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, 2018

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.)

17450 College Parkway, Livonia, Michigan	48152
(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 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, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filerx	Accelerated filero
Non-accelerated filero	Smaller reporting companyo
(Do not check if a smaller reporting company)	Emerging growth companyo

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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, 2018
Common stock, par value $1.00 per share	310,490,824

MASCO CORPORATION

INDEX

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets — as at March 31, 2018 and December 31, 2017	1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2018 and 2017	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2018 and 2017	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017	4
	Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2018 and 2017	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 4.	Controls and Procedures	27
PART II.	OTHER INFORMATION	28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6.	Exhibits	29
	Signature	30

MASCO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

March 31, 2018 and December 31, 2017

(In Millions, Except Share Data)

	March 31, 2018			December 31, 2017
ASSETS
Current Assets:
Cash and cash investments	$	370		$	1,194
Short-term bank deposits	99			108
Receivables	1,356			1,066
Prepaid expenses and other	118			111
Inventories:
Finished goods	643			402
Raw material	300			277
Work in process	107			105
	1,050			784
Total current assets	2,993			3,263
Property and equipment, net	1,183			1,129
Goodwill	891			841
Other intangible assets, net	429			187
Other assets	134			114
Total assets	$	5,630		$	5,534
LIABILITIES
Current Liabilities:
Accounts payable	$	1,008		$	824
Notes payable	116			116
Accrued liabilities	646			727
Total current liabilities	1,770			1,667
Long-term debt	2,971			2,969
Other liabilities	706			715
Total liabilities	5,447			5,351
Commitments and contingencies (Note O)
EQUITY
Masco Corporation's shareholders' equity:
Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2018 – 308,000,000; 2017 – 310,400,000	308			310
Preferred shares authorized: 1,000,000; Issued and outstanding: 2018 and 2017 – None	—			—
Paid-in capital	—			—
Retained deficit	(296		)	(298		)
Accumulated other comprehensive loss	(84		)	(65		)
Total Masco Corporation's shareholders' deficit	(72		)	(53		)
Noncontrolling interest	255			236
Total equity	183			183
Total liabilities and equity	$	5,630		$	5,534

See notes to condensed consolidated financial statements.

1

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

For the Three Months Ended March 31, 2018 and 2017

(In Millions, Except Per Common Share Data)

	Three Months Ended March 31,
	2018			2017
Net sales	$	1,920		$	1,778
Cost of sales	1,301			1,173
Gross profit	619			605
Selling, general and administrative expenses	375			348
Operating profit	244			257
Other income (expense), net:
Interest expense	(41		)	(43		)
Other, net	(3		)	(4		)
	(44		)	(47		)
Income before income taxes	200			210
Income tax expense	39			62
Net income	161			148
Less: Net income attributable to noncontrolling interest	12			10
Net income attributable to Masco Corporation	$	149		$	138
Income per common share attributable to Masco Corporation:
Basic:
Net income	$	.48		$	.43
Diluted:
Net income	$	.47		$	.43

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, 2018 and 2017

(In Millions)

	Three Months Ended March 31,
	2018		2017
Net income	$	161	$	148
Less: Net income attributable to noncontrolling interest	12		10
Net income attributable to Masco Corporation	$	149	$	138
Other comprehensive income (loss), net of tax (Note K):
Cumulative translation adjustment	$	42	$	21
Pension and other post-retirement benefits	5		4
Other comprehensive income	47		25
Less: Other comprehensive income attributable to noncontrolling interest	7		4
Other comprehensive income attributable to Masco Corporation	$	40	$	21
Total comprehensive income	$	208	$	173
Less: Total comprehensive income attributable to the noncontrolling interest	19		14
Total comprehensive income attributable to Masco Corporation	$	189	$	159

See notes to condensed consolidated financial statements.

3

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the Three Months EndedMarch 31, 2018 and 2017

(In Millions)

	Three Months Ended March 31,
	2018			2017
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations	$	210		$	246
Increase in receivables	(216		)	(244		)
Increase in inventories	(87		)	(105		)
Increase (decrease) in accounts payable and accrued liabilities, net	38			(46		)
Net cash for operating activities	(55		)	(149		)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Purchase of Company common stock	(150		)	(87		)
Cash dividends paid	(33		)	(32		)
Employee withholding taxes paid on stock-based compensation	(32		)	(14		)
Net cash for financing activities	(215		)	(133		)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures	(40		)	(37		)
Acquisition of business, net of cash acquired	(548		)	—
Proceeds from disposition of:
Short-term bank deposits	13			11
Other financial investments	—			3
Property and equipment	1			6
Other, net	—			(9		)
Net cash for investing activities	(574		)	(26		)
Effect of exchange rate changes on cash and cash investments	20			7
CASH AND CASH INVESTMENTS:
Decrease for the period	(824		)	(301		)
At January 1	1,194			990
At March 31	$	370		$	689

See notes to condensed consolidated financial statements.

4

MASCO CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

For the Three Months EndedMarch 31, 2018 and 2017

(In Millions, Except Per Common Share Data)

	Total			Common Shares ($1 par value)			Paid-In Capital			Retained (Deficit) Earnings			Accumulated Other Comprehensive  (Loss) Income			Noncontrolling Interest
Balance, January 1, 2017	$	(103	)	$	318		$	—		$	(381	)	$	(235	)	$	195
Cumulative effect of adoption of new revenue recognition accounting standard	6									6
Adjusted balance, January 1, 2017	(97		)	318			—			(375		)	(235		)	195
Total comprehensive income	173									138			21			14
Shares issued	(1		)	1			(2		)
Shares retired:
Repurchased	(92		)	(3		)	(5		)	(84		)
Surrendered (non-cash)	(13		)							(13		)
Cash dividends declared	(32		)							(32		)
Stock-based compensation	7						7
Balance, March 31, 2017	$	(55	)	$	316		$	—		$	(366	)	$	(214	)	$	209
Balance, January 1, 2018	$	183		$	310		$	—		$	(298	)	$	(65	)	$	236
Reclassification of disproportionate tax effects (Refer to Note A)	—									59			(59		)
Total comprehensive income	208									149			40			19
Shares issued	(13		)	2			(7		)	(8		)
Shares retired:
Repurchased	(150		)	(4		)				(146		)
Surrendered (non-cash)	(19		)							(19		)
Cash dividends declared	(33		)							(33		)
Stock-based compensation	7						7
Balance, March 31, 2018	$	183		$	308		$	—		$	(296	)	$	(84	)	$	255

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 fairly state our financial position at March 31, 2018, and our results of operations, comprehensive income (loss), cash flows and changes in shareholders' equity for the three-month periods ended March 31, 2018 and 2017. The condensed consolidated balance sheet at December 31, 2017 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 2018 presentation in the condensed consolidated financial statements. 

Income Tax Effects within Accumulated Other Comprehensive Income (Loss). The accounting guidance for income taxes requires us to allocate our provision for income taxes between continuing operations and other categories of earnings, such as other comprehensive income (loss). Subsequent adjustments to deferred taxes originally recorded to other comprehensive income (loss) may reverse in a different category of earnings, such as continuing operations, resulting in a disproportionate tax effect within accumulated other comprehensive income (loss). Generally, a disproportionate tax effect will be eliminated and recognized in income tax expense (benefit) when the circumstances upon which it is premised cease to exist.

The disproportionate tax effect related to various defined-benefit pension plans will be eliminated from accumulated other comprehensive income (loss) at the termination of the related pension plans. The disproportionate tax effect relating to our interest rate swap hedge, which was terminated in 2012, will be eliminated from accumulated other comprehensive income (loss) upon the maturity of the related debt in March 2022.

Recently Adopted Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board ("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. We adopted ASC 606 on January 1, 2018, under the full retrospective method of adoption. As a result of this adoption, net sales increased by $1 million and operating profit (and income before income taxes) decreased by $3 million for the three-month period ended March 31, 2017, from what was previously reported. For full year 2017 and 2016, net sales decreased by $2 million and increased by $4 million, respectively, and operating profit (and income before income taxes) decreased by $1 million and increased by $2 million, respectively, from what was previously reported. We additionally have recasted our previously reported segment operating results at the end of this section.

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. We adopted ASU 2016-01 on January 1, 2018. The adoption of this standard did not have a material impact on our financial position or results of operations.

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Asset Transfers of Assets Other than Inventory," which no longer allows the tax effects of intra-entity asset transfers (intercompany sales) of assets other than inventory to be deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new standard requires the tax expense from the sale of the asset in the seller's tax jurisdiction and the corresponding basis differences in the buyer's jurisdiction to be recognized when the transfer occurs even though the pre-tax effects of the transaction are eliminated in consolidation. We adopted ASU 2016-16 on January 1, 2018. The adoption of this standard did not have a material impact on our financial position or results of operations.

6

MASCO CORPORATION

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

A. ACCOUNTING POLICIES (Continued)

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. ASU 2017-07 requires retrospective application for certain aspects of the standard. We adopted ASU 2017-07 on January 1, 2018. As a result of the adoption, we reclassified $7 million of net benefit cost from operating profit to other income (expense), net, within our results of operations for the three-month period ended March 31, 2017. For full year 2017 and 2016, we reclassified $26 million and $32 million, respectively, of net benefit cost from operating profit to other income (expense), net, within our results of operations. We additionally have recasted our previously reported segment operating results at the end of this section. The adoption of the standard did not impact income before income taxes.

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. We adopted ASU 2017-09 on January 1, 2018. The adoption of this standard did not impact our financial position or results of operations; however, modification accounting is now required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions.

In February 2018, the FASB issued ASU 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which permits a company to reclassify from accumulated other comprehensive income (loss) to retained earnings the disproportionate tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“2017 Act”). We early adopted ASU 2018-02 on March 31, 2018. As a result of the adoption, in the first quarter of 2018 we decreased accumulated other comprehensive income (loss) and increased retained earnings (deficit) by the $59 million disproportionate tax effect caused by the 2017 Act.

Impact of Adoption of ASC 606 and ASU 2017-07. The recasted impact of the adoptions of ASC 606 and ASU 2017-07 to our previously reported operating results and basic and diluted income per share was as follows, in millions (except per common share data):

	Year Ended December 31, 2016
	Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	3,526	$	3,529	$	642		$	654
Decorative Architectural Products	2,092		2,092		430			433
Cabinetry Products	970		970		93			97
Windows and Other Specialty Products	769		770		(3		)	(3		)
Total	$	7,357	$	7,361	1,162			1,181
General corporate expense, net					(109		)	(94		)
Operating profit					$	1,053		$	1,087
					Year Ended December 31, 2016
					As Reported			As Recasted
Net income attributable to Masco Corporation					$	491		$	493
Income per common share attributable to Masco Corporation:
Basic:					$	1.49		$	1.49
Diluted:					$	1.47		$	1.48

7

MASCO CORPORATION

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

A. ACCOUNTING POLICIES (Continued)

	Three Months Ended March 31, 2017
	Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	863	$	872	$	156		$	162
Decorative Architectural Products	505		496		101			94
Cabinetry Products	231		231		16			16
Windows and Other Specialty Products	178		179		6			8
Total	$	1,777	$	1,778	279			280
General corporate expense, net					(26		)	(23		)
Operating profit					$	253		$	257
					Three Months Ended March 31, 2017
					As Reported			As Recasted
Net income attributable to Masco Corporation					$	140		$	138
Income per common share attributable to Masco Corporation:
Basic:					$	0.44		$	0.43
Diluted:					$	0.43		$	0.43

	Three Months Ended June 30, 2017										Six Months Ended June 30, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	949	$	949	$	198		$	200		$	1,812	$	1,821	$	354		$	362
Decorative Architectural Products	653		661		141			149			1,158		1,157		242			243
Cabinetry Products	251		251		30			31			482		482		46			47
Windows and Other Specialty Products	204		205		18			18			382		384		24			26
Total	$	2,057	$	2,066	387			398			$	3,834	$	3,844	666			678
General corporate expense, net					(30		)	(26		)					(56		)	(49		)
Operating profit					$	357		$	372						$	610		$	629
											Three Months Ended June 30, 2017				Six Months Ended June 30, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	158	$	163	$	298		$	301
Income per common share attributable to Masco Corporation:
Basic:											$	0.50	$	0.51	$	0.93		$	0.94
Diluted:											$	0.49	$	0.51	$	0.92		$	0.93

8

MASCO CORPORATION

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

A. ACCOUNTING POLICIES (Continued)

	Three Months Ended September 30, 2017										Nine Months Ended September 30, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	951	$	950	$	175		$	175		$	2,763	$	2,771	$	529		$	537
Decorative Architectural Products	553		562		104			112			1,711		1,719		346			355
Cabinetry Products	229		229		19			20			711		711		65			67
Windows and Other Specialty Products	203		204		23			24			585		588		47			50
Total	$	1,936	$	1,945	321			331			$	5,770	$	5,789	987			1,009
General corporate expense, net					(26		)	(22		)					(82		)	(71		)
Operating profit					$	295		$	309						$	905		$	938
											Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	148	$	152	$	446		$	453
Income per common share attributable to Masco Corporation:
Basic:											$	0.47	$	0.48	$	1.40		$	1.42
Diluted:											$	0.46	$	0.48	$	1.38		$	1.41

	Three Months Ended December 31, 2017										Year Ended December 31, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	972	$	961	$	169		$	165		$	3,735	$	3,732	$	698		$	702
Decorative Architectural Products	494		487		88			83			2,205		2,206		434			438
Cabinetry Products	223		223		25			25			934		934		90			92
Windows and Other Specialty Products	185		182		5			4			770		770		52			54
Total	$	1,874	$	1,853	287			277			$	7,644	$	7,642	1,274			1,286
General corporate expense, net					(23		)	(21		)					(105		)	(92		)
Operating profit					$	264		$	256						$	1,169		$	1,194
											Three Months Ended December 31, 2017				Year Ended December 31, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	87	$	80	$	533		$	533
Income per common share attributable to Masco Corporation:
Basic:											$	0.28	$	0.25	$	1.68		$	1.68
Diluted:											$	0.27	$	0.25	$	1.66		$	1.66

9

MASCO CORPORATION

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

A. ACCOUNTING POLICIES (Concluded)

Recently Issued Accounting Pronouncements. 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 currently 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. We do not expect the standard to have a material impact on our results of operations. In preparation for the adoption of the standard, we have procured a third-party software to track and manage our leases and have trained our business units on the new standard and the use of the software.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which modifies the methodology for recognizing loss impairments on certain types of financial instruments. The new methodology requires an entity to estimate the credit losses expected over the life of an exposure. Additionally, ASU 2016-13 amends the current available-for-sale security other-than-temporary impairment model for debt securities. ASU 2016-13 is effective for us for annual periods beginning January 1, 2020. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which improves and simplifies accounting rules around hedge accounting and better portrays the economic results of an entity's risk management activities in its financial statements. ASU 2017-12 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.

