This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Fortune Brands Home & Security Grows Sales And Profit In Q4 And Full Year 2012

Use of Non-GAAP Financial Information

This press release includes measures not derived in accordance with generally accepted accounting principles (“GAAP”), such as diluted earnings per share before charges/gains, operating income before charges/gains, free cash flow and net debt-to-EBITDA before charges/gains ratio. These measures should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP and may also be inconsistent with similar measures presented by other companies. Reconciliations of these measures to the most closely comparable GAAP measures, and reasons for the company’s use of these measures, are presented in the attached pages.

 
               
FORTUNE BRANDS HOME & SECURITY, INC.
(In millions, except per share amounts)
(Unaudited)
 
 
           
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 % Change 2012 2011 % Change
Net Sales (GAAP)            
Kitchen & Bath Cabinetry $ 339.5 $ 301.7 12.5 $ 1,326.6 $ 1,256.3 5.6
Plumbing & Accessories 296.5 258.1 14.9 1,100.7 962.8 14.3
Advanced Material Windows & Door Systems 155.8 153.7 1.4 587.2 552.9 6.2
Security & Storage   156.1     162.6   (4.0 )   576.6     556.6   3.6  
Total Net Sales $ 947.9   $ 876.1   8.2   $ 3,591.1   $ 3,328.6   7.9  
 
Operating Income (Loss) Before Charges/Gains (a)            
Kitchen & Bath Cabinetry $ 12.3 $ (3.1 ) 496.8 $ 40.0 $ 18.4 117.4
Plumbing & Accessories 41.7 39.1 6.6 169.2 137.9 22.7
Advanced Material Windows & Door Systems 4.4 2.9 51.7 4.3 (3.8 ) 213.2
Security & Storage 20.7 16.9 22.5 74.4 62.6 18.8
Corporate expense   (17.9 )   (11.7 ) (53.0 )   (60.2 )   (52.1 ) (15.6 )
Total Operating Income Before Charges/Gains $ 61.2   $ 44.1   38.7   $ 227.7   $ 163.0   39.7  
 
Earnings Per Share Before Charges/Gains (b)            
Diluted $ 0.23   $ 0.17   35.3   $ 0.89   $ 0.60   48.3  
 
           
EBITDA Before Charges/Gains (c) $ 84.9   $ 69.5   22.2   $ 321.3   $ 261.4   22.9  
 
 
(a) Operating income (loss) before charges/gains is operating income (loss) derived in accordance with U.S. generally accepted accounting principles ("GAAP") including estimated incremental standalone corporate expenses for 2011 periods prior to the spin-off of the Company from Fortune Brands, Inc. (the "Separation"), and excluding restructuring and other charges, business separation costs, asset impairment charges, income from a contingent acquisition consideration adjustment, and the impact of income and expense from actuarial gains or losses associated with our defined benefit plans. Operating income (loss) before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to determine the returns generated by FBHS and to evaluate and identify cost-reduction initiatives. Management believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies. A reconciliation to operating income, the most comparable GAAP measure, is included in subsequent tables.
 
(b) Diluted EPS before charges/gains is net income (loss) calculated on a diluted per-share basis excluding restructuring and other charges, income from a contingent acquisition consideration adjustment, asset impairment charges, income tax gains pertaining to the favorable resolution of tax audits, and the impact of income and expense from actuarial gains or losses associated with our defined benefit plans. Diluted EPS before charges/gains for the three months ended December 31, 2011 have also been adjusted to reflect an adjusted pro forma effective tax rate of 35%. Diluted EPS before charges/gains for the twelve months ended December 31, 2011 have also been adjusted to reflect an adjusted pro forma effective tax rate of 35%, capital structure changes that reflect the borrowing arrangements and debt level of the Company as of October 4, 2011, the 1:1 share distribution resulting from the Separation, estimated incremental standalone corporate expenses for 2011 periods prior to the Separation, and business separation costs. Diluted EPS before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the overall performance of the Company and believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies. A reconciliation to diluted EPS, the most closely comparable GAAP measure, is included in subsequent tables.
 
(c) EBITDA before charges/gains is net income (loss) derived in accordance with GAAP including estimated incremental standalone corporate expenses for 2011 periods prior to the Separation and excluding restructuring and other charges, income from a contingent acquisition consideration adjustment, business separation costs, asset impairment charges, the impact of income and expense from actuarial gains or losses associated with our defined benefit plans, depreciation, amortization of intangible assets, related party interest expense, net, external interest expense, and income tax provision (benefit). EBITDA before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to assess returns generated by FBHS. Management believes this measure provides investors with helpful supplemental information about the Company's ability to fund internal growth, make acquisitions and repay debt and related interest. This measure may be inconsistent with similar measures presented by other companies. A reconciliation from net income, the most closely comparable GAAP measure, is included in subsequent tables.

