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|
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A. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to present fairly its financial position as at September 30, 2014 and the results of operations for the three months and nine months ended September 30, 2014 and 2013 and cash flows for the nine months ended September 30, 2014 and 2013. The condensed consolidated balance sheet at December 31, 2013 was derived from audited financial statements.
Recently Issued Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (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 the Company for annual periods beginning January 1, 2017. The Company is currently evaluating the impact the adoption of this new standard will have on its results of operations.
In April 2014, the FASB issued Accounting Standards Update 2014-8 (ASU 2014-8), “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. ASU 2014-8 is effective for the Company beginning January 1, 2015, with early adoption allowed for new disposals not previously classified as discontinued operations.
Revision of Previously Issued Financial Statements. During the first quarter ended March 31, 2014, the Company identified an error in the accounting for certain of its investments in private equity limited partnership funds. The investments were inappropriately accounted for under the cost basis versus the equity method. The impact of the error was to under report the investment value (included in other assets on the consolidated balance sheets) and to over (under) state equity investment earnings (loss) (included in other income (expense), net in the consolidated statements of operations). We have revised our three-month and nine-month periods ended September 30, 2013 consolidated statement of operations and prior year consolidated balance sheet in these financial statements to reflect the investment accounted for as an equity investment. Retained earnings and other comprehensive income were adjusted for the changes in net income. Other historic periods will be revised, as detailed below, in our future filings. This error is not considered material to any prior period financial statement.
This revision has no effect on our consolidated statement of cash flows.
The following table presents the impact of the revisions on the Company’s previously issued full-year consolidated statement of operations (in millions):
|
|
|
Year ended December 31, |
|
|||||||
|
|
|
2013 |
|
2012 |
|
2011 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Other income (expense), net |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
(239 |
) |
$ |
(229 |
) |
$ |
(177 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
(223 |
) |
$ |
(229 |
) |
$ |
(168 |
) |
|
|
|
|
|
|
|
|
|
|||
|
Income (loss) from continuing operations, before income taxes |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
434 |
|
$ |
73 |
|
$ |
(392 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
450 |
|
$ |
73 |
|
$ |
(383 |
) |
|
|
|
|
|
|
|
|
|
|||
|
Income (loss) from continuing operations |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
323 |
|
$ |
(18 |
) |
$ |
(352 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
339 |
|
$ |
(18 |
) |
$ |
(343 |
) |
|
|
|
|
|
|
|
|
|
|||
|
Net income (loss) |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
313 |
|
$ |
(79 |
) |
$ |
(533 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
329 |
|
$ |
(79 |
) |
$ |
(524 |
) |
The following table presents the impact of the revisions on the Company’s previously issued quarterly consolidated statements of operations (in millions):
|
|
|
Three Months Ended |
|
Three Months Ended |
|
||||||||||||||||||||
|
|
|
Dec. 31 |
|
Sep. 30 |
|
June 30 |
|
Mar. 31 |
|
Dec. 31 |
|
Sep. 30 |
|
June 30 |
|
Mar. 31 |
|
||||||||
|
|
|
2013 |
|
2012 |
|
||||||||||||||||||||
|
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
(71 |
) |
$ |
(58 |
) |
$ |
(57 |
) |
$ |
(53 |
) |
$ |
(57 |
) |
$ |
(57 |
) |
$ |
(66 |
) |
$ |
(49 |
) |
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
(68 |
) |
$ |
(52 |
) |
$ |
(56 |
) |
$ |
(47 |
) |
$ |
(53 |
) |
$ |
(50 |
) |
$ |
(68 |
) |
$ |
(58 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Income (loss) from continuing operations, before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
70 |
|
$ |
154 |
|
$ |
131 |
|
$ |
79 |
|
$ |
(26 |
) |
$ |
51 |
|
$ |
(12 |
) |
$ |
60 |
|
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
73 |
|
$ |
160 |
|
$ |
132 |
|
$ |
85 |
|
$ |
(22 |
) |
$ |
58 |
|
$ |
(14 |
) |
$ |
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Income (loss) from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
50 |
|
$ |
116 |
|
$ |
92 |
|
$ |
65 |
|
$ |
(63 |
) |
$ |
35 |
|
$ |
(43 |
) |
$ |
53 |
|
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
53 |
|
$ |
122 |
|
$ |
93 |
|
$ |
71 |
|
$ |
(59 |
) |
$ |
42 |
|
$ |
(45 |
) |
$ |
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
56 |
|
$ |
114 |
|
$ |
87 |
|
$ |
56 |
|
$ |
(80 |
) |
$ |
24 |
|
$ |
(67 |
) |
$ |
44 |
|
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
59 |
|
$ |
120 |
|
$ |
88 |
|
$ |
62 |
|
$ |
(76 |
) |
$ |
31 |
|
$ |
(69 |
) |
$ |
35 |
|
The following table presents the impact of the revisions on the Company’s previously issued consolidated balance sheets (in millions):
|
|
|
As of |
|
|
|
|||||||||||
|
|
|
Dec. 31 |
|
Sep. 30 |
|
June 30 |
|
Mar. 31 |
|
As of |
|
|||||
|
|
|
2013 |
|
Dec. 31, 2012 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
As reported |
|
$ |
161 |
|
$ |
166 |
|
$ |
173 |
|
$ |
182 |
|
$ |
184 |
|
|
Correction |
|
24 |
|
21 |
|
15 |
|
14 |
|
8 |
|
|||||
|
As revised |
|
$ |
185 |
|
$ |
187 |
|
$ |
188 |
|
$ |
196 |
|
$ |
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
As reported |
|
$ |
6,933 |
|
$ |
7,059 |
|
$ |
7,062 |
|
$ |
6,779 |
|
$ |
6,875 |
|
|
Correction |
|
24 |
|
21 |
|
15 |
|
14 |
|
8 |
|
|||||
|
As revised |
|
$ |
6,957 |
|
$ |
7,080 |
|
$ |
7,077 |
|
$ |
6,793 |
|
$ |
6,883 |
|
|
|||
B. In the first quarter of 2013, the Company determined that Tvilum, its Danish ready-to-assemble cabinet business, was no longer core to its long-term growth strategy and, accordingly, the Company embarked on a plan for disposition. The disposition of Tvilum was completed in the fourth quarter of 2013. The Company has accounted for this business as a discontinued operation.
Selected financial information for the discontinued operations, during the period owned by the Company, was as follows, in millions:
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||
|
|
|
September 30, 2013 |
|
September 30, 2013 |
|
||
|
|
|
|
|
|
|
||
|
Net Sales |
|
$ |
75 |
|
$ |
194 |
|
|
|
|
|
|
|
|
||
|
Operating loss from discontinued operations |
|
$ |
— |
|
$ |
(8 |
) |
|
Impairment of assets |
|
— |
|
(10 |
) |
||
|
Loss on disposal of discontinued operations, net |
|
(2 |
) |
(2 |
) |
||
|
Loss before income tax |
|
(2 |
) |
(20 |
) |
||
|
Income tax benefit |
|
— |
|
(4 |
) |
||
|
Loss from discontinued operations, net |
|
$ |
(2 |
) |
$ |
(16 |
) |
During the first quarter of 2013, the Company estimated the fair value of the business held for sale, using unobservable inputs (Level 3). After considering the deferred gains reported in Accumulated Other Comprehensive Income, the Company recorded an impairment of $10 million in the first quarter of 2013.
