SEC Filing - Fortune Brands Innovations, Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-35166

Fortune Brands Innovations, Inc.

(Exact name of Registrant as specified in its charter)

Delaware

62-1411546

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

520 Lake Cook Road, Deerfield, Illinois 60015-5611

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (847) 484-4400

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	FBIN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, at July 21, 2023 was 126,890,520.

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS.

FORTUNE BRANDS INNOVATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Twenty-six and Thirteen Weeks Ended July 1, 2023 and Six and Three Months Ended June 30, 2022

(In millions, except per share amounts)

(Unaudited)


	Twenty-Six Weeks Ended July 1, 2023			Six Months Ended June 30, 2022			Thirteen Weeks Ended July 1, 2023			Three Months Ended June 30, 2022
Net sales	$	2,203.7		$	2,395.6		$	1,163.7		$	1,255.4
Cost of products sold		1,327.2			1,413.8			695.6			742.0
Selling, general and administrative expenses		541.7			557.7			280.7			281.3
Amortization of intangible assets		25.2			23.2			12.6			11.6
Restructuring charges		25.2			1.6			22.2			1.0
Operating income		284.4			399.3			152.6			219.5
Interest expense		54.6			52.3			27.7			30.5
Other income, net		(11.6	)		(2.4	)		(5.2	)		(0.2	)
Income from continuing operations before income taxes		241.4			349.4			130.1			189.2
Income tax		53.7			78.9			28.0			44.9
Income from continuing operations, net of tax		187.7			270.5			102.1			144.3
(Loss) income from discontinued operations, net of tax		(1.0	)		102.4			-			47.7
Net income	$	186.7		$	372.9		$	102.1		$	192.0

Basic earnings per common share
Continuing operations	$	1.47		$	2.05		$	0.81		$	1.11
Discontinued operations		-			0.78			-			0.36
Basic earnings per share	$	1.47		$	2.83		$	0.81		$	1.47

Diluted earnings per common share
Continuing operations	$	1.47		$	2.03		$	0.80		$	1.10
Discontinued operations		(0.01	)		0.77			-			0.36
Diluted earnings per share	$	1.46		$	2.80		$	0.80		$	1.46

Comprehensive income	$	198.4		$	425.3		$	114.5		$	184.5

See notes to condensed consolidated financial statements.

FORTUNE BRANDS INNOVATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)


	July 1, 2023			December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	681.7		$	642.5
Accounts receivable less allowances for discounts and credit losses		621.2			521.8
Inventories		954.5			1,021.3
Other current assets		186.2			274.8
Total current assets		2,443.6			2,460.4
Property, plant and equipment, net of accumulated depreciation		866.6			783.7
Operating lease assets		114.1			118.9
Goodwill		1,910.7			1,640.7
Other intangible assets, net of accumulated amortization		1,421.5			1,000.8
Other assets		116.7			116.4
Total assets	$	6,873.2		$	6,120.9
Liabilities and equity
Current liabilities
Short-term debt	$	599.8		$	599.2
Accounts payable		489.5			421.6
Other current liabilities		551.4			523.9
Total current liabilities		1,640.7			1,544.7
Long-term debt		2,668.5			2,074.3
Deferred income taxes		138.2			136.9
Accrued defined benefit plans		66.1			79.9
Operating lease liabilities		89.0			95.4
Other non-current liabilities		93.6			102.8
Total liabilities		4,696.1			4,034.0
Commitments and contingencies (see Note 17)
Stockholders' equity
Common stock(a)		1.9			1.9
Paid-in capital		3,103.5			3,069.6
Accumulated other comprehensive loss		55.3			37.4
Retained earnings		2,475.4			2,323.8
Treasury stock		(3,459.0	)		(3,345.8	)
Total stockholders' equity		2,177.1			2,086.9
Total liabilities and equity	$	6,873.2		$	6,120.9

(a) Common stock, par value $0.01 per share; 186.8 million shares and 186.2 million shares issued at July 1, 2023 and December 31, 2022, respectively.

See notes to condensed consolidated financial statements.

