Fortune Brands Innovations, Inc. · NYSE:FBIN
Fortune Brands Innovations — Fortune Brands Home & Security — Investor Presentation (September 2011)
47 slides from Fortune Brands Innovations's investor presentation, Sep 6, 2011
Slide 1: Fortune Brands Home and Security Investor Presentation
Exhibit 99.1 Fortune Brands Home and Security Investor Presentation September 2011
Slide 2: Disclaimer
Disclaimer Please note that the information included in this presentation contains statements relating to future results, which are forward-looking statements. We caution you that these forward-looking statements speak only as of the date hereof, and we have no obligation to update them. Actual resu
Slide 3: Transaction Overview
Transaction Overview Distributing Company Fortune Brands, Inc. (NYSE: FO), to be renamed Beam Inc. (NYSE: BEAM) after distribution Distributed Company Fortune Brands Home & Security, Inc. (NYSE: FBHS) Distributed Securities 100% of outstanding shares of Fortune Brands Home & Security common stock On
Slide 4: Today's Presenters
Today’s Presenters Chris Klein Chief Executive Officer Lee Wyatt Chief Financial Officer 4
Slide 5: FBHS has multiple brands that appeal to consumers and the trade
FBHS has multiple brands that appeal to consumers and the trade focused in home products, security and storage. Our Brands Our Partners 5
Slide 6: Our Mission
Our Mission At Fortune Brands Home & Security, our Mission is to create products and services that help fulfill the dreams of homeowners and help people feel more secure 6
Slide 7: An Outperforming Industry Leader Well-Positioned to Accelerate Growth and Create Value
An Outperforming Industry Leader Well-Positioned to Accelerate Growth and Create Value Consistent, Focused Benefits & Timing Exceptional Growth Strategy & Execution of Spin-off & Value Creation Opportunities Attractive Home Benefits of Winning New & Security Product Being Independent Business Catego
Slide 8: An Outperforming Industry Leader Well-Positioned to Accelerate Growth and Create Value
An Outperforming Industry Leader Well-Positioned to Accelerate Growth and Create Value Attractive Home & Security Product Categories & Positions Consumer & Customer Focus Operational & Management Excellence Demonstrated Ability to Outperform the Market 8
Slide 9: Solid Business Foundation
FBHS has a strong foundation built on systematic innovation, strong brands, excellent customer service and balanced channels of distribution. We believe this foundation can be leveraged to create attractive growth and returns. …and Opportunities Solid Business Foundation for Leveraged Returns Strong
Slide 10: Leading Brands and Differentiated Positions in Each Category
Leading Brands and Differentiated Positions in Each Category Brand Leadership Position Kitchen Fully integrated platform, & Bath Kitchen & bath #1 poised to leverage scale cabinet manufacturer across multiple brands, Cabinetry in North America channels and price points Plumbing Powerful engine & Acc
Slide 11: Deep and Broad Channel Strength
Deep and Broad Channel Strength Dealers Home Wholesale Channel Positioning centers & 2-Step Other Retail Builders Showrooms Kitchen Specialized distribution for specific channel/customer needs & Bath Broad channel presence across Cabinetry price points and demographics Provides distinct value to ret
Slide 12: Well-Balanced Business Mix
Well-Balanced Business Mix International 17% Commercial 5% Repair & Remodel Security & Storage 45% 13% New Construction 20% by Channel* International 17% by End Market* Wholesale Builder Direct 4% 31% Other Retail 8% Dealer 14% Home Centers 26% * Source: Company internal estimates for year ended Dec
Slide 13: Consumer Driven Innovation has led to Consistently Winning Profitable New Business
