MASCO CORP /DE/, 10-K filed on 2/12/2016
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2015
Jan. 31, 2016
Jun. 30, 2015
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
MASCO CORP /DE/ 
 
 
Entity Central Index Key
0000062996 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2015 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 9,059,896,000 
Entity Common Stock, Shares Outstanding
 
333,931,600 
 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Current assets:
 
 
Cash and cash investments
$ 1,468 
$ 1,379 
Short-term bank deposits
248 
306 
Receivables
853 
820 
Inventories
687 
712 
Prepaid expenses and other
72 
68 
Assets held for sale
 
335 
Total current assets
3,328 
3,620 
Property and equipment, net
1,027 
1,046 
Goodwill
839 
840 
Other intangible assets, net
160 
142 
Other assets
326 
419 
Assets held for sale
 
1,141 
Total Assets
5,680 
7,208 
Current Liabilities:
 
 
Accounts payable
749 
721 
Notes payable
1,005 
505 
Accrued liabilities
752 
685 
Liabilities held for sale
 
300 
Total current liabilities
2,506 
2,211 
Long-term debt
2,418 
2,919 
Other liabilities
698 
781 
Liabilities held for sale
 
169 
Total Liabilities
5,622 
6,080 
Commitments and contingencies (Note U)
   
   
Masco Corporation's shareholders' equity
 
 
Common shares authorized: 1,400,000,000; issued and outstanding: 2015 - 000,000,000; 2014 - 345,000,000
330 
345 
Preferred shares authorized: 1,000,000; issued and outstanding: 2015 - None; 2014 - None
   
   
Retained (deficit) earnings
(300)
690 
Accumulated other comprehensive loss
(165)
(111)
Total Masco Corporation's shareholders' (deficit) equity
(135)
924 
Noncontrolling interest
193 
204 
Total Equity
58 
1,128 
Total Liabilities and Equity
$ 5,680 
$ 7,208 
CONSOLIDATED BALANCE SHEETS (Parenthetical)
Dec. 31, 2015
Dec. 31, 2014
CONSOLIDATED BALANCE SHEETS
 
 
Common shares, shares authorized
1,400,000,000 
1,400,000,000 
Common shares, shares issued
330,500,000 
345,000,000 
Common shares, shares outstanding
330,500,000 
345,000,000 
Preferred shares, shares authorized
1,000,000 
1,000,000 
Preferred shares, shares issued
Preferred shares, shares outstanding
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
Net sales
$ 7,142 
$ 7,006 
$ 6,761 
Cost of sales
4,889 
4,946 
4,802 
Gross profit
2,253 
2,060 
1,959 
Selling, general and administrative expenses
1,339 
1,347 
1,347 
Income from litigation settlements
 
(9)
 
Impairment charges for other intangible assets
 
 
Operating profit
914 
721 
612 
Other income (expense), net:
 
 
 
Interest expense
(225)
(225)
(235)
Other, net
 
11 
Total other income (expense), net
(225)
(214)
(226)
Income from continuing operations before income taxes
689 
507 
386 
Income tax expense (benefit)
293 
(361)
86 
Income from continuing operations
396 
868 
300 
(Loss) income from discontinued operations, net
(2)
35 
29 
Net income
394 
903 
329 
Less: Net income attributable to noncontrolling interest
39 
47 
41 
Net income attributable to Masco Corporation
355 
856 
288 
Basic:
 
 
 
Income from continuing operations (in dollars per share)
$ 1.04 
$ 2.31 
$ 0.72 
(Loss) income from discontinued operations, net
$ (0.01)
$ 0.10 
$ 0.08 
Net income (in dollars per share)
$ 1.03 
$ 2.40 
$ 0.80 
Diluted:
 
 
 
Income from continuing operations (in dollars per share)
$ 1.03 
$ 2.28 
$ 0.72 
(Loss) income from discontinued operations, net
$ (0.01)
$ 0.10 
$ 0.08 
Net income (in dollars per share)
$ 1.02 
$ 2.38 
$ 0.80 
Amounts attributable to Masco Corporation:
 
 
 
Income from continuing operations
357 
821 
259 
(Loss) income from discontinued operations, net
(2)
35 
29 
Net income attributable to Masco Corporation
$ 355 
$ 856 
$ 288 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
 
 
Net income
$ 394 
$ 903 
$ 329 
Less: Net income attributable to noncontrolling interest
39 
47 
41 
Net income attributable to Masco Corporation
355 
856 
288 
Other comprehensive (loss) income, net of tax (see Note O):
 
 
 
Cumulative translation adjustment
(96)
(124)
(75)
Interest rate swaps
Pension and other post-retirement benefits
26 
(140)
138 
Other comprehensive (loss) income
(68)
(263)
65 
Less: Other comprehensive (loss) income attributable to the noncontrolling interest:
 
 
 
Cumulative translation adjustment
(16)
(31)
Pension and other post-retirement benefits
(6)
Less: Other comprehensive (loss) income attributable to noncontrolling interest
(14)
(37)
Other comprehensive (loss) income attributable to Masco Corporation
(54)
(226)
56 
Total comprehensive income (loss)
326 
640 
394 
Less: Total comprehensive income attributable to noncontrolling interests
25 
10 
50 
Total comprehensive income attributable to Masco Corporation
$ 301 
$ 630 
$ 344 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
 
 
 
Net income (loss)
$ 394 
$ 903 
$ 329 
Depreciation and amortization
133 
167 
186 
Display amortization
20 
15 
19 
Deferred income taxes
212 
(406)
42 
Non-cash loss on disposition of businesses, net
 
15 
(Gain) on disposition of investments, net
(7)
(2)
(10)
Pension and other postretirement benefits
(18)
(36)
(23)
Impairment of property and equipment, net
27 
 
Stock-based compensation
41 
47 
54 
(Increase) in receivables
(104)
(81)
(85)
Decrease (increase) in inventories
17 
(75)
(24)
Increase in accounts payable and accrued liabilities, net
82 
63 
147 
Other items, net
(73)
(22)
(5)
Net cash from operating activities
699 
602 
645 
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
 
 
 
Retirement of notes
(500)
 
(200)
Purchase of Company common stock
(456)
(158)
(35)
Cash dividends paid
(126)
(117)
(107)
Dividends paid to noncontrolling interest
(36)
(34)
(34)
Cash distributed to TopBuild Corp.
(63)
 
 
Issuance of TopBuild Corp. debt
200 
 
 
Issuance of notes, net of issuance costs
497 
 
 
Increase in debt
Issuance of Company common stock
 
Excess tax benefit from stock-based compensation
75 
13 
 
Payment of debt
(4)
(6)
(5)
Credit Agreement and other financing costs
(3)
 
(4)
Net cash for financing activities
(410)
(297)
(382)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(158)
(128)
(126)
Acquisition of businesses, net of cash acquired
(41)
(2)
(7)
Proceeds from disposition of:
 
 
 
Short-term bank deposits
279 
379 
411 
Businesses, net of cash disposed
 
 
17 
Property and equipment
18 
16 
27 
Other financial investments
10 
64 
16 
Purchases of:
 
 
 
Other financial investments
(1)
(1)
(1)
Short-term bank deposits
(253)
(399)
(409)
Other, net
(43)
(29)
(5)
Net cash for investing activities
(189)
(100)
(77)
Effect of exchange rate changes on cash and cash investments
(15)
(45)
(3)
CASH AND CASH INVESTMENTS:
 
 
 
Increase for the year
85 
160 
183 
At January 1
1,383 
1,223 
1,040 
At December 31
$ 1,468 
$ 1,383 
$ 1,223 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)
In Millions, unless otherwise specified
Common Shares ($1 par value)
Paid-In Capital
Retained Earnings (Deficit)
Accumulated Other Comprehensive Income (Loss)
Noncontrolling Interest
Total
Balance at Dec. 31, 2012
$ 349 
$ 16 
$ (94)
$ 59 
$ 212 
$ 542 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
Total comprehensive income (loss)
 
 
288 
56 
50 
394 
Shares issued
(11)
 
 
 
(8)
Shares retired:
 
 
 
 
 
 
Repurchased
(2)
(11)
(22)
 
 
(35)
Surrendered (non-cash)
(1)
(11)
 
 
 
(12)
Cash dividends declared
 
(14)
(93)
 
 
(107)
Dividends paid to noncontrolling interest
 
 
 
 
(34)
(34)
Stock-based compensation
 
47 
 
 
 
47 
Balance at Dec. 31, 2013
349 
16 
79 
115 
228 
787 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
Total comprehensive income (loss)
 
 
856 
(226)
10 
640 
Shares issued
(9)
 
 
 
(6)
Shares retired:
 
 
 
 
 
 
Repurchased
(7)
(28)
(123)
 
 
(158)
Surrendered (non-cash)
 
(15)
 
 
 
(15)
Cash dividends declared
 
 
(122)
 
 
(122)
Dividends paid to noncontrolling interest
 
 
 
 
(34)
(34)
Stock-based compensation
 
36 
 
 
 
36 
Balance at Dec. 31, 2014
345 
 
690 
(111)
204 
1,128 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
Total comprehensive income (loss)
 
 
355 
(54)
25 
326 
Shares issued
(18)
 
 
 
(15)
Shares retired:
 
 
 
 
 
 
Repurchased
(17)
(65)
(374)
 
 
(456)
Surrendered (non-cash)
(1)
 
(17)
 
 
(18)
Cash dividends declared
 
 
(126)
 
 
(126)
Dividends paid to noncontrolling interest
 
 
 
 
(36)
(36)
Separation of TopBuild Corp.
 
 
(828)
 
 
(828)
Stock-based compensation
 
83 
 
 
 
83 
Balance at Dec. 31, 2015
$ 330 
 
$ (300)
$ (165)
$ 193 
$ 58 
ACCOUNTING POLICIES
ACCOUNTING POLICIES

A. ACCOUNTING POLICIES 

        Principles of Consolidation.    The consolidated financial statements include the accounts of Masco Corporation and all majority-owned subsidiaries. All significant intercompany transactions have been eliminated. We consolidate the assets, liabilities and results of operations of variable interest entities, for which we are the primary beneficiary.

        Use of Estimates and Assumptions in the Preparation of Financial Statements.    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates and assumptions.

        Revenue Recognition.    We recognize revenue as title to products and risk of loss is transferred to customers or when services are rendered, net of applicable provisions for discounts, returns and allowances. Amounts billed for shipping and handling are included in net sales, while costs incurred for shipping and handling are included in cost of sales.

        Customer Promotion Costs.    We record estimated reductions to revenue for customer programs and incentive offerings, including special pricing and co-operative advertising arrangements, promotions and other volume-based incentives. In-store displays that are owned by us and used to market our products are included in other assets in the consolidated balance sheets and are amortized using the straight-line method over the expected useful life of three to five years; related amortization expense is classified as a selling expense in the consolidated statements of operations.

        Foreign Currency.    The financial statements of our foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at exchange rates as of the balance sheet dates. Revenues and expenses are translated at average exchange rates in effect during the year. The resulting cumulative translation adjustments have been recorded in the accumulated other comprehensive income (loss) component of shareholders' equity. Realized foreign currency transaction gains and losses are included in the consolidated statements of operations in other income (expense), net.

        Cash and Cash Investments.    We consider all highly liquid investments with an initial maturity of three months or less to be cash and cash investments.

        Short-Term Bank Deposits.    We invest a portion of our foreign excess cash in short-term bank deposits. These highly liquid investments have original maturities between three and twelve months and are valued at cost, which approximates fair value at December 31, 2015 and 2014. These short-term bank deposits are classified in the current assets section of our consolidated balance sheets, and interest income related to short-term bank deposits is recorded in our consolidated statements of operations in other income (expense), net.

        Receivables.    We do significant business with a number of customers, including certain home center retailers and homebuilders. We monitor our exposure for credit losses on our customer receivable balances and the credit worthiness of our customers on an on-going basis and record related allowances for doubtful accounts. Allowances are estimated based upon specific customer balances, where a risk of default has been identified, and also include a provision for non-customer specific defaults based upon historical collection, return and write-off activity. During downturns in our markets, declines in the financial condition and creditworthiness of customers impacts the credit risk of the receivables involved and we have incurred additional bad debt expense related to customer defaults. A separate allowance is recorded for customer incentive rebates and is generally based upon sales activity. Receivables are presented net of certain allowances (including allowances for doubtful accounts) of $41 million at both December 31, 2015 and 2014.

        Property and Equipment.    Property and equipment, including significant improvements to existing facilities, are recorded at cost. Upon retirement or disposal, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the consolidated statements of operations. Maintenance and repair costs are charged against earnings as incurred.

        We review our property and equipment as an event occurs or circumstances change that would more likely than not reduce the fair value of the property and equipment below the carrying amount. If the carrying amount of property and equipment 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. Further, we evaluate the remaining useful lives of property and equipment at each reporting period to determine whether events and circumstances warrant a revision to the remaining depreciation periods.

        Depreciation.    Depreciation expense is computed principally using the straight-line method over the estimated useful lives of the assets. Annual depreciation rates are as follows: buildings and land improvements, 2 to 10 percent, and machinery and equipment, 5 to 33 percent. Depreciation expense was $116 million, $132 million and $147 million in 2015, 2014 and 2013, respectively. Such depreciation expense included accelerated depreciation of $1 million (in the Cabinets and Related Products segment) and $13 million (primarily in the Cabinets and Related Products and Plumbing Products segments) in 2014 and 2013, respectively.

        Goodwill and Other Intangible Assets.    We perform our annual impairment testing of goodwill in the fourth quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We have defined our reporting units and completed the impairment testing of goodwill at the operating segment level. Our operating segments are reporting units that engage in business activities, for which discrete financial information, including five-year forecasts, are available. We compare the fair value of the reporting units to the carrying value of the reporting units for goodwill impairment testing. Fair value is determined using a discounted cash flow method, which includes significant unobservable inputs (Level 3 inputs).

        Determining market values using a discounted cash flow method requires us to make significant estimates and assumptions, including long-term projections of cash flows, market conditions and appropriate discount rates. Our judgments are based upon historical experience, current market trends, consultations with external valuation specialists and other information. While we believe that the estimates and assumptions underlying the valuation methodology are reasonable, different estimates and assumptions could result in different outcomes. In estimating future cash flows, we rely on internally generated five-year forecasts for sales and operating profits, including capital expenditures, and, currently, a one to three percent long-term assumed annual growth rate of cash flows for periods after the five-year forecast. We utilize our weighted average cost of capital of approximately 8.5 percent as the basis to determine the discount rate to apply to the estimated future cash flows. Our weighted average cost of capital decreased in 2015 as compared to 2014 due to less risk associated with our stock in relation to the capital markets. In 2015, based upon our assessment of the risks impacting each of our businesses, we applied a risk premium to increase the discount rate to a range of 10.5 percent to 12.5 percent for our reporting units.

        If the carrying amount of a reporting unit exceeds its fair value, we measure the possible goodwill impairment based upon an allocation of the estimate of fair value of the reporting unit to all of the underlying assets and liabilities of the reporting unit, including any previously unrecognized intangible assets (Step Two Analysis). The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized to the extent that a reporting unit's recorded goodwill exceeds the implied fair value of goodwill.

        We review our other indefinite-lived intangible assets for impairment annually in the fourth quarter of each year, or as events occur or circumstances change that indicate the assets may be impaired without regard to the business unit. We consider the implications of both external (e.g., market growth, competition and local economic conditions) and internal (e.g., product sales and expected product growth) factors and their potential impact on cash flows related to the intangible asset in both the near- and long-term.

        Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives. We evaluate the remaining useful lives of amortizable intangible assets at each reporting period to determine whether events and circumstances warrant a revision to the remaining periods of amortization. See Note H for additional information regarding Goodwill and Other intangible assets.

        Fair Value Accounting.    We follow accounting guidance for our financial investments and liabilities, which defines fair value, establishes a framework for measuring fair value and prescribes disclosures about fair value measurements. We also follow this guidance for our non-financial investments and liabilities.

        The fair value of financial investments and liabilities is determined at each balance sheet date and future declines in market conditions, the future performance of the underlying investments or new information could affect the recorded values of our investments in marketable securities, private equity funds and other private investments.

        We use derivative financial instruments to manage certain exposure to fluctuations in earnings and cash flows resulting from changes in foreign currency exchange rates, commodity costs and interest rate exposures. Derivative financial instruments are recorded in the consolidated balance sheets as either an asset or liability measured at fair value, netted by counterparty, where the right of offset exists. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in determining current earnings during the period of the change in fair value.

        Warranty.    At the time of sale, we accrue a warranty liability for the estimated cost to provide products, parts or services to repair or replace products in satisfaction of warranty obligations. Our estimate of costs to service our warranty obligations is based upon the information available and includes a number of factors such as the warranty coverage, the warranty period, historical experience specific to the nature, frequency and average cost to service the claim, along with industry and demographic trends.

        Certain factors and related assumptions in determining our warranty liability involve judgments and estimates and are sensitive to changes in the aforementioned factors. We believe that the warranty accrual is appropriate; however, actual claims incurred could differ from the original estimates thereby requiring adjustments to previously established accruals.

        A significant portion of our business is at the consumer retail level through home center retailers and other major retailers. A consumer may return a product to a retail outlet that is a warranty return. However, certain retail outlets do not distinguish between warranty and other types of returns when they claim a return deduction from us. Our revenue recognition policy takes into account this type of return when recognizing revenue, and deductions are recorded at the time of sale.

        Insurance Reserves.    We provide for expenses associated with workers' compensation and product liability obligations when such amounts are probable and can be reasonably estimated. The accruals are adjusted as new information develops or circumstances change that would affect the estimated liability.

        Stock-Based Compensation.    We measure compensation expense for stock awards at the market price of our common stock at the grant date. Such expense is recognized ratably over the shorter of the vesting period of the stock awards, typically 5 to 10 years, or the length of time until the grantee becomes retirement-eligible at age 65.

        We measure compensation expense for stock options using a Black-Scholes option pricing model. Such expense is recognized ratably over the shorter of the vesting period of the stock options, typically five years, or the length of time until the grantee becomes retirement-eligible at age 65. We utilize the shortcut method to determine the tax windfall pool associated with stock options.

        Noncontrolling Interest.    We own 68 percent of Hansgrohe SE at both December 31, 2015 and 2014. The aggregate noncontrolling interest, net of dividends, at December 31, 2015 and 2014 has been recorded as a component of equity on our consolidated balance sheets.

        Interest and Penalties on Uncertain Tax Positions.    We record interest and penalties on our uncertain tax positions in income tax expense (benefit).

        Reclassifications.    Certain prior year amounts have been reclassified to conform to the 2015 presentation in the consolidated financial statements. In our consolidated statements of cash flows, the cash flows from discontinued operations are not separately classified.

        Recently Issued Accounting Pronouncements.    In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-8 ("ASU 2014-08"), "Reporting of Discontinued Operations and Disclosure of Disposals of Components of an Entity," which changes the criteria for determining which disposals can be presented as discontinued operations and modifies the related disclosure requirements. We adopted this guidance beginning January 1, 2015. The adoption of this new guidance did not have a material impact on our financial position or our results of operations.

        In November 2015, the FASB issued Accounting Standards Update 2015-17 ("ASU 2015-17"), "Balance Sheet Classification of Deferred Taxes," which changes the criteria for classifying deferred tax balances by requiring all deferred taxes be presented as noncurrent on the balance sheet. We retrospectively adopted this guidance on December 31, 2015. As a result of the retrospective adoption of this standard, current assets decreased by $244 million, non-current assets increased by $219 million and non-current liabilities decreased by $25 million as of December 31, 2014.

        In May 2014, FASB issued a new standard for revenue recognition, Accounting Standards Codification 606 ("ASC 606"). The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries. ASC 606 is effective for us for annual periods beginning January 1, 2018. We are currently evaluating the impact the adoption of this new standard will have on our results of operations.

        In February 2015, the FASB issued Accounting Standards Update 2015-02 ("ASU 2015-02") "Consolidation (Topic 810) – Amendments to the Consolidations Analysis," which modifies certain aspects of both the variable interest entities and voting interest entities models. ASU 2015-02 is effective for us for annual periods beginning January 1, 2016. We do not expect that the adoption will have a significant impact on our financial position or our results of operations.

        In April 2015, the FASB issued Accounting Standards Update 2015-03 ("ASU 2015-03") "Interest – Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs," that requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt. In August 2015, the FASB issued ASU 2015-15 to clarify that debt issuance costs related to line-of-credit arrangements may remain classified as an asset. Both ASU 2015-03 and ASU 2015-15 are effective for us for annual periods beginning January 1, 2016. We do not expect that the adoptions will have a significant impact on our financial position.

DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS

B. DISCONTINUED OPERATIONS 

        The presentation of discontinued operations includes a component or group of components that we have or intend to dispose of, and represents a strategic shift that has (or will have) a major effect on our operations and financial results. For spin off transactions, discontinued operations treatment is appropriate following the completion of the spin off.

        On September 30, 2014, we announced a plan to spin off 100 percent of our Installation and Other Services businesses into an independent, publicly-traded company named TopBuild Corp. ("TopBuild") through a tax-free distribution of the stock of TopBuild to our stockholders. We initiated the spin off as TopBuild was no longer considered core to our long-term growth strategy in branded building products. On June 30, 2015, immediately prior to the effective time of the spin off, TopBuild paid a cash distribution to us of $200 million using the proceeds of its new debt financing arrangement. This transaction was reported as a financing activity in the consolidated statements of cash flows.

        We have accounted for the spin off of TopBuild as a discontinued operation. (Losses) gains from this discontinued operation were included in (loss) income from discontinued operations, net, in the consolidated statements of operations.

        In February 2013, we determined that Tvilum, our Danish ready-to-assemble cabinet business, was no longer core to our long-term growth strategy and, accordingly, we embarked on a plan for disposition. In December 2013, we completed the disposition of this business and a related Danish holding company for net proceeds of $17 million.

        We have accounted for Tvilum as a discontinued operation. Losses from this discontinued operation were included in (loss) income from discontinued operations, net, in the consolidated statements of operations.

        The major classes of line items constituting pre-tax (loss) profit of the discontinued operations, in millions:

                                                                                                                                                                                    

 

 

Year Ended December 31

 

 

 

2015

 

2014

 

2013

 

Net sales (1)

 

$

762

 

$

1,515

 

$

1,412

 

Cost of sales (1)

 

 

603

 

 

1,188

 

 

1,116

 

​  

​  

​  

​  

​  

​  

Gross profit (1)

 

 

159

 

 

327

 

 

296

 

Selling, general and administrative expenses (1)

 

 

148

 

 

259

 

 

232

 

​  

​  

​  

​  

​  

​  

Income from discontinued operations

 

$

11

 

$

68

 

$

64

 

Other discontinued operations results:

 

 


 

 

 


 

 

 


 

 

(Loss) gain on disposal of discontinued operations, net (2)

 

 

(1

)

 

(6

)

 

3

 

Operating loss from discontinued operations (3)

 

 

 

 

 

 

(7

)

Impairment of assets held for sale (4)

 

 

 

 

 

 

(10

)

​  

​  

​  

​  

​  

​  

Income before income tax

 

 

10

 

 

62

 

 

50

 

Income tax expense (5)

 

 

(12

)

 

(27

)

 

(21

)

​  

​  

​  

​  

​  

​  

(Loss) income from discontinued operations, net

 

$

(2

)

$

35

 

$

29

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  


 

 

(1)          

Net sales, cost of sales, gross profit, and selling, general and administrative expenses reflect the results of TopBuild.

(2)          

Included in (loss) gain on disposal of discontinued operations, net in 2014 are additional costs and charges related to the 2013 sale of Tvilum.

(3)          

Operating loss from discontinued operations reflects the results of Tvilum, including net sales of $265 million in 2013.

(4)          

Included in impairment of assets held for sale in 2013 is the impairment of fixed assets. During 2013, we estimated the fair value of the Tvilum business held for sale, using unobservable inputs (Level 3). After considering the currency translation gains reported in accumulated other comprehensive income (loss), we recorded an impairment of $10 million in 2013.

(5)          

The unusual relationship between income tax expense and income before income tax for 2015 resulted primarily from certain non-deductible transaction costs related to the spin off of TopBuild.

 

        The carrying amount of major classes of assets and liabilities included as part of the TopBuild discontinued operations, in millions:

                                                                                                                                                                                    

 

 

At December 31,

 

 

 

2015

 

2014

 

Cash

 

$

 

$

 

Receivables

 

 

 

 

220 

 

Inventories

 

 

 

 

107 

 

Prepaid expenses and other

 

 

 

 

 

Property and equipment, net

 

 

 

 

93 

 

Goodwill

 

 

 

 

1,044 

 

Other intangible assets, net

 

 

 

 

 

Other assets

 

 

 

 

 

​  

​  

​  

​  

Total assets classified as held for sale

 

$

 

$

1,476 

 

​  

​  

​  

​  

​  

​  

​  

​  

Accounts payable

 

 

 

$

229 

 

Accrued liabilities

 

 

 

 

71 

 

Other liabilities

 

 

 

 

40 

 

Deferred income taxes

 

 

 

 

129 

 

​  

​  

​  

​  

Total liabilities classified as held for sale

 

$

 

$

469 

 

​  

​  

​  

​  

​  

​  

​  

​  

        Other selected financial information for TopBuild during the period owned by us, were as follows, in millions:

                                                                                                                                                                                    

 

 

Year Ended Dec. 31

 

 

 

2015

 

2014

 

2013

 

Depreciation and amortization

 

$

 

$

26 

 

$

27 

 

Capital expenditures

 

$

 

$

13 

 

$

14 

 

        In conjunction with the spin off, we have entered into a Transition Services Agreement with TopBuild to provide TopBuild administrative services subsequent to the separation. The fees for services rendered under the Transition Services Agreement are not expected to be material to our results of operations.

ACQUISITIONS
ACQUISITIONS

C. ACQUISITIONS 

        In the second quarter of 2015, we acquired a U.K. window business for approximately $16 million in cash in the Other Specialty Products segment. This acquisition will support our U.K. window business' growth strategy by expanding its product offerings into timber-alternative windows and doors.

        In the first quarter of 2015, we acquired an aquatic fitness business for approximately $25 million in cash in the Plumbing Products segment. This acquisition will allow our spa business to expand its wellness products platform, open new channels of distribution and access a new customer base.

        In the first quarter of 2013, we acquired a small U.K. door business in the Other Specialty Products segment. The total net cash purchase price was $4 million.

        These acquisitions are not material to us. The results of these acquisitions are included in the consolidated financial statements from the date of their respective acquisition.

INVENTORIES
INVENTORIES

D. INVENTORIES 

                                                                                                                                                                                    

 

 

(In Millions)

 

 

 

At December 31

 

 

 

2015

 

2014

 

Finished goods

 

$

358 

 

$

361 

 

Raw material

 

 

238 

 

 

251 

 

Work in process

 

 

91 

 

 

100 

 

​  

​  

​  

​  

Total

 

$

687 

 

$

712 

 

​  

​  

​  

​  

​  

​  

​  

​  

        Inventories, which include purchased parts, materials, direct labor and applied manufacturing overhead, are stated at the lower of cost or net realizable value, with cost determined by use of the first-in, first-out method.

FAIR VALUE OF FINANCIAL INVESTMENTS AND LIABILITIES
FAIR VALUE OF FINANCIAL INVESTMENTS AND LIABILITIES

E. FAIR VALUE OF FINANCIAL INVESTMENTS AND LIABILITIES 

        Accounting Policy.    We follow accounting guidance that defines fair value, establishes a framework for measuring fair value and prescribes disclosures about fair value measurements for financial investments and liabilities. The guidance defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." Further, it defines a fair value hierarchy, as follows: Level 1 inputs as quoted prices in active markets for identical assets or liabilities; Level 2 inputs as observable inputs other than Level 1 prices, such as quoted market prices for similar assets or liabilities or other inputs that are observable or can be corroborated by market data; and Level 3 inputs as unobservable inputs that are supported by little or no market activity and that are financial instruments whose value is determined using pricing models or instruments for which the determination of fair value requires significant management judgment or estimation.

