Fortune Brands Home & Security Continues Sales Growth in Q3 2011
Net sales rise to $848 million, up 4 percent amid a softer-than-expected home products market
Sales gains driven by Plumbing & Accessories, Kitchen & Bath Cabinets, and Storage & Security
Company successfully completes spin-off from parent on Oct. 3
DEERFIELD, Ill.-- Fortune Brands Home & Security (NYSE: FBHS), an industry-leading home and security products company, today announced results for the third quarter of 2011.
Net sales were $848 million, an increase of 4 percent over the third quarter of 2010. On a GAAP basis, operating income was $49.4 million, a decrease of 24 percent from the prior-year quarter. Diluted earnings per share on a GAAP basis were $0.13, a decrease of 28 percent year-over-year.
On an adjusted pro forma basis, operating income was $50.5 million, a decrease of 18 percent from the prior-year quarter. Excluding the favorable resolution of an $8.2 million litigation matter in the third quarter of 2010, the decrease would have been 6 percent. Adjusted pro forma diluted earnings per share were $0.19, a decrease of $0.06 year-over-year. Excluding the litigation matter, EPS were down $0.03.
"We continued to grow sales, which indicates that we are winning despite ongoing challenges in our industry," said Christopher J. Klein, chief executive officer, Fortune Brands Home & Security. "Our investments in innovation and market expansion are paying off in meaningful growth in our Plumbing, Cabinets, and Storage & Security segments, while our Advanced Materials Window & Door Systems segment was impacted by lower window sales and an unfavorable product mix. We believe we continue to outperform the market for our products. Despite pressure on operating income from current headwinds such as increased raw material and transportation costs, plus promotional activity in Cabinets, all of our segments were profitable on an adjusted pro forma basis."
For each segment in the third quarter 2011, compared to the prior-year quarter:
Plumbing & Accessories net sales were up 10 percent, with gains in the U.S. wholesale and retail channels as well as in China.
Kitchen & Bath Cabinetry net sales were up 4 percent. The company saw continued positive impact from its in-stock cabinetry and vanity programs at Lowe's and the Martha Stewart Living® line of cabinets at The Home Depot.
Storage & Security net sales were up 3 percent, with Master Lock benefitting from new products and a solid back-to-school season.
Advanced Materials Window & Door Systems net sales were down 1 percent, with an increase in door sales offset by a sharp decline in windows. The company believes last year's energy tax credit pulled substantial windows demand forward into 2010.
"The third quarter home products market was weaker than earlier estimates, and that impacted the big-ticket, discretionary products in our Cabinetry and Window & Door segments. But our Plumbing and Security & Storage segments, which are generally more stable, generated strong sales and operating margins," Klein said.
"We addressed our manufacturing footprint early in the housing downturn and anticipate that this will allow us to generate new products and programs now to help us remain successful, regardless of the recovery's pace. Our third quarter results indicate that we continued to win in this challenging environment, and we believe we are well-positioned for further success in front of the eventual market recovery," Klein added. "Our spin-off was executed well, our strong capital structure is in place, and our strategy is clear and we are executing against it."
For the fourth quarter of 2011, the company believes the market for its products will be similar to the third quarter, down 2 to 3 percent. Based on this market assumption, the company expects its fourth quarter net sales to increase low single digits compared to the same period last year. The company expects net sales will increase in all segments, except Windows & Doors.
The company's current plan is to provide annual guidance for 2012 in its fourth quarter 2011 earnings announcement.
Adjusted pro forma
"Adjusted pro forma" is defined as continuing operations results before charges/gains, adjusted to assume that Fortune Brands Home & Security was an independent business as of the beginning of 2010, including the impact of an initial debt level of approximately $500 million, the 1:1 share distribution resulting from the spin-off, public company corporate expense and its independent company tax rate.
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, MasterBrand cabinets, Moen faucets, Simonton windows and Therma-Tru entry door systems. FBHS holds market leadership positions in all of its segments. The company's 16,000 associates generated more than $3.2 billion in net sales in 2010. FBHS is part of the S&P MidCap 400 Index. For more information, please visit www.fbhs.com.
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