Fortune Brands Reports Sales and EPS for Q2; Updates 2014 Annual Outlook; Announces Acquisition and Share Repurchases
Highlights:
-
Q2 2014 sales increase 10 percent year-over-year to
$1.14 billion with Q2 2014 EPS of$0.55 ; EPS before charges/gains increase 34 percent to$0.55 -
Company narrows range for full-year 2014 outlook for EPS before
charges/gains to
$1.88 -$1.96 on sales growth of 9-11 percent -
Company announces acquisition of Sentry Safe and year-to-date share
repurchases of approximately
$375 million
"Our teams executed well, delivering a solid second quarter as consumer
traffic is increasing and demand gradually improved from the soft start
to the year," said
Second Quarter 2014
For the second quarter of 2014, sales were
"Sales increased 10 percent for the total company and 12 percent for our combined home segments in the second quarter. Importantly, total company operating income before charges/gains increased 28 percent," Klein said.
For each segment in the second quarter of 2014, compared to the prior-year quarter:
-
Kitchen & Bath Cabinetry sales were up 19 percent. Sales included
strong increases in the dealer channel from continued share gains and
strength in repair and remodel volume and mix. Operating income before
charges/gains increased 31 percent to
$46 million . - Plumbing & Accessories sales increased 5 percent, led by growth in the U.S. wholesale channel and international. Operating income before charges/gains increased 26 percent.
- Advanced Material Windows & Door Systems sales were up 9 percent. Entry doors sales were up 11 percent and windows sales were up 7 percent to the prior year. Operating income before charges/gains for the segment increased 53 percent.
- Security & Storage sales decreased 5 percent. Within the segment, security sales increased 1 percent and tool storage sales decreased 21 percent, which resulted in lower operating income before charges/gains.
"We also continued to invest in incremental capacity to support sales
growth to approximately
Value Enhancing Actions
The Company reinforced its commitment to maximize shareholder value by deploying free cash flow and adding debt leverage to drive incremental growth.
The Company announced today that it has acquired Sentry Safe, the
leading manufacturer of personal safes with estimated annual sales of
"Sentry Safe's global brand strength in the adjacent personal safe market enables Master Lock to broaden its product offerings and leverage its iconic brand worldwide," said Klein. "Both companies hold similar competitive advantages in their markets and produce products that protect people's most valuable assets. I am excited about the growth opportunities we will now have together to drive innovation, leverage global distribution and expand channels."
Master Lock and Sentry Safe have leading market positions and strong
consumer brands. Master Lock is the number one padlock brand in
Additionally, the Company also disclosed that share repurchases in 2014
now total approximately
"In addition to continuing our organic growth, we are sharply focused on
driving incremental shareholder value with our cash flow and balance
sheet," said
Company Updates Annual Outlook for 2014
The Company's 2014 annual outlook is based on a U.S. home products market growth assumption of 6 to 8 percent. Based on the Company's expectation to continue outperforming the market and the benefit from the Sentry Safe acquisition, the Company expects full-year 2014 net sales to increase 9 to 11 percent.
The Company expects diluted EPS before charges/gains to be in the range
of
The Company's annual outlook includes both the impact of its recent acquisition of Sentry Safe and the impact of share repurchases.
"We have seen a gradual improvement in the pace of new construction and consumer spending," said Klein. "However, our updated 2014 annual outlook for the home products market now reflects less growth in the second half of 2014 than we last estimated. Still, we remain on track to deliver strong growth this year and are well-positioned for accelerating growth in 2015."
The Company continues to expect to generate
About Fortune Brands
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains certain "forward-looking statements"
regarding business strategies, market potential, future financial
performance, the potential of our categories and brands, the effects of
the Sentry Safe acquisition and other matters. Statements preceded by,
followed by or that otherwise include the words "believes," "expects,"
"anticipates," "intends," "projects," "estimates," "plans," "outlook,"
and similar expressions or future or conditional verbs such as "will,"
"should," "would," "may" and "could" are generally forward-looking in
nature and not historical facts. Where, in any forward-looking
statement, we express an expectation or belief as to future results or
events, such expectation or belief is based on the current plans and
expectations of our management. Although we believe that these
statements are based on reasonable assumptions, they are subject to
numerous factors, risks and uncertainties that could cause actual
outcomes and results to be materially different from those indicated in
such statements. Our actual results could differ materially from the
results contemplated by these forward-looking statements due to a number
of factors, including but not limited to: (i) our reliance on the North
American home improvement, repair and new home construction activity
levels, (ii) the North American and global economies, (iii) risk
associated with entering into potential strategic acquisitions and
integrating acquired companies, (iv) our ability to remain competitive,
innovative and protect our intellectual property, (v) our reliance on
key customers and suppliers, (vi) the cost and availability associated
with our supply chains and the availability of raw materials, (vii) risk
of increases in our postretirement benefit-related costs and funding
requirements, (viii) compliance with tax, environmental and federal,
state, and international laws and industry regulatory standards, and
(ix) the risk of doing business internationally. These and other factors
are discussed in Item 1A of our Annual Report on Form 10-K for the year
ended
Use of Non-GAAP Financial Information
This press release includes measures not derived in accordance with generally accepted accounting principles ("GAAP"), such as diluted earnings per share before charges/gains, operating income before charges/gains and free cash flow. These measures should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP and may also be inconsistent with similar measures presented by other companies. Reconciliations of these measures to the most closely comparable GAAP measures, and reasons for the Company's use of these measures, are presented in the attached pages.