|
|||
C. The changes in the carrying amount of goodwill for the nine months ended September 30, 2014, by segment, were as follows, in millions:
|
|
|
Gross Goodwill |
|
Accumulated |
|
Net Goodwill |
|
|||
|
|
|
At |
|
Impairment |
|
At |
|
|||
|
|
|
Sep. 30, 2014 |
|
Losses |
|
Sep. 30, 2014 |
|
|||
|
Cabinets and Related Products |
|
$ |
240 |
|
$ |
(59 |
) |
$ |
181 |
|
|
Plumbing Products |
|
538 |
|
(340 |
) |
198 |
|
|||
|
Installation and Other Services |
|
1,806 |
|
(762 |
) |
1,044 |
|
|||
|
Decorative Architectural Products |
|
294 |
|
(75 |
) |
219 |
|
|||
|
Other Specialty Products |
|
983 |
|
(734 |
) |
249 |
|
|||
|
Total |
|
$ |
3,861 |
|
$ |
(1,970 |
) |
$ |
1,891 |
|
|
|
|
Gross Goodwill |
|
Accumulated |
|
Net Goodwill |
|
|
|
Net Goodwill |
|
|||||
|
|
|
At |
|
Impairment |
|
At |
|
|
|
At |
|
|||||
|
|
|
Dec. 31, 2013 |
|
Losses |
|
Dec. 31, 2013 |
|
Other(A) |
|
Sep. 30, 2014 |
|
|||||
|
Cabinets and Related Products |
|
$ |
240 |
|
$ |
(59 |
) |
$ |
181 |
|
$ |
— |
|
$ |
181 |
|
|
Plumbing Products |
|
550 |
|
(340 |
) |
210 |
|
(12 |
) |
198 |
|
|||||
|
Installation and Other Services |
|
1,806 |
|
(762 |
) |
1,044 |
|
— |
|
1,044 |
|
|||||
|
Decorative Architectural Products |
|
294 |
|
(75 |
) |
219 |
|
— |
|
219 |
|
|||||
|
Other Specialty Products |
|
983 |
|
(734 |
) |
249 |
|
— |
|
249 |
|
|||||
|
Total |
|
$ |
3,873 |
|
$ |
(1,970 |
) |
$ |
1,903 |
|
$ |
(12 |
) |
$ |
1,891 |
|
|
(A) |
Other principally includes the effect of foreign currency translation. |
Other indefinite-lived intangible assets were $132 million and $133 million at September 30, 2014 and December 31, 2013, respectively, and principally included registered trademarks. The carrying value of the Company’s definite-lived intangible assets was $15 million (net of accumulated amortization of $65 million) at September 30, 2014 and $16 million (net of accumulated amortization of $62 million) at December 31, 2013, and principally included customer relationships and non-compete agreements.
|
|||
D. Depreciation and amortization expense, including discontinued operations, was $125 million and $143 million, including accelerated depreciation (relating to business rationalization initiatives) of $1 million and $12 million for the nine months ended September 30, 2014 and 2013, respectively.
As a result of business rationalization initiatives, at September 30, 2014, the Company decided to sell two facilities within its Cabinets and Related Products segment. At September 30, 2014, the net book value of those facilities was approximately $10 million, included in property and equipment, net in the condensed consolidated balance sheet as of September 30, 2014. In the third quarter of 2014, the Company recorded a charge of $28 million, included in cost of goods sold in the condensed consolidated statement of operations, to reflect the estimated fair value of those facilities. Fair value was estimated using a market approach (Level 3 input), considering the estimated fair values for other comparable facilities in the areas where the facilities are located.
|
|||
E. The Company has maintained investments in available-for-sale securities and a number of private equity funds, principally as part of its 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:
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2014 |
|
2013 |
|
||
|
Equity method investments |
|
$ |
61 |
|
$ |
70 |
|
|
Total equity method investments |
|
61 |
|
70 |
|
||
|
|
|
|
|
|
|
||
|
Auction rate securities |
|
22 |
|
22 |
|
||
|
Total recurring investments |
|
22 |
|
22 |
|
||
|
|
|
|
|
|
|
||
|
Private equity funds |
|
15 |
|
18 |
|
||
|
Other investments |
|
4 |
|
3 |
|
||
|
Total non-recurring investments |
|
19 |
|
21 |
|
||
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
102 |
|
$ |
113 |
|
The Company did not have any transfers between Level 1 and Level 2 financial assets in the three months or nine months ended September 30, 2014 or 2013.
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 the Company’s proportionate share of the net income or (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.
Recurring Fair Value Measurements. The fair value of the auction rate securities held by the Company 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 the assumptions for credit defaults, since the auction rate securities are backed by credit default swap agreements.
The Company’s investments in auction rate 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 September 30, 2014 and December 31, 2013.
Non-Recurring Fair Value Measurements. During the three months and nine months ended September 30, 2014 and 2013, the Company did not measure any financial investments at fair value on a non-recurring basis, as there was no other-than-temporary decline in the estimated value of private equity funds.
Realized Gains (Losses) and Impairment Charges. Income (loss) from financial investments, net, included in other, net, within other income (expense), net, was as follows, in millions:
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
Realized gains from private equity funds |
|
$ |
— |
|
$ |
— |
|
$ |
4 |
|
$ |
7 |
|
|
Equity investment (loss) income, net |
|
— |
|
6 |
|
(2 |
) |
13 |
|
||||
|
Income from other investments, net |
|
— |
|
— |
|
— |
|
1 |
|
||||
|
Total income from financial investments |
|
$ |
— |
|
$ |
6 |
|
$ |
2 |
|
$ |
21 |
|
Fair Value of Debt. The fair value of the Company’s 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 the Company for debt with similar terms and remaining maturities. The aggregate estimated market value of short-term and long-term debt at September 30, 2014 was approximately $3.7 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, 2013 was approximately $3.7 billion, compared with the aggregate carrying value of $3.4 billion.
|
|||
F. The Company is exposed to global market risk as part of its normal daily business activities. To manage these risks, the Company enters into various derivative contracts. These contracts include interest rate swap agreements, foreign currency exchange contracts and metals contracts intended to hedge the Company’s exposure to copper and zinc. The Company reviews its hedging program, derivative positions and overall risk management on a regular basis.
Foreign Currency Contracts. The Company’s 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 during the year, the Company, including certain European operations, enters into foreign currency forward contracts and foreign currency exchange contracts.
Gains (losses) related to foreign currency forward and exchange contracts are recorded in the Company’s condensed 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 contracts, the Company’s exposure is limited to the aggregate foreign currency rate differential with such institutions.
Metals Contracts. The Company has entered into several contracts to manage its exposure to increases in the price of copper and zinc. (Losses) gains related to these contracts are recorded in the Company’s condensed consolidated statements of operations in cost of sales.
The pre-tax (losses) gains included in the Company’s condensed consolidated statements of operations is as follows, in millions:
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
Foreign Currency Contracts |
|
|
|
|
|
|
|
|
|
||||
|
Exchange Contracts |
|
$ |
5 |
|
$ |
(4 |
) |
$ |
2 |
|
$ |
3 |
|
|
Forward Contracts |
|
1 |
|
(1 |
) |
— |
|
1 |
|
||||
|
Metal Contracts |
|
— |
|
3 |
|
— |
|
(6 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total gain (loss) |
|
$ |
6 |
|
$ |
(2 |
) |
$ |
2 |
|
$ |
(2 |
) |
The Company presents its derivatives, net by counterparty due to the right of offset under master netting arrangements in current assets or current liabilities in the condensed consolidated balance sheet. The notional amounts being hedged and the fair value of those derivative instruments, on a gross basis, are as follows, in millions:
|
|
|
At September 30, 2014 |
|
|||||||
|
|
|
Notional |
|
|
|
|
|
|||
|
|
|
Amount |
|
Assets |
|
Liabilities |
|
|||
|
Foreign Currency Contracts |
|
|
|
|
|
|
|
|||
|
Exchange Contracts |
|
$ |
76 |
|
|
|
|
|
||
|
Current assets |
|
|
|
$ |
4 |
|
$ |
— |
|
|
|
Forward Contracts |
|
|
|
|
|
|
|
|||
|
Current assets |
|
64 |
|
1 |
|
— |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Metals Contracts |
|
|
|
|
|
|
|
|||
|
Current assets |
|
61 |
|
2 |
|
2 |
|
|||
|
Total |
|
|
|
$ |
7 |
|
$ |
2 |
|
|
|
|
|
At December 31, 2013 |
|
|||||||
|
|
|
Notional |
|
|
|
|
|
|||
|
|
|
Amount |
|
Assets |
|
Liabilities |
|
|||
|
Foreign Currency Contracts |
|
|
|
|
|
|
|
|||
|
Exchange Contracts |
|
$ |
53 |
|
|
|
|
|
||
|
Current liabilities |
|
|
|
$ |
— |
|
$ |
2 |
|
|
|
Forward Contracts |
|
88 |
|
|
|
|
|
|||
|
Current liabilities |
|
|
|
— |
|
1 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Metals Contracts |
|
48 |
|
|
|
|
|
|||
|
Current liabilities |
|
|
|
— |
|
2 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Total |
|
|
|
$ |
— |
|
$ |
5 |
|
|
The fair value of all metals and foreign currency derivative contracts is estimated on a recurring basis, using Level 2 inputs (significant other observable inputs).
