Fortune Brands Home & Security, Inc. (NYSE: FBHS), an industry-leading
home and security products company, today announced first quarter 2019
results.
“In the first quarter our performance was on plan, and housing market
growth in the U.S. and Canada started the year out slowly, as expected,”
said Chris Klein, chief executive officer, Fortune Brands. “Our teams
executed well despite the softer backdrop, and recently we have seen
some signs of improving demand. Overall we are tracking to our plan
built around a more conservative market—with a soft first half start,
and modest growth overall for the year,” said Klein. “Given improving
fundamentals, we continue to expect a modest acceleration in growth in
the second half of 2019.”
First Quarter 2019
For the first quarter of 2019, sales were $1.3 billion, an increase of 6
percent over the first quarter of 2018. Earnings per share were $0.60,
compared to $0.49 in the prior-year quarter. EPS before charges/gains
were $0.63, compared to $0.56 the same quarter last year. Operating
income was $135.6 million, compared to $119.4 million in the prior-year
quarter. Operating income before charges/gains was $142.0 million,
compared to $124.3 million the same quarter last year, up 14 percent.
“Each of our businesses performed well, and consistent with our plans in
the first quarter. Our plumbing business achieved its plan on sales and
margin, and our cabinet pivot is showing visible signs of progress as
sales grew 3 percent and margins increased 350 basis points,” Klein
said. “Although much work remains ahead and the overall market is likely
to remain soft through the first half, I am very pleased with the start
to the year in cabinets and our other business segments.”
For each segment in the first quarter of 2019, compared to the
prior-year quarter:
-
Plumbing sales increased 2 percent and overcame a strong prior year
comparison, when sales increased 19 percent. Excluding FX, sales
increased 3.5 percent. Operating margin before charges/gains was 19.7
percent. -
Cabinet sales increased 3 percent versus the prior year led by growing
sales of value products in homecenter, dealer and builder direct.
Segment operating margin before charges/gains increased 350 basis
points to 7.8 percent. -
Doors & Security sales were up 20 percent, or 5 percent excluding the
recent Fiberon acquisition. Security products continued to improve in
the quarter, with modest sales growth and margin improvement. Segment
operating margin before charges/gains was 8.8 percent.
The Company announced 2019 year-to-date share repurchases of
approximately $50 million for approximately 1.1 million shares, with
$364 million remaining on the current share repurchase authorization.
“Cash was $281 million and net debt to EBITDA was 2.5 times at the end
of the quarter, and we added to our financial flexibility by extending
the maturity date on our term loan to March 2020 at an amount of $350
million. With continued solid operating performance, we have substantial
flexibility to create incremental shareholder value through acquisitions
and share repurchases,” said Patrick Hallinan, chief financial officer,
Fortune Brands.
Annual Outlook for 2019
The Company’s 2019 annual outlook continues to be based on a U.S. home
products market growth assumption of 2 to 4 percent and an assumption of
2 to 4 percent growth for the total global market. The Company expects
full-year 2019 sales growth in the range of 6 to 7.5 percent.
The Company maintained its outlook for EPS before charges/gains to be in
the range of $3.53 to $3.77, which compares to 2018 EPS before
charges/gains from continuing operations of $3.34.
The Company also continues to expect free cash flow of $500 million for
the full year 2019.
“We are off to a good start to the year in a market that started slowly,
as expected. Given housing market volatility over the past few quarters,
we are managing the business tightly and remain prepared to take
additional actions if the market grows more slowly than we currently
expect. However, the fundamentals that drive housing and R&R demand are
improving and setting up a better second half. Our teams are performing
well and delivering on our plans,” said Klein. “We also remain focused
on driving incremental shareholder value, and continue to evaluate a
pipeline of potential acquisitions as well as additional opportunities
to repurchase our shares at attractive prices, while de-levering
naturally over time.”
