Cover Page
Cover Page | 6 Months Ended |
Jun. 30, 2019shares | |
Cover page. | |
Document Type | 10-Q |
Document Quarterly Report | true |
Document Period End Date | Jun. 30, 2019 |
Document Transition Report | false |
Entity File Number | 1-5794 |
Entity Registrant Name | MASCO CORP /DE/ |
Entity Incorporation, State or Country Code | DE |
Entity Tax Identification Number | 38-1794485 |
Entity Address, Address Line One | 17450 College Parkway, |
Entity Address, City or Town | Livonia, |
Entity Address, State or Province | MI |
Entity Address, Postal Zip Code | 48152 |
City Area Code | 313 |
Local Phone Number | 274-7400 |
Title of 12(b) Security | Common Stock, $1.00 par value |
Trading Symbol | MAS |
Security Exchange Name | NYSE |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding (in shares) | 289,456,006 |
Entity Central Index Key | 0000062996 |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2019 |
Document Fiscal Period Focus | Q2 |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Millions | Jun. 30, 2019 | Dec. 31, 2018 |
Current Assets: | ||
Cash and cash investments | $ 325 | $ 559 |
Receivables | 1,423 | 1,153 |
Prepaid expenses and other | 120 | 108 |
Inventories: | ||
Finished goods | 572 | 520 |
Raw material | 298 | 325 |
Work in process | 105 | 101 |
Total inventories | 975 | 946 |
Total current assets | 2,843 | 2,766 |
Property and equipment, net | 1,212 | 1,223 |
Operating lease right-of-use assets | 228 | |
Goodwill | 891 | 898 |
Other intangible assets, net | 387 | 406 |
Other assets | 92 | 100 |
Total assets | 5,653 | 5,393 |
Current Liabilities: | ||
Accounts payable | 1,023 | 926 |
Notes payable | 231 | 8 |
Accrued liabilities | 699 | 750 |
Total current liabilities | 1,953 | 1,684 |
Long-term debt | 2,771 | 2,971 |
Other liabilities | 858 | 669 |
Total liabilities | 5,582 | 5,324 |
Commitments and contingencies (Note O) | ||
Masco Corporation's shareholders' equity: | ||
Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2019 – 287,400,000; 2018 – 293,900,000 | 287 | 294 |
Preferred shares authorized: 1,000,000; Issued and outstanding: 2019 and 2018 – None | 0 | 0 |
Paid-in capital | 0 | 0 |
Retained deficit | (261) | (278) |
Accumulated other comprehensive loss | (117) | (127) |
Total Masco Corporation's shareholders' deficit | (91) | (111) |
Noncontrolling interest | 162 | 180 |
Total equity | 71 | 69 |
Total liabilities and equity | $ 5,653 | $ 5,393 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Common share, par value (in dollars per share) | $ 1 | $ 1 |
Common shares, shares authorized (in shares) | 1,400,000,000 | 1,400,000,000 |
Common shares, shares issued (in shares) | 287,400,000 | 293,900,000 |
Common shares, shares outstanding (in shares) | 287,400,000 | 293,900,000 |
Preferred shares, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred shares, shares issued (in shares) | 0 | 0 |
Preferred shares, shares outstanding (in shares) | 0 | 0 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
Net sales | $ 2,275 | $ 2,297 | $ 4,183 | $ 4,217 |
Cost of sales | 1,493 | 1,547 | 2,802 | 2,848 |
Gross profit | 782 | 750 | 1,381 | 1,369 |
Selling, general and administrative expenses | 390 | 392 | 762 | 767 |
Impairment charges for goodwill and other intangible assets | 0 | 0 | 16 | 0 |
Operating profit | 392 | 358 | 603 | 602 |
Other income (expense), net: | ||||
Interest expense | (41) | (38) | (80) | (79) |
Other, net | (4) | (8) | (8) | (11) |
Total other income (expense), net | (45) | (46) | (88) | (90) |
Income before income taxes | 347 | 312 | 515 | 512 |
Income tax expense | 95 | 88 | 136 | 127 |
Net income | 252 | 224 | 379 | 385 |
Less: Net income attributable to noncontrolling interest | 12 | 13 | 23 | 25 |
Net income attributable to Masco Corporation | $ 240 | $ 211 | $ 356 | $ 360 |
Basic: | ||||
Net income (in dollars per share) | $ 0.82 | $ 0.69 | $ 1.22 | $ 1.16 |
Diluted: | ||||
Net income (in dollars per share) | $ 0.82 | $ 0.68 | $ 1.21 | $ 1.15 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 252 | $ 224 | $ 379 | $ 385 |
Less: Net income attributable to noncontrolling interest | 12 | 13 | 23 | 25 |
Net income attributable to Masco Corporation | 240 | 211 | 356 | 360 |
Other comprehensive income (loss), net of tax (Note K): | ||||
Cumulative translation adjustment | 5 | (57) | 2 | (15) |
Interest rate swaps | 1 | 1 | ||
Interest rate swaps | 1 | 1 | ||
Pension and other post-retirement benefits | 4 | 3 | 8 | 8 |
Other comprehensive income (loss), net of tax | 10 | (53) | 11 | (6) |
Less: Other comprehensive income (loss) attributable to noncontrolling interest | 4 | (19) | 1 | (12) |
Other comprehensive income (loss) attributable to Masco Corporation | 6 | (34) | 10 | 6 |
Total comprehensive income | 262 | 171 | 390 | 379 |
Less: Total comprehensive income (loss) attributable to noncontrolling interest | 16 | (6) | 24 | 13 |
Total comprehensive income attributable to Masco Corporation | $ 246 | $ 177 | $ 366 | $ 366 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES: | ||
Cash provided by operations | $ 510 | $ 499 |
Increase in receivables | (285) | (322) |
Increase in inventories | (28) | (72) |
Increase in accounts payable and accrued liabilities, net | 16 | 188 |
Net cash from operating activities | 213 | 293 |
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES: | ||
Retirement of notes | 0 | (114) |
Purchase of Company common stock | (289) | (265) |
Cash dividends paid | (70) | (65) |
Dividends paid to noncontrolling interest | (42) | (89) |
Proceeds from the exercise of stock options | 13 | 0 |
Employee withholding taxes paid on stock-based compensation | (16) | (33) |
Increase (decrease) in debt, net | 20 | (1) |
Credit Agreement and other financing costs | (2) | 0 |
Net cash for financing activities | (386) | (567) |
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES: | ||
Capital expenditures | (71) | (103) |
Acquisition of business, net of cash acquired | 0 | (548) |
Proceeds from disposition of: | ||
Short-term bank deposits | 0 | 108 |
Proceeds from Sale and Maturity of Other Investments | 1 | 3 |
Property and equipment | 15 | 1 |
Other, net | (8) | (5) |
Net cash for investing activities | (63) | (544) |
Effect of exchange rate changes on cash and cash investments | 2 | 8 |
CASH AND CASH INVESTMENTS: | ||
Decrease for the period | (234) | (810) |
At January 1 | 559 | 1,194 |
At June 30 | $ 325 | $ 384 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) - USD ($) $ in Millions | Total | Common Shares ($1 par value) | Paid-In Capital | Retained (Deficit) Earnings | Accumulated Other Comprehensive (Loss) Income | Noncontrolling Interest |
Balance at Dec. 31, 2017 | $ 183 | $ 310 | $ 0 | $ (298) | $ (65) | $ 236 |
Increase (Decrease) in Stockholders' Equity | ||||||
Reclassification of disproportionate tax effects (Refer to Note K) | 0 | 59 | (59) | |||
Total comprehensive income | 208 | 149 | 40 | 19 | ||
Shares issued | (13) | 2 | (7) | (8) | ||
Shares retired: | ||||||
Repurchased | (150) | (4) | (146) | |||
Surrendered (non-cash) | (19) | (19) | ||||
Cash dividends declared | (33) | (33) | ||||
Stock-based compensation | 7 | 7 | ||||
Balance at Mar. 31, 2018 | 183 | 308 | 0 | (296) | (84) | 255 |
Balance at Dec. 31, 2017 | 183 | 310 | 0 | (298) | (65) | 236 |
Increase (Decrease) in Stockholders' Equity | ||||||
Total comprehensive income | 379 | |||||
Balance at Jun. 30, 2018 | 126 | 305 | 0 | (221) | (118) | 160 |
Balance at Mar. 31, 2018 | 183 | 308 | 0 | (296) | (84) | 255 |
Increase (Decrease) in Stockholders' Equity | ||||||
Total comprehensive income | 171 | 211 | (34) | (6) | ||
Shares issued | (1) | (1) | ||||
Shares retired: | ||||||
Repurchased | (115) | (3) | (8) | (104) | ||
Cash dividends declared | (32) | (32) | ||||
Dividends paid to noncontrolling interest | (89) | (89) | ||||
Stock-based compensation | 9 | 9 | ||||
Balance at Jun. 30, 2018 | 126 | 305 | 0 | (221) | (118) | 160 |
Balance at Dec. 31, 2018 | 69 | 294 | 0 | (278) | (127) | 180 |
Increase (Decrease) in Stockholders' Equity | ||||||
Total comprehensive income | 128 | 116 | 4 | 8 | ||
Shares issued | 5 | 1 | 4 | |||
Shares retired: | ||||||
Repurchased | (122) | (3) | (11) | (108) | ||
Surrendered (non-cash) | (10) | (1) | (9) | |||
Cash dividends declared | (35) | (35) | ||||
Stock-based compensation | 7 | 7 | ||||
Balance at Mar. 31, 2019 | 42 | 291 | 0 | (314) | (123) | 188 |
Balance at Dec. 31, 2018 | 69 | 294 | 0 | (278) | (127) | 180 |
Increase (Decrease) in Stockholders' Equity | ||||||
Total comprehensive income | 390 | |||||
Shares retired: | ||||||
Repurchased | (289) | |||||
Balance at Jun. 30, 2019 | 71 | 287 | 0 | (261) | (117) | 162 |
Balance at Mar. 31, 2019 | 42 | 291 | 0 | (314) | (123) | 188 |
Increase (Decrease) in Stockholders' Equity | ||||||
Total comprehensive income | 262 | 240 | 6 | 16 | ||
Shares issued | 2 | 1 | 1 | |||
Shares retired: | ||||||
Repurchased | (167) | (5) | (10) | (152) | ||
Cash dividends declared | (35) | (35) | ||||
Dividends paid to noncontrolling interest | (42) | (42) | ||||
Stock-based compensation | 9 | 9 | ||||
Balance at Jun. 30, 2019 | $ 71 | $ 287 | $ 0 | $ (261) | $ (117) | $ 162 |
CONSOLIDATED STATEMENTS OF SH_2
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 | Jun. 30, 2018 |
Statement of Stockholders' Equity [Abstract] | |||
Common share, par value (in dollars per share) | $ 1 | $ 1 | $ 1 |
Accounting Policies
Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Accounting Policies | 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 June 30, 2019 , our results of operations and comprehensive income (loss) for the three-month and six-month periods ended June 30, 2019 and 2018 , cash flows for the six-month period ended June 30, 2019 and changes in shareholders' equity for the three-month and six-month periods ended June 30, 2019 and 2018 . The condensed consolidated balance sheet at December 31, 2018 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Leases. We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets (“ROU assets”), accrued liabilities and other liabilities on our condensed consolidated balance sheet. Finance lease ROU assets are included in property and equipment, net, notes payable, and long-term debt on our condensed consolidated balance sheet. ROU assets represent our right to use an underlying asset for the duration of the lease term while lease liabilities represent our obligation to make lease payments in exchange for the right to use an underlying asset. ROU assets and lease liabilities are measured based on the present value of fixed lease payments over the lease term at the commencement date. The ROU asset also includes any lease payments made prior to the commencement date and initial direct costs incurred, and is reduced by any lease incentives received. We review our ROU assets as events occur or circumstances change that would indicate the carrying amount of the ROU assets are not recoverable and exceed their fair values. If the carrying amount of the ROU asset is not recoverable from its undiscounted cash flows, then we would recognize an impairment loss for the difference between the carrying amount and the current fair value. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate on the commencement date of the lease as the discount rate in determining the present value of future lease payments. We determine the incremental borrowing rate for each lease by using the current yields of our uncollateralized, publicly traded debts with maturity periods similar to the respective lease term, adjusted to a collateralized basis based on third-party data. Our lease terms may include options to extend or terminate the lease when there are relevant economic incentives present that make it reasonably certain that we will exercise that option. We account for any non-lease components separately from lease components. For operating leases, lease expense for future fixed lease payments is recognized on a straight-line basis over the lease term. For finance leases, lease expense for future fixed lease payments is recognized using the effective interest rate method over the lease term. Variable lease payments are recognized as lease expense in the period incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Recently Adopted Accounting Pronouncements. In February 2016, the Financial Accounting Standards Board ("FASB") issued a new standard for leases, ASC 842, which changes the accounting model for identifying and accounting for leases. We adopted ASC 842 on January 1, 2019 using the optional transition method, which allows for initial application of the new standard beginning at the adoption date. We elected the package of practical expedients that allows us to forgo reassessing a) whether any existing contracts are or contain leases, b) the lease classification for any existing leases, and c) whether initial direct costs for any existing leases are capitalized. We also elected the practical expedient to use hindsight with respect to lease renewals, terminations, and purchase options when determining the lease term and in assessing impairment of the assets related to leases existing at the time of adoption. As a result of the standard, we recorded $236 million of operating lease ROU assets, $45 million of short-term operating lease liabilities, and $214 million of long-term operating lease liabilities on the date of adoption. Our accounting for finance leases remained unchanged. The standard did not impact our condensed consolidated statements of operations or statements of cash flows. In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which improves and simplifies accounting rules around hedge accounting and better portrays the economic results of an entity's risk management activities in its financial statements. We adopted ASU 2017-12 on January 1, 2019. The adoption of the standard did not impact our financial position or results of operations. A. ACCOUNTING POLICIES (Concluded) In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting," which modifies the accounting for share-based payment awards issued to nonemployees to largely align it with the accounting for share-based payment awards issued to employees. We adopted ASU 2018-07 on January 1, 2019. The adoption of the standard did not impact our financial position or results of operations. Recently Issued Accounting Pronouncements. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which modifies the methodology for recognizing loss impairments on certain types of financial instruments, including receivables. The new methodology requires an entity to estimate the credit losses expected over the life of an exposure. Additionally, ASU 2016-13 amends the current available-for-sale security other-than-temporary impairment model for debt securities. ASU 2016-13 is effective for us for annual periods beginning January 1, 2020. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations. In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," which allows for the capitalization of certain implementation costs incurred in a hosting arrangement that is a service contract. ASU 2018-15 allows for either retrospective adoption or prospective adoption to all implementation costs incurred after the date of adoption. ASU 2018-15 is effective for us for annual periods beginning January 1, 2020. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations. |
Acquisitions
Acquisitions | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
Acquisitions | ACQUISITIONS On March 9, 2018, we acquired substantially all of the net assets of The L.D. Kichler Co. ("Kichler"), a leader in decorative residential and light commercial lighting products, ceiling fans and LED lighting systems. This business expands our product offerings to our customers. The results of this acquisition for the period from the acquisition date are included in the condensed consolidated financial statements and are reported in the Decorative Architectural Products segment. The purchase price, net of $2 million cash acquired, consisted of $549 million paid with cash on hand. Since the acquisition, we revised the allocation of the purchase price to identifiable assets and liabilities based on analysis of information as of the acquisition date that was made available in the year after acquisition. The initial and final allocations of the fair value of the acquisition of Kichler is summarized in the following table, in millions. Initial Final Receivables $ 101 $ 100 Inventories 173 166 Other current assets 5 5 Property and equipment 33 33 Goodwill 46 64 Other intangible assets 243 240 Accounts payable (24 ) (24 ) Accrued liabilities (25 ) (30 ) Other liabilities (4 ) (5 ) Total $ 548 $ 549 The goodwill acquired, which is generally tax deductible, is related primarily to the operational and financial synergies we expect to derive from combining Kichler's operations into our business, as well as the assembled workforce. The other intangible assets acquired consist of $59 million of indefinite-lived intangible assets, which is related to trademarks, and $181 million of definite-lived intangible assets. The definite-lived intangible assets consist of $145 million related to customer relationships, which is being amortized on a straight-line basis over 20 years , and $36 million of other definite-lived intangible assets, which is being amortized over a weighted average amortization period of 3 years . |
Revenue
Revenue | 6 Months Ended |
Jun. 30, 2019 | |
Revenues [Abstract] | |
Revenue | 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 June 30, 2019 Plumbing Products Decorative Architectural Products Cabinetry Products Windows and Other Specialty Products Total Primary geographic markets: North America $ 661 $ 827 $ 251 $ 152 $ 1,891 International, principally Europe 351 — — 33 384 Total $ 1,012 $ 827 $ 251 $ 185 $ 2,275 Six Months Ended June 30, 2019 Plumbing Products Decorative Architectural Products Cabinetry Products Windows and Other Specialty Products Total Primary geographic markets: North America $ 1,259 $ 1,400 $ 488 $ 279 $ 3,426 International, principally Europe 693 — — 64 757 Total $ 1,952 $ 1,400 $ 488 $ 343 $ 4,183 Three Months Ended June 30, 2018 Plumbing Products Decorative Architectural Products Cabinetry Products Windows and Other Specialty Products Total Primary geographic markets: North America $ 647 $ 806 $ 268 $ 151 $ 1,872 International, principally Europe 385 — — 40 425 Total $ 1,032 $ 806 $ 268 $ 191 $ 2,297 Six Months Ended June 30, 2018 Plumbing Products Decorative Architectural Products Cabinetry Products Windows and Other Specialty Products Total Primary geographic markets: North America $ 1,252 $ 1,351 $ 485 $ 300 $ 3,388 International, principally Europe 751 — — 78 829 Total $ 2,003 $ 1,351 $ 485 $ 378 $ 4,217 Our contract asset balance was $14 million at both June 30, 2019 and December 31, 2018 . Our contract liability balance was $14 million and $41 million at June 30, 2019 and December 31, 2018 , respectively. We (reversed) recognized $(1) million and $3 million of revenue for the three-month periods ended June 30, 2019 and 2018, respectively, related to performance obligations settled in previous quarters of the same year. We recognized $1 million of revenue for both the three-month and six-month periods ended June 30, 2019 and $3 million of revenue for both the three-month and six-month periods ended June 30, 2018 |
Leases (Notes)
