Core Insights - Fortune Brands Innovations (FBIN) reported quarterly earnings of $1.09 per share, missing the Zacks Consensus Estimate of $1.1 per share, and down from $1.16 per share a year ago [1][2] - The company posted revenues of $1.15 billion for the quarter ended September 2025, which was 2.43% below the Zacks Consensus Estimate and a slight decrease from $1.16 billion year-over-year [3] - The stock has underperformed significantly, losing about 27.2% since the beginning of the year compared to a 17.2% gain in the S&P 500 [4] Earnings Performance - The earnings surprise for the recent quarter was -0.91%, while the previous quarter saw a positive surprise of +2.04% [2] - Over the last four quarters, the company has only surpassed consensus EPS estimates once [2][3] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $1.04 on revenues of $1.12 billion, and for the current fiscal year, it is $3.78 on revenues of $4.54 billion [8] - The estimate revisions trend for Fortune Brands Innovations was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [7] Industry Context - Fortune Brands Innovations operates within the Zacks Building Products - Air Conditioner and Heating industry, which is currently ranked in the bottom 16% of over 250 Zacks industries [9] - The performance of the stock may be influenced by the overall outlook for the industry, as top-ranked industries tend to outperform the bottom-ranked ones by a significant margin [9]

Financial Data and Key Metrics Changes - In Q3 2025, sales were approximately flat at $1.1 billion, with a 1% increase when excluding China [4][14][25] - Operating income was $206 million, down 5% year-over-year, primarily due to lower volumes and higher costs [25][28] - Earnings per share (EPS) were $1.09, reflecting the impact of lower volumes and product mix [14][25] Business Line Data and Key Metrics Changes - **Water Segment**: Sales were $619 million, down 3% year-over-year, with operating income of $151 million and a margin of 24.4% [14][25][26] - **Outdoors Segment**: Sales were $345 million, roughly flat year-over-year, with operating income of $53 million and a margin of 15.5% [14][25][27] - **Security Segment**: Sales increased by 5% to $186 million, with operating income of $33 million and a margin of 17.8% [20][25][28] Market Data and Key Metrics Changes - The macroeconomic environment remains uneven, with cautious consumer sentiment and mixed signals in housing activity [9][10] - The U.S. housing market shows signs of stabilization, with recent rate cuts by the Federal Reserve leading to increased buyer interest [10][11] - Homeowners are increasingly interested in renovations, with 84% planning to renovate in the next 12 months [11][12] Company Strategy and Development Direction - The company is focused on leveraging its "Fortune Brands Advantage" capabilities to achieve sustained above-market growth [5][7] - The transformation into a tightly aligned operating company is expected to enhance performance and efficiency [6][7] - The company aims to fully offset tariff impacts through supply chain actions and strategic pricing [8][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to outperform the market despite current challenges [5][9] - The outlook for the R&R market remains encouraging, driven by aging housing stock and deferred maintenance projects [11][12] - The company anticipates growth in 2026, supported by strategic execution and a strong brand portfolio [23][32] Other Important Information - The company has made significant progress in its headquarters transition, completing hiring commitments ahead of schedule [6][29] - Free cash flow for the quarter was $177 million, with full-year expectations of $400 million to $420 million [28][29] - The company is on track to reduce its China-based costs to around 10% of COGS by year-end [30][58] Q&A Session Summary Question: Pricing strategy outcomes and future outlook - Management highlighted a disciplined approach to pricing, successfully covering tariff impacts and focusing on market opportunities for volume growth [35][36][37] Question: Segment margin guidance changes - The decline in outdoor and security segment margins was attributed to lower seasonal inventory builds and increased R&D investments [41][42][43] Question: Digital business growth and future metrics - The digital business is on track to reach a $300 million annualized run rate, with a goal of $1 billion by 2030 [45][48][49] Question: Tariff dynamics and impacts - The anticipated tariff impact for 2025 is around $80 million, with a reduced annualized impact for 2026 in the low $200 million range [56][58]

