8-K
false 0001519751 0001519751 2024-04-30 2024-04-30

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): April 30, 2024

 

 

Fortune Brands Innovations, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   1-35166   62-1411546
(State or Other Jurisdiction
of Incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)

520 Lake Cook Road

Deerfield, IL 60015

(Address of Principal Executive Offices) (Zip Code)

847-484-4400

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

 

 

 


Item 2.02.

Results of Operations and Financial Condition.

On April 30, 2024, Fortune Brands Innovations, Inc. (the “Company”) issued a press release reporting the Company’s first quarter 2024 results, as well as reaffirming certain guidance for 2024. A copy of the Company’s press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is hereby incorporated herein by reference.

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.

 

Item 9.01.

Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit No.

 

Description

99.1   Press Release dated April 30, 2024, issued by Fortune Brands Innovations, Inc.
104   Cover Page Interactive Data File (embedded within the Inline XBRL document).


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

FORTUNE BRANDS INNOVATIONS, INC.
(Registrant)
  By:  

/s/ David V. Barry

  Name:   David V. Barry
  Title:   Executive Vice President and Chief
Financial Officer

Date: April 30, 2024

EX-99.1

Exhibit 99.1

 

LOGO

Fortune Brands Delivers First Quarter Sales and Margin Results

Reflecting Strong Execution; Reaffirms Full Year Guidance

Highlights:

 

   

Q1 2024 sales were $1.1 billion, an increase of 7 percent over Q1 2023. Organic sales were $1.0 billion, a decrease of 3 percent versus Q1 2023

   

Q1 2024 earnings per share (EPS) were $0.76, an increase of 13 percent versus a year ago; EPS before charges / gains were $0.83, an increase of 20 percent versus Q1 2023

   

Company reaffirms initial 2024 guidance, with a focus on above-market sales performance, margin expansion and cash generation

DEERFIELD, Ill --April 30, 2024--Fortune Brands Innovations, Inc. (NYSE: FBIN or “Fortune Brands” or the “Company”), an industry leading innovation company focused on creating smarter, safer and more beautiful homes and improving lives, today announced first quarter 2024 results.

“Our first quarter sales and margin results came in above our expectations as our teams executed our strategy of growing the core and accelerating in connected products,” said Fortune Brands Chief Executive Officer Nicholas Fink. “By leveraging our Fortune Brands Advantage capabilities and focusing on accelerated growth through building leading brands, driving meaningful innovation, and creating value for our channel partners, we will continue to position the Company for outperformance in any environment.”

Fink continued, “This past quarter, we saw powerful proof-points of our compelling investment thesis and are increasingly seeing the benefit of the transformative actions we took over the past few years. Looking forward, we continue to be confident in the strength of our business and believe we are uniquely positioned to capture exceptional opportunities.”

First Quarter 2024 Results

($ in millions, except per share amounts; Change compared to prior year)

Unaudited

Total Company Results

 

     Reported Net Sales   Operating Income   Operating Margin   EPS

Q1 2024 GAAP

  $1,110   $155.4   14.0%   $0.76

Change

  7%   18%   130 bps   13%
       
     Reported Net Sales   Operating Income
Before Charges / Gains
 

Operating Margin

Before Charges / Gains

 

EPS

Before Charges / Gains

Q1 2024 Non-GAAP

  $1,110   $167.2   15.1%   $0.83

Change

  7%   22%   200 bps   20%


Segment Results Compared to Prior Year

Sales results were driven by the acquisition of the Emtek and Schaub premium and luxury hardware brands and the U.S. and Canadian Yale and August residential smart lock brands, and offset by lower sales volumes. Operating margin results were positively impacted by higher production volumes and continuous improvement initiatives.

 

     Net Sales   Change   Operating
Margin
  Change   Operating
Margin Before
Charges/Gains
  Change
  Reported   Organic   Reported   Organic
Water Innovations   $625   $555   5%   (7)%   22.6%   100 bps   22.6%   100 bps
Outdoors   $315   $315   9%   9%   10.9%   640 bps   12.0%   680 bps
Security   $169   $143   9%   (8)%   11.3%   (220) bps   15.7%   170 bps

Balance Sheet and Cash Flow

The Company exited the quarter with a strong balance sheet, closing with $(71.3) million in operating cash flow and ($135.9) million in free cash flow, driven by typical seasonality. In accordance with its opportunistic, returns-based share repurchase program, the Company repurchased $100 million of shares in the quarter, and as of April 30, 2024, has repurchased $125 million of shares.

