MASCO CORP /DE/, 10-Q filed on 4/28/2015
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2015
Document and Entity Information [Abstract]
 
Entity Registrant Name
MASCO CORP /DE/ 
Entity Central Index Key
0000062996 
Document Type
10-Q 
Document Period End Date
Mar. 31, 2015 
Amendment Flag
false 
Current Fiscal Year End Date
--12-31 
Entity Current Reporting Status
Yes 
Entity Filer Category
Large Accelerated Filer 
Entity Common Stock, Shares Outstanding
347,595,200 
Document Fiscal Year Focus
2015 
Document Fiscal Period Focus
Q1 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Current assets:
 
 
Cash and cash investments
$ 1,578 
$ 1,383 
Short-term bank deposits
197 
306 
Receivables
1,248 
1,040 
Deferred income taxes
219 
244 
Prepaid expenses and other
74 
71 
Inventories:
 
 
Finished goods
467 
425 
Raw material
291 
294 
Work in process
105 
100 
Total
863 
819 
Total current assets
4,179 
3,863 
Property and equipment, net
1,106 
1,139 
Goodwill
1,878 
1,884 
Other intangible assets, net
158 
145 
Other assets
147 
136 
Total Assets
7,468 
7,167 
Current Liabilities:
 
 
Notes payable
506 
505 
Accounts payable
1,019 
950 
Accrued liabilities
682 
756 
Total current liabilities
2,207 
2,211 
Long-term debt
3,418 
2,919 
Other liabilities
770 
803 
Deferred income taxes
114 
106 
Total Liabilities
6,509 
6,039 
Commitments and contingencies
   
   
Masco Corporation's shareholders' equity:
 
 
Common shares, par value $1 per share; Authorized shares: 1,400,000,000; issued and outstanding: 2015 - 342,600,000; 2014 - 345,000,000
343 
345 
Preferred shares authorized: 1,000,000; issued and outstanding: 2015 - None; 2014 - None
   
   
Retained earnings
606 
690 
Accumulated other comprehensive loss
(180)
(111)
Total Masco Corporation's shareholders' equity
769 
924 
Noncontrolling interest
190 
204 
Total equity
959 
1,128 
Total liabilities and equity
$ 7,468 
$ 7,167 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Mar. 31, 2015
Dec. 31, 2014
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
Common share, par value (in dollars per share)
$ 1 
$ 1 
Common shares, shares authorized
1,400,000,000 
1,400,000,000 
Common shares, shares issued
342,600,000 
345,000,000 
Common shares, shares outstanding
342,600,000 
345,000,000 
Preferred shares, shares authorized
1,000,000 
1,000,000 
Preferred shares, shares issued
Preferred shares, shares outstanding
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
Net sales
$ 2,018 
$ 1,965 
Cost of sales
1,450 
1,418 
Gross profit
568 
547 
Selling, general and administrative expenses
397 
395 
Operating profit
171 
152 
Other income (expense), net:
 
 
Interest expense
(56)
(56)
Other, net
(3)
Total other income (expense), net
(55)
(59)
Income from continuing operations before income taxes
116 
93 
Income taxes
43 
Income from continuing operations
73 
88 
Loss from discontinued operations
 
(2)
Net income
73 
86 
Less: Net income attributable to noncontrolling interest
12 
Net income attributable to Masco Corporation
64 
74 
Basic:
 
 
Income from continuing operations
$ 0.18 
$ 0.21 
Loss from discontinued operations (in dollars per share)
 
$ (0.01)
Net income
$ 0.18 
$ 0.21 
Diluted:
 
 
Income from continuing operations
$ 0.18 
$ 0.21 
Loss from discontinued operations (in dollars per share)
 
$ (0.01)
Net income
$ 0.18 
$ 0.21 
Amounts attributable to Masco Corporation:
 
 
Income from continuing operations
64 
76 
Loss from discontinued operations
 
(2)
Net income attributable to Masco Corporation
$ 64 
$ 74 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
 
 
Net income
$ 73 
$ 86 
Less: Net income attributable to noncontrolling interest
12 
Net income attributable to Masco Corporation
64 
74 
Other comprehensive loss, net of tax:
 
 
Cumulative translation adjustment
(96)
(4)
Amortization of pension prior service cost and net loss
Other comprehensive loss
(92)
(1)
Less: Other comprehensive loss attributable to noncontrolling interest
(23)
(1)
Other comprehensive (loss) income attributable to Masco Corporation
(69)
 
Total comprehensive (loss) income
(19)
85 
Less: Total comprehensive (loss) income attributable to noncontrolling interest
(14)
11 
Total comprehensive (loss) income attributable to Masco Corporation
$ (5)
$ 74 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
 