B. ACQUISITIONS

On March 9, 2018, we acquired substantially all of the net assets of The L.D. Kichler Co. ("Kichler"), a leader in decorative residential and light commercial lighting products, ceiling fans and LED lighting systems. This business expands our product offerings to our customers. The results of this acquisition for the period from the acquisition date are included in the condensed consolidated financial statements and are reported in the Decorative Architectural Products segment. For the three-month period ended March 31, 2018, we recorded $27 million of net sales as a result of this acquisition. The purchase price, net of $2 million cash acquired, consisted of $548 million paid at closing with cash on hand. The acquisition accounting adjustments are based on analysis of information as of the acquisition date that was available through March 31, 2018. The adjustments will be updated through the measurement period, if necessary. The preliminary allocation of the fair value of the acquisition of Kichler is summarized in the following table, in millions.

Receivables	$	101
Inventories	173
Other current assets	5
Property and equipment	33
Goodwill	46
Other intangible assets	243
Accounts payable	(24		)
Accrued liabilities	(25		)
Other liabilities	(4		)
Total	$	548

The goodwill acquired, which is generally tax deductible, is related primarily to the operational and financial synergies we expect to derive from combining Kichler's operations into our business, as well as the assembled workforce. The other intangible assets acquired consist of $59 million of indefinite-lived intangible assets, which is related to trademarks, and $184 million of definite-lived intangible assets. The definite-lived intangible assets consist of $145 million related to customer relationships, which is being amortized on a straight-line basis over 20 years, and $39 million of other definite-lived intangible assets, which is being amortized over a weighted-average amortization period of 4 years.

10

MASCO CORPORATION

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

C. REVENUE

We recognize revenue as control of our products is transferred to our customers, which is generally at the time of shipment or upon delivery based on the contractual terms with our customers, or when services are completed. Control over certain of our custom-made window products transfers to our customers as production is completed, and revenue is recognized over the production period for these products, as our products do not have an alternative use and we have an enforceable right to payment during the production period. The production period of our custom-made window products generally does not lapse days, and for these products we currently recognize revenue based on the output of production, which is a faithful depiction of the transfer of these products to our customers. Our customers' payment terms generally range from 30 to 65 days of fulfilling our performance obligations and recognizing revenue.

We consider shipping and handling activities performed by us as activities to fulfill the sales of our products. Amounts billed for shipping and handling are included in net sales, while costs incurred for shipping and handling are included in cost of sales. We capitalize incremental costs of obtaining a contract and expense the costs on a straight-line basis over the contractual period if the cost is recoverable, the cost would not have been incurred without the contract and the term of the contract is greater than one year; otherwise, we expense the amounts as incurred. We do not adjust the promised amount of consideration for the effects of a financing component if the period between when we transfer our products or services and when our customers pay for our products or services is expected to be one year or less.

Our revenues are derived primarily from sales to customers in North America and Internationally, principally Europe. Net sales from these geographic markets, by segment, were as follows, in millions:

	Three Months Ended March 31, 2018
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	605	$	545	$	217	$	149	$	1,516
International, principally Europe	366		—		—		38		404
Total	$	971	$	545	$	217	$	187	$	1,920

	Three Months Ended March 31, 2017
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	557	$	496	$	219	$	140	$	1,412
International, principally Europe	315		—		12		39		366
Total	$	872	$	496	$	231	$	179	$	1,778

We provide customer programs and incentive offerings, including special pricing and co-operative advertising arrangements, promotions and other volume-based incentives. These customer programs and incentives are considered variable consideration. We include in revenue variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the variable consideration is resolved. This determination is made based upon known customer program and incentive offerings at the time of sale, and expected sales volume forecasts as it relates to our volume-based incentives. This determination is updated each reporting period.

Certain product sales include a right of return. We estimate future product returns at the time of sale based on historical experience and record a corresponding refund liability. We additionally record an asset, based on historical experience, for the amount of product we expect to return to inventory as a result of the return, which is recorded in prepaid expenses and other in the condensed consolidated balance sheets.

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

C. REVENUE (Concluded)

We record contract assets for items for which we have satisfied our performance obligation but our receipt of payment is contingent upon delivery or other circumstances other than the passage of time. Our contract assets are recorded in prepaid expenses and other in our condensed consolidated balance sheets. Our contract assets generally

become unconditional and are reclassified to receivables in the quarter subsequent to each balance sheet date. Our contract asset balance was $15 million and $11 million at March 31, 2018 and December 31, 2017, respectively.

We record contract liabilities primarily for deferred revenue. Our contract liabilities are recorded in accrued liabilities in our condensed consolidated balance sheets. Our contract liabilities are generally recognized to net sales in the immediately subsequent reporting period. Our contract liability balance was $14 million and $32 million at March 31, 2018 and December 31, 2017, respectively.

D. DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense was $34 million and $31 million for the three-month periods endedMarch 31, 2018 and 2017, respectively. 

E. GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the three-month period endedMarch 31, 2018, by segment, were as follows, in millions: 

	Gross Goodwill At March 31, 2018		Accumulated Impairment Losses			Net Goodwill At March 31, 2018
Plumbing Products	$	578	$	(340	)	$	238
Decorative Architectural Products	340		(75		)	265
Cabinetry Products	181		—			181
Windows and Other Specialty Products	718		(511		)	207
Total	$	1,817	$	(926	)	$	891

	Gross Goodwill At December 31, 2017		Accumulated Impairment Losses			Net Goodwill At December 31, 2017		Additions (A)		Other (B)		Net Goodwill At March 31, 2018
Plumbing Products	$	574	$	(340	)	$	234	$	—	$	4	$	238
Decorative Architectural Products	294		(75		)	219		46		—		265
Cabinetry Products	181		—			181		—		—		181
Windows and Other Specialty Products	718		(511		)	207		—		—		207
Total	$	1,767	$	(926	)	$	841	$	46	$	4	$	891

(A)    Additions consist of acquisitions.

(B) Other consists of the effect of foreign currency translation.

The carrying value of our other indefinite-lived intangible assets was $200 million and $140 million at March 31, 2018 and December 31, 2017, respectively, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $229 million (net of accumulated amortization of $13 million) and $47 million (net of accumulated amortization of $10 million) at March 31, 2018 and December 31, 2017, respectively, and principally included customer relationships. The increase in our indefinite-lived intangible assets and definite-lived intangible assets is primarily a result of our acquisition of Kichler.

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MASCO CORPORATION

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

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 may include interest rate swap agreements and foreign currency 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 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. At March 31, 2018, the balance remaining in accumulated other comprehensive loss was $8 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 statement 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.

The pre-tax losses included in our condensed consolidated statements of operations were as follows, in millions:

	Three Months Ended March 31,
	2018			2017
Foreign currency contracts:
Forward contracts	$	(1	)	$	—
Total loss	$	(1	)	$	—

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, 2018
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	12
Accrued liabilities			$	—
Forward contracts	29
Accrued liabilities			—

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MASCO CORPORATION

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

F. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Concluded)

	At December 31, 2017
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	14
Accrued liabilities			$	—
Forward contracts	43
Receivables			—
Accrued liabilities			—

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

G. WARRANTY LIABILITY

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

	Three Months Ended March 31, 2018			Twelve Months Ended December 31, 2017
Balance at January 1	$	205		$	192
Accruals for warranties issued during the period	17			63
Accruals related to pre-existing warranties	1			9
Settlements made (in cash or kind) during the period	(17		)	(59		)
Other, net (including currency translation)	—			—
Balance at end of period	$	206		$	205

H. DEBT

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.

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; outstanding letters of credit under the Amended Credit Agreement reduce our borrowing capacity. At March 31, 2018, we had no 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 greater of (i) the prime rate, (ii) the Federal Funds effective rate plus 0.50% and (iii) LIBOR plus 1.0% (the "Alternative Base Rate"); plus an applicable margin based upon 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.

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MASCO CORPORATION

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

H. DEBT (Concluded)

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 were outstanding at March 31, 2018. 

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 $3.2 billion, compared with the aggregate carrying value of $3.1 billion, at March 31, 2018. The aggregate estimated market value of short-term and long-term debt was approximately $3.3 billion, compared with the aggregate carrying value of $3.1 billion, at December 31, 2017.

I. 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 March 31, 2018, 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 for these stock-based incentives were as follows, in millions: 

	Three Months Ended March 31,
	2018		2017
Long-term stock awards	$	5	$	6
Stock options	1		1
Restricted stock units	1		—
Phantom stock awards and stock appreciation rights	—		2
Total	$	7	$	9

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 585,220 shares of long-term stock awards in the three-month period endedMarch 31, 2018.

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MASCO CORPORATION

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

I. STOCK-BASED COMPENSATION (Continued)

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

	Three Months Ended March 31,
	2018		2017
Unvested stock award shares at January 1	3		4
Weighted average grant date fair value	$	24	$	20
Stock award shares granted	1		1
Weighted average grant date fair value	$	42	$	34
Stock award shares vested	1		2
Weighted average grant date fair value	$	21	$	18
Stock award shares forfeited	—		—
Weighted average grant date fair value	$	30	$	22
Unvested stock award shares at March 31	3		3
Weighted average grant date fair value	$	30	$	23

AtMarch 31, 2018 and 2017, there was $64 million and $63 million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of four years at both March 31,2018 and 2017.

The total market value (at the vesting date) of stock award shares which vested during the three-month periods endedMarch 31, 2018 and 2017 was $52 million and $39 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 385,220 shares of stock options in the three-month period endedMarch 31, 2018 with a grant date weighted-average exercise price of approximately $42 per share. In the three-month period endedMarch 31,2018, 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,
		2018		2017
Option shares outstanding, January 1		5		7
Weighted average exercise price	$	16	$	15
Option shares granted		—		—
Weighted average exercise price	$	42	$	34
Option shares exercised		—		—
Aggregate intrinsic value on date of exercise (A)	$	33 million	$	3 million
Weighted average exercise price	$	11	$	23
Option shares forfeited		—		—
Weighted average exercise price	$	—	$	—
Option shares outstanding, March 31		5		7
Weighted average exercise price	$	19	$	16
Weighted average remaining option term (in years)		5		4
Option shares vested and expected to vest, March 31		5		7
Weighted average exercise price	$	19	$	16
Aggregate intrinsic value (A)	$	98 million	$	131 million
Weighted average remaining option term (in years)		5		4
Option shares exercisable (vested), March 31		3		6
Weighted average exercise price	$	15	$	13
Aggregate intrinsic value (A)	$	88 million	$	120 million
Weighted average remaining option term (in years)		4		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.

At March 31, 2018 and 2017, there was $11 million and $10 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 March 31, 2018 and 2017.

17

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,
	2018			2017
Weighted average grant date fair value	$	12.52		$	9.68
Risk-free interest rate	2.71		%	2.16		%
Dividend yield	1.00		%	1.19		%
Volatility factor	29.00		%	30.00		%
Expected option life	6 years			6 years

Restricted Stock Units. Under the Long Term Incentive Program, we granted restricted stock units to certain senior executives. These restricted stock units vest and share awards are 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 our Organization and Compensation Committee for the performance period and the recipient's continued employment through the share award date. We granted 113,260 restricted stock units in the three-month period endedMarch 31, 2018, with a grant date fair value of approximately $42 per share and 124,780 restricted stock units in the three-month period endedMarch 31, 2017, with a grant date fair value of approximately $34 per share. No restricted stock units were forfeited in the three-month periods endedMarch 31, 2018 and 2017.

J. EMPLOYEE RETIREMENT PLANS

Net periodic pension cost for our defined-benefit pension plans, with the exception of service cost, is recorded in other income (expense), net, in our condensed consolidated statement of operations. Net periodic pension cost for our defined-benefit pension plans was as follows, in millions: 

	Three Months Ended March 31,
	2018					2017
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	1		$	—	$	1		$	—
Interest cost	10			1		12			1
Expected return on plan assets	(12		)	—		(12		)	—
Amortization of net loss	4			1		5			1
Net periodic pension cost	$	3		$	2	$	6		$	2

As of January 1, 2010, substantially all of our domestic and foreign qualified and domestic non-qualified defined-benefit pension plans were frozen to future benefit accruals.

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MASCO CORPORATION

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

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
	2018		2017
Amortization of defined-benefit pension and other postretirement benefits:
Actuarial losses, net	$	5	$	6		Other income (expense), net
Tax benefit	—		(2		)
Net of tax	$	5	$	4

In addition to the amounts reclassified above, upon adopting ASU 2018-02 in the first quarter of 2018, we reclassified $59 million of the disproportionate tax benefit relating to various defined-benefit plans from accumulated other comprehensive loss to retained deficit. Refer to Note A for additional information.

L. SEGMENT INFORMATION

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

	Three Months Ended March 31,
	2018		2017		2018			2017
	Net Sales (A)				OperatingProfit (Loss)
Operations by segment:
Plumbing Products	$	971	$	872	$	163		$	162
Decorative Architectural Products	545		496		89			94
Cabinetry Products	217		231		6			16
Windows and Other Specialty Products	187		179		4			8
Total	$	1,920	$	1,778	$	262		$	280
Operations by geographic area:
North America	$	1,516	$	1,412	$	218		$	238
International, principally Europe	404		366		44			42
Total	$	1,920	$	1,778	262			280
General corporate expense, net					(18		)	(23		)
Operating profit					244			257
Other income (expense), net					(44		)	(47		)
Income before income taxes					$	200		$	210

(A) Inter-segment sales were not material.

19

MASCO CORPORATION

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

M. OTHER INCOME (EXPENSE), NET

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

	Three Months Ended March 31,
	2018			2017
Income from cash and cash investments and short-term bank deposits	$	2		$	1
Realized gains from private equity funds	—			1
Foreign currency transaction (losses) gains	(1		)	1
Net periodic pension and post-retirement benefit cost	(4		)	(7		)
Total other, net	$	(3	)	$	(4	)

N. INCOME PER COMMON SHARE

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

	Three Months Ended March 31,
	2018		2017
Numerator (basic and diluted):
Net income	$	149	$	138
Less: Allocation to unvested restricted stock awards	1		1
Net income available to common shareholders	$	148	$	137
Denominator:
Basic common shares (based upon weighted average)	310		317
Add: Stock option dilution	3		4
Diluted common shares	313		321

For the three-month periods endedMarch 31, 2018 and 2017, we allocated dividends and undistributed earnings to the unvested restricted stock awards.

