MASCO CORP /DE/, 10-Q filed on 10/28/2011
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2011
Oct. 25, 2011
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
MASCO CORP /DE/ 
 
Entity Central Index Key
0000062996 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2011 
 
Amendment Flag
FALSE 
 
Document Fiscal Year Focus
2011 
 
Document Fiscal Period Focus
Q3 
 
Current Fiscal Year End Date
--12-31 
 
Entity Well-known Seasoned Issuer
Yes 
 
Entity Voluntary Filers
No 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding (actual number)
 
357,800,000 
Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Millions
9 Months Ended
Sep. 30, 2011
12 Months Ended
Dec. 31, 2010
Current assets:
 
 
Cash and cash investments
$ 1,610 
$ 1,715 
Receivables
1,133 
888 
Prepaid expenses and other
118 
129 
Inventories:
 
 
Finished goods
457 
393 
Raw material
297 
246 
Work in process
96 
93 
Total Inventories
850 
732 
Total current assets
3,711 
3,464 
Property and equipment, net
1,656 
1,737 
Goodwill
2,387 
2,383 
Other intangible assets, net
256 
269 
Other assets
202 
287 
Total assets
8,212 
8,140 
Current liabilities:
 
 
Notes payable
806 
66 
Accounts payable
866 
602 
Accrued liabilities
813 
819 
Total current liabilities
2,485 
1,487 
Long-term debt
3,224 
4,032 
Deferred income taxes and other
1,016 
1,039 
Total liabilities
6,725 
6,558 
Commitments and contingencies
 
 
Masco Corporation's shareholders' equity:
 
 
Common shares, par value $1 per share Authorized shares: 1,400,000,000; issued and outstanding: 2011- 347,800,000; 2010 - 348,600,000
348 
349 
Preferred shares authorized: 1,000,000; issued and outstanding: 2011 - None; 2010 - None
 
 
Paid-in capital
50 
42 
Retained earnings
638 
720 
Accumulated other comprehensive income
231 
273 
Total Masco Corporation's shareholders' equity
1,267 
1,384 
Noncontrolling interest
220 
198 
Total equity
1,487 
1,582 
Total liabilities and equity
$ 8,212 
$ 8,140 
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
Sep. 30, 2011
Dec. 31, 2010
Masco Corporation's shareholders' equity:
 
 
Common shares, par value
$ 1 
$ 1 
Common shares, shares authorized
1,400,000,000 
1,400,000,000 
Common shares, shares issued
347,800,000 
348,600,000 
Common shares, shares outstanding
347,800,000 
348,600,000 
Preferred shares, shares authorized
1,000,000 
1,000,000 
Preferred shares, shares issued
 
 
Preferred shares, shares outstanding
 
 
Condensed Consolidated Statements of Income (Unaudited) (USD $)
In Millions, except Per Share data
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
2011
2010
2011
2010
Condensed Consolidated Statements of Income [Abstract]
 
 
 
 
Net sales
$ 2,006 
$ 1,957 
$ 5,800 
$ 5,857 
Cost of sales
1,511 
1,463 
4,348 
4,325 
Gross profit
495 
494 
1,452 
1,532 
Selling, general and administrative expenses
393 
392 
1,238 
1,233 
Operating profit
102 
102 
214 
299 
Other income (expense), net:
 
 
 
 
Interest expense
(63)
(63)
(190)
(188)
Impairment charge for financial investments
(33)
Other, net
22 
(1)
74 
(2)
Total other income (expense), net
(41)
(64)
(116)
(223)
Income before income taxes
61 
38 
98 
76 
Income tax expense
12 
31 
63 
53 
Net income
49 
35 
23 
Less: Net income attributable to noncontrolling interest
13 
12 
37 
32 
Net income (loss) attributable to Masco Corporation
36 
(5)
(2)
(9)
Basic:
 
 
 
 
Net income (loss)
$ 0.10 
$ (0.02)
$ (0.01)
$ (0.03)
Diluted:
 
 
 
 
Net income (loss)
$ 0.10 
$ (0.02)
$ (0.01)
$ (0.03)
Amounts attributable to Masco Corporation:
 
 
 
 
Net income (loss)
$ 36 
$ (5)
$ (2)
$ (9)
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions
9 Months Ended
Sep. 30,
2011
2010
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
 
 
Cash provided by operations
$ 210 
$ 333 
Increase in receivables
(245)
(136)
Increase in inventories
(118)
(64)
Increase in accounts payable and accrued liabilities, net
248 
103 
Net cash from operating activities
95 
236 
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
 
 
Increase in debt
 
Payment of debt
(3)
(3)
Issuance of Notes, net of issuance costs
 
494 
Retirement of Notes
(58)
(359)
Purchase of Company common stock
(30)
(45)
Cash dividends paid
(80)
(81)
Dividend payment to noncontrolling interest
(18)
(15)
Credit Agreement costs
(1)
(9)
Net cash for financing activities
(190)
(16)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
 
 
Capital expenditures
(106)
(88)
Proceeds from disposition of:
 
 
Marketable securities
49 
Other financial investments, net
43 
Property and equipment
19 
16 
Purchases of other financial investments
(7)
 
Other, net
(7)
(26)
Net cash for investing activities
(9)
(87)
Effect of exchange rate changes on cash and cash investments
(1)
(9)
CASH AND CASH INVESTMENTS:
 
 
(Decrease) increase for the period
(105)
124 
At January 1
1,715 
1,413 
At September 30
$ 1,610 
$ 1,537 
Consolidated Statements of Shareholders' Equity (Unaudited) (USD $)
In Millions
Total
Common Shares ($1 par value)
Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income
Noncontrolling Interest
Beginning balance at Dec. 31, 2009
$ 2,817 
$ 350 
$ 42 
$ 1,871 
$ 366 
$ 188 
Net (loss) income
23 
 
 
(9)
 
32 
Cumulative translation adjustments
(37)
 
 
 
(28)
(9)
Unrealized (loss) on marketable securities, net of income tax (benefit) of $x and $(1) for 9 months ended 30 Sep, 2011 and 2010, respectively
(4)
 
 
 
(4)
 
Unrecognized prior service cost and net loss, net of income tax of $x and $3 for 9 months ended 30 Sep, 2011 and 2010, respectively
 
 
 
 
Total comprehensive income (loss)
(13)
 
 
 
 
 
Shares issued
(1)
(2)
 
 
 
Shares retired:
 
 
 
 
 
 
Repurchased
(45)
(3)
(42)
 
 
 
Surrendered (non-cash)
(6)
 
(6)
 
 
 
Cash dividends declared
(81)
 
 
(81)
 
 
Dividend payment to noncontrolling interest
(15)
 
 
 
 
(15)
Stock-based compensation
44 
 
44 
 
 
 
Ending balance at Sep. 30, 2010
2,700 
348 
36 
1,781 
339 
196 
Beginning balance at Dec. 31, 2010
1,582 
349 
42 
720 
273 
198 
Net (loss) income
35 
 
 
(2)
 
37 
Cumulative translation adjustments
 
 
 
Unrealized (loss) on marketable securities, net of income tax (benefit) of $x and $(1) for 9 months ended 30 Sep, 2011 and 2010, respectively
(38)
 
 
 
(38)
 
Unrealized (loss) on interest rate swaps, net of income tax of $x
(17)
 
 
 
(17)
 
Unrecognized prior service cost and net loss, net of income tax of $x and $3 for 9 months ended 30 Sep, 2011 and 2010, respectively
 
 
 
 
Total comprehensive income (loss)
(4)
 
 
 
 
 
Shares issued
(2)
 
 
 
Shares retired:
 
 
 
 
 
 
Repurchased
(30)
(2)
(28)
 
 
 
Surrendered (non-cash)
(8)
(1)
(7)
 
 
 
Cash dividends declared
(80)
 
 
(80)
 
 
Dividend payment to noncontrolling interest
(18)
 
 
 
 
(18)
Stock-based compensation
45 
 
45 
 
 
 
Ending balance at Sep. 30, 2011
$ 1,487 
$ 348 
$ 50 
$ 638 
$ 231 
$ 220 
Consolidated Statements of Shareholders' Equity (Unaudited) (Parenthetical) (USD $)
In Millions
9 Months Ended
Sep. 30,
2011
2010
Income tax benefit on unrealized (loss) on marketable securities
$ 0 
$ (1)
Income tax benefit on unrecognized prior service cost
Income tax benefit on unrealized gain (loss) on interest rate swaps
 
Accumulated Other Comprehensive Income
 
 
Income tax benefit on unrealized (loss) on marketable securities
(1)
Income tax benefit on unrecognized prior service cost
Income tax benefit on unrealized gain (loss) on interest rate swaps
$ 0 
 
Accounting Policies
Accounting Policies
A. Accounting Policies
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, 2011 and the results of operations for the three months and nine months ended September 30, 2011 and 2010 and cash flows and shareholders’ equity for the nine months ended September 30, 2011 and 2010. The condensed consolidated balance sheet at December 31, 2010 was derived from audited financial statements.
 
