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Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net sales | $ | — | $ | 358 | |||
Cost of sales | — | 285 | |||||
Gross profit | — | 73 | |||||
Selling, general and administrative expenses | — | 68 | |||||
Income from discontinued operations | $ | — | $ | 5 | |||
Income tax expense | — | (2 | ) | ||||
Income from discontinued operations, net | $ | — | $ | 3 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Depreciation and amortization | $ | — | $ | 3 | |||
Capital expenditures | $ | — | $ | 2 |
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Gross Goodwill At March 31, 2016 | Accumulated Impairment Losses | Net Goodwill At March 31, 2016 | |||||||||
Plumbing Products | $ | 530 | $ | (340 | ) | $ | 190 | ||||
Decorative Architectural Products | 294 | (75 | ) | 219 | |||||||
Cabinetry Products | 240 | (59 | ) | 181 | |||||||
Windows and Other Specialty Products | 988 | (734 | ) | 254 | |||||||
Total | $ | 2,052 | $ | (1,208 | ) | $ | 844 |
Gross Goodwill At December 31, 2015 | Accumulated Impairment Losses | Net Goodwill At December 31, 2015 | Other(A) | Net Goodwill At March 31, 2016 | |||||||||||||||
Plumbing Products | $ | 525 | $ | (340 | ) | $ | 185 | $ | 5 | $ | 190 | ||||||||
Decorative Architectural Products | 294 | (75 | ) | 219 | — | 219 | |||||||||||||
Cabinetry Products | 240 | (59 | ) | 181 | — | 181 | |||||||||||||
Windows and Other Specialty Products | 988 | (734 | ) | 254 | — | 254 | |||||||||||||
Total | $ | 2,047 | $ | (1,208 | ) | $ | 839 | $ | 5 | $ | 844 |
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March 31, 2016 | December 31, 2015 | ||||||
Prepaid expenses and other: | |||||||
Auction rate securities | $ | 12 | $ | — | |||
Other assets: | |||||||
Auction rate securities | 10 | 22 | |||||
Equity method investments | 13 | 13 | |||||
Private equity funds | 9 | 10 | |||||
Other investments | 3 | 3 | |||||
Total | $ | 47 | $ | 48 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Realized gains from private equity funds | $ | — | $ | 2 | |||
Equity investment income, net | 1 | — | |||||
Total income from financial investments, net | $ | 1 | $ | 2 |
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Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Foreign currency contracts: | |||||||
Exchange contracts | $ | — | $ | 4 | |||
Forward contracts | — | (4 | ) | ||||
Metal contracts | 2 | (2 | ) | ||||
Total gain (loss) | $ | 2 | $ | (2 | ) |
At March 31, 2016 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Exchange contracts | $ | 27 | |||||
Receivables | $ | 1 | |||||
Forward contracts | 26 | ||||||
Accrued liabilities | (1 | ) | |||||
Other liabilities | (2 | ) | |||||
Metals contracts | 38 | ||||||
Accrued liabilities | (6 | ) |
At December 31, 2015 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Exchange contracts | $ | 39 | |||||
Receivables | $ | 1 | |||||
Forward contracts | 30 | ||||||
Accrued liabilities | (2 | ) | |||||
Other liabilities | (1 | ) | |||||
Metals contracts | 50 | ||||||
Accrued liabilities | (10 | ) |
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Three Months Ended March 31, 2016 | Twelve Months Ended December 31, 2015 | ||||||
Balance at January 1 | $ | 152 | $ | 135 | |||
Accruals for warranties issued during the period | 13 | 56 | |||||
Accruals related to pre-existing warranties | — | 15 | |||||
Settlements made (in cash or kind) during the period | (13 | ) | (50 | ) | |||
Other, net (including currency translation) | — | (4 | ) | ||||
Balance at end of period | $ | 152 | $ | 152 |
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Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Long-term stock awards | $ | 5 | $ | 6 | |||
Stock options | 1 | 1 | |||||
Phantom stock awards and stock appreciation rights | 3 | 3 | |||||
Total | $ | 9 | $ | 10 | |||
Income tax benefit (37 percent tax rate) | $ | 3 | $ | 4 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Unvested stock award shares at January 1 | 5 | 6 | |||||
Weighted average grant date fair value | $ | 17 | $ | 18 | |||
Stock award shares granted | 1 | 1 | |||||
Weighted average grant date fair value | $ | 26 | $ | 26 | |||
Stock award shares vested | 2 | 2 | |||||
Weighted average grant date fair value | $ | 16 | $ | 17 | |||
Stock award shares forfeited | — | — | |||||
Weighted average grant date fair value | $ | 19 | $ | 19 | |||
Unvested stock award shares at March 31 | 4 | 5 | |||||
Weighted average grant date fair value | $ | 20 | $ | 19 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Option shares outstanding, January 1 | 12 | 18 | |||||
