Fortune Brands Reports Solid Second Quarter Sales and EPS Growth and Raises Full-Year EPS Outlook; Announces Combination of Doors and Security Businesses
Highlights from continuing operations reflect continued solid execution:
- Q2 2018 sales increased 5 percent year-over-year to
$1.4 billion - Q2 2018 EPS
$0.88 ; EPS before charges/gains increased 9 percent to$1.00 - Company raises full-year 2018 EPS outlook: EPS before charges/gains outlook now
$3.62 –$3.72 on sales growth of 6 – 7 percent - Doors and Security divisions combining: unified platform with approximately
$1.2B annual sales to accelerate growth through innovation and scale
“In the second quarter our teams delivered solid results overall and the performance in our Plumbing and Doors businesses was outstanding, again,” said
Second Quarter 2018
For the second quarter of 2018, sales were
“The Global Plumbing Group continues to impress, with low double digit sales growth at our target 21 percent operating margin. Across the company, performance inside each business was at or above our expectations despite inflation which ran ahead of price in the quarter,” said Klein.
For each segment in the second quarter of 2018, compared to the prior-year quarter:
- Plumbing sales increased 11 percent and 9 percent organically, led by growth in U.S. wholesale and
China . Operating margin before charges/gains was 20.9 percent. - Cabinet sales declined 2 percent versus the prior year. Excluding exits from targeted U.S. homecenter and Canadian businesses in the prior year, cabinet sales increased 1 percent. Operating margin before charges/gains was 12.7 percent.
- Door sales increased 20 percent driven by strong growth in all channels and continued share gains in wholesale and retail. Operating margin before charges/gains was 17.5 percent.
- Security sales increased 3 percent driven by retail growth, partly offset by lower commercial growth due to timing of sales. Operating margin before charges/gains was 13.6 percent and was impacted by metals inflation which should be recovered as retail pricing improves second half margins.
Annual Outlook for 2018
The Company’s 2018 annual outlook continues to be based on a U.S. home products market growth assumption of 5 to 7 percent and an assumption of 5 to 6 percent growth for our total global market. The Company expects full-year 2018 sales growth in the range of 6 to 7 percent.
The Company raised its full-year 2018 EPS outlook before charges/gains, with a new range of
The Company also expects to generate free cash flow of approximately
“In addition to delivering solid operating and financial performance, we successfully executed a number of important actions—to pivot our Cabinets business toward the most attractive parts of the market, and combine our Doors and Security business units to drive higher levels of scale, innovation and profitability. These actions should begin providing benefits this year while enabling us to drive profitable growth over the next several years,” Klein said.
Doors & Security Combination
Today the Company announced a plan to combine its Doors and Security businesses into a single business segment, “Doors & Security,” with combined results beginning in the third quarter. The combination will result in a new unit with approximately
- Leverage strong leadership. The new unit is led by
Brett Finley , previously President of Therma-Tru Doors. In his new role, Finley will continue to report directly to FBHS CEOChris Klein . - Drive innovation and accelerate product development. Master Lock and Therma-Tru are both pursuing next generation connected locking and security applications, which will be scaled more effectively across a larger business unit.
- Enhance platform scale. The combined business can more effectively attract high impact talent, while utilizing common systems and back office teams to improve profitability.
- Improve and speed acquisition integration. A deeper and more robust team can drive business initiatives faster and more seamlessly integrate acquisitions.
“Over the last two and a half years, Brett has focused the Doors business on the most attractive parts of the market and simplified the business, allowing for an acceleration of innovation. This has resulted in a more efficient organization, impressive growth and strong returns. Brett plans to bring this approach to the Security business, and I am confident in his team’s ability to grow and create value for shareholders through the new structure,” said Klein.
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 brands, the impact of the combination of our Doors and Security businesses and other matters. Statements preceded by, followed by or that otherwise include the words “believes,” “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. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including the factors 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, organic sales, operating margin 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.