 
Cash provided by operations
$ 144 
$ 121 
Increase in receivables
(244)
(227)
Increase in inventories
(56)
(75)
Increase (decrease) in accounts payable and accrued liabilities, net
(63)
Net cash for operating activities
(152)
(244)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
 
 
Purchase of Company common stock
(103)
(39)
Cash dividends paid
(32)
(27)
Issuance of notes, net of issuance costs
497 
 
Net cash from (for) financing activities
362 
(66)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
 
 
Capital expenditures
(32)
(26)
Acquisition of businesses, net of cash acquired
(26)
(2)
Proceeds from disposition of:
 
 
Other financial investments
Property and equipment
Short-term bank deposits
141 
84 
Purchases of:
 
 
Short-term bank deposits
(63)
(69)
Other, net
(15)
 
Net cash from (for) investing activities
11 
(6)
Effect of exchange rate changes on cash and cash investments
(26)
(1)
CASH AND CASH INVESTMENTS:
 
 
Increase (Decrease) for the period
195 
(317)
At January 1
1,383 
1,223 
At March 31
$ 1,578 
$ 906 
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)
In Millions, unless otherwise specified
Common Shares ($1 par value)
Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Noncontrolling Interest
Total
Balance at Dec. 31, 2013
$ 349 
$ 16 
$ 79 
$ 115 
$ 228 
$ 787 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
Total comprehensive income
 
 
74 
 
11 
85 
Shares issued
(5)
 
 
 
(3)
Shares retired:
 
 
 
 
 
 
Repurchased
(2)
(9)
(28)
 
 
(39)
Surrendered (non-cash)
 
(14)
 
 
 
(14)
Cash dividends declared
 
 
(27)
 
 
(27)
Stock-based compensation
 
12 
 
 
 
12 
Balance at Mar. 31, 2014
349 
 
98 
115 
239 
801 
Balance at Dec. 31, 2014
345 
 
690 
(111)
204 
1,128 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
Total comprehensive income
 
 
64 
(69)
(14)
(19)
Shares issued
(8)
 
 
 
(5)
Shares retired:
 
 
 
 
 
 
Repurchased
(4)
 
(102)
 
 
(106)
Surrendered (non-cash)
(1)
 
(15)
 
 
(16)
Cash dividends declared
 
 
(31)
 
 
(31)
Stock-based compensation
 
 
 
 
Balance at Mar. 31, 2015
$ 343 
 
$ 606 
$ (180)
$ 190 
$ 959 
Accounting Policies
Accounting Policies

 

A. ACCOUNTING POLICIES

 

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to present fairly our financial position as at March 31, 2015, our results of operations, comprehensive (loss) income, cash flows, and changes in shareholders’ equity for the three months ended March 31, 2015 and 2014.  The condensed consolidated balance sheet at December 31, 2014 was derived from audited financial statements.

 

Recently Issued Accounting Pronouncements:  In April 2014, the Financial Accounting Standards Board (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.  On January 1, 2015, we adopted the ASU 2014-8.  The adoption of the new standard did not have an impact on our financial position or 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 and voting models.  ASU 2015-2 is effective for us for annual periods beginning January 1, 2016.  We are currently evaluating the impact the adoption of this new standard will have on our financial position or 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.  ASU 2015-3 is effective for us for annual periods beginning January 1, 2016.  We do not expect that the adoption of the new standard will have a material impact on our financial position.

 

Discontinued Operations
Discontinued Operations

 

B. DISCONTINUED OPERATIONS

 

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 (to be named TopBuild Corp.) through a tax-free distribution of the stock of TopBuild Corp. to our shareholders. The transaction is expected to be completed in mid-2015. For the three months ended March 31, 2015, we have incurred $4 million of costs and charges related to this transaction. Under generally accepted accounting principles, the Installation and Other Services businesses are included in continuing operations until the transaction is completed.

 

Acquisitions
Acquisitions

 

C. ACQUISITIONS

 

In the first quarter of 2015, we acquired an aquatic fitness business for approximately $26 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.

 

The results of this acquisition are included in the condensed consolidated financial statements from the date of acquisition.