       
 
FORTUNE BRANDS HOME & SECURITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (GAAP)
(In millions)
(Unaudited)
 
   
December 31, December 31,
2012 2011
 
Assets
Current assets    
Cash and cash equivalents $ 336.0 $ 120.8
Accounts receivable, net 381.8 346.1
Inventories 357.2 336.3
Other current assets   151.1   150.3
Total current assets 1,226.1 953.5
 
Property, plant and equipment, net 509.4 525.8
Goodwill 1,387.0 1,366.6
Other intangible assets, net of accumulated amortization 677.7 702.9
Other assets   71.1   89.1
Total assets $ 3,871.3 $ 3,637.9
 
 
Liabilities and Equity
Current liabilities    
Notes payable to banks $ 5.5 $ 3.8
Current portion of long-term debt 22.5 17.5
Accounts payable 287.0 260.7
Other current liabilities   336.3   315.8
Total current liabilities 651.3 597.8
 
Long-term debt 297.5 389.3
Deferred income taxes 221.3 204.1
Accrued defined benefit plans 252.7 248.2
Other non-current liabilities   63.8   74.0
Total liabilities 1,486.6 1,513.4
 
Stockholders' equity 2,381.1 2,120.8
Noncontrolling interests   3.6   3.7
Total equity   2,384.7   2,124.5
Total liabilities and equity $ 3,871.3 $ 3,637.9

 
 
FORTUNE BRANDS HOME & SECURITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
 
   
Twelve Months Ended December 31,
2012 2011
Operating Activities    
Net income (loss) $ 119.7 $ (34.6 )
Depreciation and amortization 101.3 111.5
Asset impairment charges 15.8 90.0
Defined benefit plan actuarial losses 42.2 80.0
Deferred income taxes (5.4 ) (62.4 )
Other noncash items 24.0 19.2
Changes in assets and liabilities, net   (14.8 )   (28.3 )
Net cash provided by operating activities $ 282.8   $ 175.4  
 
Investing Activities    
Capital expenditures, net of proceeds from asset sales $ (61.5 ) $ (65.0 )
Acquisitions, net of cash acquired (19.5 ) (6.0 )
Other investing activities, net   (5.7 )   -  
Net cash used in investing activities $ (86.7 ) $ (71.0 )
   
Net cash provided by (used in) financing activities $ 15.7   $ (43.5 )
 
   
Effect of foreign exchange rate changes on cash   3.4     (0.8 )
   
Net increase in cash and cash equivalents $ 215.2 $ 60.1
Cash and cash equivalents at beginning of period   120.8     60.7  
Cash and cash equivalents at end of period $ 336.0   $ 120.8  
 
 
     

FREE CASH FLOW

Twelve Months Ended December 31, 2013 Full Year
2012 2011 Target
 
Free Cash Flow (a) $ 325.6 $ 121.4 $ 200.0
Add:
Capital expenditures 75.0 68.5 100.0
Less:
Proceeds from the sale of assets 13.5 3.5 -
Proceeds from the exercise of stock options   104.3     11.0     35.0
Cash Flow From Operations (GAAP) $ 282.8   $ 175.4   $ 265.0
 
(a) Free cash flow is cash flow from operations calculated in accordance with GAAP less net capital expenditures (capital expenditures less proceeds from the sale of assets including property, plant and equipment) plus proceeds from the exercise of stock options. Free cash flow does not reflect adjustments for certain non-discretionary cash flows such as mandatory debt repayments. Free cash flow is a measure not derived in accordance with GAAP. Management believes that free cash flow provides investors with helpful supplemental information about the Company's ability to fund internal growth, make acquisitions, repay debt and related interest, pay dividends and repurchase common stock. This measure may be inconsistent with similar measures presented by other companies.

