DIVESTITURES

12 Months Ended

Dec. 31, 2020

Discontinued Operations and Disposal Groups [Abstract]

On September 6, 2019, we completed the divestiture of our UK Window Group business ("UKWG"), a manufacturer and distributor of windows and doors, for proceeds of approximately $8 million, of which $2 million net of cash disposed was received upon sale. The remaining $6 million was accounted for as a note receivable that is expected to be collected within two years of the divestiture. In connection with the sale, we recognized a loss of $70 million for the year ended December 31, 2019, which is included in income from discontinued operations, net in the consolidated statements of operations.

On November 6, 2019, we completed the divestiture of our Milgard Windows and Doors business ("Milgard"), a manufacturer and distributor of windows and doors for proceeds of approximately $720 million, net of cash disposed. In connection with the sale, we recognized a gain on the divestiture of $368 million for the year ended December 31, 2019, which is included in income from discontinued operations, net in the consolidated statement of operations.

In 2019, we determined that the previously reported Windows and Other Specialty Products segment met the criteria to be classified as a discontinued operation as a result of the combined sale of UKWG and Milgard. These businesses represented all of our windows businesses and all remaining businesses in the Windows and Other Specialty Products segment.

C. DIVESTITURES (Continued)

During the second quarter of 2020, a $17 million pre-tax post-closing adjustment related to the finalization of working capital items was recorded to income from discontinued operations, net in the consolidated statement of operations, as a gain on the divestiture of Milgard. As of December 31, 2020, we have received the $17 million in cash, which is presented in investing activities on the consolidated statement of cash flow as proceeds from disposition of businesses, net of cash disposed. All post-closing adjustments related to our divestiture of Milgard were finalized with the buyer in the second quarter of 2020.

On November 14, 2019, we entered into a definitive agreement to sell Masco Cabinetry LLC ("Cabinetry"), a manufacturer of cabinetry products. We completed the divestiture of Cabinetry on February 18, 2020 for proceeds of approximately $989 million, including $853 million, net of cash disposed. The remaining $136 million was accounted for as preferred stock issued by a holding company of the buyer; refer to Note I for additional information. The working capital adjustment was finalized with the buyer in the second quarter of 2020, resulting in no significant changes to net proceeds. In connection with the sale, we recognized a gain on the divestiture of $585 million for the year ended December 31, 2020, which is included in income from discontinued operations, net in the consolidated statement of operations. We determined that the previously reported Cabinetry Products segment met the criteria to be classified as a discontinued operation as Cabinetry represented all of our cabinet businesses and all remaining businesses in the Cabinetry Products segment.

We determined that the assets and liabilities for Cabinetry, Milgard and UKWG met the held for sale criteria in accordance with ASC 205-20, Discontinued Operations, during 2019. We ceased recording depreciation and amortization for the held for sale assets upon meeting the held for sale criteria.

As the combined sale of UKWG and Milgard and the sale of Cabinetry each represented a strategic shift that will have a major effect on our operations and financial results, these businesses were presented in discontinued operations separate from continuing operations for all periods presented. In addition, depreciation and amortization, capital expenditures, and significant non-cash operating and investing activities related to discontinued operations were separately disclosed.

The results of the windows businesses recorded in (loss) income from discontinued operations before income tax was income of $2 million and $40 million for the years ended December 31, 2020 and 2018, respectively and a loss of $1 million for the year ended December 31, 2019. The results of the cabinetry business recorded in (loss) income from discontinued operations before income tax was a loss of $7 million for the year ended December 31, 2020 and income of $107 million and $95 million for the years ended December 31, 2019 and 2018, respectively.

The major classes of line items constituting income from discontinued operations, net, in millions:


	For the Years Ended December 31,
	2020		2019		2018
Net sales	$	101	$	1,528	$	1,705
Cost of sales	78		1,184		1,343
Gross profit	23		344		362
Selling, general and administrative expenses	28		232		228
Impairment charge for goodwill (A)	—		7		—
Other income (expense), net	—		1		1
(Loss) income from discontinued operations	(5)		106		135
Gain on disposal of discontinued operations, net	602		298		—
Income before income tax	597		404		135
Income tax expense	(183)		(108)		(37)
Income from discontinued operations, net	$	414	$	296	$	98

(A) In the first quarter of 2019, we recognized a $7 million non-cash goodwill impairment charge related to a decline in the long-term outlook of our windows and doors business in the United Kingdom.

C. DIVESTITURES (Concluded)

The carrying amount of major classes of assets and liabilities included as part of the Cabinetry discontinued operations and reported as held for sale, were as follows, in millions:


	December 31, 2019

Receivables	$	76

Prepaid expenses and other	7
Inventories	90
Property and equipment, net	157
Operating lease right-of-use assets	4
Goodwill	181
Other intangible assets, net	1
Other assets	12
Total assets classified as held for sale	$	528



Accounts payable	$	103
Accrued liabilities	46
Noncurrent operating lease liabilities	3
Other liabilities	10
Total liabilities classified as held for sale	$	162

Assets and liabilities classified as held for sale were required to be recorded at the lower of its carrying value or fair value less costs to sell. The estimated fair value less costs to sell of the held for sale businesses exceeded their carrying value, and therefore no adjustment to these long-lived assets was necessary.

Other selected financial information for Cabinetry, Milgard and UKWG during the period owned by us, were as follows, in millions:


	For the Years Ended December 31,
	2020		2019		2018
Depreciation and amortization	$	—	$	29	$	36
Capital expenditures	1		34		38
ROU assets obtained in exchange for new lease obligations	—		3		—

In conjunction with the divestiture of Milgard and Cabinetry, we entered into Transition Services Agreements to provide administrative services to the buyers. As of December 31, 2020, our Transition Service Agreement with Milgard and Cabinetry concluded. The fees for services rendered under each of the Transition Service Agreements were not material to our results of operations.