Consumer Driven Innovation has led to Consistently Winning Profitable New Business Track Record of Leading New Product Launches across all BusinessSegments Kitchen Adding value for customers & Bath and winning new business Cabinetry Martha Stewart Living cabinetry introduced at all US and Canadian H
Slide 14: Efficient and Scalable Supply Chain / Infrastructure
Efficient and Scalable Supply Chain / Infrastructure Substantially improved cost structures by proactively reducing footprint nearly 40% between 2006 – 2009 and creating more flexible supply chains Increased productivity through continuous improvement investments Maintaining capacity to ramp up with
Slide 15: Proven Management Team Driving Continued Growth
Proven Management Team Driving Continued Growth – Powerful Combination of Operational & Strategic Leadership Corporate, Stategic & Financial Leadership Chris Klein 8 years with Fortune Brands including ~ 3 years with FBHS and 5+ years leading Strategy & Corporate Development CEO at Fortune Brands; p
Slide 16: Sales Growth Rate 1989–2011 Projected
Demonstrated growth that has exceeded the market over extended period of time and through multiple cycles. Sales performance reflects both organic growth and acquisitions Sales Growth Rate 1989 2011 Projected includes housing recessions of ‘90-’91, ‘94-’96, ‘00-’01, ‘06-’11 9% 4% ~2% U.S. Home Produ
Slide 17: An Outperforming Industry Leader Well-Positioned to Accelerate Growth and Create Value
An Outperforming Industry Leader Well-Positioned to Accelerate Growth and Create Value + Attractive Home Benefits of & Security Product Being Independent Categories & Positions Strong Cash Flow Consumer & Flexible Capital & Customer Focus Structure Operational Front-end of & Management Housing Marke
Slide 18: Benefits of Being Independent
Benefits of Being Independent Clearer focus and alignment on Home & Security priorities enables more nimble response to growth and capital investment opportunities Strong balance sheet and flexible capital structure aligned to the needs of a growth company Business unit performance and management in
Slide 19: Opportune Timing of the Spin-off Ahead of Expected Housing Market Recovery
Opportune Timing of the Spin-off Ahead of Expected Housing Market Recovery Long-Term Home Market Drivers Factors that Enable Recovery Positive population and immigration growth New Improvements in the Increased levels of household broader economy Construction formation driven by demographics and emp
Slide 20: Long-Term Market Trends Point Towards an Eventual Recovery in New Housing Starts
Long-Term Market Trends Point Towards an Eventual Recovery in New Housing Starts New housing starts are at a historically low level, with just 587,000 starts in 2010 The long-term average, as well as demographic trends, suggest a recovery is likely 1959 – 2010 average: 1,497,000 starts Annual New Ho
Slide 21: An Outperforming Industry Leader Well-Positioned to Accelerate Growth and Create Value
An Outperforming Industry Leader Well-Positioned to Accelerate Growth and Create Value Consistent, Focused Benefits & Timing Exceptional Growth Strategy & Execution of Spin-off & Value Creation Opportunities Attractive Home Benefits of Winning New & Security Product Being Independent Business Catego
Slide 22: Our Systematic, Consumer Driven Innovation Processes Result in New Products Consumers Love
Our Systematic, Consumer Driven Innovation Processes Result in New Products Consumers Love Purestyle Technologies Differentiation is an aspiration for consumers Started with the key insight that Consumers want faucets that are easier to clean and don’t show By engaging advanced water spots or finger
Slide 23: Potential for Expansion in Adjacent Categories and International Markets
In Addition to Winning New Business, Potential for Expansion in Adjacent Categories and International Markets (Examples) Market Adjacent International Opportunity Categories Markets Bath China India Commercial Accessories Sinks 1 $25B Commercial Electronic Security Safety Europe China 2 $25B Storage
