10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

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

For the quarterly period ended September 30, 2018

Commission file number: 1-5794

Masco Corporation

(Exact name of Registrant as Specified in its Charter) 

Delaware	38-1794485
(State of Incorporation)	(I.R.S. Employer Identification No.)

17450 College Parkway, Livonia, Michigan	48152
(Address of Principal Executive Offices)	(Zip Code)

(313) 274-7400

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

x Yes   o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 

x Yes   o No

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

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

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

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

o Yes   x No

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

Class	Shares Outstanding at September 30, 2018
Common stock, par value $1.00 per share	305,498,347

MASCO CORPORATION

INDEX

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets — as at September 30, 2018 and December 31, 2017	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2018 and 2017	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017	4
	Consolidated Statements of Shareholders’ Equity for the Nine Months Ended September 30, 2018 and 2017	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 4.	Controls and Procedures	30
PART II.	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 6.	Exhibits	32
	Signature	33

MASCO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30, 2018 and December 31, 2017

(In Millions, Except Share Data)

	September 30, 2018			December 31, 2017
ASSETS
Current Assets:
Cash and cash investments	$	569		$	1,194
Short-term bank deposits	—			108
Receivables	1,298			1,066
Prepaid expenses and other	118			111
Inventories:
Finished goods	578			402
Raw material	318			277
Work in process	109			105
	1,005			784
Total current assets	2,990			3,263
Property and equipment, net	1,211			1,129
Goodwill	896			841
Other intangible assets, net	412			187
Other assets	101			114
Total assets	$	5,610		$	5,534
LIABILITIES
Current Liabilities:
Accounts payable	$	1,040		$	824
Notes payable	2			116
Accrued liabilities	711			727
Total current liabilities	1,753			1,667
Long-term debt	2,971			2,969
Other liabilities	679			715
Total liabilities	5,403			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 – 303,100,000; 2017 – 310,400,000	303			310
Preferred shares authorized: 1,000,000; Issued and outstanding: 2018 and 2017 – None	—			—
Paid-in capital	—			—
Retained deficit	(154		)	(298		)
Accumulated other comprehensive loss	(113		)	(65		)
Total Masco Corporation's shareholders' equity (deficit)	36			(53		)
Noncontrolling interest	171			236
Total equity	207			183
Total liabilities and equity	$	5,610		$	5,534

See notes to condensed consolidated financial statements.

1

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

For the Three and Nine Months Ended September 30, 2018 and 2017

(In Millions, Except Per Common Share Data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net sales	$	2,101		$	1,945		$	6,318		$	5,789
Cost of sales	1,434			1,288			4,282			3,781
Gross profit	667			657			2,036			2,008
Selling, general and administrative expenses	367			348			1,134			1,070
Operating profit	300			309			902			938
Other income (expense), net:
Interest expense	(38		)	(43		)	(117		)	(239		)
Other, net	—			(2		)	(11		)	37
	(38		)	(45		)	(128		)	(202		)
Income before income taxes	262			264			774			736
Income tax expense	71			100			198			248
Net income	191			164			576			488
Less: Net income attributable to noncontrolling interest	11			12			36			35
Net income attributable to Masco Corporation	$	180		$	152		$	540		$	453
Income per common share attributable to Masco Corporation:
Basic:
Net income	$	.59		$	.48		$	1.74		$	1.42
Diluted:
Net income	$	.58		$	.48		$	1.73		$	1.41

See notes to condensed consolidated financial statements.

2

MASCO CORPORATION

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

For the Three and Nine Months Ended September 30, 2018 and 2017

(In Millions)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018			2017
Net income	$	191	$	164	$	576		$	488
Less: Net income attributable to noncontrolling interest	11		12		36			35
Net income attributable to Masco Corporation	$	180	$	152	$	540		$	453
Other comprehensive income (loss), net of tax (Note L):
Cumulative translation adjustment	$	1	$	33	$	(14	)	$	119
Interest rate swaps	—		—		1			2
Pension and other post-retirement benefits	4		4		12			11
Other comprehensive income (loss), net of tax	5		37		(1		)	132
Less: Other comprehensive income (loss) attributable to noncontrolling interest	—		6		(12		)	24
Other comprehensive income attributable to Masco Corporation	$	5	$	31	$	11		$	108
Total comprehensive income	$	196	$	201	$	575		$	620
Less: Total comprehensive income attributable to noncontrolling interest	11		18		24			59
Total comprehensive income attributable to Masco Corporation	$	185	$	183	$	551		$	561

See notes to condensed consolidated financial statements.

3

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the Nine Months EndedSeptember 30, 2018 and 2017

(In Millions)

	Nine Months Ended September 30,
	2018			2017
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations	$	729		$	749
Increase in receivables	(182		)	(232		)
Increase in inventories	(62		)	(136		)
Increase in accounts payable and accrued liabilities, net	169			86
Net cash from operating activities	654			467
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Retirement of notes	(114		)	(535		)
Purchase of Company common stock	(354		)	(312		)
Cash dividends paid	(98		)	(96		)
Dividends paid to noncontrolling interest	(89		)	(35		)
Issuance of notes, net of issuance costs	—			593
Decrease in debt, net	(1		)	—
Debt extinguishment costs	—			(104		)
Proceeds from the exercise of stock options	8			—
Employee withholding taxes paid on stock-based compensation	(38		)	(29		)
Net cash for financing activities	(686		)	(518		)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures	(160		)	(113		)
Acquisition of business, net of cash acquired	(549		)	—
Proceeds from disposition of:
Business, net of cash disposed	—			128
Short-term bank deposits	108			206
Other financial investments	4			6
Property and equipment	3			6
Purchases of short-term bank deposits	—			(65		)
Other, net	(7		)	(11		)
Net cash (for) from investing activities	(601		)	157
Effect of exchange rate changes on cash and cash investments	8			45
CASH AND CASH INVESTMENTS:
(Decrease) increase for the period	(625		)	151
At January 1	1,194			990
At September 30	$	569		$	1,141

See notes to condensed consolidated financial statements.

4

MASCO CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

For the Nine Months EndedSeptember 30, 2018 and 2017

(In Millions, Except Per Common Share Data)

	Total			Common Shares ($1 par value)			Paid-In Capital			Retained (Deficit) Earnings			Accumulated Other Comprehensive  (Loss) Income			Noncontrolling Interest
Balance, January 1, 2017	$	(103	)	$	318		$	—		$	(381	)	$	(235	)	$	195
Cumulative effect of adoption of new revenue recognition accounting standard	6									6
Adjusted balance, January 1, 2017	(97		)	318			—			(375		)	(235		)	195
Total comprehensive income	620									453			108			59
Shares issued	(14		)	2			(16		)
Shares retired:
Repurchased	(312		)	(8		)	(6		)	(298		)
Surrendered (non-cash)	(15		)	(1		)				(14		)
Cash dividends declared	(96		)							(96		)
Dividends paid to noncontrolling interest	(35		)													(35		)
Stock-based compensation	22						22
Balance, September 30, 2017	$	73		$	311		$	—		$	(330	)	$	(127	)	$	219
Balance, January 1, 2018	$	183		$	310		$	—		$	(298	)	$	(65	)	$	236
Reclassification of disproportionate tax effects (Refer to Note A)	—									59			(59		)
Total comprehensive income	575									540			11			24
Shares issued	(11		)	2			(5		)	(8		)
Shares retired:
Repurchased	(354		)	(9		)	(18		)	(327		)
Surrendered (non-cash)	(19		)							(19		)
Cash dividends declared	(101		)							(101		)
Dividends paid to noncontrolling interest	(89		)													(89		)
Stock-based compensation	23						23
Balance, September 30, 2018	$	207		$	303		$	—		$	(154	)	$	(113	)	$	171

See notes to condensed consolidated financial statements.

5

MASCO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A. ACCOUNTING POLICIES

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to fairly state our financial position at September 30, 2018, our results of operations and comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2018 and 2017, and cash flows and changes in shareholders' equity for the nine-month periods ended September 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 $19 million for the three-month and nine-month periods ended September 30, 2017, respectively, and operating profit (and income before income taxes) increased by $7 million and $11 million for the three-month and nine-month periods ended September 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.

6

MASCO CORPORATION

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

A. ACCOUNTING POLICIES (Continued)

In March 2017, the FASB issued ASU 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," which modifies the presentation of net periodic pension and post-retirement benefit cost ("net benefit cost") in the income statement and the components eligible for capitalization as assets. ASU 2017-07 requires retrospective application for certain aspects of the standard. We adopted ASU 2017-07 on January 1, 2018. As a result of the adoption, we reclassified $7 million and $22 million of net benefit cost from operating profit to other income (expense), net, within our results of operations for the three-month and nine-month periods ended September 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):

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

7

MASCO CORPORATION

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

A. ACCOUNTING POLICIES (Continued)

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

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

8

MASCO CORPORATION

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

A. ACCOUNTING POLICIES (Continued)

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

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

9

MASCO CORPORATION

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

A. ACCOUNTING POLICIES (Concluded)

Recently Issued Accounting Pronouncements. In February 2016, the FASB issued a new standard for leases, ASC 842, which changes the accounting model for identifying and accounting for leases. ASC 842 is effective for us for annual periods beginning January 1, 2019. We currently anticipate adopting the new standard using the optional transition method which allows for initial application of the new standard beginning at the adoption date. 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, substantially loaded lease data into the software, and 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 do not expect the adoption of the standard will impact our financial position or 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.

In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," which allows for the capitalization of certain implementation costs incurred in a hosting arrangement that is a service contract. ASU 2018-15 allows for either retrospective adoption or prospective adoption to all implementation costs incurred after the date of adoption. ASU 2018-15 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.

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B. ACQUISITIONS

On March 9, 2018, we acquired substantially all of the net assets of The L.D. Kichler Co. ("Kichler"), a leader in decorative residential and light commercial lighting products, ceiling fans and LED lighting systems. This business expands our product offerings to our customers. The results of this acquisition for the period from the acquisition date are included in the condensed consolidated financial statements and are reported in the Decorative Architectural Products segment. For the three-month and nine-month periods endedSeptember 30, 2018, we recorded $104 million and $239 million, respectively, of net sales as a result of this acquisition. The purchase price, net of $2 million cash acquired, consisted of $549 million paid with cash on hand.

During the second and third quarters of 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 September 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.

	Initial			Revised
Receivables	$	101		$	101
Inventories	173			169
Other current assets	5			5
Property and equipment	33			33
Goodwill	46			59
Other intangible assets	243			240
Accounts payable	(24		)	(24		)
Accrued liabilities	(25		)	(29		)
Other liabilities	(4		)	(5		)
Total	$	548		$	549

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.

C. 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 $128 million. In connection with the divestiture we recognized a gain of $2 million and $51 million for the three-month and nine-month periods ended September 30, 2017, respectively, 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.

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D. REVENUE

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

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

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

	Three Months Ended September 30, 2018
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	653	$	673	$	239	$	159	$	1,724
International, principally Europe	339		—		—		38		377
Total	$	992	$	673	$	239	$	197	$	2,101

	Nine Months Ended September 30, 2018
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	1,905	$	2,024	$	724	$	459	$	5,112
International, principally Europe	1,090		—		—		116		1,206
Total	$	2,995	$	2,024	$	724	$	575	$	6,318

	Three Months Ended September 30, 2017
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	599	$	562	$	216	$	161	$	1,538
International, principally Europe	351		—		13		43		407
Total	$	950	$	562	$	229	$	204	$	1,945

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

D. REVENUE (Concluded)

	Nine Months Ended September 30, 2017
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	1,761	$	1,719	$	673	$	465	$	4,618
International, principally Europe	1,010		—		38		123		1,171
Total	$	2,771	$	1,719	$	711	$	588	$	5,789

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 an increase to revenue of$2 millionand$4 million for the three-month and nine-month periods endedSeptember 30, 2018, respectively, and $4 million and $7 million for the three-month and nine-month periods endedSeptember 30, 2017, respectively, of variable consideration 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 $15 million and $11 million at September 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 $18 million and $32 million at September 30, 2018 and December 31, 2017, respectively.

E. DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense was $115 million and $95 million for the nine-month periods endedSeptember 30, 2018 and 2017, respectively. 

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

F. GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the nine-month period endedSeptember 30, 2018, by segment, were as follows, in millions: 

	Gross Goodwill At September 30, 2018		Accumulated Impairment Losses			Net Goodwill At September 30, 2018
Plumbing Products	$	571	$	(340	)	$	231
Decorative Architectural Products	353		(75		)	278
Cabinetry Products	181		—			181
Windows and Other Specialty Products	717		(511		)	206
Total	$	1,822	$	(926	)	$	896

	Gross Goodwill At December 31, 2017		Accumulated Impairment Losses			Net Goodwill At December 31, 2017		Additions (A)		Other (B)			Net Goodwill At September 30, 2018
Plumbing Products	$	574	$	(340	)	$	234	$	—	$	(3	)	$	231
Decorative Architectural Products	294		(75		)	219		59		—			278
Cabinetry Products	181		—			181		—		—			181
Windows and Other Specialty Products	718		(511		)	207		—		(1		)	206
Total	$	1,767	$	(926	)	$	841	$	59	$	(4	)	$	896

(A)    Additions consist of acquisitions.

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

The carrying value of our other indefinite-lived intangible assets was $199 million and $140 million at September 30, 2018 and December 31, 2017, respectively, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $213 million (net of accumulated amortization of $24 million) and $47 million (net of accumulated amortization of $10 million) at September 30, 2018 and December 31, 2017, respectively, and principally included customer relationships. The increases in our indefinite-lived intangible assets and definite-lived intangible assets are primarily a result of our acquisition of Kichler.

G. 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 September 30, 2018, the balance remaining in accumulated other comprehensive loss was $7 million (pre-tax).

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

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:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Foreign currency contracts:
Exchange contracts	$	—		$	(1	)	$	1		$	(1	)
Forward contracts	(1		)	1			(1		)	1
Interest rate swaps	—			—			(1		)	(3		)
Total loss	$	(1	)	$	—		$	(1	)	$	(3	)

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

	At September 30, 2018
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	6
Receivables			$	—
Forward contracts	73
Receivables			—
Other assets			—
Accrued liabilities			—
Other liabilities			—

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

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

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

H. WARRANTY LIABILITY

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

	Nine Months Ended September 30, 2018			Twelve Months Ended December 31, 2017
Balance at January 1	$	205		$	192
Accruals for warranties issued during the period	60			63
Accruals related to pre-existing warranties	1			9
Settlements made (in cash or kind) during the period	(49		)	(59		)
Other, net (including currency translation)	1			—
Balance at end of period	$	218		$	205

I. 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 September 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.

