Delaware | 38-1794485 | |
(State of | (IRS Employer | |
Incorporation) | Identification No.) |
17450 Masco Way, Livonia, Michigan | 48152 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o | Smaller reporting company o | |
(Do not check if a smaller reporting company) | Emerging growth company o |
Class | Shares Outstanding at June 30, 2017 | |
Common stock, par value $1.00 per share | 318,593,732 | |
Page No. | ||
June 30, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash investments | $ | 992 | $ | 990 | |||
Short-term bank deposits | 144 | 201 | |||||
Receivables | 1,231 | 917 | |||||
Prepaid expenses and other | 89 | 114 | |||||
Inventories: | |||||||
Finished goods | 471 | 366 | |||||
Raw material | 277 | 254 | |||||
Work in process | 102 | 92 | |||||
850 | 712 | ||||||
Total current assets | 3,306 | 2,934 | |||||
Property and equipment, net | 1,080 | 1,060 | |||||
Goodwill | 797 | 832 | |||||
Other intangible assets, net | 156 | 154 | |||||
Other assets | 150 | 157 | |||||
Total assets | $ | 5,489 | $ | 5,137 | |||
LIABILITIES | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 960 | $ | 800 | |||
Notes payable | 117 | 2 | |||||
Accrued liabilities | 615 | 658 | |||||
Total current liabilities | 1,692 | 1,460 | |||||
Long-term debt | 2,967 | 2,995 | |||||
Other liabilities | 760 | 785 | |||||
Total liabilities | 5,419 | 5,240 | |||||
Commitments and contingencies (Note N) | |||||||
EQUITY | |||||||
Masco Corporation’s shareholders’ equity: | |||||||
Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2017 – 315,400,000 ; 2016 – 318,000,000 | 315 | 318 | |||||
Preferred shares authorized: 1,000,000; Issued and outstanding: 2017 and 2016 – None | — | — | |||||
Paid-in capital | — | — | |||||
Retained deficit | (288 | ) | (381 | ) | |||
Accumulated other comprehensive loss | (158 | ) | (235 | ) | |||
Total Masco Corporation’s shareholders’ deficit | (131 | ) | (298 | ) | |||
Noncontrolling interest | 201 | 195 | |||||
Total equity | 70 | (103 | ) | ||||
Total liabilities and equity | $ | 5,489 | $ | 5,137 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 2,057 | $ | 2,001 | $ | 3,834 | $ | 3,721 | |||||||
Cost of sales | 1,320 | 1,301 | 2,489 | 2,452 | |||||||||||
Gross profit | 737 | 700 | 1,345 | 1,269 | |||||||||||
Selling, general and administrative expenses | 380 | 365 | 735 | 700 | |||||||||||
Operating profit | 357 | 335 | 610 | 569 | |||||||||||
Other income (expense), net: | |||||||||||||||
Interest expense | (153 | ) | (87 | ) | (196 | ) | (143 | ) | |||||||
Other, net | 51 | 5 | 54 | 4 | |||||||||||
(102 | ) | (82 | ) | (142 | ) | (139 | ) | ||||||||
Income before income taxes | 255 | 253 | 468 | 430 | |||||||||||
Income tax expense | 84 | 90 | 147 | 148 | |||||||||||
Net income | 171 | 163 | 321 | 282 | |||||||||||
Less: Net income attributable to noncontrolling interest | 13 | 13 | 23 | 23 | |||||||||||
Net income attributable to Masco Corporation | $ | 158 | $ | 150 | $ | 298 | $ | 259 | |||||||
Income per common share attributable to Masco Corporation: | |||||||||||||||
Basic: | |||||||||||||||
Net income | $ | .50 | $ | .45 | $ | .93 | $ | .78 | |||||||
Diluted: | |||||||||||||||
Net income | $ | .49 | $ | .45 | $ | .92 | $ | .77 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 171 | $ | 163 | $ | 321 | $ | 282 | |||||||
Less: Net income attributable to noncontrolling interest | 13 | 13 | 23 | 23 | |||||||||||
Net income attributable to Masco Corporation | $ | 158 | $ | 150 | $ | 298 | $ | 259 | |||||||
Other comprehensive income (loss), net of tax (Note J): | |||||||||||||||
Cumulative translation adjustment | $ | 65 | $ | (33 | ) | $ | 86 | $ | (9 | ) | |||||
Interest rate swaps | 2 | 1 | 2 | 1 | |||||||||||
Pension and other post-retirement benefits | 3 | 3 | 7 | 6 | |||||||||||
Realized gain on available-for-sale securities | — | (1 | ) | — | (1 | ) | |||||||||
Other comprehensive income (loss) | 70 | (30 | ) | 95 | (3 | ) | |||||||||
Less: Other comprehensive income (loss) attributable to noncontrolling interest | 14 | (5 | ) | 18 | 2 | ||||||||||
Other comprehensive income (loss) attributable to Masco Corporation | $ | 56 | $ | (25 | ) | $ | 77 | $ | (5 | ) | |||||
Total comprehensive income | $ | 241 | $ | 133 | $ | 416 | $ | 279 | |||||||
Less: Total comprehensive income attributable to the noncontrolling interest | 27 | 8 | 41 | 25 | |||||||||||
Total comprehensive income attributable to Masco Corporation | $ | 214 | $ | 125 | $ | 375 | $ | 254 |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES: | |||||||
Cash provided by operations | $ | 536 | $ | 433 | |||
Increase in receivables | (335 | ) | (286 | ) | |||
Increase in inventories | (132 | ) | (79 | ) | |||
Increase in accounts payable and accrued liabilities, net | 86 | 122 | |||||
Net cash from operating activities | 155 | 190 | |||||
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES: | |||||||
Retirement of notes | (535 | ) | (1,300 | ) | |||
Purchase of Company common stock | (134 | ) | (168 | ) | |||
Cash dividends paid | (64 | ) | (63 | ) | |||
Dividends paid to noncontrolling interest | (35 | ) | (31 | ) | |||
Issuance of notes, net of issuance costs | 593 | 889 | |||||
Debt extinguishment costs | (104 | ) | (40 | ) | |||
Issuance of Company common stock | — | 1 | |||||
Employee withholding taxes paid on stock-based compensation | (27 | ) | (24 | ) | |||
Increase (decrease) in debt, net | 1 | (2 | ) | ||||
Net cash for financing activities | (305 | ) | (738 | ) | |||
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES: | |||||||
Capital expenditures | (77 | ) | (79 | ) | |||
Proceeds from disposition of: | |||||||
Business, net of cash disposed | 126 | — | |||||
Short-term bank deposits | 73 | 117 | |||||
Other financial investments | 5 | 13 | |||||
Property and equipment | 6 | — | |||||
Other, net | (9 | ) | (6 | ) | |||
Net cash from investing activities | 124 | 45 | |||||
Effect of exchange rate changes on cash and cash investments | 28 | (9 | ) | ||||
CASH AND CASH INVESTMENTS: | |||||||
Increase (decrease) for the period | 2 | (512 | ) | ||||
At January 1 | 990 | 1,468 | |||||
At June 30 | $ | 992 | $ | 956 |
Total | Common Shares ($1 par value) | Paid-In Capital | Retained Deficit | Accumulated Other Comprehensive Loss | Noncontrolling Interest | ||||||||||||||||||
Balance, January 1, 2016 | $ | 58 | $ | 330 | $ | — | $ | (300 | ) | $ | (165 | ) | $ | 193 | |||||||||
Total comprehensive income (loss) | 279 | 259 | (5 | ) | 25 | ||||||||||||||||||
Shares issued | (11 | ) | 2 | (13 | ) | ||||||||||||||||||
Shares retired: | |||||||||||||||||||||||
Repurchased | (174 | ) | (6 | ) | (10 | ) | (158 | ) | |||||||||||||||
Surrendered (non-cash) | (11 | ) | (11 | ) | |||||||||||||||||||
Cash dividends declared | (63 | ) | (63 | ) | |||||||||||||||||||
Dividends paid to noncontrolling interest | (31 | ) | (31 | ) | |||||||||||||||||||
Stock-based compensation | 23 | 23 | |||||||||||||||||||||
Balance, June 30, 2016 | $ | 70 | $ | 326 | $ | — | $ | (273 | ) | $ | (170 | ) | $ | 187 | |||||||||
Balance, January 1, 2017 | $ | (103 | ) | $ | 318 | $ | — | $ | (381 | ) | $ | (235 | ) | $ | 195 | ||||||||
Total comprehensive income | 416 | 298 | 77 | 41 | |||||||||||||||||||
Shares issued | (13 | ) | 2 | (15 | ) | ||||||||||||||||||
Shares retired: | |||||||||||||||||||||||
Repurchased | (134 | ) | (4 | ) | (1 | ) | (129 | ) | |||||||||||||||
