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
$0.83, an increase of 20 percent versus Q1 2023
- Company reaffirms initial 2024 guidance, with a focus on
above-market sales performance, margin expansion and cash
generation
Fortune Brands Innovations, Inc. (NYSE: FBIN or “Fortune Brands”
or the “Company”), an industry leading innovation company focused
on creating smarter, safer and more beautiful homes and improving
lives, today announced first quarter 2024 results.
“Our first quarter sales and margin results came in above our
expectations as our teams executed our strategy of growing the core
and accelerating in connected products,” said Fortune Brands Chief
Executive Officer Nicholas Fink. “By leveraging our Fortune Brands
Advantage capabilities and focusing on accelerated growth through
building leading brands, driving meaningful innovation, and
creating value for our channel partners, we will continue to
position the Company for outperformance in any environment.”
Fink continued, “This past quarter, we saw powerful proof-points
of our compelling investment thesis and are increasingly seeing the
benefit of the transformative actions we took over the past few
years. Looking forward, we continue to be confident in the strength
of our business and believe we are uniquely positioned to capture
exceptional opportunities.”
First Quarter 2024
Results
($ 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240430357482/en/
INVESTOR AND MEDIA CONTACT: Leigh Avsec 847-484-4211
Investor.Questions@fbhs.com
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