Fortune Brands(US:FBIN)2026-02-12 21:17Financial Performance - Q4 2025 sales were $1.1 billion, a decrease of 2% compared to Q4 2024; sales excluding the impact of China were flat[3]. - Q4 2025 earnings per share (EPS) were $0.63, a decrease of 25% year-over-year; EPS before charges/gains were $0.86, a decrease of 12% compared to Q4 2024[3]. - Full-year 2025 sales totaled $4.5 billion, a decrease of 3% versus 2024; sales excluding the impact of China were down 1%[3]. - Full-year 2025 EPS were $2.47, a decrease of 34% year-over-year; EPS before charges/gains were $3.61, a decrease of 12% compared to 2024[3]. - Total net sales for the thirteen weeks ended December 27, 2025, were $1,077.5 million, a decrease of $26.6 million or 2.4% compared to $1,104.1 million for the same period in 2024[20]. - Net income for the fifty-two weeks ended December 27, 2025, was $298.8 million, down 36.7% from $471.9 million in 2024[32]. - Operating income for the fifty-two weeks ended December 27, 2025, was $516.1 million, down 30.1% from $737.9 million in 2024[32]. - Operating income (GAAP) for the total company decreased to $121.6 million, down $56.7 million or 31.8% from $178.3 million in the prior year[21]. - The total operating margin for the company was 11.3%, down 480 basis points from 16.1% in the previous year[47]. Cash Flow and Liquidity - The company generated $208.2 million of operating cash flow and $183.7 million of free cash flow in Q4 2025, with a cash conversion ratio of over 120%[8]. - Free cash flow for the fifty-two weeks ended December 27, 2025, was $366.8 million, compared to $474.5 million in 2024, with an estimated range for 2026 full year projected at $400 to $450 million[27]. - Cash and cash equivalents decreased to $264.0 million as of December 27, 2025, down from $381.1 million a year earlier[23]. - The cash conversion ratio for the fifty-two weeks ended December 27, 2025, was 122.8%[28]. - Free cash flow is not explicitly stated but is a key measure for assessing the company's ability to fund growth and repay debt[56]. Debt and Financial Ratios - The company exited the quarter with $1.1266 billion of liquidity and a net debt of $2.3 billion, resulting in a net debt to EBITDA ratio of 2.6x[9]. - Long-term debt increased to $2,544.9 million from $2,173.7 million year-over-year, indicating a rise of $371.2 million or 17.1%[23]. - The net debt-to-EBITDA before charges/gains ratio as of December 27, 2025, was 2.6[35]. Segment Performance - The Water segment reported a decline in net sales of $117.0 million or 4.6% for the fifty-two weeks ended December 27, 2025, compared to the previous year[20]. - Water segment net sales decreased by 4.3% to $616.8 million, while Outdoors segment sales fell by 2.7% to $294.9 million[44]. - The Outdoors segment's operating income (GAAP) fell by $114.5 million or 57.8% to $83.5 million for the fifty-two weeks ended December 27, 2025[21]. - The Outdoors segment experienced a significant decline in operating income, dropping 56.2% to $23.7 million[44]. - The Security segment's operating income (GAAP) decreased by $20.5 million or 20.4% to $79.9 million for the fifty-two weeks ended December 27, 2025[21]. Future Outlook - For full-year 2026, the company expects net sales to be flat to 2% growth and EPS before charges/gains to be between $3.35 and $3.65[11]. - The company anticipates operating margin before charges/gains for 2026 to be between 14.5% and 15.5%[12]. - Water Innovations segment net sales for 2026 are expected to be flat to 2% growth, with an operating margin before charges/gains of 22.0% to 23.0%[12]. - The company is focused on optimizing its footprint and resource allocation towards high-growth opportunities to improve earnings trajectory[10]. Expenses and Charges - Selling, general and administrative expenses for the fifty-two weeks ended December 27, 2025, increased by 4.3% to $1,292.1 million from $1,239.1 million in 2024[32]. - Interest expense for the fifty-two weeks ended December 27, 2025, was $115.2 million, a decrease of 4.4% from $120.5 million in 2024[32]. - Restructuring charges for the fifty-two weeks ended December 27, 2025, totaled $52.4 million, a significant increase of 223.5% compared to $16.2 million in 2024[32]. - Restructuring charges for the thirteen weeks ended December 27, 2025, amounted to $3.1 million, up 42.7% from $2.2 million in the same period of 2024[44]. - Other charges for the thirteen weeks ended December 27, 2025, were $12.0 million, significantly higher than $1.1 million in the prior year[45]. Performance Metrics - The company reported a net sales percentage change excluding the impact of China sales of 2.2% for the total company[49]. - Cash conversion ratio is a key measure for assessing the company's ability to fund growth, acquisitions, and dividends, calculated as free cash flow divided by net income[58]. - Net sales excluding the impact of China sales provide insight into the overall performance of the company's segments, helping to evaluate underlying performance from period to period[59]. - The company is unable to provide reconciliations for certain forward-looking non-GAAP measures due to the inherent difficulty in forecasting various items, including gains and losses from defined benefit plans and restructuring charges[60].