| FORTUNE BRANDS HOME & SECURITY, INC. | |||||||||||||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
| 2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||||||||||||||
| Net Sales (GAAP) | Net Sales (GAAP) | ||||||||||||||||||||||||||
| Cabinets | $ | 637.6 | $ | 653.4 | (2 | ) | Cabinets | $ | 1,194.8 | $ | 1,227.0 | (3 | ) | ||||||||||||||
| Plumbing | 483.7 | 434.8 | 11 | Plumbing | 933.4 | 813.2 | 15 | ||||||||||||||||||||
| Doors | 160.2 | 133.5 | 20 | Doors | 270.5 | 235.7 | 15 | ||||||||||||||||||||
| Security | 147.5 | 143.7 | 3 | Security | 284.9 | 276.3 | 3 | ||||||||||||||||||||
| Total Net Sales | $ | 1,429.0 | $ | 1,365.4 | 5 | Total Net Sales | $ | 2,683.6 | $ | 2,552.2 | 5 | ||||||||||||||||
| Current Quarter Operating Income | |||||||||||||||||||||||||||
| Before Charges & Gains | GAAP | ||||||||||||||||||||||||||
| Three Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||||||||||||||
| Operating Income (loss) Before Charges/Gains (a) | 2018 | 2017 | % Change | Operating Income (loss) | 2018 | 2017 | % Change | ||||||||||||||||||||
| Cabinets | $ | 81.2 | $ | 88.7 | (8 | ) | Cabinets | $ | 69.4 | $ | 88.7 | (22 | ) | ||||||||||||||
| Plumbing | 101.3 | 101.3 | - | Plumbing | 95.3 | 101.2 | (6 | ) | |||||||||||||||||||
| Doors | 28.0 | 22.6 | 24 | Doors | 27.9 | 22.5 | 24 | ||||||||||||||||||||
| Security | 20.0 | 21.6 | (7 | ) | Security | 17.4 | 18.6 | (6 | ) | ||||||||||||||||||
| Corporate Expenses | (21.3 | ) | (21.8 | ) | 2 | Corporate Expenses | (21.4 | ) | (21.8 | ) | 2 | ||||||||||||||||
| Total Operating Income Before Charges/Gains | $ | 209.2 | $ | 212.4 | (2 | ) | Total Operating Income (GAAP) | $ | 188.6 | $ | 209.2 | (10 | ) | ||||||||||||||
| Earnings Per Share Before Charges/Gains (b) | Diluted EPS from Continuing Operations (GAAP) | ||||||||||||||||||||||||||
| Diluted - Continuing Operations | $ | 1.00 | $ | 0.92 | 9 | Diluted EPS - Continuing Operations | $ | 0.88 | $ | 0.90 | (2 | ) | |||||||||||||||
| EBITDA Before Charges/Gains (c) | $ | 250.5 | $ | 246.9 | 1 | Income from Continuing Operations, net of tax | $ | 129.7 | $ | 140.3 | (8 | ) | |||||||||||||||
| Year to Date Operating Income | |||||||||||||||||||||||||||
| Before Charges & Gains | GAAP | ||||||||||||||||||||||||||
| Six Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
| Operating Income (loss) Before Charges/Gains (a) | 2018 | 2017 | % Change | Operating Income (loss) | 2018 | 2017 | % Change | ||||||||||||||||||||
| Cabinets | $ | 105.4 | $ | 135.7 | (22 | ) | Cabinets | $ | 93.5 | $ | 135.7 | (31 | ) | ||||||||||||||
| Plumbing | 193.7 | 170.9 | 13 | Plumbing | 183.7 | 168.4 | 9 | ||||||||||||||||||||
| Doors | 41.8 | 30.6 | 37 | Doors | 41.0 | 30.7 | 34 | ||||||||||||||||||||
| Security | 35.2 | 36.6 | (4 | ) | Security | 32.5 | 28.7 | 13 | |||||||||||||||||||
| Corporate Expenses | (42.6 | ) | (43.3 | ) | 2 | Corporate Expenses | (42.7 | ) | (43.3 | ) | 1 | ||||||||||||||||
| Total Operating Income Before Charges/Gains | $ | 333.5 | $ | 330.5 | 1 | Total Operating Income (GAAP) | $ | 308.0 | $ | 320.2 | (4 | ) | |||||||||||||||
| Earnings Per Share Before Charges/Gains (b) | Diluted EPS From Continuing Operations (GAAP) | ||||||||||||||||||||||||||
| Diluted - Continuing Operations | $ | 1.55 | $ | 1.45 | 7 | Diluted EPS - Continuing Operations | $ | 1.37 | $ | 1.39 | (1 | ) | |||||||||||||||
| EBITDA Before Charges/Gains (c) | $ | 411.1 | $ | 401.5 | 2 | Income from Continuing Operations, net of tax | $ | 204.8 | $ | 217.7 | (6 | ) | |||||||||||||||
| (a) (b) (c) For definitions of Non-GAAP measures, see Definitions of Terms page | |||||||||||||||||||||||||||
| FORTUNE BRANDS HOME & SECURITY, INC. | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET (GAAP) | ||||||||
| (In millions) | ||||||||
| (Unaudited) | ||||||||
| June 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 345.5 | $ | 323.0 | ||||
| Accounts receivable, net | 657.5 | 555.3 | ||||||
| Inventories | 627.0 | 580.8 | ||||||
| Other current assets | 175.5 | 142.6 | ||||||
| Total current assets | 1,805.5 | 1,601.7 | ||||||
| Property, plant and equipment, net | 737.6 | 740.0 | ||||||
| Goodwill | 1,916.7 | 1,912.0 | ||||||
| Other intangible assets, net of accumulated amortization | 1,139.0 | 1,162.4 | ||||||
| Other assets | 98.3 | 95.3 | ||||||
| Total assets | $ | 5,697.1 | $ | 5,511.4 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities | ||||||||