Leases (Notes) | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Leases | LEASES We have operating and finance leases primarily for corporate offices, manufacturing facilities, warehouses, vehicles, and equipment. Our leases have remaining lease terms up to 14 years , some of which may include one or more renewal options with terms to extend the lease for up to an additional 20 years , and some of which may include options to terminate the leases prior to their expiration. The components of lease cost were as follows, in millions: Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Operating lease cost $ 15 $ 31 Short-term lease cost 2 4 Variable lease cost 1 2 Finance lease cost: Amortization of right-of-use assets — 1 Interest on lease liabilities 1 1 Supplemental cash flow information related to leases was as follows, in millions: Six Months Ended June 30, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 29 Operating cash flows for finance leases 1 Financing cash flows for finance leases 1 ROU assets obtained in exchange for new lease obligations: Operating leases $ 17 Finance leases — Certain other information related to leases was as follows: At June 30, 2019 Weighted-average remaining lease term: Operating leases 9 years Finance leases 10 years Weighted-average discount rate: Operating leases 4.5 % Finance leases 3.4 % Supplemental balance sheet information related to leases was as follows, in millions: At June 30, 2019 Operating Leases Finance Leases Property and equipment, net $ — $ 36 Notes payable — 7 Accrued liabilities 46 — Long-term debt — 29 Other liabilities 206 — Gross ROU assets under finance leases recorded within property and equipment, net were $47 million , and accumulated amortization associated with these leases was $11 million , at June 30, 2019 . D. LEASES (Concluded) At June 30, 2019 , future maturities of lease liabilities (under ASC 842) were as follows, in millions: Operating Leases Finance Leases Year ending December 31, 2019 (excluding the six months ended June 30, 2019) $ 28 $ 7 2020 53 3 2021 45 3 2022 36 3 2023 25 4 Thereafter 127 23 Total lease payments 314 43 Less: imputed interest (62 ) (7 ) Total $ 252 $ 36 At December 31, 2018 , future minimum operating lease payments (under ASC 840) were as follows, in millions: 2019 – $55 million ; 2020 – $47 million ; 2021 – $40 million ; 2022 – $30 million ; 2023 – $20 million ; 2024 and beyond – $99 million |
Leases | LEASES We have operating and finance leases primarily for corporate offices, manufacturing facilities, warehouses, vehicles, and equipment. Our leases have remaining lease terms up to 14 years , some of which may include one or more renewal options with terms to extend the lease for up to an additional 20 years , and some of which may include options to terminate the leases prior to their expiration. The components of lease cost were as follows, in millions: Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Operating lease cost $ 15 $ 31 Short-term lease cost 2 4 Variable lease cost 1 2 Finance lease cost: Amortization of right-of-use assets — 1 Interest on lease liabilities 1 1 Supplemental cash flow information related to leases was as follows, in millions: Six Months Ended June 30, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 29 Operating cash flows for finance leases 1 Financing cash flows for finance leases 1 ROU assets obtained in exchange for new lease obligations: Operating leases $ 17 Finance leases — Certain other information related to leases was as follows: At June 30, 2019 Weighted-average remaining lease term: Operating leases 9 years Finance leases 10 years Weighted-average discount rate: Operating leases 4.5 % Finance leases 3.4 % Supplemental balance sheet information related to leases was as follows, in millions: At June 30, 2019 Operating Leases Finance Leases Property and equipment, net $ — $ 36 Notes payable — 7 Accrued liabilities 46 — Long-term debt — 29 Other liabilities 206 — Gross ROU assets under finance leases recorded within property and equipment, net were $47 million , and accumulated amortization associated with these leases was $11 million , at June 30, 2019 . D. LEASES (Concluded) At June 30, 2019 , future maturities of lease liabilities (under ASC 842) were as follows, in millions: Operating Leases Finance Leases Year ending December 31, 2019 (excluding the six months ended June 30, 2019) $ 28 $ 7 2020 53 3 2021 45 3 2022 36 3 2023 25 4 Thereafter 127 23 Total lease payments 314 43 Less: imputed interest (62 ) (7 ) Total $ 252 $ 36 At December 31, 2018 , future minimum operating lease payments (under ASC 840) were as follows, in millions: 2019 – $55 million ; 2020 – $47 million ; 2021 – $40 million ; 2022 – $30 million ; 2023 – $20 million ; 2024 and beyond – $99 million |
Depreciation and Amortization
Depreciation and Amortization | 6 Months Ended |
Jun. 30, 2019 | |
Depreciation, Depletion and Amortization [Abstract] | |
Depreciation and Amortization | DEPRECIATION AND AMORTIZATION Depreciation and amortization expense was $82 million and $74 million for the six-month periods ended June 30, 2019 and 2018 |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets | GOODWILL AND OTHER INTANGIBLE ASSETS The changes in the carrying amount of goodwill for the six-month period ended June 30, 2019 , by segment, were as follows, in millions: Gross Goodwill At June 30, 2019 Accumulated Net Goodwill At June 30, 2019 Plumbing Products $ 568 $ (340 ) $ 228 Decorative Architectural Products 358 (75 ) 283 Cabinetry Products 181 — 181 Windows and Other Specialty Products 717 (518 ) 199 Total $ 1,824 $ (933 ) $ 891 Gross Goodwill At December 31, 2018 Accumulated Impairment Losses Net Goodwill At December 31, 2018 Pre-Tax Impairment Charges Net Goodwill At June 30, 2019 Plumbing Products $ 568 $ (340 ) $ 228 $ — $ 228 Decorative Architectural Products 358 (75 ) 283 — 283 Cabinetry Products 181 — 181 — 181 Windows and Other Specialty Products 717 (511 ) 206 (7 ) 199 Total $ 1,824 $ (926 ) $ 898 $ (7 ) $ 891 F. GOODWILL AND OTHER INTANGIBLE ASSETS (Concluded) In the first quarter of 2019 we recognized a $7 million non-cash goodwill impairment charge in our Windows and Other Specialty Products segment, related to a decline in the long-term outlook of our windows and doors business in the United Kingdom. We did not recognize a tax benefit as a result of this impairment. The carrying value of our other indefinite-lived intangible assets was $190 million and $199 million at June 30, 2019 and December 31, 2018 , respectively, and principally included registered trademarks. During the first quarter of 2019, we recognized a $9 million impairment charge related to a registered trademark in our Decorative Architectural Products segment due to a change in the long-term net sales projections of lighting products. The carrying value of our definite-lived intangible assets was $197 million (net of accumulated amortization of $41 million ) and $207 million (net of accumulated amortization of $29 million ) at June 30, 2019 and December 31, 2018 , respectively, and principally included customer relationships. |
Warranty Liability
Warranty Liability | 6 Months Ended |
Jun. 30, 2019 | |
Product Warranties Disclosures [Abstract] | |
Warranty Liability | WARRANTY LIABILITY Changes in our warranty liability were as follows, in millions: Six Months Ended Twelve Months Ended December 31, 2018 Balance at January 1 $ 217 $ 205 Accruals for warranties issued during the period 38 78 Accruals related to pre-existing warranties (2 ) (1 ) Settlements made (in cash or kind) during the period (34 ) (65 ) Other, net (including currency translation) (1 ) — Balance at end of period $ 218 $ 217 |
Debt
Debt | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Debt | DEBT On April 16, 2018, we repaid and retired all of our $114 million , 6.625% Notes on the scheduled repayment date. On March 13, 2019, we entered into a credit agreement (the “Credit Agreement”) with a bank group, 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 bank group or new lenders. Upon entry into the Credit Agreement, our credit agreement dated March 28, 2013, as amended, with an aggregate commitment of $750 million , was terminated. 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 June 30, 2019 , 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) adjusted LIBO Rate plus 1.0% (the "Alternative Base Rate"); plus an applicable margin based upon our then-applicable corporate credit ratings; or (B) 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 plus an applicable margin based upon our then-applicable corporate credit ratings. The Credit Agreement contains financial covenants requiring us to maintain (A) a maximum net leverage ratio, as adjusted for certain items, of 4.0 to 1.0, and (B) a minimum interest coverage ratio, as adjusted for certain items, equal to or greater than 2.5 to 1.0. H. DEBT (Concluded) 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 June 30, 2019 . 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, 2019 was approximately $3.2 billion , compared with the aggregate carrying value of $3.0 billion . The aggregate estimated market value was approximately $3.0 billion at December 31, 2018 , which equaled the aggregate carrying value of short-term and long-term debt at that date. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | STOCK-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, 2019 , outstanding stock-based incentives were in the form of long-term stock awards, stock options, restricted stock units, phantom stock awards and stock appreciation rights. Pre-tax compensation expense for these stock-based incentives was as follows, in millions: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Long-term stock awards $ 7 $ 7 $ 12 $ 12 Stock options 1 1 2 2 Restricted stock units 1 1 2 2 Phantom stock awards and stock appreciation rights 1 (1 ) 2 (1 ) Total $ 10 $ 8 $ 18 $ 15 Long-Term Stock Awards. Long-term stock awards are granted to our key employees and non-employee Directors and do not cause net share dilution inasmuch as we continue the practice of repurchasing and retiring an equal number of shares in the open market. We granted 632,280 shares of long-term stock awards in the six-month period ended June 30, 2019 . I. STOCK-BASED COMPENSATION (Continued) Our long-term stock award activity was as follows, shares in millions: Six Months Ended June 30, 2019 2018 Unvested stock award shares at January 1 2 3 Weighted average grant date fair value $ 30 $ 24 Stock award shares granted 1 1 Weighted average grant date fair value $ 36 $ 42 Stock award shares vested 1 1 Weighted average grant date fair value $ 25 $ 21 Stock award shares forfeited — — Weighted average grant date fair value $ 31 $ 30 Unvested stock award shares at June 30 2 3 Weighted average grant date fair value $ 34 $ 30 At June 30, 2019 and 2018 , there was $55 million and $56 million , respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of three years at both June 30, 2019 and 2018 . The total market value (at the vesting