Fortune Brands Reports Strong 3Q Sales and Profit Growth
Highlights from operations:
- Strong end market, share gains and exceptional operational performance drove better than anticipated results across the Company
- Continued focus on employee safety and serving customers enabled operational excellence that drove results
- 3Q 2020 sales increased 13 percent year-over-year to
$1.7 billion - 3Q 2020 EPS of
$1.17 , an increase of 56 percent; EPS before charges / gains increased 25 percent to$1.19
“I continue to be amazed by our teams,” said
Third Quarter 2020
For the third quarter of 2020, sales were
“We are ahead of our plan to permanently advance the profitability of the company, and our financial results are just beginning to reflect this,” continued Fink. “We are accelerating our multi-year margin improvement journey in a fundamentally strong housing market, which should create exceptional value for our long-term stakeholders.”
For each segment in the third quarter of 2020, compared to the prior-year quarter:
- Plumbing sales increased 15 percent with double-digit sales growth in
U.S. Retail andChina . Operating margin before charges / gains was 20.8 percent even with increased brand investment and one-time costs and remains on track to deliver expected margins of approximately 22 percent for the full year. - Doors & Security sales increased 14 percent, with doors and decking showing double-digit growth and security products returning to mid-single digit growth. Operating margin before charges / gains was 16.4 percent, an increase of 190 basis points versus the third quarter of 2019.
Cabinet sales increased 11 percent. Strong demand for value-priced cabinets continues to drive growth in this segment. Operating margin before charges / gains was 12.2 percent, an increase of 220 basis points over the third quarter of 2019.
Balance Sheet and Liquidity
At the end of the quarter net debt was
“We are leveraging this strong market to increase market share and profitability as we position for 2021 and beyond,” said
2020 Outlook
While clear COVID-19 and macroeconomic risks remain, the Company is reinitiating formal 2020 financial guidance. For the full year, the Company expects net sales growth between 4 percent and 5 percent and earnings per share of
“We have clearly entered a new phase of demographics-driven housing growth,” said Fink. “I am incredibly excited about how our teams are poised to drive growth, capture share, grow margins and deploy capital to create even more stakeholder value over the next few years.”
About Fortune Brands
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains certain “forward-looking statements” regarding statements related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of the government, consumers, and the Company, on our business, financial condition and results of operations as well as general business strategies, market potential, future financial performance, the potential of our brands and other matters. Statements preceded by, followed by or that otherwise include the words “believes,” “positioned,” “expects,” “estimates,” “plans,” “look to,” “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. Important factors that could affect performance and cause results to differ materially from management’s expectations, or could affect the Company’s ability to achieve its strategic goals, include the uncertainties relating to the impact of COVID-19 on the Company’s business, operations and employees 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, net debt, net debt to EBITDA 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.
Source:
|
||||||||||||||||||||
(In millions, except per share amounts) |
||||||||||||||||||||
(Unaudited) |
||||||||||||||||||||
|
||||||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
|||||||||||||||
Plumbing |
$ |
590.6 |
|
$ |
514.1 |
|
15 |
|
Plumbing |
$ |
1,564.4 |
|
$ |
1,478.8 |
|
6 |
|
|||
Doors & Security |
|
406.7 |
|
|
355.2 |
|
14 |
|
Doors & Security |
|
1,052.7 |
|
|
1,017.6 |
|
3 |
|
|||
Cabinets |
|
654.8 |
|
|
589.7 |
|
11 |
|
Cabinets |
|
1,813.5 |
|
|
1,797.7 |
|
1 |
|
|||
Total |
$ |
1,652.1 |
|
$ |
1,459.0 |
|
13 |
|
Total |
$ |
4,430.6 |
|
$ |
4,294.1 |
|
3 |
|
|||
Current Quarter Operating Income |
||||||||||||||||||||
Before Charges & Gains |
GAAP |
|||||||||||||||||||
Three Months Ended |
Three Months Ended |
|||||||||||||||||||
Operating Income (loss) Before Charges/Gains (a) |
2020 |
2019 |
% Change |
Operating Income (loss) |
2020 |
2019 |
% Change |
|||||||||||||
Plumbing |
$ |
123.0 |
|
$ |
112.0 |
|
10 |
|
Plumbing |
$ |
116.6 |
|
$ |
112.0 |
|
4 |
|
|||
Doors & Security |
|
66.6 |
|
|
51.6 |
|
29 |
|
Doors & Security |
|
66.8 |
|
|
50.1 |
|
33 |
|
|||
Cabinets |
|
80.0 |
|
|
58.8 |
|
36 |
|
Cabinets |
|
82.1 |
|
|
25.1 |
|
227 |
|
|||
Corporate Expenses |
|
(25.4 |
) |
|
(19.2 |
) |
(32 |
) |
Corporate Expenses |
|
(25.3 |
) |
|
(19.2 |
) |
(32 |
) |
|||
Total Operating Income Before Charges/Gains |
$ |
244.2 |
|
$ |
203.2 |
|
20 |
|
Total Operating Income (GAAP) |
$ |
240.2 |
|
$ |
168.0 |
|
43 |
|
|||
Earnings Per Share Before Charges/Gains (b) | Diluted EPS (GAAP) | |||||||||||||||||||
Diluted |
$ |
1.19 |
|
$ |
0.95 |
|
25 |
|
Diluted EPS |
$ |
1.17 |
|
$ |
0.75 |
|
56 |
|
|||
EBITDA Before Charges/Gains (c) |
$ |
284.1 |
|
$ |
242.2 |
|
17 |
|
Net Income (GAAP) |
$ |
165.8 |
|
$ |
105.7 |
|
57 |
|
|||
Year to Date Operating Income |
||||||||||||||||||||
Before Charges & Gains |
GAAP |
|||||||||||||||||||
Nine Months Ended |
Nine Months Ended |
|||||||||||||||||||
Operating Income (loss) Before Charges/Gains (a) |
2020 |
2019 |
% Change |
Operating Income (loss) |
2020 |
2019 |
% Change |
|||||||||||||
Plumbing |
$ |
350.9 |
|
$ |
317.0 |
|
11 |
|
Plumbing |
$ |
330.6 |
|
$ |
307.9 |
|
7 |
|
|||
Doors & Security |
|
147.2 |
|
|
127.9 |
|
15 |
|
Doors & Security |
|
143.5 |
|
|
122.5 |
|
17 |
|
|||
Cabinets |
|
179.9 |
|
|
170.7 |
|
5 |
|
Cabinets |
|
163.1 |
|
|
134.0 |
|
22 |
|
|||
Corporate Expenses |
|
(67.3 |
) |
|
(58.4 |
) |
(15 |
) |
Corporate Expenses |
|
(69.0 |
) |
|
(58.4 |
) |
(18 |
) |
|||
Total Operating Income Before Charges/Gains |
$ |
610.7 |
|
$ |
557.2 |
|
10 |
|
Total Operating Income (GAAP) |
$ |
568.2 |
|
$ |
506.0 |
|
12 |
|
|||
Earnings Per Share Before Charges/Gains (b) | Diluted EPS (GAAP) | |||||||||||||||||||
Diluted |
$ |
2.94 |
|
$ |
2.60 |
|
13 |
|
Diluted EPS |
$ |
2.78 |
|
$ |
2.32 |
|
20 |
|
|||
EBITDA Before Charges/Gains (c) |
$ |
726.6 |
|
$ |
672.3 |
|
8 |
|
Net Income (GAAP) |
$ |
390.8 |
|
$ |
327.3 |
|
19 |
|
|||
(a) (b) (c) For definitions of Non-GAAP measures, see Definitions of Terms page | ||||||||||||||||||||
|
|||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (GAAP) |
|||||||||
(In millions) |
|||||||||
(Unaudited) |
|||||||||
|
|
||||||||
2020 |
2019 |
||||||||
Assets | |||||||||
Current assets | |||||||||
Cash and cash equivalents |
$ |
464.5 |
$ |
387.9 |
|||||
Accounts receivable, net |
|
765.2 |
|
|
624.8 |
|
|||
Inventories |
|
738.3 |
|
|
718.6 |
|
|||
Other current assets |
|
170.0 |
|
|
166.9 |
|
|||
Total current assets |
|
2,138.0 |
|
|
1,898.2 |
|
|||
Property, plant and equipment, net |
|
791.7 |
|
|
824.2 |
|
|||
|
2,085.2 |
|
|
2,090.2 |
|
||||
Other intangible assets, net of accumulated amortization |
|
1,111.2 |
|
|
1,168.9 |
|
|||
Other assets |
|
392.9 |
|
|
309.8 |
|
|||
Total assets |
$ |
6,519.0 |
|
$ |
6,291.3 |
|
|||
Liabilities and equity | |||||||||
Current liabilities | |||||||||
Short-term debt |
$ |
- |
|
$ |
399.7 |
|
|||
Accounts payable |
|
544.1 |
|
|
460.0 |
|
|||
Other current liabilities |
|
590.9 |
|
|
549.6 |
|
|||
Total current liabilities |
|
1,135.0 |
|
|
1,409.3 |
|
|||
Long-term debt |
|
2,086.5 |
|
|
1,784.6 |
|
|||
Deferred income taxes |
|
149.2 |
|
|
157.2 |
|
|||
Other non-current liabilities |
|
519.7 |
|
|
512.4 |
|
|||
Total liabilities |
|
3,890.4 |
|
|
3,863.5 |
|
|||
Stockholders' equity |
|
2,628.6 |
|
|
2,426.6 |
|
|||
Noncontrolling interests |
|
- |
|
|
1.2 |
|
|||
Total equity |
|
2,628.6 |
|
|
2,427.8 |
|
|||
Total liabilities and equity |
$ |
6,519.0 |
|
$ |
6,291.3 |
|
|||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
(In millions) | ||||||||||||
(Unaudited) | ||||||||||||
Nine Months Ended |
||||||||||||
2020 |
2019 |
|||||||||||
Operating activities | ||||||||||||
Net income |
$ |
390.8 |
|
$ |
327.3 |
|
||||||
Depreciation and amortization |
|
116.9 |
|
|
112.7 |
|
||||||
Recognition of actuarial losses |
|
0.6 |
|
|
2.1 |
|
||||||
Non-cash lease expense |
|
26.6 |
|
|
26.5 |
|
||||||
Deferred taxes |
|
(17.0 |
) |
|
(1.8 |
) |
||||||
Equity in losses of affiliate |
|
4.7 |
|
|
- |
|
||||||
Gains on equity investments |
|
(6.6 |
) |
|
- |
|
||||||
Asset impairment charges |
|
22.5 |
|
|
31.2 |
|
||||||
Other noncash items |
|
38.1 |
|
|
24.3 |
|
||||||
Changes in assets and liabilities, net |
|
(69.8 |
) |
|
(168.5 |
) |
||||||
Net cash provided by operating activities |
$ |
506.8 |
|
$ |
353.8 |
|
||||||
Investing activities | ||||||||||||
Capital expenditures |
$ |
(66.2 |
) |
$ |
(82.4 |
) |
||||||
Proceeds from the disposition of assets |
|
1.5 |
|
|
4.2 |
|
||||||
Cost of investments in equity securities |
|
(59.4 |
) |
|
- |
|
||||||
Other investing activities, net |
|
- |
|
|
0.1 |
|
||||||
Net cash used in investing activities |
$ |
(124.1 |
) |
$ |
(78.1 |
) |
||||||
Financing activities | ||||||||||||
Increase in debt, net |
$ |
(100.0 |
) |
$ |
14.3 |
|
||||||
Proceeds from the exercise of stock options |
|
56.0 |
|
|
6.9 |
|
||||||
|
(150.0 |
) |
|
(100.0 |
) |
|||||||
Dividends to stockholders |
|
(99.9 |
) |
|
(92.3 |
) |
||||||
All other |
|
(14.9 |
) |
|
(30.8 |
) |
||||||
Net cash used in financing activities |
$ |
(308.8 |
) |
$ |
(201.9 |
) |
||||||
Effect of foreign exchange rate changes on cash |
|
1.9 |
|
|
(1.2 |
) |
||||||
Net increase in cash and cash equivalents |
$ |
75.8 |
|
$ |
72.6 |
|
||||||
Cash, cash equivalents and restricted cash* at beginning of period |
|
394.9 |
|
|
270.7 |
|
||||||
Cash, cash equivalents and restricted cash* at end of period |
$ |
470.7 |
|
$ |
343.3 |
|
||||||
FREE CASH FLOW |
Nine Months Ended |
2020 Full Year |
||||||||||
2020 |
2019 |
Approximation |
||||||||||
Free Cash Flow** |
$ |
498.1 |
|
$ |
282.5 |
|
$ |
590.0 - 620.0 |
||||
Add: |
|
|||||||||||
Capital expenditures |
|
66.2 |
|
|
82.4 |
|
120.0 - 150.0 |
|||||
Less: |
|
|||||||||||
Proceeds from the disposition of assets |
|
1.5 |
|
|
4.2 |
|
1.5 |
|||||
Proceeds from the exercise of stock options |
|
56.0 |
|
|
6.9 |
|
56.0 |
|||||
Cash Flow From Operations (GAAP) |
$ |
506.8 |
|
$ |
353.8 |
|
$ |
652.5 - 712.5 |
||||
* 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 |
||||||||||||||||||
2020 |
2019 |
% Change |
|
2020 |
2019 |
% Change |
|||||||||||||
$ |
1,652.1 |
|
$ |
1,459.0 |
|
13 |
|
$ |
4,430.6 |
|
$ |
4,294.1 |
|
3 |
|
||||
Cost of products sold |
|
1,071.5 |
|
|
934.8 |
|
15 |
|
|
2,873.9 |
|
|
2,773.5 |
|
4 |
|
|||
Selling, general | |||||||||||||||||||
and administrative expenses |
|
328.3 |
|
|
311.3 |
|
5 |
|
|
918.4 |
|
|
943.9 |
|
(3 |
) |
|||
Amortization of intangible assets |
|
10.5 |
|
|
9.9 |
|
6 |
|
|
31.1 |
|
|
30.0 |
|
4 |
|
|||
Asset impairment charges |
|
- |
|
|
29.5 |
|
(100 |
) |
|
22.5 |
|
|
29.5 |
|
(24 |
) |
|||
Restructuring charges |
|
1.6 |
|
|
5.5 |
|
(71 |
) |
|
16.5 |
|
|
11.2 |
|
47 |
|
|||
Operating income |
|
240.2 |
|
|
168.0 |
|
43 |
|
|
568.2 |
|
|
506.0 |
|
12 |
|
|||
Interest expense |
|
20.1 |
|
|
23.6 |
|
(15 |
) |
|
64.4 |
|
|
71.8 |
|
(10 |
) |
|||
Other income, net |
|
(2.1 |
) |
|
(0.3 |
) |
(600 |
) |
|
(13.4 |
) |
|
(2.2 |
) |
(509 |
) |
|||
Income before taxes |
|
222.2 |
|
|
144.7 |
|
54 |
|
|
517.2 |
|
|
436.4 |
|
19 |
|
|||
Income tax |
|
54.0 |
|
|
39.0 |
|
38 |
|
|
121.7 |
|
|
109.1 |
|
12 |
|
|||
Income after tax |
$ |
168.2 |
|
$ |
105.7 |
|
59 |
|
$ |
395.5 |
|
$ |
327.3 |
|
21 |
|
|||
Equity in losses of affiliate |
|
2.4 |
|
|
- |
|
100 |
|
|
4.7 |
|
|
- |
|
100 |
|
|||
Net income |
$ |
165.8 |
|
$ |
105.7 |
|
57 |
|
$ |
390.8 |
|
$ |
327.3 |
|
19 |
|
|||
Less: Noncontrolling interests |
|
1.2 |
|
|
0.1 |
|
1,100 |
|
|
1.3 |
|
|
(0.5 |
) |
360 |
|
|||
Net income attributable to | |||||||||||||||||||
$ |
164.6 |
|
$ |
105.6 |
|
56 |
|
$ |
389.5 |
|
$ |
327.8 |
|
19 |
|
||||
Earnings Per Common Share, Diluted: | |||||||||||||||||||
Net income |
$ |
1.17 |
|
$ |
0.75 |
|
56 |
|
$ |
2.78 |
|
$ |
2.32 |
|
20 |
|
|||
Diluted Average Shares Outstanding |
|
140.5 |
|
|
140.9 |
|
- |
|
|
140.0 |
|
|
141.4 |
|
(1 |
) |
|||
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 |
||||||||||||||||||
2020 |
2019 |
% Change |
2020 |
2019 |
% Change | ||||||||||||||
Earnings Per Common Share - Diluted | |||||||||||||||||||
Diluted EPS Before Charges/Gains (b) |
$ |
1.19 |
|
$ |
0.95 |
|
25 |
$ |
2.94 |
|
$ |
2.60 |
|
13 |
|||||
Restructuring and other charges |
|
(0.03 |
) |
|
(0.03 |
) |
- |
|
|
(0.11 |
) |
|
(0.11 |
) |
- |
|
|||
Asset impairment charges (d) |
|
- |
|
|
(0.16 |
) |
100 |
|
|
(0.13 |
) |
|
(0.16 |
) |
19 |
|
|||
Gains on equity investments (e) |
|
- |
|
|
- |
|
- |
|
|
0.06 |
|
|
- |
|
- |
|
|||
Defined benefit plan actuarial losses |
|
(0.01 |
) |
|
(0.01 |
) |
- |
|
|
- |
|
|
(0.01 |
) |
100 |
|
|||
Tax items |
|
0.02 |
|
|
- |
|
- |
|
|
0.02 |
|
|
- |
|
- |
|
|||
Diluted EPS (GAAP) |
$ |
1.17 |
|
$ |
0.75 |
|
56 |
|
$ |
2.78 |
|
$ |
2.32 |
|
20 |
|
|||
RECONCILIATION OF FULL YEAR 2020 EARNINGS GUIDANCE TO GAAP | |||||||||||||||||||
The Company is targeting diluted EPS before charges/gains to be in the range of |
|||||||||||||||||||
(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 |
|||||||||||||||||||
2020 |
2019 |
% Change |
|
2020 |
2019 |
% Change |
|||||||||||||||
EBITDA BEFORE CHARGES/GAINS (c) |
$ |
284.1 |
|
$ |
242.2 |
|
|
17 |
|
$ |
726.6 |
|
$ |
672.3 |
|
8 |
|
||||
|
|
||||||||||||||||||||
Depreciation* |
$ |
(26.7 |
) |
$ |
(26.7 |
) |
|
- |
|
$ |
(81.8 |
) |
$ |
(80.8 |
) |
(1 |
) |
||||
Amortization of intangible assets |
|
(10.5 |
) |
|
(9.9 |
) |
|
(6 |
) |
|
(31.1 |
) |
|
(30.0 |
) |
(4 |
) |
||||
Restructuring and other charges |
|
(4.0 |
) |
|
(5.7 |
) |
|
30 |
|
|
(20.0 |
) |
|
(21.7 |
) |
8 |
|
||||
Interest expense |
|
(20.1 |
) |
|
(23.6 |
) |
|
15 |
|
|
(64.4 |
) |
|
(71.8 |
) |
10 |
|
||||
Asset impairment charges (d) |
|
- |
|
|
(29.5 |
) |
|
100 |
|
|
(22.5 |
) |
|
(29.5 |
) |
24 |
|
||||
Equity in losses of affiliate |
|
(2.4 |
) |
|
- |
|
|
(100 |
) |
|
(4.7 |
) |
|
- |
|
(100 |
) |
||||
Gains on equity investments (e) |
|
- |
|
|
- |
|
|
- |
|
|
11.0 |
|
|
- |
|
100 |
|
||||
Defined benefit plan actuarial losses |
|
(0.6 |
) |
|
(2.1 |
) |
|
71 |
|
|
(0.6 |
) |
|
(2.1 |
) |
71 |
|
||||
Income taxes |
|
(54.0 |
) |
|
(39.0 |
) |
|
(38 |
) |
|
(121.7 |
) |
|
(109.1 |
) |
(12 |
) |
||||
Net Income (GAAP) |
$ |
165.8 |
|
$ |
105.7 |
|
|
57 |
|
$ |
390.8 |
|
$ |
327.3 |
|
19 |
|
||||
* Depreciation excludes accelerated depreciation expense of |
|||||||||||||||||||||
CALCULATION OF NET DEBT-TO-EBITDA BEFORE CHARGES/GAINS RATIO | |||||||||||||||||||||
As of |
|||||||||||||||||||||
Short-term debt ** |
|
- |
|
||||||||||||||||||
Long-term debt ** |
|
2,086.5 |
|
||||||||||||||||||
Total debt |
|
2,086.5 |
|
||||||||||||||||||
Less: | |||||||||||||||||||||
Cash and cash equivalents ** |
|
464.5 |
|
||||||||||||||||||
Net debt (1) |
|
1,622.0 |
|
||||||||||||||||||
For the twelve months ended |
|||||||||||||||||||||
EBITDA before charges/gains (2) (c) |
|
974.2 |
|
||||||||||||||||||
Net debt-to-EBITDA before charges/gains ratio (1/2) |
|
1.7 |
|
||||||||||||||||||
** Amounts are per the unaudited Condensed Consolidated Balance Sheet as of |
|||||||||||||||||||||
Three Months Ended |
Nine Months Ended |
Twelve Months Ended |
|||||||||||||||||||
2019 |
2020 |
2020 |
|||||||||||||||||||
EBITDA BEFORE CHARGES/GAINS (c) |
$ |
247.6 |
|
$ |
726.6 |
|
$ |
974.2 |
|
||||||||||||
Depreciation*** |
$ |
(28.6 |
) |
$ |
(81.8 |
) |
$ |
(110.4 |
) |
||||||||||||
Amortization of intangible assets |
|
(11.4 |
) |
|
(31.1 |
) |
|
(42.5 |
) |
||||||||||||
Restructuring and other charges |
|
(2.3 |
) |
|
(20.0 |
) |
|
(22.3 |
) |
||||||||||||
Interest expense |
|
(22.4 |
) |
|
(64.4 |
) |
|
(86.8 |
) |
||||||||||||
Asset impairment charges (d) |
|
(12.0 |
) |
|
(22.5 |
) |
|
(34.5 |
) |
||||||||||||
Equity in losses of affiliate |
|
- |
|
|
(4.7 |
) |
|
(4.7 |
) |
||||||||||||
Gains on equity investments (e) |
|
- |
|
|
11.0 |
|
|
11.0 |
|
||||||||||||
Defined benefit plan actuarial losses |
|
(32.0 |
) |
|
(0.6 |
) |
|
(32.6 |
) |
||||||||||||
Income taxes |
|
(34.9 |
) |
|
(121.7 |
) |
|
(156.6 |
) |
||||||||||||
Net Income (GAAP) |
$ |
104.0 |
|
$ |
390.8 |
|
$ |
494.8 |
|
||||||||||||
*** 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 |
||||||||||||||||||
2020 |
2019 |
% Change |
2020 |
2019 |
% Change | ||||||||||||||
Plumbing |
$ |
590.6 |
|
$ |
514.1 |
|
15 |
|
$ |
1,564.4 |
|
$ |
1,478.8 |
|
6 |
|
|||
Doors & Security |
|
406.7 |
|
|
355.2 |
|
14 |
|
|
1,052.7 |
|
|
1,017.6 |
|
3 |
|
|||
Cabinets |
|
654.8 |
|
|
589.7 |
|
11 |
|
|
1,813.5 |
|
|
1,797.7 |
|
1 |
|
|||
Total |
$ |
1,652.1 |
|
$ |
1,459.0 |
|
13 |
|
$ |
4,430.6 |
|
$ |
4,294.1 |
|
3 |
|
|||
Operating Income (loss) | |||||||||||||||||||
Plumbing |
$ |
116.6 |
|
$ |
112.0 |
|
4 |
|
$ |
330.6 |
|
$ |
307.9 |
|
7 |
|
|||
Doors & Security |
|
66.8 |
|
|
50.1 |
|
33 |
|
|
143.5 |
|
|
122.5 |
|
17 |
|
|||
Cabinets |
|
82.1 |
|
|
25.1 |
|
227 |
|
|
163.1 |
|
|
134.0 |
|
22 |
|
|||
Corporate expenses |
|
(25.3 |
) |
|
(19.2 |
) |
(32 |
) |
|
(69.0 |
) |
|
(58.4 |
) |
(18 |
) |
|||
Total Operating Income (GAAP) |
$ |
240.2 |
|
$ |
168.0 |
|
43 |
|
$ |
568.2 |
|
$ |
506.0 |
|
12 |
|
|||
OPERATING INCOME BEFORE CHARGES/GAINS RECONCILIATION | |||||||||||||||||||
Operating Income (loss) Before Charges/Gains (a) | |||||||||||||||||||
Plumbing |
$ |
123.0 |
|
$ |
112.0 |
|
10 |
|
$ |
350.9 |
|
$ |
317.0 |
|
11 |
|
|||
Doors & Security |
|
66.6 |
|
|
51.6 |
|
29 |
|
|
147.2 |
|
|
127.9 |
|
15 |
|
|||
Cabinets |
|
80.0 |
|
|
58.8 |
|
36 |
|
|
179.9 |
|
|
170.7 |
|
5 |
|
|||
Corporate expenses |
|
(25.4 |
) |
|
(19.2 |
) |
(32 |
) |
|
(67.3 |
) |
|
(58.4 |
) |
(15 |
) |
|||
Total Operating Income Before Charges/Gains (a) |
|
244.2 |
|
|
203.2 |
|
20 |
|
|
610.7 |
|
|
557.2 |
|
10 |
|
|||
Restructuring and other charges (1) (2) |
|
(4.0 |
) |
|
(5.7 |
) |
30 |
|
|
(20.0 |
) |
|
(21.7 |
) |
8 |
|
|||
Asset impairment charges (d) |
|
- |
|
|
(29.5 |
) |
100 |
|
|
(22.5 |
) |
|
(29.5 |
) |
24 |
|
|||
Total Operating Income (GAAP) |
$ |
240.2 |
|
$ |
168.0 |
|
43 |
|
$ |
568.2 |
|
$ |
506.0 |
|
12 |
|
|||
(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 costs may include losses on disposal of inventories, trade receivables allowances from exiting product lines, accelerated depreciation expense, impairments related to previously closed facilities and losses on the sale of closed facilities. In total, we recognized a charge of In our Doors & Security segment, other charges also includes an acquisition-related inventory step-up expense (Fiberon) classified in cost of products sold 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 | ||||||||||||||||
|
|
Restructuring |
Defined benefit |
Asset |
|
|
Before |
|||||||||
GAAP |
|
and other |
plan actuarial |
impairments |
Tax items (2) |
|
Charges/Gains |
|||||||||
(unaudited) |
|
charges (1) |
losses |
|
|
|
(Non-GAAP) |
|||||||||
2020 |
THIRD QUARTER | |||||||||||||||
$ |
1,652.1 |
|
- |
|
- |
|
- |
|
- |
|
||||||
Cost of products sold |
|
1,071.5 |
|
(2.4 |
) |
- |
|
- |
|
- |
|
|||||
Selling, general & administrative expenses |
|
328.3 |
|
- |
|
- |
|
- |
|
- |
|
|||||
Amortization of intangible assets |
|
10.5 |
|
- |
|
- |
|
- |
|
- |
|
|||||
Restructuring charges |
|
1.6 |
|
(1.6 |
) |
- |
|
- |
|
- |
|
|||||
Operating Income |
|
240.2 |
|
4.0 |
|
- |
|
- |
|
- |
|
|
244.2 |
|||
Interest expense |
|
20.1 |
|
- |
|
- |
|
- |
|
- |
|
|||||
Other income, net |
|
(2.1 |
) |
- |
|
(0.6 |
) |
- |
|
- |
|
|||||
Income before taxes |
|
222.2 |
|
4.0 |
|
0.6 |
|
- |
|
- |
|
|
226.8 |
|||
Income tax |
54.0 |
1.2 |
0.2 |
- |
2.1 |
|||||||||||
Income after tax |
$ |
168.2 |
|
2.8 |
|
0.4 |
|
- |
|
(2.1 |
) |
$ |
169.3 |
|||
Equity in losses of affliate |
|
2.4 |
|
(0.6 |
) |
- |
|
- |
|
- |
|
|||||
Net Income |
|
165.8 |
|
- |
|
- |
|
- |
|
- |
|
|||||
Less: Noncontrolling interests (1) |
|
1.2 |
|
(1.2 |
) |
- |
|
- |
|
- |
|
|||||
Net Income attributable | ||||||||||||||||
to |
$ |
164.6 |
|
4.6 |
|
0.4 |
|
- |
|
(2.1 |
) |
$ |
167.5 |
|||
Diluted Average Shares Outstanding |
|
140.5 |
|
|
140.5 |
|||||||||||
Diluted EPS |
|
1.17 |
|
|
1.19 |
|||||||||||
2019 |
||||||||||||||||
$ |
1,459.0 |
|
- |
|
- |
|
- |
|
- |
|
||||||
Cost of products sold |
|
934.8 |
|
0.2 |
|
- |
|
- |
|
- |
|
|||||
Selling, general & administrative expenses |
|
311.3 |
|
(0.4 |
) |
- |
|
- |
|
- |
|
|||||
Amortization of intangible assets |
|
9.9 |
|
- |
|
- |
|
- |
|
- |
|
|||||
Asset impairment charges |
|
29.5 |
|
- |
|
- |
|
(29.5 |
) |
- |
|
|||||
Restructuring charges |
|
5.5 |
|
(5.5 |
) |
- |
|
- |
|
- |
|
|||||
Operating Income |
|
168.0 |
|
5.7 |
|
- |
|
29.5 |
|
- |
|
|
203.2 |
|||
Interest expense |
|
23.6 |
|
- |
|
- |
|
- |
|
- |
|
|||||
Other income, net |
|
(0.3 |
) |
- |
|
(2.1 |
) |
- |
|
- |
|
|||||
Income before taxes |
|
144.7 |
|
5.7 |
|
2.1 |
|
29.5 |
|
- |
|
|
182.0 |
|||
Income tax |
|
39.0 |
|
1.4 |
|
0.5 |
|
7.0 |
|
0.2 |
|
|||||
Income after tax |
$ |
105.7 |
|
4.3 |
|
1.6 |
|
22.5 |
|
(0.2 |
) |
$ |
133.9 |
|||
Equity in losses of affliate |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|||||
Net Income |
|
105.7 |
|
- |
|
- |
|
- |
|
- |
|
|||||
Less: Noncontrolling interests (1) |
|
0.1 |
|
(0.1 |
) |
- |
|
- |
|
- |
|
|||||
Net Income attributable | ||||||||||||||||
to |
$ |
105.6 |
|
4.4 |
|
1.6 |
|
22.5 |
|
(0.2 |
) |
$ |
133.9 |
|||
Diluted Average Shares Outstanding |
|
140.9 |
|
|
140.9 |
|||||||||||
Diluted EPS |
|
0.75 |
|
|
0.95 |
|||||||||||
(1) Restructuring and other charges includes a loss in 2020 that reflects quarterly amortization of differences between our investment in Flo Technologies and the carrying value of their equity. Includes noncontrolling interests share of restructuring and other charges in our |
||||||||||||||||
(2) Tax items for the three months ended September 30, 2020 represent adjustments to previously recorded restructuring-related charges and foreign exchange movement related to the impact of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) recorded in earlier periods. Tax items for the three months ended September 30, 2019 represent foreign exchange movement related to the impact of the Tax Act recorded in earlier periods. | ||||||||||||||||
Reconciliation of Income Statements - GAAP to Before Charges/Gains Information | ||||||||||||||||||
Nine Months Ended September 30, | ||||||||||||||||||
in millions, except per share amounts | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
Before Charges/Gains adjustments | ||||||||||||||||||
Restructuring | Defined benefit | Asset | Equity | Before | ||||||||||||||
GAAP | and other | plan actuarial | impairments | investment | Tax items (2) | Charges/Gains | ||||||||||||
(unaudited) | charges (1) | losses | (Non-GAAP) | |||||||||||||||
2020 |
YEAR TO DATE | |||||||||||||||||
$ |
4,430.6 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
||||||
Cost of products sold |
|
2,873.9 |
|
(4.7 |
) |
- |
|
- |
|
- |
|
- |
|
|||||
Selling, general & administrative expenses |
|
918.4 |
|
1.2 |
|
- |
|
- |
|
- |
|
- |
|
|||||
Amortization of intangible assets |
|
31.1 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|||||
Asset impairment charges |
|
22.5 |
|
- |
|
- |
|
(22.5 |
) |
- |
|
- |
|
|||||
Restructuring charges |
|
16.5 |
|
(16.5 |
) |
- |
|
- |
|
- |
|
- |
|
|||||
Operating Income |
|
568.2 |
|
20.0 |
|
- |
|
22.5 |
|
- |
|
- |
|
|
610.7 |
|||
Interest expense |
|
64.4 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|||||
Other income, net |
|
(13.4 |
) |
- |
|
(0.6 |
) |
- |
|
11.0 |
|
- |
|
|||||
Income before taxes |
|
517.2 |
|
20.0 |
|
0.6 |
|
22.5 |
|
(11.0 |
) |
- |
|
|
549.3 |
|||
Income taxes |
|
121.7 |
|
5.6 |
|
0.2 |
|
4.9 |
|
(2.7 |
) |
4.2 |
|
|||||
Income after tax |
$ |
395.5 |
|
14.4 |
|
0.4 |
|
17.6 |
|
(8.3 |
) |
(4.2 |
) |
$ |
415.4 |
|||
Equity in losses of affiliate |
|
4.7 |
|
(1.0 |
) |
- |
|
- |
|
- |
|
- |
|
|||||
Net Income |
|
390.8 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|||||
Less: Noncontrolling interests (1) |
|
1.3 |
|
(1.3 |
) |
- |
|
- |
|
- |
|
- |
|
|||||
Net Income attributable | ||||||||||||||||||
to |
$ |
389.5 |
|
16.7 |
|
0.4 |
|
17.6 |
|
(8.3 |
) |
(4.2 |
) |
$ |
411.7 |
|||
Diluted Average Shares Outstanding |
|
140.0 |
|
|
140.0 |
|||||||||||||
Diluted EPS |
|
2.78 |
|
|
2.94 |
|||||||||||||
2019 |
||||||||||||||||||
$ |
4,294.1 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
||||||
Cost of products sold |
|
2,773.5 |
|
(7.1 |
) |
- |
|
- |
|
- |
|
- |
|
|||||
Selling, general & administrative expenses |
|
943.9 |
|
(3.4 |
) |
- |
|
- |
|
- |
|
- |
|
|||||
Amortization of intangible assets |
|
30.0 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|||||
Asset impairment charges |
|
29.5 |
|
- |
|
- |
|
(29.5 |
) |
- |
|
- |
|
|||||
Restructuring charges |
|
11.2 |
|
(11.2 |
) |
- |
|
- |
|
- |
|
- |
|
|||||
Operating Income |
|
506.0 |
|
21.7 |
|
- |
|
29.5 |
|
- |
|
- |
|
|
557.2 |
|||
Interest expense |
|
71.8 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|||||
Other income, net |
|
(2.2 |
) |
- |
|
(2.1 |
) |
- |
|
- |
|
- |
|
|||||
Income before taxes |
|
436.4 |
|
21.7 |
|
2.1 |
|
29.5 |
|
- |
|
- |
|
|
489.7 |
|||
Income taxes |
|
109.1 |
|
4.7 |
|
0.5 |
|
7.0 |
|
- |
|
0.6 |
|
|||||
Income after tax |
$ |
327.3 |
|
17.0 |
|
1.6 |
|
22.5 |
|
- |
|
(0.6 |
) |
$ |
367.8 |
|||
Net Income |
|
327.3 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|||||
Less: Noncontrolling interests (1) |
|
(0.5 |
) |
0.4 |
|
- |
|
- |
|
- |
|
- |
|
|||||
Net Income attributable | ||||||||||||||||||
to |
$ |
327.8 |
|
16.6 |
|
1.6 |
|
22.5 |
|
- |
|
(0.6 |
) |
$ |
367.9 |
|||
Diluted Average Shares Outstanding |
|
141.4 |
|
|
141.4 |
|||||||||||||
Diluted EPS |
|
2.32 |
|
|
2.60 |
|||||||||||||
(1) Restructuring and other charges includes a loss in 2020 that reflects quarterly amortization of differences between our investment in Flo Technologies and the carrying value of their equity. Includes noncontrolling interests share of restructuring and other charges in our |
||||||||||||||||||
(2) Tax items for the nine months ended September 30, 2020 represent adjustments to previously recorded restructuring-related charges, and activity related to the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) recorded in earlier periods, including foreign exchange impact. Tax items for the nine months ended September 30, 2019 represent foreign exchange movement related to the impact of the Tax Act recorded in earlier periods. | ||||||||||||||||||
BEFORE CHARGES/GAINS OPERATING MARGIN TO OPERATING MARGIN | |||||||
(Unaudited) | |||||||
Three Months Ended September 30, | |||||||
2020 |
2019 |
Change | |||||
PLUMBING | |||||||
Before charges/gains operating margin |
20.8% |
21.8% |
(100) bps | ||||
Restructuring & other charges |
(1.1%) |
- |
|||||
Operating margin |
19.7% |
21.8% |
(210) bps | ||||
|
|
||||||
|
|
||||||
DOORS & SECURITY |
|
|
|||||
Before charges/gains operating margin |
16.4% |
14.5% |
190 bps | ||||
Restructuring & other charges |
- |
(0.4%) |
|||||
Operating margin |
16.4% |
14.1% |
230 bps | ||||
|
|
||||||
|
|
||||||
CABINETS |
|
|
|||||
Before charges/gains operating margin |
12.2% |
10.0% |
220 bps | ||||
Restructuring & other charges |
0.3% |
(0.7%) |
|||||
Asset impairment charges |
- |
(5.0%) |
|||||
Operating margin |
12.5% |
4.3% |
820 bps | ||||
|
|
||||||
|
|
||||||
TOTAL COMPANY |
|
|
|||||
Before charges/gains operating margin |
14.8% |
13.9% |
90 bps | ||||
Restructuring & other charges |
(0.3%) |
(0.4%) |
|||||
Asset impairment charges |
- |
(2.0%) |
|||||
Operating margin |
14.5% |
11.5% |
300 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 and asset impairment charges, 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. | |||||||
BEFORE CHARGES/GAINS OPERATING MARGIN TO OPERATING MARGIN | |||||
(Unaudited) | |||||
Twelve Months Ended December 31, |
|||||
2020 |
|||||
PLUMBING | |||||
Before charges/gains operating margin |
22.0% |
||||
Restructuring & other charges |
(0.4%) |
||||
Asset Impairment charge |
(0.6%) |
||||
Operating margin |
21.0% |
||||
TOTAL COMPANY | |||||
Before charges/gains operating margin |
13.9% |
||||
Restructuring & other charges |
(0.4%) |
||||
Asset impairment charges |
(0.3%) |
||||
Operating margin |
13.2% |
||||
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 and asset impairment charges, 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. | |||||
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 asset impairment charges. Operating income 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 less noncontrolling interests calculated on a diluted per-share basis excluding restructuring and other charges, asset impairment charges, gains on equity investments, amortization of differences between equity investment and the carrying value of equity, actuarial losses associated with our defined benefit plans 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, interest expense, asset impairment charges, equity in loss of affiliate, gains on equity investments, defined benefit plan actuarial losses 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 nine months ended September 30, 2020 represent pre-tax impairment charges of $22.5 million related to indefinite-lived tradenames in our Cabinets and Plumbing segments. Asset impairment charges for the three and nine months ended September 30, 2019 represent a pre-tax impairment of $29.5 million related to an indefinite-lived tradename in our Cabinets segment. It also includes a $1.7 million fair value asset impairment expense classified in cost of products sold, for the nine months ended September 30, 2019 associated with an idle manufacturing facility in our Doors & Security segment. | |||||||||
(e) Gains on equity investments for the three and nine months ended September 30, 2020 represents gains related to our 2020 investments in Flo Technologies. | |||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20201028006084/en/
INVESTOR and MEDIA CONTACT:
847-484-4573
Investor.Questions@FBHS.com
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