Fortune Brands Reports Sales Increase of 9 Percent

May 5th, 2014 by DWM Magazine

Fortune Brands Home and Security Inc. announced first quarter 2014 results and updated its 2014 annual outlook for sales and earnings per share, showing a 9-percent increase in first-quarter 2014 sales, year over year.

“Our teams executed well in a quarter challenged by extreme weather across half of the country that was compounded by an expected lower level of new construction,” says Chris Klein, CEO, Fortune Brands. “We remain well positioned to deliver strong growth this year, offsetting some of the impact of weather in the first quarter, as the pace of demand reaccelerates. Our updated 2014 annual outlook has been revised to reflect the impact of the first quarter and calls for growth based on our continued share gains and the market recovery for both new construction and, more importantly, repair and remodel activity.”

For the first quarter of 2014, sales were $966 million, an increase of 9 percent over the first quarter of 2013. Earnings per share (EPS) were $0.24, compared to $0.22 in the prior-year quarter. EPS before charges/gains were $0.25, compared to $0.24 the same quarter last year. Operating income was $62.1 million, compared to $56.6 million in the prior-year quarter. Operating income before charges/gains was $65.1 million, compared to $62.4 million the same quarter last year.

“Excluding the estimated impact of weather, sales would have increased 13 percent for the total company and 14 percent for our combined home segments in the first quarter. Importantly, total company operating income before charges/gains would have increased 35 percent excluding weather,” Klein adds.

For the door and window segment in the first quarter of 2014, compared to the prior-year quarter:

  • Advanced Material Windows and Door Systems sales were up 5 percent. Entry doors sales were up 8 percent and windows sales were even to prior year. Operating income before charges/gains for the segment increased 3 percent.

“We also began to invest in incremental capacity to support long-term sales growth to approximately $6 billion over the next 3-plus years,” says Lee Wyatt, chief financial officer. “In the first quarter of 2014, we made investments of 4 cents primarily for expenses related to planning, designing and the first stages of implementing incremental capacity in the cabinetry and plumbing segments. Through the balance of the year we will pace investments to ensure we continue to be aligned with the pace of the recovery.”

The company expects diluted EPS before charges/gains to be in the range of $1.90 to $1.99. This targeted range compares to 2013 diluted EPS before charges/gains of $1.50.

FBHS expects to generate $250+ million in free cash flow in 2014. The expected free cash flow is net of anticipated capital expenditures of $130 to $140 million, as the company invests in incremental capacity and infrastructure to support multi-year growth. It also increased its quarterly dividend payment to 12 cents per share.

The company’s 2014 annual outlook is based on a U.S. home products market growth assumption of 9 to 10 percent. Based on the company’s confidence in the housing market recovery and expectation to continue outperforming the market, FBHS expects full-year 2014 net sales to increase 10 to 12 percent.

“With winter behind us, overall consumer traffic is increasing as more homeowners are able to plan and design remodel projects,” says Klein. “As momentum begins to build through the second quarter, we are preparing for a stronger second half and our teams remain poised to deliver strong growth for the full year.”

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