 

Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets

 

D. GOODWILL AND OTHER INTANGIBLE ASSETS

 

The changes in the carrying amount of goodwill for the three months ended March 31, 2015, by segment, were as follows, in millions:

 

 

 

Gross Goodwill

 

Accumulated

 

Net Goodwill

 

 

 

At

 

Impairment

 

At

 

 

 

Mar. 31, 2015

 

Losses

 

Mar. 31, 2015

 

Cabinets and Related Products

 

$

240

 

$

(59

)

$

181

 

Plumbing Products

 

525

 

(340

)

185

 

Installation and Other Services

 

1,806

 

(762

)

1,044

 

Decorative Architectural Products

 

294

 

(75

)

219

 

Other Specialty Products

 

983

 

(734

)

249

 

Total

 

$

3,848

 

$

(1,970

)

$

1,878

 

 

 

 

Gross Goodwill

 

Accumulated

 

Net Goodwill

 

 

 

 

 

Net Goodwill

 

 

 

At

 

Impairment

 

At

 

 

 

 

 

At

 

 

 

Dec. 31, 2014

 

Losses

 

Dec. 31, 2014

 

Acquisitions

 

Other(A)

 

Mar. 31, 2015

 

Cabinets and Related Products

 

$

240

 

$

(59

)

$

181

 

$

 

$

 

$

181

 

Plumbing Products

 

531

 

(340

)

191

 

9

 

(15

)

185

 

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

 

$

3,854

 

$

(1,970

)

$

1,884

 

$

9

 

$

(15

)

$

1,878

 

 

(A)

Other principally includes the effect of foreign currency translation.

 

Other indefinite-lived intangible assets were $136 million and $131 million at March 31, 2015 and December 31, 2014, respectively, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $22 million (net of accumulated amortization of $65 million) at March 31, 2015 and $14 million (net of accumulated amortization of $65 million) at December 31, 2014, and principally included customer relationships.

 

Depreciation and Amortization
Depreciation and Amortization

 

E. DEPRECIATION AND AMORTIZATION

 

Depreciation and amortization expense, including discontinued operations, was $34 million and $43 million for the three months ended March 31, 2015 and 2014, respectively.  Depreciation and amortization expense included accelerated depreciation (relating to business rationalization initiatives) of $1 million for the three months ended March 31, 2014.

 

Fair Value of Financial Investments
Fair Value of Financial Investments

 

F. FAIR VALUE OF FINANCIAL INVESTMENTS

 

We have maintained investments in available-for-sale securities, equity method investments and a number of private equity funds, 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:

 

 

 

March 31,

 

December 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Auction rate securities

 

$

22 

 

$

22 

 

Total recurring investments

 

22 

 

22 

 

 

 

 

 

 

 

Equity method investments

 

11 

 

11 

 

Private equity funds

 

12 

 

14 

 

Other investments

 

 

 

 

 

 

 

 

 

Total

 

$

48 

 

$

50 

 

 

Recurring Fair Value Measurements.  The fair value 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 the assumptions for credit defaults, since the auction rate securities are backed by credit default swap agreements.

 

Our 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 March 31, 2015 and December 31, 2014.

 

Non-Recurring Fair Value Measurements.  During the three months ended March 31, 2015 and 2014, we 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 these investments.

 

We did not have any transfers between Level 1 and Level 2 financial assets in the three months ended March 31, 2015 or 2014.

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Realized gains from private equity funds

 

$

2

 

$

1

 

Equity investments loss, net

 

 

(2

)

Total income (loss) from financial Investments, net

 

$

2

 

$

(1

)

 

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 March 31, 2015 was approximately $4.3 billion, compared with the aggregate carrying value of $3.9 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

 

G. 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 metals 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 March 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 August 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.

 

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 of our 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 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, 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 condensed consolidated statements of operations in cost of sales.

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Foreign currency contracts

 

 

 

 

 

Exchange contracts

 

$

4

 

$

(2

)

Forward contracts

 

(4

)

(1

)

Metals contracts

 

(2

)

(3

)

 

 

 

 

 

 

Total loss

 

$

(2

)

$

(6

)

 

We present our derivatives, net by counterparty due to the right of offset under master netting arrangements in receivables or accrued 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 March 31, 2015

 

 

 

Notional

 

 

 

 

 

Amount

 

Balance Sheet

 

Foreign currency contracts

 

 

 

 

 

Exchange contracts

 

$

40

 

 

 

Receivables

 

 

 

$

5

 

Forward contracts

 

61

 

 

 

Other assets

 

 

 

3

 

Accrued liabilities

 

 

 

(7

)

 

 

 

 

 

 

Metals contracts

 

76

 

 

 

Accrued liabilities

 

 

 

(3

)

 

 

 

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 metals and foreign currency derivative contracts is estimated on a recurring basis, quarterly, using Level 2 inputs (significant other observable inputs).

 

Warranty Liability
Warranty Liability

 

H. WARRANTY LIABILITY

 

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

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

 

 

 

 

Balance at January 1

 

$

135

 

$

124

 

Accruals for warranties issued during the period

 

13

 

51

 

Accruals related to pre-existing warranties

 

2

 

11

 

Settlements made (in cash or kind) during the period

 

(12

)

(46

)

Other, net (including currency translation)

 

(2

)

(5

)

Balance at end of period

 

$

136

 

$

135

 

 

Debt
Debt

 

I. DEBT

 

On March 17, 2015, we issued $500 million of 4.45% Notes (“Notes”) due April 1, 2025.  The Notes are senior indebtedness and are redeemable at our option.