Weighted average exercise price (A) | $ | 17 | $ | 21 | |||
Option shares granted | — | — | |||||
Weighted average exercise price | $ | 26 | $ | 26 | |||
Option shares exercised | 1 | 1 | |||||
Aggregate intrinsic value on date of exercise (B) | $ | 18 million | $ | 17 million | |||
Weighted average exercise price | $ | 18 | $ | 14 | |||
Option shares forfeited | — | — | |||||
Weighted average exercise price | $ | — | $ | 22 | |||
Option shares outstanding, March 31 | 11 | 17 | |||||
Weighted average exercise price (A) | $ | 18 | $ | 22 | |||
Weighted average remaining option term (in years) | 4 | 3 | |||||
Option shares vested and expected to vest, March 31 | 11 | 17 | |||||
Weighted average exercise price (A) | $ | 18 | $ | 22 | |||
Aggregate intrinsic value (B) | $ | 154 million | $ | 108 million | |||
Weighted average remaining option term (in years) | 4 | 3 | |||||
Option shares exercisable (vested), March 31 | 10 | 15 | |||||
Weighted average exercise price (A) | $ | 17 | $ | 22 | |||
Aggregate intrinsic value (B) | $ | 138 million | $ | 94 million | |||
Weighted average remaining option term (in years) | 3 | 3 |
(A) | Subsequent to the separation of TopBuild, we modified our outstanding equity awards to employees and non-employee directors such that all individuals received an equivalent fair value both before and after the separation. The modification contributed to the lower exercise price. |
(B) | 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 share. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Weighted average grant date fair value | $ | 6.43 | $ | 9.67 | |||
Risk-free interest rate | 1.41 | % | 1.75 | % | |||
Dividend yield | 1.49 | % | 1.32 | % | |||
Volatility factor | 29.00 | % | 42.00 | % | |||
Expected option life | 6 years | 6 years |
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Three Months Ended March 31, | |||||||||||||||
2016 | 2015 | ||||||||||||||
Qualified | Non-Qualified | Qualified | Non-Qualified | ||||||||||||
Service cost | $ | 1 | $ | — | $ | 1 | $ | — | |||||||
Interest cost | 11 | 1 | 12 | 1 | |||||||||||
Expected return on plan assets | (10 | ) | — | (11 | ) | — | |||||||||
Amortization of net loss | 4 | 1 | 4 | 1 | |||||||||||
Net periodic pension cost | $ | 6 | $ | 2 | $ | 6 | $ | 2 |
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Amounts Reclassified | ||||||||||
Accumulated Other Comprehensive Loss | Three Months Ended March 31, | Statement of Operations Line Item | ||||||||
2016 | 2015 | |||||||||
Amortization of defined benefit pension and other postretirement benefits: | ||||||||||
Actuarial losses, net | $ | 5 | $ | 5 | Selling, general and administrative expenses | |||||
Tax (benefit) | (2 | ) | (1 | ) | ||||||
Net of tax | $ | 3 | $ | 4 |
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Three Months Ended March 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net Sales(A) | Operating Profit (Loss) | ||||||||||||||
Our operations by segment were (B): | |||||||||||||||
Plumbing Products | $ | 813 | $ | 796 | $ | 129 | $ | 111 | |||||||
Decorative Architectural Products | 493 | 451 | 105 | 83 | |||||||||||
Cabinetry Products | 236 | 249 | 24 | (4 | ) | ||||||||||
Windows and Other Specialty Products | 178 | 163 | 3 | 6 | |||||||||||
Total | $ | 1,720 | $ | 1,659 | $ | 261 | $ | 196 | |||||||
Our operations by geographic area were: | |||||||||||||||
North America | $ | 1,350 | $ | 1,282 | $ | 215 | $ | 151 | |||||||
International, principally Europe | 370 | 377 | 46 | 45 | |||||||||||
Total | $ | 1,720 | $ | 1,659 | 261 | 196 | |||||||||
General corporate expense, net | (27 | ) | (31 | ) | |||||||||||
Operating profit | 234 | 165 | |||||||||||||
Other income (expense), net | (57 | ) | (55 | ) | |||||||||||
Income from continuing operations before income taxes | $ | 177 | $ | 110 |
(A) | Inter-segment sales were not material. |
(B) | In Q1 2016, we renamed our Cabinetry Products and Windows and Other Specialty Products segments. The name change did not impact the review of financial information by our corporate operating executive or the composition of the segments. |
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Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Income from cash and cash investments | $ | 1 | $ | — | |||
Income from financial investments, net (Note E) | 1 | 2 | |||||
Foreign currency transaction losses | — | (1 | ) | ||||
Other items, net | (3 | ) | — | ||||
Total other, net | $ | (1 | ) | $ | 1 |
