10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

Commission file number: 1-5794

Masco Corporation

(Exact name of Registrant as Specified in its Charter) 

Delaware	38-1794485
(State of	(IRS Employer
Incorporation)	Identification No.)

21001 Van Born Road, Taylor, Michigan	48180
(Address of Principal Executive Offices)	(Zip Code)

(313) 274-7400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes   o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x Yes   o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

o Yes   x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 

Class	Shares Outstanding at March 31, 2016
Common stock, par value $1.00 per share	332,746,136

MASCO CORPORATION

INDEX

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets — as at March 31, 2016 and December 31, 2015	1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and 2015	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2016 and 2015	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015	4
	Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2016 and 2015	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 4.	Controls and Procedures	23
PART II.	OTHER INFORMATION	24
Item 1.	Legal Proceedings
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.	Exhibits
	Signature

MASCO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

March 31, 2016 and December 31, 2015

(In Millions, Except Share Data)

	March 31, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash investments	$	2,175		$	1,468
Short-term bank deposits	195			248
Receivables	1,036			853
Prepaid expenses and other	87			72
Inventories:
Finished goods	420			358
Raw material	244			238
Work in process	91			91
	755			687
Total current assets	4,248			3,328
Property and equipment, net	1,040			1,027
Goodwill	844			839
Other intangible assets, net	158			160
Other assets	264			310
Total assets	$	6,554		$	5,664
LIABILITIES
Current liabilities:
Notes payable	$	1,303		$	1,004
Accounts payable	834			749
Accrued liabilities	652			752
Total current liabilities	2,789			2,505
Long-term debt	2,993			2,403
Other liabilities	688			698
Total liabilities	6,470			5,606
Commitments and contingencies (Note P)
EQUITY
Masco Corporation’s shareholders’ equity:
Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2016 – 328,700,000 ; 2015 – 330,500,000	329			330
Preferred shares authorized: 1,000,000; Issued and outstanding: 2016 and 2015 – None	—			—
Paid-in capital	—			—
Retained deficit	(310		)	(300		)
Accumulated other comprehensive loss	(145		)	(165		)
Total Masco Corporation’s shareholders’ deficit	(126		)	(135		)
Noncontrolling interest	210			193
Total equity	84			58
Total liabilities and equity	$	6,554		$	5,664

See notes to condensed consolidated financial statements.

1

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

For the Three Months Ended March 31, 2016 and 2015

(In Millions, Except Per Common Share Data)

	Three Months Ended March 31,
	2016			2015
Net sales	$	1,720		$	1,659
Cost of sales	1,151			1,164
Gross profit	569			495
Selling, general and administrative expenses	335			330
Operating profit	234			165
Other income (expense), net:
Interest expense	(56		)	(56		)
Other, net	(1		)	1
	(57		)	(55		)
Income from continuing operations before income taxes	177			110
Income tax expense	(58		)	(40		)
Income from continuing operations	119			70
Income from discontinued operations, net	—			3
Net income	119			73
Less: Net income attributable to noncontrolling interest	10			9
Net income attributable to Masco Corporation	$	109		$	64
Income per common share attributable to Masco Corporation:
Basic:
Income from continuing operations	$	.33		$	.17
Income from discontinued operations, net	—			.01
Net income	$	.33		$	.18
Diluted:
Income from continuing operations	$	.32		$	.17
Income from discontinued operations, net	—			.01
Net income	$	.32		$	.18
Amounts attributable to Masco Corporation:
Income from continuing operations	$	109		$	61
Income from discontinued operations, net	—			3
Net income	$	109		$	64

See notes to condensed consolidated financial statements.

2

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

For the Three Months Ended March 31, 2016 and 2015

(In Millions)

	Three Months Ended March 31,
	2016		2015
Net income	$	119	$	73
Less: Net income attributable to noncontrolling interest	10		9
Net income attributable to Masco Corporation	$	109	$	64
Other comprehensive income (loss), net of tax (Note K):
Cumulative translation adjustment	$	24	$	(96	)
Pension and other post-retirement benefits	3		4
Other comprehensive income (loss)	27		(92		)
Less: Other comprehensive income (loss) attributable to noncontrolling interest	7		(23		)
Other comprehensive income (loss) attributable to Masco Corporation	$	20	$	(69	)
Total comprehensive income (loss)	$	146	$	(19	)
Less: Total comprehensive income (loss) attributable to the noncontrolling interest	17		(14		)
Total comprehensive income (loss) attributable to Masco Corporation	$	129	$	(5	)

See notes to condensed consolidated financial statements.

3

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the Three Months EndedMarch 31, 2016 and 2015

(In Millions)

	Three Months Ended March 31,
	2016			2015
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations	$	189		$	144
Increase in receivables	(198		)	(244		)
Increase in inventories	(63		)	(56		)
(Decrease) increase in accounts payable and accrued liabilities, net	(28		)	4
Net cash for operating activities	(100		)	(152		)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Purchase of Company common stock	(86		)	(103		)
Cash dividends paid	(32		)	(32		)
Issuance of notes, net of issuance costs	889			497
Issuance of Company common stock	1			—
Excess tax benefit from stock-based compensation	11			—
Decrease in debt, net	(2		)	—
Net cash from financing activities	781			362
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures	(37		)	(32		)
Acquisition of companies, net of cash acquired	—			(26		)
Proceeds from disposition of:
Short-term bank deposits	60			141
Other financial investments	—			3
Property and equipment	—			3
Purchases of:
Short-term bank deposits	—			(63		)
Other, net	(3		)	(15		)
Net cash from investing activities	20			11
Effect of exchange rate changes on cash and cash investments	6			(26		)
CASH AND CASH INVESTMENTS:
Increase for the period	707			195
At January 1	1,468			1,383
At March 31	$	2,175		$	1,578

See notes to condensed consolidated financial statements.

4

MASCO CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

For the Three Months EndedMarch 31, 2016 and 2015

(In Millions)

	Total			Common Shares ($1 par value)			Paid-In Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive  Loss			Noncontrolling Interest
Balance, January 1, 2015	$	1,128		$	345		$	—		$	690		$	(111	)	$	204
Total comprehensive (loss) income	(19		)							64			(69		)	(14		)
Shares issued	(5		)	3			(8		)
Shares retired:
Repurchased	(106		)	(4		)				(102		)
Surrendered (non-cash)	(16		)	(1		)				(15		)
Cash dividends declared	(31		)							(31		)
Stock-based compensation	8						8
Balance, March 31, 2015	$	959		$	343		$	—		$	606		$	(180	)	$	190
Balance, January 1, 2016	$	58		$	330		$	—		$	(300	)	$	(165	)	$	193
Total comprehensive income	146									109			20			17
Shares issued	(6		)	2			(8		)
Shares retired:
Repurchased	(86		)	(3		)	(7		)	(76		)
Surrendered (non-cash)	(11		)							(11		)
Cash dividends declared	(32		)							(32		)
Stock-based compensation	15						15
Balance, March 31, 2016	$	84		$	329		$	—		$	(310	)	$	(145	)	$	210

See notes to condensed consolidated financial statements.

5

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A. ACCOUNTING POLICIES

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to present fairly our financial position as at March 31, 2016, and our results of operations, comprehensive income (loss), cash flows and changes in shareholders’ equity for the three months ended March 31, 2016 and 2015.  The condensed consolidated balance sheet at December 31, 2015 was derived from audited financial statements.

Reclassification. Certain prior year amounts have been reclassified to conform to the 2016 presentation in the condensed consolidated financial statements. 

Recently Issued Accounting Pronouncements.  In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-02 (“ASU 2015-02”) “Consolidation (Topic 810) — Amendments to the Consolidations Analysis,” which modifies certain aspects of both the variable interest entities and voting interest entities models. We adopted ASU 2015-02 on January 1, 2016. The adoption of the new standard did not have an impact on our financial position or our results of operations.

In April 2015, the FASB issued Accounting Standards Update 2015‑03 (“ASU 2015‑03”) “Interest - Imputation of Interest (Subtopic 835‑30) - Simplifying the Presentation of Debt Issuance Costs,” that requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt. In August 2015, the FASB issued ASU 2015‑15 to clarify that debt issuance costs related to line‑of‑credit arrangements may remain classified as an asset. We retrospectively adopted both ASU 2015‑03 and ASU 2015‑15 on January 1, 2016. As a result of the retrospective adoption of the standards, we reclassified $15 million of debt issuance costs from other assets to long-term debt, and $1 million of debt issuance costs from other assets to notes payable, as of December 31, 2015.

In May 2014, the FASB issued a new standard for revenue recognition, Accounting Standards Codification 606 (“ASC 606”).  The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries. ASC 606 is effective for us for annual periods beginning January 1, 2018.  We are currently evaluating the impact the adoption of this new standard will have on our results of operations. 

In January 2016, the FASB issued Accounting Standards Update 2016-01 (“ASU 2016-01”), “Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”, which primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. ASU 2016-01 is effective for us for annual periods beginning January 1, 2018. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

In February 2016, the FASB issued a new standard for leases, Accounting Standards Codification 842 (“ASC 842”), which changes the accounting model of identifying and accounting for leases. ASC 842 is effective for us for annual periods beginning January 1, 2019. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

In March 2016, the FASB issued Accounting Standard Update 2016-09 (“ASU 2016-09”), “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”, which requires the tax effects related to share-based payments to be recorded through the income statement and simplifies the accounting requirements for forfeitures and employers' tax withholding requirements. ASU 2016-09 is effective for us for annual periods beginning January 1, 2017. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

6

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

B. DISCONTINUED OPERATIONS

The presentation of discontinued operations includes a component or group of components that we have or intend to dispose of, and represents a strategic shift that has (or will have) a major effect on our operations and financial results.  For spin off transactions, discontinued operations treatment is appropriate following the completion of the spin off.

On September 30, 2014, we announced a plan to spin off 100 percent of our Installation and Other Services businesses into an independent, publicly-traded company named TopBuild Corp. (“TopBuild”) through a tax-free distribution of the stock of TopBuild to our stockholders.  We initiated the spin off as TopBuild was no longer considered core to our long-term growth strategy in branded building products. We completed the spin off on June 30, 2015 at which time we accounted for it as a discontinued operation. Gains from this discontinued operation were included in income from discontinued operations, net, in the condensed consolidated statement of operations for the three months ended March 31, 2015.

The major classes of line items constituting income from discontinued operations, net, in millions:

	Three Months Ended March 31,
	2016		2015
Net sales	$	—	$	358
Cost of sales	—		285
Gross profit	—		73
Selling, general and administrative expenses	—		68
Income from discontinued operations	$	—	$	5
Income tax expense	—		(2		)
Income from discontinued operations, net	$	—	$	3

Other selected financial information for TopBuild during the period owned by us was as follows, in millions:

	Three Months Ended March 31,
	2016		2015
Depreciation and amortization	$	—	$	3
Capital expenditures	$	—	$	2

In conjunction with the spin off, we entered into a Transition Services Agreement with TopBuild to provide TopBuild administrative services subsequent to the separation.  The fees for services rendered under the Transition Services Agreement are not material to our results of operations. 

7

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

C. GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the three months ended March 31, 2016, by segment, were as follows, in millions: 

	Gross Goodwill At March 31, 2016		Accumulated Impairment Losses			Net Goodwill At March 31, 2016
Plumbing Products	$	530	$	(340	)	$	190
Decorative Architectural Products	294		(75		)	219
Cabinetry Products	240		(59		)	181
Windows and Other Specialty Products	988		(734		)	254
Total	$	2,052	$	(1,208	)	$	844

	Gross Goodwill At December 31, 2015		Accumulated Impairment Losses			Net Goodwill At December 31, 2015		Other(A)		Net Goodwill At March 31, 2016
Plumbing Products	$	525	$	(340	)	$	185	$	5	$	190
Decorative Architectural Products	294		(75		)	219		—		219
Cabinetry Products	240		(59		)	181		—		181
Windows and Other Specialty Products	988		(734		)	254		—		254
Total	$	2,047	$	(1,208	)	$	839	$	5	$	844

(A)  Other principally includes the effect of foreign currency translation.

The carrying value of our other indefinite-lived intangible assets was $137 million at both March 31, 2016 and December 31, 2015, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $21 million (net of accumulated amortization of $51 million) and $23 million (net of accumulated amortization of $49 million) at March 31, 2016 and December 31, 2015, respectively, and principally included customer relationships. 

D. DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense, including discontinued operations, was $32 million and $34 million for the three months ended March 31, 2016 and 2015, respectively. 

E. FAIR VALUE OF FINANCIAL INVESTMENTS

We have maintained investments in available-for-sale securities, equity method investments and a number of private equity funds, principally as part of our tax planning strategies, as any gains enhance the utilization of any current and future tax capital losses.  Financial investments were as follows, in millions:

	March 31, 2016		December 31, 2015
Prepaid expenses and other:
Auction rate securities	$	12	$	—
Other assets:
Auction rate securities	10		22
Equity method investments	13		13
Private equity funds	9		10
Other investments	3		3
Total	$	47	$	48

8

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

E. FAIR VALUE OF FINANCIAL INVESTMENTS (Concluded)

Recurring Fair Value Measurements.  Our auction rate securities are measured at fair value on a recurring basis, and have been estimated using a discounted cash flow model (Level 3 input).  The significant inputs in the discounted cash flow model used to value the auction rate securities include:  expected maturity of auction rate securities, discount rate used to determine the present value of expected cash flows and the assumptions for credit defaults, since the auction rate securities are backed by credit default swap agreements.