Additionally, 431,000 and 221,000 common shares for the three-month periods endedMarch 31, 2018 and 2017, respectively, related to stock options were excluded from the computation of diluted income 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 February 2018, we agreed to repurchase a total of $150 million of common stock with an immediate delivery of 2.8 millionshares under an accelerated stock repurchase transaction. In March 2018, upon completion of the transaction, we received, at no cost to us, an additional0.9 millionshares of our common stock resulting from changes in the volume weighted average stock price of our common stock over the term of the transaction. In total, we repurchased and retired3.7 million shares of our common stock in the first three months of 2018 (including 0.6 million shares to offset the dilutive impact of long-term stock awards granted in the first three months of the year).At March 31, 2018, we had $1.1 billion remaining under the 2017 authorization.

On the basis of amounts paid (declared), cash dividends per common share were $0.105 ($0.105) and $0.100 ($0.100) for the three-month periods endedMarch 31, 2018 and 2017, respectively.

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MASCO CORPORATION

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

O. OTHER COMMITMENTS AND CONTINGENCIES

We are involved in claims and litigation, including class actions and regulatory proceedings, which arise in the ordinary course of our business. The types of matters may include, among others: competition, product liability, employment, warranty, advertising, contract, personal injury, environmental, intellectual property, and insurance coverage. 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.

P. INCOME TAXES

Our effective tax rate was 20 percent for the three-month period ended March 31, 2018. Our tax rate was lower than our 2018 statutory tax rate of 21 percent due primarily to a seven percent decrease from an income tax benefit on stock- based compensation, partially offset by a four percent increase from U.S. and foreign taxes on foreign earnings and a two percent increase from state and local taxes, net of U.S. Federal tax benefit.

Our effective tax rate was 30 percent for the three-month period ended March 31, 2017. Our tax rate was lower than our 2017 statutory tax rate of 35 percent due primarily to a three percent decrease from an income tax benefit on stock-based compensation and a two percent decrease from a state income tax benefit on uncertain tax positions resulting from the expiration of applicable statutes of limitation.

21

	MASCO CORPORATION
Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF
	FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER 2018 VERSUS FIRST QUARTER 2017

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
	2018		2017		2018 vs. 2017
Net Sales:
Plumbing Products	$	971	$	872	11	%
Decorative Architectural Products	545		496		10	%
Cabinetry Products	217		231		(6	)%
Windows and Other Specialty Products	187		179		4	%
Total	$	1,920	$	1,778	8	%
North America	$	1,516	$	1,412	7	%
International, principally Europe	404		366		10	%
Total	$	1,920	$	1,778	8	%

	Three Months Ended March 31,
	2018		2017
Operating Profit Margins: (A)
Plumbing Products	16.8	%	18.6	%
Decorative Architectural Products	16.3	%	19.0	%
Cabinetry Products	2.8	%	6.9	%
Windows and Other Specialty Products	2.1	%	4.5	%
North America	14.4	%	16.9	%
International, principally Europe	10.9	%	11.5	%
Total	13.6	%	15.7	%
Total operating profit margin, as reported	12.7	%	14.5	%

(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.

22

NET SALES

Net sales increased eight percent for the three-month period ended March 31, 2018, from the comparable period of 2017. Excluding acquisitions, divestitures and the favorable effect of currency translation, net sales increased five percent for the three-month period ended March 31, 2018, from the comparable period of 2017. The following table reconciles reported net sales to net sales, excluding acquisitions, divestitures and the effect of currency translation, in millions:

	Three Months Ended March 31,
	2018			2017
Net sales, as reported	$	1,920		$	1,778
Acquisitions	(38		)	—
Divestitures	—			(24		)
Net sales, excluding acquisitions and divestitures	1,882			1,754
Currency translation	(49		)	—
Net sales, excluding acquisitions, divestitures and the effect of currency translation	$	1,833		$	1,754

North American net sales increased seven percent for the three-month period ended March 31, 2018, from the comparable period of 2017. Net sales were positively impacted by increased sales volume of plumbing products, windows, builders' hardware and paints and other coating products, which, in aggregate, increased sales by four percent for the three-month period ended March 31, 2018, from the comparable period of 2017. Net selling price increases of paints and other coating products and a favorable sales mix of windows and cabinets, in aggregate, also increased sales by two percent for the three-month period ended March 31, 2018, from the comparable period of 2017. The acquisitions of Kichler and Mercury Plastics, Inc. ("Mercury Plastics") increased sales by three percent for the three-month period ended March 31, 2018, from the comparable period of 2017. Such increases were partially offset by lower sales volume of cabinets, which decreased sales by one percent for the three-month period ended March 31, 2018, from the comparable period of 2017. The divestiture of Arrow Fastener Co., LLC ("Arrow") decreased sales by one percent for the three-month period ended March 31, 2018, from the comparable period of 2017.

International net sales increased 10 percent for the three-month period ended March 31, 2018, from the comparable period of 2017, due primarily to a weaker U.S. dollar. In local currencies (including sales in currencies outside their respective functional currencies), net sales decreased two percent for the three-month period ended March 31, 2018, from the comparable period of 2017, primarily due to the divestiture of Moores Furniture Group Limited ("Moores") in the fourth quarter of 2017, which decreased sales by three percent for the three-month period ended March 31, 2018, from the comparable period of 2017. An unfavorable sales mix of plumbing products and lower sales volume of windows also decreased sales by four percent for the three-month period ended March 31, 2018, from the comparable period of 2017. Such decreases were partially offset by higher sales volume and favorable net selling prices of plumbing products, which increased sales by five percent for the three-month period ended March 31, 2018, from the comparable period of 2017.

Net sales in the Plumbing Products segment increased 11 percent for the three-month period ended March 31, 2018, from the comparable period of 2017, due to increased sales volume of both North American and International operations and net selling price increases of International operations, which, in aggregate, increased sales by six percent for the three-month period ended March 31, 2018, from the comparable period of 2017. Foreign currency translation further increased net sales by five percent for the three-month period ended March 31, 2018, from the comparable period of 2017, primarily due to the weaker U.S. dollar. The acquisition of Mercury Plastics increased sales by one percent for the three-month period ended March 31, 2018, from the comparable period of 2017. Such increases were partially offset by unfavorable sales mix of International operations.

Net sales in the Decorative Architectural Products segment increased 10 percent for the three-month period ended March 31, 2018, from the comparable period of 2017, due to the acquisition of Kichler in March 2018, which increased sales by six percent for the three-month period ended March 31, 2018, from the comparable period of 2017. Net sales also increased due to increased sales volume of builders' hardware and paints and other coatings products and net selling price increases of paints and other coating products.

23

Net sales in the Cabinetry Products segment decreased six percent for the three-month period ended March 31, 2018, from the comparable period of 2017, due primarily to the divestiture of Moores, which decreased sales by five percent for the three-month period ended March 31, 2018, from the comparable period of 2017. Lower sales volume also decreased sales by three percent for the three-month period ended March 31, 2018, from the comparable period of 2017. Such decreases were partially offset by a positive sales mix, which increased sales by two percent for the three-month period ended March 31, 2018, from the comparable period of 2017.

Net sales in the Windows and Other Specialty Products segment increased four percent for the three-month period ended March 31, 2018, from the comparable period of 2017, due to increased sales volume of North American windows, which increased sales by six percent, from the comparable period of 2017. A favorable sales mix of North American windows and net selling price increases of both North American and international windows, in aggregate, also increased sales by six percent from the comparable period of 2017. Net sales increased two percent due to favorable foreign currency translation. These increases were partially offset by the divestiture of Arrow in the second quarter of 2017, and decreased sales volume of international windows, which decreased sales by seven percent and four percent, respectively, for the three-month period ended March 31, 2018, from the comparable period of 2017.

OPERATING MARGINS

Our gross profit margins were 32.2 percent for the three-month period ended March 31, 2018, respectively, compared with 34.0 percent for the comparable period of 2017. Gross profit margins for the three-month period ended March 31, 2018 were negatively affected by an unfavorable relationship between net selling prices and commodity costs as well an increase in strategic growth initiatives, such as program launch and display expenses. Such decreases were partially offset by increased sales volume.

Selling, general and administrative expenses, as a percentage of sales, were 19.5 percent for the three-month period ended March 31, 2018, compared to 19.6 percent for the comparable period of 2017. The decrease in selling, general and administrative expenses, as a percentage of sales, was driven by improved leverage of fixed expenses, due primarily to increased sales volume.

Operating margin in the Plumbing Products segment for the three-month period ended March 31, 2018 was negatively impacted by an unfavorable relationship between net selling prices and commodity costs, higher depreciation expense, and an increase in other expenses, such as logistics costs, increased headcount and salaries and display expenses. Such decreases were partially offset by increased sales volume and the benefits associated with cost savings initiatives.

Operating margin in the Decorative Architectural Products segment for the three-month period ended March 31, 2018 was negatively impacted by investments in strategic growth initiatives and variable expenses, including an increase in legal expenses. Operating margins were also impacted by the partial recognition of the inventory step up adjustment established as part of the acquisition of Kichler.

Operating margin in the Cabinetry Products segment for the three-month period ended March 31, 2018 was negatively impacted by investments in strategic growth initiatives, such as program launch and display expenses, an increase in other expenses, such as logistics costs, and lower sales volume. Such decreases were partially offset by the divestiture of Moores in the fourth quarter of 2017.

Operating margin in the Windows and Other Specialty Products segment for the three-month period ended March 31, 2018 was negatively impacted by business restructuring costs, lower sales volume and unfavorable sales mix of our U.K. windows, and the divestiture of Arrow in the second quarter of 2017. Such decreases were partially offset by increased sales volume and favorable sales mix of our North American windows as well as cost savings initiatives.

24

OTHER INCOME (EXPENSE), NET

Interest expense for the three-month period ended March 31, 2018 was $41 million compared to $43 million for the three-month period ended March 31, 2017. Interest expense decreased due to refinancing certain debt at more favorable interest rates.

Other, net, for the three-month period ended March 31, 2018 included $4 million of net periodic pension and post-retirement benefit cost. Other, net, forthe three-month period ended March 31, 2017 included $7 million of net periodic pension and post-retirement benefit cost, partially offset by $1 million related to distributions from private equity funds.

INCOME PER COMMON SHARE — ATTRIBUTABLE TO MASCO CORPORATION

Income for the three-month period ended March 31, 2018 was $149 million, compared with $138 million for the comparable period of 2017. Diluted income per common share for the three-month period ended March 31, 2018 was $.47 per common share, compared with $.43 per common share for the comparable period of 2017.

Our effective tax rate of 20 percent and 30 percent for the three-month periods endedMarch 31, 2018 and 2017, respectively, was lower than our normalized tax rate of 26 percent and 34 percent, respectively, due primarily to an additional $13 million and $7 million income tax benefit on stock-based compensation in the first quarter of 2018 and 2017, respectively, and a $3 million state income tax benefit in the first quarter of 2017 on uncertain tax positions resulting from the expiration of applicable statutes of limitation.

OTHER FINANCIAL INFORMATION

Our current ratio was 1.7 to 1 and 2.0 to 1 at March 31, 2018 and December 31, 2017, respectively. The decrease in our current ratio is due primarily to the cash on hand we paid for our acquisition of Kichler, partially offset by the acquired working capital as well as other recurring seasonal changes to our working capital.

For the three-month period ended March 31, 2018, net cash used for operating activities was $55 million. First quarter 2018 and 2017 cash for operations was affected by an expected and annually recurring seasonal first quarter increase in accounts receivable and inventories compared with fourth quarter 2017 and 2016, respectively.

For the three-month period ended March 31, 2018, net cash used for financing activities was $215 million, due to $150 million for the repurchase and retirement of Company common stock (including 0.6 million shares repurchased to offset the dilutive impact of long-term stock awards granted in 2018), $33 million for the payment of cash dividends and $32 million for employee withholding taxes paid on stock-based compensation.

For the three-month period ended March 31, 2018, net cash used for investing activities was $574 million, primarily due to $548 million for the acquisition of Kichler, net of cash acquired, and $40 million used for capital expenditures, partially offset by $13 million in proceeds from the disposition of short-term bank deposits.

Our cash, cash investments and short-term bank deposits were $469 million and $1.3 billion at March 31, 2018 and December 31, 2017, respectively. Our cash and cash investments consist of overnight interest bearing money market demand accounts, time deposit accounts, and 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 $469 million and $1.3 billion of cash, cash investments and short-term bank deposits held at March 31, 2018 and December 31, 2017, $325 million and $759 million, respectively, is held in our 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 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 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

25

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 no borrowings were outstanding under our Amended Credit Agreement at March 31, 2018.

We believe that our present cash balance, cash flows from operations, and the ability to utilize our Amended Credit Agreement are sufficient to fund our near-term working capital and other investment needs. We believe that our longer-term working capital and other general corporate requirements will be satisfied through cash flows from operations and, to the extent necessary, from bank borrowings and future financial market activities.

OUTLOOK FOR THE COMPANY

We continue to successfully execute our long-term growth strategies by leveraging our strong brand portfolio, industry-leading positions and Masco Operating System, our methodology to drive growth and productivity. We believe the fundamentals of our industry remain strong and support our long-term growth. We believe that our strong financial position, together with our current strategy of investing in our industry-leading branded building products, our continued focus on innovation and our commitment to operational excellence, the active management of our portfolio 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 and constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "outlook," "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 residential repair and remodel activity and new home construction, our ability to maintain our strong brands and reputation and to develop new products, our ability to maintain our competitive position in our industries, our reliance on key customers, the cost and availability of raw materials, our dependence on third-party suppliers, risks associated with international operations and global strategies, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to successfully execute our acquisition strategy and integrate businesses that we have and may acquire, our ability to attract, develop and retain talented personnel, our ability to achieve the anticipated benefits from our investments in new technology, risks associated with our reliance on information systems and technology, and our ability to sustain the improved results of our U.S. window business. 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.

26

	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, 2018, the Company's disclosure controls and procedures were effective.

b.     Changes in Internal Control over Financial Reporting.

In connection with the evaluation of the Company's internal control over financial reporting that occurred during the quarter ended March 31, 2018, which is required under the Securities Exchange Act of 1934 by paragraph (d) of Exchange Rules 13a-15 or 15d-15 (as defined in paragraph (f) of Rule 13a-15), management determined that there was no change that materially affected or is reasonably likely to materially affect internal control over financial reporting.

During the second quarter of 2018, we will implement a new Enterprise Resource Planning ("ERP") system at Delta Faucet Company ("Delta"). 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 will result in modification to certain internal controls at Delta.