date) of stock award shares which vested during the six-month periods ended June 30, 2019 and 2018 was $30 million and $54 million , respectively. Stock Options. Stock options are granted to certain key employees. The exercise price equals the market price of our common stock at the grant date. These options generally become exercisable (vest ratably) over five years beginning on the first anniversary from the date of grant and expire no later than 10 years after the grant date. We granted 561,280 shares of stock options in the six-month period ended June 30, 2019 with a grant date weighted average exercise price of approximately $36 per share. In the six-month period ended June 30, 2019 , 42,570 stock options were forfeited (including options that expired unexercised). I. STOCK-BASED COMPENSATION (Continued) Our stock option activity was as follows, shares in millions: Six Months Ended June 30, 2019 2018 Option shares outstanding, January 1 4 5 Weighted average exercise price $ 21 $ 16 Option shares granted 1 — Weighted average exercise price $ 36 $ 42 Option shares exercised 1 1 Aggregate intrinsic value on date of exercise (A) $ 17 million $ 36 million Weighted average exercise price $ 11 $ 12 Option shares forfeited — — Weighted average exercise price $ 36 $ 31 Option shares outstanding, June 30 4 4 Weighted average exercise price $ 25 $ 19 Weighted average remaining option term (in years) 6 5 Option shares vested and expected to vest, June 30 4 4 Weighted average exercise price $ 25 $ 19 Aggregate intrinsic value (A) $ 52 million $ 82 million Weighted average remaining option term (in years) 6 5 Option shares exercisable (vested), June 30 2 3 Weighted average exercise price $ 20 $ 15 Aggregate intrinsic value (A) $ 45 million $ 74 million Weighted average remaining option term (in years) 4 4 (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, 2019 and 2018 , there was $11 million and $10 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 three years at both June 30, 2019 and 2018 . I. STOCK-BASED COMPENSATION (Concluded) 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: Six Months Ended June 30, 2019 2018 Weighted average grant date fair value $ 8.81 $ 12.52 Risk-free interest rate 2.57 % 2.71 % Dividend yield 1.35 % 1.00 % Volatility factor 25.00 % 29.00 % Expected option life 6 years 6 years Restricted Stock Units. Under our Long Term Incentive Program, we grant restricted stock units to certain senior executives. These restricted stock units will vest and share awards will be issued at no cost to the employees, subject to our achievement of specified return on invested capital performance goals over a three-year period that have been established by our Organization and Compensation Committee of the Board of Directors for the performance period and the recipient's continued employment through the share award date. We granted 126,680 restricted stock units in the six-month period ended June 30, 2019 , with a grant date fair value of approximately $39 per share, and 113,260 restricted stock units in the six-month period ended June 30, 2018 , with a grant date fair value of approximately $42 per share. During the six-month period ended June 30, 2018 , 11,600 |
Employee Retirement Plans
Employee Retirement Plans | 6 Months Ended |
Jun. 30, 2019 | |
Retirement Benefits [Abstract] | |
Employee Retirement Plans | EMPLOYEE RETIREMENT PLANS Net periodic pension cost for our defined-benefit pension plans, with the exception of service cost, is recorded in other income (expense), net, in our condensed consolidated statement of operations. Net periodic pension cost for our defined-benefit pension plans was as follows, in millions: Three Months Ended June 30, 2019 2018 Qualified Non-Qualified Qualified Non-Qualified Interest cost $ 9 $ 2 $ 10 $ 2 Expected return on plan assets (11 ) — (12 ) — Amortization of net loss 6 — 5 — Net periodic pension cost $ 4 $ 2 $ 3 $ 2 Six Months Ended June 30, 2019 2018 Qualified Non-Qualified Qualified Non-Qualified Service cost $ 1 $ — $ 1 $ — Interest cost 19 3 20 3 Expected return on plan assets (22 ) — (24 ) — Amortization of net loss 10 1 9 1 Net periodic pension cost $ 8 $ 4 $ 6 $ 4 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. |
Reclassifications From Accumula
Reclassifications From Accumulated Other Comprehensive Loss | 6 Months Ended |
Jun. 30, 2019 | |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |
Reclassifications From Accumulated Other Comprehensive Loss | RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE LOSS The reclassifications from accumulated other comprehensive loss to the condensed consolidated statements of operations were as follows, in millions: Amounts Reclassified Accumulated Other Comprehensive Loss Three Months Ended June 30, Six Months Ended June 30, Statement of Operations Line Item 2019 2018 2019 2018 Amortization of defined-benefit pension and other post-retirement benefits: Actuarial losses, net $ 6 $ 5 $ 11 $ 10 Other income (expense), net Tax (benefit) (2 ) (2 ) (3 ) (2 ) Net of tax $ 4 $ 3 $ 8 $ 8 Interest rate swaps $ 1 $ 1 $ 1 $ 1 Interest expense Tax (benefit) — — — — Net of tax $ 1 $ 1 $ 1 $ 1 In addition to the above amounts, as of March 31, 2018, we adopted ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." As a result of the adoption, we reclassified $59 million of the disproportionate tax benefit relating to various defined-benefit plans from accumulated other comprehensive loss to retained deficit in 2018. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Segment Information | SEGMENT INFORMATION Information by segment and geographic area was as follows, in millions: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 2019 2018 2019 2018 Net Sales (A) Operating Profit (Loss) Net Sales(A) Operating Profit (Loss) Operations by segment: Plumbing Products $ 1,012 $ 1,032 $ 198 $ 194 $ 1,952 $ 2,003 $ 351 $ 357 Decorative Architectural Products 827 806 173 145 1,400 1,351 246 234 Cabinetry Products 251 268 33 33 488 485 53 39 Windows and Other Specialty Products 185 191 7 8 343 378 (4 ) 12 Total $ 2,275 $ 2,297 $ 411 $ 380 $ 4,183 $ 4,217 $ 646 $ 642 Operations by geographic area: North America $ 1,891 $ 1,872 $ 364 $ 323 $ 3,426 $ 3,388 $ 566 $ 541 International, principally Europe 384 425 47 57 757 829 80 101 Total $ 2,275 $ 2,297 411 380 $ 4,183 $ 4,217 646 642 General corporate expense, net (19 ) (22 ) (43 ) (40 ) Operating profit 392 358 603 602 Other income (expense), net (45 ) (46 ) (88 ) (90 ) Income before income taxes $ 347 $ 312 $ 515 $ 512 (A) Inter-segment sales were not material. |
Other Income (Expense), Net
Other Income (Expense), Net | 6 Months Ended |
Jun. 30, 2019 | |
Other Income and Expenses [Abstract] | |
Other Income (Expense), Net | OTHER INCOME (EXPENSE), NET Other, net, which is included in other income (expense), net, was as follows, in millions: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Income from cash and cash investments and short-term bank deposits $ — $ — $ 1 $ 2 Equity investment income, net — 2 — 2 Foreign currency transaction gains (losses) 2 (5 ) 2 (6 ) Net periodic pension and post-retirement benefit cost (6 ) (5 ) (11 ) (9 ) Total other, net $ (4 ) $ (8 ) $ (8 ) $ (11 ) |
Income Per Common Share
Income Per Common Share | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Income Per Common Share | 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: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Numerator (basic and diluted): Net income $ 240 $ 211 $ 356 $ 360 Less: Allocation to unvested restricted stock awards 2 1 2 3 Net income available to common shareholders $ 238 $ 210 $ 354 $ 357 Denominator: Basic common shares (based upon weighted average) 289 306 291 308 Add: Stock option dilution 1 3 1 3 Diluted common shares 290 309 292 311 For the three-month and six-month periods ended June 30, 2019 and 2018 , we allocated dividends and undistributed earnings to the unvested restricted stock awards. Additionally, 1.3 million and 1.2 million common shares for the three-month and six-month periods ended June 30, 2019 , respectively, and 675,000 and 606,000 common shares for the three-month and six-month periods ended June 30, 2018 , respectively, related to stock options and 20,000 common shares related to restricted stock units for the three-month and six-month periods ended June 30, 2019 were excluded from the computation of diluted income per common share due to their antidilutive effect. In May 2017, our Board of Directors authorized the repurchase, for retirement, of up to $1.5 billion of shares of our common stock in open-market transactions or otherwise. In the first six months of 2019 , we repurchased and retired 7.7 million shares of our common stock (including 0.6 million shares to offset the dilutive impact of long-term stock awards granted in the first half of the year), for approximately $289 million . At June 30, 2019 , we had $347 million remaining under the 2017 authorization. On the basis of amounts paid (declared), cash dividends per common share were $0.120 ( $0.120 ) and $0.240 ( $0.240 ) for the three-month and six-month periods ended June 30, 2019 , respectively, and $0.105 ( $0.105 ) and $0.210 ( $0.210 ) for the three-month and six-month periods ended June 30, 2018 , respectively. |
Other Commitments and Contingen
Other Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Other Commitments and Contingencies | OTHER COMMITMENTS AND CONTINGENCIES We are involved in claims and litigation, including class actions 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 and that the likelihood that the outcome of these 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, enter into settlements of claims or revise our expectations regarding the outcome of these matters, which could materially impact our results of operations. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES Our effective tax rate was 27 percent and 28 percent for the three-month periods ended June 30, 2019 and 2018, respectively. The decrease in the rate was primarily due to a $3 million income tax expense resulting from enacted state and local tax law changes recognized in the three-month period ended June 30, 2018. Our effective tax rate was 26 percent and 25 percent for the six-month periods ended June 30, 2019 and 2018, respectively. The increase in the rate was primarily due to an additional $10 million income tax benefit on stock-based compensation recognized in the six-month period ended June 30, 2018. |