       
 
FORTUNE BRANDS HOME & SECURITY, INC.
CONSOLIDATED STATEMENT OF INCOME (GAAP)
(In millions, except per share amounts)
(Unaudited)
           
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 % Change 2012 2011 % Change
           
Net Sales $ 947.9   $ 876.1   8.2   $ 3,591.1   $ 3,328.6   7.9  
 
Cost of products sold 644.4 637.0 1.2 2,421.1 2,332.1 3.8
 
Selling, general
and administrative expenses 277.3 252.2 10.0 976.9 900.6 8.5
 
Amortization of intangible assets 2.5 3.4 (26.5 ) 11.1 14.4 (22.9 )
 
Restructuring charges 0.4 2.9 (86.2 ) 4.5 4.7 (4.3 )
 
Business separation costs - - - - 2.4 (100.0 )
 
Asset impairment charges 15.8 90.0 (82.4 ) 15.8 90.0 (82.4 )
           
Operating Income (Loss)   7.5     (109.4 ) 106.9     161.7     (15.6 ) 1,136.5  
 
Related party interest expense, net - - - - 23.2 (100.0 )
 
External interest expense 2.1 3.0 (30.0 ) 8.7 3.2 171.9
 
Other (income) expense, net (0.4 ) (0.3 ) (33.3 ) (1.0 ) 1.6 (162.5 )
           
Income (loss) before income taxes   5.8     (112.1 ) 105.2     154.0     (43.6 ) 453.3  
 
Income taxes (12.8 ) (41.2 ) 68.9 34.3 (9.0 ) 481.1
           
Net Income (Loss) $ 18.6   $ (70.9 ) 126.2   $ 119.7   $ (34.6 ) 446.1  
 
Less: Noncontrolling interests 0.2 0.1 100.0 1.0 1.0 -
           
Net Income (Loss) attributable to
Fortune Brands Home & Security $ 18.4   $ (71.0 ) 125.9   $ 118.7   $ (35.6 ) 433.5  
 
Earnings Per Common Share, Diluted (a) :            
Net Income (Loss) $ 0.11   $ (0.46 ) 123.9   $ 0.71   $ (0.23 ) 408.7  
           
Diluted Average Shares Outstanding (a)   169.2     155.7   8.6     166.1     155.2   7.1  
 
 
(a) Diluted earnings per common share and the average number of shares of common stock outstanding in the twelve months ended December 31, 2011 were retrospectively restated adjusting the number of shares of Fortune Brands Home & Security, Inc. common stock using the number of shares of common stock outstanding as of September 27, 2011. In the periods prior to the spin-off of Fortune Brands Home & Security, Inc. from Fortune Brands, Inc., the same number of shares was used to calculate diluted earnings per share since no Fortune Brands Home & Security, Inc. stock-based awards were outstanding at that time.

       
 
FORTUNE BRANDS HOME & SECURITY, INC.
(In millions, except per share amounts)
(Unaudited)
 
 
           
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 % Change 2012 2011 % Change
Net Sales (GAAP)            
Kitchen & Bath Cabinetry $ 339.5 $ 301.7 12.5 $ 1,326.6 $ 1,256.3 5.6
Plumbing & Accessories 296.5 258.1 14.9 1,100.7 962.8 14.3
Advanced Material Windows & Door Systems 155.8 153.7 1.4 587.2 552.9 6.2
Security & Storage   156.1     162.6   (4.0 )   576.6     556.6   3.6  
Total Net Sales $ 947.9   $ 876.1   8.2   $ 3,591.1   $ 3,328.6   7.9  
 
Operating Income (Loss)            
Kitchen & Bath Cabinetry $ 6.4 $ (15.2 ) 142.1 $ 20.5 $ 5.7 259.6
Plumbing & Accessories 41.7 39.1 6.6 169.2 138.0 22.6
Advanced Material Windows & Door Systems (5.4 ) (91.6 ) 94.1 (1.0 ) (101.2 ) 99.0
Security & Storage 21.2 16.9 25.4 75.4 62.6 20.4
Corporate Expenses (a)   (56.4 )   (58.6 ) 3.8     (102.4 )   (120.7 ) 15.2  
Total Operating Income (Loss) (GAAP) $ 7.5   $ (109.4 ) 106.9   $ 161.7   $ (15.6 ) 1,136.5  
 

OPERATING INCOME (LOSS) BEFORE CHARGES/GAINS RECONCILIATION

 
Operating Income (Loss) Before Charges/Gains (b)            
Kitchen & Bath Cabinetry $ 12.3 $ (3.1 ) 496.8 $ 40.0 $ 18.4 117.4
Plumbing & Accessories 41.7 39.1 6.6 169.2 137.9 22.7
Advanced Material Windows & Door Systems 4.4 2.9 51.7 4.3 (3.8 ) 213.2
Security & Storage 20.7 16.9 22.5 74.4 62.6 18.8
Corporate expenses   (17.9 )   (11.7 ) (53.0 )   (60.2 )   (52.1 ) (15.6 )
 
