MASCO CORP /DE/, 10-K filed on 2/14/2014
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2013
Jan. 31, 2014
Jun. 28, 2013
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
MASCO CORP /DE/ 
 
 
Entity Central Index Key
0000062996 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2013 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 6,794,823,000 
Entity Common Stock, Shares Outstanding
 
356,404,200 
 
Document Fiscal Year Focus
2013 
 
 
Document Fiscal Period Focus
FY 
 
 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Current Assets:
 
 
Cash and cash investments
$ 1,223 
$ 1,040 
Short-term bank deposits
321 
311 
Receivables
1,004 
933 
Inventories
765 
726 
Prepaid expenses and other
155 
107 
Assets held for sale
 
100 
Total current assets
3,468 
3,217 
Property and equipment, net
1,252 
1,326 
Goodwill
1,903 
1,894 
Other intangible assets, net
149 
151 
Other assets
161 
184 
Assets held for sale
 
103 
Total Assets
6,933 
6,875 
Current Liabilities:
 
 
Accounts payable
902 
788 
Notes payable
206 
Accrued liabilities
874 
823 
Liabilities held for sale
 
45 
Total current liabilities
1,782 
1,862 
Long-term debt
3,421 
3,422 
Deferred income taxes and other
967 
1,053 
Liabilities held for sale
 
Total Liabilities
6,170 
6,341 
Commitments and contingencies
   
   
Masco Corporation's shareholders' equity
 
 
Common shares authorized: 1,400,000,000; issued and outstanding: 2013 - 349,500,000; 2012 - 349,000,000
349 
349 
Preferred shares authorized: 1,000,000; issued and outstanding: 2013 and 2012 - None
   
   
Paid-in capital
16 
16 
Retained earnings (deficit)
55 
(102)
Accumulated other comprehensive income
115 
59 
Total Masco Corporation's shareholders' equity
535 
322 
Noncontrolling interest
228 
212 
Total Equity
763 
534 
Total Liabilities and Equity
$ 6,933 
$ 6,875 
CONSOLIDATED BALANCE SHEETS (Parenthetical)
Dec. 31, 2013
Dec. 31, 2012
CONSOLIDATED BALANCE SHEETS
 
 
Common shares, shares authorized
1,400,000,000 
1,400,000,000 
Common shares, shares issued
349,500,000 
349,000,000 
Common shares, shares outstanding
349,500,000 
349,000,000 
Preferred shares, shares authorized
1,000,000 
1,000,000 
Preferred shares, shares issued
Preferred shares, shares outstanding
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
Net sales
$ 8,173 
$ 7,495 
$ 7,170 
Cost of sales
5,918 
5,539 
5,383 
Gross profit
2,255 
1,956 
1,787 
Selling, general and administrative expenses
1,582 
1,535 
1,543 
Charge for litigation settlements, net
 
77 
Impairment charges for goodwill and other intangible assets
 
42 
450 
Operating profit (loss)
673 
302 
(215)
Other income (expense), net:
 
 
 
Interest expense
(235)
(254)
(254)
Other, net
(4)
25 
77 
Total other income (expense), net
(239)
(229)
(177)
Income (loss) from continuing operations before income taxes
434 
73 
(392)
Income tax expense (benefit)
111 
91 
(40)
Income (loss) from continuing operations
323 
(18)
(352)
Loss from discontinued operations, net
(10)
(61)
(181)
Net income (loss)
313 
(79)
(533)
Less: Net income attributable to noncontrolling interest
41 
35 
42 
Net income (loss) attributable to Masco Corporation
272 
(114)
(575)
Basic:
 
 
 
Income (loss) from continuing operations (in dollars per share)
$ 0.79 
$ (0.16)
$ (1.14)
Loss from discontinued operations, net (in dollars per share)
$ (0.03)
$ (0.17)
$ (0.52)
Net income (loss) (in dollars per share)
$ 0.76 
$ (0.33)
$ (1.66)
Diluted:
 
 
 
Income (loss) from continuing operations (in dollars per share)
$ 0.78 
$ (0.16)
$ (1.14)
Loss from discontinued operations, net (in dollars per share)
$ (0.03)
$ (0.17)
$ (0.52)
Net income (loss) (in dollars per share)
$ 0.76 
$ (0.33)
$ (1.66)
Amounts attributable to Masco Corporation:
 
 
 
Income (loss) from continuing operations
282 
(53)
(394)
Loss from discontinued operations, net
(10)
(61)
(181)
Net income (loss) attributable to Masco Corporation
$ 272 
$ (114)
$ (575)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
 
 
Net income (loss)
$ 313 
$ (79)
$ (533)
Less: Net income attributable to noncontrolling interest
41 
35 
42 
Net income (loss) attributable to Masco Corporation
272 
(114)
(575)
Other comprehensive income (loss), net of tax (see Note O):
 
 
 
Cumulative translation adjustment
(75)
28 
(30)
Interest rate swaps
(23)
Marketable securities
 
 
(38)
Unrecognized pension prior service cost and net gain (loss)
138 
(45)
(113)
Other comprehensive income (loss)
65 
(15)
(204)
Less: Other comprehensive income (loss) attributable to the noncontrolling interest:
 
 
 
Cumulative translation adjustment
(7)
Unrecognized pension prior service cost and net gain (loss)
(7)
 
Other comprehensive income (loss) attributable to the noncontrolling interest
(7)
Other comprehensive income (loss) attributable to Masco Corporation
56 
(17)
(197)
Total comprehensive income (loss)
378 
(94)
(737)
Less: Total comprehensive income attributable to noncontrolling interest
50 
37 
35 
Total comprehensive income (loss) attributable to Masco Corporation
$ 328 
$ (131)
$ (772)
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
 
 
 
Net income (loss)
$ 313 
$ (79)
$ (533)
Depreciation and amortization
186 
214 
263 
Deferred income taxes
42 
50 
(112)
Non-cash loss on disposition of businesses, net
15 
 
(Gain) on disposition of investments, net
(10)
(24)
(71)
Impairment charges:
 
 
 
Financial investments
 
 
Goodwill and other intangible assets
 
42 
450 
Discontinued operations
10 
130 
Stock-based compensation
54 
61 
61 
Other items, net
(3)
(28)
53 
Increase in receivables
(85)
(50)
(60)
Increase in inventories
(24)
(16)
(54)
Increase in accounts payable and accrued liabilities, net
147 
102 
112 
Net cash from operating activities
645 
281 
239 
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
 
 
 
Increase in debt
Payment of debt
(5)
(5)
(9)
Issuance of notes, net of issuance costs
 
396 
 
Credit Agreement costs
(4)
 
(1)
Retirement of Notes
(200)
(791)
(58)
Payment for settlement of swaps
 
(25)
 
Purchase of Company common stock
(35)
(8)
(30)
Dividends paid to noncontrolling interest
(34)
(40)
(18)
Cash dividends paid
(107)
(107)
(107)
Net cash for financing activities
(382)
(576)
(219)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(126)
(119)
(151)
Acquisition of businesses, net of cash acquired
(7)
 
(10)
Proceeds from disposition of:
 
 
 
Marketable securities
 
 
49 
Short-term bank deposits
411 
430 
545 
Businesses, net of cash disposed
17 
 
Property and equipment
27 
67 
24 
Other financial investments
16 
43 
52 
Purchases of:
 
 
 
Other financial investments
(1)
(3)
(7)
Short-term bank deposits
(409)
(432)
(568)
Other, net
(5)
(24)
(18)
Net cash for investing activities
(77)
(29)
(84)
Effect of exchange rate changes on cash and cash investments
(3)
11 
(8)
CASH AND CASH INVESTMENTS:
 
 
 