Financial Performance - Q3 2025 reported net sales were $1,149.2 million, a decrease of 0.5% compared to Q3 2024[3] - Q3 2025 earnings per share (EPS) were $0.59, down 46% year-over-year; EPS before charges/gains was $1.09, a decrease of 6%[4] - Operating income (GAAP) for the thirteen weeks ended September 27, 2025, was $125.9 million, a decrease of 38.6% compared to $205.1 million for the same period in 2024[16] - Net income for the thirteen weeks ended September 27, 2025, was $70.8 million, a decline of 48.2% from $136.6 million in the same period last year[24] - Total operating income for the thirteen weeks ended September 27, 2025, was $125.9 million, down 38.6% from $205.1 million in the prior year[38] - Operating income before charges/gains for the thirteen weeks was $206.2 million, a decrease of 4.5% compared to $215.9 million in the same period last year[40] Segment Performance - Water Innovations segment reported net sales of $618.5 million, a decline of 2.6% from the previous year[5] - Security segment achieved net sales of $186.2 million, an increase of 4.9% year-over-year[5] - Water segment net sales decreased by 2.6% to $618.5 million, while Outdoors segment sales increased slightly by 0.5% to $344.5 million[38] - The Outdoors segment reported an operating margin of (1.5%) for the thirteen weeks ended September 27, 2025, a decline of 1840 basis points from 16.9% in the prior year[40] Cash Flow and Debt - The company generated $204.4 million in operating cash flow and $177.0 million in free cash flow during the quarter[6] - Net debt stood at $2.4 billion, with a net debt to EBITDA ratio of 2.7x[6] - Free cash flow for the thirty-nine weeks ended September 27, 2025, was $183.1 million, compared to $262.4 million for the same period in 2024[20] - Long-term debt increased to $2,654.5 million as of September 27, 2025, from $2,173.7 million as of December 28, 2024[18] Guidance and Projections - Full-year 2025 guidance for EPS before charges/gains has been narrowed to $3.70 to $3.80[7] - The company anticipates finishing the year near the low end of its prior net sales guidance of -2% to flat[7] - The U.S. market is expected to remain stable with a forecast of -4% to -2% for 2025[8] - Capital expenditures (Capex) are projected to be between $120 million and $130 million for 2025[9] Restructuring and Charges - The company incurred restructuring charges of $10.8 million for the thirteen weeks ended September 27, 2025, compared to $7.4 million in the same period of 2024, representing a 45.9% increase[16] - Restructuring charges increased by 45.9% to $10.8 million for the thirteen weeks ended September 27, 2025, compared to $7.4 million in the same period last year[25] - Other charges for the thirteen weeks ended September 27, 2025, were $19.4 million, significantly higher than $3.4 million in the same period of 2024[39] - Asset impairment charges of $50.1 million were recorded for the thirteen weeks ended September 27, 2025, with no comparable charges in the prior year[25] Asset and Liability Overview - Total current assets increased slightly to $2,010.2 million as of September 27, 2025, compared to $2,007.4 million as of December 28, 2024[18] - Total liabilities remained stable at $4,139.7 million as of September 27, 2025, compared to $4,139.8 million as of December 28, 2024[18] - Cash and cash equivalents decreased to $223.9 million as of September 27, 2025, from $381.1 million as of December 28, 2024[18] Miscellaneous - High variability and low visibility regarding gains and losses associated with defined benefit plans affect net debt to EBITDA and diluted EPS calculations[52] - Restructuring and other charges are excluded from operating margin and diluted EPS calculations, impacting cash conversion metrics[52] - Net sales excluding the impact of China sales increased by 1.1% for the thirteen weeks ended September 27, 2025[41] - The Company is unable to provide a reconciliation for certain forward-looking non-GAAP measures due to the inherent difficulty of forecasting various items[52]

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for Fortune Brands Innovations (FBIN) despite higher revenues, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - The upcoming earnings report is expected to show earnings of $1.10 per share, reflecting a -5.2% change year-over-year, while revenues are projected at $1.18 billion, a 2% increase from the previous year [3]. - The consensus EPS estimate has been revised down by 0.55% over the last 30 days, indicating a bearish sentiment among analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate for FBIN is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -0.02% [12]. - The stock currently holds a Zacks Rank of 4, suggesting a sell rating, which complicates the prediction of an earnings beat [12]. Historical Performance - In the last reported quarter, FBIN exceeded the expected earnings of $0.98 per share by delivering $1.00, resulting in a surprise of +2.04% [13]. - Over the past four quarters, the company has beaten consensus EPS estimates twice [14]. Industry Comparison - Another company in the same industry, Watsco (WSO), is expected to report earnings of $4.21 per share, reflecting a -0.2% year-over-year change, with revenues anticipated at $2.11 billion, down 2.2% from the previous year [18][19]. - Watsco's consensus EPS estimate has been revised down by 11.7% in the last 30 days, leading to an Earnings ESP of -5.53% and a Zacks Rank of 4 [19][20].

Group 1 - The core viewpoint is that Fortune Brands Innovations (NYSE: FBIN) has been assigned a hold rating due to weak performance and uncertain macroeconomic pressures affecting the stock [1] - The second quarter results for 2025 have been released, and the analysis indicates a mixed performance for the company [1] Group 2 - The investment approach focuses on identifying undervalued companies with long-term growth potential, emphasizing the importance of buying quality companies at a discount to their intrinsic value [1]