Total Operating Income Before Charges/Gains (b)   61.2     44.1   38.7     227.7     163.0   39.7  
Restructuring and other charges (c) 0.6 (16.6 ) 103.6 (10.0 ) (20.0 ) 50.0
Contingent acquisition consideration adjustment (d) - - - 2.0 - 100.0
Standalone corporate costs (e) - - - - 13.8 (100.0 )
Asset impairment charges (15.8 ) (90.0 ) 82.4 (15.8 ) (90.0 ) 82.4
Business separation costs (f) - - - - (2.4 ) 100.0
Defined benefit plan actuarial losses (g)   (38.5 )   (46.9 ) 18.0     (42.2 )   (80.0 ) 47.3  
Total Operating Income (Loss) (GAAP) $ 7.5   $ (109.4 ) 106.9   $ 161.7   $ (15.6 ) 1,136.3  
 
(a) For twelve months ended December 31, 2011, corporate expenses include allocations of certain Fortune Brands, Inc. general corporate expenses incurred directly by Fortune Brands, Inc. These allocated expenses include costs associated with legal, finance, treasury, accounting, internal audit and general management services. They also include the components of defined benefit plan expense other than service cost including actuarial gains and losses.
 
(b) Operating income (loss) before charges/gains is operating income (loss) derived in accordance with GAAP including estimated incremental standalone corporate expenses for 2011 periods prior to the Separation and excluding restructuring and other charges, business separation costs, asset impairment charges, income from a contingent acquisition consideration adjustment and the impact of income and expense from actuarial gains or losses associated with our defined benefit plans. Operating income (loss) before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to determine the returns generated by FBHS and to evaluate and identify cost-reduction initiatives. Management believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies.
 
(c) Restructuring charges are costs incurred to implement significant cost reduction initiatives and include workforce reduction costs; "other charges" represent charges directly related to restructuring initiatives that cannot be reported as restructuring under GAAP. Such costs may include losses on disposal of inventories, trade receivables allowances from exiting product lines and accelerated depreciation resulting from the closure of facilities and gains or losses associated with the sale of closed facilities.
 
(d) Represents gain attributable to reduction of estimated liability for contingent consideration associated with a business acquisition.
 
(e) The Company estimates that it would have incurred $13.8 million of incremental corporate expenses if it had functioned as an independent standalone public company for the twelve months ended December 31, 2011.
 
(f) Business separation costs are costs related to non-cash non-recurring costs associated with the modification of share-based compensation awards as a result of the spin-off of FBHS from Fortune Brands, Inc.
 
(g) Represents actuarial losses associated with our defined benefit plans. Actuarial gains or losses in a period represent the difference between actual and actuarially assumed experience, principally related to liability discount rates and plan asset returns, as well as other actuarial assumptions including compensation rates, turnover rates, and health care cost trend rates. The Company recognizes actuarial gains or losses immediately in operating income to the extent they cumulatively exceed a “corridor.” The corridor is equal to the greater of 10% of the fair value of plan assets or 10% of a plan’s projected benefit obligation. Actuarial gains or losses are determined at required remeasurement dates which occur at least annually in the fourth quarter. Our Operating Income Before Charges/Gains reflects our expected rate of return on pension plan assets which in a given period may materially differ from our actual return on plan assets. Our liability discount rates and plan asset returns are based upon difficult to predict fluctuations in global bond and equity markets that are not directly related to the Company’s business. We believe that the exclusion of actuarial gains or losses from Operating Income Before Charges/Gains provides investors with useful supplemental information regarding the underlying performance of the business from period to period that may be considered in conjunction with our operating income as measured on a GAAP basis. We present this supplemental information because such actuarial gains or losses may create volatility in our operating income that does not necessarily have an immediate corresponding impact on operating cash flow or the actual compensation and benefits provided to our employees. The table below sets forth additional supplemental information on the Company’s historical actual and expected rate of return on plan assets, as well as discount rates used to value its defined benefit obligations:
 
(In millions) Year Ended Year Ended
December 31, 2012 December 31, 2011
% $ % $
Actual return on plan assets 14.5 % $ 63.7 (0.6 )% ($2.7 )
Expected return on plan assets 7.8 % 36.8 8.5 % 41.3
Discount rate at December 31:
Pension benefits 4.9 % 5.8 %
Postretirement benefits 4.6 % 5.3 %

       
 

DILUTED EPS BEFORE CHARGES/GAINS RECONCILIATION

Diluted EPS before charges/gains is net income (loss) calculated on a diluted per-share basis excluding restructuring and other charges, income from a contingent acquisition consideration adjustment, asset impairment charges, income tax gains pertaining to the favorable resolution of tax audits, and the impact of income and expense from actuarial gains or losses associated with our defined benefit plans. Diluted EPS for the three months ended December 31, 2011 have also been adjusted to reflect an adjusted pro forma effective tax rate of 35%. Diluted EPS before charges/gains for the twelve months ended December 31, 2011 have also been adjusted to reflect an adjusted pro forma effective tax rate of 35%, capital structure changes that reflect the borrowing arrangements and debt level of the Company as of October 4, 2011, the 1:1 share distribution resulting from the Separation, estimated incremental standalone corporate expenses for the 2011 periods prior to the Separation, and business separation costs. Diluted EPS before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the overall performance of the Company and believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies.
 