As of the end of the first quarter 2024:

 

Net debt

  $2.7 billion

Net debt to EBITDA before charges / gains

  2.9x

Cash

  $360 million

Amount available under revolving credit facility

  $875 million

2024 Market and Financial Guidance

“We are reaffirming our full year 2024 financial guidance, which reflects our expectation of outperformance as we execute our strategy amid a dynamic external environment,” said Fortune Brands Chief Financial Officer David Barry. “As we position Fortune Brands for continued shareholder value creation, we will prioritize above-market sales growth opportunities, margin expansion and cash generation, while continuing to invest in key strategic priorities with a returns-focused view.”

2024 Full-Year Guidance

 

     2024 Full-Year Guidance

MARKET

   

Global market

  -3% to 0%

U.S. market

  -2% to 0%

U.S. R&R

  -4% to -2%


U.S. SFNC

  5% to 7%

China market

  -9% to -7%

TOTAL COMPANY FINANCIAL METRICS

   

Net sales

  3.5% to 5.5%

Net sales [organic]

  -1% to 1%

Operating margin before charges / gains

  16.5% to 17.5%

EPS before charges / gains

  $4.20 to $4.40

Cash flow from operations

  Around $720 million

Free cash flow

  Around $520 million

Cash conversion

  Around 100%

SEGMENT FINANCIAL METRICS

   

Water Innovations net sales

  3% to 5%

Water Innovations net sales [organic]

  -2% to 0%

Water Innovations operating margin before charges / gains

  24% to 24.5%

Outdoors net sales

  1% to 3%

Outdoors operating margin before charges / gains

  13.5% to 14.5%

Security net sales

  10% to 12%

Security net sales [organic]

  0% to 2%

Security operating margin before charges / gains

  15.5% to 16.5%

OTHER ITEMS

   

Corporate expense

  $140 million to $145 million

Interest expense

  $118 million to $120 million

Other income / (expense)

  Around $5 million

Tax rate

  23.25% to 23.5%

Share count

  Around 127 million

For certain forward-looking non-GAAP measures (as used in this press release, operating margin before charges / gains on a full Company and segment basis, EPS before charges / gains and cash conversion), the Company is unable to provide a reconciliation to the most comparable GAAP financial measure because the information needed to reconcile these measures is unavailable due to the inherent difficulty of forecasting the timing and / or amount of various items that have not yet occurred, including the high variability and low visibility with respect to gains and losses associated with our defined benefit plans, which are excluded from EPS before charges / gains and cash conversion, and restructuring and other charges, which are excluded from operating margin before charges / gains, EPS before charges / gains and cash conversion. Additionally, estimating such GAAP measures and providing a meaningful reconciliation consistent with the Company’s accounting policies for future periods requires a level of precision that is unavailable for these future periods and cannot be accomplished without unreasonable effort. Forward-looking non-GAAP measures are estimated consistent with the relevant definitions and assumptions.

Conference Call Details

Today at 5:00 p.m. ET, Fortune Brands will host an investor conference call to discuss results. A live audio webcast of the conference call will be available on the Fortune Brands website at ir.fbin.com/upcoming-events. It is recommended that listeners log on at least 10 minutes prior to the start of the call. A recorded replay of the call will be made available on the Company’s website shortly after the call has ended.

About Fortune Brands Innovations

Fortune Brands Innovations, Inc. (NYSE: FBIN), headquartered in Deerfield, Ill., is a brand, innovation and channel leader focused on exciting, supercharged categories in the home products, security and commercial building markets. The Company’s growing portfolio of brands includes Moen, House of Rohl, Aqualisa, Emtek, Therma-Tru, Larson, Fiberon, Master Lock, SentrySafe, Yale residential and August. To learn more about FBIN, its brands and environmental, social and governance (ESG) commitments, visit www.FBIN.com.


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations for our business, operations, financial performance or financial condition in addition to statements regarding our expectations for the markets in which we operate, general business strategies, the market potential of our brands, trends in the housing market, the potential impact of costs, including material and labor costs, the potential impact of inflation, expected capital spending, expected pension contributions, the expected impact of acquisitions, dispositions and other strategic transactions, the anticipated impact of recently issued accounting standards on our financial statements, and other matters that are not historical in nature. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “outlook,” “positioned” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” “confident,” “opportunity” 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 current expectations, estimates, assumptions and projections of our management about our industry, business and future financial results, available at the time this press release is issued. Although we believe that these statements are based on reasonable assumptions, they are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those indicated in such statements, including but not limited to: (i) our reliance on the North American and Chinese home improvement, repair and remodel and new home construction activity levels, (ii) the housing market, downward changes in the general economy, unfavorable interest rates or other business conditions, (iii) the competitive nature of consumer and trade brand businesses, (iv) our ability to execute on our strategic plans and the effectiveness of our strategies in the face of business competition, (v) our reliance on key customers and suppliers, including wholesale distributors and dealers and retailers, (vi) risks relating to rapidly evolving technological change, (vii) risks associated with our ability to improve organizational productivity and global supply chain efficiency and flexibility, (viii) risks associated with global commodity and energy availability and price volatility, as well as the possibility of sustained inflation, (ix) delays or outages in our information technology systems or computer networks or breaches of our information technology systems or other cybersecurity incidents, (x) risks associated with doing business globally, including changes in trade-related tariffs and risks with uncertain trade environments, (xi) risks associated with the disruption of operations, (xii) our inability to obtain raw materials and finished goods in a timely and cost-effective manner, (xiii) risks associated with strategic acquisitions, divestitures and joint ventures, including difficulties integrating acquired companies and the inability to achieve the expected financial results and benefits of transactions, (xiv) impairments in the carrying value of goodwill or other acquired intangible assets, (xv) risks of increases in our defined benefit-related costs and funding requirements, (xvi) our ability to attract and retain qualified personnel and other labor constraints, (xvii) the effect of climate change and the impact of related changes in government regulations and consumer preferences, (xviii) risks associated with environmental, social and governance matters, (xix) potential liabilities and costs from claims and litigation, (xx) changes in government and industry regulatory standards, (xxi) future tax law changes or the interpretation of existing tax laws, (xxii) our ability to secure and protect our intellectual property rights, and (xxiii) the impact of COVID-19 on the business. These and other factors are discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 30, 2023. We undertake no obligation to, and expressly disclaim any such obligation to, update or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or changes to future results over time or otherwise, except as required by law.

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 before charges / gains, sales excluding the impact of acquisitions (organic sales), free cash flow and cash conversion. These non-GAAP 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 applicable most closely comparable GAAP measures, and reasons for the Company’s use of these measures, are presented in the attached pages.


FORTUNE BRANDS INNOVATIONS, INC.

(In millions)

(Unaudited)

 

    

Thirteen

Weeks

Ended

    

Thirteen

Weeks

Ended

                 
Net sales (GAAP)    March 30,
2024
     April 1,
2023
     $ Change      % Change  

Water

   $ 625.3      $ 594.2      $ 31.1        5  

Outdoors

     315.0        289.9        25.1        9  

Security

     169.3        155.9        13.4        9  

Total net sales

   $ 1,109.6      $ 1,040.0      $ 69.6        7  

RECONCILIATIONS OF GAAP OPERATING INCOME TO OPERATING INCOME BEFORE CHARGES/GAINS

(In millions)

(Unaudited)

 

    

Thirteen

Weeks

Ended

   

Thirteen

Weeks

Ended

               
     March 30,
2024
    April 1,
2023
    $ Change     % Change  

WATER

        

Operating income (GAAP)

   $ 141.3     $ 128.4     $ 12.9       10  

Restructuring charges

     0.4       0.2       0.2       100  

Other charges/(gains)

                

Cost of products sold

     (0.2     -       (0.2     NM  

Selling, general and administrative expenses

     -       -       -       -  

Operating income before charges/gains (a)

   $ 141.5     $ 128.6     $ 12.9       10  

OUTDOORS

        
       

Operating income (GAAP)

   $ 34.3     $ 13.0     $ 21.3       164  

Restructuring charges

     0.5       1.5       (1.0     (67

Other charges/(gains)

                

Cost of products sold

     2.9       0.1       2.8       2,800  

Selling, general and administrative expenses

     0.2       0.6       (0.4     (67

Operating income before charges/gains (a)

     37.9       15.2     $ 22.7       149  

SECURITY

        
       

Operating income (GAAP)

   $ 19.1     $ 21.1     $ (2.0     (9

Restructuring charges

     1.6       0.7       0.9       129  

Other charges/(gains)