27

MASCO CORPORATION

PART II.  OTHER INFORMATION

Item 1.Legal Proceedings

Information regarding legal proceedings involving us is set forth in Note O 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, 2017.

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-month period endedMarch 31, 2018 under the 2017 share repurchase authorization: 

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	Maximum Value Of Shares That May Yet Be Purchased Under The Plans Or Programs
1/1/18-1/31/18	—	—		—	$	1,289,581,762
2/1/18-2/28/18 (A)	2,801,774	$	53.56	2,801,774	1,139,506,762
3/1/18-3/31/18 (A)	850,545	—		850,545	1,139,506,762
Total for the period	3,652,319	$	41.09	3,652,319	$	1,139,506,762

(A) In February 2018, we entered into an accelerated stock repurchase transaction whereby we agreed to repurchase a total of $150 million of our common stock with an immediate delivery of 2.8 millionshares. This transaction was completed in March 2018, at which time we received, at no additional cost,0.9 millionadditional shares of our common stock resulting from changes in the volume weighted average stock price of our common stock over the term of the transaction.

28

MASCO CORPORATION

PART II.  OTHER INFORMATION, Continued

Item 6. Exhibits

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

29

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, Chief Financial Officer

April 24, 2018

30

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 March 31,		Year Ended December 31,
	2018		2017			2016			2015			2014		2013
Earnings Before Income Taxes, Preferred Stock Dividends and Fixed Charges:
Income from continuing operations before income taxes (A)	$	200	$	884		$	833		$	689		$	507	$	386
Deduct equity in undistributed (earnings) loss of fifty-percent-or-less-owned companies	—		(1		)	(2		)	(2		)	2		(16)
Add interest on indebtedness, net	40		167			185			222			221		230
Add amortization of debt expense	1		4			5			5			5		6
Add estimated interest factor for rentals	5		22			21			19			33		31
Earnings before income taxes, noncontrolling interest, fixed charges and preferred stock dividends	$	246	$	1,076		$	1,042		$	933		$	768	$	637
Fixed Charges:
Interest on indebtedness	$	41	$	170		$	190		$	223		$	221	$	229
Amortization of debt expense	1		4			5			5			5		6
Estimated interest factor for rentals	5		22			21			19			33		31
Total fixed charges	$	47	$	196		$	216		$	247		$	259	$	266
Preferred stock dividends (B)	—		—			—			—			—		—
Combined fixed charges and preferred stock dividends	$	47	$	196		$	216		$	247		$	259	$	266
Ratio of earnings to fixed charges	5.2		5.5			4.8			3.8			3.0		2.4
Ratio of earnings to combined fixed charges and preferred stock dividends	5.2		5.5			4.8			3.8			3.0		2.4
Ratio of earnings to combined fixed charges and preferred stock dividends excluding certain items (C)	5.2		5.5			4.8			3.8			2.9		2.4

(A) Income from continuing operations before income taxes for the years ended December 31, 2013, 2014, and 2015 has not been restated for the adoption of ASC 606.

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

(C)Excludes the 2014 litigation settlement income 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 24, 2018	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 24, 2018	By:	/s/ John G. Sznewajs
			John G. Sznewajs
			Vice President, 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, 2018 (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, 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 24, 2018	/s/ Keith Allman
		Keith Allman
		President and Chief Executive Officer
Date:	April 24, 2018	/s/ John G. Sznewajs
		John G. Sznewajs
		Vice President, Chief Financial Officer

1

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2018 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, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding (in shares)	310,490,824

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Current Assets:
Cash and cash investments	$ 370	$ 1,194
Short-term bank deposits	99	108
Receivables	1,356	1,066
Prepaid expenses and other	118	111
Inventories:
Finished goods	643	402
Raw material	300	277
Work in process	107	105
Total inventories	1,050	784
Total current assets	2,993	3,263
Property and equipment, net	1,183	1,129
Goodwill	891	841
Other intangible assets, net	429	187
Other assets	134	114
Total assets	5,630	5,534
Current Liabilities:
Accounts payable	1,008	824
Notes payable	116	116
Accrued liabilities	646	727
Total current liabilities	1,770	1,667
Long-term debt	2,971	2,969
Other liabilities	706	715
Total liabilities	5,447	5,351
Commitments and contingencies (Note O)
Masco Corporation's shareholders' equity:
Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2018 – 308,000,000; 2017 – 310,400,000	308	310
Preferred shares authorized: 1,000,000; Issued and outstanding: 2018 and 2017 – None	0	0
Paid-in capital	0	0
Retained deficit	(296)	(298)
Accumulated other comprehensive loss	(84)	(65)
Total Masco Corporation's shareholders' deficit	(72)	(53)
Noncontrolling interest	255	236
Total equity	183	183
Total liabilities and equity	$ 5,630	$ 5,534

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
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)	308,000,000	310,400,000
Common shares, shares outstanding (in shares)	308,000,000	310,400,000
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

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Statement [Abstract]
Net sales	$ 1,920	$ 1,778
Cost of sales	1,301	1,173
Gross profit	619	605
Selling, general and administrative expenses	375	348
Operating profit	244	257
Other income (expense), net:
Interest expense	(41)	(43)
Other, net	(3)	(4)
Total other income (expense), net	(44)	(47)
Income before income taxes	200	210
Income tax expense	39	62
Net income	161	148
Less: Net income attributable to noncontrolling interest	12	10
Net income attributable to Masco Corporation	$ 149	$ 138
Basic:
Net income (in dollars per share)	$ 0.48	$ 0.43
Diluted:
Net income (in dollars per share)	$ 0.47	$ 0.43

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statement of Comprehensive Income [Abstract]
Net income	$ 161	$ 148
Less: Net income attributable to noncontrolling interest	12	10
Net income attributable to Masco Corporation	149	138
Other comprehensive income (loss), net of tax (Note K):
Cumulative translation adjustment	42	21
Pension and other post-retirement benefits	5	4
Other comprehensive income	47	25
Less: Other comprehensive income attributable to noncontrolling interest	7	4
Other comprehensive income attributable to Masco Corporation	40	21
Total comprehensive income	208	173
Less: Total comprehensive income attributable to the noncontrolling interest	19	14
Total comprehensive income attributable to Masco Corporation	$ 189	$ 159

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations	$ 210	$ 246
Increase in receivables	(216)	(244)
Increase in inventories	(87)	(105)
Increase (decrease) in accounts payable and accrued liabilities, net	38	(46)
Net cash for operating activities	(55)	(149)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Purchase of Company common stock	(150)	(87)
Cash dividends paid	(33)	(32)
Employee withholding taxes paid on stock-based compensation	(32)	(14)
Net cash for financing activities	(215)	(133)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures	(40)	(37)
Payments to Acquire Businesses, Net of Cash Acquired	548	0
Proceeds from disposition of:
Short-term bank deposits	13	11
Other financial investments	0	3
Property and equipment	1	6
Other, net	0	(9)
Net cash for investing activities	(574)	(26)
Effect of exchange rate changes on cash and cash investments	20	7
CASH AND CASH INVESTMENTS:
Decrease for the period	(824)	(301)
At January 1	1,194	990
At March 31	$ 370	$ 689

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) - USD ($) $ in Millions	Total	Common Shares ($1 par value)	Paid-In Capital	Retained (Deficit) Earnings	Accumulated Other Comprehensive (Loss) Income	Noncontrolling Interest
Increase (Decrease) in Stockholders' Equity
Cumulative effect of adoption of new revenue recognition accounting standard | Accounting Standards Update 2014-09	$ 6			$ 6
Balance at Dec. 31, 2016	(103)	$ 318	$ 0	(381)	$ (235)	$ 195
Balance (Accounting Standards Update 2014-09) at Dec. 31, 2016	(97)	318	0	(375)	(235)	195
Increase (Decrease) in Stockholders' Equity
Total comprehensive income	173			138	21	14
Shares issued	(1)	1	(2)
Shares retired:
Repurchased	(92)	(3)	(5)	(84)
Surrendered (non-cash)	(13)			(13)
Cash dividends declared	(32)			(32)
Stock-based compensation	7		7
Balance at Mar. 31, 2017	(55)	316	0	(366)	(214)	209
Increase (Decrease) in Stockholders' Equity
Cumulative effect of adoption of new revenue recognition accounting standard | Accounting Standards Update 2018-02 [Member]	0			59	(59)
Balance at Dec. 31, 2017	183	310	0	(298)	(65)	236
Increase (Decrease) in Stockholders' Equity
Total comprehensive income	208			149	40	19
Shares issued	(13)	2	(7)	(8)
Shares retired:
Repurchased	(150)	(4)		(146)
Surrendered (non-cash)	(19)			(19)
Cash dividends declared	(33)			(33)
Stock-based compensation	7		7
Balance at Mar. 31, 2018	$ 183	$ 308	$ 0	$ (296)	$ (84)	$ 255

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Statement of Stockholders' Equity [Abstract]
Common share, par value (in dollars per share)	$ 1	$ 1

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Accounting Policies

3 Months Ended

Mar. 31, 2018

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 March 31, 2018, and our results of operations, comprehensive income (loss), cash flows and changes in shareholders' equity for the three-month periods ended March 31, 2018 and 2017. The condensed consolidated balance sheet at December 31, 2017 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 2018 presentation in the condensed consolidated financial statements. 

Income Tax Effects within Accumulated Other Comprehensive Income (Loss). The accounting guidance for income taxes requires us to allocate our provision for income taxes between continuing operations and other categories of earnings, such as other comprehensive income (loss). Subsequent adjustments to deferred taxes originally recorded to other comprehensive income (loss) may reverse in a different category of earnings, such as continuing operations, resulting in a disproportionate tax effect within accumulated other comprehensive income (loss). Generally, a disproportionate tax effect will be eliminated and recognized in income tax expense (benefit) when the circumstances upon which it is premised cease to exist.

The disproportionate tax effect related to various defined-benefit pension plans will be eliminated from accumulated other comprehensive income (loss) at the termination of the related pension plans. The disproportionate tax effect relating to our interest rate swap hedge, which was terminated in 2012, will be eliminated from accumulated other comprehensive income (loss) upon the maturity of the related debt in March 2022.

Recently Adopted Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board ("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. We adopted ASC 606 on January 1, 2018, under the full retrospective method of adoption. As a result of this adoption, net sales increased by $1 million and operating profit (and income before income taxes) decreased by $3 million for the three-month period ended March 31, 2017, from what was previously reported. For full year 2017 and 2016, net sales decreased by $2 million and increased by $4 million, respectively, and operating profit (and income before income taxes) decreased by $1 million and increased by $2 million, respectively, from what was previously reported. We additionally have recasted our previously reported segment operating results at the end of this section.

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. We adopted ASU 2016-01 on January 1, 2018. The adoption of this standard did not have a material impact on our financial position or results of operations.

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Asset Transfers of Assets Other than Inventory," which no longer allows the tax effects of intra-entity asset transfers (intercompany sales) of assets other than inventory to be deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new standard requires the tax expense from the sale of the asset in the seller's tax jurisdiction and the corresponding basis differences in the buyer's jurisdiction to be recognized when the transfer occurs even though the pre-tax effects of the transaction are eliminated in consolidation. We adopted ASU 2016-16 on January 1, 2018. The adoption of this standard did not have a material impact on our financial position or results of operations.

A. ACCOUNTING POLICIES (Continued)

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. ASU 2017-07 requires retrospective application for certain aspects of the standard. We adopted ASU 2017-07 on January 1, 2018. As a result of the adoption, we reclassified $7 million of net benefit cost from operating profit to other income (expense), net, within our results of operations for the three-month period ended March 31, 2017. For full year 2017 and 2016, we reclassified $26 million and $32 million, respectively, of net benefit cost from operating profit to other income (expense), net, within our results of operations. We additionally have recasted our previously reported segment operating results at the end of this section. The adoption of the standard did not impact income before income taxes.

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. We adopted ASU 2017-09 on January 1, 2018. The adoption of this standard did not impact our financial position or results of operations; however, modification accounting is now required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions.

In February 2018, the FASB issued ASU 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which permits a company to reclassify from accumulated other comprehensive income (loss) to retained earnings the disproportionate tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“2017 Act”). We early adopted ASU 2018-02 on March 31, 2018. As a result of the adoption, in the first quarter of 2018 we decreased accumulated other comprehensive income (loss) and increased retained earnings (deficit) by the $59 million disproportionate tax effect caused by the 2017 Act.

Impact of Adoption of ASC 606 and ASU 2017-07. The recasted impact of the adoptions of ASC 606 and ASU 2017-07 to our previously reported operating results and basic and diluted income per share was as follows, in millions (except per common share data):

	Year Ended December 31, 2016
	Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	3,526	$	3,529	$	642		$	654
Decorative Architectural Products	2,092		2,092		430			433
Cabinetry Products	970		970		93			97
Windows and Other Specialty Products	769		770		(3		)	(3		)
Total	$	7,357	$	7,361	1,162			1,181
General corporate expense, net					(109		)	(94		)
Operating profit					$	1,053		$	1,087
					Year Ended December 31, 2016
					As Reported			As Recasted
Net income attributable to Masco Corporation					$	491		$	493
Income per common share attributable to Masco Corporation:
Basic:					$	1.49		$	1.49
Diluted:					$	1.47		$	1.48

A. ACCOUNTING POLICIES (Continued)

	Three Months Ended March 31, 2017
	Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	863	$	872	$	156		$	162
Decorative Architectural Products	505		496		101			94
Cabinetry Products	231		231		16			16
Windows and Other Specialty Products	178		179		6			8
Total	$	1,777	$	1,778	279			280
General corporate expense, net					(26		)	(23		)
Operating profit					$	253		$	257
					Three Months Ended March 31, 2017
					As Reported			As Recasted
Net income attributable to Masco Corporation					$	140		$	138
Income per common share attributable to Masco Corporation:
Basic:					$	0.44		$	0.43
Diluted:					$	0.43		$	0.43

	Three Months Ended June 30, 2017										Six Months Ended June 30, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	949	$	949	$	198		$	200		$	1,812	$	1,821	$	354		$	362
Decorative Architectural Products	653		661		141			149			1,158		1,157		242			243
Cabinetry Products	251		251		30			31			482		482		46			47
Windows and Other Specialty Products	204		205		18			18			382		384		24			26
Total	$	2,057	$	2,066	387			398			$	3,834	$	3,844	666			678
General corporate expense, net					(30		)	(26		)					(56		)	(49		)
Operating profit					$	357		$	372						$	610		$	629
											Three Months Ended June 30, 2017				Six Months Ended June 30, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	158	$	163	$	298		$	301
Income per common share attributable to Masco Corporation:
Basic:											$	0.50	$	0.51	$	0.93		$	0.94
Diluted:											$	0.49	$	0.51	$	0.92		$	0.93

A. ACCOUNTING POLICIES (Continued)

	Three Months Ended September 30, 2017										Nine Months Ended September 30, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	951	$	950	$	175		$	175		$	2,763	$	2,771	$	529		$	537
Decorative Architectural Products	553		562		104			112			1,711		1,719		346			355
Cabinetry Products	229		229		19			20			711		711		65			67
Windows and Other Specialty Products	203		204		23			24			585		588		47			50
Total	$	1,936	$	1,945	321			331			$	5,770	$	5,789	987			1,009
General corporate expense, net					(26		)	(22		)					(82		)	(71		)
Operating profit					$	295		$	309						$	905		$	938
											Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	148	$	152	$	446		$	453
Income per common share attributable to Masco Corporation:
Basic:											$	0.47	$	0.48	$	1.40		$	1.42
Diluted:											$	0.46	$	0.48	$	1.38		$	1.41

	Three Months Ended December 31, 2017										Year Ended December 31, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	972	$	961	$	169		$	165		$	3,735	$	3,732	$	698		$	702
Decorative Architectural Products	494		487		88			83			2,205		2,206		434			438
Cabinetry Products	223		223		25			25			934		934		90			92
Windows and Other Specialty Products	185		182		5			4			770		770		52			54
Total	$	1,874	$	1,853	287			277			$	7,644	$	7,642	1,274			1,286
General corporate expense, net					(23		)	(21		)					(105		)	(92		)
Operating profit					$	264		$	256						$	1,169		$	1,194
											Three Months Ended December 31, 2017				Year Ended December 31, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	87	$	80	$	533		$	533
Income per common share attributable to Masco Corporation:
Basic:											$	0.28	$	0.25	$	1.68		$	1.68
Diluted:											$	0.27	$	0.25	$	1.66		$	1.66

A. ACCOUNTING POLICIES (Concluded)

Recently Issued Accounting Pronouncements. 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 currently 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. We do not expect the standard to have a material impact on our results of operations. In preparation for the adoption of the standard, we have procured a third-party software to track and manage our leases and have trained our business units on the new standard and the use of the software.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which modifies the methodology for recognizing loss impairments on certain types of financial instruments. The new methodology requires an entity to estimate the credit losses expected over the life of an exposure. Additionally, ASU 2016-13 amends the current available-for-sale security other-than-temporary impairment model for debt securities. ASU 2016-13 is effective for us for annual periods beginning January 1, 2020. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which improves and simplifies accounting rules around hedge accounting and better portrays the economic results of an entity's risk management activities in its financial statements. ASU 2017-12 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.

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Acquisitions

3 Months Ended

Mar. 31, 2018

Business Combinations [Abstract]

Acquisitions

ACQUISITIONS

On March 9, 2018, we acquired substantially all of the net assets of The L.D. Kichler Co. ("Kichler"), a leader in decorative residential and light commercial lighting products, ceiling fans and LED lighting systems. This business expands our product offerings to our customers. The results of this acquisition for the period from the acquisition date are included in the condensed consolidated financial statements and are reported in the Decorative Architectural Products segment. For the three-month period ended March 31, 2018, we recorded $27 million of net sales as a result of this acquisition. The purchase price, net of $2 million cash acquired, consisted of $548 million paid at closing with cash on hand. The acquisition accounting adjustments are based on analysis of information as of the acquisition date that was available through March 31, 2018. The adjustments will be updated through the measurement period, if necessary. The preliminary allocation of the fair value of the acquisition of Kichler is summarized in the following table, in millions.

Receivables	$	101
Inventories	173
Other current assets	5
Property and equipment	33
Goodwill	46
Other intangible assets	243
Accounts payable	(24		)
Accrued liabilities	(25		)
Other liabilities	(4		)
Total	$	548

The goodwill acquired, which is generally tax deductible, is related primarily to the operational and financial synergies we expect to derive from combining Kichler's operations into our business, as well as the assembled workforce. The other intangible assets acquired consist of $59 million of indefinite-lived intangible assets, which is related to trademarks, and $184 million of definite-lived intangible assets. The definite-lived intangible assets consist of $145 million related to customer relationships, which is being amortized on a straight-line basis over 20 years, and $39 million of other definite-lived intangible assets, which is being amortized over a weighted-average amortization period of 4 years.

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Revenue

3 Months Ended

Mar. 31, 2018

Revenues [Abstract]

Revenue

REVENUE

We recognize revenue as control of our products is transferred to our customers, which is generally at the time of shipment or upon delivery based on the contractual terms with our customers, or when services are completed. Control over certain of our custom-made window products transfers to our customers as production is completed, and revenue is recognized over the production period for these products, as our products do not have an alternative use and we have an enforceable right to payment during the production period. The production period of our custom-made window products generally does not lapse days, and for these products we currently recognize revenue based on the output of production, which is a faithful depiction of the transfer of these products to our customers. Our customers' payment terms generally range from 30 to 65 days of fulfilling our performance obligations and recognizing revenue.

We consider shipping and handling activities performed by us as activities to fulfill the sales of our products. Amounts billed for shipping and handling are included in net sales, while costs incurred for shipping and handling are included in cost of sales. We capitalize incremental costs of obtaining a contract and expense the costs on a straight-line basis over the contractual period if the cost is recoverable, the cost would not have been incurred without the contract and the term of the contract is greater than one year; otherwise, we expense the amounts as incurred. We do not adjust the promised amount of consideration for the effects of a financing component if the period between when we transfer our products or services and when our customers pay for our products or services is expected to be one year or less.

Our revenues are derived primarily from sales to customers in North America and Internationally, principally Europe. Net sales from these geographic markets, by segment, were as follows, in millions:

	Three Months Ended March 31, 2018
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	605	$	545	$	217	$	149	$	1,516
International, principally Europe	366		—		—		38		404
Total	$	971	$	545	$	217	$	187	$	1,920

	Three Months Ended March 31, 2017
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	557	$	496	$	219	$	140	$	1,412
International, principally Europe	315		—		12		39		366
Total	$	872	$	496	$	231	$	179	$	1,778

We provide customer programs and incentive offerings, including special pricing and co-operative advertising arrangements, promotions and other volume-based incentives. These customer programs and incentives are considered variable consideration. We include in revenue variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the variable consideration is resolved. This determination is made based upon known customer program and incentive offerings at the time of sale, and expected sales volume forecasts as it relates to our volume-based incentives. This determination is updated each reporting period.

Certain product sales include a right of return. We estimate future product returns at the time of sale based on historical experience and record a corresponding refund liability. We additionally record an asset, based on historical experience, for the amount of product we expect to return to inventory as a result of the return, which is recorded in prepaid expenses and other in the condensed consolidated balance sheets.

C. REVENUE (Concluded)

We record contract assets for items for which we have satisfied our performance obligation but our receipt of payment is contingent upon delivery or other circumstances other than the passage of time. Our contract assets are recorded in prepaid expenses and other in our condensed consolidated balance sheets. Our contract assets generally

become unconditional and are reclassified to receivables in the quarter subsequent to each balance sheet date. Our contract asset balance was $15 million and $11 million at March 31, 2018 and December 31, 2017, respectively.

We record contract liabilities primarily for deferred revenue. Our contract liabilities are recorded in accrued liabilities in our condensed consolidated balance sheets. Our contract liabilities are generally recognized to net sales in the immediately subsequent reporting period. Our contract liability balance was $14 million and $32 million at March 31, 2018 and December 31, 2017, respectively.

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Depreciation and Amortization

3 Months Ended

Mar. 31, 2018

Depreciation, Depletion and Amortization [Abstract]

Depreciation and Amortization

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense was $34 million and $31 million for the three-month periods endedMarch 31, 2018 and 2017, respectively.

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Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2018

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-month period endedMarch 31, 2018, by segment, were as follows, in millions: 

	Gross Goodwill At March 31, 2018		Accumulated Impairment Losses			Net Goodwill At March 31, 2018
Plumbing Products	$	578	$	(340	)	$	238
Decorative Architectural Products	340		(75		)	265
Cabinetry Products	181		—			181
Windows and Other Specialty Products	718		(511		)	207
Total	$	1,817	$	(926	)	$	891

	Gross Goodwill At December 31, 2017		Accumulated Impairment Losses			Net Goodwill At December 31, 2017		Additions (A)		Other (B)		Net Goodwill At March 31, 2018
Plumbing Products	$	574	$	(340	)	$	234	$	—	$	4	$	238
Decorative Architectural Products	294		(75		)	219		46		—		265
Cabinetry Products	181		—			181		—		—		181
Windows and Other Specialty Products	718		(511		)	207		—		—		207
Total	$	1,767	$	(926	)	$	841	$	46	$	4	$	891

(A)    Additions consist of acquisitions.

(B) Other consists of the effect of foreign currency translation.

The carrying value of our other indefinite-lived intangible assets was $200 million and $140 million at March 31, 2018 and December 31, 2017, respectively, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $229 million (net of accumulated amortization of $13 million) and $47 million (net of accumulated amortization of $10 million) at March 31, 2018 and December 31, 2017, respectively, and principally included customer relationships. The increase in our indefinite-lived intangible assets and definite-lived intangible assets is primarily a result of our acquisition of Kichler.

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Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2018

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 and foreign currency 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 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. At March 31, 2018, the balance remaining in accumulated other comprehensive loss was $8 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 statement 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.

The pre-tax losses included in our condensed consolidated statements of operations were as follows, in millions:

	Three Months Ended March 31,
	2018			2017
Foreign currency contracts:
Forward contracts	$	(1	)	$	—
Total loss	$	(1	)	$	—

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, 2018
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	12
Accrued liabilities			$	—
Forward contracts	29
Accrued liabilities			—

F. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Concluded)

	At December 31, 2017
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	14
Accrued liabilities			$	—
Forward contracts	43
Receivables			—
Accrued liabilities			—

The fair value of all foreign currency 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, 2018

Product Warranties Disclosures [Abstract]

Warranty Liability

WARRANTY LIABILITY

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

	Three Months Ended March 31, 2018			Twelve Months Ended December 31, 2017
Balance at January 1	$	205		$	192
Accruals for warranties issued during the period	17			63
Accruals related to pre-existing warranties	1			9
Settlements made (in cash or kind) during the period	(17		)	(59		)
Other, net (including currency translation)	—			—
Balance at end of period	$	206		$	205

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Debt

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Debt

DEBT

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.

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; outstanding letters of credit under the Amended Credit Agreement reduce our borrowing capacity. At March 31, 2018, we had no 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 greater of (i) the prime rate, (ii) the Federal Funds effective rate plus 0.50% and (iii) LIBOR plus 1.0% (the "Alternative Base Rate"); plus an applicable margin based upon 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.

H. DEBT (Concluded)

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 were outstanding at March 31, 2018. 

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 $3.2 billion, compared with the aggregate carrying value of $3.1 billion, at March 31, 2018. The aggregate estimated market value of short-term and long-term debt was approximately $3.3 billion, compared with the aggregate carrying value of $3.1 billion, at December 31, 2017.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2018

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 March 31, 2018, 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 for these stock-based incentives were as follows, in millions: 

	Three Months Ended March 31,
	2018		2017
Long-term stock awards	$	5	$	6
Stock options	1		1
Restricted stock units	1		—
Phantom stock awards and stock appreciation rights	—		2
Total	$	7	$	9

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 585,220 shares of long-term stock awards in the three-month period endedMarch 31, 2018.

I. STOCK-BASED COMPENSATION (Continued)

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

	Three Months Ended March 31,
	2018		2017
Unvested stock award shares at January 1	3		4
Weighted average grant date fair value	$	24	$	20
Stock award shares granted	1		1
Weighted average grant date fair value	$	42	$	34
Stock award shares vested	1		2
Weighted average grant date fair value	$	21	$	18
Stock award shares forfeited	—		—
Weighted average grant date fair value	$	30	$	22
Unvested stock award shares at March 31	3		3
Weighted average grant date fair value	$	30	$	23

AtMarch 31, 2018 and 2017, there was $64 million and $63 million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of four years at both March 31,2018 and 2017.

The total market value (at the vesting date) of stock award shares which vested during the three-month periods endedMarch 31, 2018 and 2017 was $52 million and $39 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 385,220 shares of stock options in the three-month period endedMarch 31, 2018 with a grant date weighted-average exercise price of approximately $42 per share. In the three-month period endedMarch 31,2018, 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,
		2018		2017
Option shares outstanding, January 1		5		7
Weighted average exercise price	$	16	$	15
Option shares granted		—		—
Weighted average exercise price	$	42	$	34
Option shares exercised		—		—
Aggregate intrinsic value on date of exercise (A)	$	33 million	$	3 million
Weighted average exercise price	$	11	$	23
Option shares forfeited		—		—
Weighted average exercise price	$	—	$	—
Option shares outstanding, March 31		5		7
Weighted average exercise price	$	19	$	16
Weighted average remaining option term (in years)		5		4
Option shares vested and expected to vest, March 31		5		7
Weighted average exercise price	$	19	$	16
Aggregate intrinsic value (A)	$	98 million	$	131 million
Weighted average remaining option term (in years)		5		4
Option shares exercisable (vested), March 31		3		6
Weighted average exercise price	$	15	$	13
Aggregate intrinsic value (A)	$	88 million	$	120 million
Weighted average remaining option term (in years)		4		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.

At March 31, 2018 and 2017, there was $11 million and $10 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 March 31, 2018 and 2017.

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,
	2018			2017
Weighted average grant date fair value	$	12.52		$	9.68
Risk-free interest rate	2.71		%	2.16		%
Dividend yield	1.00		%	1.19		%
Volatility factor	29.00		%	30.00		%
Expected option life	6 years			6 years

Restricted Stock Units. Under the Long Term Incentive Program, we granted restricted stock units to certain senior executives. These restricted stock units vest and share awards are 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 our Organization and Compensation Committee for the performance period and the recipient's continued employment through the share award date. We granted 113,260 restricted stock units in the three-month period endedMarch 31, 2018, with a grant date fair value of approximately $42 per share and 124,780 restricted stock units in the three-month period endedMarch 31, 2017, with a grant date fair value of approximately $34 per share. No restricted stock units were forfeited in the three-month periods endedMarch 31, 2018 and 2017.

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Employee Retirement Plans

3 Months Ended

Mar. 31, 2018

Retirement Benefits [Abstract]

Employee Retirement Plans

EMPLOYEE RETIREMENT PLANS

Net periodic pension cost for our defined-benefit pension plans, with the exception of service cost, is recorded in other income (expense), net, in our condensed consolidated statement of operations. Net periodic pension cost for our defined-benefit pension plans was as follows, in millions: 

	Three Months Ended March 31,
	2018					2017
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	1		$	—	$	1		$	—
Interest cost	10			1		12			1
Expected return on plan assets	(12		)	—		(12		)	—
Amortization of net loss	4			1		5			1
Net periodic pension cost	$	3		$	2	$	6		$	2

As of January 1, 2010, substantially all of our domestic and foreign qualified and domestic non-qualified defined-benefit pension plans were frozen to future benefit accruals.

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Reclassifications From Accumulated Other Comprehensive Loss

3 Months Ended

Mar. 31, 2018

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: 

	Amounts Reclassified
Accumulated Other Comprehensive Loss	Three Months Ended March 31,					Statement of Operations Line Item
	2018		2017
Amortization of defined-benefit pension and other postretirement benefits:
Actuarial losses, net	$	5	$	6		Other income (expense), net
Tax benefit	—		(2		)
Net of tax	$	5	$	4

In addition to the amounts reclassified above, upon adopting ASU 2018-02 in the first quarter of 2018, we reclassified $59 million of the disproportionate tax benefit relating to various defined-benefit plans from accumulated other comprehensive loss to retained deficit. Refer to Note A for additional information.

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Segment Information

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

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

	Three Months Ended March 31,
	2018		2017		2018			2017
	Net Sales (A)				OperatingProfit (Loss)
Operations by segment:
Plumbing Products	$	971	$	872	$	163		$	162
Decorative Architectural Products	545		496		89			94
Cabinetry Products	217		231		6			16
Windows and Other Specialty Products	187		179		4			8
Total	$	1,920	$	1,778	$	262		$	280
Operations by geographic area:
North America	$	1,516	$	1,412	$	218		$	238
International, principally Europe	404		366		44			42
Total	$	1,920	$	1,778	262			280
General corporate expense, net					(18		)	(23		)
Operating profit					244			257
Other income (expense), net					(44		)	(47		)
Income before income taxes					$	200		$	210

(A) Inter-segment sales were not material.

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Other Income (Expense), Net

3 Months Ended

Mar. 31, 2018

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,
	2018			2017
Income from cash and cash investments and short-term bank deposits	$	2		$	1
Realized gains from private equity funds	—			1
Foreign currency transaction (losses) gains	(1		)	1
Net periodic pension and post-retirement benefit cost	(4		)	(7		)
Total other, net	$	(3	)	$	(4	)

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Earnings Per Common Share

INCOME PER COMMON SHARE

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

	Three Months Ended March 31,
	2018		2017
Numerator (basic and diluted):
Net income	$	149	$	138
Less: Allocation to unvested restricted stock awards	1		1
Net income available to common shareholders	$	148	$	137
Denominator:
Basic common shares (based upon weighted average)	310		317
Add: Stock option dilution	3		4
Diluted common shares	313		321

For the three-month periods endedMarch 31, 2018 and 2017, we allocated dividends and undistributed earnings to the unvested restricted stock awards.

Additionally, 431,000 and 221,000 common shares for the three-month periods endedMarch 31, 2018 and 2017, respectively, related to stock options were excluded from the computation of diluted income 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 February 2018, we agreed to repurchase a total of $150 million of common stock with an immediate delivery of 2.8 millionshares under an accelerated stock repurchase transaction. In March 2018, upon completion of the transaction, we received, at no cost to us, an additional0.9 millionshares of our common stock resulting from changes in the volume weighted average stock price of our common stock over the term of the transaction. In total, we repurchased and retired3.7 million shares of our common stock in the first three months of 2018 (including 0.6 million shares to offset the dilutive impact of long-term stock awards granted in the first three months of the year).At March 31, 2018, we had $1.1 billion remaining under the 2017 authorization.

On the basis of amounts paid (declared), cash dividends per common share were $0.105 ($0.105) and $0.100 ($0.100) for the three-month periods endedMarch 31, 2018 and 2017, respectively.

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Other Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Other Commitments and Contingencies

OTHER COMMITMENTS AND CONTINGENCIES

We are involved in claims and litigation, including class actions and regulatory proceedings, which arise in the ordinary course of our business. The types of matters may include, among others: competition, product liability, employment, warranty, advertising, contract, personal injury, environmental, intellectual property, and insurance coverage. 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, 2018

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Our effective tax rate was 20 percent for the three-month period ended March 31, 2018. Our tax rate was lower than our 2018 statutory tax rate of 21 percent due primarily to a seven percent decrease from an income tax benefit on stock- based compensation, partially offset by a four percent increase from U.S. and foreign taxes on foreign earnings and a two percent increase from state and local taxes, net of U.S. Federal tax benefit.

Our effective tax rate was 30 percent for the three-month period ended March 31, 2017. Our tax rate was lower than our 2017 statutory tax rate of 35 percent due primarily to a three percent decrease from an income tax benefit on stock-based compensation and a two percent decrease from a state income tax benefit on uncertain tax positions resulting from the expiration of applicable statutes of limitation.

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Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Reclassification

Reclassification. Certain prior year amounts have been reclassified to conform to the 2018 presentation in the condensed consolidated financial statements. 

Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board ("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. We adopted ASC 606 on January 1, 2018, under the full retrospective method of adoption. As a result of this adoption, net sales increased by $1 million and operating profit (and income before income taxes) decreased by $3 million for the three-month period ended March 31, 2017, from what was previously reported. For full year 2017 and 2016, net sales decreased by $2 million and increased by $4 million, respectively, and operating profit (and income before income taxes) decreased by $1 million and increased by $2 million, respectively, from what was previously reported. We additionally have recasted our previously reported segment operating results at the end of this section.

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. We adopted ASU 2016-01 on January 1, 2018. The adoption of this standard did not have a material impact on our financial position or results of operations.

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Asset Transfers of Assets Other than Inventory," which no longer allows the tax effects of intra-entity asset transfers (intercompany sales) of assets other than inventory to be deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new standard requires the tax expense from the sale of the asset in the seller's tax jurisdiction and the corresponding basis differences in the buyer's jurisdiction to be recognized when the transfer occurs even though the pre-tax effects of the transaction are eliminated in consolidation. We adopted ASU 2016-16 on January 1, 2018. The adoption of this standard did not have a material impact on our financial position or results of operations.

A. ACCOUNTING POLICIES (Continued)

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. ASU 2017-07 requires retrospective application for certain aspects of the standard. We adopted ASU 2017-07 on January 1, 2018. As a result of the adoption, we reclassified $7 million of net benefit cost from operating profit to other income (expense), net, within our results of operations for the three-month period ended March 31, 2017. For full year 2017 and 2016, we reclassified $26 million and $32 million, respectively, of net benefit cost from operating profit to other income (expense), net, within our results of operations. We additionally have recasted our previously reported segment operating results at the end of this section. The adoption of the standard did not impact income before income taxes.

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. We adopted ASU 2017-09 on January 1, 2018. The adoption of this standard did not impact our financial position or results of operations; however, modification accounting is now required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions.

In February 2018, the FASB issued ASU 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which permits a company to reclassify from accumulated other comprehensive income (loss) to retained earnings the disproportionate tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“2017 Act”). We early adopted ASU 2018-02 on March 31, 2018. As a result of the adoption, in the first quarter of 2018 we decreased accumulated other comprehensive income (loss) and increased retained earnings (deficit) by the $59 million disproportionate tax effect caused by the 2017 Act.

Impact of Adoption of ASC 606 and ASU 2017-07. The recasted impact of the adoptions of ASC 606 and ASU 2017-07 to our previously reported operating results and basic and diluted income per share was as follows, in millions (except per common share data):

	Year Ended December 31, 2016
	Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	3,526	$	3,529	$	642		$	654
Decorative Architectural Products	2,092		2,092		430			433
Cabinetry Products	970		970		93			97
Windows and Other Specialty Products	769		770		(3		)	(3		)
Total	$	7,357	$	7,361	1,162			1,181
General corporate expense, net					(109		)	(94		)
Operating profit					$	1,053		$	1,087
					Year Ended December 31, 2016
					As Reported			As Recasted
Net income attributable to Masco Corporation					$	491		$	493
Income per common share attributable to Masco Corporation:
Basic:					$	1.49		$	1.49
Diluted:					$	1.47		$	1.48

A. ACCOUNTING POLICIES (Continued)

	Three Months Ended March 31, 2017
	Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	863	$	872	$	156		$	162
Decorative Architectural Products	505		496		101			94
Cabinetry Products	231		231		16			16
Windows and Other Specialty Products	178		179		6			8
Total	$	1,777	$	1,778	279			280
General corporate expense, net					(26		)	(23		)
Operating profit					$	253		$	257
					Three Months Ended March 31, 2017
					As Reported			As Recasted
Net income attributable to Masco Corporation					$	140		$	138
Income per common share attributable to Masco Corporation:
Basic:					$	0.44		$	0.43
Diluted:					$	0.43		$	0.43

	Three Months Ended June 30, 2017										Six Months Ended June 30, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	949	$	949	$	198		$	200		$	1,812	$	1,821	$	354		$	362
Decorative Architectural Products	653		661		141			149			1,158		1,157		242			243
Cabinetry Products	251		251		30			31			482		482		46			47
Windows and Other Specialty Products	204		205		18			18			382		384		24			26
Total	$	2,057	$	2,066	387			398			$	3,834	$	3,844	666			678
General corporate expense, net					(30		)	(26		)					(56		)	(49		)
Operating profit					$	357		$	372						$	610		$	629
											Three Months Ended June 30, 2017				Six Months Ended June 30, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	158	$	163	$	298		$	301
Income per common share attributable to Masco Corporation:
Basic:											$	0.50	$	0.51	$	0.93		$	0.94
Diluted:											$	0.49	$	0.51	$	0.92		$	0.93

A. ACCOUNTING POLICIES (Continued)

	Three Months Ended September 30, 2017										Nine Months Ended September 30, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	951	$	950	$	175		$	175		$	2,763	$	2,771	$	529		$	537
Decorative Architectural Products	553		562		104			112			1,711		1,719		346			355
Cabinetry Products	229		229		19			20			711		711		65			67
Windows and Other Specialty Products	203		204		23			24			585		588		47			50
Total	$	1,936	$	1,945	321			331			$	5,770	$	5,789	987			1,009
General corporate expense, net					(26		)	(22		)					(82		)	(71		)
Operating profit					$	295		$	309						$	905		$	938
											Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	148	$	152	$	446		$	453
Income per common share attributable to Masco Corporation:
Basic:											$	0.47	$	0.48	$	1.40		$	1.42
Diluted:											$	0.46	$	0.48	$	1.38		$	1.41

	Three Months Ended December 31, 2017										Year Ended December 31, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	972	$	961	$	169		$	165		$	3,735	$	3,732	$	698		$	702
Decorative Architectural Products	494		487		88			83			2,205		2,206		434			438
Cabinetry Products	223		223		25			25			934		934		90			92
Windows and Other Specialty Products	185		182		5			4			770		770		52			54
Total	$	1,874	$	1,853	287			277			$	7,644	$	7,642	1,274			1,286
General corporate expense, net					(23		)	(21		)					(105		)	(92		)
Operating profit					$	264		$	256						$	1,169		$	1,194
											Three Months Ended December 31, 2017				Year Ended December 31, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	87	$	80	$	533		$	533
Income per common share attributable to Masco Corporation:
Basic:											$	0.28	$	0.25	$	1.68		$	1.68
Diluted:											$	0.27	$	0.25	$	1.66		$	1.66

A. ACCOUNTING POLICIES (Concluded)

Recently Issued Accounting Pronouncements. 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 currently 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. We do not expect the standard to have a material impact on our results of operations. In preparation for the adoption of the standard, we have procured a third-party software to track and manage our leases and have trained our business units on the new standard and the use of the software.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which modifies the methodology for recognizing loss impairments on certain types of financial instruments. The new methodology requires an entity to estimate the credit losses expected over the life of an exposure. Additionally, ASU 2016-13 amends the current available-for-sale security other-than-temporary impairment model for debt securities. ASU 2016-13 is effective for us for annual periods beginning January 1, 2020. We are currently evaluating the impact the adoption of this new standard will have on our financial position and results of operations.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which improves and simplifies accounting rules around hedge accounting and better portrays the economic results of an entity's risk management activities in its financial statements. ASU 2017-12 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.

Revenue Recognition, Policy

We recognize revenue as control of our products is transferred to our customers, which is generally at the time of shipment or upon delivery based on the contractual terms with our customers, or when services are completed. Control over certain of our custom-made window products transfers to our customers as production is completed, and revenue is recognized over the production period for these products, as our products do not have an alternative use and we have an enforceable right to payment during the production period. The production period of our custom-made window products generally does not lapse days, and for these products we currently recognize revenue based on the output of production, which is a faithful depiction of the transfer of these products to our customers. Our customers' payment terms generally range from 30 to 65 days of fulfilling our performance obligations and recognizing revenue.

We consider shipping and handling activities performed by us as activities to fulfill the sales of our products. Amounts billed for shipping and handling are included in net sales, while costs incurred for shipping and handling are included in cost of sales. We capitalize incremental costs of obtaining a contract and expense the costs on a straight-line basis over the contractual period if the cost is recoverable, the cost would not have been incurred without the contract and the term of the contract is greater than one year; otherwise, we expense the amounts as incurred. We do not adjust the promised amount of consideration for the effects of a financing component if the period between when we transfer our products or services and when our customers pay for our products or services is expected to be one year or less.

Revenue Recognition, Revenue Reductions

We provide customer programs and incentive offerings, including special pricing and co-operative advertising arrangements, promotions and other volume-based incentives. These customer programs and incentives are considered variable consideration. We include in revenue variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the variable consideration is resolved. This determination is made based upon known customer program and incentive offerings at the time of sale, and expected sales volume forecasts as it relates to our volume-based incentives. This determination is updated each reporting period.

Revenue Recognition, Sales Returns

Certain product sales include a right of return. We estimate future product returns at the time of sale based on historical experience and record a corresponding refund liability. We additionally record an asset, based on historical experience, for the amount of product we expect to return to inventory as a result of the return, which is recorded in prepaid expenses and other in the condensed consolidated balance sheets.