Our investments in auction rate securities included cost basis of $19 million and pre-tax unrealized gains of $3 million and had a recorded basis of $22 million at both March 31, 2016 and December 31, 2015.

Non-Recurring Fair Value Measurements.  During the three months ended March 31, 2016 and 2015, we did not measure any financial investments at fair value on a non-recurring basis, as there was no other-than-temporary decline in the estimated value of these investments.

We did not have any transfers between Level 1 and Level 2 financial assets in the three months ended March 31, 2016 or 2015.

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

	Three Months Ended March 31,
	2016		2015
Realized gains from private equity funds	$	—	$	2
Equity investment income, net	1		—
Total income from financial investments, net	$	1	$	2

Fair Value of Debt.  The fair value of our short-term and long-term fixed-rate debt instruments is based principally upon modeled market prices for the same or similar issues or the current rates available to us for debt with similar terms and remaining maturities.  The aggregate estimated market value of short-term and long-term debt at March 31, 2016 was approximately $4.6 billion, compared with the aggregate carrying value of $4.3 billion.  The aggregate estimated market value of short-term and long-term debt at December 31, 2015 was approximately $3.6 billion, compared with the aggregate carrying value of $3.4 billion.

F. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to global market risk as part of our normal daily business activities.  To manage these risks, we enter into various derivative contracts.  These contracts include interest rate swap agreements, foreign currency contracts and metals contracts intended to hedge our exposure to copper and zinc. We review our hedging program, derivative positions and overall risk management on a regular basis.

Interest Rate Swap Agreements.  In 2012, in connection with the issuance of $400 million of debt, we terminated the interest rate swap hedge relationships that we had entered into in 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 an approximate $2 million loss was recognized in our consolidated statement of operations in other, net within other income (expense), net.  The remaining loss of approximately $23 million from the termination of these swaps is being amortized as an increase to interest expense over the remaining term of the debt, through March 2022.

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

9

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

F. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Concluded)

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

Metals Contracts.  We have entered into several contracts to manage our exposure to increases in the price of copper and zinc.  Gains (losses) related to these contracts are recorded in our condensed consolidated statements of operations in cost of sales.

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

	Three Months Ended March 31,
	2016		2015
Foreign currency contracts:
Exchange contracts	$	—	$	4
Forward contracts	—		(4		)
Metal contracts	2		(2		)
Total gain (loss)	$	2	$	(2	)

We present our derivatives net by counterparty, due to the right of offset under master netting arrangements, in the condensed consolidated balance sheets.  The notional amounts being hedged and the fair value of those derivative instruments are as follows, in millions:

	At March 31, 2016
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	27
Receivables			$	1
Forward contracts	26
Accrued liabilities			(1		)
Other liabilities			(2		)
Metals contracts	38
Accrued liabilities			(6		)

	At December 31, 2015
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	39
Receivables			$	1
Forward contracts	30
Accrued liabilities			(2		)
Other liabilities			(1		)
Metals contracts	50
Accrued liabilities			(10		)

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

10

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

G. WARRANTY LIABILITY

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

	Three Months Ended March 31, 2016			Twelve Months Ended December 31, 2015
Balance at January 1	$	152		$	135
Accruals for warranties issued during the period	13			56
Accruals related to pre-existing warranties	—			15
Settlements made (in cash or kind) during the period	(13		)	(50		)
Other, net (including currency translation)	—			(4		)
Balance at end of period	$	152		$	152

H. DEBT

On March 17, 2016, we issued $400 million of 3.5% Notes due April 1, 2021 and $500 million of 4.375% Notes due April 1, 2026. We received proceeds of $896 million, net of discount, for the issuance of these Notes. The Notes are senior indebtedness and are redeemable at our option at the applicable redemption price. On April 15, 2016, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire all of our $1 billion, 6.125% Notes which were due on October 3, 2016 and all of our $300 million, 5.85% Notes which were due on March 15, 2017. In connection with these early retirements, in April 2016 we recorded $40 million of additional interest expense in connection with the discharge of indebtedness.

On March 28, 2013, we entered into a credit agreement (the “Credit Agreement”) with a bank group, with an aggregate commitment of $1.25 billion and a maturity date of March 28, 2018.  On May 29, 2015 and August 28, 2015, we amended the Credit Agreement with the bank group (the “Amended Credit Agreement”).  The Amended Credit Agreement reduced the aggregate commitment to $750 million and extends the maturity date to May 29, 2020.  Under the Amended Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $375 million with the current bank group or new lenders.

The Amended Credit Agreement provides for an unsecured revolving credit facility available to us and one of our 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. We can also borrow swingline loans up to $75 million and obtain letters of credit of up to $100 million; any outstanding letters of credit under the Amended Credit Agreement reduce our borrowing capacity. At March 31, 2016, we had $1.5 million of outstanding standby letters of credit under the Amended Credit Agreement.

Revolving credit loans bear interest under the Amended Credit Agreement, at our option, at (A) a rate per annum equal to the greatest 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 our then-applicable corporate credit ratings; or (B) LIBOR plus an applicable margin based upon our then-applicable corporate credit ratings. The foreign currency revolving credit loans bear interest at a rate equal to LIBOR plus an applicable margin based upon our then-applicable corporate credit ratings.

The Amended Credit Agreement contains financial covenants requiring us to maintain (A) a maximum net leverage ratio, as adjusted for certain items, of 4.0 to 1.0, and (B) a minimum interest coverage ratio, as adjusted for certain items, equal to or greater than 2.5 to 1.0.

In order for us to borrow under the Amended Credit Agreement, there must not be any default in our covenants in the Amended Credit Agreement (i.e., in addition to the two financial covenants, principally limitations on subsidiary debt, negative pledge restrictions, legal compliance requirements and maintenance of properties and insurance) and our representations and warranties in the Amended 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, 2014, in each case, no material ERISA or environmental non-compliance, and no material tax deficiency). We were in compliance with all covenants and had no borrowing under the Amended Credit Agreement at March 31, 2016. 

11

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

I. STOCK-BASED COMPENSATION

Our 2014 Long Term Stock Incentive Plan (the “2014 Plan”) provides for the issuance of stock-based incentives in various forms to our employees and non-employee Directors.  At March 31, 2016, outstanding stock-based incentives were in the form of long-term stock awards, stock options, phantom stock awards and stock appreciation rights.  Pre-tax compensation expense and the related income tax benefit for these stock-based incentives were as follows, in millions: 

	Three Months Ended March 31,
	2016		2015
Long-term stock awards	$	5	$	6
Stock options	1		1
Phantom stock awards and stock appreciation rights	3		3
Total	$	9	$	10
Income tax benefit (37 percent tax rate)	$	3	$	4

Long-Term Stock Awards.  Long-term stock awards are granted to our key employees and non-employee Directors and do not cause net share dilution inasmuch as we continue the practice of repurchasing and retiring an equal number of shares in the open market.  We granted 1,013,480 shares of long-term stock awards in the three months ended March 31, 2016.

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

	Three Months Ended March 31,
	2016		2015
Unvested stock award shares at January 1	5		6
Weighted average grant date fair value	$	17	$	18
Stock award shares granted	1		1
Weighted average grant date fair value	$	26	$	26
Stock award shares vested	2		2
Weighted average grant date fair value	$	16	$	17
Stock award shares forfeited	—		—
Weighted average grant date fair value	$	19	$	19
Unvested stock award shares at March 31	4		5
Weighted average grant date fair value	$	20	$	19

At March 31, 2016 and 2015, there was $62 million and $68 million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of 4 years at March 31,2016 and 3 years at March 31,2015.

The total market value (at the vesting date) of stock award shares which vested during the three months ended March 31, 2016 and 2015 was $36 million and $48 million, respectively.

Stock Options.  Stock options are granted to our key employees.  The exercise price equals the market price of our common stock at the grant date.  These options generally become exercisable (vest ratably) over five years beginning on the first anniversary from the date of grant and expire no later than 10 years after the grant date.

We granted 474,500 of stock option shares in the three months ended March 31, 2016 with a grant date exercise price approximating $26 per share. In the three months ended March 31,2016, no stock option shares were forfeited (including options that expired unexercised).

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MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

I. STOCK-BASED COMPENSATION (Continued)

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

		Three Months Ended March 31,
		2016		2015
Option shares outstanding, January 1		12		18
Weighted average exercise price (A)	$	17	$	21
Option shares granted		—		—
Weighted average exercise price	$	26	$	26
Option shares exercised		1		1
Aggregate intrinsic value on date of exercise (B)	$	18 million	$	17 million
Weighted average exercise price	$	18	$	14
Option shares forfeited		—		—
Weighted average exercise price	$	—	$	22
Option shares outstanding, March 31		11		17
Weighted average exercise price (A)	$	18	$	22
Weighted average remaining option term (in years)		4		3
Option shares vested and expected to vest, March 31		11		17
Weighted average exercise price (A)	$	18	$	22
Aggregate intrinsic value (B)	$	154 million	$	108 million
Weighted average remaining option term (in years)		4		3
Option shares exercisable (vested), March 31		10		15
Weighted average exercise price (A)	$	17	$	22
Aggregate intrinsic value (B)	$	138 million	$	94 million
Weighted average remaining option term (in years)		3		3

(A) Subsequent to the separation of TopBuild, we modified our outstanding equity awards to employees and non-employee directors such that all individuals received an equivalent fair value both before and after the separation.  The modification contributed to the lower exercise price.

(B) Aggregate intrinsic value is calculated using our stock price at each respective date, less the exercise price (grant date price) multiplied by the number of share.

At March 31, 2016 and 2015, there was $8 million and $9 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 3 years at both March 31, 2016 and 2015.

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MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

I. STOCK-BASED COMPENSATION (Concluded)

The weighted average grant date fair value of option shares granted and the assumptions used to estimate those values using a Black-Scholes option pricing model were as follows: 

	Three Months Ended March 31,
	2016			2015
Weighted average grant date fair value	$	6.43		$	9.67
Risk-free interest rate	1.41		%	1.75		%
Dividend yield	1.49		%	1.32		%
Volatility factor	29.00		%	42.00		%
Expected option life	6 years			6 years

J. EMPLOYEE RETIREMENT PLANS

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

	Three Months Ended March 31,
	2016					2015
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	1		$	—	$	1		$	—
Interest cost	11			1		12			1
Expected return on plan assets	(10		)	—		(11		)	—
Amortization of net loss	4			1		4			1
Net periodic pension cost	$	6		$	2	$	6		$	2

We froze all future benefit accruals under substantially all of our domestic qualified and foreign and domestic non-qualified defined benefit pension plans several years ago.

K. RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE LOSS

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

	Amounts Reclassified
Accumulated Other Comprehensive Loss	Three Months Ended March 31,						Statement of Operations Line Item
	2016			2015
Amortization of defined benefit pension and other postretirement benefits:
Actuarial losses, net	$	5		$	5		Selling, general and administrative expenses
Tax (benefit)	(2		)	(1		)
Net of tax	$	3		$	4

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MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

L. SEGMENT INFORMATION

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

	Three Months Ended March 31,
	2016		2015		2016			2015
	Net Sales(A)				OperatingProfit (Loss)
Our operations by segment were (B):
Plumbing Products	$	813	$	796	$	129		$	111
Decorative Architectural Products	493		451		105			83
Cabinetry Products	236		249		24			(4		)
Windows and Other Specialty Products	178		163		3			6
Total	$	1,720	$	1,659	$	261		$	196
Our operations by geographic area were:
North America	$	1,350	$	1,282	$	215		$	151
International, principally Europe	370		377		46			45
Total	$	1,720	$	1,659	261			196
General corporate expense, net					(27		)	(31		)
Operating profit					234			165
Other income (expense), net					(57		)	(55		)
Income from continuing operations before income taxes					$	177		$	110

(A) Inter-segment sales were not material.

(B) In Q1 2016, we renamed our Cabinetry Products and Windows and Other Specialty Products segments. The name change did not impact the review of financial information by our corporate operating executive or the composition of the segments.

M. SEVERANCE COSTS

We recorded charges related to severance of $2 million and $6 million for the three months ended March 31, 2016 and 2015, respectively. Such charges are principally reflected in the condensed consolidated statements of operations in selling, general and administrative expenses. 

N. OTHER INCOME (EXPENSE), NET

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

	Three Months Ended March 31,
	2016			2015
Income from cash and cash investments	$	1		$	—
Income from financial investments, net (Note E)	1			2
Foreign currency transaction losses	—			(1		)
Other items, net	(3		)	—
Total other, net	$	(1	)	$	1

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MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

O. EARNINGS PER COMMON SHARE

Reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share were as follows, in millions: 

	Three Months Ended March 31,
	2016		2015
Numerator (basic and diluted):
Income from continuing operations	$	109	$	61
Less: Allocation to unvested restricted stock awards	1		1
Income from continuing operations attributable to common shareholders	108		60
Income from discontinued operations, net	—		3
Less: Allocation to unvested restricted stock awards	—		—
Income from discontinued operations attributable to common shareholders	—		3
Net income available to common shareholders	$	108	$	63
Denominator:
Basic common shares (based upon weighted average)	330		344
Add: Stock option dilution	3		3
Diluted common shares	333		347

For the three months ended March 31, 2016 and 2015, we allocated dividends and undistributed earnings to the unvested restricted stock awards.

