Delaware | 38-1794485 | |
(State of | (IRS Employer | |
Incorporation) | Identification No.) |
17450 College Parkway, Livonia, Michigan | 48152 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o | Smaller reporting company o | |
(Do not check if a smaller reporting company) | Emerging growth company o |
Class | Shares Outstanding at June 30, 2018 | |
Common stock, par value $1.00 per share | 307,476,697 | |
Page No. | ||
June 30, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash investments | $ | 384 | $ | 1,194 | |||
Short-term bank deposits | — | 108 | |||||
Receivables | 1,444 | 1,066 | |||||
Prepaid expenses and other | 117 | 111 | |||||
Inventories: | |||||||
Finished goods | 592 | 402 | |||||
Raw material | 317 | 277 | |||||
Work in process | 108 | 105 | |||||
1,017 | 784 | ||||||
Total current assets | 2,962 | 3,263 | |||||
Property and equipment, net | 1,187 | 1,129 | |||||
Goodwill | 890 | 841 | |||||
Other intangible assets, net | 417 | 187 | |||||
Other assets | 109 | 114 | |||||
Total assets | $ | 5,565 | $ | 5,534 | |||
LIABILITIES | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 1,093 | $ | 824 | |||
Notes payable | 2 | 116 | |||||
Accrued liabilities | 675 | 727 | |||||
Total current liabilities | 1,770 | 1,667 | |||||
Long-term debt | 2,970 | 2,969 | |||||
Other liabilities | 699 | 715 | |||||
Total liabilities | 5,439 | 5,351 | |||||
Commitments and contingencies (Note P) | |||||||
EQUITY | |||||||
Masco Corporation's shareholders' equity: | |||||||
Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2018 – 305,000,000; 2017 – 310,400,000 | 305 | 310 | |||||
Preferred shares authorized: 1,000,000; Issued and outstanding: 2018 and 2017 – None | — | — | |||||
Paid-in capital | — | — | |||||
Retained deficit | (221 | ) | (298 | ) | |||
Accumulated other comprehensive loss | (118 | ) | (65 | ) | |||
Total Masco Corporation's shareholders' deficit | (34 | ) | (53 | ) | |||
Noncontrolling interest | 160 | 236 | |||||
Total equity | 126 | 183 | |||||
Total liabilities and equity | $ | 5,565 | $ | 5,534 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 2,297 | $ | 2,066 | $ | 4,217 | $ | 3,844 | |||||||
Cost of sales | 1,547 | 1,320 | 2,848 | 2,493 | |||||||||||
Gross profit | 750 | 746 | 1,369 | 1,351 | |||||||||||
Selling, general and administrative expenses | 392 | 374 | 767 | 722 | |||||||||||
Operating profit | 358 | 372 | 602 | 629 | |||||||||||
Other income (expense), net: | |||||||||||||||
Interest expense | (38 | ) | (153 | ) | (79 | ) | (196 | ) | |||||||
Other, net | (8 | ) | 43 | (11 | ) | 39 | |||||||||
(46 | ) | (110 | ) | (90 | ) | (157 | ) | ||||||||
Income before income taxes | 312 | 262 | 512 | 472 | |||||||||||
Income tax expense | 88 | 86 | 127 | 148 | |||||||||||
Net income | 224 | 176 | 385 | 324 | |||||||||||
Less: Net income attributable to noncontrolling interest | 13 | 13 | 25 | 23 | |||||||||||
Net income attributable to Masco Corporation | $ | 211 | $ | 163 | $ | 360 | $ | 301 | |||||||
Income per common share attributable to Masco Corporation: | |||||||||||||||
Basic: | |||||||||||||||
Net income | $ | .69 | $ | .51 | $ | 1.16 | $ | .94 | |||||||
Diluted: | |||||||||||||||
Net income | $ | .68 | $ | .51 | $ | 1.15 | $ | .93 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 224 | $ | 176 | $ | 385 | $ | 324 | |||||||
Less: Net income attributable to noncontrolling interest | 13 | 13 | 25 | 23 | |||||||||||
Net income attributable to Masco Corporation | $ | 211 | $ | 163 | $ | 360 | $ | 301 | |||||||
Other comprehensive income (loss), net of tax (Note L): | |||||||||||||||
Cumulative translation adjustment | $ | (57 | ) | $ | 65 | $ | (15 | ) | $ | 86 | |||||
Interest rate swaps | 1 | 2 | 1 | 2 | |||||||||||
Pension and other post-retirement benefits | 3 | 3 | 8 | 7 | |||||||||||
Other comprehensive (loss) income | (53 | ) | 70 | (6 | ) | 95 | |||||||||
Less: Other comprehensive (loss) income attributable to noncontrolling interest | (19 | ) | 14 | (12 | ) | 18 | |||||||||
Other comprehensive (loss) income attributable to Masco Corporation | $ | (34 | ) | $ | 56 | $ | 6 | $ | 77 | ||||||
Total comprehensive income | $ | 171 | $ | 246 | $ | 379 | $ | 419 | |||||||
Less: Total comprehensive (loss) income attributable to the noncontrolling interest | (6 | ) | 27 | 13 | 41 | ||||||||||
Total comprehensive income attributable to Masco Corporation | $ | 177 | $ | 219 | $ | 366 | $ | 378 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES: | |||||||
Cash provided by operations | $ | 499 | $ | 535 | |||
Increase in receivables | (322 | ) | (340 | ) | |||
Increase in inventories | (72 | ) | (127 | ) | |||
Increase in accounts payable and accrued liabilities, net | 188 | 87 | |||||
Net cash from operating activities | 293 | 155 | |||||
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES: | |||||||
Retirement of notes | (114 | ) | (535 | ) | |||
Purchase of Company common stock | (265 | ) | (134 | ) | |||
Cash dividends paid | (65 | ) | (64 | ) | |||
Dividends paid to noncontrolling interest | (89 | ) | (35 | ) | |||
Issuance of notes, net of issuance costs | — | 593 | |||||
(Decrease) increase in debt, net | (1 | ) | 1 | ||||
Debt extinguishment costs | — | (104 | ) | ||||
Employee withholding taxes paid on stock-based compensation | (33 | ) | (27 | ) | |||
Net cash for financing activities | (567 | ) | (305 | ) | |||
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES: | |||||||
Capital expenditures | (103 | ) | (77 | ) | |||
Acquisition of business, net of cash acquired | (548 | ) | — | ||||
Proceeds from disposition of: | |||||||
Business, net of cash disposed | — | 126 | |||||
Short-term bank deposits | 108 | 73 | |||||
Other financial investments | 3 | 5 | |||||