Increase (decrease) for the year
183 
(313)
(72)
At January 1
1,040 
1,353 
1,425 
At December 31
$ 1,223 
$ 1,040 
$ 1,353 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)
In Millions, unless otherwise specified
Total
Common Shares ($1 par value)
Paid-In Capital
Retained (Deficit) Earnings
Accumulated Other Comprehensive Income
Noncontrolling Interest
Balance at Dec. 31, 2010
$ 1,582 
$ 349 
$ 42 
$ 720 
$ 273 
$ 198 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
Total comprehensive (loss) income
(737)
 
 
(575)
(197)
35 
Shares issued
 
(2)
 
 
 
Shares retired:
 
 
 
 
 
 
Repurchased
(30)
(2)
(28)
 
 
 
Surrendered (non-cash)
(8)
(1)
(7)
 
 
 
Cash dividends declared
(107)
 
 
(107)
 
 
Dividends paid to noncontrolling interest
(18)
 
 
 
 
(18)
Stock-based compensation
60 
 
60 
 
 
 
Balance at Dec. 31, 2011
742 
348 
65 
38 
76 
215 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
Total comprehensive (loss) income
(94)
 
 
(114)
(17)
37 
Shares issued
(1)
(4)
 
 
 
Shares retired:
 
 
 
 
 
 
Repurchased
(8)
(1)
(7)
 
 
 
Surrendered (non-cash)
(8)
(1)
(7)
 
 
 
Cash dividends declared
(107)
 
(81)
(26)
 
 
Dividends paid to noncontrolling interest
(40)
 
 
 
 
(40)
Stock-based compensation
50 
 
50 
 
 
 
Balance at Dec. 31, 2012
534 
349 
16 
(102)
59 
212 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
Total comprehensive (loss) income
378 
 
 
272 
56 
50 
Shares issued
(8)
(11)
 
 
 
Shares retired:
 
 
 
 
 
 
Repurchased
(35)
(2)
(11)
(22)
 
 
Surrendered (non-cash)
(12)
(1)
(11)
 
 
 
Cash dividends declared
(107)
 
(14)
(93)
 
 
Dividends paid to noncontrolling interest
(34)
 
 
 
 
(34)
Stock-based compensation
47 
 
47 
 
 
 
Balance at Dec. 31, 2013
$ 763 
$ 349 
$ 16 
$ 55 
$ 115 
$ 228 
ACCOUNTING POLICIES
ACCOUNTING POLICIES

A. ACCOUNTING POLICIES

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

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

        Revenue Recognition.    The Company recognizes revenue as title to products and risk of loss is transferred to customers or when services are rendered, net of applicable provisions for discounts, returns and allowances. The Company records revenue for unbilled services performed based upon material and labor incurred in the Installation and Other Services segment; such amounts are recorded in receivables. Amounts billed for shipping and handling are included in net sales, while costs incurred for shipping and handling are included in cost of sales.

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

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

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

        Short-Term Bank Deposits.    The Company invests a portion of its foreign excess cash in short-term bank deposits. These highly liquid investments have original maturities between three and twelve months and are valued at cost, which approximates fair value at December 31, 2013 and December 31, 2012. These short-term bank deposits are classified in the current assets section of the Company's consolidated balance sheets, and interest income related to short-term bank deposits is recorded in the Company's consolidated statement of operations in other income (expense), net.

        Receivables.    The Company does significant business with a number of customers, including certain home centers and homebuilders. The Company monitors its exposure for credit losses on its customer receivable balances and the credit worthiness of its customers on an on-going basis and records related allowances for doubtful accounts. Allowances are estimated based upon specific customer balances, where a risk of default has been identified, and also include a provision for non-customer specific defaults based upon historical collection, return and write-off activity. During downturns in the Company's markets, declines in the financial condition and creditworthiness of customers impacts the credit risk of the receivables involved and the Company has incurred additional bad debt expense related to customer defaults. A separate allowance is recorded for customer incentive rebates and is generally based upon sales activity. Receivables are presented net of certain allowances (including allowances for doubtful accounts) of $57 million and $71 million at December 31, 2013 and 2012, respectively. Receivables include unbilled revenue related to the Installation and Other Services segment of $24 million and $18 million at December 31, 2013 and 2012, respectively.

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

        The Company reviews its property and equipment as an event occurs or circumstances change that would more likely than not reduce the fair value of the property and equipment below the carrying amount. If the carrying amount of property and equipment is not recoverable from its undiscounted cash flows, then the Company would recognize an impairment loss for the difference between the carrying amount and the current fair value. Further, the Company evaluates the remaining useful lives of property and equipment at each reporting period to determine whether events and circumstances warrant a revision to the remaining depreciation periods.

        Depreciation.    Depreciation expense is computed principally using the straight-line method over the estimated useful lives of the assets. Annual depreciation rates are as follows: buildings and land improvements, 2 to 10 percent, and machinery and equipment, 5 to 33 percent. Depreciation expense was $175 million, $192 million and $234 million in 2013, 2012 and 2011, respectively. Such depreciation expense included accelerated depreciation of $13 million (primarily in the Cabinets and Related Products and Plumbing Products segments), $28 million (primarily in the Cabinets and Related Products and Plumbing Products segments) and $52 million (primarily in the Cabinets and Related Products and Other Specialty Products segment) in 2013, 2012 and 2011, respectively.

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

        Determining market values using a discounted cash flow method requires the Company to make significant estimates and assumptions, including long-term projections of cash flows, market conditions and appropriate discount rates. The Company's judgments are based upon historical experience, current market trends, consultations with external valuation specialists and other information. In estimating future cash flows, the Company relies on internally generated five-year forecasts for sales and operating profits, including capital expenditures, and generally a one to three percent long-term assumed annual growth rate of cash flows for periods after the five-year forecast. The Company utilizes its weighted average cost of capital of approximately 10 percent as the basis to determine the discount rate to apply to the estimated future cash flows. Our weighted average cost of capital increased in 2013 due to improving market conditions and an increased stock price. In 2013 and 2012, due to improving market conditions, the Company increased the discount rate to a range of 11.5 percent to 13.5 percent in 2013 for most of its reporting units compared to a range of 11 percent to 13 percent in 2012. The Company records an impairment to goodwill (adjusting the value to the estimated fair value) if the book value exceeds the estimated fair value.

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

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

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

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

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

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

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

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

        Product Liability.    The Company provides for expenses associated with product liability obligations when such amounts are probable and can be reasonably estimated. The accruals are adjusted as new information develops or circumstances change that would affect the estimated liability.

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

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

        Noncontrolling Interest.    The Company owns 68 percent of Hansgrohe SE at both December 31, 2013 and 2012. The aggregate noncontrolling interest, net of dividends, at December 31, 2013 and 2012 has been recorded as a component of equity on the Company's consolidated balance sheets.

        Interest and Penalties on Uncertain Tax Positions.    The Company records interest and penalties on its uncertain tax positions in income tax expense.

        Reclassifications.    Certain prior-year amounts have been reclassified to conform to the 2013 presentation in the consolidated financial statements. In the Company's consolidated statements of cash flows, the cash flows from discontinued operations are not separately classified.

        Revision of Previously Issued Financial Statements.    During the third quarter ended September 30, 2013, the Company identified an error related to the classification of cash and cash investments. Foreign short-term bank deposits with terms ranging from three months to twelve months were incorrectly classified as cash and cash investments rather than short-term bank deposits. Historic periods are revised, as detailed below, in our future filings. These classification errors were not considered material to any prior period financial statements.

        The following table presents the impact of the revisions on the Company's previously issued consolidated balance sheets (in millions).

Balance Sheet December 31, 2012
  As Reported   As Revised  

Cash and cash investments

  $ 1,351   $ 1,040  

Short-term bank deposits

        311  

Total current assets

  $ 3,217   $ 3,217  


 

Balance Sheet December 31, 2011
  As Reported   As Revised  

Cash and cash investments

  $ 1,656   $ 1,353  

Short-term bank deposits

        303  

Total current assets

  $ 3,429   $ 3,429  

        This revision had no effect on our consolidated results of operations.