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| (In millions, except per share amounts) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
|
Three Months Ended |
Six Months Ended |
|||||||||||||||||||
| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||
| Net Sales (GAAP) | ||||||||||||||||||||
| Kitchen & Bath Cabinetry | $ | 467.9 | $ | 392.4 | 19 | $ | 878.8 | $ | 737.7 | 19 | ||||||||||
| Plumbing & Accessories | 340.1 | 322.6 | 5 | 650.0 | 631.5 | 3 | ||||||||||||||
| Advanced Material Windows & Door Systems | 192.9 | 176.5 | 9 | 322.9 | 300.7 | 7 | ||||||||||||||
| Security & Storage | 141.3 | 148.9 | (5 | ) | 256.7 | 260.5 | (1 | ) | ||||||||||||
| Total Net Sales | $ | 1,142.2 | $ | 1,040.4 | 10 | $ | 2,108.4 | $ | 1,930.4 | 9 | ||||||||||
| Operating Income Before Charges/Gains (a) | ||||||||||||||||||||
| Kitchen & Bath Cabinetry | $ | 46.3 | $ | 35.3 | 31 | $ | 66.3 | $ | 50.2 | 32 | ||||||||||
| Plumbing & Accessories | 69.9 | 55.3 | 26 | 125.3 | 110.3 | 14 | ||||||||||||||
| Advanced Material Windows & Door Systems | 15.1 | 9.9 | 53 | 7.4 | 2.0 | 270 | ||||||||||||||
| Security & Storage | 19.8 | 26.3 | (25 | ) | 31.8 | 38.6 | (18 | ) | ||||||||||||
| Corporate Expenses | (14.3 | ) | (19.6 | ) | 27 | (28.9 | ) | (31.5 | ) | 8 | ||||||||||
| Total Operating Income Before Charges/Gains | $ | 136.8 | $ | 107.2 | 28 | $ | 201.9 | $ | 169.6 | 19 | ||||||||||
| Earnings Per Share Before Charges/Gains (b) | ||||||||||||||||||||
| Diluted | $ | 0.55 | $ | 0.41 | 34 | $ | 0.80 | $ | 0.65 | 23 | ||||||||||
| EBITDA Before Charges/Gains (c) | $ | 160.1 | $ | 128.4 | 25 | $ | 249.2 | $ | 212.9 | 17 | ||||||||||
|
(a) (b) (c) For definitions of Non-GAAP measures, see Definitions of Terms page |
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||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET (GAAP) | ||||||||
| (In millions) | ||||||||
| (Unaudited) | ||||||||
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|||||||
| 2014 | 2013 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 145.0 | $ | 241.4 | ||||
| Accounts receivable, net | 535.3 | 477.1 | ||||||
| Inventories | 521.2 | 471.6 | ||||||
| Other current assets | 135.6 | 137.3 | ||||||
| Total current assets | 1,337.1 | 1,327.4 | ||||||
| Property, plant and equipment, net | 540.2 | 534.4 | ||||||
| Goodwill | 1,520.6 | 1,519.9 | ||||||
| Other intangible assets, net of accumulated amortization | 744.2 | 752.9 | ||||||
| Other assets | 48.0 | 43.5 | ||||||
| Total assets | $ | 4,190.1 | $ | 4,178.1 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities | ||||||||
| Notes payable to banks | $ | 10.1 | $ | 6.0 | ||||
| Accounts payable | 337.7 | 343.8 | ||||||
| Other current liabilities | 297.1 | 388.9 | ||||||
| Total current liabilities | 644.9 | 738.7 | ||||||
| Long-term debt | 595.0 | 350.0 | ||||||
| Deferred income taxes | 243.4 | 245.8 | ||||||
| Other non-current liabilities | 175.2 | 190.5 | ||||||
| Total liabilities | 1,658.5 | 1,525.0 | ||||||
| Stockholders' equity | 2,528.6 | 2,649.4 | ||||||
| Noncontrolling interests | 3.0 | 3.7 | ||||||
| Total equity | 2,531.6 | 2,653.1 | ||||||
| Total liabilities and equity | $ | 4,190.1 | $ | 4,178.1 | ||||
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| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| (In millions) | |||||||||
| (Unaudited) | |||||||||
|
Six Months Ended |
|||||||||
| 2014 | 2013 | ||||||||
| Operating Activities | |||||||||
| Net income | $ | 134.8 | $ | 101.7 | |||||
| Depreciation and amortization | 47.6 | 42.8 | |||||||
|
Asset impairment charge |
- |
6.2 | |||||||
| Recognition of actuarial losses | 0.6 | 5.4 | |||||||
| Deferred taxes | 6.6 | 4.9 | |||||||
| Other noncash items | 16.2 | 13.8 | |||||||
| Changes in assets and liabilities, net | (236.5 | ) | (128.9 | ) | |||||
| Net cash (used in) provided by operating activities | $ | (30.7 | ) | $ | 45.9 | ||||
| Investing Activities | |||||||||