        Financial investments that are available to be traded on readily accessible stock exchanges (domestic or foreign) are considered to have active markets and have been valued using Level 1 inputs. Financial investments that are not available to be traded on a public market or have limited secondary markets, or contain provisions that limit the ability to sell the investment are considered to have inactive markets and have been valued using Level 2 or 3 inputs. We incorporated credit risk into the valuations of financial investments by estimating the likelihood of non-performance by the counterparty to the applicable transactions. The estimate included the length of time relative to the contract, financial condition of the counterparty and current market conditions. The criteria for determining if a market was active or inactive were based on the individual facts and circumstances.

        Financial Investments.    We have maintained investments in available-for-sale securities, equity method investments, and a number of private equity funds and other private investments, principally as part of our tax planning strategies, as any gains enhance the utilization of any current and future tax capital losses.

        Financial investments included in other assets were as follows, in millions:

                                                                                                                                                                                    

 

 

At December 31

 

 

 

2015

 

2014

 

Auction rate securities

 

$

22 

 

$

22 

 

​  

​  

​  

​  

Total recurring investments

 

 

22 

 

 

22 

 

Equity method investments

 

 

13 

 

 

11 

 

Private equity funds

 

 

10 

 

 

14 

 

Other investments

 

 

 

 

 

​  

​  

​  

​  

Total

 

$

48 

 

$

50 

 

​  

​  

​  

​  

​  

​  

​  

​  

        Auction Rate Securities.    Our investments in available-for-sale securities included cost basis of $19 million and pre-tax unrealized gains of $3 million and had a recorded basis of $22 million at both December 31, 2015 and 2014.

        Equity Method Investments.    Investments in private equity fund partnerships, joint ventures and less than majority-owned subsidiaries in which we have significant influence are accounted for under the equity method. Our consolidated statements of operations include our proportionate share of the net income (loss) of our equity method investees. When we record our proportionate share of net income (loss), it increases (decreases) our equity income in our consolidated statement of operations and our carrying value of that investment on our consolidated balance sheet.

        During the fourth quarter of 2014, we sold our investment in the private equity fund, Long Point Capital Fund II L.P. (accounted for as an equity method investment) for proceeds of $48 million, which approximated net book value. Such proceeds are included in the consolidated statements of cash flows in proceeds from other financial investments, in the investing activities section.

        Private Equity Funds and Other Investments.    Our investments in private equity funds and other private investments, where we do not have significant influence, are carried at cost.

        Recurring Fair Value Measurements.    For financial investments measured at fair value on a recurring basis at each reporting period, the unrealized gains or losses (that are deemed to be temporary) are recognized, net of tax effect, through shareholders' equity, as a component of other comprehensive income (loss). Realized gains and losses and charges for other-than-temporary impairments are included in determining net income, with related purchase costs based upon specific identification.

        In the past, we invested excess cash in auction rate securities. Auction rate securities are investment securities that have interest rates which are reset every 7, 28 or 35 days. The fair values of the auction rate securities held by us have been estimated, on a recurring basis, using a discounted cash flow model (Level 3 input). The significant inputs in the discounted cash flow model used to value the auction rate securities include: expected maturity of auction rate securities, discount rate used to determine the present value of expected cash flows and assumptions for credit defaults, since the auction rate securities are backed by credit default swap agreements.

        There were no changes in the fair value of Level 3 financial investments for the years ended December 31, 2015 or 2014.

        Non-Recurring Fair Value Measurements.    It is not practicable for us to estimate the fair value of equity method investments or private equity funds and other private investments where we do not have significant influence, because there are no quoted market prices and sufficient information is not readily available for us to utilize a valuation model to determine the fair value for each fund. Due to the significant unobservable inputs, the fair value measurements used to evaluate impairment are a Level 3 input. These investments are evaluated, on a non-recurring basis, for potential other-than-temporary impairment when impairment indicators are present, or when an event or change in circumstances has occurred, that may have a significant adverse effect on the fair value of the investment.

        There were no financial investments measured for impairment on a non-recurring basis during 2015, 2014 or 2013.

        We did not have any transfers between Level 1 and Level 2 financial assets in 2015 or 2014.

        Realized Gains (Losses).    Income from financial investments, net, included in other, net, within other income (expense), net, was as follows, in millions:

                                                                                                                                                                                    

 

 

2015

 

2014

 

2013

 

Equity investment income (loss), net

 

$

2

 

$

(2

)

$

16

 

Realized gains from private equity funds

 

 

6

 

 

4

 

 

11

 

​  

​  

​  

​  

​  

​  

Income from financial investments, net

 

$

8

 

$

2

 

$

27

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        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 or the current rates available to us for debt with similar terms and remaining maturities. The aggregate estimated market value of short-term and long-term debt at December 31, 2015 was approximately $3.6 billion, compared with the aggregate carrying value of $3.4 billion. The aggregate estimated market value of short-term and long-term debt at December 31, 2014 was approximately $3.7 billion, compared with the aggregate carrying value of $3.4 billion.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

F. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES 

        We are exposed to global market risk as part of our normal daily business activities. To manage these risks, we enter into various derivative contracts. These contracts include interest rate swap agreements, foreign currency exchange contracts and contracts intended to hedge our exposure to copper and zinc. We review our hedging program, derivative positions and overall risk management on a regular basis.

        Interest Rate Swap Agreements.    In 2012, in connection with the issuance of $400 million of debt, we terminated the interest rate swap hedge relationships that we had entered into in 2011. These interest rate swaps were designated as cash flow hedges and effectively fixed interest rates on the forecasted debt issuance to variable rates based on 3-month LIBOR. Upon termination, the ineffective portion of the cash flow hedges of approximately $2 million loss was recognized in our consolidated statement of operations in other, net. The remaining loss of approximately $23 million from the termination of these swaps is being amortized as an increase to interest expense over the remaining term of the debt, through March 2022. At December 31, 2015, the balance remaining in accumulated other comprehensive loss was $16 million.

        Foreign Currency Contracts.    Our net cash inflows and outflows exposed to the risk of changes in foreign currency exchange rates arise from the sale of products in countries other than the manufacturing source, foreign currency denominated supplier payments, debt and other payables, and investments in subsidiaries. To mitigate this risk, we, including certain European operations, entered into foreign currency forward contracts and foreign currency exchange contracts.

        Gains (losses) related to foreign currency forward and exchange contracts are recorded in our consolidated statements of operations in other income (expense), net. In the event that the counterparties fail to meet the terms of the foreign currency forward or exchange contracts, our exposure is limited to the aggregate foreign currency rate differential with such institutions.

        Metals Contracts.    We have entered into several contracts to manage our exposure to increases in the price of copper and zinc. Gains (losses) related to these contracts are recorded in our consolidated statements of operations in cost of sales.

        The pre-tax (losses) gains included in our consolidated statements of operations are as follows, in millions:

                                                                                                                                                                                    

 

 

Year Ended December 31,

 

 

 

2015

 

2014

 

2013

 

Foreign currency contracts

 

 

 

 

 

 

 

 

 

 

Exchange contracts

 

$

4

 

$

5

 

$

2

 

Forward contracts

 

 

(3

)

 

 

 

1

 

Metals contracts

 

 

(17


)

 

(3


)

 

(7


)

Interest rate swaps

 

 

(2

)

 

(2

)

 

(2

)

​  

​  

​  

​  

​  

​  

Total

 

$

(18

)

$

 

$

(6

)

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

        We present our net derivatives due to the right of offset by our counterparties under master netting arrangements in the consolidated balance sheets. The notional amounts being hedged and the fair value of those derivative instruments are as follows, in millions:

                                                                                                                                                                                    

 

 

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

)

 

                                                                                                                                                                                    

 

 

At December 31, 2014

 

 

 

Notional
Amount

 

Balance Sheet

 

Foreign currency contracts

 

 

 

 

 

 

 

Exchange contracts

 

$

55

 

 

 

 

Receivables

 

 

 

 

$

6

 

Forward contracts

 

 

79

 

 

 

 

Other assets

 

 

 

 

 

2

 

Accrued liabilities

 

 

 

 

 

(1

)

Metals contracts

 

 

70

 

 

 

 

Accrued liabilities

 

 

 

 

 

(2

)

        The fair value of all foreign currency and metals derivative contracts is estimated on a recurring basis, quarterly, using Level 2 inputs.

PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT

G. PROPERTY AND EQUIPMENT 

                                                                                                                                                                                    

 

 

(In Millions)

 

 

 

At December 31

 

 

 

2015

 

2014

 

Land and improvements

 

$

115

 

$

122

 

Buildings

 

 

672

 

 

715

 

Machinery and equipment

 

 

1,787

 

 

1,790

 

​  

​  

​  

​  

 

 

 

2,574

 

 

2,627

 

Less: Accumulated depreciation

 

 

(1,547

)

 

(1,581

)

​  

​  

​  

​  

Total

 

$

1,027

 

$

1,046

 

​  

​  

​  

​  

​  

​  

​  

​  

 

        We lease certain equipment and plant facilities under noncancellable operating leases. Rental expense recorded in the consolidated statements of operations totaled approximately $60 million, $63 million and $59 million during 2015, 2014 and 2013, respectively.

        At December 31, 2015, future minimum lease payments were as follows, in millions:

                                                                                                                                                                                    

2016

 

$

38 

 

2017

 

 

27 

 

2018

 

 

20 

 

2019

 

 

16 

 

2020

 

 

11 

 

2021 and beyond

 

 

65 

 

        As a result of our business rationalization activities, over the last several years we were holding several facilities for sale. The net book value of facilities held for sale was approximately $2 million and $17 million, included in property and equipment, net, in the consolidated balance sheets, as of December 31, 2015 and 2014, respectively.

        During 2014, we decided to sell two facilities in our Cabinets and Related Products segment, and we recorded a charge of $28 million, included in cost of sales in the consolidated statement of operations, to reflect the estimated fair value of those two facilities. Fair value was estimated using a market approach, considering the estimated fair values for other comparable buildings in the areas where the facilities are located (Level 3 inputs). These facilities were considered held for sale as of December 31, 2014 and were sold in 2015.

GOODWILL AND OTHER INTANGIBLE ASSETS
GOODWILL AND OTHER INTANGIBLE ASSETS

H. GOODWILL AND OTHER INTANGIBLE ASSETS 

        The changes in the carrying amount of goodwill, by segment, were as follows, in millions:

                                                                                                                                                                                    

 

 

Gross Goodwill
At December 31,
2015

 

Accumulated
Impairment
Losses

 

Net Goodwill
At December 31,
2015

 

Cabinets and Related Products

 

$

240

 

$

(59

)

$

181

 

Plumbing Products

 

 

525

 

 

(340

)

 

185

 

Decorative Architectural Products

 

 

294

 

 

(75

)

 

219

 

Other Specialty Products

 

 

988

 

 

(734

)

 

254

 

​  

​  

​  

​  

​  

​  

Total

 

$

2,047

 

$

(1,208

)

$

839

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

 

 

Gross Goodwill
At December 31,
2014

 

Accumulated
Impairment
Losses

 

Net Goodwill
At December 31,
2014

 

Additions (A)

 

Other (B)

 

Net Goodwill
At December 31,
2015

 

Cabinets and Related Products

 

$

240

 

$

(59

)

$

181

 

$

 

$

 

$

181

 

Plumbing Products

 

 

531

 

 

(340

)

 

191

 

 

8

 

 

(14

)

 

185

 

Decorative Architectural Products

 

 

294

 

 

(75

)

 

219

 

 

 

 

 

 

219

 

Other Specialty Products

 

 

983

 

 

(734

)

 

249

 

 

6

 

 

(1

)

 

254

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Total

 

$

2,048

 

$

(1,208

)

$

840

 

$

14

 

$

(15

)

$

839

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

 

 

Gross Goodwill
At December 31,
2013

 

Accumulated
Impairment
Losses

 

Net Goodwill
At December 31,
2013

 

Additions (A)

 

Other (B)

 

Net Goodwill
At December 31,
2014

 

Cabinets and Related Products

 

$

240

 

$

(59

)

$

181

 

$

 

$

 

$

181

 

Plumbing Products

 

 

550

 

 

(340

)

 

210

 

 

 

 

(19

)

 

191

 

Decorative Architectural Products

 

 

294

 

 

(75

)

 

219

 

 

 

 

 

 

219

 

Other Specialty Products

 

 

983

 

 

(734

)

 

249

 

 

 

 

 

 

249

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Total

 

$

2,067

 

$

(1,208

)

$

859

 

$

 

$

(19

)

$

840

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  


 

 

(A)          

Additions consist of acquisitions.

(B)          

Other principally includes the effect of foreign currency translation.

        We completed our annual impairment testing of goodwill and other indefinite-lived intangible assets in the fourth quarters of 2015, 2014 and 2013. There was no impairment of goodwill for any of our reporting units for any of these years.

        Other indefinite-lived intangible assets were $137 million and $130 million at December 31, 2015 and 2014, respectively, and principally included registered trademarks. In 2015 and 2013, the impairment test indicated there was no impairment of other indefinite-lived intangible assets for any of our business units. In 2014, we recognized an insignificant impairment charge for other indefinite-lived intangible assets. As a result of our 2015 acquisitions, other indefinite lived intangible assets increased by $7 million as of the acquisition dates.

        The carrying value of our definite-lived intangible assets was $23 million (net of accumulated amortization of $49 million) at December 31, 2015 and $12 million (net of accumulated amortization of $48 million) at December 31, 2014 and principally included customer relationships with a weighted average amortization period of 6 years in both 2015 and 2014. Amortization expense related to the definite-lived intangible assets of continuing operations was $6 million in 2015 and $4 million in both 2014 and 2013. As a result of our 2015 acquisitions, definite-lived intangible assets increased by $17 million as of the acquisition dates.

        At December 31, 2015, amortization expense related to the definite-lived intangible assets during each of the next five years was as follows: 2016 – $4 million; 2017 – $2 million; 2018 – $2 million, 2019 – $2 million and 2020 – $2 million.

OTHER ASSETS
OTHER ASSETS

I. OTHER ASSETS 

                                                                                                                                                                                    

 

 

(In Millions)

 

 

 

At December 31

 

 

 

2015

 

2014

 

Financial investments (Note E)

 

$

48 

 

$

50 

 

In-store displays, net

 

 

56 

 

 

36 

 

Debenture expense

 

 

20 

 

 

19 

 

Deferred tax assets

 

 

184 

 

 

293 

 

Other

 

 

18 

 

 

21 

 

​  

​  

​  

​  

Total

 

$

326 

 

$

419 

 

​  

​  

​  

​  

​  

​  

​  

​  

        In-store displays are amortized using the straight-line method over the expected useful life of three to five years; we recognized amortization expense related to in-store displays of $20 million, $15 million and $19 million in 2015, 2014 and 2013, respectively. Cash spent for displays was $43 million, $30 million and $5 million in 2015, 2014 and 2013, respectively, and are included in other, net within investing activities on the consolidated statements of cash flows.

ACCRUED LIABILITIES
ACCRUED LIABILITIES

J. ACCRUED LIABILITIES 

                                                                                                                                                                                    

 

 

(In Millions)

 

 

 

At December 31

 

 

 

2015

 

2014

 

Salaries, wages and commissions

 

$

171 

 

$

164 

 

Warranty (Note U)

 

 

152 

 

 

135 

 

Advertising and sales promotion

 

 

132 

 

 

111 

 

Insurance reserves

 

 

44 

 

 

39 

 

Interest

 

 

62 

 

 

57 

 

Employee retirement plans

 

 

48 

 

 

40 

 

Property, payroll and other taxes

 

 

25 

 

 

25 

 

Dividends payable

 

 

32 

 

 

32 

 

Other

 

 

86 

 

 

82 

 

​  

​  

​  

​  

Total

 

$

752 

 

$

685 

 

​  

​  

​  

​  

​  

​  

​  

​  

 

DEBT
DEBT

K. DEBT 

                                                                                                                                                                                    

 

 

(In Millions)

 

 

 

At December 31

 

 

 

2015

 

2014

 

Notes and debentures:

 

 

 

 

 

 

 

4.800%, due June 15, 2015

 

$

 

$

500 

 

6.125%, due October 3, 2016

 

 

1,000 

 

 

1,000 

 

5.850%, due March 15, 2017

 

 

300 

 

 

300 

 

6.625%, due April 15, 2018

 

 

114 

 

 

114 

 

7.125%, due March 15, 2020

 

 

500 

 

 

500 

 

5.950%, due March 15, 2022

 

 

400 

 

 

400 

 

4.450%, due April 1, 2025

 

 

500 

 

 

 

7.750%, due August 1, 2029

 

 

296 

 

 

296 

 

6.500%, due August 15, 2032

 

 

300 

 

 

300 

 

Other

 

 

13 

 

 

14 

 

​  

​  

​  

​  

 

 

 

3,423 

 

 

3,424 

 

Less: Current portion

 

 

1,005 

 

 

505 

 

​  

​  

​  

​  

Total long-term debt

 

$

2,418 

 

$

2,919 

 

​  

​  

​  

​  

​  

​  

​  

​  

        All of the notes and debentures above are senior indebtedness and, other than the 6.625% notes due 2018 and the 7.75% notes due 2029, are redeemable at our option.

        On June 15, 2015, we repaid and retired all of our $500 million, 4.8% Notes on the scheduled retirement date.

        On March 24, 2015, we issued $500 million of 4.45% Notes due April 1, 2025.

        On March 28, 2013, we entered into a credit agreement (the "Credit Agreement") with a bank group, with an aggregate commitment of $1.25 billion and a maturity date of March 28, 2018. On May 29, 2015 and August 28, 2015, we amended the Credit Agreement with the bank group (the "Amended Credit Agreement"). The Amended Credit Agreement reduces the aggregate commitment to $750 million and extends the maturity date to May 29, 2020. Under the Amended Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $375 million with the current bank group or new lenders.

        The Amended Credit Agreement provides for an unsecured revolving credit facility available to us and one of our foreign subsidiaries, in U.S. dollars, European euros and certain other currencies. Borrowings under the revolver denominated in euros are limited to $500 million, equivalent. We can also borrow swingline loans up to $75 million and obtain letters of credit of up to $100 million; any outstanding letters of credit under the Amended Credit Agreement reduce our borrowing capacity. At December 31, 2015, we had $5 million of outstanding standby letters of credit.

        Revolving credit loans bear interest under the Amended Credit Agreement, at our option, at (A) a rate per annum equal to the greater of (i) the prime rate, (ii) the Federal Funds effective rate plus 0.50% and (iii) LIBOR plus 1.0% (the "Alternative Base Rate"); plus an applicable margin based upon our then-applicable corporate credit ratings; or (B) LIBOR 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 LIBOR plus an applicable margin based upon our then-applicable corporate credit ratings.

        The Amended 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.

        In order for us to borrow under the Amended Credit Agreement, there must not be any default in our covenants in the Amended 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 Amended 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, 2014, in each case, no material ERISA or environmental non-compliance, and no material tax deficiency). We were in compliance with all covenants and no borrowings have been made at December 31, 2015.

        At December 31, 2015, the debt maturities during each of the next five years were as follows: 2016 – $1,005 million; 2017 – $301 million; 2018 – $115 million; 2019 – $1 million and 2020 – $501 million.

        Interest paid was $216 million, $220 million and $232 million in 2015, 2014 and 2013, respectively.

STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION

L. STOCK-BASED COMPENSATION 

        Our 2014 Long Term Stock Incentive Plan (the "2014 Plan") replaced the 2005 Long Term Stock Incentive Plan in May 2014 and provides for the issuance of stock-based incentives in various forms to employees and non-employee Directors of the Company. At December 31, 2015, outstanding stock-based incentives were in the form of long-term stock awards, stock options, phantom stock awards and stock appreciation rights.

        Pre-tax compensation expense and the related income tax benefit for these stock-based incentives were as follows, in millions:

                                                                                                                                                                                    

 

 

2015

 

2014

 

2013

 

Long-term stock awards

 

$

23 

 

$

33 

 

$

31 

 

Stock options

 

 

 

 

 

 

12 

 

Phantom stock awards and stock appreciation rights

 

 

11 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

Total

 

$

39 

 

$

43 

 

$

50 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Income tax benefit (37 percent tax rate)

 

$

14 

 

$

16 

 

$

19 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        At December 31, 2015, a total of 17.1 million shares of our common stock were available under the 2014 Plan for the granting of stock options and other long-term stock incentive awards.

        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 741,040 shares of long-term stock awards during 2015.

        Our long-term stock award activity was as follows, shares in millions:

                                                                                                                                                                                    

 

 

2015

 

2014

 

2013

 

Unvested stock award shares at January 1

 

 

 

 

 

 

 

Weighted average grant date fair value

 

$

18 

 

$

17 

 

$

16 

 

Stock award shares granted

 

 

 

 

 

 

 

Weighted average grant date fair value

 

$

26 

 

$

22 

 

$

20 

 

Stock award shares vested

 

 

 

 

 

 

 

Weighted average grant date fair value

 

$

17 

 

$

17 

 

$

17 

 

Stock award shares forfeited

 

 


 

 

 

 


 

Weighted average grant date fair value

 

$

18 

 

$

19 

 

$

16 

 

Forfeitures upon spin off (A)

 

 

 

 


 

 


 

Weighted average grant date fair value

 

$

20 

 

$

 

$

 

Modification upon spin off (B)

 

 

 

 


 

 


 

Unvested stock award shares at December 31

 

 

 

 

 

 

 

Weighted average grant date fair value

 

$

17 

 

$

18 

 

$

17 

 


 

 

(A)          

In connection with the spin off of TopBuild, TopBuild employees forfeited their outstanding Masco equity awards.

(B)          

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 to the outstanding stock awards was made pursuant to existing anti-dilution provisions in our 2014 Plan and 2005 Long Term Incentive Plan.

        At December 31, 2015, 2014 and 2013, there was $42 million, $60 million and $69 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 December 31, 2015, 2014 and 2013.

        The total market value (at the vesting date) of stock award shares which vested during 2015, 2014 and 2013 was $54 million, $50 million and $38 million, respectively.

        Stock Options.    Stock options are granted to our 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 452,380 shares of stock options during 2015 with a grant date weighted-average exercise price of approximately $26 per share. During 2015, 3.2 million stock option shares were forfeited (including options that expired unexercised).

        Our stock option activity was as follows, shares in millions:

                                                                                                                                                                                    

 

 

2015

 

2014

 

2013

 

Option shares outstanding, January 1

 

 

18 

 

 

24 

 

 

30 

 

Weighted average exercise price

 

$

21 

 

$

22 

 

$

21 

 

Option shares granted

 

 


 

 


 

 

 

Weighted average exercise price

 

$

26 

 

$

22 

 

$

20 

 

Option shares exercised

 

 

 

 

 

 

 

Aggregate intrinsic value on date of exercise (A)

 

$

50 million

 

$

22 million

 

$

23 million

 

Weighted average exercise price

 

$

17 

 

$

16 

 

$

12 

 

Option shares forfeited

 

 

 

 

 

 

 

Weighted average exercise price

 

$

29 

 

$

28 

 

$

26 

 

Forfeitures upon spin off (B)

 

 


 

 


 

 


 

Weighted average exercise price

 

$

19 

 

$

 

$

 

Modifications upon spin off (C)

 

 

 

 


 

 


 

Option shares outstanding, December 31

 

 

12 

 

 

18 

 

 

24 

 

Weighted average exercise price

 

$

17 

 

$

21 

 

$

22 

 

Weighted average remaining option term (in years)

 

 

 

 

 

 

 

Option shares vested and expected to vest, December 31

 

 

12 

 

 

18 

 

 

24 

 

Weighted average exercise price

 

$

17 

 

$

21 

 

$

22 

 

Aggregate intrinsic value (A)

 

$

133 million

 

$

110 million

 

$

109 million

 

Weighted average remaining option term (in years)

 

 

 

 

 

 

 

Option shares exercisable (vested), December 31

 

 

10 

 

 

15 

 

 

20 

 

Weighted average exercise price

 

$

18 

 

$

22 

 

$

24 

 

Aggregate intrinsic value (A)

 

$

113 million

 

$

84 million

 

$

62 million

 

Weighted average remaining option term (in years)

 

 

 

 

 

 

 


 

 

(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.

(B)          

In connection with the spin off of TopBuild, TopBuild employees forfeited their outstanding Masco equity awards.

(C)          

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 to the outstanding options was made pursuant to existing anti-dilution provisions in our 2014 Plan and 2005 Long Term Incentive Plan.

        At December 31, 2015, 2014 and 2013, there was $6 million, $6 million and $9 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 two years at December 31, 2015, 2014 and 2013.

        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:

                                                                                                                                                                                    

 

 

2015

 

2014

 

2013

 

Weighted average grant date fair value

 

$

9.67 

 

$

9.53 

 

$

8.35 

 

Risk-free interest rate

 

 

1.75 

%

 

1.91 

%

 

1.22 

%

Dividend yield

 

 

1.32 

%

 

1.34 

%

 

1.47 

%

Volatility factor

 

 

42.00 

%

 

49.00 

%

 

49.07 

%

Expected option life

 

 

6 years

 

 

6 years

 

 

6 years

 

        The following table summarizes information for stock option shares outstanding and exercisable at December 31, 2015, shares in millions:

                                                                                                                                                                                    

Option Shares Outstanding

 

Option Shares Exercisable

 

Range of
Prices

 

Number of
Shares

 

Weighted
Average
Remaining
Option
Term

 

Weighted
Average
Exercise
Price

 

Number of
Shares

 

Weighted
Average
Exercise
Price

 

$

7 - 18

 

 

 

4 Years

 

$

12 

 

 

 

$

12 

 

$

20 - 23

 

 

 

3 Years

 

$

23 

 

 

 

$

23 

 

$

25 - 27

 

 

 

1 Years

 

$

27 

 

 

 

$

27 

 

$

28 - 29

 

 

 

- Years

 

$

29 

 

 

 

$

29 

 

​  

​  

​  

​  

$

7 - 29

 

 

12 

 

3 Years

 

$

17 

 

 

10 

 

$

18 

 

​  

​  

​  

​  

​  

​  

​  

​  

        Phantom Stock Awards and Stock Appreciation Rights ("SARs").    We grant phantom stock awards and SARs to certain non-U.S. employees.

        Phantom stock awards are linked to the value of our common stock on the date of grant and are settled in cash upon vesting, typically over 5 to 10 years. We account for phantom stock awards as liability-based awards; the compensation expense is initially measured as the market price of our common stock at the grant date and is recognized over the vesting period. The liability is remeasured and adjusted at the end of each reporting period until the awards are fully-vested and paid to the employees. We recognized expense of $5 million related to the valuation of phantom stock awards in 2015, 2014 and 2013. In 2015, 2014 and 2013, we granted 134,560 shares, 183,530 shares and 165,180 shares, respectively, of phantom stock awards with an aggregate fair value of $4 million, $4 million and $3 million, respectively, and paid $6 million, $5 million and $4 million of cash in 2015, 2014 and 2013, respectively, to settle phantom stock awards.

        SARs are linked to the value of our common stock on the date of grant and are settled in cash upon exercise. We account for SARs using the fair value method, which requires outstanding SARs to be classified as liability-based awards and valued using a Black-Scholes option pricing model at the grant date; such fair value is recognized as compensation expense over the vesting period, typically five years. The liability is remeasured and adjusted at the end of each reporting period until the SARs are exercised and payment is made to the employees or the SARs expire. We recognized expense of $6 million, $1 million and $2 million related to the valuation of SARs for 2015, 2014 and 2013, respectively. During 2015, 2014 and 2013, we did not grant any SARs.