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

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 September 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 September 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.

J. 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 September 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: 

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Long-term stock awards	$	5	$	6	$	17	$	19
Stock options	1		—		3		2
Restricted stock units	1		—		3		1
Phantom stock awards and stock appreciation rights	1		2		—		7
Total	$	8	$	8	$	23	$	29

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 644,580 shares of long-term stock awards in the nine-month period endedSeptember 30, 2018.

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

J. STOCK-BASED COMPENSATION (Continued)

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

	Nine Months Ended September 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	2		2
Weighted average grant date fair value	$	21	$	18
Stock award shares forfeited	—		—
Weighted average grant date fair value	$	31	$	24
Unvested stock award shares at September 30	2		3
Weighted average grant date fair value	$	30	$	24

At bothSeptember 30, 2018 and 2017, there was $50 million of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of three years at both September 30,2018 and 2017.

The total market value (at the vesting date) of stock award shares which vested during the nine-month periods endedSeptember 30, 2018 and 2017 was $56 million and $45 million, respectively.

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

We granted 385,220 shares of stock options in the nine-month period endedSeptember 30, 2018 with a grant date weighted average exercise price of approximately $42 per share. In the nine-month period endedSeptember 30,2018, 68,927 shares of stock options were forfeited (including options that expired unexercised).

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

J. STOCK-BASED COMPENSATION (Continued)

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

		Nine Months Ended September 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)	$	47 million	$	36 million
Weighted average exercise price	$	11	$	15
Option shares forfeited		—		—
Weighted average exercise price	$	31	$	—
Option shares outstanding, September 30		4		6
Weighted average exercise price	$	20	$	16
Weighted average remaining option term (in years)		5		4
Option shares vested and expected to vest, September 30		4		6
Weighted average exercise price	$	20	$	16
Aggregate intrinsic value (A)	$	69 million	$	132 million
Weighted average remaining option term (in years)		5		4
Option shares exercisable (vested), September 30		3		4
Weighted average exercise price	$	15	$	13
Aggregate intrinsic value (A)	$	62 million	$	115 million
Weighted average remaining option term (in years)		3		3

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

At September 30, 2018 and 2017, there was $9 million and $8 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model at the grant date) related to unvested stock options; such options had a weighted average remaining vesting period of three years at both September 30, 2018 and 2017.

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

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: 

	Nine Months Ended September 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

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 nine-month period endedSeptember 30, 2018, with a grant date fair value of approximately $42 per share, and 124,780 restricted stock units in the nine-month period endedSeptember 30, 2017, with a grant date fair value of approximately $34 per share. During the nine-month period endedSeptember 30, 2018, 11,600 restricted stock units were forfeited.

K. EMPLOYEE RETIREMENT PLANS

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

	Three Months Ended September 30,
	2018					2017
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	1		$	—	$	1		$	—
Interest cost	8			1		11			2
Expected return on plan assets	(12		)	—		(12		)	—
Amortization of net loss	4			1		5			1
Net periodic pension cost	$	1		$	2	$	5		$	3

	Nine Months Ended September 30,
	2018					2017
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	2		$	—	$	2		$	—
Interest cost	28			4		36			5
Expected return on plan assets	(36		)	—		(36		)	—
Amortization of net loss	13			2		15			2
Net periodic pension cost	$	7		$	6	$	17		$	7

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

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

L. RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE LOSS

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

	Amounts Reclassified
Accumulated Other Comprehensive Loss	Three Months Ended September 30,						Nine Months Ended September 30,						Statement of Operations Line Item
	2018			2017			2018			2017
Amortization of defined-benefit pension and other postretirement benefits:
Actuarial losses, net	$	5		$	6		$	15		$	17		Other income (expense), net
Tax benefit	(1		)	(2		)	(3		)	(6		)
Net of tax	$	4		$	4		$	12		$	11
Interest rate swaps	$	—		$	—		$	1		$	3		Interest expense
Tax (benefit)	—			—			—			(1		)
Net of tax	$	—		$	—		$	1		$	2

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.

M. SEGMENT INFORMATION

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

	Three Months Ended September 30,										Nine Months Ended September 30,
	2018		2017		2018			2017			2018		2017		2018			2017
	Net Sales (A)				OperatingProfit (Loss)						Net Sales(A)				OperatingProfit (Loss)
Operations by segment:
Plumbing Products	$	992	$	950	$	177		$	175		$	2,995	$	2,771	$	534		$	537
Decorative Architectural Products	673		562		104			112			2,024		1,719		338			355
Cabinetry Products	239		229		23			20			724		711		62			67
Windows and Other Specialty Products	197		204		16			24			575		588		28			50
Total	$	2,101	$	1,945	$	320		$	331		$	6,318	$	5,789	$	962		$	1,009
Operations by geographic area:
North America	$	1,724	$	1,538	$	272		$	276		$	5,112	$	4,618	$	813		$	854
International, principally Europe	377		407		48			55			1,206		1,171		149			155
Total	$	2,101	$	1,945	320			331			$	6,318	$	5,789	962			1,009
General corporate expense, net					(20		)	(22		)					(60		)	(71		)
Operating profit					300			309							902			938
Other income (expense), net					(38		)	(45		)					(128		)	(202		)
Income before income taxes					$	262		$	264						$	774		$	736

(A) Inter-segment sales were not material.

21

MASCO CORPORATION

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

N. OTHER INCOME (EXPENSE), NET

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Gain on sale of business	$	—		$	2		$	—		$	51
Income from cash and cash investments and short-term bank deposits	1			1			3			3
Equity investment income, net	—			—			2			1
Realized gains from private equity funds	—			—			—			2
Impairment of private equity funds	—			(2		)	—			(2		)
Foreign currency transaction gains (losses)	1			3			(5		)	3
Net periodic pension and post-retirement benefit cost	(2		)	(7		)	(11		)	(22		)
Other items, net	—			1			—			1
Total other, net	$	—		$	(2	)	$	(11	)	$	37

O. INCOME PER COMMON SHARE

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Numerator (basic and diluted):
Net income	$	180	$	152	$	540	$	453
Less: Allocation to unvested restricted stock awards	1		1		5		4
Net income available to common shareholders	$	179	$	151	$	535	$	449
Denominator:
Basic common shares (based upon weighted average)	304		313		307		315
Add: Stock option dilution	2		3		2		4
Diluted common shares	306		316		309		319

For the three-month and nine-month periods endedSeptember 30, 2018 and 2017, we allocated dividends and undistributed earnings to the unvested restricted stock awards.

Additionally, 667,586 and 626,734 common shares for the three-month and nine-month periods endedSeptember 30, 2018, respectively, and 397,000 and 339,000 common shares for the three-month and nine-month periods endedSeptember 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 nine months of 2018, we repurchased and retired 9.0 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 nine months of the year). At September 30, 2018, we had $936 million remaining under the 2017 authorization.

On the basis of amounts paid (declared), cash dividends per common share were $0.105 ($0.120) and $0.315 ($0.330) for the three-month and nine-month periods endedSeptember 30, 2018, respectively, and $0.100 ($0.105) and $0.300 ($0.305) for the three-month and nine-month periods endedSeptember 30, 2017, respectively.

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MASCO CORPORATION

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

P. 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.

Q. INCOME TAXES

 Our effective tax rate was 27 percent and 26 percent for the three-month and nine-month periods ended September 30, 2018, respectively. Our tax rate was higher than our 2018 statutory tax rate of 21 percent due primarily to an increase from U.S. and foreign taxes on foreign earnings of four percent, and an increase from state and local taxes, net of U.S. Federal tax benefit, of two percent and three percent for the three-month and nine-month periods ended September 30, 2018, respectively. The effective tax rate in the three-month period was also higher by one percent due to non-deductible compensation resulting from recently issued IRS guidance related to the application of the 2017 Act. These increases were partially offset by an income tax benefit on stock-based compensation of one percent and two percent for the three-month and nine-month periods ended September 30, 2018, respectively.

Our effective tax rate of 38 percent for the three-month period ending September 30, 2017 was higher than our 2017 statutory tax rate of 35 percent due primarily to an increase from state and local taxes, net of U.S. Federal tax benefit, of two percent, an increase due to a change in the mix of earnings from lower to higher tax jurisdictions of two percent, partially offset by an income tax benefit on stock-based compensation of one percent. Our effective tax rate of 34 percent for the nine-month period ending September 30, 2017 was lower than our 2017 statutory tax rate due primarily to an income tax benefit on stock-based compensation of three percent, partially offset by an increase from state and local taxes, net of U.S. Federal tax benefit, of two percent.    

23

MASCO CORPORATION

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIRD QUARTER 2018 AND THE FIRST NINE MONTHS 2018 VERSUS

THIRD QUARTER 2017 AND THE FIRST NINE MONTHS 2017

SALES AND OPERATIONS

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

	Three Months Ended September 30,				Percent Change
	2018		2017		2018 vs. 2017
Net Sales:
Plumbing Products	$	992	$	950	4	%
Decorative Architectural Products	673		562		20	%
Cabinetry Products	239		229		4	%
Windows and Other Specialty Products	197		204		(3	)%
Total	$	2,101	$	1,945	8	%
North America	$	1,724	$	1,538	12	%
International, principally Europe	377		407		(7	)%
Total	$	2,101	$	1,945	8	%

	Nine Months Ended September 30,				Percent Change
	2018		2017		2018 vs. 2017
Net Sales:
Plumbing Products	$	2,995	$	2,771	8	%
Decorative Architectural Products	2,024		1,719		18	%
Cabinetry Products	724		711		2	%
Windows and Other Specialty Products	575		588		(2	)%
Total	$	6,318	$	5,789	9	%
North America	$	5,112	$	4,618	11	%
International, principally Europe	1,206		1,171		3	%
Total	$	6,318	$	5,789	9	%

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Operating Profit Margins: (A)
Plumbing Products	17.8	%	18.4	%	17.8	%	19.4	%
Decorative Architectural Products	15.5	%	19.9	%	16.7	%	20.7	%
Cabinetry Products	9.6	%	8.7	%	8.6	%	9.4	%
Windows and Other Specialty Products	8.1	%	11.8	%	4.9	%	8.5	%
North America	15.8	%	17.9	%	15.9	%	18.5	%
International, principally Europe	12.7	%	13.5	%	12.4	%	13.2	%
Total	15.2	%	17.0	%	15.2	%	17.4	%
Total operating profit margin, as reported	14.3	%	15.9	%	14.3	%	16.2	%

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

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

The following discussion of consolidated results of operations and segment and geographic results refers to the three-month and nine-month periods endedSeptember 30, 2018 compared to the same periods of 2017.

NET SALES

Net sales increased eight percent and nine percent for the three-month and nine-month periods ended September 30, 2018, respectively. Excluding acquisitions, divestitures and the effect of currency translation, net sales increased four percent and five percent for the three-month and nine-month periods endedSeptember 30, 2018, respectively. The following table reconciles reported net sales to net sales, excluding acquisitions, divestitures and the effect of currency translation, in millions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net sales, as reported	$	2,101		$	1,945		$	6,318		$	5,789
Acquisitions	(111		)	—			(264		)	—
Divestitures	—			(13		)	—			(67		)
Net sales, excluding acquisitions and divestitures	1,990			1,932			6,054			5,722
Currency translation	12			—			(66		)	—
Net sales, excluding acquisitions, divestitures and the effect of currency translation	$	2,002		$	1,932		$	5,988		$	5,722

North American net sales increased 12 percent and 11 percent for the three-month and nine-month periods endedSeptember 30, 2018, respectively. Net sales were positively impacted by the acquisitions of Kichler and Mercury Plastics, Inc. ("Mercury Plastics"), which, in aggregate, increased sales by seven percent and six percent for the three-month and nine-month periods ended September 30, 2018, respectively. Increased sales volume of plumbing products, cabinets and builder's hardware, in aggregate, also increased sales by five percent and four percent for the three-month and nine-month periods ended September 30, 2018, respectively. Net selling price increases of paints and other coating products additionally increased sales for the nine-month period ended September 30, 2018. The divestiture of Arrow decreased sales by one percent for the nine-month period ended September 30, 2018.

International net sales decreased seven percent for the three-month period ended September 30, 2018, and increased three percent for the nine-month period ended September 30, 2018. In local currencies (including sales in currencies outside their respective functional currencies), net sales decreased six percent and two percent for the three-month and nine-month periods ended September 30, 2018, respectively. The divestiture of Moores Furniture Group Limited ("Moores") in the fourth quarter of 2017 decreased sales by three percent for both periods. For the three-month period ended September 30, 2018, lower sales volume of windows and plumbing products, in aggregate, decreased sales by four percent. These decreases were partially offset by net selling price increases of plumbing products and windows, which, in aggregate, increased sales by two percent. For the nine-month period ended September 30, 2018, lower sales volume of windows decreased sales by two percent, and unfavorable sales mix of plumbing products decreased sales by one percent. These decreases were partially offset by increased sales volume and net selling price increases of plumbing products, which, in aggregate, increased sales by three percent.

Net sales in the Plumbing Products segment increased four percent and eight percent for the three-month and nine-month periods ended September 30, 2018, respectively. Increased sales volume of North American and, for the nine-month period only, International operations, increased sales by five percent and six percent for the three-month and nine-month periods ended September 30, 2018, respectively. Net selling price increases increased sales by one percent for the three-month period ended September 30, 2018 and the acquisition of Mercury Plastics increased sales by one percent for both periods. Such increases were partially offset by decreased sales volume of International operations and unfavorable sales mix of North American operations, which, in aggregate, decreased sales by one percent for the three-month period ended September 30, 2018. Unfavorable sales mix of North American and

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International operations, in aggregate, decreased sales by one percent for the nine-month period ended September 30, 2018. Foreign currency translation decreased net sales by one percent and increased net sales by two percent for the three-month and nine-month periods ended September 30, 2018, respectively.

