Fortune Brands(FBIN) - 2025 Q2 - Quarterly Results

Executive Summary & Company Highlights Fortune Brands Innovations reported solid Q2 2025 results, outperforming end markets, and provided updated full-year guidance Company Overview 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] - The company's purpose is to elevate every life by transforming spaces into havens[1] CEO Commentary 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] - Fortune Brands remains on track to fully offset the anticipated 2025 impacts of tariffs by leveraging its Fortune Brands Advantage capabilities[2] - 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] Second Quarter 2025 Key Highlights 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] - 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] Second Quarter 2025 Financial Performance Fortune Brands reported a 3% net sales decrease in Q2 2025, with varied segment performance and reduced operating income Total Company Results 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 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 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 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 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 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 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] 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 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 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 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] 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 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 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 This section provides details on the investor conference call, company overview, and investor contact information Conference Call Details 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] - A live internet audio webcast and a recorded replay are available on the Fortune Brands website at ir.fbin.com/upcoming-events[11] About Fortune Brands Innovations 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] - The company's purpose is to elevate every life by transforming spaces into havens, focusing on innovative products for residential and commercial environments[12] - Key brands include Moen, House of Rohl, Aqualisa, SpringWell, Therma-Tru, Larson, Fiberon, Master Lock, SentrySafe, and Yale residential[12] Investor Contact For investor inquiries, contact Curtis Worthington at Investor.Questions@fbin.com - Investor contact: Curtis Worthington at Investor.Questions@fbin.com[15] Legal & Non-GAAP Disclosures 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 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] - 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] - The company undertakes no obligation to update or clarify any forward-looking statements, except as required by law[13] Use of Non-GAAP Financial Information 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] - 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] - Reconciliations to the most comparable GAAP measures and reasons for their use are provided in the attached pages[14] Definitions of Non-GAAP Measures 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] - Diluted earnings per share from continuing operations before charges/(gains) excludes restructuring and other charges/(gains) from diluted EPS to assess overall performance[47] - 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] - 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] Detailed Financial Statements and Reconciliations 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) 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) 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) 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) 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] - 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] Reconciliation of Operating Margin (GAAP to Non-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] Reconciliation of Diluted EPS (GAAP to Non-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] Reconciliation of EBITDA (GAAP to Non-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] Calculation of Net Debt-to-EBITDA Ratio 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 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] Free Cash Flow Reconciliation 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][24]