| Capital expenditures, net of proceeds from asset sales | $ | (47.5 | ) | $ | (30.9 | ) | |||
| Cost of acquisition, net of cash | - | (299.4 | ) | ||||||
| Net cash used in investing activities | $ | (47.5 | ) | $ | (330.3 | ) | |||
| Financing Activities | |||||||||
| Increase in debt, net | $ |
248.9 |
$ | 61.1 | |||||
| Proceeds from the exercise of stock options | 11.0 | 28.8 | |||||||
| Treasury stock purchases | (255.0 | ) | (13.5 | ) | |||||
| Dividends to stockholders | (39.5 | ) | (16.5 | ) | |||||
| All other, net | 17.5 | 12.0 | |||||||
| Net cash (used in) provided by financing activities | $ | (17.1 | ) | $ | 71.9 | ||||
| Effect of foreign exchange rate changes on cash | (1.1 | ) | 0.1 | ||||||
| Net decrease in cash and cash equivalents | $ | (96.4 | ) | $ | (212.4 | ) | |||
| Cash and cash equivalents at beginning of period | 241.4 | 336.0 | |||||||
| Cash and cash equivalents at end of period | $ | 145.0 | $ | 123.6 | |||||
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FREE |
Six Months Ended |
2014 Full Year | |||||||
| 2014 | 2013 | Approximation | |||||||
|
Free |
$ | (67.2 | ) | $ | 43.8 | $ | 225.0 - 250.0 | ||
| Add: | |||||||||
| Capital expenditures | 47.6 | 31.2 | 130.0 - 140.0 | ||||||
| Less: | |||||||||
| Proceeds from the sale of assets | 0.1 | 0.3 | - | ||||||
| Proceeds from the exercise of stock options | 11.0 | 28.8 | 20.0 | ||||||
| Cash Flow From Operations (GAAP) | $ | (30.7 | ) | $ | 45.9 | $ | 335.0 - 370.0 | ||
| * Free cash flow is cash flow from operations calculated in accordance with GAAP less net capital expenditures (capital expenditures less proceeds from the sale of assets including property, plant and equipment) plus proceeds from the exercise of stock options. Free cash flow does not include adjustments for certain non-discretionary cash flows such as mandatory debt repayments. Free cash flow is a measure not derived in accordance with GAAP. Management believes that free cash flow provides investors with helpful supplemental information about the Company's ability to fund internal growth, make acquisitions, repay debt and related interest, pay dividends and repurchase common stock. This measure may be inconsistent with similar measures presented by other companies. | |||||||||
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| CONSOLIDATED STATEMENT OF INCOME (GAAP) | ||||||||||||||||||
| (In millions, except per share amounts) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
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Three Months Ended |
Six Months Ended |
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| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||
| Net Sales | $ | 1,142.2 | $ | 1,040.4 | 10 | $ | 2,108.4 | $ | 1,930.4 | 9 | ||||||||
| Cost of products sold | 741.8 | 663.4 | 12 | 1,393.3 | 1,253.2 | 11 | ||||||||||||
| Selling, general | ||||||||||||||||||
| and administrative expenses | 259.0 | 267.7 | (3 | ) | 505.3 | 507.8 | (0 | ) | ||||||||||
| Amortization of intangible assets | 4.0 | 2.5 | 60 | 8.0 | 5.1 | 57 | ||||||||||||
| Restructuring charges | 0.8 | 0.3 | 167 | 3.1 | 1.2 | 158 | ||||||||||||
| Operating Income | 136.6 | 106.5 | 28 | 198.7 | 163.1 | 22 | ||||||||||||
| Interest expense | 2.1 | 1.7 | 24 | 4.0 | 3.4 | 18 | ||||||||||||
| Other expense, net | 0.8 | 6.1 | (87 | ) | 0.3 | 5.9 | (95 | ) | ||||||||||
| Income before income taxes | 133.7 | 98.7 | 35 | 194.4 | 153.8 | 26 | ||||||||||||
| Income taxes | 40.1 | 34.5 | 16 | 59.6 | 52.1 | 14 | ||||||||||||
| Net Income | $ | 93.6 | $ | 64.2 | 46 | $ | 134.8 | $ | 101.7 | 33 | ||||||||
| Less: Noncontrolling interests | 0.3 | 0.2 | 50 | 0.7 | 0.4 | 75 | ||||||||||||
| Net Income attributable to | ||||||||||||||||||
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$ | 93.3 | $ | 64.0 | 46 | $ | 134.1 | $ | 101.3 | 32 | ||||||||
| Earnings Per Common Share, Diluted: | ||||||||||||||||||
| Net Income | $ | 0.55 | $ | 0.37 | 49 | $ | 0.79 | $ | 0.59 | 34 | ||||||||
