MASCO CORP /DE/

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, 2026, our results of operations and comprehensive income (loss) for the three and nine months ended September 30, 2026 and 2025, cash flows for the nine months ended September 30, 2026 and 2025 and changes in shareholders' equity for the three and nine months ended September 30, 2026 and 2025. The condensed consolidated balance sheet at December 31, 2025 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes.

In the first quarter of 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unlawful. Subsequently, the U.S. Court of International Trade ordered U.S. Customs and Border Protection to refund IEEPA tariffs previously collected. During the second quarter of 2026, we began receiving refunds related to IEEPA tariffs. Additionally, as of September 30, 2026, we have recognized a receivable for tariff refunds not yet paid that are considered to be probable of collection and reasonably estimable.

In the first quarter of 2026, we began the implementation of an internal reorganization to further streamline our business and optimize operations resulting in the integration of our Liberty Hardware (“Liberty”) business, a distributor of cabinet and other hardware and shower doors, into our Delta Faucet business. Prior to this reorganization Liberty had historically been included in our Decorative Architectural Products segment. As a result of the integration, all segment information herein, including comparable prior periods, include Liberty in our Plumbing Products segment rather than our Decorative Architectural Products segment.

Recently Adopted Accounting Pronouncements. In July 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-05, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets," which provides a practical expedient that allows entities to assume the current conditions as of the balance sheet date do not change for the remaining life of the asset when estimating expected credit losses for current accounts receivable and current contract assets. We adopted this standard on a prospective basis for interim and annual periods beginning January 1, 2026. The adoption of this guidance did not have a material impact on our financial position and results of operations.

Recently Issued Accounting Pronouncements. In December 2025, the FASB issued ASU 2025-10, "Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities," which establishes guidance on the recognition, measurement, and presentation of government grants received by business entities. ASU 2025-10 is effective on a modified prospective, modified retrospective, or retrospective basis for interim and annual reporting periods beginning January 1, 2029. Early adoption is permitted. We are currently reviewing the provisions of this standard and the impact, if any, the adoption of this guidance will have on our financial position and results of operations.

In September 2025, the FASB issued ASU 2025-06, "Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software," which requires that an entity capitalize internal-use software development costs once management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. ASU 2025-06 is effective on a prospective, modified transition, or retrospective basis for interim and annual reporting periods beginning January 1, 2028. Early adoption is permitted. We are currently reviewing the provisions of this standard and the impact, if any, the adoption of this guidance will have on our financial position and results of operations.

In November 2024, the FASB issued ASU 2024-03, "Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses," which requires additional disclosure of the nature of expenses included in the income statement. ASU 2024-03 is effective on a prospective or retrospective basis for annual periods beginning January 1, 2027, and interim periods within those annual periods beginning January 1, 2028. Early adoption is permitted. The adoption of this guidance will modify our disclosures, but will not have an impact on our financial position and results of operations.

B. DIVESTITURES

In the third quarter of 2026, we completed the divestiture of our Bristan Group ("Bristan") business, a United Kingdom-based provider of bathroom and kitchen faucets, showerheads, shower enclosures, and other products for a purchase price of £49 million ($65 million), net of cash disposed, subject to customary closing adjustments, and up to an additional £6 million ($8 million) if certain performance measures are achieved by the year ended December 31, 2026. In connection with the divestiture, we recognized a preliminary gain of $13 million, net of selling costs, for the three and nine months ended September 30, 2026, which is included in other, net in our condensed consolidated statements of operations. The sale of Bristan did not represent a strategic shift that will have a major effect on our operations and financial results and, therefore, will not be presented as discontinued operations. Prior to the divestiture, the results of the business were included in our Plumbing Products segment.

C. REVENUE

Our revenues are derived from sales to customers in the following geographic areas: North America and International, which are particularly in Europe. Net sales from these geographic areas, by segment, were as follows, in millions:

C. REVENUE (Concluded)

Our contract liability balance was $13 million and $57 million at September 30, 2026 and December 31, 2025, respectively.

Changes in the allowance for credit losses deducted from accounts receivable were as follows, in millions:

D. INVENTORIES

The components of inventory were as follows, in millions:

E. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill at September 30, 2026, by segment, was as follows, in millions:

(A)As a result of the divestiture of Bristan in the third quarter of 2026, gross goodwill and accumulated impairment losses for the Plumbing Products segment were reduced by $212 million and $208 million, respectively.

The changes in the carrying amount of goodwill for the nine months ended September 30, 2026, by segment, were as follows, in millions:

(B)As a result of the divestiture of Bristan in the third quarter of 2026, net goodwill for the Plumbing Products segment was reduced by $4 million.

The carrying value of our other indefinite-lived intangible assets was $72 million and $77 million at September 30, 2026 and December 31, 2025, respectively, and principally included registered trademarks. The decrease in our indefinite-lived intangible assets is primarily a result of the divestiture of Bristan. The carrying value of our definite-lived intangible assets was $113 million (net of accumulated amortization of $100 million) at September 30, 2026 and $128 million (net of accumulated amortization of $92 million) at December 31, 2025, and principally included customer relationships.

F. SUPPLIER FINANCE PROGRAM

We 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. The amounts confirmed as valid under the program were $34 million and $26 million at September 30, 2026 and December 31, 2025, respectively. Of the amounts confirmed as valid under the program, the amounts owed to participating financial institutions were $15 million and $17 million at September 30, 2026 and December 31, 2025, respectively.

G. DEBT

On March 20, 2026, we entered into a revolving credit agreement (the “2026 Credit Agreement”) with an aggregate commitment of $1.0 billion and a maturity date of March 20, 2031. At our request (which may not be exercised more than two times), the maturity may be extended for an additionalone-year period, in each case subject to customary terms and conditions, including the consent of lenders holding at least a majority of the commitments and outstanding credit exposure under the 2026 Credit Agreement at the time. In addition, we may, at our option, request an increase in the aggregate commitment under the 2026 Credit Agreement of up to $500 million, subject to customary terms and conditions. Upon entry into the 2026 Credit Agreement, our credit agreement dated April 26, 2022, with an aggregate commitment of $1.0 billion, was terminated.

G. DEBT (Concluded)

The 2026 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 the equivalent of $500 million. We can also borrow swingline loans up to $120 million and obtain letters of credit of up to $25 million. Outstanding letters of credit under the 2026 Credit Agreement reduce our borrowing capacity and we hadno outstanding letters of credit under the 2026 Credit Agreement at September 30, 2026.

Revolving credit loans denominated in U.S. dollars bear interest under the 2026 Credit Agreement, at our option, at a rate per annum equal to (A) a U.S. dollar base rate or (B) the adjusted term SOFR rate, in each case, plus an applicable margin based upon our then-applicable corporate credit ratings. Foreign currency revolving credit loans bear interest at a rate per annum equal to the applicable floating reference rate for loans denominated in the relevant foreign currency plus an applicable margin based upon our then-applicable corporate credit ratings. The various benchmarks are subject to applicable floors.

The 2026 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) an interest coverage ratio, as adjusted for certain items, not less than 2.5 to 1.0.

In order for us to borrow under the 2026 Credit Agreement, there must not be any default in our covenants in the 2026 Credit Agreement (i.e., in addition to the two financial covenants described above, principally limitations on subsidiary debt, negative pledge restrictions, and requirements relating to legal compliance, maintenance of our properties and insurance) and our representations and warranties in the 2026 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, 2025, no material ERISA or environmental non-compliance, and no material tax deficiency). We were in compliance with all covenants andno borrowings were outstanding at September 30, 2026.

On April 21, 2026, we entered into atwo year, up to $500 million senior unsecured delayed draw term loan due April 21, 2028 with a syndicate of lenders. The senior unsecured delayed draw term loan and commitments thereunder are subject to prepayment at our option and the loans will bear interest, at our option, at a rate per annum equal to (A) a U.S. dollar base rate, (B) the adjusted term SOFR rate, or (C) the adjusted daily simple SOFR rate, in each case, plus an applicable margin based upon our then-applicable corporate credit ratings. The various benchmarks are subject to applicable floors. The covenants are substantially the same as those in the 2026 Credit Agreement. We were in compliance with all covenants and $300 million was borrowed and outstanding at a weighted average interest rate of 4.517% at September 30, 2026.

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 term loan has an interest rate that resets monthly and the fair value of this instrument approximates the carrying value at September 30, 2026. The aggregate estimated market value of our short-term and long-term debt at September 30, 2026 was approximately $2.9 billion, compared with the aggregate carrying value of $3.3 billion. The aggregate estimated market value of our short-term and long-term debt at December 31, 2025 was approximately $2.7 billion, compared with the aggregate carrying value of $3.0 billion.

H. SEGMENT INFORMATION

Ourreportable segments are as follows:

Plumbing Products – principally includes faucets, plumbing system components and valves, showerheads and handheld showers, bath hardware and accessories, bathing units, tubs and shower bases, enclosures and doors, shower drains, steam shower systems, water filtration systems, sinks, kitchen accessories, cabinet and other hardware, spas, exercise pools, aquatic fitness systems, and saunas.

Decorative Architectural Products – principally includes paints and other coating products, paint applications and accessories.

H. SEGMENT INFORMATION (Continued)

Information by segment was as follows, in millions:

H. SEGMENT INFORMATION (Concluded)

(A)Intra-company sales between segments were not material and have been excluded from net sales.

(B)Operating expenses included cost of sales and selling, general and administrative expenses.

(C)Corporate expenses included specific corporate overhead allocated to each segment. General corporate expense, net included those expenses not specifically attributable to our segments.

(D)Operating profit included the net tariff benefit from IEEPA tariff refunds of approximately $90 million for the nine months ended September 30, 2026, principally in the Plumbing Products segment.

I. INCOME TAXES

Our effective tax rate was 25.5 percent and 27.5 percent for the three months ended September 30, 2026 and 2025, respectively, and was 23.9 percent and 24.9 percent for the nine months ended September 30, 2026 and 2025, respectively.

J. INCOME PER COMMON SHARE

Reconciliations of the numerators and denominators used in the computations of basic and diluted income per common share were as follows, in millions:

For the three and nine months ended September 30, 2026, we allocated dividends and undistributed earnings to the forward contract associated with the accelerated share repurchase transaction, which is considered a participating security, using the two-class method. For the three and nine months ended September 30, 2025, basic and diluted income per common share were calculated using the treasury stock method.

The following stock options, restricted stock units and performance restricted stock units were excluded from the computation of weighted-average diluted common shares outstanding due to their anti-dilutive effect, in thousands:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Concluded)

J. INCOME PER COMMON SHARE (Concluded)

Effective February 10, 2026, our Board of Directors authorized the repurchase, for retirement, of up to $2.0 billion of shares of our common stock, exclusive of excise tax, in open-market transactions or otherwise, replacing the previous Board of Directors authorization established in 2022. In May 2026, we entered into an accelerated share repurchase transaction whereby we agreed to repurchase a total of $300 million of our common stock with an initial delivery of approximately 3.3 million shares. This transaction was completed on July 27, 2026, at which time we received, at no additional cost, approximately 0.8 million additional shares of our common stock based on the volume weighted average stock price of our common stock over the term of the transaction, less a discount. During the nine months ended September 30, 2026, we repurchased and retired approximately 12.3 million shares of our common stock (including 0.4 million shares to offset the dilutive impact of restricted stock units granted in the nine months ended September 30, 2026) for approximately $861 million, inclusive of excise tax of $8 million. At September 30, 2026, we had approximately $1.2 billion remaining under the 2026 authorization.

We have declared and paid cash dividends per common share of $0.32 and $0.96 for the three and nine months ended September 30, 2026, respectively, and $0.31 and $0.93 for the three and nine months ended September 30, 2025, respectively.

K. OTHER COMMITMENTS AND CONTINGENCIES

Litigation. We are involved in claims and litigation, including class actions, mass torts and regulatory proceedings, which arise in the ordinary course of our business. The types of matters may include, among others: advertising, competition, contract, data privacy, employment, environmental, insurance coverage, intellectual property, personal injury, product compliance, product liability, securities and warranty. We are also subject to product safety regulations, product recalls and direct claims for product liabilities. We believe the likelihood that the outcome of these claims, litigation and product safety matters would have a material adverse effect on us is remote. However, there is no assurance that we will prevail in these matters, and we could, in the future, incur judgments or penalties, enter into settlements of claims or revise our expectations regarding the outcome of these matters, which could materially impact our results of operations.

Warranty. Changes in our warranty liability were as follows, in millions: