Masco corporation

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

P. SEGMENT INFORMATION (Concluded)

	Property Additions (5)												Depreciation and Amortization (5)
	2016				2015				2014				2016				2015				2014
Our operations by segment were: (9)
Plumbing Products	$	110			$	87			$	65			$	57			$	56			$	63
Decorative Architectural Products	22				16				12				16				16				16
Cabinetry Products	8				6				9				21				24				33
Windows and Other Specialty Products	30				41				28				21				18				18
	170				150				114				115				114				130
Unallocated amounts, principally related to corporate assets	10				1				1				19				13				11
Total	$	180			$	151			$	115			$	134			$	127			$	141

(1)					Included in net sales were export sales from the U.S. of $226 million , $217 million and $228 million in 2016 , 2015 and 2014 , respectively.
(2)		Excluded from net sales were intra-company sales between segments of less than one percent in 2016 , 2015 and 2014 .
(3)			Included in net sales were sales to one customer of $2,480 million , $2,378 million and $2,310 million in 2016 , 2015 and 2014 , respectively. Such net sales were included in each of our segments.
(4)						Net sales from our operations in the U.S. were $5,605 million , $5,407 million and $5,112 million in 2016 , 2015 and 2014 , respectively.
(5)	Net sales, operating profit (loss), property additions and depreciation and amortization expense for 2015 and 2014 excluded the results of businesses reported as discontinued operations.
(6)	General corporate expense, net included those expenses not specifically attributable to our segments.
(7)	The income from litigation settlements in 2014 relates to a business in our Decorative Architectural Products segment.
(8)				Long-lived assets of our operations in the U.S. and Europe were $1,508 million and $417 million , $1,487 million and $427 million , and $1,470 million and $428 million at December 31, 2016 , 2015 and 2014 , respectively.
(9)	In 2016, we renamed our Cabinetry Products and Windows and Other Specialty Products segments. The name change did not impact the review of financial information by our corporate operating executive or the composition of the segments.
(10)	Corporate assets at December 31, 2014 has not been recasted for the impact of the adoption of Accounting Standards Update 2015-03, as amended by Accounting Standards Update 2015-15, which required the reclassification of certain debt issuance costs from an asset to a liability. Total debt issuance costs subject to reclassification would have been $15 million at December 31, 2014.

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MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Q. SEVERANCE COSTS
As part of our continuing review of our operations, actions were taken during 2016 , 2015 and 2014 to respond to market conditions. We recorded charges related to severance and early retirement programs of $8 million , $12 million and $27 million for the years ended December 31, 2016 , 2015 and 2014 , respectively, and were primarily paid when incurred. Such 2016 charges are reflected in the consolidated statement of operations in selling, general and administrative expenses and cost of sales, while 2015 and 2014 charges are principally reflected in selling, general and administrative expenses.
R. OTHER INCOME (EXPENSE), NET

Other, net, which is included in other income (expense), net, was as follows, in millions:

	2016				2015				2014
Income from cash and cash investments and short-term bank deposits	$	4			$	3			$	3
Income from financial investments, net (Note E)	7				8				2
Foreign currency transaction (losses) gains	(3		)		(14		)		5
Other items, net	(2		)		3				1
Total other, net	$	6			$	—			$	11

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MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

S. INCOME TAXES

									(In Millions)
	2016				2015				2014
Income from continuing operations before income taxes:
U.S.	$	614			$	496			$	270
Foreign	216				193				237
	$	830			$	689			$	507
Income tax expense (benefit) on income from continuing operations:
Currently payable:
U.S. Federal	$	73			$	10			$	3
State and local	24				27				1
Foreign	69				56				67
Deferred:
U.S. Federal	140				192				(401		)
State and local	2				3				(21		)
Foreign	(12		)		5				(10		)
	$	296			$	293			$	(361	)
Deferred tax assets at December 31:
Receivables	$	10			$	9
Inventories	17				17
Other assets, including stock-based compensation	58				78
Accrued liabilities	53				77
Long-term liabilities	280				266
Net operating loss carryforward	51				39
Tax credit carryforward	9				55
	478				541
Valuation allowance	(45		)		(49		)
	433				492
Deferred tax liabilities at December 31:
Property and equipment	127				104
Intangibles	222				212
Investment in foreign subsidiaries	15				8
Other	21				1
	385				325
Net deferred tax asset at December 31	$	48			$	167

The net deferred tax asset consisted of net deferred tax assets (included in other assets) of $68 million and $184 million , and net deferred tax liabilities (included in other liabilities) of $20 million and $17 million , at December 31, 2016 and 2015 , respectively.

The current portion of the state and local income tax includes an $8 million , $5 million and $8 million tax benefit from the reversal of an accrual for uncertain tax positions resulting primarily from the expiration of applicable statutes of limitations and favorable settlements on state audits in 2016 , 2015 and 2014 , respectively. The deferred portion of the state and local taxes includes a $5 million , $(1) million and $(29) million tax expense (benefit) resulting from a change in the valuation allowance against state and local deferred tax assets in 2016 , 2015 and 2014 , respectively. The deferred portion of the foreign taxes includes $6 million , $12 million and $(6) million tax expense (benefit) from a change in the valuation allowance against foreign deferred tax assets in 2016 , 2015 and 2014 , respectively.

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