Additionally, 1 million and 8 million common shares for the three months ended March 31, 2016 and 2015, respectively, related to stock options were excluded from the computation of diluted earnings per common share due to their antidilutive effect.

On September 30, 2014, we announced that our Board of Directors authorized the repurchase of up to 50 million shares for retirement of our common stock in open-market transactions or otherwise, replacing the previous Board of Directors authorization established in 2007. In the first three months of 2016, we repurchased and retired 3.2 million shares of our common stock (including 1.0 million shares to offset the dilutive impact of long-term stock awards granted in the first quarter), for approximately $86 million. At March 31, 2016, we had 24.6 million shares remaining under the authorization.

On the basis of amounts paid (declared), cash dividends per common share were $0.095 ($0.095) and $0.090 ($0.090) for the three months ended March 31, 2016 and 2015, respectively. 

P. OTHER COMMITMENTS AND CONTINGENCIES

We are subject to claims, charges, litigation and other proceedings in the ordinary course of our business, including those arising from or related to contractual matters, intellectual property, personal injury, environmental matters, product liability, product recalls, construction defect, insurance coverage, personnel and employment disputes, anti-trust issues and other matters, including class actions.  We believe we have adequate defenses in these matters and that the likelihood that the outcome of these matters would have a material adverse effect on us is remote.  However, there is no assurance that we will prevail in these matters, and we could, in the future, incur judgments, enter into settlements of claims or revise our expectations regarding the outcome of these matters, which could materially impact our results of operations. 

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MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Concluded)

Q. INCOME TAXES

Our effective tax rate was 33 percent and 36 percent for the three months ended March 31, 2016 and 2015, respectively.  The 2016 tax rate includes a $4 million state income tax benefit on uncertain tax positions resulting from the expiration of applicable statutes of limitation and the tax benefit of the domestic production deduction which allows a deduction for certain qualified production activities within the U.S.

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	MASCO CORPORATION
Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF
	FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER 2016 VERSUS FIRST QUARTER 2015

SALES AND OPERATIONS

The following table sets forth our net sales and operating profit margins by business segment and geographic area, dollars in millions: 

	Three Months Ended March 31,				Percent Change
	2016		2015		2016 vs. 2015
Net Sales:
Plumbing Products	$	813	$	796	2	%
Decorative Architectural Products	493		451		9	%
Cabinetry Products	236		249		(5	)%
Windows and Other Specialty Products	178		163		9	%
Total	$	1,720	$	1,659	4	%
North America	$	1,350	$	1,282	5	%
International, principally Europe	370		377		(2	)%
Total	$	1,720	$	1,659	4	%

	Three Months Ended March 31,
	2016		2015
Operating Profit (Loss) Margins: (A)
Plumbing Products	15.9	%	13.9	%
Decorative Architectural Products	21.3	%	18.4	%
Cabinetry Products	10.2	%	(1.6	)%
Windows and Other Specialty Products	1.7	%	3.7	%
North America	15.9	%	11.8	%
International, principally Europe	12.4	%	11.9	%
Total	15.2	%	11.8	%
Total operating profit margin, as reported	13.6	%	9.9	%

(A) Before general corporate expense, net; see Note L to the condensed consolidated financial statements.

We report our financial results in accordance with generally accepted accounting principles (“GAAP”) in the United States.  However, we believe that certain non-GAAP performance measures and ratios used in managing the business may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods.  Non-GAAP performance measures and ratios should be viewed in addition to, and not as an alternative for, our reported results under GAAP.

18

NET SALES

Net sales increased four percent for the three-month period ended March 31, 2016, from the comparable period of 2015. Excluding acquisitions and the unfavorable effect of currency translation, net sales increased five percent for the three-month period ended March 31, 2016, from the comparable period of 2015. The following table reconciles reported net sales to net sales, excluding acquisitions and the effect of currency translation, in millions:

	Three Months Ended March 31,
	2016			2015
Net sales, as reported	$	1,720		$	1,659
Acquisitions	(3		)	—
Net sales, excluding acquisitions	1,717			1,659
Currency translation	19			—
Net sales, excluding acquisitions and the effect of currency translation	$	1,736		$	1,659

North American net sales increased five percent for the three-month period ended March 31, 2016, from the comparable period of 2015. Net sales were positively impacted by increased sales volume of paints and stains, plumbing products, windows, and builders’ hardware, which, in the aggregate, increased North American sales by seven percent for the three-month period ended March 31, 2016, from the comparable period of 2015. An increase in net selling prices and favorable sales mix of cabinets increased sales by one percent. Such increases were partially offset by decreased sales volumes in cabinets and a decrease in net selling prices of paints and stains, plumbing products and builders’ hardware, which, in aggregate, decreased sales by three percent for the three-month period ended March 31, 2016, from the comparable period of 2015.

International net sales decreased two percent for the three-month period ended March 31, 2016, from the comparable period of 2015, due primarily to a stronger U.S. dollar. In local currencies (including sales in foreign currencies outside their respective functional currencies), net sales from International operations increased two percent for the three-month period ended March 31, 2016, from the comparable period of 2015, primarily due to favorable product mix of cabinets and windows and net selling price increases of international plumbing products. An acquisition also increased net sales by one percent for the three-month period ended March 31, 2016, from the comparable period of 2015. Such increases were partially offset by lower sales volume of cabinets.

Net sales of Plumbing Products increased for the three-month period ended March 31, 2016, from the comparable period of 2015, due to increased sales volume of both North American and International operations, which, on a combined basis, increased sales by four percent. Foreign currency translation reduced net sales by two percent for the three-month period ended March 31, 2016, from the comparable period of 2015, primarily due to the stronger U.S. dollar.

Net sales of Decorative Architectural Products increased for the three-month period ended March 31, 2016, from the comparable period of 2015, due to increased sales volume of paints and stains and builders’ hardware, partially offset by lower selling prices and higher promotions of paints and stains.

Net sales of Cabinetry Products decreased for the three-month period ended March 31, 2016, from the comparable period of 2015, due to decreased sales volume of both North American and international cabinets, which, in aggregate, decreased sales by 11 percent. Such decrease was partially offset by a positive sales mix and net selling price increases for North American cabinets and a positive sales mix for international cabinets.

Net sales of Windows and Other Specialty Products increased for the three-month period ended March 31, 2016, from the comparable period of 2015, due primarily to increased sales volume and net selling price increases of North American windows in the western U.S., which, on a combined basis, increased sales eight percent. An international acquisition positively impacted net sales by two percent for the three-month period ended March 31, 2016, from the comparable period of 2015. A stronger U.S. dollar decreased sales by two percent in the three-month period ended March 31, 2016, from the comparable period in 2015.

19

OPERATING MARGINS

Our gross profit margins were 33.1 percent for the three-month period ended March 31, 2016 compared with 29.8percent for the comparable period of 2015.

Gross profit margins for the three-month period ended March 31, 2016 were positively affected by increased sales volume, a more favorable relationship between net selling prices and commodity costs and the benefits associated with other cost savings initiatives.

Selling, general and administrative expenses, as a percentage of sales, were 19.5 percent for the three-month period ended March 31, 2016 compared to 19.9 percent for the comparable period of 2015.

Operating profit for the three-month period ended March 31, 2016 includes$3 million of costs and charges related to our business rationalizations and other initiatives. For the three-month period ended March 31, 2015, we incurred costs and charges of $6 million related to business rationalization initiatives.

Operating margins in the Plumbing Products segment for the three-month period ended March 31, 2016 were positively impacted by increased sales volume, a more favorable relationship between net selling prices and commodity costs and the benefits associated with business rationalization activities and other cost savings initiatives, partially offset by unfavorable product mix.

Operating margins in the Decorative Architectural Products segment for the three-month period ended March 31, 2016 were positively affected by increased sales volume of paints and stains and builders' hardware coupled with a more favorable relationship between net selling prices and commodity costs.

Operating margins in the Cabinetry Products segment for the three-month period ended March 31, 2016 were positively affected by the benefits associated with business rationalization activities and other cost savings initiatives and a more favorable relationship between net selling prices and commodity costs in our North America business. Such increases were partially offset by a decrease in sales volume.

Operating margins in the Windows and Other Specialty Products segment for the three-month period ended March 31, 2016 reflect an increase in certain expenses, such as higher labor costs to support demand, as well as system implementation costs. Such cost increases were partially offset by a more favorable relationship between net selling prices and commodity costs and increased sales volume of windows in the western U.S.

OTHER INCOME (EXPENSE), NET

Interest expense for the three-month periods endedMarch 31, 2016 and 2015 was $56 million. 

Other, net, for the three-month period endedMarch 31, 2016 included earnings of $1 million related to equity method investments, and for the three-month period endedMarch 31, 2015 included gains of $2 million related to distributions from private equity funds and $1 million of currency transaction losses.

INCOME PER COMMON SHARE FROM CONTINUING OPERATIONS — ATTRIBUTABLE TO MASCO CORPORATION

Income for the three-month period ended March 31, 2016 was $109 million, compared with $61 million for the comparable period of 2015. Diluted earnings per common share for the three-month period endedMarch 31, 2016 was $.32 per common share, compared with $.17 per common share for the comparable period of 2015.

Our effective tax rate of 33 percent for the three-months ended ended March 31, 2016 was lower than our normalized tax rate of 36 percent due primarily to a $4 million state income tax benefit on uncertain tax positions resulting from the expiration of applicable statutes of limitation and the tax benefit of the domestic production deduction which allows a deduction for certain qualified production activities within the U.S.

20

OTHER FINANCIAL INFORMATION

Our current ratio was 1.5 to 1 and 1.3 to 1 at March 31, 2016 and December 31, 2015, respectively.  The increase in the current ratio was primarily due to the issuance of an aggregate $900 million of senior Notes during the three-month period endedMarch 31, 2016, offset by an approximately $300 million increase in short-term notes payable at March 31, 2016 compared to December 31, 2015 due to scheduled debt maturities.

For the three-month period endedMarch 31, 2016, net cash of $100 million was used for operating activities. First quarter 2016 and 2015 cash for operations was affected by an expected and annually recurring seasonal first quarter increase in accounts receivable and inventories compared with fourth quarter 2015 and 2014, respectively.

For the three-month period endedMarch 31, 2016, net cash provided by financing activities was $781 million, primarily due to the issuance of $400 million of 3.5% Notes due April 1, 2021 and $500 million of 4.375% Notes due April 1, 2026, partially offset by $86 million for the repurchase and retirement of Company common stock, including 1.0 million shares repurchased to offset the dilutive impact of long-term stock awards granted in 2016 and $32 million for the payment of cash dividends. 

For the three-month period endedMarch 31, 2016, net cash provided by investing activities was $20 million, primarily due to $60 million net proceeds from the sale of short-term bank cash deposits, partially offset by $37 million used for capital expenditures.

Our cash, cash investments and short-term bank deposits were $2.4 billion and $1.7 billion at March 31, 2016 and December 31, 2015, respectively.  Our cash and cash investments consist of overnight interest bearing money market demand accounts, time deposit accounts, money market mutual funds containing government securities and treasury obligations.  Our short-term bank deposits consist of time deposits with maturities of 12 months or less.

Of the $2.4 billion and the $1.7 billion of cash, cash investments and short-term bank deposits held at March 31, 2016 and December 31, 2015, $614 million and $630 million, respectively, is held in foreign subsidiaries.  If these funds were needed for our operations in the U.S., their repatriation into the U.S. would not result in significant additional U.S. income tax or foreign withholding tax, as we have recorded such taxes on substantially all undistributed foreign earnings, except for those that are legally restricted.

On March 17, 2016, we issued $400 million of 3.5% Notes due April 1, 2021 and $500 million of 4.375% Notes due April 1, 2026. We received proceeds of $896 million, net of discount, for the issuance of these Notes. The Notes are senior indebtedness and are redeemable at our option at the applicable redemption price. On April 15, 2016, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire all of our $1 billion, 6.125% Notes which were due on October 3, 2016 and all of our $300 million, 5.85% Notes which were due on March 15, 2017. In connection with these early retirements, in April 2016 we recorded $40 million of additional interest expense in connection with the discharge of indebtedness.

On March 28, 2013, we entered into a credit agreement (the “Credit Agreement”) with a bank group, with an aggregate commitment of $1.25 billion and a maturity date of March 28, 2018.  On May 29, 2015 and August 28, 2015, we amended the Credit Agreement with the bank group (the “Amended Credit Agreement”).  The Amended Credit Agreement reduces the aggregate commitment to $750 million and extends the maturity date to May 29, 2020.  Under the Amended Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $375 million with the current bank group or new lenders.  See Note H to the condensed consolidated financial statements.

The Amended Credit Agreement contains financial covenants requiring us to maintain (A) a maximum net leverage ratio, as adjusted for certain items, of 4.0 to 1.0, and (B) a minimum interest coverage ratio, as adjusted for certain items, equal to or greater than 2.5 to 1.0.  We were in compliance with all covenants and had no borrowings under our Amended Credit Agreement at March 31, 2016.