|
|||
G. Changes in the Company’s warranty liability were as follows, in millions:
|
|
|
Nine Months Ended |
|
Twelve Months Ended |
|
||
|
|
|
September 30, 2014 |
|
December 31, 2013 |
|
||
|
Balance at January 1 |
|
$ |
124 |
|
$ |
118 |
|
|
Accruals for warranties issued during the period |
|
36 |
|
42 |
|
||
|
Accruals related to pre-existing warranties |
|
6 |
|
6 |
|
||
|
Settlements made (in cash or kind) during the period |
|
(35 |
) |
(42 |
) |
||
|
Other, net |
|
(3 |
) |
— |
|
||
|
Balance at end of period |
|
$ |
128 |
|
$ |
124 |
|
|
|||
H. On March 28, 2013, the Company 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.
Based on the limitations of the debt to total capitalization ratio covenant in the Credit Agreement, at September 30, 2014, the Company had additional borrowing capacity, subject to availability, of up to $1.2 billion. Additionally, at September 30, 2014, the Company could absorb a reduction to shareholders’ equity of approximately $859 million and remain in compliance with the debt to total capitalization covenant.
In order for the Company to borrow under the Credit Agreement, there must not be any default in the Company’s covenants in the Credit Agreement (i.e., in addition to the two financial covenants, principally limitations on subsidiary debt, negative pledge restrictions, legal compliance requirements and maintenance of properties and insurance) and the Company’s representations and warranties in the Credit Agreement must be true in all material respects on the date of borrowing (i.e., principally no material adverse change or litigation likely to result in a material adverse change, since December 31, 2012, in each case, no material ERISA or environmental non-compliance and no material tax deficiency). The Company was in compliance with all covenants and no borrowings have been made at September 30, 2014.
|
|||
I.The Company’s 2014 Long Term Stock Incentive Plan (and the prior plan that it replaced) provides for the issuance of stock-based incentives in various forms to employees and non-employee Directors of the Company. At September 30, 2014, 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:
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
Long-term stock awards |
|
$ |
7 |
|
$ |
7 |
|
$ |
30 |
|
$ |
27 |
|
|
Stock options |
|
1 |
|
2 |
|
3 |
|
12 |
|
||||
|
Phantom stock awards and stock appreciation rights |
|
3 |
|
3 |
|
4 |
|
6 |
|
||||
|
Total |
|
$ |
11 |
|
$ |
12 |
|
$ |
37 |
|
$ |
45 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Income tax benefit (37 percent tax rate - before valuation allowance) |
|
$ |
4 |
|
$ |
5 |
|
$ |
14 |
|
$ |
17 |
|
Long-Term Stock Awards. Long-term stock awards are granted to key employees and non-employee Directors of the Company and do not cause net share dilution inasmuch as the Company continues the practice of repurchasing and retiring an equal number of shares in the open market. The Company granted 1,680,220 shares of long-term stock awards in the nine months ended September 30, 2014.
The Company’s long-term stock award activity was as follows, shares in millions:
|
|
|
Nine Months Ended |
|
||||
|
|
|
September 30, |
|
||||
|
|
|
2014 |
|
2013 |
|
||
|
Unvested stock award shares at January 1 |
|
8 |
|
8 |
|
||
|
Weighted average grant date fair value |
|
$ |
17 |
|
$ |
16 |
|
|
|
|
|
|
|
|
||
|
Stock award shares granted |
|
1 |
|
2 |
|
||
|
Weighted average grant date fair value |
|
$ |
22 |
|
$ |
20 |
|
|
|
|
|
|
|
|
||
|
Stock award shares vested |
|
2 |
|
2 |
|
||
|
Weighted average grant date fair value |
|
$ |
17 |
|
$ |
17 |
|
|
|
|
|
|
|
|
||
|
Stock award shares forfeited |
|
1 |
|
— |
|
||
|
Weighted average grant date fair value |
|
$ |
16 |
|
$ |
17 |
|
|
|
|
|
|
|
|
||
|
Unvested stock award shares at September 30 |
|
6 |
|
8 |
|
||
|
Weighted average grant date fair value |
|
$ |
18 |
|
$ |
17 |
|
At September 30, 2014 and 2013, there was $68 million and $76 million of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of three years in both 2014 and 2013.
The total market value (at the vesting date) of stock award shares which vested during the nine months ended September 30, 2014 and 2013 was $50 million and $38 million, respectively.
Stock Options. Stock options are granted to key employees of the Company. The exercise price equals the market price of the Company’s common stock at the grant date.
The Company granted 332,750 of stock option shares in the nine months ended September 30, 2014 with a grant date exercise price approximating $22 per share. In the first nine months of 2014, 3,640,670 stock option shares were forfeited (including options that expired unexercised).