Net sales in the Decorative Architectural Products segment increased 20 percent and 18 percent for the three-month and nine-month periods ended September 30, 2018, respectively, due primarily to the acquisition of Kichler in March 2018, which increased sales by 18 percent and 14 percent for the three-month and nine-month periods ended September 30, 2018, respectively. Net sales also increased due to net selling price increases of paints and other coating products and increased sales volume of builders' hardware for both periods. Such increases were partially offset by decreased sales volume of paints and other coating products for the three-month period ended September 30, 2018.

Net sales in the Cabinetry Products segment increased four percent and two percent for the three-month and nine-month periods ended September 30, 2018, respectively, due to primarily to increased sales volume, which increased sales by seven percent and four percent for the three-month and nine-month periods ended September 30, 2018, respectively. Net selling price increases and favorable sales mix further increased sales, in aggregate, by three percent for both periods. These increases were partially offset by the divestiture of Moores, which decreased sales by six percent and five percent for the three-month and nine-month periods ended September 30, 2018, respectively.

Net sales in the Windows and Other Specialty Products segment decreased three percent and two percent for the three-month and nine-month periods ended September 30, 2018, respectively. Decreased sales volume of International windows and, for the three-month period only, North American windows, in aggregate, decreased sales by nine percent and four percent for the three-month and nine-month periods ended September 30, 2018, respectively. The divestiture of Arrow in the second quarter of 2017 further decreased sales by five percent for the nine-month period ended September 30, 2018. Such decreases were partially offset by net selling price increases, which increased sales by three percent for both periods. Favorable sales mix for North American and International windows and, for the nine-month period only, increased sales volume of North American windows, in aggregate, increased sales by three percent for both periods. Foreign currency translation also increased sales by one percent for the nine-month period ended September 30, 2018.

OPERATING MARGINS

Our gross profit margins were 31.7 percent and 32.2 percent for the three-month and nine-month periods ended September 30, 2018, respectively, compared with 33.8 percent and 34.7 percent for the comparable periods of 2017. Gross profit margins were negatively affected by the recognition of the inventory step up adjustment established as part of the acquisition of Kichler, an increase in other expenses (such as logistics costs), unfavorable sales mix, an increase in commodity costs, and, for the nine-month period only, an increase in strategic growth initiatives. These negative impacts were partially offset by increased net selling prices and increased sales volume in both periods.

Selling, general and administrative expenses, as a percentage of sales, were 17.5 percent and 17.9 percent percent for the three-month and nine-month periods ended September 30, 2018, respectively, compared to 17.9 percent and 18.5 percent for the comparable periods of 2017. The decrease in selling, general and administrative expenses, as a percentage of sales, was driven by improved leverage of fixed expenses, due primarily to increased sales volume.

Operating margins in the Plumbing Products segment for the three-month and nine-month periods ended September 30, 2018 were negatively impacted by unfavorable sales mix, an increase in commodity costs, higher depreciation expense, and an increase in other expenses (such as salaries and Enterprise Resource Planning system costs). Logistics costs also negatively impacted operating margins for the nine-month period ended September 30, 2018. These negative impacts were partially offset by increased sales volume, the benefits associated with cost savings initiatives and increased net selling prices in both periods.

Operating margins in the Decorative Architectural Products segment for the three-month and nine-month periods ended September 30, 2018 were negatively impacted by the recognition of the inventory step up adjustment established as part of the acquisition of Kichler, an increase in commodity costs of paints and other coating products, and increased depreciation and amortization expense. Lower sales volume of paints and other coating products also negatively impacted operating margin for the three-month period ended September 30, 2018. An increase in other expenses (including legal costs) negatively impacted operating margins for the nine-month period ended September 30, 2018. These negative impacts were partially offset in both periods by increased net selling prices of paints and

26

other coating products, increased sales volume of builder's hardware, and benefits associated with cost savings initiatives of paints and other coating products.

Operating margin in the Cabinetry Products segment for the three-month period ended September 30, 2018 was positively impacted by increased sales volume, benefits associated with cost savings initiatives and the divestiture of Moores. These positive impacts were partially offset by an increase in other expenses (such as logistics costs) and unfavorable sales mix. Operating margin in the Cabinetry Products segment for the nine-month period ended September 30, 2018 was negatively impacted by an increase in other expenses (such as logistics costs), program launch and display expenses, and unfavorable sales mix. These negative impacts were partially offset in both periods by the divestiture of Moores, benefits associated with cost savings initiatives, and increased sales volume.

Operating margins in the Windows and Other Specialty Products segment for the three-month and nine-month periods ended September 30, 2018 were negatively impacted by an increase in other expenses (such as warranty and related service costs and higher labor costs) and commodity costs, which have more than offset benefits associated with cost savings initiatives. Decreased sales volume of North American and International windows also negatively impacted operating margins for the three-month period ended September 30, 2018. The divestiture of Arrow in the second quarter of 2017 and decreased sales volume of international windows negatively impacted operating margins for the nine-month period ended September 30, 2018. These negative impacts were partially offset by increased net selling prices in both periods.

Due to the recently-announced increase in tariffs on imported materials from China, and assuming tariffs rise to 25 percent on January 1, 2019, we could be exposed to approximately $150 million of potential annual direct cost increases.  We will work to mitigate the impact of these tariffs through a combination of price increases, supplier negotiations, supply chain repositioning and other internal productivity measures. 

OTHER INCOME (EXPENSE), NET

Interest expense for the three-month and nine-month periods endedSeptember 30, 2018 was $38 million and $117 million, respectively, compared to $43 million and $239 million for the comparable periods of 2017. Interest expense decreased due to the retirement of all of our all of our $114 million, 6.625% Notes in the second quarter of 2018, and the refinancing of certain debt at more favorable interest rates and the related $107 million of debt extinguishment costs which was recorded as additional interest expense in the second quarter of 2017.

Other, net, for the three-month and nine-month periods endedSeptember 30, 2018 included $2 million and $11 million, respectively, of net periodic pension and post-retirement benefit cost and $1 million of foreign currency transaction gains and $5 million of foreign currency transaction losses, respectively. The nine-month period ended September 30, 2018 also included $2 million of earnings related to equity method investments. Other, net, for the three-month and nine-month periods endedSeptember 30, 2017 included $7 million and $22 million, respectively, of net periodic pension and post-retirement benefit cost, $2 million and $51 million, respectively, of gains related to the sale of Arrow, and $3 million of foreign currency transaction gains and $2 million related to the impairment of a private equity fund in both periods. Other, net, for the nine-month period ended September 30, 2017 also included $1 million of earnings related to equity method investments and $2 million of distributions from private equity funds.

INCOME PER COMMON SHARE — ATTRIBUTABLE TO MASCO CORPORATION

Income for the three-month and nine-month periods endedSeptember 30, 2018 was $180 million and $540 million, respectively, compared with $152 million and $453 million for the comparable periods of 2017. Diluted income per common share for the three-month and nine-month periods endedSeptember 30, 2018 was $.58 and $1.73 per common share, respectively, compared with $.48 and $1.41 per common share for the comparable periods of 2017.

Our effective tax rate was 27 percent and 26 percent for the three-month and nine-month periods ended September 30, 2018, respectively. Our tax rate for the three-month period was higher than our normalized tax rate of 26 percent due primarily to $3 million of income tax expense for non-deductible compensation resulting from recently issued IRS guidance related to the application of the 2017 Act.

Our effective tax rate was 38 percent and 34 percent for the three-month and nine-month periods ended September 30, 2017, respectively. Our tax rate for the three-month period was higher than our normalized tax rate of 34 percent due primarily to a change in the mix of earnings from lower to higher tax jurisdictions.

27

OTHER FINANCIAL INFORMATION

Our current ratio was 1.7 to 1 and 2.0 to 1 at September 30, 2018 and December 31, 2017, respectively. The decrease in our current ratio is due primarily to the cash on hand we paid for our acquisition of Kichler, partially offset by the acquired working capital.

For the nine-month period endedSeptember 30, 2018, net cash provided by operating activities was $654 million.

For the nine-month period endedSeptember 30, 2018, net cash used for financing activities was $686 million, primarily due to $354 million for the repurchase and retirement of Company common stock (including 0.6 million shares repurchased to offset the dilutive impact of long-term stock awards granted in 2018), $114 million for the retirement of our 6.625% of Notes due April 15, 2018, $98 million for the payment of cash dividends, $89 million for dividends paid to noncontrolling interests, and $38 million for employee withholding taxes paid on stock-based compensation.

For the nine-month period endedSeptember 30, 2018, net cash used for investing activities was $601 million, primarily due to $549 million for the acquisition of Kichler, net of cash acquired, and $160 million used for capital expenditures, offset by $108 million in proceeds from the disposition of short-term bank deposits.

Our cash, cash investments and short-term bank deposits were $569 million and $1.3 billion at September 30, 2018 and December 31, 2017, respectively. Our cash and cash investments consist of overnight interest bearing money market demand accounts, time deposit accounts, and money market mutual funds containing government securities and treasury obligations. Our short-term bank deposits consist of time deposits with maturities of 12 months or less.

Of the $569 million and $1.3 billion of cash, cash investments and short-term bank deposits held at September 30, 2018 and December 31, 2017, $235 million and $759 million, respectively, was held in our foreign subsidiaries. If these funds were needed for our operations in the U.S., their repatriation into the U.S. would not result in significant additional U.S. income tax or foreign withholding tax, as we have recorded such taxes on substantially all undistributed foreign earnings, except for those that are legally restricted.

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

The Amended Credit Agreement contains financial covenants requiring us to maintain (A) a maximum net leverage ratio, as adjusted for certain items, of 4.0 to 1.0, and (B) a minimum interest coverage ratio, as adjusted for certain items, equal to or greater than 2.5 to 1.0.  We were in compliance with all covenants and no borrowings were outstanding under our Amended Credit Agreement at September 30, 2018.

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

28

OUTLOOK FOR THE COMPANY

We continue to successfully execute our long-term growth strategies by leveraging our strong brand portfolio, industry-leading positions and Masco Operating System, our methodology to drive growth and productivity. Although we have experienced market softness in our DIY paints and other coating products and international markets, and we continue to face commodity and logistics cost pressures, we remain confident in the fundamentals of our business. We believe that our strong financial position and cash flow generation, together with our current strategy of investing in our industry-leading branded building products, our continued focus on innovation and our commitment to operational excellence, the active management of our portfolio and disciplined capital allocation, will allow us to drive long-term growth and create value for our shareholders.

FORWARD-LOOKING STATEMENTS

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

29

MASCO CORPORATION

Item 4.

CONTROLS AND PROCEDURES

a.     Evaluation of Disclosure Controls and Procedures.

The Company’s principal executive officer and principal financial officer have concluded, based on an evaluation of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15 that, as of September 30, 2018, the Company's disclosure controls and procedures were effective.

b.     Changes in Internal Control over Financial Reporting.

In connection with the evaluation of the Company's internal control over financial reporting that occurred during the quarter ended September 30, 2018, which is required under the Securities Exchange Act of 1934 by paragraph (d) of Exchange Rules 13a-15 or 15d-15 (as defined in paragraph (f) of Rule 13a-15), management determined that there was no change that materially affected or is reasonably likely to materially affect internal control over financial reporting.

30

MASCO CORPORATION

PART II.  OTHER INFORMATION

Item 1.Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes to the risk factors of the Company set forth in Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

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

The following table provides information regarding the repurchase of Company common stock for the three-month period endedSeptember 30, 2018 under the 2017 share repurchase authorization: 

Period	Total Number  Of Shares Purchased	Average Price Paid Per Common Share		Total Number Of Shares Purchased As Part Of Publicly Announced Plans or Programs	Maximum Value Of Shares That May Yet Be Purchased Under The Plans Or Programs
7/1/18-7/31/18	1,049,378	$	38.27	1,049,378	$	984,508,306
8/1/18-8/31/18	1,008,743	$	38.97	1,008,743	945,202,515
9/1/18-9/30/18	245,441	$	37.89	245,441	935,902,138
Total for the period	2,303,562	$	38.53	2,303,562	$	935,902,138

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MASCO CORPORATION

PART II.  OTHER INFORMATION, Continued

Item 6. Exhibits

10	–	Employment Offer Letter dated July 27, 2018 between Scott McDowell and Masco Corporation
12	–	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
31a	–	Certification by Chief Executive Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
31b	–	Certification by Chief Financial Officer Required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
32	–	Certification Required by Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code
101	–	Interactive Data File

32

MASCO CORPORATION

PART II.  OTHER INFORMATION, Concluded

SIGNATURE

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

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

October 30, 2018

33

EX-10

Exhibit 10

[Masco Corporation letterhead]

July 27, 2018

RE: Employment Offer

Scott McDowell

[Home address removed]    

Dear Scott:

I am pleased to confirm your offer of employment for the position of Vice President, Masco Operating System for Masco Corporation, reporting to Keith Allman. This offer includes:

Cash Compensation

Your rate of pay is $14,615.38 bi-weekly. Projected on an annualized basis, it amounts to $380,000 with your first salary review to be in April 2019.

You will also be eligible to participate in our annual discretionary performance bonus program. Your standard bonus opportunity is 50% of your annual base salary. In a typical year, your bonus percent can range from 0% to 100% of your annual base salary depending on Company and individual performance. Bonuses are determined after year-end and are normally paid out in February. Contingent on your employment beginning by no later than August 27, 2018, your bonus for 2018 will be guaranteed at $162,500 to be paid in February of 2019. 

Non-Cash Compensation

As part of your hiring package, we will recommend to the Organization and Compensation Committee of the Masco Board of Directors (the “Committee”) your eligibility to participate in the Company’s discretionary annual performance incentive stock program. Your standard stock award opportunity is 50% of your annual base salary. In a typical year, your stock award can range from 0% to100% of your annual base salary depending on Company and individual performance. Stock awards are determined at year-end and are normally communicated in February. All awards under Masco’s annual performance stock program have a 20%, five-year vesting schedule. Currently, all unvested shares also pay a dividend if declared by the Company. Contingent on your employment beginning by no later than August 27, 2018 and subject to the Committee’s approval, your stock award for 2018 will be guaranteed at the equivalent share value of $162,500 in February of 2019. 

