DEERFIELD, Ill - Fortune Brands Home & Security, Inc. (NYSE: FBHS), an industry-leading home and security products company, today announced second quarter 2013 results and raised its annual outlook for sales and earnings per share. The Company has also completed a strategic acquisition in the cabinet segment, paid its first quarterly dividend and extended the maturity of its existing credit agreement.
"We continue to leverage the market recovery with strong second quarter results," said Chris Klein, chief executive officer, Fortune Brands Home & Security. "We developed solid momentum in the first half of the year by focusing on profitable growth. Based on our strong first half performance, our continued confidence in the home products market, and our efficient closing of the WoodCrafters acquisition, we are again increasing our annual outlook."
Second Quarter 2013
For the second quarter of 2013, net sales were $1.04 billion, an increase of 11 percent over the second quarter of 2012. Diluted earnings per share were $0.37, compared to $0.29 in the prior year quarter. Diluted EPS before charges/gains was $0.41, compared to $0.29 the prior year.
Operating income was $106.5 million, compared to $72.3 million in the prior year quarter. Operating income before charges/gains was $107.2 million, compared to $72.7 million the prior year.
"Sales were up double digits in each of our home segments, with these segments growing a combined 13 percent vs. last year, once again outperforming the market. Importantly, this was very profitable growth, with operating income before charges/gains increasing 54 percent for the home product segments. New housing construction continued at a strong pace, and spending on home repairs and remodeling continued to strengthen," Klein said.
For each segment in the second quarter 2013, compared to the prior-year quarter:
Kitchen & Bath Cabinetry net sales were up 13 percent, with operating income before charges/gains of $35.3 million vs. $18.5 million last year. Growth and share gains were driven across all parts of the business, with new construction leading the momentum and our semi-custom products benefitting more broadly from increasing repair and remodel spending.
Plumbing & Accessories net sales were up 15 percent, and operating income before charges/gains was up 29 percent with share gains across the business.
Advanced Material Windows & Door Systems net sales were up double digits, as entry doors grew 15 percent, and we began to see some positive signs in windows. Importantly, operating income before charges/gains for the segment more than doubled to $10 million.
Security & Storage net sales were relatively even with prior year, with a security sales increase of 4 percent, offset by lower tool storage sales as we reposition that business. Segment operating income before charges/gains was up 25 percent.
Company Raises Annual Outlook for 2013
Based on the Company's first half performance, its continued confidence in the home products market recovery and expectation to continue outperforming the market, plus growth from the recently closed WoodCrafters acquisition, the Company now expects full-year 2013 net sales to increase 13 to 15 percent. The Company now expects diluted EPS before charges/gains to be in the range of $1.35 to $1.43, which includes $0.04 from the WoodCrafters acquisition. This targeted range compares to 2012 diluted EPS before charges/gains of $0.89.
"We have the confidence to raise our annual outlook because we are executing well and our performance continues to outpace the recovering market," Klein said.
Company Pays Dividend and Completes Strategic Acquisition
On June 19, 2013, the Company paid its first quarterly cash dividend of $0.10 per share of common stock. The Company implemented this dividend approximately 19 months after becoming an independent company.
On June 20, 2013, the Company completed the acquisition of WoodCrafters Home Products Holding, LLC, a leading, privately-owned manufacturer of bathroom vanities and tops with estimated annual sales of $230 million. The transaction was valued at approximately $300 million. WoodCrafters is now part of the Company's Kitchen & Bath Cabinetry segment and greatly expands the Company's offerings of bathroom cabinetry.
"Our strong performance over the last six quarters provides the foundation to drive incremental shareholder value," said Lee Wyatt, chief financial officer. "The dividend reflects our confidence in ongoing cash flows, and the acquisition should increase operating results in the second half of 2013. Even with these two actions, we expect our net-debt-to-EBITDA before charges/gains ratio to be less than 0.5 times at year-end. The benefits from our capital structure and free cash flow have contributed to our ability to increase full year guidance," Wyatt said.
"Our balance sheet remains solid and we have extended our existing credit agreement to five years in order to maintain our flexibility," Wyatt said. "As of June 30, 2013, cash was $124 million and debt increased to $386 million; both reflecting the completed WoodCrafters acquisition."
About Fortune Brands Home & Security, Inc.
Fortune Brands Home & Security, Inc. (NYSE: FBHS), headquartered in Deerfield, Ill., creates products and services that help fulfill the dreams of homeowners and help people feel more secure. The Company's trusted brands include Master Lock security products, MasterBrand cabinets, Moen faucets, Simonton windows and Therma-Tru entry door systems. FBHS holds market leadership positions in all of its segments. The Company generated $3.6 billion in net sales in 2012. FBHS is part of the S&P MidCap 400 Index. For more information, please visit www.FBHS.com.
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