We believe that our present cash balance, cash flows from operations and, to the extent necessary, bank borrowings and future financial market activities, are sufficient to fund our working capital and other investment needs.

21

OUTLOOK FOR THE COMPANY

We are making progress on our strategic priorities, which include leveraging opportunities across our businesses, driving the full potential of our core businesses and actively managing our portfolio.

We believe we will continue to see steady demand for our market-leading products, as both repair and remodel and new home construction trends continue to improve. We believe and are confident that the long-term fundamentals for home improvement activity and new home construction continue to be positive.  We believe that our strong financial position, together with our current strategy of investing in our industry-leading branded building products, including BEHR® paint, DELTA® and HANSGROHE® faucets, bath and shower fixtures, KRAFTMAID® and MERILLAT® cabinets, MILGARD® windows and doors and HOTSPRING® spas, our continued focus on innovation and our commitment to operational excellence and disciplined capital allocation will allow us to drive long-term growth and create value for our shareholders.

FORWARD-LOOKING STATEMENTS

This report contains statements that reflect our views about our future performance constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by words such as “believe,” “anticipate,” “appear,” “may,” “will,” “should,” “intend,” “plan,” “estimate,” “expect,” “assume,” “seek,” “forecast,” and similar references to future periods. Our views about future performance involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements.  We caution you against relying on any of these forward-looking statements.  Our future performance may be affected by the levels of home improvement activity and new home construction, our ability to maintain our strong brands and to develop and introduce new and improved products, our ability to maintain our competitive position in our industries, our reliance on key customers, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to sustain the performance at our cabinetry businesses, the cost and availability of raw materials, our dependence on third party suppliers, and risks associated with international operations and global strategies.  These and other factors are discussed in detail in Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K, as well as in other filings we make with the Securities and Exchange Commission.  The forward-looking statements in this report speak only as of the date of this report.  Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.  Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise.

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	MASCO CORPORATION
Item 4.	CONTROLS AND PROCEDURES

a.     Evaluation of Disclosure Controls and Procedures.

The Company’s principal executive officer and principal financial officer have concluded, based on an evaluation of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15 that, as of March 31, 2016, the Company’s disclosure controls and procedures were effective.

b.     Changes in Internal Control over Financial Reporting.

During the first quarter of 2016, the Company started a phased deployment of a new Enterprise Resource Planning (“ERP”) system at Milgard. The system implementation is designed, in part, to enhance the overall system of internal control over financial reporting through further automation and improve business processes and is not in response to any identified deficiency or weakness in the Company’s internal control over financial reporting. However, this system implementation is significant in scale and complexity and have resulted in modification to certain Milgard internal controls.

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MASCO CORPORATION

PART II.  OTHER INFORMATION

Item 1.Legal Proceedings

Information regarding legal proceedings involving us is set forth in Note P to our condensed consolidated financial statements included in Part I, Item 1 of this Report and is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes to the risk factors of the Company set forth in Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding the repurchase of Company common stock for the three months ended March 31, 2016: 

Period	Total Number  of Shares Purchased	Average Price Paid Per Common Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (A)	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
1/1/16 - 1/31/16	799,000	$	25.64	799,000	26,973,834
2/1/16 - 2/29/16	1,694,300	$	26.63	1,694,300	25,279,534
3/1/16 - 3/31/16	700,000	$	29.37	700,000	24,579,534
Total for the quarter	3,193,300	$	26.98	3,193,300	24,579,534

(A) In September 2014, our Board of Directors authorized the purchase of up to 50 million shares of our common stock in open-market transactions or otherwise.

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MASCO CORPORATION

PART II.  OTHER INFORMATION, Continued

Item 6. Exhibits

4.1	–	Resolutions establishing the terms of the 3.500% Notes Due 2021 and form of global note. Incorporated by reference to Exhibit 4.1 to Masco Corporation’s Current Report on Form 8-K dated March 10, 2016 and filed on March 16, 2016.
4.2	–	Resolutions establishing the terms of the 4.375% Notes Due 2026 and form of global note. Incorporated by reference to Exhibit 4.2 to Masco Corporation’s Current Report on Form 8-K dated March 10, 2016 and filed on March 16, 2016.
12	–	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
31a	–	Certification by Chief Executive Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
31b	–	Certification by Chief Financial Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
32	–	Certification Required by Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code
101	–	Interactive Data File

25

MASCO CORPORATION

PART II.  OTHER INFORMATION, Concluded

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

MASCO CORPORATION
By:	/s/ John G. Sznewajs
Name: John G. Sznewajs
Title: Vice President, Treasurer and Chief Financial Officer

April 26, 2016

26

MASCO CORPORATION

EXHIBIT INDEX

Exhibit
Exhibit 4.1	Resolutions establishing the terms of the 3.500% Notes Due 2021 and form of global note. Incorporated by reference to Exhibit 4.1 to Masco Corporation’s Current Report on Form 8-K dated March 10, 2016 and filed on March 16, 2016.
Exhibit 4.2	Resolutions establishing the terms of the 4.375% Notes Due 2026 and form of global note. Incorporated by reference to Exhibit 4.2 to Masco Corporation’s Current Report on Form 8-K dated March 10, 2016 and filed on March 16, 2016.
Exhibit 12	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Exhibit 31a	Certification by Chief Executive Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
Exhibit 31b	Certification by Chief Financial Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
Exhibit 32	Certification Required by Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code
Exhibit 101	Interactive Data File

27

EX-12

Exhibit 12

MASCO CORPORATION

Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends

	(Dollars in Millions)
	Three Months Ended Mar. 31,			Year Ended December 31,
	2016			2015			2014		2013		2012		2011
Earnings Before Income Taxes, Preferred Stock Dividends and Fixed Charges:
Income (loss) from continuing operations before income taxes	$	177		$	689		$	507	$	386	$	155	$	(322	)
Deduct equity in undistributed (earnings) loss of fifty-percent- or-less-owned companies	(1		)	(2		)	2		(16)		—		(9)
Add interest on indebtedness, net	55			222			221		230		249		250
Add amortization of debt expense	1			5			5		6		7		7
Add estimated interest factor for rentals	5			19			33		31		31		33
Earnings (loss) before income taxes, noncontrolling interest, fixed charges and preferred stock dividends	$	237		$	933		$	768	$	637	$	442	$	(41	)
Fixed Charges:
Interest on indebtedness	$	55		$	223		$	221	$	229	$	248	$	249
Amortization of debt expense	1			5			5		6		7		7
Estimated interest factor for rentals	5			19			33		31		31		33
Total fixed charges	$	61		$	247		$	259	$	266	$	286	$	289
Preferred stock dividends (A)	—			—			—		—		—		—
Combined fixed charges and preferred stock dividends	$	61		$	247		$	259	$	266	$	286	$	289
Ratio of earnings to fixed charges	3.9			3.8			3.0		2.4		1.5		(0.1		)
Ratio of earnings to combined fixed charges and preferred stock dividends	3.9			3.8			3.0		2.4		1.5		(0.1		)
Ratio of earnings to combined fixed charges and preferred stock dividends excluding certain items (B)	3.9			3.8			2.9		2.4		1.7		1.4

(A)Represents amount of income before provision for income taxes required to meet the preferred stock dividend requirements of the Company.

(B)Excludes the 2014 litigation settlement income of $9 million; the 2012 non-cash, pre-tax impairment charge for other intangible assets of $42 million and litigation expense of $1 million; and the 2011 non-cash, pre-tax impairment charge for goodwill and other intangible assets of $450 million and litigation expense of $9 million.

1

EX-31.A

Exhibit 31a

MASCO CORPORATION

Certification Required by Rule 13a-14(a) or 15d-14(a)

of the Securities Exchange Act of 1934

I, Keith Allman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Masco Corporation ("the registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 26, 2016	By:	/s/ Keith Allman
			Keith Allman
			President and Chief Executive Officer

1

EX-31.B

Exhibit 31b

MASCO CORPORATION

Certification Required by Rule 13a-14(a) or 15d-14(a)

of the Securities Exchange Act of 1934

I, John G. Sznewajs, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Masco Corporation ("the registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 26, 2016	By:	/s/ John G. Sznewajs
			John G. Sznewajs
			Vice President, Treasurer and Chief Financial Officer

1

EX-32

Exhibit 32

MASCO CORPORATION

Certification Required by Rule 13a-14(b) or 15d-14(b)

of the Securities Exchange Act of 1934 and

Section 1350 of Chapter 63 of Title 18 of the

United States Code

The certification set forth below is being submitted in connection with the Masco Corporation Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Keith Allman, the President and Chief Executive Officer, and John G. Sznewajs, the Vice President, Treasurer and Chief Financial Officer, of Masco Corporation, each certifies that, to the best of his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of Masco Corporation.

Date:	April 26, 2016	/s/ Keith Allman
		Keith Allman
		President and Chief Executive Officer
Date:	April 26, 2016	/s/ John G. Sznewajs
		John G. Sznewajs
		Vice President, Treasurer and Chief Financial Officer

1

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Document and Entity Information	3 Months Ended
	Mar. 31, 2016 shares
Document and Entity Information [Abstract]
Entity Registrant Name	MASCO CORP /DE/
Entity Central Index Key	0000062996
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding (in shares)	332,746,136
Entity Current Reporting Status	Yes

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash investments	$ 2,175	$ 1,468
Short-term bank deposits	195	248
Receivables	1,036	853
Prepaid expenses and other	87	72
Inventories:
Finished goods	420	358
Raw material	244	238
Work in process	91	91
Total	755	687
Total current assets	4,248	3,328
Property and equipment, net	1,040	1,027
Goodwill	844	839
Other intangible assets, net	158	160
Other assets	264	310
Total assets	6,554	5,664
Current liabilities:
Notes payable	1,303	1,004
Accounts payable	834	749
Accrued liabilities	652	752
Total current liabilities	2,789	2,505
Long-term debt	2,993	2,403
Other liabilities	688	698
Total liabilities	$ 6,470	$ 5,606
Commitments and contingencies
Masco Corporation’s shareholders’ equity:
Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2016 – 328,700,000 ; 2015 – 330,500,000	$ 329	$ 330
Preferred shares authorized: 1,000,000; Issued and outstanding: 2016 and 2015 – None	0	0
Paid-in capital	0	0
Retained deficit	(310)	(300)
Accumulated other comprehensive loss	(145)	(165)
Total Masco Corporation’s shareholders’ deficit	(126)	(135)
Noncontrolling interest	210	193
Total equity	84	58
Total liabilities and equity	$ 6,554	$ 5,664

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Common share, par value (in dollars per share)	$ 1	$ 1
Common shares, shares authorized	1,400,000,000	1,400,000,000
Common shares, shares issued	328,700,000	330,500,000
Common shares, shares outstanding	328,700,000	330,500,000
Preferred shares, shares authorized	1,000,000	1,000,000
Preferred shares, shares issued	0	0
Preferred shares, shares outstanding	0	0

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Net sales	$ 1,720	$ 1,659
Cost of sales	1,151	1,164
Gross profit	569	495
Selling, general and administrative expenses	335	330
Operating profit	234	165
Other income (expense), net:
Interest expense	(56)	(56)
Other, net	(1)	1
Total other income (expense), net	(57)	(55)
Income from continuing operations before income taxes	177	110
Income tax expense	(58)	(40)
Income from continuing operations	119	70
Income from discontinued operations, net	0	3
Net income	119	73
Less: Net income attributable to noncontrolling interest	10	9
Net income attributable to Masco Corporation	$ 109	$ 64
Basic:
Income from continuing operations (in dollars per share)	$ 0.33	$ 0.17
Income (loss) from discontinued operations, net (in dollars per share)	0.00	0.01
Net income (in dollars per share)	0.33	0.18
Diluted:
Income from continuing operations (in dollars per share)	0.32	0.17
Income (loss) from discontinued operations, net (in dollars per share)	0.00	0.01
Net income (in dollars per share)	$ 0.32	$ 0.18
Amounts attributable to Masco Corporation:
Income from continuing operations	$ 109	$ 61
Income from discontinued operations, net	0	3
Net income attributable to Masco Corporation	$ 109	$ 64

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
Net income	$ 119	$ 73
Less: Net income attributable to noncontrolling interest	10	9
Net income attributable to Masco Corporation	109	64
Other comprehensive income (loss), net of tax
Cumulative translation adjustment	24	(96)
Pension and other post-retirement benefits	3	4
Other comprehensive income (loss)	27	(92)
Less: Other comprehensive income (loss) attributable to noncontrolling interest	7	(23)
Other comprehensive income (loss) attributable to Masco Corporation	20	(69)
Total comprehensive income (loss)	146	(19)
Less: Total comprehensive income (loss) attributable to the noncontrolling interest	17	(14)
Total comprehensive income (loss) attributable to Masco Corporation	$ 129	$ (5)

