DEERFIELD, Ill.- Fortune Brands Home & Security, Inc. (NYSE: FBHS, the 'Company', or 'Fortune Brands'), an industry-leading home and security products company, today announced third quarter 2020 results.

'I continue to be amazed by our teams,' said Nicholas Fink, chief executive officer, Fortune Brands. 'We delivered exceptional performance in an accelerating housing market as demographic forces and consumers focused on home investment drove both renovation and remodeling and new construction activity. We are serving our customers' increasing needs through a strict focus on safety and operational excellence. Also reflected in our financial results were increased investments in our leading brands, innovation and supply chain capability and capacity that will enable us to continue to capture opportunities and accelerate share gains in a fundamentally robust housing market over the next few years.'

Third Quarter 2020

For the third quarter of 2020, sales were $1.7 billion, an increase of 13 percent over the third quarter of 2019. Earnings per share were $1.17, compared to $0.75 in the prior-year quarter. EPS before charges / gains were $1.19, compared to $0.95 the same quarter last year. Operating income was $240.2 million, compared to $168.0 million in the prior-year quarter. Operating income before charges / gains was $244.2 million, compared to $203.2 million the same quarter last year, an increase of 20 percent.

'We are ahead of our plan to permanently advance the profitability of the company, and our financial results are just beginning to reflect this,' continued Fink. 'We are accelerating our multi-year margin improvement journey in a fundamentally strong housing market, which should create exceptional value for our long-term stakeholders.'

For each segment in the third quarter of 2020, compared to the prior-year quarter:

Plumbing sales increased 15 percent with double-digit sales growth in U.S. Retail and China. Operating margin before charges / gains was 20.8 percent even with increased brand investment and one-time costs and remains on track to deliver expected margins of approximately 22 percent for the full year.

Doors & Security sales increased 14 percent, with doors and decking showing double-digit growth and security products returning to mid-single digit growth. Operating margin before charges / gains was 16.4 percent, an increase of 190 basis points versus the third quarter of 2019.

Cabinet sales increased 11 percent. Strong demand for value-priced cabinets continues to drive growth in this segment. Operating margin before charges / gains was 12.2 percent, an increase of 220 basis points over the third quarter of 2019.

Balance Sheet and Liquidity

At the end of the quarter net debt was $1.6 billion and net debt to EBITDA was 1.7x. The Company had $465 million in cash and $1.35 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 $300 million at the end of the third quarter.

'We are leveraging this strong market to increase market share and profitability as we position for 2021 and beyond,' said Patrick Hallinan, chief financial officer, Fortune Brands. 'The permanent efficiency improvements we have made over the past six months will serve as a foundation for future margin improvement and enable us to capture the opportunities presented by what we expect to be a prolonged period of housing market strength. With this momentum, we have the ability to make investments and deploy capital to accelerate growth and stakeholder value creation.'

2020 Outlook

While clear COVID-19 and macroeconomic risks remain, the Company is reinitiating formal 2020 financial guidance. For the full year, the Company expects net sales growth between 4 percent and 5 percent and earnings per share of $4.03 to $4.11, with an operating margin of approximately 14 percent. The Company expects to generate free cash flow of approximately $590 to $620 million for the full year 2020, which includes accelerated investments in capacity to support our customers.

'We have clearly entered a new phase of demographics-driven housing growth,' said Fink. 'I am incredibly excited about how our teams are poised to drive growth, capture share, grow margins and deploy capital to create even more stakeholder value over the next few years.'

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.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains certain 'forward-looking statements' regarding statements related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of the government, consumers, and the Company, on our business, financial condition and results of operations as well as general business strategies, market potential, future financial performance, the potential of our brands and other matters. Statements preceded by, followed by or that otherwise include the words 'believes,' 'positioned,' 'expects,' 'estimates,' 'plans,' 'look to,' '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. Important factors that could affect performance and cause results to differ materially from management's expectations, or could affect the Company's ability to achieve its strategic goals, include the uncertainties relating to the impact of COVID-19 on the Company's business, operations and employees and the other factors discussed in our securities filings, including in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, all 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 of this release.

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 and free cash flow. 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.

Source: Fortune Brands Home & Security, Inc.

Operating margin is calculated as operating income derived in accordance with GAAP divided by GAAP net sales. Before charges/gains operating margin is operating income derived in accordance with GAAP excluding restructuring and other charges and asset impairment charges, divided by GAAP net sales. Before charges/gains operating margin is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the returns generated by FBHS 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.

Definitions of Terms: Non-GAAP Measures

(a) Operating income before charges/gains is operating income derived in accordance with GAAP excluding restructuring and other charges and asset impairment charges. Operating income 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 EPS before charges/gains is net income less noncontrolling interests calculated on a diluted per-share basis excluding restructuring and other charges, asset impairment charges, gains on equity investments, amortization of differences between equity investment and the carrying value of equity, actuarial losses associated with our defined benefit plans and tax items. 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.

EBITDA before charges/gains is net income derived in accordance with GAAP excluding depreciation, amortization of intangible assets, restructuring and other charges, interest expense, asset impairment charges, equity in loss of affiliate, gains on equity investments, defined benefit plan actuarial losses 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) Asset impairment charges for the nine months ended September 30, 2020 represent pre-tax impairment charges of $22.5 million related to indefinite-lived tradenames in our Cabinets and Plumbing segments. Asset impairment charges for the three and nine months ended September 30, 2019 represent a pre-tax impairment of $29.5 million related to an indefinite-lived tradename in our Cabinets segment. It also includes a $1.7 million fair value asset impairment expense classified in cost of products sold, for the nine months ended September 30, 2019 associated with an idle manufacturing facility in our Doors & Security segment.

(e) Gains on equity investments for the three and nine months ended September 30, 2020 represents gains related to our 2020 investments in Flo Technologies.

See details at: https://ir.fbhs.com/news-releases/news-release-details/fortune-brands-reports-strong-3q-sales-and-profit-growth

INVESTOR and MEDIA CONTACT:

Matthew Skelly

847-484-4573

Investor.Questions@FBHS.com

Source: Fortune Brands Home & Security, Inc.

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