Surrendered (non-cash) | (13 | ) | (1 | ) | (12 | ) | |||||||||||||||||
Cash dividends declared | (64 | ) | (64 | ) | |||||||||||||||||||
Dividends paid to noncontrolling interest | (35 | ) | (35 | ) | |||||||||||||||||||
Stock-based compensation | 16 | 16 | |||||||||||||||||||||
Balance, June 30, 2017 | $ | 70 | $ | 315 | $ | — | $ | (288 | ) | $ | (158 | ) | $ | 201 |
Gross Goodwill At June 30, 2017 | Accumulated Impairment Losses | Net Goodwill At June 30, 2017 | |||||||||
Plumbing Products | $ | 531 | $ | (340 | ) | $ | 191 | ||||
Decorative Architectural Products | 294 | (75 | ) | 219 | |||||||
Cabinetry Products | 240 | (59 | ) | 181 | |||||||
Windows and Other Specialty Products | 717 | (511 | ) | 206 | |||||||
Total | $ | 1,782 | $ | (985 | ) | $ | 797 |
Gross Goodwill At December 31, 2016 | Accumulated Impairment Losses | Net Goodwill At December 31, 2016 | Other(A) | Divestitures (B) | Net Goodwill At June 30, 2017 | ||||||||||||||||||
Plumbing Products | $ | 519 | $ | (340 | ) | $ | 179 | $ | 12 | $ | — | $ | 191 | ||||||||||
Decorative Architectural Products | 294 | (75 | ) | 219 | — | — | 219 | ||||||||||||||||
Cabinetry Products | 240 | (59 | ) | 181 | — | — | 181 | ||||||||||||||||
Windows and Other Specialty Products | 987 | (734 | ) | 253 | — | (47 | ) | 206 | |||||||||||||||
Total | $ | 2,040 | $ | (1,208 | ) | $ | 832 | $ | 12 | $ | (47 | ) | $ | 797 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Metals contracts | $ | — | $ | 2 | $ | — | $ | 4 | |||||||
Interest rate swaps | (3 | ) | (1 | ) | (3 | ) | (1 | ) | |||||||
Total (loss) gain | $ | (3 | ) | $ | 1 | $ | (3 | ) | $ | 3 |
At June 30, 2017 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Exchange contracts | $ | 4 | |||||
Accrued liabilities | $ | — | |||||
Forward contracts | 15 | ||||||
Accrued liabilities | (1 | ) |
At December 31, 2016 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Forward contracts | $ | 21 | |||||
Accrued liabilities | $ | (2 | ) | ||||
Metals contracts | 1 | ||||||
Accrued liabilities | — |
Six Months Ended June 30, 2017 | Twelve Months Ended December 31, 2016 | ||||||
Balance at January 1 | $ | 192 | $ | 152 | |||
Accruals for warranties issued during the period | 27 | 66 | |||||
Accruals related to pre-existing warranties | 2 | 33 | |||||
Settlements made (in cash or kind) during the period | (28 | ) | (56 | ) | |||
Other, net (including currency translation) | 1 | (3 | ) | ||||
Balance at end of period | $ | 194 | $ | 192 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Long-term stock awards | $ | 7 | $ | 7 | $ | 13 | $ | 12 | |||||||
Stock options | 1 | — | 2 | 1 | |||||||||||
Restricted stock units | 1 | — | 1 | — | |||||||||||
Phantom stock awards and stock appreciation rights | 3 | (1 | ) | 5 | 2 | ||||||||||
Total | $ | 12 | $ | 6 | $ | 21 | $ | 15 |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Unvested stock award shares at January 1 | 4 | 5 | |||||
Weighted average grant date fair value | $ | 20 | $ | 17 | |||
Stock award shares granted | 1 | 1 | |||||
Weighted average grant date fair value | $ | 34 | $ | 26 | |||
Stock award shares vested | 2 | 2 | |||||
Weighted average grant date fair value | $ | 18 | $ | 16 | |||
Stock award shares forfeited | — | — | |||||
Weighted average grant date fair value | $ | 24 | $ | 20 | |||
Unvested stock award shares at June 30 | 3 | 4 | |||||
Weighted average grant date fair value | $ | 24 | $ | 20 |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Option shares outstanding, January 1 | 7 | 12 | |||||
Weighted average exercise price | $ | 15 | $ | 17 | |||
Option shares granted | — | — | |||||
Weighted average exercise price | $ | 34 | $ | 26 | |||
Option shares exercised | 1 | 2 | |||||
Aggregate intrinsic value on date of exercise (A) | $ | 33 million | $ | 31 million | |||
Weighted average exercise price | $ | 15 | $ | 21 | |||
Option shares forfeited | — | — | |||||
Weighted average exercise price | $ | — | $ | — | |||
Option shares outstanding, June 30 | 6 | 10 | |||||
Weighted average exercise price | $ | 16 | $ | 17 | |||
Weighted average remaining option term (in years) | 4 | 4 | |||||
Option shares vested and expected to vest, June 30 | 6 | 10 | |||||
Weighted average exercise price | $ | 16 | $ | 17 | |||
Aggregate intrinsic value (A) | $ | 130 million | $ | 137 million | |||
Weighted average remaining option term (in years) | 4 | 4 | |||||
Option shares exercisable (vested), June 30 | 4 | 8 | |||||
Weighted average exercise price | $ | 13 | $ | 16 | |||
Aggregate intrinsic value (A) | $ | 113 million | $ | 122 million | |||
Weighted average remaining option term (in years) | 3 | 3 |
(A) | 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 shares. |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Weighted average grant date fair value | $ | 9.68 | $ | 6.43 | |||
Risk-free interest rate | 2.16 | % | 1.41 | % | |||
Dividend yield | 1.19 | % | 1.49 | % | |||
Volatility factor | 30.00 | % | 29.00 | % | |||
Expected option life | 6 years | 6 years |
Three Months Ended June 30, | |||||||||||||||
2017 | 2016 | ||||||||||||||
Qualified | Non-Qualified | Qualified | Non-Qualified | ||||||||||||
Service cost | $ | — | $ | — | $ | — | $ | — | |||||||
Interest cost | 13 | 2 | 10 | 3 | |||||||||||
Expected return on plan assets | (12 | ) | — | (9 | ) | — | |||||||||
Amortization of net loss | 5 | — | 3 | — | |||||||||||
Net periodic pension cost | $ | 6 | $ | 2 | $ | 4 | $ | 3 |
Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | ||||||||||||||
Qualified | Non-Qualified | Qualified | Non-Qualified | ||||||||||||
Service cost | $ | 1 | $ | — | $ | 1 | $ | — | |||||||
Interest cost | 25 | 3 | 21 | 4 | |||||||||||
Expected return on plan assets | (24 | ) | — | (19 | ) | — | |||||||||
Amortization of net loss | 10 | 1 | 7 | 1 | |||||||||||
Net periodic pension cost | $ | 12 | $ | 4 | $ | 10 | $ | 5 |
Amounts Reclassified | ||||||||||||||||||
Accumulated Other Comprehensive Loss | Three Months Ended June 30, | Six Months Ended June 30, | Statement of Operations Line Item | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Amortization of defined benefit pension and other postretirement benefits: | ||||||||||||||||||
Actuarial losses, net | $ | 5 | $ | 3 | $ | 11 | $ | 8 | Selling, general and administrative expenses | |||||||||
Tax (benefit) | (2 | ) | — | (4 | ) | (2 | ) | |||||||||||
Net of tax | $ | 3 | $ | 3 | $ | 7 | $ | 6 | ||||||||||
Interest rate swaps | $ | 3 | $ | 1 | $ | 3 | $ | 1 | Interest expense | |||||||||
Tax (benefit) | (1 | ) | — | (1 | ) | — | ||||||||||||
Net of tax | $ | 2 | $ | 1 | $ | 2 | $ | 1 | ||||||||||
Available-for-sale securities | $ | — | $ | (1 | ) | $ | — | $ | (1 | ) | Other, net | |||||||
Tax expense | — | — | — | — | ||||||||||||||
Net of tax | $ | — | $ | (1 | ) | $ | — | $ | (1 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Net Sales(A) | Operating Profit (Loss) | Net Sales(A) | Operating Profit (Loss) | ||||||||||||||||||||||||||||
Operations by segment: | |||||||||||||||||||||||||||||||
Plumbing Products | $ | 949 | $ | 923 | $ | 198 | $ | 188 | $ | 1,812 | $ | 1,736 | $ | 354 | $ | 317 | |||||||||||||||
Decorative Architectural Products | 653 | 620 | 141 | 139 | 1,158 | 1,113 | 242 | 244 | |||||||||||||||||||||||
Cabinetry Products | 251 | 261 | 30 | 34 | 482 | 497 | 46 | 58 | |||||||||||||||||||||||
Windows and Other Specialty Products | 204 | 197 | 18 | (2 | ) | 382 | 375 | 24 | 1 | ||||||||||||||||||||||
Total | $ | 2,057 | $ | 2,001 | $ | 387 | $ | 359 | $ | 3,834 | $ | 3,721 | $ | 666 | $ | 620 | |||||||||||||||
Operations by geographic area: | |||||||||||||||||||||||||||||||
North America | $ | 1,660 | $ | 1,598 | $ | 330 | $ | 299 | $ | 3,071 | $ | 2,948 | $ | 569 | $ | 514 | |||||||||||||||
International, principally Europe | 397 | 403 | 57 | 60 | 763 | 773 | 97 | 106 | |||||||||||||||||||||||
Total | $ | 2,057 | $ | 2,001 | 387 | 359 | $ | 3,834 | $ | 3,721 | 666 | 620 | |||||||||||||||||||
General corporate expense, net | (30 | ) | (24 | ) | (56 | ) | (51 | ) | |||||||||||||||||||||||
Operating profit | 357 | 335 | 610 | 569 | |||||||||||||||||||||||||||
Other income (expense), net | (102 | ) | (82 | ) | (142 | ) | (139 | ) | |||||||||||||||||||||||
Income before income taxes | $ | 255 | $ | 253 | $ | 468 | $ | 430 |
(A) | Inter-segment sales were not material. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Gain on sale of business | $ | 49 | $ | — | $ | 49 | $ | — | |||||||
Income from cash and cash investments and short-term bank deposits | 1 | 1 | 2 | 2 | |||||||||||
Equity investment income, net | 1 | — | 1 | 1 | |||||||||||
Realized gain from auction rate securities | — | 1 | — | 1 | |||||||||||
Realized gains from private equity funds | 1 | 1 | 2 | 1 | |||||||||||
Foreign currency transaction (losses) gains | (1 | ) | 2 | — | 2 | ||||||||||
Other items, net | — | — | — | (3 | ) | ||||||||||
Total other, net | $ | 51 | $ | 5 | $ | 54 | $ | 4 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Numerator (basic and diluted): | |||||||||||||||
Net income | $ | 158 | $ | 150 | $ | 298 | $ | 259 | |||||||
Less: Allocation to unvested restricted stock awards | 1 | 2 | 3 | 3 | |||||||||||
Net income available to common shareholders | $ | 157 | $ | 148 | $ | 295 | $ | 256 | |||||||
Denominator: | |||||||||||||||
Basic common shares (based upon weighted average) | 315 | 328 | 316 | 329 | |||||||||||
Add: Stock option dilution | 4 | 3 | 4 | 4 | |||||||||||
Diluted common shares | 319 | 331 | 320 | 333 |
MASCO CORPORATION | |
Item 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
SECOND QUARTER 2017 AND THE FIRST SIX MONTHS 2017 VERSUS SECOND QUARTER 2016 AND THE FIRST SIX MONTHS 2016 |
Three Months Ended June 30, | Percent Change | |||||||||
2017 | 2016 | 2017 vs. 2016 | ||||||||
Net Sales: | ||||||||||
Plumbing Products | $ | 949 | $ | 923 | 3 | % | ||||
Decorative Architectural Products | 653 | 620 | 5 | % | ||||||
Cabinetry Products | 251 | 261 | (4 | )% | ||||||
Windows and Other Specialty Products | 204 | 197 | 4 | % | ||||||
Total | $ | 2,057 | $ | 2,001 | 3 | % | ||||
North America | $ | 1,660 | $ | 1,598 | 4 | % | ||||
International, principally Europe | 397 | 403 | (1 | )% | ||||||
Total | $ | 2,057 | $ | 2,001 | 3 | % |
Six Months Ended June 30, | Percent Change | |||||||||
2017 | 2016 | 2017 vs. 2016 | ||||||||
Net Sales: | ||||||||||
Plumbing Products | $ | 1,812 | $ | 1,736 | 4 | % | ||||
Decorative Architectural Products | 1,158 | 1,113 | 4 | % | ||||||
Cabinetry Products | 482 | 497 | (3 | )% | ||||||
Windows and Other Specialty Products | 382 | 375 | 2 | % | ||||||
Total | $ | 3,834 | $ | 3,721 | 3 | % | ||||
North America | $ | 3,071 | $ | 2,948 | 4 | % | ||||
International, principally Europe | 763 | 773 | (1 | )% | ||||||
Total | $ | 3,834 | $ | 3,721 | 3 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Operating Profit (Loss) Margins: (A) | |||||||||||
Plumbing Products | 20.9 | % | 20.4 | % | 19.5 | % | 18.3 | % | |||
Decorative Architectural Products | 21.6 | % | 22.4 | % | 20.9 | % | 21.9 | % | |||
Cabinetry Products | 12.0 | % | 13.0 | % | 9.5 | % | 11.7 | % | |||
Windows and Other Specialty Products | 8.8 | % | (1.0 | )% | 6.3 | % | 0.3 | % | |||
North America | 19.9 | % | 18.7 | % | 18.5 | % | 17.4 | % | |||
International, principally Europe | 14.4 | % | 14.9 | % | 12.7 | % | 13.7 | % | |||
Total | 18.8 | % | 17.9 | % | 17.4 | % | 16.7 | % | |||
Total operating profit margin, as reported | 17.4 | % | 16.7 | % | 15.9 | % | 15.3 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales, as reported | $ | 2,057 | $ | 2,001 | $ | 3,834 | $ | 3,721 | |||||||
Acquisitions (none) | — | — | — | — | |||||||||||
Net sales, excluding acquisitions | 2,057 | 2,001 | 3,834 | 3,721 | |||||||||||
Currency translation | 23 | — | 45 | — | |||||||||||
Net sales, excluding acquisitions and the effect of currency translation | $ | 2,080 | $ | 2,001 | $ | 3,879 | $ | 3,721 |
MASCO CORPORATION | |
Item 4. | CONTROLS AND PROCEDURES |
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 | ||||||||
4/1/17-4/30/17 | 846,400 | $ | 33.67 | 846,400 | 9,246,513 | |||||||
5/1/17-5/12/17 | — | $ | — | — | 9,246,513 | |||||||
Total for the period | 846,400 | $ | 33.67 | 846,400 |
(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. This authorization was replaced in May 2017. |
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 Value Of Shares That May Yet Be Purchased Under The Plans Or Programs | |||||||||
5/13/17-5/31/17 | 100,000 | $ | 37.05 | 100,000 | $ | 1,496,294,590 | |||||||
6/1/17-6/30/17 | 264,047 | $ | 37.20 | 264,047 | $ | 1,486,473,118 | |||||||
Total for the period | 364,047 | $ | 37.16 | 364,047 | $ | 1,486,473,118 |
(A) | In May 2017, our Board of Directors authorized the repurchase, for retirement, of up to $1.5 billion of shares of our common stock in open-market transactions or otherwise, replacing the previous Board of Directors authorization established in 2014. |
4.1 | Resolutions establishing the terms of the 3.500% Notes Due 2027 and form of global note. Incorporated by reference to Exhibit 4.1 to Masco Corporation’s Current Report on Form 8-K dated June 12, 2017 and filed on June 15, 2017 | ||
4.2 | – | Resolutions establishing the terms of the 4.500% Notes Due 2047 and form of global note. Incorporated by reference to Exhibit 4.2 to Masco Corporation’s Current Report on Form 8-K dated June 12, 2017 and filed on June 15, 2017 | |
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 |
MASCO CORPORATION | ||
By: | /s/ John G. Sznewajs | |
Name: John G. Sznewajs | ||
Title: Vice President, Chief Financial Officer |
Exhibit | ||
Exhibit 4.1 | Resolutions establishing the terms of the 3.500% Notes Due 2027 and form of global note. Incorporated by reference to Exhibit 4.1 to Masco Corporation’s Current Report on Form 8-K dated June 12, 2017 and filed on June 15, 2017 | |
Exhibit 4.2 | Resolutions establishing the terms of the 4.500% Notes Due 2047 and form of global note. Incorporated by reference to Exhibit 4.2 to Masco Corporation’s Current Report on Form 8-K dated June 12, 2017 and filed on June 15, 2017 | |
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 |
(Dollars in Millions) | ||||||||||||||||||||||||
Six Months Ended June 30, | Year Ended December 31, | |||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
Earnings Before Income Taxes, Preferred Stock Dividends and Fixed Charges: | ||||||||||||||||||||||||
Income from continuing operations before income taxes | $ | 468 | $ | 830 | $ | 689 | $ | 507 | $ | 386 | $ | 155 | ||||||||||||
Deduct equity in undistributed (earnings) loss of fifty-percent-or-less-owned companies | (1 | ) | (2 | ) | (2 | ) | 2 | (16) | — | |||||||||||||||
Add interest on indebtedness, net | 87 | 185 | 222 | 221 | 230 | 249 | ||||||||||||||||||
Add amortization of debt expense | 2 | 5 | 5 | 5 | 6 | 7 | ||||||||||||||||||
Add estimated interest factor for rentals | 10 | 21 | 19 | 33 | 31 | 31 | ||||||||||||||||||
Earnings before income taxes, noncontrolling interest, fixed charges and preferred stock dividends | $ | 566 | $ | 1,039 | $ | 933 | $ | 768 | $ | 637 | $ | 442 | ||||||||||||
Fixed Charges: | ||||||||||||||||||||||||
Interest on indebtedness | $ | 89 | $ | 190 | $ | 223 | $ | 221 | $ | 229 | $ | 248 | ||||||||||||
Amortization of debt expense | 2 | 5 | 5 | 5 | 6 | 7 | ||||||||||||||||||
Estimated interest factor for rentals | 10 | 21 | 19 | 33 | 31 | 31 | ||||||||||||||||||
Total fixed charges | $ | 101 | $ | 216 | $ | 247 | $ | 259 | $ | 266 | $ | 286 | ||||||||||||
Preferred stock dividends (A) | — | — | — | — | — | — | ||||||||||||||||||
Combined fixed charges and preferred stock dividends | $ | 101 | $ | 216 | $ | 247 | $ | 259 | $ | 266 | $ | 286 | ||||||||||||
Ratio of earnings to fixed charges | 5.6 | 4.8 | 3.8 | 3.0 | 2.4 | 1.5 | ||||||||||||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends | 5.6 | 4.8 | 3.8 | 3.0 | 2.4 | 1.5 | ||||||||||||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends excluding certain items (B) | 5.6 | 4.8 | 3.8 | 2.9 | 2.4 | 1.7 |
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: | July 27, 2017 | By: | /s/ Keith Allman | |
Keith Allman | ||||
President and Chief Executive Officer |
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: | July 27, 2017 | By: | /s/ John G. Sznewajs | |
John G. Sznewajs | ||||
Vice President, Chief Financial Officer |
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: | July 27, 2017 | /s/ Keith Allman | ||
Keith Allman | ||||
President and Chief Executive Officer | ||||
Date: | July 27, 2017 | /s/ John G. Sznewajs | ||
John G. Sznewajs | ||||
Vice President, Chief Financial Officer |
Document and Entity Information |
6 Months Ended |
---|---|
Jun. 30, 2017
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 | Jun. 30, 2017 |
Document Fiscal Year Focus | 2017 |
Document Fiscal Period Focus | Q2 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding (in shares) | 318,593,732 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common share, par value (in dollars per share) | $ 1 | $ 1 |
Common shares, shares authorized (in shares) | 1,400,000,000 | 1,400,000,000 |
Common shares, shares issued (in shares) | 315,400,000 | 318,000,000 |
Common shares, shares outstanding (in shares) | 315,400,000 | 318,000,000 |
Preferred shares, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred shares, shares issued (in shares) | 0 | 0 |
Preferred shares, shares outstanding (in shares) | 0 | 0 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Income Statement [Abstract] | ||||
Net sales | $ 2,057 | $ 2,001 | $ 3,834 | $ 3,721 |
Cost of sales | 1,320 | 1,301 | 2,489 | 2,452 |
Gross profit | 737 | 700 | 1,345 | 1,269 |
Selling, general and administrative expenses | 380 | 365 | 735 | 700 |
Operating profit | 357 | 335 | 610 | 569 |
Other income (expense), net: | ||||
Interest expense | (153) | (87) | (196) | (143) |
Other, net | 51 | 5 | 54 | 4 |
Total other income (expense), net | (102) | (82) | (142) | (139) |
Income before income taxes | 255 | 253 | 468 | 430 |
Income tax expense | 84 | 90 | 147 | 148 |
Net income | 171 | 163 | 321 | 282 |
Less: Net income attributable to noncontrolling interest | 13 | 13 | 23 | 23 |
Net income attributable to Masco Corporation | $ 158 | $ 150 | $ 298 | $ 259 |
Basic: | ||||
Net income (in dollars per share) | $ 0.50 | $ 0.45 | $ 0.93 | $ 0.78 |
Diluted: | ||||
Net income (in dollars per share) | $ 0.49 | $ 0.45 | $ 0.92 | $ 0.77 |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Stockholders' Equity [Abstract] | ||
Common share, par value (in dollars per share) | $ 1 | $ 1 |
Accounting Policies |
6 Months Ended |
---|---|
Jun. 30, 2017 | |
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 fairly state our financial position at June 30, 2017, our results of operations and comprehensive income (loss) for the three-month and six-month periods ended June 30, 2017 and 2016, and cash flows and changes in shareholders' equity for the six-month periods ended June 30, 2017 and 2016. The condensed consolidated balance sheet at December 31, 2016 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. Reclassification. Certain prior year amounts have been reclassified to conform to the 2017 presentation in the condensed consolidated financial statements. Recently Adopted Accounting Pronouncements. In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory," which requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value, as opposed to the lower of cost or market. We adopted ASU 2015-11 on January 1, 2017. The adoption of the new standard did not have an impact on our financial position or results of operations. In March 2016, the FASB issued 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, simplifies the accounting requirements for forfeitures and employers' tax withholding requirements, and modifies the presentation of certain items on the statement of cash flows. We adopted ASU 2016-09 on January 1, 2017, using the retrospective options for reclassifying excess tax benefit from stock-based compensation and employee withholding taxes paid on stock-based compensation within our statement of cash flows. The adoption of the remaining requirements did not have an impact on our financial position or results of operation. As a result of this adoption, we increased cash flows from (for) operating activities and decreased cash flows from (for) financing activities by $36 million for the six-month period ended June 30, 2016. For full year 2016 and 2015, we currently estimate increasing cash flows from (for) operating activities and decreasing cash flows from (for) financing activities by $62 million and $111 million, respectively. Subsequent to adoption, tax effects related to employee share-based payments will be recorded to income tax expense, thus increasing the volatility in our effective tax rate. In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We early adopted ASU 2017-04 effective January 1, 2017. The adoption of the new standard did not have an impact on our financial position or results of operations. Recently Issued Accounting Pronouncements. In May 2014, FASB issued a new standard for revenue recognition, Accounting Standards Codification ("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. The standard allows for either a full retrospective or modified retrospective method of adoption. We are finalizing our assessment of the impact of the adoption; however, currently, we do not expect the adoption will have a material impact on our financial position or results of operations. We currently anticipate adopting this standard on its effective date, January 1, 2018, under the full retrospective method of adoption. We have not experienced significant issues in our implementation process and we do not anticipate significant changes to our accounting policies. In January 2016, the FASB issued 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. The adoption of this standard is not expected to have a material impact on our financial position or results of operations. In