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Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net sales | $ | — | $ | 358 | |||
Cost of sales | — | 285 | |||||
Gross profit | — | 73 | |||||
Selling, general and administrative expenses | — | 68 | |||||
Income from discontinued operations | $ | — | $ | 5 | |||
Income tax expense | — | (2 | ) | ||||
Income from discontinued operations, net | $ | — | $ | 3 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Depreciation and amortization | $ | — | $ | 3 | |||
Capital expenditures | $ | — | $ | 2 |
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Gross Goodwill At March 31, 2016 | Accumulated Impairment Losses | Net Goodwill At March 31, 2016 | |||||||||
Plumbing Products | $ | 530 | $ | (340 | ) | $ | 190 | ||||
Decorative Architectural Products | 294 | (75 | ) | 219 | |||||||
Cabinetry Products | 240 | (59 | ) | 181 | |||||||
Windows and Other Specialty Products | 988 | (734 | ) | 254 | |||||||
Total | $ | 2,052 | $ | (1,208 | ) | $ | 844 |
Gross Goodwill At December 31, 2015 | Accumulated Impairment Losses | Net Goodwill At December 31, 2015 | Other(A) | Net Goodwill At March 31, 2016 | |||||||||||||||
Plumbing Products | $ | 525 | $ | (340 | ) | $ | 185 | $ | 5 | $ | 190 | ||||||||
Decorative Architectural Products | 294 | (75 | ) | 219 | — | 219 | |||||||||||||
Cabinetry Products | 240 | (59 | ) | 181 | — | 181 | |||||||||||||
Windows and Other Specialty Products | 988 | (734 | ) | 254 | — | 254 | |||||||||||||
Total | $ | 2,047 | $ | (1,208 | ) | $ | 839 | $ | 5 | $ | 844 |
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March 31, 2016 | December 31, 2015 | ||||||
Prepaid expenses and other: | |||||||
Auction rate securities | $ | 12 | $ | — | |||
Other assets: | |||||||
Auction rate securities | 10 | 22 | |||||
Equity method investments | 13 | 13 | |||||
Private equity funds | 9 | 10 | |||||
Other investments | 3 | 3 | |||||
Total | $ | 47 | $ | 48 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Realized gains from private equity funds | $ | — | $ | 2 | |||
Equity investment income, net | 1 | — | |||||
Total income from financial investments, net | $ | 1 | $ | 2 |
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Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Foreign currency contracts: | |||||||
Exchange contracts | $ | — | $ | 4 | |||
Forward contracts | — | (4 | ) | ||||
Metal contracts | 2 | (2 | ) | ||||
Total gain (loss) | $ | 2 | $ | (2 | ) |
At March 31, 2016 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Exchange contracts | $ | 27 | |||||
Receivables | $ | 1 | |||||
Forward contracts | 26 | ||||||
Accrued liabilities | (1 | ) | |||||
Other liabilities | (2 | ) | |||||
Metals contracts | 38 | ||||||
Accrued liabilities | (6 | ) |
At December 31, 2015 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Exchange contracts | $ | 39 | |||||
Receivables | $ | 1 | |||||
Forward contracts | 30 | ||||||
Accrued liabilities | (2 | ) | |||||
Other liabilities | (1 | ) | |||||
Metals contracts | 50 | ||||||
Accrued liabilities | (10 | ) |
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Three Months Ended March 31, 2016 | Twelve Months Ended December 31, 2015 | ||||||
Balance at January 1 | $ | 152 | $ | 135 | |||
Accruals for warranties issued during the period | 13 | 56 | |||||
Accruals related to pre-existing warranties | — | 15 | |||||
Settlements made (in cash or kind) during the period | (13 | ) | (50 | ) | |||
Other, net (including currency translation) | — | (4 | ) | ||||
Balance at end of period | $ | 152 | $ | 152 |
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Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Long-term stock awards | $ | 5 | $ | 6 | |||
Stock options | 1 | 1 | |||||
Phantom stock awards and stock appreciation rights | 3 | 3 | |||||
Total | $ | 9 | $ | 10 | |||
Income tax benefit (37 percent tax rate) | $ | 3 | $ | 4 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Unvested stock award shares at January 1 | 5 | 6 | |||||
Weighted average grant date fair value | $ | 17 | $ | 18 | |||
Stock award shares granted | 1 | 1 | |||||
Weighted average grant date fair value | $ | 26 | $ | 26 | |||
Stock award shares vested | 2 | 2 | |||||
Weighted average grant date fair value | $ | 16 | $ | 17 | |||
Stock award shares forfeited | — | — | |||||
Weighted average grant date fair value | $ | 19 | $ | 19 | |||
Unvested stock award shares at March 31 | 4 | 5 | |||||
Weighted average grant date fair value | $ | 20 | $ | 19 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Option shares outstanding, January 1 | 12 | 18 | |||||
