Fortune Brands Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

fbhs-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-35166

FORTUNE BRANDS HOME & SECURITY, INC.

(Exact name of Registrant as specified in its charter)

Delaware

62-1411546

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

520 Lake Cook Road, Deerfield, Illinois 60015-5611

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (847) 484-4400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	FBHS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, at July 17, 2020 was 138,148,321.

PART I. FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS.

FORTUNE BRANDS HOME & SECURITY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Six and Three Months Ended June 30, 2020 and 2019

(In millions, except per share amounts)

(Unaudited)

	Six Months Ended						Three Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Net sales	$	2,778.5		$	2,835.1		$	1,375.8		$	1,507.2
Cost of products sold		1,802.4			1,838.7			892.9			969.6
Selling, general and administrative expenses		590.1			632.6			276.2			320.6
Amortization of intangible assets		20.6			20.1			10.3			10.1
Asset impairment charges		22.5			—			13.0			—
Restructuring charges		14.9			5.7			10.4			4.5
Operating income		328.0			338.0			173.0			202.4
Interest expense		44.3			48.2			22.2			24.5
Other income, net		(11.3	)		(1.9	)		(5.2	)		(0.7	)
Income before taxes		295.0			291.7			156.0			178.6
Income tax		67.7			70.1			37.8			41.5
Income after tax		227.3			221.6			118.2			137.1
Equity in losses of affiliate		2.3			—			2.0			—
Net income		225.0			221.6			116.2			137.1
Less: Noncontrolling interests		0.1			(0.6	)		0.4			(0.4	)
Net income attributable to Fortune Brands	$	224.9		$	222.2		$	115.8		$	137.5

Basic earnings per common share	$	1.62		$	1.58		$	0.84		$	0.98
Diluted earnings per common share	$	1.61		$	1.57		$	0.83		$	0.97

Comprehensive income	$	187.3		$	233.1		$	129.1		$	140.3

See notes to condensed consolidated financial statements.

FORTUNE BRANDS HOME & SECURITY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

	June 30, 2020			December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	398.4		$	387.9
Accounts receivable less allowances for discounts and doubtful accounts		657.7			624.8
Inventories		732.3			718.6
Other current assets		168.9			166.9
Total current assets		1,957.3			1,898.2
Property, plant and equipment, net of accumulated depreciation		794.2			824.2
Operating lease assets		164.4			165.6
Goodwill		2,081.3			2,090.2
Other intangible assets, net of accumulated amortization		1,118.0			1,168.9
Other assets		217.1			144.2
Total assets	$	6,332.3		$	6,291.3
Liabilities and equity
Current liabilities
Short-term debt	$	—		$	399.7
Accounts payable		463.9			460.0
Other current liabilities		488.9			549.6
Total current liabilities		952.8			1,409.3
Long-term debt		2,245.9			1,784.6
Deferred income taxes		152.1			157.2
Accrued defined benefit plans		197.5			201.4
Operating lease liabilities		137.5			139.8
Other non-current liabilities		183.4			171.2
Total liabilities		3,869.2			3,863.5
Commitments and contingencies (see Note 17)
Equity
Fortune Brands equity
Common stock^(a)		1.8			1.8
Paid-in capital		2,852.9			2,813.8
Accumulated other comprehensive loss		(110.3	)		(72.6	)
Retained earnings		1,954.7			1,763.0
Treasury stock		(2,237.3	)		(2,079.4	)
Total Fortune Brands equity		2,461.8			2,426.6
Noncontrolling interests		1.3			1.2
Total equity		2,463.1			2,427.8
Total liabilities and equity	$	6,332.3		$	6,291.3

^(a)	Common stock, par value $0.01 per share; 183.0 million shares and 181.9 million shares issued at June 30, 2020 and December 31, 2019, respectively.

See notes to condensed consolidated financial statements.

FORTUNE BRANDS HOME & SECURITY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2020 and 2019

(In millions)

(Unaudited)

	2020			2019
Operating activities
Net income	$	225.0		$	221.6
Non-cash pre-tax expense:
Depreciation		57.0			56.0
Amortization of intangibles		20.6			20.0
Non-cash lease expense		16.7			17.9
Stock-based compensation		15.0			14.5
Deferred taxes		(11.8	)		5.0
Asset impairment charges		22.5			1.7
Amortization of deferred financing fees		2.1			1.5
Equity in losses of affiliate		2.3			—
Gain on equity investments		(6.6	)		—
Loss (gain) on sale of property, plant and equipment		1.2			(1.0	)
Changes in assets and liabilities:
Increase in accounts receivable		(59.6	)		(132.6	)
Increase in inventories		(18.1	)		(61.1	)
Increase in accounts payable		11.9			26.8
Increase in other assets		(8.1	)		(13.8	)
Decrease in accrued expenses and other liabilities		(62.2	)		(41.2	)
Increase (decrease) in accrued taxes		52.6			(3.3	)
Net cash provided by operating activities		260.5			112.0
Investing activities
Capital expenditures^(a)		(42.3	)		(54.9	)
Proceeds from the disposition of assets		1.5			4.1
Cost of investments in equity securities		(59.4	)		—
Net cash used in investing activities		(100.2	)		(50.8	)
Financing activities
Decrease in short-term debt		—			(175.0	)
Issuance of long-term debt		900.0			665.0
Repayment of long-term debt		(840.0	)		(410.0	)
Proceeds from the exercise of stock options		24.1			6.1
Treasury stock purchases		(150.0	)		(50.0	)
Employee withholding taxes related to stock-based compensation		(7.9	)		(8.2	)
Deferred acquisition payments		—			(19.0	)
Dividends to stockholders		(66.6	)		(61.7	)
Other financing, net		(1.8	)		(0.2	)
Net cash used in financing activities		(142.2	)		(53.0	)
Effect of foreign exchange rate changes on cash		(8.0	)		4.9
Net increase in cash and cash equivalents	$	10.1		$	13.1
Cash, cash equivalents and restricted cash^(b) at beginning of period	$	394.9		$	270.7
Cash, cash equivalents and restricted cash^(b)at end of period	$	405.0		$	283.8

(a)	Capital expenditures of $3.9 million and $7.8 million that had not been paid as of June 30, 2020 and 2019, respectively, were excluded from the Statement of Cash Flows.

(b)

Restricted cash of $1.0 million and $5.6 million is included in Other current assets and Other assets, respectively, as of June 30, 2020 and restricted cash of $0.7 million and $6.8 million is included in Other current assets and Other assets, respectively, as of June 30, 2019. Restricted cash of $0.8 million and $6.1 million is included in Other current assets and Other assets, respectively, as of December 31, 2019.

See notes to condensed consolidated financial statements.

FORTUNE BRANDS HOME & SECURITY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Six and Three Months Ended June 30, 2020 and 2019

(In millions)

(Unaudited)

	Common Stock		Paid-In Capital		Accumulated Other Comprehensive (Loss) Income			Retained Earnings			Treasury Stock			Non- controlling Interests			Total Equity
Balance at December 31, 2018	$	1.8	$	2,766.0	$	(67.0	)	$	1,448.1		$	(1,970.7	)	$	1.8		$	2,180.0
Comprehensive income:
Net income		—		—		—			222.2			—			(0.6	)		221.6
Other comprehensive loss		—		—		11.5			—			—			—			11.5
Stock options exercised		—		6.1		—			—			—			—			6.1
Stock-based compensation		—		14.5		—			—			(8.2	)		—			6.3
Adoption of ASU 2018-02		—		—		(8.6	)		8.6			—			—			-
Treasury stock purchases		—		—		—			—			(50.0	)		—			(50.0	)
Dividends ($0.22 per common share)		—		—		—			(30.8	)		—			—			(30.8	)
Balance at June 30, 2019	$	1.8	$	2,786.6	$	(64.1	)	$	1,648.1		$	(2,028.9	)	$	1.2		$	2,344.7

Balance at December 31, 2019	$	1.8	$	2,813.8	$	(72.6	)	$	1,763.0		$	(2,079.4	)	$	1.2		$	2,427.8
Comprehensive income:
Net income		—		—		—			224.9			—			0.1			225.0
Other comprehensive income		—		—		(37.7	)		—			—			—			(37.7	)
Stock options exercised		—

Price	53.34	EPS	3
Shares	141	P/E	18
MCap	7,542	P/FCF	21
Net Debt	1,606	EBIT	594
TEV	9,148	TEV/EBIT	15
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-07-31
10-Q	2020-03-31	Filed 2020-05-01
10-K	2019-12-31	Filed 2020-02-26
10-Q	2019-09-30	Filed 2019-10-31
10-Q	2019-06-30	Filed 2019-08-02
10-Q	2019-03-31	Filed 2019-05-07
10-K	2018-12-31	Filed 2019-02-25
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-07-31
10-Q	2018-03-31	Filed 2018-05-02
10-K	2017-12-31	Filed 2018-02-28
10-Q	2017-09-30	Filed 2017-10-31
10-Q	2017-06-30	Filed 2017-08-04
10-Q	2017-03-31	Filed 2017-05-02
10-K	2016-12-31	Filed 2017-02-28
10-Q	2016-09-30	Filed 2016-11-02
10-Q	2016-06-30	Filed 2016-08-04
10-Q	2016-03-31	Filed 2016-04-28
10-K	2015-12-31	Filed 2016-02-25
10-Q	2015-09-30	Filed 2015-10-30
10-Q	2015-06-30	Filed 2015-07-29
10-Q	2015-03-31	Filed 2015-05-05
10-K	2014-12-31	Filed 2015-02-25
10-Q	2014-09-30	Filed 2014-10-31
10-Q	2014-06-30	Filed 2014-07-31
10-Q	2014-03-31	Filed 2014-05-01
10-K	2013-12-31	Filed 2014-02-26
10-Q	2013-09-30	Filed 2013-11-01
10-Q	2013-06-30	Filed 2013-07-31
10-Q	2013-03-31	Filed 2013-05-03
10-K	2012-12-31	Filed 2013-02-27
10-Q	2012-09-30	Filed 2012-11-05
10-Q	2012-06-30	Filed 2012-08-07
10-Q	2012-03-31	Filed 2012-05-04
10-K	2011-12-31	Filed 2012-02-22
10-Q	2011-09-30	Filed 2011-11-10

8-K	2020-07-29	Earnings, Exhibits
8-K	2020-07-13	Exhibits
8-K	2020-04-29
8-K	2020-04-28
8-K	2020-01-29
8-K	2019-10-23
8-K	2019-10-07
8-K	2019-09-30
8-K	2019-09-24
8-K	2019-09-09
8-K	2019-08-01
8-K	2019-07-26
8-K	2019-05-07
8-K	2019-04-24
8-K	2019-03-05
8-K	2019-02-21
8-K	2019-01-31
8-K	2018-10-25
8-K	2018-09-19
8-K	2018-07-26
8-K	2018-07-13
8-K	2018-04-30
8-K	2018-04-26
8-K	2018-02-01

EX-31.1	fbhs-ex311_8.htm
EX-31.2	fbhs-ex312_7.htm
EX-32	fbhs-ex32_6.htm

FBHS 10Q Quarterly Report

Fortune Brands Earnings 2020-06-30