For the fourth quarter of 2012, diluted EPS before charges/gains is net income calculated on a diluted per-share basis excluding income of $0.6 million ($0.3 million after tax) related to previously announced restructuring initiatives, asset impairment charges of $15.8 million ($9.7 million after tax or $0.06 per diluted share) pertaining to the impairment of certain indefinite lived trade names, income tax gains pertaining to the favorable resolution of tax audits of $12.7 million ($0.08 per diluted share) and the impact of expense from actuarial losses associated with our defined benefit plans of $38.5 million ($23.8 million after tax or $0.14 per diluted share).
 
For the twelve months ended December 31, 2012, diluted EPS before charges/gains is net income calculated on a diluted per-share basis excluding $10.0 million ($6.6 million after tax or $0.04 per diluted share) of restructuring and other charges, income from a contingent acquisition consideration adjustment of $2.0 million ($1.2 million after tax), asset impairment charges of $15.8 million ($9.7 million after tax or $0.06 per diluted share) pertaining to the impairment of certain indefinite lived trade names, income tax gains pertaining to the favorable resolution of tax audits of $12.7 million ($0.08 per diluted share) and the impact of expense from actuarial losses associated with our defined benefit plans of $42.2 million ($26.2 million after tax or $0.16 per diluted share).
 
For the fourth quarter of 2011, diluted EPS before charges/gains is net income (loss) calculated on a diluted per-share basis adjusted to reflect an adjusted pro forma tax rate adjustment of $3.1 million ($0.02 per diluted share), and excludes $16.6 million ($10.2 million after tax or $0.07 per diluted share) of restructuring and other charges, asset impairment charges of $90.0 million ($55.3 million after tax or $0.35 per diluted share) pertaining to the impairment of certain indefinite lived trade names and the impact of expense from actuarial losses associated with our defined benefit plans of $46.9 million ($29.2 million after tax or $0.18 per diluted share).
 
For the year ended December 31, 2011, diluted EPS before charges/gains is net income (loss) calculated on a diluted per-share basis adjusted to reflect the actual number of diluted shares of the Company as of December 31, 2011 of 160.7 million, estimated incremental standalone corporate costs of $13.8 million ($8.6 million after tax or $0.05 per diluted share), an adjusted pro forma effective tax rate adjustment of $12.0 million ($0.07 per share) to reflect an effective tax rate of 35%, capital structure changes that reflect the borrowing arrangements and debt level of the Company as of October 4, 2011 of $14.4 million ($8.9 million after tax or $0.06 per diluted share), and excludes restructuring and other charges of $20.0 million ($12.5 million after tax or $0.08 per diluted share), business separation costs of $2.4 million ($1.7 million after tax or $0.01 per diluted share), asset impairment charges of $90.0 million ($55.3 million after tax or $0.34 per diluted share) pertaining to the impairment of certain indefinite lived trade names and the impact of expense from actuarial losses associated with our defined benefit plans of $80.0 million ($49.9 million after tax or $0.31 per diluted share).
 
 
           
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 % Change 2012 2011 % Change
           
Earnings Per Common Share - Diluted
EPS Before Charges/Gains $ 0.23 $ 0.17 35.3 $ 0.89 $ 0.60 48.3
 
Restructuring and other charges - (0.07 ) 100.0 (0.04 ) (0.08 ) 50.0
Contingent acquisition consideration adjustment - - - - - -
Standalone corporate costs - - - - 0.05 (100.0 )
Capital structure change - - - - (0.06 ) 100.0
Business separation costs - - - - (0.01 ) 100.0
Adjusted pro forma tax rate adjustment - (0.02 ) 100.0 - (0.07 ) 100.0
Asset impairment charges (0.06 ) (0.35 ) 82.9 (0.06 ) (0.34 ) 82.4
Defined benefit plan actuarial losses (0.14 ) (0.18 ) 22.2 (0.16 ) (0.31 ) 48.4
Income tax gains 0.08 - 100.0 0.08 - 100.0
Impact of anti-dilution   -     (0.01 ) 100.0   -     (0.01 ) 100.0  
 
Diluted EPS (GAAP) $ 0.11   $ (0.46 ) 123.9 $ 0.71   $ (0.23 ) 408.7  
 
 
 

RECONCILIATION OF FULL YEAR 2013 EARNINGS GUIDANCE TO GAAP

 
For the full year, the Company is targeting diluted EPS before charges/gains to be in the range of $1.13 to $1.23 per share. On a GAAP basis, the Company is targeting diluted EPS to be in the range of $1.13 to $1.23 per share. The Company's GAAP basis EPS range assumes the Company incurs no actuarial gains or loss associated with its defined benefit plans.