        The following table presents the impact of the revisions on the Company's previously issued consolidated statement of cash flows (in millions).

Cash Flows December 31, 2012
  As Reported   As Revised  

Net cash (for) investing activities

  $ (27 ) $ (29 )

Effect of exchange rate changes on cash and cash investments

  $ 17   $ 11  

Decrease in cash and cash investments

  $ (305 ) $ (313 )


 

Cash Flows December 31, 2011
  As Reported   As Revised  

Net cash (for) investing activities

  $ (61 ) $ (84 )

Effect of exchange rate changes on cash and cash investments

  $ (18 ) $ (8 )

Decrease in cash and cash investments

  $ (59 ) $ (72 )


 

Cash Flows December 31, 2010
  As Reported   As Revised  

Net cash (for) investing activities

  $ (109 ) $ (244 )

Effect of exchange rate changes on cash and cash investments

  $ (14 ) $ (7 )

Increase in cash and cash investments

  $ 302   $ 174  

        The following table presents the impact of the revisions on the Company's previously issued consolidated balance sheets and statements of cash flows (all cash flow figures are year-to-date, in millions).

 
  Mar. 31,
2012
  June 30,
2012
  Sep. 30,
2012
  Mar. 31,
2013
  June 30,
2013
 

Cash and cash investments

                               

As reported

  $ 1,788   $ 1,853   $ 1,166   $ 1,032   $ 1,223  

As revised

  $ 1,491   $ 1,612   $ 889   $ 828   $ 1,028  

Short-term bank deposits

   
 
   
 
   
 
   
 
   
 
 

As reported

                     

As revised

  $ 297   $ 241   $ 277   $ 204   $ 195  

Net cash (for) from investing activities

   
 
   
 
   
 
   
 
   
 
 

As reported

  $ (2 ) $ (15 ) $ (42 ) $ (30 ) $ (51 )

As revised

  $ 10   $ 37   $ (17 ) $ 70   $ 62  

        The revisions did not significantly impact the effect of exchange rate changes on cash and cash investments in each quarter above. These changes will be reflected in the revised statements of cash flows, in future filings.

        Recently Issued Accounting Pronouncements.    On January 1, 2013, the Company adopted new accounting guidance requiring disclosure of amounts reclassified from accumulated other comprehensive income. The adoption of this new guidance did not have an impact on the Company's financial position or its results of operations.

DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS

B. DISCONTINUED OPERATIONS

        The presentation of discontinued operations includes components of the Company that the Company intends to sell, which comprises operations and cash flows that can be clearly distinguished from the rest of the Company.

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

        During 2011, the Company determined that several businesses in the Installation and Other Services segment were not core to the Company's long-term growth strategy. These businesses provide commercial drywall installation, millwork and framing services. During 2012, the Company disposed all of these businesses for net proceeds of $7 million.

        The Company has accounted for the business units identified in 2013 and 2011 as discontinued operations. Losses from these discontinued operations were included in loss from discontinued operations, net, in the consolidated statements of operations.

        Selected financial information for the discontinued operations during the period owned by the Company, were as follows, in millions:

 
  2013   2012   2011  

Net sales

  $ 265   $ 321   $ 389  
               
               

Operating loss from discontinued operations

  $ (7 ) $ (44 ) $ (58 )

Impairment of assets held for sale

    (10 )   (3 )   (130 )

Gain (loss) on disposal of discontinued operations, net

    3     (6 )   (3 )
               

Loss before income tax

    (14 )   (53 )   (191 )

Income tax (benefit) expense

   
(4

)
 
8
   
(10

)
               

Loss from discontinued operations, net

 
$

(10

)

$

(61

)

$

(181

)
               
               

        Included in impairment of assets held for sale in 2013 is the impairment of fixed assets. During the first quarter of 2013, the Company estimated the fair value of the business held for sale, using unobservable inputs (Level 3). After considering the currency translation gains reported in Accumulated Other Comprehensive Income, the Company recorded an impairment of $10 million in the first quarter of 2013.

        In 2013, in conjunction with the transaction to sell the Danish ready-to-assemble cabinet business (included in discontinued operations), the Company also disposed of a non-operating entity in Denmark. This disposition triggered the settlement of loans, which resulted in the recognition of $18 million of currency translation expense, which is included in other income (expense) from continuing operations in the statement of operations.

        Included in the impairment of assets held for sale, net in 2011 is the impairment of indefinite and definite-lived intangible assets of $56 million, the impairment of goodwill of $57 million and the impairment of fixed and other assets of $17 million. Included in the loss on disposal of discontinued operations, net in 2011 is $3 million expense reflecting the adjustment of certain assets related to businesses disposed in prior years.

        The unusual relationship between income tax expense and loss before income tax in 2012 resulted primarily from the increase in the deferred tax liability associated with the abandonment of tax basis in indefinite-lived intangibles due to the disposition of certain discontinued operations.

        The unusual relationship between income taxes and loss before income taxes in 2011 resulted primarily from certain losses providing no current tax benefit.

       The following balance sheet items have been classified as held for sale:

 
  December 31,  
 
  2013   2012  

Receivables

  $   $ 32  

Inventories

        66  

Prepaid expenses and other

        2  

Property and equipment, net

        103  
           

Total assets

  $   $ 203  

Accounts payable

   
   
31
 

Accrued liabilities

        14  

Deferred income taxes

        4  
           

Total liabilities

  $   $ 49  

        In the fourth quarter of 2012, the Company determined that the estimated fair value calculated for Tvilum was lower than the net book value. The Company assessed the long-lived assets associated with this business unit and determined that no impairment was necessary at December 31, 2012.

        Also during 2011, the Company decided to exit a product line in builders' hardware in the Decorative Architectural Products segment with net sales of $1 million and an operating loss of $15 million in 2011 (including $8 million to write-down inventory related to satisfaction of contractual obligations). In the first quarter of 2012, the Company disposed of this product line. This business was included in continuing operations through the date of disposal.

ACQUISITIONS
ACQUISITIONS

C. ACQUISITIONS

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

        In late 2011, the Company acquired a small manufacturer of hot tubs in the Plumbing Products segment; this business allows the Company to expand its spa offering into additional price point categories. The total net cash purchase price was $10 million in 2011.

        The results of these acquisitions are included in the consolidated financial statements from the respective date of acquisition.

INVENTORIES
INVENTORIES

D. INVENTORIES

 
  (In Millions)
 
 
  At December 31  
 
  2013   2012  

Finished goods

  $ 398   $ 369  

Raw material

    268     261  

Work in process

    99     96  
           

Total

  $ 765   $ 726  
           
           

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

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

E. FAIR VALUE OF FINANCIAL INVESTMENTS AND LIABILITIES

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

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

        Financial Investments.    The Company has maintained investments in available-for-sale securities and a number of private equity funds and other private investments, 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:

 
  At December 31  
 
  2013   2012  

Auction rate securities

  $ 22   $ 22  
           

Total recurring investments

    22     22  

Private equity funds

   
63
   
69
 

Other investments

    3     4  
           

Total non-recurring investments

    66     73  

Total

 
$

88
 
$

95
 
           
           

        The Company's investments in available-for-sale securities included cost basis of $19 million and pre-tax unrealized gains of $3 million and had a recorded basis of $22 million at both December 31, 2013 and 2012.

        The Company's investments in private equity funds and other private investments are carried at cost. At December 31, 2013, the Company has investments in 14 venture capital funds, with an aggregate carrying value of $15 million. The venture capital funds invest in start-up or smaller, early-stage established businesses, principally in the information technology, bio-technology and health care sectors. At December 31, 2013, the Company also has investments in 15 buyout funds, with an aggregate carrying value of $48 million. The buyout funds invest in later-stage, established businesses and no buyout fund has a concentration in a particular sector.

