Fortune Brands(FBIN) - 2025 Q1 - Quarterly Results

First Quarter 2025 Results Fortune Brands' Q1 2025 results met margin and EPS expectations despite geopolitical and macroeconomic challenges, with net sales down 7% to $1.0 billion and organic sales down 5%, as the company implements strategies to offset 2025 tariffs Overall Company Performance Fortune Brands' Q1 2025 results met margin and EPS expectations despite geopolitical and macroeconomic challenges, with net sales down 7% to $1.0 billion and organic sales down 5%, as the company implements strategies to offset 2025 tariffs Q1 2025 Financial Highlights (vs. Q1 2024, in millions, except percentages and EPS) | Metric | Q1 2025 GAAP | Change | Q1 2025 Non-GAAP | Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,033M | (7%) | $1,033M | (7%) | | Operating Income | $97.0M | (38%) | $135.8M | (19%) | | Operating Margin | 9.4% | (460) bps | 13.1% | (200) bps | | EPS | $0.42 | (45%) | $0.66 | (20%) | - Organic sales, excluding the impact of China and foreign exchange, decreased by 5% compared to Q1 2024[4] - The company is implementing tariff mitigation strategies designed to fully offset anticipated 2025 tariff impacts[4] - Management expressed confidence in the company's long-term strategy and its ability to manage costs, cash, and outperform the market in an uncertain landscape[2] Segment Results All Fortune Brands' segments experienced year-over-year declines in Q1 2025 net sales and operating margins, with Water Innovations seeing the largest sales drop at 10% and all segments contracting margins before charges/gains Q1 2025 Segment Performance (vs. Q1 2024) | Segment | Reported Net Sales Change | Organic Net Sales Change | Operating Margin Before Charges/Gains | Margin Change (bps) | | :--- | :--- | :--- | :--- | :--- | | Water Innovations | (10%) | (10%) | 20.0% | (260) bps | | Outdoors | (3%) | (3%) | 10.4% | (160) bps | | Security | (4%) | (4%) | 14.2% | (160) bps | Balance Sheet and Cash Flow Fortune Brands maintained a strong Q1 2025 balance sheet with net debt to EBITDA at 2.8x, despite negative seasonal operating and free cash flows, while repurchasing $175 million in shares Key Financial Position Metrics (as of Q1 2025 End, in millions/billions) | Metric | Value | | :--- | :--- | | Net debt | $2.6 billion | | Net debt to EBITDA before charges / gains | 2.8x | | Cash | $340 million | | Available under revolving credit facility | $970 million | - Cash flow was in line with expectations, with operating cash flow of $(83.4) million and free cash flow of $(112.6) million, driven by typical seasonality[7] - The company repurchased $175 million of its shares in Q1 2025, with a total of $225 million repurchased year-to-date as of May 6, 2025[7] Outlook and Corporate Information 2025 Full-Year Guidance Fortune Brands is not providing detailed 2025 full-year guidance due to demand uncertainty, instead offering an EPS framework based on volume scenarios and focusing on tariff mitigation through sourcing, cost reduction, and pricing - The company is not providing detailed 2025 full-year guidance due to uncertainty around consumer demand and volumes[9] - Management will provide a framework for EPS before charges/gains scenarios based on different volume assumptions during the earnings call[9] - The company is confident in its long-term strategy, focusing on brand and innovation, and accelerating its digital strategy[9] About Fortune Brands Innovations Fortune Brands Innovations, Inc. (NYSE: FBIN) is an innovation-focused leader in home products, security, and commercial building markets, featuring a portfolio of prominent brands including Moen and Master Lock - The company is a brand, innovation, and channel leader in the home products, security, and commercial building markets[14] - Key brands in the portfolio include Moen, House of Rohl, Aqualisa, SpringWell, Therma-Tru, Larson, Fiberon, Master Lock, SentrySafe, and Yale residential[14] Forward-Looking Statements and Non-GAAP Measures This section provides cautionary forward-looking statements, detailing risks like market conditions and tariffs, and explains the use of non-GAAP financial measures as supplemental information with provided