     
 
FORTUNE BRANDS HOME & SECURITY, INC.
(In millions, except per share amounts)
(Unaudited)
 
 
 

RECONCILIATION OF GAAP NET INCOME (LOSS) TO EBITDA BEFORE CHARGES/GAINS

           
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 % Change 2012 2011 % Change
           
Net Income (Loss) $ 18.6   $ (70.9 ) 126.2   $ 119.7   $ (34.6 ) 446.1  
           
Depreciation (a) $ 20.8 $ 21.7 (4.0 ) $ 81.5 $ 85.6 (4.7 )
Amortization of intangible assets 2.5 3.4 (26.5 ) 11.1 14.4 (22.9 )
Restructuring and other charges (0.6 ) 16.6 (103.6 ) 10.0 20.0 (50.0 )
Contingent acquisition consideration adjustment - - - (2.0 ) - (100.0 )
Business separation costs - - - - 2.4 (100.0 )
Related party interest expense, net - - - - 23.2 (100.0 )
External interest expense 2.1 3.0 (30.0 ) 8.7 3.2 171.9
Standalone corporate expenses - - - - (13.8 ) 100.0
Asset impairment charges 15.8 90.0 (82.4 ) 15.8 90.0 (82.4 )
Defined benefit plan actuarial losses 38.5 46.9 (18.0 ) 42.2 80.0 (47.3 )
Income tax provision (benefit)   (12.8 )   (41.2 ) 68.9     34.3     (9.0 ) 481.1  
           
EBITDA BEFORE CHARGES/GAINS (b) $ 84.9   $ 69.5   22.2   $ 321.3   $ 261.4   22.9  
 
 
(a) Depreciation excludes accelerated depreciation of $(1.0) million and $8.7 million for the three and twelve months ended December 31, 2012, respectively, and $10.4 million and $11.5 million for the three and twelve months ended December 31, 2011. Accelerated depreciation is included in restructuring and other charges.
(b) EBITDA before charges/gains is net income (loss) derived in accordance with GAAP including estimated incremental standalone corporate expenses for 2011 periods prior to the Separation and excluding restructuring and other charges, income from a contingent acquisition consideration adjustment, business separation costs, asset impairment charges, the impact of income and expense from actuarial gains or losses associated with our defined benefit plans, depreciation, amortization of intangible assets, related party interest expense, net, external interest expense, and income tax provision (benefit). EBITDA before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to assess returns generated by FBHS. Management believes this measure provides investors with helpful supplemental information about the Company's ability to fund internal growth, make acquisitions and repay debt and related interest. This measure may be inconsistent with similar measures presented by other companies.
 
 

CALCULATION OF NET DEBT-TO-EBITDA BEFORE CHARGES/GAINS RATIO

 
 
 
As of December 31, 2012  
Notes payable to banks (a) 5.5
Current portion of long-term debt (a) 22.5
Long-term debt (a)   297.5  
Total debt 325.5
Less:
Cash and cash equivalents (a)   336.0  
Net debt (1)   (10.5 )
 
For the twelve months ended December 31, 2012  
EBITDA before charges/gains (2) (b)   321.3  
 
Net debt-to-EBITDA before charges/gains ratio (1/2)   (0.0 )
 
(a) Amounts are per the unaudited Condensed Consolidated Balance Sheet as of December 31, 2012.
 
(b) EBITDA before charges/gains is net income derived in accordance with GAAP excluding depreciation, amortization of intangible assets, restructuring and other charges, asset impairment charges, income from a contingent acquisition consideration adjustment, the impact of income and expense from actuarial gains or losses associated with our defined benefit plans, external interest expense and income tax provision (benefit). EBITDA before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to assess returns generated by FBHS. Management believes this measure provides investors with helpful supplemental information about the Company’s ability to fund internal growth, make acquisitions and repay debt and related interest. This measure may be inconsistent with similar measures presented by other companies.

