2.  RELATED PARTY TRANSACTIONS

Prior to the Separation, interest was charged each month as an adjustment to Former Parent investment in TopBuild.  Our Consolidated Statements of Operations reflect an interest expense charge of $6.3 million, $12.4 million, and $13.4 million for the years ended December 31, 2015, 2014, and 2013, respectively.  The charge was based on the monthly average intercompany balance payable to Masco based on a 12-month LIBOR plus two percent.

Prior to the Separation, transactions between us and Masco, with the exception of purchase transactions, are reflected in equity in the Consolidated Balance Sheets as “Former Parent investment” and in the Consolidated Statements of Cash Flows as a financing activity in “Net transfer from (to) Former Parent.”  TopBuild related party purchases from Masco businesses aggregated $2.6 million, $6.7 million, and $6.4 million for the years ended December 31, 2015, 2014, and 2013, respectively, and have been included in cost of sales.  The amounts owed to Masco subsidiaries was $0.6 million at December 31, 2014.  Subsequent to the Separation, any transactions with Masco are no longer considered related party and are reflected in our Consolidated Statements of Operations and included in the operating cash flow section of our Consolidated Statements of Cash Flows.

In conjunction with the Separation, we executed several agreements with Masco.  These agreements include a Tax Matters Agreement, a Transition Services Agreement, and an Employee Matters Agreement.  The Tax Matters Agreement governs the parties’ respective rights, responsibilities, and obligations with respect to taxes.  The Transition Services Agreement sets forth the terms on which Masco will provide to us and we will provide to Masco, on a transition basis, certain services or functions that the companies have historically shared.  The Employee Matters Agreement governs our, and Masco’s, compensation and employee benefit obligations with respect to current and former employees and non-employee directors of each company.  Masco will continue to provide some of thse services to us, generally through June 30, 2016, with a possible extension of 12 months.

One of our directors, Mr. Carl Camden, is the Chief Executive and President of Kelly Services, Inc.  We purchased approximately $0.2 million, $0.1 million, and $0.2 million of Kelly Services’ services in the years ended December 31, 2015, 2014, and 2013, respectively.

Subsequent to the Separation, one of our Directors, Mr. Dennis Archer, continues to serve on the Masco board of directors