Accounting Policies (Policies)
Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements | Recently Adopted Accounting Pronouncements. In February 2016, the Financial Accounting Standards Board ("FASB") issued a new standard for leases, ASC 842, which changes the accounting model for identifying and accounting for leases. We adopted ASC 842 on January 1, 2019 using the optional transition method, which allows for initial application of the new standard beginning at the adoption date. We elected the package of practical expedients that allows us to forgo reassessing a) whether any existing contracts are or contain leases, b) the lease classification for any existing leases, and c) whether initial direct costs for any existing leases are capitalized. We also elected the practical expedient to use hindsight with respect to lease renewals, terminations, and purchase options when determining the lease term and in assessing impairment of the assets related to leases existing at the time of adoption. As a result of the standard, we recorded $236 million of operating lease ROU assets, $45 million of short-term operating lease liabilities, and $214 million of long-term operating lease liabilities on the date of adoption. Our accounting for finance leases remained unchanged. The standard did not impact our condensed consolidated statements of operations or statements of cash flows. In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which improves and simplifies accounting rules around hedge accounting and better portrays the economic results of an entity's risk management activities in its financial statements. We adopted ASU 2017-12 on January 1, 2019. The adoption of the standard did not impact our financial position or results of operations. A. ACCOUNTING POLICIES (Concluded) In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting," which modifies the accounting for share-based payment awards issued to nonemployees to largely align it with the accounting for share-based payment awards issued to employees. We adopted ASU 2018-07 on January 1, 2019. The adoption of the standard did not impact our financial position or results of operations. Recently Issued Accounting Pronouncements. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which modifies the methodology for recognizing loss impairments on certain types of financial instruments, including receivables. The new methodology requires an entity to estimate the credit losses expected over the life of an exposure. Additionally, ASU 2016-13 amends the current available-for-sale security other-than-temporary impairment model for debt securities. ASU 2016-13 is effective for us for annual periods beginning January 1, 2020. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations. In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," which allows for the capitalization of certain implementation costs incurred in a hosting arrangement that is a service contract. ASU 2018-15 allows for either retrospective adoption or prospective adoption to all implementation costs incurred after the date of adoption. ASU 2018-15 is effective for us for annual periods beginning January 1, 2020. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations. |
Acquisitions (Tables)
Acquisitions (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The initial and final allocations of the fair value of the acquisition of Kichler is summarized in the following table, in millions. Initial Final Receivables $ 101 $ 100 Inventories 173 166 Other current assets 5 5 Property and equipment 33 33 Goodwill 46 64 Other intangible assets 243 240 Accounts payable (24 ) (24 ) Accrued liabilities (25 ) (30 ) Other liabilities (4 ) (5 ) Total $ 548 $ 549 |
Revenue (Tables)
Revenue (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Revenues [Abstract] | |
Disaggregation of Revenue | Net sales from these geographic markets, by segment, were as follows, in millions: Three Months Ended June 30, 2019 Plumbing Products Decorative Architectural Products Cabinetry Products Windows and Other Specialty Products Total Primary geographic markets: North America $ 661 $ 827 $ 251 $ 152 $ 1,891 International, principally Europe 351 — — 33 384 Total $ 1,012 $ 827 $ 251 $ 185 $ 2,275 Six Months Ended June 30, 2019 Plumbing Products Decorative Architectural Products Cabinetry Products Windows and Other Specialty Products Total Primary geographic markets: North America $ 1,259 $ 1,400 $ 488 $ 279 $ 3,426 International, principally Europe 693 — — 64 757 Total $ 1,952 $ 1,400 $ 488 $ 343 $ 4,183 Three Months Ended June 30, 2018 Plumbing Products Decorative Architectural Products Cabinetry Products Windows and Other Specialty Products Total Primary geographic markets: North America $ 647 $ 806 $ 268 $ 151 $ 1,872 International, principally Europe 385 — — 40 425 Total $ 1,032 $ 806 $ 268 $ 191 $ 2,297 Six Months Ended June 30, 2018 Plumbing Products Decorative Architectural Products Cabinetry Products Windows and Other Specialty Products Total Primary geographic markets: North America $ 1,252 $ 1,351 $ 485 $ 300 $ 3,388 International, principally Europe 751 — — 78 829 Total $ 2,003 $ 1,351 $ 485 $ 378 $ 4,217 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Lease, Cost | The components of lease cost were as follows, in millions: Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Operating lease cost $ 15 $ 31 Short-term lease cost 2 4 Variable lease cost 1 2 Finance lease cost: Amortization of right-of-use assets — 1 Interest on lease liabilities 1 1 |
Schedule of Supplemental Cash Flow Information Related to Leases | Supplemental cash flow information related to leases was as follows, in millions: Six Months Ended June 30, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 29 Operating cash flows for finance leases 1 Financing cash flows for finance leases 1 ROU assets obtained in exchange for new lease obligations: Operating leases $ 17 Finance leases — |
Lessee, Other Lease Information | Certain other information related to leases was as follows: At June 30, 2019 Weighted-average remaining lease term: Operating leases 9 years Finance leases 10 years Weighted-average discount rate: Operating leases 4.5 % Finance leases 3.4 % |
Schedule of Supplemental Balance Sheet Information Related to Leases | Supplemental balance sheet information related to leases was as follows, in millions: At June 30, 2019 Operating Leases Finance Leases Property and equipment, net $ — $ 36 Notes payable — 7 Accrued liabilities 46 — Long-term debt — 29 Other liabilities 206 — |
Finance Lease, Liability, Maturity | At June 30, 2019 , future maturities of lease liabilities (under ASC 842) were as follows, in millions: Operating Leases Finance Leases Year ending December 31, 2019 (excluding the six months ended June 30, 2019) $ 28 $ 7 2020 53 3 2021 45 3 2022 36 3 2023 25 4 Thereafter 127 23 Total lease payments 314 43 Less: imputed interest (62 ) (7 ) Total $ 252 $ 36 |
Operating Lease, Liability, Maturity | At June 30, 2019 , future maturities of lease liabilities (under ASC 842) were as follows, in millions: Operating Leases Finance Leases Year ending December 31, 2019 (excluding the six months ended June 30, 2019) $ 28 $ 7 2020 53 3 2021 45 3 2022 36 3 2023 25 4 Thereafter 127 23 Total lease payments 314 43 Less: imputed interest (62 ) (7 ) Total $ 252 $ 36 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of changes in carrying amount of goodwill | The changes in the carrying amount of goodwill for the six-month period ended June 30, 2019 , by segment, were as follows, in millions: Gross Goodwill At June 30, 2019 Accumulated Net Goodwill At June 30, 2019 Plumbing Products $ 568 $ (340 ) $ 228 Decorative Architectural Products 358 (75 ) 283 Cabinetry Products 181 — 181 Windows and Other Specialty Products 717 (518 ) 199 Total $ 1,824 $ (933 ) $ 891 Gross Goodwill At December 31, 2018 Accumulated Impairment Losses Net Goodwill At December 31, 2018 Pre-Tax Impairment Charges Net Goodwill At June 30, 2019 Plumbing Products $ 568 $ (340 ) $ 228 $ — $ 228 Decorative Architectural Products 358 (75 ) 283 — 283 Cabinetry Products 181 — 181 — 181 Windows and Other Specialty Products 717 (511 ) 206 (7 ) 199 Total $ 1,824 $ (926 ) $ 898 $ (7 ) $ 891 |
Warranty Liability (Tables)
Warranty Liability (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Product Warranties Disclosures [Abstract] | |
Schedule of changes in the Company's warranty liability | Changes in our warranty liability were as follows, in millions: Six Months Ended Twelve Months Ended December 31, 2018 Balance at January 1 $ 217 $ 205 Accruals for warranties issued during the period 38 78 Accruals related to pre-existing warranties (2 ) (1 ) Settlements made (in cash or kind) during the period (34 ) (65 ) Other, net (including currency translation) (1 ) — Balance at end of period $ 218 $ 217 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of pre-tax compensation expense and the related income tax benefit for these stock-based incentives | Pre-tax compensation expense for these stock-based incentives was as follows, in millions: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Long-term stock awards $ 7 $ 7 $ 12 $ 12 Stock options 1 1 2 2 Restricted stock units 1 1 2 2 Phantom stock awards and stock appreciation rights 1 (1 ) 2 (1 ) Total $ 10 $ 8 $ 18 $ 15 |
Schedule of the Company's long-term stock award activity | Our long-term stock award activity was as follows, shares in millions: Six Months Ended June 30, 2019 2018 Unvested stock award shares at January 1 2 3 Weighted average grant date fair value $ 30 $ 24 Stock award shares granted 1 1 Weighted average grant date fair value $ 36 $ 42 Stock award shares vested 1 1 Weighted average grant date fair value $ 25 $ 21 Stock award shares forfeited — — Weighted average grant date fair value $ 31 $ 30 Unvested stock award shares at June 30 2 3 Weighted average grant date fair value $ 34 $ 30 |
