October 23, 2013

Fortune Brands Home & Security Reports Strong Q3 Sales and EPS, Increases Annual Outlook

Highlights:

  • Q3 2013 net sales increase 24 percent year-over-year to $1.125 billion
  • Q3 2013 EPS $0.37, EPS before charges/gains increases 59 percent to $0.46 vs. $0.29 prior year
  • Company raises expected annual sales growth to 15 — 16 percent and EPS before charges/gains to $1.47 - $1.49

DEERFIELD, Ill.--(BUSINESS WIRE)-- Fortune Brands Home & Security, Inc. (NYSE: FBHS), an industry-leading home and security products company, today announced third quarter 2013 results and raised its annual outlook for sales and earnings per share.

"We continue to leverage our structural competitive advantages and the market recovery to deliver profitable growth," said Chris Klein, chief executive officer, Fortune Brands Home & Security. "We are again increasing our 2013 annual outlook based on our strong performance."

Third Quarter 2013

For the third quarter of 2013, net sales were $1.125 billion, an increase of 24 percent over the third quarter of 2012. Diluted earnings per share were $0.37, compared to $0.24 in the prior year quarter. Diluted EPS before charges/gains were $0.46, compared to $0.29 the prior year. Operating income was $98.6 million, compared to $60.6 million in the prior year quarter. Operating income before charges/gains was $121.6 million, compared to $72.9 million the prior year.

"Sales were up double digits vs. last year for each of our segments in the third quarter, with our home product segments growing a combined 26 percent. Importantly, total operating income before charges/gains increased 67 percent," Klein said.

For each segment in the third quarter 2013, compared to the prior-year quarter:

  • Kitchen & Bath Cabinetry net sales were up 36 percent. Operating income before charges/gains increased $23.7 million over last year to $36.8 million, with GAAP operating income increasing $12.6 million. The sales increase was led by growth in dealers and home centers, with a continued improvement in repair and remodel volume and mix.
  • Plumbing & Accessories net sales were up 22 percent, and operating income before charges/gains was up 36 percent with share gains across the business.
  • Advanced Material Windows & Door Systems net sales were up 14 percent, as entry doors and windows each grew double digits. Operating income before charges/gains for the segment increased 39 percent, while GAAP operating income was down 8 percent.
  • Security & Storage net sales were up 10 percent, with a security sales increase of 7 percent and double digit tool storage sales growth. Segment operating income before charges/gains was up 42 percent.

"We delivered strong sales and profit growth across all segments of our business in the third quarter and have built solid momentum throughout the year," said Klein. "We believe we are still in the early stages of a multi-year housing recovery driven both by demand for new homes and consumers' desire to improve existing homes. Importantly, we remain confident in our ability to leverage our structural competitive advantages to continue to outperform our market, and we are well positioned for 2014."

Company Raises Annual Outlook for 2013

Based on the Company's continued strong performance, its continued confidence in the home products market recovery and expectation to continue outperforming the market, the Company now expects full-year 2013 net sales to increase 15 to 16 percent. The Company now expects diluted EPS before charges/gains to be in the range of $1.47 to $1.49. This targeted range compares to 2012 diluted EPS before charges/gains of $0.89.

"Our cash position increased in the third quarter, even as we repurchased $30 million of our shares in the quarter," said Lee Wyatt, chief financial officer. "As of September 30, 2013, cash increased to $157 million and debt decreased to $356 million. We expect to generate approximately $300 million in free cash flow in 2013 and end the year with net-debt-to-EBITDA around zero."

About Fortune Brands Home & Security, Inc.

Fortune Brands Home & Security, Inc. (NYSE: FBHS), headquartered in Deerfield, Ill., creates products and services that help fulfill the dreams of homeowners and help people feel more secure. The Company's trusted brands include Master Lock security products, MasterBrand cabinets, Moen faucets, Simonton windows and Therma-Tru entry door systems. FBHS holds market leadership positions in all of its segments. FBHS is part of the S&P MidCap 400 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 and other matters. Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," "plans," "outlook," and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward-looking in nature and not historical facts. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of our management. Although we believe that these statements are based on reasonable assumptions, they are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those indicated in such statements. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including but not limited to: (i) our reliance on the North American home improvement, repair and new home construction activity levels, (ii) the North American and larger global economies, (iii) risk associated with entering into potential strategic acquisitions and integrating acquired companies, (iv) our ability to remain innovative and protect our intellectual property, (v) our reliance on key customers and suppliers, (vi) the cost and availability associated with our supply chains and the availability of raw materials, (vii) risk of increases in our postretirement benefit-related costs and funding requirements, and (viii) changes in tax, environmental and federal and state laws and industry regulatory standards. These and other factors are discussed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012, 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 hereof.

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, free cash flow, and net debt-to-EBITDA before charges/gains. 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)
                   
Three Months Ended September 30, Nine Months Ended September 30,
2013   2012   % Change 2013   2012   % Change
Net Sales (GAAP)                    
Kitchen & Bath Cabinetry $ 448.6 $ 329.7 36.1 $ 1,186.3 $ 987.1 20.2
Plumbing & Accessories 338.1 278.2 21.5 969.6 804.2 20.6
Advanced Material Windows & Door Systems 181.0 158.4 14.3 481.7 431.4 11.7
Security & Storage   157.4       142.8     10.2     417.9       420.5     (0.6 )
Total Net Sales $ 1,125.1     $ 909.1     23.8   $ 3,055.5     $ 2,643.2     15.6  
 
Operating Income (Loss) Before Charges/Gains (a)                    
Kitchen & Bath Cabinetry $ 36.8 $ 13.1 180.9 $ 87.0 $ 27.7 214.1
Plumbing & Accessories 65.9 48.5 35.9 176.2 127.5 38.2
Advanced Material Windows & Door Systems 8.6 6.2 38.7 10.6 (0.1 ) N/A
Security & Storage 29.5 20.8 41.8 68.1 53.7 26.8
Corporate Expenses   (19.2 )     (15.7 )   (22.3 )   (50.7 )     (42.3 )   (19.9 )
Total Operating Income Before Charges/Gains $ 121.6     $ 72.9     66.8   $ 291.2     $ 166.5     74.9  
 
Earnings Per Share Before Charges/Gains (b)

 

                 
Diluted $ 0.46     $ 0.29     58.6   $ 1.12     $ 0.66     69.7  
 
                   
EBITDA Before Charges/Gains (c) $ 145.5     $ 96.0     51.6   $ 358.4     $ 236.4     51.6  
 
(a) Operating income (loss) before charges/gains is operating income (loss) derived in accordance with U.S. generally accepted accounting principles ("GAAP") excluding restructuring and other charges, income from a contingent acquisition consideration adjustment, an asset impairment charge and the impact of income and expense from actuarial gains or losses associated with our defined benefit plans. 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 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. A reconciliation to operating income, the most comparable GAAP measure, is included in subsequent tables.
 
(b) Diluted EPS before charges/gains is net income calculated on a diluted per-share basis excluding restructuring and other charges, income from a contingent acquisition consideration adjustment, asset impairment charges and the impact of income and expense from actuarial gains or losses associated with our defined benefit plans. Diluted EPS before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the overall performance of the Company and believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies. A reconciliation to diluted EPS, the most closely comparable GAAP measure, is included in subsequent tables.
 
(c) EBITDA before charges/gains is net income derived in accordance with GAAP excluding restructuring and other charges, income from a contingent acquisition consideration adjustment, asset impairment charges, the impact of income and expense from actuarial gains or losses associated with our defined benefit plans, depreciation, amortization of intangible assets, interest expense, and income taxes. EBITDA before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to assess returns generated by FBHS. Management believes this measure provides investors with helpful supplemental information about the Company's ability to fund internal growth, make acquisitions and repay debt and related interest. This measure may be inconsistent with similar measures presented by other companies. A reconciliation from net income, the most closely comparable GAAP measure, is included in subsequent tables.
 
 
 


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Copyright 2015 Fortune Brands Home & Security

FORTUNE BRANDS HOME & SECURITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (GAAP)
(In millions)
(Unaudited)
   
   
September 30, December 31,
2013 2012
 
Assets
Current assets    
Cash and cash equivalents $ 157.0