Document and Company Informatio
Document and Company Information (USD $) | |||
6 Months Ended
Jun. 30, 2009 | Jul. 28, 2009
| Jun. 30, 2008
| |
Document and Company Information [Abstract] | |||
Entity Registrant Name | Masco Corporation | ||
Entity Central Index Key | 0000062996 | ||
Document Type | 10-Q | ||
Document Period End Date | 2009-06-30 | ||
Amendment Flag | true | ||
Amendment Description | Amended 10-Q | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $5,516,595,000 | ||
Entity Common Stock, Shares Outstanding (actual number) | 359,200,000 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (USD $) | ||
In Millions | Jun. 30, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and cash investments | $926 | $1,028 |
Receivables | 1,236 | 999 |
Prepaid expenses and other | 346 | 332 |
Inventories: | ||
Finished goods | 475 | 483 |
Raw material | 308 | 333 |
Work in process | 103 | 125 |
Total inventories | 886 | 941 |
Total current assets | 3,394 | 3,300 |
Property and equipment, net | 2,066 | 2,136 |
Goodwill | 3,378 | 3,371 |
Other intangible assets, net | 295 | 299 |
Other assets | 354 | 377 |
Total assets | 9,487 | 9,483 |
Current liabilities: | ||
Notes payable | 370 | 71 |
Accounts payable | 637 | 531 |
Accrued liabilities | 862 | 945 |
Total current liabilities | 1,869 | 1,547 |
Long-term debt | 3,610 | 3,915 |
Deferred income taxes and other | 1,003 | 1,040 |
Total liabilities | 6,482 | 6,502 |
Masco Corporation's shareholders' equity: | ||
Common shares, par value $1 per share, Authorized shares: 1,400,000,000; issued and outstanding: 2009 - 350,000,000; 2008 - 351,400,000 | 350 | 351 |
Preferred shares authorized: 1,000,000; issued and outstanding: 2009 - None; 2008 - None | 0 | 0 |
Paid-in capital | 23 | 0 |
Retained earnings | 2,082 | 2,162 |
Accumulated other comprehensive income | 387 | 308 |
Total Masco Corporation's shareholders' equity | 2,842 | 2,821 |
Noncontrolling interest | 163 | 160 |
Total equity | 3,005 | 2,981 |
Total liabilities and equity | $9,487 | $9,483 |
1_Condensed Consolidated Balanc
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | ||
Jun. 30, 2009
| Dec. 31, 2008
| |
Common stock, par value | 1 | 1 |
Common shares, shares authorized | 1,400,000,000 | 1,400,000,000 |
Common shares, shares issued | 350,000,000 | 351,400,000 |
Common shares, shares outstanding | 350,000,000 | 351,400,000 |
Preferred shares, shares authorized | 1,000,000 | 1,000,000 |
Preferred shares, shares issued | 0 | 0 |
Preferred shares, shares outstanding | 0 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Jun. 30, 2009 | 3 Months Ended
Jun. 30, 2008 | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
Net sales | $2,036 | $2,643 | $3,855 | $5,093 |
Cost of sales | 1,490 | 1,943 | 2,893 | 3,763 |
Gross profit | 546 | 700 | 962 | 1,330 |
Selling, general and administrative expenses | 434 | 485 | 849 | 961 |
Charge for defined-benefit plan curtailment | 0 | 0 | 8 | 0 |
Operating profit | 112 | 215 | 105 | 369 |
Other income (expense), net: | ||||
Interest expense | (57) | (57) | (113) | (113) |
Impairment charge for financial investments | (7) | (3) | (10) | (29) |
Other, net | 15 | 4 | 15 | 2 |
Total Other income (expense), net: | (49) | (56) | (108) | (140) |
Income (loss) from continuing operations before income taxes | 63 | 159 | (3) | 229 |
Income taxes | 1 | 75 | 9 | 115 |
Income (loss) from continuing operations | 62 | 84 | (12) | 114 |
Income (loss) from discontinued operations, net | 1 | 10 | 1 | (6) |
Net income (loss) | 63 | 94 | (11) | 108 |
Less: Net income attributable to noncontrolling interest | 8 | 12 | 15 | 24 |
Net income (loss) attributable to Masco Corporation | 55 | 82 | (26) | 84 |
Basic: | ||||
Income (loss) from continuing operations | 0.15 | 0.2 | -0.08 | 0.24 |
Income (loss) from discontinued operations, net | $0 | 0.03 | $0 | -0.02 |
Net income (loss) | 0.15 | 0.23 | -0.08 | 0.23 |
Diluted: | ||||
Income (loss) from continuing operations | 0.15 | 0.2 | -0.08 | 0.24 |
Income (loss) from discontinued operations, net | $0 | 0.03 | $0 | -0.02 |
Net income (loss) | 0.15 | 0.23 | -0.08 | 0.23 |
Amounts attributable to Masco Corporation: | ||||
Income (loss) from continuing operations | 54 | 72 | (27) | 90 |
Income (loss) from discontinued operations, net | 1 | 10 | 1 | (6) |
Net income (loss) | $55 | $82 | ($26) | $84 |
2_Condensed Consolidated Statem
Condensed Consolidated Statements of Cash Flows (USD $) | ||
In Millions | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES: | ||
Cash provided by operations | $217 | $385 |
(Increase) in receivables | (225) | (193) |
Decrease (increase) in inventories | 68 | (78) |
Increase in accounts payable and accrued liabilities, net | 50 | 65 |
Net cash from operating activities | 110 | 179 |
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES: | ||
Increase in debt | 2 | 0 |
Payment of debt | (5) | (13) |
Purchase of Company common stock | (11) | (147) |
Cash dividends paid | (112) | (168) |
Dividend payment to noncontrolling interest | (16) | (22) |
