Fortune Brands Delivers Strong Operating Margin and Profit Results; Company Updates Guidance to Reflect Softening Market Environment; Separation Into Two World-class Companies Progressing Well Ahead of Schedule
Business and Operations Highlights:
- 3Q 2022 sales of
$2.1 billion , an increase of 3 percent versus a year ago - 3Q 2022 earnings per share (EPS) of
$1.57 , an increase of 8 percent versus a year ago; EPS before charges / gains of$1.79 , an increase of 20 percent versus a year ago - Full-year guidance updated to reflect a softening market environment
- Separation into two world-class companies progressing well ahead of schedule
“Our team delivered impressive third quarter results, including 20 percent EPS growth and margin improvement across all of our segments,” said
Fink continued, “We are taking proactive measures to drive market outperformance and profitability as we finish 2022 and begin 2023, while maintaining investment in our highest priority strategic initiatives. We have consistently distinguished ourselves by making the right moves during challenging times. Today’s environment is no different. We remain confident in the long-term fundamental demand for housing and will be primed to capture opportunities for value creation. Finally, I am pleased to report that our progress toward separating into two public companies is continuing well ahead of schedule. Our teams are working hard to complete the transaction this year.”
Third Quarter 2022
For the third quarter of 2022, sales were
For each segment in the third quarter of 2022, compared to the prior-year quarter:
- Water Innovations sales decreased 14 percent and also decreased 14 percent adjusting for FX and acquisitions. Results were impacted by continued inventory destocking and softness in
China . Importantly,U.S. point-of-sale grew approximately 5 percent in the quarter. Operating margin before charges / gains was 24.7 percent, up 210 basis points in the period over last year. - Outdoors & Security sales increased 6 percent, or 5 percent adjusting for FX and acquisitions driven by price across all product categories. Operating margin before charges / gains was 16.1 percent, up 50 basis points in the period over last year.
Cabinet sales increased 20 percent, driven by price across all product categories. Operating margin before charges / gains was 13.8 percent, up 410 basis points in the period over last year.
Balance Sheet and Liquidity
At the end of the quarter, net debt was
The Company has repurchased approximately
Annual Outlook Update
The Company now anticipates delivering 2022 full-year sales growth in the range of 4.5 percent to 5.5 percent relative to a global home products market growing at 2 percent to 4 percent and a
The Company now expects EPS before charges / gains for the full year to be in the range of
The Company now expects to generate free cash flow of approximately
“Our teams continue to execute in a challenging environment, as demonstrated by our progress on margin and on strategic priorities,” said
Update on Separation into Two World-Class Companies
Please visit www.fbhs.com/separation-updates for more information about the progress of the separation, as well as information about our upcoming Investor Day on
About Fortune Brands
The Company’s growing portfolio of complementary businesses and innovative brands includes Moen and the
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains certain “forward-looking statements” that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding general business strategies, market potential, anticipated future financial performance, the potential of our brands, the housing market, the timing of the completion of the intended spin-off transaction, and other matters. Statements preceded by, followed by or that otherwise include the words “believes”, “positioned”, “expects”, “estimates”, “plans”, “look to”, “outlook”, “intend”, and similar expressions or future or conditional verbs such as “will”, “should”, “would”, “may” and “could” are generally forward-looking in nature and not historical facts. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of our management. Although we believe that these statements are based on reasonable assumptions, they are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those indicated in such statements, including but not limited to include the expected benefits and costs of the intended spin-off transaction, the tax-free nature of the spin-off, the expected timing of the completion of the spin-off transaction and the transaction terms; general business and economic conditions; our reliance on the North American repair and remodel and new home construction activity levels; our reliance on key customers and suppliers; our ability to maintain our strong brands and to develop innovative products while maintaining our competitive positions; our ability to improve organizational productivity and global supply chain efficiency; our ability to obtain raw materials and finished goods in a timely and cost-effective manner; the impact of sustained inflation, including global commodity and energy availability and price volatility; the impact of trade-related tariffs and risks with uncertain trade environments or changes in government and industry regulatory standards; our ability to attract and retain qualified personnel and other labor constraints; the uncertainties relating to the impact of COVID-19 on the Company’s business and results, 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; and the other factors discussed in our securities filings, including in Item 1A of our Annual Report on Form 10-K for the year ended
Use of Non-GAAP Financial Information
This press release includes measures not derived in accordance with generally accepted accounting principles (“GAAP”), such as diluted earnings per share before charges / gains, operating income before charges / gains, operating margin before charges / gains, EBITDA before charges / gains, net debt, net debt to EBITDA before charges / gains, and free cash flow, sales adjusted for foreign exchange, and organic increase in sales. These measures should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP and may also be inconsistent with similar measures presented by other companies. Reconciliations of these measures to the most closely comparable GAAP measures, and reasons for the Company’s use of these measures, are presented in the attached pages.
| (In millions, except per share amounts) | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| Net sales | ||||||||||||||||||||||
|
Three Months Ended |
|
|
|
|
Nine Months Ended |
|||||||||||||||||
|
2022 |
2021 |
% Change |
|
|
|
|
2022 |
2021 |
% Change |
|||||||||||||
| Net sales (GAAP) | Net sales (GAAP) | |||||||||||||||||||||
| Water Innovations |
$ |
635.1 |
|
$ |
741.4 |
|
(14 |
) |
Water Innovations |
$ |
1,928.6 |
|
$ |
2,057.6 |
|
(6 |
) |
|||||
| Outdoors & Security |
|
560.4 |
|
|
528.4 |
|
6 |
|
Outdoors & Security |
|
1,662.4 |
|
|
1,525.4 |
|
9 |
|
|||||
| Cabinets |
|
858.2 |
|
|
716.5 |
|
20 |
|
Cabinets |
|
2,491.0 |
|
|
2,110.4 |
|
18 |
|
|||||
| Total net sales |
$ |
2,053.7 |
|
$ |
1,986.3 |
|
3 |
|
Total net sales |
$ |
6,082.0 |
|
$ |
5,693.4 |
|
7 |
|
|||||
| Quarter operating income | ||||||||||||||||||||||
| Before charges & gains | GAAP | |||||||||||||||||||||
|
Three Months Ended |
Three Months Ended |
|||||||||||||||||||||
| Operating income (loss) before charges/gains (a) |
2022 |
2021 |
% Change |
Operating income (loss) |
2022 |
2021 |
% Change |
|||||||||||||||
| Water Innovations |
$ |
156.9 |
|
$ |
167.7 |
|
(6 |
) |
Water Innovations |
$ |
152.7 |
|
$ |
166.5 |
|
(8 |
) |
|||||
| Outdoors & Security |
|
90.1 |
|
|
82.4 |
|
9 |
|
Outdoors & Security |
|
70.6 |
|
|
80.4 |
|
(12 |
) |
|||||
| Cabinets |
|
118.6 |
|
|
69.3 |
|
71 |
|
Cabinets |
|
100.9 |
|
|
67.2 |
|
50 |
|
|||||
| Corporate expenses |
|
(30.7 |
) |
|
(26.1 |
) |
18 |
|
Corporate expenses |
|
(43.0 |
) |
|
(27.5 |
) |
56 |
|
|||||
| Total operating income before charges/gains |
$ |
334.9 |
|
$ |
293.3 |
|
14 |
|
Total operating income (GAAP) |
$ |
281.2 |
|
$ |
286.6 |
|
(2 |
) |
|||||
| Earnings per share before charges/gains (b) | Diluted EPS (GAAP) | |||||||||||||||||||||
| Diluted |
$ |
1.79 |
|
$ |
1.49 |
|
20 |
|
Diluted EPS |
$ |
1.57 |
|
$ |
1.45 |
|
8 |
|
|||||
| EBITDA before charges/gains (c) |
$ |
385.8 |
|
$ |
341.8 |
|
13 |
|
Net income (GAAP) |
$ |
204.2 |
|
$ |
202.1 |
|
1 |
|
|||||
| Year to Date operating income | ||||||||||||||||||||||
| Before charges & gains | GAAP | |||||||||||||||||||||
|
Nine Months Ended |
Nine Months Ended |
|||||||||||||||||||||
| Operating income (loss) before charges/gains (a) |
2022 |
2021 |
% Change |
Operating income (loss) |
2022 |
2021 |
% Change |
|||||||||||||||
| Water Innovations |
$ |
468.6 |
|
$ |
486.1 |
|
(4 |
) |
Water Innovations |
$ |
462.7 |
|
$ |
483.3 |
|
(4 |
) |
|||||
| Outdoors & Security |
|
238.8 |
|
|
223.2 |
|
7 |
|
Outdoors & Security |
|
223.3 |
|
|
211.7 |
|
5 |
|
|||||
| Cabinets |
|
290.7 |
|
|
220.7 |
|
32 |
|
Cabinets |
|
243.3 |
|
|
214.2 |
|
14 |
|
|||||
| Corporate expenses |
|
(93.8 |
) |
|
(77.4 |
) |
21 |
|
Corporate expenses |
|
(110.6 |
) |
|
(79.3 |
) |
39 |
|
|||||
| Total operating income before charges/gains |
$ |
904.3 |
|
$ |
852.6 |
|
6 |
|
Total operating income (GAAP) |
$ |
818.7 |
|
$ |
829.9 |
|
(1 |
) |
|||||
| Earnings per share before charges/gains (b) | Diluted EPS (GAAP) | |||||||||||||||||||||
| Diluted |
$ |
4.76 |
|
$ |
4.41 |
|
8 |
|
Diluted EPS |
$ |
4.37 |
|
$ |
4.26 |
|
3 |
|
|||||
| EBITDA before charges/gains (c) |
$ |
1,050.3 |
|
$ |
995.0 |
|
6 |
|
Net income (GAAP) |
$ |
577.1 |
|
$ |
597.1 |
|
(3 |
) |
|||||
| (a) (b) (c) For definitions of Non-GAAP measures, see Definitions of Terms page | ||||||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (GAAP) | |||||||
| (In millions) | |||||||
| (Unaudited) | |||||||
|
|
|
|
|||||
|
2022 |
|
2021 |
|||||
| Assets | |||||||
| Current assets | |||||||
| Cash and cash equivalents |
$ |
345.3 |
$ |
471.5 |
|||
| Accounts receivable, net |
|
936.1 |
|
885.7 |
|||
| Inventories |
|
1,502.3 |
|
1,193.8 |
|||
| Other current assets |
|
223.9 |
|
193.5 |
|||
| Total current assets |
|
3,007.6 |
|
2,744.5 |
|||
| Property, plant and equipment, net |
|
1,097.7 |
|
1,009.5 |
|||
|
|
2,546.2 |
|
2,465.1 |
||||
| Other intangible assets, net of accumulated amortization |
|
1,375.9 |
|
1,383.8 |
|||
| Other assets |
|
388.2 |
|
333.3 |
|||
| Total assets |
$ |
8,415.6 |
$ |
7,936.2 |
|||
| Liabilities and equity | |||||||
| Current liabilities | |||||||
| Short-term debt |
$ |
600.3 |
$ |
400.0 |
|||
| Accounts payable |
|
672.6 |
|
764.9 |
|||
| Other current liabilities |
|
775.0 |
|
806.2 |
|||
| Total current liabilities |
|
2,047.9 |
|
1,971.1 |
|||
| Long-term debt |
|
2,786.9 |
|
2,309.8 |
|||
| Deferred income taxes |
|
222.7 |
|
176.0 |
|||
| Other non-current liabilities |
|
328.0 |
|
414.5 |
|||
| Total liabilities |
|
5,385.5 |
|
4,871.4 |
|||
| Stockholders' equity |
|
3,030.1 |
|
3,064.8 |
|||
| Total equity |
|
3,030.1 |
|
3,064.8 |
|||
| Total liabilities and equity |
$ |
8,415.6 |
$ |
7,936.2 |
|||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| (In millions) | |||||||||||
| (Unaudited) | |||||||||||
| Nine Months Ended |
|||||||||||
|
2022 |
2021 |
||||||||||
| Operating activities | |||||||||||
| Net income |
$ |
577.1 |
|
$ |
597.1 |
|
|||||
| Depreciation and amortization |
|
142.4 |
|
|
141.4 |
|
|||||
| Recognition of actuarial losses |
|
0.4 |
|
|
1.1 |
|
|||||
| Non-cash lease expense |
|
33.8 |
|
|
31.8 |
|
|||||
| Deferred taxes |
|
34.9 |
|
|
9.6 |
|
|||||
| Loss on equity investments |
|
- |
|
|
2.9 |
|
|||||
| Asset impairment charge |
|
26.0 |
|
|
- |
|
|||||
| Other non-cash items |
|
44.7 |
|
|
40.3 |
|
|||||
| Changes in assets and liabilities, net |
|
(570.5 |
) |
|
(393.4 |
) |
|||||
| Net cash provided by operating activities |
$ |
288.8 |
|
$ |
430.8 |
|
|||||
| Investing activities | |||||||||||
| Capital expenditures |
$ |
(175.1 |
) |
$ |
(113.0 |
) |
|||||
| Proceeds from the disposition of assets |
|
8.1 |
|
|
1.7 |
|
|||||
| Cost of acquisitions, net of cash acquired |
|
(214.0 |
) |
|
5.2 |
|
|||||
| Net cash used in investing activities |
$ |
(381.0 |
) |
$ |
(106.1 |
) |
|||||
| Financing activities | |||||||||||
| Increase in debt, net |
$ |
679.4 |
|
$ |
55.0 |
|
|||||
| Proceeds from the exercise of stock options |
|
0.6 |
|
|
32.6 |
|
|||||
|
|
(531.1 |
) |
|
(252.9 |
) |
||||||
| Dividends to stockholders |
|
(109.8 |
) |
|
(107.9 |
) |
|||||
| Other items, net |
|
(48.0 |
) |
|
(11.9 |
) |
|||||
| Net cash used in financing activities |
$ |
(8.9 |
) |
$ |
(285.1 |
) |
|||||
| Effect of foreign exchange rate changes on cash |
$ |
(26.0 |
) |
$ |
1.0 |
|
|||||
| Net (decrease) increase in cash and cash equivalents |
$ |
(127.1 |
) |
$ |
40.6 |
|
|||||
| Cash, cash equivalents and restricted cash* at beginning of period |
|
476.1 |
|
|
425.0 |
|
|||||
| Cash, cash equivalents and restricted cash* at end of period |
$ |
349.0 |
|
$ |
465.6 |
|
|||||
| FREE CASH FLOW | Nine Months Ended |
2022 Full Year | |||||||||
|
2022 |
2021 |
Approximation |
|||||||||
| Free cash flow** |
$ |
122.4 |
|
$ |
352.1 |
|
|
||||
| Add: | |||||||||||
| Capital expenditures |
|
175.1 |
|
|
113.0 |
|
250.0 - 275.0 |
||||
| Less: | |||||||||||
| Proceeds from the disposition of assets |
|
8.1 |
|
|
1.7 |
|
8.1 |
||||
| Proceeds from the exercise of stock options |
|
0.6 |
|
|
32.6 |
|
1.0 |
||||
| Cash flow from operations (GAAP) |
$ |
288.8 |
|
$ |
430.8 |
|
|
||||
| *Restricted cash of |
|||||||||||
| ** Free cash flow is cash flow from operations calculated in accordance with |
|||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME (GAAP) | ||||||||||||||||||
| (In millions, except per share amounts) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||
|
2022 |
2021 |
% Change |
|
2022 |
2021 |
% Change |
||||||||||||
| Net sales |
$ |
2,053.7 |
|
$ |
1,986.3 |
|
3 |
|
$ |
6,082.0 |
|
$ |
5,693.4 |
7 |
|
|||
| Cost of products sold |
|
1,310.2 |
|
|
1,280.0 |
|
2 |
|
|
3,895.9 |
|
|
3,637.2 |
7 |
|
|||
| Selling, general | ||||||||||||||||||
| and administrative expenses |
|
415.3 |
|
|
400.2 |
|
4 |
|
|
1,259.4 |
|
|
1,166.3 |
8 |
|
|||
| Amortization of intangible assets |
|
16.8 |
|
|
15.9 |
|
6 |
|
|
48.9 |
|
|
48.5 |
1 |
|
|||
| Asset impairment charge |
|
- |
|
|
- |
|
- |
|
|
26.0 |
|
|
- |
NM |
|
|||
| Restructuring charges |
|
30.2 |
|
|
3.6 |
|
739 |
|
|
33.1 |
|
|
11.5 |
188 |
|
|||
| Operating income |
|
281.2 |
|
|
286.6 |
|
(2 |
) |
|
818.7 |
|
|
829.9 |
(1 |
) |
|||
| Interest expense |
|
33.1 |
|
|
20.6 |
|
61 |
|
|
85.4 |
|
|
63.2 |
35 |
|
|||
| Other (income) expense, net |
|
(2.1 |
) |
|
(1.3 |
) |
(62 |
) |
|
(3.6 |
) |
|
0.7 |
(614 |
) |
|||
| Income before taxes |
|
250.2 |
|
|
267.3 |
|
(6 |
) |
|
736.9 |
|
|
766.0 |
(4 |
) |
|||
| Income tax |
|
46.0 |
|
|
65.2 |
|
(29 |
) |
|
159.8 |
|
|
168.9 |
(5 |
) |
|||
| Net income |
$ |
204.2 |
|
$ |
202.1 |
|
1 |
|
$ |
577.1 |
|
$ |
597.1 |
(3 |
) |
|||
| Diluted earnings per common share | ||||||||||||||||||
| Net income |
$ |
1.57 |
|
$ |
1.45 |
|
8 |
|
$ |
4.37 |
|
$ |
4.26 |
3 |
|
|||
| Diluted average number of shares outstanding |
|
130.1 |
|
|
139.7 |
|
(7 |
) |
|
132.0 |
|
|
140.2 |
(6 |
) |
|||
| DILUTED EPS BEFORE CHARGES/GAINS RECONCILIATION | |||||||||||||||||||
| For the three months ended |
|||||||||||||||||||
| For the nine months ended |
|||||||||||||||||||
| For the three months ended |
|||||||||||||||||||
| For the nine months ended |
|||||||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||||||
|
2022 |
2021 |
% Change |
|
2022 |
2021 |
% Change |
|||||||||||||
| Earnings per common share - Diluted | |||||||||||||||||||
| Diluted EPS before charges/gains (b) |
$ |
1.79 |
|
$ |
1.49 |
|
20 |
|
$ |
4.76 |
|
$ |
4.41 |
|
8 |
|
|||
| Restructuring and other (charges)/gains |
|
(0.32 |
) |
|
(0.03 |
) |
967 |
|
|
(0.33 |
) |
|
(0.12 |
) |
175 |
|
|||
| Asset impairment charge (d) |
|
- |
|
|
- |
|
- |
|
|
(0.15 |
) |
|
- |
|
NM |
|
|||
| Loss on equity investments (e) |
|
- |
|
|
- |
|
- |
|
|
- |
|
|
(0.02 |
) |
(100 |
) |
|||
| Defined benefit plan actuarial losses |
|
- |
|
|
(0.01 |
) |
(100 |
) |
|
- |
|
|
(0.01 |
) |
(100 |
) |
|||
| Tax items |
|
0.10 |
|
|
- |
|
NM |
|
|
0.09 |
|
|
- |
|
NM |
|
|||
| Diluted EPS (GAAP) |
$ |
1.57 |
|
$ |
1.45 |
|
8 |
|
$ |
4.37 |
|
$ |
4.26 |
|
3 |
|
|||
| (b) (d) (e) For definitions of Non-GAAP measures, see Definitions of Terms page | |||||||||||||||||||
| (In millions) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| RECONCILIATION OF EBITDA BEFORE CHARGES/GAINS TO NET INCOME | ||||||||||||||||||||
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||||
|
2022 |
2021 |
% Change |
|
2022 |
2021 |
% Change |
||||||||||||||
| EBITDA BEFORE CHARGES/GAINS (c) |
$ |
385.8 |
|
$ |
341.8 |
|
|
13 |
|
$ |
1,050.3 |
|
$ |
995.0 |
|
6 |
|
|||
| Depreciation* |
$ |
(31.6 |
) |
$ |
(30.2 |
) |
|
5 |
|
$ |
(93.1 |
) |
$ |
(89.0 |
) |
5 |
|
|||
| Amortization of intangible assets |
|
(16.8 |
) |
|
(15.9 |
) |
|
6 |
|
|
(48.9 |
) |
|
(48.5 |
) |
1 |
|
|||
| Restructuring and other (charges)/gains |
|
(53.7 |
) |
|
(6.7 |
) |
|
701 |
|
|
(59.6 |
) |
|
(22.7 |
) |
163 |
|
|||
| Interest expense |
|
(33.1 |
) |
|
(20.6 |
) |
|
61 |
|
|
(85.4 |
) |
|
(63.2 |
) |
35 |
|
|||
| Asset impairment charge (d) |
|
- |
|
|
- |
|
|
- |
|
|
(26.0 |
) |
|
- |
|
NM |
|
|||
| Loss on equity investments (e) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(4.5 |
) |
(100 |
) |
|||
| Defined benefit plan actuarial losses |
|
(0.4 |
) |
|
(1.1 |
) |
|
(64 |
) |
|
(0.4 |
) |
|
(1.1 |
) |
(64 |
) |
|||
| Income taxes |
|
(46.0 |
) |
|
(65.2 |
) |
|
(29 |
) |
|
(159.8 |
) |
|
(168.9 |
) |
(5 |
) |
|||
| Net income (GAAP) |
$ |
204.2 |
|
$ |
202.1 |
|
|
1 |
|
$ |
577.1 |
|
$ |
597.1 |
|
(3 |
) |
|||
| * Depreciation excludes accelerated depreciation expense of |
||||||||||||||||||||
| CALCULATION OF NET DEBT-TO-EBITDA BEFORE CHARGES/GAINS RATIO | ||||||||||||||||||||
| As of |
||||||||||||||||||||
| Short-term debt ** |
$ |
600.3 |
|
|||||||||||||||||
| Long-term debt ** |
|
2,786.9 |
|
|||||||||||||||||
| Total debt |
|
3,387.2 |
|
|||||||||||||||||
| Less: | ||||||||||||||||||||
| Cash and cash equivalents ** |
|
345.3 |
|
|||||||||||||||||
| Net debt (1) |
$ |
3,041.9 |
|
|||||||||||||||||
| For the twelve months ended |
||||||||||||||||||||
| EBITDA before charges/gains (2) (c) |
$ |
1,363.6 |
|
|||||||||||||||||
| Net debt-to-EBITDA before charges/gains ratio (1/2) |
|
2.2 |
|
|||||||||||||||||
| ** Amounts are per the Unaudited Condensed Consolidated Balance Sheet as of |
||||||||||||||||||||
| Three Months Ended |
Nine Months Ended |
Twelve Months Ended |
||||||||||||||||||
|
2021 |
2022 |
2022 |
||||||||||||||||||
| EBITDA BEFORE CHARGES/GAINS (c) |
$ |
313.3 |
|
$ |
1,050.3 |
|
$ |
1,363.6 |
|
|||||||||||
| Depreciation*** |
$ |
(32.2 |
) |
$ |
(93.1 |
) |
$ |
(125.3 |
) |
|||||||||||
| Amortization of intangible assets |
|
(15.6 |
) |
|
(48.9 |
) |
|
(64.5 |
) |
|||||||||||
| Restructuring and other (charges)/gains |
|
(5.4 |
) |
|
(59.6 |
) |
|
(65.0 |
) |
|||||||||||
| Interest expense |
|
(21.1 |
) |
|
(85.4 |
) |
|
(106.5 |
) |
|||||||||||
| Asset impairment charge (d) |
|
- |
|
|
(26.0 |
) |
|
(26.0 |
) |
|||||||||||
| Defined benefit plan actuarial (losses)/gains |
|
0.2 |
|
|
(0.4 |
) |
|
(0.2 |
) |
|||||||||||
| Income taxes |
|
(63.9 |
) |
|
(159.8 |
) |
|
(223.7 |
) |
|||||||||||
| Net income (GAAP) |
$ |
175.3 |
|
$ |
577.1 |
|
$ |
752.4 |
|
|||||||||||
| *** Depreciation excludes accelerated depreciation expense of |
||||||||||||||||||||
| (c) (d) (e) For definitions of Non-GAAP measures, see Definitions of Terms page | ||||||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
|
Three Months Ended |
|
|
|
Nine Months Ended |
|||||||||||||||||
|
2022 |
2021 |
% Change |
|
|
|
2022 |
2021 |
% Change |
|||||||||||||
| Net sales (GAAP) | |||||||||||||||||||||
| Water Innovations |
$ |
635.1 |
|
$ |
741.4 |
|
(14 |
) |
$ |
1,928.6 |
|
$ |
2,057.6 |
|
(6 |
) |
|||||
| Outdoors & Security |
|
560.4 |
|
|
528.4 |
|
6 |
|
|
1,662.4 |
|
|
1,525.4 |
|
9 |
|
|||||
| Cabinets |
|
858.2 |
|
|
716.5 |
|
20 |
|
|
2,491.0 |
|
|
2,110.4 |
|
18 |
|
|||||
| Total net sales |
$ |
2,053.7 |
|
$ |
1,986.3 |
|
3 |
|
$ |
6,082.0 |
|
$ |
5,693.4 |
|
7 |
|
|||||
| Operating income (loss) | |||||||||||||||||||||
| Water Innovations |
$ |
152.7 |
|
$ |
166.5 |
|
(8 |
) |
$ |
462.7 |
|
$ |
483.3 |
|
(4 |
) |
|||||
| Outdoors & Security |
|
70.6 |
|
|
80.4 |
|
(12 |
) |
|
223.3 |
|
|
211.7 |
|
5 |
|
|||||
| Cabinets |
|
100.9 |
|
|
67.2 |
|
50 |
|
|
243.3 |
|
|
214.2 |
|
14 |
|
|||||
| Corporate expenses |
|
(43.0 |
) |
|
(27.5 |
) |
56 |
|
|
(110.6 |
) |
|
(79.3 |
) |
39 |
|
|||||
| Total operating income (GAAP) |
$ |
281.2 |
|
$ |
286.6 |
|
(2 |
) |
$ |
818.7 |
|
$ |
829.9 |
|
(1 |
) |
|||||
| OPERATING INCOME BEFORE CHARGES/GAINS RECONCILIATION | |||||||||||||||||||||
| Operating income (loss) before charges/gains (a) | |||||||||||||||||||||
| Water Innovations |
$ |
156.9 |
|
$ |
167.7 |
|
(6 |
) |
$ |
468.6 |
|
$ |
486.1 |
|
(4 |
) |
|||||
| Outdoors & Security |
|
90.1 |
|
|
82.4 |
|
9 |
|
|
238.8 |
|
|
223.2 |
|
7 |
|
|||||
| Cabinets |
|
118.6 |
|
|
69.3 |
|
71 |
|
|
290.7 |
|
|
220.7 |
|
32 |
|
|||||
| Corporate expenses |
|
(30.7 |
) |
|
(26.1 |
) |
18 |
|
|
(93.8 |
) |
|
(77.4 |
) |
21 |
|
|||||
| Total operating income before charges/gains (a) |
|
334.9 |
|
|
293.3 |
|
14 |
|
|
904.3 |
|
|
852.6 |
|
6 |
|
|||||
| Restructuring and other (charges)/gains (1) (2) |
|
(53.7 |
) |
|
(6.7 |
) |
701 |
|
|
(59.6 |
) |
|
(22.7 |
) |
163 |
|
|||||
| Asset impairment charge (d) |
|
- |
|
|
- |
|
- |
|
|
(26.0 |
) |
|
- |
|
NM |
|
|||||
| Total operating income (GAAP) |
$ |
281.2 |
|
$ |
286.6 |
|
(2 |
) |
$ |
818.7 |
|
$ |
829.9 |
|
(1 |
) |
|||||
| (1) Restructuring charges are costs incurred to implement significant cost reduction initiatives and include workforce reduction costs by segment these charges. Restructuring charges totaled |
|||||||||||||||||||||
| (2) "Other charges/gains" represent charges directly related to restructuring initiatives that cannot be reported as restructuring under GAAP. Such costs may include losses on disposal of inventories, trade receivables allowances from exiting product lines, accelerated depreciation resulting from the closure of facilities and gains or losses on the sale of previously closed facilities. In total, we recognized other charges of In our Water Innovations segment, other charges also include an acquisition-related inventory step-up expense for In our Outdoors & Security segment, other charges also include an acquisition-related inventory step-up expense for In our Cabinets segment, other charges also include expenditures of At Corporate, other charges also include expenditures of |
|||||||||||||||||||||
| (a) (d) For definitions of Non-GAAP measures, see Definitions of Terms page | |||||||||||||||||||||
| Reconciliation of Income Statements - GAAP to before charges/gains information | |||||||||||||||
| Three Months Ended |
|||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Before charges/gains adjustments | |||||||||||||||
| Defined benefit plan actuarial losses | |||||||||||||||
| Restructuring | Before | ||||||||||||||
| GAAP | and other | Tax items (1) | charges/gains | ||||||||||||
| (unaudited) | charges | (Non-GAAP) | |||||||||||||
|
2022 |
Third Quarter | ||||||||||||||
| Net sales |
$ |
2,053.7 |
|
- |
|
- |
|
- |
|
||||||
| Cost of products sold |
|
1,310.2 |
|
(5.4 |
) |
- |
|
- |
|
||||||
| Selling, general & administrative expenses |
|
415.3 |
|
(18.1 |
) |
- |
|
- |
|
||||||
| Amortization of intangible assets |
|
16.8 |
|
- |
|
- |
|
- |
|
||||||
| Restructuring charges |
|
30.2 |
|
(30.2 |
) |
- |
|
- |
|
||||||
| Operating income |
|
281.2 |
|
53.7 |
|
- |
|
- |
|
|
334.9 |
||||
| Interest expense |
|
33.1 |
|
- |
|
- |
|
- |
|
||||||
| Other (income) expense, net |
|
(2.1 |
) |
- |
|
(0.4 |
) |
- |
|
||||||
| Income before taxes |
|
250.2 |
|
53.7 |
|
0.4 |
|
- |
|
|
304.3 |
||||
| Income tax |
|
46.0 |
|
13.3 |
|
- |
|
12.5 |
|
||||||
| Net income |
|
204.2 |
|
40.4 |
|
0.4 |
|
(12.5 |
) |
|
232.5 |
||||
| Diluted average number of shares outstanding |
|
130.1 |
|
|
130.1 |
||||||||||
| Diluted EPS |
$ |
1.57 |
|
$ |
1.79 |
||||||||||
|
2021 |
|||||||||||||||
|
$ |
1,986.3 |
|
- |
|
- |
|
- |
|
|||||||
| Cost of products sold |
|
1,280.0 |
|
(1.0 |
) |
- |
|
- |
|
||||||
| Selling, general & administrative expenses |
|
400.2 |
|
(2.1 |
) |
- |
|
- |
|
||||||
| Amortization of intangible assets |
|
15.9 |
|
- |
|
- |
|
- |
|
||||||
| Restructuring charges |
|
3.6 |
|
(3.6 |
) |
- |
|
- |
|
||||||
| Operating income |
|
286.6 |
|
6.7 |
|
- |
|
- |
|
|
293.3 |
||||
| Interest expense |
|
20.6 |
|
- |
|
- |
|
- |
|
||||||
| Other (income) expense, net |
|
(1.3 |
) |
- |
|
(1.1 |
) |
- |
|
||||||
| Income before taxes |
|
267.3 |
|
6.7 |
|
1.1 |
|
- |
|
|
275.1 |
||||
| Income tax |
|
65.2 |
|
1.6 |
|
0.3 |
|
0.1 |
|
||||||
| Net income |
|
202.1 |
|
5.1 |
|
0.8 |
|
(0.1 |
) |
$ |
207.9 |
||||
| Diluted average number of shares outstanding |
|
139.7 |
|
|
139.7 |
||||||||||
| Diluted EPS |
$ |
1.45 |
|
$ |
1.49 |
||||||||||
| (1) Tax items for the three months ended |
|||||||||||||||
| Reconciliation of Income Statements - GAAP to before charges/gains information | |||||||||||||||||||
| Nine Months Ended |
|||||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Before charges/gains adjustments | |||||||||||||||||||
| Defined benefit plan actuarial losses | |||||||||||||||||||
| Restructuring | Asset | Loss on | Before | ||||||||||||||||
| GAAP | and other | impairment | equity | Tax items (1) | charges/gains | ||||||||||||||
| (Unaudited) | charges | charge | investments | (Non-GAAP) | |||||||||||||||
|
2022 |
Year to Date | ||||||||||||||||||
| Net sales |
$ |
6,082.0 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
||||||
| Cost of products sold |
|
3,895.9 |
|
(2.2 |
) |
- |
|
- |
|
- |
|
- |
|
||||||
| Selling, general & administrative expenses |
|
1,259.4 |
|
(24.3 |
) |
- |
|
- |
|
- |
|
- |
|
||||||
| Amortization of intangible assets |
|
48.9 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
||||||
| Asset impairment charge |
|
26.0 |
|
- |
|
- |
|
(26.0 |
) |
- |
|
- |
|
||||||
| Restructuring charges |
|
33.1 |
|
(33.1 |
) |
- |
|
- |
|
- |
|
- |
|
||||||
| Operating income |
|
818.7 |
|
59.6 |
|
- |
|
26.0 |
|
- |
|
- |
|
|
904.3 |
||||
| Interest expense |
|
85.4 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
||||||
| Other (income) expense, net |
|
(3.6 |
) |
- |
|
(0.4 |
) |
- |
|
- |
|
- |
|
||||||
| Income before taxes |
|
736.9 |
|
59.6 |
|
0.4 |
|
26.0 |
|
- |
|
- |
|
|
822.9 |
||||
| Income taxes |
|
159.8 |
|
15.9 |
|
- |
|
6.4 |
|
- |
|
12.5 |
|
||||||
| Net income |
$ |
577.1 |
|
43.7 |
|
0.4 |
|
19.6 |
|
- |
|
(12.5 |
) |
$ |
628.3 |
||||
| Diluted average number of shares outstanding |
|
132.0 |
|
|
132.0 |
||||||||||||||
| Diluted EPS |
$ |
4.37 |
|
$ |
4.76 |
||||||||||||||
|
2021 |
|||||||||||||||||||
| Net sales |
$ |
5,693.4 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
||||||
| Cost of products sold |
|
3,637.2 |
|
(8.3 |
) |
- |
|
- |
|
- |
|
- |
|
||||||
| Selling, general & administrative expenses |
|
1,166.3 |
|
(2.9 |
) |
- |
|
- |
|
- |
|
- |
|
||||||
| Amortization of intangible assets |
|
48.5 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
||||||
| Restructuring charges |
|
11.5 |
|
(11.5 |
) |
- |
|
- |
|
- |
|
- |
|
||||||
| Operating income |
|
829.9 |
|
22.7 |
|
- |
|
- |
|
- |
|
- |
|
|
852.6 |
||||
| Interest expense |
|
63.2 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
||||||
| Other (income) expense, net |
|
0.7 |
|
- |
|
(1.1 |
) |
- |
|
(4.5 |
) |
- |
|
||||||
| Income before taxes |
|
766.0 |
|
22.7 |
|
1.1 |
|
- |
|
4.5 |
|
- |
|
|
794.3 |
||||
| Income taxes |
|
168.9 |
|
5.7 |
|
0.3 |
|
- |
|
1.1 |
|
(0.1 |
) |
||||||
| Net income |
$ |
597.1 |
|
17.0 |
|
0.8 |
|
- |
|
3.4 |
|
0.1 |
|
$ |
618.4 |
||||
| Diluted average number of shares outstanding |
|
140.2 |
|
|
140.2 |
||||||||||||||
| Diluted EPS |
$ |
4.26 |
|
$ |
4.41 |
||||||||||||||
| (1) Tax items for the nine months ended September 30, 2022 were for reserves established relating to the Tax Cuts and Jobs Act of 2017 (the "Tax Act") that are now being reversed. Tax items for the nine months ended September 30, 2021 represent foreign exchange movement related to the impact of the Tax Cuts and Jobs Act of 2017 (the "Tax Act") recorded in earlier periods. | |||||||||||||||||||
| BEFORE CHARGES/GAINS OPERATING MARGIN TO OPERATING MARGIN | |||||||
| (Unaudited) | |||||||
| Three Months Ended, | |||||||
| September 30, 2022 | September 30, 2021 | Change | |||||
| WATER INNOVATIONS | |||||||
| Before charges/gains operating margin |
24.7% |
22.6% |
210 bps |
||||
| Restructuring & other (charges)/gains |
(0.7%) |
(0.1%) |
|
||||
| Operating margin |
24.0% |
22.5% |
150 bps |
||||
|
|
|
|
|||||
| OUTDOORS & SECURITY |
|
|
|
||||
| Before charges/gains operating margin |
16.1% |
15.6% |
50 bps |
||||
| Restructuring & other (charges)/gains |
(3.5%) |
(0.4%) |
|
||||
| Operating margin |
12.6% |
15.2% |
(260) bps |
||||
|
|
|
|
|||||
| CABINETS |
|
|
|
||||
| Before charges/gains operating margin |
13.8% |
9.7% |
410 bps |
||||
| Restructuring & other (charges)/gains |
(2.0%) |
(0.3%) |
|
||||
| Operating margin |
11.8% |
9.4% |
240 bps |
||||
|
|
|
|
|||||
| TOTAL COMPANY |
|
|
|
||||
| Before charges/gains operating margin |
16.3% |
14.8% |
150 bps |
||||
| Restructuring & other (charges)/gains |
(2.6%) |
(0.4%) |
|
||||
| Operating margin |
13.7% |
14.4% |
(70) bps |
||||
| Operating margin is calculated as operating income derived in accordance with GAAP, divided by GAAP net sales. Before charges/gains operating margin is operating income derived in accordance with GAAP, excluding restructuring and other charges/gains, divided by GAAP net sales. Before charges/gains operating margin is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the returns generated by FBHS and its business segments. Management believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies. | |||||||
| RECONCILIATION OF FULL YEAR 2022 GUIDANCE DILUTED EPS BEFORE CHARGES/GAINS TO GAAP DILUTED EPS | |||||||
| (Unaudited) | |||||||
| Twelve Months Ending | |||||||
| December 31, 2022 | December 31, 2021 | % Change | |||||
| Diluted EPS before charges/gains - full year range |
$ 6.20 - 6.30 |
$ 5.73 |
8 - 10 |
||||
|
|
|
|
|||||
| Diluted EPS before charges/gains (b) |
$ 6.25 |
$ 5.73 |
9 |
||||
|
|
|
|
|||||
| Restructuring and other (charges)/gains |
(0.52) |
(0.17) |
|
||||
| Asset impairment charge (d) |
(0.15) |
- |
|
||||
| Loss on equity investments (e) |
- |
(0.02) |
|
||||
| Defined benefit plan actuarial losses |
(0.01) |
- |
|
||||
|
- |
- |
|
|||||
| Tax items |
0.10 |
0.09 |
|
||||
|
|
|
|
|||||
| Diluted EPS - (GAAP) |
$ 5.67 |
$ 5.63 |
1 |
||||
|
|
|
|
|||||
| Diluted EPS - (GAAP) - full year range |
$ 5.62 - 5.72 |
$ 5.63 |
0 - 2 |
||||
| For the twelve months ended December 31, 2021, diluted EPS before charges/gains is net income calculated on a diluted per-share basis excluding $28.1 million ($22.9 million after tax or $0.17 per diluted share) of restructuring and other charges/gains, including costs for banking, legal, accounting and other similar services directly related to the separation of FBHS and its Cabinets business and $2.2 million of mark-to-market expense classified in the other expense, net associated with the acquisition of the remaining outstanding shares of Flo, which occurred in January 2022, loss on equity investments of $4.5 million ($3.4 million net of tax or $0.02 per diluted share), the impact from actuarial losses associated with our defined benefit plans of $1.0 million ($0.7 million net of tax) and a net tax expense of $0.2 million. In addition, we have excluded from this reconciliation the one-time external costs that are contingent on the separation between FBHS and its Cabinets business occurring, for which the timing is unknown. We estimate that these expenses will be in the range of $0.28 to $0.32 per diluted share and will be excluded from our diluted EPS before charges and gains. | |||||||
| (b) (d) (e) For definitions of Non-GAAP measures, see Definitions of Terms page | |||||||
| RECONCILIATION OF PERCENTAGE CHANGE IN OUTDOORS & SECURITY NET SALES EXCLUDING FX IMPACT AND ACQUISITIONS NET SALES TO PERCENTAGE CHANGE IN OUTDOORS & SECURITY |
|||||
| (Unaudited) | |||||
| Three Months Ended September 30, 2022 |
|||||
| % Change | |||||
| OUTDOORS & SECURITY | |||||
| Percentage change in Outdoors & Security net sales excluding FX impact and acquisitions (organic) |
5% |
||||
| Acquisitions net sales |
2% |
||||
| FX impact |
(1%) |
||||
| Percentage change in Outdoors & Security net sales (GAAP) |
6% |
||||
| Outdoors & Security net sales excluding FX impact and acquisitions (organic) net sales is Outdoors & Security net sales derived in accordance with GAAP, excluding the impact of FX on net sales and Solar net sales. Management uses this measure to evaluate the overall performance of the Outdoors & Security segment and believes this measure provides investors with helpful supplemental information regarding the underlying performance of the segment from period to period. This measure may be inconsistent with similar measures presented by other companies. | |||||
| RECONCILIATION OF PERCENTAGE CHANGE IN WATER INNOVATIONS NET SALES EXCLUDING FX IMPACT AND ACQUISITIONS TO PERCENTAGE CHANGE IN WATER INNOVATIONS |
|||||
| (Unaudited) | |||||
|
Three Months Ended |
|||||
|
% Change |
|||||
| WATER INNOVATIONS |
|
||||
| Percentage change in Water Innovations net sales excluding FX impact and acquisitions (organic) |
(14%) |
||||
| Acquisitions net sales |
1% |
||||
| FX impact |
(1%) |
||||
| Percentage change in Water Innovations net sales (GAAP) |
(14%) |
||||
| Water Innovations net sales excluding FX impact and acquisitions (organic) is Water Innovations net sales derived in accordance with GAAP, excluding the impact of FX on net sales and Aqualisa net sales. Management uses this measure to evaluate the overall performance of the Water Innovations segment and believes this measure provides investors with helpful supplemental information regarding the underlying performance of the segment from period to period. This measure may be inconsistent with similar measures presented by other companies. | |||||
| Definitions of Terms: Non-GAAP Measures |
| (a) Operating income (loss) before charges/gains is operating income derived in accordance with GAAP, excluding restructuring and other charges/gains and asset impairment charges. Operating income (loss) before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the returns generated by the Company and its business segments. Management believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies. |
| (b) Diluted EPS before charges/gains is net income calculated on a diluted per-share basis, excluding restructuring and other charges/gains, asset impairment charges, defined benefit plan actuarial losses, loss on equity investments and tax items. Diluted EPS before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the overall performance of the Company and believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies. |
| (c) EBITDA before charges/gains is net income derived in accordance with GAAP, excluding depreciation, amortization of intangible assets, restructuring and other charges/gains, asset impairment charges, interest expense, defined benefit plan actuarial losses, loss on equity investments and income taxes. EBITDA before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to assess returns generated by the Company. Management believes this measure provides investors with helpful supplemental information about the Company's ability to fund internal growth, make acquisitions and repay debt and related interest. This measure may be inconsistent with similar measures presented by other companies. |
| (d) Asset impairment charges for the and nine months ended September 30, 2022, represent a pre-tax impairment charge of $26.0 million related to an indefinite-lived tradename in our Cabinets segment. |
| (e) Loss on equity investments is related to our investment in Flo Technologies. |
| Definitions of Terms: GAAP Measures |
| In the first quarter of 2022, our Plumbing segment was renamed “Water Innovations” in order to better align with our key brands and organizational purpose. The Plumbing segment name change is to the name only and had no impact on the Company’s historical financial position, results of operations, cash flow or segment level results previously reported. |
| In 2018, our Water Innovations segment entered into a strategic partnership with, and acquired non-controlling equity interests in, Flo Technologies, Inc. ("Flo"), a |
| In January 2022, we acquired 100% of the outstanding equity of Solar a leading producer of wide-opening exterior door systems and outdoor enclosures, for a purchase price of $61.6 million, net of cash acquired. The purchase price is subject to a final post-closing working capital adjustment. We financed the transaction using cash on hand and borrowings under our revolving credit facility. The results of Solar are reported as part of the Outdoors & Security segment. Its complementary product offerings support the segment’s outdoor living strategy. Solar's net sales and operating income for the three and nine months ended September 30, 2022 were not material to the Company. We have not included pro forma financial information as the transaction is immaterial to our condensed consolidated statements of comprehensive income. The fair value allocated to assets acquired and liabilities assumed as of January 31, 2022 was $61.6 million, which includes $21.0 million of goodwill. |
| On April 28, 2022, the Company announced that its Board of Directors authorized the Company to develop a plan to separate the Company into two independent, publicly-traded companies via a tax-free spin-off of the |
| In July 2022, we acquired 100% of the outstanding equity of Aqualisa, a leading |
View source version on businesswire.com: https://www.businesswire.com/news/home/20221026005085/en/
INVESTOR CONTACT:
847-484-4573
Investor.Questions@FBHS.com
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847-484-4204
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