Core Insights - Fortune Brands Innovations reported Q2 2025 earnings that exceeded analyst forecasts, with non-GAAP EPS at $1.00 compared to the $0.96 consensus, and GAAP revenue at $1.20 billion versus the $1.19 billion estimate, despite a year-over-year decline in key metrics [1][2] - The company experienced a 14% decline in non-GAAP EPS and a 3% drop in GAAP revenue compared to the previous year, indicating ongoing business challenges [1][2] Financial Performance - Non-GAAP EPS for Q2 2025 was $1.00, down 14% from $1.16 in Q2 2024 [2] - GAAP revenue reached $1.20 billion, a 3% decrease from $1.24 billion in Q2 2024 [2] - Operating margin (non-GAAP) narrowed to 16.5%, down 0.9 percentage points from 17.4% in the prior year [2] - GAAP EPS was reported at $0.83, reflecting a 22% decline from $1.06 in Q2 2024 [2] - Free cash flow (GAAP) was $119 million [2] Business Overview and Strategic Focus - Fortune Brands Innovations specializes in branded products for water solutions, outdoor living, and security, with a portfolio that includes Moen, Larson, Thermatru, Master Lock, SentrySafe, and Yale [3] - The company emphasizes digital transformation, supply chain control, strong retailer partnerships, and ESG commitments as key business priorities [4] Segment Performance - The Water Innovations segment reported net sales of $647 million, a 2% decrease, but a 4% increase when excluding the impact of the China market [5] - The Outdoors segment saw revenue decline 3% to $379 million, with operating margins slipping by 350 basis points [6] - The Security segment experienced a 7% revenue decline to $178 million, with a 410 basis point drop in operating margin [7] Tariff and Restructuring Impact - The company faced increased restructuring charges of $13.7 million, up 251% from the prior year, due to plant consolidations and supply chain reconfiguration [8] - Management is working to mitigate the impact of tariffs, particularly in the Water and Security segments, with expectations for further effects into 2026 [8] Outlook and Guidance - The company updated its FY2025 guidance, expecting net sales to be flat to down 2% and adjusted EPS in the range of $3.75 to $3.95 [9] - Segment forecasts indicate a decline in Water Innovations revenue by 1% to 3%, Outdoors to be flat to up 2%, and Security to be down 1% to up 2% [9] - Management anticipates a 2% to 4% decline in global home product markets for the year [9]

Core Insights - Fortune Brands Innovations (FBIN) reported $1.2 billion in revenue for the quarter ended June 2025, reflecting a year-over-year decline of 3% and an EPS of $1.00 compared to $1.16 a year ago, with a revenue surprise of +0.62% over the Zacks Consensus Estimate [1] Financial Performance - The reported revenue of $1.2 billion was in line with the Zacks Consensus Estimate, while the EPS exceeded the consensus estimate of $0.98 by +2.04% [1] - Net Sales in the Outdoors segment were $378.8 million, slightly below the average estimate of $379.68 million, marking a year-over-year decline of -2.7% [4] - Net Sales in the Security segment were $177.6 million, compared to the average estimate of $183.6 million, representing a year-over-year decline of -7% [4] - Net Sales in the Water segment were $646.9 million, exceeding the average estimate of $641.46 million, with a year-over-year change of -1.9% [4] Operating Income - Operating Income (Non-GAAP) for the Water segment was $165.5 million, surpassing the average estimate of $140.12 million [4] - Operating Income (Non-GAAP) for the Outdoors segment was $48.6 million, below the average estimate of $59.46 million [4] - Operating Income (Non-GAAP) for the Security segment was $26.3 million, compared to the average estimate of $31.62 million [4] - Total Corporate Expenses (Non-GAAP) were reported at $-41.4 million, slightly worse than the average estimate of $-39 million [4] Stock Performance - Shares of Fortune Brands Innovations have returned +0.3% over the past month, while the Zacks S&P 500 composite has changed by +2.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Company Performance - Fortune Brands Innovations (FBIN) reported quarterly earnings of $1 per share, exceeding the Zacks Consensus Estimate of $0.98 per share, but down from $1.16 per share a year ago [1] - The quarterly earnings surprise was +2.04%, and the company had previously met expectations with earnings of $0.66 per share [2] - The company posted revenues of $1.2 billion for the quarter, surpassing the Zacks Consensus Estimate by 0.62%, but down from $1.24 billion year-over-year [3] Stock Performance - Fortune Brands Innovations shares have declined approximately 20.3% since the beginning of the year, contrasting with the S&P 500's gain of 8.2% [4] - The current Zacks Rank for the stock is 3 (Hold), indicating expected performance in line with the market in the near future [7] Future Outlook - The consensus EPS estimate for the upcoming quarter is $1.12 on revenues of $1.15 billion, and for the current fiscal year, it is $3.78 on revenues of $4.49 billion [8] - The outlook for the Retail - Home Furnishings industry, where Fortune Brands operates, is currently in the top 39% of over 250 Zacks industries, suggesting a favorable environment for performance [9]