About Fortune Brands
Fortune Brands Home & Security, Inc. (NYSE: FBHS), headquartered in
Deerfield, Ill., creates products and services that fulfill the dreams
of homeowners and help people feel more secure. The Company’s operating
segments are Plumbing, Cabinets, and Doors & Security. Its trusted
brands include Moen, Perrin & Rowe, Riobel, Rohl, Shaws and Victoria +
Albert under the Global Plumbing Group (GPG); more than a dozen core
brands under MasterBrand Cabinets; Therma-Tru entry door systems,
Fiberon composite decking and Master Lock and SentrySafe security
products in the Doors & Security segment. Fortune Brands holds market
leadership positions in all of its segments. Fortune Brands is part of
the S&P 500 Index. For more information, please visit www.FBHS.com.
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 and other matters. Statements
preceded by, followed by or that otherwise include the words “believes,”
“positioned,” “expects,” “estimates,” “plans,” “look to,” “outlook,” and
similar expressions or future or conditional verbs such as “will,”
“should,” “would,” “may” and “could” are generally forward-looking in
nature and not historical facts. Where, in any forward-looking
statement, we express an expectation or belief as to future results or
events, such expectation or belief is based on the current plans and
expectations of our management. Although we believe that these
statements are based on reasonable assumptions, they are subject to
numerous factors, risks and uncertainties that could cause actual
outcomes and results to be materially different from those indicated in
such statements. 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 December 31, 2018, filed with the
Securities and Exchange Commission. The forward-looking statements
included in this release are made as of the date hereof, and except as
required by law, we undertake no obligation to update, amend or clarify
any forward-looking statements to reflect events, new information or
circumstances occurring after the date of this release.
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 March 31, | |||||||||||||||||||||||||||
| 2019 | 2018 | % Change | |||||||||||||||||||||||||
| Net Sales (GAAP) |
|
||||||||||||||||||||||||||
| Cabinets | $ | 573.0 | $ | 557.2 | 3 |
|
|||||||||||||||||||||
| Plumbing | 458.6 | 449.7 | 2 |
|
|||||||||||||||||||||||
| Doors & Security (f) | 296.3 | 247.7 | 20 |
|
|||||||||||||||||||||||
| Total Net Sales | $ | 1,327.9 | $ | 1,254.6 | 6 |
|
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| Current Quarter Operating Income | |||||||||||||||||||||||||||
| Before Charges & Gains | GAAP | ||||||||||||||||||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||||||||||||||
| Operating Income (loss) Before Charges/Gains (a) | 2019 | 2018 | % Change | Operating Income (loss) | 2019 | 2018 | % Change | ||||||||||||||||||||
| Cabinets | $ | 44.6 | $ | 24.2 | 84 | Cabinets | $ | 43.2 | $ | 24.1 | 79 | ||||||||||||||||
| Plumbing | 90.5 | 92.4 | (2 | ) | Plumbing | 89.2 | 88.4 | 1 | |||||||||||||||||||
| Doors & Security (f) | 26.1 | 29.0 | (10 | ) | Doors & Security (f) | 22.4 | 28.2 | (21 | ) | ||||||||||||||||||
| Corporate Expenses | (19.2 | ) | (21.3 | ) | 10 | Corporate Expenses | (19.2 | ) | (21.3 | ) | 10 | ||||||||||||||||
| Total Operating Income Before Charges/Gains | $ | 142.0 | $ | 124.3 | 14 | Total Operating Income (GAAP) | $ | 135.6 | $ | 119.4 | 14 | ||||||||||||||||
| Earnings Per Share Before Charges/Gains (b) | Diluted EPS from Continuing Operations (GAAP) | ||||||||||||||||||||||||||
| Diluted – Continuing Operations | $ | 0.63 | $ | 0.56 | 13 | Diluted EPS – Continuing Operations | $ | 0.60 | $ | 0.49 | 22 | ||||||||||||||||