Property and equipment | 1 | 6 | |||||
Other, net | (5 | ) | (9 | ) | |||
Net cash (for) from investing activities | (544 | ) | 124 | ||||
Effect of exchange rate changes on cash and cash investments | 8 | 28 | |||||
CASH AND CASH INVESTMENTS: | |||||||
(Decrease) increase for the period | (810 | ) | 2 | ||||
At January 1 | 1,194 | 990 | |||||
At June 30 | $ | 384 | $ | 992 |
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 | 419 | 301 | 77 | 41 | |||||||||||||||||||
Shares issued | (13 | ) | 2 | (15 | ) | ||||||||||||||||||
Shares retired: | |||||||||||||||||||||||
Repurchased | (134 | ) | (4 | ) | (1 | ) | (129 | ) | |||||||||||||||
Surrendered (non-cash) | (13 | ) | (1 | ) | (12 | ) | |||||||||||||||||
Cash dividends declared | (64 | ) | (64 | ) | |||||||||||||||||||
Dividends paid to noncontrolling interest | (35 | ) | (35 | ) | |||||||||||||||||||
Stock-based compensation | 16 | 16 | |||||||||||||||||||||
Balance, June 30, 2017 | $ | 79 | $ | 315 | $ | — | $ | (279 | ) | $ | (158 | ) | $ | 201 | |||||||||
Balance, January 1, 2018 | $ | 183 | $ | 310 | $ | — | $ | (298 | ) | $ | (65 | ) | $ | 236 | |||||||||
Reclassification of disproportionate tax effects (Refer to Note A) | — | 59 | (59 | ) | |||||||||||||||||||
Total comprehensive income | 379 | 360 | 6 | 13 | |||||||||||||||||||
Shares issued | (14 | ) | 2 | (8 | ) | (8 | ) | ||||||||||||||||
Shares retired: | |||||||||||||||||||||||
Repurchased | (265 | ) | (7 | ) | (8 | ) | (250 | ) | |||||||||||||||
Surrendered (non-cash) | (19 | ) | (19 | ) | |||||||||||||||||||
Cash dividends declared | (65 | ) | (65 | ) | |||||||||||||||||||
Dividends paid to noncontrolling interest | (89 | ) | (89 | ) | |||||||||||||||||||
Stock-based compensation | 16 | 16 | |||||||||||||||||||||
Balance, June 30, 2018 | $ | 126 | $ | 305 | $ | — | $ | (221 | ) | $ | (118 | ) | $ | 160 |
Year Ended December 31, 2016 | |||||||||||||||
Net Sales | Operating Profit (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 | Operating Profit (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 | Operating Profit (Loss) | Net Sales | Operating Profit (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 | Operating Profit (Loss) | Net Sales | Operating Profit (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 | Operating Profit (Loss) | Net Sales | Operating Profit (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 |
Initial | Revised | ||||||
Receivables | $ | 101 | $ | 101 | |||
Inventories | 173 | 169 | |||||
Other current assets | 5 | 5 | |||||
Property and equipment | 33 | 33 | |||||
Goodwill | 46 | 55 | |||||
Other intangible assets | 243 | 240 | |||||
Accounts payable | (24 | ) | (24 | ) | |||
Accrued liabilities | (25 | ) | (27 | ) | |||
Other liabilities | (4 | ) | (4 | ) | |||
Total | $ | 548 | $ | 548 |
Three Months Ended June 30, 2018 | |||||||||||||||||||
Plumbing Products | Decorative Architectural Products | Cabinetry Products | Windows and Other Specialty Products | Total | |||||||||||||||
Primary geographic markets: | |||||||||||||||||||
North America | $ | 647 | $ | 806 | $ | 268 | $ | 151 | $ | 1,872 | |||||||||
International, principally Europe | 385 | — | — | 40 | 425 | ||||||||||||||
Total | $ | 1,032 | $ | 806 | $ | 268 | $ | 191 | $ | 2,297 |
Six Months Ended June 30, 2018 | |||||||||||||||||||
Plumbing Products | Decorative Architectural Products | Cabinetry Products | Windows and Other Specialty Products | Total | |||||||||||||||
Primary geographic markets: | |||||||||||||||||||
North America | $ | 1,252 | $ | 1,351 | $ | 485 | $ | 300 | $ | 3,388 | |||||||||
International, principally Europe | 751 | — | — | 78 | 829 | ||||||||||||||
Total | $ | 2,003 | $ | 1,351 | $ | 485 | $ | 378 | $ | 4,217 |
Three Months Ended June 30, 2017 | |||||||||||||||||||
Plumbing Products | Decorative Architectural Products | Cabinetry Products | Windows and Other Specialty Products | Total | |||||||||||||||
Primary geographic markets: | |||||||||||||||||||
North America | $ | 605 | $ | 661 | $ | 238 | $ | 164 | $ | 1,668 | |||||||||
International, principally Europe | 344 | — | 13 | 41 | 398 | ||||||||||||||
Total | $ | 949 | $ | 661 | $ | 251 | $ | 205 | $ | 2,066 |
Six Months Ended June 30, 2017 | |||||||||||||||||||
Plumbing Products | Decorative Architectural Products | Cabinetry Products | Windows and Other Specialty Products | Total | |||||||||||||||
Primary geographic markets: | |||||||||||||||||||
North America | $ | 1,162 | $ | 1,157 | $ | 457 | $ | 304 | $ | 3,080 | |||||||||
International, principally Europe | 659 | — | 25 | 80 | 764 | ||||||||||||||
Total | $ | 1,821 | $ | 1,157 | $ | 482 | $ | 384 | $ | 3,844 |
Gross Goodwill At June 30, 2018 | Accumulated Impairment Losses | Net Goodwill At June 30, 2018 | |||||||||
Plumbing Products | $ | 569 | $ | (340 | ) | $ | 229 | ||||
Decorative Architectural Products | 349 | (75 | ) | 274 | |||||||
Cabinetry Products | 181 | — | 181 | ||||||||
Windows and Other Specialty Products | 717 | (511 | ) | 206 | |||||||
Total | $ | 1,816 | $ | (926 | ) | $ | 890 |
Gross Goodwill At December 31, 2017 | Accumulated Impairment Losses | Net Goodwill At December 31, 2017 | Additions (A) | Other (B) | Net Goodwill At June 30, 2018 | ||||||||||||||||||
Plumbing Products | $ | 574 | $ | (340 | ) | $ | 234 | $ | — | $ | (5 | ) | $ | 229 | |||||||||
Decorative Architectural Products | 294 | (75 | ) | 219 | 55 | — | 274 | ||||||||||||||||
Cabinetry Products | 181 | — | 181 | — | — | 181 | |||||||||||||||||
Windows and Other Specialty Products | 718 | (511 | ) | 207 | — | (1 | ) | 206 | |||||||||||||||
Total | $ | 1,767 | $ | (926 | ) | $ | 841 | $ | 55 | $ | (6 | ) | $ | 890 |