        Information related to phantom stock awards and SARs was as follows, in millions:

                                                                                                                                                                                    

 

 

Phantom
Stock
Awards

 

Stock
Appreciation
Rights

 

 

 

At December 31,

 

At December 31,

 

 

 

2015

 

2014

 

2015

 

2014

 

Accrued compensation cost liability

 

$

13 

 

$

13 

 

$

10 

 

$

 

Unrecognized compensation cost

 

$

 

$

 

$

 

$

 

Equivalent common shares

 

 

 

 

 

 

 

 

 

 

EMPLOYEE RETIREMENT PLANS
EMPLOYEE RETIREMENT PLANS

M. EMPLOYEE RETIREMENT PLANS 

        We sponsor qualified defined-benefit and defined-contribution retirement plans for most of our employees. In addition to our qualified defined-benefit pension plans, we have unfunded non-qualified defined-benefit pension plans covering certain employees, which provide for benefits in addition to those provided by the qualified pension plans. Substantially all salaried employees participate in non-contributory defined-contribution retirement plans, to which payments are determined annually by the Organization and Compensation Committee of the Board of Directors.

        In addition, we participate in one regional multi-employer pension plan, principally related to building trades, which is not considered significant to us.

        Pre-tax expense related to our retirement plans was as follows, in millions:

                                                                                                                                                                                    

 

 

2015

 

2014

 

2013

 

Defined-contribution plans

 

$

52 

 

$

43 

 

$

51 

 

Defined-benefit plans

 

 

32 

 

 

25 

 

 

31 

 

​  

​  

​  

​  

​  

​  

 

 

$

84 

 

$

68 

 

$

82 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        In March 2009, based on management's recommendation, the Board of Directors approved a plan to freeze all future benefit accruals under substantially all of our domestic qualified and non-qualified defined-benefit pension plans. The freeze was effective January 1, 2010.

        Changes in the projected benefit obligation and fair value of plan assets, and the funded status of our defined-benefit pension plans were as follows, in millions:

                                                                                                                                                                                    

 

 

2015

 

2014

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Changes in projected benefit obligation:

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected benefit obligation at January 1

 

$

1,145

 

$

190

 

$

983

 

$

163

 

Service cost

 

 

3

 

 

 

 

3

 

 

 

Interest cost

 

 

41

 

 

7

 

 

41

 

 

7

 

Actuarial (gain) loss, net

 

 

(61

)

 

(11

)

 

184

 

 

32

 

Foreign currency exchange

 

 

(23

)

 

 

 

(24

)

 

 

Benefit payments

 

 

(46

)

 

(12

)

 

(42

)

 

(12

)

​  

​  

​  

​  

​  

​  

​  

​  

Projected benefit obligation at December 31

 

$

1,059

 

$

174

 

$

1,145

 

$

190

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Changes in fair value of plan assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at January 1

 

$

691

 

$

 

$

659

 

$

 

Actual return on plan assets

 

 

(12

)

 

 

 

38

 

 

 

Foreign currency exchange

 

 

(7

)

 

 

 

(8

)

 

 

Company contributions

 

 

38

 

 

12

 

 

49

 

 

12

 

Expenses, other

 

 

(6

)

 

 

 

(5

)

 

 

Benefit payments

 

 

(46

)

 

(12

)

 

(42

)

 

(12

)

​  

​  

​  

​  

​  

​  

​  

​  

Fair value of plan assets at December 31

 

$

658

 

$

 

$

691

 

$

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Funded status at December 31:

 

$

(401

)

$

(174

)

$

(454

)

$

(190

)

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        Amounts in our consolidated balance sheets were as follows, in millions:

                                                                                                                                                                                    

 

 

At December 31, 2015

 

At December 31, 2014

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Other assets

 

$

1

 

$

 

$

 

$

 

Accrued liabilities

 

 

(3

)

 

(12

)

 

(2

)

 

(12

)

Other liabilities

 

 

(399

)

 

(162

)

 

(452

)

 

(178

)

​  

​  

​  

​  

​  

​  

​  

​  

Total net liability

 

$

(401

)

$

(174

)

$

(454

)

$

(190

)

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        Unrealized loss included in accumulated other comprehensive income (loss) before income taxes was as follows, in millions:

                                                                                                                                                                                    

 

 

At December 31, 2015

 

At December 31, 2014

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Net loss

 

$

501 

 

$

56 

 

$

524 

 

$

68 

 

Net transition obligation

 

 

 

 

 

 

 

 

 

Net prior service cost

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

Total

 

$

504 

 

$

56 

 

$

527 

 

$

68 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        Information for defined-benefit pension plans with an accumulated benefit obligation in excess of plan assets was as follows, in millions:

                                                                                                                                                                                    

 

 

At December 31

 

 

 

2015

 

2014

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Projected benefit obligation

 

$

1,045 

 

$

174 

 

$

1,132 

 

$

190 

 

Accumulated benefit obligation

 

$

1,045 

 

$

174 

 

$

1,132 

 

$

190 

 

Fair value of plan assets

 

$

643 

 

$

 

$

677 

 

$

 

        The projected benefit obligation was in excess of plan assets for all of our qualified defined-benefit pension plans at December 31, 2015 and 2014 which had an accumulated benefit obligation in excess of plan assets.

        Net periodic pension cost for our defined-benefit pension plans was as follows, in millions:

                                                                                                                                                                                    

 

 

2015

 

2014

 

2013

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Service cost

 

$

3

 

$

 

$

3

 

$

 

$

3

 

$

 

Interest cost

 

 

47

 

 

7

 

 

47

 

 

7

 

 

44

 

 

6

 

Expected return on plan assets

 

 

(46

)

 

 

 

(45

)

 

 

 

(40

)

 

 

Recognized net loss

 

 

18

 

 

3

 

 

11

 

 

2

 

 

16

 

 

2

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Net periodic pension cost

 

$

22

 

$

10

 

$

16

 

$

9

 

$

23

 

$

8

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        We expect to recognize $19 million of pre-tax net loss from accumulated other comprehensive income (loss) into net periodic pension cost in 2016 related to our defined-benefit pension plans.

        Plan Assets.    Our qualified defined-benefit pension plan weighted average asset allocation, which is based upon fair value, was as follows:

                                                                                                                                                                                    

 

 

2015

 

2014

 

Equity securities

 

 

49 

%

 

46 

%

Debt securities

 

 

32 

%

 

34 

%

Other

 

 

19 

%

 

20 

%

​  

​  

​  

​  

Total

 

 

100 

%

 

100 

%

​  

​  

​  

​  

​  

​  

​  

​  

        For our qualified defined-benefit pension plans, we have adopted accounting guidance that defines fair value, establishes a framework for measuring fair value and prescribes disclosures about fair value measurements. Accounting guidance defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."

        Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2015 compared to December 31, 2014.

        Common and Preferred Stocks: Valued at the closing price on the active market on which the individual securities are traded, or based on the active market for similar securities.

        Private Equity and Hedge Funds: Valued based on an estimated fair value using either a market approach or an income approach, each of which requires a significant degree of judgment. There is no active trading market for these investments and they are generally illiquid. Due to the significant unobservable inputs, the fair value measurements used to estimate fair value are a Level 3 input.

        Corporate Debt Securities: Valued based on the active market for similar securities or on estimated fair value.

        Government and Other Debt Securities: Valued based on either the closing price reported on the active market on which the individual securities are traded, the market for similar securities or estimated fair value based on a model for similar securities.

        Common Collective Trust Fund: Valued based on a unit value basis, which approximates fair value. Such basis is determined by reference to the respective fund's underlying assets, which are primarily marketable equity and fixed income securities. There are no unfunded commitments or other restrictions associated with this fund.

        Short-Term and Other Investments: Valued based on a net asset value (NAV), which approximates fair value. Such basis is determined by referencing the respective fund's underlying assets. There are no unfunded commitments or other restrictions associated with these investments.

        The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

        The following table sets forth, by level within the fair value hierarchy, the qualified defined-benefit pension plan assets at fair value as of December 31, 2015 and 2014, in millions.

                                                                                                                                                                                    

 

 

At December 31, 2015

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Common and Preferred Stocks:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

127 

 

$

126 

 

$

 

$

253 

 

International

 

 

55 

 

 

14 

 

 

 

 

69 

 

Private Equity and Hedge Funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

52 

 

 

52 

 

International

 

 

 

 

 

 

24 

 

 

24 

 

Corporate Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

18 

 

 

26 

 

 

 

 

44 

 

International

 

 

 

 

48 

 

 

 

 

48 

 

Government and Other Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

64 

 

 

 

 

 

 

67 

 

International

 

 

23 

 

 

30 

 

 

 

 

53 

 

Common Collective Trust Fund – United States

 

 

 

 

 

 

 

 

 

Short-Term and Other Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

International

 

 

 

 

21 

 

 

19 

 

 

42 

 

​  

​  

​  

​  

​  

​  

​  

​  

Total Assets at Fair Value

 

$

291 

 

$

272 

 

$

95 

 

$

658 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

 

 

At December 31, 2014

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Common and Preferred Stocks:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

136 

 

$

116 

 

$

 

$

252 

 

International

 

 

50 

 

 

15 

 

 

 

 

65 

 

Private Equity and Hedge Funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

59 

 

 

59 

 

International

 

 

 

 

 

 

27 

 

 

27 

 

Corporate Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

15 

 

 

33 

 

 

 

 

48 

 

International

 

 

 

 

75 

 

 

 

 

75 

 

Government and Other Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

64 

 

 

 

 

 

 

66 

 

International

 

 

24 

 

 

27 

 

 

 

 

51 

 

Common Collective Trust Fund – United States

 

 

 

 

 

 

 

 

 

Short-Term and Other Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

International

 

 

 

 

21 

 

 

18 

 

 

42 

 

​  

​  

​  

​  

​  

​  

​  

​  

Total Assets at Fair Value

 

$

292 

 

$

295 

 

$

104 

 

$

691 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        Changes in the fair value of the qualified defined-benefit pension plan Level 3 assets, were as follows, in millions:

                                                                                                                                                                                    

 

 

2015

 

2014

 

Fair Value, January 1

 

$

104

 

$

93

 

Purchases

 

 

4

 

 

13

 

Sales

 

 

(11

)

 

(9

)

Transfers, net

 

 

 

 

 

Unrealized (losses) gains

 

 

(2

)

 

7

 

​  

​  

​  

​  

Fair Value, December 31

 

$

95

 

$

104

 

​  

​  

​  

​  

​  

​  

​  

​  

        Assumptions.    Weighted-average major assumptions used in accounting for our defined-benefit pension plans were as follows:

                                                                                                                                                                                    

 

 

2015

 

2014

 

2013

 

Discount rate for obligations

 

 

4.00 

%

 

3.80 

%

 

4.40 

%

Expected return on plan assets

 

 

7.25 

%

 

7.25 

%

 

7.25 

%

Rate of compensation increase

 

 

 —

%

 

 —

%

 

 —

%

Discount rate for net periodic pension cost

 

 

3.80 

%

 

4.40 

%

 

3.80 

%

        The discount rate for obligations for 2015 and 2014 was based upon the expected duration of each defined-benefit pension plan's liabilities matched to the December 31, 2015 and 2014 Towers Watson Rate Link Curve. At December 31, 2015, such rates for our defined-benefit pension plans ranged from 2.0 percent to 4.3 percent, with the most significant portion of the liabilities having a discount rate for obligations of 4.0 percent or higher. At December 31, 2014, such rates for our defined-benefit pension plans ranged from 2.0 percent to 4.0 percent, with the most significant portion of the liabilities having a discount rate for obligations of 3.70 percent or higher. The increase in the weighted average discount rate over the last year is principally the result of higher long-term interest rates in the bond markets.

        For 2015 and 2014, we determined the expected long-term rate of return on plan assets of 7.25 percent based upon an analysis of expected and historical rates of return of various asset classes utilizing the current and long-term target asset allocation of the plan assets. The projected asset return at both December 31, 2015 and 2014 also considered near term returns, including current market conditions as well as that pension assets are long-term in nature. The actual annual rate of return on our pension plan assets was negative 1.8 percent in 2015, and positive 3.6 percent and 13.6 percent in 2014 and 2013, respectively. For the 10-year period ended December 31, 2015, the actual annual rate of return on our pension plan assets was 3.9 percent. Although this rate of return is less than our current expected long-term rate of return on plan assets, we note that the 10-year period ended December 31, 2015 includes one significant decline in the equity markets in 2008 (of negative 32.1 percent). Accordingly, we believe a 7.25 percent expected long-term rate of return is reasonable.

        The investment objectives seek to minimize the volatility of the value of our plan assets relative to pension liabilities and to ensure plan assets are sufficient to pay plan benefits. In 2015, we substantially achieved targeted asset allocation: 50 percent equities, 30 percent fixed-income, and 20 percent alternative investments (such as private equity, commodities and hedge funds). The asset allocation of the investment portfolio was developed with the objective of achieving our expected rate of return and reducing volatility of asset returns, and considered the freezing of future benefits. The equity portfolios are invested in individual securities or funds that are expected to mirror broad market returns for equity securities. The fixed-income portfolio is invested in corporate bonds, bond index funds and U.S. Treasury securities. It is expected that the alternative investments would have a higher rate of return than the targeted overall long-term return of 7.25 percent. However, these investments are subject to greater volatility, due to their nature, than a portfolio of equities and fixed-income investments, and would be less liquid than financial instruments that trade on public markets. This portfolio is expected to yield a long-term rate of return of 7.25 percent.

        The fair value of our plan assets is subject to risk including significant concentrations of risk in our plan assets related to equity, interest rate and operating risk. In order to ensure plan assets are sufficient to pay benefits, a portion of plan assets is allocated to equity investments that are expected, over time, to earn higher returns with more volatility than fixed-income investments which more closely match pension liabilities. Within equity, risk is mitigated by targeting a portfolio that is broadly diversified by geography, market capitalization, manager mandate size, investment style and process.

        In order to minimize asset volatility relative to the liabilities, a portion of plan assets are allocated to fixed-income investments that are exposed to interest rate risk. Rate increases generally will result in a decline in fixed-income assets, while reducing the present value of the liabilities. Conversely, rate decreases will increase fixed income assets, partially offsetting the related increase in the liabilities.

        Potential events or circumstances that could have a negative effect on estimated fair value include the risks of inadequate diversification and other operating risks. To mitigate these risks, investments are diversified across and within asset classes in support of investment objectives. Policies and practices to address operating risks include ongoing manager oversight, plan and asset class investment guidelines and instructions that are communicated to managers, and periodic compliance and audit reviews to ensure adherence to these policies. In addition, we periodically seek the input of our independent advisor to ensure the investment policy is appropriate.

        Other.    We sponsor certain post-retirement benefit plans that provide medical, dental and life insurance coverage for eligible retirees and dependents in the United States based upon age and length of service. The aggregate present value of the unfunded accumulated post-retirement benefit obligation was $10 million and $12 million at December 31, 2015 and 2014, respectively.

        Cash Flows.    At December 31, 2015, we expected to contribute approximately $45 million to our qualified defined-benefit pension plans in 2016, which will exceed ERISA requirements in 2016. We also expected to pay benefits of $8 million and $12 million to participants of our foreign and non-qualified (domestic) defined-benefit pension plans, respectively, in 2016.

        At December 31, 2015, the benefits expected to be paid in each of the next five years, and in aggregate for the five years thereafter, relating to our defined-benefit pension plans, were as follows, in millions:

                                                                                                                                                                                    

 

 

Qualified
Plans

 

Non-Qualified
Plans

 

2016

 

$

49 

 

$

12 

 

2017

 

$

50 

 

$

12 

 

2018

 

$

51 

 

$

12 

 

2019

 

$

52 

 

$

12 

 

2020

 

$

53 

 

$

12 

 

2021 - 2025

 

$

280 

 

$

58 

 

 

SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY

N. SHAREHOLDERS' EQUITY 

        On September 30, 2014, we announced that our Board of Directors authorized the repurchase of up to 50 million shares for retirement of our common stock in open-market transactions or otherwise, replacing the previous Board of Directors authorization established in 2007. At December 31, 2015, we have 27.8 million shares remaining under the authorization.

        During 2015, we repurchased and retired 17.2 million shares of our common stock for cash aggregating $456 million (including 741 thousand shares to offset the dilutive impact of long-term stock awards granted in 2015). During 2014, we repurchased and retired 6.7 million shares of our common stock for cash aggregating $158 million (including 1.7 million shares to offset the dilutive impact of long-term stock awards granted in 2014). During 2013, we repurchased and retired 1.7 million shares of our common stock for cash aggregating $35 million to offset the dilutive impact of long-term stock awards granted in 2013.

        On June 30, 2015, we completed the spin off of Top Build as an independent publicly traded company. As a result of the separation, our retained earnings decreased by $828 million in 2015.

        On the basis of amounts paid (declared), cash dividends per common share were $.365 ($.370) in 2015, $.330 ($.345) in 2014 and $.300 ($.300) in 2013.

        Accumulated Other Comprehensive Loss.    The components of accumulated other comprehensive loss attributable to Masco Corporation were as follows, in millions:

                                                                                                                                                                                    

 

 

At December 31

 

 

 

2015

 

2014

 

Cumulative translation adjustments

 

$

245

 

$

325

 

Unrealized loss on marketable securities, net

 

 

(12

)

 

(12

)

Unrealized loss on interest rate swaps

 

 

(16

)

 

(18

)

Unrecognized net loss and prior service cost, net

 

 

(382

)

 

(406

)

​  

​  

​  

​  

Accumulated other comprehensive loss

 

$

(165

)

$

(111

)

​  

​  

​  

​  

​  

​  

​  

​  

 

        The unrealized loss on marketable securities, net, is reported net of income tax expense of $14 million at both December 31, 2015 and 2014. The unrealized loss on interest rate swaps is reported net of income tax benefit of $1 million at both December 31, 2015 and 2014. The unrecognized net loss and prior service cost, net, is reported net of income tax benefit of $186 million and $199 million at December 31, 2015 and 2014, respectively.

RECLASSIFICATIONS FROM OTHER COMPREHENSIVE (LOSS) INCOME
RECLASSIFICATIONS FROM OTHER COMPREHENSIVE (LOSS) INCOME

O. RECLASSIFICATIONS FROM OTHER COMPREHENSIVE (LOSS) INCOME 

        The reclassifications from accumulated other comprehensive income (loss) to the consolidated statements of operations were as follows, in millions:

                                                                                                                                                                                    

Accumulated Other
Comprehensive Income (Loss)

 

2015

 

2014

 

2013

 

Statement of Operations Line Item

Amortization of defined benefit pension:

 

 

 

 

 

 

 

 

 

 

 

Actuarial losses, net

 

$

21

 

$

13

 

$

18

 

Selling, general and administrative expenses

Tax (benefit) expense

 

 

(8

)

 

(5

)

 

2

 

 

​  

​  

​  

​  

​  

​  

Net of tax

 

$

13

 

$

8

 

$

20

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Interest rate swaps

 

$

2

 

$

2

 

$

2

 

Interest expense

Tax (benefit)

 

 

 

 

(1

)

 

 

 

​  

​  

​  

​  

​  

​  

Net of tax

 

$

2

 

$

1

 

$

2

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

SEGMENT INFORMATION
SEGMENT INFORMATION

P. SEGMENT INFORMATION 

        Our reportable segments are as follows:

        Cabinets and Related Products –  principally includes assembled kitchen and bath cabinets; home office workstations; entertainment centers; storage products; bookcases; and kitchen utility products.

        Plumbing Products –  principally includes faucets; plumbing fittings and valves; showerheads and hand showers; bathtubs and shower enclosures; toilets; spas; and, exercise pools.

        Decorative Architectural Products –  principally includes paints and stains; and cabinet, door, window and other hardware.

        Other Specialty Products –  principally includes windows, window frame components and patio doors; staple gun tackers, staples and other fastening tools.

        The above products and services are sold to the home improvement and new home construction markets through home center retailers, mass merchandisers, hardware stores, homebuilders, distributors and other outlets for consumers and contractors and direct to the customer.

        Our operations are principally located in North America and Europe. Our country of domicile is the United States of America.

        Corporate assets consist primarily of real property, equipment, cash and cash investments and other investments.

        Our segments are based upon similarities in products and services and represent the aggregation of operating units, for which financial information is regularly evaluated by our corporate operating executive in determining resource allocation and assessing performance, and is periodically reviewed by the Board of Directors. Accounting policies for the segments are the same as those for us. We primarily evaluate performance based upon operating profit (loss) and, other than general corporate expense, allocate specific corporate overhead to each segment. The evaluation of segment operating profit (loss) also excludes the income from litigation settlements.

        Information by segment and geographic area was as follows, in millions:

                                                                                                                                                                                    

 

 

Net Sales
(1)(2)(3)(4)(5)

 

Operating Profit
(Loss) (5)(6)

 

Assets at
December 31 (8)

 

 

 

2015

 

2014

 

2013

 

2015

 

2014

 

2013

 

2015

 

2014

 

2013

 

Our operations by segment were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cabinets and Related Products

 

$

1,025

 

$

999

 

$

1,014

 

$

51

 

$

(62

)

$

(10

)

$

567

 

$

608

 

$

659

 

Plumbing Products

 

 

3,341

 

 

3,308

 

 

3,183

 

 

512

 

 

512

 

 

394

 

 

1,972

 

 

1,989

 

 

2,040

 

Decorative Architectural Products

 

 

2,020

 

 

1,998

 

 

1,927

 

 

403

 

 

360

 

 

351

 

 

874

 

 

857

 

 

812

 

Other Specialty Products

 

 

756

 

 

701

 

 

637

 

 

57

 

 

47

 

 

35

 

 

748

 

 

702

 

 

693

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Total

 

$

7,142

 

$

7,006

 

$

6,761

 

$

1,023

 

$

857

 

$

770

 

$

4,161

 

$

4,156

 

$

4,204

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Our operations by geographic area were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

5,645

 

$

5,377

 

$

5,222

 

$

841

 

$

643

 

$

612

 

$

2,925

 

$

2,861

 

$

2,830

 

International, principally Europe

 

 

1,497

 

 

1,629

 

 

1,539

 

 

182

 

 

214

 

 

158

 

 

1,236

 

 

1,295

 

 

1,374

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Total, as above

 

$

7,142

 

$

7,006

 

$

6,761

 

 

1,023

 

 

857

 

 

770

 

 

4,161

 

 

4,156

 

 

4,204

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

General corporate expense, net (6)

 

 

(109

)

 

(145

)

 

(158

)

 

 

 

 

 

 

 

 

 

Income from litigation settlements (7)

 

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

Operating profit, as reported

 

 

914

 

 

721

 

 

612

 

 

 

 

 

 

 

 

 

 


Other income (expense), net


 


 

(225


)


 

(214


)


 

(226


)


 


 


 


 


 


 


 


 


 

​  

​  

​  

​  

​  

​  

Income from continuing operations before income taxes

 

$

689

 

$

507

 

$

386

 

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Corporate assets

 

 

 

 

 

 

 

 

 

 

 

1,519

 

 

1,576

 

 

1,214

 

Assets held for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

1,476

 

 

1,467

 

​  

​  

​  

​  

​  

​  

Total assets

 

 

 

 

 

 

 

 

 

 

$

5,680

 

$

7,208

 

$

6,885

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

 

 

Property Additions (5)

 

Depreciation and
Amortization (5)

 

 

 

2015

 

2014

 

2013

 

2015

 

2014

 

2013

 

Our operations by segment were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cabinets and Related Products          

 

$

 

$

 

$

 

$

24 

 

$

33 

 

$

42 

 

Plumbing Products

 

 

87 

 

 

65 

 

 

71 

 

 

56 

 

 

63 

 

 

65 

 

Decorative Architectural Products

 

 

16 

 

 

12 

 

 

16 

 

 

16 

 

 

16 

 

 

17 

 

Other Specialty Products

 

 

41 

 

 

28 

 

 

10 

 

 

18 

 

 

18 

 

 

22 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

 

 

150 

 

 

114 

 

 

106 

 

 

114 

 

 

130 

 

 

146 

 

Unallocated amounts, principally related to corporate assets

 

 

 

 

 

 

 

 

13 

 

 

11 

 

 

11 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Total

 

$

151 

 

$

115 

 

$

110 

 

$

127 

 

$

141 

 

$

157 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  


 

 

(1)          

Included in net sales were export sales from the U.S. of $217 million, $228 million and $227 million in 2015, 2014 and 2013, respectively.

(2)          

Excluded from net sales were intra-company sales between segments of less than one percent in 2015, 2014 and 2013.

(3)          

Included in net sales were sales to one customer of $2,378 million, $2,310 million and $2,275 million in 2015, 2014 and 2013, respectively. Such net sales were included in each of our segments.

(4)          

Net sales from our operations in the U.S. were $5,407 million, $5,112 million and $4,947 million in 2015, 2014 and 2013, respectively.

(5)          

Net sales, operating profit (loss), property additions and depreciation and amortization expense for 2015, 2014 and 2013 excluded the results of businesses reported as discontinued operations.

(6)          

General corporate expense, net included those expenses not specifically attributable to our segments.

(7)          

The income from litigation settlements in 2014 relates to a business in our Decorative Architectural Products segment.

(8)          

Long-lived assets of our operations in the U.S. and Europe were $1,487 million and $427 million, $1,470 million and $428 million, and $1,530 million and $481 million at December 31, 2015, 2014 and 2013, respectively.

 

SEVERANCE COSTS
SEVERANCE COSTS

Q. SEVERANCE COSTS 

        As part of our continuing review of our operations, actions were taken during 2015, 2014 and 2013 to respond to market conditions. We recorded charges related to severance and early retirement programs of $12 million, $27 million and $19 million for the years ended December 31, 2015, 2014 and 2013, respectively. Such charges are principally reflected in the consolidated statements of operations in selling, general and administrative expenses and were primarily paid when incurred.

OTHER INCOME (EXPENSE), NET
OTHER INCOME (EXPENSE), NET

R. OTHER INCOME (EXPENSE), NET 

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

                                                                                                                                                                                    

 

 

2015

 

2014

 

2013

 

Income from cash and cash investments

 

$

3

 

$

3

 

$

3

 

Income from financial investments, net (Note E)

 

 

8

 

 

2

 

 

27

 

Foreign currency transaction (losses) gains

 

 

(14

)

 

5

 

 

(21

)

Other items, net

 

 

3

 

 

1

 

 

 

​  

​  

​  

​  

​  

​  

Total other, net

 

$

 

$

11

 

$

9

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        In 2013, in conjunction with the transaction to sell the Danish ready-to-assemble cabinet business (included in discontinued operations), we also disposed of a related Danish holding company. This disposition triggered the settlement of loans, which resulted in the recognition of $18 million of currency translation expense.

INCOME TAXES
INCOME TAXES

S. INCOME TAXES 

                                                                                                                                                                                    

 

 

 

 

(In Millions)

 

 

 

2015

 

2014

 

2013

 

Income from continuing operations before income taxes:

 

 

 

 

 

 

 

 

 

 

U.S. 