Financial Data and Key Metrics Changes - Net revenue for the second quarter was $1,200 million, down 3% year-over-year, or down 1% excluding the impact of China [27][42] - Operating income was $199 million, with an operating margin of 16.5%, reflecting a decrease of 8% compared to the previous year [42] - Earnings per share were $1, with an effective tax rate of 31% due to withholding tax from cash repatriation from China [42] Business Line Data and Key Metrics Changes Water Segment - Water segment sales were $647 million, down 2%, but up 2% excluding China [43] - Operating income for the Water segment was $165.5 million, an increase of 8%, with an operating margin of 25.6% [44] Outdoors Segment - Sales for the Outdoors segment were $379 million, down 3%, with low single-digit point of sale growth [45] - Operating income for Outdoors was $48.6 million, down 23%, with an operating margin of 12.8% [45] Security Segment - Security segment sales decreased by 7% to $178 million, driven by mid-single-digit point of sale declines [46] - Operating income for Security was $26.3 million, down 27%, with an operating margin of 14.8% [46] Market Data and Key Metrics Changes - The company outperformed the North American market, gaining over 200 basis points in market share excluding China [26] - Point of sale growth in the Water and Outdoors segments returned to positive territory, with the Water segment outperforming the broader market [26][28] Company Strategy and Development Direction - The company is focused on a multi-year transformation to become a highly aligned and efficient growth company, emphasizing brand-driven innovation and digital capabilities [7][20] - Strategic actions include responding to market conditions, investing in brands, and accelerating innovation [6][8] - The company aims to fully offset the anticipated impact of tariffs through supply chain actions and strategic pricing [17][18] Management's Comments on Operating Environment and Future Outlook - Management noted broader uncertainty affecting consumer demand, particularly in the housing market, but remains optimistic about long-term fundamentals [25][54] - The company expects to see benefits from new business commitments and product launches in the second half of 2025 [53][54] - Management is confident in the company's ability to navigate current challenges and capitalize on future growth opportunities [55] Other Important Information - The company has reduced its reliance on China, with expectations for China COGS to be around 10% by year-end [50] - The company anticipates a full-year net sales decline of flat to down 2% for 2025, with EPS guidance between $3.75 and $3.95 [51] Q&A Session Summary Question: Details on the Connected Products business and subscription model - Management expressed satisfaction with the connected results and highlighted the upcoming subscription model as a potential revenue stream, expecting to close the year closer to a $300 million run rate [60][62] Question: Market share in the Water business - Management confirmed strong performance in the Water segment, particularly with the Moen brand, and noted ongoing efforts to enhance retail and e-commerce strategies [66][70] Question: Security segment initiatives and retail wins - Management discussed the journey of the Security segment, emphasizing new branding initiatives and expected solid performance in the second half of the year [76][79] Question: Cost-saving efforts and profitability outlook - Management highlighted ongoing cost management efforts and expected margin improvements in the second half of the year, driven by operational efficiencies and strategic investments [80][84]

[Executive Summary & Company Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Company%20Highlights) Fortune Brands Innovations reported solid Q2 2025 results, outperforming end markets, and provided updated full-year guidance [Company Overview](index=1&type=section&id=Company%20Overview) Fortune Brands Innovations, Inc. (FBIN) is a leading company in home, security, and digital products, focused on transforming spaces and elevating lives - Fortune Brands Innovations, Inc. (NYSE: FBIN) is an industry-leading home, security, and digital products company[1](index=1&type=chunk) - The company's purpose is to elevate every life by transforming spaces into havens[1](index=1&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Nicholas Fink noted solid Q2 performance, outperforming end markets, and confirmed plans to offset 2025 tariff impacts - The Company's team executed well, with many businesses gaining momentum and outperforming end markets, particularly in Water and Outdoors[2](index=2&type=chunk) - Fortune Brands remains on track to fully offset the anticipated **2025** impacts of tariffs by leveraging its Fortune Brands Advantage capabilities[2](index=2&type=chunk) - The company is committed to investing in profitable growth opportunities that align with strategic priorities, aiming for consistent outperformance driven by world-class brands and strong leadership[2](index=2&type=chunk) [Second Quarter 2025 Key Highlights](index=1&type=section&id=Second%20Quarter%202025%20Key%20Highlights) Fortune Brands reported Q2 2025 sales of **$1.2 billion**, a **3%** decrease, with GAAP EPS of **$0.83** and Non-GAAP EPS of **$1.00** Q2 2025 Key Highlights | Metric | Q2 2025 Value | Change vs Q2 2024 | Additional Context | | :--- | :--- | :--- | :--- | | Sales | $1.2 billion | (3%) | Sales excluding China were down 1% | | GAAP EPS | $0.83 | (22%) | | | Non-GAAP EPS before charges/gains | $1.00 | (14%) | | - The Company outperformed its end market, demonstrating solid momentum in strategic initiatives and brand strength[4](index=4&type=chunk) - Updated full year **2025** guidance was provided, with the company remaining on track to fully offset anticipated **2025** tariff