The Company’s stock option activity was as follows, shares in millions:
|
|
|
Nine Months Ended |
|
||||
|
|
|
September 30, |
|
||||
|
|
|
2014 |
|
2013 |
|
||
|
Option shares outstanding, January 1 |
|
24 |
|
30 |
|
||
|
Weighted average exercise price |
|
$ |
22 |
|
$ |
21 |
|
|
|
|
|
|
|
|
||
|
Option shares granted, including restoration options |
|
— |
|
1 |
|
||
|
Weighted average exercise price |
|
$ |
22 |
|
$ |
20 |
|
|
|
|
|
|
|
|
||
|
Option shares exercised |
|
2 |
|
3 |
|
||
|
Aggregate intrinsic value on date of exercise (A) |
|
$ |
17 million |
|
$ |
22 million |
|
|
Weighted average exercise price |
|
$ |
16 |
|
$ |
12 |
|
|
|
|
|
|
|
|
||
|
Option shares forfeited |
|
3 |
|
1 |
|
||
|
Weighted average exercise price |
|
$ |
28 |
|
$ |
23 |
|
|
|
|
|
|
|
|
||
|
Option shares outstanding, September 30 |
|
19 |
|
27 |
|
||
|
Weighted average exercise price |
|
$ |
21 |
|
$ |
22 |
|
|
Weighted average remaining option term (in years) |
|
4 |
|
4 |
|
||
|
|
|
|
|
|
|
||
|
Option shares vested and expected to vest, September 30 |
|
19 |
|
27 |
|
||
|
Weighted average exercise price |
|
$ |
21 |
|
$ |
22 |
|
|
Aggregate intrinsic value (A) |
|
$ |
102 million |
|
$ |
91 million |
|
|
Weighted average remaining option term (in years) |
|
4 |
|
4 |
|
||
|
|
|
|
|
|
|
||
|
Option shares exercisable (vested), September 30 |
|
16 |
|
22 |
|
||
|
Weighted average exercise price |
|
$ |
22 |
|
$ |
24 |
|
|
Aggregate intrinsic value (A) |
|
$ |
80 million |
|
$ |
51 million |
|
|
Weighted average remaining option term (in years) |
|
3 |
|
3 |
|
||
|
(A) |
Aggregate intrinsic value is calculated using the Company’s stock price at each respective date, less the exercise price (grant date price) multiplied by the number of shares. |
At September 30, 2014 and 2013, there was $7 million and $10 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model at the grant date) related to unvested stock options; such options had a weighted average remaining vesting period of two years at both September 30, 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:
|
|
|
Nine Months Ended |
|
||||
|
|
|
September 30, |
|
||||
|
|
|
2014 |
|
2013 |
|
||
|
Weighted average grant date fair value |
|
$ |
9.53 |
|
$ |
8.35 |
|
|
Risk-free interest rate |
|
1.91 |
% |
1.22 |
% |
||
|
Dividend yield |
|
1.34 |
% |
1.47 |
% |
||
|
Volatility factor |
|
49.00 |
% |
49.07 |
% |
||
|
Expected option life |
|
6 years |
|
6 years |
|
||
|
|||
J.Net periodic pension cost for the Company’s defined-benefit pension plans was as follows, in millions:
|
|
|
Three Months Ended September 30, |
|
||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||
|
|
|
Qualified |
|
Non-Qualified |
|
Qualified |
|
Non-Qualified |
|
||||
|
Service cost |
|
$ |
1 |
|
$ |
— |
|
$ |
1 |
|
$ |
— |
|
|
Interest cost |
|
12 |
|
2 |
|
10 |
|
2 |
|
||||
|
Expected return on plan assets |
|
(11 |
) |
— |
|
(10 |
) |
— |
|
||||
|
Amortization of net loss |
|
2 |
|
1 |
|
4 |
|
1 |
|
||||
|
Net periodic pension cost |
|
$ |
4 |
|
$ |
3 |
|
5 |
|
3 |
|
||
|
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||
|
|
|
Qualified |
|
Non-Qualified |
|
Qualified |
|
Non-Qualified |
|
||||
|
Service cost |
|
$ |
3 |
|
$ |
— |
|
$ |
3 |
|
$ |
— |
|
|
Interest cost |
|
38 |
|
6 |
|
32 |
|
5 |
|
||||
|
Expected return on plan assets |
|
(35 |
) |
— |
|
(30 |
) |
— |
|
||||
|
Amortization of net loss |
|
8 |
|
1 |
|
12 |
|
2 |
|
||||
|
Net periodic pension cost |
|
$ |
14 |
|
$ |
7 |
|
$ |
17 |
|
$ |
7 |
|
The Company participates in 21 regional multi-employer pension plans, principally related to building trades; none of the plans are considered significant to the Company.
Effective January 1, 2010, the Company froze all future benefit accruals under substantially all of the Company’s domestic qualified and non-qualified defined benefit pension plans. Future benefit accruals related to the Company’s foreign non-qualified plans were frozen several years ago.
|
|||
K. The reclassifications from accumulated other comprehensive income to the condensed consolidated statement of operations were as follows, in millions:
|
|
|
Amount Reclassified |
|
|
|
||||||||||
|
Accumulated Other |
|
Three Months |
|
Nine Months |
|
|
|
||||||||
|
Comprehensive |
|
Ended Sep. 30, |
|
Ended Sep. 30, |
|
Income Statement |
|
||||||||
|
Income (Loss) |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Line Item |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Amortization of defined benefit pension: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Actuarial losses, net |
|
$ |
3 |
|
$ |
5 |
|
$ |
9 |
|
$ |
14 |
|
Selling, General & Administrative Expense |
|
|
|
|
(3 |
) |
— |
|
(3 |
) |
— |
|
Income tax benefit |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest rate swaps |
|
$ |
— |
|
$ |
— |
|
$ |
1 |
|
$ |
1 |
|
Interest expense |
|
|
|
|
— |
|
— |
|
— |
|
— |
|
Income tax benefit |
|
||||
There was no tax effect for either the amortization of the actuarial losses or the interest rate swaps in 2013 due to the tax valuation allowance.
|
|||
L.Information about the Company by segment and geographic area was as follows, in millions:
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||||||
|
|
|
Net Sales(A) |
|
Operating Profit (Loss) |
|
Net Sales(A) |
|
Operating Profit (Loss) |
|
||||||||||||||||
|
The Company’s operations by segment were: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Cabinets and Related Products |
|
$ |
266 |
|
$ |
262 |
|
$ |
(35 |
) |
$ |
(2 |
) |
$ |
756 |
|
$ |
763 |
|
$ |
(55 |
) |
$ |
(4 |
) |
|
Plumbing Products |
|
855 |
|
820 |
|
141 |
|
118 |
|
2,504 |
|
2,384 |
|
399 |
|
306 |
|
||||||||
|
Installation and Other Services |
|
398 |
|
370 |
|
20 |
|
18 |
|
1,117 |
|
1,039 |
|
33 |
|
22 |
|
||||||||
|
Decorative Architectural Products |
|
523 |
|
522 |
|
91 |
|
93 |
|
1,560 |
|
1,519 |
|
280 |
|
286 |
|
||||||||
|
Other Specialty Products |
|
190 |
|
176 |
|
20 |
|
16 |
|
520 |
|
470 |
|
39 |
|
26 |
|
||||||||
|
Total |
|
$ |
2,232 |
|
$ |
2,150 |
|
$ |
237 |
|
$ |
243 |
|
$ |
6,457 |
|
$ |
6,175 |
|
$ |
696 |
|
$ |
636 |
|
|
The Company’s operations by geographic area were: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
North America |
|
$ |
1,818 |
|
$ |
1,756 |
|
$ |
182 |
|
$ |
193 |
|
$ |
5,217 |
|
$ |
5,031 |
|
$ |
527 |
|
$ |
518 |
|
|
International, principally Europe |
|
414 |
|
394 |
|
55 |
|
50 |
|
1,240 |
|
1,144 |
|
169 |
|
118 |
|
||||||||
|
Total |
|
$ |
2,232 |
|
$ |
2,150 |
|
237 |
|
243 |
|
$ |
6,457 |
|
$ |
6,175 |
|
696 |
|
636 |
|
||||
|
General corporate expense, net |
|
|
|
|
|
(35 |
) |
(31 |
) |
|
|
|
|
(102 |
) |
(104 |
) |
||||||||
|
Operating profit |
|
|
|
|
|
202 |
|
212 |
|
|
|
|
|
594 |
|
532 |
|
||||||||
|
Other income (expense), net |
|
|
|
|
|
(50 |
) |
(52 |
) |
|
|
|
|
(159 |
) |
(155 |
) |
||||||||
|
Income from continuing operations before income taxes |
|
|
|
|
|
$ |
152 |
|
$ |
160 |
|
|
|
|
|
$ |
435 |
|
$ |
377 |
|
||||
|
(A) |
Inter-segment sales were not material. |
|
|||
M. As part of the Company’s continuing review of its operations to improve cost structure and business processes, actions were taken during 2014 and 2013 to respond to market conditions. The Company recorded charges related to severance and early retirement programs of $13 million and $24 million for the three months and nine months ended September 30, 2014, respectively, and $4 million and $16 million for the three months and nine months ended September 30, 2013, respectively. Such charges are principally reflected in the statement of operations in selling, general and administrative expenses. In 2014, $13 million and $20 million for the three months and nine months ended September 30, 2014, respectively, of the severance costs relate to corporate office actions and are included in general corporate expense, net.
|
|||
N. Other, net, which is included in other income (expense), net, was as follows, in millions:
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
Income from cash and cash investments |
|
$ |
1 |
|
$ |
1 |
|
$ |
2 |
|
$ |
3 |
|
|
Income from financial investments (Note E) |
|
— |
|
6 |
|
2 |
|
21 |
|
||||
|
Currency gains (losses) |
|
5 |
|
(1 |
) |
5 |
|
— |
|
||||
|
Other items, net |
|
1 |
|
— |
|
1 |
|
(1 |
) |
||||
|
Total other net |
|
$ |
7 |
|
$ |
6 |
|
$ |
10 |
|
$ |
23 |
|
|
|||
P. 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 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.
|
|||
Q. 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 that can be placed on projected taxable income to support the recovery of the deferred tax assets.