 

$

496

 

$

270

 

$

231

 

Foreign

 

 

193

 

 

237

 

 

155

 

​  

​  

​  

​  

​  

​  

 

 

$

689

 

$

507

 

$

386

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Income tax expense (benefit) on income from continuing operations:

 

 

 

 

 

 

 

 

 

 

Currently payable:

 

 

 

 

 

 

 

 

 

 

U.S. Federal

 

$

10

 

$

3

 

$

3

 

State and local

 

 

27

 

 

1

 

 

2

 

Foreign

 

 

56

 

 

67

 

 

58

 

Deferred:

 

 

 

 

 

 

 

 

 

 

U.S. Federal

 

 

192

 

 

(401

)

 

22

 

State and local

 

 

3

 

 

(21

)

 

3

 

Foreign

 

 

5

 

 

(10

)

 

(2

)

​  

​  

​  

​  

​  

​  

 

 

$

293

 

$

(361

)

$

86

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Deferred tax assets at December 31 (1):

 

 

 

 

 

 

 

 

 

 

Receivables

 

$

9

 

$

9

 

 

 

 

Inventories

 

 

17

 

 

25

 

 

 

 

Other assets, principally stock-based Compensation

 

 

78

 

 

77

 

 

 

 

Accrued liabilities

 

 

118

 

 

102

 

 

 

 

Long-term liabilities

 

 

225

 

 

284

 

 

 

 

Net operating loss carryforward

 

 

39

 

 

194

 

 

 

 

Tax credit carryforward

 

 

55

 

 

44

 

 

 

 

​  

​  

​  

​  

 

 

 

541

 

 

735

 

 

 

 

Valuation allowance

 

 

(49

)

 

(66

)

 

 

 

​  

​  

​  

​  

 

 

 

492

 

 

669

 

 

 

 

​  

​  

​  

​  

Deferred tax liabilities at December 31 (1):

 

 

 

 

 

 

 

 

 

 

Property and equipment

 

 

104

 

 

118

 

 

 

 

Intangibles

 

 

212

 

 

387

 

 

 

 

Investment in foreign subsidiaries

 

 

8

 

 

4

 

 

 

 

Other

 

 

1

 

 

13

 

 

 

 

​  

​  

​  

​  

 

 

 

325

 

 

522

 

 

 

 

​  

​  

​  

​  

Net deferred tax asset at December 31

 

$

167

 

$

147

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  


 

 

(1)          

2014 amounts have not been recasted to exclude discontinued operations.

 

        The net deferred tax asset consisted of net long-term deferred tax liabilities (included in other liabilities) of $17 million and $17 million, and net long-term deferred tax assets (included in other assets) of $184 million and $293 million, at December 31, 2015 and 2014, respectively, and net long-term liabilities (included in liabilities held for sale) of $129 million at December 31, 2014.

        The tax benefit from certain stock-based compensation is not recognized as a deferred tax asset until the tax deduction reduces cash taxes. During 2015, we recorded a $53 million deferred tax asset to paid-in capital related to additional net operating losses, previously not recognized, that were used to reduce cash taxes on our 2015 taxable income.

        As a result of recording the separation of TopBuild due to its spin off, as of June 30, 2015, our net deferred tax asset increased by $190 million.

        The current portion of the state and local income tax includes a $5 million, $8 million and $8 million tax benefit from the reversal of an accrual for uncertain tax positions resulting primarily from the expiration of applicable statutes of limitations and favorable settlements on state audits in 2015, 2014 and 2013, respectively. The deferred portion of the state and local taxes includes a $(1) million, $(29) million and $19 million tax (benefit) expense resulting from a change in the valuation allowance against state and local deferred tax assets in 2015, 2014 and 2013, respectively. The deferred portion of the foreign taxes includes $12 million and $(6) million tax expense (benefit) from a change in the valuation allowance against foreign deferred tax assets in 2015 and 2014, respectively.

        During 2015 we recorded a $21 million valuation allowance against certain deferred tax assets related to TopBuild as a non-cash charge to income tax expense. The TopBuild deferred tax assets have been impaired by our decision to spin off TopBuild into a separate company that on a stand-alone basis as of June 30, 2015, the spin off date, will unlikely be able to realize the value of such deferred tax assets as a result of its history of losses.

        Our capital management strategy includes the repurchase of Masco common stock, the payment of dividends, the pay-down of debt and the funding of potential acquisitions both within and outside the U.S. In order to provide greater flexibility in the execution of our capital management strategy, we determined in the fourth quarter of 2015 that we may repatriate earnings from certain foreign subsidiaries that were previously considered permanently reinvested. As a result, we recorded a $19 million charge to income tax expense in 2015 to recognize the required taxes on foreign earnings, including those previously considered permanently reinvested. Our December 31, 2015 deferred tax balance on investment in foreign subsidiaries reflects the impact of all taxable temporary differences, including those related to substantially all undistributed foreign earnings, except those that are legally restricted.

        The accounting guidance for income taxes requires that the future realization of deferred tax assets depends on the existence of sufficient taxable income in future periods. Possible sources of taxable income include taxable income in carryback periods, the future reversal of existing taxable temporary differences recorded as a deferred tax liability, tax-planning strategies that generate future income or gains in excess of anticipated losses in the carryforward period and projected future taxable income.

        If, based upon all available evidence, both positive and negative, it is more likely than not (more than 50 percent likely) such deferred tax assets will not be realized, a valuation allowance is recorded. Significant weight is given to positive and negative evidence that is objectively verifiable. A company's three-year cumulative loss position is significant negative evidence in considering whether deferred tax assets are realizable, and the accounting guidance restricts the amount of reliance the company can place on projected taxable income to support the recovery of the deferred tax assets.

        In 2010, we recorded a $372 million valuation allowance against our U.S. Federal deferred tax assets as a non-cash charge to income tax expense. In reaching this conclusion, we considered the weaker retail sales of certain of our building products and the slower than anticipated recovery in the U.S. housing market which led to U.S. operating losses and significant U.S. goodwill impairment charges, that primarily occurred in the fourth quarter of 2010, causing us to be in a three-year cumulative U.S. loss position.

        During 2012 and 2011, objective and verifiable negative evidence, such as U.S. operating losses and significant impairment charges for U.S. goodwill and other intangible assets, continued to outweigh positive evidence necessary to reduce the valuation allowance. As a result, we recorded increases of $65 million and $87 million in the valuation allowance related to our U.S. Federal deferred tax assets in 2012 and 2011, respectively.

        In the third quarter of 2014, we recorded a $517 million tax benefit from the release of the valuation allowance against our U.S. Federal and certain state deferred tax assets due primarily to a return to sustainable profitability in our U.S. operations. In reaching this conclusion, we considered the continued improvement in both the new home construction market and repair and remodel activity in the U.S. and our progress on strategic initiatives to reduce costs and expand our product leadership positions which contributed to the continued improvement in our U.S. operations over the past few years.

        In the fourth quarter of 2014, we recorded an additional $12 million tax benefit from the release of the valuation allowances against certain U.K. and Mexican deferred tax assets primarily resulting from a return to sustainable profitability in these jurisdictions.

        We continue to maintain a valuation allowance on certain state and foreign deferred tax assets as of December 31, 2015. Should we determine that we would not be able to realize our remaining deferred tax assets in these jurisdictions in the future, an adjustment to the valuation allowance would be recorded in the period such determination is made.

        Of the $94 million and $238 million deferred tax asset related to the net operating loss and tax credit carryforwards at December 31, 2015 and December 31, 2014, $67 million and $233 million will expire between 2021 and 2033 and $27 million and $5 million are unlimited, respectively.

        A reconciliation of the U.S. Federal statutory tax rate to the income tax expense (benefit) on income from continuing operations was as follows:

                                                                                                                                                                                    

 

 

2015

 

2014

 

2013

 

U.S. Federal statutory tax rate – expense

 

 

35

%

 

35

%

 

35

%

State and local taxes, net of U.S. Federal tax benefit

 

 

3

 

 

(2

)

 

1

 

Lower taxes on foreign earnings

 

 

(1

)

 

(5

)

 

 

U.S. and foreign taxes on distributed and undistributed foreign earnings

 

 

3

 

 

 

 

 

U.S. Federal valuation allowance

 

 

3

 

 

(98

)

 

(13

)

Other, net

 

 

 

 

(1

)

 

(1

)

​  

​  

​  

​  

​  

​  

Effective tax rate – expense (benefit)

 

 

43

%

 

(71

)%

 

22

%

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

        Income taxes paid were $107 million, $80 million and $77 million in 2015, 2014 and 2013, respectively.

        A reconciliation of the beginning and ending liability for uncertain tax positions, including related interest and penalties, is as follows, in millions:

                                                                                                                                                                                    

 

 

Uncertain
Tax Positions

 

Interest and
Penalties

 

Total

 

Balance at January 1, 2014

 

$

46

 

$

13

 

$

59

 

Current year tax positions:

 

 

 

 

 

 

 

 

 

 

Additions

 

 

9

 

 

 

 

9

 

Reductions

 

 

(1

)

 

 

 

(1

)

Prior year tax positions:

 

 

 

 

 

 

 

 

 

 

Additions

 

 

1

 

 

 

 

1

 

Reductions

 

 

(5

)

 

 

 

(5

)

Settlements with tax authorities

 

 

(1

)

 

 

 

(1

)

Lapse of applicable statute of limitations

 

 

(10

)

 

 

 

(10

)

Interest and penalties recognized in income tax expense

 

 

 

 

(4

)

 

(4

)

​  

​  

​  

​  

​  

​  

Balance at December 31, 2014

 

$

39

 

$

9

 

$

48

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Current year tax positions:

 

 

 

 

 

 

 

 

 

 

Additions

 

 

10

 

 

 

 

10

 

Prior year tax positions:

 

 

 

 

 

 

 

 

 

 

Additions

 

 

1

 

 

 

 

1

 

Reductions

 

 

(1

)

 

 

 

(1

)

Lapse of applicable statute of limitations

 

 

(6

)

 

 

 

(6

)

Interest and penalties recognized in income tax expense

 

 

 

 

1

 

 

1

 

​  

​  

​  

​  

​  

​  

Balance at December 31, 2015

 

$

43

 

$

10

 

$

53

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

        If recognized, $28 million and $26 million of the liability for uncertain tax positions at December 31, 2015 and 2014, respectively, net of any U.S. Federal tax benefit, would impact our effective tax rate.

        Of the $53 million and $48 million total liability for uncertain tax positions (including related interest and penalties) at December 31, 2015 and 2014, $52 million and $48 million are recorded in other liabilities, respectively, and $1 million is recorded as a net offset to other assets at December 31, 2015.

        We file income tax returns in the U.S. Federal jurisdiction, and various local, state and foreign jurisdictions. We continue to participate in the Compliance Assurance Program ("CAP"). CAP is a real-time audit of the U.S. Federal income tax return that allows the Internal Revenue Service ("IRS"), working in conjunction with us, to determine tax return compliance with the U.S. Federal tax law prior to filing the return. This program provides us with greater certainty about our tax liability for a given year within months, rather than years, of filing our annual tax return and greatly reduces the need for recording a liability for U.S. Federal uncertain tax positions. The IRS has completed their examination of our consolidated U.S. Federal tax returns through 2014. With few exceptions, we are no longer subject to state or foreign income tax examinations on filed returns for years before 2005.

        As a result of tax audit closings, settlements and the expiration of applicable statutes of limitations in various jurisdictions within the next 12 months, we anticipate that it is reasonably possible the liability for uncertain tax positions could be reduced by approximately $8 million.

EARNINGS PER COMMON SHARE
EARNINGS PER COMMON SHARE

T. EARNINGS PER COMMON SHARE 

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

                                                                                                                                                                                    

 

 

2015

 

2014

 

2013

 

Numerator (basic and diluted):

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

357

 

$

821

 

$

259

 

Less: Allocation to unvested restricted stock awards

 

 

5

 

 

16

 

 

6

 

​  

​  

​  

​  

​  

​  

Income from continuing operations attributable to common shareholders          

 

 

352

 

 

805

 

 

253

 

​  

​  

​  

​  

​  

​  

(Loss) income from discontinued operations, net

 

 

(2

)

 

35

 

 

29

 

Less: Allocation to unvested restricted stock awards

 

 

 

 

(1

)

 

 

​  

​  

​  

​  

​  

​  

(Loss) income from discontinued operations attributable to common shareholders

 

 

(2

)

 

34

 

 

29

 

​  

​  

​  

​  

​  

​  

Net income available to common shareholders

 

$

350

 

$

839

 

$

282

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Denominator:

 

 

 

 

 

 

 

 

 

 

Basic common shares (based upon weighted average)

 

 

338

 

 

349

 

 

350

 

Add:

 

 

 

 

 

 

 

 

 

 

Stock option dilution

 

 

3

 

 

3

 

 

2

 

​  

​  

​  

​  

​  

​  

Diluted common shares

 

 

341

 

 

352

 

 

352

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        We follow accounting guidance regarding determining whether instruments granted in share-based payment transactions are participating securities. This accounting guidance clarifies that share-based payment awards that entitle their holders to receive non-forfeitable dividends prior to vesting should be considered participating securities. We have granted restricted stock awards that contain non-forfeitable rights to dividends on unvested shares; such unvested restricted stock awards are considered participating securities. As participating securities, the unvested shares are required to be included in the calculation of our basic earnings per common share, using the "two-class method." The two-class method of computing earnings per common share is an allocation method that calculates earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. For the years ended December 31, 2015, 2014 and 2013, we allocated dividends and undistributed earnings to the participating securities.

        Additionally, 5 million common shares, 7 million common shares and 12 million common shares for 2015, 2014 and 2013, respectively, related to stock options were excluded from the computation of diluted earnings per common share due to their antidilutive effect.

        Common shares outstanding included on our balance sheet and for the calculation of earnings per common share do not include unvested stock awards (5 million common shares and 6 million common shares at December 31, 2015 and 2014, respectively); shares outstanding for legal requirements included all common shares that have voting rights (including unvested stock awards).

OTHER COMMITMENTS AND CONTINGENCIES
OTHER COMMITMENTS AND CONTINGENCIES

U. OTHER COMMITMENTS AND CONTINGENCIES 

        Litigation.    We are subject to claims, charges, litigation and other proceedings in the ordinary course of our business, including those arising from or related to contractual matters, intellectual property, personal injury, environmental matters, product liability, product recalls, construction defect, insurance coverage, personnel and employment disputes, anti-trust issues and other matters, including class actions. 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.

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

                                                                                                                                                                                    

 

 

2015

 

2014

 

Balance at January 1

 

$

135

 

$

124

 

Accruals for warranties issued during the year

 

 

56

 

 

51

 

Accruals related to pre-existing warranties

 

 

15

 

 

11

 

Settlements made (in cash or kind) during the year

 

 

(50

)

 

(46

)

Other, net (including currency translation)

 

 

(4

)

 

(5

)

​  

​  

​  

​  

Balance at December 31

 

$

152

 

$

135

 

​  

​  

​  

​  

​  

​  

​  

​  

        Investments.    With respect to our investments in private equity funds, we had, at December 31, 2015, commitments to contribute up to $6 million of additional capital to such funds representing our aggregate capital commitment to such funds less capital contributions made to date. We are contractually obligated to make additional capital contributions to certain of our private equity funds upon receipt of a capital call from the private equity fund. We have no control over when or if the capital calls will occur. Capital calls are funded in cash and generally result in an increase in the carrying value of our investment in the private equity fund when paid.

        Other Matters.    We enter into contracts, which include reasonable and customary indemnifications that are standard for the industries in which we operate. Such indemnifications include customer claims against builders for issues relating to our products and workmanship. In conjunction with divestitures and other transactions, we occasionally provide reasonable and customary indemnifications relating to various items including: the enforceability of trademarks; legal and environmental issues; provisions for sales returns; and asset valuations. We have never had to pay a material amount related to these indemnifications and we evaluate the probability that amounts may be incurred and appropriately record an estimated liability when probable.

INTERIM FINANCIAL INFORMATION (UNAUDITED)
INTERIM FINANCIAL INFORMATION (UNAUDITED)

V. INTERIM FINANCIAL INFORMATION (UNAUDITED) 

                                                                                                                                                                                    

 

 

 

 

Quarters Ended

 

 

 

 

 

(In Millions, Except Per Common Share Data)

 

 

 

Total
Year

 

December 31

 

September 30

 

June 30

 

March 31

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

7,142 

 

$

1,715 

 

$

1,839 

 

$

1,929 

 

$

1,659 

 

Gross profit

 

$

2,253 

 

$

532 

 

$

589 

 

$

637 

 

$

495 

 

Income from continuing operations

 

$

357 

 

$

76 

 

$

111 

 

$

109 

 

$

61 

 

Net income

 

$

355 

 

$

75 

 

$

111 

 

$

105 

 

$

64 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations          

 

$

1.04 

 

$

.23

 

$

.33

 

$

.32

 

$

.17

 

Net income

 

$

1.03 

 

$

.22

 

$

.33

 

$

.30

 

$

.18

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations          

 

$

1.03 

 

$

.22

 

$

.32

 

$

.31

 

$

.17

 

Net income

 

$

1.02 

 

$

.22

 

$

.32

 

$

.30

 

$

.18

 

2014

 

 


 

 

 


 

 

 


 

 

 


 

 

 


 

 

Net sales

 

$

7,006 

 

$

1,666 

 

$

1,834 

 

$

1,876 

 

$

1,630 

 

Gross profit

 

$

2,060 

 

$

481 

 

$

522 

 

$

575 

 

$

482 

 

Income from continuing operations

 

$

821 

 

$

86 

 

$

533 

 

$

124 

 

$

78 

 

Net income

 

$

856 

 

$

100 

 

$

543 

 

$

139 

 

$

74 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations          

 

$

2.31 

 

$

.24

 

$

1.49 

 

$

.35

 

$

.22

 

Net income

 

$

2.40 

 

$

.28

 

$

1.52 

 

$

.39

 

$

.21

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations          

 

$

2.28 

 

$

.24

 

$

1.48 

 

$

.35

 

$

.22

 

Net income

 

$

2.38 

 

$

.28

 

$

1.51 

 

$

.39

 

$

.21

 

        Earnings per common share amounts for the four quarters of 2015 and 2014 may not total to the earnings per common share amounts for the years ended December 31, 2015 and 2014 due to the allocation of income to participating securities.

        In the third quarter of 2014, we recorded a $517 million tax benefit from the release of the valuation allowance against our U.S. Federal and certain state deferred tax assets.

SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS

 

                                                                                                                                                                                    

 

 

 

(In Millions)

 

Column A

 

Column B

 

Column C

 

 

 

Column D

 

 

 

Column E

 

 

 

 

 

Additions

 

 

 

 

 

 

 

 

 

Description

 

Balance at
Beginning
of Period

 

Charged to
Costs and
Expenses

 

Charged
to Other
Accounts

 

 

 

Deductions

 

 

 

Balance at
End of
Period

 

Allowances for doubtful accounts, deducted from accounts receivable in the balance sheet (e):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

$

14

 

$

4

 

$

 

 

 

 

$

(7

)

 

(a

)

$

11

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

2014

 

$

22

 

$

3

 

$

 

 

 

 

$

(11

)

 

(a

)

$

14

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

2013

 

$

26

 

$

5

 

$

 

 

 

 

$

(9

)

 

(a

)

$

22

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Valuation Allowance on deferred tax assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

$

66

 

$

36

 

$

(53

)

 

(b

)

$

 

 

 

 

$

49

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

2014

 

$

662

 

$

(539

)

$

(57

)

 

(c

)

$

 

 

 

 

$

66

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

2013

 

$

785

 

$

(36

)

$

(87

)

 

(d

)

$

 

 

 

 

$

662

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  


 

 

(a)          

Deductions, representing uncollectible accounts written off, less recoveries of accounts written off in prior years.

(b)          

Valuation allowance on deferred tax assets allocated to TopBuild due to its spin off into a separate stand-alone company on June 30, 2015.

(c)          

Write off of a $55 million deferred tax asset on certain net operating loss carryforward against the valuation allowance as it was determined that there was only a remote likelihood that such a carryforward could be utilized; and $2 million valuation allowance on deferred tax assets recorded primarily in other comprehensive income.

(d)          

Valuation allowance on deferred tax assets recorded primarily in other comprehensive income and paid in capital.

(e)          

Amounts exclude discontinued operations.

 

ACCOUNTING POLICIES (Policies)

 

        Principles of Consolidation.    The consolidated financial statements include the accounts of Masco Corporation and all majority-owned subsidiaries. All significant intercompany transactions have been eliminated. We consolidate the assets, liabilities and results of operations of variable interest entities, for which we are the primary beneficiary.

 

        Use of Estimates and Assumptions in the Preparation of Financial Statements.    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates and assumptions.

 

        Revenue Recognition.    We recognize revenue as title to products and risk of loss is transferred to customers or when services are rendered, net of applicable provisions for discounts, returns and allowances. Amounts billed for shipping and handling are included in net sales, while costs incurred for shipping and handling are included in cost of sales.

 

        Customer Promotion Costs.    We record estimated reductions to revenue for customer programs and incentive offerings, including special pricing and co-operative advertising arrangements, promotions and other volume-based incentives. In-store displays that are owned by us and used to market our products are included in other assets in the consolidated balance sheets and are amortized using the straight-line method over the expected useful life of three to five years; related amortization expense is classified as a selling expense in the consolidated statements of operations.

 

 

        Foreign Currency.    The financial statements of our foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at exchange rates as of the balance sheet dates. Revenues and expenses are translated at average exchange rates in effect during the year. The resulting cumulative translation adjustments have been recorded in the accumulated other comprehensive income (loss) component of shareholders' equity. Realized foreign currency transaction gains and losses are included in the consolidated statements of operations in other income (expense), net.

 

        Cash and Cash Investments.    We consider all highly liquid investments with an initial maturity of three months or less to be cash and cash investments.

 

        Short-Term Bank Deposits.    We invest a portion of our foreign excess cash in short-term bank deposits. These highly liquid investments have original maturities between three and twelve months and are valued at cost, which approximates fair value at December 31, 2015 and 2014. These short-term bank deposits are classified in the current assets section of our consolidated balance sheets, and interest income related to short-term bank deposits is recorded in our consolidated statements of operations in other income (expense), net.

 

        Receivables.    We do significant business with a number of customers, including certain home center retailers and homebuilders. We monitor our exposure for credit losses on our customer receivable balances and the credit worthiness of our customers on an on-going basis and record related allowances for doubtful accounts. Allowances are estimated based upon specific customer balances, where a risk of default has been identified, and also include a provision for non-customer specific defaults based upon historical collection, return and write-off activity. During downturns in our markets, declines in the financial condition and creditworthiness of customers impacts the credit risk of the receivables involved and we have incurred additional bad debt expense related to customer defaults. A separate allowance is recorded for customer incentive rebates and is generally based upon sales activity. Receivables are presented net of certain allowances (including allowances for doubtful accounts) of $41 million at both December 31, 2015 and 2014.

 

        Property and Equipment.    Property and equipment, including significant improvements to existing facilities, are recorded at cost. Upon retirement or disposal, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the consolidated statements of operations. Maintenance and repair costs are charged against earnings as incurred.

        We review our property and equipment as an event occurs or circumstances change that would more likely than not reduce the fair value of the property and equipment below the carrying amount. If the carrying amount of property and equipment 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. Further, we evaluate the remaining useful lives of property and equipment at each reporting period to determine whether events and circumstances warrant a revision to the remaining depreciation periods.

 

        Depreciation.    Depreciation expense is computed principally using the straight-line method over the estimated useful lives of the assets. Annual depreciation rates are as follows: buildings and land improvements, 2 to 10 percent, and machinery and equipment, 5 to 33 percent. Depreciation expense was $116 million, $132 million and $147 million in 2015, 2014 and 2013, respectively. Such depreciation expense included accelerated depreciation of $1 million (in the Cabinets and Related Products segment) and $13 million (primarily in the Cabinets and Related Products and Plumbing Products segments) in 2014 and 2013, respectively.

 

        Goodwill and Other Intangible Assets.    We perform our annual impairment testing of goodwill in the fourth quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We have defined our reporting units and completed the impairment testing of goodwill at the operating segment level. Our operating segments are reporting units that engage in business activities, for which discrete financial information, including five-year forecasts, are available. We compare the fair value of the reporting units to the carrying value of the reporting units for goodwill impairment testing. Fair value is determined using a discounted cash flow method, which includes significant unobservable inputs (Level 3 inputs).

        Determining market values using a discounted cash flow method requires us to make significant estimates and assumptions, including long-term projections of cash flows, market conditions and appropriate discount rates. Our judgments are based upon historical experience, current market trends, consultations with external valuation specialists and other information. While we believe that the estimates and assumptions underlying the valuation methodology are reasonable, different estimates and assumptions could result in different outcomes. In estimating future cash flows, we rely on internally generated five-year forecasts for sales and operating profits, including capital expenditures, and, currently, a one to three percent long-term assumed annual growth rate of cash flows for periods after the five-year forecast. We utilize our weighted average cost of capital of approximately 8.5 percent as the basis to determine the discount rate to apply to the estimated future cash flows. Our weighted average cost of capital decreased in 2015 as compared to 2014 due to less risk associated with our stock in relation to the capital markets. In 2015, based upon our assessment of the risks impacting each of our businesses, we applied a risk premium to increase the discount rate to a range of 10.5 percent to 12.5 percent for our reporting units.

        If the carrying amount of a reporting unit exceeds its fair value, we measure the possible goodwill impairment based upon an allocation of the estimate of fair value of the reporting unit to all of the underlying assets and liabilities of the reporting unit, including any previously unrecognized intangible assets (Step Two Analysis). The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized to the extent that a reporting unit's recorded goodwill exceeds the implied fair value of goodwill.

        We review our other indefinite-lived intangible assets for impairment annually in the fourth quarter of each year, or as events occur or circumstances change that indicate the assets may be impaired without regard to the business unit. We consider the implications of both external (e.g., market growth, competition and local economic conditions) and internal (e.g., product sales and expected product growth) factors and their potential impact on cash flows related to the intangible asset in both the near- and long-term.

        Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives. We evaluate the remaining useful lives of amortizable intangible assets at each reporting period to determine whether events and circumstances warrant a revision to the remaining periods of amortization. See Note H for additional information regarding Goodwill and Other intangible assets.

 

        Fair Value Accounting.    We follow accounting guidance for our financial investments and liabilities, which defines fair value, establishes a framework for measuring fair value and prescribes disclosures about fair value measurements. We also follow this guidance for our non-financial investments and liabilities.

        The fair value of financial investments and liabilities is determined at each balance sheet date and future declines in market conditions, the future performance of the underlying investments or new information could affect the recorded values of our investments in marketable securities, private equity funds and other private investments.

        We use derivative financial instruments to manage certain exposure to fluctuations in earnings and cash flows resulting from changes in foreign currency exchange rates, commodity costs and interest rate exposures. Derivative financial instruments are recorded in the consolidated balance sheets as either an asset or liability measured at fair value, netted by counterparty, where the right of offset exists. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in determining current earnings during the period of the change in fair value.

 

        Warranty.    At the time of sale, we accrue a warranty liability for the estimated cost to provide products, parts or services to repair or replace products in satisfaction of warranty obligations. Our estimate of costs to service our warranty obligations is based upon the information available and includes a number of factors such as the warranty coverage, the warranty period, historical experience specific to the nature, frequency and average cost to service the claim, along with industry and demographic trends.

        Certain factors and related assumptions in determining our warranty liability involve judgments and estimates and are sensitive to changes in the aforementioned factors. We believe that the warranty accrual is appropriate; however, actual claims incurred could differ from the original estimates thereby requiring adjustments to previously established accruals.

        A significant portion of our business is at the consumer retail level through home center retailers and other major retailers. A consumer may return a product to a retail outlet that is a warranty return. However, certain retail outlets do not distinguish between warranty and other types of returns when they claim a return deduction from us. Our revenue recognition policy takes into account this type of return when recognizing revenue, and deductions are recorded at the time of sale.

 

        Insurance Reserves.    We provide for expenses associated with workers' compensation and product liability obligations when such amounts are probable and can be reasonably estimated. The accruals are adjusted as new information develops or circumstances change that would affect the estimated liability.