| Short-term debt | $ | 350.0 | $ | - | ||||
| Accounts payable | 428.7 | 428.8 | ||||||
| Other current liabilities | 451.8 | 478.0 | ||||||
| Total current liabilities | 1,230.5 | 906.8 | ||||||
| Long-term debt | 1,793.3 | 1,507.6 | ||||||
| Deferred income taxes | 156.2 | 166.8 | ||||||
| Other non-current liabilities | 342.4 | 329.1 | ||||||
| Total liabilities | 3,522.4 | 2,910.3 | ||||||
| Stockholders' equity | 2,173.1 | 2,599.5 | ||||||
| Noncontrolling interests | 1.6 | 1.6 | ||||||
| Total equity | 2,174.7 | 2,601.1 | ||||||
| Total liabilities and equity | $ | 5,697.1 | $ | 5,511.4 | ||||
| FORTUNE BRANDS HOME & SECURITY, INC. | ||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| (In millions) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Six Months Ended June 30, | ||||||||||||||
| 2018 | 2017 | |||||||||||||
| Operating Activities | ||||||||||||||
| Net income | $ | 204.6 | $ | 215.1 | ||||||||||
| Depreciation and amortization | 71.4 | 64.0 | ||||||||||||
| Deferred taxes | (9.9 | ) | 5.6 | |||||||||||
| Loss on sale of product line | - | 2.4 | ||||||||||||
| Asset impairment charges | - | 3.2 | ||||||||||||
| Other noncash items |
25.7 |
21.9 | ||||||||||||
| Changes in assets and liabilities, net |
(154.5 |
) | (141.0 | ) | ||||||||||
| Net cash provided by operating activities | $ | 137.3 | $ | 171.2 | ||||||||||
| Investing Activities | ||||||||||||||
| Capital expenditures | $ | (67.2 | ) | $ | (59.5 | ) | ||||||||
| Proceeds from the sale of assets | 0.7 | - | ||||||||||||
| Proceeds from sale of product line | - | 1.5 | ||||||||||||
| Cost of acquisitions, net of cash | (5.8 | ) | (0.1 | ) | ||||||||||
| Net cash used by investing activities | $ | (72.3 | ) | $ | (58.1 | ) | ||||||||
| Financing Activities | ||||||||||||||
| Increase/(Decrease) in debt, net | $ | 635.0 | $ | (40.0 | ) | |||||||||
| Proceeds from the exercise of stock options | 3.8 | 22.1 | ||||||||||||
| Treasury stock purchases | (602.7 | ) | (32.7 | ) | ||||||||||
| Dividends to stockholders | (58.6 | ) | (55.3 | ) | ||||||||||
| All other | (12.7 | ) | (9.3 | ) | ||||||||||
| Net cash used by financing activities | $ | (35.2 | ) | $ | (115.2 | ) | ||||||||
| Effect of foreign exchange rate changes on cash | (7.3 | ) | 3.3 | |||||||||||
| Net increase in cash and cash equivalents | $ | 22.5 | $ | 1.2 | ||||||||||
| Cash and cash equivalents at beginning of period | 323.0 | 251.5 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 345.5 | $ | 252.7 | ||||||||||
|
FREE CASH FLOW |
Six Months Ended June 30, | 2018 Full Year | ||||||||||||
| 2018 | 2017 | Approximation | ||||||||||||
| Free Cash Flow* | $ | 74.6 | $ | 133.8 | $ | 500.0 - 525.0 | ||||||||
| Add: | ||||||||||||||
| Capital expenditures |
67.2 |
59.5 | 150.0 - 155.0 | |||||||||||
| Less: | ||||||||||||||
| Proceeds from the sale of assets |
0.7 |
- | - | |||||||||||
| Proceeds from the exercise of stock options |
3.8 |
22.1 | 5.0 - 10.0 | |||||||||||
| Cash Flow From Operations (GAAP) | $ | 137.3 | $ | 171.2 | $ | 645.0 - 670.0 | ||||||||
| * 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, and the proceeds from the exercise of stock options). 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. |
| FORTUNE BRANDS HOME & SECURITY, INC. | ||||||||||||||||||||||||
| CONSOLIDATED STATEMENT OF INCOME (GAAP) | ||||||||||||||||||||||||
| (In millions, except per share amounts) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
| 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||||
| Net Sales | $ | 1,429.0 | $ | 1,365.4 | 5 | $ | 2,683.6 | $ | 2,552.2 | 5 | ||||||||||||||
| Cost of products sold | 904.9 | 852.1 | 6 | 1,719.9 | 1,624.8 | 6 | ||||||||||||||||||
| Selling, general | ||||||||||||||||||||||||
| and administrative expenses | 316.5 | 292.8 | 8 | 627.7 | 582.4 | 8 | ||||||||||||||||||
| Amortization of intangible assets | 8.2 | 8.0 | 2 | 16.4 | 16.1 | 2 | ||||||||||||||||||
| Loss on sale of product line | - | 2.4 | (100 | ) | - | 2.4 | (100 | ) | ||||||||||||||||
| Asset impairment charges | - | - | - | - | 3.2 | (100 | ) | |||||||||||||||||
| Restructuring charges | 10.8 | 0.9 | 1,100 | 11.6 | 3.1 | 274 | ||||||||||||||||||
| Operating Income | 188.6 | 209.2 | (10 | ) | 308.0 | 320.2 | (4 | ) | ||||||||||||||||
| Interest expense | 17.4 | 12.3 | 41 | 32.1 | 24.2 | 33 | ||||||||||||||||||