Slide 24: We will use Cash Flow to Maximize Shareholder Value in Multiple Ways
We will use Cash Flow to Maximize Shareholder Value in Multiple Ways Continue to invest in current businesses – products, markets, brands, supply chains Pay down debt Pursue accretive acquisitions or return cash to shareholders – share buybacks or dividends 24
Slide 25: Acquisition Opportunities Can Accelerate Growth in Both Home and Security Markets
Acquisition Opportunities Can Accelerate Growth in Both Home and Security Markets Target Criteria Illustrative Past Acquisitions Fit within our market attractiveness criteria What We Acquired: Position in higher-end of dealer channel Primary focus Custom kitchen products and capabilities on core cat
Slide 26: Security Market Offers Attractive Opportunities for Growth
Security Market Offers Attractive Opportunities for Growth The Security Market is Attractive Master Lock has Strong Assets to Leverage Growing ~$25B North American Security Unparalleled brand and channel market strength, particularly with distributors and locksmiths Historically stable demand in cor
Slide 27: FBHS Corporate Governance Structure
FBHS Corporate Governance Structure is consistent with Fortune Brands but supplemented with additional defenses to protect new company Board of Directors • Initially 7 members (6 independent from Fortune Brands plus Chris Klein) • David Thomas – non-executive chairman Auditors • External auditors –
Slide 28: Confidence in the Fortune Brands Home & Security Opportunity
Confidence in the Fortune Brands Home & Security Opportunity Strong belief in our strong brands and attractive categories Well positioned, having restructured early and made substantial strategic investments in long-term growth Strong historical performance versus market and demonstrated operating l
Slide 29: Housing market slump reduced sales and profit; business positioned to return to previous levels
While the housing market slump has significantly reduced sales and profit, we believe the business is positioned to return to previous levels when the housing market recovers $ millions Fiscal Year ending December 31 2006 2007 2008 2009 2010 adjusted Pro Forma Net Sales $4,694 $4,551 $3,759 $3,007 $
Slide 30: 2011 First-half results and second-half expectations
2011 First-half results reflect overall market decline, negative impact of 2010 home buyers credit and commodity inflation, but FBHS continued to invest in the business and out-perform the market. Second-half expectations assume a flat market and negative impact of 2010 energy credit, but FBHS expec
Slide 31: Spin-off Capital Structure: Peer Debt/EBITDA Benchmarking
Flexible capital structure following spin-off with strong balance sheet and cash flow to fuel growth opportunities. Bank financing in place with strong bank leadership group. $ millions 1 Spin-off Capital Structure: Peer Debt/EBITDA Benchmarking Term Loans $350 ~3.9x Revolver ($650 facility) 150 Sub
Slide 32: Market Recovery Scenarios
Our success is not dependent on rapid market recovery for solid returns and cash flow, although returning to “steady state” is very attractive Market Recovery Scenarios 1 Sales EBITDA $850 annual $ in B $5 annual $ in M $4 $550 $3 $300 Operating Income $200 $450 $750 flat mid-recovery steady state H
Slide 33: Ability to Leverage Our Business Model as the Market Recovers
Ability to Leverage Our Business Model as the Market Recovers Brands/ Market Industry leading brands can be leveraged for both organic and acquisition growth Position Leadership market positions to introduce new products Efficient supply chains allow us to profitably SupplyChains serve a wide range
Slide 34: Thank You Any Questions?
