Masco corporation

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

F. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Concluded)

Metals Contracts.     We have entered into several contracts to manage our exposure to increases in the price of copper and zinc. Gains (losses) related to these contracts are recorded in our consolidated statements of operations in cost of sales.

The pre-tax gains (losses) included in our consolidated statements of operations are as follows, in millions:

	Year Ended December 31,
	2016				2015				2014
Foreign currency contracts:
Exchange contracts	$	—			$	4			$	5
Forward contracts	—				(3		)		—
Metals contracts	5				(17		)		(3		)
Interest rate swaps	(2		)		(2		)		(2		)
Total	$	3			$	(18	)		$	—

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

	At December 31, 2016
	Notional Amount				Balance Sheet
Foreign currency contracts
Forward contracts	$	21
Accrued liabilities					$	(2	)
Metals contracts	1
Accrued liabilities					—

 

	At December 31, 2015
	Notional Amount				Balance Sheet
Foreign currency contracts:
Exchange contracts	$	39
Receivables					$	1
Forward contracts	30
Accrued liabilities					(2		)
Other liabilities					(1		)
Metals contracts	50
Accrued liabilities					(10		)

The fair value of all foreign currency and metals derivative contracts is estimated on a recurring basis, quarterly, using Level 2 inputs.
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MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

G. PROPERTY AND EQUIPMENT

	(In Millions) At December 31
	2016				2015
Land and improvements	$	111			$	115
Buildings	712				672
Machinery and equipment	1,795				1,787
	2,618				2,574
Less: Accumulated depreciation	(1,558		)		(1,547		)
Total	$	1,060			$	1,027

We lease certain equipment and plant facilities under noncancellable operating leases. Rental expense recorded in the consolidated statements of operations totaled approximately $63 million , $60 million and $63 million during 2016 , 2015 and 2014 , respectively.

At December 31, 2016 , future minimum lease payments were as follows, in millions:

2017	$	44
2018	35
2019	25
2020	19
2021	16
2022 and beyond	50

During 2014, we decided to sell two facilities in our Cabinetry Products segment, and we recorded a charge of $28 million , included in cost of sales in the consolidated statement of operations, to reflect the estimated fair value of those two facilities. Fair value was estimated using a market approach, considering the estimated fair values for other comparable buildings in the areas where the facilities are located (Level 3 inputs). These facilities were sold in 2015.

H. GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill, by segment, were as follows, in millions:

	Gross Goodwill At December 31, 2016				Accumulated Impairment Losses				Net Goodwill At December 31, 2016
Plumbing Products	$	519			$	(340	)		$	179
Decorative Architectural Products	294				(75		)		219
Cabinetry Products	240				(59		)		181
Windows and Other Specialty Products	987				(734		)		253
Total	$	2,040			$	(1,208	)		$	832

	Gross Goodwill At December 31, 2015				Accumulated Impairment Losses				Net Goodwill At December 31, 2015				Additions (A)				Other (B)				Net Goodwill At December 31, 2016
Plumbing Products	$	525			$	(340	)		$	185			$	—			$	(6	)		$	179
Decorative Architectural Products	294				(75		)		219				—				—				219
Cabinetry Products	240				(59		)		181				—				—				181
Windows and Other Specialty Products	988				(734		)		254				—				(1		)		253
Total	$	2,047			$	(1,208	)		$	839			$	—			$	(7	)		$	832

 
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