February 2016, the FASB issued a new standard for leases, ASC 842, which changes the accounting model for identifying and accounting for leases. ASC 842 is effective for us for annual periods beginning January 1, 2019 and requires retrospective application. We expect this standard to increase our total assets and total liabilities; however, we are currently evaluating the magnitude of the impact the adoption of this new standard will have on our financial position and results of operations. A. ACCOUNTING POLICIES (Concluded) In March 2017, the FASB issued ASU 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," which modifies the presentation of net periodic pension and post-retirement benefit cost ("net benefit cost") in the income statement and the components eligible for capitalization as assets. ASC 2017-07 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; however, we expect the impact to be limited to the reclassification of non-service cost components of net benefit cost from operating profit to other income (expense), net, within our results of operations. In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting," which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. ASC 2017-09 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. |
Divestitures |
6 Months Ended |
---|---|
Jun. 30, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Divestitures | DIVESTITURES In the second quarter of 2017 we divested of Arrow Fastener Co., LLC ("Arrow"), a manufacturer and distributor of fastening tools, for proceeds of $126 million. In connection with the divestiture we recognized a gain of $49 million, included in other, net, within other income (expense), net in our condensed consolidated statement of operations. The results of this business are included within income before income taxes in the condensed consolidated statement of operations and reported as part of our Windows and Other Specialty Products segment prior to the date of the divestiture. |
Goodwill and Other Intangible Assets |
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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 six-month period ended June 30, 2017, by segment, were as follows, in millions:
(A) Other principally includes the effect of foreign currency translation. (B) Divestitures includes the disposition of Arrow in the second quarter of 2017 and is comprised of $270 million of gross goodwill and $223 million of accumulated impairment losses. The carrying value of our other indefinite-lived intangible assets was $135 million and $136 million at June 30, 2017 and December 31, 2016, respectively, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $21 million (net of accumulated amortization of $9 million) and $18 million (net of accumulated amortization of $16 million) at June 30, 2017 and December 31, 2016, respectively, and principally included customer relationships. |
Depreciation and Amortization |
6 Months Ended |
---|---|
Jun. 30, 2017 | |
Depreciation, Depletion and Amortization [Abstract] | |
Depreciation and Amortization | DEPRECIATION AND AMORTIZATION Depreciation and amortization expense was $64 million and $66 million for the six-month periods ended June 30, 2017 and 2016, respectively. |
Derivative Instruments and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | 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 may include interest rate swap agreements, foreign currency contracts and metals contracts. 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 approximately $2 million loss was recognized in our consolidated statement of operations in other, net. The remaining loss of approximately $23 million from the termination of these swaps is being amortized as an increase to interest expense over the remaining term of the debt, through March 2022. At June 30, 2017, the balance remaining in accumulated other comprehensive loss was $9 million (pre-tax). 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, enter into foreign currency forward contracts and foreign currency exchange contracts. Gains (losses) related to foreign currency forward and exchange contracts are recorded in our condensed consolidated statements of operations in other income (expense), net. In the event that the counterparties fail to meet the terms of the foreign currency forward or exchange contracts, our exposure is limited to the aggregate foreign currency rate differential with such institutions. Metals Contracts. From time to time, we have entered into contracts to manage our exposure to increases in the prices 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:
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:
E. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Concluded)
The fair value of all foreign currency derivative contracts is estimated on a recurring basis, quarterly, using Level 2 inputs (significant other observable inputs). |
Warranty Liability |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warranty Liability | WARRANTY LIABILITY Changes in our warranty liability were as follows, in millions:
In the second and third quarters of 2016, a business unit in the Windows and Other Specialty Products segment recorded $10 million and $21 million, respectively, for increases in its estimate of expected future warranty claims relating to previously sold windows and doors. The change in estimate resulted from the adoption of an improved warranty valuation model and the availability of additional information used to support the estimate of costs to service claims and recent warranty claims trends, including a shift to increased costs to repair. |
Debt |
6 Months Ended |
---|---|
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Debt | DEBT On June 21, 2017, we issued $300 million of 3.5% Notes due November 15, 2027 and $300 million of 4.5% Notes due May 15, 2047. We received proceeds of $599 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 June 27, 2017, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire $299 million of our 7.125% Notes due March 15, 2020, $74 million of our 5.95% Notes due March 15, 2022, $62 million of our 7.75% Notes due August 1, 2029, and $100 million of our 6.5% Notes due August 15, 2032. In connection with these early retirements, we incurred a loss on debt extinguishment of $107 million, which was recorded as interest expense. 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 extended 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 Euro 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 June 30, 2017, we had no outstanding standby letters of credit under the Amended Credit Agreement. G. DEBT (Concluded) 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 no borrowings have been made at June 30, 2017. 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, which are Level 1 inputs. The aggregate estimated market value of short-term and long-term debt was approximately $3.4 billion, compared with the aggregate carrying value of $3.1 billion, at June 30, 2017. The aggregate estimated market value of short-term and long-term debt was approximately $3.3 billion, compared with the aggregate carrying value of $3.0 billion, at December 31, 2016. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | STOCK-BASED COMPENSATION Our 2014 Long Term Stock Incentive Plan provides for the issuance of stock-based incentives in various forms to our employees and non-employee Directors. At June 30, 2017, outstanding stock-based incentives were in the form of long-term stock awards, stock options, restricted stock units, 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:
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 817,000 shares of long-term stock awards in the six-month period ended June 30, 2017. H. STOCK-BASED COMPENSATION (Continued) Our long-term stock award activity was as follows, shares in millions:
At June 30, 2017 and 2016, there was $56 million and $55 million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of three years at both June 30, 2017 and 2016. The total market value (at the vesting date) of stock award shares which vested during the six-month periods ended June 30, 2017 and 2016 was $41 million and $38 million, respectively. Stock Options. Stock options are granted to certain 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 397,350 shares of stock options in the six-month period ended June 30, 2017 with a grant date weighted-average exercise price of approximately $34 per share. In the six-month period ended June 30, 2017, no stock option shares were forfeited (including options that expired unexercised). H. STOCK-BASED COMPENSATION (Continued) Our stock option activity was as follows, shares in millions:
H. STOCK-BASED COMPENSATION (Concluded) At June 30, 2017 and 2016, there was $9 million and $8 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 three years at both June 30, 2017 and 2016. 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:
Restricted Stock Units. In March 2017, our Organization and Compensation Committee ("Compensation Committee") of the Board of Directors approved a Long Term Incentive Program ("LTIP Program"), replacing our previous Long Term Cash Incentive Plan. Under the LTIP Program, we granted restricted stock units to certain senior executives. These restricted stock units will vest and share awards will be issued at no cost to the employees, subject to our achievement of specified return on invested capital performance goals over a three-year period that have been established by the Compensation Committee for the performance period and the employee's continued employment through the share award date. Restricted stock units are granted at a target number; based on our performance, the number of restricted stock units that vest can be adjusted downward to zero and upward to a maximum of 200%. We granted 124,780 restricted stock units in the six-month period ended June 30, 2017, with a grant date fair value of approximately $34 per share. No restricted stock units were forfeited in the six-month period ended June 30, 2017. |
Employee Retirement Plans |
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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:
We froze all future benefit accruals under substantially all of our domestic and foreign qualified and domestic non-qualified defined benefit pension plans several years ago. |
Reclassifications From Accumulated Other Comprehensive Loss |
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Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications From Accumulated Other Comprehensive Loss | 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:
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Segment Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | SEGMENT INFORMATION Information by segment and geographic area was as follows, in millions:
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Other Income (Expense), Net |
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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:
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Earnings Per Common Share |
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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:
For the three-month and six-month periods ended June 30, 2017 and 2016, we allocated dividends and undistributed earnings to the unvested restricted stock awards. Additionally, 397,000 and 310,000 common shares for the three-month and six-month periods ended June 30, 2017, respectively, and 380,000 and 1 million common shares for the three-month and six-month periods ended June 30, 2016, respectively, related to stock options were excluded from the computation of diluted earnings per common share due to their antidilutive effect. In May 2017, our Board of Directors authorized the repurchase, for retirement, of up to $1.5 billion of shares of our common stock in open-market transactions or otherwise, replacing the previous Board of Directors authorization established in 2014. In the first six months of 2017, we repurchased and retired 4.0 million shares of our common stock (including 0.8 million shares to offset the dilutive impact of long-term stock awards granted in the first half of the year), for approximately $134 million. At June 30, 2017, we had $1.486 billion remaining under the 2017 authorization. On the basis of amounts paid (declared), cash dividends per common share were $0.100 ($0.100) and $0.200 ($0.200) for the three-month and six-month periods ended June 30, 2017, respectively, and $0.095 ($0.095) and $0.190 ($0.190) for the three-month and six-month periods ended June 30, 2016, respectively. |
Other Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2017 | |
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. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES Effective January 1, 2017, we adopted ASU 2016-09 which requires the tax effects related to employee share-based payments to be recorded to income tax expense, thus increasing the volatility in our effective tax rate. Our effective tax rate was 33 percent and 31 percent for the three-month and six-month periods ended June 30, 2017, respectively, and 36 percent and 34 percent for the three-month and six-month periods ended June 30, 2016, respectively. The decrease in the rates is primarily due to a $10 million and $17 million income tax benefit on employee share-based payments recognized during the three-month and six-month periods ended June 30, 2017, respectively. |
Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Reclassification | Reclassification. Certain prior year amounts have been reclassified to conform to the 2017 presentation in the condensed consolidated financial statements. |
Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements | Recently Adopted Accounting Pronouncements. In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory," which requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value, as opposed to the lower of cost or market. We adopted ASU 2015-11 on January 1, 2017. The adoption of the new standard did not have an impact on our financial position or results of operations. In March 2016, the FASB issued 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, simplifies the accounting requirements for forfeitures and employers' tax withholding requirements, and modifies the presentation of certain items on the statement of cash flows. We adopted ASU 2016-09 on January 1, 2017, using the retrospective options for reclassifying excess tax benefit from stock-based compensation and employee withholding taxes paid on stock-based compensation within our statement of cash flows. The adoption of the remaining requirements did not have an impact on our financial position or results of operation. As a result of this adoption, we increased cash flows from (for) operating activities and decreased cash flows from (for) financing activities by $36 million for the six-month period ended June 30, 2016. For full year 2016 and 2015, we currently estimate increasing cash flows from (for) operating activities and decreasing cash flows from (for) financing activities by $62 million and $111 million, respectively. Subsequent to adoption, tax effects related to employee share-based payments will be recorded to income tax expense, thus increasing the volatility in our effective tax rate. In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We early adopted ASU 2017-04 effective January 1, 2017. The adoption of the new standard did not have an impact on our financial position or results of operations. Recently Issued Accounting Pronouncements. In May 2014, FASB issued a new standard for revenue recognition, Accounting Standards Codification ("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. The standard allows for either a full retrospective or modified retrospective method of adoption. We are finalizing our assessment of the impact of the adoption; however, currently, we do not expect the adoption will have a material impact on our financial position or results of operations. We currently anticipate adopting this standard on its effective date, January 1, 2018, under the full retrospective method of adoption. We have not experienced significant issues in our implementation process and we do not anticipate significant changes to our accounting policies. In January 2016, the FASB issued 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. The adoption of this standard is not expected to have a material impact on our financial position or results of operations. In February 2016, the FASB issued a new standard for leases, ASC 842, which changes the accounting model for identifying and accounting for leases. ASC 842 is effective for us for annual periods beginning January 1, 2019 and requires retrospective application. We expect this standard to increase our total assets and total liabilities; however, we are currently evaluating the magnitude of the impact the adoption of this new standard will have on our financial position and results of operations. A. ACCOUNTING POLICIES (Concluded) In March 2017, the FASB issued ASU 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," which modifies the presentation of net periodic pension and post-retirement benefit cost ("net benefit cost") in the income statement and the components eligible for capitalization as assets. ASC 2017-07 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; however, we expect the impact to be limited to the reclassification of non-service cost components of net benefit cost from operating profit to other income (expense), net, within our results of operations. In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting," which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. ASC 2017-09 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. |
Goodwill and Other Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in carrying amount of goodwill | The changes in the carrying amount of goodwill for the six-month period ended June 30, 2017, by segment, were as follows, in millions:
(A) Other principally includes the effect of foreign currency translation. (B) Divestitures includes the disposition of Arrow in the second quarter of 2017 and is comprised of $270 million of gross goodwill and $223 million of accumulated impairment losses. |
Derivative Instruments and Hedging Activities (Tables) |
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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:
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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:
E. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Concluded)
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Warranty Liability (Tables) |
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in the Company's warranty liability | Changes in our warranty liability were as follows, in millions:
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Stock-Based Compensation (Tables) |
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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:
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Schedule of the Company's long-term stock award activity | Our long-term stock award activity was as follows, shares in millions:
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Schedule of the Company's stock option activity | Our stock option activity was as follows, shares in millions:
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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:
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Employee Retirement Plans (Tables) |
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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:
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Reclassifications From Accumulated Other Comprehensive Loss (Tables) |
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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:
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Segment Information (Tables) |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of information by segment and geographic area | Information by segment and geographic area was as follows, in millions:
|
Other Income (Expense), Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
|
Earnings Per Common Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
|
Accounting Policies - Narrative (Details) - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Debt Instrument [Line Items] | ||||
Net cash for operating activities | $ 155 | $ 190 | ||
Net cash from financing activities | $ (305) | (738) | ||
Accounting Standards Update 2016-09, Statutory Tax Withholding Component | ||||
Debt Instrument [Line Items] | ||||
Net cash for operating activities | 36 | $ 62 | $ 111 | |
Net cash from financing activities | $ (36) | $ (62) | $ (111) |
Divestitures (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Proceeds from divestiture of business | $ 126 | $ 0 | |
Arrow Fastener | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Proceeds from divestiture of business | $ 126 | ||
Gain recognized in connection with divestiture | $ 49 |
Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Other indefinite-lived intangible assets | $ 135 | $ 136 |
Carrying value of definite-lived intangible assets | 21 | 18 |
Accumulated amortization | $ 9 | $ 16 |
Depreciation and Amortization (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Depreciation, Depletion and Amortization [Abstract] | ||
Depreciation and amortization expense | $ 64 | $ 66 |
Derivative Instruments and Hedging Activities - Narrative (Details) - Derivatives designated as hedging instruments - Cash flow hedges - Interest rate swaps - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2017 |
Dec. 31, 2012 |
|
Three Month London Interbank Offered Rate | ||
Interest Rate Swap Agreements | ||
Unrealized gain (loss) on interest rate cash flow hedges, AOCI | $ (9,000,000) | |