 

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.

 

Based on the limitations of the debt to total capitalization ratio covenant in the Credit Agreement, at March 31, 2015, we had additional borrowing capacity, subject to availability, of up to $1.1 billion.  Additionally, at March 31, 2015, we could absorb a reduction to shareholders’ equity of approximately $579 million and remain in compliance with the debt to total capitalization covenant.

 

In order for us to borrow under the Credit Agreement, there must not be any default in our covenants in the Credit Agreement (i.e., in addition to the two financial covenants, principally limitations on subsidiary debt, negative pledge restrictions, legal compliance requirements and maintenance of properties and insurance) and our representations and warranties in the Credit Agreement must be true in all material respects on the date of borrowing (i.e., principally no material adverse change or litigation likely to result in a material adverse change, since December 31, 2012, 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 March 31, 2015.

 

Stock-Based Compensation
Stock-Based Compensation

 

J. STOCK-BASED COMPENSATION

 

Our 2014 Long Term Stock Incentive Plan (the “2014 Plan”) provides for the issuance of stock-based incentives in various forms to our employees and non-employee Directors.  At March 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:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Long-term stock awards

 

$

 

$

11 

 

Stock options

 

 

 

Phantom stock awards and stock appreciation rights

 

 

 

 

 

 

 

 

 

Total

 

$

11 

 

$

12 

 

 

 

 

 

 

 

Income tax benefit (37 percent tax rate - before valuation allowance)

 

$

 

$

 

 

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 675,040 shares of long-term stock awards in the three months ended March 31, 2015.

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Unvested stock award shares at January 1

 

 

 

Weighted average grant date fair value

 

$

18 

 

$

17 

 

 

 

 

 

 

 

Stock award shares granted

 

 

 

Weighted average grant date fair value

 

$

26 

 

$

22 

 

 

 

 

 

 

 

Stock award shares vested

 

 

 

Weighted average grant date fair value

 

$

17 

 

$

17 

 

 

 

 

 

 

 

Stock award shares forfeited

 

 

 

Weighted average grant date fair value

 

$

19 

 

$

18 

 

 

 

 

 

 

 

Unvested stock award shares at March 31

 

 

 

Weighted average grant date fair value

 

$

19 

 

$

18 

 

 

At March 31, 2015 and 2014, there was $68 million and $94 million of total unrecognized compensation expense related to unvested stock awards, respectively; such awards had a weighted average remaining vesting period of three years in 2015 and four years in 2014.

 

The total market value (at the vesting date) of stock award shares which vested during the three months ended March 31, 2015 and 2014 was $48 million and $45 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 of stock option shares in the three months ended March 31, 2015 with a grant date exercise price approximating $26 per share. In the first three months of 2015, 136,040 stock option shares were forfeited (including options that expired unexercised).

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Option shares outstanding, January 1

 

18 

 

24 

 

Weighted average exercise price

 

$

21 

 

$

22 

 

 

 

 

 

 

 

Option shares granted

 

 

 

Weighted average exercise price

 

$

26 

 

$

22 

 

 

 

 

 

 

 

Option shares exercised

 

 

 

Aggregate intrinsic value on date of exercise (A) 

 

$

17 million

 

$

10 million

 

Weighted average exercise price

 

$

14 

 

$

16 

 

 

 

 

 

 

 

Option shares forfeited

 

 

 

Weighted average exercise price

 

$

22 

 

$

27 

 

 

 

 

 

 

 

Option shares outstanding, March 31

 

17 

 

23 

 

Weighted average exercise price

 

$

22 

 

$

22 

 

Weighted average remaining option term (in years)

 

 

 

 

 

 

 

 

 

Option shares vested and expected to vest, March 31

 

17 

 

23 

 

Weighted average exercise price

 

$

22 

 

$

22 

 

Aggregate intrinsic value (A) 

 

$

108 million

 

$

93 million

 

Weighted average remaining option term (in years)

 

 

 

 

 

 

 

 

 

Option shares exercisable (vested), March 31

 

15 

 

20 

 

Weighted average exercise price

 

$

22 

 

$

23 

 

Aggregate intrinsic value (A) 

 

$

94 million

 

$

72 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.

 

At March 31, 2015 and 2014, there were $9 million and $11 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model at the grant date) related to unvested stock options; such options had a weighted average remaining vesting period of three years at both March 31, 2015 and 2014.

