial statements.
3


MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the Nine Months Ended September 30, 2021 and 2020
(In Millions) 
Nine Months Ended September 30,
 20212020
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:  
Cash provided by operations$904 $590 
Increase in receivables(219)(294)
Increase in inventories(237)(66)
Increase in accounts payable and accrued liabilities, net147 343 
Net cash from operating activities595 573 
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:  
Retirement of notes(1,326)(400)
Purchase of Company common stock(878)(602)
Cash dividends paid(154)(108)
Dividends paid to noncontrolling interest(43)(23)
Issuance of notes, net of issuance costs1,481 415 
Debt extinguishment costs(160)(5)
Proceeds from the exercise of stock options1 26 
Employee withholding taxes paid on stock-based compensation(14)(25)
(Decrease) increase in debt, net(2)1 
Net cash for financing activities(1,095)(721)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:  
Capital expenditures(82)(72)
Acquisition of businesses, net of cash acquired(57)(24)
Proceeds from disposition of:  
Businesses, net of cash disposed5 868 
Other financial investments170 2 
Other, net7 (4)
Net cash from investing activities43 770 
Effect of exchange rate changes on cash and cash investments(15)7 
CASH AND CASH INVESTMENTS:  
(Decrease) increase for the period(472)629 
At January 11,326 697 
At September 30$854 $1,326 
See notes to condensed consolidated financial statements.
4


MASCO CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

For the Three and Nine Months Ended September 30, 2021 and 2020
(In Millions, Except Per Common Share Data)
 
Total
Common
Shares
($1 par value)
Paid-In
Capital
Retained (Deficit) EarningsAccumulated
Other
Comprehensive
 (Loss) Income
Noncontrolling
Interest
Balance, January 1, 2020$(56)$276 $ $(332)$(179)$179 
Cumulative effect of adoption of new credit loss standard(1)— — (1)— — 
Adjusted balance, January 1, 2020
$(57)$276 $ $(333)$(179)$179 
Total comprehensive income (loss)514 — — 530 (20)4 
Shares issued11 1 10 — — — 
Shares retired:
Repurchased(602)(14)(28)(560)— — 
Surrendered (non-cash)(13)— — (13)— — 
Cash dividends declared(36)— — (36)— — 
Stock-based compensation18 — 18 — — — 
Balance, March 31, 2020$(165)$263 $ $(412)$(199)$183 
Total comprehensive income252 — — 224 15 13 
Shares retired:
Repurchased (3)3 — — — 
Cash dividends declared(35)— — (35)— — 
Dividends paid to noncontrolling interest
(23)— — — — (23)
Stock-based compensation8 — 8 — — — 
Balance, June 30, 2020$37 $260 $11 $(223)$(184)$173 
Total comprehensive income330 — — 275 28 27 
Shares issued3 1 2 — — — 
Cash dividends declared(37)— — (37)— — 
Stock-based compensation8 — 8 — — — 
Balance, September 30, 2020$341 $261 $21 $15 $(156)$200 
 


















5


MASCO CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Concluded)

For the Three and Nine Months Ended September 30, 2021 and 2020
(In Millions, Except Per Common Share Data)

Total
Common
Shares
($1 par value)
Paid-In
Capital
Retained Earnings (Deficit)Accumulated
Other
Comprehensive
 (Loss) Income
Noncontrolling
Interest
Balance, January 1, 2021$421 $258 $ $79 $(142)$226 
Total comprehensive income (loss)90 — — 94 (12)8 
Shares issued 1 (1)— — — 
Shares retired:
Repurchased(303)(6)(27)(270)— — 
Surrendered (non-cash)(13)— — (13)— — 
Redeemable noncontrolling interest - redemption adjustment(6)— — (6)— — 
Stock-based compensation28 — 28 — — — 
Balance, March 31, 2021$217 $253 $ $(116)$(154)$234 
Total comprehensive income (loss)380 — — (36)393 23 
Shares retired:
Repurchased(447)(6)(12)(429)— — 
Cash dividends declared(59)— — (59)— — 
Dividends paid to noncontrolling interest
(43)— — — — (43)
Stock-based compensation12 — 12 — — — 
Balance, June 30, 2021$60 $247 $ $(640)$239 $214 
Total comprehensive income (loss)
220 — — 220 (13)13 
Shares retired:
Repurchased(128)(4)(8)(116)— — 
Cash dividends declared(59)— — (59)— — 
Stock-based compensation8 — 8 — — — 
Balance, September 30, 2021$101 $243 $ $(595)$226 $227 
See notes to condensed consolidated financial statements.
6


MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A. ACCOUNTING 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 September 30, 2021, our results of operations and comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020, cash flows for the nine months ended September 30, 2021 and 2020 and changes in shareholders' equity for the three and nine months ended September 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.
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. ACQUISITIONS
In the third quarter of 2021, we acquired all of the share capital of Steamist, Inc. ("Steamist") for approximately $56 million in cash. This amount is subject to working capital and other adjustments. Steamist is a manufacturer of residential steam bath products that are complementary to many of our plumbing products. This business is included in our Plumbing Products segment. In connection with this acquisition, we recognized $31 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 11 years. We also recognized $29 million of goodwill, which is not tax deductible, and is related primarily to the expected synergies from combining the operations into our business.

In the first quarter of 2021, we acquired a 75.1% equity interest in Easy Sanitary Solutions B.V. ("ESS"), for approximately €47 million ($58 million), including $52 million of cash and $6 million of debt that will be paid out over two years less any pending or settled indemnity matters. These amounts are subject to working capital and other adjustments. 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 $32 million of definite-lived intangible assets, primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of 10 years. We also recognized $35 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 24.9% 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 September 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 $103 million and an additional cash payment of up to $50 million to be paid in 2023, 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 $8 million. Refer to Note G for additional information regarding the subsequent remeasurement of the contingent consideration liability. This business expands our product offerings to our customers and our online presence under the Kraus brand. This business is included in our Plumbing Products segment. In connection with this acquisition, we recognized $25 million of indefinite-lived intangible assets, which is related to trademarks, and $49 million of definite-lived intangible assets, primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of 10 years. We also recognized $20 million of goodwill, which is generally tax deductible, and is related primarily to the expected synergies from combining the operations into our business. 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 $1 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 $53 million, including $48 million of cash and $5 million of debt that will be paid out in 18 months less any pending or settled indemnity matters. Work Tools expands 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 $7 million of indefinite-lived intangible assets, which is related to trademarks, and $27 million of definite-lived intangible assets, primarily related to customer relationships. The definite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of 12 years. We also recognized $7 million of goodwill, which is generally tax deductible, and is related primarily to the expected synergies from combining the operations into our business. The working capital adjustments were finalized with the seller in the first quarter of 2021, resulting in no significant changes.
In the first quarter of 2020, we acquired all of the share capital of SmarTap A.Y Ltd. ("SmarTap") for approximately $24 million in cash. SmarTap is a developer of a smart bathing system that monitors and controls the temperature and flow of water. This acquisition provides an adaptable solution for a wide range of products as it is compatible with showerheads, hand showers, spouts and shower jets. This business is included in our Plumbing Products segment. In connection with this acquisition, we recognized $10 million of definite-lived intangible assets, primarily related to technology, which is being amortized on a straight-line basis over a weighted average amortization period of 5 years. We also recognized $14 million of goodwill, which is not tax deductible, and is related primarily to the expected synergies from combining the operations into our business.



