3 month LIBOR interest rate swap, cash flow hedge terminated March 2012 | ||
Interest Rate Swap Agreements | ||
Debt issued | $ 400,000,000 | |
Loss on termination of swaps being amortized | 23,000,000 | |
Other, net | 3 month LIBOR interest rate swap, cash flow hedge terminated March 2012 | ||
Interest Rate Swap Agreements | ||
Ineffective portion of the cash flow hedges | $ 2,000,000 |
Derivative Instruments and Hedging Activities - Pre-tax Gains (Losses) (Details) - Not designated as a hedge - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Derivative instruments and hedging activities | ||||
Total gain (loss) | $ (3) | $ 1 | $ (3) | $ 3 |
Metals contracts | Cost of sales | ||||
Derivative instruments and hedging activities | ||||
Total gain (loss) | 0 | 2 | 0 | 4 |
Interest rate swaps | ||||
Derivative instruments and hedging activities | ||||
Total gain (loss) | $ (3) | $ (1) | $ (3) | $ (1) |
Derivative Instruments and Hedging Activities - Fair Value of Derivative Instruments (Details) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Foreign currency exchange contracts | ||
Derivative instruments and hedging activities | ||
Notional Amount | $ 4 | |
Foreign currency exchange contracts | Accrued liabilities | Recurring | Level 2 | ||
Derivative instruments and hedging activities | ||
Liabilities | 0 | |
Forward contracts | ||
Derivative instruments and hedging activities | ||
Notional Amount | 15 | $ 21 |
Forward contracts | Accrued liabilities | Recurring | Level 2 | ||
Derivative instruments and hedging activities | ||
Liabilities | $ (1) | (2) |
Metals contracts | ||
Derivative instruments and hedging activities | ||
Notional Amount | 1 | |
Metals contracts | Accrued liabilities | Recurring | Level 2 | ||
Derivative instruments and hedging activities | ||
Liabilities | $ 0 |
Warranty Liability (Details) - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
|
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward] | ||
Balance at the beginning of the period | $ 192 | $ 152 |
Accruals for warranties issued during the period | 27 | 66 |
Accruals related to pre-existing warranties | 2 | 33 |
Settlements made (in cash or kind) during the period | (28) | (56) |
Other, net (including currency translation) | 1 | (3) |
Balance at the end of the period | $ 194 | $ 192 |
Warranty Liability - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Sep. 30, 2016 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Dec. 31, 2016 |
|
Product Warranty Liability [Line Items] | ||||
Increase in expected future warranty claims | $ 27 | $ 66 | ||
Windows and Other Specialty Products | ||||
Product Warranty Liability [Line Items] | ||||
Increase in expected future warranty claims | $ 21 | $ 10 |
Stock-Based Compensation (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Stock-based compensation | ||||
Pre-tax compensation expense | $ 12 | $ 6 | $ 21 | $ 15 |
Long-term stock awards | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | 7 | 7 | 13 | 12 |
Stock options | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | 1 | 0 | 2 | 1 |
Restricted stock units | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | 1 | 0 | 1 | 0 |
Phantom stock awards and stock appreciation rights | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | $ 3 | $ (1) | $ 5 | $ 2 |
Stock-Based Compensation - Long-Term Stock Award (Details) - Long-term stock awards - USD ($) $ / shares in Units, $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Unvested stock award shares | ||
Balance at the beginning of the period (in shares) | 4,000,000 | 5,000,000 |
Granted (in shares) | 817,000 | 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) | 3,000,000 | 4,000,000 |
Weighted average grant date fair value | ||
Balance at the beginning of the period (in dollars per share) | $ 20 | $ 17 |
Granted (in dollars per share) | 34 | 26 |
Vested (in dollars per share) | 18 | 16 |
Forfeited (in dollars per share) | 24 | 20 |
Balance at the end of the period (in dollars per share) | $ 24 | $ 20 |
Additional disclosures | ||
Total unrecognized compensation expense | $ 56 | $ 55 |
Remaining weighted average vesting period | 3 years | 3 years |
Total market value (at the vesting date) of stock award shares | $ 41 | $ 38 |
Stock-Based Compensation - Option Pricing Assumptions and Estimates (Details) - Stock options - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Stock Options | ||
Weighted average grant date fair value (in dollars per share) | $ 9.68 | $ 6.43 |
Risk-free interest rate (as a percent) | 2.16% | 1.41% |
Dividend yield (as a percent) | 1.19% | 1.49% |
Volatility factor (as a percent) | 30.00% | 29.00% |
Expected option life | 6 years | 6 years |
Stock-Based Compensation - Restricted Stock Units (Details) - LTIP Program - Restricted stock units |
6 Months Ended |
---|---|
Jun. 30, 2017
$ / shares
shares
| |
Stock-based compensation | |
Period for recognition | 3 years |
Granted (in shares) | 124,780 |
Granted (in dollars per share) | $ / shares | $ 34 |
Forfeited (in shares) | 0 |
Minimum | |
Stock-based compensation | |
Award vesting rights, percentage | 0.00% |
Maximum | |
Stock-based compensation | |
Award vesting rights, percentage | 200.00% |
Employee Retirement Plans (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Qualified | ||||
Net periodic pension cost for the company's defined-benefit pension plans | ||||
Service cost | $ 0 | $ 0 | $ 1 | $ 1 |
Interest cost | 13 | 10 | 25 | 21 |
Expected return on plan assets | (12) | (9) | (24) | (19) |
Amortization of net loss | 5 | 3 | 10 | 7 |
Net periodic pension cost | 6 | 4 | 12 | 10 |
Non-Qualified | ||||
Net periodic pension cost for the company's defined-benefit pension plans | ||||
Service cost | 0 | 0 | 0 | 0 |
Interest cost | 2 | 3 | 3 | 4 |
Expected return on plan assets | 0 | 0 | 0 | 0 |
Amortization of net loss | 0 | 0 | 1 | 1 |
Net periodic pension cost | $ 2 | $ 3 | $ 4 | $ 5 |
Other Income (Expense), Net (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Investment [Line Items] | ||||
Gain on sale of business | $ 49 | $ 0 | $ 49 | $ 0 |
Income from cash and cash investments and short-term bank deposits | 1 | 1 | 2 | 2 |
Equity investment income, net | 1 | 0 | 1 | 1 |
Foreign currency transaction (losses) gains | (1) | 2 | 0 | 2 |
Other items, net | 0 | 0 | 0 | (3) |
Total other, net | 51 | 5 | 54 | 4 |
Auction Rate Securities | ||||
Investment [Line Items] | ||||
Realized gains from investments | 0 | 1 | 0 | 1 |
Private equity funds | ||||
Investment [Line Items] | ||||
Realized gains from investments | $ 1 | $ 1 | $ 2 | $ 1 |
Earnings Per Common Share (Details) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Numerator (basic and diluted): | ||||
Net income | $ 158 | $ 150 | $ 298 | $ 259 |
Less: Allocation to unvested restricted stock awards | 1 | 2 | 3 | 3 |
Net income available to common shareholders | $ 157 | $ 148 | $ 295 | $ 256 |
Denominator: | ||||
Basic common shares (based upon weighted average) (in shares) | 315 | 328 | 316 | 329 |
Add: Stock option dilution (in shares) | 4 | 3 | 4 | 4 |
Diluted common shares (in shares) | 319 | 331 | 320 | 333 |
Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Income Tax Disclosure [Abstract] | ||||
Effective tax rate (as a percent) | 33.00% | 36.00% | 31.00% | 34.00% |
Tax benefit from share-based compensation | $ 10 | $ 17 |
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