 

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:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Weighted average grant date fair value

 

$

9.67 

 

$

9.53 

 

Risk-free interest rate

 

1.75 

%

1.91 

%

Dividend yield

 

1.32 

%

1.34 

%

Volatility factor

 

42.00 

%

49.00 

%

Expected option life

 

6 years

 

6 years

 

 

Employee Retirement Plans
Employee Retirement Plans

 

K. EMPLOYEE RETIREMENT PLANS

 

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

 

 

 

Three Months ended March 31,

 

 

 

2015

 

2014

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

1

 

$

 

$

1

 

$

 

Interest cost

 

12

 

1

 

13

 

2

 

Expected return on plan assets

 

(11

)

 

(12

)

 

Amortization of net loss

 

4

 

1

 

3

 

 

Net periodic pension cost

 

$

6

 

$

2

 

$

5

 

$

2

 

 

We participate in 21 regional multi-employer pension plans, principally related to building trades; none of the plans are considered significant to us.

 

Effective January 1, 2010, we froze all future benefit accruals under substantially all of our domestic qualified and non-qualified defined benefit pension plans.  Future benefit accruals related to our foreign non-qualified plans were frozen several years ago.

 

 

 

Reclassifications From Accumulated Other Comprehensive (Loss) Income
Reclassifications from accumulated other comprehensive (loss) income to the condensed consolidated statement of operations

 

L. RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

 

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

 

 

 

Amount

 

 

 

 

 

Reclassified

 

 

 

Accumulated Other

 

Three Months

 

 

 

Comprehensive

 

Ended March 31,

 

 

 

(Loss) Income

 

2015

 

2014

 

Statement of Operations Line Item

 

 

 

 

 

 

 

 

 

Amortization of defined benefit pension:

 

 

 

 

 

 

 

Actuarial losses, Net

 

$

5

 

$

3

 

Selling, general & administrative expense

 

Tax (benefit) expense

 

(1

)

 

 

 

Net of tax

 

$

4

 

$

3

 

 

 

 

Segment Information
Segment Information

 

M. SEGMENT INFORMATION

 

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

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

Net Sales (A)

 

Operating Profit (Loss)

 

Our operations by segment were:

 

 

 

 

 

 

 

 

 

Cabinets and Related Products

 

$

249

 

$

237

 

$

(4

)

$

(12

)

Plumbing Products

 

796

 

800

 

111

 

119

 

Installation and Other Services

 

359

 

335

 

7

 

(4

)

Decorative Architectural Products

 

451

 

441

 

83

 

76

 

Other Specialty Products

 

163

 

152

 

6

 

5

 

Total

 

$

2,018

 

$

1,965

 

$

203

 

$

184

 

 

 

 

 

 

 

 

 

 

 

Our operations by geographic area were:

 

 

 

 

 

 

 

 

 

North America

 

$

1,641

 

$

1,556

 

$

158

 

$

129

 

International, principally Europe

 

377

 

409

 

45

 

55

 

Total

 

$

2,018

 

$

1,965

 

203

 

184

 

 

 

 

 

 

 

 

 

 

 

General corporate expense, net

 

 

 

 

 

(32

)

(32

)

Operating profit, as reported

 

 

 

 

 

171

 

152

 

Other income (expense), net

 

 

 

 

 

(55

)

(59

)

Income from continuing operations before income taxes

 

 

 

 

 

$

116

 

$

93

 

 

 

(A)

Inter-segment sales were not material.

 

Severance Costs
Severance Costs

 

N. SEVERANCE COSTS

 

We recorded charges related to severance of $6 million and $2 million for the three months ended March 31, 2015 and 2014, respectively.  Such charges are principally reflected in the condensed consolidated statement of operations in selling, general and administrative expenses.

 

Other Income (Expense), Net
Other Income (Expense), Net

 

O. OTHER INCOME (EXPENSE), NET

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Income from cash and cash investments

 

$

 

$

1

 

Income (loss) from financial investments (Note F)

 

2

 

(1

)

Foreign currency transaction losses

 

(1

)

(2

)

Other items, net

 

 

(1

)

Total other, net

 

$

1

 

$

(3

)

 

Earnings Per Common Share
Earnings Per Common Share

 

P. 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:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

Numerator (basic and diluted):

 

 

 

 

 

Income from continuing operations

 

$

64

 

$

76

 

Less: Allocation to unvested restricted stock awards

 

1

 

1

 

Income from continuing operations available to common shareholders

 

$

63

 

$

75

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

(2

)

Less: Allocation to unvested restricted stock awards

 

 

 

Loss from discontinued operations available to common shareholders

 

 

(2

)

 

 

 

 

 

 

Net income available to common shareholders

 

$

63

 

$

73

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Basic common shares (based upon weighted average)

 

344

 

351

 

Add: Stock option dilution

 

3

 

3

 

Diluted common shares

 

347

 

354

 

 

For the three months ended March 31, 2015 and 2014, we allocated dividends and undistributed earnings to the unvested restricted stock awards (participating securities).