| Other income, net | (3.4 | ) | (2.3 | ) | (48 | ) | (6.2 | ) | (7.0 | ) | 11 | |||||||||||||
| Income from continuing operations before income taxes | 174.6 | 199.2 | (12 | ) | 282.1 | 303.0 | (7 | ) | ||||||||||||||||
| Income taxes | 44.9 | 58.9 | (24 | ) | 77.3 | 85.3 | (9 | ) | ||||||||||||||||
| Income from continuing operations, net of tax | $ | 129.7 | $ | 140.3 | (8 | ) | $ | 204.8 | $ | 217.7 | (6 | ) | ||||||||||||
| Loss from discontinued operations, net of tax | - | (2.6 | ) | 100 | (0.2 | ) | (2.6 | ) | 92 | |||||||||||||||
| Net income | $ | 129.7 | $ | 137.7 | (6 | ) | $ | 204.6 | $ | 215.1 | (5 | ) | ||||||||||||
| Less: Noncontrolling interests | 0.1 | - | 100 | - | - | - | ||||||||||||||||||
| Net income attributable to | ||||||||||||||||||||||||
| Fortune Brands Home & Security | $ | 129.6 | $ | 137.7 | (6 | ) | $ | 204.6 | $ | 215.1 | (5 | ) | ||||||||||||
| Earnings Per Common Share, Diluted: | ||||||||||||||||||||||||
| Net Income from continuing operations | $ | 0.88 | $ | 0.90 | (2 | ) | $ | 1.37 | $ | 1.39 | (1 | ) | ||||||||||||
| Diluted Average Shares Outstanding | 146.7 | 156.6 | (6 | ) | 149.4 | 156.4 | (4 | ) | ||||||||||||||||
|
DILUTED EPS BEFORE CHARGES/GAINS RECONCILIATION |
| For the three months ended June 30, 2018, diluted EPS before charges/gains is net income from continuing operations, net of tax including the impact from noncontrolling interests calculated on a diluted per-share basis excluding $20.6 million ($16.3 million after tax or $0.11 per diluted share) of restructuring and other charges and a tax expense associated with the 2017 sale of a product line of $0.7 million ($0.01 per diluted share). |
| For the six months ended June 30, 2018, diluted EPS before charges/gains is net income from continuing operations, net of tax including the impact from noncontrolling interests calculated on a diluted per-share basis excluding $25.5 million ($20.8 million after tax or $0.14 per diluted share) of restructuring and other charges and a net charge related to the Tax Cuts and Jobs Act of 2017 and tax expense associated with the 2017 sale of a product line of $6.1 million ($0.04 per diluted share). |
|
For the three months ended June 30, 2017, diluted EPS before charges/gains is net income from continuing operations, net of tax including the impact from noncontrolling interests calculated on a diluted per-share basis excluding $0.8 million ($0.5 million after tax) of restructuring and other charges and a loss on sale of product line of $2.4 million ($2.5 million after tax or $0.02 per diluted share). |
| For the six months ended June 30, 2017, 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 $4.7 million ($3.4 million after tax or $0.02 per diluted share) of restructuring and other charges, asset impairment charges of $3.2 million ($3.2 million after tax or $0.02 per diluted share) and a loss on sale of product line of $2.4 million ($2.5 million after tax or $0.02 per diluted share). |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
| 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||||
| Earnings Per Common Share - Diluted | ||||||||||||||||||||||||
| Diluted EPS Before Charges/Gains - Continuing Operations (b) | $ | 1.00 | $ | 0.92 | 9 | $ | 1.55 | $ | 1.45 | 7 | ||||||||||||||
| Restructuring and other charges | (0.11 | ) | - | - | (0.14 | ) | (0.02 | ) | (600 | ) | ||||||||||||||
| Asset impairment charges (d) | - | - | - | - | (0.02 | ) | 100 | |||||||||||||||||
| Loss on sale of product line | - | (0.02 | ) | 100 | - | (0.02 | ) | 100 | ||||||||||||||||
| Tax items | (0.01 | ) | - | - | (0.04 | ) | - | - | ||||||||||||||||
| Diluted EPS - Continuing Operations | $ | 0.88 | $ | 0.90 | (2 | ) | $ | 1.37 | $ | 1.39 | (1 | ) | ||||||||||||
|
RECONCILIATION OF FULL YEAR 2018 EARNINGS GUIDANCE TO GAAP |
|
The Company is targeting diluted EPS before charges/gains from continuing operations to be in the range of $3.62 to $3.72 per share. For the full year, on a GAAP basis, the Company is targeting diluted EPS from continuing operations to be in the range of $3.34 to $3.44 per share and including the full year impact of previously announced restructuring actions. Reconciliation of non-GAAP diluted EPS guidance to GAAP diluted EPS guidance cannot be provided without unreasonable efforts on a forward-looking basis due to the high variability and low visibility with respect to gains and losses associated with our defined benefit plans and restructuring and other charges, which are excluded from the diluted EPS before charges/gains. In addition, the Company's GAAP EPS range assumes the Company incurs no gains or losses associated with its defined benefit plans during 2018. |