| Diluted Average Shares Outstanding | 168.7 | 171.3 | (1 | ) | 170.0 | 170.8 | (0 | ) | ||||||||||
|
DILUTED EPS BEFORE CHARGES/GAINS RECONCILIATION |
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For the second quarter of 2014, diluted EPS before charges/gains is
net income calculated on a diluted per-share basis excluding |
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For six months ended |
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For the second quarter of 2013, diluted EPS before charges/gains is
net income calculated on a diluted per-share basis excluding the
impact of expense from actuarial losses associated with our defined
benefit plans of |
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For six months ended |
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Three Months Ended |
Six Months Ended |
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| 2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||||||
| Earnings Per Common Share - Diluted | |||||||||||||||
| Diluted EPS Before Charges/Gains (b) | $ | 0.55 | $ | 0.41 | 34 | $ | 0.80 | $ | 0.65 | 23 | |||||
| Restructuring and other charges | - | - | - | (0.01 | ) | - | - | ||||||||
| Asset impairment charge | - | (0.04 | ) | 100 | - | (0.04 | ) | 100 | |||||||
| Defined benefit plan actuarial losses | - | - | - | - | (0.02 | ) | 100 | ||||||||
| Diluted EPS (GAAP) | $ | 0.55 | $ | 0.37 | 49 | $ | 0.79 | $ | 0.59 | 34 | |||||
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RECONCILIATION OF FULL YEAR 2014 EARNINGS GUIDANCE TO GAAP |
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For the full year, the Company is targeting diluted EPS before
charges/gains to be in the range of |
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(b) For definitions of Non-GAAP measures, see Definitions of Terms page |
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| RECONCILIATION OF FULL YEAR 2013 DILUTED EPS BEFORE CHARGES/GAINS TO GAAP DILUTED EPS | |||||
| (unaudited) | |||||
| For the twelve months ended | |||||
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| Diluted EPS before charges/gains - full year | $ | 1.50 | |||
| Diluted EPS before charges/gains* | $ | 1.50 | |||
| Restructuring and other charges | (0.02 | ) | |||
| Asset impairment charges | (0.12 | ) | |||
| Defined benefit plan actuarial losses | (0.02 | ) | |||
| Diluted EPS (GAAP) | $ | 1.34 | |||
* For the year ended
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| (In millions) | |||||||||||||||
| (Unaudited) | |||||||||||||||
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RECONCILIATION OF GAAP NET INCOME TO EBITDA BEFORE CHARGES/GAINS |
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|
Three Months Ended |
Six Months Ended |
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| 2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||||||
| Net Income | $ | 93.6 | $ | 64.2 | 46 | $ | 134.8 | $ | 101.7 | 33 | |||||
| Depreciation* | $ | 20.1 | $ | 18.6 | 8 | $ | 39.6 | $ | 37.9 | 4 | |||||
| Amortization of intangible assets | 4.0 | 2.5 | 60 | 8.0 | 5.1 | 57 | |||||||||
| Restructuring and other charges | 0.2 | - | 100 | 2.6 | 1.2 | 117 | |||||||||
| Interest expense | 2.1 | 1.7 | 24 | 4.0 | 3.4 | 18 | |||||||||
| Asset impairment charge | - | 6.2 | (100 | ) | - | 6.2 | (100 | ) | |||||||
| Defined benefit plan actuarial losses | - | 0.7 | (100 | ) | 0.6 | 5.3 | (89 | ) | |||||||
| Income taxes | 40.1 | 34.5 | 16 | 59.6 | 52.1 | 14 | |||||||||
| EBITDA BEFORE CHARGES/GAINS (c) | $ | 160.1 | $ | 128.4 | 25 | $ | 249.2 | $ | 212.9 | 17 | |||||
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*Depreciation excludes accelerated depreciation of
(c) For definitions of Non-GAAP measures, see Definitions of Terms page
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| Reconciliation of Income Statement - GAAP to Before Charges/Gains Information | |||||||||||||||
|
Three Months Ended |
