Information on Business Segments

12 Months Ended

Dec. 31, 2014

Information on Business Segments

18.    Information on Business Segments

We report our operating segments based on how operating results are regularly reviewed by our chief operating decision maker for making decisions about resource allocations to segments and assessing performance. The Company’s operating segments and types of products from which each segment derives revenues are described below.

The Cabinets segment includes custom, semi-custom and stock cabinetry for the kitchen, bath and other parts of the home under brand names including Aristokraft, Kitchen Craft, Kitchen Classics, Omega, Homecrest, Diamond, Schrock, Decorá, Kemper and St. Paul. In addition, cabinets are distributed under the Martha Stewart Living and Thomasville Cabinetry brand names. The Plumbing segment manufactures or assembles and sells faucets, bath furnishings, accessories and kitchen sinks predominantly under the Moen brand. The Doors segment includes residential fiberglass and steel entry door systems under the Therma-Tru brand name and urethane millwork under the Fypon brand name. The Security segment includes locks, safety and security devices and electronic security products under the Master Lock brand name and safes under the SentrySafe brand name. Corporate expenses consist of headquarter administrative expenses and defined benefit plans costs, primarily interest costs and expected return on plan assets, as well as actuarial gains and losses arising from periodic remeasurement of our liabilities. Corporate assets primarily consist of cash.

The Company’s subsidiaries operate principally in the United States, Canada, Mexico, China and Western Europe.

(In millions)	2014		2013		2012
Net sales:
Cabinets	$	1,787.5	$	1,642.2	$	1,326.6
Plumbing		1,331.0		1,287.0		1,100.7
Doors		413.9		371.6		321.5
Security		481.2		402.8		386.0
Net sales	$	4,013.6	$	3,703.6	$	3,134.8

Net sales to two of the Company’s customers, The Home Depot, Inc. (“The Home Depot”) and Lowe’s Companies, Inc. (“Lowe’s”) each accounted for greater than 10% of the Company’s net sales in 2014, 2013 and 2012. All segments sell to both The Home Depot and Lowe’s. Net sales to The Home Depot were 15%, 14% and 12% of net sales in 2014, 2013 and 2012, respectively. Net sales to Lowe’s were 14%, 14% and 15% of net sales in 2014, 2013 and 2012, respectively.

(In millions)	2014			2013			2012
Operating income (loss):
Cabinets	$	137.9		$	97.1		$	20.5
Plumbing		258.9			228.3			169.2
Doors		29.2			15.3			(1.3	)
Security		49.4			55.4			54.3
Less: Corporate expenses(a)		(71.9	)		(73.1	)		(99.5	)
Operating income	$	403.5		$	323.0		$	143.2
(a)    Below is a table detailing Corporate expenses:
General and administrative expense	$	(67.0	)	$	(78.0	)	$	(60.8	)
Defined benefit plan income		8.8			10.1			3.5
Recognition of defined benefit plan actuarial losses		(13.7	)		(5.2	)		(42.2	)
Total Corporate expenses	$	(71.9	)	$	(73.1	)	$	(99.5	)
Total assets:
Cabinets	$	1,603.6		$	1,588.0		$	1,248.5
Plumbing		1,270.2			1,176.3			1,081.7
Doors		459.3			462.0			473.3
Security		528.5			361.8			341.7
Corporate		110.7			185.9			305.7
Continuing operations		3,972.3			3,774.0			3,450.9
Discontinued operations		80.6			404.1			423.0
Total assets	$	4,052.9		$	4,178.1		$	3,873.9

(In millions)	2014			2013			2012
Depreciation expense:
Cabinets	$	31.0		$	29.3		$	38.8
Plumbing		18.5			16.7			18.1
Doors		11.7			11.4			12.3
Security		10.0			8.2			8.2
Corporate		2.0			1.3			1.5
Continuing operations		73.2			66.9			78.9
Discontinued operations		9.7			10.3			11.3
Depreciation expense	$	82.9		$	77.2		$	90.2
Amortization of intangible assets:
Cabinets	$	8.0		$	5.1		$	3.3
Doors		3.8			3.8			3.8
Security		1.3			0.5			0.2
Continuing operations		13.1			9.4			7.3
Discontinued operations		2.8			3.8			3.8
Amortization of intangible assets	$	15.9		$	13.2		$	11.1
Capital expenditures:
Cabinets	$	64.0		$	36.4		$	27.7
Plumbing		25.8			25.3			19.1
Doors		10.9			7.3			10.2
Security		16.2			12.6			10.5
Corporate		4.8			2.5			0.2
Continuing operations		121.7			84.1			67.7
Discontinued operations		5.8			12.6			7.3
Capital expenditures, gross		127.5			96.7			75.0
Less: proceeds from disposition of assets		(0.7	)		(2.2	)		(13.5	)
Capital expenditures, net	$	126.8		$	94.5		$	61.5
Net sales by geographic region(a):
United States	$	3,313.1		$	3,046.5		$	2,528.7
Canada		405.8			413.2			400.5
China and other international		294.7			243.9			205.6
Net sales	$	4,013.6		$	3,703.6		$	3,134.8
Property, plant and equipment, net(b):
United States	$	429.1		$	378.0		$	369.9
Mexico		72.5			50.8			32.3
Canada		28.4			29.4			32.7
China and other international		9.8			10.1			10.8
Property, plant and equipment, net	$	539.8		$	468.3		$	445.7

^(a)  Based on country of destination

^(b)  Purchases of property, plant and equipment not yet paid for as of December 31, 2014, 2013 and 2012 were $4.2 million, $0.2 million and $3.4 million, respectively.