 

Additionally, 8 million and 11 million common shares for the three months ended March 31, 2015 and 2014, respectively, related to stock options were excluded from the computation of diluted earnings per common share due to their antidilutive effect.

 

In the first three months of 2015, we repurchased and retired 4.1 million shares of our common stock (including 675 thousand shares to offset the dilutive impact of long-term stock awards granted in the first quarter), for approximately $106 million, including $3 million that was cash settled in April 2015. At March 31, 2015, we had 40.9 million shares of our common stock remaining under the September 2014 Board of Directors’ repurchase authorization.

 

On the basis of amounts paid (declared), cash dividends per common share were $.09 ($.09) and $.075 ($.075) for the three months ended March 31, 2015 and 2014, respectively.

 

Other Commitments and Contingencies
Other Commitments and Contingencies

 

Q. OTHER COMMITMENTS AND CONTINGENCIES

 

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 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.

 

Income Taxes
Income Taxes

 

R. INCOME TAXES

 

Our effective tax rate was 37 and 5 percent for the three months ended March 31, 2015 and 2014, respectively. The 2015 tax rate includes certain anticipated non-deductible transaction costs related to the previously announced proposed spin-off of our Services Business.  The 2014 tax rate includes the decrease in the valuation allowance resulting from the partial utilization of our U.S. Federal net operating loss carryforward. The effective tax rate was also impacted by a $3 million and $15 million state income tax benefit on uncertain tax positions primarily due to the expiration of applicable statutes of limitation for the three months ended March 31, 2015 and 2014, respectively.

 

It is reasonably possible that the continued improvements in certain of our U.S. businesses could result in the objective positive evidence necessary to warrant the reversal of all or a portion of the valuation allowance on certain state and local deferred tax assets, up to approximately $27 million, by the end of 2015.

Accounting Policies (Policies)
Recently Issued Accounting Pronouncements

 

Recently Issued Accounting Pronouncements:  In April 2014, the Financial Accounting Standards Board (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.  On January 1, 2015, we adopted the ASU 2014-8.  The adoption of the new standard did not have an impact on our financial position or 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 and voting models.  ASU 2015-2 is effective for us for annual periods beginning January 1, 2016.  We are currently evaluating the impact the adoption of this new standard will have on our financial position or 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.  ASU 2015-3 is effective for us for annual periods beginning January 1, 2016.  We do not expect that the adoption of the new standard will have a material impact on our financial position.

 

Goodwill and Other Intangible Assets (Tables)
Schedule of changes in carrying amount of goodwill

 

The changes in the carrying amount of goodwill for the three months ended March 31, 2015, by segment, were as follows, in millions:

 

 

 

Gross Goodwill

 

Accumulated

 

Net Goodwill

 

 

 

At

 

Impairment

 

At

 

 

 

Mar. 31, 2015

 

Losses

 

Mar. 31, 2015

 

Cabinets and Related Products

 

$

240

 

$

(59

)

$

181

 

Plumbing Products

 

525

 

(340

)

185

 

Installation and Other Services

 

1,806

 

(762

)

1,044

 

Decorative Architectural Products

 

294

 

(75

)

219

 

Other Specialty Products

 

983

 

(734

)

249

 

Total

 

$

3,848

 

$

(1,970

)

$

1,878

 

 

 

 

Gross Goodwill

 

Accumulated

 

Net Goodwill

 

 

 

 

 

Net Goodwill

 

 

 

At

 

Impairment

 

At

 

 

 

 

 

At

 

 

 

Dec. 31, 2014

 

Losses

 

Dec. 31, 2014

 

Acquisitions

 

Other(A)

 

Mar. 31, 2015

 

Cabinets and Related Products

 

$

240

 

$

(59

)

$

181

 

$

 

$

 

$

181

 

Plumbing Products

 

531

 

(340

)

191

 

9

 

(15

)

185

 

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

 

$

3,854

 

$

(1,970

)

$

1,884

 

$

9

 

$

(15

)

$

1,878

 

 

(A)

Other principally includes the effect of foreign currency translation.

