Fortune Brands Home & Security Reports Strong Q2 Sales and EPS Growth, and Raises Annual Outlook

Fortune Brands Home & Security Reports Strong Q2 Sales and EPS Growth, and Raises Annual Outlook

Highlights:

  • Q2 2013 net sales increase 11 percent year-over-year to $1.04 billion
  • Q2 2013 EPS $0.37, EPS before charges/gains increases to $0.41 vs. $0.29 prior year
  • Company raises annual outlook to sales growth of 13 - 15 percent and EPS before charges/gains of $1.35 - $1.43
  • Company completes WoodCrafters Home Products acquisition, pays its first quarterly dividend, and extends existing credit agreement

DEERFIELD, Ill.--(BUSINESS WIRE)-- Fortune Brands Home & Security, Inc. (NYS: FBHS) , an industry-leading home and security products company, today announced second quarter 2013 results and raised its annual outlook for sales and earnings per share. The Company has also completed a strategic acquisition in the cabinet segment, paid its first quarterly dividend and extended the maturity of its existing credit agreement.


"We continue to leverage the market recovery with strong second quarter results," said Chris Klein, chief executive officer, Fortune Brands Home & Security. "We developed solid momentum in the first half of the year by focusing on profitable growth. Based on our strong first half performance, our continued confidence in the home products market, and our efficient closing of the WoodCrafters acquisition, we are again increasing our annual outlook."

Second Quarter 2013

For the second quarter of 2013, net sales were $1.04 billion, an increase of 11 percent over the second quarter of 2012. Diluted earnings per share were $0.37, compared to $0.29 in the prior year quarter. Diluted EPS before charges/gains was $0.41, compared to $0.29 the prior year.

Operating income was $106.5 million, compared to $72.3 million in the prior year quarter. Operating income before charges/gains was $107.2 million, compared to $72.7 million the prior year.

"Sales were up double digits in each of our home segments, with these segments growing a combined 13 percent vs. last year, once again outperforming the market. Importantly, this was very profitable growth, with operating income before charges/gains increasing 54 percent for the home product segments. New housing construction continued at a strong pace, and spending on home repairs and remodeling continued to strengthen," Klein said.

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

  • Kitchen & Bath Cabinetry net sales were up 13 percent, with operating income before charges/gains of $35.3 million vs. $18.5 million last year. Growth and share gains were driven across all parts of the business, with new construction leading the momentum and our semi-custom products benefitting more broadly from increasing repair and remodel spending.
  • Plumbing & Accessories net sales were up 15 percent, and operating income before charges/gains was up 29 percent with share gains across the business.
  • Advanced Material Windows & Door Systems net sales were up double digits, as entry doors grew 15 percent, and we began to see some positive signs in windows. Importantly, operating income before charges/gains for the segment more than doubled to $10 million.
  • Security & Storage net sales were relatively even with prior year, with a security sales increase of 4 percent, offset by lower tool storage sales as we reposition that business. Segment operating income before charges/gains was up 25 percent.

Company Raises Annual Outlook for 2013

Based on the Company's first half performance, its continued confidence in the home products market recovery and expectation to continue outperforming the market, plus growth from the recently closed WoodCrafters acquisition, the Company now expects full-year 2013 net sales to increase 13 to 15 percent. The Company now expects diluted EPS before charges/gains to be in the range of $1.35 to $1.43, which includes $0.04 from the WoodCrafters acquisition. This targeted range compares to 2012 diluted EPS before charges/gains of $0.89.

"We have the confidence to raise our annual outlook because we are executing well and our performance continues to outpace the recovering market," Klein said.

Company Pays Dividend and Completes Strategic Acquisition

On June 19, 2013, the Company paid its first quarterly cash dividend of $0.10 per share of common stock. The Company implemented this dividend approximately 19 months after becoming an independent company.

On June 20, 2013, the Company completed the acquisition of WoodCrafters Home Products Holding, LLC, a leading, privately-owned manufacturer of bathroom vanities and tops with estimated annual sales of $230 million. The transaction was valued at approximately $300 million. WoodCrafters is now part of the Company's Kitchen & Bath Cabinetry segment and greatly expands the Company's offerings of bathroom cabinetry.

"Our strong performance over the last six quarters provides the foundation to drive incremental shareholder value," said Lee Wyatt, chief financial officer. "The dividend reflects our confidence in ongoing cash flows, and the acquisition should increase operating results in the second half of 2013. Even with these two actions, we expect our net-debt-to-EBITDA before charges/gains ratio to be less than 0.5 times at year-end. The benefits from our capital structure and free cash flow have contributed to our ability to increase full year guidance," Wyatt said.

"Our balance sheet remains solid and we have extended our existing credit agreement to five years in order to maintain our flexibility," Wyatt said. "As of June 30, 2013, cash was $124 million and debt increased to $386 million; both reflecting the completed WoodCrafters acquisition."

About Fortune Brands Home & Security, Inc.

Fortune Brands Home & Security, Inc. (NYS: 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. The Company generated $3.6 billion in net sales in 2012. 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, the effect of the WoodCrafters acquisition, 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) by 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, and net debt-to-EBITDA before charges/gains ratio. 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 June 30,Six Months Ended June 30,
2013 2012 % Change2013 2012 % Change
Net Sales (GAAP)          
Kitchen & Bath Cabinetry$392.4$345.913.4$737.7$657.412.2
Plumbing & Accessories322.6281.514.6631.5526.020.1
Advanced Material Windows & Door Systems176.5159.610.6300.7273.010.1
Security & Storage 148.9   148.3  0.4  260.5   277.7  (6.2)
Total Net Sales$1,040.4  $935.3  11.2 $1,930.4  $1,734.1  11.3 
 
Operating Income (Loss) Before Charges/Gains(a)          
Kitchen & Bath Cabinetry$35.3$18.590.8$50.2$14.6243.8
Plumbing & Accessories55.342.829.2110.379.039.6
Advanced Material Windows & Door Systems9.94.0147.52.0(6.3)131.7
Security & Storage26.321.124.638.632.917.3
Corporate Expenses (19.6)  (13.7) (43.1) (31.5)  (26.6) (18.4)
Total Operating Income Before Charges/Gains$107.2  $72.7  47.5 $169.6  $93.6  81.2 
 
Earnings Per Share Before Charges/Gains(b)          
Diluted$0.41  $0.29  41.4 $0.65  $0.37  75.7 
 
          
EBITDA Before Charges/Gains(c)$128.4  $95.0  35.1 $212.9  $140.4  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, 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 determine the returns generated by FBHS and to evaluate and identify cost-reduction initiatives. 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.

   
FORTUNE BRANDS HOME & SECURITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (GAAP)
(In millions)
(Unaudited)
 
  
June 30,December 31,
20132012
 
Assets
Current assets  
Cash and cash equivalents$123.6$336.0
Accounts receivable, net499.8381.7
Inventories438.8357.2
Other current assets 141.4 153.0
Total current assets1,203.61,227.9
 
Property, plant and equipment, net522.2509.4
Goodwill1,521.81,381.4
Other intangible assets, net of accumulated amortization764.6683.6
Other assets 53.2 71.6
Total assets$4,065.4$3,873.9
 
 
Liabilities and Equity
Current liabilities  
Notes payable to banks$6.1$5.5
Current portion of long-term debt22.522.5
Accounts payable350.1287.0
Other current liabilities 293.0 317.4

Total current liabilities

671.7632.4
 
Long-term debt357.5297.5
Deferred income taxes230.0224.0
Accrued defined benefit plans196.0252.7
Other non-current liabilities 81.8 82.6
Total liabilities1,537.01,489.2
 
Stockholders' equity2,525.52,381.1
Noncontrolling interests 2.9 3.6
Total equity 2,528.4 2,384.7
Total liabilities and equity$4,065.4$3,873.9

  
FORTUNE BRANDS HOME & SECURITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)
 
 
   
Six Months Ended June 30,
2013 2012
Operating Activities   
Net income$101.7$60.9
Depreciation and amortization42.847.5

Asset impairment charge

6.2-
Recognition of actuarial losses5.4-
Deferred income taxes4.99.6
Other noncash items13.813.4
Changes in assets and liabilities, net (128.9)  (78.9)
Net cash provided by operating activities$45.9  $52.5 
 
Investing Activities   
Capital expenditures, net of proceeds from asset sales

$

(30.9

)

$ Read Full Story

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

Markets

DJIA21,613.43100.260.47%
NASDAQ6,412.171.370.02%
S&P 5002,477.137.220.29%
NIKKEI 22520,050.1694.960.48%
HANG SENG26,880.6828.630.11%
DAX12,264.3155.360.45%
USD (per EUR)1.160.00-0.09%
USD (per CHF)0.950.000.02%
JPY (per USD)111.84-0.16-0.14%
GBP (per USD)1.300.00-0.07%
More to Explore
Wed, Jul 26
Set Your Location
City, State, or Zip