| (b) (d) For definitions of Non-GAAP measures, see Definitions of Terms page |
| FORTUNE BRANDS HOME & SECURITY, INC. | ||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
|
RECONCILIATION OF EBITDA BEFORE CHARGES/GAINS TO INCOME FROM CONTINUING OPERATIONS |
||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
| 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||||
| EBITDA BEFORE CHARGES/GAINS (c) | $ | 250.5 | $ | 246.9 | 1 | $ | 411.1 | $ | 401.5 | 2 | ||||||||||||||
| Depreciation | $ | (29.7 | ) | $ | (24.2 | ) | (23 | ) | $ | (55.0 | ) | $ | (47.9 | ) | (15 | ) | ||||||||
| Amortization of intangible assets | (8.2 | ) | (8.0 | ) | (2 | ) | (16.4 | ) | (16.1 | ) | (2 | ) | ||||||||||||
| Restructuring and other charges | (20.6 | ) | (0.8 | ) | (2,475 | ) | (25.5 | ) | (4.7 | ) | (443 | ) | ||||||||||||
| Interest expense | (17.4 | ) | (12.3 | ) | (41 | ) | (32.1 | ) | (24.2 | ) | (33 | ) | ||||||||||||
| Loss on sale of product line | - | (2.4 | ) | 100 | - | (2.4 | ) | 100 | ||||||||||||||||
| Asset impairments (d) | - | - | - | - | (3.2 | ) | 100 | |||||||||||||||||
| Income taxes | (44.9 | ) | (58.9 | ) | 24 | (77.3 | ) | (85.3 | ) | 9 | ||||||||||||||
| Income from continuing operations, net of tax | $ | 129.7 | $ | 140.3 | (8 | ) | $ | 204.8 | $ | 217.7 | (6 | ) | ||||||||||||
| (c) (d) For definitions of Non-GAAP measures, see Definitions of Terms page | ||||||||||||||||||||||||
| FORTUNE BRANDS HOME & SECURITY, INC. | |||||||||||||||||||||
| Reconciliation of Income Statement - GAAP to Before Charges/Gains Information | |||||||||||||||||||||
| Three Months Ended June 30, | |||||||||||||||||||||
| $ in millions, except per share amounts | |||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||
| Before Charges/Gains adjustments | |||||||||||||||||||||
| Restructuring | Loss on sale | Before | |||||||||||||||||||
| GAAP | and other | Tax Items (1) | of product line | Charges/Gains | |||||||||||||||||
| (unaudited) | charges | (Non-GAAP) | |||||||||||||||||||
| 2018 | SECOND QUARTER | ||||||||||||||||||||
| Net Sales | $ | 1,429.0 | - | - | - | ||||||||||||||||
| Cost of products sold | 904.9 | (8.1 | ) | - | - | ||||||||||||||||
| Selling, general & administrative expenses | 316.5 | (1.7 | ) | - | - | ||||||||||||||||
| Amortization of intangible assets | 8.2 | - | - | - | |||||||||||||||||
| Restructuring charges | 10.8 | (10.8 | ) | - | - | ||||||||||||||||
| Operating Income | 188.6 | 20.6 | - | - | 209.2 | ||||||||||||||||
| Interest expense | 17.4 | - | - | - | |||||||||||||||||
| Other income, net | (3.4 | ) | - | - | - | ||||||||||||||||
| Income from continuing operations before income taxes | 174.6 | 20.6 | - | - | 195.2 | ||||||||||||||||
| Income taxes | 44.9 | 4.3 | (0.7 | ) | - | ||||||||||||||||
| Income from continuing operations, net of tax | $ | 129.7 | 16.3 | 0.7 | - | $ | 146.7 | ||||||||||||||
| Income from discontinued operations, net of tax | - | - | - | - | |||||||||||||||||
| Net Income | 129.7 | - | - | - | |||||||||||||||||
| Less: Noncontrolling interests | 0.1 | - | - | - | |||||||||||||||||
| Net Income attributable | |||||||||||||||||||||
| to Fortune Brands Home & Security, Inc. | $ | 129.6 | 16.3 | 0.7 | - | $ | 146.6 | ||||||||||||||
| Income from continuing operations, net of tax | |||||||||||||||||||||
| less noncontrolling interests | $ | 129.6 | 16.3 | 0.7 | - | $ | 146.6 | ||||||||||||||
| Diluted Average Shares Outstanding | 146.7 | 146.7 | |||||||||||||||||||
| Diluted EPS - Continuing Operations | 0.88 | 1.00 | |||||||||||||||||||
| 2017 | |||||||||||||||||||||
| Net Sales | $ | 1,365.4 | - | - | - | ||||||||||||||||
| Cost of products sold | 852.1 | 0.1 | - | - | |||||||||||||||||
| Selling, general & administrative expenses | 292.8 | - | - | - | |||||||||||||||||
| Amortization of intangible assets | 8.0 | - | - | - | |||||||||||||||||
| Loss on sale of product line | 2.4 | - | - | (2.4 | ) | ||||||||||||||||
| Restructuring charges | 0.9 | (0.9 | ) | - | - | ||||||||||||||||
| Operating Income | 209.2 | 0.8 | - | 2.4 | 212.4 | ||||||||||||||||
| Interest expense | 12.3 | - | - | - | |||||||||||||||||
| Other expense, net | (2.3 | ) | - | - | - | ||||||||||||||||
| Income from continuing operations before income taxes | 199.2 | 0.8 | - | 2.4 | 202.4 | ||||||||||||||||
| Income taxes | 58.9 | 0.3 | - | (0.1 | ) | ||||||||||||||||
| Income from continuing operations, net of tax | $ | 140.3 | 0.5 | - | 2.5 | $ | 143.3 | ||||||||||||||
| Loss from discontinued operations, net of tax | (2.6 | ) | - | - | - | ||||||||||||||||
| Net Income | 137.7 | - | - | - | |||||||||||||||||
| Less: Noncontrolling interests | - | - | - | - | |||||||||||||||||
| Net Income attributable | |||||||||||||||||||||
| to Fortune Brands Home & Security, Inc. | $ | 137.7 | 0.5 | - | 2.5 | $ | 140.7 | ||||||||||||||
| Income from continuing operations, net of tax | |||||||||||||||||||||
| less noncontrolling interests | $ | 140.3 | 0.5 | - | 2.5 | $ | 143.3 | ||||||||||||||
| Diluted Average Shares Outstanding | 156.6 | 156.6 | |||||||||||||||||||
| Diluted EPS - Continuing Operations | 0.90 | 0.92 | |||||||||||||||||||
| (1) Tax Items for the three months ended June 30, 2018 represent an adjustment to the tax impact of the Loss on sale of a product line disposed of in 2017. | |||||||||||||||||||||
| FORTUNE BRANDS HOME & SECURITY, INC. | |||||||||||||||||||||||||
| Reconciliation of Income Statement - GAAP to Before Charges/Gains Information | |||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||||||||||
| $ in millions, except per share amounts | |||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||
| Before Charges/Gains adjustments | |||||||||||||||||||||||||
| Restructuring | Asset | Loss on sale | Before | ||||||||||||||||||||||
| GAAP | and other | impairments | Tax Items (1) | of product line | Charges/Gains | ||||||||||||||||||||
| (unaudited) | charges | (Non-GAAP) | |||||||||||||||||||||||
| 2018 | YEAR TO DATE | ||||||||||||||||||||||||
| Net Sales | $ | 2,683.6 | - | - | - | - | |||||||||||||||||||
| Cost of products sold | 1,719.9 | (9.6 | ) | - | - | - | |||||||||||||||||||
| Selling, general & administrative expenses | 627.7 | (4.3 | ) | - | - | - | |||||||||||||||||||
| Amortization of intangible assets | 16.4 | - | - | - | - | ||||||||||||||||||||
| Restructuring charges | 11.6 | (11.6 | ) | - | - | - | |||||||||||||||||||
| Operating Income | 308.0 | 25.5 | - | - | - | 333.5 | |||||||||||||||||||
| Interest expense | 32.1 | - | - | - | - | ||||||||||||||||||||
| Other income, net | (6.2 | ) | - | - | - | - | |||||||||||||||||||
| Income from continuing operations before income taxes | 282.1 | 25.5 | - | - | - | 307.6 | |||||||||||||||||||
| Income taxes | 77.3 | 4.7 | - | (6.1 | ) | - | |||||||||||||||||||
| Income from continuing operations, net of tax | $ | 204.8 | 20.8 | - | 6.1 | - | $ | 231.7 | |||||||||||||||||
| Loss from discontinued operations, net of tax | (0.2 | ) | - | - | - | - | |||||||||||||||||||
| Net Income | 204.6 | - | - | - | - | ||||||||||||||||||||
| Less: Noncontrolling interests | - | - | - | - | - | ||||||||||||||||||||
| Net Income attributable | |||||||||||||||||||||||||
| to Fortune Brands Home & Security, Inc. | $ | 204.6 | 20.8 | - | 6.1 | - | $ | 231.5 | |||||||||||||||||
| Income from continuing operations, net of tax | |||||||||||||||||||||||||
| less noncontrolling interests | $ | 204.8 | 20.8 | - | 6.1 | - | $ | 231.7 | |||||||||||||||||
| Diluted Average Shares Outstanding | 149.4 | 149.4 | |||||||||||||||||||||||
| Diluted EPS - Continuing Operations | 1.37 | 1.55 | |||||||||||||||||||||||
| 2017 | |||||||||||||||||||||||||
| Net Sales | $ | 2,552.2 | - | - | - | - | |||||||||||||||||||
| Cost of products sold | 1,624.8 | (0.9 | ) | - | - | - | |||||||||||||||||||
| Selling, general & administrative expenses | 582.4 | (0.7 | ) | - | - | - | |||||||||||||||||||
| Amortization of intangible assets | 16.1 | - | - | - | - | ||||||||||||||||||||
| Loss on sale of product line | 2.4 | - | - | - | (2.4 | ) | |||||||||||||||||||
| Asset impairment charge | 3.2 | - | (3.2 | ) | - | - | |||||||||||||||||||
| Restructuring charges | 3.1 | (3.1 | ) | - | - | - | |||||||||||||||||||
| Operating Income | 320.2 | 4.7 | 3.2 | - | 2.4 | 330.5 | |||||||||||||||||||
| Interest expense | 24.2 | - | - | - | - | ||||||||||||||||||||
| Other income, net | (7.0 | ) | - | - | - | - | |||||||||||||||||||