In the fourth quarter of 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 in 2011 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 $89 million in the valuation allowance related to our U.S. Federal deferred tax assets as a non-cash charge to income tax expense in 2012 and 2011, respectively.
Although new home construction activity and retail sales of builder products strengthened during 2013 resulting in profitability in the Company’s U.S. operations, we continued to record a full valuation allowance against the U.S. Federal deferred tax assets as we remained in a three-year cumulative loss position throughout 2013.
In the third quarter of 2014, the Company recorded a $517 million tax benefit from the release of the valuation allowance against its U.S. Federal and certain state deferred tax assets due primarily to a return to sustainable profitability in its 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. Additionally, we anticipate the availability of future taxable income and achieving a cumulative three-year income position in the U.S. by the fourth quarter of 2014 as a result of seven consecutive quarters of U.S. pre-tax earnings.
As a result of the valuation allowance release in the third quarter of 2014, the net short-term deferred tax assets included in prepaid expenses and other on the condensed consolidated balance sheet as of September 30, 2014 was $265 million; such balance was $73 million at December 31, 2013.
It is reasonably possible that the continued improvements in certain of our businesses located in the U.S. and in Europe could result in the objective positive evidence necessary to warrant the additional reversal of all or a portion of the valuation allowance, up to approximately $35 million, by the end of 2015.
Excluding the $517 million valuation allowance release, our effective tax rate was 75 percent and 36 percent for the three months and nine months ended September 30, 2014, respectively. As a result of the reversal of the valuation allowance in the third quarter of 2014, the tax expense for the nine months ended September 30, 2014 approximates our U.S. Federal statutory tax rate while the tax expense for the three months ended September 30, 2014 includes an additional tax expense of $51 million to adjust the taxes recorded in the first and second quarter of 2014, which previously benefited from the decrease in the valuation allowance, to the higher third quarter effective tax rate.
Our effective tax rate of 24 percent for both the three months and nine months ended September 30, 2013, primarily due to the decrease in the valuation allowance resulting from the partial utilization of our U.S. Federal net operating loss carryforward. The effective tax rate for the nine months ended September 30, 2013 includes a $12 million state tax benefit on uncertain tax positions due primarily to the expiration of applicable statutes of limitation.
|
|||
R. On September 30, 2014, the Company announced a plan to spin-off of 100 percent of its Installation and Other Services businesses into an independent, publicly-traded company through a tax-free stock distribution to the Company’s shareholders. The transaction is expected to be completed in mid-2015.
|
|||
Recently Issued Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (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 the Company for annual periods beginning January 1, 2017. The Company is currently evaluating the impact the adoption of this new standard will have on its results of operations.
In April 2014, the FASB issued Accounting Standards Update 2014-8 (ASU 2014-8), “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. ASU 2014-8 is effective for the Company beginning January 1, 2015, with early adoption allowed for new disposals not previously classified as discontinued operations.
Revision of Previously Issued Financial Statements. During the first quarter ended March 31, 2014, the Company identified an error in the accounting for certain of its investments in private equity limited partnership funds. The investments were inappropriately accounted for under the cost basis versus the equity method. The impact of the error was to under report the investment value (included in other assets on the consolidated balance sheets) and to over (under) state equity investment earnings (loss) (included in other income (expense), net in the consolidated statements of operations). We have revised our three-month and nine-month periods ended September 30, 2013 consolidated statement of operations and prior year consolidated balance sheet in these financial statements to reflect the investment accounted for as an equity investment. Retained earnings and other comprehensive income were adjusted for the changes in net income. Other historic periods will be revised, as detailed below, in our future filings. This error is not considered material to any prior period financial statement.
This revision has no effect on our consolidated statement of cash flows.
The following table presents the impact of the revisions on the Company’s previously issued full-year consolidated statement of operations (in millions):
|
|
|
Year ended December 31, |
|
|||||||
|
|
|
2013 |
|
2012 |
|
2011 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Other income (expense), net |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
(239 |
) |
$ |
(229 |
) |
$ |
(177 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
(223 |
) |
$ |
(229 |
) |
$ |
(168 |
) |
|
|
|
|
|
|
|
|
|
|||
|
Income (loss) from continuing operations, before income taxes |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
434 |
|
$ |
73 |
|
$ |
(392 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
450 |
|
$ |
73 |
|
$ |
(383 |
) |
|
|
|
|
|
|
|
|
|
|||
|
Income (loss) from continuing operations |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
323 |
|
$ |
(18 |
) |
$ |
(352 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
339 |
|
$ |
(18 |
) |
$ |
(343 |
) |
|
|
|
|
|
|
|
|
|
|||
|
Net income (loss) |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
313 |
|
$ |
(79 |
) |
$ |
(533 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
329 |
|
$ |
(79 |
) |
$ |
(524 |
) |
The following table presents the impact of the revisions on the Company’s previously issued quarterly consolidated statements of operations (in millions):
|
|
|
Three Months Ended |
|
Three Months Ended |
|
||||||||||||||||||||
|
|
|
Dec. 31 |
|
Sep. 30 |
|
June 30 |
|
Mar. 31 |
|
Dec. 31 |
|
Sep. 30 |
|
June 30 |
|
Mar. 31 |
|