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations	$ 189	$ 144
Increase in receivables	(198)	(244)
Increase in inventories	(63)	(56)
(Decrease) increase in accounts payable and accrued liabilities, net	(28)	4
Net cash for operating activities	(100)	(152)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Purchase of Company common stock	(86)	(103)
Cash dividends paid	(32)	(32)
Issuance of notes, net of issuance costs	889	497
Issuance of Company common stock	1	0
Excess tax benefit from stock-based compensation	11	0
Decrease in debt, net	(2)	0
Net cash from financing activities	781	362
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures	(37)	(32)
Acquisition of companies, net of cash acquired	0	(26)
Proceeds from disposition of:
Short-term bank deposits	60	141
Other financial investments	0	3
Property and equipment	0	3
Purchases of:
Short-term bank deposits	0	(63)
Other, net	(3)	(15)
Net cash from investing activities	20	11
Effect of exchange rate changes on cash and cash investments	6	(26)
CASH AND CASH INVESTMENTS:
Increase for the period	707	195
At January 1	1,468	1,383
At March 31	$ 2,175	$ 1,578

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Millions	Total	Common Shares ($1 par value)	Paid-In Capital	Retained Earnings (Deficit)	Accumulated Other Comprehensive Loss	Noncontrolling Interest
Balance at Dec. 31, 2014	$ 1,128	$ 345	$ 0	$ 690	$ (111)	$ 204
Increase (Decrease) in Stockholders' Equity
Total comprehensive (loss) income	(19)			64	(69)	(14)
Shares issued	(5)	3	(8)
Shares retired:
Repurchased	(106)	(4)		(102)
Surrendered (non-cash)	(16)	(1)		(15)
Cash dividends declared	(31)			(31)
Stock-based compensation	8		8
Balance at Mar. 31, 2015	959	343	0	606	(180)	190
Balance at Dec. 31, 2015	58	330	0	(300)	(165)	193
Increase (Decrease) in Stockholders' Equity
Total comprehensive (loss) income	146			109	20	17
Shares issued	(6)	2	(8)
Shares retired:
Repurchased	(86)	(3)	(7)	(76)
Surrendered (non-cash)	(11)			(11)
Cash dividends declared	(32)			(32)
Stock-based compensation	15		15
Balance at Mar. 31, 2016	$ 84	$ 329	$ 0	$ (310)	$ (145)	$ 210

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Accounting Policies

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Accounting Policies

ACCOUNTING POLICIES

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to present fairly our financial position as at March 31, 2016, and our results of operations, comprehensive income (loss), cash flows and changes in shareholders’ equity for the three months ended March 31, 2016 and 2015.  The condensed consolidated balance sheet at December 31, 2015 was derived from audited financial statements.

Reclassification. Certain prior year amounts have been reclassified to conform to the 2016 presentation in the condensed consolidated financial statements. 

Recently Issued Accounting Pronouncements.  In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-02 (“ASU 2015-02”) “Consolidation (Topic 810) — Amendments to the Consolidations Analysis,” which modifies certain aspects of both the variable interest entities and voting interest entities models. We adopted ASU 2015-02 on January 1, 2016. The adoption of the new standard did not have an impact on our financial position or our results of operations.

In April 2015, the FASB issued Accounting Standards Update 2015‑03 (“ASU 2015‑03”) “Interest - Imputation of Interest (Subtopic 835‑30) - Simplifying the Presentation of Debt Issuance Costs,” that requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt. In August 2015, the FASB issued ASU 2015‑15 to clarify that debt issuance costs related to line‑of‑credit arrangements may remain classified as an asset. We retrospectively adopted both ASU 2015‑03 and ASU 2015‑15 on January 1, 2016. As a result of the retrospective adoption of the standards, we reclassified $15 million of debt issuance costs from other assets to long-term debt, and $1 million of debt issuance costs from other assets to notes payable, as of December 31, 2015.

In May 2014, the FASB issued a new standard for revenue recognition, Accounting Standards Codification 606 (“ASC 606”).  The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries. ASC 606 is effective for us for annual periods beginning January 1, 2018.  We are currently evaluating the impact the adoption of this new standard will have on our results of operations. 

In January 2016, the FASB issued Accounting Standards Update 2016-01 (“ASU 2016-01”), “Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”, which primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. ASU 2016-01 is effective for us for annual periods beginning January 1, 2018. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

In February 2016, the FASB issued a new standard for leases, Accounting Standards Codification 842 (“ASC 842”), which changes the accounting model of identifying and accounting for leases. ASC 842 is effective for us for annual periods beginning January 1, 2019. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

In March 2016, the FASB issued Accounting Standard Update 2016-09 (“ASU 2016-09”), “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”, which requires the tax effects related to share-based payments to be recorded through the income statement and simplifies the accounting requirements for forfeitures and employers' tax withholding requirements. ASU 2016-09 is effective for us for annual periods beginning January 1, 2017. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

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Discontinued Operations

3 Months Ended

Mar. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

The presentation of discontinued operations includes a component or group of components that we have or intend to dispose of, and represents a strategic shift that has (or will have) a major effect on our operations and financial results.  For spin off transactions, discontinued operations treatment is appropriate following the completion of the spin off.

On September 30, 2014, we announced a plan to spin off 100 percent of our Installation and Other Services businesses into an independent, publicly-traded company named TopBuild Corp. (“TopBuild”) through a tax-free distribution of the stock of TopBuild to our stockholders.  We initiated the spin off as TopBuild was no longer considered core to our long-term growth strategy in branded building products. We completed the spin off on June 30, 2015 at which time we accounted for it as a discontinued operation. Gains from this discontinued operation were included in income from discontinued operations, net, in the condensed consolidated statement of operations for the three months ended March 31, 2015.

The major classes of line items constituting income from discontinued operations, net, in millions:

	Three Months Ended March 31,
	2016		2015
Net sales	$	—	$	358
Cost of sales	—		285
Gross profit	—		73
Selling, general and administrative expenses	—		68
Income from discontinued operations	$	—	$	5
Income tax expense	—		(2		)
Income from discontinued operations, net	$	—	$	3

Other selected financial information for TopBuild during the period owned by us was as follows, in millions:

	Three Months Ended March 31,
	2016		2015
Depreciation and amortization	$	—	$	3
Capital expenditures	$	—	$	2

In conjunction with the spin off, we entered into a Transition Services Agreement with TopBuild to provide TopBuild administrative services subsequent to the separation.  The fees for services rendered under the Transition Services Agreement are not material to our results of operations.

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Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the three months ended March 31, 2016, by segment, were as follows, in millions: 

	Gross Goodwill At March 31, 2016		Accumulated Impairment Losses			Net Goodwill At March 31, 2016
Plumbing Products	$	530	$	(340	)	$	190
Decorative Architectural Products	294		(75		)	219
Cabinetry Products	240		(59		)	181
Windows and Other Specialty Products	988		(734		)	254
Total	$	2,052	$	(1,208	)	$	844

	Gross Goodwill At December 31, 2015		Accumulated Impairment Losses			Net Goodwill At December 31, 2015		Other(A)		Net Goodwill At March 31, 2016
Plumbing Products	$	525	$	(340	)	$	185	$	5	$	190
Decorative Architectural Products	294		(75		)	219		—		219
Cabinetry Products	240		(59		)	181		—		181
Windows and Other Specialty Products	988		(734		)	254		—		254
Total	$	2,047	$	(1,208	)	$	839	$	5	$	844

(A)  Other principally includes the effect of foreign currency translation.

The carrying value of our other indefinite-lived intangible assets was $137 million at both March 31, 2016 and December 31, 2015, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $21 million (net of accumulated amortization of $51 million) and $23 million (net of accumulated amortization of $49 million) at March 31, 2016 and December 31, 2015, respectively, and principally included customer relationships.

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Depreciation and Amortization

3 Months Ended

Mar. 31, 2016

Depreciation, Depletion and Amortization [Abstract]

Depreciation and Amortization

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense, including discontinued operations, was $32 million and $34 million for the three months ended March 31, 2016 and 2015, respectively.

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Fair Value of Financial Investments

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value of Financial Investments

FAIR VALUE OF FINANCIAL INVESTMENTS

We have maintained investments in available-for-sale securities, equity method investments and a number of private equity funds, principally as part of our tax planning strategies, as any gains enhance the utilization of any current and future tax capital losses.  Financial investments were as follows, in millions:

	March 31, 2016		December 31, 2015
Prepaid expenses and other:
Auction rate securities	$	12	$	—
Other assets:
Auction rate securities	10		22
Equity method investments	13		13
Private equity funds	9		10
Other investments	3		3
Total	$	47	$	48

E. FAIR VALUE OF FINANCIAL INVESTMENTS (Concluded)

Recurring Fair Value Measurements.  Our auction rate securities are measured at fair value on a recurring basis, and have been estimated using a discounted cash flow model (Level 3 input).  The significant inputs in the discounted cash flow model used to value the auction rate securities include:  expected maturity of auction rate securities, discount rate used to determine the present value of expected cash flows and the assumptions for credit defaults, since the auction rate securities are backed by credit default swap agreements.

Our investments in auction rate securities included cost basis of $19 million and pre-tax unrealized gains of $3 million and had a recorded basis of $22 million at both March 31, 2016 and December 31, 2015.

Non-Recurring Fair Value Measurements.  During the three months ended March 31, 2016 and 2015, we did not measure any financial investments at fair value on a non-recurring basis, as there was no other-than-temporary decline in the estimated value of these investments.

We did not have any transfers between Level 1 and Level 2 financial assets in the three months ended March 31, 2016 or 2015.

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

	Three Months Ended March 31,
	2016		2015
Realized gains from private equity funds	$	—	$	2
Equity investment income, net	1		—
Total income from financial investments, net	$	1	$	2

Fair Value of Debt.  The fair value of our short-term and long-term fixed-rate debt instruments is based principally upon modeled market prices for the same or similar issues or the current rates available to us for debt with similar terms and remaining maturities.  The aggregate estimated market value of short-term and long-term debt at March 31, 2016 was approximately $4.6 billion, compared with the aggregate carrying value of $4.3 billion.  The aggregate estimated market value of short-term and long-term debt at December 31, 2015 was approximately $3.6 billion, compared with the aggregate carrying value of $3.4 billion.

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Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to global market risk as part of our normal daily business activities.  To manage these risks, we enter into various derivative contracts.  These contracts include interest rate swap agreements, foreign currency contracts and metals contracts intended to hedge our exposure to copper and zinc. We review our hedging program, derivative positions and overall risk management on a regular basis.

Interest Rate Swap Agreements.  In 2012, in connection with the issuance of $400 million of debt, we terminated the interest rate swap hedge relationships that we had entered into in 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 an approximate $2 million loss was recognized in our consolidated statement of operations in other, net within other income (expense), net.  The remaining loss of approximately $23 million from the termination of these swaps is being amortized as an increase to interest expense over the remaining term of the debt, through March 2022.

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

F. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Concluded)

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

Metals Contracts.  We have entered into several contracts to manage our exposure to increases in the price of copper and zinc.  Gains (losses) related to these contracts are recorded in our condensed consolidated statements of operations in cost of sales.

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

	Three Months Ended March 31,
	2016		2015
Foreign currency contracts:
Exchange contracts	$	—	$	4
Forward contracts	—		(4		)
Metal contracts	2		(2		)
Total gain (loss)	$	2	$	(2	)

We present our derivatives net by counterparty, due to the right of offset under master netting arrangements, in the condensed consolidated balance sheets.  The notional amounts being hedged and the fair value of those derivative instruments are as follows, in millions:

	At March 31, 2016
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	27
Receivables			$	1
Forward contracts	26
Accrued liabilities			(1		)
Other liabilities			(2		)
Metals contracts	38
Accrued liabilities			(6		)

	At December 31, 2015
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	39
Receivables			$	1
Forward contracts	30
Accrued liabilities			(2		)
Other liabilities			(1		)
Metals contracts	50
Accrued liabilities			(10		)

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

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Warranty Liability

3 Months Ended

Mar. 31, 2016

Product Warranties Disclosures [Abstract]

Warranty Liability

WARRANTY LIABILITY

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

	Three Months Ended March 31, 2016			Twelve Months Ended December 31, 2015
Balance at January 1	$	152		$	135
Accruals for warranties issued during the period	13			56
Accruals related to pre-existing warranties	—			15
Settlements made (in cash or kind) during the period	(13		)	(50		)
Other, net (including currency translation)	—			(4		)
Balance at end of period	$	152		$	152

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Debt

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Debt

DEBT

On March 17, 2016, we issued $400 million of 3.5% Notes due April 1, 2021 and $500 million of 4.375% Notes due April 1, 2026. We received proceeds of $896 million, net of discount, for the issuance of these Notes. The Notes are senior indebtedness and are redeemable at our option at the applicable redemption price. On April 15, 2016, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire all of our $1 billion, 6.125% Notes which were due on October 3, 2016 and all of our $300 million, 5.85% Notes which were due on March 15, 2017. In connection with these early retirements, in April 2016 we recorded $40 million of additional interest expense in connection with the discharge of indebtedness.

On March 28, 2013, we entered into a credit agreement (the “Credit Agreement”) with a bank group, with an aggregate commitment of $1.25 billion and a maturity date of March 28, 2018.  On May 29, 2015 and August 28, 2015, we amended the Credit Agreement with the bank group (the “Amended Credit Agreement”).  The Amended Credit Agreement reduced the aggregate commitment to $750 million and extends the maturity date to May 29, 2020.  Under the Amended Credit Agreement, at our request and subject to certain conditions, we can increase the aggregate commitment up to an additional $375 million with the current bank group or new lenders.