    Recently Issued Accounting Pronouncements
 
    Effective January 1, 2011, the Company adopted new accounting guidance which addresses how to determine whether a sales arrangement involves multiple deliverables or contains more than one unit of accounting, and how the sales arrangement consideration should be allocated among the separate units of accounting. The Company evaluated this new guidance and the adoption did not have an impact on the Company’s financial position or its results of operations.
 
    In June 2011, new accounting guidance was issued regarding the presentation and disclosure of comprehensive income. The new guidance will require presentation of other comprehensive income items in the Company’s consolidated statement of income; such items will no longer be included in the statement of shareholders’ equity. The new guidance will also require additional disclosure for reclassification of items from other comprehensive income to the Company’s statement of income. The new guidance will be effective for the Company January 1, 2012. The Company does not expect this guidance to have a material impact on the Company’s financial condition or its results of operations.
 
    In September 2011, new accounting guidance was issued regarding impairment testing of goodwill. The new guidance would allow the Company to make a qualitative determination regarding potential goodwill impairment before performing the quantitative impairment test. The new guidance will be effective for the Company January 1, 2012. The Company does not anticipate utilizing the qualitative provisions of the new guidance.
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets
B. Goodwill and Other Intangible Assets
B.   The changes in the carrying amount of goodwill for the nine months ended September 30, 2011, by segment, were as follows, in millions:
                         
    Gross Goodwill     Accumulated     Net Goodwill  
    At     Impairment     At  
    Sep. 30, 2011     Losses     Sep. 30, 2011  
Cabinets and Related Products
  $ 588     $ (364 )   $ 224  
Plumbing Products
    539       (340 )     199  
Installation and Other Services
    1,819       (762 )     1,057  
Decorative Architectural Products
    294             294  
Other Specialty Products
    980       (367 )     613  
 
                 
Total
  $ 4,220     $ (1,833 )   $ 2,387  
 
                 
                                         
    Gross Goodwill     Accumulated     Net Goodwill                
    At     Impairment     At             At  
    Dec. 31, 2010     Losses     Dec. 31, 2010     Other(A)     Sep. 30, 2011  
Cabinets and Related Products
  $ 587     $ (364 )   $ 223     $ 1     $ 224  
Plumbing Products
    536       (340 )     196       3       199  
Installation and Other Services
    1,819       (762 )     1,057             1,057  
Decorative Architectural Products
    294             294             294  
Other Specialty Products
    980       (367 )     613             613  
 
                             
Total
  $ 4,216     $ (1,833 )   $ 2,383     $ 4     $ 2,387  
 
                             
    (A) Other principally includes the effect of foreign currency translation.
 
    Other indefinite-lived intangible assets were $185 million at both September 30, 2011 and December 31, 2010, respectively, and principally included registered trademarks. The carrying value of the Company’s definite-lived intangible assets was $71 million (net of accumulated amortization of $80 million) at September 30, 2011 and $84 million (net of accumulated amortization of $75 million) at December 31, 2010, and principally included customer relationships and non-compete agreements.
 
    As a result of continued losses in the commercial businesses in the Installation and Other Services segment, at September 30, 2011, the Company recorded a pre-tax impairment charge of $7 million related to certain intangible assets for these businesses. The Company then assessed the goodwill associated with these businesses and determined no impairment was necessary at September 30, 2011.
Depreciation and Amortization Expense
Depreciation and Amortization Expense
C. Depreciation and Amortization Expense
C.   Depreciation and amortization expense was $188 million and $209 million for the nine months ended September 30, 2011 and 2010, respectively.
Fair Value of Financial Investments and Liabilities
Fair Value of Financial Investments and Liabilities
D. Fair Value of Financial Investments and Liabilities
D.   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,  
    2011     2010  
Auction rate securities
  $ 22     $ 22  
TriMas Corporation common stock
          40  
 
           
Total recurring investments
    22       62  
 
               
Private equity funds
    92       106  
Other investments
    5       13  
 
           
Total non-recurring investments
    97       119  
 
           
Total
  $ 119     $ 181  
 
           
    The Company’s investments in available-for-sale securities at September 30, 2011 and December 31, 2010 were as follows, in millions:
                                 
            Pre-tax        
            Unrealized     Unrealized     Recorded  
    Cost Basis     Gains     Losses     Basis  
September 30, 2011
  $ 19     $ 3     $     $ 22  
December 31, 2010
  $ 22     $ 40     $     $ 62  
    Recurring Fair Value Measurements. Financial assets and (liabilities) measured at fair value on a recurring basis at each reporting period and the amounts for each level within the fair value hierarchy were as follows, in millions:
                                 
            Fair Value Measurements Using  
                    Significant        
            Quoted     Other     Significant  
            Market     Observable     Unobservable  
    Sep. 30,     Prices     Inputs     Inputs  
    2011     (Level 1)     (Level 2)     (Level 3)  
Auction rate securities
  $ 22     $     $     $ 22  
 
                       
Total
  $ 22     $     $     $ 22  
 
                       
                                 
            Fair Value Measurements Using  
                    Significant        
            Quoted     Other     Significant  
            Market     Observable     Unobservable  
    Dec. 31,     Prices     Inputs     Inputs  
    2010     (Level 1)     (Level 2)     (Level 3)  
Auction rate securities
  $ 22     $     $     $ 22  
TriMas Corporation
    40       40              
 
                       
Total
  $ 62     $ 40     $     $ 22  
 
                       
    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 following tables summarize the changes in Level 3 financial assets measured at fair value on a recurring basis for the nine months ended September 30, 2011 and the year ended December 31, 2010, in millions:
         
    Auction Rate  
    Securities  
Fair value January 1, 2011
  $ 22  
Total losses included in earnings
     
Unrealized (losses)
     
Purchases
     
Settlements
     
Transfer from Level 3 to Level 2
     
 
     
Fair value at September 30, 2011
  $ 22  
 
     
    During 2010, the Company converted all of its holdings in Asahi Tec preferred stock into common stock, which was sold in its entirety in 2010 in open market transactions.
                         
    Asahi Tec     Auction Rate        
    Preferred Stock     Securities     Total  
Fair value January 1, 2010
  $ 71     $ 22     $ 93  
Total losses included in earnings
    (28 )           (28 )
Unrealized losses
    (23 )           (23 )
Purchases, issuances, settlements
                 
Transfers from Level 3 to Level 2
    (20 )           (20 )
 
                 
Fair value at December 31, 2010
  $     $ 22     $ 22  
 
                 
    Non-Recurring Fair Value Measurements. For the nine months ended September 30, 2011 and 2010, the Company did not measure any financial investments on a non-recurring basis, as there was no other-than-temporary decline in the estimated value of private equity funds. Financial investments measured at fair value on a non-recurring basis during 2010 and the amounts for each level within the fair value hierarchy were as follows, in millions:
                                         
            Fair Value Measurements Using        
                    Significant              
            Quoted     Other     Significant        
            Market     Observable     Unobservable     Total  
    Dec. 31,     Prices     Inputs     Inputs     Gains  
    2010     (Level 1)     (Level 2)     (Level 3)     (Losses)  
Private equity funds
  $ 2     $     $     $ 2     $ (4 )
Other private investments
                            (2 )
 
                             
 
  $ 2     $     $     $ 2     $ (6 )
 
                             
    The Company did not have any transfers between Level 1 and Level 2 financial assets in the first nine months of 2011 or in the full-year 2010.
    Income and impairment charges for financial investments were as follows, in millions:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Realized gains (losses)
                               
from:
                               
TriMas Corporation common stock
  $     $     $ 41     $  
Private equity funds
    19             28        
Other financial investments
          (3 )           (2 )
 
                       
Total realized gains
  $ 19     $ (3 )   $ 69     $ (2 )
Impairment charges:
                               
Asahi Tec Preferred Stock
  $     $     $     $ (28 )
Private equity funds
                      (3 )
Other private investments
                      (2 )
 
                       
Total impairment charges
  $     $     $     $ (33 )
 
                       
    The fair value of the Company’s short-term and long-term fixed-rate debt instruments is based principally upon quoted 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, 2011 was approximately $3.9 billion, compared with the aggregate carrying value of $4.0 billion. The aggregate estimated market value of short-term and long-term debt at December 31, 2010 was approximately $4.2 billion, compared with the aggregate carrying value of $4.1 billion.
Derivatives
Derivatives
E. Derivatives
E.   In August 2011, the Company entered into new interest rate swap agreements to hedge the volatility in interest payments associated with the expected debt issuance planned to occur in 2012. These interest rate swaps are designed as cash flow hedges and effectively fix interest rates on the forecasted debt issuance based on 3-month LIBOR. The average fixed rate on the interest rate swaps is 2.8%. At September 30, 2011, the interest rate swap agreements covered a notional amount of $400 million, which we expect to issue in connection with the maturity of the Company’s $791 million fixed-rate debt due July 15, 2012 with an interest rate of 5.875%. At September 30, 2011, the interest rate swaps are considered 100 percent effective; therefore, the market valuation of $17 million is recorded in other comprehensive income in the Company’s statement of shareholders’ equity with a corresponding increase to accrued liabilities in the Company’s condensed consolidated balance sheet at September 30, 2011.
    During 2011 and 2010, the Company entered into foreign currency exchange contracts to hedge currency fluctuations related to intercompany loans denominated in non-functional currencies. Based upon period-end market prices, the Company had recorded assets (liabilities) of $5 million and $(2) million to reflect contract prices at September 30, 2011 and December 31, 2010, respectively. Such gains (losses) are partially offset by gains (losses) related to the translation of loans and accounts denominated in non-functional currencies. Gains (losses) related to these contracts are recorded in the Company’s consolidated statements of income in other income (expense), net. For the nine months ended September 30, 2011 and 2010, the Company had recorded gains net of $1 million and $2 million, respectively, related to these foreign currency exchange contracts. For the three months ended September 30, 2011 and 2010, the Company had recorded gains (losses) net of $8 million and $(8) million, respectively, related to these foreign currency exchange contracts.
 
    During 2011 and 2010, the Company, including certain of its European operations, also entered into foreign currency forward contracts to manage a portion of its exposure to currency fluctuations in the European euro and the U.S. dollar. Based upon period-end market prices, the Company had recorded liabilities of $— million and $3 million to reflect contract prices at September 30, 2011 and December 31, 2010, respectively. Gains (losses) related to these contracts are recorded in the Company’s consolidated statements of income in other income (expense), net. For the nine months ended September 30, 2011 and 2010, the Company had recorded gains (losses) net of $3 million and $(1) million, respectively, related to these foreign currency exchange contracts. For the three months ended September 30, 2011 and 2010, the Company had recorded gains net of $2 million and $1 million, respectively, related to these foreign currency exchange contracts.
 
    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.
 
    During 2011 and 2010, the Company entered into several contracts to manage its exposure to increases in the price of copper and zinc. Based upon period-end market prices, the Company had recorded (liabilities) assets of $(5) million and $7 million to reflect contract prices at September 30, 2011 and December 31, 2010, respectively. Gains (losses) related to these contracts are recorded in the Company’s consolidated statements of income in cost of goods sold. For the nine months ended September 30, 2011 and 2010, the Company had recorded (losses) gains net of $(10) million and $3 million, respectively, related to these commodity contracts. For the three months ended September 30, 2011 and 2010, the Company had recorded (losses) gains net of $(11) million and $4 million, respectively, related to these commodity contracts.
 
    The fair value of these derivative contracts is estimated on a recurring basis, quarterly, using Level 2 inputs (significant other observable inputs).
Warranty
Warranty
F. Warranty
F.   Changes in the Company’s warranty liability were as follows, in millions:
                 
    Nine Months Ended     Twelve Months Ended  
    September 30, 2011     December 31, 2010  
Balance at January 1
  $ 107     $ 109  
Accruals for warranties issued during the period
    20       42  
Accruals related to pre-existing warranties
    7       (4 )
Settlements made (in cash or kind) during the period
    (29 )     (37 )
Other, net
    (2 )     (3 )
 
           
Balance at end of period
  $ 103     $ 107  
 
           
Debt
Debt
G. Debt
G.   Based on the limitations of the debt to total capitalization covenant, at September 30, 2011, the Company had additional borrowing capacity, subject to availability, of up to $979 million. Additionally, at September 30, 2011, the Company could absorb a reduction to shareholders’ equity of approximately $527 million, and remain in compliance with the debt to total capitalization covenant.
 
    In order 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, 2009, and, 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, 2011.
 
    At September 30, 2011, no principal amount at maturity of Zero Coupon Convertible Senior Notes due 2031 (“Notes”) was outstanding. During the third quarter of 2011, holders of $108.1 million principal amount at maturity with an accreted value of $58.1 million of Notes required the Company to repurchase the Notes for cash of $57.9 million; the remaining Notes were retired.
Stock-Based Compensation
Stock-Based Compensation
H. Stock-Based Compensation
H.   The Company’s 2005 Long Term Stock Incentive Plan (the “2005 Plan”) provides for the issuance of stock-based incentives in various forms to employees and non-employee Directors of the Company. At September 30, 2011, 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,  
    2011     2010     2011     2010  
Long-term stock awards
  $ 9     $ 9     $ 28     $ 28  
Stock options
    6       6       17       17  
Phantom stock awards and stock appreciation rights
    (5 )     1       (3 )      
 
                       
Total
  $ 10     $ 16     $ 42     $ 45  
 
                       
 
                               
Income tax benefit (before valuation allowance)
  $ 4     $ 6     $ 16     $ 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 on the open market.
 
    The Company’s long-term stock award activity was as follows, shares in millions:
                 
    Nine Months Ended
    September 30,
    2011   2010
Unvested stock award shares at January 1
    10       9  
Weighted average grant date fair value
  $ 19     $ 21  
 
               
Stock award shares granted
    2       3  
Weighted average grant date fair value
  $ 13     $ 14  
 
               
Stock award shares vested
    2       2  
Weighted average grant date fair value
  $ 20     $ 23  
 
               
Stock award shares forfeited
           
Weighted average grant date fair value
  $ 18     $ 19  
 
               
Unvested stock award shares at September 30
    10       10  
Weighted average grant date fair value
  $ 17     $ 19  
    At September 30, 2011 and 2010, there was $122 million and $136 million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of five years in both periods.
 
    The total market value (at the vesting date) of stock award shares which vested during the nine months ended September 30, 2011 and 2010 was $28 million and $22 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. 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.
 
    The Company granted 2,372,500 of stock option shares in the nine months ended September 30, 2011 with a grant date exercise price approximating $13 per share. In the first nine months of 2011, 2,830,000 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,
    2011   2010
Option shares outstanding, January 1
    37       36  
Weighted average exercise price
  $ 21     $ 23  
 
               
Option shares granted, including restoration options
    2       5  
Weighted average exercise price
  $ 13     $ 14  
 
               
Option shares exercised
           
Aggregate intrinsic value on date of exercise (A)
  $1 million   $1 million
Weighted average exercise price
  $ 8     $ 8  
 
               
Option shares forfeited
    3       4  
Weighted average exercise price
  $ 22     $ 23  
 
               
Option shares outstanding, September 30
    36       37  
Weighted average exercise price
  $ 21     $ 21  
Weighted average remaining option term (in years)
    6       6  
 
               
Option shares vested and expected to vest, September 30
    36       37  
Weighted average exercise price
  $ 21     $ 22  
Aggregate intrinsic value (A)
  $—million   $15 million
Weighted average remaining option term (in years)
    6       6  
 
               
Option shares exercisable (vested), September 30
    24       22  
Weighted average exercise price
  $ 24     $ 25  
Aggregate intrinsic value (A)
  $—million   $3 million
Weighted average remaining option term (in years)
    4       4  
    (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, 2011 and 2010, there was $39 million and $50 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model) related to unvested stock options; such options had a weighted average vesting period of three years in both 2011 and 2010.
    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,
    2011   2010
Weighted average grant date fair value
  $ 5.10     $ 5.30  
Risk-free interest rate
    2.72 %     2.77 %
Dividend yield
    2.34 %     2.17 %
Volatility factor
    49.00 %     46.01 %
Expected option life
  6 years   6 years
Employee Retirement Plans
Employee Retirement Plans
I. Employee Retirement Plans
I.   The Company sponsors qualified defined-benefit or defined-contribution retirement plans for most of its employees. In addition to the Company’s qualified defined-benefit pension plans, the Company has unfunded non-qualified defined-benefit pension plans covering certain employees, which provide for benefits in addition to those provided by the qualified pension plans. Substantially all salaried employees participate in non-contributory defined-contribution retirement plans, to which payments are determined annually by the Organization and Compensation Committee of the Board of Directors.
 
    During the nine months ended September 30, 2011, the Company adjusted certain employee expense related accruals which resulted in a $5 million reduction to expenses related to the fourth quarter of 2010. The effect was not material to the previously issued financial statements.
 
    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.
 
    Net periodic pension cost for the Company’s defined-benefit pension plans was as follows, in millions:
                                 
    Three Months Ended September 30,  
    2011     2010  
    Qualified     Non-Qualified     Qualified     Non-Qualified  
Service cost
  $ 1     $     $ 2     $  
Interest cost
    12       2       11       3  
Expected return on plan assets
    (9 )           (9 )      
Amortization of prior service cost
                       
Amortization of net loss
    2       1       3        
 
                       
Net periodic pension cost
  $ 6     $ 3       7       3  
 
                       
                                 
    Nine Months Ended September 30,  
    2011     2010  
    Qualified     Non-Qualified     Qualified     Non-Qualified  
Service cost
  $ 2     $     $ 4     $  
Interest cost
    34       6       34       7  
Expected return on plan assets
    (25 )           (27 )      
Amortization of prior service cost
                       
Amortization of net loss
    7       1       8        
 
                       
Net periodic pension cost
  $ 18     $ 7     $ 19     $ 7  
 
                       
    At December 31, 2010, the Company reported a net liability of $522 million, of which $163 million was related to our non-qualified, supplemental retirement plans, which are not subject to the funding requirements of the Pension Protection Act. In accordance with the Pension Protection Act of 2006, the Adjusted Funding Target Attainment Percentage (“AFTAP”) for the various defined-benefit pension plans ranges from 62 percent to 86 percent. At December 31, 2010, the Company had one plan that offered accelerated benefits (i.e., lump sum distributions) and the AFTAP for that plan is less than 80 percent; therefore, the plan is prohibited from allowing participants to receive any lump sum distribution in excess of 50 percent of the benefit value. In addition, plan amendments increasing benefits or liabilities for that plan are also prohibited.
Segment Information
Segment Information
J. Segment Information
J. Information about the Company by segment and geographic area was as follows, in millions:
                                                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2011     2010     2011     2010     2011     2010     2011     2010  
    Net Sales(A)     Operating Profit (Loss)     Net Sales(A)     Operating Profit (Loss)  
The Company’s operations by
                                                               
segment were:
                                                               
Cabinets and Related Products
  $ 307     $ 357     $ (34 )   $ (61 )   $ 944     $ 1,160     $ (111 )   $ (113 )
Plumbing Products
    768       686       91       97       2,239       2,031       270       267  
Installation and Other Services
    315       292       (27 )     (22 )     863       874       (93 )     (87 )
Decorative Architectural Products
    455       463       88       104       1,322       1,357       247       300  
Other Specialty Products
    161       159       12       11       432       435       2       16  
 
                                               
Total
  $ 2,006     $ 1,957     $ 130     $ 129     $ 5,800     $ 5,857     $ 315     $ 383  
 
                                               
The Company’s operations by geographic area were:
                                                               
North America
  $ 1,524     $ 1,528     $ 80     $ 79     $ 4,420     $ 4,617     $ 178     $ 257  
International, principally Europe
    482       429       50       50       1,380       1,240       137       126  
 
                                               
Total
  $ 2,006     $ 1,957       130       129     $ 5,800     $ 5,857       315       383  
 
                                                       
General corporate expense, net
                    (27 )     (27 )                     (95 )     (84 )
Charge for litigation settlement (B)
                    (1 )                           (6 )      
 
                                                       
Operating profit
                    102       102                       214       299  
Other income (expense), net
                    (41 )     (64 )                     (116 )     (223 )
 
                                                       
Income before income taxes
                  $ 61     $ 38                     $ 98     $ 76  
 
                                                       
 
(A)   Inter-segment sales were not material.
 
(B)   Charge for litigation settlement relates to a business unit in the Cabinets and Related Products segment and the Other Specialty Products segment.
Other Income (Expense), Net
Other Income (Expense), Net
K. Other Income (Expense), Net
K. 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,  
    2011     2010     2011     2010  
Income from cash and
                               
cash investments
  $ 2     $ 2     $ 5     $ 4  
Other interest income
    1             1       1  
Income (loss) from financial investments
                               
(Note D)
    19       (3 )     69       (2 )
Other items, net
                (1 )     (5 )
 
                       
Total other net
  $ 22     $ (1 )   $ 74     $ (2 )
 
                       
    Other items, net, included $1 million and $— million of currency gains for the three months and nine months ended September 30, 2011, respectively. Other items, net, included $4 million and $(2) million of currency gains (losses) for the three months and nine months ended September 30, 2010, respectively.
Earning Per Common Share
Earnings Per Common Share
L. Earnings Per Common Share
L. 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     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Numerator (basic and diluted):
                               
Net income (loss)
  $ 36     $ (5 )   $ (2 )   $ (9 )
Allocation to unvested restricted stock awards
    (1 )     (1 )     (2 )     (2 )
 
                       
Net income (loss) attributable to common shareholders
    35       (6 )     (4 )     (11 )
 
                       
Net income (loss) available to common shareholders
  $ 35     $ (6 )   $ (4 )   $ (11 )
 
                       
 
                               
Denominator:
                               
Basic common shares (based upon weighted average)
    348       349       348       349  
Add:
                               
Contingent common shares
                       
Stock option dilution
                       
 
                       
Diluted common shares
    348       349       348       349  
 
                       
For the three months and nine months ended September 30, 2011 and 2010, the Company allocated dividends to the unvested restricted stock awards (participating securities).
Additionally, 37 million common shares for the three months and nine months ended September 30, 2011 and 2010 related to stock options were excluded from the computation of diluted earnings per common share due to their antidilutive effect.
    In the first nine months of 2011, the Company granted 2 million shares of long-term stock awards; to offset the dilutive impact of these awards, the Company also repurchased and retired approximately 2 million shares of Company common stock, for cash aggregating $30 million. At September 30, 2011, the Company had 25 million shares of its common stock remaining under the July 2007 Board of Directors repurchase authorization.
    On the basis of amounts paid (declared), cash dividends per common share were $.075 ($.075) and $.225 ($.225), respectively, for the three months and nine months ended September 30, 2011 and the three months and nine months ended September 30, 2010.
Other Commitments and Contingencies
Other Commitments and Contingencies
M. Other Commitments and Contingencies
M. The Company is subject to lawsuits and pending or asserted claims with respect to matters generally arising in the ordinary course of business.
    As previously disclosed, a lawsuit was brought against the Company and a number of its insulation installation companies alleging that certain of their practices violated provisions of the federal antitrust laws. The case was filed in October 2004 in the United States District Court for the Northern District of Georgia by Columbus Drywall & Insulation, Inc., Leo Jones Insulation, Inc., Southland Insulators, Inc., Southland Insulators of Maryland, Inc. d/b/a Devere Insulation, Southland Insulators of Delaware LLC d/b/a Delmarva Insulation, and Whitson Insulation Company of Grand Rapids, Inc. against the Company, its subsidiaries Masco Contractors Services Group Corp., Masco Contractor Services Central, Inc. (“MCS Central”) and Masco Contractor Services East, Inc., and several insulation manufacturers (the “Columbus Drywall case”). In February 2009, the court certified a class of 377 insulation contractors. Another suit was filed in March 2003 in the United States District Court for the Northern District of Georgia by Wilson Insulation Company, Wilson Insulation of Augusta, Inc. and The Wilson Insulation Group, Inc. against the Company, Masco Contractor Services, Inc., and MCS Central that alleged anticompetitive conduct. This case has been removed from the court’s active docket. In March 2007, Albert Von Der Werth and Valerie Good filed suit in the United States District Court for the Northern District of California against the Company, its subsidiary Masco Contractor Services, and several insulation manufacturers seeking class action status and alleging anticompetitive conduct. This case was subsequently transferred to the United States District Court for the Northern District of Georgia and has been administratively stayed by the court. An additional suit, which was filed in September 2005 and alleged anticompetitive conduct, was dismissed with prejudice in December 2006.
    The Company is vigorously defending the Columbus Drywall case. Based upon the advice of its outside counsel, the Company believes that the conduct of the Company and its insulation installation companies, which is the subject of the above-described lawsuits, has not violated any antitrust laws. The Company is unable at this time to reliably estimate any potential liability which might occur from an adverse judgment. There cannot be any assurance that the Company will ultimately prevail in these lawsuits, or, if unsuccessful, that the ultimate liability would not be material and would not have a material adverse effect on its businesses or the methods used by its insulation installation companies in doing business.
Income Taxes
Income Taxes
N. Income Taxes
N.   The effective tax rate was 64 percent for the nine months ended September 30, 2011 primarily due to an increase in the valuation allowance related to net operating losses and losses in certain jurisdictions providing no tax benefit.
    As a result of tax audit closings, settlements and expiration of applicable statutes of limitations in various jurisdictions within the next 12 months, the Company anticipates that it is reasonably possible that the liability for uncertain tax positions could be reduced by approximately $6 million.
Subsequent Events
Subsequent Events
O. Subsequent Events
O.   In October 2011, the Company determined that several businesses in the Installation and Other Services segment related to commercial drywall installation, millwork and framing are not core to the Company’s long-term growth strategy and, accordingly, has embarked on a plan of disposition. The businesses had combined 2010 net sales of approximately $100 million and aggregate operating losses of $10 million (excluding any impairment charges). The Company expects proceeds from the dispositions will be less than the net book value of the businesses. The dispositions are expected to be completed within the next twelve months.
Accounting Policies (Policies)
Recently Issued Accounting Pronouncements
 
    Recently Issued Accounting Pronouncements
 
    Effective January 1, 2011, the Company adopted new accounting guidance which addresses how to determine whether a sales arrangement involves multiple deliverables or contains more than one unit of accounting, and how the sales arrangement consideration should be allocated among the separate units of accounting. The Company evaluated this new guidance and the adoption did not have an impact on the Company’s financial position or its results of operations.
 
    In June 2011, new accounting guidance was issued regarding the presentation and disclosure of comprehensive income. The new guidance will require presentation of other comprehensive income items in the Company’s consolidated statement of income; such items will no longer be included in the statement of shareholders’ equity. The new guidance will also require additional disclosure for reclassification of items from other comprehensive income to the Company’s statement of income. The new guidance will be effective for the Company January 1, 2012. The Company does not expect this guidance to have a material impact on the Company’s financial condition or its results of operations.
 
    In September 2011, new accounting guidance was issued regarding impairment testing of goodwill. The new guidance would allow the Company to make a qualitative determination regarding potential goodwill impairment before performing the quantitative impairment test. The new guidance will be effective for the Company January 1, 2012. The Company does not anticipate utilizing the qualitative provisions of the new guidance.
Goodwill and Other Intangible Assets (Tables)
Changes in carrying amount of goodwill
                         
    Gross Goodwill     Accumulated     Net Goodwill  
    At     Impairment     At  
    Sep. 30, 2011     Losses     Sep. 30, 2011  
Cabinets and Related Products
  $ 588     $ (364 )   $ 224  
Plumbing Products
    539       (340 )     199  
Installation and Other Services
    1,819       (762 )     1,057  
Decorative Architectural Products
    294             294  
Other Specialty Products
    980       (367 )     613  
 
                 
Total
  $ 4,220     $ (1,833 )   $ 2,387  
 
                 
                                         
    Gross Goodwill     Accumulated     Net Goodwill                
    At     Impairment     At             At  
    Dec. 31, 2010     Losses     Dec. 31, 2010     Other(A)     Sep. 30, 2011  
Cabinets and Related Products
  $ 587     $ (364 )   $ 223     $ 1     $ 224  
Plumbing Products
    536       (340 )     196       3       199  
Installation and Other Services
    1,819       (762 )     1,057             1,057  
Decorative Architectural Products
    294             294             294  
Other Specialty Products
    980       (367 )     613             613  
 
                             
Total
  $ 4,216     $ (1,833 )   $ 2,383     $ 4     $ 2,387  
 
                             
    (A) Other principally includes the effect of foreign currency translation.
Fair Value of Financial Investments and Liabilities (Tables)
                 
    September 30,     December 31,  
    2011     2010  
Auction rate securities
  $ 22     $ 22  
TriMas Corporation common stock
          40  
 
           
Total recurring investments
    22       62  
 
               
Private equity funds
    92       106  
Other investments
    5       13  
 
           
Total non-recurring investments
    97       119  
 
           
Total
  $ 119     $ 181  
 
           
                                 
            Pre-tax        
            Unrealized     Unrealized     Recorded  
    Cost Basis     Gains     Losses     Basis  
September 30, 2011
  $ 19     $ 3     $     $ 22  
December 31, 2010
  $ 22     $ 40     $     $ 62  
                                 
            Fair Value Measurements Using  
                    Significant        
            Quoted     Other     Significant  
            Market     Observable     Unobservable  
    Sep. 30,     Prices     Inputs     Inputs  
    2011     (Level 1)     (Level 2)     (Level 3)  
Auction rate securities
  $ 22     $     $     $ 22  
 
                       
Total
  $ 22     $     $     $ 22  
 
                       
                                 
            Fair Value Measurements Using  
                    Significant        
            Quoted     Other     Significant  
            Market     Observable     Unobservable  
    Dec. 31,     Prices     Inputs     Inputs  
    2010     (Level 1)     (Level 2)     (Level 3)  
Auction rate securities
  $ 22     $     $     $ 22  
TriMas Corporation
    40       40              
 
                       
Total
  $ 62     $ 40     $     $ 22  
 
                       
         
    Auction Rate  
    Securities  
Fair value January 1, 2011
  $ 22  
Total losses included in earnings
     
Unrealized (losses)
     
Purchases
     
Settlements
     
Transfer from Level 3 to Level 2
     
 
     
Fair value at September 30, 2011
  $ 22  
 
     
                         
    Asahi Tec     Auction Rate        
    Preferred Stock     Securities     Total  
Fair value January 1, 2010
  $ 71     $ 22     $ 93  
Total losses included in earnings
    (28 )           (28 )
Unrealized losses
    (23 )           (23 )
Purchases, issuances, settlements
                 
Transfers from Level 3 to Level 2
    (20 )           (20 )
 
                 
Fair value at December 31, 2010
  $     $ 22     $ 22  
 
                 
                                         
            Fair Value Measurements Using        
                    Significant              
            Quoted     Other     Significant        
            Market     Observable     Unobservable     Total  
    Dec. 31,     Prices     Inputs     Inputs     Gains  
    2010     (Level 1)     (Level 2)     (Level 3)     (Losses)  
Private equity funds
  $ 2     $     $     $ 2     $ (4 )
Other private investments
                            (2 )
 
                             
 
  $ 2     $     $     $ 2     $ (6 )
 
                             
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Realized gains (losses)
                               
from:
                               
TriMas Corporation common stock
  $     $     $ 41     $  
Private equity funds
    19             28        
Other financial investments
          (3 )           (2 )
 
                       
Total realized gains
  $ 19     $ (3 )   $ 69     $ (2 )
Impairment charges:
                               
Asahi Tec Preferred Stock
  $     $     $     $ (28 )
Private equity funds
                      (3 )
Other private investments
                      (2 )
 
                       
Total impairment charges
  $     $     $     $ (33 )
 
                       
Warranty (Tables)
Warranty liability
                 
    Nine Months Ended     Twelve Months Ended  
    September 30, 2011     December 31, 2010  
Balance at January 1
  $ 107     $ 109  
Accruals for warranties issued during the period
    20       42  
Accruals related to pre-existing warranties
    7       (4 )
Settlements made (in cash or kind) during the period
    (29 )     (37 )
Other, net
    (2 )     (3 )
 
           
Balance at end of period
  $ 103     $ 107  
 
           
Stock-Based Compensation (Tables)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Long-term stock awards
  $ 9     $ 9     $ 28     $ 28  
Stock options
    6       6       17       17  
Phantom stock awards and stock appreciation rights
    (5 )     1       (3 )      
 
                       
Total
  $ 10     $ 16     $ 42     $ 45  
 
                       
 
                               
Income tax benefit (before valuation allowance)
  $ 4     $ 6     $ 16     $ 17  
 
                       
                 
    Nine Months Ended
    September 30,
    2011   2010
Unvested stock award shares at January 1
    10       9  
Weighted average grant date fair value
  $ 19     $ 21  
 
               
Stock award shares granted
    2       3  
Weighted average grant date fair value
  $ 13     $ 14  
 
               
Stock award shares vested
    2       2  
Weighted average grant date fair value
  $ 20     $ 23  
 
               
Stock award shares forfeited
           
Weighted average grant date fair value
  $ 18     $ 19  
 
               
Unvested stock award shares at September 30
    10       10  
Weighted average grant date fair value
  $ 17     $ 19  
                 
    Nine Months Ended
    September 30,
    2011   2010
Option shares outstanding, January 1
    37       36  
Weighted average exercise price
  $ 21     $ 23  
 
               
Option shares granted, including restoration options
    2       5  
Weighted average exercise price
  $ 13     $ 14  
 
               
Option shares exercised
           
Aggregate intrinsic value on date of exercise (A)
  $1 million   $1 million
Weighted average exercise price
  $ 8     $ 8  
 
               
Option shares forfeited
    3       4  
Weighted average exercise price
  $ 22     $ 23  
 
               
Option shares outstanding, September 30
    36       37  
Weighted average exercise price
  $ 21     $ 21  
Weighted average remaining option term (in years)
    6       6  
 
               
Option shares vested and expected to vest, September 30
    36       37  
Weighted average exercise price
  $ 21     $ 22  
Aggregate intrinsic value (A)
  $—million   $15 million
Weighted average remaining option term (in years)
    6       6  
 
               
Option shares exercisable (vested), September 30
    24       22  
Weighted average exercise price
  $ 24     $ 25  
Aggregate intrinsic value (A)
  $—million   $3 million
Weighted average remaining option term (in years)
    4       4  
    (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,
    2011   2010
Weighted average grant date fair value
  $ 5.10     $ 5.30  
Risk-free interest rate
    2.72 %     2.77 %
Dividend yield
    2.34 %     2.17 %
Volatility factor
    49.00 %     46.01 %
Expected option life
  6 years   6 years
Employee Retirement Plans (Tables)
Net periodic pension cost for defined-benefit pension plans
                                 
    Three Months Ended September 30,  
    2011     2010  
    Qualified     Non-Qualified     Qualified     Non-Qualified  
Service cost
  $ 1     $     $ 2     $  
Interest cost
    12       2       11       3  
Expected return on plan assets
    (9 )           (9 )      
Amortization of prior service cost
                       
Amortization of net loss
    2       1       3        
 
                       
Net periodic pension cost
  $ 6     $ 3       7       3  
 
                       
                                 
    Nine Months Ended September 30,  
    2011     2010  
    Qualified     Non-Qualified     Qualified     Non-Qualified  
Service cost
  $ 2     $     $ 4     $  
Interest cost
    34       6       34       7  
Expected return on plan assets
    (25 )           (27 )      
Amortization of prior service cost
                       
Amortization of net loss
    7       1       8        
 
                       
Net periodic pension cost
  $ 18     $ 7     $ 19     $ 7  
 
                       
Segment Information (Tables)
Company by segment and geographic area
                                                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2011     2010     2011     2010     2011     2010     2011     2010  
    Net Sales(A)     Operating Profit (Loss)     Net Sales(A)     Operating Profit (Loss)  
The Company’s operations by
                                                               
segment were:
                                                               
Cabinets and Related Products
  $ 307     $ 357     $ (34 )   $ (61 )   $ 944     $ 1,160     $ (111 )   $ (113 )
Plumbing Products
    768       686       91       97       2,239       2,031       270       267  
Installation and Other Services
    315       292       (27 )     (22 )     863       874       (93 )     (87 )
Decorative Architectural Products
    455       463       88       104       1,322       1,357       247       300  
Other Specialty Products
    161       159       12       11       432       435       2       16  
 
                                               
Total
  $ 2,006     $ 1,957     $ 130     $ 129     $ 5,800     $ 5,857     $ 315     $ 383  
 
                                               
The Company’s operations by geographic area were:
                                                               
North America
  $ 1,524     $ 1,528     $ 80     $ 79     $ 4,420     $ 4,617     $ 178     $ 257  
International, principally Europe
    482       429       50       50       1,380       1,240       137       126  
 
                                               
Total
  $ 2,006     $ 1,957       130       129     $ 5,800     $ 5,857       315       383  
 
                                                       
General corporate expense, net
                    (27 )     (27 )                     (95 )     (84 )
Charge for litigation settlement (B)
                    (1 )                           (6 )      
 
                                                       
Operating profit
                    102       102                       214       299  
Other income (expense), net
                    (41 )     (64 )                     (116 )     (223 )
 
                                                       
Income before income taxes
                  $ 61     $ 38                     $ 98     $ 76  
 
                                                       
 
(A)   Inter-segment sales were not material.
 
(B)   Charge for litigation settlement relates to a business unit in the Cabinets and Related Products segment and the Other Specialty Products segment.
Other Income (Expense), Net (Tables)
Other, net
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Income from cash and
                               
cash investments
  $ 2     $ 2     $ 5     $ 4  
Other interest income
    1             1       1  
Income (loss) from financial investments
                               
(Note D)
    19       (3 )     69       (2 )
Other items, net
                (1 )     (5 )
 
                       
Total other net
  $ 22     $ (1 )   $ 74     $ (2 )
 
                       
Earning Per Common Share (Tables)
Numerators and denominators used in the computations of basic and diluted earnings per common share
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Numerator (basic and diluted):
                               
Net income (loss)
  $ 36     $ (5 )   $ (2 )   $ (9 )
Allocation to unvested restricted stock awards
    (1 )     (1 )     (2 )     (2 )
 
                       
Net income (loss) attributable to common shareholders
    35       (6 )     (4 )     (11 )
 
                       
Net income (loss) available to common shareholders
  $ 35     $ (6 )   $ (4 )   $ (11 )
 
                       
 
                               
Denominator:
                               
Basic common shares (based upon weighted average)
    348       349       348       349  
Add:
                               
Contingent common shares
                       
Stock option dilution
                       
 
                       
Diluted common shares
    348       349       348       349  
 
                       
Goodwill and Other Intangible Assets (Details) (USD $)
In Millions
9 Months Ended
Sep. 30, 2011
Dec. 31, 2010
Changes in carrying amount of goodwill
 
 
Gross Goodwill
$ 4,220 
$ 4,216 
Accumulated Impairment Losses
(1,833)
(1,833)
Goodwill
2,387 
2,383 
Other
 
Goodwill and Other Intangible Assets (Textuals) [Abstract]
 
 
Other indefinite-lived intangible assets
185 
185 
Carrying value of definite-lived intangible assets
71 
84 
Accumulated amortization
80 
75 
Pre-tax impairment
 
Cabinets and Related Products [Member]
 
 
Changes in carrying amount of goodwill
 
 
Gross Goodwill
588 
587 
Accumulated Impairment Losses
(364)
(364)
Goodwill
224 
223 
Other
 
Plumbing Products [Member]
 
 
Changes in carrying amount of goodwill
 
 
Gross Goodwill
539 
536 
Accumulated Impairment Losses
(340)
(340)
Goodwill
199 
196 
Other
 
Installation and Other Services [Member]
 
 
Changes in carrying amount of goodwill
 
 
Gross Goodwill
1,819 
1,819 
Accumulated Impairment Losses
(762)
(762)
Goodwill
1,057 
1,057 
Decorative Architectural Products [Member]
 
 
Changes in carrying amount of goodwill
 
 
Gross Goodwill
294 
294 
Accumulated Impairment Losses
Goodwill
294 
294 
Other Specialty Products [Member]
 
 
Changes in carrying amount of goodwill
 
 
Gross Goodwill
980 
980 
Accumulated Impairment Losses
(367)
(367)
Goodwill
$ 613 
$ 613 
Depreciation and Amortization Expense (Details Textuals) (USD $)
In Millions
9 Months Ended
Sep. 30,
2011
2010
Depreciation and Amortization Expense (Textuals) [Abstract]
 
 
Depreciation and amortization expense
$ 188 
$ 209 
Financial Investments Included in Other Assets (Details) (USD $)
In Millions
9 Months Ended
Sep. 30, 2011
12 Months Ended
Dec. 31, 2010
Financial investments included in other assets
 
 
Total recurring investments
$ 22 
$ 62 
Total non-recurring investments
97 
119 
Total
119 
181 
Company's investments in available-for-sale securities
 
 
Cost Basis
19 
22 
Pre-tax Unrealized Gains
40 
Pre-tax Unrealized Losses
Recorded Basis
22 
62 
Auction rate securities [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
22 
22 
Trimas Corporation Common Stock [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
40 
Private Equity Funds [Member]
 
 
Financial investments included in other assets
 
 
Total non-recurring investments
92 
106 
Other investments [Member]
 
 
Financial investments included in other assets
 
 
Total non-recurring investments
$ 5 
$ 13 
Recurring Fair Value Measurements (Details 1) (USD $)
In Millions
Sep. 30, 2011
Dec. 31, 2010
Financial investments included in other assets
 
 
Total recurring investments
$ 22 
$ 62 
Auction rate securities [Member] |
Quoted Market Prices (Level 1) [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
Trimas Corporation Common Stock [Member] |
Quoted Market Prices (Level 1) [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
 
40 
Quoted Market Prices (Level 1) [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
40 
Auction rate securities [Member] |
Significant Other Observable Inputs (Level 2) [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
Trimas Corporation Common Stock [Member] |
Significant Other Observable Inputs (Level 2) [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
 
Significant Other Observable Inputs (Level 2) [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
Auction rate securities [Member] |
Significant Unobservable Inputs (Level 3) [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
22 
22 
Trimas Corporation Common Stock [Member] |
Significant Unobservable Inputs (Level 3) [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
 
Significant Unobservable Inputs (Level 3) [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
22 
22 
Auction rate securities [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
22 
22 
Trimas Corporation Common Stock [Member]
 
 
Financial investments included in other assets
 
 
Total recurring investments
$ 0 
$ 40 
Level 3 Financial Assets Fair Value (Details 2) (USD $)
In Millions
9 Months Ended
Sep. 30, 2011
12 Months Ended
Dec. 31, 2010
Changes in Level 3 financial assets measured at fair value on a recurring basis
 
 
Fair value, Beginning Balance
 
$ 93 
Total losses included in earnings
 
(28)
Unrealized losses
 
(23)
Purchases, issuances, settlements
 
Transfers from Level 3 to Level 2
 
(20)
Fair value, Ending Balance
 
22 
Asahi Tec Corporation - preferred stock [Member]
 
 
Changes in Level 3 financial assets measured at fair value on a recurring basis
 
 
Fair value, Beginning Balance
 
71 
Total losses included in earnings
 
(28)
Unrealized losses
 
(23)
Purchases, issuances, settlements
 
Transfers from Level 3 to Level 2
 
(20)
Fair value, Ending Balance
 
Auction rate securities [Member]
 
 
Changes in Level 3 financial assets measured at fair value on a recurring basis
 
 
Fair value, Beginning Balance
22 
22 
Total losses included in earnings
Unrealized losses
Purchases
 
Settlements
 
Purchases, issuances, settlements
 
Transfers from Level 3 to Level 2
Fair value, Ending Balance
$ 22 
$ 22 
Non-recurring Fair Value Measurements (Details 3) (USD $)
In Millions
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
2011
2010
2011
2010
12 Months Ended
Dec. 31, 2010
Non-Recurring Fair Value Measurements
 
 
 
 
 
Fair value on a non-recurring basis of financial investments
 
 
 
 
$ 2 
Impairment charge for financial investments
(33)
 
Private Equity Funds [Member] |
Quoted Market Prices (Level 1) [Member]
 
 
 
 
 
Non-Recurring Fair Value Measurements
 
 
 
 
 
Fair value on a non-recurring basis of financial investments
 
 
 
 
Quoted Market Prices (Level 1) [Member]
 
 
 
 
 
Non-Recurring Fair Value Measurements
 
 
 
 
 
Fair value on a non-recurring basis of financial investments
 
 
 
 
Private Equity Funds [Member] |
Significant Other Observable Inputs (Level 2) [Member]
 
 
 
 
 
Non-Recurring Fair Value Measurements
 
 
 
 
 
Fair value on a non-recurring basis of financial investments
 
 
 
 
Significant Other Observable Inputs (Level 2) [Member]
 
 
 
 
 
Non-Recurring Fair Value Measurements
 
 
 
 
 
Fair value on a non-recurring basis of financial investments
 
 
 
 
Private Equity Funds [Member] |
Significant Unobservable Inputs (Level 3) [Member]
 
 
 
 
 
Non-Recurring Fair Value Measurements
 
 
 
 
 
Fair value on a non-recurring basis of financial investments
 
 
 
 
Significant Unobservable Inputs (Level 3) [Member]
 
 
 
 
 
Non-Recurring Fair Value Measurements
 
 
 
 
 
Fair value on a non-recurring basis of financial investments
 
 
 
 
Private Equity Funds [Member] |
Total Gains (Losses) [Member]
 
 
 
 
 
Non-Recurring Fair Value Measurements
 
 
 
 
 
Impairment charge for financial investments
 
 
 
 
(4)
Other private investments [Member] |
Total Gains (Losses) [Member]
 
 
 
 
 
Non-Recurring Fair Value Measurements
 
 
 
 
 
Impairment charge for financial investments
 
 
 
 
(2)
Total Gains (Losses) [Member]
 
 
 
 
 
Non-Recurring Fair Value Measurements
 
 
 
 
 
Impairment charge for financial investments
 
 
 
 
(6)
Private Equity Funds [Member]
 
 
 
 
 
Non-Recurring Fair Value Measurements
 
 
 
 
 
Fair value on a non-recurring basis of financial investments
 
 
 
 
Impairment charge for financial investments
 
Other private investments [Member]
 
 
 
 
 
Non-Recurring Fair Value Measurements
 
 
 
 
 
Impairment charge for financial investments
$ 0 
$ 0 
$ 0 
$ 2 
$ 0 
Impairment Charges for Financial Assets (Details 5) (USD $)
In Millions
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
2011
2010
2011
2010
12 Months Ended
Dec. 31, 2010
Income from financial investments, net, included in other, net, within other income (expense), net, and impairment charges for financial investments
 
 
 
 
 
Realized gains (losses) from:
$ 19 
$ (3)
$ 69 
$ (2)
 
Impairment charge for financial investments
(33)
 
Trimas Corporation Common Stock [Member]
 
 
 
 
 
Income from financial investments, net, included in other, net, within other income (expense), net, and impairment charges for financial investments
 
 
 
 
 
Realized gains (losses) from:
41 
 
Private Equity Funds [Member]
 
 
 
 
 
Income from financial investments, net, included in other, net, within other income (expense), net, and impairment charges for financial investments
 
 
 
 
 
Realized gains (losses) from:
19 
28 
 
Impairment charge for financial investments
 
Asahi Tec Corporation - preferred stock [Member]
 
 
 
 
 
Income from financial investments, net, included in other, net, within other income (expense), net, and impairment charges for financial investments
 
 
 
 
 
Impairment charge for financial investments
28 
 
Other private investments [Member]
 
 
 
 
 
Income from financial investments, net, included in other, net, within other income (expense), net, and impairment charges for financial investments
 
 
 
 
 
Realized gains (losses) from:
(3)
(2)
 