Weighted average exercise price (A) | $ | 17 | $ | 21 | |||
Option shares granted | — | — | |||||
Weighted average exercise price | $ | 26 | $ | 26 | |||
Option shares exercised | 1 | 1 | |||||
Aggregate intrinsic value on date of exercise (B) | $ | 18 million | $ | 17 million | |||
Weighted average exercise price | $ | 18 | $ | 14 | |||
Option shares forfeited | — | — | |||||
Weighted average exercise price | $ | — | $ | 22 | |||
Option shares outstanding, March 31 | 11 | 17 | |||||
Weighted average exercise price (A) | $ | 18 | $ | 22 | |||
Weighted average remaining option term (in years) | 4 | 3 | |||||
Option shares vested and expected to vest, March 31 | 11 | 17 | |||||
Weighted average exercise price (A) | $ | 18 | $ | 22 | |||
Aggregate intrinsic value (B) | $ | 154 million | $ | 108 million | |||
Weighted average remaining option term (in years) | 4 | 3 | |||||
Option shares exercisable (vested), March 31 | 10 | 15 | |||||
Weighted average exercise price (A) | $ | 17 | $ | 22 | |||
Aggregate intrinsic value (B) | $ | 138 million | $ | 94 million | |||
Weighted average remaining option term (in years) | 3 | 3 |
(A) | Subsequent to the separation of TopBuild, we modified our outstanding equity awards to employees and non-employee directors such that all individuals received an equivalent fair value both before and after the separation. The modification contributed to the lower exercise price. |
(B) | 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 share. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Weighted average grant date fair value | $ | 6.43 | $ | 9.67 | |||
Risk-free interest rate | 1.41 | % | 1.75 | % | |||
Dividend yield | 1.49 | % | 1.32 | % | |||
Volatility factor | 29.00 | % | 42.00 | % | |||
Expected option life | 6 years | 6 years |
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Three Months Ended March 31, | |||||||||||||||
2016 | 2015 | ||||||||||||||
Qualified | Non-Qualified | Qualified | Non-Qualified | ||||||||||||
Service cost | $ | 1 | $ | — | $ | 1 | $ | — | |||||||
Interest cost | 11 | 1 | 12 | 1 | |||||||||||
Expected return on plan assets | (10 | ) | — | (11 | ) | — | |||||||||
Amortization of net loss | 4 | 1 | 4 | 1 | |||||||||||
Net periodic pension cost | $ | 6 | $ | 2 | $ | 6 | $ | 2 |
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Amounts Reclassified | ||||||||||
Accumulated Other Comprehensive Loss | Three Months Ended March 31, | Statement of Operations Line Item | ||||||||
2016 | 2015 | |||||||||
Amortization of defined benefit pension and other postretirement benefits: | ||||||||||
Actuarial losses, net | $ | 5 | $ | 5 | Selling, general and administrative expenses | |||||
Tax (benefit) | (2 | ) | (1 | ) | ||||||
Net of tax | $ | 3 | $ | 4 |
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Three Months Ended March 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net Sales(A) | Operating Profit (Loss) | ||||||||||||||
Our operations by segment were (B): | |||||||||||||||
Plumbing Products | $ | 813 | $ | 796 | $ | 129 | $ | 111 | |||||||
Decorative Architectural Products | 493 | 451 | 105 | 83 | |||||||||||
Cabinetry Products | 236 | 249 | 24 | (4 | ) | ||||||||||
Windows and Other Specialty Products | 178 | 163 | 3 | 6 | |||||||||||
Total | $ | 1,720 | $ | 1,659 | $ | 261 | $ | 196 | |||||||
Our operations by geographic area were: | |||||||||||||||
North America | $ | 1,350 | $ | 1,282 | $ | 215 | $ | 151 | |||||||
International, principally Europe | 370 | 377 | 46 | 45 | |||||||||||
Total | $ | 1,720 | $ | 1,659 | 261 | 196 | |||||||||
General corporate expense, net | (27 | ) | (31 | ) | |||||||||||
Operating profit | 234 | 165 | |||||||||||||
Other income (expense), net | (57 | ) | (55 | ) | |||||||||||
Income from continuing operations before income taxes | $ | 177 | $ | 110 |
(A) | Inter-segment sales were not material. |
(B) | In Q1 2016, we renamed our Cabinetry Products and Windows and Other Specialty Products segments. The name change did not impact the review of financial information by our corporate operating executive or the composition of the segments. |
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Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Income from cash and cash investments | $ | 1 | $ | — | |||
Income from financial investments, net (Note E) | 1 | 2 | |||||
Foreign currency transaction losses | — | (1 | ) | ||||
Other items, net | (3 | ) | — | ||||
Total other, net | $ | (1 | ) | $ | 1 |
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