An initial stock award will be recommended in the amount of 12,000 shares of Masco Corporation common stock. Up to a four (4) month waiting period (from start of employment) may be required prior to submission to the Committee for approval. All stock grants, including this initial award, are governed by plan documents that are provided at the time the grant is issued, and require your acceptance of the terms of these documents. This initial award will have a 20%, five-year vesting schedule. Currently, all unvested shares receive dividends if declared by the Company.

Effective January 1, 2019, you will be eligible to participate in our discretionary long term stock incentive program. Your target award percent is 50% of your annual base salary. In a typical year, your award can range from 0% to 100% of your annual base salary depending on Company and individual performance. Awards are determined after the end of the three-year performance period.

Masco considers the granting of stock options annually to motivate key executives to improve our share price and to align their long-term interests with those of shareholders.  You will be eligible for participation in this program. 

Exhibit 10

[Masco Corporation letterhead]

An initial stock option grant will be recommended in the amount of 15,000 shares. Up to a four (4) month waiting period (from start of employment) may be required prior to submission to the Committee for approval. All stock option grants, including this initial award, are governed by plan documents that are provided at the time the grant is issued, and require your acceptance of the terms of these documents. This initial award will have a 20%, five-year vesting schedule.

Benefits

You will also be eligible to participate in all of the health and welfare benefit programs of Masco Corporation as a full-time regular employee. Your health insurance begins on the first of the month following 30 days of employment. You will also be eligible to participate in the 401(k) Plan immediately. The match formula is 100% of the first 4% of your compensation deferred to the plan, subject to IRS 401(k) plan contribution limits. Company matching contributions are immediately 100% vested.

You will also participate in the Masco Corporation discretionary profit sharing plan beginning January 1, 2019 with your eligibility for the initial contribution based on 2019 results. After the end of each year, our Committee approves the Company contribution percentage based on the profitability of Masco Corporation for the preceding year. For 2017, the profit sharing contribution was 8.3% of annual earnings (salary and cash bonus). You will become 100% vested in this benefit after completing three years of service.

In addition to the qualified Profit Sharing and 401(k) Plans, Masco provides a Benefit Restoration Plan designed to restore profit sharing and 401(k) benefits that you would otherwise lose due to IRS compensation limits that apply to these qualified plans.  You will become 100% vested in this benefit after completing three years of service.

You will also be eligible for four weeks of Company paid time off each service year, in addition to the normal holiday schedule for Masco Corporate. These benefits along with additional health, welfare, and other Company-sponsored benefits, will be explained in detail on your start date.

Relocation Assistance

We have agreed that you will be commuting in your new role with the Company. During this commuting period you will receive a special allowance reflecting the pre-tax payment of $5,600 per month (paid bi-weekly).  This is approximately $67,200 per year which, on an after-tax basis, represents a reasonable cost for local housing and to offset travel costs associated with regular trips to Michigan.

However, you will be eligible for relocation assistance should you wish to relocate from your current residence to the Detroit, Michigan area within the first twenty-four (24) months of your employment with Masco. To assist you with your move, you will be eligible for the Masco Executive Relocation Assistance benefits. If you have relocation questions, please discuss them me. In the event you should leave Masco Corporation within two years of your date of relocation for reasons other than ours, you will reimburse Masco Corporation for the monies associated with your relocation benefits, including allowance, noted in the relocation assistance guidelines.

Severance Protection

Should your employment be involuntarily terminated for any reason other than misconduct or cause within 24 months of your hire date, you will be eligible for a severance payment of 12 months base salary and target bonus. These severance payments would be in consideration for and contingent upon your signing and adhering to the terms of the Company’s general release of liability, including a confidentiality agreement, a non-compete agreement, and such other terms as the Company requires.

Exhibit 10

[Masco Corporation letterhead]

This letter is intended to answer many of the questions that you may have concerning your employment, but should not be construed as a contract of employment or a binding obligation without unrestricted right of the Company to modify or terminate the provisions provided herein. In any case, at all times during your employment you will be an “at will” employee, which means that your employment may be terminated at any time with or without cause. Upon your start date, you will be required to sign Confidentiality and Non-Compete Agreements, and Masco’s Legal and Ethical Standards Compliance Program. Additionally, your employment is contingent on the successful completion of a pre-employment background investigation and drug screen.

If the terms of our offer meet with your approval, please print and sign a copy of this letter and return to me via email at renee_straber@mascohq.com.

Scott, we believe we can offer you an exciting and challenging opportunity for your personal and professional growth and are convinced you can make a significant contribution in this leadership role for Masco! If you have any questions, please call me at 313.792.6467.

Sincerely,                         

/s/ RENEE STRABER

Renee Straber

Chief Human Resource Officer

Copy:     Keith Allman

Offer Accepted:

Signature: /s/ SCOTT MCDOWELL        Date:         7-31-18        

EX-12

Exhibit 12

MASCO CORPORATION

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

	(Dollars in Millions)
	Nine Months Ended September 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)	$	774		$	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	114			167			185			222			221		230
Add amortization of debt expense	3			4			5			5			5		6
Add estimated interest factor for rentals	18			22			21			19			33		31
Earnings before income taxes, noncontrolling interest, fixed charges and preferred stock dividends	$	907		$	1,076		$	1,042		$	933		$	768	$	637
Fixed Charges:
Interest on indebtedness	$	117		$	170		$	190		$	223		$	221	$	229
Amortization of debt expense	3			4			5			5			5		6
Estimated interest factor for rentals	18			22			21			19			33		31
Total fixed charges	$	138		$	196		$	216		$	247		$	259	$	266
Preferred stock dividends (B)	—			—			—			—			—		—
Combined fixed charges and preferred stock dividends	$	138		$	196		$	216		$	247		$	259	$	266
Ratio of earnings to fixed charges	6.6			5.5			4.8			3.8			3.0		2.4
Ratio of earnings to combined fixed charges and preferred stock dividends	6.6			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)	6.6			5.5			4.8			3.8			2.9		2.4

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

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

(C) Excludes the 2014 litigation settlement income of $9 million.

1

EX-31.A

Exhibit 31a

MASCO CORPORATION

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

of the Securities Exchange Act of 1934

I, Keith Allman, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	October 30, 2018	By:	/s/ Keith Allman
			Keith Allman
			President and Chief Executive Officer

1

EX-31.B

Exhibit 31b

MASCO CORPORATION

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

of the Securities Exchange Act of 1934

I, John G. Sznewajs, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	October 30, 2018	By:	/s/ John G. Sznewajs
			John G. Sznewajs
			Vice President, Chief Financial Officer

1

EX-32

Exhibit 32

MASCO CORPORATION

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

of the Securities Exchange Act of 1934 and

Section 1350 of Chapter 63 of Title 18 of the

United States Code

The certification set forth below is being submitted in connection with the Masco Corporation Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

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

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

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

Date:	October 30, 2018	/s/ Keith Allman
		Keith Allman
		President and Chief Executive Officer
Date:	October 30, 2018	/s/ John G. Sznewajs
		John G. Sznewajs
		Vice President, Chief Financial Officer

1

XML

Document and Entity Information	9 Months Ended
	Sep. 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	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding (in shares)	305,498,347

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Current Assets:
Cash and cash investments	$ 569	$ 1,194
Short-term bank deposits	0	108
Receivables	1,298	1,066
Prepaid expenses and other	118	111
Inventories:
Finished goods	578	402
Raw material	318	277
Work in process	109	105
Total inventories	1,005	784
Total current assets	2,990	3,263
Property and equipment, net	1,211	1,129
Goodwill	896	841
Other intangible assets, net	412	187
Other assets	101	114
Total assets	5,610	5,534
Current Liabilities:
Accounts payable	1,040	824
Notes payable	2	116
Accrued liabilities	711	727
Total current liabilities	1,753	1,667
Long-term debt	2,971	2,969
Other liabilities	679	715
Total liabilities	5,403	5,351
Commitments and contingencies (Note P)
Masco Corporation's shareholders' equity:
Common shares, par value $1 per share Authorized shares: 1,400,000,000; Issued and outstanding: 2018 – 303,100,000; 2017 – 310,400,000	303	310
Preferred shares authorized: 1,000,000; Issued and outstanding: 2018 and 2017 – None	0	0
Paid-in capital	0	0
Retained deficit	(154)	(298)
Accumulated other comprehensive loss	(113)	(65)
Total Masco Corporation's shareholders' equity (deficit)	36	(53)
Noncontrolling interest	171	236
Total equity	207	183
Total liabilities and equity	$ 5,610	$ 5,534

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 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)	303,100,000	310,400,000
Common shares, shares outstanding (in shares)	303,100,000	310,400,000
Preferred shares, shares authorized (in shares)	1,000,000	1,000,000
Preferred shares, shares issued (in shares)	0	0
Preferred shares, shares outstanding (in shares)	0	0

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Net sales	$ 2,101	$ 1,945	$ 6,318	$ 5,789
Cost of sales	1,434	1,288	4,282	3,781
Gross profit	667	657	2,036	2,008
Selling, general and administrative expenses	367	348	1,134	1,070
Operating profit	300	309	902	938
Other income (expense), net:
Interest expense	(38)	(43)	(117)	(239)
Other, net	0	(2)	(11)	37
Total other income (expense), net	(38)	(45)	(128)	(202)
Income before income taxes	262	264	774	736
Income tax expense	71	100	198	248
Net income	191	164	576	488
Less: Net income attributable to noncontrolling interest	11	12	36	35
Net income attributable to Masco Corporation	$ 180	$ 152	$ 540	$ 453
Basic:
Net income (in dollars per share)	$ 0.59	$ 0.48	$ 1.74	$ 1.42
Diluted:
Net income (in dollars per share)	$ 0.58	$ 0.48	$ 1.73	$ 1.41

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement of Comprehensive Income [Abstract]
Net income	$ 191	$ 164	$ 576	$ 488
Less: Net income attributable to noncontrolling interest	11	12	36	35
Net income attributable to Masco Corporation	180	152	540	453
Other comprehensive income (loss), net of tax (Note L):
Cumulative translation adjustment	1	33	(14)	119
Interest rate swaps	0	0	1	2
Pension and other post-retirement benefits	4	4	12	11
Other comprehensive income (loss), net of tax	5	37	(1)	132
Less: Other comprehensive income (loss) attributable to noncontrolling interest	0	6	(12)	24
Other comprehensive income attributable to Masco Corporation	5	31	11	108
Total comprehensive income	196	201	575	620
Less: Total comprehensive income attributable to noncontrolling interest	11	18	24	59
Total comprehensive income attributable to Masco Corporation	$ 185	$ 183	$ 551	$ 561

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations	$ 729	$ 749
Increase in receivables	(182)	(232)
Increase in inventories	(62)	(136)
Increase in accounts payable and accrued liabilities, net	169	86
Net cash from operating activities	654	467
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Retirement of notes	(114)	(535)
Purchase of Company common stock	(354)	(312)
Cash dividends paid	(98)	(96)
Dividends paid to noncontrolling interest	(89)	(35)
Issuance of notes, net of issuance costs	0	593
Decrease in debt, net	(1)	0
Debt extinguishment costs	0	(104)
Proceeds from the exercise of stock options	8	0
Employee withholding taxes paid on stock-based compensation	(38)	(29)
Net cash for financing activities	(686)	(518)
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures	(160)	(113)
Acquisition of business, net of cash acquired	(549)	0
Proceeds from disposition of:
Business, net of cash disposed	0	128
Short-term bank deposits	108	206
Other financial investments	4	6
Property and equipment	3	6
Purchases of short-term bank deposits	0	(65)
Other, net	(7)	(11)
Net cash (for) from investing activities	(601)	157
Effect of exchange rate changes on cash and cash investments	8	45
CASH AND CASH INVESTMENTS:
(Decrease) increase for the period	(625)	151
At January 1	1,194	990
At September 30	$ 569	$ 1,141

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) - USD ($) $ in Millions	Total	Common Shares ($1 par value)	Paid-In Capital	Retained (Deficit) Earnings	Accumulated Other Comprehensive (Loss) Income	Noncontrolling Interest
Increase (Decrease) in Stockholders' Equity
Cumulative effect of adoption of new revenue recognition accounting standard | Accounting Standards Update 2014-09	$ 6			$ 6
Balance at Dec. 31, 2016	(103)	$ 318	$ 0	(381)	$ (235)	$ 195
Balance (Accounting Standards Update 2014-09) at Dec. 31, 2016	(97)	318	0	(375)	(235)	195
Increase (Decrease) in Stockholders' Equity
Total comprehensive income	620			453	108	59
Shares issued	(14)	2	(16)
Shares retired:
Repurchased	(312)	(8)	(6)	(298)
Surrendered (non-cash)	(15)	(1)		(14)
Cash dividends declared	(96)			(96)
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders	(35)					(35)
Stock-based compensation	22		22
Balance at Sep. 30, 2017	73	311	0	(330)	(127)	219
Increase (Decrease) in Stockholders' Equity
Cumulative effect of adoption of new revenue recognition accounting standard | Accounting Standards Update 2018-02	0			59	(59)
Balance at Dec. 31, 2017	183	310	0	(298)	(65)	236
Increase (Decrease) in Stockholders' Equity
Total comprehensive income	575			540	11	24
Shares issued	(11)	2	(5)	(8)
Shares retired:
Repurchased	(354)	(9)	(18)	(327)
Surrendered (non-cash)	(19)			(19)
Cash dividends declared	(101)			(101)
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders	(89)					(89)
Stock-based compensation	23		23
Balance at Sep. 30, 2018	$ 207	$ 303	$ 0	$ (154)	$ (113)	$ 171

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2018	Dec. 31, 2017
Statement of Stockholders' Equity [Abstract]
Common share, par value (in dollars per share)	$ 1	$ 1

XML

Accounting Policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Accounting Policies

ACCOUNTING POLICIES

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to fairly state our financial position at September 30, 2018, our results of operations and comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2018 and 2017, and cash flows and changes in shareholders' equity for the nine-month periods ended September 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 $19 million for the three-month and nine-month periods ended September 30, 2017, respectively, and operating profit (and income before income taxes) increased by $7 million and $11 million for the three-month and nine-month periods ended September 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 $7 million and $22 million of net benefit cost from operating profit to other income (expense), net, within our results of operations for the three-month and nine-month periods ended September 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):

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

A. ACCOUNTING POLICIES (Continued)

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

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

A. ACCOUNTING POLICIES (Continued)

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

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

A. ACCOUNTING POLICIES (Concluded)

Recently Issued Accounting Pronouncements. In February 2016, the FASB issued a new standard for leases, ASC 842, which changes the accounting model for identifying and accounting for leases. ASC 842 is effective for us for annual periods beginning January 1, 2019. We currently anticipate adopting the new standard using the optional transition method which allows for initial application of the new standard beginning at the adoption date. 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, substantially loaded lease data into the software, and 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 do not expect the adoption of the standard will impact our financial position or 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.

