Fortune Brands Reports Strong 2Q Results Amid COVID-19 Environment
Fortune Brands Home & Security, Inc. (the “Company”, or “Fortune Brands”), an industry-leading home and security products company, announced second quarter 2020 results.
“I couldn’t be prouder of our teams,” said Nicholas Fink, chief executive officer, Fortune Brands. “I want to thank all of our dedicated team members who worked so hard in a challenging environment to keep our facilities safe and open. During an extremely tough and uncertain time, we performed exceptionally in a home products market that was and remains stronger than expected. We went above and beyond recommended guidelines and took care of our associates and partners in a way which led to our strong performance. Our teams’ operational excellence was reflected in our financial results and our service to our customers, which resulted in accelerated share gains and produced future opportunities.”
Second Quarter 2020
For the second quarter of 2020, sales were $1.4 billion, a decrease of 9 percent over the second quarter of 2019. Earnings per share were $0.83, compared to $0.97 in the prior-year quarter. EPS before charges / gains were $0.94, compared to $1.03 the same quarter last year. Operating income was $173.0 million, compared to $202.4 million in the prior-year quarter. Operating income before charges / gains was $196.7 million, compared to $212.0 million the same quarter last year, a decrease of 7 percent. Decremental margin for the Company was 12 percent for the second quarter.
“We executed our plans to permanently reposition the cost basis of the Company against a home products market that exceeded expectations in the second quarter. We gained share and executed efficiency improvements which not only drove sales and profit results in the quarter but positions us to invest for long-term profitable growth,” added Fink.
For each segment in the second quarter of 2020, compared to the prior-year quarter:
– Plumbing sales were approximately flat and increased 1 percent excluding the impacts of foreign exchange. Strong double-digit sales growth in U.S. Retail and China drove the quarter. Operating margin before charges / gains was 24.5 percent, an increase of 190 basis points over the second quarter of 2019.
– Doors & Security sales decreased 9 percent, with doors and decking exceeding expectations and security products challenged by effects of COVID-19 on its supply chain. Operating margin before charges / gains was 14.4 percent, which was an increase of 70 basis points versus the second quarter of 2019. Decremental margin was 7 percent for the quarter.
– Cabinet sales decreased 15 percent. Strong demand in value-priced cabinets was offset by a softer market for higher-priced products. Operating margin before charges / gains was 8.2 percent, a decrease of 240 basis points over the second quarter of 2019. Decremental margin was 24 percent for the quarter.
Balance Sheet and Liquidity
At the end of the quarter net debt was $1.8 billion and net debt to EBITDA was 2.0x. The Company had $398 million in cash and $1.2 billion of availability under its revolving credit agreements. The total outstanding on both the Company’s original $1.25 billion and supplemental $400 million revolving credit facilities was $460 million at the end of the second quarter.
As previously mentioned during the 2020 first quarter earnings press release and earnings call, on April 29, 2020, the Company, in cooperation with its lending group, executed a supplemental 364-day revolving credit facility. This supplemental facility increased borrowing capacity by $400 million and operates essentially under the same terms and conditions as the existing facility.
“We set ambitious efficiency goals and are exceeding our objectives,” said Patrick Hallinan, chief financial officer, Fortune Brands. “In addition to expense and cash management improvement initiatives being pursued throughout the Company, we have positioned the businesses for additional share gains on the top line. We also have enhanced liquidity via strong cash generation. We are even better situated today to capture any potential upside and to manage any potential further softness than we were three months ago.”
Due to the uncertainty caused by the high unemployment and recession resulting from the pandemic, the Company is maintaining suspension of any previous financial guidance and projections for 2020 and beyond. The Company will provide further details on the quarterly earnings call.
“We are pleased with the resilience in market conditions and are positioned advantageously for the back half of the year and into 2021. We continue to see encouraging levels of R&R spending and rising activity in new construction. We are acutely aware of the uncertainty that exists with high unemployment in the U.S. and COVID-19 and will remain prudent in our management of the business as we continue to position ourselves to perform well in a downturn and accelerate in a recovery,” concluded Fink.
For the full second quarter results, click here.
About Fortune Brands
Fortune Brands Home & Security, Inc. (NYSE: FBHS), headquartered in Deerfield, IL., creates products and services that fulfill the dreams of home. The Company’s operating segments are Plumbing, Cabinets, and Doors & Security. Its trusted brands include Moen, Riobel, Perrin & Rowe, Shaws, Victoria + Albert and Rohl under the Global Plumbing Group (GPG); more than a dozen core brands under MasterBrand Cabinets; Therma-Tru entry door systems, Fiberon composite decking and Master Lock and SentrySafe security products in the Doors & Security segment. Fortune Brands holds market leadership positions in all of its segments. Fortune Brands is a Fortune 500 Company and part of the S&P 500 Index. For more information, please visit www.FBHS.com. To learn more about how Fortune Brands is embracing and accelerating its environmental, social and governance duties, please visit our ESG section and report at www.FBHS.com/global-citizenship.
Matthew Skelly – Investor & Media Relations – firstname.lastname@example.org – (847) 484-4573
Source: Fortune Brands Home & Security, Inc.