8



MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

C. DIVESTITURES
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 $18 million for the nine months ended September 30, 2021, which is included in other, net in our condensed consolidated statements of operations. This loss resulted primarily from the recognition of $23 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 $720 million, net of cash disposed. During the nine months ended September 30, 2020, a $17 million pre-tax post-closing adjustment related to the finalization of working capital items was recorded to income from discontinued operations, net in the condensed consolidated statements of operations, as a gain on the divestiture of Milgard. Of the $17 million, we received $15 million in cash as of September 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 $2 million was received in two 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 $989 million, including $853 million, net of cash disposed. The remaining $136 million was accounted for as preferred stock issued by a holding company of the buyer; refer to Note G for additional information. In connection with the sale, we recognized a gain on the divestiture of $585 million for the nine months ended September 30, 2020, which is included in income from discontinued operations, net in the condensed consolidated statement of operations.
As the sale of Milgard and Cabinetry represented a strategic shift having a major effect on our operations and financial results, these businesses were presented in discontinued operations separate from continuing operations for the nine months ended September 30, 2020, as applicable. There was no activity for the three months ended September 30, 2021 and 2020.
The major classes of line items constituting income from discontinued operations, net, in millions:
Nine Months Ended September 30,
 20212020
Net sales$ $101 
Cost of sales 78 
Gross profit 23 
Selling, general and administrative expenses 31 
(Loss) from discontinued operations (8)
Gain on disposal of discontinued operations 602 
Income before income tax 594 
Income tax expense (183)
Income from discontinued operations, net$ $411 













9



MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (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:
Three Months Ended September 30, 2021
Plumbing ProductsDecorative Architectural ProductsTotal
Primary geographic markets:
North America$878 $875 $1,753 
International, principally Europe451  451 
Total$1,329 $875 $2,204 
Nine Months Ended September 30, 2021
Plumbing ProductsDecorative Architectural ProductsTotal
Primary geographic markets:
North America$2,553 $2,446 $4,999 
International, principally Europe1,354  1,354 
Total$3,907 $2,446 $6,353 
Three Months Ended September 30, 2020
Plumbing ProductsDecorative Architectural ProductsTotal
Primary geographic markets:
North America$757 $842 $1,599 
International, principally Europe384  384 
Total$1,141 $842 $1,983 
Nine Months Ended September 30, 2020
Plumbing ProductsDecorative Architectural ProductsTotal
Primary geographic markets:
North America$1,973 $2,364 $4,337 
International, principally Europe991  991 
Total$2,964 $2,364 $5,328 
Our contract asset balance was $1 million and $2 million at September 30, 2021 and December 31, 2020, respectively. Our contract liability balance was $24 million and $62 million at September 30, 2021 and December 31, 2020, respectively.
We reversed $1 million and $6 million of revenue for the three months ended September 30, 2021 and 2020, respectively, related to performance obligations settled in previous quarters of the same year. We recognized $3 million and $7 million of revenue for the three and nine months ended September 30, 2021, respectively, and $1 million and $6 million of revenue for the three and nine months ended September 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)
Changes in the allowance for credit losses deducted from accounts receivable were as follows, in millions: 
Nine Months Ended
September 30, 2021
Twelve Months Ended December 31, 2020
Balance at January 1$7 $5 
Provision for expected credit losses during the period1 3 
Write-offs charged against the allowance(1)(2)
Recoveries of amounts previously written off1 1 
Other (A)
(1) 
Balance at end of period$7 $7 
(A)    As a result of Hüppe being divested in May 2021, $1 million for the nine months ended September 30, 2021 was removed from allowance for credit losses.

E. DEPRECIATION AND AMORTIZATION
 Depreciation and amortization expense was $114 million and $99 million for the nine months ended September 30, 2021 and 2020, respectively.

F. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill at September 30, 2021, by segment, was as follows, in millions:
Gross Goodwill At September 30, 2021Accumulated
Impairment
Losses
Net Goodwill At September 30, 2021
Plumbing Products (A)
$627 $(301)$326 
Decorative Architectural Products366 (75)291 
Total$993 $(376)$617 
(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 $39 million.

The changes in the carrying amount of goodwill for the nine months ended September 30, 2021, by segment, were as follows, in millions: 
 Gross Goodwill At December 31, 2020Accumulated
Impairment
Losses
Net Goodwill At December 31, 2020Acquisitions Other (B)Net Goodwill At September 30, 2021
Plumbing Products$613 $(340)$273 $63 $(10)$326 
Decorative Architectural Products
365 (75)290 1  291 
Total$978 $(415)$563 $64 $(10)$617 
(B)    Other consists of the effect of foreign currency translation.
    
The carrying value of our other indefinite-lived intangible assets was $109 million at both September 30, 2021 and December 31, 2020 and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $286 million (net of accumulated amortization of $70 million) and $248 million (net of accumulated amortization of $73 million) at September 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 acquisitions of Steamist and ESS.





11



MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

G. FAIR VALUE OF FINANCIAL INVESTMENTS
Preferred Stock of ACProducts Holding, Inc. As described in Note C, in conjunction with our divestiture of Cabinetry, we received preferred stock of ACProducts Holding, Inc., the holding company of the buyer, with a liquidation preference of $150 million. 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 $136 million and was included in other assets in our condensed consolidated balance sheet.

In May 2021, we received, in cash, $166 million for the redemption of the preferred stock, including all accrued but unpaid dividends, and recognized a gain of $14 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 $6 million for the nine months ended September 30, 2021, and $3 million and $7 million for the three and nine months ended September 30, 2020, respectively. The preferred stock was reported at the carrying value of $146 million in other assets in our condensed consolidated balance sheet at December 31, 2020.

Kraus Acquisition Contingent Consideration. As described in Note B, we may be obligated to pay up to an additional $50 million in 2023 for the Kraus acquisition contingent upon the achievement of certain financial performance metrics for the year ending December 31, 2022. The measurement of the liability for contingent consideration is based on significant inputs that are not observable in the market, and is therefore classified as Level 3 inputs. Examples of utilized unobservable inputs are estimated future revenues and earnings of the acquired business and an applicable discount rate. The estimate of the liability may fluctuate if there are changes in the forecast of the acquired business' future revenues and earnings, as a result of actual levels achieved, or in the discount rate used to determine the present value of contingent future cash flows. All subsequent remeasurements from the initial estimate at the time of acquisition are recorded in other, net in our condensed consolidated statement of operations, as described in Note N. The fair value of the liability was estimated to be $22 million and $8 million as of September 30, 2021 and December 31, 2020, respectively, using probability weighted discounted cash flows and a discount rate that reflects the uncertainty surrounding the expected outcomes, which we believe is appropriate and representative of a market participant assumption.

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 September 30, 2021 was approximately $3.2 billion, compared with the aggregate carrying value of $3.0 billion. The aggregate estimated market value of our short-term and long-term debt at December 31, 2020 was approximately $3.3 billion, compared with the aggregate carrying value of $2.8 billion.

H. WARRANTY LIABILITY
Changes in our warranty liability were as follows, in millions: 
Nine Months Ended
September 30, 2021
Twelve Months Ended December 31, 2020
Balance at January 1$83 $84 
Accruals for warranties issued during the period28 34 
Accruals related to pre-existing warranties1 (3)
Settlements made (in cash or kind) during the period(23)(33)
Other, net (including currency translation and acquisitions)(2)1 
Balance at end of period$87 $83 




12



MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

I. DEBT
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 for the nine months ended September 30, 2021, which was recorded as interest expense in the condensed consolidated statement of operations.

On September 18, 2020, we issued $300 million of 2.000% Notes due October 1, 2030 (the "2030 Notes") and received proceeds of $300 million, net of discount, for the issuance of the 2030 Notes. Also on September 18, 2020, we issued an incremental $100 million of our existing 4.500% Notes due May 15, 2047 (the "2047 Notes") and received proceeds of $119 million, including a premium, for the issuance of the 2047 Notes. The incremental $100 million will form a single series with the existing $300 million of 4.500% Notes due May 15, 2047. The 2030 Notes and 2047 Notes are senior indebtedness and are redeemable at our option at the applicable redemption price. On September 29, 2020, proceeds from the debt issuances were used to repay and early retire our $400 million 3.500% Notes due April 1, 2021. In connection with this early retirement, we incurred a loss on debt extinguishment of $6 million for the three and nine months ended September 30, 2020, 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 $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.
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 September 30, 2021, we had no 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 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 September 30, 2021.