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

        In the past, the Company invested excess cash in auction rate securities. Auction rate securities are investment securities that have interest rates which are reset every 7, 28 or 35 days. The fair values of the auction rate securities held by 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 assumptions for credit defaults, since the auction rate securities are backed by credit default swap agreements.

        There were no changes in the fair value of Level 3 financial investments for the year ended December 31, 2013 or 2012.

        During 2011, the Company sold 1,974,000 shares of its investment in TriMas common stock for cash of $43 million; at December 31, 2013, 2012 and 2011, the Company did not own any shares of TriMas common stock.

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

        Impairment indicators the Company considers include the following: whether there has been a significant deterioration in earnings performance, asset quality or business prospects; a significant adverse change in the regulatory, economic or technological environment; a significant adverse change in the general market condition or geographic area in which the investment operates; industry and sector performance; current equity and credit market conditions; and any bona fide offers to purchase the investment for less than the carrying value. The Company also considers specific adverse conditions related to the financial health of and business outlook for the fund, including industry and sector performance. The significant assumptions utilized in analyzing a fund for potential other-than-temporary impairment include current economic conditions, market analysis for specific funds and performance indicators in the residential and commercial construction, bio-technology, health care and information technology sectors in which the applicable funds' investments operate. Since there is no active trading market for these investments, they are for the most part illiquid. These investments, by their nature, can also have a relatively higher degree of business risk, including financial leverage, than other financial investments. Future changes in market conditions, the future performance of the underlying investments or new information provided by private equity fund managers could affect the recorded values of such investments and the amounts realized upon liquidation. Due to the significant unobservable inputs, the fair value measurements used to evaluate impairment are a Level 3 input.

        During 2013, there were no financial investments measured on a non-recurring basis. None of the Company's investments in private equity funds, for which fair value was determined, had unrealized losses in 2013 or 2012.

        During 2012, the Company recognized a $2 million loss related to private equity funds (financial investments measured at fair value on a non-recurring basis) using significant unobservable inputs (Level 3). The remaining private equity investments in 2012 with an aggregate carrying value of $67 million, were not reviewed for impairment, as there were no indicators of impairment or identified events or changes in circumstances that would have a significant adverse effect on the fair value of the investment.

        The Company did not have any transfers between Level 1 and Level 2 financial assets in 2013 or 2012.

        Realized Gains (Losses) and Impairment Charges.    Income from financial investments, net, included in other, net, within other income (expense), net, and impairment charges for financial investments were as follows, in millions:

 
  2013   2012   2011  

Realized gains from marketable securities

  $   $   $ 41  

Realized gains from private equity funds

    11     24     32  

Impairment of private equity funds

        (2 )    
               

Income from financial investments, net

  $ 11   $ 22   $ 73  
               
               

        The impairment charges related to the Company's financial investments recognized during 2012 were based upon then-current estimates for the fair value of certain financial investments; such estimates could change in the near-term based upon future events and circumstances.

        The fair value of the Company's short-term and long-term fixed-rate debt instruments is based principally upon modeled market prices for the same or similar issues or the current rates available to the Company for debt with similar terms and remaining maturities. The aggregate estimated market value of short-term and long-term debt at December 31, 2013 was approximately $3.7 billion, compared with the aggregate carrying value of $3.4 billion. The aggregate estimated market value of short-term and long-term debt at December 31, 2012 was approximately $4.0 billion, compared with the aggregate carrying value of $3.6 billion.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

F. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

        The Company is exposed to global market risk as part of its normal daily business activities. To manage these risks, the Company enters into various derivative contracts. These contracts include interest rate swap agreements, foreign currency exchange contracts and contracts intended to hedge the Company's exposure to copper and zinc. The Company reviews its hedging program, derivative positions and overall risk management on a regular basis.

        Interest Rate Swap Agreements.    In March 2012, in connection with the issuance of $400 million of debt, the Company terminated the interest rate swap hedge relationships that it 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 the Company's consolidated statement of operations in other, net. The remaining loss of approximately $23 million from the termination of these swaps is being amortized as an increase to interest expense over the remaining term of the debt, through March 2022. At December 31, 2013, the balance remaining in accumulated other comprehensive income was $19 million. In 2013, the Company recognized an increase in interest expense of $2 million related to the annual amortization of the March 2012 terminated interest rate swap.

        In 2012, the Company recognized a decrease in interest expense of $6 million, offset by interest expense of $2 million related to the cash flow hedge terminated in March 2012. In 2011, the Company recognized a decrease in interest expense of $10 million related to the amortization of gains resulting from the terminations (in 2008 and 2004) of two fair value interest rate swap agreements.

        Foreign Currency Contracts.    The Company's net cash inflows and outflows exposed to the risk of changes in foreign currency exchange rates arise from the sale of products in countries other than the manufacturing source, foreign currency denominated supplier payments, debt and other payables, and investments in subsidiaries. To mitigate this risk during 2013, 2012 and 2011, the Company, including certain European operations, entered into foreign currency forward contracts and foreign currency exchange contracts.

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

        Metals Contracts.    During 2013, 2012 and 2011, the Company entered into several contracts to manage its exposure to increases in the price of copper and zinc. Gains (losses) related to these contracts are recorded in the Company's consolidated statements of operations in cost of sales.

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

 
  Twelve Months Ended December 31,  
 
  2013   2012   2011  

Foreign Currency Contracts

                   

Exchange Contracts

  $ 2   $ (2 ) $ 3  

Forward Contracts

    1         3  

Metals Contracts

   
(7

)
 
2
   
(7

)
               

Total gains (losses)

  $ (4 ) $   $ (1 )
               
               

 

        The Company presents its net derivatives due to the right of offset by its counterparties under master netting arrangements in current assets or accrued liabilities in the consolidated balance sheet. The notional amounts being hedged and the fair value of those derivative instruments, on a gross basis, is as follows, in millions:

 
  At December 31, 2013  
 
  Notional
Amount
  Assets   Liabilities  

Foreign Currency Contracts

                   

Exchange Contracts

  $ 53              

Current liabilities

        $   $ 2  

Forward Contracts

    88              

Current liabilities

              1  

Metals Contracts

   
48
             

Current liabilities

              2  
                 

Total

        $   $ 5  
                 
                 


 

 
  At December 31, 2012  
 
  Notional
Amount
  Assets   Liabilities  

Foreign Currency Contracts

                   

Exchange Contracts

  $ 172              

Current liabilities

        $   $ 5  

Forward Contracts

    76              

Current assets

          1     1  

Metals Contracts

   
35
             

Current liabilities

          1     2  
                 

Total

        $ 2   $ 8  
                 
                 

        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).

PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT

G. PROPERTY AND EQUIPMENT

 
  (In Millions)
 
 
  At December 31  
 
  2013   2012  

Land and improvements

  $ 135   $ 140  

Buildings

    809     819  

Machinery and equipment

    2,046     2,054  
           

 

    2,990     3,013  

Less: Accumulated depreciation

    1,738     1,687  
           

Total

  $ 1,252   $ 1,326  
           
           

        The Company leases certain equipment and plant facilities under noncancellable operating leases. Rental expense recorded in the consolidated statements of operations totaled approximately $93 million, $94 million and $102 million during 2013, 2012 and 2011, respectively. Future minimum lease payments at December 31, 2013 were approximately as follows: 2014 – $62 million; 2015 – $47 million; 2016 – $32 million; 2017 – $20 million; 2018 – $14 million; and 2019 and beyond – $86 million.

        The Company leases operating facilities from certain related parties, primarily former owners (and in certain cases, current management personnel) of companies acquired. The Company recorded rental expense to such related parties of approximately $6 million in 2013 and $5 million in each of 2012 and 2011, respectively.