Impairment charge for financial investments
$ 0 
$ 0 
$ 0 
$ 2 
$ 0 
Fair Value of Financial Investments and Liabilities (Details Textuals) (USD $)
In Billions
Sep. 30, 2011
Dec. 31, 2010
Fair Value of Financial Investments and Liabilities (Textuals) [Abstract]
 
 
Estimated market value of long-term and short-term debt
$ 3.9 
$ 4.2 
Aggregate carrying value of long-term and short-term debt
$ 4.0 
$ 4.1 
Derivatives (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
2011
2010
2011
2010
Dec. 31, 2010
Derivative [Line Items]
 
 
 
 
 
Gains (losses) related to these foreign currency forward contracts recorded in the Company consolidated statements of income
$ 2 
$ 1 
$ 3 
$ (1)
 
Derivatives (Textuals) [Abstract]
 
 
 
 
 
Average fixed rate on interest rate swaps
2.80% 
 
2.80% 
 
 
Debt Instrument, Interest Rate Terms
 
 
3-month LIBOR 
 
 
Gain (loss) related to hedging contracts
(11)
(10)
 
Liabilities related to foreign currency exchange contracts
 
 
Notional amount of interest rate swap agreement
400 
 
400 
 
 
Fixed-rate debt due July 15, 2012
791 
 
791 
 
 
Interest on notes
5.875% 
 
5.875% 
 
 
Market valuation recorded in other comprehensive income
17 
 
17 
 
 
Effectiveness of interest rate swaps
100.00% 
 
100.00% 
 
 
Intercompany Loans [Member]
 
 
 
 
 
Derivative [Line Items]
 
 
 
 
 
Gains (losses) related to these foreign currency forward contracts recorded in the Company consolidated statements of income
(8)
 
Interest rate derivative assets
 
 
 
Interest rate derivative liabilities
 
 
 
 
Fair Value Hedging [Member]
 
 
 
 
 
Derivative [Line Items]
 
 
 
 
 
Assets recorded by the company as a result of hedging activities
 
 
 
Liability recorded by the company as a result of hedging activities
 
 
 
 
$ (5)
Warranty (Details) (USD $)
In Millions
9 Months Ended
Sep. 30, 2011
12 Months Ended
Dec. 31, 2010
Warranty liability
 
 
Balance at January 1
$ 107 
$ 109 
Accruals for warranties issued during the period
20 
42 
Accruals related to pre-existing warranties
(4)
Settlements made (in cash or kind) during the period
(29)
(37)
Other, net
(2)
(3)
Balance at end of period
$ 103 
$ 107 
Debt (Details) (USD $)
9 Months Ended
Sep. 30, 2011
Debt (Textuals) [Abstract]
 
Additional borrowing capacity
$ 979,000,000 
Absorption of reduction to shareholders' equity to remain in compliance with covenant
527,000,000 
Financial covenants
Borrowings under Five Year Revolving Credit Agreement
Principal amount of Zero Coupon Convertible Senior Notes
Principal amount of Zero Coupon Convertible Senior Notes due 2031
108,100,000 
Accreted value principal amount of Zero Coupon Convertible Senior Notes
58,100,000 
Zero Coupon Convertible Senior Notes due 2031 [Member]
 
Short-term Debt [Line Items]
 
Repurchase of senior notes for cash
$ 57,900,000 
Stock-Based Compensation (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
2011
2010
2011
Year
Lawsuits
Contractor
Covenants
2010
Year
Pre-tax compensation expense and related income tax benefit for stock -based incentives
 
 
 
 
Long-term stock awards
$ 9 
$ 9 
$ 28 
$ 28 
Stock options
17 
17 
Phantom stock awards and stock appreciation rights
(5)
(3)
 
Total
10 
16 
42 
45 
Income tax benefit (before valuation allowance)
16 
17 
Company's long-term stock award activity
 
 
 
 
Unvested stock award shares at January 1
 
 
10,000,000 
9,000,000 
Weighted average grant date fair value
 
 
$ 19 
$ 21 
Stock award shares granted
 
 
2,000,000 
3,000,000 
Weighted average grant date fair value
 
 
$ 13 
$ 14 
Stock award shares vested
 
 
2,000,000 
2,000,000 
Weighted average grant date fair value
 
 
$ 20 
$ 23 
Stock award shares forfeited
 
 
Weighted average grant date fair value
 
 
$ 18 
$ 19 
Unvested stock award shares at September 30
10,000,000 
10,000,000 
10,000,000 
10,000,000 
Weighted average grant date fair value
$ 17 
$ 19 
$ 17 
$ 19 
Company's stock option activity
 
 
 
 
Option shares outstanding, January 1
 
 
37,000,000 
36,000,000 
Weighted average exercise price
 
 
$ 21 
$ 23 
Option shares granted, including restoration options
 
 
2,372,500 
5,000,000 
Weighted average exercise price
 
 
$ 13 
$ 14 
Option shares exercised
 
 
Aggregate intrinsic value on date of exercise
 
 
Weighted average exercise price
 
 
$ 8 
$ 8 
Option shares forfeited
 
 
2,830,000 
4,000,000 
Weighted average exercise price
 
 
$ 22 
$ 23 
Option shares outstanding, September 30
36,000,000 
37,000,000 
36,000,000 
37,000,000 
Weighted average exercise price
$ 21 
$ 21 
$ 21 
$ 21 
Weighted average remaining option term (in years)
 
 
Option shares vested and expected to vest, September 30
36,000,000 
37,000,000 
36,000,000 
37,000,000 
Weighted average exercise price
$ 21 
$ 22 
$ 21 
$ 22 
Aggregate intrinsic value
15 
15 
Weighted average remaining option term (in years)
 
 
Option shares exercisable (vested), September 30
24,000,000 
22,000,000 
24,000,000 
22,000,000 
Weighted average exercise price
$ 24 
$ 25 
$ 24 
$ 25 
Aggregate intrinsic value
 
 
Weighted average remaining option term (in years)
 
 
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
 
 
 
 
Weighted average grant date fair value
 
 
$ 5.10 
$ 5.30 
Risk-free interest rate
 
 
2.72% 
2.77% 
Dividend yield
 
 
2.34% 
2.17% 
Volatility factor
 
 
49.00% 
46.01% 
Expected option life (in years)
 
 
Stock-Based Compensation (Textuals) (Abstract)
 
 
 
 
Typical vesting period of stock awards granted prior to January 1, 2010
 
 
10 years 
 
Stock awards granted subsequent to January 1, 2010 have a vesting period, in years
 
 
5 years 
 
Total unrecognized compensation expense
122 
136 
122 
136 
Remaining weighted average vesting period
 
 
Total market value (at the vesting date) of stock award shares
 
 
28 
22 
Grant and expire date
 
 
Not later than 10 years 
 
Stock option shares granted
 
 
2,372,500 
5,000,000 
Approx grant date exercise price
 
 
$ 13 
 
Stock option shares forfeited
 
 
2,830,000 
4,000,000 
Unrecognized compensation expense related to unvested stock options
$ 39 
$ 50 
$ 39 
$ 50 
Weighted average vesting period for unvested stock options
 
 
Employee Retirement Plans (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
9 Months Ended
Sep. 30, 2011
12 Months Ended
Dec. 31, 2010
Plan
2011
Qualified [Member]
2010
Qualified [Member]
2011
Qualified [Member]
2010
Qualified [Member]
2011
Non-Qualified [Member]
2010
Non-Qualified [Member]
2011
Non-Qualified [Member]
2010
Non-Qualified [Member]
Dec. 31, 2010
Non-Qualified [Member]
Net periodic pension cost for defined-benefit pension plans
 
 
 
 
 
 
 
 
 
 
 
Service cost
 
 
$ 1 
$ 2 
$ 2 
$ 4 
$ 0 
$ 0 
$ 0 
$ 0 
 
Interest cost
 
 
12 
11 
34 
34 
 
Expected return on plan assets
 
 
(9)
(9)
(25)
(27)
 
Amortization of prior service cost
 
 
 
Amortization of net loss
 
 
 
Net periodic pension cost
 
 
18 
19 
 
Net Liability of defined-benefit pension plans
 
522 
 
 
 
 
 
 
 
 
163 
Employee Retirement Plans (Textuals) [Abstract]