Q3 2021 Fortune Brands Supplemental Financial Information

FORTUNE BRANDS HOME & SECURITY, INC.

RECONCILIATION OF OPERATING INCOME BEFORE CHARGES/GAINS TO GAAP OPERATING INCOME

(In millions) (Unaudited)

				Three Months Ended,
		September 30, 2021		September 30, 2020			$ Change	% Change
PLUMBING
Operating income before charges/gains (a)	$	167.7	$	123.0		$	44.7	36
Restructuring charges (b)		-		(4.0)			4.0	100
Other charges (b)
Cost of products sold		-		(2.4)			2.4	100
Selling, general and administrative expenses		(1.2)		-			(1.2)	(100)
Operating income (GAAP)	$	166.5	$	116.6		$	49.9	43
OUTDOORS & SECURITY
Operating income before charges/gains (a)	$	82.4	$	66.6		$	15.8	24
Restructuring charges (b)		(2.4)		(0.1)			(2.3)	(2,300)
Other charges (b)
Cost of products sold		-		0.3			(0.3)	(100)
Selling, general and administrative expenses		0.4		-			0.4	100
Operating income (GAAP)	$	80.4	$	66.8		$	13.6	20
CABINETS
Operating income before charges/gains (a)	$	69.3	$	80.0		$	(10.7)	(13)
Restructuring charges (b)		(1.2)		2.4			(3.6)	(150)
Other charges (b)
Cost of products sold		(1.0)		(0.3)			(0.7)	(233)
Selling, general and administrative expenses		0.1		-			0.1	100
Operating income (GAAP)	$	67.2	$	82.1		$	(14.9)	(18)
CORPORATE
General and administrative expense before charges/gains	$	(26.1)	$	(25.4)		$	(0.7)	(3)
Restructuring charges (b)		-		0.1			(0.1)	(100)
Other charges (b)
Selling, general and administrative expenses		(1.4)		-			(1.4)	(100)
Corporate expense (GAAP)	$	(27.5)	$	(25.3)		$	(2.2)	(9)
TOTAL COMPANY
Operating income before charges/gains (a)	$	293.3	$	244.2		$	49.1	20
Restructuring charges (b)		(3.6)		(1.6)			(2.0)	(125)
Other charges (b)
Cost of products sold		(1.0)		(2.4)			1.4	58
Selling, general and administrative expenses		(2.1)		-			(2.1)	(100)
Operating income (GAAP)	$	286.6	$	240.2		$	46.4	19

(a) (b) For definitions of Non-GAAP measures, see Definitions of Terms page

FORTUNE BRANDS HOME & SECURITY, INC.

BEFORE CHARGES/GAINS OPERATING MARGIN TO OPERATING MARGIN

(Unaudited)

	Three Months Ended September 30,
	2021	2020	Change
PLUMBING
Before charges/gains operating margin	22.6%	20.8%	180 bps
Restructuring & other charges	(0.1%)	(1.1%)
Operating margin	22.5%	19.7%	280 bps
OUTDOORS & SECURITY
Before charges/gains operating margin	15.6%	16.4%	(80) bps
Restructuring & other charges	(0.4%)	-
Operating margin	15.2%	16.4%	(120) bps
CABINETS
Before charges/gains operating margin	9.7%	12.2%	(250) bps
Restructuring & other charges	(0.3%)	0.3%
Operating margin	9.4%	12.5%	(310) bps
TOTAL COMPANY
Before charges/gains operating margin	14.8%	14.8%	0 bps
Restructuring & other charges	(0.4%)	(0.3%)
Operating margin	14.4%	14.5%	(10) bps

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, 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.

DILUTED EPS BEFORE CHARGES/GAINS RECONCILIATION

For the three months ended September 30, 2021, diluted EPS before charges/gains is net income less noncontrolling interests calculated on a diluted per-share basis, excluding $6.7 million ($5.1 million after tax or $0.03 per diluted share) of restructuring and other charges, the impact from actuarial losses associated with our defined benefit plans of $1.1 million ($0.8 million after tax or $0.01 per diluted share) and a tax benefit of $0.1 million.

For the three months ended September 30, 2020, diluted EPS before charges/gains is net income less noncontrolling interests calculated on a diluted per-share basis excluding $4.0 million ($4.6 million after tax or $0.03 per diluted share) of restructuring and other charges, the impact from actuarial losses associated with our defined benefit plans of $0.6 million ($0.4 million after tax or $0.01 per diluted share) and a net tax benefit of $2.1 million ($0.02 per diluted share).

Earnings Per Common Share - Diluted

Diluted EPS Before Charges/Gains (c)

Restructuring and other charges Defined benefit plan actuarial losses Tax items

Diluted EPS (GAAP)

	Three Months Ended September 30,
	2021		2020	% Change
$	1.49	$	1.19	25
	(0.03)		(0.03)	-
	(0.01)		(0.01)	-
	-		0.02	(100)
$	1.45	$	1.17	24

(c) For definitions of Non-GAAP measures, see Definitions of Terms page

FORTUNE BRANDS HOME & SECURITY, INC.

FREE CASH FLOW GUIDANCE TO GAAP CASH FLOW FROM OPERATIONS (In millions)

(Unaudited)

	2021 Full Year
	Approximation
Free Cash Flow*	$	625.0 - 675.0
Add:
Capital expenditures		210.0 - 250.0
Less:
Proceeds from the disposition of assets		1.7 - 5.0
Proceeds from the exercise of stock options		35.0 - 40.0
Cash Flow From Operations (GAAP)	$	798.3 - 880.0

• Free cash flow is cash flow from operations calculated in accordance with U.S. generally accepted accounting principles ("GAAP") less net capital expenditures (capital expenditures less proceeds from the disposition of assets including property, plant and equipment, and proceeds from the exercise of stock options). Free cash flow does not include adjustments for certain non-discretionary cash flows such as mandatory debt repayments. Free cash flow is a measure not derived in accordance with GAAP. Management believes that free cash flow provides investors with helpful supplemental information about the Company's ability to fund internal growth, make acquisitions, repay debt and related interest, pay dividends and repurchase common stock. This measure may be inconsistent with similar measures presented by other companies.

FORTUNE BRANDS HOME & SECURITY, INC.
		(In millions)
		(Unaudited)
CALCULATION OF NET DEBT-TO-EBITDA BEFORE CHARGES/GAINS RATIO
As of September 30, 2021
Long-term debt **						2,629.1
Total debt						2,629.1
Less:
Cash and cash equivalents **						460.7
Net debt (1)						2,168.4
For the twelve months ended September 30, 2021
EBITDA before charges/gains (2) (d)						1,286.0
Net debt-to-EBITDA before charges/gains ratio (1/2)
				1.7
** Amounts are per the Unaudited Condensed Consolidated Balance Sheet as of September 30, 2021.
	Three Months Ended	Nine Months Ended	Twelve Months Ended
	December 31,	September 30,		September 30,
		2020		2021		2021
EBITDA BEFORE CHARGES/GAINS (d)
$	291.0	$	995.0	$	1,286.0
Depreciation***
$	(31.2)	$	(89.0)	$	(120.2)
Amortization of intangible assets		(10.9)		(48.5)		(59.4)
Restructuring and other charges		(13.2)		(22.7)		(35.9)
Interest expense		(19.5)		(63.2)		(82.7)
Equity in losses of affiliate		(2.9)		-		(2.9)
Gain (loss) on equity investments (f)		-		(4.5)		(4.5)
Defined benefit plan actuarial losses		(2.6)		(1.1)		(3.7)
Income taxes		(47.1)		(168.9)		(216.0)
Net Income (GAAP)
$	163.6	$	597.1	$	760.7

• Depreciation excludes accelerated depreciation expense of ($4.5) million for the three months ended December 31, 2020. Accelerated depreciation is included in restructuring and other charges.

(d) (f) For definitions of Non-GAAP measures, see Definitions of Terms page