        As a result of its business rationalization activities over the last several years, at December 31, 2013 and 2012, the Company was holding several facilities for sale, within the Cabinets and Related Products segment and the Other Specialty Products segment. At December 31, 2013 and 2012, the net book value of those facilities was approximately $6 million and $14 million, respectively, and approximates fair value. Fair value was estimated using a market approach, considering the estimated fair values for the other comparable buildings in the areas where the facilities are located, Level 3 inputs.

GOODWILL AND OTHER INTANGIBLE ASSETS
GOODWILL AND OTHER INTANGIBLE ASSETS

H. GOODWILL AND OTHER INTANGIBLE ASSETS

        The changes in the carrying amount of goodwill for 2013 and 2012, by segment, were as follows, in millions:

 
  Gross Goodwill
At December 31,
2013
  Accumulated
Impairment
Losses
  Net Goodwill
At December 31,
2013
 

Cabinets and Related Products

  $ 240   $ (59 ) $ 181  

Plumbing Products

    550     (340 )   210  

Installation and Other Services

    1,806     (762 )   1,044  

Decorative Architectural Products

    294     (75 )   219  

Other Specialty Products

    983     (734 )   249  
               

Total

  $ 3,873   $ (1,970 ) $ 1,903  
               
               


 

 
  Gross Goodwill
At December 31,
2012
  Accumulated
Impairment
Losses
  Net Goodwill
At December 31,
2012
  Pre-tax
Impairment
Charge
  Additions (A)   Other (B)   Net Goodwill
At December 31,
2013
 

Cabinets and Related Products

  $ 240   $ (59 ) $ 181   $   $   $   $ 181  

Plumbing Products

    544     (340 )   204             6     210  

Installation and Other Services

    1,806     (762 )   1,044                 1,044  

Decorative Architectural Products

    294     (75 )   219                 219  

Other Specialty Products

    980     (734 )   246         3         249  
                               

Total

  $ 3,864   $ (1,970 ) $ 1,894   $   $ 3   $ 6   $ 1,903  
                               
                               


 

 
  Gross Goodwill
At December 31,
2011
  Accumulated
Impairment
Losses
  Net Goodwill
At December 31,
2011
  Pre-tax
Impairment
Charge
  Additions (A)   Other (B)   Net Goodwill
At December 31,
2012
 

Cabinets and Related Products

  $ 240   $ (59 ) $ 181   $   $   $   $ 181  

Plumbing Products

    541     (340 )   201             3     204  

Installation and Other Services

    1,806     (762 )   1,044                 1,044  

Decorative Architectural Products

    294     (75 )   219                 219  

Other Specialty Products

    980     (734 )   246                 246  
                               

Total

  $ 3,861   $ (1,970 ) $ 1,891   $   $   $ 3   $ 1,894  
                               
                               

(A)
Additions include acquisitions.
(B)
Other principally includes the effect of foreign currency translation.

        In the fourth quarters of 2013 and 2012, the Company completed its annual impairment testing of goodwill and other indefinite-lived intangible assets. The impairment test in 2013 and 2012 indicated there was no impairment of goodwill for any of the Company's reporting units.

        The impairment test in 2011 indicated that goodwill recorded for certain of the Company's reporting units was impaired. The Company recognized the non-cash, pre-tax impairment charges, in continuing operations, for goodwill of $442 million ($286 million, after tax) for 2011. In 2011, the pre-tax impairment charge in the Decorative Architectural Products segment relates to the builders' hardware business and reflects increasing competitive conditions for that business. The pre-tax impairment charge in the Other Specialty Products segment relates to the North American window and door business and reflects the continuing weak level of new home construction activity in the western U.S., the reduced levels of repair and remodel activity and the expectation that recovery in these segments will be modestly slower than anticipated. The Company then assessed the long-lived assets associated with these business units and determined no impairment was necessary at December 31, 2011.

        Other indefinite-lived intangible assets were $133 million and $132 million at December 31, 2013 and 2012, respectively, and principally included registered trademarks. In 2013, the impairment test indicated there was no impairment of other intangible assets for any of the Company's reporting units. In 2012 and 2011, the impairment test indicated that the registered trademark for a North American business unit in the Other Specialty Products segment and the registered trademark for a North American business unit in the Plumbing Products segment (2011 only) were impaired due to changes in the long-term outlook for the business units. The Company recognized non-cash, pre-tax impairment charges for other indefinite-lived intangible assets of $42 million ($27 million, after tax) and $8 million ($5 million, after tax) in 2012 and 2011, respectively.

        The carrying value of the Company's definite-lived intangible assets was $16 million (net of accumulated amortization of $62 million) at December 31, 2013 and $19 million at December 31, 2012 (net of accumulated amortization of $57 million) and principally included customer relationships and non-compete agreements, with a weighted average amortization period of 6 years in both 2013 and 2012. Amortization expense related to the definite-lived intangible assets of continuing operations was $5 million in 2013 and $6 million in each of 2012 and 2011.

        At December 31, 2013, amortization expense related to the definite-lived intangible assets during each of the next five years was as follows: 2014 – $5 million; 2015 – $4 million; 2016 – $3 million; 2017 – $1 million; and 2018 – $1 million.

OTHER ASSETS
OTHER ASSETS

I. OTHER ASSETS

 
  (In Millions)
 
 
  At December 31  
 
  2013   2012  

Financial investments (Note E)

  $ 88   $ 95  

In-store displays, net

    21     35  

Debenture expense

    24     25  

Notes receivable

    2     2  

Other

    26     27  
           

Total

  $ 161   $ 184  
           
           

        In-store displays are amortized using the straight-line method over the expected useful life of three to five years; the Company recognized amortization expense related to in-store displays of $19 million, $21 million and $24 million in 2013, 2012 and 2011, respectively. Cash spent for displays was $5 million, $23 million and $17 million in 2013, 2012 and 2011, respectively.

ACCRUED LIABILITIES
ACCRUED LIABILITIES

J. ACCRUED LIABILITIES

 
  (In Millions)
 
 
  At December 31  
 
  2013   2012  

Salaries, wages and commissions

  $ 210   $ 189  

Insurance

    166     170  

Warranty (Note U)

    124     118  

Advertising and sales promotion

    111     93  

Interest

    58     63  

Employee retirement plans

    48     40  

Income taxes payable

    32     27  

Property, payroll and other taxes

    28     24  

Dividends payable

    27     27  

Derivative instruments (Note F)

    5     6  

Plant closures

    6     5  

Litigation

    4     7  

Other

    55     54  
           

Total

  $ 874   $ 823  
           
           
DEBT
DEBT

K. DEBT

 
  (In Millions)
 
 
  At December 31  
 
  2013   2012  

Notes and debentures:

             

7.125%, due Aug. 15, 2013

  $   $ 200  

4.8%, due June 15, 2015

    500     500  

6.125%, due Oct. 3, 2016

    1,000     1,000  

5.85%, due Mar. 15, 2017

    300     300  

6.625%, due Apr. 15, 2018

    114     114  

7.125%, due Mar. 15, 2020

    500     500  

5.95%, due March 15, 2022

    400     400  

7.75%, due Aug. 1, 2029

    296     296  

6.5%, due Aug. 15, 2032

    300     300  

Other

    17     18  
           

 

    3,427     3,628  

Less: Current portion

    6     206  
           

Total long-term debt

  $ 3,421   $ 3,422  
           
           

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

        On August 15, 2013, the Company repurchased and retired all of its $200 million, 7.125% Notes on the scheduled retirement date.

        On March 5, 2012, the Company issued $400 million of 5.95% Notes ("the Notes") due March 15, 2022. Including the interest rate swap amortization, the effective interest rate for the Notes is approximately 6.5%, see Note F. The Notes are senior indebtedness and are redeemable at the Company's option.

        In January 2012, the Company repurchased $46 million of 5.875% Notes due July 15, 2012 in open-market transactions; the Company paid a premium of $1 million for the repurchase. In July 2012, the Company retired all of its $745 million of 5.875% Notes on the scheduled retirement date.