                

Cost of products sold

     6.0       -       6.0       NM  

Operating income before charges/gains (a)

   $ 26.7     $ 21.8     $ 4.9       22  

CORPORATE

        
       

Corporate expense (GAAP)

   $ (39.3   $ (30.7   $ (8.6     28  

Restructuring charges

     0.3       0.7       (0.4     (57

Other charges/(gains)

                

Selling, general and administrative expenses

     0.1       1.1       (1.0     (91

General and administrative expenses before charges/gains (a)

   $ (38.9   $ (28.9   $ (10.0     35  

TOTAL COMPANY

        
       

Operating income (GAAP)

   $ 155.4     $ 131.8     $ 23.6       18  

Restructuring charges

     2.8       3.1       (0.3     (10

Other charges/(gains)

                

Cost of products sold

     8.7       0.1       8.6       8,600  

Selling, general and administrative expenses

     0.3       1.7       (1.4     (82

Operating income before charges/gains (a)

   $ 167.2     $ 136.7     $ 30.5       22  

NM - Not Meaningful

(a) For definitions of Non-GAAP measures, see Definitions of Terms page


FORTUNE BRANDS INNOVATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (GAAP)

(In millions)

(Unaudited)

 

     March 30,
2024
          December 30,
2023
 

Assets

        

Current assets

        

Cash and cash equivalents

   $ 359.7         $ 366.4  

Accounts receivable, net

     615.9           534.2  

Inventories

     1,025.2           982.3  

Other current assets

     171.3           162.8  

Total current assets

     2,172.1           2,045.7  
   

Property, plant and equipment, net

     982.6           975.0  

Goodwill

     1,988.7           1,906.8  

Other intangible assets, net of accumulated amortization

     1,354.7           1,354.7  

Other assets

     293.4           282.8  

Total assets

   $ 6,791.5         $ 6,565.0  

Liabilities and equity

        

Current liabilities

        

Accounts payable

   $ 571.4         $ 568.1  

Other current liabilities

     491.1           632.3  

Total current liabilities

     1,062.5           1,200.4  
   

Long-term debt

     3,044.7           2,670.1  

Deferred income taxes

     118.6           111.3  

Other non-current liabilities

     284.9           289.8  

Total liabilities

     4,510.7           4,271.6  
   

Stockholders’ equity

     2,280.8           2,293.4  

Total equity

     2,280.8           2,293.4  

Total liabilities and equity

   $   6,791.5         $   6,565.0  


FORTUNE BRANDS INNOVATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

   

Thirteen Weeks

Ended

   

Thirteen Weeks

Ended

       
    March 30, 2024     April 1, 2023        

Operating activities

     

Net income

  $ 96.4     $ 84.6    

Depreciation and amortization

    46.1       31.9    

Non-cash lease expense

    9.3       8.1    

Deferred taxes

    8.8       7.4    

Other non-cash items

    10.9       10.5    

Changes in assets and liabilities, net

    (242.8     (66.4  

Net cash (used in) provided by operating activities

  $ (71.3   $ 76.1    

Investing activities

     

Capital expenditures

  $ (64.6   $ (42.6  

Cost of acquisitions, net of cash acquired

    (105.2     -    

Net cash used in investing activities

  $ (169.8   $ (42.6  

Financing activities

     

Increase in debt, net

  $ 375.0     $ -    

Proceeds from the exercise of stock options

    6.3       2.3    

Treasury stock purchases

    (100.0     (100.0  

Dividends to stockholders

    (30.1     (29.5  

Other items, net

    (12.5     (12.1  

Net cash provided by (used in) financing activities

  $ 238.7     $ (139.3  

     

Effect of foreign exchange rate changes on cash

  $ (5.0   $ 2.2    

     

Net decrease in cash and cash equivalents

  $ (7.4   $ (103.6  

Cash, cash equivalents and restricted cash* at beginning of period

    395.5       648.3    

Cash, cash equivalents and restricted cash* at end of period

  $ 388.1     $ 544.7    
     
     

FREE CASH FLOW

  Thirteen Weeks
Ended
    Thirteen Weeks
Ended
   

2024 Full Year

 
  March 30, 2024     April 1, 2023     Estimate  

     

Cash flow from operations (GAAP)

  $ (71.3   $ 76.1     $ 720.0  

Less:

           

Capital expenditures

    64.6       42.6       200.0  

Free cash flow**

  $ (135.9   $ 33.5     $ 520.0  

* Restricted cash of $25.9 million and $2.5 million is included in Other current assets and Other assets, respectively, as of March 30, 2024, and $2.7 million and $2.9 million is included in Other current assets and Other assets, respectively, as of April 1, 2023.