(B) | Other consists of the effect of foreign currency translation. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Foreign currency contracts: | |||||||||||||||
Exchange contracts | $ | 1 | $ | — | $ | 1 | $ | — | |||||||
Forward contracts | 1 | — | — | — | |||||||||||
Interest rate swaps | (1 | ) | (3 | ) | (1 | ) | (3 | ) | |||||||
Total loss | $ | 1 | $ | (3 | ) | $ | — | $ | (3 | ) |
At June 30, 2018 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Exchange contracts | $ | 12 | |||||
Receivables | $ | — | |||||
Forward contracts | 20 | ||||||
Receivables | — | ||||||
Accrued liabilities | — |
At December 31, 2017 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Exchange contracts | $ | 14 | |||||
Accrued liabilities | $ | — | |||||
Forward contracts | 43 | ||||||
Receivables | — | ||||||
Accrued liabilities | — |
Six Months Ended June 30, 2018 | Twelve Months Ended December 31, 2017 | ||||||
Balance at January 1 | $ | 205 | $ | 192 | |||
Accruals for warranties issued during the period | 40 | 63 | |||||
Accruals related to pre-existing warranties | 1 | 9 | |||||
Settlements made (in cash or kind) during the period | (32 | ) | (59 | ) | |||
Other, net (including currency translation) | (2 | ) | — | ||||
Balance at end of period | $ | 212 | $ | 205 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Long-term stock awards | $ | 7 | $ | 7 | $ | 12 | $ | 13 | |||||||
Stock options | 1 | 1 | 2 | 2 | |||||||||||
Restricted stock units | 1 | 1 | 2 | 1 | |||||||||||
Phantom stock awards and stock appreciation rights | (1 | ) | 3 | (1 | ) | 5 | |||||||||
Total | $ | 8 | $ | 12 | $ | 15 | $ | 21 |
Six Months Ended June 30, | |||||||
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 | $ | 24 | |||
Unvested stock award shares at June 30 | 3 | 3 | |||||
Weighted average grant date fair value | $ | 30 | $ | 24 |
Six Months Ended June 30, | |||||||
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 | 1 | 1 | |||||
Aggregate intrinsic value on date of exercise (A) | $ | 36 million | $ | 33 million | |||
Weighted average exercise price | $ | 12 | $ | 15 | |||
Option shares forfeited | — | — | |||||
Weighted average exercise price | $ | 31 | $ | — | |||
Option shares outstanding, June 30 | 4 | 6 | |||||
Weighted average exercise price | $ | 19 | $ | 16 | |||
Weighted average remaining option term (in years) | 5 | 4 | |||||
Option shares vested and expected to vest, June 30 | 4 | 6 | |||||
Weighted average exercise price | $ | 19 | $ | 16 | |||
Aggregate intrinsic value (A) | $ | 82 million | $ | 130 million | |||
Weighted average remaining option term (in years) | 5 | 4 | |||||
Option shares exercisable (vested), June 30 | 3 | 4 | |||||
Weighted average exercise price | $ | 15 | $ | 13 | |||
Aggregate intrinsic value (A) | $ | 74 million | $ | 113 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. |
Six Months Ended June 30, | |||||||
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 |
Three Months Ended June 30, | |||||||||||||||
2018 | 2017 | ||||||||||||||
Qualified | Non-Qualified | Qualified | Non-Qualified | ||||||||||||
Service cost | $ | — | $ | — | $ | — | $ | — | |||||||
Interest cost | 10 | 2 | 13 | 2 | |||||||||||
Expected return on plan assets | (12 | ) | — | (12 | ) | — | |||||||||
Amortization of net loss | 5 | — | 5 | — | |||||||||||
Net periodic pension cost | $ | 3 | $ | 2 | $ | 6 | $ | 2 |
Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | ||||||||||||||
Qualified | Non-Qualified | Qualified | Non-Qualified | ||||||||||||
Service cost | $ | 1 | $ | — | $ | 1 | $ | — | |||||||
Interest cost | 20 | 3 | 25 | 3 | |||||||||||
Expected return on plan assets | (24 | ) | — | (24 | ) | — | |||||||||
Amortization of net loss | 9 | 1 | 10 | 1 | |||||||||||
Net periodic pension cost | $ | 6 | $ | 4 | $ | 12 | $ | 4 |
Amounts Reclassified | |||||||||||||||||
Accumulated Other Comprehensive Loss | Three Months Ended June 30, | Six Months Ended June 30, | Statement of Operations Line Item | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Amortization of defined-benefit pension and other postretirement benefits: | |||||||||||||||||
Actuarial losses, net | $ | 5 | $ | 5 | $ | 10 | $ | 11 | Other income (expense), net | ||||||||
Tax benefit | (2 | ) | (2 | ) | (2 | ) | (4 | ) | |||||||||
Net of tax | $ | 3 | $ | 3 | $ | 8 | $ | 7 | |||||||||
Interest rate swaps | $ | 1 | $ | 3 | $ | 1 | $ | 3 | Interest expense | ||||||||
Tax (benefit) | — | (1 | ) | — | (1 | ) | |||||||||||
Net of tax | $ | 1 | $ | 2 | $ | 1 | $ | 2 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Net Sales (A) | Operating Profit (Loss) | Net Sales(A) | Operating Profit (Loss) | ||||||||||||||||||||||||||||
Operations by segment: | |||||||||||||||||||||||||||||||
Plumbing Products | $ | 1,032 | $ | 949 | $ | 194 | $ | 200 | $ | 2,003 | $ | 1,821 | $ | 357 | $ | 362 | |||||||||||||||
Decorative Architectural Products | 806 | 661 | 145 | 149 | 1,351 | 1,157 | 234 | 243 | |||||||||||||||||||||||
Cabinetry Products | 268 | 251 | 33 | 31 | 485 | 482 | 39 | 47 | |||||||||||||||||||||||
Windows and Other Specialty Products | 191 | 205 | 8 | 18 | 378 | 384 | 12 | 26 | |||||||||||||||||||||||
Total | $ | 2,297 | $ | 2,066 | $ | 380 | $ | 398 | $ | 4,217 | $ | 3,844 | $ | 642 | $ | 678 | |||||||||||||||
Operations by geographic area: | |||||||||||||||||||||||||||||||
North America | $ | 1,872 | $ | 1,668 | $ | 323 | $ | 340 | $ | 3,388 | $ | 3,080 | $ | 541 | $ | 578 | |||||||||||||||
International, principally Europe | 425 | 398 | 57 | 58 | 829 | 764 | 101 | 100 | |||||||||||||||||||||||
Total | $ | 2,297 | $ | 2,066 | 380 | 398 | $ | 4,217 | $ | 3,844 | 642 | 678 | |||||||||||||||||||
General corporate expense, net | (22 | ) | (26 | ) | (40 | ) | (49 | ) | |||||||||||||||||||||||