        On March 28, 2013, the Company entered into a Credit Agreement (the "Credit Agreement") with a bank group, with an aggregate commitment of $1.25 billion and a maturity date of March 28, 2018. Upon entry into the Credit Agreement, the Company's credit agreement dated as of June 21, 2010, as amended, with an aggregate commitment of $1.25 billion, was terminated.

        The Credit Agreement provides for an unsecured revolving credit facility available to the Company and one of its foreign subsidiaries, in U.S. dollars, European euros and certain other currencies. Borrowings under the revolver denominated in euros are limited to $500 million, equivalent. The Company can also borrow swingline loans up to $150 million and obtain letters of credit of up to $250 million; any outstanding Letters of Credit, under the Credit Agreement, reduce the Company's borrowing capacity. At December 31, 2013, the Company had $92 million of outstanding and unused Letters of Credit, reducing the Company's borrowing capacity by such amount.

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

        The Credit Agreement contains financial covenants requiring the Company to maintain (A) a maximum debt to total capitalization ratio, as adjusted for certain items, of 65 percent, and (B) a minimum interest coverage ratio, as adjusted for certain items, equal to or greater than 2.5 to 1.0. The debt to total capitalization ratio allows the add-back, if incurred, of up to the first $250 million of certain non-cash charges, including goodwill and other intangible asset impairment charges, occurring from and after January 1, 2012 that would negatively impact shareholders' equity.

        Based on the limitations of the debt to total capitalization ratio covenant in the Credit Agreement, at December 31, 2013, the Company had additional borrowing capacity, subject to availability, of up to $1.2 billion. Additionally, at December 31, 2013, the Company could absorb a reduction to shareholders' equity of approximately $770 million and remain in compliance with the debt to total capitalization covenant.

        In order for the Company to borrow under the Credit Agreement, there must not be any default in the Company's covenants in the new Credit Agreement (i.e., in addition to the two financial covenants, principally limitations on subsidiary debt, negative pledge restrictions, legal compliance requirements and maintenance of properties and insurance) and the Company's representations and warranties in the Credit Agreement must be true in all material respects on the date of borrowing (i.e., principally no material adverse change or litigation likely to result in a material adverse change, since December 31, 2012, in each case, no material ERISA or environmental non-compliance and no material tax deficiency). At December 31, 2013 and 2012, the Company was in compliance with all covenants and no borrowings have been made under the Credit Agreement.

        At December 31, 2013, the debt maturities during each of the next five years were as follows: 2014 – $6 million; 2015 – $501 million; 2016 – $1,001 million; 2017 – $301 million; and 2018 – $115 million.

        Interest paid was $232 million, $269 million and $254 million in 2013, 2012 and 2011, respectively.

STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION

L. STOCK-BASED COMPENSATION

        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 December 31, 2013, 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:

 
  2013   2012   2011  

Long-term stock awards

  $ 34   $ 35   $ 39  

Stock options

    13     15     21  

Phantom stock awards and stock appreciation rights

    7     11     1  
               

Total

  $ 54   $ 61   $ 61  
               
               

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

  $ 20   $ 23   $ 23  
               
               

        At December 31, 2013, a total of 9.3 million shares of Company common stock were available under the 2005 Plan for the granting of stock options and other long-term stock incentive awards.

        Long-Term Stock Awards.    Long-term stock awards are granted to key employees and non-employee Directors of the Company and do not cause net share dilution inasmuch as the Company continues the practice of repurchasing and retiring an equal number of shares in the open market. The Company granted 1,743,180 shares of long-term stock awards during 2013.

        The Company's long-term stock award activity was as follows, shares in millions:

 
  2013   2012   2011  

Unvested stock award shares at January 1

    8     10     10  

Weighted average grant date fair value

  $ 16   $ 17   $ 19  

Stock award shares granted

   
2
   
1
   
2
 

Weighted average grant date fair value

  $ 20   $ 12   $ 13  

Stock award shares vested

   
2
   
2
   
2
 

Weighted average grant date fair value

  $ 17   $ 18   $ 20  

Stock award shares forfeited

   
   
1
   
 

Weighted average grant date fair value

  $ 16   $ 17   $ 18  

Unvested stock award shares at December 31

   
8
   
8
   
10
 

Weighted average grant date fair value

  $ 17   $ 16   $ 17  

        At December 31, 2013, 2012 and 2011, there was $69 million, $72 million and $107 million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of three years for 2013, four years for 2012 and four years for 2011.

        The total market value (at the vesting date) of stock award shares which vested during 2013, 2012 and 2011 was $38 million, $27 million and $28 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 899,000 of stock option shares during 2013 with a grant date exercise price approximating $20 per share. During 2013, 3.8 million stock option shares were forfeited (including options that expired unexercised).

        The Company's stock option activity was as follows, shares in millions:

 
  2013   2012   2011  

Option shares outstanding, January 1

    30     36     37  

Weighted average exercise price

  $ 21   $ 21   $ 21  

Option shares granted

   
1
   
1
   
2
 

Weighted average exercise price

  $ 20   $ 12   $ 13  

Option shares exercised

   
3
   
1
   
 

Aggregate intrinsic value on date of exercise (A)

  $ 23 million   $ 5 million   $ 1 million  

Weighted average exercise price

  $ 12   $ 10   $ 8  

Option shares forfeited

   
4
   
6
   
3
 

Weighted average exercise price

  $ 26   $ 19   $ 22  

Option shares outstanding, December 31

   
24
   
30
   
36
 

Weighted average exercise price

  $ 22   $ 21   $ 21  

Weighted average remaining option term (in years)

    4     5     5  

Option shares vested and expected to vest, December 31

   
24
   
30
   
36
 

Weighted average exercise price

  $ 22   $ 21   $ 21  

Aggregate intrinsic value (A)

  $ 109 million   $ 55 million   $ 12 million  

Weighted average remaining option term (in years)

    4     5     5  

Option shares exercisable (vested), December 31

   
20
   
23
   
24
 

Weighted average exercise price

  $ 24   $ 24   $ 25  

Aggregate intrinsic value (A)

  $ 62 million   $ 22 million   $ 4 million  

Weighted average remaining option term (in years)

    3     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 December 31, 2013, 2012 and 2011, there was $9 million, $15 million and $33 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model at the grant date) related to unvested stock options; such options had a weighted average remaining vesting period of two years in 2013, two years in 2012 and three years in 2011.

        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:

 
  2013   2012   2011  

Weighted average grant date fair value

  $ 8.35   $ 4.44   $ 5.07  

Risk-free interest rate

    1.22 %   1.09 %   2.69 %

Dividend yield

    1.47 %   2.57 %   2.35 %

Volatility factor

    49.07 %   50.97 %   49.03 %

Expected option life

    6 years     6 years     6 years  

        The following table summarizes information for stock option shares outstanding and exercisable at December 31, 2013, shares in millions:

Option Shares Outstanding   Option Shares Exercisable  
Range of
Prices
  Number of
Shares
  Weighted
Average
Remaining
Option
Term
  Weighted
Average
Exercise
Price
  Number of
Shares
  Weighted
Average
Exercise
Price
 
$ 8 - 21     13   6 Years   $ 14     8   $ 15  
$ 26 - 28     3   2 Years   $ 27     3   $ 27  
$ 29 - 31     8   2 Years   $ 30     9   $ 30  
$ 33 - 36       2 Years   $ 34       $ 34  
                             
$ 8 - 36     24   4 Years   $ 22     20   $ 24  
                             
                             

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

        Phantom stock awards are linked to the value of the Company's common stock on the date of grant and are settled in cash upon vesting, typically over 5 to 10 years. The Company accounts for phantom stock awards as liability-based awards; the compensation expense is initially measured as the market price of the Company's common stock at the grant date and is recognized over the vesting period. The liability is remeasured and adjusted at the end of each reporting period until the awards are fully-vested and paid to the employees. The Company recognized expense of $5 million, $7 million and $2 million related to the valuation of phantom stock awards for 2013, 2012 and 2011, respectively. In 2013, 2012 and 2011, the Company granted 165,180 shares, 162,310 shares and 349,550 shares, respectively, of phantom stock awards with an aggregate fair value of $3 million, $2 million and $4 million, respectively, and paid $4 million, $3 million and $2 million of cash in 2013, 2012 and 2011, respectively, to settle phantom stock awards.