In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," which allows for the capitalization of certain implementation costs incurred in a hosting arrangement that is a service contract. ASU 2018-15 allows for either retrospective adoption or prospective adoption to all implementation costs incurred after the date of adoption. ASU 2018-15 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.

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Acquisitions

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Acquisitions

ACQUISITIONS

On March 9, 2018, we acquired substantially all of the net assets of The L.D. Kichler Co. ("Kichler"), a leader in decorative residential and light commercial lighting products, ceiling fans and LED lighting systems. This business expands our product offerings to our customers. The results of this acquisition for the period from the acquisition date are included in the condensed consolidated financial statements and are reported in the Decorative Architectural Products segment. For the three-month and nine-month periods endedSeptember 30, 2018, we recorded $104 million and $239 million, respectively, of net sales as a result of this acquisition. The purchase price, net of $2 million cash acquired, consisted of $549 million paid with cash on hand.

During the second and third quarters of 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 September 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.

	Initial			Revised
Receivables	$	101		$	101
Inventories	173			169
Other current assets	5			5
Property and equipment	33			33
Goodwill	46			59
Other intangible assets	243			240
Accounts payable	(24		)	(24		)
Accrued liabilities	(25		)	(29		)
Other liabilities	(4		)	(5		)
Total	$	548		$	549

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.

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Divestitures

9 Months Ended

Sep. 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 $128 million. In connection with the divestiture we recognized a gain of $2 million and $51 million for the three-month and nine-month periods ended September 30, 2017, respectively, 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.

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Revenue

9 Months Ended

Sep. 30, 2018

Revenues [Abstract]

Revenue

REVENUE

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

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

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

	Three Months Ended September 30, 2018
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	653	$	673	$	239	$	159	$	1,724
International, principally Europe	339		—		—		38		377
Total	$	992	$	673	$	239	$	197	$	2,101

	Nine Months Ended September 30, 2018
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	1,905	$	2,024	$	724	$	459	$	5,112
International, principally Europe	1,090		—		—		116		1,206
Total	$	2,995	$	2,024	$	724	$	575	$	6,318

	Three Months Ended September 30, 2017
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	599	$	562	$	216	$	161	$	1,538
International, principally Europe	351		—		13		43		407
Total	$	950	$	562	$	229	$	204	$	1,945

D. REVENUE (Concluded)

	Nine Months Ended September 30, 2017
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	1,761	$	1,719	$	673	$	465	$	4,618
International, principally Europe	1,010		—		38		123		1,171
Total	$	2,771	$	1,719	$	711	$	588	$	5,789

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 an increase to revenue of$2 millionand$4 million for the three-month and nine-month periods endedSeptember 30, 2018, respectively, and $4 million and $7 million for the three-month and nine-month periods endedSeptember 30, 2017, respectively, of variable consideration 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 $15 million and $11 million at September 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 $18 million and $32 million at September 30, 2018 and December 31, 2017, respectively.

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Depreciation and Amortization

9 Months Ended

Sep. 30, 2018

Depreciation, Depletion and Amortization [Abstract]

Depreciation and Amortization

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense was $115 million and $95 million for the nine-month periods endedSeptember 30, 2018 and 2017, respectively.

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Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the nine-month period endedSeptember 30, 2018, by segment, were as follows, in millions: 

	Gross Goodwill At September 30, 2018		Accumulated Impairment Losses			Net Goodwill At September 30, 2018
Plumbing Products	$	571	$	(340	)	$	231
Decorative Architectural Products	353		(75		)	278
Cabinetry Products	181		—			181
Windows and Other Specialty Products	717		(511		)	206
Total	$	1,822	$	(926	)	$	896

	Gross Goodwill At December 31, 2017		Accumulated Impairment Losses			Net Goodwill At December 31, 2017		Additions (A)		Other (B)			Net Goodwill At September 30, 2018
Plumbing Products	$	574	$	(340	)	$	234	$	—	$	(3	)	$	231
Decorative Architectural Products	294		(75		)	219		59		—			278
Cabinetry Products	181		—			181		—		—			181
Windows and Other Specialty Products	718		(511		)	207		—		(1		)	206
Total	$	1,767	$	(926	)	$	841	$	59	$	(4	)	$	896

(A)    Additions consist of acquisitions.

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

The carrying value of our other indefinite-lived intangible assets was $199 million and $140 million at September 30, 2018 and December 31, 2017, respectively, and principally included registered trademarks. The carrying value of our definite-lived intangible assets was $213 million (net of accumulated amortization of $24 million) and $47 million (net of accumulated amortization of $10 million) at September 30, 2018 and December 31, 2017, respectively, and principally included customer relationships. The increases in our indefinite-lived intangible assets and definite-lived intangible assets are primarily a result of our acquisition of Kichler.

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Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

Interest Rate Swap Agreements. In 2012, in connection with the issuance of $400 million of debt, we terminated the interest rate swap hedge relationships that we had entered into in 2011. These interest rate swaps were designated as cash flow hedges and effectively fixed interest rates on the forecasted debt issuance to variable rates based on 3-month LIBOR. Upon termination, the ineffective portion of the cash flow hedges of an approximate $2 million loss was recognized in our consolidated statement of operations in other, net, within other income (expense), net. The remaining loss of approximately $23 million from the termination of these swaps is being amortized as an increase to interest expense over the remaining term of the debt, through March 2022. At September 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:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Foreign currency contracts:
Exchange contracts	$	—		$	(1	)	$	1		$	(1	)
Forward contracts	(1		)	1			(1		)	1
Interest rate swaps	—			—			(1		)	(3		)
Total loss	$	(1	)	$	—		$	(1	)	$	(3	)

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

	At September 30, 2018
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	6
Receivables			$	—
Forward contracts	73
Receivables			—
Other assets			—
Accrued liabilities			—
Other liabilities			—

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

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

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Warranty Liability

9 Months Ended

Sep. 30, 2018

Product Warranties Disclosures [Abstract]

Warranty Liability

WARRANTY LIABILITY

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

	Nine Months Ended September 30, 2018			Twelve Months Ended December 31, 2017
Balance at January 1	$	205		$	192
Accruals for warranties issued during the period	60			63
Accruals related to pre-existing warranties	1			9
Settlements made (in cash or kind) during the period	(49		)	(59		)
Other, net (including currency translation)	1			—
Balance at end of period	$	218		$	205

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Debt

9 Months Ended

Sep. 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 September 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 September 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 September 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.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2018

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

Stock-Based Compensation

STOCK-BASED COMPENSATION

Our 2014 Long Term Stock Incentive Plan provides for the issuance of stock-based incentives in various forms to our employees and non-employee Directors. At September 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: 

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Long-term stock awards	$	5	$	6	$	17	$	19
Stock options	1		—		3		2
Restricted stock units	1		—		3		1
Phantom stock awards and stock appreciation rights	1		2		—		7
Total	$	8	$	8	$	23	$	29

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 644,580 shares of long-term stock awards in the nine-month period endedSeptember 30, 2018.

J. STOCK-BASED COMPENSATION (Continued)

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

	Nine Months Ended September 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	2		2
Weighted average grant date fair value	$	21	$	18
Stock award shares forfeited	—		—
Weighted average grant date fair value	$	31	$	24
Unvested stock award shares at September 30	2		3
Weighted average grant date fair value	$	30	$	24

At bothSeptember 30, 2018 and 2017, there was $50 million of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of three years at both September 30,2018 and 2017.

The total market value (at the vesting date) of stock award shares which vested during the nine-month periods endedSeptember 30, 2018 and 2017 was $56 million and $45 million, respectively.

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

We granted 385,220 shares of stock options in the nine-month period endedSeptember 30, 2018 with a grant date weighted average exercise price of approximately $42 per share. In the nine-month period endedSeptember 30,2018, 68,927 shares of stock options were forfeited (including options that expired unexercised).

J. STOCK-BASED COMPENSATION (Continued)

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

		Nine Months Ended September 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)	$	47 million	$	36 million
Weighted average exercise price	$	11	$	15
Option shares forfeited		—		—
Weighted average exercise price	$	31	$	—
Option shares outstanding, September 30		4		6
Weighted average exercise price	$	20	$	16
Weighted average remaining option term (in years)		5		4
Option shares vested and expected to vest, September 30		4		6
Weighted average exercise price	$	20	$	16
Aggregate intrinsic value (A)	$	69 million	$	132 million
Weighted average remaining option term (in years)		5		4
Option shares exercisable (vested), September 30		3		4
Weighted average exercise price	$	15	$	13
Aggregate intrinsic value (A)	$	62 million	$	115 million
Weighted average remaining option term (in years)		3		3

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

At September 30, 2018 and 2017, there was $9 million and $8 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model at the grant date) related to unvested stock options; such options had a weighted average remaining vesting period of three years at both September 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: 

	Nine Months Ended September 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

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 nine-month period endedSeptember 30, 2018, with a grant date fair value of approximately $42 per share, and 124,780 restricted stock units in the nine-month period endedSeptember 30, 2017, with a grant date fair value of approximately $34 per share. During the nine-month period endedSeptember 30, 2018, 11,600 restricted stock units were forfeited.

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Employee Retirement Plans

9 Months Ended

Sep. 30, 2018

Retirement Benefits [Abstract]

Employee Retirement Plans

EMPLOYEE RETIREMENT PLANS

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

	Three Months Ended September 30,
	2018					2017
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	1		$	—	$	1		$	—
Interest cost	8			1		11			2
Expected return on plan assets	(12		)	—		(12		)	—
Amortization of net loss	4			1		5			1
Net periodic pension cost	$	1		$	2	$	5		$	3

	Nine Months Ended September 30,
	2018					2017
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	2		$	—	$	2		$	—
Interest cost	28			4		36			5
Expected return on plan assets	(36		)	—		(36		)	—
Amortization of net loss	13			2		15			2
Net periodic pension cost	$	7		$	6	$	17		$	7

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

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Reclassifications From Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2018

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

Reclassifications From Accumulated Other Comprehensive Loss

RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE LOSS

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

	Amounts Reclassified
Accumulated Other Comprehensive Loss	Three Months Ended September 30,						Nine Months Ended September 30,						Statement of Operations Line Item
	2018			2017			2018			2017
Amortization of defined-benefit pension and other postretirement benefits:
Actuarial losses, net	$	5		$	6		$	15		$	17		Other income (expense), net
Tax benefit	(1		)	(2		)	(3		)	(6		)
Net of tax	$	4		$	4		$	12		$	11
Interest rate swaps	$	—		$	—		$	1		$	3		Interest expense
Tax (benefit)	—			—			—			(1		)
Net of tax	$	—		$	—		$	1		$	2

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

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Segment Information

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

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

	Three Months Ended September 30,										Nine Months Ended September 30,
	2018		2017		2018			2017			2018		2017		2018			2017
	Net Sales (A)				OperatingProfit (Loss)						Net Sales(A)				OperatingProfit (Loss)
Operations by segment:
Plumbing Products	$	992	$	950	$	177		$	175		$	2,995	$	2,771	$	534		$	537
Decorative Architectural Products	673		562		104			112			2,024		1,719		338			355
Cabinetry Products	239		229		23			20			724		711		62			67
Windows and Other Specialty Products	197		204		16			24			575		588		28			50
Total	$	2,101	$	1,945	$	320		$	331		$	6,318	$	5,789	$	962		$	1,009
Operations by geographic area:
North America	$	1,724	$	1,538	$	272		$	276		$	5,112	$	4,618	$	813		$	854
International, principally Europe	377		407		48			55			1,206		1,171		149			155
Total	$	2,101	$	1,945	320			331			$	6,318	$	5,789	962			1,009
General corporate expense, net					(20		)	(22		)					(60		)	(71		)
Operating profit					300			309							902			938
Other income (expense), net					(38		)	(45		)					(128		)	(202		)
Income before income taxes					$	262		$	264						$	774		$	736

(A) Inter-segment sales were not material.

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Other Income (Expense), Net

9 Months Ended

Sep. 30, 2018

Other Income and Expenses [Abstract]

Other Income (Expense), Net

OTHER INCOME (EXPENSE), NET

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Gain on sale of business	$	—		$	2		$	—		$	51
Income from cash and cash investments and short-term bank deposits	1			1			3			3
Equity investment income, net	—			—			2			1
Realized gains from private equity funds	—			—			—			2
Impairment of private equity funds	—			(2		)	—			(2		)
Foreign currency transaction gains (losses)	1			3			(5		)	3
Net periodic pension and post-retirement benefit cost	(2		)	(7		)	(11		)	(22		)
Other items, net	—			1			—			1
Total other, net	$	—		$	(2	)	$	(11	)	$	37

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Income Per Common Share

9 Months Ended

Sep. 30, 2018

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: 

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Numerator (basic and diluted):
Net income	$	180	$	152	$	540	$	453
Less: Allocation to unvested restricted stock awards	1		1		5		4
Net income available to common shareholders	$	179	$	151	$	535	$	449
Denominator:
Basic common shares (based upon weighted average)	304		313		307		315
Add: Stock option dilution	2		3		2		4
Diluted common shares	306		316		309		319

For the three-month and nine-month periods endedSeptember 30, 2018 and 2017, we allocated dividends and undistributed earnings to the unvested restricted stock awards.

Additionally, 667,586 and 626,734 common shares for the three-month and nine-month periods endedSeptember 30, 2018, respectively, and 397,000 and 339,000 common shares for the three-month and nine-month periods endedSeptember 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 nine months of 2018, we repurchased and retired 9.0 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 nine months of the year). At September 30, 2018, we had $936 million remaining under the 2017 authorization.

On the basis of amounts paid (declared), cash dividends per common share were $0.105 ($0.120) and $0.315 ($0.330) for the three-month and nine-month periods endedSeptember 30, 2018, respectively, and $0.100 ($0.105) and $0.300 ($0.305) for the three-month and nine-month periods endedSeptember 30, 2017, respectively.