impacts and navigate an uncertain macroeconomic climate[4](index=4&type=chunk) [Second Quarter 2025 Financial Performance](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Performance) Fortune Brands reported a **3%** net sales decrease in Q2 2025, with varied segment performance and reduced operating income [Total Company Results](index=1&type=section&id=Total%20Company%20Results) In Q2 2025, net sales decreased **3%** to **$1,203 million**, GAAP operating income declined **14%**, and non-GAAP operating income decreased **8%** Q2 2025 Total Company Financial Results | Metric | Q2 2025 GAAP | Change | Q2 2025 Non-GAAP | Change | | :--- | :--- | :--- | :--- | :--- | | Reported Net Sales | $1,203M | (3%) | $1,203M | (3%) | | Operating Income | $171.6M | (14%) | $199.0M (Before Charges/Gains) | (8%) | | Operating Margin | 14.3% | (180) bps | 16.5% (Before Charges/Gains) | (90) bps | | EPS | $0.83 | (22%) | $1.00 (Before Charges/Gains) | (14%) | [Segment Results](index=2&type=section&id=Segment%20Results) Segment performance in Q2 2025 showed varied results, with Water Innovations improving margins despite sales decline, while Outdoors and Security saw sales and margin reductions [Water Innovations](index=2&type=section&id=Water%20Innovations) The Water Innovations segment experienced a **2%** net sales decrease but achieved a **230 basis point** improvement in non-GAAP operating margin Q2 2025 Water Innovations Segment Performance | Metric | Q2 2025 Value | Change | | :--- | :--- | :--- | | Net Sales | $647M | (2%) | | Operating Margin | 24.1% | 120 bps | | Operating Margin Before Charges/Gains | 25.6% | 230 bps | [Outdoors](index=2&type=section&id=Outdoors) The Outdoors segment reported a **3%** net sales decline and a **350 basis point** decrease in non-GAAP operating margin Q2 2025 Outdoors Segment Performance | Metric | Q2 2025 Value | Change | | :--- | :--- | :--- | | Net Sales | $379M | (3%) | | Operating Margin | 11.1% | (220) bps | | Operating Margin Before Charges/Gains | 12.8% | (350) bps | [Security](index=2&type=section&id=Security) The Security segment saw a **7%** net sales decrease and a **410 basis point** reduction in non-GAAP operating margin Q2 2025 Security Segment Performance | Metric | Q2 2025 Value | Change | | :--- | :--- | :--- | | Net Sales | $178M | (7%) | | Operating Margin | 12.8% | (520) bps | | Operating Margin Before Charges/Gains | 14.8% | (410) bps | [Financial Position and Cash Flow](index=2&type=section&id=Financial%20Position%20and%20Cash%20Flow) Fortune Brands maintained a strong balance sheet with **$2.6 billion** net debt and generated **$66 million** in operating cash flow in Q2 2025 [Balance Sheet Summary](index=2&type=section&id=Balance%20Sheet%20Summary) Fortune Brands maintained a strong balance sheet at the end of Q2 2025, with net debt at **$2.6 billion** and a net debt to EBITDA ratio of **2.8x** - The Company exited the quarter with a strong balance sheet[6](index=6&type=chunk) Key Balance Sheet Metrics (as of Q2 2025) | Metric | Value | | :--- | :--- | | Net debt | $2.6 billion | | Net debt to EBITDA before charges / gains | 2.8x | | Cash | $235 million | | Amount available under revolving credit facility | $613 million | [Cash Flow Summary](index=2&type=section&id=Cash%20Flow%20Summary) During Q2 2025, Fortune Brands generated **$66 million** in operating cash flow and **$6 million** in free cash flow Q2 2025 Cash Flow Highlights | Metric | Value | | :--- | :--- | | Operating cash flow | $66 million | | Free cash flow | $6 million | | Share repurchases (Q2) | $63 million | | Share repurchases (YTD) | $238 million | [Full Year 2025 Guidance and Assumptions](index=2&type=section&id=Full%20Year%202025%20Guidance%20and%20Assumptions) Fortune Brands provided full-year 2025 guidance, projecting flat to **-2%** net sales and EPS before charges/gains of **$3.75** to **$3.95** [Total Company Guidance](index=2&type=section&id=Total%20Company%20Guidance) Fortune Brands provided updated full-year 2025 guidance, projecting net sales between **-2%** and flat, and EPS before charges/gains from **$3.75** to **$3.95** - The updated full year **2025** guidance reflects the company's agility and ability to execute despite market uncertainty, including mitigating anticipated tariff impacts[8](index=8&type=chunk) 2025 Full-Year Total Company Guidance | Metric | 2025 Full-Year Guidance | | :--- | :--- | | Net sales | -2% to Flat | | EPS before charges / gains | $3.75 to $3.95 | [Market and Financial Assumptions](index=2&type=section&id=Market%20and%20Financial%20Assumptions) For 2025, Fortune Brands assumes global and U.S. market declines of **4% to 2%**, with China market declining **20% to 15%** 2025 Full-Year Market Assumptions | Market | 2025 Full-Year Assumptions | | :--- | :--- | | Global market | -4% to -2% | | U.S. market | -4% to -2% | | U.S. R&R | -3% to -1% | | U.S. SFNC | -6% to -5% | | China market | -20% to -15% | 2025 Full-Year Total Company Financial Assumptions | Metric | 2025 Full-Year Assumptions | | :--- | :--- | | Operating margin before charges / gains | 16.0% to 17.0% | | Cash flow from operations | Around $650 million | | Free cash flow | Around $500 million to $520 million | | Cash conversion | Around 120% to 130% | [Segment Guidance](index=3&type=section&id=Segment%20Guidance) For 2025, Water Innovations net sales are projected **-3% to -1%**, Outdoors flat to **2%**, and Security **-1% to 2%** 2025 Full-Year