Operating profit | 358 | 372 | 602 | 629 | |||||||||||||||||||||||||||
Other income (expense), net | (46 | ) | (110 | ) | (90 | ) | (157 | ) | |||||||||||||||||||||||
Income before income taxes | $ | 312 | $ | 262 | $ | 512 | $ | 472 |
(A) | Inter-segment sales were not material. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Gain on sale of business | $ | — | $ | 49 | $ | — | $ | 49 | |||||||
Income from cash and cash investments and short-term bank deposits | — | 1 | 2 | 2 | |||||||||||
Equity investment income, net | 2 | 1 | 2 | 1 | |||||||||||
Realized gains from private equity funds | — | 1 | — | 2 | |||||||||||
Foreign currency transaction losses | (5 | ) | (1 | ) | (6 | ) | — | ||||||||
Net periodic pension and post-retirement benefit cost | (5 | ) | (8 | ) | (9 | ) | (15 | ) | |||||||
Total other, net | $ | (8 | ) | $ | 43 | $ | (11 | ) | $ | 39 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator (basic and diluted): | |||||||||||||||
Net income | $ | 211 | $ | 163 | $ | 360 | $ | 301 | |||||||
Less: Allocation to unvested restricted stock awards | 1 | 2 | 3 | 3 | |||||||||||
Net income available to common shareholders | $ | 210 | $ | 161 | $ | 357 | $ | 298 | |||||||
Denominator: | |||||||||||||||
Basic common shares (based upon weighted average) | 306 | 315 | 308 | 316 | |||||||||||
Add: Stock option dilution | 3 | 4 | 3 | 4 | |||||||||||
Diluted common shares | 309 | 319 | 311 | 320 |
MASCO CORPORATION | |
Item 2. | |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
SECOND QUARTER 2018 AND THE FIRST SIX MONTHS 2018 VERSUS SECOND QUARTER 2017 AND THE FIRST SIX MONTHS 2017 |
Three Months Ended June 30, | Percent Change | |||||||||
2018 | 2017 | 2018 vs. 2017 | ||||||||
Net Sales: | ||||||||||
Plumbing Products | $ | 1,032 | $ | 949 | 9 | % | ||||
Decorative Architectural Products | 806 | 661 | 22 | % | ||||||
Cabinetry Products | 268 | 251 | 7 | % | ||||||
Windows and Other Specialty Products | 191 | 205 | (7 | )% | ||||||
Total | $ | 2,297 | $ | 2,066 | 11 | % | ||||
North America | $ | 1,872 | $ | 1,668 | 12 | % | ||||
International, principally Europe | 425 | 398 | 7 | % | ||||||
Total | $ | 2,297 | $ | 2,066 | 11 | % |
Six Months Ended June 30, | Percent Change | |||||||||
2018 | 2017 | 2018 vs. 2017 | ||||||||
Net Sales: | ||||||||||
Plumbing Products | $ | 2,003 | $ | 1,821 | 10 | % | ||||
Decorative Architectural Products | 1,351 | 1,157 | 17 | % | ||||||
Cabinetry Products | 485 | 482 | 1 | % | ||||||
Windows and Other Specialty Products | 378 | 384 | (2 | )% | ||||||
Total | $ | 4,217 | $ | 3,844 | 10 | % | ||||
North America | $ | 3,388 | $ | 3,080 | 10 | % | ||||
International, principally Europe | 829 | 764 | 9 | % | ||||||
Total | $ | 4,217 | $ | 3,844 | 10 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Operating Profit Margins: (A) | |||||||||||
Plumbing Products | 18.8 | % | 21.1 | % | 17.8 | % | 19.9 | % | |||
Decorative Architectural Products | 18.0 | % | 22.5 | % | 17.3 | % | 21.0 | % | |||
Cabinetry Products | 12.3 | % | 12.4 | % | 8.0 | % | 9.8 | % | |||
Windows and Other Specialty Products | 4.2 | % | 8.8 | % | 3.2 | % | 6.8 | % | |||
North America | 17.3 | % | 20.4 | % | 16.0 | % | 18.8 | % | |||
International, principally Europe | 13.4 | % | 14.6 | % | 12.2 | % | 13.1 | % | |||
Total | 16.5 | % | 19.3 | % | 15.2 | % | 17.6 | % | |||
Total operating profit margin, as reported | 15.6 | % | 18.0 | % | 14.3 | % | 16.4 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales, as reported | $ | 2,297 | $ | 2,066 | $ | 4,217 | $ | 3,844 | |||||||
Acquisitions | (115 | ) | — | (153 | ) | — | |||||||||
Divestitures | — | (30 | ) | — | (54 | ) | |||||||||
Net sales, excluding acquisitions and divestitures | 2,182 | 2,036 | 4,064 | 3,790 | |||||||||||
Currency translation | (29 | ) | — | (78 | ) | — | |||||||||
Net sales, excluding acquisitions, divestitures and the effect of currency translation | $ | 2,153 | $ | 2,036 | $ | 3,986 | $ | 3,790 |
MASCO CORPORATION | |
Item 4. | |
CONTROLS AND PROCEDURES |
Period | Total Number Of Shares Purchased | Average Price Paid Per Common Share | Total Number Of Shares Purchased As Part Of Publicly Announced Plans or Programs | Maximum Value Of Shares That May Yet Be Purchased Under The Plans Or Programs | |||||||||
4/1/18-4/30/18 | 1,350,879 | $ | 37.93 | 1,350,879 | $ | 1,088,274,281 | |||||||
5/1/18-5/31/18 | 922,100 | $ | 37.94 | 922,100 | 1,053,291,488 | ||||||||
6/1/18-6/30/18 | 754,993 | $ | 37.92 | 754,993 | 1,024,665,461 | ||||||||
Total for the period | 3,027,972 | $ | 37.93 | 3,027,972 | $ | 1,024,665,461 |
12 | – | ||
31a | – | ||
31b | – | ||
32 | – | ||
101 | – | Interactive Data File |
MASCO CORPORATION | ||
By: | /s/ John G. Sznewajs | |
Name: John G. Sznewajs | ||
Title: Vice President, Chief Financial Officer |
(Dollars in Millions) | ||||||||||||||||||||||||
Six Months Ended June 30, | 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) | $ | 512 | $ | 884 | $ | 833 | $ | 689 | $ | 507 | $ | 386 | ||||||||||||
Deduct equity in undistributed (earnings) loss of fifty-percent-or-less-owned companies | (2 | ) | (1 | ) | (2 | ) | (2 | ) | 2 | (16) | ||||||||||||||
Add interest on indebtedness, net | 77 | 167 | 185 | 222 | 221 | 230 | ||||||||||||||||||
Add amortization of debt expense | 2 | 4 | 5 | 5 | 5 | 6 | ||||||||||||||||||
Add estimated interest factor for rentals | 11 | 22 | 21 | 19 | 33 | 31 | ||||||||||||||||||
Earnings before income taxes, noncontrolling interest, fixed charges and preferred stock dividends | $ | 600 | $ | 1,076 | $ | 1,042 | $ | 933 | $ | 768 | $ | 637 | ||||||||||||
Fixed Charges: | ||||||||||||||||||||||||
Interest on indebtedness | $ | 79 | $ | 170 | $ | 190 | $ | 223 | $ | 221 | $ | 229 | ||||||||||||
