Fortune Brands Reports First Quarter Results; Reaffirms 2015 Annual EPS Outlook
Highlights from continuing operations:
-
Q1 2015 sales increased 7 percent year-over-year to
$951 million with Q1 2015 EPS of$0.25 ; EPS before charges/gains were$0.28 , vs$0.27 in the prior-year quarter -
Company reaffirms full-year 2015 EPS before charges/gains outlook
of
$2.00 -$2.10 on sales growth of 9 - 10.5 percent, excluding the potential impact of the Norcraft acquisition - Norcraft acquisition on track for Q2 close
"As we expected, the 2015 home products market growth was moderate in
the first quarter. Regardless, our teams delivered profit growth that
was right on plan," said
First Quarter 2015
For the first quarter of 2015, sales were
For each segment in the first quarter of 2015, compared to the prior-year quarter:
- Cabinet sales were even with the prior year, with the key dealer channel growing 8 percent offset by the timing of in-stock cabinet and vanities shipments and the impact of currency.
-
Plumbing sales increased 8 percent, with growth across the U.S.
wholesale and retail channels, and
Canada . - Door sales were up 5 percent with growth in both the wholesale and retail channels.
- Security sales increased 39 percent driven by the SentrySafe acquisition.
"The completion of capacity investments and the pending Norcraft
acquisition position our cabinets segment well to leverage the improving
housing market," said
Agreement to Acquire Norcraft
As previously announced, the Company has signed an agreement to acquire Norcraft, a leading, publicly-owned manufacturer of kitchen and bathroom cabinetry.
"Our disciplined growth strategy for our cabinets business includes
being the best in
The transaction is subject to customary closing conditions and is on track to close in the second quarter of 2015. Upon completion of the recently launched tender offer, Norcraft will be merged into Fortune Brands' cabinets business.
Annual Outlook for 2015
The Company's 2015 annual outlook is based on a U.S. home products market growth assumption of 6 to 8 percent. Based on the Company's expectation to continue outperforming the market, the Company reduced full-year 2015 net sales growth from a range of 9 to 11 percent to a range of 9 to 10.5 percent to reflect the impact of currency.
The Company reaffirmed its expectations for EPS before charges/gains to
be in the range of
"The first quarter home products market performed as we expected. We plan for some improvement in the second quarter," said Klein. "Due to the positive signs we are seeing in April and the natural lag for our businesses, we continue to look for the strongest market growth in the second half of the year."
The Company's outlook includes the impact of the 2014 acquisition of SentrySafe. The outlook does not include any potential impact from the pending Norcraft acquisition.
The Company expects to generate free cash flow of approximately
About Fortune Brands
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains certain "forward-looking statements"
regarding business strategies, market potential, future financial
performance, the potential of our categories and brands, potential
effects of past actions on future performance, the impact of
acquisitions, expected free cash flow and capital expenditures, and
other matters. Statements preceded by, followed by or that otherwise
include the words "believes," "expects," "anticipates," "intends,"
"projects," "estimates," "plans," "outlook," 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. Our actual
results could differ materially from the results contemplated by these
forward-looking statements due to a number of factors, including but not
limited to: (i) our reliance on the North American home improvement,
repair and new home construction activity levels, (ii) the North
American and global economies, (iii) risk associated with entering into
potential strategic acquisitions and integrating acquired companies,
(iv) our ability to remain competitive, innovative and protect our
intellectual property, (v) our reliance on key customers and suppliers,
(vi) the cost and availability associated with our supply chains and the
availability of raw materials, (vii) risk of increases in our
postretirement benefit-related costs and funding requirements, (viii)
compliance with tax, environmental and federal, state, and international
laws and industry regulatory standards, and (ix) the risk of doing
business internationally. These and other factors are discussed 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 and free cash flow. 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.
Additional Information
This press release is for informational purposes only and is not a
recommendation, an offer to purchase or a solicitation of an offer to
sell shares of Norcraft stock.