Segment Financial Metrics Guidance | Segment | Net Sales Guidance | Operating Margin Before Charges/Gains Guidance | | :--- | :--- | :--- | | Water Innovations | -3% to -1% | 23.0% to 24.0% | | Outdoors | Flat to 2% | 14.0% to 15.0% | | Security | -1% to 2% | 16.5% to 17.5% | [Corporate Information](index=3&type=section&id=Corporate%20Information) This section provides details on the investor conference call, company overview, and investor contact information [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) Fortune Brands hosted an investor conference call on July 31, 2025, at 5:00 p.m. ET, with webcast and replay available - Fortune Brands hosted an investor conference call on July **31**, **2025**, at **5:00** p.m. ET[11](index=11&type=chunk) - A live internet audio webcast and a recorded replay are available on the Fortune Brands website at ir.fbin.com/upcoming-events[11](index=11&type=chunk) [About Fortune Brands Innovations](index=3&type=section&id=About%20Fortune%20Brands%20Innovations) Fortune Brands Innovations is a leading home, security, and digital products company, transforming spaces with innovative solutions under trusted brands - Fortune Brands Innovations, Inc. (NYSE: FBIN) is an industry-leading home, security, and digital products company[12](index=12&type=chunk) - The company's purpose is to elevate every life by transforming spaces into havens, focusing on innovative products for residential and commercial environments[12](index=12&type=chunk) - Key brands include Moen, House of Rohl, Aqualisa, SpringWell, Therma-Tru, Larson, Fiberon, Master Lock, SentrySafe, and Yale residential[12](index=12&type=chunk) [Investor Contact](index=5&type=section&id=Investor%20Contact) For investor inquiries, contact Curtis Worthington at Investor.Questions@fbin.com - Investor contact: Curtis Worthington at Investor.Questions@fbin.com[15](index=15&type=chunk) [Legal & Non-GAAP Disclosures](index=4&type=section&id=Legal%20%26%20Non-GAAP%20Disclosures) This section outlines cautionary statements for forward-looking information and details the use and definitions of non-GAAP financial measures [Cautionary Statement Concerning Forward-Looking Statements](index=4&type=section&id=Cautionary%20Statement%20Concerning%20Forward-Looking%20Statements) This statement warns that forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially - The press release contains forward-looking statements, which are not historical facts and are based on current expectations, estimates, assumptions, and projections[13](index=13&type=chunk) - Such statements are subject to numerous factors, risks, and uncertainties that could cause actual outcomes and results to be materially different, including reliance on North American and Chinese home improvement markets, housing market conditions, competition, and global commodity price volatility[13](index=13&type=chunk) - The company undertakes no obligation to update or clarify any forward-looking statements, except as required by law[13](index=13&type=chunk) [Use of Non-GAAP Financial Information](index=5&type=section&id=Use%20of%20Non-GAAP%20Financial%20Information) The report includes non-GAAP financial measures for supplemental information, which should not be considered substitutes for GAAP measures - The press release includes non-GAAP measures such as diluted EPS before charges/gains, operating income/margin before charges/gains, net debt, net debt to EBITDA before charges/gains, sales excluding China impact, free cash flow, and cash conversion[14](index=14&type=chunk) - These non-GAAP measures should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP and may be inconsistent with similar measures presented by other companies[14](index=14&type=chunk) - Reconciliations to the most comparable GAAP measures and reasons for their use are provided in the attached pages[14](index=14&type=chunk) [Definitions of Non-GAAP Measures](index=16&type=section&id=Definitions%20of%20Non-GAAP%20Measures) This section defines non-GAAP measures like operating income before charges/gains, diluted EPS before charges/gains, and EBITDA before charges/gains - Operating income (loss) before charges/(gains) excludes restructuring and other charges/(gains) from GAAP operating income to evaluate underlying performance[46](index=46&type=chunk) - Diluted earnings per share from continuing operations before charges/(gains) excludes restructuring and other charges/(gains) from diluted EPS to assess overall performance[47](index=47&type=chunk) - EBITDA before charges/(gains) is calculated by adjusting net income for depreciation, amortization, restructuring and other charges/(gains), interest expense, and income taxes, used to assess funding ability for growth, acquisitions, and debt repayment[48](index=48&type=chunk) - The Company is unable to provide reconciliation for certain forward-looking non-GAAP measures due to the inherent difficulty of forecasting the timing and/or amount of various items that have not yet occurred[51](index=51&type=chunk) [Detailed Financial Statements and Reconciliations](index=6&type=section&id=Detailed%20Financial%20Statements%20and%20Reconciliations) This section provides GAAP financial statements and detailed reconciliations of non-GAAP measures for income, margin, EPS, EBITDA, net debt, sales, and cash flow [Condensed Consolidated Statements of Income (GAAP)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(GAAP)) This section