| EBITDA Before Charges/Gains (c) | $ | 179.7 | $ | 160.6 | 12 | Income from Continuing Operations, net of tax | $ | 84.5 | $ | 75.1 | 13 | ||||||||||||||||
|
(a) (b) (c) For definitions of Non-GAAP measures, see Definitions of Terms page |
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| (f) For definitions of GAAP measures, see Definitions of Terms page | |||||||||||||||||||||||||||
| FORTUNE BRANDS HOME & SECURITY, INC. | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET (GAAP) | ||||||||
| (In millions) | ||||||||
| (Unaudited) | ||||||||
| March 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 281.2 | $ | 262.9 | ||||
| Accounts receivable, net | 650.1 | 571.7 | ||||||
| Inventories | 737.9 | 678.9 | ||||||
| Other current assets | 178.8 | 172.6 | ||||||
| Total current assets | 1,848.0 | 1,686.1 | ||||||
| Property, plant and equipment, net | 806.3 | 813.4 | ||||||
| Goodwill | 2,084.0 | 2,080.3 | ||||||
| Other intangible assets, net of accumulated amortization | 1,239.7 | 1,246.8 | ||||||
| Other assets | 311.2 | 138.0 | ||||||
| Total assets | $ | 6,289.2 | $ | 5,964.6 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities | ||||||||
| Short-term debt | $ | 350.0 | $ | 525.0 | ||||
| Accounts payable | 442.0 | 459.0 | ||||||
| Other current liabilities | 446.8 | 508.1 | ||||||
| Total current liabilities | 1,238.8 | 1,492.1 | ||||||
| Long-term debt | 2,169.7 | 1,809.0 | ||||||
| Deferred income taxes | 161.7 | 162.6 | ||||||
| Other non-current liabilities | 471.9 | 320.9 | ||||||
| Total liabilities | 4,042.1 | 3,784.6 | ||||||
| Stockholders’ equity | 2,245.5 | 2,178.2 | ||||||
| Noncontrolling interests | 1.6 | 1.8 | ||||||
| Total equity | 2,247.1 | 2,180.0 | ||||||
| Total liabilities and equity | $ | 6,289.2 | $ | 5,964.6 | ||||
| FORTUNE BRANDS HOME & SECURITY, INC. | ||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||||||
| (In millions) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2019 | 2018 | |||||||||||||
| Operating Activities | ||||||||||||||
| Net income | $ | 84.5 | $ | 74.9 | ||||||||||
| Depreciation and amortization | 37.8 | 33.5 | ||||||||||||
| Non-cash rent expense | 8.7 | – | ||||||||||||
| Deferred taxes | (2.0 | ) | (9.2 | ) | ||||||||||
| Asset impairment charges | 1.7 | – | ||||||||||||
| Other noncash items | 7.0 | 13.3 | ||||||||||||
| Changes in assets and liabilities, net | (227.4 | ) | (164.4 | ) | ||||||||||
| Net cash used by operating activities | $ | (89.7 | ) | $ | (51.9 | ) | ||||||||
| Investing Activities | ||||||||||||||
| Capital expenditures | $ | (27.2 | ) | $ | (37.6 | ) | ||||||||
| Proceeds from the sale of assets | 1.9 | 0.7 | ||||||||||||
| Cost of acquisitions, net of cash | – | (5.8 | ) | |||||||||||
| Net cash used by investing activities | $ | (25.3 | ) | $ | (42.7 | ) | ||||||||
| Financing Activities | ||||||||||||||
| Increase in debt, net | $ | 185.0 | $ | 380.0 | ||||||||||
| Proceeds from the exercise of stock options | 2.9 | 3.2 | ||||||||||||
| Treasury stock purchases | (18.0 | ) | (325.2 | ) | ||||||||||
| Dividends to stockholders | (31.0 | ) | (29.6 | ) | ||||||||||
| All other | (9.5 | ) | (12.2 | ) | ||||||||||
| Net cash provided by financing activities | $ | 129.4 | $ | 16.2 | ||||||||||
| Effect of foreign exchange rate changes on cash | 3.8 | (0.2 | ) | |||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 18.2 | $ | (78.6 | ) | |||||||||
| Cash, cash equivalents and restricted cash* at beginning of period | 270.7 | 323.0 | ||||||||||||
| Cash, cash equivalents and restricted cash* at end of period | $ | 288.9 | $ | 244.4 | ||||||||||
|
FREE CASH FLOW |
Three Months Ended March 31, | 2019 Full Year | ||||||||||||