Net cash (for) financing activities | (142) | (350) |
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES: | ||
Capital expenditures | (50) | (92) |
Proceeds from disposition of: | ||
Marketable securities | 3 | 9 |
Other financial investments, net | 2 | 21 |
Businesses, net of cash disposed | 0 | 151 |
Property and equipment | 9 | 12 |
Acquisition of businesses, net of cash acquired | (8) | (17) |
Other, net | (17) | (11) |
Net cash (for) from investing activities | (61) | 73 |
Effect of exchange rate changes on cash and cash investments | (9) | 29 |
CASH AND CASH INVESTMENTS: | ||
Decrease for the period | (102) | (69) |
At January 1 | 1,028 | 922 |
At June 30 | $926 | $853 |
Accounting Policies
Accounting Policies | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Accounting Policies [Abstract] | |
Accounting Policies | A. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to present fairly its financial position as at June30, 2009 and the results of operations for the three months and six months ended June30, 2009 and 2008 and cash flows for the six months ended June30, 2009 and 2008. The condensed consolidated balance sheet at December31, 2008 was derived from audited financial statements. Certain prior-year amounts have been reclassified to conform to the 2009 presentation in the condensed consolidated financial statements. The results of operations related to 2008 discontinued operations have been separately stated in the accompanying condensed consolidated statements of income for the three months and six months ended June30, 2008. In the Companys condensed consolidated statements of cash flows for the six months ended June30, 2009 and 2008, cash flows of discontinued operations are not separately classified. The Company has evaluated subsequent events through July30, 2009, the date the Companys condensed consolidated financial statements were issued. Recently Issued Accounting Pronouncements In June2009, the Financial Accounting Standards Board (the FASB) issued SFAS No.168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a Replacement of SFAS No.162, (SFAS No.168). SFAS No.168 establishes the FASB Standards Account Codification (Codification) as the source of authoritative U.S. generally accepted accounting principles (GAAP) to be applied to nongovernmental entities and rules and interpretive releases of the SEC as authoritative GAAP for SEC registrants. SFAS No.168 is effective for the quarter ended September30, 2009 and will supersede all then-existing non-SEC accounting and reporting standards. Once SFAS No.168 is in effect, all of its content will carry the same level of authority; the GAAP hierarchy will be modified to include only two levels of GAAP: authoritative and nonauthoritative. The Company does not anticipate that the adoption of this pronouncement will have a significant effect on its condensed consolidated financial statements or disclosures. In May2009, the FASB issued SFAS No.165, Subsequent Events, (SFAS No.165). SFAS No. 165 requires the disclosure of the date through which an entity has evaluated subsequent events and whether that date represents the date the financial statements were issued or were available to be issued. The Company adopted SFAS No.165 effective June30, 2009. The adoption of this pronouncement did not have an effect on its condensed consolidated financial statements. In April2009, the FASB issued FASB Staff Position No.FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies, (FSP No.FAS 141(R)-1). FSP No.FAS 141(R)-1 amends and clarifies the accounting, measurement and recognition provisions and the related disclosures arising from contingencies in a business combination under FAS No.141(R). FSP No.FAS 141(R)-1 is effecti |
Discontinued Operations
Discontinued Operations | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Discontinued Operations [Abstract] | |
Discontinued Operations | B. During the second quarter of 2009, the Company recorded income of $1million included in gain on disposal of discontinued operations related to cash received for a disposition completed in prior years. During the first quarter of 2008, the Company determined that several European business units (previously included in the Plumbing Products segment and the Other Specialty Products segment) were not core to the Companys long-term growth strategy and, accordingly, embarked on a plan of disposition; the dispositions were completed in August2008. In accordance with SFAS No.144, Accounting for the Impairment or Disposal of Long-Lived Assets, (SFAS No. 144), the Company has accounted for the 2008 dispositions as discontinued operations. The impairment charge in the first quarter of 2008 included $6million related to a business unit that was reclassified from discontinued operations to continuing operations in the third quarter of 2008, since the business unit would not be sold. The related assets and liabilities were also reclassified out of assets and liabilities held for sale. In addition, the Company recognized pre-tax income of $6million for the three months ended September30, 2008 related to the reversal of the impairment charge recorded in the first quarter of 2008. The income resulted from an adjustment of the assets to the lower of the carrying value, prior to inclusion in assets held for sale, adjusted for depreciation expenses, or current market value. As a result, this business unit is reported in continuing operations in 2008 and 2009; the related charge of $6million is reported in continuing operations in 2008. Selected financial information for these discontinued operations was as follows, in millions: Three Months Ended Six Months Ended June 30, 2008 June 30, 2008 Net sales $ 32 $ 94 Income from discontinued operations $ 5 $ 12 Gain on disposal of discontinued operations 7 7 Impairment of assets held for sale (2 ) (45 ) Income (loss)before income tax 10 (26 ) Income tax benefit 20 Income (loss)from discontinued operations, net $ 10 $ (6 ) The unusual relationship between income taxes and income (loss)before income taxes in 2008 (excluding the impairment charge for assets held for sale and the net gain on disposals) resulted primarily from certain losses providing no current tax benefit and from income not subject to taxes. |
Stock Based Compensation
Stock Based Compensation | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Stock Based Compensation [Abstract] | |
Stock Based Compensation | C. The Companys 2005 Long Term Stock Incentive Plan (the 2005 Plan) provides for the issuance of stock-based incentives in various forms to employees and non-employee Directors of the Company. At June30, 2009, outstanding stock-based incentives were in the form of long-term stock awards, stock options, phantom stock awards and stock appreciation rights. Pre-tax compensation expense (income)and the related income tax benefit, for these stock-based incentives, were as follows, in millions: Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 Long-term stock awards $ 13 $ 11 $ 21 $ 23 Stock options 8 10 15 18 Phantom stock awards and stock appreciation rights 2 (2 ) 2 (3 ) Total $ 23 $ 19 $ 38 $ 38 Income tax benefit $ 9 $ 7 $ 14 $ 14 In June2009, the Company recognized $6million of accelerated stock compensation expense (for previously granted stock awards and options) related to the retirement from full-time employment of the Companys Executive Chairman of the Board of Directors; he will continue to serve as a non-executive, non-employee Chairman of the Board of Directors. Long-Term Stock Awards Long-term stock awards are granted to key employees and non-employee Directors of the Company and do not cause net share dilution inasmuch as the Company continues the practice of repurchasing and retiring an equal number of shares on the open market. The Companys long-term stock award activity was as follows, shares in millions: Six Months Ended June 30, 2009 2008 Unvested stock award shares at January 1 8 9 Weighted average grant date fair value $ 26 $ 28 Stock award shares granted 2 1 Weighted average grant date fair value $ 8 $ 21 Stock award shares vested 1 1 Weighted average grant date fair value $ 26 $ 27 Stock award shares forfeited Weighted average grant date fair value $ 26 $ 28 Unvested stock award shares at June 30 9 9 Weighted average grant date fair value $ 22 $ 26 At June30, 2009 and 2008, there was $144million and $182million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of seven years at both dates. The total market value (at the vesting date) of stock award shares which vested during the six months ended June30, 2009 and 2008 was $11million and $21million, respectively. Stock Options Stock options are granted to key employees and non-employee Directors of the Company. The exercise price equals the market price of the Companys common stock at the grant date. These options generally become exercisable (vest ratably) over five years beginning on the first anniver |
Employee Retirement Plans
Employee Retirement Plans | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Employee Retirement Plans [Abstract] | |
Employee Retirement Plans | D. The Company sponsors qualified defined-benefit and defined-contribution retirement plans for most of its employees. In addition to the Companys qualified defined-benefit pension plans, the Company has unfunded non-qualified defined-benefit pension plans covering certain employees, which provide for benefits in addition to those provided by the qualified pension plans. Substantially all salaried employees participate in non-contributory defined-contribution retirement plans, to which payments are determined annually by the Organization and Compensation Committee of the Board of Directors. Net periodic pension cost for the Companys defined-benefit pension plans was as follows, in millions: Three Months ended June 30, 2009 2008 Qualified Non-Qualified Qualified Non-Qualified Service cost $ 2 $ 1 $ 4 $ Interest cost 8 1 14 2 Expected return on plan assets (5 ) (14 ) Amortization of prior service cost 1 Recognized curtailment loss Amortization of net loss 2 Net periodic pension cost $ 7 $ 2 4 3 Six Months ended June 30, 2009 2008 Qualified Non-Qualified Qualified Non-Qualified Service cost $ 6 $ 1 $ 9 $ 1 Interest cost 19 3 28 4 Expected return on plan assets (13 ) (30 ) Amortization of prior service cost 1 1 Recognized curtailment loss 3 5 Amortization of net loss 7 1 Net periodic pension cost $ 22 $ 10 8 6 In March2009, based on managements recommendation, the Board of Directors approved a plan to freeze all future benefit accruals under substantially all of the Companys domestic qualified and non-qualified defined-benefit pension plans. The freeze is effective January1, 2010. As a result of this action, the liabilities for the plans impacted by the freeze were remeasured and the Company recognized a curtailment charge of $8million in the first quarter of 2009. In addition, the Company expects net periodic pension costs related to the domestic defined-benefit pension plans that were remeasured to decrease by approximately $14million in 2009 to $31million from the original forecast of $45million at December31, 2008. Assumptions Major assumptions used in accounting for the Companys domestic defined-benefit pension plans that have been frozen were as follows: At March 31, 2009 Discount rate for obligations 7.3 % Expected return on plan assets 8.0 % Discount rate for net periodic pension cost 6.1 % The discount rate for obligations was based upon the expected duration of each defined-benefit pension plans liabilities matched to the March31, 2009 Citigroup Pension Discount Curve. Such rates for the Compa |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Goodwill and Other Intangible Assets [Abstract] | |
Goodwill and Other Intangible Assets | E. The changes in the carrying amount of goodwill for the six months ended June30, 2009, by segment, were as follows, in millions: At At Dec. 31, 2008 Additions (A) Other(B) June 30, 2009 Cabinets and Related Products $ 225 $ $ $ 225 Plumbing Products 248 4 3 255 Installation and Other Services 1,768 1,768 Decorative Architectural Products 294 294 Other Specialty Products 836 836 Total $ 3,371 $ 4 $ 3 $ 3,378 (A) Additions include acquisitions. (B) Other principally includes the effect of foreign currency translation, reclassifications and purchase price adjustments related to prior-year acquisitions. Other indefinite-lived intangible assets were $196million and $195million at June30, 2009 and December31, 2008, respectively, and principally included registered trademarks. The carrying value of the Companys definite-lived intangible assets was $99million (net of accumulated amortization of $62million) at June30, 2009 and $104million (net of accumulated amortization of $56million) at December31, 2008, and principally included customer relationships and non-compete agreements. |
Depreciation and Amortization E
Depreciation and Amortization Expense | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Depreciation and Amortization Expense [Abstract] | |
Depreciation and Amortization Expense | F. Depreciation and amortization expense was $128million and $119million, respectively, for the six months ended June30, 2009 and 2008. |
Financial Investments
Financial Investments | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Financial Investments [Abstract] | |
Financial Investments | G. The Company has maintained investments in available-for-sale securities and a number of private equity funds, principally as part of its tax planning strategies, as any gains enhance the utilization of any current and future tax capital losses. Financial investments included in other assets were as follows, in millions: June 30, December 31, 2009 2008 Asahi Tec Corporation common and preferred stock $ 69 $ 73 TriMas Corporation 8 3 Auction rate securities 22 22 Marketable securities 3 Private equity funds 126 138 Other investments 9 10 Total $ 234 $ 249 The Companys investments in available-for-sale securities at June30, 2009 and December31, 2008 (including marketable securities, auction rate securities, Asahi Tec Corporation common and preferred stock and TriMas Corporation) were as follows, in millions: Pre-tax Unrealized Unrealized Recorded Cost Basis Gains Losses Basis June30, 2009 $ 72 $ 27 $ $ 99 December31, 2008 $ 75 $ 26 $ $ 101 The Companys investments in private equity funds and other private investments are carried at cost. It is not practicable for the Company to estimate a fair value because the private equity funds have no quoted market price and sufficient information is not readily available for the Company to utilize a valuation model to determine the fair value for each fund. These investments are evaluated quarterly for potential other-than-temporary impairment when impairment indicators are present, or when an event or change in circumstances has occurred, that may have a significant adverse effect on the fair value of the investment. Impairment indicators the Company considers include the following: whether there has been a significant deterioration in earnings performance, asset quality or business prospects; a significant adverse change in the regulatory, economic or technological environment; a significant adverse change in the general market condition or geographic area in which the investment operates; industry and sector performance; current equity and credit market conditions; and any bona fide offers to purchase the investment for less than the carrying value. The Company also considers specific adverse conditions related to the financial health of and business outlook for the fund, including industry and sector performance. The significant assumptions utilized in analyzing a fund for potential other-than-temporary impairment include current economic conditions, market analysis for specific funds and performance indicators in the automotive and transportation, residential and commercial construction, bio-technology, health care and information technology sectors in which the applicable funds investments operate. Since there is no active trading market for these investments, they are for the most part illiquid. These investments, by their nature, can also have a relatively higher degree of business risk, including financi |
Derivatives
Derivatives | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Derivatives [Abstract] | |
Derivatives | H. During 2009 and 2008, the Company had entered into foreign currency exchange contracts to hedge currency fluctuations related to intercompany loans denominated in non-functional currencies. At June30, 2009 and December31, 2008, the Company had recorded losses of $3 million and $16million, respectively, on the foreign currency exchange contract, which is more than offset by gains related to the translation of loans and accounts denominated in non-functional currencies. Gains (losses)related to these contracts are recorded in the Companys consolidated statements of income in other income (expense), net. For the three months and six months ended June30, 2009, the Company had recorded losses of $2million and $3million, respectively, related to these foreign currency exchange contracts. For both the three months and six months ended June30, 2008, the Company had recorded a loss of $4million related to these foreign currency exchange contracts. During 2009 and 2008, the Company, including certain European operations, also had entered into foreign currency forward contracts to manage a portion of its exposure to currency fluctuations in the European euro and the U.S. dollar. At June30, 2009 and December31, 2008, the Company had recorded gains of $1million and $2million, respectively, on these contracts based upon period-end market prices. Gains (losses)related to these contracts are recorded in the Companys consolidated statements of income in other income (expense), net. For the three months and six months ended June30, 2009, the Company had recorded losses of $2 million and $1million, respectively, related to these foreign currency exchange contracts. For the six months ended June30, 2008, the Company had recorded a loss of $2million related to these foreign currency exchange contracts. In the event that the counterparties fail to meet the terms of the foreign currency forward contracts, the Companys exposure is limited to the aggregate foreign currency rate differential with such institutions. |
Debt
Debt | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Debt [Abstract] | |
Debt | I. At June30, 2009 and December31, 2008, there were outstanding $108million principal amount of Zero Coupon Convertible Senior Notes due 2031, with an accreted value of $55million and $54million, respectively. The Company adopted FASB Staff Position No.APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), (FSP No.APB 14-1) effective January1, 2009. The adoption of FSP No.APB 14-1 will have no impact on 2009 results; the Company recorded a $1million cumulative effect of accounting change as of January1, 2007 and the adoption had no impact on the Companys condensed consolidated financial statements for the periods ended June30, 2009 and 2008. At the Companys request, in late April2009, the Company and its Bank Group modified the terms of its Five-Year Revolving Credit Facility, which expires February2011. After reviewing its anticipated liquidity position, the Company requested that the maximum amount the Company could borrow under this facility be reduced to $1.25billion from $2.0billion; in addition, the debt to total capitalization ratio has been increased from 60percent to 65 percent. The debt to total capitalization ratio and the minimum net worth covenant have also been amended to allow the add-back, if incurred, of up to the first $500million of certain non-cash charges, including goodwill and other intangible asset impairment charges that would negatively impact shareholders equity. Under the terms of the Amended Credit Facility, any outstanding Letters of Credit reduce the Companys borrowing capacity. At June30, 2009, the Company had $57million of unused Letters of Credit; accordingly, the Companys remaining borrowing capacity is approximately $1.2billion. The Company incurred approximately $2million of fees and expenses associated with the Amendment. The Company, if the facility is utilized, will incur higher borrowing costs as a result of the Amendment. At June30, 2009, the Company was in compliance with the requirements of the Amended Five-Year Revolving Credit Facility. |
Fair Value
Fair Value | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Fair Value [Abstract] | |
Fair Value | J. On January1, 2008, the Company adopted SFAS No.157 for its financial assets and liabilities. On January1, 2009, the Company adopted SFAS No.157 for its non-financial assets and liabilities; such adoption did not have a significant effect on its condensed consolidated financial statements. SFAS No.157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No.157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No.157 further defines a fair value hierarchy, as follows: Level 1 inputs as quoted prices in active markets for identical assets or liabilities; Level 2 inputs as observable inputs other than Level 1 prices, such as quoted market prices for similar assets or liabilities or other inputs that are observable or can be corroborated by market data; and Level 3 inputs as unobservable inputs that are supported by little or no market activity and that are financial instruments whose value is determined using pricing models or instruments for which the determination of fair value requires significant management judgment or estimation. Financial investments that are available to be traded on readily accessible stock exchanges (domestic or foreign) are considered to have active markets and have been valued using Level 1 inputs. Financial investments that are not available to be traded on a public market or have limited secondary markets, or contain provisions that limit the ability to sell the investment are considered to have inactive markets and have been valued using Level 2 or 3 inputs. The Company incorporated credit risk into the valuations of financial investments by estimating the likelihood of non-performance by the counterparty to the applicable transactions. The estimate included the length of time relative to the contract, financial condition of the counterparty and current market conditions. The criteria for estimating if a market was active or inactive were based on the individual facts and circumstances. Financial assets and (liabilities)measured at fair value on a recurring basis at each reporting period and the amounts for each level within the fair value hierarchy established by SFAS No.157, were as follows, in millions: Fair Value Measurements Using Significant Quoted Other Significant Market Observable Unobservable June 30, Prices Inputs Inputs 2009 (Level 1) (Level 2) (Level 3) Asahi Tec Corporation: Preferred stock $ 68 $ $ $ 68 Common stock 1 1 Foreign currency exchange contracts (A) (2 ) (2 ) Auction rate securities 22 22 TriMas Corporation 8 8 Total $ 97 $ 9 $ (2 ) $ 90 Fair Value Measurem |
Shareholders Equity and Compreh
Shareholders Equity and Comprehensive Income | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Shareholders Equity and Comprehensive Income [Abstract] | |
Shareholders' Equity and Comprehensive Income | K. Effective January1, 2009, the Company adopted SFAS No.160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No.51, (SFAS No.160). At June 30, 2009 and December31, 2008, the Company owns 68percent of Hansgrohe AG. SFAS No.160 requires the reclassification of the Companys noncontrolling interest in Hansgrohe AG to shareholders equity from deferred income taxes and other. At December31, 2008, the Company did not have a balance in paid-in capital due to repurchases of Company common stock. The Companys activity in shareholders equity was as follows, in millions: Accumulated Other Common Paid-in- Retained Comprehensive Noncontrolling Total Shares Capital Earnings Income Interest Balance, January1, 2008 $ 4,142 $ 359 $ $ 2,969 $ 661 $ 153 Net (loss)income (352 ) (391 ) 39 Cumulative translation adjustments (221 ) (210 ) (11 ) Unrealized gain on marketable securities, net of income tax of $4 7 7 Prior service cost and net loss, net of income tax benefit of $86 (150 ) (150 ) Total comprehensive (loss)income (716 ) Shares issued 1 1 Shares retired: Repurchased (160 ) (9 ) (71 ) (80 ) Surrendered (non-cash) (7 ) (7 ) Cash dividends declared (357 ) (336 ) (21 ) Stock-based compensation 78 78 Balance, December31, 2008 $ 2,981 $ 351 $ $ 2,162 $ 308 $ 160 Net (loss)income (11 ) (26 ) 15 Cumulative translation adjustments 16 12 4 Unrealized gain on marketable securities, net of income tax of $3 5 5 Prior service cost and net loss, net of income tax of $36 62 62 Total comprehensive income (loss) 72 Shares issued 1 (1 ) Shares retired: Repurchased (11 ) (2 ) (9 ) Surrendered (non-cash) (3 ) (3 ) Cash dividends declared (54 ) (54 ) Dividend payments to noncontrolling interest (16 ) (16 ) Stock-based compensation 36 36 Balance, June30, 2009 $ 3,005 $ 350 $ 23 $ 2,082 $ 387 $ 163 |
Segment Information
Segment Information | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Segment Information [Abstract] | |
Segment Information | L. Information about the Company by segment and geographic area was as follows, in millions: Three Months Ended June 30, Six Months Ended June 30, 2009 2008 2009 2008 2009 2008 2009 2008 Net Sales(A) Operating Profit (Loss) Net Sales(A) Operating Profit (Loss) The Companys operations by segment were: Cabinets and Related Products $ 419 $ 608 $ (12 ) $ 37 $ 814 $ 1,204 $ (40 ) $ 65 Plumbing Products 654 857 70 107 1,260 1,678 100 206 Installation and Other Services 312 508 (34 ) 4 629 994 (70 ) (2 ) Decorative Architectural Products 505 476 116 89 891 855 191 163 Other Specialty Products 146 194 7 13 261 362 21 Total $ 2,036 $ 2,643 $ 147 $ 250 $ 3,855 $ 5,093 $ 181 $ 453 The Companys operations by geographic area were: North America $ 1,630 $ 2,067 $ 119 $ 200 $ 3,064 $ 3,960 $ 138 $ 349 International, principally Europe 406 576 28 50 791 1,133 43 104 Total $ 2,036 $ 2,643 147 250 $ 3,855 $ 5,093 181 453 General corporate expense, net (27 ) (35 ) (60 ) (78 ) Accelerated stock compensation expense (B) (6 ) (6 ) (Loss) on corporate fixed assets, net (2 ) (2 ) Charge for defined-benefit plan curtailment (C) (8 ) Charge for planned disposition of business (D) (6 ) Operating profit 112 215 105 369 Other income (expense), net (49 ) (56 ) (108 ) (140 ) Income (loss)from continuing operations before income taxes $ 63 $ 159 $ (3 ) $ 229 (A) Inter-segment sales were not material. (B) See Note C to the condensed consolidated financial statements. (C) In March2009, the Company recognized a curtailment loss related to the plan to freeze all future benefit accruals beginning January1, 2010 under substantially all of the Companys domestic qualified and non-qualified defined-benefit pension plans. (D) See Note B to the condensed consolidat |
Other Income
Other Income (Expense), Net | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Other Income Expense Net [Abstract] | |
Other Income (Expense), Net | M. Other, net, which is included in other income (expense), net, was as follows, in millions: Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 Income from cash and cash investments $ 1 $ 5 $ 4 $ 11 Income from financial investments, net (Note G) 3 Other items, net 14 (4 ) 11 (9 ) Total $ 15 $ 4 $ 15 $ 2 Other items, net, included $11million and $9million of currency gains for the three months and six months ended June30, 2009, respectively. Other items, net, included $4million and $15million of currency losses for the three months and six months ended June30, 2008, respectively. |
Earnings Per Share
Earnings Per Share | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Earnings Per Share [Abstract] | |
Earnings Per Share | N. Reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share were as follows, in millions: Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 Numerator (basic and diluted): Income (loss)from continuing operations $ 54 $ 72 $ (27 ) $ 90 Allocation to unvested restricted stock awards (1 ) (2 ) (1 ) (4 ) Income (loss)from continuing operations attributable to common shareholders 53 70 (28 ) 86 Income (loss)from discontinued operations, net 1 10 1 (6 ) Net income (loss)available to common shareholders $ 54 $ 80 $ (27 ) $ 80 Denominator: Basic common shares (based upon weighted average) 350 354 351 355 Add: Contingent common shares Stock option dilution Diluted common shares 350 354 351 355 Effective January1, 2009, the Company adopted FASB Staff Position No.EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities, (FSP EITF 03-6-1). FSP EITF 03-6-1 clarifies that share-based payment awards that entitle their holders to receive non-forfeitable dividends prior to vesting should be considered participating securities. The Company has granted restricted stock awards that contain non-forfeitable rights to dividends on unvested shares; such unvested restricted stock awards are considered participating securities under FSP EITF 03-6-1. As participating securities, the unvested shares are required to be included in the calculation of the Companys basic earnings per common share, using the two-class method. The two-class method of computing earnings per common share is an allocation method that calculates earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Unvested restricted stock awards were previously included in the Companys diluted share calculation using the treasury stock method. For the six months ended June30, 2009, the Company did not allocate any loss to the unvested restricted stock awards (participating securities), due to the anti-dilutive effect; however, dividends were allocated to the unvested restricted stock awards (participating securities) for both the three months and six months ended June30, 2009. For the three months ended June30, 2009, the Company allocated income to the unvested restricted stock awards (participating securities). At June30, 2009 and 2008, the Company did not include any common shares related to the Zero Coupon Convertible Senior Notes (Notes) in the calculation of diluted earnings per common share, as the price of the Companys common stock at June30, 2009 |
Commitments and Contingencies
Commitments and Contingencies | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | O. The Company is subject to lawsuits and pending or asserted claims with respect to matters generally arising in the ordinary course of business. As previously disclosed, a lawsuit has been brought against the Company and a number of its insulation installation companies in the federal court in Atlanta, Georgia alleging that certain practices violate provisions of the federal antitrust laws. In February2009, the federal court in Atlanta certified a class of 377 insulation contractors. Two additional lawsuits, seeking class action status and alleging anticompetitive conduct, were filed against the Company and a number of its insulation suppliers. One of these lawsuits was filed in a Florida state court and has been dismissed by the court with prejudice. The other lawsuit was filed in federal court in northern California and was subsequently transferred to federal court in Atlanta, Georgia. The Company is vigorously defending the pending cases. Based upon the advice of its outside counsel, the Company believes that the conduct of the Company and its insulation installation companies, which has been the subject of the above-described lawsuits, has not violated any antitrust laws. The Company is unable at this time to reliably estimate any potential liability which might occur from an adverse judgment. There cannot be any assurance that the Company will ultimately prevail in the remaining lawsuits, or, if unsuccessful, that the ultimate liability would not be material and would not have a material adverse effect on its businesses or the methods used by its insulation installation companies in doing business. As previously disclosed, European governmental authorities are investigating possible anticompetitive business practices relating to the plumbing and heating industries in Europe. The investigations involve a number of European companies, including certain of the Companys European manufacturing divisions and a number of other large businesses. The Company believes that it will not incur material liability as a result of the matters that are subject to these investigations. |
Warranty
Warranty | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Warranty [Abstract] | |
Warranty | P. Changes in the Companys warranty liability were as follows, in millions: Six Months Ended Twelve Months Ended June 30, 2009 December 31, 2008 Balance at January 1 $ 119 $ 133 Accruals for warranties issued during the period 11 42 Accruals related to pre-existing warranties 2 6 Settlements made (in cash or kind) during the period (19 ) (53 ) Other, net (1 ) (9 ) Balance at end of period $ 112 $ 119 |
Income Taxes
Income Taxes | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Income Taxes [Abstract] | |
Income Taxes | Q. Because the Companys projected pre-tax income is near break-even, small changes in projected pre-tax income may cause large changes in the estimated annual effective tax rate thereby producing potentially unreliable estimates of tax expense. Since these small changes to pre-tax income are likely to occur, the Company recorded the tax expense for the first six months of 2009 using the actual effective tax rate on the year-to-date pre-tax income and did not use the estimated annual effective tax rate. The unusual relationship between income tax expense and loss from continuing operations before income taxes in the first six months of 2009 results primarily from an increase in the valuation allowance on the 2008 net operating loss carryforward of $4million due to the anticipated continued losses of certain subsidiaries during 2009, losses in certain state and local jurisdictions providing no tax benefit and tax expense associated with foreign earnings that are not permanently reinvested. During the first six months of 2009, the Companys liability for unrecognized tax benefits and accrued interest and penalties decreased by $12million and $3million, respectively, due primarily to a settlement with a tax authority on various unrecognized tax benefits. As a result of tax audit closings, settlements and expiration of applicable statutes of limitations in various jurisdictions within the next 12months, the Company anticipates that it is reasonably possible that the liability for unrecognized tax benefits could be reduced by approximately $8million. For the three months and six months ended June30, 2009, the Company reported tax expense of $1million and $9million, respectively, which is the result of applying a discrete tax rate for the six months ended June30, 2009. |