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]

Financial Data and Key Metrics Changes - For the full year 2025, total company sales were $4.5 billion, down 3%, with a decline primarily due to lower volumes across segments, reflecting a challenging market environment [24][25] - Consolidated operating income was $699 million, down 10%, and operating margin was 15.7%, down 120 basis points, largely due to lower sales volume and higher manufacturing costs [25][26] - Earnings per share were $3.61, down 12% [26] Business Line Data and Key Metrics Changes - Water segment sales for Q4 were $617 million, down 4%, with significant pressure in wholesale as customers managed inventory levels [28] - Outdoor segment sales for Q4 were $295 million, down 3%, driven largely by modest volume declines [31] - Security segment sales for Q4 were $166 million, up 6%, due to higher volume and pricing actions [33] Market Data and Key Metrics Changes - The U.S. housing market fundamentals remain strong, with aging housing and high levels of home equity, but near-term demand remains uncertain [20][21] - The company estimates that the U.S. market for its products will decline low single digits in 2026, driven primarily by repair and remodel activity [37][38] Company Strategy and Development Direction - The company is focused on a comprehensive profitability reset, including a 10% reduction in headquarters workforce and initiatives to optimize operating costs [9][10] - A new CEO, Amit Banati, will take over in May, with a focus on continuing the company's transformation and driving long-term value creation [5][6][13] - The company is committed to investing in its people, systems, and brand building while ensuring operational discipline [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledges macroeconomic uncertainty and low consumer confidence, with no near-term demand inflection expected [22][39] - The company anticipates a modest market recovery in 2026, with net sales growth expected to be flat to 2% [38][39] - Management is confident in the company's ability to execute its strategy and deliver shareholder value despite current challenges [42][43] Other Important Information - The company successfully extended its $1.25 billion senior unsecured revolving credit facility for an additional five-year term [36] - Free cash flow generation for the full year was $367 million, representing cash conversion of over 120% [36] Q&A Session Questions and Answers Question: What is driving the expected decline in margin despite flat to up 2% sales outlook? - Management indicated that increased tariff costs and under absorption from the balance sheet will lead to margin compression in the first half of 2026 [48][49] Question: What makes Amit Banati the best candidate for CEO? - The board highlighted Amit's strong background in consumer-branded products and his proven leadership in delivering profitable growth [54][55] Question: How did the company approach market growth assumptions for 2026? - Management built a model for 2026 that reflects current trends without assuming a market recovery, focusing on internal initiatives to drive profitability [60][62]

Financial Data and Key Metrics Changes - Total company sales for 2025 were $4.5 billion, down 3%, with a decline of 1% excluding the impact of China [24][25] - Consolidated operating income was $699 million, down 10%, and operating margin was 15.7%, down 120 basis points [25] - Earnings per share were $3.61, down 12% [26] Business Line Data and Key Metrics Changes - **Water Segment**: Sales were $617 million for Q4, down 4%, with operating income of $141 million, down 8% [28][30] - **Outdoors Segment**: Sales for Q4 were $295 million, down 3%, with operating income of $42 million, down 24% [31][32] - **Security Segment**: Sales for Q4 were $166 million, up 6%, with operating income of $22 million, up 52% [33][34] Market Data and Key Metrics Changes - The Chinese market saw double-digit declines, with the company taking actions to reduce costs and reposition its business there [27][30] - U.S. housing fundamentals remain strong, but repair and remodel spending has tapered, leading to uncertain near-term demand [20][21] Company Strategy and Development Direction - The company is focused on a comprehensive profitability reset, including a 10% reduction in headquarters workforce and $60 million in continuous improvement savings [9][10] - A new CEO, Amit Banati, will take over in May, with a focus on continuing the company's transformation and growth strategies [5][6][13] Management's Comments on Operating Environment and Future Outlook - Management acknowledges macroeconomic uncertainty and low consumer confidence, with no near-term demand inflection expected [22][38] - The outlook for 2026 anticipates flat to 2% net sales growth, with operating income margin expected to be approximately 14.5%-15.5% [39][41] Other Important Information - The company has a strong balance sheet with net debt of approximately $2.3 billion and ample liquidity of $1.1 billion [35][36] - Free cash flow generation for the full year was $367 million, representing cash conversion of over 120% [36] Q&A Session Summary Question: What is driving the expected decline in margin despite flat to up 2% sales outlook? - Management indicated that increased tariff costs and manufacturing inflation will lead to margin compression in the first half of 2026 [48][49] Question: What makes Amit Banati the best candidate for CEO? - The board highlighted Banati's strong background in consumer-branded products and his proven leadership in delivering profitable growth [54][55] Question: How did the company approach market growth assumptions given the macro uncertainty? - Management built a conservative model for 2026, reflecting current trends without assuming a market recovery [60][61]

Financial Data and Key Metrics Changes - Total company sales for 2025 were $4.5 billion, down 3%, with a decline of 1% when excluding China [22] - Consolidated operating income was $699 million, down 10%, and operating margin decreased to 15.7%, down 120 basis points [23] - Earnings per share were $3.61, down 12% [23] Business Line Data and Key Metrics Changes - Water segment sales for Q4 were $617 million, down 4%, with operating income of $141 million, down 8% [26][28] - Outdoors segment sales for Q4 were $295 million, down 3%, with operating income of $42 million, down 24% [30][31] - Security segment sales for Q4 were $166 million, up 6%, with operating income of $22 million, up 52% [31] Market Data and Key Metrics Changes - The Chinese market represented less than 5% of total revenue in 2025, down from approximately 10% in 2021 [23] - Repair and remodel spending in single-family new construction tapered through Q4, with near-term demand remaining uncertain [19] - U.S. housing fundamentals remain strong, with aging housing and high levels of home equity [19] Company Strategy and Development Direction - The company is focused on a comprehensive profitability reset, including a 10% reduction in headquarters workforce and $60 million in continuous improvement savings [8] - A new CEO, Amit Banati, will take over in May, with a focus on continuing the company's transformation [5][12] - The company aims to optimize its operating footprint and cost structure, targeting an annualized run rate operating income savings of $35 million by year-end 2026 [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledges macroeconomic uncertainty and low consumer confidence, with no near-term demand inflection expected [19] - The outlook for 2026 includes a projected sales growth of approximately flat to 2%, with operating income margin expected to be around 14.5%-15.5% [38][39] - The company is committed to identifying efficiencies to drive shareholder value despite anticipated continued macroeconomic challenges [41] Other Important Information - The company finished 2025 with net debt of approximately $2.3 billion and ample liquidity of $1.1 billion [33] - Free cash flow generation for the full year was $367 million, representing cash conversion of over 120% [34] - The company plans to continue investing in long-term growth and transformation while reducing working capital levels [34] Q&A Session Questions and Answers Question: What is driving the expected decline in margin despite a flat to up 2% sales outlook? - Management indicated that increased tariff costs and under absorption from the balance sheet will lead to margin compression in the first half of 2026 [47][48] Question: What makes Amit Banati the best candidate for CEO given his lack of building product experience? - The board emphasized Banati's strong background in consumer-branded products and his proven leadership in driving profitable growth and business transformation [51][53] Question: How did management approach market growth assumptions given the macro uncertainty? - Management built a model for 2026 that reflects current trends without assuming a market recovery, focusing on internal initiatives to drive profitability [59][60]

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]