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 $0.83, an increase of 20 percent versus Q1 2023
- Company reaffirms initial 2024 guidance, with a focus on above-market sales performance, margin expansion and cash generation
Fortune Brands Innovations, Inc. (NYSE:FBIN), an industry leading innovation company focused on creating smarter, safer and more beautiful homes and improving lives, today announced first quarter 2024 results.
"Our first quarter sales and margin results came in above our expectations as our teams executed our strategy of growing the core and accelerating in connected products," said Fortune Brands Chief Executive Officer Nicholas Fink. "By leveraging our Fortune Brands Advantage capabilities and focusing on accelerated growth through building leading brands, driving meaningful innovation, and creating value for our channel partners, we will continue to position the Company for outperformance in any environment."
Fink continued, "This past quarter, we saw powerful proof-points of our compelling investment thesis and are increasingly seeing the benefit of the transformative actions we took over the past few years. Looking forward, we continue to be confident in the strength of our business and believe we are uniquely positioned to capture exceptional opportunities."
First Quarter 2024 Results
($ 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, |
December 30, |
||||||
|
2024 |
|
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. | |||||||||
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