The Amended Credit Agreement provides for an unsecured revolving credit facility available to us and one of our 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. We can also borrow swingline loans up to $75 million and obtain letters of credit of up to $100 million; any outstanding letters of credit under the Amended Credit Agreement reduce our borrowing capacity. At March 31, 2016, we had $1.5 million of outstanding standby letters of credit under the Amended Credit Agreement.

Revolving credit loans bear interest under the Amended Credit Agreement, at our option, at (A) a rate per annum equal to the greatest 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 our then-applicable corporate credit ratings; or (B) LIBOR plus an applicable margin based upon our then-applicable corporate credit ratings. The foreign currency revolving credit loans bear interest at a rate equal to LIBOR plus an applicable margin based upon our then-applicable corporate credit ratings.

The Amended Credit Agreement contains financial covenants requiring us to maintain (A) a maximum net leverage ratio, as adjusted for certain items, of 4.0 to 1.0, and (B) a minimum interest coverage ratio, as adjusted for certain items, equal to or greater than 2.5 to 1.0.

In order for us to borrow under the Amended Credit Agreement, there must not be any default in our covenants in the Amended Credit Agreement (i.e., in addition to the two financial covenants, principally limitations on subsidiary debt, negative pledge restrictions, legal compliance requirements and maintenance of properties and insurance) and our representations and warranties in the Amended 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, 2014, in each case, no material ERISA or environmental non-compliance, and no material tax deficiency). We were in compliance with all covenants and had no borrowing under the Amended Credit Agreement at March 31, 2016.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

STOCK-BASED COMPENSATION

Our 2014 Long Term Stock Incentive Plan (the “2014 Plan”) provides for the issuance of stock-based incentives in various forms to our employees and non-employee Directors.  At March 31, 2016, outstanding stock-based incentives were in the form of long-term stock awards, stock options, phantom stock awards and stock appreciation rights.  Pre-tax compensation expense and the related income tax benefit for these stock-based incentives were as follows, in millions: 

	Three Months Ended March 31,
	2016		2015
Long-term stock awards	$	5	$	6
Stock options	1		1
Phantom stock awards and stock appreciation rights	3		3
Total	$	9	$	10
Income tax benefit (37 percent tax rate)	$	3	$	4

Long-Term Stock Awards.  Long-term stock awards are granted to our key employees and non-employee Directors and do not cause net share dilution inasmuch as we continue the practice of repurchasing and retiring an equal number of shares in the open market.  We granted 1,013,480 shares of long-term stock awards in the three months ended March 31, 2016.

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

	Three Months Ended March 31,
	2016		2015
Unvested stock award shares at January 1	5		6
Weighted average grant date fair value	$	17	$	18
Stock award shares granted	1		1
Weighted average grant date fair value	$	26	$	26
Stock award shares vested	2		2
Weighted average grant date fair value	$	16	$	17
Stock award shares forfeited	—		—
Weighted average grant date fair value	$	19	$	19
Unvested stock award shares at March 31	4		5
Weighted average grant date fair value	$	20	$	19

At March 31, 2016 and 2015, there was $62 million and $68 million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of 4 years at March 31,2016 and 3 years at March 31,2015.

The total market value (at the vesting date) of stock award shares which vested during the three months ended March 31, 2016 and 2015 was $36 million and $48 million, respectively.

Stock Options.  Stock options are granted to our key employees.  The exercise price equals the market price of our common stock at the grant date.  These options generally become exercisable (vest ratably) over five years beginning on the first anniversary from the date of grant and expire no later than 10 years after the grant date.

We granted 474,500 of stock option shares in the three months ended March 31, 2016 with a grant date exercise price approximating $26 per share. In the three months ended March 31,2016, no stock option shares were forfeited (including options that expired unexercised).

I. STOCK-BASED COMPENSATION (Continued)

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

		Three Months Ended March 31,
		2016		2015
Option shares outstanding, January 1		12		18
Weighted average exercise price (A)	$	17	$	21
Option shares granted		—		—
Weighted average exercise price	$	26	$	26
Option shares exercised		1		1
Aggregate intrinsic value on date of exercise (B)	$	18 million	$	17 million
Weighted average exercise price	$	18	$	14
Option shares forfeited		—		—
Weighted average exercise price	$	—	$	22
Option shares outstanding, March 31		11		17
Weighted average exercise price (A)	$	18	$	22
Weighted average remaining option term (in years)		4		3
Option shares vested and expected to vest, March 31		11		17
Weighted average exercise price (A)	$	18	$	22
Aggregate intrinsic value (B)	$	154 million	$	108 million
Weighted average remaining option term (in years)		4		3
Option shares exercisable (vested), March 31		10		15
Weighted average exercise price (A)	$	17	$	22
Aggregate intrinsic value (B)	$	138 million	$	94 million
Weighted average remaining option term (in years)		3		3

(A) Subsequent to the separation of TopBuild, we modified our outstanding equity awards to employees and non-employee directors such that all individuals received an equivalent fair value both before and after the separation.  The modification contributed to the lower exercise price.

(B) Aggregate intrinsic value is calculated using our stock price at each respective date, less the exercise price (grant date price) multiplied by the number of share.

At March 31, 2016 and 2015, there was $8 million and $9 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 3 years at both March 31, 2016 and 2015.

I. STOCK-BASED COMPENSATION (Concluded)

The weighted average grant date fair value of option shares granted and the assumptions used to estimate those values using a Black-Scholes option pricing model were as follows: 

	Three Months Ended March 31,
	2016			2015
Weighted average grant date fair value	$	6.43		$	9.67
Risk-free interest rate	1.41		%	1.75		%
Dividend yield	1.49		%	1.32		%
Volatility factor	29.00		%	42.00		%
Expected option life	6 years			6 years

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Employee Retirement Plans

3 Months Ended

Mar. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Employee Retirement Plans

EMPLOYEE RETIREMENT PLANS

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

	Three Months Ended March 31,
	2016					2015
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	1		$	—	$	1		$	—
Interest cost	11			1		12			1
Expected return on plan assets	(10		)	—		(11		)	—
Amortization of net loss	4			1		4			1
Net periodic pension cost	$	6		$	2	$	6		$	2

We froze all future benefit accruals under substantially all of our domestic qualified and foreign and domestic non-qualified defined benefit pension plans several years ago.

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Reclassifications From Accumulated Other Comprehensive Loss

3 Months Ended

Mar. 31, 2016

Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]

Reclassifications From Accumulated Other Comprehensive Income

RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE LOSS

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

	Amounts Reclassified
Accumulated Other Comprehensive Loss	Three Months Ended March 31,						Statement of Operations Line Item
	2016			2015
Amortization of defined benefit pension and other postretirement benefits:
Actuarial losses, net	$	5		$	5		Selling, general and administrative expenses
Tax (benefit)	(2		)	(1		)
Net of tax	$	3		$	4

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Segment Information

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

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

	Three Months Ended March 31,
	2016		2015		2016			2015
	Net Sales(A)				OperatingProfit (Loss)
Our operations by segment were (B):
Plumbing Products	$	813	$	796	$	129		$	111
Decorative Architectural Products	493		451		105			83
Cabinetry Products	236		249		24			(4		)
Windows and Other Specialty Products	178		163		3			6
Total	$	1,720	$	1,659	$	261		$	196
Our operations by geographic area were:
North America	$	1,350	$	1,282	$	215		$	151
International, principally Europe	370		377		46			45
Total	$	1,720	$	1,659	261			196
General corporate expense, net					(27		)	(31		)
Operating profit					234			165
Other income (expense), net					(57		)	(55		)
Income from continuing operations before income taxes					$	177		$	110

(A) Inter-segment sales were not material.

(B) In Q1 2016, we renamed our Cabinetry Products and Windows and Other Specialty Products segments. The name change did not impact the review of financial information by our corporate operating executive or the composition of the segments.

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Severance Costs

3 Months Ended

Mar. 31, 2016

Restructuring Charges [Abstract]

Severance Costs

SEVERANCE COSTS

We recorded charges related to severance of $2 million and $6 million for the three months ended March 31, 2016 and 2015, respectively. Such charges are principally reflected in the condensed consolidated statements of operations in selling, general and administrative expenses.

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Other Income (Expense), Net

3 Months Ended

Mar. 31, 2016

Other Income and Expenses [Abstract]

Other Income (Expense), Net

OTHER INCOME (EXPENSE), NET

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

	Three Months Ended March 31,
	2016			2015
Income from cash and cash investments	$	1		$	—
Income from financial investments, net (Note E)	1			2
Foreign currency transaction losses	—			(1		)
Other items, net	(3		)	—
Total other, net	$	(1	)	$	1

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Common Share

EARNINGS PER COMMON SHARE

Reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share were as follows, in millions: 

	Three Months Ended March 31,
	2016		2015
Numerator (basic and diluted):
Income from continuing operations	$	109	$	61
Less: Allocation to unvested restricted stock awards	1		1
Income from continuing operations attributable to common shareholders	108		60
Income from discontinued operations, net	—		3
Less: Allocation to unvested restricted stock awards	—		—
Income from discontinued operations attributable to common shareholders	—		3
Net income available to common shareholders	$	108	$	63
Denominator:
Basic common shares (based upon weighted average)	330		344
Add: Stock option dilution	3		3
Diluted common shares	333		347

For the three months ended March 31, 2016 and 2015, we allocated dividends and undistributed earnings to the unvested restricted stock awards.

Additionally, 1 million and 8 million common shares for the three months ended March 31, 2016 and 2015, respectively, related to stock options were excluded from the computation of diluted earnings per common share due to their antidilutive effect.

On September 30, 2014, we announced that our Board of Directors authorized the repurchase of up to 50 million shares for retirement of our common stock in open-market transactions or otherwise, replacing the previous Board of Directors authorization established in 2007. In the first three months of 2016, we repurchased and retired 3.2 million shares of our common stock (including 1.0 million shares to offset the dilutive impact of long-term stock awards granted in the first quarter), for approximately $86 million. At March 31, 2016, we had 24.6 million shares remaining under the authorization.

On the basis of amounts paid (declared), cash dividends per common share were $0.095 ($0.095) and $0.090 ($0.090) for the three months ended March 31, 2016 and 2015, respectively.

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Other Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Other Commitments and Contingencies

OTHER COMMITMENTS AND CONTINGENCIES

We are subject to claims, charges, litigation and other proceedings in the ordinary course of our business, including those arising from or related to contractual matters, intellectual property, personal injury, environmental matters, product liability, product recalls, construction defect, insurance coverage, personnel and employment disputes, anti-trust issues and other matters, including class actions.  We believe we have adequate defenses in these matters and that the likelihood that the outcome of these matters would have a material adverse effect on us is remote.  However, there is no assurance that we will prevail in these matters, and we could, in the future, incur judgments, enter into settlements of claims or revise our expectations regarding the outcome of these matters, which could materially impact our results of operations.

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Income Taxes

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Our effective tax rate was 33 percent and 36 percent for the three months ended March 31, 2016 and 2015, respectively.  The 2016 tax rate includes a $4 million state income tax benefit on uncertain tax positions resulting from the expiration of applicable statutes of limitation and the tax benefit of the domestic production deduction which allows a deduction for certain qualified production activities within the U.S.

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Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Reclassification

Reclassification. Certain prior year amounts have been reclassified to conform to the 2016 presentation in the condensed consolidated financial statements. 

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements.  In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-02 (“ASU 2015-02”) “Consolidation (Topic 810) — Amendments to the Consolidations Analysis,” which modifies certain aspects of both the variable interest entities and voting interest entities models. We adopted ASU 2015-02 on January 1, 2016. The adoption of the new standard did not have an impact on our financial position or our results of operations.

In April 2015, the FASB issued Accounting Standards Update 2015‑03 (“ASU 2015‑03”) “Interest - Imputation of Interest (Subtopic 835‑30) - Simplifying the Presentation of Debt Issuance Costs,” that requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt. In August 2015, the FASB issued ASU 2015‑15 to clarify that debt issuance costs related to line‑of‑credit arrangements may remain classified as an asset. We retrospectively adopted both ASU 2015‑03 and ASU 2015‑15 on January 1, 2016. As a result of the retrospective adoption of the standards, we reclassified $15 million of debt issuance costs from other assets to long-term debt, and $1 million of debt issuance costs from other assets to notes payable, as of December 31, 2015.

In May 2014, the FASB issued a new standard for revenue recognition, Accounting Standards Codification 606 (“ASC 606”).  The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries. ASC 606 is effective for us for annual periods beginning January 1, 2018.  We are currently evaluating the impact the adoption of this new standard will have on our results of operations. 

In January 2016, the FASB issued Accounting Standards Update 2016-01 (“ASU 2016-01”), “Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”, which primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. ASU 2016-01 is effective for us for annual periods beginning January 1, 2018. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

In February 2016, the FASB issued a new standard for leases, Accounting Standards Codification 842 (“ASC 842”), which changes the accounting model of identifying and accounting for leases. ASC 842 is effective for us for annual periods beginning January 1, 2019. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

In March 2016, the FASB issued Accounting Standard Update 2016-09 (“ASU 2016-09”), “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”, which requires the tax effects related to share-based payments to be recorded through the income statement and simplifies the accounting requirements for forfeitures and employers' tax withholding requirements. ASU 2016-09 is effective for us for annual periods beginning January 1, 2017. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

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Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Schedules of major classes of line items constituting pre-tax profit (loss) of discontinued operations, carrying amount of major classes of assets and liabilities, and other selected financial information during the period owned

The major classes of line items constituting income from discontinued operations, net, in millions:

	Three Months Ended March 31,
	2016		2015
Net sales	$	—	$	358
Cost of sales	—		285
Gross profit	—		73
Selling, general and administrative expenses	—		68
Income from discontinued operations	$	—	$	5
Income tax expense	—		(2		)
Income from discontinued operations, net	$	—	$	3

Other selected financial information for TopBuild during the period owned by us was as follows, in millions:

	Three Months Ended March 31,
	2016		2015
Depreciation and amortization	$	—	$	3
Capital expenditures	$	—	$	2

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Goodwill and Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of changes in carrying amount of goodwill

The changes in the carrying amount of goodwill for the three months ended March 31, 2016, by segment, were as follows, in millions: 

	Gross Goodwill At March 31, 2016		Accumulated Impairment Losses			Net Goodwill At March 31, 2016
Plumbing Products	$	530	$	(340	)	$	190
Decorative Architectural Products	294		(75		)	219
Cabinetry Products	240		(59		)	181
Windows and Other Specialty Products	988		(734		)	254
Total	$	2,052	$	(1,208	)	$	844

	Gross Goodwill At December 31, 2015		Accumulated Impairment Losses			Net Goodwill At December 31, 2015		Other(A)		Net Goodwill At March 31, 2016
Plumbing Products	$	525	$	(340	)	$	185	$	5	$	190
Decorative Architectural Products	294		(75		)	219		—		219
Cabinetry Products	240		(59		)	181		—		181
Windows and Other Specialty Products	988		(734		)	254		—		254
Total	$	2,047	$	(1,208	)	$	839	$	5	$	844

(A)  Other principally includes the effect of foreign currency translation.

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Fair Value of Financial Investments (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of financial investments included in other assets

Financial investments were as follows, in millions:

	March 31, 2016		December 31, 2015
Prepaid expenses and other:
Auction rate securities	$	12	$	—
Other assets:
Auction rate securities	10		22
Equity method investments	13		13
Private equity funds	9		10
Other investments	3		3
Total	$	47	$	48

Schedule of income from financial investments, net, included in other, net, within other income (expense), net,

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

	Three Months Ended March 31,
	2016		2015
Realized gains from private equity funds	$	—	$	2
Equity investment income, net	1		—
Total income from financial investments, net	$	1	$	2

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Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of pre-tax (losses) gains included in the Company's condensed consolidated statements of operations

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

	Three Months Ended March 31,
	2016		2015
Foreign currency contracts:
Exchange contracts	$	—	$	4
Forward contracts	—		(4		)
Metal contracts	2		(2		)
Total gain (loss)	$	2	$	(2	)

Schedule of notional amounts being hedged and the fair value of derivative instruments

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

	At March 31, 2016
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	27
Receivables			$	1
Forward contracts	26
Accrued liabilities			(1		)
Other liabilities			(2		)
Metals contracts	38
Accrued liabilities			(6		)

	At December 31, 2015
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	39
Receivables			$	1
Forward contracts	30
Accrued liabilities			(2		)
Other liabilities			(1		)
Metals contracts	50
Accrued liabilities			(10		)

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Warranty Liability (Tables)

3 Months Ended

Mar. 31, 2016

Product Warranties Disclosures [Abstract]

Schedule of changes in the Company's warranty liability

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

	Three Months Ended March 31, 2016			Twelve Months Ended December 31, 2015
Balance at January 1	$	152		$	135
Accruals for warranties issued during the period	13			56
Accruals related to pre-existing warranties	—			15
Settlements made (in cash or kind) during the period	(13		)	(50		)
Other, net (including currency translation)	—			(4		)
Balance at end of period	$	152		$	152

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of pre-tax compensation expense and the related income tax benefit for these stock-based incentives

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

	Three Months Ended March 31,
	2016		2015
Long-term stock awards	$	5	$	6
Stock options	1		1
Phantom stock awards and stock appreciation rights	3		3
Total	$	9	$	10
Income tax benefit (37 percent tax rate)	$	3	$	4

Schedule of the Company's long-term stock award activity

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

	Three Months Ended March 31,
	2016		2015
Unvested stock award shares at January 1	5		6
Weighted average grant date fair value	$	17	$	18
Stock award shares granted	1		1
Weighted average grant date fair value	$	26	$	26
Stock award shares vested	2		2
Weighted average grant date fair value	$	16	$	17
Stock award shares forfeited	—		—
Weighted average grant date fair value	$	19	$	19
Unvested stock award shares at March 31	4		5
Weighted average grant date fair value	$	20	$	19

Schedule of the Company's stock option activity

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

		Three Months Ended March 31,
		2016		2015
Option shares outstanding, January 1		12		18
Weighted average exercise price (A)	$	17	$	21
Option shares granted		—		—
Weighted average exercise price	$	26	$	26
Option shares exercised		1		1
Aggregate intrinsic value on date of exercise (B)	$	18 million	$	17 million
Weighted average exercise price	$	18	$	14
Option shares forfeited		—		—
Weighted average exercise price	$	—	$	22
Option shares outstanding, March 31		11		17
Weighted average exercise price (A)	$	18	$	22
Weighted average remaining option term (in years)		4		3
Option shares vested and expected to vest, March 31		11		17
Weighted average exercise price (A)	$	18	$	22
Aggregate intrinsic value (B)	$	154 million	$	108 million
Weighted average remaining option term (in years)		4		3
Option shares exercisable (vested), March 31		10		15
Weighted average exercise price (A)	$	17	$	22
Aggregate intrinsic value (B)	$	138 million	$	94 million
Weighted average remaining option term (in years)		3		3

(A) Subsequent to the separation of TopBuild, we modified our outstanding equity awards to employees and non-employee directors such that all individuals received an equivalent fair value both before and after the separation.  The modification contributed to the lower exercise price.

(B) Aggregate intrinsic value is calculated using our stock price at each respective date, less the exercise price (grant date price) multiplied by the number of share.

Schedule of 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

The weighted average grant date fair value of option shares granted and the assumptions used to estimate those values using a Black-Scholes option pricing model were as follows: 

	Three Months Ended March 31,
	2016			2015
Weighted average grant date fair value	$	6.43		$	9.67
Risk-free interest rate	1.41		%	1.75		%
Dividend yield	1.49		%	1.32		%
Volatility factor	29.00		%	42.00		%
Expected option life	6 years			6 years

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Employee Retirement Plans (Tables)

3 Months Ended

Mar. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Schedule of net periodic pension cost for the Company's defined-benefit pension plans

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

	Three Months Ended March 31,
	2016					2015
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	1		$	—	$	1		$	—
Interest cost	11			1		12			1
Expected return on plan assets	(10		)	—		(11		)	—
Amortization of net loss	4			1		4			1
Net periodic pension cost	$	6		$	2	$	6		$	2

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Reclassifications From Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2016

Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]

Schedule of reclassifications from accumulated other comprehensive (loss) income to the condensed consolidated statements of operations

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

	Amounts Reclassified
Accumulated Other Comprehensive Loss	Three Months Ended March 31,						Statement of Operations Line Item
	2016			2015
Amortization of defined benefit pension and other postretirement benefits:
Actuarial losses, net	$	5		$	5		Selling, general and administrative expenses
Tax (benefit)	(2		)	(1		)
Net of tax	$	3		$	4

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Schedule of information by segment and geographic area

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

	Three Months Ended March 31,
	2016		2015		2016			2015
	Net Sales(A)				OperatingProfit (Loss)
Our operations by segment were (B):
Plumbing Products	$	813	$	796	$	129		$	111
Decorative Architectural Products	493		451		105			83
Cabinetry Products	236		249		24			(4		)
Windows and Other Specialty Products	178		163		3			6
Total	$	1,720	$	1,659	$	261		$	196
Our operations by geographic area were:
North America	$	1,350	$	1,282	$	215		$	151
International, principally Europe	370		377		46			45
Total	$	1,720	$	1,659	261			196
General corporate expense, net					(27		)	(31		)
Operating profit					234			165
Other income (expense), net					(57		)	(55		)
Income from continuing operations before income taxes					$	177		$	110

(A) Inter-segment sales were not material.

(B) In Q1 2016, we renamed our Cabinetry Products and Windows and Other Specialty Products segments. The name change did not impact the review of financial information by our corporate operating executive or the composition of the segments.

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Other Income (Expense), Net (Tables)

3 Months Ended

Mar. 31, 2016

Other Income and Expenses [Abstract]

Schedule of components of other, net, which is included in other income (expense), net

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

	Three Months Ended March 31,
	2016			2015
Income from cash and cash investments	$	1		$	—
Income from financial investments, net (Note E)	1			2
Foreign currency transaction losses	—			(1		)
Other items, net	(3		)	—
Total other, net	$	(1	)	$	1

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Schedule of reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share

Reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share were as follows, in millions: 

	Three Months Ended March 31,
	2016		2015
Numerator (basic and diluted):
Income from continuing operations	$	109	$	61
Less: Allocation to unvested restricted stock awards	1		1
Income from continuing operations attributable to common shareholders	108		60
Income from discontinued operations, net	—		3
Less: Allocation to unvested restricted stock awards	—		—
Income from discontinued operations attributable to common shareholders	—		3
Net income available to common shareholders	$	108	$	63
Denominator:
Basic common shares (based upon weighted average)	330		344
Add: Stock option dilution	3		3
Diluted common shares	333		347

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Accounting Policies - Narrative (Details) $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($)
Adjustment for Reclassifying Issuance Costs Other Assets to Long Term Debt | Long term debt
Debt Instrument [Line Items]
Reclassification of issuance costs	$ (15)
Adjustment for Reclassifying Issuance Costs Other Assets to Long Term Debt | Other assets
Debt Instrument [Line Items]
Reclassification of issuance costs	15
Adjustment for Reclassifying Issuance costs from Other Assets to Notes Payable | Other assets
Debt Instrument [Line Items]
Reclassification of issuance costs	1
Adjustment for Reclassifying Issuance costs from Other Assets to Notes Payable | Notes payable
Debt Instrument [Line Items]
Reclassification of issuance costs	$ (1)

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Discontinued Operations (Details)	Sep. 30, 2014
Spinoff | TopBuild | Installation and Other Services
Selected financial information of discontinued operations
Percentage of businesses planned for spinoff	100.00%

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Discontinued Operations - Income Statement Line Items (Details) - Spinoff - TopBuild - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Pre-tax profit (Loss) of discontinued operations
Net sales	$ 0	$ 358
Cost of sales	0	285
Gross profit	0	73
Selling, general and administrative expenses	0	68
Income from discontinued operations	0	5
Income tax expense	0	(2)
Income from discontinued operations, net	$ 0	$ 3

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Discontinued Operations - Other Financial Information (Details) - Spinoff - TopBuild - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Selected financial information of discontinued operations
Depreciation and amortization	$ 0	$ 3
Capital expenditures	$ 0	$ 2

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Goodwill and Other Intangible Assets - Goodwill Rollforward (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Goodwill [Roll Forward]
Goodwill, Gross	$ 2,052	$ 2,047
Accumulated Impairment Losses	(1,208)	(1,208)
Beginning balance	839
Other	5
Ending balance	844
Plumbing Products
Goodwill [Roll Forward]
Goodwill, Gross	530	525
Accumulated Impairment Losses	(340)	(340)
Beginning balance	185
Other	5
Ending balance	190
Decorative Architectural Products
Goodwill [Roll Forward]
Goodwill, Gross	294	294
Accumulated Impairment Losses	(75)	(75)
Beginning balance	219
Other	0
Ending balance	219
Cabinetry Products
Goodwill [Roll Forward]
Goodwill, Gross	240	240
Accumulated Impairment Losses	(59)	(59)
Beginning balance	181
Other	0
Ending balance	181
Windows and Other Specialty Products
Goodwill [Roll Forward]
Goodwill, Gross	988	988
Accumulated Impairment Losses	(734)	$ (734)
Beginning balance	254
Other	0
Ending balance	$ 254

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Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Other indefinite-lived intangible assets	$ 137	$ 137
Carrying value of definite-lived intangible assets	21	23
Accumulated amortization	$ 51	$ 49

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Depreciation and Amortization (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Depreciation, Depletion and Amortization [Abstract]
Depreciation and amortization expense	$ 32	$ 34

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Fair Value of Financial Investments - Financial Investments (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Fair value of financial investments and liabilities
Total financial investments	$ 47	$ 48
Prepaid expenses and other | Auction rate securities
Fair value of financial investments and liabilities
Available-for-sale Securities, Equity Securities, Current	12
Available-for-sale Securities, Debt Securities, Current		0
Other assets | Auction rate securities
Fair value of financial investments and liabilities
Recurring investments, available-for-sale securities	10	22
Other assets | Equity method investments
Fair value of financial investments and liabilities
Equity method investments	13	13
Other assets | Private equity funds
Fair value of financial investments and liabilities
Non-recurring investments	9	10
Other assets | Other investments
Fair value of financial investments and liabilities
Non-recurring investments	$ 3	$ 3