__ fF Fortune Brands ww Home&éSecurity Thank You Any Questions?
Slide 35: Appendix
__ FW Fortune Brands wD Home&Security Appendix
Slide 36: Kitchen & Bath Cabinetry – Fully Integrated Business, Scalable
Kitchen & Bath Cabinetry – Fully Integrated Business, Scalable and Poised to Leverage Across Multiple Brands, Channels and Price Points Why We Win Key Brands Differentiated brands across multiple channels and price points Broad participation across channels Leading design and finish innovation Lever
Slide 37: Plumbing & Accessories – The Engine that Provides Consistent Growth and Profitability
Plumbing & Accessories – The Engine that Provides Consistent Growth and Profitability Why We Win Key Brands Strong consumer and trade brand Leading market position Sustainable and flexible supply chain Large installed base helps replace / repair Consistent ability to innovate Market Position Summary
Slide 38: Advanced Material Windows & Door Systems – Ready to Leverage the Market Recovery
Advanced Material Windows & Door Systems – Ready to Leverage the Market Recovery Why We Win Key Brands Strong market positions Trusted trade brands Restructured to profitably lever with market recovery Market Position Summary $ millions $601 Market Size 2010 Sales Notes: Market size - US residential
Slide 39: Security & Storage – Strong Brand with Growth Potential Well Beyond Padlocks
Security & Storage – Strong Brand with Growth Potential Well Beyond Padlocks; More Stable Market not Tied to Housing Cycle Why We Win Key Brands Large market size and room for growth Strong brand Ability to extend across broader security categories Strong channel position across retail and commercia
Slide 40: Differentiated and Focused Supply Chains to Best Serve Our Customers
Differentiated and Focused Supply Chains to Best Serve Our Customers Supply Chain Characteristics Competitive Advantage Customizable designs and cabinet Serve multiple channels and brands Kitchen configurations Can achieve value price points profitably & Bath Flexible manufacturing facilities when w
Slide 41: Reconciliation of Non-GAAP Measures to GAAP
Appendix Reconciliation of Non-GAAP Measures to GAAP FBHS Net Sales Growth Rate to FBHS Organic Sales Growth Page 42 Adjusted Pro Forma Operating Income to GAAP Operating Income Page 43 Adjusted Pro Forma Operating Margin to GAAP Operating Margin Page 44 Adjusted Pro Forma EBITDA to GAAP Net Income
Slide 42: Reconciliation of FBHS Net Sales Growth Rate to Organic Sales Growth
Reconciliation of FBHS Net Sales Growth Rate to FBHS Organic Sales Growth Home & Security 1989-2011 Projected CAGR* Net sales growth (GAAP) 9% Net impact from acquisitions/divestitures (5)% Organic sales growth 4% * Compounded annual growth rate Organic sales growth is the rate of compounded annual
Slide 43: Reconciliation of Adjusted Pro Forma Operating Income to GAAP Operating Income
Reconciliation of Adjusted Pro Forma Operating Income to GAAP Operating Income (in millions) 2006 2007 2008 2009 2010 Adjusted pro forma operating income $668 $553 $ 301 $ 81 $180 Standalone corporate expenses (1) 20 20 20 20 20 Restructuring and other charges (2) (26) (93) (56) (52) (12) Asset impa
Slide 44: Reconciliation of Adjusted Pro Forma Operating Margin to GAAP Operating Margin
Reconciliation of Adjusted Pro Forma Operating Margin to GAAP Operating Margin 2006 2007 2008 2009 2010 Adjusted pro forma operating margin 14.2% 12.1% 8.0% 2.7% 5.6% Standalone corporate expenses (1) 0.4% 0.4% 0.5% 0.6% 0.6% Restructuring and other charges (2) (0.5)% (2.0)% (1.5)% (1.7)% (0.4)% Ass
Slide 45: Reconciliation of Adjusted Pro Forma EBITDA to GAAP Net Income
Reconciliation of Adjusted Pro Forma EBITDA to GAAP Net Income (in millions) 2006 2007 2008 2009 2010 Adjusted pro forma EBITDA $ 816 $ 703 $ 435 $195 $ 288 Depreciation (1) (105) (116) (108) (97) (92) Amortization of intangible assets (30) (35) (33) (16) (16) Restructuring and other charges (2) (26
Slide 46: Reconciliation of Adjusted Pro Forma EBITDA margin to GAAP Net Income margin
Reconciliation of Adjusted Pro Forma EBITDA margin to GAAP Net Income margin 2006 2007 2008 2009 2010 Adjusted pro forma EBITDA margin 17% 15% 12% 6% 9% Depreciation (1) (2)% (3)% (3)% (3)% (3)% Amortization of intangible assets (1)% (1)% (1)% (0)% (0)% Restructuring and other charges (2) (0)% (2)%
Slide 47: Reconciliation of Adjusted Pro Forma Unlevered Free Cash Flow to GAAP Cash Flow from Operations
Reconciliation of Adjusted Pro Forma Unlevered Free Cash Flow to GAAP Cash flow from Operations (in millions) 2006 2007 2008 2009 2010 Adjusted pro forma unlevered free cash flow $464 $393 $325 $280 $146 Add: Capital Expenditures 128 75 57 43 58 Standalone corporate expenses, net of tax 13 13 13 13
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