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Other Commitments and Contingencies

9 Months Ended

Sep. 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.

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Income Taxes

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

 Our effective tax rate was 27 percent and 26 percent for the three-month and nine-month periods ended September 30, 2018, respectively. Our tax rate was higher than our 2018 statutory tax rate of 21 percent due primarily to an increase from U.S. and foreign taxes on foreign earnings of four percent, and an increase from state and local taxes, net of U.S. Federal tax benefit, of two percent and three percent for the three-month and nine-month periods ended September 30, 2018, respectively. The effective tax rate in the three-month period was also higher by one percent due to non-deductible compensation resulting from recently issued IRS guidance related to the application of the 2017 Act. These increases were partially offset by an income tax benefit on stock-based compensation of one percent and two percent for the three-month and nine-month periods ended September 30, 2018, respectively.

Our effective tax rate of 38 percent for the three-month period ending September 30, 2017 was higher than our 2017 statutory tax rate of 35 percent due primarily to an increase from state and local taxes, net of U.S. Federal tax benefit, of two percent, an increase due to a change in the mix of earnings from lower to higher tax jurisdictions of two percent, partially offset by an income tax benefit on stock-based compensation of one percent. Our effective tax rate of 34 percent for the nine-month period ending September 30, 2017 was lower than our 2017 statutory tax rate due primarily to an income tax benefit on stock-based compensation of three percent, partially offset by an increase from state and local taxes, net of U.S. Federal tax benefit, of two percent.

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Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Reclassification

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

Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board ("FASB") issued a new standard for revenue recognition, Accounting Standards Codification ("ASC") 606. The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries. We adopted ASC 606 on January 1, 2018, under the full retrospective method of adoption. As a result of this adoption, net sales increased by $9 million and $19 million for the three-month and nine-month periods ended September 30, 2017, respectively, and operating profit (and income before income taxes) increased by $7 million and $11 million for the three-month and nine-month periods ended September 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 $7 million and $22 million of net benefit cost from operating profit to other income (expense), net, within our results of operations for the three-month and nine-month periods ended September 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):

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

A. ACCOUNTING POLICIES (Continued)

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

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

A. ACCOUNTING POLICIES (Continued)

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

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

A. ACCOUNTING POLICIES (Concluded)

Recently Issued Accounting Pronouncements. In February 2016, the FASB issued a new standard for leases, ASC 842, which changes the accounting model for identifying and accounting for leases. ASC 842 is effective for us for annual periods beginning January 1, 2019. We currently anticipate adopting the new standard using the optional transition method which allows for initial application of the new standard beginning at the adoption date. 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, substantially loaded lease data into the software, and 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 do not expect the adoption of the standard will impact our financial position or 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.

In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," which allows for the capitalization of certain implementation costs incurred in a hosting arrangement that is a service contract. ASU 2018-15 allows for either retrospective adoption or prospective adoption to all implementation costs incurred after the date of adoption. ASU 2018-15 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.

Revenue Recognition, Policy

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

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

Revenue Recognition, Revenue Reductions

We provide customer programs and incentive offerings, including special pricing and co-operative advertising arrangements, promotions and other volume-based incentives. These customer programs and incentives are considered variable consideration. We include in revenue variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the variable consideration is resolved. This determination is made based upon known customer program and incentive offerings at the time of sale, and expected sales volume forecasts as it relates to our volume-based incentives. This determination is updated each reporting period. We recognized an increase to revenue of$2 millionand$4 million for the three-month and nine-month periods endedSeptember 30, 2018, respectively, and $4 million and $7 million for the three-month and nine-month periods endedSeptember 30, 2017, respectively, of variable consideration related to performance obligations settled in previous periods.

Revenue Recognition, Sales Returns

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

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Accounting Policies Impact of Accounting Standards (Tables)

9 Months Ended

Sep. 30, 2018

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):

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

A. ACCOUNTING POLICIES (Continued)

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

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

A. ACCOUNTING POLICIES (Continued)

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

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

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

During the second and third quarters of 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 September 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.

	Initial			Revised
Receivables	$	101		$	101
Inventories	173			169
Other current assets	5			5
Property and equipment	33			33
Goodwill	46			59
Other intangible assets	243			240
Accounts payable	(24		)	(24		)
Accrued liabilities	(25		)	(29		)
Other liabilities	(4		)	(5		)
Total	$	548		$	549

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Revenue (Tables)

9 Months Ended

Sep. 30, 2018

Revenues [Abstract]

Disaggregation of Revenue

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

	Three Months Ended September 30, 2018
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	653	$	673	$	239	$	159	$	1,724
International, principally Europe	339		—		—		38		377
Total	$	992	$	673	$	239	$	197	$	2,101

	Nine Months Ended September 30, 2018
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	1,905	$	2,024	$	724	$	459	$	5,112
International, principally Europe	1,090		—		—		116		1,206
Total	$	2,995	$	2,024	$	724	$	575	$	6,318

	Three Months Ended September 30, 2017
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	599	$	562	$	216	$	161	$	1,538
International, principally Europe	351		—		13		43		407
Total	$	950	$	562	$	229	$	204	$	1,945

D. REVENUE (Concluded)

	Nine Months Ended September 30, 2017
	Plumbing Products		Decorative Architectural Products		Cabinetry Products		Windows and Other Specialty Products		Total
Primary geographic markets:
North America	$	1,761	$	1,719	$	673	$	465	$	4,618
International, principally Europe	1,010		—		38		123		1,171
Total	$	2,771	$	1,719	$	711	$	588	$	5,789

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Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of changes in carrying amount of goodwill

The changes in the carrying amount of goodwill for the nine-month period endedSeptember 30, 2018, by segment, were as follows, in millions: 

	Gross Goodwill At September 30, 2018		Accumulated Impairment Losses			Net Goodwill At September 30, 2018
Plumbing Products	$	571	$	(340	)	$	231
Decorative Architectural Products	353		(75		)	278
Cabinetry Products	181		—			181
Windows and Other Specialty Products	717		(511		)	206
Total	$	1,822	$	(926	)	$	896

	Gross Goodwill At December 31, 2017		Accumulated Impairment Losses			Net Goodwill At December 31, 2017		Additions (A)		Other (B)			Net Goodwill At September 30, 2018
Plumbing Products	$	574	$	(340	)	$	234	$	—	$	(3	)	$	231
Decorative Architectural Products	294		(75		)	219		59		—			278
Cabinetry Products	181		—			181		—		—			181
Windows and Other Specialty Products	718		(511		)	207		—		(1		)	206
Total	$	1,767	$	(926	)	$	841	$	59	$	(4	)	$	896

(A)    Additions consist of acquisitions.

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

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Derivative Instruments and Hedging Activities (Tables)

9 Months Ended

Sep. 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:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Foreign currency contracts:
Exchange contracts	$	—		$	(1	)	$	1		$	(1	)
Forward contracts	(1		)	1			(1		)	1
Interest rate swaps	—			—			(1		)	(3		)
Total loss	$	(1	)	$	—		$	(1	)	$	(3	)

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

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

	At September 30, 2018
	Notional Amount		Balance Sheet
Foreign currency contracts:
Exchange contracts	$	6
Receivables			$	—
Forward contracts	73
Receivables			—
Other assets			—
Accrued liabilities			—
Other liabilities			—

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

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Warranty Liability (Tables)

9 Months Ended

Sep. 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: 

	Nine Months Ended September 30, 2018			Twelve Months Ended December 31, 2017
Balance at January 1	$	205		$	192
Accruals for warranties issued during the period	60			63
Accruals related to pre-existing warranties	1			9
Settlements made (in cash or kind) during the period	(49		)	(59		)
Other, net (including currency translation)	1			—
Balance at end of period	$	218		$	205

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 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: 

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Long-term stock awards	$	5	$	6	$	17	$	19
Stock options	1		—		3		2
Restricted stock units	1		—		3		1
Phantom stock awards and stock appreciation rights	1		2		—		7
Total	$	8	$	8	$	23	$	29

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

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

	Nine Months Ended September 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	2		2
Weighted average grant date fair value	$	21	$	18
Stock award shares forfeited	—		—
Weighted average grant date fair value	$	31	$	24
Unvested stock award shares at September 30	2		3
Weighted average grant date fair value	$	30	$	24

Schedule of the Company's stock option activity

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

		Nine Months Ended September 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)	$	47 million	$	36 million
Weighted average exercise price	$	11	$	15
Option shares forfeited		—		—
Weighted average exercise price	$	31	$	—
Option shares outstanding, September 30		4		6
Weighted average exercise price	$	20	$	16
Weighted average remaining option term (in years)		5		4
Option shares vested and expected to vest, September 30		4		6
Weighted average exercise price	$	20	$	16
Aggregate intrinsic value (A)	$	69 million	$	132 million
Weighted average remaining option term (in years)		5		4
Option shares exercisable (vested), September 30		3		4
Weighted average exercise price	$	15	$	13
Aggregate intrinsic value (A)	$	62 million	$	115 million
Weighted average remaining option term (in years)		3		3

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

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: 

	Nine Months Ended September 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

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Employee Retirement Plans (Tables)

9 Months Ended

Sep. 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: 

	Three Months Ended September 30,
	2018					2017
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	1		$	—	$	1		$	—
Interest cost	8			1		11			2
Expected return on plan assets	(12		)	—		(12		)	—
Amortization of net loss	4			1		5			1
Net periodic pension cost	$	1		$	2	$	5		$	3

	Nine Months Ended September 30,
	2018					2017
	Qualified			Non-Qualified		Qualified			Non-Qualified
Service cost	$	2		$	—	$	2		$	—
Interest cost	28			4		36			5
Expected return on plan assets	(36		)	—		(36		)	—
Amortization of net loss	13			2		15			2
Net periodic pension cost	$	7		$	6	$	17		$	7

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Reclassifications From Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 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: 

	Amounts Reclassified
Accumulated Other Comprehensive Loss	Three Months Ended September 30,						Nine Months Ended September 30,						Statement of Operations Line Item
	2018			2017			2018			2017
Amortization of defined-benefit pension and other postretirement benefits:
Actuarial losses, net	$	5		$	6		$	15		$	17		Other income (expense), net
Tax benefit	(1		)	(2		)	(3		)	(6		)
Net of tax	$	4		$	4		$	12		$	11
Interest rate swaps	$	—		$	—		$	1		$	3		Interest expense
Tax (benefit)	—			—			—			(1		)
Net of tax	$	—		$	—		$	1		$	2

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Schedule of information by segment and geographic area

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

	Three Months Ended September 30,										Nine Months Ended September 30,
	2018		2017		2018			2017			2018		2017		2018			2017
	Net Sales (A)				OperatingProfit (Loss)						Net Sales(A)				OperatingProfit (Loss)
Operations by segment:
Plumbing Products	$	992	$	950	$	177		$	175		$	2,995	$	2,771	$	534		$	537
Decorative Architectural Products	673		562		104			112			2,024		1,719		338			355
Cabinetry Products	239		229		23			20			724		711		62			67
Windows and Other Specialty Products	197		204		16			24			575		588		28			50
Total	$	2,101	$	1,945	$	320		$	331		$	6,318	$	5,789	$	962		$	1,009
Operations by geographic area:
North America	$	1,724	$	1,538	$	272		$	276		$	5,112	$	4,618	$	813		$	854
International, principally Europe	377		407		48			55			1,206		1,171		149			155
Total	$	2,101	$	1,945	320			331			$	6,318	$	5,789	962			1,009
General corporate expense, net					(20		)	(22		)					(60		)	(71		)
Operating profit					300			309							902			938
Other income (expense), net					(38		)	(45		)					(128		)	(202		)
Income before income taxes					$	262		$	264						$	774		$	736

(A) Inter-segment sales were not material.

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Other Income (Expense), Net (Tables)

9 Months Ended

Sep. 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:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Gain on sale of business	$	—		$	2		$	—		$	51
Income from cash and cash investments and short-term bank deposits	1			1			3			3
Equity investment income, net	—			—			2			1
Realized gains from private equity funds	—			—			—			2
Impairment of private equity funds	—			(2		)	—			(2		)
Foreign currency transaction gains (losses)	1			3			(5		)	3
Net periodic pension and post-retirement benefit cost	(2		)	(7		)	(11		)	(22		)
Other items, net	—			1			—			1
Total other, net	$	—		$	(2	)	$	(11	)	$	37

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Income Per Common Share (Tables)

9 Months Ended

Sep. 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: 

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Numerator (basic and diluted):
Net income	$	180	$	152	$	540	$	453
Less: Allocation to unvested restricted stock awards	1		1		5		4
Net income available to common shareholders	$	179	$	151	$	535	$	449
Denominator:
Basic common shares (based upon weighted average)	304		313		307		315
Add: Stock option dilution	2		3		2		4
Diluted common shares	306		316		309		319

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Accounting Policies - Narrative (Details) - USD ($) $ in Millions	3 Months Ended						6 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	$ 2,101			$ 1,945				$ 6,318	$ 5,789
Operating Income (Loss)	300		$ 256	309	$ 372	$ 257	$ 629	902	938	$ 1,194	$ 1,087
Other, net	$ 0			(2)				$ (11)	37
Reclassifications, tax (benefit)		$ 59
Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales				9					19	(2)	4
Operating Income (Loss)				7					11	(1)	2
Accounting Standards Update 2017-07
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other, net				$ 7					$ 22	$ 26
Accounting Standards Update 2018-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other, net											$ 32

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Accounting Policies Accounting Pronouncements (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended					6 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	$ 2,101		$ 1,945				$ 6,318	$ 5,789
Operating Income (Loss)	300	$ 256	309	$ 372	$ 257	$ 629	902	938	$ 1,194	$ 1,087
Net Income (Loss) Attributable to Parent	$ 180	$ 80	$ 152	$ 163	$ 138	$ 301	$ 540	$ 453	$ 533	$ 493
Net income basic (in dollars per share)	$ 0.59	$ 0.25	$ 0.48	$ 0.51	$ 0.43	$ 0.94	$ 1.74	$ 1.42	$ 1.68	$ 1.49
Net income diluted (in dollars per share)	$ 0.58	$ 0.25	$ 0.48	$ 0.51	$ 0.43	$ 0.93	$ 1.73	$ 1.41	$ 1.66	$ 1.48
Plumbing Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	$ 992		$ 950				$ 2,995	$ 2,771
Decorative Architectural Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	673		562				2,024	1,719
Cabinetry Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	239		229				724	711
Windows and Other Specialty Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	197		204				575	588
Operating Segments
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	2,101	$ 1,853	1,945	$ 2,066	$ 1,778	$ 3,844	6,318	5,789	$ 7,642	$ 7,361
Operating Income (Loss)	320	277	331	398	280	678	962	1,009	1,286	1,181
Operating Segments | Plumbing Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	992	961	950	949	872	1,821	2,995	2,771	3,732	3,529
Operating Income (Loss)	177	165	175	200	162	362	534	537	702	654
Operating Segments | Decorative Architectural Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	673	487	562	661	496	1,157	2,024	1,719	2,206	2,092
Operating Income (Loss)	104	83	112	149	94	243	338	355	438	433
Operating Segments | Cabinetry Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	239	223	229	251	231	482	724	711	934	970
Operating Income (Loss)	23	25	20	31	16	47	62	67	92	97
Operating Segments | Windows and Other Specialty Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales	197	182	204	205	179	384	575	588	770	770
Operating Income (Loss)	16	4	24	18	8	26	28	50	54	(3)
Corporate, Non-Segment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating Expenses	$ (20)	(21)	(22)	(26)	23	(49)	$ (60)	(71)	(92)	(94)
Previous Accounting Guidance
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating Income (Loss)		264	295	357	253	610		905	1,169	1,053
Net Income (Loss) Attributable to Parent		$ 87	$ 148	$ 158	$ 140	$ 298		$ 446	$ 533	$ 491
Net income basic (in dollars per share)		$ 0.28	$ 0.47	$ 0.50	$ 0.44	$ 0.93		$ 1.40	$ 1.68	$ 1.49
Net income diluted (in dollars per share)		$ 0.27	$ 0.46	$ 0.49	$ 0.43	$ 0.92		$ 1.38	$ 1.66	$ 1.47
Previous Accounting Guidance | Operating Segments
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales		$ 1,874	$ 1,936	$ 2,057	$ 1,777	$ 3,834		$ 5,770	$ 7,644	$ 7,357
Operating Income (Loss)		287	321	387	279	666		987	1,274	1,162
Previous Accounting Guidance | Operating Segments | Plumbing Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales		972	951	949	863	1,812		2,763	3,735	3,526
Operating Income (Loss)		169	175	198	156	354		529	698	642
Previous Accounting Guidance | Operating Segments | Decorative Architectural Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales		494	553	653	505	1,158		1,711	2,205	2,092
Operating Income (Loss)		88	104	141	101	242		346	434	430
Previous Accounting Guidance | Operating Segments | Cabinetry Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales		223	229	251	231	482		711	934	970
Operating Income (Loss)		25	19	30	16	46		65	90	93
Previous Accounting Guidance | Operating Segments | Windows and Other Specialty Products
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net sales		185	203	204	178	382		585	770	769
Operating Income (Loss)		5	23	18	6	24		47	52	(3)
Previous Accounting Guidance | Corporate, Non-Segment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating Expenses		$ (23)	$ (26)	$ (30)	$ (26)	$ (56)		$ (82)	$ (105)	$ (109)

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Acquisitions (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018	Mar. 09, 2018	Dec. 31, 2017
Business Acquisition [Line Items]
Goodwill	$ 896	$ 896		$ 841
Decorative Architectural Products
Business Acquisition [Line Items]
Goodwill	278	278		$ 219
The LD Kichler Co | Decorative Architectural Products
Business Acquisition [Line Items]
Net sales	104	239
Cash acquired			$ 2
Receivables	101	101	101
Inventories	169	169	173
Other current assets	5	5	5
Property and equipment	33	33	33
Goodwill	59	59	46
Other intangible assets	240	240	243
Accounts payable	(24)	(24)	(24)
Accrued liabilities	(29)	(29)	(25)
Other liabilities	(5)	(5)	(4)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net	$ 549	549	$ 548
Indefinite-lived intangible assets acquired		59
Finite-lived intangible assets acquired		181
The LD Kichler Co | Customer Relationships | Decorative Architectural Products
Business Acquisition [Line Items]
Finite-lived intangible assets acquired		$ 145
Weighted average useful life (in years)		20 years
The LD Kichler Co | Other Intangible Assets | Decorative Architectural Products
Business Acquisition [Line Items]
Finite-lived intangible assets acquired		$ 36
Weighted average useful life (in years)		3 years

XML

Divestitures (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Jun. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Business, net of cash disposed			$ 0	$ 128
Arrow Fastener
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Business, net of cash disposed		$ 128
Gain (loss) on disposal	$ 2			$ 51

XML

Revenue (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended					6 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
Disaggregation of Revenue [Line Items]
Net sales	$ 2,101		$ 1,945				$ 6,318	$ 5,789
Operating Income (Loss)	300	$ 256	309	$ 372	$ 257	$ 629	902	938	$ 1,194	$ 1,087
Net Income (Loss) Attributable to Parent	$ 180	$ 80	$ 152	$ 163	$ 138	$ 301	$ 540	$ 453	$ 533	$ 493
Net income basic (in dollars per share)	$ 0.59	$ 0.25	$ 0.48	$ 0.51	$ 0.43	$ 0.94	$ 1.74	$ 1.42	$ 1.68	$ 1.49
Net income diluted (in dollars per share)	$ 0.58	$ 0.25	$ 0.48	$ 0.51	$ 0.43	$ 0.93	$ 1.73	$ 1.41	$ 1.66	$ 1.48
Performance obligation satisfied in previous period	$ 2		$ 4				$ 4	$ 7
Contract with customer, asset, gross, current	15	$ 11					15		$ 11
Contract with customer, liability	18	32					18		32
Plumbing Products
Disaggregation of Revenue [Line Items]
Net sales	992		950				2,995	2,771
Decorative Architectural Products
Disaggregation of Revenue [Line Items]
Net sales	673		562				2,024	1,719
Cabinetry Products
Disaggregation of Revenue [Line Items]
Net sales	239		229				724	711
Windows and Other Specialty Products
Disaggregation of Revenue [Line Items]
Net sales	197		204				575	588
North America
Disaggregation of Revenue [Line Items]
Net sales	1,724		1,538				5,112	4,618
North America | Plumbing Products
Disaggregation of Revenue [Line Items]
Net sales	653		599				1,905	1,761
North America | Decorative Architectural Products
Disaggregation of Revenue [Line Items]
Net sales	673		562				2,024	1,719
North America | Cabinetry Products
Disaggregation of Revenue [Line Items]
Net sales	239		216				724	673
North America | Windows and Other Specialty Products
Disaggregation of Revenue [Line Items]
Net sales	159		161				459	465
International, principally Europe
Disaggregation of Revenue [Line Items]
Net sales	377		407				1,206	1,171
International, principally Europe | Plumbing Products
Disaggregation of Revenue [Line Items]
Net sales	339		351				1,090	1,010
International, principally Europe | Decorative Architectural Products
Disaggregation of Revenue [Line Items]
Net sales	0		0				0	0
International, principally Europe | Cabinetry Products
Disaggregation of Revenue [Line Items]
Net sales	0		13				0	38
International, principally Europe | Windows and Other Specialty Products
Disaggregation of Revenue [Line Items]
Net sales	38		43				116	123
Operating Segments
Disaggregation of Revenue [Line Items]
Net sales	2,101	1,853	1,945	$ 2,066	$ 1,778	$ 3,844	6,318	5,789	7,642	$ 7,361
Operating Income (Loss)	320	277	331	398	280	678	962	1,009	1,286	1,181
Operating Segments | Plumbing Products
Disaggregation of Revenue [Line Items]
Net sales	992	961	950	949	872	1,821	2,995	2,771	3,732	3,529
Operating Income (Loss)	177	165	175	200	162	362	534	537	702	654
Operating Segments | Decorative Architectural Products
Disaggregation of Revenue [Line Items]
Net sales	673	487	562	661	496	1,157	2,024	1,719	2,206	2,092
Operating Income (Loss)	104	83	112	149	94	243	338	355	438	433
Operating Segments | Cabinetry Products
Disaggregation of Revenue [Line Items]
Net sales	239	223	229	251	231	482	724	711	934	970
Operating Income (Loss)	23	25	20	31	16	47	62	67	92	97
Operating Segments | Windows and Other Specialty Products
Disaggregation of Revenue [Line Items]
Net sales	197	182	204	205	179	384	575	588	770	770
Operating Income (Loss)	16	4	24	18	8	26	28	50	54	(3)
Corporate, Non-Segment
Disaggregation of Revenue [Line Items]
Operating Expenses	$ 20	21	22	26	(23)	49	$ 60	71	92	94
Previous Accounting Guidance
Disaggregation of Revenue [Line Items]
Operating Income (Loss)		264	295	357	253	610		905	1,169	1,053
Net Income (Loss) Attributable to Parent		$ 87	$ 148	$ 158	$ 140	$ 298		$ 446	$ 533	$ 491
Net income basic (in dollars per share)		$ 0.28	$ 0.47	$ 0.50	$ 0.44	$ 0.93		$ 1.40	$ 1.68	$ 1.49
Net income diluted (in dollars per share)		$ 0.27	$ 0.46	$ 0.49	$ 0.43	$ 0.92		$ 1.38	$ 1.66	$ 1.47
Previous Accounting Guidance | Operating Segments
Disaggregation of Revenue [Line Items]
Net sales		$ 1,874	$ 1,936	$ 2,057	$ 1,777	$ 3,834		$ 5,770	$ 7,644	$ 7,357
Operating Income (Loss)		287	321	387	279	666		987	1,274	1,162
Previous Accounting Guidance | Operating Segments | Plumbing Products
Disaggregation of Revenue [Line Items]
Net sales		972	951	949	863	1,812		2,763	3,735	3,526
Operating Income (Loss)		169	175	198	156	354		529	698	642
Previous Accounting Guidance | Operating Segments | Decorative Architectural Products
Disaggregation of Revenue [Line Items]
Net sales		494	553	653	505	1,158		1,711	2,205	2,092
Operating Income (Loss)		88	104	141	101	242		346	434	430
Previous Accounting Guidance | Operating Segments | Cabinetry Products
Disaggregation of Revenue [Line Items]
Net sales		223	229	251	231	482		711	934	970
Operating Income (Loss)		25	19	30	16	46		65	90	93
Previous Accounting Guidance | Operating Segments | Windows and Other Specialty Products
Disaggregation of Revenue [Line Items]
Net sales		185	203	204	178	382		585	770	769
Operating Income (Loss)		5	23	18	6	24		47	52	(3)
Previous Accounting Guidance | Corporate, Non-Segment
Disaggregation of Revenue [Line Items]
Operating Expenses		$ 23	$ 26	$ 30	$ 26	$ 56		$ 82	$ 105	$ 109

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Depreciation and Amortization (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Depreciation, Depletion and Amortization [Abstract]
Depreciation and amortization expense	$ 115	$ 95

XML

Goodwill and Other Intangible Assets - Goodwill Rollforward (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018	Dec. 31, 2017
Goodwill [Line Items]
Goodwill, gross at period start	$ 1,767
Accumulated Impairment Losses		$ (926)	$ (926)
Goodwill, gross at period end	1,822
Goodwill [Roll Forward]
Beginning balance	841
Additions	59
Other	(4)
Ending balance	841	896	841
Plumbing Products
Goodwill [Line Items]
Goodwill, gross at period start	574
Accumulated Impairment Losses		(340)	(340)
Goodwill, gross at period end	571
Goodwill [Roll Forward]
Beginning balance	234
Additions	0
Other	(3)
Ending balance	234	231	234
Decorative Architectural Products
Goodwill [Line Items]
Goodwill, gross at period start	294
Accumulated Impairment Losses		(75)	(75)
Goodwill, gross at period end	353
Goodwill [Roll Forward]
Beginning balance	219
Additions	59
Other	0
Ending balance	219	278	219
Cabinetry Products
Goodwill [Line Items]
Goodwill, gross at period start	181
Accumulated Impairment Losses		0	0
Goodwill, gross at period end	181
Goodwill [Roll Forward]
Beginning balance	181
Additions	0
Other	0
Ending balance	181	181	181
Windows and Other Specialty Products
Goodwill [Line Items]
Goodwill, gross at period start	718
Accumulated Impairment Losses		(511)	(511)
Goodwill, gross at period end	717
Goodwill [Roll Forward]
Beginning balance	207
Additions	0
Other	(1)
Ending balance	$ 207	$ 206	$ 207

XML

Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions	Sep. 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	213	47
Accumulated amortization	$ 24	$ 10

XML

Derivative Instruments and Hedging Activities - Narrative (Details) - Derivatives designated as hedging instruments - Cash flow hedges - Interest rate swaps - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2012
Three Month London Interbank Offered Rate
Interest Rate Swap Agreements
Unrealized gain (loss) on interest rate cash flow hedges, AOCI	$ (7,000,000)
3 month LIBOR interest rate swap, cash flow hedge terminated March 2012
Interest Rate Swap Agreements
Debt issued		$ 400,000,000
Loss on termination of swaps being amortized		23,000,000
Other, net | 3 month LIBOR interest rate swap, cash flow hedge terminated March 2012
Interest Rate Swap Agreements
Ineffective portion of the cash flow hedges		$ 2,000,000

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Derivative Instruments and Hedging Activities - Pre-tax Gains (Losses) (Details) - Not designated as a hedge - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Derivative instruments and hedging activities
Total gain (loss)	$ (1)	$ 0	$ (1)	$ (3)
Foreign currency exchange contracts | Other, net
Derivative instruments and hedging activities
Total gain (loss)	0	(1)	1	(1)
Forward contracts | Other, net
Derivative instruments and hedging activities
Total gain (loss)	(1)	1	(1)	1
Interest rate swaps
Derivative instruments and hedging activities
Total gain (loss)	$ 0	$ 0	$ (1)	$ (3)

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Derivative Instruments and Hedging Activities - Fair Value of Derivative Instruments (Details) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Foreign currency exchange contracts
Derivative instruments and hedging activities
Notional Amount	$ 6	$ 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	73	43
Forward contracts | Receivables | Recurring | Level 2
Derivative instruments and hedging activities
Asset	0	0
Forward contracts | Other Assets | Recurring | Level 2
Derivative instruments and hedging activities
Asset	0
Forward contracts | Accrued liabilities | Recurring | Level 2
Derivative instruments and hedging activities
Liabilities	0	$ 0
Forward contracts | Other Liabilities | Recurring | Level 2
Derivative instruments and hedging activities
Liabilities	$ 0

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Warranty Liability (Details) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 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	60	63
Accruals related to pre-existing warranties	1	9
Settlements made (in cash or kind) during the period	(49)	(59)
Other, net (including currency translation)	1	0
Balance at the end of the period	$ 218	$ 205

XML

Debt (Details)					9 Months Ended
	Apr. 16, 2018 USD ($)	Jun. 27, 2017 USD ($)	Jun. 21, 2017 USD ($)	May 29, 2015 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Mar. 28, 2013 USD ($)
Debt
Retirement of notes					$ 114,000,000	$ 535,000,000
Proceeds from issuance of debt			$ 599,000,000
Interest expense, debt						$ 107,000,000
Estimate of Fair Value Measurement
Debt
Estimated market value of long-term and short-term debt					3,000,000,000		$ 3,300,000,000
Carrying Value Reported Value Measurement
Debt
Aggregate carrying value of long-term and short-term debt					3,000,000,000		$ 3,100,000,000
Credit Agreement dated March 28, 2013
Debt
Borrowing capacity, maximum								$ 1,250,000,000
Credit agreement dated May 29, 2015 and August 28, 2015, as amended
Debt
Borrowing capacity, maximum				$ 750,000,000
Increase in maximum borrowing capacity				$ 375,000,000
Maximum net leverage ratio				4
Minimum interest coverage ratio				2.5
Borrowings outstanding					0
Credit agreement dated May 29, 2015 and August 28, 2015, as amended | Federal funds effective rate
Debt
Interest rate, basis spread (as a percent)				0.50%
Credit agreement dated May 29, 2015 and August 28, 2015, as amended | Libor rate
Debt
Interest rate, basis spread (as a percent)				1.00%
Credit agreement dated May 29, 2015 and August 28, 2015, as amended | Revolver
Debt
Borrowing capacity, maximum					500,000,000
Credit agreement dated May 29, 2015 and August 28, 2015, as amended | Swingline loans
Debt
Borrowing capacity, maximum					75,000,000
Credit agreement dated May 29, 2015 and August 28, 2015, as amended | Letters of credit
Debt
Borrowing capacity, maximum					100,000,000
Outstanding and unused Letters of Credit					$ 0
6.625% Notes and Debentures Due April 15, 2018
Debt
Retirement of notes	$ 114,000,000
Debt instrument, interest rate	6.625%
3.5% Notes and Debentures Due November 15, 2027
Debt
Debt instrument, interest rate			3.50%
Debt issued			$ 300,000,000
4.5% Notes and Debentures Due May 15, 2047
Debt
Debt instrument, interest rate			4.50%
Debt issued			$ 300,000,000
7.125% Notes and Debentures due March 15, 2020
Debt
Retirement of notes		$ 299,000,000
Debt instrument, interest rate		7.125%
5.95% Notes and Debentures Due March 15, 2022
Debt
Retirement of notes		$ 74,000,000
Debt instrument, interest rate		5.95%
7.75% Notes And Debentures due 2029
Debt
Retirement of notes		$ 62,000,000
Debt instrument, interest rate		7.75%
6.5% Notes and Debentures due 2032
Debt
Retirement of notes		$ 100,000,000
Debt instrument, interest rate		6.50%

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Stock-Based Compensation (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Stock-based compensation
Pre-tax compensation expense	$ 8	$ 8	$ 23	$ 29
Long-term stock awards
Stock-based compensation
Pre-tax compensation expense	5	6	17	19
Stock options
Stock-based compensation
Pre-tax compensation expense	1	0	3	2
Restricted stock units
Stock-based compensation
Pre-tax compensation expense	1	0	3	1
Phantom stock awards and stock appreciation rights
Stock-based compensation
Pre-tax compensation expense	$ 1	$ 2	$ 0	$ 7

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Stock-Based Compensation - Long-Term Stock Award (Details) - Long-term stock awards $ / shares in Units, $ in Millions	9 Months Ended
	Sep. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2017 USD ($) $ / shares shares
Unvested stock award shares
Balance at the beginning of the period (in shares) | shares	3,000,000	4,000,000
Granted (in shares) | shares	644,580	1,000,000
Vested (in shares) | shares	2,000,000	2,000,000
Forfeited (in shares) | shares	0	0
Balance at the end of the period (in shares) | shares	2,000,000	3,000,000
Weighted average grant date fair value
Balance at the beginning of the period (in dollars per share) | $ / shares	$ 24	$ 20
Granted (in dollars per share) | $ / shares	42	34
Vested (in dollars per share) | $ / shares	21	18
Forfeited (in dollars per share) | $ / shares	31	24
Balance at the end of the period (in dollars per share) | $ / shares	$ 30	$ 24
Additional disclosures
Total unrecognized compensation expense | $	$ 50	$ 50
Remaining weighted average vesting period	3 years	3 years
Total market value (at the vesting date) of stock award shares | $	$ 56	$ 45

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Stock-Based Compensation - Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Stock Options
Grant date intrinsic value (in dollars per share)	$ 42
Shares
Granted (in shares)	385,220
Forfeited (in shares)	68,927
Stock options
Stock Options
Vesting period	5 years
Expiration period	10 years
Shares
Outstanding at the beginning of the period (in shares)	5,000,000	7,000,000
Granted (in shares)	0	0
Exercised (in shares)	1,000,000	1,000,000
Forfeited (in shares)	0	0
Outstanding at the end of the period (in shares)	4,000,000	6,000,000
Vested and expected to vest at the end of the period (in shares)	4,000,000	6,000,000
Exercisable at the end of the period (in shares)	3,000,000	4,000,000
Weighted average exercise price
Outstanding at the beginning of the period (in dollars per share)	$ 16	$ 15
Granted (in dollars per share)	42	34
Exercised (in dollars per share)	11	15
Forfeited (in dollars per share)	31	0
Outstanding at the end of the period (in dollars per share)	20	16
Vested and expected to vest at the end of the period (in dollars per share)	20	16
Exercisable at the end of the period (in dollars per share)	$ 15	$ 13
Aggregate intrinsic value
Exercised	$ 47	$ 36
Vested and expected to vest at the end of the period	69	132
Exercisable at the end of the period	$ 62	$ 115
Weighted average remaining option term
Outstanding at the end of the period	5 years	4 years
Vested and expected to vest at the end of the period	5 years	4 years
Exercisable at the end of the period	3 years	3 years
Additional disclosures
Total unrecognized compensation expense	$ 9	$ 8
Weighted average remaining vesting period	3 years	3 years

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Stock-Based Compensation - Option Pricing Assumptions and Estimates (Details) - Stock options - $ / shares	9 Months Ended
	Sep. 30, 2018	Sep. 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

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Stock-Based Compensation - Restricted Stock Units (Details) - LTIP Program - Restricted stock units - $ / shares	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2018
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

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Employee Retirement Plans (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Qualified
Net periodic pension cost for the company's defined-benefit pension plans
Service cost	$ 1	$ 1	$ 2	$ 2
Interest cost	8	11	28	36
Expected return on plan assets	(12)	(12)	(36)	(36)
Amortization of net loss	4	5	13	15
Net periodic pension cost	1	5	7	17
Non-Qualified
Net periodic pension cost for the company's defined-benefit pension plans
Service cost	0	0	0	0
Interest cost	1	2	4	5
Expected return on plan assets	0	0	0	0
Amortization of net loss	1	1	2	2
Net periodic pension cost	$ 2	$ 3	$ 6	$ 7

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Reclassifications From Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2018	Mar. 31, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Reclassifications from accumulated other comprehensive (loss) income
Reclassifications, tax (benefit)		$ 59
Income Tax Expense (Benefit)	$ 71		$ 100	$ 198	$ 248
Net income available to common shareholders	179		151	535	449
Actuarial losses, net
Reclassifications from accumulated other comprehensive (loss) income
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax	5		6	15	17
Reclassifications, tax (benefit)	(1)		(2)	(3)	(6)
Reclassifications, after tax	4		4	12	11
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Gain (Loss) from Cash Flow Hedges Including Portion Attributable to Noncontrolling Interest [Member]
Reclassifications from accumulated other comprehensive (loss) income
Income Tax Expense (Benefit)	0		0	0	(1)
Net income available to common shareholders	0		0	1	2
Interest rate swaps | Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Gain (Loss) from Cash Flow Hedges Including Portion Attributable to Noncontrolling Interest [Member]
Reclassifications from accumulated other comprehensive (loss) income
Interest expense	$ 0		$ 0	$ 1	$ 3

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Segment Information (Details) - USD ($) $ in Millions	3 Months Ended					6 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
Segment Information
Net sales	$ 2,101		$ 1,945				$ 6,318	$ 5,789
Operating Profit (Loss)	300	$ 256	309	$ 372	$ 257	$ 629	902	938	$ 1,194	$ 1,087
Other income (expense), net	(38)		(45)				(128)	(202)
Income before income taxes	262		264				774	736
North America
Segment Information
Net sales	1,724		1,538				5,112	4,618
International, principally Europe
Segment Information
Net sales	377		407				1,206	1,171
Plumbing Products
Segment Information
Net sales	992		950				2,995	2,771
Plumbing Products | North America
Segment Information
Net sales	653		599				1,905	1,761
Plumbing Products | International, principally Europe
Segment Information
Net sales	339		351				1,090	1,010
Decorative Architectural Products
Segment Information
Net sales	673		562				2,024	1,719
Decorative Architectural Products | North America
Segment Information
Net sales	673		562				2,024	1,719
Decorative Architectural Products | International, principally Europe
Segment Information
Net sales	0		0				0	0
Cabinetry Products
Segment Information
Net sales	239		229				724	711
Cabinetry Products | North America
Segment Information
Net sales	239		216				724	673
Cabinetry Products | International, principally Europe
Segment Information
Net sales	0		13				0	38
Windows and Other Specialty Products
Segment Information
Net sales	197		204				575	588
Windows and Other Specialty Products | North America
Segment Information
Net sales	159		161				459	465
Windows and Other Specialty Products | International, principally Europe
Segment Information
Net sales	38		43				116	123
Operating Segments
Segment Information
Net sales	2,101	1,853	1,945	2,066	1,778	3,844	6,318	5,789	7,642	7,361
Operating Profit (Loss)	320	277	331	398	280	678	962	1,009	1,286	1,181
Operating Segments | Plumbing Products
Segment Information
Net sales	992	961	950	949	872	1,821	2,995	2,771	3,732	3,529
Operating Profit (Loss)	177	165	175	200	162	362	534	537	702	654
Operating Segments | Decorative Architectural Products
Segment Information
Net sales	673	487	562	661	496	1,157	2,024	1,719	2,206	2,092
Operating Profit (Loss)	104	83	112	149	94	243	338	355	438	433
Operating Segments | Cabinetry Products
Segment Information
Net sales	239	223	229	251	231	482	724	711	934	970
Operating Profit (Loss)	23	25	20	31	16	47	62	67	92	97
Operating Segments | Windows and Other Specialty Products
Segment Information
Net sales	197	182	204	205	179	384	575	588	770	770
Operating Profit (Loss)	16	4	24	18	8	26	28	50	54	(3)
Geographic Areas
Segment Information
Net sales	2,101		1,945				6,318	5,789
Operating Profit (Loss)	320		331				962	1,009
Geographic Areas | North America
Segment Information
Net sales	1,724		1,538				5,112	4,618
Operating Profit (Loss)	272		276				813	854
Geographic Areas | International, principally Europe
Segment Information
Net sales	377		407				1,206	1,171
Operating Profit (Loss)	48		55				149	155
Corporate, Non-Segment
Segment Information
General corporate expense, net	$ (20)	$ (21)	$ (22)	$ (26)	$ 23	$ (49)	$ (60)	$ (71)	$ (92)	$ (94)

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Other Income (Expense), Net (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Investment [Line Items]
Gain on sale of business	$ 0	$ 2	$ 0	$ 51
Income from cash and cash investments and short-term bank deposits	1	1	3	3
Equity investment income, net	0	0	2	1
Realized gains from private equity funds	0	0	0	2
Impairment of private equity funds	0	(2)	0	(2)
Foreign currency transaction gains (losses)	1	3	(5)	3
Net periodic pension and post-retirement benefit cost	(2)	(7)	(11)	(22)
Other items, net	0	1	0	1
Total other, net	$ 0	$ (2)	$ (11)	$ 37

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Income Per Common Share (Details) - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Numerator (basic and diluted):
Net income	$ 180	$ 152	$ 540	$ 453
Less: Allocation to unvested restricted stock awards	1	1	5	4
Net income available to common shareholders	$ 179	$ 151	$ 535	$ 449
Denominator:
Basic common shares (based upon weighted average) (in shares)	304	313	307	315
Add: Stock option dilution (in shares)	2	3	2	4
Diluted common shares (in shares)	306	316	309	319

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Income Per Common Share - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	May 31, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Amount authorized for repurchase					$ 1,500,000,000
Stock repurchased during period (in shares)			9,000,000
Remaining amount authorized to be repurchased	$ 936,000,000		$ 936,000,000
Dividends
Cash dividends per common share paid (in dollars per share)	$ 0.105	$ 0.1	$ 0.315	$ 0.3
Cash dividends per common share declared (in dollars per share)	$ 0.12	$ 0.105	$ 0.33	$ 0.305
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive effect on computation of diluted earnings per common share (in shares)	667,586	397,000	626,734	339,000
Long-term stock awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock repurchased and retired during period to offset dilutive impact of awards granted (in shares)			600,000

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Income Taxes (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Tax Disclosure [Abstract]
Effective tax rate (as a percent)	27.00%	38.00%	26.00%	34.00%
Statutory income tax rate, percent	21.00%	35.00%
State and local income taxes (as a percent)	2.00%	2.00%	3.00%	2.00%
Nondeductible expense, other (as a percent)	1.00%	2.00%
Foreign income tax rate differential (as a percent)	4.00%
Share-based compensation cost (as a percent)	1.00%	1.00%	2.00%	3.00%