Schedule of the Company's stock option activity | Our stock option activity was as follows, shares in millions: Six Months Ended June 30, 2019 2018 Option shares outstanding, January 1 4 5 Weighted average exercise price $ 21 $ 16 Option shares granted 1 — Weighted average exercise price $ 36 $ 42 Option shares exercised 1 1 Aggregate intrinsic value on date of exercise (A) $ 17 million $ 36 million Weighted average exercise price $ 11 $ 12 Option shares forfeited — — Weighted average exercise price $ 36 $ 31 Option shares outstanding, June 30 4 4 Weighted average exercise price $ 25 $ 19 Weighted average remaining option term (in years) 6 5 Option shares vested and expected to vest, June 30 4 4 Weighted average exercise price $ 25 $ 19 Aggregate intrinsic value (A) $ 52 million $ 82 million Weighted average remaining option term (in years) 6 5 Option shares exercisable (vested), June 30 2 3 Weighted average exercise price $ 20 $ 15 Aggregate intrinsic value (A) $ 45 million $ 74 million Weighted average remaining option term (in years) 4 4 (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. |
Schedule of 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 | 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: Six Months Ended June 30, 2019 2018 Weighted average grant date fair value $ 8.81 $ 12.52 Risk-free interest rate 2.57 % 2.71 % Dividend yield 1.35 % 1.00 % Volatility factor 25.00 % 29.00 % Expected option life 6 years 6 years |
Employee Retirement Plans (Tabl
Employee Retirement Plans (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Retirement Benefits [Abstract] | |
Schedule of net periodic pension cost for the Company's defined-benefit pension plans | Net periodic pension cost for our defined-benefit pension plans, with the exception of service cost, is recorded in other income (expense), net, in our condensed consolidated statement of operations. Net periodic pension cost for our defined-benefit pension plans was as follows, in millions: Three Months Ended June 30, 2019 2018 Qualified Non-Qualified Qualified Non-Qualified Interest cost $ 9 $ 2 $ 10 $ 2 Expected return on plan assets (11 ) — (12 ) — Amortization of net loss 6 — 5 — Net periodic pension cost $ 4 $ 2 $ 3 $ 2 Six Months Ended June 30, 2019 2018 Qualified Non-Qualified Qualified Non-Qualified Service cost $ 1 $ — $ 1 $ — Interest cost 19 3 20 3 Expected return on plan assets (22 ) — (24 ) — Amortization of net loss 10 1 9 1 Net periodic pension cost $ 8 $ 4 $ 6 $ 4 |
Reclassifications From Accumu_2
Reclassifications From Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |
Schedule of reclassifications from accumulated other comprehensive (loss) income to the condensed consolidated statements of operations | The reclassifications from accumulated other comprehensive loss to the condensed consolidated statements of operations were as follows, in millions: Amounts Reclassified Accumulated Other Comprehensive Loss Three Months Ended June 30, Six Months Ended June 30, Statement of Operations Line Item 2019 2018 2019 2018 Amortization of defined-benefit pension and other post-retirement benefits: Actuarial losses, net $ 6 $ 5 $ 11 $ 10 Other income (expense), net Tax (benefit) (2 ) (2 ) (3 ) (2 ) Net of tax $ 4 $ 3 $ 8 $ 8 Interest rate swaps $ 1 $ 1 $ 1 $ 1 Interest expense Tax (benefit) — — — — Net of tax $ 1 $ 1 $ 1 $ 1 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Schedule of information by segment and geographic area | Information by segment and geographic area was as follows, in millions: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 2019 2018 2019 2018 Net Sales (A) Operating Profit (Loss) Net Sales(A) Operating Profit (Loss) Operations by segment: Plumbing Products $ 1,012 $ 1,032 $ 198 $ 194 $ 1,952 $ 2,003 $ 351 $ 357 Decorative Architectural Products 827 806 173 145 1,400 1,351 246 234 Cabinetry Products 251 268 33 33 488 485 53 39 Windows and Other Specialty Products 185 191 7 8 343 378 (4 ) 12 Total $ 2,275 $ 2,297 $ 411 $ 380 $ 4,183 $ 4,217 $ 646 $ 642 Operations by geographic area: North America $ 1,891 $ 1,872 $ 364 $ 323 $ 3,426 $ 3,388 $ 566 $ 541 International, principally Europe 384 425 47 57 757 829 80 101 Total $ 2,275 $ 2,297 411 380 $ 4,183 $ 4,217 646 642 General corporate expense, net (19 ) (22 ) (43 ) (40 ) Operating profit 392 358 603 602 Other income (expense), net (45 ) (46 ) (88 ) (90 ) Income before income taxes $ 347 $ 312 $ 515 $ 512 (A) Inter-segment sales were not material. |
Other Income (Expense), Net (Ta
Other Income (Expense), Net (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Other Income and Expenses [Abstract] | |
Schedule of components of other, net, which is included in other income (expense), net | Other, net, which is included in other income (expense), net, was as follows, in millions: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Income from cash and cash investments and short-term bank deposits $ — $ — $ 1 $ 2 Equity investment income, net — 2 — 2 Foreign currency transaction gains (losses) 2 (5 ) 2 (6 ) Net periodic pension and post-retirement benefit cost (6 ) (5 ) (11 ) (9 ) Total other, net $ (4 ) $ (8 ) $ (8 ) $ (11 ) |
Income Per Common Share (Tables
Income Per Common Share (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of reconciliations of the numerators and denominators used in the computations of basic and diluted earnings 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: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Numerator (basic and diluted): Net income $ 240 $ 211 $ 356 $ 360 Less: Allocation to unvested restricted stock awards 2 1 2 3 Net income available to common shareholders $ 238 $ 210 $ 354 $ 357 Denominator: Basic common shares (based upon weighted average) 289 306 291 308 Add: Stock option dilution 1 3 1 3 Diluted common shares 290 309 292 311 |
Accounting Policies - Narrative
Accounting Policies - Narrative (Details) - USD ($) $ in Millions | Jun. 30, 2019 | Jan. 01, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets | $ 228 | |
Operating lease, liability, current | $ 45 | |
Operating lease, liability, noncurrent | 214 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets | $ 236 |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ in Millions | 6 Months Ended | ||
Jun. 30, 2019 | Dec. 31, 2018 | Mar. 09, 2018 | |
Business Acquisition [Line Items] | |||
Goodwill | $ 891 | $ 898 | |
Decorative Architectural Products | |||
Business Acquisition [Line Items] | |||
Goodwill | 283 | $ 283 | |
The LD Kichler Co | Decorative Architectural Products | |||
Business Acquisition [Line Items] | |||
Cash acquired | $ 2 | ||
Receivables | 100 | 101 | |
Inventories | 166 | 173 | |
Other current assets | 5 | 5 | |
Property and equipment | 33 | 33 | |
Goodwill | 64 | 46 | |
Other intangible assets | 240 | 243 | |
Accounts payable | (24) | (24) | |
Accrued liabilities | (30) | (25) | |
Other liabilities | (5) | (4) | |
Total | 549 | $ 548 | |
Indefinite-lived intangible assets acquired | 59 | ||
Finite-lived intangible assets acquired | 181 | ||
The LD Kichler Co | Customer Relationships | Decorative Architectural Products | |||
Business Acquisition [Line Items] | |||
Finite-lived intangible assets acquired | $ 145 | ||
Weighted average useful life (in years) | 20 years | ||
The LD Kichler Co | Other Intangible Assets | Decorative Architectural Products | |||
Business Acquisition [Line Items] | |||
Finite-lived intangible assets acquired | $ 36 | ||
Weighted average useful life (in years) | 3 years |
Revenue (Details)
Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Disaggregation of Revenue [Line Items] | |||||
Net sales | $ 2,275 | $ 2,297 | $ 4,183 | $ 4,217 | |
Contract with customer, asset, gross, current | 14 | 14 | $ 14 | ||
Contract with customer, liability | 14 | 14 | $ 41 | ||
Performance obligation satisfied in previous period of the same year | (1) | 3 | |||
Performance obligation satisfied in previous period | 1 | 3 | 1 | 3 | |
Plumbing Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 1,012 | 1,032 | 1,952 | 2,003 | |
Decorative Architectural Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 827 | 806 | 1,400 | 1,351 | |
Cabinetry Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 251 | 268 | 488 | 485 | |
Windows and Other Specialty Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 185 | 191 | 343 | 378 | |
North America | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 1,891 | 1,872 | 3,426 | 3,388 | |
North America | Plumbing Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 661 | 647 | 1,259 | 1,252 | |
North America | Decorative Architectural Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 827 | 806 | 1,400 | 1,351 | |
North America | Cabinetry Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 251 | 268 | 488 | 485 | |
North America | Windows and Other Specialty Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 152 | 151 | 279 | 300 | |
International, principally Europe | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 384 | 425 | 757 | 829 | |
International, principally Europe | Plumbing Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 351 | 385 | 693 | 751 | |
International, principally Europe | Decorative Architectural Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 0 | 0 | 0 | 0 | |
International, principally Europe | Cabinetry Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 0 | 0 | 0 | 0 | |
International, principally Europe | Windows and Other Specialty Products | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | $ 33 | $ 40 | $ 64 | $ 78 |
Leases - Narrative (Details)
Leases - Narrative (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Lessee, Lease, Description [Line Items] | |
Renewal term | 20 years |
Finance lease, right-of-use asset | $ 47 |
Accumulated depreciation, depletion and amortization, property, plant, and equipment | $ 11 |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Remaining lease term | 14 years |
Leases - Lease Costs (Details)
Leases - Lease Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Leases [Abstract] | ||