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||||||||||||||
| (In millions, except per share amounts) | ||||||||||||||
| (Unaudited) | ||||||||||||||
|
Three Months Ended |
||||||||||||||
| 2015 | 2014 | % Change | ||||||||||||
| Net Sales (GAAP) | ||||||||||||||
| Cabinets | $ | 411.1 | $ | 410.9 | - | |||||||||
| Plumbing | 333.6 | 309.9 | 8 | |||||||||||
| Doors | 83.2 | 79.6 | 5 | |||||||||||
| Security | 122.9 | 88.7 | 39 | |||||||||||
| Total Net Sales | $ | 950.8 | $ | 889.1 | 7 | |||||||||
| Operating Income Before Charges/Gains (a) | ||||||||||||||
| Cabinets | $ | 13.9 | $ | 20.0 | (31 | ) | ||||||||
| Plumbing | 64.9 | 55.4 | 17 | |||||||||||
| Doors | (1.2 | ) | (0.1 | ) | (1,100 | ) | ||||||||
| Security | 9.9 | 9.2 | 8 | |||||||||||
| Corporate Expenses | (14.3 | ) | (14.4 | ) | 1 | |||||||||
| Total Operating Income Before Charges/Gains | $ | 73.2 | $ | 70.1 | 4 | |||||||||
| Earnings Per Share Before Charges/Gains (b) | ||||||||||||||
| Diluted - Continuing Operations | $ | 0.28 | $ | 0.27 | 4 | |||||||||
| EBITDA Before Charges/Gains (c) | $ |
95.5 |
$ | 90.4 | 6 | |||||||||
| (a) (b) (c) For definitions of Non-GAAP measures, see Definitions of Terms page | ||||||||||||||
|
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||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET (GAAP) | ||||||||
| (In millions) | ||||||||
| (Unaudited) | ||||||||
|
|
|
|||||||
| 2015 | 2014 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 179.4 | $ | 191.9 | ||||
| Accounts receivable, net | 477.2 | 458.9 | ||||||
| Inventories | 501.8 | 462.2 | ||||||
| Other current assets | 139.5 | 122.8 | ||||||
| Current assets of discontinued operations | 38.6 | 63.3 | ||||||
| Total current assets | 1,336.5 | 1,299.1 | ||||||
| Property, plant and equipment, net | 543.7 | 539.8 | ||||||
| Goodwill | 1,454.4 | 1,467.8 | ||||||
| Other intangible assets, net of accumulated amortization | 661.5 | 656.5 | ||||||
| Other assets | 70.9 | 72.4 | ||||||
| Non-current assets of discontinued operations | 18.3 | 17.3 | ||||||
| Total assets | $ | 4,085.3 | $ | 4,052.9 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities | ||||||||
| Current portion of long-term debt | $ | 26.3 | $ | 26.3 | ||||
| Accounts payable | 327.4 | 333.8 | ||||||
| Other current liabilities | 243.6 | 322.0 | ||||||
| Current liabilities of discontinued operations | 11.8 | 17.5 | ||||||
| Total current liabilities | 609.1 | 699.6 | ||||||
| Long-term debt | 733.7 | 643.7 | ||||||
| Deferred income taxes | 151.7 | 150.6 | ||||||
| Other non-current liabilities | 289.5 | 292.5 | ||||||
| Non-current liabilities of discontinued operations | 2.7 | 3.4 | ||||||
| Total liabilities | 1,786.7 | 1,789.8 | ||||||
| Stockholders' equity | 2,294.7 | 2,259.5 | ||||||
| Noncontrolling interests | 3.9 | 3.6 | ||||||
| Total equity | 2,298.6 | 2,263.1 | ||||||
| Total liabilities and equity | $ | 4,085.3 | $ | 4,052.9 | ||||
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| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| (In millions) | ||||||||||||||
| (Unaudited) | ||||||||||||||
|
Three Months Ended |
||||||||||||||
| 2015 | 2014 | |||||||||||||
| Operating Activities | ||||||||||||||
| Net income | $ | 40.3 | $ | 41.2 | ||||||||||
| Depreciation and amortization | 24.0 | 23.5 | ||||||||||||
| Recognition of actuarial losses | - | 0.6 | ||||||||||||
| Deferred taxes | 7.5 | 11.7 | ||||||||||||
| Other noncash items | 6.6 | 9.6 | ||||||||||||
| Changes in assets and liabilities, net | (145.1 | ) | (243.2 | ) | ||||||||||
| Net cash used in operating activities | $ | (66.7 | ) | $ | (156.6 | ) | ||||||||
| Investing Activities | ||||||||||||||
| Capital expenditures, net of proceeds from asset sales | $ | (24.3 | ) | $ | (20.9 | ) | ||||||||
| Cost of acquisitions, net of cash | (6.3 | ) | - | |||||||||||
| Net cash used in investing activities | $ | (30.6 | ) | $ | (20.9 | ) | ||||||||
| Financing Activities | ||||||||||||||
| Increase in debt, net | $ | 90.0 | $ | 128.5 | ||||||||||
| Proceeds from the exercise of stock options | 8.9 | 8.2 | ||||||||||||
| Treasury stock purchases | (0.4 | ) | (68.7 | ) | ||||||||||
| Dividends to stockholders | (22.3 | ) | (19.9 | ) | ||||||||||
| All other, net | 14.2 | 13.9 | ||||||||||||
| Net cash provided by financing activities | $ | 90.4 | $ | 62.0 | ||||||||||
| Effect of foreign exchange rate changes on cash | (5.6 | ) | (1.7 | ) | ||||||||||
| Net decrease in cash and cash equivalents | $ | (12.5 | ) | $ | (117.2 | ) | ||||||||
| Cash and cash equivalents at beginning of period | 191.9 | 241.4 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 179.4 | $ | 124.2 | ||||||||||
|
FREE CASH FLOW |
Three Months Ended |
2015 Full Year | ||||||||||||
| 2015 | 2014 | Approximation | ||||||||||||
| Free Cash Flow* | $ | (82.1 | ) | $ | (169.3 | ) |
$ |
250.0 |
||||||
| Add: | ||||||||||||||
| Capital expenditures |
24.6 |
21.0 | 130.0 | |||||||||||
| Less: | ||||||||||||||
| Proceeds from the sale of assets |
0.3 |
0.1 |
|
- |
||||||||||
| Proceeds from the exercise of stock options |
8.9 |
8.2 |
|
10.0 |
||||||||||
| Cash Flow From Operations (GAAP) | $ | (66.7 | ) | $ | (156.6 | ) |
$ |
370.0 |
||||||
|
* Free cash flow is cash flow from operations calculated in accordance with U.S. generally accepted accounting principles ("GAAP") less net capital expenditures (capital expenditures less proceeds from the sale of assets including property, plant and equipment) plus proceeds from the exercise of stock options. It additionally does not include any potential impact from the pending Norcraft acquisition. Free cash flow does not include adjustments for certain non-discretionary cash flows such as mandatory debt repayments. Free cash flow is a measure not derived in accordance with GAAP. Management believes that free cash flow provides investors with helpful supplemental information about the Company's ability to fund internal growth, make acquisitions, repay debt and related interest, pay dividends and repurchase common stock. This measure may be inconsistent with similar measures presented by other companies. |
|
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||||||||||||||
| CONSOLIDATED STATEMENT OF INCOME (GAAP) | ||||||||||||||
| (In millions, except per share amounts) | ||||||||||||||
| (Unaudited) | ||||||||||||||
|
Three Months Ended |
||||||||||||||
| 2015 | 2014 | % Change | ||||||||||||
| Net Sales | $ | 950.8 | $ | 889.1 | 7 | |||||||||
| Cost of products sold | 633.9 | 593.8 | 7 | |||||||||||
| Selling, general | ||||||||||||||
| and administrative expenses | 241.4 | 222.7 | 8 | |||||||||||
| Amortization of intangible assets | 3.5 | 3.1 | 13 | |||||||||||
| Restructuring charges | 4.7 | 0.2 | 2,250 | |||||||||||
| Operating Income | 67.3 | 69.3 | (3 | ) | ||||||||||
| Interest expense | 3.4 | 1.9 | 79 | |||||||||||
| Other expense (income), net | 1.7 | (0.5 | ) | 440 | ||||||||||
| Income from continuing operations before income taxes | 62.2 | 67.9 | (8 | ) | ||||||||||
| Income taxes | 21.3 | 21.6 | (1 | ) | ||||||||||
| Income from continuing operations, net of tax | $ | 40.9 | $ | 46.3 | (12 | ) | ||||||||
| Loss from discontinued operations, net of tax | (0.6 | ) | (5.1 | ) | 88 | |||||||||
| Net income | $ | 40.3 | $ | 41.2 | (2 | ) | ||||||||
| Less: Noncontrolling interests | 0.3 | 0.4 | (25 | ) | ||||||||||
| Net income attributable to | ||||||||||||||
|
|
$ | 40.0 | $ | 40.8 | (2 | ) | ||||||||
| Earnings Per Common Share, Diluted: | ||||||||||||||
| Net Income from continuing operations | $ | 0.25 | $ | 0.27 | (7 | ) | ||||||||
| Diluted Average Shares Outstanding | 162.6 | 171.2 | (5 | ) | ||||||||||
DILUTED EPS BEFORE CHARGES/GAINS RECONCILIATION
For the first quarter of 2015, diluted EPS before charges/gains is
income from continuing operations, net of tax and including the impact
from noncontrolling interests calculated on a diluted per-share basis
excluding
For the first quarter of 2014, diluted EPS before charges/gains is net
income calculated on a diluted per-share basis excluding
|
Three Months Ended |
|||||||||||||||||
| 2015 | 2014 | % Change | |||||||||||||||
| Earnings Per Common Share - Diluted | |||||||||||||||||
| Diluted EPS Before Charges/Gains (b) | $ | 0.28 | $ | 0.27 | 4 | ||||||||||||
| Restructuring and other charges | (0.02 | ) | - | - | |||||||||||||
| Defined benefit plan actuarial losses | - | - | - | ||||||||||||||
| Tax item | (0.01 | ) | - | - | |||||||||||||
| Diluted EPS - Continuing Operations | $ | 0.25 | $ | 0.27 | (7 | ) | |||||||||||
RECONCILIATION OF FULL YEAR 2015 EARNINGS GUIDANCE TO GAAP
For the full year, the Company is targeting diluted EPS before
charges/gains from continuing operations to be in the range of
(b) For definitions of Non-GAAP measures, see Definitions of Terms page
|
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|||||
| RECONCILIATION OF FULL YEAR 2014 DILUTED EPS BEFORE CHARGES/GAINS TO GAAP DILUTED EPS FROM CONTINUING OPERATIONS | |||||
| (unaudited) | |||||
| For the twelve months ended | |||||
|
|
|||||
| Diluted EPS Before Charges/Gains* (b) | $ | 1.74 | |||
| Restructuring and other charges | (0.05 | ) | |||
| Asset impairment charges | (0.01 | ) | |||
| Defined benefit plan actuarial losses | (0.05 | ) | |||
| Tax item | 0.01 | ||||
| Diluted EPS - Continuing Operations | $ | 1.64 | |||
*For the year ended
(b) For definitions of Non-GAAP measures, see Definitions of Terms page
|
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| (In millions) | ||||||||||||
| (Unaudited) | ||||||||||||
|
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO EBITDA BEFORE CHARGES/GAINS |
||||||||||||
|
Three Months Ended |
||||||||||||
| 2015 | 2014 | % Change | ||||||||||
| Income from continuing operations, net of tax | $ | 40.9 | $ | 46.3 | (12 | ) | ||||||
| Depreciation | $ |
20.5 |
$ |
16.7 |
23 |
|||||||
| Amortization of intangible assets | 3.5 | 3.1 | 13 | |||||||||
| Restructuring and other charges | 5.9 | 0.2 | 2,850 | |||||||||
| Interest expense | 3.4 | 1.9 | 79 | |||||||||
| Defined benefit plan actuarial losses | - | 0.6 | (100 | ) | ||||||||
| Income taxes | 21.3 | 21.6 | (1 | ) | ||||||||
| EBITDA BEFORE CHARGES/GAINS (c) | $ |
95.5 |
$ | 90.4 | 6 | |||||||
|
(c) For definitions of Non-GAAP measures, see Definitions of Terms page |
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|
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|||||||||||||||||||
| Reconciliation of Income Statement - GAAP to Before Charges/Gains Information | |||||||||||||||||||
|
Three Months Ended |
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| $ in millions, except per share amounts | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Before Charges/Gains adjustments | |||||||||||||||||||
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| Restructuring |
Defined benefit |
Before | |||||||||||||||||
| GAAP | and other |
plan actuarial |
Tax Item | Charges/Gains | |||||||||||||||
| (unaudited) | charges |
losses |
(Non-GAAP) | ||||||||||||||||
| 2015 | FIRST QUARTER | ||||||||||||||||||
| Net Sales | $ | 950.8 | - | - | - | ||||||||||||||
| Cost of products sold | 633.9 | (0.1 | ) | - | - | ||||||||||||||
| Selling, general & administrative expenses | 241.4 | (1.1 | ) | - | - | ||||||||||||||
| Amortization of intangible assets | 3.5 | - | - | - | |||||||||||||||
| Restructuring charges | 4.7 | (4.7 | ) | - | - | ||||||||||||||
| Operating Income | 67.3 | 5.9 | - | - | 73.2 | ||||||||||||||
| Interest expense | 3.4 | - | - | - | |||||||||||||||
| Other expense, net | 1.7 | - | - | - | |||||||||||||||
| Income from continuing operations before income taxes | 62.2 | 5.9 | - | - | 68.1 | ||||||||||||||
| Income taxes | 21.3 | 2.0 | - | (1.3 | ) | ||||||||||||||
| Income from continuing operations, net of tax | $ | 40.9 | 3.9 | - | 1.3 | $ | 46.1 | ||||||||||||
| Loss from discontinued operations | (0.6 | ) | - | - | - | ||||||||||||||
| Net Income | 40.3 | - | - | - | |||||||||||||||
| Less: Noncontrolling interests | 0.3 | - | - | - | |||||||||||||||
| Net Income attributable | |||||||||||||||||||
|
to |
$ | 40.0 | 3.9 | - | 1.3 | $ | 45.2 | ||||||||||||
| Income from continuing operations, net of tax | |||||||||||||||||||
| less noncontrolling interests | $ | 40.6 | 3.9 | - | 1.3 | $ | 45.8 | ||||||||||||
| Diluted Average Shares Outstanding | 162.6 | 162.6 | |||||||||||||||||
| Diluted EPS - Continuing Operations | 0.25 | 0.28 | |||||||||||||||||
| 2014 | |||||||||||||||||||
| Net Sales | $ | 889.1 | - | - | - | ||||||||||||||
| Cost of products sold | 593.8 | - | (0.6 | ) | - | ||||||||||||||
| Selling, general & administrative expenses | 222.7 | - | - | - | |||||||||||||||
| Amortization of intangible assets | 3.1 | - | - | - | |||||||||||||||
| Restructuring charges | 0.2 | (0.2 | ) | - | - | ||||||||||||||
| Operating Income | 69.3 | 0.2 | 0.6 | - | 70.1 | ||||||||||||||
| Interest expense | 1.9 | - | - | - | |||||||||||||||
| Other income, net | (0.5 | ) | - | - | - | ||||||||||||||
| Income from continuing operations before income taxes | 67.9 | 0.2 | 0.6 | - | 68.7 | ||||||||||||||
| Income taxes | 21.6 | - | 0.2 | - | |||||||||||||||
| Income from continuing operations, net of tax | $ | 46.3 | 0.2 | 0.4 | - | $ | 46.9 | ||||||||||||
| Income from discontinued operations | (5.1 | ) | - | - | - | ||||||||||||||
| Net Income | 41.2 | - | - | - | |||||||||||||||
| Less: Noncontrolling interests | 0.4 | - | - | - | |||||||||||||||
| Net Income attributable | |||||||||||||||||||
|
to |
$ | 40.8 | 0.2 | 0.4 | - | $ | 41.4 | ||||||||||||
| Income from continuing operations, net of tax | |||||||||||||||||||
| less noncontrolling interests | $ | 45.9 | 0.2 | 0.4 | - | $ | 46.5 | ||||||||||||
| Diluted Average Shares Outstanding | 171.2 | 171.2 | |||||||||||||||||
| Diluted EPS - Continuing Operations | 0.27 | 0.27 | |||||||||||||||||
|
|
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|
(In millions, except per share amounts) |
||||||||||||||
|
(Unaudited) |
||||||||||||||
|
Three Months Ended |
||||||||||||||
| 2015 | 2014 | % Change | ||||||||||||
| Net Sales (GAAP) | ||||||||||||||
| Cabinets | $ | 411.1 | $ | 410.9 | - | |||||||||
| Plumbing | 333.6 | 309.9 | 8 | |||||||||||
| Doors | 83.2 | 79.6 | 5 | |||||||||||
| Security | 122.9 | 88.7 | 39 | |||||||||||
| Total Net Sales | $ | 950.8 | $ | 889.1 | 7 | |||||||||
| Operating Income | ||||||||||||||
| Cabinets | $ | 13.0 | $ | 19.9 | (35 | ) | ||||||||
| Plumbing | 63.8 | 55.3 | 15 | |||||||||||
| Doors | (1.2 | ) | (0.1 | ) | (1,100 | ) | ||||||||
| Security | 8.0 | 9.2 | (13 | ) | ||||||||||
| Corporate Expenses (1) | (16.3 | ) | (15.0 | ) | (9 | ) | ||||||||
| Total Operating Income (GAAP) | $ | 67.3 | $ | 69.3 | (3 | ) | ||||||||
|
OPERATING INCOME BEFORE CHARGES/GAINS RECONCILIATION |
||||||||||||||
| Operating Income Before Charges/Gains (a) | ||||||||||||||
| Cabinets | $ | 13.9 | $ | 20.0 | (31 | ) | ||||||||
| Plumbing | 64.9 | 55.4 | 17 | |||||||||||
| Doors | (1.2 | ) | (0.1 | ) | (1,100 | ) | ||||||||
| Security | 9.9 | 9.2 | 8 | |||||||||||
| Corporate Expenses | (14.3 | ) | (14.4 | ) | 1 | |||||||||
| Total Operating Income Before Charges/Gains (a) | 73.2 | 70.1 | 4 | |||||||||||
| Restructuring and other charges (2) (3) | (5.9 | ) | (0.2 | ) | (2,850 | ) | ||||||||
| Defined benefit plan actuarial losses (4) | - | (0.6 | ) | 100 | ||||||||||
| Total Operating Income (GAAP) | $ | 67.3 | $ | 69.3 | (3 | ) | ||||||||
| (1) Corporate expenses include the components of defined benefit plan expense other than service cost including actuarial gains and losses. |
| (2) Restructuring charges are costs incurred to implement significant cost reduction initiatives and include workforce reduction costs. |
| (3) "Other charges" represent charges or gains directly related to restructuring initiatives that cannot be reported as restructuring under GAAP. Such charges or gains may include losses on disposal of inventories, trade receivables allowances from exiting product lines, accelerated depreciation resulting from the closure of facilities, and gains and losses on the sale of previously closed facilities. In addition, other charges include expenses related to the pending Norcraft transaction. |
| (4) Represents actuarial gains or losses associated with our defined benefit plans. Actuarial gains or losses in a period represent the difference between actual and actuarially assumed experience, principally related to liability discount rates and plan asset returns, as well as other actuarial assumptions including compensation rates, turnover rates, and health care cost trend rates. The Company recognizes actuarial gains or losses immediately in operating income to the extent they cumulatively exceed a "corridor." The corridor is equal to the greater of 10% of the fair value of plan assets or 10% of a plan's projected benefit obligation. Actuarial gains or losses are determined at required remeasurement dates which occur at least annually in the fourth quarter. Remeasurements due to plan amendments and settlements may also occur in interim periods during the year. Our operating income before charges/gains reflects our expected rate of return on pension plan assets which in a given period may materially differ from our actual return on plan assets. Our liability discount rates and plan asset returns are based upon difficult to predict fluctuations in global bond and equity markets that are not directly related to the Company's business. We believe that the exclusion of actuarial gains or losses from operating income before charges/gains provides investors with useful supplemental information regarding the underlying performance of the business from period to period that may be considered in conjunction with our operating income as measured on a GAAP basis. We present this supplemental information because such actuarial gains or losses may create volatility in our operating income that does not necessarily have an immediate corresponding impact on operating cash flow or the actual compensation and benefits provided to our employees. The table below sets forth additional supplemental information on the Company's historical actual and expected rate of return on plan assets, as well as discount rates used to value its defined benefit obligations: |
| ($ In millions) | ||||||||||||||||
| Year Ended | Year Ended | |||||||||||||||
|
|
|
|||||||||||||||
|
% |
$ |
% |
$ |
|||||||||||||
| Actual return on plan assets | 9.8% |
|
15.2% |
|
||||||||||||
| Expected return on plan assets | 7.4% | 42.2 | 7.8% | 41.8 | ||||||||||||
|
Discount rate at |
||||||||||||||||
| Pension benefits | 4.2% | 5.0% | ||||||||||||||
| Postretirement benefits | 3.5% | 4.3% | ||||||||||||||
|
(a) For definitions of Non-GAAP measures, see Definitions of Terms page |
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| (In millions) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
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RECONCILIATION OF SEGMENT OPERATING INCOME BEFORE CHARGES/GAINS TO GAAP OPERATING INCOME |
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| For the three month period ended | ||||||||||||||||
|
|
|
$ change |
% change | |||||||||||||
| CABINETS | ||||||||||||||||
| Operating income before charges/gains(a) | $ | 13.9 | $ | 20.0 | $ | (6.1 | ) | (31 | ) | |||||||
| Restructuring charges (1) | (0.9 | ) | (0.1 | ) | (0.8 | ) | (800 | ) | ||||||||
| Operating income (GAAP) | $ | 13.0 | $ | 19.9 | $ | (6.9 | ) | (35 | ) | |||||||
| PLUMBING | ||||||||||||||||
| Operating income before charges/gains(a) | $ | 64.9 | $ | 55.4 | $ | 9.5 | 17 | |||||||||
| Restructuring charges (1) | (1.0 | ) | (0.1 | ) | (0.9 | ) | (900 | ) | ||||||||
| Other charges (2) | ||||||||||||||||
| Cost of products sold | (0.1 | ) | - | (0.1 | ) | (100 | ) | |||||||||
| Operating income (GAAP) | $ | 63.8 | $ | 55.3 | $ | 8.5 | 15 | |||||||||
| DOORS | ||||||||||||||||
| Operating income before charges/gains (a) | $ | (1.2 | ) | $ | (0.1 | ) | $ | (1.1 | ) | (1,100 | ) | |||||
| Operating income (GAAP) | $ | (1.2 | ) | $ | (0.1 | ) | $ | (1.1 | ) | (1,100 | ) | |||||
| SECURITY | ||||||||||||||||
| Operating income before charges/gains(a) | $ | 9.9 | $ | 9.2 | $ | 0.7 | 8 | |||||||||
| Restructuring charges (1) | (1.9 | ) | - | (1.9 | ) | (100 | ) | |||||||||
| Operating income (GAAP) | $ | 8.0 | $ | 9.2 | $ | (1.2 | ) | (13 | ) | |||||||
| CORPORATE | ||||||||||||||||
| Corporate expense before charges/gains(a) | $ | (14.3 | ) | $ | (14.4 | ) | $ | 0.1 | 1 | |||||||
| Restructuring charges (1) | (0.9 | ) | - | (0.9 | ) | (100 | ) | |||||||||
| Other charges (2) | ||||||||||||||||
| Cost of products sold | (1.1 | ) | - | - | (100 | ) | ||||||||||
| Defined benefit plan actuarial losses (3) | - | (0.6 | ) | 0.6 | 100 | |||||||||||
| Corporate expense (GAAP) | $ | (16.3 | ) | $ | (15.0 | ) | $ | (0.2 | ) | (9 | ) | |||||
| (1) Restructuring charges are costs incurred to implement significant cost reduction initiatives and include workforce reduction costs. |
| (2) "Other charges" represent charges or gains directly related to restructuring initiatives that cannot be reported as restructuring under GAAP. Such charges or gains may include losses on disposal of inventories, trade receivables allowances from exiting product lines, accelerated depreciation resulting from the closure of facilities, and gains and losses on the sale of previously closed facilities. In addition, other charges include expenses related to the pending Norcraft transaction. |
| (3) Represents actuarial gains or losses associated with our defined benefit plans. Actuarial gains or losses in a period represent the difference between actual and actuarially assumed experience, principally related to liability discount rates and plan asset returns, as well as other actuarial assumptions including compensation rates, turnover rates, and health care cost trend rates. The Company recognizes actuarial gains or losses immediately in operating income to the extent they cumulatively exceed a "corridor." The corridor is equal to the greater of 10% of the fair value of plan assets or 10% of a plan's projected benefit obligation. Actuarial gains or losses are determined at required remeasurement dates which occur at least annually in the fourth quarter. Remeasurements due to plan amendments and settlements may also occur in interim periods during the year. Our operating income before charges/gains reflects our expected rate of return on pension plan assets which in a given period may materially differ from our actual return on plan assets. Our liability discount rates and plan asset returns are based upon difficult to predict fluctuations in global bond and equity markets that are not directly related to the Company's business. We believe that the exclusion of actuarial gains or losses from operating income before charges/gains provides investors with useful supplemental information regarding the underlying performance of the business from period to period that may be considered in conjunction with our operating income as measured on a GAAP basis. We present this supplemental information because such actuarial gains or losses may create volatility in our operating income that does not necessarily have an immediate corresponding impact on operating cash flow or the actual compensation and benefits provided to our employees. The table below sets forth additional supplemental information on the Company's historical actual and expected rate of return on plan assets, as well as discount rates used to value its defined benefit obligations: |
| ($ In millions) | ||||||||||||||||
| Year Ended | Year Ended | |||||||||||||||
|
|
|
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|
% |
$ |
% |
$ |
|||||||||||||
| Actual return on plan assets | 9.8% |
|
15.2% |
|
||||||||||||
| Expected return on plan assets | 7.4% | 42.2 | 7.8% | 41.8 | ||||||||||||
|
Discount rate at |
||||||||||||||||
| Pension benefits | 4.2% | 5.0% | ||||||||||||||
| Postretirement benefits | 3.5% | 4.3% | ||||||||||||||
| (a) For definitions of Non-GAAP measures, see Definitions of Terms page | ||||||||||||||||
| Definitions of Terms: Non-GAAP Measures |
|
(a) Operating income before charges/gains is operating income
derived in accordance with GAAP excluding restructuring and other
charges and the impact of income and expense from actuarial gains or
losses associated with our defined benefit plans. Operating income
before charges/gains is a measure not derived in accordance with
GAAP. Management uses this measure to evaluate the returns generated
by |
| (b) Diluted EPS before charges/gains is income from continuing operations, net of tax, less noncontrolling interests calculated on a diluted per-share basis excluding restructuring and other charges, tax items and the impact of income and expense from actuarial gains or losses associated with our defined benefit plans. 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 income from continuing
operations, net of tax, derived in accordance with GAAP excluding
the following impacts on income from continuing operations, net of
tax: restructuring and other charges, the impact of income and
expense from actuarial gains or losses associated with our defined
benefit plans, depreciation, amortization of intangible assets,
interest expense, 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 |
INVESTOR and MEDIA CONTACT:
847-484-4574
brian.lantz@FBHS.com
Source:
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