** Free cash flow is cash flow from operations calculated in accordance with U.S. generally accepted accounting principles (“GAAP”) less capital expenditures. 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.

The Consolidated Statements of Cash Flows and Free Cash Flow presented above include cash flows from continuing and discontinued operations.


FORTUNE BRANDS INNOVATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (GAAP)

(In millions, except per share amounts)

(Unaudited)

 

    Thirteen Weeks
Ended
    Thirteen Weeks
Ended
        
    March 30, 2024     April 1, 2023    

%

Change

 

     

Net sales

  $ 1,109.6     $ 1,040.0       7  

Cost of products sold

    622.0       631.7       (2

Selling, general and administrative expenses

    311.6       260.8       19  

Amortization of intangible assets

    17.8       12.6       41  

Restructuring charges

    2.8       3.1       (10

Operating income

    155.4       131.8       18  

Interest expense

    30.1       26.8       12  

Other expense (income), net

    0.1       (6.3     (102

Income from continuing operations before income taxes

    125.2       111.3       12  

Income tax

    28.8       25.7       12  

Income from continuing operations, net of tax

  $ 96.4     $ 85.6       13  

Loss from discontinued operations, net of tax

    -       (1.0     (100

Net income

  $ 96.4     $ 84.6       14  
         

Net income attributable to Fortune Brands

  $ 96.4     $ 84.6       14  

Diluted earnings per common share

     

Continuing operations

  $ 0.76     $ 0.67       13  

Discontinued operations

  $ -     $ (0.01     100  

Diluted EPS attributable to Fortune Brands

  $ 0.76     $ 0.66       15  

     

Diluted average number of shares outstanding

    127.0       128.5       (1


FORTUNE BRANDS INNOVATIONS, INC.

(In millions)

(Unaudited)

RECONCILIATIONS OF INCOME FROM CONTINUING OPERATIONS, NET OF TAX TO EBITDA BEFORE CHARGES/GAINS

 

   

Thirteen Weeks
Ended

    Thirteen Weeks
Ended
        
    March 30, 2024     April 1, 2023    

%

Change

 

     

Income from continuing operations, net of tax

  $ 96.4     $ 85.6       13  

     

Depreciation*

  $ 20.7     $ 19.2       8  

Amortization of intangible assets

    17.8       12.6       41  

Restructuring charges

    2.8       3.1       (10

Other charges/(gains)

    9.0       1.8       400  

Interest expense

    30.1       26.8       12  

Income taxes

    28.8       25.7       12  

     

EBITDA before charges/gains (c)

  $ 205.6     $ 174.8       18  

* Depreciation excludes accelerated depreciation expense of $7.6 million for the thirteen weeks ended March 30, 2024, and $0.1 million for the thirteen weeks ended April 1, 2023. Accelerated depreciation is included in restructuring and other charges/gains.

CALCULATION OF NET DEBT-TO-EBITDA BEFORE CHARGES/GAINS RATIO

 

As of March 30, 2024

 

Long-term debt **

  $ 3,044.7  

Total debt

    3,044.7  

Less:

   

Cash and cash equivalents **

    359.7  

Net debt (1)

  $  2,685.0  

 

For the fifty-two weeks ended March 30, 2024

 

EBITDA before charges/gains (2) (c)

  $ 940.5  
 

Net debt-to-EBITDA before charges/gains ratio (1/2)

    2.9  

** Amounts are per the Unaudited Condensed Consolidated Balance Sheet as of March 30, 2024.

 

    Thirty-nine Weeks
Ended
    Thirteen Weeks
Ended
    Fifty-Two Weeks
Ended
 
    December 30, 2023     March 30, 2024     March 30, 2024  

     

Income from continuing operations, net of tax

  $ 320.0     $ 96.4     $ 416.4  

     

Depreciation***

  $ 71.3     $ 20.7     $ 92.0  

Amortization of intangible assets

    49.5       17.8       67.3  

Restructuring charges

    29.5       2.8       32.3  

Other charges/(gains)

    22.1       9.0       31.1  

ASSA transaction expenses (d)

    18.7       -       18.7  

Solar compensation (e)

    2.0       -       2.0  

Amortization of inventory step-up (f)

    12.4       -       12.4  

Interest expense

    89.7       30.1       119.8  

Asset impairment charge (g)

    33.5       -       33.5  

Defined benefit plan actuarial gains

    (0.5     -       (0.5

Income taxes

    86.7       28.8       115.5  

EBITDA before charges/gains (c)

  $ 734.9     $ 205.6     $ 940.5  

*** Depreciation excludes accelerated depreciation expense of $16.3 million for the thirty-nine weeks ended December 30, 2023, and $7.6 million for the thirteen weeks ended March 30, 2024. Accelerated depreciation is included in restructuring and other charges/gains.

(c) (d) (e) (f) (g) For definitions of Non-GAAP measures, see Definitions of Terms page


RECONCILIATION OF DILUTED EPS FROM CONTINUING OPERATIONS BEFORE CHARGES/GAINS

For the thirteen weeks ended March 30, 2024, the diluted EPS before charges/gains is calculated as income from continuing operations on a diluted per-share basis, excluding $2.8 million ($2.0 million after tax or $0.02 per diluted share) of restructuring charges and $9.0 million ($6.9 million after tax or $0.05 per diluted share) of other charges/gains.

For the thirteen weeks ended April 1, 2023, the diluted EPS before charges/gains is calculated as income from continuing operations on a diluted per-share basis, excluding $3.1 million ($2.4 million after tax or $0.01 per diluted share) of restructuring charges and $1.8 million ($1.3 million after tax or $0.01 per diluted share) of other charges/gains.

 

    Thirteen Weeks
Ended
    Thirteen Weeks
Ended
        
    March 30, 2024     April 1, 2023     %
Change
 

Earnings per common share (EPS) - Diluted

     

Diluted EPS from continuing operations (GAAP)

  $ 0.76     $ 0.67       13  

Restructuring charges

    0.02       0.01       100  

Other charges/(gains)

    0.05       0.01       400  

Diluted EPS from continuing operations before charges/gains (b)

  $ 0.83     $ 0.69       20  

 

(b)

For definitions of Non-GAAP measures, see Definitions of Terms page


FORTUNE BRANDS INNOVATIONS, INC.

(In millions, except per share amounts)

(Unaudited)

 

    Thirteen Weeks
Ended
    Thirteen Weeks
Ended
        
    March 30, 2024     April 1, 2023     %
Change
 

Net sales (GAAP)

     

Water

  $ 625.3     $ 594.2       5  

Outdoors

    315.0       289.9       9  

Security

    169.3       155.9       9  

Total net sales

  $ 1,109.6     $ 1,040.0       7  

Operating income (loss)

     

Water

  $ 141.3     $ 128.4       10  

Outdoors

    34.3       13.0       164  

Security

    19.1       21.1       (9

Corporate expenses

    (39.3     (30.7     28  

Total operating income (GAAP)

  $ 155.4     $ 131.8       18  

OPERATING INCOME BEFORE CHARGES/GAINS RECONCILIATION

 

Total operating income (GAAP)

  $ 155.4     $ 131.8       18  

Restructuring charges (1)

    2.8       3.1       (10

Other charges/(gains) (2)

    9.0       1.8       400  

Operating income (loss) before charges/gains (a)

  $ 167.2     $ 136.7       22  

     

Water

  $ 141.5     $ 128.6       10  

Outdoors

    37.9       15.2       149  

Security

    26.7       21.8       22  

Corporate expenses

    (38.9     (28.9     35  

Total operating income before charges/gains (a)

  $ 167.2       136.7       22  

(1) Restructuring charges, which include costs incurred for significant cost reduction initiatives and workforce reduction costs by segment, totaled $2.8 million for the thirteen weeks ended March 30, 2024, and $3.1 million for the thirteen weeks ended April 1, 2023.

(2) Other charges/gains represent costs that are directly related to restructuring initiatives but cannot be reported as restructuring costs under GAAP. These costs can include losses from disposing of inventories, trade receivables allowances from discontinued product lines, accelerated depreciation due to the closure of facilities, and gains or losses from selling previously closed facilities. During the thirteen weeks ended March 30, 2024, total other charges were $9.0 million. For the thirteen weeks ended April 1, 2023, total other charges were $0.7 million.

At Corporate, other charges also include expenditures of $1.1 million for the thirteen weeks ended April 1, 2023 for banking, legal, accounting, and other similar services directly related to the planned acquisition of the Emtek and Schaub premium and luxury door and hardware business, as well as the U.S. and Canadian Yale and August residential smart lock businesses.

(a) For definitions of Non-GAAP measures, see Definitions of Terms page


FORTUNE BRANDS INNOVATIONS, INC.

OPERATING MARGIN TO BEFORE CHARGES/GAINS OPERATING MARGIN

(Unaudited)

 

    

Thirteen Weeks

Ended

   

Thirteen Weeks

Ended

        
     March 30, 2024     April 1, 2023     Change  

WATER

      
     

Operating margin

     22.6     21.6     100 bps  

Restructuring charges

     -       -          

Before charges/gains operating margin

     22.6     21.6     100 bps  

OUTDOORS

      
     

Operating margin

     10.9     4.5     640 bps  

Restructuring charges

     0.2     0.5    

Other charges/(gains)

            

Cost of products sold

     0.8     -      

Selling, general and administrative expenses

     0.1     0.2        

Before charges/gains operating margin

     12.0     5.2     680 bps  

SECURITY

      
     

Operating margin

     11.3     13.5     (220) bps  

Restructuring charges

     0.9     0.5    

Other charges/(gains)

            

Cost of products sold

     3.5     -      

Before charges/gains operating margin

     15.7     14.0     170 bps  

TOTAL COMPANY

      
     

Operating margin

     14.0     12.7     130 bps  

Restructuring charges

     0.3     0.3    

Other charges/(gains)

            

Cost of products sold

     0.8     -      

Selling, general and administrative expenses

     -       0.1    

Before charges/gains operating margin

     15.1     13.1     200 bps  

Operating margin is calculated as the operating income in accordance with GAAP, divided by the GAAP net sales. The before charges/gains operating margin is calculated as the operating income, excluding restructuring charges and other charges/gains, divided by the GAAP net sales. This before charges/gains operating margin is not a measure derived in accordance with GAAP. Management uses this measure to evaluate the returns generated by the Company and its business segments. Management believes that this measure provides investors with helpful supplemental information about the Company’s underlying performance from period to period. However, this measure may not be consistent with similar measures presented by other companies.


FORTUNE BRANDS INNOVATIONS, INC.

RECONCILIATION OF GAAP NET SALES TO ORGANIC NET SALES EXCLUDING THE IMPACT OF ACQUISITIONS

(Unaudited)

 

    Thirteen Weeks
Ended
    Thirteen Weeks
Ended
        
    March 30, 2024     April 1, 2023     % Change  

WATER

     

Net sales (GAAP)

  $ 625.3     $ 594.2       5

Impact of SpringWell Acquisition

    2.8       -      

Impact of Emtek and Schaub Acquisition

    67.6       -          

Organic net sales excluding impact of acquisitions

  $ 554.9     $ 594.2       (7 %) 

OUTDOORS

     

Net sales (GAAP)

  $ 315.0     $ 289.9       9

Organic net sales

  $ 315.0     $ 289.9       9

SECURITY

     

Net sales (GAAP)

  $ 169.3     $ 155.9       9

Impact of Yale and August Acquisition

    26.1       -          

Organic net sales excluding impact of an acquisition

  $ 143.2     $ 155.9       (8 %) 

TOTAL COMPANY

     

Net sales (GAAP)

  $ 1,109.6     $ 1,040.0       7

Impact of SpringWell Acquisition

    2.8       -      

Impact of Emtek and Schaub Acquisition

    67.6       -      

Impact of Yale and August Acquisition

    26.1       -      

Organic net sales excluding impact of acquisitions

  $   1,013.1     $   1,040.0       (3 %) 

Reconciliation of GAAP Net sales to organic net sales excluding the impact of acquisitions on net sales is net sales derived in accordance with GAAP excluding impact of the acquisitions of SpringWell and Emtek and Schaub in our Water segment and the acquisition of Yale and August in our Security segment on net sales. Management uses this measure to evaluate the overall performance of its segments and believes this measure provides investors with helpful supplemental information regarding the underlying performance of the segment from period to period. This measure may be inconsistent with similar measures presented by other companies.


Definitions of Terms: Non-GAAP Measures

(a) Operating income (loss) before charges/gains is calculated as operating income derived in accordance with GAAP, excluding restructuring and other charges/gains. Operating income (loss) before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the returns generated by the Company and its business segments. Management believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies.

(b) Diluted earnings per share from continuing operations before charges/gains is calculated as income from continuing operations on a diluted per-share basis, excluding restructuring and other charges/gains. This measure is not in accordance with GAAP. Management uses this measure to evaluate the Company’s overall performance and believes it provides investors with helpful supplemental information about the Company’s underlying performance from period to period. However, this measure may not be consistent with similar measures presented by other companies.

(c) EBITDA before charges/gains is calculated as income from continuing operations, net of tax in accordance with GAAP, excluding depreciation, amortization of intangible assets, restructuring and other charges/gains, ASSA transaction expenses, amortization of inventory step-up associated with acquisition of the ASSA businesses, asset impairment charges, charges for a compensation arrangement with the former owner of Solar, actuarial gains/losses associated with our defined benefit plans, 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 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) At Corporate, other charges also include expenditures of $18.7 million for the thirty-nine weeks ended December 30, 2023, for external banking, legal, accounting, and other similar services directly related to our ASSA transaction.

(e) In Outdoors, other charges include charges for a compensation arrangement with the former owner of Solar classified in selling, general and administrative expenses of $2.0 million for thirty-nine weeks ended December 30, 2023.

(f) For the thirty-nine weeks ended December 30, 2023, the amortization of inventory step-up associated with the acquisition of the ASSA business was $3.5 million for the Water segment and $8.9 million for the Security segment.

(g) Asset impairment charges for the thirty-nine weeks ended December 30, 2023 represent pre-tax impairment charges of $33.5 million related to indefinite-lived tradenames in our Outdoor segment.

 

 

Additional Information:

In January 2023, the Board of Directors of the Company approved a change to the Company’s fiscal year end from December 31 to a 52-or 53-week fiscal year ending on the Saturday closest but not subsequent to December 31, effective as of the commencement of the Company’s fiscal year on January 1, 2023. This change was made in order to align the Company’s fiscal year with that of its operating businesses and to align the Company’s reporting calendar with how the Company evaluates its businesses. There was no material impact to any of our previously disclosed financial information.

On December 14, 2022, the Company completed the previously announced spin-off of its Cabinets business, MasterBrand, Inc. (“MasterBrand”) (the “Spin-off”), in a tax-free transaction to the Company and our stockholders for U.S. federal income tax purposes, creating two independent, publicly traded companies. In addition, the Company’s name changed from “Fortune Brands Home & Security, Inc.” to “Fortune Brands Innovations, Inc.” and its stock ticker changed from “FBHS” to “FBIN” each of which became effective subsequent to the completion of the Spin-off. The operating results of the Cabinets business are reported as discontinued operations for all periods presented.

In January 2022, we acquired 100% of the outstanding equity of Solar Innovations, a leading producer of wide-opening exterior door systems and outdoor enclosures, for a purchase price of $61.6 million, net of cash acquired of $4.8 million. We financed the transaction using cash on hand and borrowings under our revolving credit facility. The results of Solar are reported as part of the Outdoors segment. Its complementary product offerings support the segment’s outdoor living strategy.

For certain forward-looking non-GAAP measures (as used in this press release, operating margin before charges/gains, EPS before charges/gains and cash conversion), the Company is unable to provide a reconciliation to the most comparable GAAP financial measure because the information needed to reconcile these measures is unavailable due to the inherent difficulty of forecasting the timing and/or amount of various items that have not yet occurred, including the high variability and low visibility with respect to gains and losses associated with our defined benefit plans, which are excluded from our diluted EPS before charges/gains and cash conversion, and restructuring and other charges, which are excluded from our operating margin before charges/gains, diluted EPS before charges/gains and cash conversion. Additionally, estimating such GAAP measures and providing a meaningful reconciliation consistent with the Company’s accounting policies for future periods requires a level of precision that is unavailable for these future periods and cannot be accomplished without unreasonable effort. Forward-looking non-GAAP measures are estimated consistent with the relevant definitions and assumptions.

 

Source: Fortune Brands Innovations, Inc.

INVESTOR AND MEDIA CONTACT:

Leigh Avsec

847-484-4211

Investor.Questions@fbhs.com