        SARs are linked to the value of the Company's common stock on the date of grant and are settled in cash upon exercise. The Company accounts for SARs using the fair value method, which requires outstanding SARs to be classified as liability-based awards and valued using a Black-Scholes option pricing model at the grant date; such fair value is recognized as compensation expense over the vesting period, typically five years. The liability is remeasured and adjusted at the end of each reporting period until the SARs are exercised and payment is made to the employees or the SARs expire. The Company recognized expense (income) of $2 million, $4 million and $(1) million related to the valuation of SARs for 2013, 2012 and 2011, respectively. During 2013, 2012 and 2011, the Company did not grant any SARs.

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

 
  Phantom
Stock
Awards
  Stock
Appreciation
Rights
 
 
  At December 31,   At December 31,  
 
  2013   2012   2013   2012  

Accrued compensation cost liability

  $ 14   $ 11   $ 8   $ 6  

Unrecognized compensation cost

  $ 4   $ 5   $   $ 1  

Equivalent common shares

    1     1     2     2  
EMPLOYEE RETIREMENT PLANS
EMPLOYEE RETIREMENT PLANS

M. EMPLOYEE RETIREMENT PLANS

        The Company sponsors qualified defined-benefit and 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. Aggregate charges to earnings under the Company's defined-benefit and defined-contribution retirement plans were $31 million and $54 million in 2013, $36 million and $43 million in 2012 and $34 million and $31 million in 2011, respectively.

        In addition, the Company participates in 20 regional multi-employer pension plans, principally related to building trades; none of the plans are considered significant. The aggregate expense recognized through contributions by the Company to these plans was approximately $4 million, $4 million and $3 million in 2013, 2012 and 2011, respectively.

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

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

 
  2013   2012  
 
  Qualified   Non-Qualified   Qualified   Non-Qualified  

Changes in projected benefit obligation:

                         

Projected benefit obligation at January 1

  $ 1,056   $ 181   $ 943   $ 174  

Service cost

    3         2      

Interest cost

    40     6     42     7  

Actuarial (gain) loss, net

    (81 )   (13 )   100     11  

Foreign currency exchange

    7         9      

Benefit payments

    (42 )   (11 )   (40 )   (11 )
                   

Projected benefit obligation at December 31

  $ 983   $ 163   $ 1,056   $ 181  
                   
                   

Changes in fair value of plan assets:

                         

Fair value of plan assets at January 1

  $ 594   $   $ 504   $  

Actual return on plan assets

    65         75      

Foreign currency exchange

    2         4      

Company contributions

    44     11     55     11  

Expenses, other

    (4 )       (4 )    

Benefit payments

    (42 )   (11 )   (40 )   (11 )
                   

Fair value of plan assets at December 31

  $ 659   $   $ 594   $  
                   
                   

Funded status at December 31:

  $ (324 ) $ (163 ) $ (462 ) $ (181 )
                   
                   

        Amounts in the Company's consolidated balance sheets were as follows, in millions:

 
  At December 31, 2013   At December 31, 2012  
 
  Qualified   Non-Qualified   Qualified   Non-Qualified  

Accrued liabilities

  $ (3 ) $ (12 ) $ (3 ) $ (12 )

Deferred income taxes and other

    (321 )   (151 )   (459 )   (169 )
                   

Total net liability

  $ (324 ) $ (163 ) $ (462 ) $ (181 )
                   
                   

        Unrealized loss included in accumulated other comprehensive income before income taxes were as follows, in millions:

 
  At December 31, 2013   At December 31, 2012  
 
  Qualified   Non-Qualified   Qualified   Non-Qualified  

Net loss

  $ 344   $ 38   $ 467   $ 53  

Net transition obligation

    1         1      

Net prior service cost

    2         2      
                   

Total

  $ 347   $ 38   $ 470   $ 53  
                   
                   

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

 
  At December 31  
 
  2013   2012  
 
  Qualified   Non-Qualified   Qualified   Non-Qualified  

Projected benefit obligation

  $ 983   $ 163   $ 1,056   $ 181  

Accumulated benefit obligation

  $ 982   $ 163   $ 1,054   $ 181  

Fair value of plan assets

  $ 659   $   $ 594   $  

        The projected benefit obligation was in excess of plan assets for all of the Company's qualified defined-benefit pension plans at December 31, 2013 and 2012.

        Net periodic pension cost for the Company's defined-benefit pension plans was as follows, in millions:

 
  2013   2012   2011  
 
  Qualified   Non-Qualified   Qualified   Non-Qualified   Qualified   Non-Qualified  

Service cost

  $ 3   $   $ 2   $   $ 2   $  

Interest cost

    44     6     46     7     47     8  

Expected return on plan assets

    (40 )       (35 )       (36 )    

Recognized prior service cost

                         

Recognized net loss

    16     2     14     2     10     1  
                           

Net periodic pension cost

  $ 23   $ 8   $ 27   $ 9   $ 23   $ 9  
                           
                           

        The Company expects to recognize $13 million of pre-tax net loss from accumulated other comprehensive income into net periodic pension cost in 2014 related to its defined-benefit pension plans.

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

 
  At December 31  
 
  2013   2012  

Equity securities

    47 %   44 %

Debt securities

    35 %   41 %

Other

    18 %   15 %
           

Total

    100 %   100 %
           
           

        Plan assets included 600,000 shares of Company common stock valued at $10 million at December 31, 2012. The shares of Company common stock were sold in 2013.

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

        Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2013.

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

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

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

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

        Common Collective Trust Fund: Valued based on a unit value basis, which approximates fair value as of December 31, 2013 and 2012, respectively. Such basis is determined by reference to the respective fund's underlying assets, which are primarily marketable equity and fixed income securities. There are no unfunded commitments or other restrictions associated with this fund.

        Short-Term and Other Investments: Valued based on a net asset value (NAV) which approximates fair value at December 31, 2013 and 2012, respectively. Such basis is determined by referencing the respective fund's underlying assets.

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

        The following table sets forth by level, within the fair value hierarchy, the qualified defined-benefit pension plan assets at fair value as of December 31, 2013 and 2012, in millions.

 
  Assets at Fair Value as of
December 31, 2013
 
 
  Level 1   Level 2   Level 3   Total  

Common and Preferred Stocks:

                         

United States

  $ 143   $ 107   $   $ 250  

International

    46     16         62  

Private Equity and Hedge Funds

                         

United States

            52     52  

International

            24     24  

Corporate Debt Securities:

                         

United States

    15     25         40  

International

        61         61  

Government and Other Debt Securities:

                         

United States

    79     1         80  

International

    23     27         50  

Common Collective Trust Fund – United States

        3         3  

Short-Term and Other Investments

                         

United States

    2     2         4  

International

    10     6     17     33  
                   

Total Assets at Fair Value

  $ 318   $ 248   $ 93   $ 659  
                   
                   


 

 
  Assets at Fair Value as of
December 31, 2012
 
 
  Level 1   Level 2   Level 3   Total  

Common and Preferred Stocks:

                         

United States

  $ 127   $ 61   $   $ 188  

International

    61     10         71  

Private Equity and Hedge Funds

                         

United States

            52     52  

International

            11     11  

Corporate Debt Securities:

                         

United States

        25         25  

International

        73         73  

Government and Other Debt Securities:

                         

United States

    51     42         93  

International

    24     29         53  

Common Collective Trust Fund – United States

        12         12  

Short-Term and Other Investments

                         