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| $ in millions, except per share amounts | |||||||||||||||
| (unaudited) | |||||||||||||||
| Before Charges/Gains adjustments | |||||||||||||||
| Restructuring |
Defined benefit |
Asset | Before | ||||||||||||
| GAAP | and other |
plan actuarial |
impairment | Charges/Gains | |||||||||||
| (unaudited) | charges |
losses |
charge | (Non-GAAP) | |||||||||||
| 2014 | SECOND QUARTER | ||||||||||||||
| Net Sales | $ | 1,142.2 | - | - | - | ||||||||||
| Cost of products sold | 741.8 | 0.6 | - | - | |||||||||||
| Selling, general & administrative expenses | 259.0 | - | - | - | |||||||||||
| Amortization of intangible assets | 4.0 | - | - | - | |||||||||||
| Restructuring charges | 0.8 | (0.8 | ) | - | - | ||||||||||
| Operating Income | 136.6 | 0.2 | - | - | 136.8 | ||||||||||
| Interest expense | 2.1 | - | - | - | |||||||||||
| Other expense, net | 0.8 | - | - | - | |||||||||||
| Income before income taxes | 133.7 | 0.2 | - | - | 133.9 | ||||||||||
| Income taxes | 40.1 | 0.6 | - | - | |||||||||||
| Net Income | $ | 93.6 | (0.4 | ) | - | - | $ | 93.2 | |||||||
| Less: Noncontrolling interests | 0.3 | - | - | - | |||||||||||
| Net Income attributable | |||||||||||||||
|
to |
$ | 93.3 | (0.4 | ) | - | - | $ | 92.9 | |||||||
| Diluted Average Shares Outstanding | 168.7 | 168.7 | |||||||||||||
| Diluted EPS | 0.55 | 0.55 | |||||||||||||
| 2013 | |||||||||||||||
| Net Sales | $ | 1,040.4 | - | - | - | ||||||||||
| Cost of products sold | 663.4 | 0.3 | (0.3 | ) | - | ||||||||||
| Selling, general & administrative expenses | 267.7 | - | (0.4 | ) | - | ||||||||||
| Amortization of intangible assets | 2.5 | - | - | - | |||||||||||
| Restructuring charges | 0.3 | (0.3 | ) | - | - | ||||||||||
| Operating Income | 106.5 | - | 0.7 | - | 107.2 | ||||||||||
| Interest expense | 1.7 | - | - | - | |||||||||||
| Other expense, net | 6.1 | - | - | (6.2 | ) | ||||||||||
| Income before income taxes | 98.7 | - | 0.7 | 6.2 | 105.6 | ||||||||||
| Income taxes | 34.5 | - | 0.3 | - | |||||||||||
| Net Income | $ | 64.2 | - | 0.4 | 6.2 | $ | 70.8 | ||||||||
| Less: Noncontrolling interests | 0.2 | - | - | - | |||||||||||
| Net Income attributable | |||||||||||||||
|
to |
$ | 64.0 | - | 0.4 | 6.2 | $ | 70.6 | ||||||||
| Diluted Average Shares Outstanding | 171.3 | 171.3 | |||||||||||||
| Diluted EPS | 0.37 | 0.41 | |||||||||||||
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| Reconciliation of Income Statement - GAAP to Before Charges/Gains Information | |||||||||||||||
|
Six Months Ended |
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| $ in millions, except per share amounts | |||||||||||||||
| (unaudited) | |||||||||||||||
| Before Charges/Gains adjustments | |||||||||||||||
| Restructuring |
Defined benefit |
Asset | Before | ||||||||||||
| GAAP | and other |
plan actuarial |
impairment | Charges/Gains | |||||||||||
| (unaudited) | charges |
losses |
charge | (Non-GAAP) | |||||||||||
| 2014 |
YEAR |
||||||||||||||
| Net Sales | $ | 2,108.4 | - | - | - | ||||||||||
| Cost of products sold | 1,393.3 | 0.5 | (0.6 | ) | - | ||||||||||
| Selling, general & administrative expenses | 505.3 | - | - | - | |||||||||||
| Amortization of intangible assets | 8.0 | - | - | - | |||||||||||
| Restructuring charges | 3.1 | (3.1 | ) | - | - | ||||||||||
| Operating Income | 198.7 | 2.6 | 0.6 | - | 201.9 | ||||||||||
| Interest expense | 4.0 | - | - | - | |||||||||||
| Other expense, net | 0.3 | - | - | - | |||||||||||
| Income before income taxes | 194.4 | 2.6 | 0.6 | - | 197.6 | ||||||||||
| Income taxes | 59.6 | 1.5 | 0.2 | - | |||||||||||
| Net Income | $ | 134.8 | 1.1 | 0.4 | - | $ | 136.3 | ||||||||
| Less: Noncontrolling interests | 0.7 | - | - | - | |||||||||||
| Net Income attributable | |||||||||||||||
|
to |
$ | 134.1 | 1.1 | 0.4 | - | $ | 135.6 | ||||||||
| Diluted Average Shares Outstanding | 170.0 | 170.0 | |||||||||||||
| Diluted EPS | 0.79 | 0.80 | |||||||||||||
| 2013 | |||||||||||||||
| Net Sales | 1,930.4 | - | - | - | |||||||||||
| Cost of products sold | 1,253.2 | - | (3.3 | ) | - | ||||||||||
| Selling, general & administrative expenses | 507.8 | - | (2.0 | ) | - | ||||||||||
| Amortization of intangible assets | 5.1 | - | - | - | |||||||||||
| Restructuring charges | 1.2 | (1.2 | ) | - | - | ||||||||||
| Operating Income | 163.1 | 1.2 | 5.3 | - | 169.6 | ||||||||||
| Interest expense | 3.4 | - | - | - | |||||||||||
| Other expense, net | 5.9 | - | - | (6.2 | ) | ||||||||||
| Income before income taxes | 153.8 | 1.2 | 5.3 | 6.2 | 166.5 | ||||||||||
| Income taxes | 52.1 | 0.4 | 1.8 | - | |||||||||||
| Net Income | $ | 101.7 | 0.8 | 3.5 | 6.2 | $ | 112.2 | ||||||||
| Less: Noncontrolling interests | 0.4 | - | - | - | |||||||||||
| Net Income attributable | |||||||||||||||
|
to |
$ | 101.3 | 0.8 | 3.5 | 6.2 | $ | 111.8 | ||||||||
| Diluted Average Shares Outstanding | 170.8 | 170.8 | |||||||||||||
| Diluted EPS | 0.59 | 0.65 | |||||||||||||
|
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| (In millions, except per share amounts) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
|
Three Months Ended |
Six Months Ended |
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| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||
| Net Sales (GAAP) | ||||||||||||||||||||
| Kitchen & Bath Cabinetry | $ | 467.9 | $ | 392.4 | 19 | $ | 878.8 | $ | 737.7 | 19 | ||||||||||
| Plumbing & Accessories | 340.1 | 322.6 | 5 | 650.0 | 631.5 | 3 | ||||||||||||||
| Advanced Material Windows & Door Systems | 192.9 | 176.5 | 9 | 322.9 | 300.7 | 7 | ||||||||||||||
| Security & Storage | 141.3 | 148.9 | (5 | ) | 256.7 | 260.5 | (1 | ) | ||||||||||||
| Total Net Sales | $ | 1,142.2 | $ | 1,040.4 | 10 | $ | 2,108.4 | $ | 1,930.4 | 9 | ||||||||||
| Operating Income | ||||||||||||||||||||
| Kitchen & Bath Cabinetry | $ | 46.1 | $ | 35.4 | 30 | $ | 66.0 | $ | 49.7 | 33 | ||||||||||
| Plumbing & Accessories | 71.5 | 55.3 | 29 | 126.8 | 110.3 | 15 | ||||||||||||||
| Advanced Material Windows & Door Systems | 15.1 | 9.8 | 54 | 7.4 | 1.3 | 469 | ||||||||||||||
| Security & Storage | 19.8 | 26.3 | (25 | ) | 29.6 | 38.6 | (23 | ) | ||||||||||||
| Corporate Expenses (1) | (15.9 | ) | (20.3 | ) | 22 | (31.1 | ) | (36.8 | ) | 15 | ||||||||||
| Total Operating Income (GAAP) | $ | 136.6 | $ | 106.5 | 28 | $ | 198.7 | $ | 163.1 | 22 | ||||||||||
|
OPERATING INCOME BEFORE CHARGES/GAINS RECONCILIATION |
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| Operating Income Before Charges/Gains (a) | ||||||||||||||||||||
| Kitchen & Bath Cabinetry | $ | 46.3 | $ | 35.3 | 31 | $ | 66.3 | $ | 50.2 | 32 | ||||||||||
| Plumbing & Accessories | 69.9 | 55.3 | 26 | 125.3 | 110.3 | 14 | ||||||||||||||
| Advanced Material Windows & Door Systems | 15.1 | 9.9 | 53 | 7.4 | 2.0 | 270 | ||||||||||||||
| Security & Storage | 19.8 | 26.3 | (25 | ) | 31.8 | 38.6 | (18 | ) | ||||||||||||
| Corporate Expenses | (14.3 | ) | (19.6 | ) | 27 | (28.9 | ) | (31.5 | ) | 8 | ||||||||||
| Total Operating Income Before Charges/Gains (a) | 136.8 | 107.2 | 28 | 201.9 | 169.6 | 19 | ||||||||||||||
| Restructuring and other charges (2) (4) | (0.2 | ) | - | (100 | ) | (2.6 | ) | (1.2 | ) | (117 | ) | |||||||||
| Defined benefit plan actuarial losses (3) | - | (0.7 | ) | 100 | (0.6 | ) | (5.3 | ) | 89 | |||||||||||
| Total Operating Income (GAAP) | $ | 136.6 | $ | 106.5 | 28 | $ | 198.7 | $ | 163.1 | 22 | ||||||||||
| (1) Corporate expenses include the components of defined benefit plan expense other than service cost including actuarial gains and losses. | ||||||||||||||||||||
| (2) Restructuring charges are costs incurred to implement significant cost reduction initiatives and include workforce reduction costs. | ||||||||||||||||||||
| (3) Represents actuarial gains or losses associated with our defined benefit plans. Actuarial gains or losses in a period represent the difference between actual and actuarially assumed experience, principally related to liability discount rates and plan asset returns, as well as other actuarial assumptions including compensation rates, turnover rates, and health care cost trend rates. The Company recognizes actuarial gains or losses immediately in operating income to the extent they cumulatively exceed a "corridor." The corridor is equal to the greater of 10% of the fair value of plan assets or 10% of a plan's projected benefit obligation. Actuarial gains or losses are determined at required remeasurement dates which occur at least annually in the fourth quarter. Remeasurements due to plan amendments and settlements may also occur in interim periods during the year. Our operating income before charges/gains reflects our expected rate of return on pension plan assets which in a given period may materially differ from our actual return on plan assets. Our liability discount rates and plan asset returns are based upon difficult to predict fluctuations in global bond and equity markets that are not directly related to the Company's business. We believe that the exclusion of actuarial gains or losses from operating income before charges/gains provides investors with useful supplemental information regarding the underlying performance of the business from period to period that may be considered in conjunction with our operating income as measured on a GAAP basis. We present this supplemental information because such actuarial gains or losses may create volatility in our operating income that does not necessarily have an immediate corresponding impact on operating cash flow or the actual compensation and benefits provided to our employees. The table below sets forth additional supplemental information on the Company's historical actual and expected rate of return on plan assets, as well as discount rates used to value its defined benefit obligations: | ||||||||||||||||||||
| ($ In millions) | ||||||||||||||||||||
| Year Ended | Year Ended | |||||||||||||||||||
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| Actual return on plan assets | % | $ | % | $ | ||||||||||||||||
| Expected return on plan assets | 15.2 | % | $ | 74.6 | 14.5 | % | $ | 63.7 | ||||||||||||
|
Discount rate at |
7.8 | % | 41.8 | 7.8 | % | 36.8 | ||||||||||||||
| Pension benefits | ||||||||||||||||||||
| Postretirement benefits | 5.0 | % | 4.2 | % | ||||||||||||||||
| 4.3 | % | 3.7 | % | |||||||||||||||||
| (4) Other charges which were recorded in cost of products sold represent charges or gains directly related to restructuring initiatives that cannot be reported as restructuring under GAAP. Such charges or gains may include losses on disposal of inventories, trade receivables allowances from exiting product lines, accelerated depreciation resulting from the closure of facilities and gains or losses associated with the sale of closed facilities. | ||||||||||||||||||||
|
(a) For definitions of Non-GAAP measures, see Definitions of Terms page |
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| RECONCILIATION OF SEGMENT OPERATING INCOME BEFORE CHARGES/GAINS TO GAAP OPERATING INCOME | |||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||
| For the three month period ended | For the six month period ended | ||||||||||||||||||||||||||||
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|
$ change |
% change |
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|
$ change |
% change | ||||||||||||||||||||||
| KITCHEN & BATH CABINETRY | |||||||||||||||||||||||||||||
| Operating income before charges/gains(a) | $ | 46.3 | $ | 35.3 | $ | 11.0 | 31 | $ | 66.3 | $ | 50.2 | $ | 16.1 | 32 | |||||||||||||||
| Restructuring charges (1) | (0.2 | ) | (0.2 | ) | - | - | (0.3 | ) | (0.5 | ) | 0.2 | 40 | |||||||||||||||||
|
Other charges (2) |
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|
Cost of products sold |
- | 0.3 | (0.3 | ) | (100 | ) | - | - | - | - | |||||||||||||||||||
| Operating income (GAAP) | $ | 46.1 | $ | 35.4 | $ | 10.7 | 30 | $ | 66.0 | $ | 49.7 | $ | 16.3 | 33 | |||||||||||||||
| PLUMBING & ACCESSORIES | |||||||||||||||||||||||||||||
| Operating income before charges/gains(a) | $ | 69.9 | $ | 55.3 | $ | 14.6 | 26 | $ | 125.3 | $ | 110.3 | $ | 15.0 | 14 | |||||||||||||||
| Restructuring charges (1) | 1.0 | - | 1.0 | 100 | 0.9 | - | 0.9 | 100 | |||||||||||||||||||||
|
Other charges (2) |
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| Cost of products sold | 0.6 | - | 0.6 | 100 | 0.6 | - | 0.6 | 100 | |||||||||||||||||||||
| Operating income (GAAP) | $ | 71.5 | $ | 55.3 | $ | 16.2 | 29 | $ | 126.8 | $ | 110.3 | $ | 16.5 | 15 | |||||||||||||||
| ADVANCED MATERIAL WINDOWS & DOOR SYSTEMS | |||||||||||||||||||||||||||||
| Operating income before charges/gains(a) | $ | 15.1 | $ | 9.9 | $ | 5.2 | 53 | $ | 7.4 | $ | 2.0 | $ | 5.4 | 270 | |||||||||||||||
| Restructuring charges (1) | - | (0.1 | ) | 0.1 | 100 | - | (0.7 | ) | 0.7 | 100 | |||||||||||||||||||
| Operating income (GAAP) | $ | 15.1 | $ | 9.8 | $ | 5.3 | 54 | $ | 7.4 | $ | 1.3 | $ | 6.1 | 469 | |||||||||||||||
| SECURITY & STORAGE | |||||||||||||||||||||||||||||
| Operating income before charges/gains(a) | $ | 19.8 | $ | 26.3 | $ | (6.5 | ) | (25 | ) | $ | 31.8 | $ | 38.6 | $ | (6.8 | ) | (18 | ) | |||||||||||
| Restructuring charges (1) | - | - | - | - | (2.1 | ) | - | (2.1 | ) | (100 | ) | ||||||||||||||||||
| Other charges (2) | |||||||||||||||||||||||||||||
| Cost of products sold | - | - | - | - | (0.1 | ) | - | (0.1 | ) | (100 | ) | ||||||||||||||||||
| Operating income (GAAP) | $ | 19.8 | $ | 26.3 | $ | (6.5 | ) | (25 | ) | $ | 29.6 | $ | 38.6 | $ | (9.0 | ) | (23 | ) | |||||||||||
| (1) Restructuring charges are costs incurred to implement significant cost reduction initiatives and include workforce reduction costs. | |||||||||||||||||||||||||||||
| (2) Other charges which were recorded in cost of products sold represent charges or gains directly related to restructuring initiatives that cannot be reported as restructuring under GAAP. Such charges or gains may include losses on disposal of inventories, trade receivables allowances from exiting product lines, accelerated depreciation resulting from the closure of facilities and gains or losses associated with the sale of closed facilities. | |||||||||||||||||||||||||||||
|
(a) For definitions of Non-GAAP measures, see Definitions of Terms page |
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| Definitions of Terms: Non-GAAP Measures | ||
| (a) Operating income before charges/gains is operating income derived in accordance with U.S. generally accepted accounting principles ("GAAP") excluding restructuring and other charges and the impact of income and expense from actuarial gains or losses associated with our defined benefit plans. Operating income before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the returns generated by 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 net income calculated on a diluted per-share basis excluding restructuring and other charges, an asset impairment charge pertaining to a cost method investment and the impact of income and expense from actuarial gains or losses associated with our defined benefit plans. Diluted EPS before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the overall performance of the Company and believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies. | ||
| (c) EBITDA before charges/gains is net income derived in accordance with GAAP excluding restructuring and other charges, an asset impairment charge pertaining to a cost method investment, the impact of income and expense from actuarial gains or losses associated with our defined benefit plans, depreciation, amortization of intangible assets, interest expense, and income taxes. EBITDA before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to assess returns generated by 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. | ||
Investor and Media Contact:
brian.lantz@FBHS.com
Source:
News Provided by Acquire Media