| 2019 | 2018 | Approximation | ||||||||||||
| Free Cash Flow** | $ | (112.1 | ) | $ | (85.6 | ) | $ | 500.0 | ||||||
| Add: | ||||||||||||||
| Capital expenditures | 27.2 | 37.6 | 135.0 – 145.0 | |||||||||||
| Less: | ||||||||||||||
| Proceeds from the sale of assets | 1.9 | 0.7 |
2.0 |
|||||||||||
| Proceeds from the exercise of stock options | 2.9 | 3.2 |
3.0 – 5.0 |
|||||||||||
| Cash Flow From Operations (GAAP) | $ | (89.7 | ) | $ | (51.9 | ) | $ |
630.0 – 638.0 |
||||||
|
*Restricted cash of $7.7 million is included in other assets as of March 31, 2019 within our Condensed Consolidated Balance Sheet. There was no restricted cash as of March 31, 2018. |
||||||||||||||
|
** 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. |
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| FORTUNE BRANDS HOME & SECURITY, INC. | ||||||||||||||
| CONSOLIDATED STATEMENT OF INCOME (GAAP) | ||||||||||||||
| (In millions, except per share amounts) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2019 | 2018 | % Change | ||||||||||||
| Net Sales | $ | 1,327.9 | $ | 1,254.6 | 6 | |||||||||
| Cost of products sold | 869.1 | 815.0 | 7 | |||||||||||
| Selling, general | ||||||||||||||
| and administrative expenses | 312.0 | 311.2 | – | |||||||||||
| Amortization of intangible assets | 10.0 | 8.2 | 22 | |||||||||||
| Restructuring charges | 1.2 | 0.8 | 50 | |||||||||||
| Operating Income | 135.6 | 119.4 | 14 | |||||||||||
| Interest expense | 23.7 | 14.7 | 61 | |||||||||||
| Other income, net | (1.2 | ) | (2.8 | ) | 57 | |||||||||
| Income from continuing operations before income taxes | 113.1 | 107.5 | 5 | |||||||||||
| Income taxes | 28.6 | 32.4 | (12 | ) | ||||||||||
| Income from continuing operations, net of tax | $ | 84.5 | $ | 75.1 | 13 | |||||||||
| Loss from discontinued operations, net of tax | – | (0.2 | ) | 100 | ||||||||||
| Net income | $ | 84.5 | $ | 74.9 | 13 | |||||||||
| Less: Noncontrolling interests | (0.2 | ) | (0.1 | ) | (100 | ) | ||||||||
| Net income attributable to | ||||||||||||||
| Fortune Brands Home & Security | $ | 84.7 | $ | 75.0 | 13 | |||||||||
| Earnings Per Common Share, Diluted: | ||||||||||||||
| Net Income from continuing operations | $ | 0.60 | $ | 0.49 | 22 | |||||||||
| Diluted Average Shares Outstanding | 141.9 | 152.1 | (7 | ) | ||||||||||
DILUTED EPS BEFORE CHARGES/GAINS RECONCILIATION
For the three months ended March 31, 2019, 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 $6.4 million ($4.7 million after tax
or $0.03 per diluted share) of restructuring and other charges and the
benefit from a tax item of $0.5 million.
For the three months ended March 31, 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 $4.9 million ($4.5 million after tax
or $0.03 per diluted share) of restructuring and other charges and a net
charge related to the Tax Cuts and Jobs Act of 2017 of $5.4 million
($0.04 per diluted share).
| Three Months Ended March 31, | |||||||||||||||||||
| 2019 | 2018 | % Change | |||||||||||||||||
| Earnings Per Common Share – Diluted | |||||||||||||||||||
| Diluted EPS Before Charges/Gains – Continuing Operations (b) | $ | 0.63 | $ | 0.56 | 13 | ||||||||||||||
| Restructuring and other charges | (0.03 | ) | (0.03 | ) | – | ||||||||||||||
| Tax items | – | (0.04 | ) | 100 | |||||||||||||||
| Diluted EPS – Continuing Operations | $ | 0.60 | $ | 0.49 | 22 | ||||||||||||||
RECONCILIATION OF FULL YEAR 2019 EARNINGS
GUIDANCE TO GAAP
The Company is targeting diluted EPS before charges/gains from
continuing operations to be in the range of $3.53 to $3.77 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 $3.45 to $3.69 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 2019.
(b) For definitions of Non-GAAP measures, see Definitions of Terms page
| FORTUNE BRANDS HOME & SECURITY, INC. | |||||||||||||||
| (In millions) | |||||||||||||||
| (Unaudited) | |||||||||||||||
|
RECONCILIATION OF EBITDA BEFORE |
|||||||||||||||
| Three Months Ended March 31, | |||||||||||||||
| 2019 | 2018 | % Change | |||||||||||||
| EBITDA BEFORE CHARGES/GAINS (c) | $ | 179.7 | $ | 160.6 | 12 | ||||||||||
| Depreciation* | $ | (26.5 | ) | $ | (25.3 | ) | (5 | ) | |||||||
| Amortization of intangible assets | (10.0 | ) | (8.2 | ) | (22 | ) | |||||||||
| Restructuring and other charges | (6.4 | ) | (4.9 | ) | (31 | ) | |||||||||
| Interest expense | (23.7 | ) | (14.7 | ) | (61 | ) | |||||||||
| Income taxes | (28.6 | ) | (32.4 | ) | 12 | ||||||||||
| Income from continuing operations, net of tax | $ | 84.5 | $ | 75.1 | 13 | ||||||||||
|
* Depreciation excludes accelerated depreciation of $1.3 million for the three months ended March 31, 2019. Accelerated depreciation is included in restructuring and other charges. |
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|
CALCULATION OF NET DEBT-TO-EBITDA BEFORE |
|||||||||||||||
| As of March 31, 2019 | |||||||||||||||
| Short-term debt ** | 350.0 | ||||||||||||||
| Long-term debt ** | 2,169.7 | ||||||||||||||
| Total debt | 2,519.7 | ||||||||||||||
| Less: | |||||||||||||||
| Cash and cash equivalents ** | 281.2 | ||||||||||||||
| Net debt (1) | 2,238.5 | ||||||||||||||
| For the twelve months ended March 31, 2019 | |||||||||||||||
| EBITDA before charges/gains (2) (c) | 887.4 | ||||||||||||||
| Net debt-to-EBITDA before charges/gains ratio (1/2) | 2.5 | ||||||||||||||
|
** Amounts are per the unaudited Condensed Consolidated Balance Sheet as of March 31, 2019. |
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| Nine Months Ended | Three Months | Twelve Months Ended | |||||||||||||
| December 31, | Ended March 31, | March 31, | |||||||||||||
| 2018 | 2019 | 2019 | |||||||||||||
| EBITDA BEFORE CHARGES/GAINS (c) | $ | 707.7 | $ | 179.7 | $ | 887.4 | |||||||||
| Depreciation*** | $ | (82.0 | ) | $ | (26.5 | ) | $ | (108.5 | ) | ||||||
| Amortization of intangible assets | (27.9 | ) | (10.0 | ) | (37.9 | ) | |||||||||
| Restructuring and other charges | (49.3 | ) | (6.4 | ) | (55.7 | ) | |||||||||
| Interest expense | (59.8 | ) | (23.7 | ) | (83.5 | ) | |||||||||
| Asset impairment charges (d) | (62.6 | ) | – | (62.6 | ) | ||||||||||
| Change in inventory costing method (e) | 7.3 | – | 7.3 | ||||||||||||
| Defined benefit plan actuarial losses | (3.9 | ) | – | (3.9 | ) | ||||||||||
| Income taxes | (114.6 | ) | (28.6 | ) | (143.2 | ) | |||||||||
|
Income from continuing operations, net of tax |
$ | 314.9 | $ | 84.5 | $ | 399.4 | |||||||||
|
*** Depreciation excludes accelerated depreciation of $6.2 million |
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|
(c) (d) (e) For definitions of Non-GAAP measures, see Definitions of Terms page |
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| FORTUNE BRANDS HOME & SECURITY, INC. | |||||||||||||||||
|
Reconciliation of Income Statement – GAAP to Before Charges/Gains Information |
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| Three Months Ended March 31, | |||||||||||||||||
| in millions, except per share amounts | |||||||||||||||||
| (unaudited) | |||||||||||||||||
|
Before Charges/Gains |
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| Restructuring | Before | ||||||||||||||||
| GAAP | and other | Tax Items (2) | Charges/Gains | ||||||||||||||
| (unaudited) | charges | (Non-GAAP) | |||||||||||||||
| 2019 | FIRST QUARTER | ||||||||||||||||
| Net Sales | $ | 1,327.9 | – | – | |||||||||||||
| Cost of products sold | 869.1 | (5.0 | ) | – | |||||||||||||
| Selling, general & administrative expenses | 312.0 | (0.2 | ) | – | |||||||||||||
| Amortization of intangible assets | 10.0 | – | – | ||||||||||||||
| Restructuring charges | 1.2 | (1.2 | ) | – | |||||||||||||
| Operating Income | 135.6 | 6.4 | – | 142.0 | |||||||||||||
| Interest expense | 23.7 | – | – | ||||||||||||||
| Other income, net | (1.2 | ) | – | – | |||||||||||||
| Income from continuing operations before income taxes | 113.1 | 6.4 | – | 119.5 | |||||||||||||
| Income taxes | 28.6 | 1.5 | 0.5 | ||||||||||||||
| Income from continuing operations, net of tax | $ | 84.5 | 4.9 | (0.5 | ) | $ | 88.9 | ||||||||||
| Income from discontinued operations, net of tax | – | – | – | ||||||||||||||
| Net Income | 84.5 | – | – | ||||||||||||||
| Less: Noncontrolling interests (1) | (0.2 | ) | 0.2 | – | |||||||||||||
| Net Income attributable | |||||||||||||||||
| to Fortune Brands Home & Security, Inc. | $ | 84.7 | 4.7 | (0.5 | ) | $ | 88.9 | ||||||||||
| Income from continuing operations, net of tax | |||||||||||||||||
| less noncontrolling interests | $ | 84.7 | 4.7 | (0.5 | ) | $ | 88.9 | ||||||||||
| Diluted Average Shares Outstanding | 141.9 | 141.9 | |||||||||||||||
| Diluted EPS – Continuing Operations | 0.60 | 0.63 | |||||||||||||||
| 2018 | |||||||||||||||||
| Net Sales | $ | 1,254.6 | – | – | |||||||||||||
| Cost of products sold | 815.0 | (1.5 | ) | – | |||||||||||||
| Selling, general & administrative expenses | 311.2 | (2.6 | ) | – | |||||||||||||
| Amortization of intangible assets | 8.2 | – | – | ||||||||||||||
| Restructuring charges | 0.8 | (0.8 | ) | – | |||||||||||||
| Operating Income | 119.4 | 4.9 | – | 124.3 | |||||||||||||
| Interest expense | 14.7 | – | – | ||||||||||||||
| Other income, net | (2.8 | ) | – | – | |||||||||||||
| Income from continuing operations before income taxes | 107.5 | 4.9 | – | 112.4 | |||||||||||||
| Income taxes | 32.4 | 0.4 | (5.4 | ) | |||||||||||||
| Income from continuing operations, net of tax | $ | 75.1 | 4.5 | 5.4 | $ | 85.0 | |||||||||||
| Loss from discontinued operations, net of tax | (0.2 | ) | – | – | |||||||||||||
| Net Income | 74.9 | – | – | ||||||||||||||
| Less: Noncontrolling interests | (0.1 | ) | – | – | |||||||||||||
| Net Income attributable | |||||||||||||||||
| to Fortune Brands Home & Security, Inc. | $ | 75.0 | 4.5 | 5.4 | $ | 84.9 | |||||||||||
| Income from continuing operations, net of tax | |||||||||||||||||
| less noncontrolling interests | $ | 75.2 | 4.5 | 5.4 | $ | 85.1 | |||||||||||
| Diluted Average Shares Outstanding | 152.1 | 152.1 | |||||||||||||||
| Diluted EPS – Continuing Operations | 0.49 | 0.56 | |||||||||||||||
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(1) Includes noncontrolling interests share of restructuring and other charges in our China plumbing operations. |
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(2) Tax Items for the three months ended March 31, 2018, represent an update to the estimated impact of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). Tax items for the three months ended March 31, 2019 represent foreign exchange movement related to the impact of the Tax Act recorded in prior periods. |
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| FORTUNE BRANDS HOME & SECURITY, INC. | ||||||||||||||
| (In millions, except per share amounts) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2019 | 2018 | % Change | ||||||||||||
| Net Sales (GAAP) | ||||||||||||||
| Cabinets | $ | 573.0 | $ | 557.2 | 3 | |||||||||
| Plumbing | 458.6 | 449.7 | 2 | |||||||||||
| Doors & Security (f) | 296.3 | 247.7 | 20 | |||||||||||
| Total Net Sales | $ | 1,327.9 | $ | 1,254.6 | 6 | |||||||||
| Operating Income (loss) | ||||||||||||||
| Cabinets | $ | 43.2 | $ | 24.1 | 79 | |||||||||
| Plumbing | 89.2 | 88.4 | 1 | |||||||||||
| Doors & Security (f) | 22.4 | 28.2 | (21 | ) | ||||||||||
| Corporate expenses | (19.2 | ) | (21.3 | ) | 10 | |||||||||
| Total Operating Income (GAAP) | $ | 135.6 | $ | 119.4 | 14 | |||||||||
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OPERATING INCOME BEFORE CHARGES/GAINS |
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| Operating Income (loss) Before Charges/Gains (a) | ||||||||||||||
| Cabinets | $ | 44.6 | $ | 24.2 | 84 | |||||||||
| Plumbing | 90.5 | 92.4 | (2 | ) | ||||||||||
| Doors & Security (f) | 26.1 | 29.0 | (10 | ) | ||||||||||
| Corporate expenses | (19.2 | ) | (21.3 | ) | 10 | |||||||||
| Total Operating Income Before Charges/Gains (a) | 142.0 | 124.3 | 14 | |||||||||||
| Restructuring and other charges (1) (2) | (6.4 | ) | (4.9 | ) | (31 | ) | ||||||||
| Total Operating Income (GAAP) | $ | 135.6 | $ | 119.4 | 14 | |||||||||
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(1) Restructuring charges are costs incurred to implement significant cost reduction initiatives and include workforce reduction costs. |
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(2) “Other charges” represent charges or gains directly related to |
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In our Doors & Security segment, other charges also includes an |
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(a) For definitions of Non-GAAP measures, see Definitions of Terms page |
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| (f) For definitions of GAAP measures, see Definitions of Terms page | ||||||||||||||
| FORTUNE BRANDS HOME & SECURITY, INC. | |||||||||
| BEFORE CHARGES/GAINS OPERATING MARGIN TO OPERATING MARGIN | |||||||||
| (Unaudited) | |||||||||
| Three Months Ended March 31, | |||||||||
| 2019 | 2018 | Change | |||||||
| CABINETS | |||||||||
| Before Charges/Gains Operating Margin | 7.8% | 4.3% | 350 bps | ||||||
| Restructuring & Other Charges | (0.3%) | – | |||||||
| Operating Margin | 7.5% | 4.3% | 320 bps | ||||||
| PLUMBING | |||||||||
| Before Charges/Gains Operating Margin | 19.7% | 20.5% | (80) bps | ||||||
| Restructuring & Other Charges | (0.2%) | (0.8%) | |||||||
| Operating Margin | 19.5% | 19.7% | (20) bps | ||||||
| DOORS & SECURITY | |||||||||
| Before Charges/Gains Operating Margin | 8.8% | 11.7% | (290) bps | ||||||
| Restructuring & Other Charges | (1.2%) | (0.3%) | |||||||
| Operating Margin | 7.6% | 11.4% | (380) bps | ||||||
| Total Company | |||||||||
| Before Charges/Gains Operating Margin | 10.7% | 9.9% | 80 bps | ||||||
| Restructuring & Other Charges | (0.5%) | (0.4%) | |||||||
| Operating Margin | 10.2% | 9.5% | 70 bps | ||||||
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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, 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. |
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| FORTUNE BRANDS HOME & SECURITY, INC. | |||
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RECONCILIATION OF PERCENTAGE CHANGE IN DOORS & SECURITY NET |
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| (Unaudited) | |||
| Three months ended March 31, 2019 | |||
| % change | |||
| DOORS & SECURITY | |||
| Percentage change in Net Sales excluding Fiberon Net Sales | 5% | ||
| Fiberon Net Sales | 15% | ||
| Percentage change in Net Sales (GAAP) | 20% | ||
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Doors & Security net sales excluding Fiberon net sales is Doors & |
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| FORTUNE BRANDS HOME & SECURITY, INC. | |||
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RECONCILIATION OF PERCENTAGE CHANGE IN PLUMBING NET SALES EXCLUDING FX IMPACT TO PERCENTAGE CHANGE IN NET SALES (GAAP) |
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| (Unaudited) | |||
| Three months ended March 31, 2019 | |||