Amortization of debt expense | 2 | 4 | 5 | 5 | 5 | 6 | ||||||||||||||||||
Estimated interest factor for rentals | 11 | 22 | 21 | 19 | 33 | 31 | ||||||||||||||||||
Total fixed charges | $ | 92 | $ | 196 | $ | 216 | $ | 247 | $ | 259 | $ | 266 | ||||||||||||
Preferred stock dividends (B) | — | — | — | — | — | — | ||||||||||||||||||
Combined fixed charges and preferred stock dividends | $ | 92 | $ | 196 | $ | 216 | $ | 247 | $ | 259 | $ | 266 | ||||||||||||
Ratio of earnings to fixed charges | 6.5 | 5.5 | 4.8 | 3.8 | 3.0 | 2.4 | ||||||||||||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends | 6.5 | 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) | 6.5 | 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. | I have reviewed this quarterly report on Form 10-Q of Masco Corporation ("the registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | July 31, 2018 | By: | /s/ Keith Allman | |
Keith Allman | ||||
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Masco Corporation ("the registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | July 31, 2018 | By: | /s/ John G. Sznewajs | |
John G. Sznewajs | ||||
Vice President, Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of Masco Corporation. |
Date: | July 31, 2018 | /s/ Keith Allman | ||
Keith Allman | ||||
President and Chief Executive Officer | ||||
Date: | July 31, 2018 | /s/ John G. Sznewajs | ||
John G. Sznewajs | ||||
Vice President, Chief Financial Officer |
Document and Entity Information |
6 Months Ended |
---|---|
Jun. 30, 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 | Jun. 30, 2018 |
Document Fiscal Year Focus | 2018 |
Document Fiscal Period Focus | Q2 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding (in shares) | 307,476,697 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 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) | 305,000,000 | 310,400,000 |
Common shares, shares outstanding (in shares) | 305,000,000 | 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 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Statement [Abstract] | ||||
Net sales | $ 2,297 | $ 2,066 | $ 4,217 | $ 3,844 |
Cost of sales | 1,547 | 1,320 | 2,848 | 2,493 |
Gross profit | 750 | 746 | 1,369 | 1,351 |
Selling, general and administrative expenses | 392 | 374 | 767 | 722 |
Operating profit | 358 | 372 | 602 | 629 |
Other income (expense), net: | ||||
Interest expense | (38) | (153) | (79) | (196) |
Other, net | (8) | 43 | (11) | 39 |
Total other income (expense), net | (46) | (110) | (90) | (157) |
Income before income taxes | 312 | 262 | 512 | 472 |
Income tax expense | 88 | 86 | 127 | 148 |
Net income | 224 | 176 | 385 | 324 |
Less: Net income attributable to noncontrolling interest | 13 | 13 | 25 | 23 |
Net income attributable to Masco Corporation | $ 211 | $ 163 | $ 360 | $ 301 |
Basic: | ||||
Net income (in dollars per share) | $ 0.69 | $ 0.51 | $ 1.16 | $ 0.94 |
Diluted: | ||||
Net income (in dollars per share) | $ 0.68 | $ 0.51 | $ 1.15 | $ 0.93 |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Stockholders' Equity [Abstract] | ||
Common share, par value (in dollars per share) | $ 1 | $ 1 |
Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies | ACCOUNTING POLICIES In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to fairly state our financial position at June 30, 2018, our results of operations and comprehensive income (loss) for the three-month and six-month periods ended June 30, 2018 and 2017, and cash flows and changes in shareholders' equity for the six-month periods ended June 30, 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 $9 million and $10 million for the three-month and six-month periods ended June 30, 2017, respectively, and operating profit (and income before income taxes) increased by $7 million and $4 million for the three-month and six-month periods ended June 30, 2017, respectively, 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 $8 million and $15 million of net benefit cost from operating profit to other income (expense), net, within our results of operations for the three-month and six-month periods ended June 30, 2017, respectively. 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):
A. ACCOUNTING POLICIES (Continued)
A. ACCOUNTING POLICIES (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. 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, including receivables. 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. In June 2018, the FASB issued ASU 2018-07, "Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting," which modifies the accounting for share-based payment awards issued to nonemployees to largely align it with the accounting for share-based payment awards issued to employees. ASU 2018-07 is effective for us for annual periods beginning January 1, 2019. We do not expect the adoption of the standard will impact our financial position or results of operations. |
Acquisitions |
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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 and six-month periods ended June 30, 2018, we recorded $108 million and $135 million, respectively, 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. During the three-month period ended June 30, 2018, we revised the allocation of the purchase price to identifiable assets and liabilities based on analysis of information as of the acquisition date that has been made available through June 30, 2018. Receipt of additional information to complete such analysis and finalization of the valuation is still in process, and, as a result, the allocation will continue to 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.
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 $181 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 $36 million of other definite-lived intangible assets, which is being amortized over a weighted-average amortization period of 3 years. |
Divestitures |
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Jun. 30, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Divestitures | DIVESTITURES In the second quarter of 2017 we divested of Arrow Fastener Co., LLC ("Arrow"), a manufacturer and distributor of fastening tools, for proceeds of $126 million. In connection with the divestiture we recognized a gain of $49 million, included in other, net, within other income (expense), net in our condensed consolidated statement of operations. The results of this business are included within income before income taxes in the condensed consolidated statement of operations and reported as part of our Windows and Other Specialty Products segment prior to the date of the divestiture. |
Revenue |
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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:
D. REVENUE (Concluded)
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. We recognized $6 million and $3 million for the three-month and six-month periods ended June 30, 2018, respectively, and $8 million and $7 million for the three-month and six-month periods ended June 30, 2017, respectively, of revenue related to performance obligations settled in previous periods. 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. 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 $14 million and $11 million at June 30, 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 $13 million and $32 million at June 30, 2018 and December 31, 2017, respectively. |
Depreciation and Amortization |
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Jun. 30, 2018 | |
Depreciation, Depletion and Amortization [Abstract] | |
Depreciation and Amortization | DEPRECIATION AND AMORTIZATION Depreciation and amortization expense was $74 million and $64 million for the six-month periods ended June 30, 2018 and 2017, respectively. |
Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | GOODWILL AND OTHER INTANGIBLE ASSETS The changes in the carrying amount of goodwill for the six-month period ended June 30, 2018, by segment, were as follows, in millions:
(A) Additions consist of acquisitions.
The carrying value of our other indefinite-lived intangible assets was $199 million and $140 million at June 30, 2018 and December 31, 2017, respectively, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $218 million (net of accumulated amortization of $18 million) and $47 million (net of accumulated amortization of $10 million) at June 30, 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. |
Derivative Instruments and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We are exposed to global market risk as part of our normal, daily business activities. To manage these risks, we enter into various derivative contracts. These contracts may include interest rate swap agreements 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 June 30, 2018, the balance remaining in accumulated other comprehensive loss was $7 million (pre-tax). G. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Concluded) 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 gains (losses) included in our condensed consolidated statements of operations were as follows, in millions:
We present our derivatives net by counterparty, due to the right of offset under master netting arrangements in the condensed consolidated balance sheets. The notional amounts being hedged and the fair value of those derivative instruments are as follows, in millions:
The fair value of all foreign currency contracts is estimated on a recurring basis, quarterly, using Level 2 inputs (significant other observable inputs). |
Warranty Liability |
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Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warranty Liability | WARRANTY LIABILITY Changes in our warranty liability were as follows, in millions:
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Debt |
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Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Debt | DEBT On April 16, 2018, we repaid and retired all of our $114 million, 6.625% Notes on the scheduled repayment date. On June 21, 2017, we issued $300 million of 3.5% Notes due November 15, 2027 and $300 million of 4.5% Notes due May 15, 2047. We received proceeds of $599 million, net of discount, for the issuance of these Notes. The Notes are senior indebtedness and are redeemable at our option at the applicable redemption price. On June 27, 2017, proceeds from the debt issuances, together with cash on hand, were used to repay and early retire $299 million of our 7.125% Notes due March 15, 2020, $74 million of our 5.95% Notes due March 15, 2022, $62 million of our 7.75% Notes due August 1, 2029, and $100 million of our 6.5% Notes due August 15, 2032. In connection with these early retirements, we incurred a loss on debt extinguishment of $107 million, which was recorded as interest expense. On March 28, 2013, we entered into a credit agreement (the “Credit Agreement”) with a bank group, with an aggregate commitment of $1.25 billion and a maturity date of March 28, 2018. On May 29, 2015 and August 28, 2015, we amended the Credit Agreement with the bank group (the "Amended Credit Agreement"). The Amended Credit Agreement 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 June 30, 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. I. 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 June 30, 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 was approximately $3.0 billion at June 30, 2018, which equaled the aggregate carrying value of short-term and long-term debt at that date. 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. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | STOCK-BASED COMPENSATION Our 2014 Long Term Stock Incentive Plan provides for the issuance of stock-based incentives in various forms to our employees and non-employee Directors. At June 30, 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 was as follows, in millions:
Long-Term Stock Awards. Long-term stock awards are granted to our key employees and non-employee Directors and do not cause net share dilution inasmuch as we continue the practice of repurchasing and retiring an equal number of shares in the open market. We granted 629,970 shares of long-term stock awards in the six-month period ended June 30, 2018. J. STOCK-BASED COMPENSATION (Continued) Our long-term stock award activity was as follows, shares in millions:
There was $56 million of total unrecognized compensation expense related to unvested stock awards at both June 30, 2018 and 2017; such awards had a weighted average remaining vesting period of three years at both June 30, 2018 and 2017. The total market value (at the vesting date) of stock award shares which vested during the six-month periods ended June 30, 2018 and 2017 was $54 million and $41 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. J. STOCK-BASED COMPENSATION (Continued) We granted 385,220 shares of stock options in the six-month period ended June 30, 2018 with a grant date weighted-average exercise price of approximately $42 per share. In the six-month period ended June 30, 2018, 68,927 shares of stock options were forfeited (including options that expired unexercised). Our stock option activity was as follows, shares in millions:
At June 30, 2018 and 2017, there was $10 million and $9 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model at the grant date) related to unvested stock options; such options had a weighted average remaining vesting period of three years at both June 30, 2018 and 2017. J. 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:
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 six-month period ended June 30, 2018, with a grant date fair value of approximately $42 per share, and 124,780 restricted stock units in the six-month period ended June 30, 2017, with a grant date fair value of approximately $34 per share. During the six-month period ended June 30, 2018, 11,600 restricted stock units were forfeited. |
Employee Retirement Plans |
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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:
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. |
Reclassifications From Accumulated Other Comprehensive Loss |
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Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications From Accumulated Other Comprehensive Loss | RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE LOSS The reclassifications from accumulated other comprehensive loss to the condensed consolidated statements of operations were as follows, in millions:
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. |
Segment Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | SEGMENT INFORMATION Information by segment and geographic area was as follows, in millions:
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Other Income (Expense), Net |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income (Expense), Net | OTHER INCOME (EXPENSE), NET Other, net, which is included in other income (expense), net, was as follows, in millions:
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Income Per Common Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income 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:
For the three-month and six-month periods ended June 30, 2018 and 2017, we allocated dividends and undistributed earnings to the unvested restricted stock awards. Additionally, 675,000 and 606,000 common shares for the three-month and six-month periods ended June 30, 2018, respectively, and 397,000 and 310,000 common shares for the three-month and six-month periods ended June 30, 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 the first six months of 2018, we repurchased and retired 6.7 million shares of our common stock (including 0.6 million shares to offset the dilutive impact of long-term stock awards granted in the first half of the year). At June 30, 2018, we had $1.0 billion remaining under the 2017 authorization. On the basis of amounts paid (declared), cash dividends per common share were $0.105 ($0.105) and $0.210 ($0.210) for the three-month and six-month periods ended June 30, 2018, respectively, and $0.100 ($0.100) and $0.200 ($0.200) for the three-month and six-month periods ended June 30, 2017, respectively. |
Other Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 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. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES Our effective tax rate was 28 percent and 25 percent for the three-month and six-month periods ended June 30, 2018, respectively. Our tax rate was higher than our 2018 statutory tax rate of 21 percent for these periods due primarily to an increase from state and local taxes, net of U.S. Federal tax benefit, of four percent and an increase from U.S. and foreign taxes on foreign earnings of three percent. The higher tax rate for the six-month period ended June 30, 2018 was partially offset by a decrease from an income tax benefit on stock-based compensation of three percent. Our effective tax rate was 33 percent and 31 percent for the three-month and six-month periods ended June 30, 2017, respectively. Our tax rate was lower than our 2017 statutory tax rate of 35 percent for these periods due primarily to a decrease from an income tax benefit on stock-based compensation of four percent and a decrease from lower foreign taxes on foreign earnings of one percent and two percent, respectively. These decreases were partially offset by an increase from state and local taxes, net of U.S. Federal tax benefit, of three percent and two percent, respectively. |
Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification | Reclassification. Certain prior year amounts have been reclassified to conform to the 2018 presentation in the condensed consolidated financial statements. |
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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 $9 million and $10 million for the three-month and six-month periods ended June 30, 2017, respectively, and operating profit (and income before income taxes) increased by $7 million and $4 million for the three-month and six-month periods ended June 30, 2017, respectively, 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 $8 million and $15 million of net benefit cost from operating profit to other income (expense), net, within our results of operations for the three-month and six-month periods ended June 30, 2017, respectively. 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):
A. ACCOUNTING POLICIES (Continued)
A. ACCOUNTING POLICIES (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. 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, including receivables. 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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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. |
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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. We recognized $6 million and $3 million for the three-month and six-month periods ended June 30, 2018, respectively, and $8 million and $7 million for the three-month and six-month periods ended June 30, 2017, respectively, of revenue related to performance obligations settled in previous periods. |
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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. |
Accounting Policies Impact of Accounting Standards (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | 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):
A. ACCOUNTING POLICIES (Continued)
A. ACCOUNTING POLICIES (Continued)
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Acquisitions (Tables) |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | During the three-month period ended June 30, 2018, we revised the allocation of the purchase price to identifiable assets and liabilities based on analysis of information as of the acquisition date that has been made available through June 30, 2018. Receipt of additional information to complete such analysis and finalization of the valuation is still in process, and, as a result, the allocation will continue to 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.
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Revenue (Tables) |
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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:
D. REVENUE (Concluded)
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Goodwill and Other Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in carrying amount of goodwill | The changes in the carrying amount of goodwill for the six-month period ended June 30, 2018, by segment, were as follows, in millions:
(A) Additions consist of acquisitions.
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Derivative Instruments and Hedging Activities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 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 gains (losses) included in our condensed consolidated statements of operations were as follows, in millions:
|
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Schedule of notional amounts being hedged and the fair value of derivative instruments | The notional amounts being hedged and the fair value of those derivative instruments are as follows, in millions:
|
Warranty Liability (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in the Company's warranty liability | Changes in our warranty liability were as follows, in millions:
|
Stock-Based Compensation (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 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 was as follows, in millions:
|
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Schedule of the Company's long-term stock award activity | Our long-term stock award activity was as follows, shares in millions:
|
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Schedule of the Company's stock option activity | Our stock option activity was as follows, shares in millions:
|
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Schedule of weighted average grant date fair value of option shares granted and the assumptions used to estimate those values using a Black-Scholes option pricing model | The weighted average grant date fair value of option shares granted and the assumptions used to estimate those values using a Black-Scholes option pricing model were as follows:
|
Employee Retirement Plans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 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:
|
Reclassifications From Accumulated Other Comprehensive Loss (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 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:
|
Segment Information (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of information by segment and geographic area | Information by segment and geographic area was as follows, in millions:
|
Other Income (Expense), Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 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:
|
Income Per Common Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 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:
|
Divestitures (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Business, net of cash disposed | $ 0 | $ 126 | |
Arrow Fastener | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Business, net of cash disposed | $ 126 | ||
Gain (loss) on disposal | $ 49 |
Depreciation and Amortization (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Depreciation, Depletion and Amortization [Abstract] | ||
Depreciation and amortization expense | $ 74 | $ 64 |
Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Other indefinite-lived intangible assets | $ 199 | $ 140 |
Carrying value of definite-lived intangible assets | 218 | 47 |
Accumulated amortization | $ 18 | $ 10 |
Derivative Instruments and Hedging Activities - Pre-tax Gains (Losses) (Details) - Not designated as a hedge - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Derivative instruments and hedging activities | ||||
Total gain (loss) | $ 1 | $ (3) | $ 0 | $ (3) |
Forward contracts | Other, net | ||||
Derivative instruments and hedging activities | ||||
Total gain (loss) | 1 | 0 | 0 | 0 |
Interest rate swaps | ||||
Derivative instruments and hedging activities | ||||
Total gain (loss) | $ (1) | $ (3) | $ (1) | $ (3) |
Derivative Instruments and Hedging Activities - Fair Value of Derivative Instruments (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Foreign currency exchange contracts | ||
Derivative instruments and hedging activities | ||
Notional Amount | $ 12 | $ 14 |
Foreign currency exchange contracts | Receivables | Recurring | Level 2 | ||
Derivative instruments and hedging activities | ||
Asset | 0 | |
Foreign currency exchange contracts | Accrued liabilities | Recurring | Level 2 | ||
Derivative instruments and hedging activities | ||
Liabilities | 0 | |
Forward contracts | ||
Derivative instruments and hedging activities | ||
Notional Amount | 20 | 43 |
Forward contracts | Receivables | Recurring | Level 2 | ||
Derivative instruments and hedging activities | ||
Asset | 0 | 0 |
Forward contracts | Accrued liabilities | Recurring | Level 2 | ||
Derivative instruments and hedging activities | ||
Liabilities | $ 0 | $ 0 |
Warranty Liability (Details) - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 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 | 40 | 63 |
Accruals related to pre-existing warranties | 1 | 9 |
Settlements made (in cash or kind) during the period | (32) | (59) |
Other, net (including currency translation) | (2) | 0 |
Balance at the end of the period | $ 212 | $ 205 |
Stock-Based Compensation (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Stock-based compensation | ||||
Pre-tax compensation expense | $ 8 | $ 12 | $ 15 | $ 21 |
Long-term stock awards | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | 7 | 7 | 12 | 13 |
Stock options | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | 1 | 1 | 2 | 2 |
Restricted stock units | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | 1 | 1 | 2 | 1 |
Phantom stock awards and stock appreciation rights | ||||
Stock-based compensation | ||||
Pre-tax compensation expense | $ (1) | $ 3 | $ (1) | $ 5 |
Stock-Based Compensation - Option Pricing Assumptions and Estimates (Details) - Stock options - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 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 |
Stock-Based Compensation - Restricted Stock Units (Details) - LTIP Program - Restricted stock units - $ / shares |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Stock-based compensation | |||
Period for recognition | 3 years | ||
Granted (in shares) | 124,780 | 113,260 | |
Granted (in dollars per share) | $ 34 | $ 42 | |
Forfeited (in shares) | 11,600 | 0 |
Employee Retirement Plans (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Qualified | ||||
Net periodic pension cost for the company's defined-benefit pension plans | ||||
Service cost | $ 0 | $ 0 | $ 1 | $ 1 |
Interest cost | 10 | 13 | 20 | 25 |
Expected return on plan assets | (12) | (12) | (24) | (24) |
Amortization of net loss | 5 | 5 | 9 | 10 |
Net periodic pension cost | 3 | 6 | 6 | 12 |
Non-Qualified | ||||
Net periodic pension cost for the company's defined-benefit pension plans | ||||
Service cost | 0 | 0 | 0 | 0 |
Interest cost | 2 | 2 | 3 | 3 |
Expected return on plan assets | 0 | 0 | 0 | 0 |
Amortization of net loss | 0 | 0 | 1 | 1 |
Net periodic pension cost | $ 2 | $ 2 | $ 4 | $ 4 |
Other Income (Expense), Net (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Other Income and Expenses [Abstract] | ||||
Gain on sale of business | $ 0 | $ 49 | $ 0 | $ 49 |
Income from cash and cash investments and short-term bank deposits | 0 | 1 | 2 | 2 |
Equity investment income, net | 2 | 1 | 2 | 1 |
Realized gains from private equity funds | 0 | 1 | 0 | 2 |
Foreign currency transaction losses | (5) | (1) | (6) | 0 |
Net periodic pension and post-retirement benefit cost | (5) | (8) | (9) | (15) |
Total other, net | $ (8) | $ 43 | $ (11) | $ 39 |
Income Per Common Share (Details) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Numerator (basic and diluted): | ||||
Net income | $ 211 | $ 163 | $ 360 | $ 301 |
Less: Allocation to unvested restricted stock awards | 1 | 2 | 3 | 3 |
Net income available to common shareholders | $ 210 | $ 161 | $ 357 | $ 298 |
Denominator: | ||||
Basic common shares (based upon weighted average) (in shares) | 306 | 315 | 308 | 316 |
Add: Stock option dilution (in shares) | 3 | 4 | 3 | 4 |
Diluted common shares (in shares) | 309 | 319 | 311 | 320 |
Income Taxes (Details) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
Effective tax rate (as a percent) | 28.00% | 33.00% | 25.00% | 31.00% |
Statutory income tax rate, percent | 21.00% | 35.00% | ||
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Percent | 4.00% | 1.00% | 4.00% | 2.00% |
Effective Income Tax Rate Reconciliation, Foreign Income Tax Rate Differential, Percent | 3.00% | 3.00% | 3.00% | 2.00% |
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Share-based Compensation Cost, Percent | 4.00% | 3.00% | 4.00% |
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