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Gross Goodwill At June 30, 2017 | Accumulated Impairment Losses | Net Goodwill At June 30, 2017 | |||||||||
Plumbing Products | $ | 531 | $ | (340 | ) | $ | 191 | ||||
Decorative Architectural Products | 294 | (75 | ) | 219 | |||||||
Cabinetry Products | 240 | (59 | ) | 181 | |||||||
Windows and Other Specialty Products | 717 | (511 | ) | 206 | |||||||
Total | $ | 1,782 | $ | (985 | ) | $ | 797 |
Gross Goodwill At December 31, 2016 | Accumulated Impairment Losses | Net Goodwill At December 31, 2016 | Other(A) | Divestitures (B) | Net Goodwill At June 30, 2017 | ||||||||||||||||||
Plumbing Products | $ | 519 | $ | (340 | ) | $ | 179 | $ | 12 | $ | — | $ | 191 | ||||||||||
Decorative Architectural Products | 294 | (75 | ) | 219 | — | — | 219 | ||||||||||||||||
Cabinetry Products | 240 | (59 | ) | 181 | — | — | 181 | ||||||||||||||||
Windows and Other Specialty Products | 987 | (734 | ) | 253 | — | (47 | ) | 206 | |||||||||||||||
Total | $ | 2,040 | $ | (1,208 | ) | $ | 832 | $ | 12 | $ | (47 | ) | $ | 797 |
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Metals contracts | $ | — | $ | 2 | $ | — | $ | 4 | |||||||
Interest rate swaps | (3 | ) | (1 | ) | (3 | ) | (1 | ) | |||||||
Total (loss) gain | $ | (3 | ) | $ | 1 | $ | (3 | ) | $ | 3 |
At June 30, 2017 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Exchange contracts | $ | 4 | |||||
Accrued liabilities | $ | — | |||||
Forward contracts | 15 | ||||||
Accrued liabilities | (1 | ) |
At December 31, 2016 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Forward contracts | $ | 21 | |||||
Accrued liabilities | $ | (2 | ) | ||||
Metals contracts | 1 | ||||||
Accrued liabilities | — |
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Six Months Ended June 30, 2017 | Twelve Months Ended December 31, 2016 | ||||||
Balance at January 1 | $ | 192 | $ | 152 | |||
Accruals for warranties issued during the period | 27 | 66 | |||||
Accruals related to pre-existing warranties | 2 | 33 | |||||
Settlements made (in cash or kind) during the period | (28 | ) | (56 | ) | |||
Other, net (including currency translation) | 1 | (3 | ) | ||||
Balance at end of period | $ | 194 | $ | 192 |
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Long-term stock awards | $ | 7 | $ | 7 | $ | 13 | $ | 12 | |||||||
Stock options | 1 | — | 2 | 1 | |||||||||||
Restricted stock units | 1 | — | 1 | — | |||||||||||
Phantom stock awards and stock appreciation rights | 3 | (1 | ) | 5 | 2 | ||||||||||
Total | $ | 12 | $ | 6 | $ | 21 | $ | 15 |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Unvested stock award shares at January 1 | 4 | 5 | |||||
Weighted average grant date fair value | $ | 20 | $ | 17 | |||
Stock award shares granted | 1 | 1 | |||||
Weighted average grant date fair value | $ | 34 | $ | 26 | |||
Stock award shares vested | 2 | 2 | |||||
Weighted average grant date fair value | $ | 18 | $ | 16 | |||
Stock award shares forfeited | — | — | |||||
Weighted average grant date fair value | $ | 24 | $ | 20 | |||
Unvested stock award shares at June 30 | 3 | 4 | |||||
Weighted average grant date fair value | $ | 24 | $ | 20 |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Option shares outstanding, January 1 | 7 | 12 | |||||
Weighted average exercise price | $ | 15 | $ | 17 | |||
Option shares granted | — | — | |||||
Weighted average exercise price | $ | 34 | $ | 26 | |||
Option shares exercised | 1 | 2 | |||||
Aggregate intrinsic value on date of exercise (A) | $ | 33 million | $ | 31 million | |||
Weighted average exercise price | $ | 15 | $ | 21 | |||
Option shares forfeited | — | — | |||||
Weighted average exercise price | $ | — | $ | — | |||
Option shares outstanding, June 30 | 6 | 10 | |||||
Weighted average exercise price | $ | 16 | $ | 17 | |||
Weighted average remaining option term (in years) | 4 | 4 | |||||
Option shares vested and expected to vest, June 30 | 6 | 10 | |||||
Weighted average exercise price | $ | 16 | $ | 17 | |||
Aggregate intrinsic value (A) | $ | 130 million | $ | 137 million | |||
Weighted average remaining option term (in years) | 4 | 4 | |||||
Option shares exercisable (vested), June 30 | 4 | 8 | |||||
Weighted average exercise price | $ | 13 | $ | 16 | |||
Aggregate intrinsic value (A) | $ | 113 million | $ | 122 million | |||
Weighted average remaining option term (in years) | 3 | 3 |
(A) | Aggregate intrinsic value is calculated using our stock price at each respective date, less the exercise price (grant date price), multiplied by the number of shares. |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Weighted average grant date fair value | $ | 9.68 | $ | 6.43 | |||
Risk-free interest rate | 2.16 | % | 1.41 | % | |||
Dividend yield | 1.19 | % | 1.49 | % | |||
Volatility factor | 30.00 | % | 29.00 | % | |||
Expected option life | 6 years | 6 years |
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Three Months Ended June 30, | |||||||||||||||
2017 | 2016 | ||||||||||||||
Qualified | Non-Qualified | Qualified | Non-Qualified | ||||||||||||
Service cost | $ | — | $ | — | $ | — | $ | — | |||||||
Interest cost | 13 | 2 | 10 | 3 | |||||||||||
Expected return on plan assets | (12 | ) | — | (9 | ) | — | |||||||||
Amortization of net loss | 5 | — | 3 | — | |||||||||||
Net periodic pension cost | $ | 6 | $ | 2 | $ | 4 | $ | 3 |
Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | ||||||||||||||
Qualified | Non-Qualified | Qualified | Non-Qualified | ||||||||||||
Service cost | $ | 1 | $ | — | $ | 1 | $ | — | |||||||
Interest cost | 25 | 3 | 21 | 4 | |||||||||||
Expected return on plan assets | (24 | ) | — | (19 | ) | — | |||||||||
Amortization of net loss | 10 | 1 | 7 | 1 | |||||||||||
Net periodic pension cost | $ | 12 | $ | 4 | $ | 10 | $ | 5 |
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Amounts Reclassified | ||||||||||||||||||
Accumulated Other Comprehensive Loss | Three Months Ended June 30, | Six Months Ended June 30, | Statement of Operations Line Item | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Amortization of defined benefit pension and other postretirement benefits: | ||||||||||||||||||
Actuarial losses, net | $ | 5 | $ | 3 | $ | 11 | $ | 8 | Selling, general and administrative expenses | |||||||||
Tax (benefit) | (2 | ) | — | (4 | ) | (2 | ) | |||||||||||
Net of tax | $ | 3 | $ | 3 | $ | 7 | $ | 6 | ||||||||||
Interest rate swaps | $ | 3 | $ | 1 | $ | 3 | $ | 1 | Interest expense | |||||||||
Tax (benefit) | (1 | ) | — | (1 | ) | — | ||||||||||||
Net of tax | $ | 2 | $ | 1 | $ | 2 | $ | 1 | ||||||||||
Available-for-sale securities | $ | — | $ | (1 | ) | $ | — | $ | (1 | ) | Other, net | |||||||
Tax expense | — | — | — | — | ||||||||||||||
Net of tax | $ | — | $ | (1 | ) | $ | — | $ | (1 | ) |
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Net Sales(A) | Operating Profit (Loss) | Net Sales(A) | Operating Profit (Loss) | ||||||||||||||||||||||||||||
Operations by segment: | |||||||||||||||||||||||||||||||
Plumbing Products | $ | 949 | $ | 923 | $ | 198 | $ | 188 | $ | 1,812 | $ | 1,736 | $ | 354 | $ | 317 | |||||||||||||||
Decorative Architectural Products | 653 | 620 | 141 | 139 | 1,158 | 1,113 | 242 | 244 | |||||||||||||||||||||||
Cabinetry Products | 251 | 261 | 30 | 34 | 482 | 497 | 46 | 58 | |||||||||||||||||||||||
Windows and Other Specialty Products | 204 | 197 | 18 | (2 | ) | 382 | 375 | 24 | 1 | ||||||||||||||||||||||
Total | $ | 2,057 | $ | 2,001 | $ | 387 | $ | 359 | $ | 3,834 | $ | 3,721 | $ | 666 | $ | 620 | |||||||||||||||
Operations by geographic area: | |||||||||||||||||||||||||||||||
North America | $ | 1,660 | $ | 1,598 | $ | 330 | $ | 299 | $ | 3,071 | $ | 2,948 | $ | 569 | $ | 514 | |||||||||||||||
International, principally Europe | 397 | 403 | 57 | 60 | 763 | 773 | 97 | 106 | |||||||||||||||||||||||
Total | $ | 2,057 | $ | 2,001 | 387 | 359 | $ | 3,834 | $ | 3,721 | 666 | 620 | |||||||||||||||||||
General corporate expense, net | (30 | ) | (24 | ) | (56 | ) | (51 | ) | |||||||||||||||||||||||
Operating profit | 357 | 335 | 610 | 569 | |||||||||||||||||||||||||||
Other income (expense), net | (102 | ) | (82 | ) | (142 | ) | (139 | ) | |||||||||||||||||||||||
Income before income taxes | $ | 255 | $ | 253 | $ | 468 | $ | 430 |
(A) | Inter-segment sales were not material. |
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Gain on sale of business | $ | 49 | $ | — | $ | 49 | $ | — | |||||||
Income from cash and cash investments and short-term bank deposits | 1 | 1 | 2 | 2 | |||||||||||
Equity investment income, net | 1 | — | 1 | 1 | |||||||||||
Realized gain from auction rate securities | — | 1 | — | 1 | |||||||||||
Realized gains from private equity funds | 1 | 1 | 2 | 1 | |||||||||||
Foreign currency transaction (losses) gains | (1 | ) | 2 | — | 2 | ||||||||||
Other items, net | — | — | — | (3 | ) | ||||||||||
Total other, net | $ | 51 | $ | 5 | $ | 54 | $ | 4 |
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Gross Goodwill At June 30, 2017 | Accumulated Impairment Losses | Net Goodwill At June 30, 2017 | |||||||||
Plumbing Products | $ | 531 | $ | (340 | ) | $ | 191 | ||||
Decorative Architectural Products | 294 | (75 | ) | 219 | |||||||
Cabinetry Products | 240 | (59 | ) | 181 | |||||||
Windows and Other Specialty Products | 717 | (511 | ) | 206 | |||||||
Total | $ | 1,782 | $ | (985 | ) | $ | 797 |
Gross Goodwill At December 31, 2016 | Accumulated Impairment Losses | Net Goodwill At December 31, 2016 | Other(A) | Divestitures (B) | Net Goodwill At June 30, 2017 | ||||||||||||||||||
Plumbing Products | $ | 519 | $ | (340 | ) | $ | 179 | $ | 12 | $ | — | $ | 191 | ||||||||||
Decorative Architectural Products | 294 | (75 | ) | 219 | — | — | 219 | ||||||||||||||||
Cabinetry Products | 240 | (59 | ) | 181 | — | — | 181 | ||||||||||||||||
Windows and Other Specialty Products | 987 | (734 | ) | 253 | — | (47 | ) | 206 | |||||||||||||||
Total | $ | 2,040 | $ | (1,208 | ) | $ | 832 | $ | 12 | $ | (47 | ) | $ | 797 |
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Metals contracts | $ | — | $ | 2 | $ | — | $ | 4 | |||||||
Interest rate swaps | (3 | ) | (1 | ) | (3 | ) | (1 | ) | |||||||
Total (loss) gain | $ | (3 | ) | $ | 1 | $ | (3 | ) | $ | 3 |
At June 30, 2017 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Exchange contracts | $ | 4 | |||||
Accrued liabilities | $ | — | |||||
Forward contracts | 15 | ||||||
Accrued liabilities | (1 | ) |
At December 31, 2016 | |||||||
Notional Amount | Balance Sheet | ||||||
Foreign currency contracts: | |||||||
Forward contracts | $ | 21 | |||||
Accrued liabilities | $ | (2 | ) | ||||
Metals contracts | 1 | ||||||
Accrued liabilities | — |
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Six Months Ended June 30, 2017 | Twelve Months Ended December 31, 2016 | ||||||
Balance at January 1 | $ | 192 | $ | 152 | |||
Accruals for warranties issued during the period | 27 | 66 | |||||
Accruals related to pre-existing warranties | 2 | 33 | |||||
Settlements made (in cash or kind) during the period | (28 | ) | (56 | ) | |||
Other, net (including currency translation) | 1 | (3 | ) | ||||
Balance at end of period | $ | 194 | $ | 192 |
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Long-term stock awards | $ | 7 | $ | 7 | $ | 13 | $ | 12 | |||||||
Stock options | 1 | — | 2 | 1 | |||||||||||
Restricted stock units | 1 | — | 1 | — | |||||||||||
Phantom stock awards and stock appreciation rights | 3 | (1 | ) | 5 | 2 | ||||||||||
Total | $ | 12 | $ | 6 | $ | 21 | $ | 15 |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Unvested stock award shares at January 1 | 4 | 5 | |||||
Weighted average grant date fair value | $ | 20 | $ | 17 | |||
Stock award shares granted | 1 | 1 | |||||
Weighted average grant date fair value | $ | 34 | $ | 26 | |||
Stock award shares vested | 2 | 2 | |||||
Weighted average grant date fair value | $ | 18 | $ | 16 | |||
Stock award shares forfeited | — | — | |||||
Weighted average grant date fair value | $ | 24 | $ | 20 | |||
Unvested stock award shares at June 30 | 3 | 4 | |||||
Weighted average grant date fair value | $ | 24 | $ | 20 |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Option shares outstanding, January 1 | 7 | 12 | |||||
Weighted average exercise price | $ | 15 | $ | 17 | |||
Option shares granted | — | — | |||||
Weighted average exercise price | $ | 34 | $ | 26 | |||
Option shares exercised | 1 | 2 | |||||
Aggregate intrinsic value on date of exercise (A) | $ | 33 million | $ | 31 million | |||
Weighted average exercise price | $ | 15 | $ | 21 | |||
Option shares forfeited | — | — | |||||
Weighted average exercise price | $ | — | $ | — | |||
Option shares outstanding, June 30 | 6 | 10 | |||||
Weighted average exercise price | $ | 16 | $ | 17 | |||
Weighted average remaining option term (in years) | 4 | 4 | |||||
Option shares vested and expected to vest, June 30 | 6 | 10 | |||||
Weighted average exercise price | $ | 16 | $ | 17 | |||
Aggregate intrinsic value (A) | $ | 130 million | $ | 137 million | |||
Weighted average remaining option term (in years) | 4 | 4 | |||||
Option shares exercisable (vested), June 30 | 4 | 8 | |||||
Weighted average exercise price | $ | 13 | $ | 16 | |||
Aggregate intrinsic value (A) | $ | 113 million | $ | 122 million | |||
Weighted average remaining option term (in years) | 3 | 3 |
(A) | Aggregate intrinsic value is calculated using our stock price at each respective date, less the exercise price (grant date price), multiplied by the number of shares. |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Weighted average grant date fair value | $ | 9.68 | $ | 6.43 | |||
Risk-free interest rate | 2.16 | % | 1.41 | % | |||
Dividend yield | 1.19 | % | 1.49 | % | |||
Volatility factor | 30.00 | % | 29.00 | % | |||
Expected option life | 6 years | 6 years |
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Three Months Ended June 30, | |||||||||||||||
2017 | 2016 | ||||||||||||||
Qualified | Non-Qualified | Qualified | Non-Qualified | ||||||||||||
Service cost | $ | — | $ | — | $ | — | $ | — | |||||||
Interest cost | 13 | 2 | 10 | 3 | |||||||||||
Expected return on plan assets | (12 | ) | — | (9 | ) | — | |||||||||
Amortization of net loss | 5 | — | 3 | — | |||||||||||
Net periodic pension cost | $ | 6 | $ | 2 | $ | 4 | $ | 3 |
Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | ||||||||||||||
Qualified | Non-Qualified | Qualified | Non-Qualified | ||||||||||||
Service cost | $ | 1 | $ | — | $ | 1 | $ | — | |||||||
Interest cost | 25 | 3 | 21 | 4 | |||||||||||
Expected return on plan assets | (24 | ) | — | (19 | ) | — | |||||||||
Amortization of net loss | 10 | 1 | 7 | 1 | |||||||||||
Net periodic pension cost | $ | 12 | $ | 4 | $ | 10 | $ | 5 |
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Amounts Reclassified | ||||||||||||||||||
Accumulated Other Comprehensive Loss | Three Months Ended June 30, | Six Months Ended June 30, | Statement of Operations Line Item | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Amortization of defined benefit pension and other postretirement benefits: | ||||||||||||||||||
Actuarial losses, net | $ | 5 | $ | 3 | $ | 11 | $ | 8 | Selling, general and administrative expenses | |||||||||
Tax (benefit) | (2 | ) | — | (4 | ) | (2 | ) | |||||||||||
Net of tax | $ | 3 | $ | 3 | $ | 7 | $ | 6 | ||||||||||
Interest rate swaps | $ | 3 | $ | 1 | $ | 3 | $ | 1 | Interest expense | |||||||||
Tax (benefit) | (1 | ) | — | (1 | ) | — | ||||||||||||
Net of tax | $ | 2 | $ | 1 | $ | 2 | $ | 1 | ||||||||||
Available-for-sale securities | $ | — | $ | (1 | ) | $ | — | $ | (1 | ) | Other, net | |||||||
Tax expense | — | — | — | — | ||||||||||||||
Net of tax | $ | — | $ | (1 | ) | $ | — | $ | (1 | ) |
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Net Sales(A) | Operating Profit (Loss) | Net Sales(A) | Operating Profit (Loss) | ||||||||||||||||||||||||||||
Operations by segment: | |||||||||||||||||||||||||||||||
Plumbing Products | $ | 949 | $ | 923 | $ | 198 | $ | 188 | $ | 1,812 | $ | 1,736 | $ | 354 | $ | 317 | |||||||||||||||
Decorative Architectural Products | 653 | 620 | 141 | 139 | 1,158 | 1,113 | 242 | 244 | |||||||||||||||||||||||
Cabinetry Products | 251 | 261 | 30 | 34 | 482 | 497 | 46 | 58 | |||||||||||||||||||||||
Windows and Other Specialty Products | 204 | 197 | 18 | (2 | ) | 382 | 375 | 24 | 1 | ||||||||||||||||||||||
Total | $ | 2,057 | $ | 2,001 | $ | 387 | $ | 359 | $ | 3,834 | $ | 3,721 | $ | 666 | $ | 620 | |||||||||||||||
Operations by geographic area: | |||||||||||||||||||||||||||||||
North America | $ | 1,660 | $ | 1,598 | $ | 330 | $ | 299 | $ | 3,071 | $ | 2,948 | $ | 569 | $ | 514 | |||||||||||||||
International, principally Europe | 397 | 403 | 57 | 60 | 763 | 773 | 97 | 106 | |||||||||||||||||||||||
Total | $ | 2,057 | $ | 2,001 | 387 | 359 | $ | 3,834 | $ | 3,721 | 666 | 620 | |||||||||||||||||||
General corporate expense, net | (30 | ) | (24 | ) | (56 | ) | (51 | ) | |||||||||||||||||||||||
Operating profit | 357 | 335 | 610 | 569 | |||||||||||||||||||||||||||
Other income (expense), net | (102 | ) | (82 | ) | (142 | ) | (139 | ) | |||||||||||||||||||||||
Income before income taxes | $ | 255 | $ | 253 | $ | 468 | $ | 430 |
(A) | Inter-segment sales were not material. |
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Gain on sale of business | $ | 49 | $ | — | $ | 49 | $ | — | |||||||
Income from cash and cash investments and short-term bank deposits | 1 | 1 | 2 | 2 | |||||||||||
Equity investment income, net | 1 | — | 1 | 1 | |||||||||||
Realized gain from auction rate securities | — | 1 | — | 1 | |||||||||||
Realized gains from private equity funds | 1 | 1 | 2 | 1 | |||||||||||
Foreign currency transaction (losses) gains | (1 | ) | 2 | — | 2 | ||||||||||
Other items, net | — | — | — | (3 | ) | ||||||||||
Total other, net | $ | 51 | $ | 5 | $ | 54 | $ | 4 |
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