 

Fair Value of Financial Investments (Tables)

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

 

 

 

March 31,

 

December 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Auction rate securities

 

$

22 

 

$

22 

 

Total recurring investments

 

22 

 

22 

 

 

 

 

 

 

 

Equity method investments

 

11 

 

11 

 

Private equity funds

 

12 

 

14 

 

Other investments

 

 

 

 

 

 

 

 

 

Total

 

$

48 

 

$

50 

 

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Realized gains from private equity funds

 

$

2

 

$

1

 

Equity investments loss, net

 

 

(2

)

Total income (loss) from financial Investments, net

 

$

2

 

$

(1

)

 

Derivative Instruments and Hedging Activities (Tables)

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Foreign currency contracts

 

 

 

 

 

Exchange contracts

 

$

4

 

$

(2

)

Forward contracts

 

(4

)

(1

)

Metals contracts

 

(2

)

(3

)

 

 

 

 

 

 

Total loss

 

$

(2

)

$

(6

)

 

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

 

 

 

At March 31, 2015

 

 

 

Notional

 

 

 

 

 

Amount

 

Balance Sheet

 

Foreign currency contracts

 

 

 

 

 

Exchange contracts

 

$

40

 

 

 

Receivables

 

 

 

$

5

 

Forward contracts

 

61

 

 

 

Other assets

 

 

 

3

 

Accrued liabilities

 

 

 

(7

)

 

 

 

 

 

 

Metals contracts

 

76

 

 

 

Accrued liabilities

 

 

 

(3

)

 

 

 

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

)

 

 

Warranty Liability (Tables)
Schedule of changes in the Company's warranty liability

 

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

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

 

 

 

 

Balance at January 1

 

$

135

 

$

124

 

Accruals for warranties issued during the period

 

13

 

51

 

Accruals related to pre-existing warranties

 

2

 

11

 

Settlements made (in cash or kind) during the period

 

(12

)

(46

)

Other, net (including currency translation)

 

(2

)

(5

)

Balance at end of period

 

$

136

 

$

135

 

 

Stock-Based Compensation (Tables)

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Long-term stock awards

 

$

 

$

11 

 

Stock options

 

 

 

Phantom stock awards and stock appreciation rights

 

 

 

 

 

 

 

 

 

Total

 

$

11 

 

$

12 

 

 

 

 

 

 

 

Income tax benefit (37 percent tax rate - before valuation allowance)

 

$

 

$

 

 

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Unvested stock award shares at January 1

 

 

 

Weighted average grant date fair value

 

$

18 

 

$

17 

 

 

 

 

 

 

 

Stock award shares granted

 

 

 

Weighted average grant date fair value

 

$

26 

 

$

22 

 

 

 

 

 

 

 

Stock award shares vested

 

 

 

Weighted average grant date fair value

 

$

17 

 

$

17 

 

 

 

 

 

 

 

Stock award shares forfeited

 

 

 

Weighted average grant date fair value

 

$

19 

 

$

18 

 

 

 

 

 

 

 

Unvested stock award shares at March 31

 

 

 

Weighted average grant date fair value

 

$

19 

 

$

18 

 

 

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Option shares outstanding, January 1

 

18 

 

24 

 

Weighted average exercise price

 

$

21 

 

$

22 

 

 

 

 

 

 

 

Option shares granted

 

 

 

Weighted average exercise price

 

$

26 

 

$

22 

 

 

 

 

 

 

 

Option shares exercised

 

 

 

Aggregate intrinsic value on date of exercise (A) 

 

$

17 million

 

$

10 million

 

Weighted average exercise price

 

$

14 

 

$

16 

 

 

 

 

 

 

 

Option shares forfeited

 

 

 

Weighted average exercise price

 

$

22 

 

$

27 

 

 

 

 

 

 

 

Option shares outstanding, March 31

 

17 

 

23 

 

Weighted average exercise price

 

$

22 

 

$

22 

 

Weighted average remaining option term (in years)

 

 

 

 

 

 

 

 

 

Option shares vested and expected to vest, March 31

 

17 

 

23 

 

Weighted average exercise price

 

$

22 

 

$

22 

 

Aggregate intrinsic value (A) 

 

$

108 million

 

$

93 million

 

Weighted average remaining option term (in years)

 

 

 

 

 

 

 

 

 

Option shares exercisable (vested), March 31

 

15 

 

20 

 

Weighted average exercise price

 

$

22 

 

$

23 

 

Aggregate intrinsic value (A) 

 

$

94 million

 

$

72 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.