 

        Stock-Based Compensation.    We measure compensation expense for stock awards at the market price of our common stock at the grant date. Such expense is recognized ratably over the shorter of the vesting period of the stock awards, typically 5 to 10 years, or the length of time until the grantee becomes retirement-eligible at age 65.

        We measure compensation expense for stock options using a Black-Scholes option pricing model. Such expense is recognized ratably over the shorter of the vesting period of the stock options, typically five years, or the length of time until the grantee becomes retirement-eligible at age 65. We utilize the shortcut method to determine the tax windfall pool associated with stock options.

 

        Noncontrolling Interest.    We own 68 percent of Hansgrohe SE at both December 31, 2015 and 2014. The aggregate noncontrolling interest, net of dividends, at December 31, 2015 and 2014 has been recorded as a component of equity on our consolidated balance sheets.

 

        Interest and Penalties on Uncertain Tax Positions.    We record interest and penalties on our uncertain tax positions in income tax expense (benefit).

 

 

        Reclassifications.    Certain prior year amounts have been reclassified to conform to the 2015 presentation in the consolidated financial statements. In our consolidated statements of cash flows, the cash flows from discontinued operations are not separately classified.

 

        Recently Issued Accounting Pronouncements.    In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-8 ("ASU 2014-08"), "Reporting of Discontinued Operations and Disclosure of Disposals of Components of an Entity," which changes the criteria for determining which disposals can be presented as discontinued operations and modifies the related disclosure requirements. We adopted this guidance beginning January 1, 2015. The adoption of this new guidance did not have a material impact on our financial position or our results of operations.

        In November 2015, the FASB issued Accounting Standards Update 2015-17 ("ASU 2015-17"), "Balance Sheet Classification of Deferred Taxes," which changes the criteria for classifying deferred tax balances by requiring all deferred taxes be presented as noncurrent on the balance sheet. We retrospectively adopted this guidance on December 31, 2015. As a result of the retrospective adoption of this standard, current assets decreased by $244 million, non-current assets increased by $219 million and non-current liabilities decreased by $25 million as of December 31, 2014.

        In May 2014, FASB issued a new standard for revenue recognition, Accounting Standards Codification 606 ("ASC 606"). The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries. ASC 606 is effective for us for annual periods beginning January 1, 2018. We are currently evaluating the impact the adoption of this new standard will have on our results of operations.

        In February 2015, the FASB issued Accounting Standards Update 2015-02 ("ASU 2015-02") "Consolidation (Topic 810) – Amendments to the Consolidations Analysis," which modifies certain aspects of both the variable interest entities and voting interest entities models. ASU 2015-02 is effective for us for annual periods beginning January 1, 2016. We do not expect that the adoption will have a significant impact on our financial position or our results of operations.

        In April 2015, the FASB issued Accounting Standards Update 2015-03 ("ASU 2015-03") "Interest – Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs," that requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt. In August 2015, the FASB issued ASU 2015-15 to clarify that debt issuance costs related to line-of-credit arrangements may remain classified as an asset. Both ASU 2015-03 and ASU 2015-15 are effective for us for annual periods beginning January 1, 2016. We do not expect that the adoptions will have a significant impact on our financial position.

INVENTORIES POLICIES (Policies)
Inventories

INVENTORIES 

                                                                                                                                                                                    

 

 

(In Millions)

 

 

 

At December 31

 

 

 

2015

 

2014

 

Finished goods

 

$

358 

 

$

361 

 

Raw material

 

 

238 

 

 

251 

 

Work in process

 

 

91 

 

 

100 

 

​  

​  

​  

​  

Total

 

$

687 

 

$

712 

 

​  

​  

​  

​  

​  

​  

​  

​  

        Inventories, which include purchased parts, materials, direct labor and applied manufacturing overhead, are stated at the lower of cost or net realizable value, with cost determined by use of the first-in, first-out method.

DISCONTINUED OPERATIONS (Tables)
Schedules of major classes of line items constituting pre-tax profit (loss) of discontinued operations, carrying amount of major classes of assets and liabilities, and other selected financial information during the period owned

        The major classes of line items constituting pre-tax (loss) profit of the discontinued operations, in millions:

 

                                                                                                                                                                                    

 

 

 

Year Ended December 31

 

 

 

2015

 

2014

 

2013

 

Net sales (1)

 

$

762

 

$

1,515

 

$

1,412

 

Cost of sales (1)

 

 

603

 

 

1,188

 

 

1,116

 

​  

​  

​  

​  

​  

​  

Gross profit (1)

 

 

159

 

 

327

 

 

296

 

Selling, general and administrative expenses (1)

 

 

148

 

 

259

 

 

232

 

​  

​  

​  

​  

​  

​  

Income from discontinued operations

 

$

11

 

$

68

 

$

64

 

Other discontinued operations results:

 

 


 

 

 


 

 

 


 

 

(Loss) gain on disposal of discontinued operations, net (2)

 

 

(1

)

 

(6

)

 

3

 

Operating loss from discontinued operations (3)

 

 

 

 

 

 

(7

)

Impairment of assets held for sale (4)

 

 

 

 

 

 

(10

)

​  

​  

​  

​  

​  

​  

Income before income tax

 

 

10

 

 

62

 

 

50

 

Income tax expense (5)

 

 

(12

)

 

(27

)

 

(21

)

​  

​  

​  

​  

​  

​  

(Loss) income from discontinued operations, net

 

$

(2

)

$

35

 

$

29

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  


 

 

(1)          

Net sales, cost of sales, gross profit, and selling, general and administrative expenses reflect the results of TopBuild.

(2)          

Included in (loss) gain on disposal of discontinued operations, net in 2014 are additional costs and charges related to the 2013 sale of Tvilum.

(3)          

Operating loss from discontinued operations reflects the results of Tvilum, including net sales of $265 million in 2013.

(4)          

Included in impairment of assets held for sale in 2013 is the impairment of fixed assets. During 2013, we estimated the fair value of the Tvilum business held for sale, using unobservable inputs (Level 3). After considering the currency translation gains reported in accumulated other comprehensive income (loss), we recorded an impairment of $10 million in 2013.

(5)          

The unusual relationship between income tax expense and income before income tax for 2015 resulted primarily from certain non-deductible transaction costs related to the spin off of TopBuild.

 

        The carrying amount of major classes of assets and liabilities included as part of the TopBuild discontinued operations, in millions:

 

                                                                                                                                                                                    

 

 

At December 31,

 

 

 

2015

 

2014

 

Cash

 

$

 

$

 

Receivables

 

 

 

 

220 

 

Inventories

 

 

 

 

107 

 

Prepaid expenses and other

 

 

 

 

 

Property and equipment, net

 

 

 

 

93 

 

Goodwill

 

 

 

 

1,044 

 

Other intangible assets, net

 

 

 

 

 

Other assets

 

 

 

 

 

​  

​  

​  

​  

Total assets classified as held for sale

 

$

 

$

1,476 

 

​  

​  

​  

​  

​  

​  

​  

​  

Accounts payable

 

 

 

$

229 

 

Accrued liabilities

 

 

 

 

71 

 

Other liabilities

 

 

 

 

40 

 

Deferred income taxes

 

 

 

 

129 

 

​  

​  

​  

​  

Total liabilities classified as held for sale

 

$

 

$

469 

 

​  

​  

​  

​  

​  

​  

​  

​  

        Other selected financial information for TopBuild during the period owned by us, were as follows, in millions:

 

                                                                                                                                                                                    

 

 

Year Ended Dec. 31

 

 

 

2015

 

2014

 

2013

 

Depreciation and amortization

 

$

 

$

26 

 

$

27 

 

Capital expenditures

 

$

 

$

13 

 

$

14 

 

 

INVENTORIES (Tables)
Schedule of inventories

 

                                                                                                                                                                                    

 

 

 

(In Millions)

 

 

 

At December 31

 

 

 

2015

 

2014

 

Finished goods

 

$

358 

 

$

361 

 

Raw material

 

 

238 

 

 

251 

 

Work in process

 

 

91 

 

 

100 

 

​  

​  

​  

​  

Total

 

$

687 

 

$

712 

 

​  

​  

​  

​  

​  

​  

​  

​  

 

FAIR VALUE OF FINANCIAL INVESTMENTS AND LIABILITIES (Tables)

        Financial investments included in other assets were as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

At December 31

 

 

 

2015

 

2014

 

Auction rate securities

 

$

22 

 

$

22 

 

​  

​  

​  

​  

Total recurring investments

 

 

22 

 

 

22 

 

Equity method investments

 

 

13 

 

 

11 

 

Private equity funds

 

 

10 

 

 

14 

 

Other investments

 

 

 

 

 

​  

​  

​  

​  

Total

 

$

48 

 

$

50 

 

​  

​  

​  

​  

​  

​  

​  

​  

 

    Income from financial investments, net, included in other, net, within other income (expense), net, was as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

2013

 

Equity investment income (loss), net

 

$

2

 

$

(2

)

$

16

 

Realized gains from private equity funds

 

 

6

 

 

4

 

 

11

 

​  

​  

​  

​  

​  

​  

Income from financial investments, net

 

$

8

 

$

2

 

$

27

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

        The pre-tax (losses) gains included in our consolidated statements of operations are as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

Year Ended December 31,

 

 

 

2015

 

2014

 

2013

 

Foreign currency contracts

 

 

 

 

 

 

 

 

 

 

Exchange contracts

 

$

4

 

$

5

 

$

2

 

Forward contracts

 

 

(3

)

 

 

 

1

 

Metals contracts

 

 

(17


)

 

(3


)

 

(7


)

Interest rate swaps

 

 

(2

)

 

(2

)

 

(2

)

​  

​  

​  

​  

​  

​  

Total

 

$

(18

)

$

 

$

(6

)

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

      The notional amounts being hedged and the fair value of those derivative instruments are as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

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

)

 

                                                                                                                                                                                    

 

 

At December 31, 2014

 

 

 

Notional
Amount

 

Balance Sheet

 

Foreign currency contracts

 

 

 

 

 

 

 

Exchange contracts

 

$

55

 

 

 

 

Receivables

 

 

 

 

$

6

 

Forward contracts

 

 

79

 

 

 

 

Other assets

 

 

 

 

 

2

 

Accrued liabilities

 

 

 

 

 

(1

)

Metals contracts

 

 

70

 

 

 

 

Accrued liabilities

 

 

 

 

 

(2

)

 

PROPERTY AND EQUIPMENT (Tables)

                                                                                                                                                                                    

 

 

 

(In Millions)

 

 

 

At December 31

 

 

 

2015

 

2014

 

Land and improvements

 

$

115

 

$

122

 

Buildings

 

 

672

 

 

715

 

Machinery and equipment

 

 

1,787

 

 

1,790

 

​  

​  

​  

​  

 

 

 

2,574

 

 

2,627

 

Less: Accumulated depreciation

 

 

(1,547

)

 

(1,581

)

​  

​  

​  

​  

Total

 

$

1,027

 

$

1,046

 

​  

​  

​  

​  

​  

​  

​  

​  

 

        At December 31, 2015, future minimum lease payments were as follows, in millions:

 

                                                                                                                                                                                    

 

2016

 

$

38 

 

2017

 

 

27 

 

2018

 

 

20 

 

2019

 

 

16 

 

2020

 

 

11 

 

2021 and beyond

 

 

65 

 

 

GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)
Schedule of changes in carrying amount of goodwill

        The changes in the carrying amount of goodwill, by segment, were as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

Gross Goodwill
At December 31,
2015

 

Accumulated
Impairment
Losses

 

Net Goodwill
At December 31,
2015

 

Cabinets and Related Products

 

$

240

 

$

(59

)

$

181

 

Plumbing Products

 

 

525

 

 

(340

)

 

185

 

Decorative Architectural Products

 

 

294

 

 

(75

)

 

219

 

Other Specialty Products

 

 

988

 

 

(734

)

 

254

 

​  

​  

​  

​  

​  

​  

Total

 

$

2,047

 

$

(1,208

)

$

839

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

 

 

Gross Goodwill
At December 31,
2014

 

Accumulated
Impairment
Losses

 

Net Goodwill
At December 31,
2014

 

Additions (A)

 

Other (B)

 

Net Goodwill
At December 31,
2015

 

Cabinets and Related Products

 

$

240

 

$

(59

)

$

181

 

$

 

$

 

$

181

 

Plumbing Products

 

 

531

 

 

(340

)

 

191

 

 

8

 

 

(14

)

 

185

 

Decorative Architectural Products

 

 

294

 

 

(75

)

 

219

 

 

 

 

 

 

219

 

Other Specialty Products

 

 

983

 

 

(734

)

 

249

 

 

6

 

 

(1

)

 

254

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Total

 

$

2,048

 

$

(1,208

)

$

840

 

$

14

 

$

(15

)

$

839

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

 

 

Gross Goodwill
At December 31,
2013

 

Accumulated
Impairment
Losses

 

Net Goodwill
At December 31,
2013

 

Additions (A)

 

Other (B)

 

Net Goodwill
At December 31,
2014

 

Cabinets and Related Products

 

$

240

 

$

(59

)

$

181

 

$

 

$

 

$

181

 

Plumbing Products

 

 

550

 

 

(340

)

 

210

 

 

 

 

(19

)

 

191

 

Decorative Architectural Products

 

 

294

 

 

(75

)

 

219

 

 

 

 

 

 

219

 

Other Specialty Products

 

 

983

 

 

(734

)

 

249

 

 

 

 

 

 

249

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Total

 

$

2,067

 

$

(1,208

)

$

859

 

$

 

$

(19

)

$

840

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  


 

 

(A)          

Additions consist of acquisitions.

(B)          

Other principally includes the effect of foreign currency translation.

 

OTHER ASSETS (Tables)
Schedule of other assets

                                                                                                                                                                                    

 

 

 

(In Millions)

 

 

 

At December 31

 

 

 

2015

 

2014

 

Financial investments (Note E)

 

$

48 

 

$

50 

 

In-store displays, net

 

 

56 

 

 

36 

 

Debenture expense

 

 

20 

 

 

19 

 

Deferred tax assets

 

 

184 

 

 

293 

 

Other

 

 

18 

 

 

21 

 

​  

​  

​  

​  

Total

 

$

326 

 

$

419 

 

​  

​  

​  

​  

​  

​  

​  

​  

 

ACCRUED LIABILITIES (Tables)
Schedule of Accrued Liabilities

                                                                                                                                                                                    

 

 

 

(In Millions)

 

 

 

At December 31

 

 

 

2015

 

2014

 

Salaries, wages and commissions

 

$

171 

 

$

164 

 

Warranty (Note U)

 

 

152 

 

 

135 

 

Advertising and sales promotion

 

 

132 

 

 

111 

 

Insurance reserves

 

 

44 

 

 

39 

 

Interest

 

 

62 

 

 

57 

 

Employee retirement plans

 

 

48 

 

 

40 

 

Property, payroll and other taxes

 

 

25 

 

 

25 

 

Dividends payable

 

 

32 

 

 

32 

 

Other

 

 

86 

 

 

82 

 

​  

​  

​  

​  

Total

 

$

752 

 

$

685 

 

​  

​  

​  

​  

​  

​  

​  

​  

 

DEBT (Tables)
Schedule of long-term debt

                                                                                                                                                                                    

 

 

 

(In Millions)

 

 

 

At December 31

 

 

 

2015

 

2014

 

Notes and debentures:

 

 

 

 

 

 

 

4.800%, due June 15, 2015

 

$

 

$

500 

 

6.125%, due October 3, 2016

 

 

1,000 

 

 

1,000 

 

5.850%, due March 15, 2017

 

 

300 

 

 

300 

 

6.625%, due April 15, 2018

 

 

114 

 

 

114 

 

7.125%, due March 15, 2020

 

 

500 

 

 

500 

 

5.950%, due March 15, 2022

 

 

400 

 

 

400 

 

4.450%, due April 1, 2025

 

 

500 

 

 

 

7.750%, due August 1, 2029

 

 

296 

 

 

296 

 

6.500%, due August 15, 2032

 

 

300 

 

 

300 

 

Other

 

 

13 

 

 

14 

 

​  

​  

​  

​  

 

 

 

3,423 

 

 

3,424 

 

Less: Current portion

 

 

1,005 

 

 

505 

 

​  

​  

​  

​  

Total long-term debt

 

$

2,418 

 

$

2,919 

 

​  

​  

​  

​  

​  

​  

​  

​  

 

STOCK-BASED COMPENSATION (Tables)

        Pre-tax compensation expense and the related income tax benefit for these stock-based incentives were as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

2013

 

Long-term stock awards

 

$

23 

 

$

33 

 

$

31 

 

Stock options

 

 

 

 

 

 

12 

 

Phantom stock awards and stock appreciation rights

 

 

11 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

Total

 

$

39 

 

$

43 

 

$

50 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Income tax benefit (37 percent tax rate)

 

$

14 

 

$

16 

 

$

19 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

        Our long-term stock award activity was as follows, shares in millions:

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

2013

 

Unvested stock award shares at January 1

 

 

 

 

 

 

 

Weighted average grant date fair value

 

$

18 

 

$

17 

 

$

16 

 

Stock award shares granted

 

 

 

 

 

 

 

Weighted average grant date fair value

 

$

26 

 

$

22 

 

$

20 

 

Stock award shares vested

 

 

 

 

 

 

 

Weighted average grant date fair value

 

$

17 

 

$

17 

 

$

17 

 

Stock award shares forfeited

 

 


 

 

 

 


 

Weighted average grant date fair value

 

$

18 

 

$

19 

 

$

16 

 

Forfeitures upon spin off (A)

 

 

 

 


 

 


 

Weighted average grant date fair value

 

$

20 

 

$

 

$

 

Modification upon spin off (B)

 

 

 

 


 

 


 

Unvested stock award shares at December 31

 

 

 

 

 

 

 

Weighted average grant date fair value

 

$

17 

 

$

18 

 

$

17 

 


 

 

(A)          

In connection with the spin off of TopBuild, TopBuild employees forfeited their outstanding Masco equity awards.

(B)          

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 to the outstanding stock awards was made pursuant to existing anti-dilution provisions in our 2014 Plan and 2005 Long Term Incentive Plan.

 

        Our stock option activity was as follows, shares in millions:

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

2013

 

Option shares outstanding, January 1

 

 

18 

 

 

24 

 

 

30 

 

Weighted average exercise price

 

$

21 

 

$

22 

 

$

21 

 

Option shares granted

 

 


 

 


 

 

 

Weighted average exercise price

 

$

26 

 

$

22 

 

$

20 

 

Option shares exercised

 

 

 

 

 

 

 

Aggregate intrinsic value on date of exercise (A)

 

$

50 million

 

$

22 million

 

$

23 million

 

Weighted average exercise price

 

$

17 

 

$

16 

 

$

12 

 

Option shares forfeited

 

 

 

 

 

 

 

Weighted average exercise price

 

$

29 

 

$

28 

 

$

26 

 

Forfeitures upon spin off (B)

 

 


 

 


 

 


 

Weighted average exercise price

 

$

19 

 

$

 

$

 

Modifications upon spin off (C)

 

 

 

 


 

 


 

Option shares outstanding, December 31

 

 

12 

 

 

18 

 

 

24 

 

Weighted average exercise price

 

$

17 

 

$

21 

 

$

22 

 

Weighted average remaining option term (in years)

 

 

 

 

 

 

 

Option shares vested and expected to vest, December 31

 

 

12 

 

 

18 

 

 

24 

 

Weighted average exercise price

 

$

17 

 

$

21 

 

$

22 

 

Aggregate intrinsic value (A)

 

$

133 million

 

$

110 million

 

$

109 million

 

Weighted average remaining option term (in years)

 

 

 

 

 

 

 

Option shares exercisable (vested), December 31

 

 

10 

 

 

15 

 

 

20 

 

Weighted average exercise price

 

$

18 

 

$

22 

 

$

24 

 

Aggregate intrinsic value (A)

 

$

113 million

 

$

84 million

 

$

62 million

 

Weighted average remaining option term (in years)

 

 

 

 

 

 

 


 

 

(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.

(B)          

In connection with the spin off of TopBuild, TopBuild employees forfeited their outstanding Masco equity awards.

(C)          

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 to the outstanding options was made pursuant to existing anti-dilution provisions in our 2014 Plan and 2005 Long Term Incentive Plan.

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

2013

 

Weighted average grant date fair value

 

$

9.67 

 

$

9.53 

 

$

8.35 

 

Risk-free interest rate

 

 

1.75 

%

 

1.91 

%

 

1.22 

%

Dividend yield

 

 

1.32 

%

 

1.34 

%

 

1.47 

%

Volatility factor

 

 

42.00 

%

 

49.00 

%

 

49.07 

%

Expected option life

 

 

6 years

 

 

6 years

 

 

6 years

 

 

 

        The following table summarizes information for stock option shares outstanding and exercisable at December 31, 2015, shares in millions:

 

                                                                                                                                                                                    

 

Option Shares Outstanding

 

Option Shares Exercisable

 

Range of
Prices

 

Number of
Shares

 

Weighted
Average
Remaining
Option
Term

 

Weighted
Average
Exercise
Price

 

Number of
Shares

 

Weighted
Average
Exercise
Price

 

$

7 - 18

 

 

 

4 Years

 

$

12 

 

 

 

$

12 

 

$

20 - 23

 

 

 

3 Years

 

$

23 

 

 

 

$

23 

 

$

25 - 27

 

 

 

1 Years

 

$

27 

 

 

 

$

27 

 

$

28 - 29

 

 

 

- Years

 

$

29 

 

 

 

$

29 

 

​  

​  

​  

​  

$

7 - 29

 

 

12 

 

3 Years

 

$

17 

 

 

10 

 

$

18 

 

​  

​  

​  

​  

​  

​  

​  

​  

 

        Information related to phantom stock awards and SARs was as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

Phantom
Stock
Awards

 

Stock
Appreciation
Rights

 

 

 

At December 31,

 

At December 31,

 

 

 

2015

 

2014

 

2015

 

2014

 

Accrued compensation cost liability

 

$

13 

 

$

13 

 

$

10 

 

$

 

Unrecognized compensation cost

 

$

 

$

 

$

 

$

 

Equivalent common shares

 

 

 

 

 

 

 

 

 

 

EMPLOYEE RETIREMENT PLANS (Tables)

        Pre-tax expense related to our retirement plans was as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

2013

 

Defined-contribution plans

 

$

52 

 

$

43 

 

$

51 

 

Defined-benefit plans

 

 

32 

 

 

25 

 

 

31 

 

​  

​  

​  

​  

​  

​  

 

 

$

84 

 

$

68 

 

$

82 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

        Changes in the projected benefit obligation and fair value of plan assets, and the funded status of our defined-benefit pension plans were as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Changes in projected benefit obligation:

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected benefit obligation at January 1

 

$

1,145

 

$

190

 

$

983

 

$

163

 

Service cost

 

 

3

 

 

 

 

3

 

 

 

Interest cost

 

 

41

 

 

7

 

 

41

 

 

7

 

Actuarial (gain) loss, net

 

 

(61

)

 

(11

)

 

184

 

 

32

 

Foreign currency exchange

 

 

(23

)

 

 

 

(24

)

 

 

Benefit payments

 

 

(46

)

 

(12

)

 

(42

)

 

(12

)

​  

​  

​  

​  

​  

​  

​  

​  

Projected benefit obligation at December 31

 

$

1,059

 

$

174

 

$

1,145

 

$

190

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Changes in fair value of plan assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at January 1

 

$

691

 

$

 

$

659

 

$

 

Actual return on plan assets

 

 

(12

)

 

 

 

38

 

 

 

Foreign currency exchange

 

 

(7

)

 

 

 

(8

)

 

 

Company contributions

 

 

38

 

 

12

 

 

49

 

 

12

 

Expenses, other

 

 

(6

)

 

 

 

(5

)

 

 

Benefit payments

 

 

(46

)

 

(12

)

 

(42

)

 

(12

)

​  

​  

​  

​  

​  

​  

​  

​  

Fair value of plan assets at December 31

 

$

658

 

$

 

$

691

 

$

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Funded status at December 31:

 

$

(401

)

$

(174

)

$

(454

)

$

(190

)

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

 

        Amounts in our consolidated balance sheets were as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

At December 31, 2015

 

At December 31, 2014

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Other assets

 

$

1

 

$

 

$

 

$

 

Accrued liabilities

 

 

(3

)

 

(12

)

 

(2

)

 

(12

)

Other liabilities

 

 

(399

)

 

(162

)

 

(452

)

 

(178

)

​  

​  

​  

​  

​  

​  

​  

​  

Total net liability

 

$

(401

)

$

(174

)

$

(454

)

$

(190

)

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

        Unrealized loss included in accumulated other comprehensive income (loss) before income taxes was as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

At December 31, 2015

 

At December 31, 2014

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Net loss

 

$

501 

 

$

56 

 

$

524 

 

$

68 

 

Net transition obligation

 

 

 

 

 

 

 

 

 

Net prior service cost

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

Total

 

$

504 

 

$

56 

 

$

527 

 

$

68 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

        Information for defined-benefit pension plans with an accumulated benefit obligation in excess of plan assets was as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

At December 31

 

 

 

2015

 

2014

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Projected benefit obligation

 

$

1,045 

 

$

174 

 

$

1,132 

 

$

190 

 

Accumulated benefit obligation

 

$

1,045 

 

$

174 

 

$

1,132 

 

$

190 

 

Fair value of plan assets

 

$

643 

 

$

 

$

677 

 

$

 

 

        Net periodic pension cost for our defined-benefit pension plans was as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

2013

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

Service cost

 

$

3

 

$

 

$

3

 

$

 

$

3

 

$

 

Interest cost

 

 

47

 

 

7

 

 

47

 

 

7

 

 

44

 

 

6

 

Expected return on plan assets

 

 

(46

)

 

 

 

(45

)

 

 

 

(40

)

 

 

Recognized net loss

 

 

18

 

 

3

 

 

11

 

 

2

 

 

16

 

 

2

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Net periodic pension cost

 

$

22

 

$

10

 

$

16

 

$

9

 

$

23

 

$

8

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

Equity securities

 

 

49 

%

 

46 

%

Debt securities

 

 

32 

%

 

34 

%

Other

 

 

19 

%

 

20 

%

​  

​  

​  

​  

Total

 

 

100 

%

 

100 

%

​  

​  

​  

​  

​  

​  

​  

​  

 

        The following table sets forth, by level within the fair value hierarchy, the qualified defined-benefit pension plan assets at fair value as of December 31, 2015 and 2014, in millions.

 

                                                                                                                                                                                    

 

 

 

At December 31, 2015

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Common and Preferred Stocks:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

127 

 

$

126 

 

$

 

$

253 

 

International

 

 

55 

 

 

14 

 

 

 

 

69 

 

Private Equity and Hedge Funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

52 

 

 

52 

 

International

 

 

 

 

 

 

24 

 

 

24 

 

Corporate Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

18 

 

 

26 

 

 

 

 

44 

 

International

 

 

 

 

48 

 

 

 

 

48 

 

Government and Other Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

64 

 

 

 

 

 

 

67 

 

International

 

 

23 

 

 

30 

 

 

 

 

53 

 

Common Collective Trust Fund – United States

 

 

 

 

 

 

 

 

 

Short-Term and Other Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

International

 

 

 

 

21 

 

 

19 

 

 

42 

 

​  

​  

​  

​  

​  

​  

​  

​  

Total Assets at Fair Value

 

$

291 

 

$

272 

 

$

95 

 

$

658 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

 

 

At December 31, 2014

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Common and Preferred Stocks:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

136 

 

$

116 

 

$

 

$

252 

 

International

 

 

50 

 

 

15 

 

 

 

 

65 

 

Private Equity and Hedge Funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

59 

 

 

59 

 

International

 

 

 

 

 

 

27 

 

 

27 

 

Corporate Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

15 

 

 

33 

 

 

 

 

48 

 

International

 

 

 

 

75 

 

 

 

 

75 

 

Government and Other Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

64 

 

 

 

 

 

 

66 

 

International

 

 

24 

 

 

27 

 

 

 

 

51 

 

Common Collective Trust Fund – United States

 

 

 

 

 

 

 

 

 

Short-Term and Other Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

International

 

 

 

 

21 

 

 

18 

 

 

42 

 

​  

​  

​  

​  

​  

​  

​  

​  

Total Assets at Fair Value

 

$

292 

 

$

295 

 

$

104 

 

$

691 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

        Changes in the fair value of the qualified defined-benefit pension plan Level 3 assets, were as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

Fair Value, January 1

 

$

104

 

$

93

 

Purchases

 

 

4

 

 

13

 

Sales

 

 

(11

)

 

(9

)

Transfers, net

 

 

 

 

 

Unrealized (losses) gains

 

 

(2

)

 

7

 

​  

​  

​  

​  

Fair Value, December 31

 

$

95

 

$

104

 

​  

​  

​  

​  

​  

​  

​  

​  

 

      Weighted-average major assumptions used in accounting for our defined-benefit pension plans were as follows:

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

2013

 

Discount rate for obligations

 

 

4.00 

%

 

3.80 

%

 

4.40 

%

Expected return on plan assets

 

 

7.25 

%

 

7.25 

%

 

7.25 

%

Rate of compensation increase

 

 

 —

%

 

 —

%

 

 —

%

Discount rate for net periodic pension cost

 

 

3.80 

%

 

4.40 

%

 

3.80 

%

 

        At December 31, 2015, the benefits expected to be paid in each of the next five years, and in aggregate for the five years thereafter, relating to our defined-benefit pension plans, were as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

Qualified
Plans

 

Non-Qualified
Plans

 

2016

 

$

49 

 

$

12 

 

2017

 

$

50 

 

$

12 

 

2018

 

$

51 

 

$

12 

 

2019

 

$

52 

 

$

12 

 

2020

 

$

53 

 

$

12 

 

2021 - 2025

 

$

280 

 

$

58 

 

 

SHAREHOLDERS' EQUITY (Tables)
Schedule of components of accumulated other comprehensive loss

     The components of accumulated other comprehensive loss attributable to Masco Corporation were as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

At December 31

 

 

 

2015

 

2014

 

Cumulative translation adjustments

 

$

245

 

$

325

 

Unrealized loss on marketable securities, net

 

 

(12

)

 

(12

)

Unrealized loss on interest rate swaps

 

 

(16

)

 

(18

)

Unrecognized net loss and prior service cost, net

 

 

(382

)

 

(406

)

​  

​  

​  

​  

Accumulated other comprehensive loss

 

$

(165

)

$

(111

)

​  

​  

​  

​  

​  

​  

​  

​  

 

RECLASSIFICATIONS FROM OTHER COMPREHENSIVE (LOSS) INCOME (Tables)
Schedule of reclassifications from accumulated other comprehensive income (loss) to the condensed consolidated statements of operations

        The reclassifications from accumulated other comprehensive income (loss) to the consolidated statements of operations were as follows, in millions:

 

                                                                                                                                                                                    

 

Accumulated Other
Comprehensive Income (Loss)

 

2015

 

2014

 

2013

 

Statement of Operations Line Item

Amortization of defined benefit pension:

 

 

 

 

 

 

 

 

 

 

 

Actuarial losses, net

 

$

21

 

$

13

 

$

18

 

Selling, general and administrative expenses

Tax (benefit) expense

 

 

(8

)

 

(5

)

 

2

 

 

​  

​  

​  

​  

​  

​  

Net of tax

 

$

13

 

$

8

 

$

20

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Interest rate swaps

 

$

2

 

$

2

 

$

2

 

Interest expense

Tax (benefit)

 

 

 

 

(1

)

 

 

 

​  

​  

​  

​  

​  

​  

Net of tax

 

$

2

 

$

1

 

$

2

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

SEGMENT INFORMATION (Tables)
Schedule of information by segment and geographic area

        Information by segment and geographic area was as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

Net Sales
(1)(2)(3)(4)(5)

 

Operating Profit
(Loss) (5)(6)

 

Assets at
December 31 (8)

 

 

 

2015

 

2014

 

2013

 

2015

 

2014

 

2013

 

2015

 

2014

 

2013

 

Our operations by segment were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cabinets and Related Products

 

$

1,025

 

$

999

 

$

1,014

 

$

51

 

$

(62

)

$

(10

)

$

567

 

$

608

 

$

659

 

Plumbing Products

 

 

3,341

 

 

3,308

 

 

3,183

 

 

512

 

 

512

 

 

394

 

 

1,972

 

 

1,989

 

 

2,040

 

Decorative Architectural Products

 

 

2,020

 

 

1,998

 

 

1,927

 

 

403

 

 

360

 

 

351

 

 

874

 

 

857

 

 

812

 

Other Specialty Products

 

 

756

 

 

701

 

 

637

 

 

57

 

 

47

 

 

35

 

 

748

 

 

702

 

 

693

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Total

 

$

7,142

 

$

7,006

 

$

6,761

 

$

1,023

 

$

857

 

$

770

 

$

4,161

 

$

4,156

 

$

4,204

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Our operations by geographic area were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

5,645

 

$

5,377

 

$

5,222

 

$

841

 

$

643

 

$

612

 

$

2,925

 

$

2,861

 

$

2,830

 

International, principally Europe

 

 

1,497

 

 

1,629

 

 

1,539

 

 

182

 

 

214

 

 

158

 

 

1,236

 

 

1,295

 

 

1,374

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Total, as above

 

$

7,142

 

$

7,006

 

$

6,761

 

 

1,023

 

 

857

 

 

770

 

 

4,161

 

 

4,156

 

 

4,204

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

General corporate expense, net (6)

 

 

(109

)

 

(145

)

 

(158

)

 

 

 

 

 

 

 

 

 

Income from litigation settlements (7)

 

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

Operating profit, as reported

 

 

914

 

 

721

 

 

612

 

 

 

 

 

 

 

 

 

 


Other income (expense), net


 


 

(225


)


 

(214


)


 

(226


)


 


 


 


 


 


 


 


 


 

​  

​  

​  

​  

​  

​  

Income from continuing operations before income taxes

 

$

689

 

$

507

 

$

386

 

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Corporate assets

 

 

 

 

 

 

 

 

 

 

 

1,519

 

 

1,576

 

 

1,214

 

Assets held for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

1,476

 

 

1,467

 

​  

​  

​  

​  

​  

​  

Total assets

 

 

 

 

 

 

 

 

 

 

$

5,680

 

$

7,208

 

$

6,885

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

 

 

Property Additions (5)

 

Depreciation and
Amortization (5)

 

 

 

2015

 

2014

 

2013

 

2015

 

2014

 

2013

 

Our operations by segment were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cabinets and Related Products          

 

$

 

$

 

$

 

$

24 

 

$

33 

 

$

42 

 

Plumbing Products

 

 

87 

 

 

65 

 

 

71 

 

 

56 

 

 

63 

 

 

65 

 

Decorative Architectural Products

 

 

16 

 

 

12 

 

 

16 

 

 

16 

 

 

16 

 

 

17 

 

Other Specialty Products

 

 

41 

 

 

28 

 

 

10 

 

 

18 

 

 

18 

 

 

22 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

 

 

150 

 

 

114 

 

 

106 

 

 

114 

 

 

130 

 

 

146 

 

Unallocated amounts, principally related to corporate assets

 

 

 

 

 

 

 

 

13 

 

 

11 

 

 

11 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Total

 

$

151 

 

$

115 

 

$

110 

 

$

127 

 

$

141 

 

$

157 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  


 

 

(1)          

Included in net sales were export sales from the U.S. of $217 million, $228 million and $227 million in 2015, 2014 and 2013, respectively.

(2)          

Excluded from net sales were intra-company sales between segments of less than one percent in 2015, 2014 and 2013.

(3)          

Included in net sales were sales to one customer of $2,378 million, $2,310 million and $2,275 million in 2015, 2014 and 2013, respectively. Such net sales were included in each of our segments.

(4)          

Net sales from our operations in the U.S. were $5,407 million, $5,112 million and $4,947 million in 2015, 2014 and 2013, respectively.

(5)          

Net sales, operating profit (loss), property additions and depreciation and amortization expense for 2015, 2014 and 2013 excluded the results of businesses reported as discontinued operations.

(6)          

General corporate expense, net included those expenses not specifically attributable to our segments.

(7)          

The income from litigation settlements in 2014 relates to a business in our Decorative Architectural Products segment.

(8)          

Long-lived assets of our operations in the U.S. and Europe were $1,487 million and $427 million, $1,470 million and $428 million, and $1,530 million and $481 million at December 31, 2015, 2014 and 2013, respectively.

 

OTHER INCOME (EXPENSE), NET (Tables)
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:

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

2013

 

Income from cash and cash investments

 

$

3

 

$

3

 

$

3

 

Income from financial investments, net (Note E)

 

 

8

 

 

2

 

 

27

 

Foreign currency transaction (losses) gains

 

 

(14

)

 

5

 

 

(21

)

Other items, net

 

 

3

 

 

1

 

 

 

​  

​  

​  

​  

​  

​  

Total other, net

 

$

 

$

11

 

$

9

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

INCOME TAXES (Tables)

 

                                                                                                                                                                                    

 

 

 

 

 

(In Millions)

 

 

 

2015

 

2014

 

2013

 

Income from continuing operations before income taxes:

 

 

 

 

 

 

 

 

 

 

U.S. 

 

$

496

 

$

270

 

$

231

 

Foreign

 

 

193

 

 

237

 

 

155

 

​  

​  

​  

​  

​  

​  

 

 

$

689

 

$

507

 

$

386

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Income tax expense (benefit) on income from continuing operations:

 

 

 

 

 

 

 

 

 

 

Currently payable:

 

 

 

 

 

 

 

 

 

 

U.S. Federal

 

$

10

 

$

3

 

$

3

 

State and local

 

 

27

 

 

1

 

 

2

 

Foreign

 

 

56

 

 

67

 

 

58

 

Deferred:

 

 

 

 

 

 

 

 

 

 

U.S. Federal

 

 

192

 

 

(401

)

 

22

 

State and local

 

 

3

 

 

(21

)

 

3

 

Foreign

 

 

5

 

 

(10

)

 

(2

)

​  

​  

​  

​  

​  

​  

 

 

$

293

 

$

(361

)

$

86

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Deferred tax assets at December 31 (1):

 

 

 

 

 

 

 

 

 

 

Receivables

 

$

9

 

$

9

 

 

 

 

Inventories

 

 

17

 

 

25

 

 

 

 

Other assets, principally stock-based Compensation

 

 

78

 

 

77

 

 

 

 

Accrued liabilities

 

 

118

 

 

102

 

 

 

 

Long-term liabilities

 

 

225

 

 

284

 

 

 

 

Net operating loss carryforward

 

 

39

 

 

194

 

 

 

 

Tax credit carryforward

 

 

55

 

 

44

 

 

 

 

​  

​  

​  

​  

 

 

 

541

 

 

735

 

 

 

 

Valuation allowance

 

 

(49

)

 

(66

)

 

 

 

​  

​  

​  

​  

 

 

 

492

 

 

669

 

 

 

 

​  

​  

​  

​  

Deferred tax liabilities at December 31 (1):

 

 

 

 

 

 

 

 

 

 

Property and equipment

 

 

104

 

 

118

 

 

 

 

Intangibles

 

 

212

 

 

387

 

 

 

 

Investment in foreign subsidiaries

 

 

8

 

 

4

 

 

 

 

Other

 

 

1

 

 

13

 

 

 

 

​  

​  

​  

​  

 

 

 

325

 

 

522

 

 

 

 

​  

​  

​  

​  

Net deferred tax asset at December 31

 

$

167

 

$

147

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  


 

 

(1)          

2014 amounts have not been recasted to exclude discontinued operations.

 

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

2013

 

U.S. Federal statutory tax rate – expense

 

 

35

%

 

35

%

 

35

%

State and local taxes, net of U.S. Federal tax benefit

 

 

3

 

 

(2

)

 

1

 

Lower taxes on foreign earnings

 

 

(1

)

 

(5

)

 

 

U.S. and foreign taxes on distributed and undistributed foreign earnings

 

 

3

 

 

 

 

 

U.S. Federal valuation allowance

 

 

3

 

 

(98

)

 

(13

)

Other, net

 

 

 

 

(1

)

 

(1

)

​  

​  

​  

​  

​  

​  

Effective tax rate – expense (benefit)

 

 

43

%

 

(71

)%

 

22

%

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

        A reconciliation of the beginning and ending liability for uncertain tax positions, including related interest and penalties, is as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

Uncertain
Tax Positions

 

Interest and
Penalties

 

Total

 

Balance at January 1, 2014

 

$

46

 

$

13

 

$

59

 

Current year tax positions:

 

 

 

 

 

 

 

 

 

 

Additions

 

 

9

 

 

 

 

9

 

Reductions

 

 

(1

)

 

 

 

(1

)

Prior year tax positions:

 

 

 

 

 

 

 

 

 

 

Additions

 

 

1

 

 

 

 

1

 

Reductions

 

 

(5

)

 

 

 

(5

)

Settlements with tax authorities

 

 

(1

)

 

 

 

(1

)

Lapse of applicable statute of limitations

 

 

(10

)

 

 

 

(10

)

Interest and penalties recognized in income tax expense

 

 

 

 

(4

)

 

(4

)

​  

​  

​  

​  

​  

​  

Balance at December 31, 2014

 

$

39

 

$

9

 

$

48

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Current year tax positions:

 

 

 

 

 

 

 

 

 

 

Additions

 

 

10

 

 

 

 

10

 

Prior year tax positions:

 

 

 

 

 

 

 

 

 

 

Additions

 

 

1

 

 

 

 

1

 

Reductions

 

 

(1

)

 

 

 

(1

)

Lapse of applicable statute of limitations

 

 

(6

)

 

 

 

(6

)

Interest and penalties recognized in income tax expense

 

 

 

 

1

 

 

1

 

​  

​  

​  

​  

​  

​  

Balance at December 31, 2015

 

$

43

 

$

10

 

$

53

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

EARNINGS PER COMMON SHARE (Tables)
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 earnings per common share were as follows, in millions:

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

2013

 

Numerator (basic and diluted):

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

357

 

$

821

 

$

259

 

Less: Allocation to unvested restricted stock awards

 

 

5

 

 

16

 

 

6

 

​  

​  

​  

​  

​  

​  

Income from continuing operations attributable to common shareholders          

 

 

352

 

 

805

 

 

253

 

​  

​  

​  

​  

​  

​  

(Loss) income from discontinued operations, net

 

 

(2

)

 

35

 

 

29

 

Less: Allocation to unvested restricted stock awards

 

 

 

 

(1

)

 

 

​  

​  

​  

​  

​  

​  

(Loss) income from discontinued operations attributable to common shareholders

 

 

(2

)

 

34

 

 

29

 

​  

​  

​  

​  

​  

​  

Net income available to common shareholders

 

$

350

 

$

839

 

$

282

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Denominator:

 

 

 

 

 

 

 

 

 

 

Basic common shares (based upon weighted average)

 

 

338

 

 

349

 

 

350

 

Add:

 

 

 

 

 

 

 

 

 

 

Stock option dilution

 

 

3

 

 

3

 

 

2

 

​  

​  

​  

​  

​  

​  

Diluted common shares

 

 

341

 

 

352

 

 

352

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

OTHER COMMITMENTS AND CONTINGENCIES (Tables)
Schedule of changes in the Company's warranty liability

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

 

                                                                                                                                                                                    

 

 

 

2015

 

2014

 

Balance at January 1

 

$

135

 

$

124

 

Accruals for warranties issued during the year

 

 

56

 

 

51

 

Accruals related to pre-existing warranties

 

 

15

 

 

11

 

Settlements made (in cash or kind) during the year

 

 

(50

)

 

(46

)

Other, net (including currency translation)

 

 

(4

)

 

(5

)

​  

​  

​  

​  

Balance at December 31

 

$

152

 

$

135

 

​  

​  

​  

​  

​  

​  

​  

​  

 

INTERIM FINANCIAL INFORMATION (UNAUDITED) (Tables)
Schedule of interim financial information

 

                                                                                                                                                                                    

 

 

 

 

 

Quarters Ended

 

 

 

 

 

(In Millions, Except Per Common Share Data)

 

 

 

Total
Year

 

December 31

 

September 30

 

June 30

 

March 31

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

7,142 

 

$

1,715 

 

$

1,839 

 

$

1,929 

 

$

1,659 

 

Gross profit

 

$

2,253 

 

$

532 

 

$

589 

 

$

637 

 

$

495 

 

Income from continuing operations

 

$

357 

 

$

76 

 

$

111 

 

$

109 

 

$

61 

 

Net income

 

$

355 

 

$

75 

 

$

111 

 

$

105 

 

$

64 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations          

 

$

1.04 

 

$

.23

 

$

.33

 

$

.32

 

$

.17

 

Net income

 

$

1.03 

 

$

.22

 

$

.33

 

$

.30

 

$

.18

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations          

 

$

1.03 

 

$

.22

 

$

.32

 

$

.31

 

$

.17

 

Net income

 

$

1.02 

 

$

.22

 

$

.32

 

$

.30

 

$

.18

 

2014

 

 


 

 

 


 

 

 


 

 

 


 

 

 


 

 

Net sales

 

$

7,006 

 

$

1,666 

 

$

1,834 

 

$

1,876 

 

$

1,630 

 

Gross profit

 

$

2,060 

 

$

481 

 

$

522 

 

$

575 

 

$

482 

 

Income from continuing operations

 

$

821 

 

$

86 

 

$

533 

 

$

124 

 

$

78 

 

Net income

 

$

856 

 

$

100 

 

$

543 

 

$

139 

 

$

74 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations          

 

$

2.31 

 

$

.24

 

$

1.49 

 

$

.35

 

$

.22

 

Net income

 

$

2.40 

 

$

.28

 

$

1.52 

 

$

.39

 

$

.21

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations          

 

$

2.28 

 

$

.24

 

$

1.48 

 

$

.35

 

$

.22

 

Net income

 

$

2.38 

 

$

.28

 

$

1.51 

 

$

.39

 

$

.21

 

 

ACCOUNTING POLICIES - Customer Promotion Costs (Details)
12 Months Ended
Dec. 31, 2015
Minimum
 
Customer promotion costs
 
Expected useful life of product
3 years 
Maximum
 
Customer promotion costs
 
Expected useful life of product
5 years 
ACCOUNTING POLICIES - Receivables (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Receivables
 
 
Certain receivables allowances including allowances for doubtful accounts
$ 41 
$ 41 
ACCOUNTING POLICIES - Depreciation (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Property and equipment
 
 
 
Depreciation expense
$ 116 
$ 132 
$ 147 
Cabinets and Related Products and Plumbing Products segments
 
 
 
Property and equipment
 
 
 
Accelerated depreciation expenses
 
 
13 
Cabinets and Related Products
 
 
 
Property and equipment
 
 
 
Accelerated depreciation expenses
 
$ 1 
 
Buildings |
Minimum
 
 
 
Property and equipment
 
 
 
Annual depreciation rates (as a percent)
2.00% 
 
 
Buildings |
Maximum
 
 
 
Property and equipment
 
 
 
Annual depreciation rates (as a percent)
10.00% 
 
 
Machinery and equipment |
Minimum
 
 
 
Property and equipment
 
 
 
Annual depreciation rates (as a percent)
5.00% 
 
 
Machinery and equipment |
Maximum
 
 
 
Property and equipment
 
 
 
Annual depreciation rates (as a percent)
33.00% 
 
 
ACCOUNTING POLICIES - Goodwill and Other Intangible Assets (Details)
12 Months Ended
Dec. 31, 2015
Goodwill and Other Intangible Assets
 
Period of operation forecasts used in impairment test
5 years 
Weighted average cost of capital (as a percent)
8.50% 
Minimum
 
Goodwill and Other Intangible Assets
 
Assumed annual growth rate of cash flows (as a percent)
1.00% 
Discount rate on estimated discounted cash flows (as a percent)
10.50% 
Maximum
 
Goodwill and Other Intangible Assets
 
Assumed annual growth rate of cash flows (as a percent)
3.00% 
Discount rate on estimated discounted cash flows (as a percent)
12.50% 
ACCOUNTING POLICIES - Stock-Based Compensation (Details) (Long-term stock awards)
12 Months Ended
Dec. 31, 2015
Minimum
 
Stock-based compensation
 
Award vesting period
5 years 
Maximum
 
Stock-based compensation
 
Award vesting period
10 years 
Age 66 or older
 
Stock-based compensation
 
Award vesting period
5 years 
ACCOUNTING POLICIES - Noncontrolling Interest (Details) (Hansgrohe SE)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Hansgrohe SE
 
 
Noncontrolling interest
 
 
Ownership percentage of Hansgrohe SE
68.00% 
68.00% 
ACCOUNTING POLICIES - Recently Issued Accounting Pronouncements (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Recently Issued Accounting Pronouncements
 
 
Decrease in current assets
$ (3,328)
$ (3,620)
Restatement adjustment |
Accounting Standards Update 2015-17
 
 
Recently Issued Accounting Pronouncements
 
 
Decrease in current assets
 
244 
Increase in non-current assets
 
219 
Decrease in non-current liabilities
 
$ 25 
DISCONTINUED OPERATIONS - Selected Financial Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 0 Months Ended 1 Months Ended
Dec. 31, 2015
Dec. 31, 2013
Sep. 30, 2015
TopBuild
Sep. 30, 2014
TopBuild
Installation and Other Services
Dec. 31, 2013
Tvilum
Selected financial information of discontinued operations
 
 
 
 
 
Percentage of businesses planned for spinoff
 
 
 
100.00% 
 
Issuance of TopBuild Corp. debt
$ 200 
 
$ 200 
 
 
Net proceeds from disposition of business
 
$ 17 
 
 
$ 17 
DISCONTINUED OPERATIONS - The Major Classes of Line Items Constituting Pre-tax (Loss) Profit (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Pre-tax profit (Loss) of discontinued operations
 
 
 
Net sales
$ 762 
$ 1,515 
$ 1,412 
Cost of sales
603 
1,188 
1,116 
Gross profit
159 
327 
296 
Selling, general and administrative expenses
148 
259 
232 
Income from discontinued operations
11 
68 
64 
(Loss) gain on disposal of discontinued operations, net
(1)
(6)
Operating loss from discontinued operations
 
 
(7)
Impairment of assets held for sale
 
 
(10)
Income before income tax
10 
62 
50 
Income tax expense
(12)
(27)
(21)
(Loss) income from discontinued operations, net
(2)
35 
29 
Tvilum
 
 
 
Pre-tax profit (Loss) of discontinued operations
 
 
 
Net sales
 
 
265 
Impairment of assets held for sale
 
 
$ (10)
DISCONTINUED OPERATIONS - The Carrying Amount of Major Classes of Assets and Liabilities (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Carrying amount of major classes of assets and liabilities included as part of discontinued operations
 
 
Total assets classified as held for sale
$ 1,476 
$ 1,467 
TopBuild
 
 
Carrying amount of major classes of assets and liabilities included as part of discontinued operations
 
 
Cash
 
Receivables
220 
 
Inventories
107 
 
Prepaid expenses and other
 
Property and equipment, net
93 
 
Goodwill
1,044 
 
Other intangible assets, net
 
Other assets
 
Total assets classified as held for sale
1,476 
 
Accounts payable
229 
 
Accrued liabilities
71 
 
Other liabilities
40 
 
Deferred income taxes
129 
 
Total liabilities classified as held for sale
$ 469 
 
DISCONTINUED OPERATIONS - Other Selected Financial Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Selected financial information of discontinued operations
 
 
 
Depreciation and amortization
$ 6 
$ 26 
$ 27 
Capital expenditures
$ 7 
$ 13 
$ 14 
ACQUISITIONS (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Jun. 30, 2015
U.K. window business
Mar. 31, 2015
Aquatic fitness business
Mar. 31, 2013
Small U.K. door business
Acquisitions
 
 
 
Cash consideration
$ 16 
$ 25 
$ 4 
INVENTORIES (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
INVENTORIES
 
 
Finished goods
$ 358 
$ 361 
Raw material
238 
251 
Work in process
91 
100 
Total
$ 687 
$ 712 
FAIR VALUE OF FINANCIAL INVESTMENTS AND LIABILITIES - Financial Investments (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Financial Investments
 
 
Total
$ 48 
$ 50 
Auction rate securities
 
 
Financial Investments
 
 
Recurring investments, Available-for-sale securities
22 
22 
Recurring |
Level 3
 
 
Financial Investments
 
 
Recurring investments, Available-for-sale securities
22 
22 
Recurring |
Auction rate securities |
Level 3
 
 
Financial Investments
 
 
Recurring investments, Available-for-sale securities
22 
22 
Non-recurring |
Equity method investments
 
 
Financial Investments
 
 
Equity method investments
13 
11 
Non-recurring |
Private equity funds
 
 
Financial Investments
 
 
Private equity funds
10 
14 
Non-recurring |
Other investments
 
 
Financial Investments
 
 
Other investments
$ 3 
$ 3 
FAIR VALUE OF FINANCIAL INVESTMENTS AND LIABILITIES - General Disclosures (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Financial Investments
 
 
 
 
Proceeds from sale of equity method investment
$ 48 
 
 
 
Changes in Level 3 financial investments
 
 
Financial investments measured for impairment
Transfers from Level 1 to Level 2
 
Transfers from Level 2 to Level 1
 
Auction rate securities
 
 
 
 
Financial Investments
 
 
 
 
Cost basis available-for-sale securities
19 
19 
19 
 
Pre-tax unrealized gains, available-for-sale securities
 
Recorded basis, available for sale securities
$ 22 
$ 22 
$ 22 
 
First auction rate securities interest rate reset period
 
7 days 
 
 
Second auction rate securities interest rate reset period
 
28 days 
 
 
Third auction rate securities interest rate reset period
 
35 days 
 
 
FAIR VALUE OF FINANCIAL INVESTMENTS AND LIABILITIES - Realized Gains (Losses) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Realized Gains (Losses)
 
 
 
Income from financial investments, net
$ 8 
$ 2 
$ 27 
Other, net
 
 
 
Realized Gains (Losses)
 
 
 
Equity investment income (loss), net
(2)
16 
Income from financial investments, net
27 
Other, net |
Private equity funds
 
 
 
Realized Gains (Losses)
 
 
 
Realized gains from private equity funds
$ 6 
$ 4 
$ 11 
FAIR VALUE OF FINANCIAL INVESTMENTS AND LIABILITIES - Fair Value of Debt (Details) (USD $)
In Billions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Fair Value
 
 
Fair value of debt
 
 
Long-term and short-term debt
$ 3.6 
$ 3.7 
Carrying Value
 
 
Fair value of debt
 
 
Long-term and short-term debt
$ 3.4 
$ 3.4 
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Interest Rate Swap Agreements (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2012
Interest Rate Swap Agreements
 
 
Debt issued
 
$ 400 
Derivatives designated as hedging instruments |
Cash flow hedges |
Interest Rate Swaps |
Three-month LIBOR
 
 
Interest Rate Swap Agreements
 
 
Interest rate swap loss amortized as an increase to interest expense over the remaining term of the debt
 
23 
Balance remaining in accumulated other comprehensive loss
16 
 
Derivatives designated as hedging instruments |
Cash flow hedges |
Interest Rate Swaps |
Other, net |
Three-month LIBOR
 
 
Interest Rate Swap Agreements
 
 
Ineffective portion of the cash flow hedges
 
$ 2 
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - The Pre-tax (Losses) Gains Included in the Consolidated Statements of Operations (Details) (Not designated as a hedge, USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Derivative instruments and hedging activities
 
 
 
Total (loss) gain
$ (18)
 
$ (6)
Foreign currency exchange contracts |
Other, net
 
 
 
Derivative instruments and hedging activities
 
 
 
Total (loss) gain
Foreign currency forward contracts |
Other, net
 
 
 
Derivative instruments and hedging activities
 
 
 
Total (loss) gain
(3)
 
Metals contracts |
Cost of sales
 
 
 
Derivative instruments and hedging activities
 
 
 
Total (loss) gain
(17)
(3)
(7)
Interest Rate Swaps |
Other, net
 
 
 
Derivative instruments and hedging activities
 
 
 
Total (loss) gain
$ (2)
$ (2)
$ (2)
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Notional Amounts Being Hedged and the Fair Value of those Derivative Instruments (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Foreign currency exchange contracts
 
 
Derivative instruments and hedging activities
 
 
Notional Amount
$ 39 
$ 55 
Foreign currency exchange contracts |
Receivables, net, current |
Recurring |
Level 2
 
 
Derivative instruments and hedging activities
 
 
Assets
Foreign currency forward contracts
 
 
Derivative instruments and hedging activities
 
 
Notional Amount
30 
79 
Foreign currency forward contracts |
Other non-current assets |
Recurring |
Level 2
 
 
Derivative instruments and hedging activities
 
 
Assets
 
Foreign currency forward contracts |
Accrued liabilities, current |
Recurring |
Level 2
 
 
Derivative instruments and hedging activities
 
 
Liabilities
(2)
(1)
Foreign currency forward contracts |
Other non-current liabilities |
Recurring |
Level 2
 
 
Derivative instruments and hedging activities
 
 
Liabilities
(1)
 
Metals contracts
 
 
Derivative instruments and hedging activities
 
 
Notional Amount
50 
70 
Metals contracts |
Accrued liabilities, current |
Recurring |
Level 2
 
 
Derivative instruments and hedging activities
 
 
Liabilities
$ (10)
$ (2)
PROPERTY AND EQUIPMENT - Property and Equipment, Net (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Property and Equipment
 
 
Property and equipment, Gross
$ 2,574 
$ 2,627 
Less: Accumulated depreciation
(1,547)
(1,581)
Total
1,027 
1,046 
Land and improvements
 
 
Property and Equipment
 
 
Property and equipment, Gross
115 
122 
Buildings
 
 
Property and Equipment
 
 
Property and equipment, Gross
672 
715 
Machinery and equipment
 
 
Property and Equipment
 
 
Property and equipment, Gross
$ 1,787 
$ 1,790 
PROPERTY AND EQUIPMENT - Future Minimum Lease Payments (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
PROPERTY AND EQUIPMENT
 
 
 
Rental expense
$ 60 
$ 63 
$ 59 
2016
38 
 
 
2017
27 
 
 
2018
20 
 
 
2019
16 
 
 
2020
11 
 
 
2021 and beyond
$ 65 
 
 
PROPERTY AND EQUIPMENT - Facilities Held-for-sale (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
facility
Dec. 31, 2014
Facilities held-for-sale
 
 
Net book value
$ 1,027 
$ 1,046 
Two facilities held for sale |
Cabinets and Related Products
 
 
Facilities held-for-sale
 
 
Net book value
17 
Number of facilities sold
 
Asset impairment charges
 
$ 28 
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill, Net (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Goodwill
 
 
 
Gross Goodwill
$ 2,047 
$ 2,048 
$ 2,067 
Accumulated Impairment Losses
(1,208)
(1,208)
(1,208)
Net Goodwill
839 
840 
859 
Cabinets and Related Products
 
 
 
Goodwill
 
 
 
Gross Goodwill
240 
240 
240 
Accumulated Impairment Losses
(59)
(59)
(59)
Net Goodwill
181 
181 
181 
Plumbing Products
 
 
 
Goodwill
 
 
 
Gross Goodwill
525 
531 
550 
Accumulated Impairment Losses
(340)
(340)
(340)
Net Goodwill
185 
191 
210 
Decorative Architectural Products
 
 
 
Goodwill
 
 
 
Gross Goodwill
294 
294 
294 
Accumulated Impairment Losses
(75)
(75)
(75)
Net Goodwill
219 
219 
219 
Other Specialty Products
 
 
 
Goodwill
 
 
 
Gross Goodwill
988 
983 
983 
Accumulated Impairment Losses
(734)
(734)
(734)
Net Goodwill
$ 254 
$ 249 
$ 249 
GOODWILL AND OTHER INTANGIBLE ASSETS - Changes in the Carrying Amount of Goodwill (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Cabinets and Related Products
Dec. 31, 2014
Cabinets and Related Products
Dec. 31, 2013
Cabinets and Related Products
Dec. 31, 2015
Plumbing Products
Dec. 31, 2014
Plumbing Products
Dec. 31, 2015
Decorative Architectural Products
Dec. 31, 2014
Decorative Architectural Products
Dec. 31, 2013
Decorative Architectural Products
Dec. 31, 2015
Other Specialty Products
Dec. 31, 2013
Other Specialty Products
Changes in the carrying amount of goodwill
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$ 840 
$ 859 
$ 181 
$ 181 
$ 181 
$ 191 
$ 210 
$ 219 
$ 219 
$ 219 
$ 249 
$ 249 
Additions
14 
 
 
 
 
 
 
 
 
 
Other
(15)
(19)
 
 
 
(14)
(19)
 
 
 
(1)
 
Ending balance
$ 839 
$ 840 
$ 181 
$ 181 
$ 181 
$ 185 
$ 191 
$ 219 
$ 219 
$ 219 
$ 254 
$ 249 
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill Impairment (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
GOODWILL AND OTHER INTANGIBLE ASSETS
 
 
 
Pre-tax impairment charges for goodwill
$ 0 
$ 0 
$ 0 
GOODWILL AND OTHER INTANGIBLE ASSETS - Other Indefinite-lived Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2013
Dec. 31, 2014
GOODWILL AND OTHER INTANGIBLE ASSETS
 
 
 
Impairment of other indefinite-lived assets
$ 0 
$ 0 
 
Other indefinite-lived intangible assets
137 
 
130 
Increase in other indefinite-lived intangible assets
$ 7 
 
 
GOODWILL AND OTHER INTANGIBLE ASSETS - Definite-lived Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Definite-lived Intangible Assets
 
 
 
Carrying value of definite-lived intangible assets
$ 23 
$ 12 
 
Accumulated amortization
49 
48 
 
Amortization expense related to the definite-lived intangible assets
Increase in definite-lived intangible assets
17 
 
 
Amortization expense related to the definite-lived intangible assets, 2016
 
 
Amortization expense related to the definite-lived intangible assets, 2017
 
 
Amortization expense related to the definite-lived intangible assets, 2018
 
 
Amortization expense related to the definite-lived intangible assets, 2019
 
 
Amortization expense related to the definite-lived intangible assets, 2020
$ 2 
 
 
Weighted average
 
 
 
Definite-lived Intangible Assets
 
 
 
Weighted average amortization period
6 years 
6 years 
 
OTHER ASSETS (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
OTHER ASSETS
 
 
 
Financial investments (Note E)
$ 48 
$ 50 
 
In-store displays, net
56 
36 
 
Debenture expense
20 
19 
 
Deferred tax assets
184 
293 
 
Other
18 
21 
 
Total
326 
419 
 
Amortization period of in-store displays, minimum
3 years 
 
 
Amortization period of in-store displays, maximum
5 years 
 
 
Amortization expense related to in-store displays
20 
15 
19 
Cash spent for in-store displays
$ 43 
$ 30 
$ 5 
ACCRUED LIABILITIES (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
ACCRUED LIABILITIES
 
 
 
Salaries, wages and commissions
$ 171 
$ 164 
 
Warranty (Note U)
152 
135 
124 
Advertising and sales promotion
132 
111 
 
Insurance reserves
44 
39 
 
Interest
62 
57 
 
Employee retirement plans
48 
40 
 
Property, payroll and other taxes
25 
25 
 
Dividends payable
32 
32 
 
Other
86 
82 
 
Total
$ 752 
$ 685 
 
DEBT - Tabular Disclosure - Notes and Debentures and Other (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Jun. 15, 2015
Senior notes and debentures
4.8% Notes and Debentures Due 15 June 2015
Dec. 31, 2014
Senior notes and debentures
4.8% Notes and Debentures Due 15 June 2015
Dec. 31, 2015
Senior notes and debentures
6.125% Notes and Debentures Due 3 October 2016
Dec. 31, 2014
Senior notes and debentures
6.125% Notes and Debentures Due 3 October 2016
Dec. 31, 2015
Senior notes and debentures
5.85% Notes and Debentures Due 15 March 2017
Dec. 31, 2014
Senior notes and debentures
5.85% Notes and Debentures Due 15 March 2017
Dec. 31, 2015
Senior notes and debentures
6.625% Notes and Debentures Due 15 April 2018
Dec. 31, 2014
Senior notes and debentures
6.625% Notes and Debentures Due 15 April 2018
Dec. 31, 2015
Senior notes and debentures
7.125% Notes and Debentures Due 15 March 2020
Dec. 31, 2014
Senior notes and debentures
7.125% Notes and Debentures Due 15 March 2020
Dec. 31, 2015
Senior notes and debentures
5.95% Notes and Debentures Due 15 March 2022
Dec. 31, 2014
Senior notes and debentures
5.95% Notes and Debentures Due 15 March 2022
Dec. 31, 2015
Senior notes and debentures
4.45% Notes and Debentures Due 1 April 2025
Mar. 24, 2015
Senior notes and debentures
4.45% Notes and Debentures Due 1 April 2025
Dec. 31, 2015
Senior notes and debentures
7.75% Notes and Debentures Due 1 August 2029
Dec. 31, 2014
Senior notes and debentures
7.75% Notes and Debentures Due 1 August 2029
Dec. 31, 2015
Senior notes and debentures
6.5% Notes and Debentures Due 15 August 2032
Dec. 31, 2014
Senior notes and debentures
6.5% Notes and Debentures Due 15 August 2032
Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate (as a percent)
 
 
4.80% 
4.80% 
6.125% 
6.125% 
5.85% 
5.85% 
6.625% 
6.625% 
7.125% 
7.125% 
5.95% 
5.95% 
4.45% 
4.45% 
7.75% 
7.75% 
6.50% 
6.50% 
Notes and debentures
 
 
 
$ 500 
$ 1,000 
$ 1,000 
$ 300 
$ 300 
$ 114 
$ 114 
$ 500 
$ 500 
$ 400 
$ 400 
$ 500 
 
$ 296 
$ 296 
$ 300 
$ 300 
Other
13 
14 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total long-term debt, current and non-current
$ 3,423 
$ 3,424 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DEBT - Tabular Disclosure - Total Long-term Debt (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Debt
 
 
Total long-term debt, current and non-current
$ 3,423 
$ 3,424 
Less: Current portion
1,005 
505 
Total long-term debt
$ 2,418 
$ 2,919 
DEBT - Notes and Debentures (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 0 Months Ended
Dec. 31, 2015
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2015
6.625% Notes and Debentures Due 15 April 2018
Senior notes and debentures
Dec. 31, 2014
6.625% Notes and Debentures Due 15 April 2018
Senior notes and debentures
Dec. 31, 2015
7.75% Notes and Debentures Due 1 August 2029
Senior notes and debentures
Dec. 31, 2014
7.75% Notes and Debentures Due 1 August 2029
Senior notes and debentures
Jun. 15, 2015
4.8% Notes and Debentures Due 15 June 2015
Senior notes and debentures
Jun. 15, 2015
4.8% Notes and Debentures Due 15 June 2015
Senior notes and debentures
Dec. 31, 2014
4.8% Notes and Debentures Due 15 June 2015
Senior notes and debentures
Dec. 31, 2015
4.45% Notes and Debentures Due 1 April 2025
Senior notes and debentures
Mar. 24, 2015
4.45% Notes and Debentures Due 1 April 2025
Senior notes and debentures
Debt
 
 
 
 
 
 
 
 
 
 
 
 
Repayments of Notes Payable
$ 500 
$ 200 
 
 
 
 
 
$ 500 
 
 
 
 
Debt issued
 
 
$ 400 
 
 
 
 
 
 
 
 
$ 500 
Interest rate (as a percent)
 
 
 
6.625% 
6.625% 
7.75% 
7.75% 
 
4.80% 
4.80% 
4.45% 
4.45% 
DEBT - Credit Agreement (Details) (Line of credit, USD $)
In Millions, unless otherwise specified
0 Months Ended 0 Months Ended
Mar. 28, 2013
Credit Agreement dated March 28, 2013
May 29, 2015
Credit agreement dated March 28, 2013 as amended on May 29, 2015 and August 28, 2015
Dec. 31, 2015
Credit agreement dated March 28, 2013 as amended on May 29, 2015 and August 28, 2015
May 29, 2015
Credit agreement dated March 28, 2013 as amended on May 29, 2015 and August 28, 2015
Mar. 28, 2013
Credit agreement dated March 28, 2013 as amended on May 29, 2015 and August 28, 2015
Prime rate
Mar. 28, 2013
Credit agreement dated March 28, 2013 as amended on May 29, 2015 and August 28, 2015
Federal funds effective rate
Mar. 28, 2013
Credit agreement dated March 28, 2013 as amended on May 29, 2015 and August 28, 2015
Libor rate
Dec. 31, 2015
Credit agreement dated March 28, 2013 as amended on May 29, 2015 and August 28, 2015
Revolver
European euros
Dec. 31, 2015
Credit agreement dated March 28, 2013 as amended on May 29, 2015 and August 28, 2015
Swingline loans
Dec. 31, 2015
Credit agreement dated March 28, 2013 as amended on May 29, 2015 and August 28, 2015
Letters of credit
Debt
 
 
 
 
 
 
 
 
 
 
Borrowing capacity, maximum
$ 1,250 
 
 
$ 750 
 
 
 
$ 500 
$ 75 
$ 100 
Increase in maximum borrowing capacity
 
 
 
375 
 
 
 
 
 
 
Outstanding and unused Letters of Credit
 
 
 
 
 
 
 
 
 
Basis spread
 
 
 
 
prime rate 
Federal Funds effective rate 
LIBOR 
 
 
 
Interest rate, basis spread (as a percent)
 
 
 
 
 
0.50% 
1.00% 
 
 
 
Maximum net leverage ratio
 
4.0 
 
 
 
 
 
 
 
 
Minimum interest coverage ratio
 
2.5 
 
 
 
 
 
 
 
 
Amount borrowed
 
 
$ 0 
 
 
 
 
 
 
 
DEBT - Debt Maturities (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Debt maturities
 
2016
$ 1,005 
2017
301 
2018
115 
2019
2020
$ 501 
STOCK-BASED COMPENSATION - Common Stock Available under the Plan (Details) (2014 Plan)
In Millions, unless otherwise specified
Dec. 31, 2015
2014 Plan
 
Stock-based compensation
 
Common stock available for granting stock options and other long-term stock incentive awards
17.1 
STOCK-BASED COMPENSATION - Long-Term Stock Awards (Details) (Long-term stock awards, USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Long-term stock awards
 
 
 
Unvested stock award shares
 
 
 
Balance at the beginning of the period (in shares)
6,000,000 
8,000,000 
8,000,000 
Granted (in shares)
741,040 
1,000,000 
2,000,000 
Vested (in shares)
2,000,000 
2,000,000 
2,000,000 
Forfeited (in shares)
 
1,000,000 
 
Forfeitures upon spin off
1,000,000 
 
 
Modification upon spin off
1,000,000 
 
 
Balance at the end of the period (in shares)
5,000,000 
6,000,000 
8,000,000 
Weighted average grant date fair value
 
 
 
Balance at the beginning of the period (in dollars per share)
$ 18 
$ 17 
$ 16 
Granted (in dollars per share)
$ 26 
$ 22 
$ 20 
Vested (in dollars per share)
$ 17 
$ 17 
$ 17 
Forfeited (in dollars per share)
$ 18 
$ 19 
$ 16 
Forfeitures upon spin off (in dollars per share)
$ 20 
 
 
Balance at the end of the period (in dollars per share)
$ 17 
$ 18 
$ 17 
Additional disclosures
 
 
 
Total unrecognized compensation expense
$ 42 
$ 60 
$ 69 
Remaining weighted average vesting period
3 years 
3 years 
3 years 
Total market value (at the vesting date) of stock award shares
$ 54 
$ 50 
$ 38 
STOCK-BASED COMPENSATION - Stock Options (Details) (Stock Options, USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Stock Options
 
 
 
Stock Options
 
 
 
Vesting period
5 years 
 
 
Expiration period
10 years 
 
 
Shares
 
 
 
Outstanding at the beginning of the period (in shares)
18,000,000 
24,000,000 
30,000,000 
Granted (in shares)
452,380 
 
1,000,000 
Exercised (in shares)
5,000,000 
2,000,000 
3,000,000 
Forfeited (in shares)
3,200,000 
4,000,000 
4,000,000 
Modification upon spin off
2,000,000 
 
 
Outstanding at the end of the period (in shares)
12,000,000 
18,000,000 
24,000,000 
Option shares vested and expected to vest at the end of the period
12,000,000 
18,000,000 
24,000,000 
Option shares exercisable at the end of the period
10,000,000 
15,000,000 
20,000,000 
Weighted average exercise price
 
 
 
Outstanding at the beginning of the period (in dollars per share)
$ 21 
$ 22 
$ 21 
Granted (in dollars per share)
$ 26 
$ 22 
$ 20 
Exercised (in dollars per share)
$ 17 
$ 16 
$ 12 
Forfeited (in dollars per share)
$ 29 
$ 28 
$ 26 
Forfeitures upon spin off (in dollars per share)
$ 19 
 
 
Outstanding at the end of the period (in dollars per share)
$ 17 
$ 21 
$ 22 
Option shares vested and expected to vest at the end of the period (in dollars per share)
$ 17 
$ 21 
$ 22 
Option shares exercisable at the end of the period (in dollars per share)
$ 18 
$ 22 
$ 24 
Aggregate intrinsic value
 
 
 
Exercised
$ 50 
$ 22 
$ 23 
Option shares vested and expected to vest at the end of the period
133 
110 
109 
Option shares exercisable at the end of the period
113 
84 
62 
Weighted average remaining option term
 
 
 
Outstanding at the end of the period
3 years 
4 years 
4 years 
Option shares vested and expected to vest at the end of the period
3 years 
4 years 
4 years 
Option shares exercisable at the end of the period
3 years 
3 years 
3 years 
Additional disclosures
 
 
 
Total unrecognized compensation expense
$ 6 
$ 6 
$ 9 
Weighted average remaining vesting period
2 years 
2 years 
2 years 
STOCK-BASED COMPENSATION - Weighted Average Grant Date Fair Value of Option Shares Granted and Assumptions Used (Details) (Stock Options, USD $)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Stock Options
 
 
 
Stock Options
 
 
 
Weighted average grant date fair value (in dollars per share)
$ 9.67 
$ 9.53 
$ 8.35 
Risk-free interest rate (as a percent)
1.75% 
1.91% 
1.22% 
Dividend yield (as a percent)
1.32% 
1.34% 
1.47% 
Volatility factor (as a percent)
42.00% 
49.00% 
49.07% 
Expected option life
6 years 
6 years 
6 years 
STOCK-BASED COMPENSATION - Stock Option Shares Outstanding and Exercisable (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Stock-based compensation
 
Exercise price range, low end of range (in dollars per share)
$ 7 
Exercise price range, high end of range (in dollars per share)
$ 29 
Option Shares Outstanding, Number of Shares
12 
Option Shares Outstanding, Weighted Average Remaining Option Term
3 years 
Option Shares Outstanding, Weighted Average Exercise Price (in dollars per share)
$ 17 
Option Shares Exercisable, Number of Shares
10 
Option Shares Exercisable, Weighted Average Exercise price (in dollars per share)
$ 18 
Range One
 
Stock-based compensation
 
Exercise price range, low end of range (in dollars per share)
$ 7 
Exercise price range, high end of range (in dollars per share)
$ 18 
Option Shares Outstanding, Number of Shares
Option Shares Outstanding, Weighted Average Remaining Option Term
4 years 
Option Shares Outstanding, Weighted Average Exercise Price (in dollars per share)
$ 12 
Option Shares Exercisable, Number of Shares
Option Shares Exercisable, Weighted Average Exercise price (in dollars per share)
$ 12 
Range Two
 
Stock-based compensation
 
Exercise price range, low end of range (in dollars per share)
$ 20 
Exercise price range, high end of range (in dollars per share)
$ 23 
Option Shares Outstanding, Number of Shares
Option Shares Outstanding, Weighted Average Remaining Option Term
3 years 
Option Shares Outstanding, Weighted Average Exercise Price (in dollars per share)
$ 23 
Option Shares Exercisable, Number of Shares
Option Shares Exercisable, Weighted Average Exercise price (in dollars per share)
$ 23 
Range Three
 
Stock-based compensation
 
Exercise price range, low end of range (in dollars per share)
$ 25 
Exercise price range, high end of range (in dollars per share)
$ 27 
Option Shares Outstanding, Number of Shares
Option Shares Outstanding, Weighted Average Remaining Option Term
1 year 
Option Shares Outstanding, Weighted Average Exercise Price (in dollars per share)
$ 27 
Option Shares Exercisable, Number of Shares
Option Shares Exercisable, Weighted Average Exercise price (in dollars per share)
$ 27 
Range Four
 
Stock-based compensation
 
Exercise price range, low end of range (in dollars per share)
$ 28 
Exercise price range, high end of range (in dollars per share)
$ 29 
Option Shares Outstanding, Weighted Average Remaining Option Term
0 years 
Option Shares Outstanding, Weighted Average Exercise Price (in dollars per share)
$ 29 
Option Shares Exercisable, Weighted Average Exercise price (in dollars per share)
$ 29 
STOCK-BASED COMPENSATION - Phantom Stock Awards and Stock Appreciation Rights ("SARs") (Details) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Phantom Stock Awards
 
 
 
Stock-based compensation
 
 
 
Recognized expense (income) related to valuation
$ 5 
$ 5 
$ 5 
Granted (in shares)
134,560 
183,530 
165,180 
Fair value of stock award granted
Cash paid to settle awards
Accrued compensation cost liability
13 
13 
 
Unrecognized compensation cost
 
Equivalent common shares
1,000,000 
1,000,000 
 
Phantom Stock Awards |
Minimum
 
 
 
Stock-based compensation
 
 
 
Vesting period
5 years 
 
 
Phantom Stock Awards |
Maximum
 
 
 
Stock-based compensation
 
 
 
Vesting period
10 years 
 
 
Stock Appreciation Rights
 
 
 
Stock-based compensation
 
 
 
Vesting period
5 years 
 
 
Recognized expense (income) related to valuation
Accrued compensation cost liability
$ 10 
$ 7 
 
Equivalent common shares
1,000,000 
1,000,000 
 
EMPLOYEE RETIREMENT PLANS - Pre-tax Expense (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
plan
Dec. 31, 2014
Dec. 31, 2013
Pre-tax expense
 
 
 
Number of regional multi-employer pension plans in which the entity participates
 
 
Pre-tax expense
$ 84 
$ 68 
$ 82 
Defined-contribution plans
 
 
 
Pre-tax expense
 
 
 
Pre-tax expense
52 
43 
51 
Defined-benefit pension plans
 
 
 
Pre-tax expense
 
 
 
Pre-tax expense
$ 32 
$ 25 
$ 31 
EMPLOYEE RETIREMENT PLANS - Changes in the Projected Benefit Obligation and Fair Value of Plan Assets, and the Funded Status of Defined-benefit Pension Plans (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Qualified
 
 
 
Changes in projected benefit obligation:
 
 
 
Balance at the beginning of the period
$ 1,145 
$ 983 
 
Service cost
Interest cost
41 
41 
 
Actuarial (gain) loss, net
(61)
184 
 
Foreign currency exchange
(23)
(24)
 
Benefit payments
(46)
(42)
 
Balance at the end of the period
1,059 
1,145 
983 
Changes in fair value of plan assets:
 
 
 
Balance at the beginning of the period
691 
659 
 
Actual return on plan assets
(12)
38 
 
Foreign currency exchange
(7)
(8)
 
Company contributions
38 
49 
 
Expenses, other
(6)
(5)
 
Benefit payments
(46)
(42)
 
Balance at the end of the period
658 
691 
659 
Funded status at the end of the period
(401)
(454)
 
Non-Qualified
 
 
 
Changes in projected benefit obligation:
 
 
 
Balance at the beginning of the period
190 
163 
 
Interest cost
 
Actuarial (gain) loss, net
(11)
32 
 
Benefit payments
(12)
(12)
 
Balance at the end of the period
174 
190 
 
Changes in fair value of plan assets:
 
 
 
Company contributions
12 
12 
 
Benefit payments
(12)
(12)
 
Funded status at the end of the period
$ (174)
$ (190)
 
EMPLOYEE RETIREMENT PLANS - Amounts in Consolidated Balance Sheets (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Amounts in the company's consolidated balance sheets
 
 
Accrued liabilities
$ (48)
$ (40)
Qualified
 
 
Amounts in the company's consolidated balance sheets
 
 
Other assets
 
Accrued liabilities
(3)
(2)
Other liabilities
399 
452 
Total net liability
(401)
(454)
Non-Qualified
 
 
Amounts in the company's consolidated balance sheets
 
 
Accrued liabilities
(12)
(12)
Other liabilities
162 
178 
Total net liability
$ (174)
$ (190)
EMPLOYEE RETIREMENT PLANS - Unrealized Loss Included in Accumulated Other Comprehensive (Loss) Income before Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Qualified
 
 
Amounts in accumulated other comprehensive income (loss) before income taxes
 
 
Net loss
$ 501 
$ 524 
Net transition obligation
Net prior service cost
Total
504 
527 
Non-Qualified
 
 
Amounts in accumulated other comprehensive income (loss) before income taxes
 
 
Net loss
56 
68 
Total
$ 56 
$ 68 
EMPLOYEE RETIREMENT PLANS - Defined-benefit Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Qualified
 
 
Information for the defined-benefit pension plans with an accumulated benefit obligation in excess of plan assets
 
 
Projected benefit obligation
$ 1,045 
$ 1,132 
Accumulated benefit obligation
1,045 
1,132 
Fair value of plan assets
643 
677 
Non-Qualified
 
 
Information for the defined-benefit pension plans with an accumulated benefit obligation in excess of plan assets
 
 
Projected benefit obligation
174 
190 
Accumulated benefit obligation
$ 174 
$ 190 
EMPLOYEE RETIREMENT PLANS - Net Periodic Pension Cost for Defined-benefit Pension Plans (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Net periodic pension cost for the company's defined-benefit pension plans
 
 
 
Pre-tax net loss from accumulated other comprehensive income (loss) into net periodic pension cost
$ 19 
 
 
Qualified
 
 
 
Net periodic pension cost for the company's defined-benefit pension plans
 
 
 
Service cost
Interest cost
47 
47 
44 
Expected return on plan assets
(46)
(45)
(40)
Amortization of net loss
18 
11 
16 
Net periodic pension cost
22 
16 
23 
Non-Qualified
 
 
 
Net periodic pension cost for the company's defined-benefit pension plans
 
 
 
Interest cost
Amortization of net loss
Net periodic pension cost
$ 10 
$ 9 
$ 8 
EMPLOYEE RETIREMENT PLANS - Qualified Defined-benefit Pension Plan Weighted Average Asset Allocation (Details) (Qualified)
Dec. 31, 2015
Dec. 31, 2014
Plan Assets
 
