Core Insights - The company is undergoing a "comprehensive profitability reset" with significant volume deleverage expected in 2025 and a planned leadership transition [1][3][6] 2025 Results - Full-year sales were $4.5 billion, down 3% year-over-year, with a 1% decline excluding China [5][7] - Operating income decreased to $699 million, down 10%, and earnings per share (EPS) fell to $3.61, down 12% [5][7] - Margins were pressured by lower volumes, higher manufacturing costs, and tariffs, with operating margin at 15.7%, down 120 basis points [7][11] 2026 Outlook - Management guides for net sales growth of approximately flat to 2%, operating margin of about 14.5% to 15.5%, and EPS of $3.35 to $3.65 [4][13] - The outlook assumes continued tariff impacts, with mitigated tariff costs expected to be around $151 million in 2026, an increase of over $100 million year-over-year [14] - Free cash flow is projected to be about $400 million to $450 million, with capital expenditures of roughly $110 million to $140 million [16] Leadership Transition - Amit Banati has been appointed as CEO effective May, succeeding Nick Fink, who is departing [2][6] - The board has been evaluating succession continuously and views Banati as a proven leader with significant experience [2][3] Segment Performance - In Q4, sales in the Water segment were $617 million, down 4%, while the Security segment saw a 6% increase in sales to $166 million [10][15] - The Outdoors segment reported a 3% decline in sales to $295 million, with operating income down 24% [15] - The company has seen improved market share performance, outperforming the market by approximately 130 basis points for the full year, excluding China [12]

Leadership Transition - The company has announced the appointment of Amit Banati as the new CEO, effective in May, following a structured succession process to ensure continuity and optimal performance [3][4][12] - Nick Fink, the current CEO, has led the company since 2020 and will transition to a new opportunity outside the company [10][4] - The board believes Amit Banati is an exceptional choice due to his experience on the board and his background in commercial and financial leadership [3][12] Financial Performance Overview - For the full year 2025, total company sales were $4.5 billion, down 3%, primarily due to lower volumes across segments amid a challenging market environment [22] - Consolidated operating income decreased to $699 million, down 10%, with an operating margin of 15.7%, reflecting lower sales volume and higher manufacturing costs [23] - In Q4 2025, total company sales were $1.1 billion, down 2%, with a consolidated operating income of $158 million, down 13% [25][27] Cost Management and Profitability Initiatives - The company has initiated a comprehensive profitability reset, reducing the headquarters workforce by around 10% and capturing $60 million in continuous improvement savings [6][7] - An estimated annualized run-rate operating income savings of $35 million is expected by year-end 2026, although this is not included in the 2026 guidance [7][40] - The company is focused on identifying further opportunities to structurally improve performance and return to expected profitability levels [7][21] Market Outlook and Guidance - The company anticipates global market declines of low single digits for 2026, with expectations for modest recovery later in the year [38][39] - The guidance for 2026 includes net sales growth of approximately flat to 2%, with operating income margin expected to be around 14.5% to 15.5% [40] - The company expects to generate free cash flow of approximately $400 million to $450 million in 2026, supported by operating performance and working capital initiatives [42] Segment Performance Highlights - In the Water segment, sales for Q4 were $617 million, down 4%, with point-of-sale performance slightly above the market [27][30] - The Outdoors segment experienced sales of $295 million, down 3%, with operating income down 24% due to lower volume and product mix [31][33] - The Security segment saw sales increase by 6% in Q4, with operating income up 52%, reflecting strong execution and improved manufacturing costs [34]