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Fair Value of Financial Investments - Realized Gains (Losses) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income from financial investments, net and impairment charges
Equity investments income (loss), net	$ 1	$ 0
Total income from financial investments, net	1	2
Private equity funds
Income from financial investments, net and impairment charges
Realized gains from private equity funds	$ 0	$ 2

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Fair Value of Financial Investments - Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cost basis available-for-sale securities	$ 19	$ 19
Pre-tax unrealized gains, available-for-sale securities	3	3
Recorded basis, available for sale securities	22	22
Estimate of Fair Value Measurement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Estimated market value of long-term and short-term debt	4,600	3,600
Carrying Value Reported Value Measurement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Aggregate carrying value of long-term and short-term debt	$ 4,300	$ 3,400

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Derivative Instruments and Hedging Activities (Details) - Derivatives designated as hedging instruments - Cash flow hedges - Interest Rate Swaps - 3 month LIBOR interest rate swap, cash flow hedge terminated March 2012 - USD ($)	1 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2012
Interest Rate Swap Agreements
Debt issued		$ 400,000,000
Interest rate swap loss amortized as an increase to interest expense over the remaining term of the debt	$ 23,000,000
Other, net
Interest Rate Swap Agreements
Ineffective portion of the cash flow hedges		$ 2,000,000

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Derivative Instruments and Hedging Activities - Pre-tax Gains (Losses) (Details) - Not designated as a hedge - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Derivative instruments and hedging activities
Total gain (loss)	$ 2	$ (2)
Foreign currency exchange contracts | Other, net
Derivative instruments and hedging activities
Total gain (loss)	0	4
Foreign currency forward contracts | Other, net
Derivative instruments and hedging activities
Total gain (loss)	0	(4)
Metal contracts | Cost of sales
Derivative instruments and hedging activities
Total gain (loss)	$ 2	$ (2)

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Derivative Instruments and Hedging Activities - Fair Value of Derivative Instruments (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Foreign currency exchange contracts
Derivative instruments and hedging activities
Notional Amount	$ 27	$ 39
Foreign currency exchange contracts | Receivables | Recurring | Level 2
Derivative instruments and hedging activities
Assets	1	1
Foreign currency forward contracts
Derivative instruments and hedging activities
Notional Amount	26	30
Foreign currency forward contracts | Accrued liabilities | Recurring | Level 2
Derivative instruments and hedging activities
Liabilities	(1)	(2)
Foreign currency forward contracts | Other liabilities | Recurring | Level 2
Derivative instruments and hedging activities
Liabilities	(2)	(1)
Metal contracts
Derivative instruments and hedging activities
Notional Amount	38	50
Metal contracts | Accrued liabilities | Recurring | Level 2
Derivative instruments and hedging activities
Liabilities	$ (6)	$ (10)

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Warranty Liability (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward]
Balance at the beginning of the period	$ 152	$ 135
Accruals for warranties issued during the year	13	56
Accruals related to pre-existing warranties	0	15
Settlements made (in cash or kind) during the year	(13)	(50)
Other, net (including currency translation)	0	(4)
Balance at the end of the period	$ 152	$ 152

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Debt (Details)				1 Months Ended
	Apr. 15, 2016 USD ($)	Mar. 17, 2016 USD ($)	May. 29, 2015 USD ($)	Apr. 30, 2016 USD ($)	Mar. 31, 2016 USD ($)	Mar. 28, 2013 USD ($)
Debt
Proceeds from issuance of debt		$ 896,000,000
3.5% Notes and Debentures Due April 1, 2021
Debt
Long-term debt, gross		$ 400,000,000
Interest rate (as a percent)		3.50%
4.375% Notes and Debentures Due April 1, 2026
Debt
Long-term debt, gross		$ 500,000,000
Interest rate (as a percent)		4.375%
Credit Agreement dated March 28, 2013
Debt
Borrowing capacity, maximum						$ 1,250,000,000
Credit agreement dated May 29, 2015 and August 28, 2015, as amended
Debt
Borrowing capacity, maximum			$ 750,000,000
Increase in maximum borrowing capacity			$ 375,000,000
Outstanding and unused Letters of Credit					$ 0
Maximum net leverage ratio			4
Minimum interest coverage ratio			2.5
Credit agreement dated May 29, 2015 and August 28, 2015, as amended | Federal funds effective rate
Debt
Interest rate, basis spread (as a percent)			0.50%
Credit agreement dated May 29, 2015 and August 28, 2015, as amended | Libor rate
Debt
Interest rate, basis spread (as a percent)			1.00%
Credit agreement dated May 29, 2015 and August 28, 2015, as amended | Revolver
Debt
Borrowing capacity, maximum					500,000,000
Credit agreement dated May 29, 2015 and August 28, 2015, as amended | Swingline loans
Debt
Borrowing capacity, maximum					75,000,000
Credit agreement dated May 29, 2015 and August 28, 2015, as amended | Letters of credit
Debt
Borrowing capacity, maximum					100,000,000
Outstanding and unused Letters of Credit					$ 1,500,000
Subsequent Event | 6.125% Notes and Debentures Due October 3, 2016
Debt
Interest rate (as a percent)	6.125%
Notes repaid and retired	$ 1,000,000,000
Subsequent Event | 5.85% Notes and Debenture Due March 15, 2017
Debt
Interest rate (as a percent)	5.85%
Notes repaid and retired	$ 300,000,000
Subsequent Event | 5.85% and 6.125% Notes and Debentures
Debt
Interest expense, debt				$ 40,000,000

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Stock-Based Compensation (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock-based compensation
Pre-tax compensation expense	$ 9	$ 10
Income tax benefit	$ 3	$ 4
Tax rate (as a percent)	37.00%	37.00%
Long-term stock awards
Stock-based compensation
Pre-tax compensation expense	$ 5	$ 6
Stock Options
Stock-based compensation
Pre-tax compensation expense	1	1
Phantom stock awards and stock appreciation rights
Stock-based compensation
Pre-tax compensation expense	$ 3	$ 3

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Stock-Based Compensation - Long-Term Stock Award (Details) - Long-term stock awards - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Unvested stock award shares
Balance at the beginning of the period (in shares)	5,000,000	6,000,000
Granted (in shares)	1,013,480	1,000,000
Vested (in shares)	2,000,000	2,000,000
Forfeited (in shares)	0	0
Balance at the end of the period (in shares)	4,000,000	5,000,000
Weighted average grant date fair value
Balance at the beginning of the period (in dollars per share)	$ 17	$ 18
Granted (in dollars per share)	26	26
Vested (in dollars per share)	16	17
Forfeited (in dollars per share)	19	19
Balance at the end of the period (in dollars per share)	$ 20	$ 19
Additional disclosures
Total unrecognized compensation expense	$ 62	$ 68
Remaining weighted average vesting period	4 years	3 years
Total market value (at the vesting date) of stock award shares	$ 36	$ 48

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Stock-Based Compensation - Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock Options
Grant date exercise price	$ 26
Stock Options
Stock Options
Vesting period	5 years
Expiration period	10 years
Shares
Outstanding at the beginning of the period (in shares)	12,000,000	18,000,000
Granted (in shares)	474,500	0
Exercised (in shares)	1,000,000	1,000,000
Forfeited (in shares)	0	0
Outstanding at the end of the period (in shares)	11,000,000	17,000,000
Option shares vested and expected to vest at the end of the period (in shares)	11,000,000	17,000,000
Option shares exercisable at the end of the period (in shares)	10,000,000	15,000,000
Weighted average exercise price
Outstanding at the beginning of the period (in dollars per share)	$ 17	$ 21
Granted (in dollars per share)	26	26
Exercised (in dollars per share)	18	14
Forfeited (in dollars per share)	0	22
Outstanding at the end of the period (in dollars per share)	18	22
Option shares vested and expected to vest at the end of the period (in dollars per share)	18	22
Option shares exercisable at the end of the period (in dollars per share)	$ 17	$ 22
Aggregate intrinsic value
Exercised	$ 18	$ 17
Option shares vested and expected to vest at the end of the period	154	108
Option shares exercisable at the end of the period	$ 138	$ 94
Weighted average remaining option term
Outstanding at the end of the period	4 years	3 years
Option shares vested and expected to vest at the end of the period	4 years	3 years
Option shares exercisable at the end of the period	3 years	3 years
Additional disclosures
Total unrecognized compensation expense	$ 8	$ 9
Weighted average remaining vesting period	3 years	3 years

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Stock-Based Compensation - Option Pricing Assumptions and Estimates (Details) - Stock Options - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock Options
Weighted average grant date fair value (in dollars per share)	$ 6.43	$ 9.67
Risk-free interest rate (as a percent)	1.41%	1.75%
Dividend yield (as a percent)	1.49%	1.32%
Volatility factor (as a percent)	29.00%	42.00%
Expected option life	6 years	6 years

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Employee Retirement Plans (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Qualified
Net periodic pension cost for the company's defined-benefit pension plans
Service cost	$ 1	$ 1
Interest cost	11	12
Expected return on plan assets	(10)	(11)
Amortization of net loss	4	4
Net periodic pension cost	6	6
Non-Qualified
Net periodic pension cost for the company's defined-benefit pension plans
Service cost	0	0
Interest cost	1	1
Expected return on plan assets	0	0
Amortization of net loss	1	1
Net periodic pension cost	$ 2	$ 2

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Reclassifications From Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Reclassifications from accumulated other comprehensive (loss) income
Net of tax	$ (3)	$ (4)
Accumulated Defined Benefit Plans Adjustment Attributable to Parent
Reclassifications from accumulated other comprehensive (loss) income
Tax (benefit)	(2)	(1)
Selling, General and Administrative Expenses | Accumulated Defined Benefit Plans Adjustment, Net Gain (Loss) Attributable to Parent
Reclassifications from accumulated other comprehensive (loss) income
Actuarial losses, net	$ 5	$ 5

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Segment Information (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Segment Information
Net Sales	$ 1,720	$ 1,659
Operating Profit (Loss)	234	165
Other income (expense), net	(57)	(55)
Income from continuing operations before income taxes	177	110
Operating Segments
Segment Information
Net Sales	1,720	1,659
Operating Profit (Loss)	261	196
Operating Segments | Plumbing Products
Segment Information
Net Sales	813	796
Operating Profit (Loss)	129	111
Operating Segments | Decorative Architectural Products
Segment Information
Net Sales	493	451
Operating Profit (Loss)	105	83
Operating Segments | Cabinetry Products
Segment Information
Net Sales	236	249
Operating Profit (Loss)	24	(4)
Operating Segments | Windows and Other Specialty Products
Segment Information
Net Sales	178	163
Operating Profit (Loss)	3	6
Geographic Areas
Segment Information
Net Sales	1,720	1,659
Operating Profit (Loss)	261	196
Geographic Areas | North America
Segment Information
Net Sales	1,350	1,282
Operating Profit (Loss)	215	151
Geographic Areas | International, principally Europe
Segment Information
Net Sales	370	377
Operating Profit (Loss)	46	45
Corporate
Segment Information
General corporate expense, net	$ (27)	$ (31)

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Severance Costs (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Restructuring Charges [Abstract]
Severance costs	$ 2	$ 6

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Other Income (Expense), Net (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Other Income and Expenses [Abstract]
Income from cash and cash investments	$ 1	$ 0
Income from financial investments, net	1	2
Foreign currency transaction losses	0	(1)
Other items, net	(3)	0
Total other, net	$ (1)	$ 1

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Earnings Per Common Share (Details) - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Numerator (basic and diluted):
Income from continuing operations	$ 109	$ 61
Less: Allocation to unvested restricted stock awards	1	1
Income from continuing operations attributable to common shareholders	108	60
Income from discontinued operations, net	0	3
Less: Allocation to unvested restricted stock awards	0	0
Income (loss) from discontinued operations attributable to common shareholders	0	3
Net income available to common shareholders	$ 108	$ 63
Denominator:
Basic common shares (based upon weighted average) (in shares)	330	344
Add: Stock option dilution (in shares)	3	3
Diluted common shares (in shares)	333	347

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Earnings Per Common Share - Narrative (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Sep. 30, 2014
Antidilutive securities excluded from computation of earnings per share
Repurchase and retirement of common stock (in shares)	3.2
Remaining number of shares authorized to be repurchased	24.6		50.0
Total consideration for repurchase of common stock including unpaid cash	$ 86
Dividends
Cash dividends per common share declared (in dollars per share)	$ 0.095	$ 0.090
Cash dividends per common share paid (in dollars per share)	$ 0.095	$ 0.090
Stock Options
Antidilutive securities excluded from computation of earnings per share
Antidilutive effect on computation of diluted earnings per common share (in shares)	1.0	8.0
Long-term stock awards
Antidilutive securities excluded from computation of earnings per share
Repurchase and retirement of common stock to offset the dilutive impact of stock awards (in shares)	1.0

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Tax Disclosure [Abstract]
Effective tax rate (as a percent)	33.00%	36.00%
Uncertain tax position expirations	$ 4