 
Weighted average asset allocation (as a percent)
100.00% 
100.00% 
Equity securities
 
 
Plan Assets
 
 
Weighted average asset allocation (as a percent)
49.00% 
46.00% 
Debt securities
 
 
Plan Assets
 
 
Weighted average asset allocation (as a percent)
32.00% 
34.00% 
Other
 
 
Plan Assets
 
 
Weighted average asset allocation (as a percent)
19.00% 
20.00% 
EMPLOYEE RETIREMENT PLANS - Qualified Defined-benefit Pension Plan Assets at Fair Value by Level within the Fair Value Hierarchy (Details) (Qualified, USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Fair Value
 
 
 
Total Assets at Fair Value
$ 658 
$ 691 
$ 659 
US |
Common and Preferred Stocks
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
253 
252 
 
US |
Private Equity and Hedge Funds
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
52 
59 
 
US |
Corporate Debt Securities
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
44 
48 
 
US |
Government and Other Debt Securities
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
67 
66 
 
US |
Common Collective Trust Fund
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
 
US |
Short-Term and other Investments
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
 
International |
Common and Preferred Stocks
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
69 
65 
 
International |
Private Equity and Hedge Funds
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
24 
27 
 
International |
Corporate Debt Securities
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
48 
75 
 
International |
Government and Other Debt Securities
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
53 
51 
 
International |
Short-Term and other Investments
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
42 
42 
 
Assets at Fair Value (Level 1)
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
291 
292 
 
Assets at Fair Value (Level 1) |
US |
Common and Preferred Stocks
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
127 
136 
 
Assets at Fair Value (Level 1) |
US |
Corporate Debt Securities
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
18 
15 
 
Assets at Fair Value (Level 1) |
US |
Government and Other Debt Securities
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
64 
64 
 
Assets at Fair Value (Level 1) |
US |
Short-Term and other Investments
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
 
 
Assets at Fair Value (Level 1) |
International |
Common and Preferred Stocks
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
55 
50 
 
Assets at Fair Value (Level 1) |
International |
Government and Other Debt Securities
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
23 
24 
 
Assets at Fair Value (Level 1) |
International |
Short-Term and other Investments
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
 
Level 2
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
272 
295 
 
Level 2 |
US |
Common and Preferred Stocks
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
126 
116 
 
Level 2 |
US |
Corporate Debt Securities
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
26 
33 
 
Level 2 |
US |
Government and Other Debt Securities
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
 
Level 2 |
US |
Common Collective Trust Fund
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
 
Level 2 |
US |
Short-Term and other Investments
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
 
 
Level 2 |
International |
Common and Preferred Stocks
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
14 
15 
 
Level 2 |
International |
Corporate Debt Securities
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
48 
75 
 
Level 2 |
International |
Government and Other Debt Securities
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
30 
27 
 
Level 2 |
International |
Short-Term and other Investments
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
21 
21 
 
Level 3
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
95 
104 
 
Level 3 |
US |
Private Equity and Hedge Funds
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
52 
59 
 
Level 3 |
International |
Private Equity and Hedge Funds
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
24 
27 
 
Level 3 |
International |
Short-Term and other Investments
 
 
 
Fair Value
 
 
 
Total Assets at Fair Value
$ 19 
$ 18 
 
EMPLOYEE RETIREMENT PLANS - Changes in the Fair Value of the Qualified Defined-benefit Pension Plan Level 3 Assets (Details) (Qualified, USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Qualified
 
 
Changes in the fair value of plan level 3 assets
 
 
Balance at the beginning of the period
$ 104 
$ 93 
Purchases
13 
Sales
(11)
(9)
Unrealized (losses) gains
(2)
Balance at the end of the period
$ 95 
$ 104 
EMPLOYEE RETIREMENT PLANS - Assumptions - Tabular Disclosure (Details) (Defined-benefit pension plans)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Defined-benefit pension plans
 
 
 
Assumptions
 
 
 
Discount rate for obligations (as a percent)
4.00% 
3.80% 
4.40% 
Expected return on plan assets (as a percent)
7.25% 
7.25% 
7.25% 
Discount rate for net periodic pension cost (as a percent)
3.80% 
4.40% 
3.80% 
EMPLOYEE RETIREMENT PLANS - Assumptions - General Disclosures (Details) (Defined-benefit pension plans)
12 Months Ended 120 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2008
Dec. 31, 2015
Assumptions
 
 
 
 
 
Discount rate for obligations (as a percent)
4.00% 
3.80% 
4.40% 
 
4.00% 
Expected return on plan assets (as a percent)
7.25% 
7.25% 
7.25% 
 
 
Actual annual rate of return on pension plan assets (as a percent)
(1.80%)
3.60% 
13.60% 
(32.10%)
3.90% 
Equity securities
 
 
 
 
 
Assumptions
 
 
 
 
 
Asset allocation (as a percent)
50.00% 
 
 
 
 
Debt securities
 
 
 
 
 
Assumptions
 
 
 
 
 
Asset allocation (as a percent)
30.00% 
 
 
 
 
Alternative investments
 
 
 
 
 
Assumptions
 
 
 
 
 
Asset allocation (as a percent)
20.00% 
 
 
 
 
Minimum
 
 
 
 
 
Assumptions
 
 
 
 
 
Discount rate for obligations (as a percent)
2.00% 
 
 
 
2.00% 
Liabilities having a discount rate for obligations (as a percent)
4.00% 
3.70% 
 
 
4.00% 
Maximum
 
 
 
 
 
Assumptions
 
 
 
 
 
Discount rate for obligations (as a percent)
4.30% 
4.00% 
 
 
4.30% 
EMPLOYEE RETIREMENT PLANS - Other and Cash Flows (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Other US post-retirement benefit plans
Dec. 31, 2014
Other US post-retirement benefit plans
Dec. 31, 2015
Qualified
Dec. 31, 2015
Foreign defined-benefit pension plans
Dec. 31, 2015
Non-Qualified
Employee Retirement Plans
 
 
 
 
 
Aggregate present value of unfunded accumulated post-retirement benefit obligation
$ 10 
$ 12 
 
 
 
Contribution to qualified defined-benefit pension plans
 
 
45 
 
 
Payments to participants defined-benefit pension plans
 
 
$ 49 
$ 8 
$ 12 
SHAREHOLDERS' EQUITY - Stock Repurchase (Details) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Sep. 30, 2014
SHAREHOLDERS' EQUITY
 
 
 
 
Number of shares authorized to be repurchased for retirement
 
 
 
50,000,000 
Remaining number of shares authorized to be repurchased
27,800,000 
 
 
 
Repurchase and retirement of common stock (in shares)
17,200,000 
6,700,000 
1,700,000 
 
Repurchase and retirement of common stock
$ 456 
$ 158 
$ 35 
 
Repurchase and retirement of common stock to offset the dilutive impact of the grant of long-term stock awards (shares)
741,000 
1,700,000 
 
 
SHAREHOLDERS' EQUITY - Spin off (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
SHAREHOLDERS' EQUITY
 
Separation of TopBuild Corp.
$ 828 
Retained Earnings (Deficit)
 
SHAREHOLDERS' EQUITY
 
Separation of TopBuild Corp.
828 
TopBuild |
Retained Earnings (Deficit)
 
SHAREHOLDERS' EQUITY
 
Separation of TopBuild Corp.
$ 828 
SHAREHOLDERS' EQUITY - Dividends (Details)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
SHAREHOLDERS' EQUITY
 
 
 
Cash dividends per common share paid (in dollars per share)
$ 0.365 
$ 0.330 
$ 0.300 
Cash dividends per common share declared (in dollars per share)
$ 0.37 
$ 0.345 
$ 0.3 
SHAREHOLDERS' EQUITY - Accumulated Other Comprehensive Loss (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
SHAREHOLDERS' EQUITY
 
 
Cumulative translation adjustments
$ 245 
$ 325 
Unrealized loss on marketable securities, net
(12)
(12)
Unrealized loss on interest rate swaps
(16)
(18)
Unrecognized net loss and prior service cost, net
(382)
(406)
Accumulated other comprehensive loss
(165)
(111)
Income tax expense on unrealized loss on marketable securities
14 
14 
Income tax benefit on unrealized loss on interest rate swap securities
Income tax benefit on prior service cost and net loss
$ 186 
$ 199 
RECLASSIFICATIONS FROM OTHER COMPREHENSIVE (LOSS) INCOME (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Reclassifications from accumulated other comprehensive (loss) income
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
 
 
 
 
 
 
 
$ 1,339 
$ 1,347 
$ 1,347 
Interest expense
 
 
 
 
 
 
 
 
225 
225 
235 
Tax (benefit)
 
 
 
 
 
 
 
 
293 
(361)
86 
Net of tax
75 
111 
105 
64 
100 
543 
139 
74 
355 
856 
288 
Accumulated Other Comprehensive Income (Loss) - Actuarial losses, net |
Amount reclassified
 
 
 
 
 
 
 
 
 
 
 
Reclassifications from accumulated other comprehensive (loss) income
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
 
 
 
 
 
 
 
21 
13 
18 
Tax (benefit)
 
 
 
 
 
 
 
 
(8)
(5)
Net of tax
 
 
 
 
 
 
 
 
13 
20 
Accumulated Other Comprehensive Income (Loss) - Interest rate swaps |
Amount reclassified
 
 
 
 
 
 
 
 
 
 
 
Reclassifications from accumulated other comprehensive (loss) income
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
 
 
 
 
 
 
 
Tax (benefit)
 
 
 
 
 
 
 
 
(1)
 
Net of tax
 
 
 
 
 
 
 
 
$ 2 
$ 1 
$ 2 
SEGMENT INFORMATION - Net Sales (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Net Sales
 
 
 
 
 
 
 
 
 
 
 
Net Sales
$ 1,715 
$ 1,839 
$ 1,929 
$ 1,659 
$ 1,666 
$ 1,834 
$ 1,876 
$ 1,630 
$ 7,142 
$ 7,006 
$ 6,761 
Export sales from U.S. included in net sales
 
 
 
 
 
 
 
 
217 
228 
227 
Maximum
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
 
 
 
Intra-company sales between segments in percentage
 
 
 
 
 
 
 
 
1.00% 
1.00% 
1.00% 
North America
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
5,645 
5,377 
5,222 
International, principally Europe
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
1,497 
1,629 
1,539 
Cabinets and Related Products
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
1,025 
999 
1,014 
Plumbing Products
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
3,341 
3,308 
3,183 
Decorative Architectural Products
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
2,020 
1,998 
1,927 
Other Specialty Products
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
756 
701 
637 
Sales |
US
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
5,407 
5,112 
4,947 
One customer |
Customer concentration risk |
Sales
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
$ 2,378 
$ 2,310 
$ 2,275 
Number of major customers
 
 
 
 
 
 
 
 
SEGMENT INFORMATION - Operating Profit (Loss) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Operating Profit (Loss)
 
 
 
Income from litigation settlements
 
$ 9 
 
Operating Profit (Loss)
914 
721 
612 
Other income (expense), net
(225)
(214)
(226)
Income from continuing operations before income taxes
689 
507 
386 
Operating Segments
 
 
 
Operating Profit (Loss)
 
 
 
Operating Profit (Loss)
1,023 
857 
770 
Operating Segments |
Cabinets and Related Products
 
 
 
Operating Profit (Loss)
 
 
 
Operating Profit (Loss)
51 
(62)
(10)
Operating Segments |
Plumbing Products
 
 
 
Operating Profit (Loss)
 
 
 
Operating Profit (Loss)
512 
512 
394 
Operating Segments |
Decorative Architectural Products
 
 
 
Operating Profit (Loss)
 
 
 
Operating Profit (Loss)
403 
360 
351 
Operating Segments |
Other Specialty Products
 
 
 
Operating Profit (Loss)
 
 
 
Operating Profit (Loss)
57 
47 
35 
Corporate
 
 
 
Operating Profit (Loss)
 
 
 
General corporate expense, net
(109)
(145)
(158)
Geographic Areas
 
 
 
Operating Profit (Loss)
 
 
 
Operating Profit (Loss)
1,023 
857 
770 
Geographic Areas |
North America
 
 
 
Operating Profit (Loss)
 
 
 
Operating Profit (Loss)
841 
643 
612 
Geographic Areas |
International, principally Europe
 
 
 
Operating Profit (Loss)
 
 
 
Operating Profit (Loss)
$ 182 
$ 214 
$ 158 
SEGMENT INFORMATION - Assets (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Assets
 
 
 
Assets held for sale
 
$ 1,476 
$ 1,467 
Assets
5,680 
7,208 
6,885 
US
 
 
 
Assets
 
 
 
Long-lived assets
1,487 
1,470 
1,530 
Europe
 
 
 
Assets
 
 
 
Long-lived assets
427 
428 
481 
Operating Segments
 
 
 
Assets
 
 
 
Assets
4,161 
4,156 
4,204 
Operating Segments |
Cabinets and Related Products
 
 
 
Assets
 
 
 
Assets
567 
608 
659 
Operating Segments |
Plumbing Products
 
 
 
Assets
 
 
 
Assets
1,972 
1,989 
2,040 
Operating Segments |
Decorative Architectural Products
 
 
 
Assets
 
 
 
Assets
874 
857 
812 
Operating Segments |
Other Specialty Products
 
 
 
Assets
 
 
 
Assets
748 
702 
693 
Corporate
 
 
 
Assets
 
 
 
Assets
1,519 
1,576 
1,214 
Geographic Areas
 
 
 
Assets
 
 
 
Assets
4,161 
4,156 
4,204 
Geographic Areas |
North America
 
 
 
Assets
 
 
 
Assets
2,925 
2,861 
2,830 
Geographic Areas |
International, principally Europe
 
 
 
Assets
 
 
 
Assets
$ 1,236 
$ 1,295 
$ 1,374 
SEGMENT INFORMATION - Property Additions (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Property Additions
 
 
 
Property Additions
$ 151 
$ 115 
$ 110 
Operating Segments
 
 
 
Property Additions
 
 
 
Property Additions
150 
114 
106 
Operating Segments |
Cabinets and Related Products
 
 
 
Property Additions
 
 
 
Property Additions
Operating Segments |
Plumbing Products
 
 
 
Property Additions
 
 
 
Property Additions
87 
65 
71 
Operating Segments |
Decorative Architectural Products
 
 
 
Property Additions
 
 
 
Property Additions
16 
12 
16 
Operating Segments |
Other Specialty Products
 
 
 
Property Additions
 
 
 
Property Additions
41 
28 
10 
Corporate
 
 
 
Property Additions
 
 
 
Property Additions
$ 1 
$ 1 
$ 4 
SEGMENT INFORMATION - Depreciation and Amortization (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Depreciation and Amortization
 
 
 
Depreciation and Amortization
$ 127 
$ 141 
$ 157 
Operating Segments
 
 
 
Depreciation and Amortization
 
 
 
Depreciation and Amortization
114 
130 
146 
Operating Segments |
Cabinets and Related Products
 
 
 
Depreciation and Amortization
 
 
 
Depreciation and Amortization
24 
33 
42 
Operating Segments |
Plumbing Products
 
 
 
Depreciation and Amortization
 
 
 
Depreciation and Amortization
56 
63 
65 
Operating Segments |
Decorative Architectural Products
 
 
 
Depreciation and Amortization
 
 
 
Depreciation and Amortization
16 
16 
17 
Operating Segments |
Other Specialty Products
 
 
 
Depreciation and Amortization
 
 
 
Depreciation and Amortization
18 
18 
22 
Corporate
 
 
 
Depreciation and Amortization
 
 
 
Depreciation and Amortization
$ 13 
$ 11 
$ 11 
SEVERANCE COSTS (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
SEVERANCE COSTS
 
 
 
Severance and early retirement program costs
$ 12 
$ 27 
$ 19 
OTHER INCOME (EXPENSE), NET (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
OTHER INCOME (EXPENSE), NET
 
 
 
Income from cash and cash investments
$ 3 
$ 3 
$ 3 
Income from financial investments, net (Note E)
27 
Foreign currency transaction (losses) gains
(14)
(21)
Other items, net
 
Total other, net
 
11 
Currency translation expense related to sale of the ready-to-assemble cabinet business
 
 
$ 18 
INCOME TAXES - Income from Continuing Operations before Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income from continuing operations before income taxes
 
 
 
U.S.
$ 496 
$ 270 
$ 231 
Foreign
193 
237 
155 
Income from continuing operations before income taxes
$ 689 
$ 507 
$ 386 
INCOME TAXES - Income Tax Expense (Benefit) on Income from Continuing Operations (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Currently payable:
 
 
 
U.S. Federal
$ 10 
$ 3 
$ 3 
State and local
27 
Foreign
56 
67 
58 
Deferred:
 
 
 
U.S. Federal
192 
(401)
22 
State and local
(21)
Foreign
(10)
(2)
Income tax (benefit) expense
$ 293 
$ (361)
$ 86 
INCOME TAXES - Deferred Tax Assets and Liabilities (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Deferred tax assets at December 31:
 
 
Receivables
$ 9 
$ 9 
Inventories
17 
25 
Other assets, principally stock-based compensation
78 
77 
Accrued liabilities
118 
102 
Long-term liabilities
225 
284 
Net operating loss carryforward
39 
194 
Tax credit carryforward
55 
44 
Total
541 
735 
Valuation allowance
(49)
(66)
Total
492 
669 
Deferred tax liabilities at December 31:
 
 
Property and equipment
104 
118 
Intangibles
212 
387 
Investment in foreign subsidiaries
Other
13 
Total
325 
522 
Net deferred tax asset at December 31
$ 167 
$ 147 
INCOME TAXES - Net Long-term Deferred Tax Assets and Liabilities (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Net Deferred Tax Asset
 
 
Net long-term deferred tax assets
$ 184 
$ 293 
Other non-current liabilities
 
 
Net Deferred Tax Asset
 
 
Net long-term deferred tax liabilities
17 
17 
Other non-current assets
 
 
Net Deferred Tax Asset
 
 
Net long-term deferred tax assets
184 
293 
Liabilities held-for-sale, non-current
 
 
Net Deferred Tax Asset
 
 
Net long-term deferred tax liabilities
 
$ 129 
INCOME TAXES - General Textual Disclosures (Details) (USD $)
In Millions, unless otherwise specified
1 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended
Jun. 30, 2015
Sep. 30, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2010
Federal
Dec. 31, 2012
Federal
Dec. 31, 2011
Federal
Dec. 31, 2010
Federal
Dec. 31, 2015
State
Dec. 31, 2014
State
Dec. 31, 2013
State
Dec. 31, 2014
Foreign
Dec. 31, 2015
Foreign
Dec. 31, 2014
Foreign
Dec. 31, 2015
TopBuild
Income Taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustment to Additional Paid in Capital, Income Tax Effect from Share-based Compensation, Net
 
 
$ 53 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in deferred tax asset net
190 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax benefit, reversal of accrual for uncertain tax positions, expiration of statutes of limitations and settlements on audits
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-cash charge to deferred income tax (benefit) expense due to change in deferred tax assets valuation allowance
 
 
 
 
 
 
 
 
 
(1)
(29)
19 
 
12 
(6)
 
Increase (decrease) in valuation allowance
 
 
 
 
 
 
65 
87 
372 
 
 
 
 
 
 
 
Period of cumulative loss position
 
 
 
 
 
3 years 
 
 
 
 
 
 
 
 
 
 
Valuation allowance
 
 
49 
66 
 
 
 
 
 
 
 
 
 
 
 
21 
Income tax expense (benefit)
 
 
293 
(361)
86 
 
 
 
 
 
 
 
 
19 
 
 
Tax benefit from release of valuation allowance
 
517 
 
 
 
 
 
 
 
 
 
 
12 
 
 
 
Deferred tax asset related to net operating loss and tax credit carryforwards
 
 
94 
238 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred tax assets related to net operating loss and tax credit carryforwards expiring between 2020 and 2032 for 2012 and between 2020 and 2033 for 2013
 
 
67 
233 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred tax assets related to net operating loss and tax credit carryforwards with unlimited expiration period
 
 
$ 27 
$ 5 
 
 
 
 
 
 
 
 
 
 
 
 
INCOME TAXES - Reconciliation of the U.S. Federal Statutory Tax Rate to the Income Tax (Benefit) Expense (Details)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
INCOME TAXES
 
 
 
U.S. Federal statutory tax rate-expense (as a percent)
35.00% 
35.00% 
35.00% 
State and local taxes, net of U.S. Federal tax benefit (as a percent)
3.00% 
(2.00%)
1.00% 
Lower taxes on foreign earnings (as a percent)
(1.00%)
(5.00%)
 
U.S. and foreign taxes on distributed and undistributed foreign earnings (as a percent)
3.00% 
 
 
U.S. Federal valuation allowance (as a percent)
3.00% 
(98.00%)
(13.00%)
Other, net (as a percent)
 
(1.00%)
(1.00%)
Effective tax rate - (benefit) expense (as a percent)
43.00% 
(71.00%)
22.00% 
INCOME TAXES - Total Uncertain Tax Positions and Interest and Penalties (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
INCOME TAXES
 
 
 
Uncertain tax positions
$ 43 
$ 39 
$ 46 
Interest and penalties
10 
13 
Uncertain tax positions and interest and penalties
$ 53 
$ 48 
$ 59 
INCOME TAXES - Uncertain Tax Positions (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Uncertain Tax Positions
 
 
Balance at the beginning of the period
$ 39 
$ 46 
Current year tax positions: Additions
10 
Current year tax positions: Reductions
 
(1)
Prior year tax positions: Additions
Prior year tax positions: Reductions
(1)
(5)
Settlements with tax authorities
 
(1)
Lapse of applicable statute of limitations
(6)
(10)
Balance at the end of the period
$ 43 
$ 39 
INCOME TAXES - Interest and Penalties (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
INCOME TAXES
 
 
 
Interest and penalties
$ 10 
$ 9 
$ 13 
Interest and penalties recognized in income tax expense
$ 1 
$ (4)
 
INCOME TAXES - Uncertain Tax Positions and Interest and Penalties - Additional Disclosures (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income Taxes
 
 
 
Unrecognized tax benefits that would impact effective tax rate if recognized
$ 28 
$ 26 
 
Liability for uncertain tax positions
53 
48 
59 
Reasonably possible reduction in the liability for uncertain tax positions
 
 
Other non-current liabilities
 
 
 
Income Taxes
 
 
 
Liability for uncertain tax positions
52 
48 
 
Other non-current assets
 
 
 
Income Taxes
 
 
 
Liability for uncertain tax positions
$ 1 
 
 
EARNINGS PER COMMON SHARE - Reconciliations of the Numerators and Denominators Used in the Computations of Basic and Diluted Earnings per Common Share (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Numerator (basic and diluted):
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
$ 76 
$ 111 
$ 109 
$ 61 
$ 86 
$ 533 
$ 124 
$ 78 
$ 357 
$ 821 
$ 259 
Less: Allocation to unvested restricted stock awards
 
 
 
 
 
 
 
 
16 
Income from continuing operations attributable to common shareholders
 
 
 
 
 
 
 
 
352 
805 
253 
(Loss) income from discontinued operations, net
 
 
 
 
 
 
 
 
(2)
35 
29 
Less: Allocation to unvested restricted stock awards
 
 
 
 
 
 
 
 
 
(1)
 
(Loss) income from discontinued operations attributable to common shareholders
 
 
 
 
 
 
 
 
(2)
34 
29 
Net income available to common shareholders
 
 
 
 
 
 
 
 
$ 350 
$ 839 
$ 282 
Denominator:
 
 
 
 
 
 
 
 
 
 
 
Basic common shares (based upon weighted average) (in shares)
 
 
 
 
 
 
 
 
338 
349 
350 
Add: Stock option dilution (in shares)
 
 
 
 
 
 
 
 
Diluted common shares (in shares)
 
 
 
 
 
 
 
 
341 
352 
352 
EARNINGS PER COMMON SHARE - Antidilutive Securities (Details)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Stock Options
 
 
 
Antidilutive securities excluded from computation of earnings per share
 
 
 
Antidilutive effect on computation of diluted earnings per common share (in shares)
12 
Long-term stock awards
 
 
 
Antidilutive securities excluded from computation of earnings per share
 
 
 
Antidilutive effect on computation of diluted earnings per common share (in shares)
 
OTHER COMMITMENTS AND CONTINGENCIES - Warranty (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Changes in the company's warranty liability
 
 
Balance at the beginning of the period
$ 135 
$ 124 
Accruals for warranties issued during the year
56 
51 
Accruals related to pre-existing warranties
15 
11 
Settlements made (in cash or kind) during the year
(50)
(46)
Other, net (including currency translation)
(4)
(5)
Balance at the end of the period
$ 152 
$ 135 
OTHER COMMITMENTS AND CONTINGENCIES - Investments (Details) (Private equity funds, capital calls, Maximum, USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Private equity funds, capital calls |
Maximum
 
Investments
 
Company's obligation to make additional capital contributions
$ 6 
INTERIM FINANCIAL INFORMATION (UNAUDITED) (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
INTERIM FINANCIAL INFORMATION (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Net sales
$ 1,715 
$ 1,839 
$ 1,929 
$ 1,659 
$ 1,666 
$ 1,834 
$ 1,876 
$ 1,630 
$ 7,142 
$ 7,006 
$ 6,761 
Gross profit
532 
589 
637 
495 
481 
522 
575 
482 
2,253 
2,060 
1,959 
Income from continuing operations
76 
111 
109 
61 
86 
533 
124 
78 
357 
821 
259 
Net income (loss)
75 
111 
105 
64 
100 
543 
139 
74 
355 
856 
288 
Basic:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
$ 0.23 
$ 0.33 
$ 0.32 
$ 0.17 
$ 0.24 
$ 1.49 
$ 0.35 
$ 0.22 
$ 1.04 
$ 2.31 
$ 0.72 
Net income
$ 0.22 
$ 0.33 
$ 0.30 
$ 0.18 
$ 0.28 
$ 1.52 
$ 0.39 
$ 0.21 
$ 1.03 
$ 2.40 
$ 0.80 
Diluted:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
$ 0.22 
$ 0.32 
$ 0.31 
$ 0.17 
$ 0.24 
$ 1.48 
$ 0.35 
$ 0.22 
$ 1.03 
$ 2.28 
$ 0.72 
Net income
$ 0.22 
$ 0.32 
$ 0.30 
$ 0.18 
$ 0.28 
$ 1.51 
$ 0.39 
$ 0.21 
$ 1.02 
$ 2.38 
$ 0.80 
Tax benefit from release of valuation allowance
 
 
 
 
 
$ 517 
 
 
 
 
 
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Allowances for doubtful accounts, deducted from accounts receivable
 
 
 
Movement in valuation and qualifying accounts
 
 
 
Balance at Beginning of Period
$ 14 
$ 22 
$ 26 
Additions, Charged to Costs and Expenses
Deductions
(7)
(11)
(9)
Balance at End of Period
11 
14 
22 
Valuation Allowance on deferred tax assets
 
 
 
Movement in valuation and qualifying accounts
 
 
 
Balance at Beginning of Period
66 
662 
785 
Additions, Charged to Costs and Expenses
36 
(539)
(36)
Additions, Charged to Other Accounts
(53)
(57)
(87)
Balance at End of Period
49 
66 
662 
Valuation Allowance on deferred tax assets |
Other comprehensive income
 
 
 
Movement in valuation and qualifying accounts
 
 
 
Additions, Charged to Other Accounts
 
(2)
 
Certain net operating loss carryforward
 
 
 
Movement in valuation and qualifying accounts
 
 
 
Additions, Charged to Other Accounts
 
$ (55)