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Accounting Policies Impact of Accounting Standards (Tables)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

	Three Months Ended June 30, 2017										Six Months Ended June 30, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	949	$	949	$	198		$	200		$	1,812	$	1,821	$	354		$	362
Decorative Architectural Products	653		661		141			149			1,158		1,157		242			243
Cabinetry Products	251		251		30			31			482		482		46			47
Windows and Other Specialty Products	204		205		18			18			382		384		24			26
Total	$	2,057	$	2,066	387			398			$	3,834	$	3,844	666			678
General corporate expense, net					(30		)	(26		)					(56		)	(49		)
Operating profit					$	357		$	372						$	610		$	629
											Three Months Ended June 30, 2017				Six Months Ended June 30, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	158	$	163	$	298		$	301
Income per common share attributable to Masco Corporation:
Basic:											$	0.50	$	0.51	$	0.93		$	0.94
Diluted:											$	0.49	$	0.51	$	0.92		$	0.93

	Three Months Ended September 30, 2017										Nine Months Ended September 30, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	951	$	950	$	175		$	175		$	2,763	$	2,771	$	529		$	537
Decorative Architectural Products	553		562		104			112			1,711		1,719		346			355
Cabinetry Products	229		229		19			20			711		711		65			67
Windows and Other Specialty Products	203		204		23			24			585		588		47			50
Total	$	1,936	$	1,945	321			331			$	5,770	$	5,789	987			1,009
General corporate expense, net					(26		)	(22		)					(82		)	(71		)
Operating profit					$	295		$	309						$	905		$	938
											Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	148	$	152	$	446		$	453
Income per common share attributable to Masco Corporation:
Basic:											$	0.47	$	0.48	$	1.40		$	1.42
Diluted:											$	0.46	$	0.48	$	1.38		$	1.41

	Year Ended December 31, 2016
	Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	3,526	$	3,529	$	642		$	654
Decorative Architectural Products	2,092		2,092		430			433
Cabinetry Products	970		970		93			97
Windows and Other Specialty Products	769		770		(3		)	(3		)
Total	$	7,357	$	7,361	1,162			1,181
General corporate expense, net					(109		)	(94		)
Operating profit					$	1,053		$	1,087
					Year Ended December 31, 2016
					As Reported			As Recasted
Net income attributable to Masco Corporation					$	491		$	493
Income per common share attributable to Masco Corporation:
Basic:					$	1.49		$	1.49
Diluted:					$	1.47		$	1.48

	Three Months Ended March 31, 2017
	Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	863	$	872	$	156		$	162
Decorative Architectural Products	505		496		101			94
Cabinetry Products	231		231		16			16
Windows and Other Specialty Products	178		179		6			8
Total	$	1,777	$	1,778	279			280
General corporate expense, net					(26		)	(23		)
Operating profit					$	253		$	257
					Three Months Ended March 31, 2017
					As Reported			As Recasted
Net income attributable to Masco Corporation					$	140		$	138
Income per common share attributable to Masco Corporation:
Basic:					$	0.44		$	0.43
Diluted:					$	0.43		$	0.43

	Three Months Ended December 31, 2017										Year Ended December 31, 2017
	Net Sales				OperatingProfit (Loss)						Net Sales				OperatingProfit (Loss)
	As Reported		As Recasted		As Reported			As Recasted			As Reported		As Recasted		As Reported			As Recasted
Operations by segment:
Plumbing Products	$	972	$	961	$	169		$	165		$	3,735	$	3,732	$	698		$	702
Decorative Architectural Products	494		487		88			83			2,205		2,206		434			438
Cabinetry Products	223		223		25			25			934		934		90			92
Windows and Other Specialty Products	185		182		5			4			770		770		52			54
Total	$	1,874	$	1,853	287			277			$	7,644	$	7,642	1,274			1,286
General corporate expense, net					(23		)	(21		)					(105		)	(92		)
Operating profit					$	264		$	256						$	1,169		$	1,194
											Three Months Ended December 31, 2017				Year Ended December 31, 2017
											As Reported		As Recasted		As Reported			As Recasted
Net income attributable to Masco Corporation											$	87	$	80	$	533		$	533
Income per common share attributable to Masco Corporation:
Basic:											$	0.28	$	0.25	$	1.68		$	1.68
Diluted:											$	0.27	$	0.25	$	1.66		$	1.66

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Acquisitions (Tables)

3 Months Ended

Mar. 31, 2018

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The preliminary allocation of the fair value of the acquisition of Kichler is summarized in the following table, in millions.

Receivables	$	101
Inventories	173
Other current assets	5
Property and equipment	33
Goodwill	46
Other intangible assets	243
Accounts payable	(24		)
Accrued liabilities	(25		)
Other liabilities	(4		)
Total	$	548

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Revenue (Tables)

3 Months Ended

Mar. 31, 2018

Revenues [Abstract]

Disaggregation of Revenue

Our revenues are derived primarily from sales to customers in North America and Internationally, principally Europe. Net sales from these geographic markets, by segment, were as follows, in millions:

	Three Months Ended March 31, 2018
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	605	$	545	$	217	$	149	$	1,516
International, principally Europe	366		—		—		38		404
Total	$	971	$	545	$	217	$	187	$	1,920

	Three Months Ended March 31, 2017
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	557	$	496	$	219	$	140	$	1,412
International, principally Europe	315		—		12		39		366
Total	$	872	$	496	$	231	$	179	$	1,778

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Goodwill and Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2018

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-month period endedMarch 31, 2018, by segment, were as follows, in millions: 

	Gross Goodwill At March 31, 2018		Accumulated Impairment Losses			Net Goodwill At March 31, 2018
Plumbing Products	$	578	$	(340	)	$	238
Decorative Architectural Products	340		(75		)	265
Cabinetry Products	181		—			181
Windows and Other Specialty Products	718		(511		)	207
Total	$	1,817	$	(926	)	$	891

	Gross Goodwill At December 31, 2017		Accumulated Impairment Losses			Net Goodwill At December 31, 2017		Additions (A)		Other (B)		Net Goodwill At March 31, 2018
Plumbing Products	$	574	$	(340	)	$	234	$	—	$	4	$	238
Decorative Architectural Products	294		(75		)	219		46		—		265
Cabinetry Products	181		—			181		—		—		181
Windows and Other Specialty Products	718		(511		)	207		—		—		207
Total	$	1,767	$	(926	)	$	841	$	46	$	4	$	891

(A)    Additions consist of acquisitions.

(B) Other consists of the effect of foreign currency translation.

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Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2018

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 losses included in our condensed consolidated statements of operations were as follows, in millions:

	Three Months Ended March 31,
	2018			2017
Foreign currency contracts:
Forward contracts	$	(1	)	$	—
Total loss	$	(1	)	$	—

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, 2018
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	12
Accrued liabilities			$	—
Forward contracts	29
Accrued liabilities			—

F. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Concluded)

	At December 31, 2017
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	14
Accrued liabilities			$	—
Forward contracts	43
Receivables			—
Accrued liabilities			—

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Warranty Liability (Tables)

3 Months Ended

Mar. 31, 2018

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, 2018			Twelve Months Ended December 31, 2017
Balance at January 1	$	205		$	192
Accruals for warranties issued during the period	17			63
Accruals related to pre-existing warranties	1			9
Settlements made (in cash or kind) during the period	(17		)	(59		)
Other, net (including currency translation)	—			—
Balance at end of period	$	206		$	205

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

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 for these stock-based incentives were as follows, in millions: 

	Three Months Ended March 31,
	2018		2017
Long-term stock awards	$	5	$	6
Stock options	1		1
Restricted stock units	1		—
Phantom stock awards and stock appreciation rights	—		2
Total	$	7	$	9

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,
	2018		2017
Unvested stock award shares at January 1	3		4
Weighted average grant date fair value	$	24	$	20
Stock award shares granted	1		1
Weighted average grant date fair value	$	42	$	34
Stock award shares vested	1		2
Weighted average grant date fair value	$	21	$	18
Stock award shares forfeited	—		—
Weighted average grant date fair value	$	30	$	22
Unvested stock award shares at March 31	3		3
Weighted average grant date fair value	$	30	$	23

Schedule of the Company's stock option activity

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

		Three Months Ended March 31,
		2018		2017
Option shares outstanding, January 1		5		7
Weighted average exercise price	$	16	$	15
Option shares granted		—		—
Weighted average exercise price	$	42	$	34
Option shares exercised		—		—
Aggregate intrinsic value on date of exercise (A)	$	33 million	$	3 million
Weighted average exercise price	$	11	$	23
Option shares forfeited		—		—
Weighted average exercise price	$	—	$	—
Option shares outstanding, March 31		5		7
Weighted average exercise price	$	19	$	16
Weighted average remaining option term (in years)		5		4
Option shares vested and expected to vest, March 31		5		7
Weighted average exercise price	$	19	$	16
Aggregate intrinsic value (A)	$	98 million	$	131 million
Weighted average remaining option term (in years)		5		4
Option shares exercisable (vested), March 31		3		6
Weighted average exercise price	$	15	$	13
Aggregate intrinsic value (A)	$	88 million	$	120 million
Weighted average remaining option term (in years)		4		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.

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,
	2018			2017
Weighted average grant date fair value	$	12.52		$	9.68
Risk-free interest rate	2.71		%	2.16		%
Dividend yield	1.00		%	1.19		%
Volatility factor	29.00		%	30.00		%
Expected option life	6 years			6 years

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Employee Retirement Plans (Tables)

3 Months Ended

Mar. 31, 2018

Retirement Benefits [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, with the exception of service cost, is recorded in other income (expense), net, in our condensed consolidated statement of operations. Net periodic pension cost for our defined-benefit pension plans was as follows, in millions: 

	Three Months Ended March 31,
	2018					2017
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	1		$	—	$	1		$	—
Interest cost	10			1		12			1
Expected return on plan assets	(12		)	—		(12		)	—
Amortization of net loss	4			1		5			1
Net periodic pension cost	$	3		$	2	$	6		$	2

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Reclassifications From Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2018

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
	2018		2017
Amortization of defined-benefit pension and other postretirement benefits:
Actuarial losses, net	$	5	$	6		Other income (expense), net
Tax benefit	—		(2		)
Net of tax	$	5	$	4

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2018

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,
	2018		2017		2018			2017
	Net Sales (A)				OperatingProfit (Loss)
Operations by segment:
Plumbing Products	$	971	$	872	$	163		$	162
Decorative Architectural Products	545		496		89			94
Cabinetry Products	217		231		6			16
Windows and Other Specialty Products	187		179		4			8
Total	$	1,920	$	1,778	$	262		$	280
Operations by geographic area:
North America	$	1,516	$	1,412	$	218		$	238
International, principally Europe	404		366		44			42
Total	$	1,920	$	1,778	262			280
General corporate expense, net					(18		)	(23		)
Operating profit					244			257
Other income (expense), net					(44		)	(47		)
Income before income taxes					$	200		$	210

(A) Inter-segment sales were not material.

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Other Income (Expense), Net (Tables)

3 Months Ended

Mar. 31, 2018

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,
	2018			2017
Income from cash and cash investments and short-term bank deposits	$	2		$	1
Realized gains from private equity funds	—			1
Foreign currency transaction (losses) gains	(1		)	1
Net periodic pension and post-retirement benefit cost	(4		)	(7		)
Total other, net	$	(3	)	$	(4	)

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2018

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 income per common share were as follows, in millions: 

	Three Months Ended March 31,
	2018		2017
Numerator (basic and diluted):
Net income	$	149	$	138
Less: Allocation to unvested restricted stock awards	1		1
Net income available to common shareholders	$	148	$	137
Denominator:
Basic common shares (based upon weighted average)	310		317
Add: Stock option dilution	3		4
Diluted common shares	313		321

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Accounting Policies - Narrative (Details) - USD ($) $ in Millions	3 Months Ended					6 Months Ended	9 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2017	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	$ 1,920				$ 1,778
Operating Income (Loss)	244	$ 256	$ 309	$ 372	257	$ 629	$ 938	$ 1,194	$ 1,087
Other, net	(3)				(4)
Reclassification from AOCI, Current Period, Tax	$ 59
Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales					1			2	4
Operating Income (Loss)					3			1	2
Accounting Standards Update 2017-07
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other, net					$ 7			$ 26
Accounting Standards Update 2018-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other, net									$ 32

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Accounting Policies Accounting Pronouncements (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended					6 Months Ended	9 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2017	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	$ 1,920				$ 1,778
Operating Income (Loss)	244	$ 256	$ 309	$ 372	257	$ 629	$ 938	$ 1,194	$ 1,087
Net Income (Loss) Attributable to Parent	$ 149	$ 80	$ 152	$ 163	$ 138	$ 301	$ 453	$ 533	$ 493
Net income (in dollars per share)	$ 0.48	$ 0.25	$ 0.48	$ 0.51	$ 0.43	$ 0.94	$ 1.42	$ 1.68	$ 1.49
Net income (in dollars per share)	$ 0.47	$ 0.25	$ 0.48	$ 0.51	$ 0.43	$ 0.93	$ 1.41	$ 1.66	$ 1.48
Operating Segments
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	$ 1,920	$ 1,853	$ 1,945	$ 2,066	$ 1,778	$ 3,844	$ 5,789	$ 7,642	$ 7,361
Operating Income (Loss)	262	277	331	398	280	678	1,009	1,286	1,181
Operating Segments | Plumbing Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	971	961	950	949	872	1,821	2,771	3,732	3,529
Operating Income (Loss)	163	165	175	200	162	362	537	702	654
Operating Segments | Decorative Architectural Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	545	487	562	661	496	1,157	1,719	2,206	2,092
Operating Income (Loss)	89	83	112	149	94	243	355	438	433
Operating Segments | Cabinetry Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	217	223	229	251	231	482	711	934	970
Operating Income (Loss)	6	25	20	31	16	47	67	92	97
Operating Segments | Windows and Other Specialty Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	187	182	204	205	179	384	588	770	770
Operating Income (Loss)	4	4	24	18	8	26	50	54	(3)
Corporate, Non-Segment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating Expenses	$ (18)	21	(22)	(26)	(23)	(49)	(71)	(92)	(94)
Previous Accounting Guidance
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating Income (Loss)		264	295	357	253	610	905	1,169	1,053
Net Income (Loss) Attributable to Parent		$ 87	$ 148	$ 158	$ 140	$ 298	$ 446	$ 533	$ 491
Net income (in dollars per share)		$ 0.28	$ 0.47	$ 0.50	$ 0.44	$ 0.93	$ 1.40	$ 1.68	$ 1.49
Net income (in dollars per share)		$ 0.27	$ 0.46	$ 0.49	$ 0.43	$ 0.92	$ 1.38	$ 1.66	$ 1.47
Previous Accounting Guidance | Operating Segments
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales		$ 1,874	$ 1,936	$ 2,057	$ 1,777	$ 3,834	$ 5,770	$ 7,644	$ 7,357
Operating Income (Loss)		287	321	387	279	666	987	1,274	1,162
Previous Accounting Guidance | Operating Segments | Plumbing Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales		972	951	949	863	1,812	2,763	3,735	3,526
Operating Income (Loss)		169	175	198	156	354	529	698	642
Previous Accounting Guidance | Operating Segments | Decorative Architectural Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales		494	553	653	505	1,158	1,711	2,205	2,092
Operating Income (Loss)		88	104	141	101	242	346	434	430
Previous Accounting Guidance | Operating Segments | Cabinetry Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales		223	229	251	231	482	711	934	970
Operating Income (Loss)		25	19	30	16	46	65	90	93
Previous Accounting Guidance | Operating Segments | Windows and Other Specialty Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales		185	203	204	178	382	585	770	769
Operating Income (Loss)		5	23	18	6	24	47	52	(3)
Previous Accounting Guidance | Corporate, Non-Segment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating Expenses		$ 23	$ (26)	$ (30)	$ (26)	$ (56)	$ (82)	$ (105)	$ (109)

