DEERFIELD, Ill.- Fortune Brands Home & Security, Inc. (NYSE: FBHS), an industry-leading home and security products company, today announced third quarter 2014 results from continuing operations and updated its 2014 annual outlook for sales and earnings per share.
"Our teams delivered solid growth in the third quarter despite the comparison to the prior year quarter where sales increased 24 percent and a market that is currently running at the low end of our planning assumption," said Chris Klein, chief executive officer, Fortune Brands. "Importantly, our mix continues to improve and we continue to gain share. At the same time, we are strengthening our portfolio and have invested in capacity to deliver higher growth in 2015 and beyond."
Third Quarter 2014
For the third quarter of 2014, sales were $1.1 billion, an increase of 5 percent over the third quarter of 2013. Earnings per share were $0.54, compared to $0.37 in the prior-year quarter. EPS before charges/gains were $0.55, compared to $0.46 the same quarter last year. Operating income was $136.4 million, compared to $97.6 million in the prior-year quarter. Operating income before charges/gains was $138.2 million, compared to $120.5 million the same quarter last year. Window business results have now been reflected as a discontinued operation in all periods and are therefore excluded from these results.
"Sales increased 5 percent for the total company and importantly, earnings per share before charges/gains increased 20 percent," Klein said.
For each segment in the third quarter of 2014, compared to the prior-year quarter:
Cabinet sales were up 1 percent. Excluding the impact of both exiting builder direct business in the west and the comparison to a large bath vanity product launch in the third quarter of 2013, core cabinet sales increased 10 percent with mid-teens growth in the dealer channel and high-single digits gains in retail.
Plumbing sales increased 2 percent, led by growth in the U.S. wholesale channel and retail, up 5 percent and 8 percent respectively, and offset partially by softer international sales.
Door sales were up 13 percent with growth in both the wholesale and retail channels.
Security & Storage sales increased 17 percent. Sales from the SentrySafe acquisition added significantly to the growth while organic security sales increased 4 percent and tool storage sales decreased 3 percent.
"Our core business performance remained solid and we continue to invest in incremental capacity to support future sales growth," said Lee Wyatt, chief financial officer. "While these capacity investments, combined with slower market growth, pressure profitability in the short run, they should enhance future profit growth. We are also taking steps to refine our portfolio with the acquisition of SentrySafe and the sale of Simonton windows in the third quarter and by separating the tool storage business from our larger and growing security business in the fourth quarter. All of these actions should position us well to deliver even higher growth in 2015 and beyond."
Company Updates Annual Outlook for 2014
The Company's 2014 annual outlook is based on a slower U.S. home products market growth assumption of 4 to 5 percent for the fourth quarter. Based on the Company's expectation to continue outperforming the market, the Company expects full-year 2014 net sales to increase approximately 8 percent.
The Company expects diluted EPS before charges/gains to be in the range of $1.84 to $1.86, which compares to 2013 diluted EPS before charges/gains of $1.50 and assumes that tool storage profits are even with the prior year.
The Company's outlook includes the impact of third quarter actions, including the acquisition of SentrySafe, the sale of Simonton windows, and share repurchases.
The Company continues to expect to generate free cash flow approaching $200 million for the full year 2014. The expected free cash flow is net of anticipated capital expenditures of approximately $120 million, as the Company invests in incremental capacity and infrastructure to support multi-year growth.
"Although we are seeing growth in both new construction and consumer spending on remodel projects, that growth is at the low end of our last estimates," said Klein. "Regardless, we continue to gain share, our core businesses are performing well and we are well-positioned for higher growth in 2015. Importantly, we also remain sharply focused on driving incremental shareholder value with our cash flow and balance sheet."
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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