reconciliations - Forward-looking statements are based on current expectations and are subject to numerous risks and uncertainties, including reliance on housing market activity, competition, supply chain risks, and trade tariffs[15] - The report uses non-GAAP measures like diluted EPS before charges/gains, organic sales, and free cash flow to provide supplemental information. These are reconciled to comparable GAAP measures within the report[17] Financial Statements and Reconciliations Consolidated Financial Statements (GAAP) Fortune Brands' unaudited Q1 2025 GAAP financial statements report total assets of $6.58 billion, net income of $51.4 million on $1.03 billion in net sales, and diluted EPS of $0.42, with net cash used in operating activities at $(83.4) million Condensed Consolidated Statements of Income (GAAP) Q1 2025 Income Statement Summary (in millions, except EPS) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $1,033.1 | $1,109.6 | | Operating income | $97.0 | $155.4 | | Net income | $51.4 | $96.4 | | Diluted EPS | $0.42 | $0.76 | Condensed Consolidated Balance Sheets (GAAP) Balance Sheet Summary (in millions) | Metric | March 29, 2025 | Dec 28, 2024 | | :--- | :--- | :--- | | Total current assets | $2,062.0 | $2,007.4 | | Total assets | $6,584.8 | $6,561.8 | | Total current liabilities | $1,461.9 | $1,602.3 | | Total liabilities | $4,280.2 | $4,139.8 | | Total equity | $2,304.6 | $2,422.0 | Condensed Consolidated Statements of Cash Flows (GAAP) Q1 Cash Flow Summary (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $(83.4) | $(71.3) | | Net cash used in investing activities | $(29.2) | $(169.8) | | Net cash provided by financing activities | $68.0 | $238.7 | | Free cash flow | $(112.6) | $(135.9) | Reconciliations of Non-GAAP Measures This section details reconciliations for key non-GAAP metrics, showing Q1 2025 Operating Income Before Charges/Gains at $135.8 million, Diluted EPS Before Charges/Gains at $0.66, and a 5% decline in organic sales (ex-China and FX) Reconciliation of Operating Income Before Charges/Gains Q1 2025 Reconciliation of Operating Income (in millions) | Description | Total Company | Water | Outdoors | Security | | :--- | :--- | :--- | :--- | :--- | | Operating income (GAAP) | $97.0 | $103.2 | $22.6 | $16.0 | | Restructuring charges | $24.8 | $9.6 | $2.5 | $3.9 | | Other charges/(gains) | $14.0 | $0.4 | $6.6 | $3.3 | | Operating income before charges/gains | $135.8 | $113.2 | $31.7 | $23.2 | Reconciliation of Diluted EPS Before Charges/Gains Q1 2025 Reconciliation of Diluted EPS | Description | Per Share Amount | | :--- | :--- | | Diluted EPS from continuing operations (GAAP) | $0.42 | | Restructuring charges | $0.14 | | Other charges/(gains) | $0.10 | | Diluted EPS before charges/gains | $0.66 | Calculation of Net Debt-to-EBITDA Before Charges/Gains Ratio - As of March 29, 2025, the Net Debt-to-EBITDA before charges/gains ratio was 2.8x, based on $2.61 billion in net debt and $929.9 million in trailing fifty-two week EBITDA before charges/gains[30][31] Reconciliation of Organic Net Sales Q1 2025 Reconciliation of Net Sales Growth (%) | Description | Total Company | | :--- | :--- | | Percentage change in net sales (GAAP) | (7%) | | Excluding Acquisitions | (0%) | | Excluding China sales | 1% | | Excluding FX | 1% | | Organic sales excluding impact of China and FX | (5%) | Definitions of Terms: Non-GAAP Measures This section defines the non-GAAP financial measures used in the report. Management believes these measures, such as Operating Income before charges/gains, Diluted EPS before charges/gains, and EBITDA before charges/gains, provide helpful supplemental information regarding the company's underlying performance and ability to fund growth and repay debt - Operating income before charges/gains excludes restructuring and other charges to evaluate returns generated by the company and its segments[40] - Diluted EPS before charges/gains excludes restructuring and other charges to evaluate the company's overall underlying performance from period to period[41] - EBITDA before charges/gains is used to assess returns and the company's ability to fund internal growth, make acquisitions, and repay debt[42]