United States

    1             1  

International

            15     15  
                   

Total Assets at Fair Value

  $ 264   $ 252   $ 78   $ 594  
                   
                   

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

 
  Year Ended
December 31, 2013
  Year Ended
December 31, 2012
 

Fair Value, January 1

  $ 78   $ 72  

Purchases

    25     9  

Sales

    (14 )   (8 )

Transfers from Level 2 to Level 3

         

Unrealized gains (losses)

    4     5  
           

Fair Value, December 31

  $ 93   $ 78  
           
           

        Assumptions.    Major assumptions used in accounting for the Company's defined-benefit pension plans were as follows:

 
  December 31  
 
  2013   2012   2011  

Discount rate for obligations

    4.40 %   3.80 %   4.40 %

Expected return on plan assets

    7.25 %   7.25 %   7.25 %

Rate of compensation increase

     — %    — %    — %

Discount rate for net periodic pension cost

    3.80 %   4.40 %   5.30 %

        The discount rate for obligations for 2013 and 2012 was based upon the expected duration of each defined-benefit pension plan's liabilities matched to the December 31, 2013 and 2012 Towers Watson Rate Link Curve. At December 31, 2013, such rates for the Company's defined-benefit pension plans ranged from 1.75 percent to 4.80 percent, with the most significant portion of the liabilities having a discount rate for obligations of 4.20 percent or higher. At December 31, 2012, such rates for the Company's defined-benefit pension plans ranged from 1.75 percent to 4.50 percent, with the most significant portion of the liabilities having a discount rate for obligations of 3.40 percent or higher. The increase in the weighted average discount rate over the last year is principally the result of increasing long-term interest rates in the bond markets. The weighted average discount rates were also affected by the freezing of all future benefit accruals for substantially all of the Company's domestic qualified and non-qualified defined-benefit plans, which shortened the period of future payments.

        For 2013 and 2012, the Company determined the expected long-term rate of return on plan assets of 7.25 percent based upon an analysis of expected and historical rates of return of various asset classes utilizing the current and long-term target asset allocation of the plan assets. The projected asset return at both December 31, 2013 and 2012 also considered near term returns, including current market conditions and also that pension assets are long-term in nature. The actual annual rate of return on the Company's pension plan assets was 5.9 percent and 6.9 percent for the 10-year periods ended December 31, 2013 and 2012, respectively. Although these rates of return are less than the Company's current expected long-term rate of return on plan assets, the Company notes that the 10-year period ended December 31, 2012 includes one significant decline in the equity markets. In 2013, actual annual rate of return on the Company's pension plan assets was 13.6 percent. Accordingly, the Company believes a 7.25 percent expected long-term rate of return is reasonable.

        The investment objectives seek to minimize the volatility of the value of the Company's plan assets relative to pension liabilities and to ensure plan assets are sufficient to pay plan benefits. In 2013, the Company achieved its targeted asset allocation: 38 percent equities, 22 percent fixed-income, 20 percent global assets (combination of equity and fixed-income) and 20 percent alternative investments (such as private equity, commodities and hedge funds). The asset allocation of the investment portfolio was developed with the objective of achieving the Company's expected rate of return and reducing volatility of asset returns, and considered the freezing of future benefits. The equity portfolios are invested in individual securities or funds that are expected to mirror broad market returns for equity securities. The fixed-income portfolio is invested in corporate bonds, bond index funds or U.S. Treasury securities. The increased allocation to fixed-income securities partially matches the bond-like and long-term nature of the pension liabilities. It is expected that the alternative investments would have a higher rate of return than the targeted overall long-term return of 7.25 percent. However, these investments are subject to greater volatility, due to their nature, than a portfolio of equities and fixed-income investments, and would be less liquid than financial instruments that trade on public markets. This portfolio is expected to yield a long-term rate of return of 7.25 percent.

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

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

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

        Other.    The Company sponsors certain post-retirement benefit plans that provide medical, dental and life insurance coverage for eligible retirees and dependents in the United States based upon age and length of service. The aggregate present value of the unfunded accumulated post-retirement benefit obligation was $10 million and $12 million at December 31, 2013 and 2012, respectively.

        Cash Flows.    At December 31, 2013, the Company expected to contribute approximately $45 million to its qualified defined-benefit pension plans to meet ERISA requirements in 2014. The Company also expected to pay benefits of $7 million and $12 million to participants of its foreign and non-qualified (domestic) defined-benefit pension plans, respectively, in 2014.

         At December 31, 2013, the benefits expected to be paid in each of the next five years, and in aggregate for the five years thereafter, relating to the Company's defined-benefit pension plans, were as follows, in millions:

 
  Qualified
Plans
  Non-Qualified
Plans
 

2014

  $ 45   $ 12  

2015

  $ 47   $ 12  

2016

  $ 48   $ 12  

2017

  $ 49   $ 12  

2018

  $ 50   $ 12  

2019 - 2023

  $ 273   $ 59  
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY

N. SHAREHOLDERS' EQUITY

        In July 2007, the Company's Board of Directors authorized the repurchase for retirement of up to 50 million shares of the Company's common stock in open-market transactions or otherwise. The Company had remaining authorization to repurchase up to 22.6 million shares and 24.3 million shares at December 31, 2013 and 2012, respectively.

        During 2013, the Company repurchased and retired 1.7 million shares of Company common stock for cash aggregating $35 million, to offset the dilutive impact of the 2013 grant of 1.7 million shares of long-term stock awards. During 2012, the Company repurchased and retired one million shares of Company common stock, for cash aggregating $8 million to offset the dilutive impact of the 2012 grant of one million shares of long-term stock awards. The Company repurchased and retired two million common shares in 2011 for cash aggregating $30 million.

        On the basis of amounts paid (declared), cash dividends per common share were $.30 ($.30) in each of 2013, 2012 and 2011.

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

 
  At December 31  
 
  2013   2012  

Cumulative translation adjustments

  $ 418   $ 501  

Unrealized loss on marketable securities, net

    (12 )   (12 )

Unrealized loss on interest rate swaps

    (19 )   (21 )

Unrecognized prior service cost and net loss, net

    (272 )   (409 )
           

Accumulated other comprehensive income

  $ 115   $ 59  
           
           

        The unrealized loss on marketable securities, net, is reported net of income tax expense of $14 million at both December 31, 2013 and 2012. The unrecognized prior service cost and net loss, net, is reported net of income tax benefit of $105 million and $107 million at December 31, 2013 and 2012.

RECLASSIFICATIONS FROM OTHER COMPREHENSIVE INCOME
RECLASSIFICATIONS FROM OTHER COMPREHENSIVE INCOME

O. RECLASSIFICATIONS FROM OTHER COMPREHENSIVE INCOME

        The reclassifications from accumulated other comprehensive income to the income statement were as follows, in millions:

 
  Amount Reclassified    
 
  Twelve Months Ended December 31,    
Accumulated Other
Comprehensive Income
  2013   2012   2011   Income Statement Line Item

Amortization of defined benefit pension:

                     

Actuarial losses, net

  $ 18   $ 16   $ 11   Selling, General & Administrative Expense

 

    2     (9 )   5   Tax expense (benefit)
                 

 

  $ 20   $ 7   $ 16   Net of tax
                 
                 

Interest rate swaps

  $ 2   $ 2   $   Interest expense

 

              Tax expense
                 

 

  $ 2   $ 2   $   Net of tax
                 
                 
SEGMENT INFORMATION
SEGMENT INFORMATION

P. SEGMENT INFORMATION

        The Company's reportable segments are as follows:

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

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

        Installation and Other Services –  principally includes the sale, installation and distribution of insulation and other building products.

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

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

        The above products and services are sold to the home improvement and new home construction markets through mass merchandisers, hardware stores, home centers, builders, distributors and other outlets for consumers and contractors.

        The Company's operations are principally located in North America and Europe. The Company's country of domicile is the United States of America.

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