| Income from continuing operations before income taxes | 303.0 | 4.7 | 3.2 | - | 2.4 | 313.3 | |||||||||||||||||||
| Income taxes | 85.3 | 1.3 | - | - | (0.1 | ) | |||||||||||||||||||
| Income from continuing operations, net of tax | $ | 217.7 | 3.4 | 3.2 | - | 2.5 | $ | 226.8 | |||||||||||||||||
| Loss from discontinued operations, net of tax | (2.6 | ) | - | - | - | - | |||||||||||||||||||
| Net Income | 215.1 | - | - | - | - | ||||||||||||||||||||
| Less: Noncontrolling interests | - | - | - | - | - | ||||||||||||||||||||
| Net Income attributable | |||||||||||||||||||||||||
| to Fortune Brands Home & Security, Inc. | $ | 215.1 | 3.4 | 3.2 | - | 2.5 | $ | 224.2 | |||||||||||||||||
| Income from continuing operations, net of tax | |||||||||||||||||||||||||
| less noncontrolling interests | $ | 217.7 | 3.4 | 3.2 | - | 2.5 | $ | 226.8 | |||||||||||||||||
| Diluted Average Shares Outstanding | 156.4 | 156.4 | |||||||||||||||||||||||
| Diluted EPS - Continuing Operations | 1.39 | 1.45 | |||||||||||||||||||||||
| (1) Tax Items for the six months ended June 30, 2018 represent an update to the estimated impact of the Tax Cuts and Jobs Act of 2017 and an adjustment to the tax impact of the Loss on sale of a product line disposed of in 2017. |
| FORTUNE BRANDS HOME & SECURITY, INC. | ||||||||||||||||||||||||
| (In millions, except per share amounts) | ||||||||||||||||||||||||
|
(Unaudited) |
||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
| 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||||
| Net Sales (GAAP) | ||||||||||||||||||||||||
| Cabinets | $ | 637.6 | $ | 653.4 | (2 | ) | $ | 1,194.8 | $ | 1,227.0 | (3 | ) | ||||||||||||
| Plumbing | 483.7 | 434.8 | 11 | 933.4 | 813.2 | 15 | ||||||||||||||||||
| Doors | 160.2 | 133.5 | 20 | 270.5 | 235.7 | 15 | ||||||||||||||||||
| Security | 147.5 | 143.7 | 3 | 284.9 | 276.3 | 3 | ||||||||||||||||||
| Total Net Sales | $ | 1,429.0 | $ | 1,365.4 | 5 | $ | 2,683.6 | $ | 2,552.2 | 5 | ||||||||||||||
| Operating Income (loss) | ||||||||||||||||||||||||
| Cabinets | $ | 69.4 | $ | 88.7 | (22 | ) | $ | 93.5 | $ | 135.7 | (31 | ) | ||||||||||||
| Plumbing | 95.3 | 101.2 | (6 | ) | 183.7 | 168.4 | 9 | |||||||||||||||||
| Doors | 27.9 | 22.5 | 24 | 41.0 | 30.7 | 34 | ||||||||||||||||||
| Security | 17.4 | 18.6 | (6 | ) | 32.5 | 28.7 | 13 | |||||||||||||||||
| Corporate expenses | (21.4 | ) | (21.8 | ) | 2 | (42.7 | ) | (43.3 | ) | 1 | ||||||||||||||
| Total Operating Income (GAAP) | $ | 188.6 | $ | 209.2 | (10 | ) | $ | 308.0 | $ | 320.2 | (4 | ) | ||||||||||||
|
OPERATING INCOME BEFORE CHARGES/GAINS RECONCILIATION |
||||||||||||||||||||||||
| Operating Income (loss) Before Charges/Gains (a) | ||||||||||||||||||||||||
| Cabinets | $ | 81.2 | $ | 88.7 | (8 | ) | $ | 105.4 | $ | 135.7 | (22 | ) | ||||||||||||
| Plumbing | 101.3 | 101.3 | - | 193.7 | 170.9 | 13 | ||||||||||||||||||
| Doors | 28.0 | 22.6 | 24 | 41.8 | 30.6 | 37 | ||||||||||||||||||
| Security | 20.0 | 21.6 | (7 | ) | 35.2 | 36.6 | (4 | ) | ||||||||||||||||
| Corporate expenses | (21.3 | ) | (21.8 | ) | 2 | (42.6 | ) | (43.3 | ) | 2 | ||||||||||||||
| Total Operating Income Before Charges/Gains (a) | 209.2 | 212.4 | (2 | ) | 333.5 | 330.5 | 1 | |||||||||||||||||
| Restructuring and other charges (1) (2) | (20.6 | ) | (0.8 | ) | (2,475 | ) | (25.5 | ) | (4.7 | ) | (443 | ) | ||||||||||||
| Asset impairment charges | - | - | - | - | (3.2 | ) | 100 | |||||||||||||||||
| Loss on sale of product line | - | (2.4 | ) | 100 | - | (2.4 | ) | 100 | ||||||||||||||||
| Total Operating Income (GAAP) | $ | 188.6 | $ | 209.2 | (10 | ) | $ | 308.0 | $ | 320.2 | (4 | ) | ||||||||||||
| (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 inventory obsolescence provisions, 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 our Plumbing segment, other charges include acquisition related inventory step-up expense of $1.7 million and $3.4 million for the three and six months ended June 30, 2018 and $0.9 million for the six months ended June 30, 2017. In addition, in our Plumbing segment, other charges includes compensation expense related to deferred purchase price consideration payable to certain former Victoria + Albert shareholders contingent on their employment through October 2018 of $2.5 million and $5.0 million for the three and six months ended June 30, 2018. In Corporate, other charges include $0.1 million of expense associated with our assessment of the impact on the Company from the Tax Cuts and Jobs Act of 2017. |
| (a) For definitions of Non-GAAP measures, see Definitions of Terms page |
| FORTUNE BRANDS HOME & SECURITY, INC. | |||||||||||
| BEFORE CHARGES/GAINS OPERATING MARGIN TO OPERATING MARGIN | |||||||||||
| (Unaudited) | |||||||||||
| Three Months Ended June 30, | |||||||||||
| 2018 | 2017 | Change | |||||||||
| CABINETS | |||||||||||
| Before Charges/Gains Operating Margin | 12.7 | % | 13.6 | % | (90) bps | ||||||
| Restructuring & Other Charges | (1.8 | %) | - | ||||||||
| Operating Margin | 10.9 | % | 13.6 | % | (270) bps | ||||||
| PLUMBING | |||||||||||
| Before Charges/Gains Operating Margin | 20.9 | % | 23.3 | % | (240) bps | ||||||
| Restructuring & Other Charges | (1.2 | %) | - | ||||||||
| Operating Margin | 19.7 | % | 23.3 | % | (360) bps | ||||||
| DOORS | |||||||||||
| Before Charges/Gains Operating Margin | 17.5 | % | 16.9 | % | 60 bps | ||||||
| Restructuring & Other Charges | (0.1 | %) | - | ||||||||
| Operating Margin | 17.4 | % | 16.9 | % | 50 bps | ||||||
| SECURITY | |||||||||||
| Before Charges/Gains Operating Margin | 13.6 | % | 15.0 | % | (140) bps | ||||||
| Restructuring & Other Charges | (1.8 | %) | (0.4 | %) | |||||||
| Loss on sale of product line | - | (1.7 | %) | ||||||||
| Operating Margin | 11.8 | % | 12.9 | % | (110) bps | ||||||
| Total Company | |||||||||||
| Before Charges/Gains Operating Margin | 14.6 | % | 15.6 | % | (100) bps | ||||||
| Restructuring & Other Charges | (1.4 | %) | (0.1 | %) | |||||||
| Loss on sale of product line | - | (0.2 | %) | ||||||||
| Operating Margin | 13.2 | % |
15.3 |
% | (200) 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 loss on sale of product line, 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. |
| FORTUNE BRANDS HOME & SECURITY, INC. | |||
| RECONCILIATION OF PERCENTAGE CHANGE IN NET SALES EXCLUDING EXITS FROM TARGETED BUSINESS TO PERCENTAGE CHANGE IN NET SALES (GAAP) | |||
| (Unaudited) | |||
| Three months ended June 30, 2018 | |||
| % change | |||
| CABINETS | |||
| Percentage change in Net Sales excluding exits from targeted U.S. Homecenter and Canadian business | 1% | ||
| Impact of U.S. Homecenter business | (3%) | ||
| Impact of Canadian business | (0%) | ||
| Percentage change in Net Sales (GAAP) | (2%) | ||
| Net sales excluding exits of targeted business lines is Cabinets net sales derived in accordance with GAAP excluding certain U.S. Homecenter and Canadian businesses. Management uses this measure to evaluate the overall performance of the Cabinets 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. |
| FORTUNE BRANDS HOME & SECURITY, INC. | ||
| RECONCILIATION OF PERCENTAGE CHANGE IN PLUMBING NET SALES EXCLUDING GPG ACQUISITIONS TO PERCENTAGE CHANGE IN NET SALES (GAAP) | ||
| (Unaudited) | ||
| Three months ended June 30, 2018 | ||
| % change | ||
| PLUMBING | ||
| Percentage change in Net Sales excluding acquisitions (organic) | 9% | |
| Acquisitions Net Sales | 2% | |
| Percentage change in Net Sales (GAAP) | 11% | |
| Plumbing net sales excluding acquisitions is net sales derived in accordance with GAAP excluding Shaws and Victoria + Albert net sales. Management uses this measure to evaluate the overall performance of the Plumbing 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 before charges/gains is operating income derived in accordance with GAAP excluding restructuring, other charges and asset impairment charges and the loss on sale of product line. Operating income before charges/gains 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. |
| (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, asset impairment charges, the loss on sale of product line 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 income from continuing operations, net of tax, derived in accordance with GAAP excluding restructuring and other charges, depreciation, asset impairment charges, the loss on sale of product line, 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 FBHS. 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 six months ended June 30, 2017, include impairments related to our decision during the first quarter of 2017 to sell the Field ID product line. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180726005843/en/
Source:
Fortune Brands Home & Security, Inc.
INVESTOR and MEDIA CONTACT:
Kaveh Bakhtiari
847-484-4573
kaveh.bakhtiari@FBHS.com