| % change | |||
| PLUMBING | |||
| Percentage change in Net Sales excluding FX impact | 3.5% | ||
| FX impact | (1.5%) | ||
| Percentage change in Net Sales (GAAP) | 2.0% | ||
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Plumbing net sales excluding FX impact is Plumbing net sales derived in accordance with GAAP excluding the impact of FX on 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. |
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| FORTUNE BRANDS HOME & SECURITY, INC. | |||||
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RECONCILIATION OF FULL YEAR 2018 DILUTED EPS BEFORE CHARGES/GAINS TO GAAP DILUTED EPS FROM CONTINUING OPERATIONS |
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| (unaudited) | |||||
| For the twelve months ended | |||||
| December 31, 2018 | |||||
| Diluted EPS Before Charges/Gains – Continuing Operations* (b) | $ | 3.34 | |||
| Restructuring and other charges | (0.30 | ) | |||
| Asset impairment charges (d) | (0.35 | ) | |||
| Change in inventory costing method (e) | 0.04 | ||||
| Defined benefit plan actuarial losses | (0.02 | ) | |||
| Tax items | (0.05 | ) | |||
| Diluted EPS – Continuing Operations | $ | 2.66 | |||
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* For the year ended December 31, 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 $54.2 million ($43.4 million after tax or $0.30 per diluted share) of restructuring and other charges, asset impairment charges of $62.6 million ($50.8 million after tax or $0.35 per diluted share), a benefit from an inventory costing change of $7.3 million ($5.5 million after tax or $0.04 per diluted share), a net tax charge principally related to an update to the estimated impact from the Tax Cuts and Jobs Act of 2017 ($7.2 million or $0.05 per diluted share) and the impact from actuarial losses associated with our defined benefit plans of $3.9 million ($2.9 million after tax or $0.02 per diluted share). |
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(b) (d) (e) For definitions of Non-GAAP measures, see Definitions of Terms page |
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| Definitions of Terms: Non-GAAP Measures |
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(a) Operating income before charges/gains is operating income derived in accordance with GAAP excluding restructuring and other charges. Operating income before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the returns generated by 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. |
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(b) Diluted EPS before charges/gains for the three months ended |
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(c) EBITDA before charges/gains is income from continuing |
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(d) Asset impairment charges for the twelve months ended December |
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(e) During the fourth quarter of 2018, we determined that it was preferable to change our accounting policy for product groups in which metals inventory comprise a significant portion of inventories from last-in, first-out (“LIFO”) to first-in, first-out (“FIFO”). As a result, we recorded a pre-tax benefit of $7.3 million within cost of products sold during the three months ended December 31, 2018. |
| Definitions of Terms: GAAP Measures |
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(f) As previously announced, we combined our Doors and Security segments into a new reportable segment ‘Doors & Security’. Reporting for the new Doors & Security segment began in the third quarter of 2018 and historical financial segment information has been restated to conform to the new segment presentation. |
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