DEERFIELD, Ill- Fortune Brands Home & Security, Inc. (NYSE: FBHS), an industry-leading home and security products company, today announced first quarter 2015 results from continuing operations and reaffirmed its 2015 annual outlook for earnings per share, while slightly adjusting its outlook for sales.
"As we expected, the 2015 home products market growth was moderate in the first quarter. Regardless, our teams delivered profit growth that was right on plan," said Chris Klein, chief executive officer, Fortune Brands. "We continue to anticipate accelerating new construction activity in the second half of the year. Based on that market assumption and solid execution of our plan in the first quarter, we are maintaining our full year profit outlook, while reducing the high end of our sales outlook due to the impact of currency."
First Quarter 2015
For the first quarter of 2015, sales were $951 million, an increase of 7 percent over the first quarter of 2014. Earnings per share were $0.25, compared to $0.27 in the prior-year quarter. EPS before charges/gains were $0.28, compared to $0.27 the same quarter last year. Operating income was $67.3 million, compared to $69.3 million in the prior-year quarter. Operating income before charges/gains was $73.2 million, compared to $70.1 million the same quarter last year.
For each segment in the first quarter of 2015, compared to the prior-year quarter:
Cabinet sales were even with the prior year, with the key dealer channel growing 8 percent offset by the timing of in-stock cabinet and vanities shipments and the impact of currency.
Plumbing sales increased 8 percent, with growth across the U.S. wholesale and retail channels, and Canada.
Door sales were up 5 percent with growth in both the wholesale and retail channels.
Security sales increased 39 percent driven by the SentrySafe acquisition.
"The completion of capacity investments and the pending Norcraft acquisition position our cabinets segment well to leverage the improving housing market," said Lee Wyatt, chief financial officer. "These actions also reflect our focus on driving incremental growth and shareholder value with our cash flow and balance sheet."
Agreement to Acquire Norcraft
As previously announced, the Company has signed an agreement to acquire Norcraft, a leading, publicly-owned manufacturer of kitchen and bathroom cabinetry.
"Our disciplined growth strategy for our cabinets business includes being the best in North America by excelling in the most attractive areas of the cabinet market. Norcraft can help to build on our existing strengths and we see tremendous opportunity for accelerated growth by bringing these businesses together," said Klein. "Norcraft has proven capabilities and great relationships in the dealer channel with strong operating management throughout their business. We intend to replicate the success we have had selling multiple product lines to dealers into the Norcraft relationships, as well as leverage Norcraft products into our existing relationships. In a few years this business could add more than $450 million in revenue and 20 cents of EPS annually."
The transaction is subject to customary closing conditions and is on track to close in the second quarter of 2015. Upon completion of the recently launched tender offer, Norcraft will be merged into Fortune Brands' cabinets business.
Annual Outlook for 2015
The Company's 2015 annual outlook is based on a U.S. home products market growth assumption of 6 to 8 percent. Based on the Company's expectation to continue outperforming the market, the Company reduced full-year 2015 net sales growth from a range of 9 to 11 percent to a range of 9 to 10.5 percent to reflect the impact of currency.
The Company reaffirmed its expectations for EPS before charges/gains to be in the range of $2.00 to $2.10, which compares to 2014 EPS before charges/gains of $1.74.
"The first quarter home products market performed as we expected. We plan for some improvement in the second quarter," said Klein. "Due to the positive signs we are seeing in April and the natural lag for our businesses, we continue to look for the strongest market growth in the second half of the year."
The Company's outlook includes the impact of the 2014 acquisition of SentrySafe. The outlook does not include any potential impact from the pending Norcraft acquisition.
The Company expects to generate free cash flow of approximately $250 million for the full year 2015. The expected free cash flow is net of anticipated capital expenditures of approximately $130 million, as the Company invests in incremental capacity and infrastructure to support multi-year growth.
About Fortune Brands
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 MasterBrand cabinets, Moen faucets, Therma-Tru entry door systems, and Master Lock and SentrySafe security products. Fortune Brands holds market leadership positions in all of its segments. Fortune Brands is part of the S&P MidCap 400 Index. For more information, please visit www.FBHS.com.
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