Information on Business Segments

12 Months Ended

Dec. 31, 2015

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, Diamond, Kitchen Craft, Mid-Continent, Kitchen Classics, Schrock, Omega, Homecrest, Ultracraft and StarMark. In addition, cabinets are distributed under the Thomasville Cabinetry brand names. The Plumbing segment manufactures or assembles and sells faucets, bath furnishings, accessories and kitchen sinks and waste disposals predominantly under the Moen and Waste King brands. The Doors segment includes residential fiberglass and steel entry door systems under the Therma-Tru brand name and urethane millwork product lines 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 fire resistant safes, security containers and commercial cabinets 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)	2015		2014		2013
Net sales:
Cabinets	$	2,173.4	$	1,787.5	$	1,642.2
Plumbing		1,414.5		1,331.0		1,287.0
Doors		439.1		413.9		371.6
Security		552.4		481.2		402.8
Net sales	$	4,579.4	$	4,013.6	$	3,703.6

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 2015, 2014 and 2013. All segments sell to both The Home Depot and Lowe’s. Net sales to The Home Depot were 14%, 15% and 14% of net sales in 2015, 2014 and 2013, respectively. Net sales to Lowe’s were 14%, 14% and 14% of net sales in 2015, 2014 and 2013, respectively.

(In millions)	2015			2014			2013
Operating income:
Cabinets	$	192.4		$	137.9		$	97.1
Plumbing		285.4			258.9			228.3
Doors		44.0			29.2			15.3
Security		55.9			49.4			55.4
Less: Corporate expenses(a)		(81.6	)		(71.9	)		(73.1	)
Operating income	$	496.1		$	403.5		$	323.0
(a)    Below is a table detailing Corporate expenses:
General and administrative expense	$	(70.1	)	$	(67.0	)	$	(78.0	)
Defined benefit plan income		6.1			8.8			10.1
Recognition of defined benefit plan actuarial losses		(2.5	)		(13.7	)		(5.2	)
Norcraft transaction costs(b)		(15.1	)		—			—
Total Corporate expenses	$	(81.6	)	$	(71.9	)	$	(73.1	)

^(b)  Representing external costs directly related to the acquisition of Norcraft and primarily includes expenditures for banking, legal, accounting and other similar services.

(In millions)	2015			2014			2013
Total assets:
Cabinets	$	2,364.0		$	1,603.6		$	1,588.0
Plumbing		1,341.4			1,270.2			1,176.3
Doors		483.9			459.3			462.0
Security		520.7			528.5			361.8
Corporate		168.6			110.7			185.9
Continuing operations		4,878.6			3,972.3			3,774.0
Discontinued operations		—			80.6			404.1
Total assets	$	4,878.6		$	4,052.9		$	4,178.1
Depreciation expense:
Cabinets	$	38.1		$	31.0		$	29.3
Plumbing		21.3			18.5			16.7
Doors		11.2			11.7			11.4
Security		19.5			10.0			8.2
Corporate		3.4			2.0			1.3
Continuing operations		93.5			73.2			66.9
Discontinued operations		—			9.7			10.3
Depreciation expense	$	93.5		$	82.9		$	77.2
Amortization of intangible assets:
Cabinets	$	14.3		$	8.0		$	5.1
Plumbing		1.2			—			—
Doors		3.8			3.8			3.8
Security		2.3			1.3			0.5
Continuing operations		21.6			13.1			9.4
Discontinued operations		—			2.8			3.8
Amortization of intangible assets	$	21.6		$	15.9		$	13.2
Capital expenditures:
Cabinets	$	61.3		$	64.0		$	36.4
Plumbing		27.2			25.8			25.3
Doors		13.3			10.9			7.3
Security		17.3			16.2			12.6
Corporate		9.4			4.8			2.5
Continuing operations		128.5			121.7			84.1
Discontinued operations		—			5.8			12.6
Capital expenditures, gross		128.5			127.5			96.7
Less: proceeds from disposition of assets		(2.5	)		(0.7	)		(2.2	)
Capital expenditures, net	$	126.0		$	126.8		$	94.5
Net sales by geographic region(a):
United States	$	3,892.9		$	3,313.1		$	3,046.5
Canada		385.1			405.8			413.2
China and other international		301.4			294.7			243.9
Net sales	$	4,579.4		$	4,013.6		$	3,703.6
Property, plant and equipment, net(b):
United States	$	498.9		$	429.1		$	378.0
Mexico		74.2			72.5			50.8
Canada		39.4			28.4			29.4
China and other international		15.4			9.8			10.1
Property, plant and equipment, net	$	627.9		$	539.8		$	468.3

^(a)  Based on country of destination

^(b)  Purchases of property, plant and equipment not yet paid for as of December 31, 2015, 2014 and 2013 were $16.1 million, $4.2 million and $0.2 million, respectively.