Operating lease cost | $ 15 | $ 31 |
Short-term lease cost | 2 | 4 |
Variable lease cost | 1 | 2 |
Amortization of right-of-use assets | 0 | 1 |
Interest on lease liabilities | $ 1 | $ 1 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow Information (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Leases [Abstract] | |
Operating cash flows for operating leases | $ 29 |
Operating cash flows for finance leases | 1 |
Financing cash flows for finance leases | 1 |
Right-of-Use asset obtained in exchange for operating lease liability | 17 |
Right-of-Use asset obtained in exchange for finance lease liability | $ 0 |
Leases - Weighted Average Lease
Leases - Weighted Average Lease Term and Discount Rate (Details) | Jun. 30, 2019 |
Leases [Abstract] | |
Operating Lease, Weighted Average Remaining Lease Term | 9 years |
Finance Lease, Weighted Average Remaining Lease Term | 10 years |
Operating Lease, Weighted Average Discount Rate, Percent | 4.50% |
Finance Lease, Weighted Average Discount Rate, Percent | 3.40% |
Leases - Supplemental Balance S
Leases - Supplemental Balance Sheet Information (Details) - USD ($) $ in Millions | Jun. 30, 2019 | Jan. 01, 2019 |
Lessee, Lease, Description [Line Items] | ||
Operating lease, liability, current | $ 45 | |
Operating lease, liability, noncurrent | $ 214 | |
Property and equipment, net | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease, liability, current | $ 0 | |
Finance lease, liability, current | 36 | |
Notes payable | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease, liability, current | 0 | |
Finance lease, liability, current | 7 | |
Accrued liabilities | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease, liability, current | 46 | |
Finance lease, liability, current | 0 | |
Long-term debt | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease, liability, noncurrent | 0 | |
Finance lease, liability, noncurrent | 29 | |
Other liabilities | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease, liability, noncurrent | 206 | |
Finance lease, liability, noncurrent | $ 0 |
Leases - Future Maturities of L
Leases - Future Maturities of Lease Liabilities (Details) $ in Millions | Jun. 30, 2019USD ($) |
Operating Leases | |
2019 (excluding the six months ended June 30, 2019) | $ 28 |
2020 | 53 |
2021 | 45 |
2022 | 36 |
2023 | 25 |
Thereafter | 127 |
Total lease payments | 314 |
Less: imputed interest | (62) |
Total | 252 |
Finance Leases | |
2019 (excluding the six months ended June 30, 2019) | 7 |
2020 | 3 |
2021 | 3 |
2022 | 3 |
2023 | 4 |
Thereafter | 23 |
Total lease payments | 43 |
Less: imputed interest | (7) |
Total | $ 36 |
Leases - Future Minimum Lease P
Leases - Future Minimum Lease Payments Prior to Adoption (Details) $ in Millions | Dec. 31, 2018USD ($) |
Leases [Abstract] | |
2019 | $ 55 |
2020 | 47 |
2021 | 40 |
2022 | 30 |
2023 | 20 |
2024 and beyond | $ 99 |
Depreciation and Amortization (
Depreciation and Amortization (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Depreciation, Depletion and Amortization [Abstract] | ||
Depreciation and amortization expense | $ 82 | $ 74 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Goodwill Rollforward (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2019 | Jun. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | |
Goodwill [Line Items] | ||||
Gross goodwill at period start | $ 1,824 | $ 1,824 | ||
Accumulated Impairment Losses | (933) | (926) | ||
Goodwill | $ 898 | $ 898 | 891 | 898 |
Goodwill [Roll Forward] | ||||
Beginning balance | 898 | 898 | ||
Ending balance | 891 | |||
Plumbing Products | ||||
Goodwill [Line Items] | ||||
Gross goodwill at period start | 568 | 568 | ||
Accumulated Impairment Losses | (340) | (340) | ||
Goodwill | 228 | 228 | 228 | 228 |
Goodwill [Roll Forward] | ||||
Beginning balance | 228 | 228 | ||
Pre-Tax Impairment Charges | 0 | |||
Ending balance | 228 | |||
Decorative Architectural Products | ||||
Goodwill [Line Items] | ||||
Gross goodwill at period start | 358 | 358 | ||
Accumulated Impairment Losses | (75) | (75) | ||
Goodwill | 283 | 283 | 283 | 283 |
Goodwill [Roll Forward] | ||||
Beginning balance | 283 | 283 | ||
Pre-Tax Impairment Charges | 0 | |||
Ending balance | 283 | |||
Cabinetry Products | ||||
Goodwill [Line Items] | ||||
Gross goodwill at period start | 181 | 181 | ||
Accumulated Impairment Losses | 0 | 0 | ||
Goodwill | 181 | 181 | 181 | 181 |
Goodwill [Roll Forward] | ||||
Beginning balance | 181 | 181 | ||
Pre-Tax Impairment Charges | 0 | |||
Ending balance | 181 | |||
Windows and Other Specialty Products | ||||
Goodwill [Line Items] | ||||
Gross goodwill at period start | 717 | 717 | ||
Accumulated Impairment Losses | (518) | (511) | ||
Goodwill | 206 | 199 | $ 199 | $ 206 |
Goodwill [Roll Forward] | ||||
Beginning balance | 206 | 206 | ||
Pre-Tax Impairment Charges | $ 7 | (7) | ||
Ending balance | $ 199 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |
Mar. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | |
Goodwill [Line Items] | |||
Other indefinite-lived intangible assets | $ 190 | $ 199 | |
Carrying value of definite-lived intangible assets | 197 | 207 | |
Accumulated amortization | 41 | $ 29 | |
Windows and Other Specialty Products | |||
Goodwill [Line Items] | |||
Goodwill, impairment loss | $ 7 | (7) | |
Decorative Architectural Products | |||
Goodwill [Line Items] | |||
Goodwill, impairment loss | $ 0 | ||
Impairment of intangible assets | $ 9 |
Warranty Liability (Details)
Warranty Liability (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward] | ||
Balance at the beginning of the period | $ 217 | $ 205 |
Accruals for warranties issued during the period | 38 | 78 |
Accruals related to pre-existing warranties | (2) | (1) |
Settlements made (in cash or kind) during the period | (34) | (65) |
Other, net (including currency translation) | (1) | 0 |
Balance at the end of the period | $ 218 | $ 217 |
Debt (Details)
Debt (Details) - USD ($) | Mar. 13, 2019 | Apr. 16, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | Mar. 28, 2013 |
Debt | ||||||
Repayments of notes payable | $ 0 | $ 114,000,000 | ||||
Estimate of Fair Value Measurement | ||||||
Debt | ||||||
Estimated market value of long-term and short-term debt | 3,200,000,000 | $ 3,000,000,000 | ||||
Carrying Value Reported Value Measurement | ||||||
Debt | ||||||
Aggregate carrying value of long-term and short-term debt | 3,000,000,000 | $ 3,000,000,000 | ||||
6.625% Notes and Debentures Due April 15, 2018 | ||||||
Debt | ||||||
Repayments of notes payable | $ 114,000,000 | |||||
Interest rate, stated percentage | 6.625% | |||||
Credit Agreement dated March 13, 2019 | ||||||
Debt | ||||||
Borrowing capacity, maximum | $ 1,000,000,000 | |||||
Increase in maximum borrowing capacity | $ 500,000,000 | |||||
Maximum net leverage ratio | 4 | |||||
Minimum interest coverage ratio | 2.5 | |||||
Borrowings outstanding | 0 | |||||
Credit Agreement dated March 13, 2019 | Federal funds effective rate | ||||||
Debt | ||||||
Interest rate, basis spread (as a percent) | 0.50% | |||||
Credit Agreement dated March 13, 2019 | Libor rate | ||||||
Debt | ||||||
Interest rate, basis spread (as a percent) | 1.00% | |||||
Credit Agreement dated March 13, 2019 | Revolver | ||||||
Debt | ||||||
Borrowing capacity, maximum | $ 500,000,000 | |||||
Credit Agreement dated March 13, 2019 | Swingline loans | ||||||
Debt | ||||||
Borrowing capacity, maximum | 100,000,000 | |||||
Credit Agreement dated March 13, 2019 | Letters of credit | ||||||
Debt | ||||||
Borrowing capacity, maximum | $ 25,000,000 | |||||
Outstanding and unused Letters of Credit | $ 0 | |||||
Credit Agreement dated March 28, 2013 | ||||||
Debt | ||||||
Borrowing capacity, maximum | $ 750,000,000 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Stock-based compensation | ||||
Pre-tax compensation expense | $ 10 | $ 8 | $ 18 | $ 15 |
Long-term stock awards | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | 7 | 7 | 12 | 12 |
Stock options | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | 1 | 1 | 2 | 2 |
Restricted stock units | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | 1 | 1 | 2 | 2 |
Phantom stock awards and stock appreciation rights | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | $ 1 | $ (1) | $ 2 | $ (1) |
Stock-Based Compensation - Long
Stock-Based Compensation - Long-Term Stock Award (Details) - Long-term stock awards - USD ($) $ / shares in Units, $ in Millions | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Sep. 30, 2017 | |
Unvested stock award shares | |||
Balance at the beginning of the period (in shares) | 2,000,000 | 3,000,000 | |
Granted (in shares) | 632,280 | 1,000,000 | |
Vested (in shares) | 1,000,000 | 1,000,000 | |
Forfeited (in shares) | 0 | 0 | |
Balance at the end of the period (in shares) | 2,000,000 | 3,000,000 | |
Weighted average grant date fair value | |||
Balance at the beginning of the period (in dollars per share) | $ 30 | $ 24 | |
Granted (in dollars per share) | 36 | 42 | |
Vested (in dollars per share) | 25 | 21 | |
Forfeited (in dollars per share) | 31 | 30 | |
Balance at the end of the period (in dollars per share) | $ 34 | $ 30 | |
Additional disclosures | |||
Total unrecognized compensation expense | $ 55 | $ 56 | |
Remaining weighted average vesting period | 3 years | 3 years | |
Total market value (at the vesting date) of stock award shares | $ 30 | $ 54 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Sep. 30, 2017 | |
Stock Options | |||
Grant date intrinsic value (in dollars per share) | $ 36 | ||
Shares | |||
Granted (in shares) | 561,280 | ||
Forfeited (in shares) | 42,570 | ||
Stock options | |||
Stock Options | |||
Vesting period | 5 years | ||
Expiration period | 10 years | ||
Shares | |||
Outstanding at the beginning of the period (in shares) | 4,000,000 | 5,000,000 | |
Granted (in shares) | 1,000,000 | 0 | |
Exercised (in shares) | 1,000,000 | 1,000,000 | |
Forfeited (in shares) | 0 | 0 | |
Outstanding at the end of the period (in shares) | 4,000,000 | 4,000,000 | |
Vested and expected to vest at the end of the period (in shares) | 4,000,000 | 4,000,000 | |
Exercisable at the end of the period (in shares) | 2,000,000 | 3,000,000 | |