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Weighted average grant date fair value

 

$

9.67 

 

$

9.53 

 

Risk-free interest rate

 

1.75 

%

1.91 

%

Dividend yield

 

1.32 

%

1.34 

%

Volatility factor

 

42.00 

%

49.00 

%

Expected option life

 

6 years

 

6 years

 

 

Employee Retirement Plans (Tables)
Schedule of net periodic pension cost for the Company's defined-benefit pension plans

 

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

 

 

 

Three Months ended March 31,

 

 

 

2015

 

2014

 

 

 

Qualified

 

Non-Qualified

 

Qualified

 

Non-Qualified

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

1

 

$

 

$

1

 

$

 

Interest cost

 

12

 

1

 

13

 

2

 

Expected return on plan assets

 

(11

)

 

(12

)

 

Amortization of net loss

 

4

 

1

 

3

 

 

Net periodic pension cost

 

$

6

 

$

2

 

$

5

 

$

2

 

 

Reclassifications From Accumulated Other Comprehensive (Loss) Income (Tables)
Schedule of reclassifications from accumulated other comprehensive (loss) income

 

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

 

 

 

Amount

 

 

 

 

 

Reclassified

 

 

 

Accumulated Other

 

Three Months

 

 

 

Comprehensive

 

Ended March 31,

 

 

 

(Loss) Income

 

2015

 

2014

 

Statement of Operations Line Item

 

 

 

 

 

 

 

 

 

Amortization of defined benefit pension:

 

 

 

 

 

 

 

Actuarial losses, Net

 

$

5

 

$

3

 

Selling, general & administrative expense

 

Tax (benefit) expense

 

(1

)

 

 

 

Net of tax

 

$

4

 

$

3

 

 

 

 

Segment Information (Tables)
Schedule of information about the Company by segment and geographic area

 

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

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

Net Sales (A)

 

Operating Profit (Loss)

 

Our operations by segment were:

 

 

 

 

 

 

 

 

 

Cabinets and Related Products

 

$

249

 

$

237

 

$

(4

)

$

(12

)

Plumbing Products

 

796

 

800

 

111

 

119

 

Installation and Other Services

 

359

 

335

 

7

 

(4

)

Decorative Architectural Products

 

451

 

441

 

83

 

76

 

Other Specialty Products

 

163

 

152

 

6

 

5

 

Total

 

$

2,018

 

$

1,965

 

$

203

 

$

184

 

 

 

 

 

 

 

 

 

 

 

Our operations by geographic area were:

 

 

 

 

 

 

 

 

 

North America

 

$

1,641

 

$

1,556

 

$

158

 

$

129

 

International, principally Europe

 

377

 

409

 

45

 

55

 

Total

 

$

2,018

 

$

1,965

 

203

 

184

 

 

 

 

 

 

 

 

 

 

 

General corporate expense, net

 

 

 

 

 

(32

)

(32

)

Operating profit, as reported

 

 

 

 

 

171

 

152

 

Other income (expense), net

 

 

 

 

 

(55

)

(59

)

Income from continuing operations before income taxes

 

 

 

 

 

$

116

 

$

93

 

 

 

(A)

Inter-segment sales were not material.

 

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:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Income from cash and cash investments

 

$

 

$

1

 

Income (loss) from financial investments (Note F)

 

2

 

(1

)

Foreign currency transaction losses

 

(1

)

(2

)

Other items, net

 

 

(1

)

Total other, net

 

$

1

 

$

(3

)

 

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:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

Numerator (basic and diluted):

 

 

 

 

 

Income from continuing operations

 

$

64

 

$

76

 

Less: Allocation to unvested restricted stock awards

 

1

 

1

 

Income from continuing operations available to common shareholders

 

$

63

 

$

75

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

(2

)

Less: Allocation to unvested restricted stock awards

 

 

 

Loss from discontinued operations available to common shareholders

 

 

(2

)

 

 

 

 

 

 

Net income available to common shareholders

 

$

63

 

$

73

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Basic common shares (based upon weighted average)

 

344

 

351

 

Add: Stock option dilution

 

3

 

3

 

Diluted common shares

 

347

 

354

 

 

Discontinued Operations (Details) (Spinoff of Installation and Other Services, USD $)
In Millions, unless otherwise specified
1 Months Ended 3 Months Ended
Sep. 30, 2014
Mar. 31, 2015
Spinoff of Installation and Other Services
 
 
Selected financial information for the discontinued operations
 
 
Percentage of businesses planned for spinoff
100.00% 
 
Costs and charges related to spin-off transaction
 
$ 4 
Acquisitions (Details) (Aquatic fitness business, USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Aquatic fitness business
 
Acquisitions
 
Cash consideration
$ 26 
Goodwill and Other Intantgible Assets (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Dec. 31, 2014
Goodwill
 
 
Gross Goodwill
$ 3,848 
$ 3,854 
Accumulated Impairment Losses
(1,970)
(1,970)
Net Goodwill
1,878 
 
Changes in the carrying amount of goodwill
 
 
Beginning balance
1,884 
 
Other
(15)
 
Acquisitions
 
Ending balance
1,878 
 
Cabinets and Related Products
 
 
Goodwill