presents unaudited GAAP consolidated statements of income for the thirteen and twenty-six weeks ended June 28, 2025 Condensed Consolidated Statements of Income (GAAP) | Metric | Thirteen Weeks Ended June 28, 2025 | Thirteen Weeks Ended June 29, 2024 | % Change | Twenty-Six Weeks Ended June 28, 2025 | Twenty-Six Weeks Ended June 29, 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,203.3 | $1,240.0 | (3) | $2,236.5 | $2,349.5 | (5) | | Cost of products sold | $660.1 | $699.0 | (6) | $1,238.7 | $1,320.9 | (6) | | Selling, general and administrative expenses | $338.8 | $319.7 | 6 | $653.7 | $631.3 | 4 | | Amortization of intangible assets | $19.1 | $18.3 | 4 | $37.0 | $36.1 | 2 | | Restructuring charges | $13.7 | $3.9 | 251 | $38.5 | $6.7 | 475 | | Operating income | $171.6 | $199.1 | (14) | $268.6 | $354.5 | (24) | | Interest expense | $31.2 | $32.3 | (3) | $59.8 | $62.4 | (4) | | Other (income)/expense, net | $(7.3) | $(3.7) | 97 | $(8.2) | $(3.6) | 128 | | Income before taxes | $147.7 | $170.5 | (13) | $217.0 | $295.7 | (27) | | Income tax | $47.4 | $36.6 | 30 | $65.4 | $65.5 | - | | Net income | $100.3 | $133.9 | (25) | $151.6 | $230.2 | (34) | | Diluted earnings per common share | $0.83 | $1.06 | (22) | $1.24 | $1.82 | (32) | | Diluted average number of shares outstanding | 120.7 | 125.8 | (4) | 121.8 | 126.4 | (4) | [Condensed Consolidated Balance Sheets (GAAP)](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(GAAP)) This section provides unaudited GAAP consolidated balance sheets as of June 28, 2025, and December 28, 2024 Condensed Consolidated Balance Sheets (GAAP) | Asset/Liability/Equity | June 28, 2025 | December 28, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $234.7 | $381.1 | | Accounts receivable, net | $607.1 | $514.4 | | Inventories | $1,012.7 | $960.3 | | Other current assets | $152.1 | $151.6 | | Total current assets | $2,006.6 | $2,007.4 | | Property, plant and equipment, net | $994.4 | $999.2 | | Goodwill | $2,008.4 | $1,992.0 | | Other intangible assets, net | $1,270.3 | $1,297.2 | | Other assets | $316.0 | $266.0 | | Total assets | $6,595.7 | $6,561.8 | | **Liabilities and equity** | | | | Short-term debt | $- | $499.6 | | Accounts payable | $517.6 | $513.9 | | Other current liabilities | $498.6 | $588.8 | | Total current liabilities | $1,016.2 | $1,602.3 | | Long-term debt | $2,812.3 | $2,173.7 | | Deferred income taxes | $115.8 | $117.4 | | Other non-current liabilities | $311.2 | $246.4 | | Total liabilities | $4,255.5 | $4,139.8 | | Stockholders' equity | $2,340.2 | $2,422.0 | | Total equity | $2,340.2 | $2,422.0 | | Total liabilities and equity | $6,595.7 | $6,561.8 | [Condensed Consolidated Statements of Cash Flows (GAAP)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(GAAP)) This section presents unaudited GAAP consolidated statements of cash flows for the twenty-six weeks ended June 28, 2025 Condensed Consolidated Statements of Cash Flows (GAAP) | Activity | Twenty-Six Weeks Ended June 28, 2025 | Twenty-Six Weeks Ended June 29, 2024 | | :--- | :--- | :--- | | **Operating activities** | | | | Net income | $151.6 | $230.2 | | Depreciation and amortization | $102.0 | $101.5 | | Changes in assets and liabilities, net | $(224.5) | $(192.3) | | Net cash provided by operating activities | $66.0 | $190.2 | | **Investing activities** | | | | Capital expenditures | $(59.9) | $(103.4) | | Cost of acquisitions, net of cash acquired | $- | $(129.0) | | Net cash used in investing activities | $(57.0) | $(230.2) | | **Financing activities** | | | | Increase in debt, net | $140.0 | $230.0 | | Treasury stock purchases | $(237.8) | $(150.2) | | Dividends to stockholders | $(60.6) | $(60.2) | | Net cash (used in) provided by financing activities | $(165.3) | $9.7 | | Net decrease in cash and cash equivalents | $(146.7) | $(38.0) | | Cash, cash equivalents and restricted cash* at end of period | $238.8 | $357.5 | [Reconciliation of Operating Income (GAAP to Non-GAAP)](index=6&type=section&id=Reconciliation%20of%20Operating%20Income%20(GAAP%20to%20Non-GAAP)) This section provides detailed reconciliations of GAAP operating income to operating income before charges/gains for the total company and by segment Total Company Operating Income Reconciliation (GAAP to Non-GAAP) | Metric | Thirteen Weeks Ended June 28, 2025 | Thirteen Weeks Ended June 29, 2024 | % Change | Twenty-Six Weeks Ended June 28, 2025 | Twenty-Six Weeks Ended June 29, 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating income (GAAP) | $171.6 | $199.1 | (14) | $268.6 | $354.5 | (24) | | Restructuring charges | $13.7 | $3.9 | 251 | $38.5 | $6.7 | 475 | | Other charges/(gains) | $13.7 | $12.0 | 14 | $27.8 | $20.5 | 36 | | Operating income before charges/(gains) | $199.0 | $215.9 | (8) | $334.9 | $383.2 | (13) | - Restructuring charges for the thirteen weeks ended June **28**, **2025**, were primarily due to consolidating U.S. regional offices, product-line rationalization, and plant closures, totaling **$13.7 million**[39](index=39&type=chunk) - Other charges/(gains) represent costs directly related to restructuring initiatives but not classified as restructuring costs under GAAP, such as inventory disposal losses and accelerated depreciation[40](index=40&type=chunk) [Reconciliation of Operating Margin (GAAP to Non-GAAP)](index=14&type=section&id=Reconciliation%20of%20Operating%20Margin%20(GAAP%20to%20Non-GAAP)) This section reconciles GAAP operating margin to operating margin before charges/gains for the total company and by segment Total Company Operating Margin Reconciliation (GAAP to Non-GAAP) | Metric | Thirteen Weeks Ended June 28, 2025 | Thirteen Weeks Ended June 29, 2024 | Change | Twenty-Six Weeks Ended June 28, 2025 | Twenty-Six Weeks Ended June 29, 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating margin | 14.3% | 16.1% | (180) bps | 12.0% | 15.1% | (310) bps | | Restructuring charges | 1.1% | 0.3% | | 1.7% | 0.3% | | | Other charges/(gains) (Cost of products sold) | - | 1.0% | | 0.5% | 0.8% | | | Other charges/(gains) (SG&A) | 1.1% | - | | 0.8% | - | | | Operating margin before charges/(gains) | 16.5% | 17.4% | (90) bps | 15.0% | 16.3% | (130) bps | - Operating margin before charges/(gains) is a non-GAAP measure used by management to evaluate returns and underlying performance, excluding restructuring and other charges/gains[42](index=42&type=chunk) [Reconciliation of Diluted EPS (GAAP to Non-GAAP)](index=12&type=section&id=Reconciliation%20of%20Diluted%20EPS%20(GAAP%20to%20Non-GAAP)) This section reconciles GAAP diluted EPS to diluted EPS before charges/gains for the thirteen and twenty-six weeks Diluted EPS Reconciliation (GAAP to Non-GAAP) | Metric | Thirteen Weeks Ended June 28, 2025 | Thirteen Weeks Ended June 29, 2024 | % Change | Twenty-Six Weeks Ended June 28, 2025 | Twenty-Six Weeks Ended June 29, 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Diluted EPS from continuing operations (GAAP) | $0.83 | $1.06 | (22) | $1.24 | $1.82 | (32) | | Restructuring charges | $0.10 | $0.02 | 400 | $0.25 | $0.04 | 525 | | Other charges/(gains) | $0.07 | $0.08 | (13) | $0.17 | $0.13 | 31 | | Diluted EPS from continuing operations before charges/(gains) | $1.00 | $1.16 | (14) | $1.66 | $1.99 | (16) | - Diluted EPS before charges/(gains) is a non-GAAP measure used to evaluate the Company's overall performance, excluding the impact of restructuring and other charges[47](index=47&type=chunk) [Reconciliation of EBITDA (GAAP to Non-GAAP)](index=11&type=section&id=Reconciliation%20of%20EBITDA%20(GAAP%20to%20Non-GAAP)) This section reconciles GAAP net income to EBITDA before charges/gains for the thirteen and twenty-six weeks EBITDA Before Charges/(Gains) Reconciliation | Metric | Thirteen Weeks Ended June 28, 2025 | Thirteen Weeks Ended June 29, 2024 | % Change | Twenty-Six Weeks Ended June 28, 2025 | Twenty-Six Weeks Ended June 29, 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net income | $100.3 | $133.9 | (25) | $151.6 | $230.2 | (34) | | Depreciation | $24.9 | $26.2 | (5) | $49.7 | $46.9 | 6 | | Amortization of intangible assets | $19.1 | $18.3 | 4 | $37.0 | $36.1 | 2 | | Restructuring charges | $13.7 | $3.9 | 251 | $38.5 | $6.7 | 475 | | Other charges/(gains) | $13.7 | $12.0 | 14 | $27.8 | $20.5 | 36 | | Interest expense | $31.2 | $32.3 | (3) | $59.8 | $62.4 | (4) | | Income taxes | $47.4 | $36.6 | 30 | $65.4 | $65.5 | - | | EBITDA before charges/(gains) | $250.3 | $264.1 | (5) | $429.8 | $469.8 | (9) | - EBITDA before charges/(gains) is a non-GAAP measure used to assess returns and the company's ability to fund internal growth, acquisitions, and debt repayment[48](index=48&type=chunk) [Calculation of Net Debt-to-EBITDA Ratio](index=11&type=section&id=Calculation%20of%20Net%20Debt-to-EBITDA%20Ratio) This section details the calculation of the net debt-to-EBITDA before charges/gains ratio as of June 28, 2025, which stood at **2.8x** Net Debt-to-EBITDA Before Charges/(Gains) Ratio (as of June 28, 2025) | Metric | Value | | :--- | :--- | | Long-term debt | $2,812.3M | | Total debt | $2,812.3M | | Less: Cash and cash equivalents | $234.7M | | Net debt | $2,577.6M | | EBITDA before charges/(gains) (fifty-two weeks ended June 28, 2025) | $916.0M | | Net debt-to-EBITDA before charges/(gains) ratio | 2.8 | [Reconciliation of Net Sales Excluding China Impact](index=15&type=section&id=Reconciliation%20of%20Net%20Sales%20Excluding%20China%20Impact) This section reconciles GAAP net sales to net sales excluding China impact for the thirteen weeks ended June 28, 2025 Net Sales Excluding Impact of China Sales Reconciliation (Thirteen Weeks Ended June 28, 2025 vs. June 29, 2024) | Metric | % Change | | :--- | :--- | | Total Company Percentage change in net sales (GAAP) | (3%) | | Excluding China sales | 2% | | Net sales excluding impact of China | (1%) | - Net sales excluding the impact of China sales is a non-GAAP measure used by management to evaluate overall segment performance and provide supplemental information regarding underlying performance[44](index=44&type=chunk) [Free Cash Flow Reconciliation](index=8&type=section&id=Free%20Cash%20Flow%20Reconciliation) This section reconciles GAAP cash flow from operations to free cash flow for the twenty-six weeks and provides the full-year 2025 estimate Free Cash Flow Reconciliation | Metric | Twenty-Six Weeks Ended June 28, 2025 | Twenty-Six Weeks Ended June 29, 2024 | 2025 Full Year Estimate | | :--- | :--- | :--- | :--- | | Cash flow from operations (GAAP) | $66.0 | $190.2 | $650.0 | | Less: Capital expenditures | $59.9 | $103.4 | $130 to $150 | | Free cash flow | $6.1 | $86.8 | $500 to $520 | - Free cash flow is a non-GAAP measure that management believes provides helpful supplemental information about the Company's ability to fund internal growth, make acquisitions, repay debt, pay dividends, and repurchase common stock[22](index=22&type=chunk)[24](index=24&type=chunk)