             
 
FORTUNE BRANDS HOME & SECURITY, INC.
Reconciliation of Income Statement - GAAP to Before Charges/Gains Information
Three Months Ended December 31,
$ in millions, except per share amounts
(unaudited)
 
  Before Charges/Gains adjustments  
Restructuring

Defined benefit

Pro forma Asset

 

Before
GAAP and other

plan actuarial

tax rate impairment

Income tax

Charges/Gains
(unaudited) charges    

losses

  adjustment   charges  

gains

(Non-GAAP)
       
2012 FOURTH QUARTER    
 
Net Sales $ 947.9 - - - - -
 
Cost of products sold 644.4 1.0 (12.7 ) - - -
Selling, general & administrative expenses 277.3 - (25.8 ) - - -
Amortization of intangible assets 2.5 - - - - -
Restructuring charges 0.4 (0.4 ) - - - -
Asset impairment charges   15.8   -     -     -     (15.8 )   -  
 
Operating Income 7.5 (0.6 ) 38.5 - 15.8 - 61.2
 
External interest expense 2.1 - - - -

-

Other income, net   (0.4 ) -     -     -     -    

-

 
Income before income taxes 5.8 (0.6 ) 38.5 - 15.8 - 59.5
 
Income taxes   (12.8 ) (0.3 )   14.7     -     6.1     12.7  
 
Net Income $ 18.6   (0.3 )   23.8     -     9.7     (12.7 ) 39.1
 
Less: Noncontrolling interests   0.2   -     -     -     -     -  
 
Net Income attributable to Fortune Brands Home & Security, Inc. $ 18.4   (0.3 )   23.8     -     9.7     (12.7 ) 38.9
 
Average Diluted Shares Outstanding 169.2 169.2
 
Diluted EPS 0.11 0.23
 
2011
 
Net Sales $ 876.1 - - - - -
 
Cost of products sold 637.0 (13.7 ) (23.9 ) - - -
Selling, general & administrative expenses 252.2

-

(23.0 ) - - -
Amortization of intangible assets 3.4 - - - - -
Restructuring charges 2.9 (2.9 ) - - - -
Asset impairment charges   90.0   -     -     -     (90.0 )   -  
 
Operating Income (Loss) (109.4 ) 16.6 46.9 - 90.0 - 44.1
 

External interest expense

3.0 - - - - -
Other income, net   (0.3 ) -     -     -     -     -  
Income before (loss) income taxes (112.1 ) 16.6 46.9 - 90.0 - 41.4
 
Income taxes   (41.2 ) 6.4     17.7     (3.1 )   34.7     -  
 
Net Income (Loss) $ (70.9 ) 10.2     29.2     3.1     55.3     -   26.9
 
Less: Noncontrolling interests   0.1   -     -     -     -     -  
 
Net Income (Loss) attributable to Fortune Brands Home & Security, Inc. $ (71.0 ) 10.2     29.2     3.1     55.3     -   26.8
 
Average Diluted Shares Outstanding 155.7 159.3
 
Diluted EPS (0.46 ) 0.17

                     
 
FORTUNE BRANDS HOME & SECURITY, INC.
Reconciliation of Income Statement - GAAP to Before Charges/Gains Information
Twelve Months Ended December 31,
$ in millions, except per share amounts
(unaudited)
 
  Before Charges/Gains adjustments  
Contingent

Defined

Restructuring acquisition Standalone Business

benefit plan

Capital Pro forma Asset

 

Before
GAAP and other consideration corporate separation

actuarial

structure tax rate impairment

Income tax

Charges/Gains
(unaudited) charges   adjustment   costs   costs  

losses

  change   adjustment   charges  

gains

(Non-GAAP)
                                           
2012 YEAR TO DATE
 
Net Sales $ 3,591.1 - - - - - - - - -
 
Cost of products sold 2,421.1 (5.5 ) - - - (14.2 ) - - - -
Selling, general & administrative expenses 976.9 - 2.0 - - (28.0 ) - - - -
Amortization of intangible assets 11.1 - - - - - - - - -
Restructuring charges 4.5 (4.5 ) - - - - - - - -
Asset impairment charges   15.8   -     -     -     -     -     -     -     (15.8 )   -  
 
Operating Income 161.7 10.0 (2.0 ) - - 42.2 - - 15.8 - 227.7
 
External interest expense 8.7 - - - - - - - - -
Other income, net   (1.0 ) -     -     -     -     -     -     -     -     -  
Income before income taxes 154.0 10.0 (2.0 ) - - 42.2 - - 15.8 - 220.0
 
Income taxes   34.3   3.4     (0.8 )   -     -     16.0     -     -     6.1     12.7  
 
Net Income $ 119.7   6.6     (1.2 )   -     -     26.2     -     -     9.7     (12.7 ) 148.3
 
Less: Noncontrolling interests   1.0   -     -     -     -     -     -     -     -     -  
 
