Fortune Brands Delivers Solid Margin Progress and Strong Cash Flow Amidst a Dynamic Environment; Announces $1 Billion Share Repurchase Authorization

Highlights:

• Q4 2024 sales were $1.1 billion, a decrease of 5 percent versus Q4 2023; organic sales excluding the impact of China and one-time disruptions were down 1 percent
• Q4 2024 earnings per share (EPS) were $0.84, an increase of 31 percent versus a year ago; EPS before charges / gains were $0.98, an increase of 3 percent versus Q4 2023
• Full-year 2024 sales were $4.6 billion, flat versus 2023; organic sales excluding the impact of China and one-time disruptions were down 2 percent
• Full-year 2024 EPS were $3.75, an increase of 18 percent versus a year ago; EPS before charges / gains were $4.12, an increase of 5 percent versus 2023
• Company announces new $1 billion share repurchase authorization to replace existing share repurchase authorization, reflecting confidence in cash generation and commitment to driving long-term shareholder value
• Company provides full-year 2025 guidance focused on outperforming the market, expanding margins while continuing to invest in key strategic priorities and generating and deploying cash

Fortune Brands Innovations, Inc. (NYSE:FBIN), an industry-leading innovation company whose purpose is to elevate every life by transforming spaces into havens, today announced fourth quarter and full-year 2024 results.

"We made significant progress in 2024 against our key digital, brand and organizational priorities. We have built a foundation for growth which we are confident will accelerate as conditions improve. Our teams continued to execute in a challenging market, and we saw areas of sales outperformance against the market in our core products portfolio, as well as accelerating digital water sales. The Company again delivered margin expansion while continuing to invest in our key priorities," said Fortune Brands Chief Executive Officer Nicholas Fink. "We recently announced changes to our organization and leadership that will enable us to be a more aligned and agile Company with continued focus on our biggest growth opportunities."

Comments on the Fourth Quarter

Results in the quarter were impacted by a third-party software outage in our Security distribution centers, as well as by softness in China impacting our Water Innovations segment and the impact of the southeastern U.S. hurricanes. Collectively, these impacts represented approximately a 5 percent impact to the Company's fourth quarter organic sales.

Balance Sheet and Cash Flow

The Company exited the quarter with a strong balance sheet and generated $272 million of operating cash flow and $212 million of free cash flow in the quarter. For the full year, the Company generated $668 million of operating cash flow and $475 million of free cash flow, which represents over a 100% cash conversion ratio. In accordance with its opportunistic, returns-based share repurchase program, the Company repurchased $50 million of shares in the fourth quarter, bringing the full year total to $240 million. The Company finished the year with full availability on its revolving credit facility.

As of the end of the fourth quarter 2024:

Share Repurchase Authorization

The Company announced that on February 4, 2025, its Board of Directors authorized the repurchase of up to $1 billion of shares of the Company's outstanding common stock over the next two years on the open market or in privately negotiated transactions or otherwise (including pursuant to a Rule 10b5-1 trading plan, block trades and accelerated share repurchase transactions), in accordance with applicable securities laws. The new $1 billion share repurchase authorization announced today replaces the existing authorization, which was set to expire on January 29, 2026, and which had $409 million remaining.

The new purchases, if made, will occur from time to time depending on market conditions. The newly announced share repurchase authorization does not obligate the Company to repurchase any dollar amount or number of shares of common stock. This authorization is in effect until February 4, 2027, and may be suspended or discontinued at any time.

2025 Market and Financial Guidance

"Our full-year guidance reflects current market conditions and our expectation for continued acceleration of digital products coupled with R&R softness in the first half of 2025. Our team is navigating near-term challenges while also executing multiple foundational strategic initiatives which we expect will enable the Company to drive market beating growth," said Fortune Brands Chief Financial Officer David Barry. "Our new $1 billion share repurchase authorization shows we continue to have full confidence in our long-term strategy, and the authorization underscores our ability to drive cash flow and working capital initiatives while being mindful of our leverage target."

2025 Market and Financial Guidance

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 and EPS before charges / gains), 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 restructuring and other charges, which are excluded from operating margin before charges / gains and EPS before charges / gains. 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 internet 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. is an industry-leading innovation company dedicated to creating smarter, safer and more beautiful homes and improving lives. The Company's driving purpose is to elevate every life by transforming spaces into havens.

The Company is a brand, innovation and channel leader focused on exciting, supercharged categories in the home products, security and commercial building markets. The Company's portfolio of brands includes Moen, House of Rohl, Aqualisa, SpringWell, Therma-Tru, Larson, Fiberon, Master Lock, SentrySafe and Yale residential.

Fortune Brands is headquartered in Deerfield, Illinois and trades on the NYSE as FBIN. To learn more, 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, expected impacts from recently-announced organizational and leadership changes, 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 or de-risking initiatives, 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," "confident," "opportunity," "focus" 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 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, including as a result of severe weather events, (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), organic sales excluding the impact of China and one-time disruptions, 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.

RECONCILIATION OF DILUTED EPS FROM CONTINUING OPERATIONS BEFORE CHARGES/GAINS

For the thirteen weeks ended December 28, 2024, the diluted EPS before charges/gains is calculated as income from continuing operations on a diluted per-share basis, excluding $2.2 million ($1.6 million after tax or $0.01 per diluted share) of restructuring charges, $1.1 million ($0.9 million after tax or $0.01 per diluted share) of other charges/gains and $18.8 million ($14.4 million after tax or $0.11 per diluted share) of defined benefit plan actuarial losses.

For the fifty-two weeks ended December 28, 2024, the diluted EPS before charges/gains is calculated as income from continuing operations on a diluted per-share basis, excluding $16.2 million ($12.3 million after tax or $0.1 per diluted share) of restructuring charges, $25.8 million ($20.1 million after tax or $0.16 per diluted share) of other charges/gains and $18.6 million ($14.2 million after tax or $0.11 per diluted share) of defined benefit plan actuarial losses.

For the thirteen weeks ended December 30, 2023, the diluted EPS before charges/gains is calculated as income from continuing operations on a diluted per-share basis, excluding $3.6 million ($2.8 million after tax or $0.02 per diluted share) of restructuring charges, $9.3 million ($7.2 million after tax or $0.06 per diluted share) of other charges/gains, $1.1 million ($0.8 million after tax or $0.01 per diluted share) of expenses directly related to our ASSA transaction, $0.6 million ($0.5 million after tax) related to the compensation agreement with the former owner of Solar, $1.5 million ($1.1 million after tax or $0.01 per diluted share) of amortization of inventory step-up related to acquisition of the ASSA businesses, $33.5 million ($25.4 million after tax or $0.20 per diluted share) of asset impairment charges and the impact from actuarial losses associated with our defined benefit plans of $1.9 million ($1.4 million after tax or $0.01 per diluted share).

For the fifty-two weeks ended December 30, 2023, the diluted EPS before charges/gains is calculated as income from continuing operations on a diluted per-share basis, excluding $32.5 million ($24.8 million after tax or $0.20 per diluted share) of restructuring charges, $23.3 million ($17.0 million after tax or $0.13 per diluted share) of other charges/gains, $18.7 million ($15.1 million after tax or $0.12 per diluted share) of expenses directly related to our ASSA transaction, $2.7 million ($2.0 million after tax or $0.02 per diluted share) related to the compensation agreement with the former owner of Solar, $12.4 million ($9.5 million after tax or $0.07 per diluted share) of amortization of inventory step-up related to acquisition of the ASSA businesses, $33.5 million ($25.4 million after tax or $0.20 per diluted share) of asset impairment charges and the impact from actuarial gains associated with our defined benefit plans of $0.5 million ($0.4 million after tax).