||||||||
|
|
|
2013 |
|
2012 |
|
||||||||||||||||||||
|
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
(71 |
) |
$ |
(58 |
) |
$ |
(57 |
) |
$ |
(53 |
) |
$ |
(57 |
) |
$ |
(57 |
) |
$ |
(66 |
) |
$ |
(49 |
) |
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
(68 |
) |
$ |
(52 |
) |
$ |
(56 |
) |
$ |
(47 |
) |
$ |
(53 |
) |
$ |
(50 |
) |
$ |
(68 |
) |
$ |
(58 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Income (loss) from continuing operations, before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
70 |
|
$ |
154 |
|
$ |
131 |
|
$ |
79 |
|
$ |
(26 |
) |
$ |
51 |
|
$ |
(12 |
) |
$ |
60 |
|
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
73 |
|
$ |
160 |
|
$ |
132 |
|
$ |
85 |
|
$ |
(22 |
) |
$ |
58 |
|
$ |
(14 |
) |
$ |
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Income (loss) from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
50 |
|
$ |
116 |
|
$ |
92 |
|
$ |
65 |
|
$ |
(63 |
) |
$ |
35 |
|
$ |
(43 |
) |
$ |
53 |
|
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
53 |
|
$ |
122 |
|
$ |
93 |
|
$ |
71 |
|
$ |
(59 |
) |
$ |
42 |
|
$ |
(45 |
) |
$ |
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
56 |
|
$ |
114 |
|
$ |
87 |
|
$ |
56 |
|
$ |
(80 |
) |
$ |
24 |
|
$ |
(67 |
) |
$ |
44 |
|
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
59 |
|
$ |
120 |
|
$ |
88 |
|
$ |
62 |
|
$ |
(76 |
) |
$ |
31 |
|
$ |
(69 |
) |
$ |
35 |
|
The following table presents the impact of the revisions on the Company’s previously issued consolidated balance sheets (in millions):
|
|
|
As of |
|
|
|
|||||||||||
|
|
|
Dec. 31 |
|
Sep. 30 |
|
June 30 |
|
Mar. 31 |
|
As of |
|
|||||
|
|
|
2013 |
|
Dec. 31, 2012 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
As reported |
|
$ |
161 |
|
$ |
166 |
|
$ |
173 |
|
$ |
182 |
|
$ |
184 |
|
|
Correction |
|
24 |
|
21 |
|
15 |
|
14 |
|
8 |
|
|||||
|
As revised |
|
$ |
185 |
|
$ |
187 |
|
$ |
188 |
|
$ |
196 |
|
$ |
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
As reported |
|
$ |
6,933 |
|
$ |
7,059 |
|
$ |
7,062 |
|
$ |
6,779 |
|
$ |
6,875 |
|
|
Correction |
|
24 |
|
21 |
|
15 |
|
14 |
|
8 |
|
|||||
|
As revised |
|
$ |
6,957 |
|
$ |
7,080 |
|
$ |
7,077 |
|
$ |
6,793 |
|
$ |
6,883 |
|
|
|||
The following table presents the impact of the revisions on the Company’s previously issued full-year consolidated statement of operations (in millions):
|
|
|
Year ended December 31, |
|
|||||||
|
|
|
2013 |
|
2012 |
|
2011 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Other income (expense), net |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
(239 |
) |
$ |
(229 |
) |
$ |
(177 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
(223 |
) |
$ |
(229 |
) |
$ |
(168 |
) |
|
|
|
|
|
|
|
|
|
|||
|
Income (loss) from continuing operations, before income taxes |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
434 |
|
$ |
73 |
|
$ |
(392 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
450 |
|
$ |
73 |
|
$ |
(383 |
) |
|
|
|
|
|
|
|
|
|
|||
|
Income (loss) from continuing operations |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
323 |
|
$ |
(18 |
) |
$ |
(352 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
339 |
|
$ |
(18 |
) |
$ |
(343 |
) |
|
|
|
|
|
|
|
|
|
|||
|
Net income (loss) |
|
|
|
|
|
|
|
|||
|
As reported |
|
$ |
313 |
|
$ |
(79 |
) |
$ |
(533 |
) |
|
Correction |
|
16 |
|
— |
|
9 |
|
|||
|
As revised |
|
$ |
329 |
|
$ |
(79 |
) |
$ |
(524 |
) |
The following table presents the impact of the revisions on the Company’s previously issued quarterly consolidated statements of operations (in millions):
|
|
|
Three Months Ended |
|
Three Months Ended |
|
||||||||||||||||||||
|
|
|
Dec. 31 |
|
Sep. 30 |
|
June 30 |
|
Mar. 31 |
|
Dec. 31 |
|
Sep. 30 |
|
June 30 |
|
Mar. 31 |
|
||||||||
|
|
|
2013 |
|
2012 |
|
||||||||||||||||||||
|
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
(71 |
) |
$ |
(58 |
) |
$ |
(57 |
) |
$ |
(53 |
) |
$ |
(57 |
) |
$ |
(57 |
) |
$ |
(66 |
) |
$ |
(49 |
) |
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
(68 |
) |
$ |
(52 |
) |
$ |
(56 |
) |
$ |
(47 |
) |
$ |
(53 |
) |
$ |
(50 |
) |
$ |
(68 |
) |
$ |
(58 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Income (loss) from continuing operations, before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
70 |
|
$ |
154 |
|
$ |
131 |
|
$ |
79 |
|
$ |
(26 |
) |
$ |
51 |
|
$ |
(12 |
) |
$ |
60 |
|
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
73 |
|
$ |
160 |
|
$ |
132 |
|
$ |
85 |
|
$ |
(22 |
) |
$ |
58 |
|
$ |
(14 |
) |
$ |
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Income (loss) from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
50 |
|
$ |
116 |
|
$ |
92 |
|
$ |
65 |
|
$ |
(63 |
) |
$ |
35 |
|
$ |
(43 |
) |
$ |
53 |
|
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
53 |
|
$ |
122 |
|
$ |
93 |
|
$ |
71 |
|
$ |
(59 |
) |
$ |
42 |
|
$ |
(45 |
) |
$ |
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As reported |
|
$ |
56 |
|
$ |
114 |
|
$ |
87 |
|
$ |
56 |
|
$ |
(80 |
) |
$ |
24 |
|
$ |
(67 |
) |
$ |
44 |
|
|
Correction |
|
3 |
|
6 |
|
1 |
|
6 |
|
4 |
|
7 |
|
(2 |
) |
(9 |
) |
||||||||
|
As revised |
|
$ |
59 |
|
$ |
120 |
|
$ |
88 |
|
$ |
62 |
|
$ |
(76 |
) |
$ |
31 |
|
$ |
(69 |
) |
$ |
35 |
|
The following table presents the impact of the revisions on the Company’s previously issued consolidated balance sheets (in millions):
|
|
|
As of |
|
|
|
|||||||||||
|
|
|
Dec. 31 |
|
Sep. 30 |
|
June 30 |
|
Mar. 31 |
|
As of |
|
|||||
|
|
|
2013 |
|
Dec. 31, 2012 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
As reported |
|
$ |
161 |
|
$ |
166 |
|
$ |
173 |
|
$ |
182 |
|
$ |
184 |
|
|
Correction |
|
24 |
|
21 |
|
15 |
|
14 |
|
8 |
|
|||||
|
As revised |
|
$ |
185 |
|
$ |
187 |
|
$ |
188 |
|
$ |
196 |
|
$ |
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
As reported |
|
$ |
6,933 |
|
$ |
7,059 |
|
$ |
7,062 |
|
$ |
6,779 |
|
$ |
6,875 |
|
|
Correction |
|
24 |
|
21 |
|
15 |
|
14 |
|
8 |
|
|||||
|
As revised |
|
$ |
6,957 |
|
$ |
7,080 |
|
$ |
7,077 |
|
$ |
6,793 |
|
$ |
6,883 |
|
|
|||
Selected financial information for the discontinued operations, during the period owned by the Company, was as follows, in millions:
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||
|
|
|
September 30, 2013 |
|
September 30, 2013 |
|
||
|
|
|
|
|
|
|
||
|
Net Sales |
|
$ |
75 |
|
$ |
194 |
|
|
|
|
|
|
|
|
||
|
Operating loss from discontinued operations |
|
$ |
— |
|
$ |
(8 |
) |
|
Impairment of assets |
|
— |
|
(10 |
) |
||
|
Loss on disposal of discontinued operations, net |
|
(2 |
) |
(2 |
) |
||
|
Loss before income tax |