Net Income attributable
to Fortune Brands Home & Security, Inc. $ 118.7   6.6     (1.2 )   -     -     26.2     -     -     9.7     (12.7 ) 147.3
 
Average Diluted Shares Outstanding 166.1 166.1
 
Diluted EPS 0.71 ` 0.89
 
 
2011
 
Net Sales $ 3,328.6 - - - - - - - - -
 
Cost of products sold 2,332.1 (15.3 ) - - - (41.0 ) - - - -
Selling, general & administrative expenses 900.6 - - 13.8 - (39.0 ) - - - -
Amortization of intangible assets 14.4 - - - - - - - - -
Restructuring charges 4.7 (4.7 ) - - - - - - - -
Business separation costs 2.4 - - - (2.4 ) - - - - -
Asset impairment charges   90.0   -     -     -     -     -     -     -     (90.0 )   -  
 
Operating Income (Loss) (15.6 ) 20.0 - (13.8 ) 2.4 80.0 - - 90.0 - 163.0
 
Related party interest expense, net 23.2 - - - - - (14.4 ) - - -
External interest expense 3.2 - - - - - - - - -
Other expense, net   1.6   -     -     -     -     -     -     -     -     -  
Income (loss) before income taxes (43.6 ) 20.0 - (13.8 ) 2.4 80.0 14.4 - 90.0 - 149.4
 
Income taxes   (9.0 ) 7.5     -     (5.2 )   0.7     30.1     5.5     (12.0 )   34.7     -  
 
Net Income (Loss) $ (34.6 ) 12.5     -     (8.6 )   1.7     49.9     8.9     12.0     55.3     -   97.1
 
Less: Noncontrolling interests   1.0   -     -     -     -     -     -     -     -     -  
 
Net Income (Loss) attributable
to Fortune Brands Home & Security, Inc. $ (35.6 ) 12.5     -     (8.6 )   1.7     49.9     8.9     12.0     55.3     -   96.1
 
Average Diluted Shares Outstanding 155.2 160.7
 
Diluted EPS (0.23 ) 0.60

   
 
FORTUNE BRANDS HOME & SECURITY, INC.
RECONCILIATION OF SEGMENT OPERATING INCOME (LOSS) BEFORE CHARGES/GAINS TO GAAP OPERATING INCOME (LOSS)
(In millions)
(unaudited)
     
For the three month period ended
December 31, 2012 December 31, 2011

$ change

KITCHEN & BATH CABINETRY      
Operating income (loss) before charges/gains (a) $ 12.3 $ (3.1 ) $ 15.4
Restructuring charges (1.1 ) (2.9 ) 1.8
Other charges (b)
Cost of products sold 1.1 (9.2 ) 10.3
Asset impairment charges   (5.9 )   -     (5.9 )
Operating income (loss) (GAAP) $ 6.4   $ (15.2 ) $ 21.6  
 
 
(a) Operating income (loss) before charges/gains is operating income (loss) derived in accordance with GAAP excluding restructuring and other charges and asset impairment charges. Operating income before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to determine the returns generated by FBHS and to evaluate and identify cost-reduction initiatives. Management believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies.
 
(b) Other charges represents charges directly related to restructuring initiatives that cannot be reported as restructuring under GAAP. Such costs may include losses on disposal of inventories, trade receivables allowances from exiting product lines and accelerated depreciation resulting from the closure of facilities and gains or losses associated with the sale of closed facilities.

   
 
FORTUNE BRANDS HOME & SECURITY, INC.
RECONCILIATION OF PERCENTAGE CHANGE IN GAAP NET SALES TO NET SALES EXCLUDING 53rd WEEK IN 2011
(unaudited)
 
Three Months Ended
December 31, 2012
 
SECURITY & STORAGE  
Net Sales (GAAP) (4 )%
53rd week impact in 2011 4 %
Net Sales excluding 53rd week impact in 2011 0 %
 
SECURITY  
Net Sales (GAAP) (1 )%
53rd week impact in 2011 5 %
Net Sales excluding 53rd week impact in 2011 4 %
 
STORAGE  
Net Sales (GAAP) (8 )%
53rd week impact in 2011 3 %
Net Sales excluding 53rd week impact in 2011 (5 )%
 
Net sales excluding the 53rd week in sales is net sales derived in accordance with GAAP excluding an additional 53rd week of sales in 2011. Management uses this measure to evaluate the overall performance of the Company and believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies.




4 of 5

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,067.56 -30.89 -0.18%
S&P 500 2,002.28 -1.09 -0.05%
NASDAQ 4,598.1880 +17.9170 0.39%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs