Fortune brands’ results solidly ahead of expectations amid an anticipated challenging macro environment; increases full-year 2023 eps guidance
Deerfield, ill.--(business wire)--fortune brands innovations, inc. (nyse: fbin or “fortune brands” or the “company”), an industry-leading home, security and commercial building products company, today announced first quarter 2023 results. “our solid results for our first full quarter as fortune brands innovations speak to the true potential of our new company,” said fortune brands chief executive officer nicholas fink. “we took proactive steps to prepare for an expected challenging 2023, while also focusing on long-term growth. by leveraging our fortune brands advantage capabilities and focusing on building leading brands, driving meaningful innovation, and collaborating with our channel partners, we will continue to position the company for outperformance in any environment.” fink continued, “looking forward, we remain confident in the mid- to long-term strength of the housing market. our leading products play in the most attractive, highest growth areas of our markets, and our more balanced exposure to new construction and smaller-ticket repair and remodel should position us to capture exceptional opportunities as the housing market returns to growth.” first quarter 2023 results for the first quarter of 2023, sales were $1.0 billion, a decrease of 9 percent over the first quarter of 2022. operating income was $131.8 million, compared to $179.8 million in the prior-year quarter, a decrease of 27 percent. operating income before charges / gains was $136.7 million versus $176.0 million in 2022. operating margin was 12.7 percent, compared to 15.8 percent in the first quarter of 2022. operating margin before charges / gains was 13.1 percent, compared to 15.4 percent in the first quarter of 2022, a decrease of 230 basis points. for each segment in the first quarter of 2023, compared to the prior-year quarter: water innovations sales decreased 8 percent, primarily due to lower sales volumes, partially offset by price. excluding the impact of fx and the aqualisa acquisition, net sales also decreased 8 percent. operating margin before charges / gains was 21.6 percent. outdoors sales decreased 16 percent, driven by lower sales volume in part due to channel inventory reductions and a return to normal seasonality across the segment, partially offset by price. operating margin before charges / gains was 5.2 percent. security sales increased 2 percent, driven by price and continued growth in the commercial safety business. operating margin before charges / gains was 14.0 percent. balance sheet and liquidity at the end of the quarter, net debt was $2.1 billion and net debt to ebitda was 2.3x. the company had $539 million in cash and full availability under its $1.25 billion revolving credit facility. the company repurchased approximately $100 million in common stock in the quarter. free cash flow was positive for the quarter, reflecting the favorable impact of the company’s working capital and inventory reduction efforts. annual outlook the company is increasing the midpoint of full-year eps before charges / gains guidance by $0.05 to a range of $3.65 to $3.85, reflecting the company’s operational outperformance amid an external environment that is expected to remain challenging and the impact of share repurchases. the company continues to expect a global housing market decline of 6.5 percent to 8.5 percent with full-year net sales down in the range of 5 percent to 7 percent, operating margins between 16 percent and 17 percent, ebitda margins before charges / gains of between 19 percent and 20 percent and free cash flow of approximately $475 million. “we delivered solid sales and financial performance in an external operating environment that we expect will continue to be volatile,” said fortune brands chief financial officer david barry. “our financial position is strong, and our teams remain agile in the face of macro headwinds. we will continue to position the company for success by prioritizing above-market sales growth, margin preservation and enhancement and cash generation.” 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. (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, therma-tru, larson, fiberon, master lock and sentrysafe. 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 (the “exchange act”). 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 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 including the expected benefits and costs of the separation (the “separation”) of masterbrand, inc. (“masterbrand”) and the tax-free nature of the separation, 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” 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 associated with our ability to improve organizational productivity and global supply chain efficiency and flexibility, (vii) risks associated with global commodity and energy availability and price volatility, as well as the possibility of sustained inflation, (viii) delays or outages in our information technology systems or computer networks, (ix) risks associated with doing business globally, including changes in trade-related tariffs and risks with uncertain trade environments, (x) risks associated with the disruption of operations, (xi) our inability to obtain raw materials and finished goods in a timely and cost-effective manner, (xii) risks associated with entering into potential strategic acquisitions and joint ventures and related integration activities, (xiii) impairments in the carrying value of goodwill or other acquired intangible assets, (xiv) risk of increases in our defined benefit-related costs and funding requirements, (xv) the uncertainties relating to the impact of covid-19 on the company’s business, financial performance and operating results, (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) changes in government and industry regulatory standards, (xx) future tax law changes or the interpretation of existing tax laws, (xxi) our ability to secure and protect our intellectual property rights, (xxii) potential liabilities and costs from claims and litigation, (xxiii) our ability to achieve the expected benefits of the separation of masterbrand, (xxiv) the risk that we may be required to indemnify masterbrand in connection with the separation or that masterbrand’s indemnities to us may not be sufficient to hold us harmless for the full amount of liabilities for which masterbrand has been allocated responsibility and (xxv) the potential that the separation fails to qualify as tax-free for u.s. federal income tax purposes. 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 31, 2022. 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 from continuing operations before charges / gains, operating income before charges / gains, operating margin before charges / gains, ebitda before charges / gains, net debt, net debt to ebitda before charges / gains, sales excluding the impact of fx and acquisitions, and free cash flow. 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. $ 594.2 $ 643.6 (8 ) 289.9 343.6 (16 ) 155.9 153.0 2 $ 1,040.0 $ 1,140.2 (9 ) $ 128.4 $ 149.3 (14 ) $ 128.6 $ 150.1 (14 ) 13.0 39.8 (67 ) 15.2 35.2 (57 ) 21.1 20.4 3 21.8 20.4 7 (30.7 ) (29.7 ) 3 (28.9 ) (29.7 ) (3 ) $ 131.8 $ 179.8 (27 ) $ 136.7 $ 176.0 (22 ) $ 0.67 $ 0.94 (29 ) $ 0.69 $ 0.91 (24 ) $ 85.6 $ 126.2 (32 ) $ 174.8 $ 209.8 (17 ) april 1, december 31, 2023 2022 $ 539.1 $ 642.5 559.0 521.8 931.1 1,021.3 272.0 274.8 2,301.2 2,460.4 805.8 783.7 1,643.6 1,640.7 990.7 1,000.8 231.4 235.3 $ 5,972.7 $ 6,120.9 $ 599.5 $ 599.2 423.7 421.6 390.0 523.9 1,413.2 1,544.7 2,074.9 2,074.3 143.0 136.9 259.1 278.1 3,890.2 4,034.0 2,082.5 2,086.9 2,082.5 2,086.9 $ 5,972.7 $ 6,120.9 thirteen weeks ended three months ended $ 84.6 $ 180.9 31.9 46.9 8.1 10.9 7.4 5.7 10.5 7.0 (66.4 ) (434.5 ) $ 76.1 $ (183.1 ) $ (42.6 ) $ (60.8 ) - 8.0 - (61.6 ) $ (42.6 ) $ (114.4 ) $ - $ 660.5 2.3 0.2 (100.0 ) (377.1 ) (29.5 ) (37.2 ) (12.1 ) (43.2 ) $ (139.3 ) $ 203.2 $ 2.2 $ 0.7 $ (103.6 ) $ (93.6 ) 648.3 476.1 $ 544.7 $ 382.5 three months ended $ 76.1 $ (183.1 ) 715.0 - 765.0 42.6 60.8 250.0 - 300.0 - 8.0 5.0 2.3 0.2 5.0 $ 35.8 $ (235.7 ) $ 475.0 $ 1,040.0 $ 1,140.2 (9 ) 631.7 671.8 (6 ) 260.8 276.4 (6 ) 12.6 11.6 9 3.1 0.6 417 131.8 179.8 (27 ) 26.8 21.7 24 (6.3 ) (2.1 ) 200 111.3 160.2 (31 ) 25.7 34.0 (24 ) $ 85.6 $ 126.2 (32 ) (1.0 ) 54.7 (102 ) $ 84.6 $ 180.9 (53 ) $ 84.6 $ 180.9 (53 ) $ 0.67 $ 0.94 (29 ) $ (0.01 ) $ 0.41 (102 ) $ 0.66 $ 1.35 (51 ) 128.5 134.7 (5 ) $ 85.6 $ 126.2 (32 ) $ 19.2 $ 20.1 (4 ) 12.6 11.6 9 4.9 (3.8 ) (229 ) 26.8 21.7 24 25.7 34.0 (24 ) $ 174.8 $ 209.8 (17 ) $ 599.5 2,074.9 2,674.4 539.1 $ 2,135.3 $ 916.6 2.3 $ 413.7 $ 85.6 $ 499.3 $ 62.7 $ 19.2 $ 81.9 36.7 12.6 49.3 39.2 4.9 44.1 97.4 26.8 124.2 (1.2 ) - (1.2 ) 93.2 25.7 118.9 $ 741.7 $ 174.8 $ 916.5 $ 0.67 $ 0.94 (29 ) 0.02 (0.03 ) (167 ) $ 0.69 $ 0.91 (24 ) $ 1,040.0 - 631.7 (0.1 ) 260.8 (1.7 ) 12.6 - 3.1 (3.1 ) 131.8 4.9 136.7 26.8 - (6.3 ) - 111.3 4.9 116.2 25.7 1.2 $ 85.6 3.7 $ 89.3 (1.0 ) - $ (1.0 ) $ 84.6 3.7 $ 88.3 128.5 128.5 $ 0.67 $ 0.69 $ 1,140.2 - 671.8 5.4 276.4 (1.0 ) 11.6 - 0.6 (0.6 ) 179.8 (3.8 ) 176.0 21.7 - (2.1 ) - 160.2 (3.8 ) 156.4 34.0 0.3 126.2 (4.1 ) $ 122.1 54.7 - $ 54.7 $ 180.9 (4.1 ) $ 176.8 134.7 134.7 $ 0.94 $ 0.91 $ 594.2 $ 643.6 (8 ) 289.9 343.6 (16 ) 155.9 153.0 2 $ 1,040.0 $ 1,140.2 (9 ) $ 128.4 $ 149.3 (14 ) 13.0 39.8 (67 ) 21.1 20.4 3 (30.7 ) (29.7 ) 3 $ 131.8 $ 179.8 (27 ) $ 131.8 $ 179.8 (27 ) 4.9 (3.8 ) (229 ) $ 136.7 $ 176.0 (22 ) $ 128.6 $ 150.1 (14 ) 15.2 35.2 (57 ) 21.8 20.4 7 (28.9 ) (29.7 ) (3 ) $ 136.7 $ 176.0 (22 ) 21.6% 23.2% - 0.1% 21.6% 23.3% 4.5% 11.6% 0.7% (1.4%) 5.2% 10.2% 13.5% 13.3% 0.5% - 14.0% 13.3% 12.7% 15.8% 0.4% (0.4%) 13.1% 15.4% (8%) (2%) 2% (8%) $ $ 4.11 (16) - (11) $ 3.56 $ 4.11 (13) 0.19 0.20 - (0.01) - (0.06) $ 3.75 $ 4.24 (12) $ $ 4.24 (14) - (9)