Weighted average exercise price | |||
Outstanding at the beginning of the period (in dollars per share) | $ 21 | $ 16 | |
Granted (in dollars per share) | 36 | 42 | |
Exercised (in dollars per share) | 11 | 12 | |
Forfeited (in dollars per share) | 36 | 31 | |
Outstanding at the end of the period (in dollars per share) | 25 | $ 19 | |
Vested and expected to vest at the end of the period (in dollars per share) | 25 | $ 19 | |
Exercisable at the end of the period (in dollars per share) | $ 20 | $ 15 | |
Aggregate intrinsic value | |||
Exercised | $ 17 | $ 36 | |
Vested and expected to vest at the end of the period | 52 | $ 82 | |
Exercisable at the end of the period | $ 45 | 74 | |
Weighted average remaining option term | |||
Outstanding at the end of the period | 6 years | 5 years | |
Vested and expected to vest at the end of the period | 6 years | 5 years | |
Exercisable at the end of the period | 4 years | 4 years | |
Additional disclosures | |||
Total unrecognized compensation expense | $ 11 | $ 10 | |
Weighted average remaining vesting period | 3 years | 3 years |
Stock-Based Compensation - Opti
Stock-Based Compensation - Option Pricing Assumptions and Estimates (Details) - Stock options - $ / shares | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Stock Options | ||
Weighted average grant date fair value (in dollars per share) | $ 8.81 | $ 12.52 |
Risk-free interest rate (as a percent) | 2.57% | 2.71% |
Dividend yield (as a percent) | 1.35% | 1.00% |
Volatility factor (as a percent) | 25.00% | 29.00% |
Expected option life | 6 years | 6 years |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock Units (Details) - $ / shares | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Stock-based compensation | |||
Period for recognition | 3 years | ||
LTIP Program | Restricted stock units | |||
Stock-based compensation | |||
Granted (in shares) | 113,260 | 126,680 | |
Granted (in dollars per share) | $ 42 | $ 39 | |
Forfeited (in shares) | 11,600 |
Employee Retirement Plans (Deta
Employee Retirement Plans (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Qualified | ||||
Net periodic pension cost for the company's defined-benefit pension plans | ||||
Service cost | $ 1 | $ 1 | ||
Interest cost | $ 9 | $ 10 | 19 | 20 |
Expected return on plan assets | (11) | (12) | (22) | (24) |
Amortization of net loss | 6 | 5 | 10 | 9 |
Net periodic pension cost | 4 | 3 | 8 | 6 |
Non-Qualified | ||||
Net periodic pension cost for the company's defined-benefit pension plans | ||||
Service cost | 0 | 0 | ||
Interest cost | 2 | 2 | 3 | 3 |
Expected return on plan assets | 0 | 0 | 0 | 0 |
Amortization of net loss | 0 | 0 | 1 | 1 |
Net periodic pension cost | $ 2 | $ 2 | $ 4 | $ 4 |
Reclassifications From Accumu_3
Reclassifications From Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Reclassifications from accumulated other comprehensive (loss) income | |||||
Other income (expense), net | $ 45 | $ 46 | $ 88 | $ 90 | |
Interest expense | 41 | 38 | 80 | 79 | |
Tax (benefit) | 95 | 88 | 136 | 127 | |
Reclassifications, after tax | (252) | (224) | (379) | (385) | |
Reclassification of disproportionate tax effects | $ 0 | ||||
Accounting Standards Update 2018-02 | |||||
Reclassifications from accumulated other comprehensive (loss) income | |||||
Reclassification of disproportionate tax effects | 59 | ||||
Reclassification out of Accumulated Other Comprehensive Income | Actuarial losses, net | |||||
Reclassifications from accumulated other comprehensive (loss) income | |||||
Other income (expense), net | 6 | 5 | 11 | 10 | |
Tax (benefit) | (2) | (2) | (3) | (2) | |
Reclassifications, after tax | 4 | 3 | 8 | 8 | |
Interest rate swaps | Reclassification out of Accumulated Other Comprehensive Income | Interest rate swaps | |||||
Reclassifications from accumulated other comprehensive (loss) income | |||||
Interest expense | 1 | 1 | |||
Tax (benefit) | 0 | 0 | |||
Reclassifications, after tax | $ 1 | $ 1 | |||
Interest rate swaps | Reclassification out of Accumulated Other Comprehensive Income | Interest rate swaps | |||||
Reclassifications from accumulated other comprehensive (loss) income | |||||
Interest expense | 1 | 1 | |||
Tax (benefit) | 0 | 0 | |||
Reclassifications, after tax | $ 1 | $ 1 |
Segment Information (Details)
Segment Information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Segment Information | ||||
Net sales | $ 2,275 | $ 2,297 | $ 4,183 | $ 4,217 |
Operating Profit (Loss) | 392 | 358 | 603 | 602 |
Other income (expense), net | (45) | (46) | (88) | (90) |
Income before income taxes | 347 | 312 | 515 | 512 |
North America | ||||
Segment Information | ||||
Net sales | 1,891 | 1,872 | 3,426 | 3,388 |
International, principally Europe | ||||
Segment Information | ||||
Net sales | 384 | 425 | 757 | 829 |
Plumbing Products | ||||
Segment Information | ||||
Net sales | 1,012 | 1,032 | 1,952 | 2,003 |
Plumbing Products | North America | ||||
Segment Information | ||||
Net sales | 661 | 647 | 1,259 | 1,252 |
Plumbing Products | International, principally Europe | ||||
Segment Information | ||||
Net sales | 351 | 385 | 693 | 751 |
Decorative Architectural Products | ||||
Segment Information | ||||
Net sales | 827 | 806 | 1,400 | 1,351 |
Decorative Architectural Products | North America | ||||
Segment Information | ||||
Net sales | 827 | 806 | 1,400 | 1,351 |
Decorative Architectural Products | International, principally Europe | ||||
Segment Information | ||||
Net sales | 0 | 0 | 0 | 0 |
Cabinetry Products | ||||
Segment Information | ||||
Net sales | 251 | 268 | 488 | 485 |
Cabinetry Products | North America | ||||
Segment Information | ||||
Net sales | 251 | 268 | 488 | 485 |
Cabinetry Products | International, principally Europe | ||||
Segment Information | ||||
Net sales | 0 | 0 | 0 | 0 |
Windows and Other Specialty Products | ||||
Segment Information | ||||
Net sales | 185 | 191 | 343 | 378 |
Windows and Other Specialty Products | North America | ||||
Segment Information | ||||
Net sales | 152 | 151 | 279 | 300 |
Windows and Other Specialty Products | International, principally Europe | ||||
Segment Information | ||||
Net sales | 33 | 40 | 64 | 78 |
Operating Segments | ||||
Segment Information | ||||
Net sales | 2,275 | 2,297 | 4,183 | 4,217 |
Operating Profit (Loss) | 411 | 380 | 646 | 642 |
Operating Segments | Plumbing Products | ||||
Segment Information | ||||
Net sales | 1,012 | 1,032 | 1,952 | 2,003 |
Operating Profit (Loss) | 198 | 194 | 351 | 357 |
Operating Segments | Decorative Architectural Products | ||||
Segment Information | ||||
Net sales | 827 | 806 | 1,400 | 1,351 |
Operating Profit (Loss) | 173 | 145 | 246 | 234 |
Operating Segments | Cabinetry Products | ||||
Segment Information | ||||
Net sales | 251 | 268 | 488 | 485 |
Operating Profit (Loss) | 33 | 33 | 53 | 39 |
Operating Segments | Windows and Other Specialty Products | ||||
Segment Information | ||||
Net sales | 185 | 191 | 343 | 378 |
Operating Profit (Loss) | 7 | 8 | (4) | 12 |
Geographic Areas | ||||
Segment Information | ||||
Net sales | 2,275 | 2,297 | 4,183 | 4,217 |
Operating Profit (Loss) | 411 | 380 | 646 | 642 |
Geographic Areas | North America | ||||
Segment Information | ||||
Net sales | 1,891 | 1,872 | 3,426 | 3,388 |
Operating Profit (Loss) | 364 | 323 | 566 | 541 |
Geographic Areas | International, principally Europe | ||||
Segment Information | ||||
Net sales | 384 | 425 | 757 | 829 |
Operating Profit (Loss) | 47 | 57 | 80 | 101 |
Corporate, Non-Segment | ||||
Segment Information | ||||
General corporate expense, net | $ (19) | $ (22) | $ (43) | $ (40) |
Other Income (Expense), Net (De
Other Income (Expense), Net (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Other Income and Expenses [Abstract] | ||||
Income from cash and cash investments and short-term bank deposits | $ 0 | $ 0 | $ 1 | $ 2 |
Equity investment income, net | 0 | 2 | 0 | 2 |
Foreign currency transaction gains (losses) | 2 | (5) | 2 | (6) |
Net periodic pension and post-retirement benefit cost | (6) | (5) | (11) | (9) |
Total other, net | $ (4) | $ (8) | $ (8) | $ (11) |
Income Per Common Share (Detail
Income Per Common Share (Details) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Numerator (basic and diluted): | ||||
Net income | $ 240 | $ 211 | $ 356 | $ 360 |
Less: Allocation to unvested restricted stock awards | 2 | 1 | 2 | 3 |
Net income available to common shareholders | $ 238 | $ 210 | $ 354 | $ 357 |
Denominator: | ||||
Basic common shares (based upon weighted average) (in shares) | 289 | 306 | 291 | 308 |
Add: Stock option dilution (in shares) | 1 | 3 | 1 | 3 |
Diluted common shares (in shares) | 290 | 309 | 292 | 311 |
Income Per Common Share - Narra
Income Per Common Share - Narrative (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | May 31, 2017 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||
Amount authorized for repurchase | $ 1,500,000,000 | ||||||
Stock repurchased during period (in shares) | 7,700,000 | ||||||
Stock repurchased and retired during period | $ 167,000,000 | $ 122,000,000 | $ 115,000,000 | $ 150,000,000 | $ 289,000,000 | ||
Remaining authorized repurchase amount | $ 347,000,000 | $ 347,000,000 | |||||
Dividends | |||||||
Cash dividends per common share paid (in dollars per share) | $ 0.120 | $ 0.105 | $ 0.240 | $ 0.210 | |||
Cash dividends per common share declared (in dollars per share) | $ 0.120 | $ 0.105 | $ 0.240 | $ 0.210 | |||
Stock options | |||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||
Antidilutive effect on computation of diluted earnings per common share (in shares) | 1,300,000 | 675,000 | 1,200,000 | 606,000 | |||
Long-term stock awards | |||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||
Antidilutive effect on computation of diluted earnings per common share (in shares) | 20,000 | 20,000 | |||||
Stock repurchased and retired during period to offset dilutive impact of awards granted (in shares) | 600,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Effective tax rate (as a percent) | 27.00% | 28.00% | 26.00% | 25.00% |
Income tax reconciliation, state and local income taxes | $ 3 | |||
Income tax reconciliation, share-based compensation cost | $ 10 |