FORTUNE BRANDS INNOVATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Twenty-Six Weeks Ended July 1, 2023 and Six Months Ended June 30, 2022

(In millions)

(Unaudited)


	Twenty-Six Weeks Ended July 1, 2023			Six Months Ended June 30, 2022
Operating activities
Net income	$	186.7		$	372.9
Non-cash adjustments:
Depreciation		40.9			61.7
Amortization of intangibles		25.2			32.1
Non-cash lease expense		15.8			22.2
Stock-based compensation		16.2			27.5
Deferred taxes		(1.0	)		(0.5	)
Asset impairment charges		-			26.0
Amortization of deferred financing fees		2.1			1.8
(Gain) on sale of property, plant and equipment		(1.6	)		(5.9	)
Changes in assets and liabilities:
Increase in accounts receivable		(65.4	)		(110.8	)
Decrease (increase) in inventories		177.3			(247.4	)
Increase (decrease) in accounts payable		49.6			(1.0	)
Decrease (increase) in other assets		130.3			(17.1	)
Decrease in accrued expenses and other liabilities		(46.5	)		(110.2	)
Decrease in accrued taxes		(26.0	)		(9.4	)
Net cash provided by operating activities		503.6			41.9
Investing activities
Capital expenditures (a)		(112.2	)		(115.6	)
Proceeds from the disposition of assets		2.7			8.0
Cost of acquisitions, net of cash acquired		(781.8	)		(61.6	)
Net cash used in investing activities		(891.3	)		(169.2	)
Financing activities
Issuance of short-term debt		-			700.0
Repayment of short-term debt		-			(1,100.0	)
Issuance of long-term debt		595.1			4,123.7
Repayment of long-term debt		-			(3,073.3	)
Proceeds from the exercise of stock options		5.0			0.4
Treasury stock purchases		(100.0	)		(505.0	)
Employee withholding taxes related to stock-based compensation		(12.4	)		(24.8	)
Dividends to stockholders		(58.6	)		(73.6	)
Other financing, net		(1.3	)		(20.3	)
Net cash provided by financing activities		427.8			27.1
Effect of foreign exchange rate changes on cash		(2.1	)		(11.3	)
Net increase (decrease) in cash and cash equivalents	$	38.0		$	(111.5	)
Cash, cash equivalents and restricted cash(b) at beginning of period	$	648.3		$	476.1
Cash, cash equivalents and restricted cash(b) at end of period	$	686.3		$	364.6

(a)

Capital expenditures of $5.3 million as of July 1, 2023 and $12.1 million as of June 30, 2022 that had not been paid, were excluded from the Statement of Cash Flows.

(b)

Restricted cash of $2.3 million and $2.3 million is included in Other current assets and Other assets, respectively, as of July 1, 2023 and restricted cash of $1.2 million and $2.8 million is included in Other current assets and Other assets, respectively, as of June 30, 2022. Restricted cash of $2.1 million and $3.7 million is included in Other current assets and Other assets, respectively, as of December 31, 2022.

See notes to condensed consolidated financial statements.

FORTUNE BRANDS INNOVATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Twenty-six and Thirteen Weeks Ended July 1, 2023 and Six and Three Months Ended June 30, 2022

(In millions)

(Unaudited)


	Common Stock		Paid-In Capital		Accumulated Other Comprehensive (Loss) Income			Retained Earnings			Treasury Stock			Total Equity
Balance at December 31, 2021	$	1.9	$	3,018.3	$	(24.6	)	$	2,807.9		$	(2,738.7	)	$	3,064.8
Comprehensive income:
Net income		-		-		-			372.9			-			372.9
Other comprehensive income (loss)		-		-		52.4			-			-			52.4
Stock options exercised		-		0.4		-			-			-			0.4
Stock-based compensation		-		27.5		-			-			(24.8	)		2.7
Treasury stock purchases		-		-		-			-			(505.0	)		(505.0	)
Dividends ($0.28 per common share)		-		-		-			(35.8	)		-			(35.8	)
Balance at June 30, 2022	$	1.9	$	3,046.2	$	27.8		$	3,145.0		$	(3,268.5	)	$	2,952.4

Balance at December 31, 2022	$	1.9	$	3,069.6	$	37.4		$	2,323.8		$	(3,345.8	)	$	2,086.9
Comprehensive income:
Net income		-		-		-			186.7			-			186.7
Other comprehensive income (loss)		-		-		11.7			-			-			11.7
Other		-		12.7		6.2			(6.0	)		-			12.9
Stock options exercised		-		5.0		-			-			-			5.0
Stock-based compensation		-		16.2		-			-			(12.4	)		3.8
Treasury stock purchases		-		-		-			-			(100.8	)		(100.8	)
Dividends ($0.23 per common share)		-		-		-			(29.1	)		-			(29.1	)
Balance at July 1, 2023	$	1.9	$	3,103.5	$	55.3		$	2,475.4		$	(3,459.0	)	$	2,177.1