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Acquisitions (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 09, 2018
Business Acquisition [Line Items]
Goodwill, Acquired During Period	$ 46
The LD Kichler Co [Member] | Decorative Architectural Products
Business Acquisition [Line Items]
Net sales	27
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Cash and Equivalents		$ 2
Receivables		101
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Inventory		173
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Prepaid Expense and Other Assets		5
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Property, Plant, and Equipment		33
Goodwill, Acquired During Period	46
Indefinite-lived Intangible Assets Acquired	59
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill		243
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Accounts Payable		(24)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Other		(25)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Liabilities, Other		(4)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net		$ 548
Finite-lived Intangible Assets Acquired	184
The LD Kichler Co [Member] | Customer Relationships | Decorative Architectural Products
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired	$ 145
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	20 years
The LD Kichler Co [Member] | Other Intangible Assets | Decorative Architectural Products
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired	$ 39
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	4 years

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Revenue (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 1,920	$ 1,778
Contract with Customer, Asset, Gross, Current	15		$ 11
Contract with Customer, Liability	14		$ 32
Plumbing Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	971	872
Decorative Architectural Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	545	496
Cabinetry Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	217	231
Windows and Other Specialty Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	187	179
North America
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	1,516	1,412
North America | Plumbing Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	605	557
North America | Decorative Architectural Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	545	496
North America | Cabinetry Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	217	219
North America | Windows and Other Specialty Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	149	140
International, principally Europe
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	404	366
International, principally Europe | Plumbing Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	366	315
International, principally Europe | Decorative Architectural Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	0	0
International, principally Europe | Cabinetry Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	0	12
International, principally Europe | Windows and Other Specialty Products
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 38	$ 39

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Depreciation and Amortization (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Depreciation, Depletion and Amortization [Abstract]
Depreciation and amortization expense	$ 34	$ 31

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Goodwill and Other Intangible Assets - Goodwill Rollforward (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Goodwill [Line Items]
Goodwill, gross at period start	$ 1,767
Accumulated Impairment Losses		$ (926)	$ (926)
Goodwill, gross at period end	1,817
Goodwill [Roll Forward]
Beginning balance	841
Additions	46
Other	4
Ending balance	841	891	841
Plumbing Products
Goodwill [Line Items]
Goodwill, gross at period start	574
Accumulated Impairment Losses		(340)	(340)
Goodwill, gross at period end	578
Goodwill [Roll Forward]
Beginning balance	234
Additions	0
Other	4
Ending balance	234	238	234
Decorative Architectural Products
Goodwill [Line Items]
Goodwill, gross at period start	294
Accumulated Impairment Losses		(75)	(75)
Goodwill, gross at period end	340
Goodwill [Roll Forward]
Beginning balance	219
Other	0
Ending balance	219	265	219
Cabinetry Products
Goodwill [Line Items]
Goodwill, gross at period start	181
Accumulated Impairment Losses		0	0
Goodwill, gross at period end	181
Goodwill [Roll Forward]
Beginning balance	181
Additions	0
Other	0
Ending balance	181	181	181
Windows and Other Specialty Products
Goodwill [Line Items]
Goodwill, gross at period start	718
Accumulated Impairment Losses		(511)	(511)
Goodwill, gross at period end	718
Goodwill [Roll Forward]
Beginning balance	207
Additions	0
Other	0
Ending balance	$ 207	$ 207	$ 207

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Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Other indefinite-lived intangible assets	$ 200	$ 140
Carrying value of definite-lived intangible assets	229	47
Accumulated amortization	$ 13	$ 10

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Derivative Instruments and Hedging Activities - Narrative (Details) - Derivatives designated as hedging instruments - Cash flow hedges - Interest rate swaps - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2012
Three Month London Interbank Offered Rate
Interest Rate Swap Agreements
Unrealized gain (loss) on interest rate cash flow hedges, AOCI	$ (8,000,000)
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

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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, 2018	Mar. 31, 2017
Derivative instruments and hedging activities
Total gain (loss)	$ (1)	$ 0
Forward contracts | Other, net
Derivative instruments and hedging activities
Total gain (loss)	$ (1)	$ 0

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Derivative Instruments and Hedging Activities - Fair Value of Derivative Instruments (Details) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Foreign currency exchange contracts
Derivative instruments and hedging activities
Notional Amount	$ 12	$ 14
Foreign currency exchange contracts | Accrued liabilities | Recurring | Level 2
Derivative instruments and hedging activities
Liabilities	0	0
Forward contracts
Derivative instruments and hedging activities
Notional Amount	29	43
Forward contracts | Accrued liabilities | Recurring | Level 2
Derivative instruments and hedging activities
Liabilities	$ 0	0
Forward contracts | Receivables | Recurring | Level 2
Derivative instruments and hedging activities
Asset		$ 0

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Warranty Liability (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward]
Balance at the beginning of the period	$ 205	$ 192
Accruals for warranties issued during the period	17	63
Accruals related to pre-existing warranties	1	9
Settlements made (in cash or kind) during the period	(17)	(59)
Other, net (including currency translation)	0	0
Balance at the end of the period	$ 206	$ 205

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Debt (Details)	May 29, 2015 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Mar. 28, 2013 USD ($)
Estimate of Fair Value Measurement
Debt
Estimated market value of long-term and short-term debt		$ 3,200,000,000	$ 3,300,000,000
Carrying Value Reported Value Measurement
Debt
Aggregate carrying value of long-term and short-term debt		3,100,000,000	$ 3,100,000,000
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
Maximum net leverage ratio	4
Minimum interest coverage ratio	2.5
Borrowings outstanding		0
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		$ 0

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Stock-Based Compensation (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Stock-based compensation
Pre-tax compensation expense	$ 7	$ 9
Long-term stock awards
Stock-based compensation
Pre-tax compensation expense	5	6
Stock options
Stock-based compensation
Pre-tax compensation expense	1	1
Restricted stock units
Stock-based compensation
Pre-tax compensation expense	1	0
Phantom stock awards and stock appreciation rights
Stock-based compensation
Pre-tax compensation expense	$ 0	$ 2

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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, 2018	Mar. 31, 2017
Unvested stock award shares
Balance at the beginning of the period (in shares)	3,000,000	4,000,000
Granted (in shares)	585,220	1,000,000
Vested (in shares)	1,000,000	2,000,000
Forfeited (in shares)	0	0
Balance at the end of the period (in shares)	3,000,000	3,000,000
Weighted average grant date fair value
Balance at the beginning of the period (in dollars per share)	$ 24	$ 20
Granted (in dollars per share)	42	34
Vested (in dollars per share)	21	18
Forfeited (in dollars per share)	30	22
Balance at the end of the period (in dollars per share)	$ 30	$ 23
Additional disclosures
Total unrecognized compensation expense	$ 64	$ 63
Remaining weighted average vesting period	4 years	4 years
Total market value (at the vesting date) of stock award shares	$ 52	$ 39

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Stock-Based Compensation - Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Stock Options
Grant date exercise price (in dollars per share)	$ 42
Stock options
Stock Options
Vesting period	5 years
Expiration period	10 years
Shares
Outstanding at the beginning of the period (in shares)	5,000,000	7,000,000
Granted (in shares)	385,220	0
Exercised (in shares)	0	0
Forfeited (in shares)	0	0
Outstanding at the end of the period (in shares)	5,000,000	7,000,000
Vested and expected to vest at the end of the period (in shares)	5,000,000	7,000,000
Exercisable at the end of the period (in shares)	3,000,000	6,000,000
Weighted average exercise price
Outstanding at the beginning of the period (in dollars per share)	$ 16	$ 15
Granted (in dollars per share)	42	34
Exercised (in dollars per share)	11	23
Forfeited (in dollars per share)	0	0
Outstanding at the end of the period (in dollars per share)	19	16
Vested and expected to vest at the end of the period (in dollars per share)	19	16
Exercisable at the end of the period (in dollars per share)	$ 15	$ 13
Aggregate intrinsic value
Exercised	$ 33	$ 3
Vested and expected to vest at the end of the period	98	131
Exercisable at the end of the period	$ 88	$ 120
Weighted average remaining option term
Outstanding at the end of the period	5 years	4 years
Vested and expected to vest at the end of the period	5 years	4 years
Exercisable at the end of the period	4 years	3 years
Additional disclosures
Total unrecognized compensation expense	$ 11	$ 10
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, 2018	Mar. 31, 2017
Stock Options
Weighted average grant date fair value (in dollars per share)	$ 12.52	$ 9.68
Risk-free interest rate (as a percent)	2.71%	2.16%
Dividend yield (as a percent)	1.00%	1.19%
Volatility factor (as a percent)	29.00%	30.00%
Expected option life	6 years	6 years

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Stock-Based Compensation - Restricted Stock Units (Details) - LTIP Program - Restricted stock units - $ / shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Stock-based compensation
Period for recognition	3 years
Granted (in shares)	113,260	124,780
Granted (in dollars per share)	$ 42	$ 34
Forfeited (in shares)	0	0

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Employee Retirement Plans (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Qualified
Net periodic pension cost for the company's defined-benefit pension plans
Service cost	$ 1	$ 1
Interest cost	10	12
Expected return on plan assets	(12)	(12)
Amortization of net loss	4	5
Net periodic pension cost	3	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, 2018	Mar. 31, 2017
Reclassifications from accumulated other comprehensive (loss) income
Reclassifications, tax (benefit)	$ 59
Actuarial losses, net
Reclassifications from accumulated other comprehensive (loss) income
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax	5	$ 6
Amortization of defined benefit pension and other postretirement benefits
Reclassifications from accumulated other comprehensive (loss) income
Reclassifications, tax (benefit)	0	(2)
Reclassifications, after tax	$ 5	$ 4

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Segment Information (Details) - USD ($) $ in Millions	3 Months Ended					6 Months Ended	9 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2017	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
Segment Information
Net sales	$ 1,920				$ 1,778
Operating Profit (Loss)	244	$ 256	$ 309	$ 372	257	$ 629	$ 938	$ 1,194	$ 1,087
Other income (expense), net	(44)				(47)
Income before income taxes	200				210
Operating Segments
Segment Information
Net sales	1,920	1,853	1,945	2,066	1,778	3,844	5,789	7,642	7,361
Operating Profit (Loss)	262	277	331	398	280	678	1,009	1,286	1,181
Operating Segments | Plumbing Products
Segment Information
Net sales	971	961	950	949	872	1,821	2,771	3,732	3,529
Operating Profit (Loss)	163	165	175	200	162	362	537	702	654
Operating Segments | Decorative Architectural Products
Segment Information
Net sales	545	487	562	661	496	1,157	1,719	2,206	2,092
Operating Profit (Loss)	89	83	112	149	94	243	355	438	433
Operating Segments | Cabinetry Products
Segment Information
Net sales	217	223	229	251	231	482	711	934	970
Operating Profit (Loss)	6	25	20	31	16	47	67	92	97
Operating Segments | Windows and Other Specialty Products
Segment Information
Net sales	187	182	204	205	179	384	588	770	770
Operating Profit (Loss)	4	4	24	18	8	26	50	54	(3)
Geographic Areas
Segment Information
Net sales	1,920				1,778
Operating Profit (Loss)	262				280
Geographic Areas | North America
Segment Information
Net sales	1,516				1,412
Operating Profit (Loss)	218				238
Geographic Areas | International, principally Europe
Segment Information
Net sales	404				366
Operating Profit (Loss)	44				42
Corporate, Non-Segment
Segment Information
General corporate expense, net	$ (18)	$ 21	$ (22)	$ (26)	$ (23)	$ (49)	$ (71)	$ (92)	$ (94)

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Other Income (Expense), Net (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Other Income and Expenses [Abstract]
Income from cash and cash investments and short-term bank deposits	$ 2	$ 1
Realized gains from investments	0	1
Foreign currency transaction (losses) gains	(1)	1
PensionandOtherPostretirementBenefitExpenseExcludingCurrentServiceCost	(4)	(7)
Total other, net	$ (3)	$ (4)

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Earnings Per Common Share (Details) - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator (basic and diluted):
Net income	$ 149	$ 138
Less: Allocation to unvested restricted stock awards	1	1
Net income available to common shareholders	$ 148	$ 137
Denominator:
Basic common shares (based upon weighted average) (in shares)	310	317
Add: Stock option dilution (in shares)	3	4
Diluted common shares (in shares)	313	321

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Earnings Per Common Share - Narrative (Details) - USD ($)	1 Months Ended		3 Months Ended
	Mar. 31, 2018	Feb. 28, 2018	Mar. 31, 2018	Mar. 31, 2017	Feb. 16, 2018	May 31, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Amount authorized for repurchase					$ 150,000,000	$ 1,500,000,000
Stock repurchased during period (in shares)	900,000	2,800,000
Stock repurchased and retired during period (in shares)			3,700,000
Remaining amount authorized to be repurchased	$ 1,100,000,000		$ 1,100,000,000
Dividends
Cash dividends per common share paid (in dollars per share)			$ 0.105	$ 0.1
Cash dividends per common share declared (in dollars per share)			$ 0.105	$ 0.100
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive effect on computation of diluted earnings per common share (in shares)			431,000	221,000
Long-term stock awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock repurchased And retired during period to offset dilutive impact of awards granted shares (in shares)			600,000

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Income Taxes (Details)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Tax Disclosure [Abstract]
Effective tax rate (as a percent)	20.00%	30.00%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	35.00%
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Share-based Compensation Cost, Percent	7.00%	3.00%
Effective Income Tax Rate Reconciliation,Other Reconciling Items, Percent	4.00%
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Percent	2.00%
Effective Income Tax Rate Reconciliation, Other Adjustments, Percent		2.00%