|
(2 |
) |
(20 |
) |
||
|
Income tax benefit |
|
— |
|
(4 |
) |
||
|
Loss from discontinued operations, net |
|
$ |
(2 |
) |
$ |
(16 |
) |
|
|||
The changes in the carrying amount of goodwill for the nine months ended September 30, 2014, by segment, were as follows, in millions:
|
|
|
Gross Goodwill |
|
Accumulated |
|
Net Goodwill |
|
|||
|
|
|
At |
|
Impairment |
|
At |
|
|||
|
|
|
Sep. 30, 2014 |
|
Losses |
|
Sep. 30, 2014 |
|
|||
|
Cabinets and Related Products |
|
$ |
240 |
|
$ |
(59 |
) |
$ |
181 |
|
|
Plumbing Products |
|
538 |
|
(340 |
) |
198 |
|
|||
|
Installation and Other Services |
|
1,806 |
|
(762 |
) |
1,044 |
|
|||
|
Decorative Architectural Products |
|
294 |
|
(75 |
) |
219 |
|
|||
|
Other Specialty Products |
|
983 |
|
(734 |
) |
249 |
|
|||
|
Total |
|
$ |
3,861 |
|
$ |
(1,970 |
) |
$ |
1,891 |
|
|
|
|
Gross Goodwill |
|
Accumulated |
|
Net Goodwill |
|
|
|
Net Goodwill |
|
|||||
|
|
|
At |
|
Impairment |
|
At |
|
|
|
At |
|
|||||
|
|
|
Dec. 31, 2013 |
|
Losses |
|
Dec. 31, 2013 |
|
Other(A) |
|
Sep. 30, 2014 |
|
|||||
|
Cabinets and Related Products |
|
$ |
240 |
|
$ |
(59 |
) |
$ |
181 |
|
$ |
— |
|
$ |
181 |
|
|
Plumbing Products |
|
550 |
|
(340 |
) |
210 |
|
(12 |
) |
198 |
|
|||||
|
Installation and Other Services |
|
1,806 |
|
(762 |
) |
1,044 |
|
— |
|
1,044 |
|
|||||
|
Decorative Architectural Products |
|
294 |
|
(75 |
) |
219 |
|
— |
|
219 |
|
|||||
|
Other Specialty Products |
|
983 |
|
(734 |
) |
249 |
|
— |
|
249 |
|
|||||
|
Total |
|
$ |
3,873 |
|
$ |
(1,970 |
) |
$ |
1,903 |
|
$ |
(12 |
) |
$ |
1,891 |
|
|
(A) |
Other principally includes the effect of foreign currency translation. |
|
|||
Financial investments included in other assets were as follows, in millions:
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2014 |
|
2013 |
|
||
|
Equity method investments |
|
$ |
61 |
|
$ |
70 |
|
|
Total equity method investments |
|
61 |
|
70 |
|
||
|
|
|
|
|
|
|
||
|
Auction rate securities |
|
22 |
|
22 |
|
||
|
Total recurring investments |
|
22 |
|
22 |
|
||
|
|
|
|
|
|
|
||
|
Private equity funds |
|
15 |
|
18 |
|
||
|
Other investments |
|
4 |
|
3 |
|
||
|
Total non-recurring investments |
|
19 |
|
21 |
|
||
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
102 |
|
$ |
113 |
|
Income (loss) from financial investments, net, included in other, net, within other income (expense), net, was as follows, in millions:
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
Realized gains from private equity funds |
|
$ |
— |
|
$ |
— |
|
$ |
4 |
|
$ |
7 |
|
|
Equity investment (loss) income, net |
|
— |
|
6 |
|
(2 |
) |
13 |
|
||||
|
Income from other investments, net |
|
— |
|
— |
|
— |
|
1 |
|
||||
|
Total income from financial investments |
|
$ |
— |
|
$ |
6 |
|
$ |
2 |
|
$ |
21 |
|
|
|||
The pre-tax (losses) gains included in the Company’s condensed consolidated statements of operations is as follows, in millions:
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
Foreign Currency Contracts |
|
|
|
|
|
|
|
|
|
||||
|
Exchange Contracts |
|
$ |
5 |
|
$ |
(4 |
) |
$ |
2 |
|
$ |
3 |
|
|
Forward Contracts |
|
1 |
|
(1 |
) |
— |
|
1 |
|
||||
|
Metal Contracts |
|
— |
|
3 |
|
— |
|
(6 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total gain (loss) |
|
$ |
6 |
|
$ |
(2 |
) |
$ |
2 |
|
$ |
(2 |
) |
The notional amounts being hedged and the fair value of those derivative instruments, on a gross basis, are as follows, in millions:
|
|
|
At September 30, 2014 |
|
|||||||
|
|
|
Notional |
|
|
|
|
|
|||
|
|
|
Amount |
|
Assets |
|
Liabilities |
|
|||
|
Foreign Currency Contracts |
|
|
|
|
|
|
|
|||
|
Exchange Contracts |
|
$ |
76 |
|
|
|
|
|
||
|
Current assets |
|
|
|
$ |
4 |
|
$ |
— |
|
|
|
Forward Contracts |
|
|
|
|
|
|
|
|||
|
Current assets |
|
64 |
|
1 |
|
— |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Metals Contracts |
|
|
|
|
|
|
|
|||
|
Current assets |
|
61 |
|
2 |
|
2 |
|
|||
|
Total |
|
|
|
$ |
7 |
|
$ |
2 |
|
|
|
|
|
At December 31, 2013 |
|
|||||||
|
|
|
Notional |
|
|
|
|
|
|||
|
|
|
Amount |
|
Assets |
|
Liabilities |
|
|||
|
Foreign Currency Contracts |
|
|
|
|
|
|
|
|||
|
Exchange Contracts |
|
$ |
53 |
|
|
|
|
|
||
|
Current liabilities |
|
|
|
$ |
— |
|
$ |
2 |
|
|
|
Forward Contracts |
|
88 |
|
|
|
|
|
|||
|
Current liabilities |
|
|
|
— |
|
1 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Metals Contracts |
|
48 |
|
|
|
|
|
|||
|
Current liabilities |
|
|
|
— |
|
2 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Total |
|
|
|
$ |
— |
|
$ |
5 |
|
|
|
|||
Changes in the Company’s warranty liability were as follows, in millions:
|
|
|
Nine Months Ended |
|
Twelve Months Ended |
|
||
|
|
|
September 30, 2014 |
|
December 31, 2013 |
|
||
|
Balance at January 1 |
|
$ |
124 |
|
$ |
118 |
|
|
Accruals for warranties issued during the period |
|
36 |
|
42 |
|
||
|
Accruals related to pre-existing warranties |
|
6 |
|
6 |
|
||
|
Settlements made (in cash or kind) during the period |
|
(35 |
) |
(42 |
) |
||
|
Other, net |
|
(3 |
) |
— |
|
||
|
Balance at end of period |
|
$ |
128 |
|
$ |
124 |
|
|
|||
Pre-tax compensation expense and the related income tax benefit for these stock-based incentives were as follows, in millions:
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
Long-term stock awards |
|
$ |
7 |
|
$ |
7 |
|
$ |
30 |
|
$ |
27 |
|
|
Stock options |
|
1 |
|
2 |
|
3 |
|
12 |
|
||||
|
Phantom stock awards and stock appreciation rights |
|
3 |
|
3 |
|
4 |
|
6 |
|
||||
|
Total |
|
$ |
11 |
|
$ |
12 |
|
$ |
37 |
|
$ |
45 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Income tax benefit (37 percent tax rate - before valuation allowance) |
|
$ |
4 |
|
$ |
5 |
|
$ |
14 |
|
$ |
17 |
|
The Company’s long-term stock award activity was as follows, shares in millions:
|
|
|
Nine Months Ended |
|
||||
|
|
|
September 30, |
|
||||
|
|
|
2014 |
|
2013 |
|
||
|
Unvested stock award shares at January 1 |
|
8 |
|
8 |
|
||
|
Weighted average grant date fair value |
|
$ |
17 |
|
$ |
16 |
|
|
|
|
|
|
|
|
||
|
Stock award shares granted |
|
1 |
|
2 |
|
||
|
Weighted average grant date fair value |
|
$ |
22 |
|
$ |
20 |
|
|
|
|
|
|
|
|
||
|
Stock award shares vested |
|
2 |
|
2 |
|
||
|
Weighted average grant date fair value |
|
$ |
17 |
|
$ |
17 |
|
|
|
|
|
|
|
|
||
|
Stock award shares forfeited |
|
1 |
|
— |
|
||
|
Weighted average grant date fair value |
|
$ |
16 |
|
$ |
17 |
|
|
|
|
|
|
|
|
||
|
Unvested stock award shares at September 30 |
|
6 |
|
8 |
|
||
|
Weighted average grant date fair value |
|
$ |
18 |
|
$ |
17 |
|
The Company’s stock option activity was as follows, shares in millions:
|
|
|
Nine Months Ended |
|
||||
|
|
|
September 30, |
|
||||
|
|
|
2014 |
|
2013 |
|
||
|
Option shares outstanding, January 1 |
|
24 |
|
30 |
|
||
|
Weighted average exercise price |
|
$ |
22 |
|
$ |
21 |
|
|
|
|
|
|
|
|
||
|
Option shares granted, including restoration options |
|
— |
|
1 |
|
||
|
Weighted average exercise price |
|
$ |
22 |
|
$ |
20 |
|
|
|
|
|
|
|
|
||
|
Option shares exercised |
|
2 |
|
3 |
|
||
|
Aggregate intrinsic value on date of exercise (A) |
|
$ |
17 million |
|
$ |
22 million |
|
|
Weighted average exercise price |
|
$ |
16 |
|
$ |
12 |
|
|
|
|
|
|
|
|
||
|
Option shares forfeited |
|
3 |
|
1 |
|
||
|
Weighted average exercise price |
|
$ |
28 |
|
$ |
23 |
|
|
|
|
|
|
|
|
||
|
Option shares outstanding, September 30 |
|
19 |
|
27 |
|
||
|
Weighted average exercise price |
|
$ |
21 |
|
$ |
22 |
|
|
Weighted average remaining option term (in years) |
|
4 |
|
4 |
|
||
|
|
|
|
|
|
|
||
|
Option shares vested and expected to vest, September 30 |
|
19 |
|
27 |
|
||
|
Weighted average exercise price |
|
$ |
21 |
|
$ |
22 |
|
|
Aggregate intrinsic value (A) |
|
$ |
102 million |
|
$ |
91 million |
|
|
Weighted average remaining option term (in years) |
|
4 |
|
4 |
|
||
|
|
|
|
|
|
|
||
|
Option shares exercisable (vested), September 30 |
|
16 |
|
22 |
|
||
|
Weighted average exercise price |
|
$ |
22 |
|
$ |
24 |
|
|
Aggregate intrinsic value (A) |
|
$ |
80 million |
|
$ |
51 million |
|
|
Weighted average remaining option term (in years) |
|
3 |
|
3 |
|
||
|
(A) |
Aggregate intrinsic value is calculated using the Company’s stock price at each respective date, less the exercise price (grant date price) multiplied by the number of shares. |
|
|
|
Nine Months Ended |
|
||||
|
|
|
September 30, |
|
||||
|
|
|
2014 |
|
2013 |
|
||
|
Weighted average grant date fair value |
|
$ |
9.53 |
|
$ |
8.35 |
|
|
Risk-free interest rate |
|
1.91 |
% |
1.22 |
% |
||
|
Dividend yield |
|
1.34 |
% |
1.47 |
% |
||
|
Volatility factor |
|
49.00 |
% |
49.07 |
% |
||
|
Expected option life |
|
6 years |
|
6 years |
|
||
|
|||
Net periodic pension cost for the Company’s defined-benefit pension plans was as follows, in millions:
|
|
|
Three Months Ended September 30, |
|
||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||
|
|
|
Qualified |
|
Non-Qualified |
|
Qualified |
|
Non-Qualified |
|
||||
|
Service cost |
|
$ |
1 |
|
$ |
— |
|
$ |
1 |
|
$ |
— |
|
|
Interest cost |
|
12 |
|
2 |
|
10 |
|
2 |
|
||||
|
Expected return on plan assets |
|
(11 |
) |
— |
|
(10 |
) |
— |
|
||||
|
Amortization of net loss |
|
2 |
|
1 |
|
4 |
|
1 |
|
||||
|
Net periodic pension cost |
|
$ |
4 |
|
$ |
3 |
|
5 |
|
3 |
|
||
|
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||
|
|
|
Qualified |
|
Non-Qualified |
|
Qualified |
|
Non-Qualified |
|
||||
|
Service cost |
|
$ |
3 |
|
$ |
— |
|
$ |
3 |
|
$ |
— |
|
|
Interest cost |
|
38 |
|
6 |
|
32 |
|
5 |
|
||||
|
Expected return on plan assets |
|
(35 |
) |
— |
|
(30 |
) |
— |
|
||||
|
Amortization of net loss |
|
8 |
|
1 |
|
12 |
|
2 |
|
||||
|
Net periodic pension cost |
|
$ |
14 |
|
$ |
7 |
|
$ |
17 |
|
$ |
7 |
|
|
|||
The reclassifications from accumulated other comprehensive income to the condensed consolidated statement of operations were as follows, in millions:
|
|
|
Amount Reclassified |
|
|
|
||||||||||
|
Accumulated Other |
|
Three Months |
|
Nine Months |
|
|
|
||||||||
|
Comprehensive |
|
Ended Sep. 30, |
|
Ended Sep. 30, |
|
Income Statement |
|
||||||||
|
Income (Loss) |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Line Item |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Amortization of defined benefit pension: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Actuarial losses, net |
|
$ |
3 |
|
$ |
5 |
|
$ |
9 |
|
$ |
14 |
|
Selling, General & Administrative Expense |
|
|
|
|
(3 |
) |
— |
|
(3 |
) |
— |
|
Income tax benefit |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest rate swaps |
|
$ |
— |
|
$ |
— |
|
$ |
1 |
|
$ |
1 |
|
Interest expense |
|
|
|
|
— |
|
— |
|
— |
|
— |
|
Income tax benefit |
|
||||
|
|||
Information about the Company by segment and geographic area was as follows, in millions:
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||||||
|
|
|
Net Sales(A) |
|
Operating Profit (Loss) |
|
Net Sales(A) |
|
Operating Profit (Loss) |
|
||||||||||||||||
|
The Company’s operations by segment were: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Cabinets and Related Products |
|
$ |
266 |
|
$ |
262 |
|
$ |
(35 |
) |
$ |
(2 |
) |
$ |
756 |
|
$ |
763 |
|
$ |
(55 |
) |
$ |
(4 |
) |
|
Plumbing Products |
|
855 |
|
820 |
|
141 |
|
118 |
|
2,504 |
|
2,384 |
|
399 |
|
306 |
|
||||||||
|
Installation and Other Services |
|
398 |
|
370 |
|
20 |
|
18 |
|
1,117 |
|
1,039 |
|
33 |
|
22 |
|
||||||||
|
Decorative Architectural Products |
|
523 |
|
522 |
|
91 |
|
93 |
|
1,560 |
|
1,519 |
|
280 |
|
286 |
|
||||||||
|
Other Specialty Products |
|
190 |
|
176 |
|
20 |
|
16 |
|
520 |
|
470 |
|
39 |
|
26 |
|
||||||||
|
Total |
|
$ |
2,232 |
|
$ |
2,150 |
|
$ |
237 |
|
$ |
243 |
|
$ |
6,457 |
|
$ |
6,175 |
|
$ |
696 |
|
$ |
636 |
|
|
The Company’s operations by geographic area were: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
North America |
|
$ |
1,818 |
|
$ |
1,756 |
|
$ |
182 |
|
$ |
193 |
|
$ |
5,217 |
|
$ |
5,031 |
|
$ |
527 |
|
$ |
518 |
|
|
International, principally Europe |
|
414 |
|
394 |
|
55 |
|
50 |
|
1,240 |
|
1,144 |
|
169 |
|
118 |
|
||||||||
|
Total |
|
$ |
2,232 |
|
$ |
2,150 |
|
237 |
|
243 |
|
$ |
6,457 |
|
$ |
6,175 |
|
696 |
|
636 |
|
||||
|
General corporate expense, net |
|
|
|
|
|
(35 |
) |
(31 |
) |
|
|
|
|
(102 |
) |
(104 |
) |
||||||||
|
Operating profit |
|
|
|
|
|
202 |
|
212 |
|
|
|
|
|
594 |
|
532 |
|
||||||||
|
Other income (expense), net |
|
|
|
|
|
(50 |
) |
(52 |
) |
|
|
|
|
(159 |
) |
(155 |
) |
||||||||
|
Income from continuing operations before income taxes |
|
|
|
|
|
$ |
152 |
|
$ |
160 |
|
|
|
|
|
$ |
435 |
|
$ |
377 |
|
||||
|
(A) |
Inter-segment sales were not material. |
|
|||
Other, net, which is included in other income (expense), net, was as follows, in millions:
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
Income from cash and cash investments |
|
$ |
1 |
|
$ |
1 |
|
$ |
2 |
|
$ |
3 |
|
|
Income from financial investments (Note E) |
|
— |
|
6 |
|
2 |
|
21 |
|
||||
|
Currency gains (losses) |
|
5 |
|
(1 |
) |
5 |
|
— |
|
||||
|
Other items, net |
|
1 |
|
— |
|
1 |
|
(1 |
) |
||||
|
Total other net |
|
$ |
7 |
|
$ |
6 |
|
$ |
10 |
|
$ |
23 |
|
|
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