Business Wire | Oct 28, 2020 04:06PM EDT

Fortune Brands Reports Strong 3Q Sales and Profit Growth

Oct. 28, 2020

DEERFIELD, Ill.--(BUSINESS WIRE)--Oct. 28, 2020--Fortune Brands Home & Security, Inc. (NYSE: FBHS, the "Company", or "Fortune Brands"), an industry-leading home and security products company, today announced third quarter 2020 results.

"I continue to be amazed by our teams," said Nicholas Fink, chief executive officer, Fortune Brands. "We delivered exceptional performance in an accelerating housing market as demographic forces and consumers focused on home investment drove both renovation and remodeling and new construction activity. We are serving our customers' increasing needs through a strict focus on safety and operational excellence. Also reflected in our financial results were increased investments in our leading brands, innovation and supply chain capability and capacity that will enable us to continue to capture opportunities and accelerate share gains in a fundamentally robust housing market over the next few years."

Third Quarter 2020

For the third quarter of 2020, sales were $1.7 billion, an increase of 13 percent over the third quarter of 2019. Earnings per share were $1.17, compared to $0.75 in the prior-year quarter. EPS before charges / gains were $1.19, compared to $0.95 the same quarter last year. Operating income was $240.2 million, compared to $168.0 million in the prior-year quarter. Operating income before charges / gains was $244.2 million, compared to $203.2 million the same quarter last year, an increase of 20 percent.

"We are ahead of our plan to permanently advance the profitability of the company, and our financial results are just beginning to reflect this," continued Fink. "We are accelerating our multi-year margin improvement journey in a fundamentally strong housing market, which should create exceptional value for our long-term stakeholders."

For each segment in the third quarter of 2020, compared to the prior-year quarter:

* Plumbing sales increased 15 percent with double-digit sales growth in U.S. Retail and China. Operating margin before charges / gains was 20.8 percent even with increased brand investment and one-time costs and remains on track to deliver expected margins of approximately 22 percent for the full year. * Doors & Security sales increased 14 percent, with doors and decking showing double-digit growth and security products returning to mid-single digit growth. Operating margin before charges / gains was 16.4 percent, an increase of 190 basis points versus the third quarter of 2019. * Cabinet sales increased 11 percent. Strong demand for value-priced cabinets continues to drive growth in this segment. Operating margin before charges / gains was 12.2 percent, an increase of 220 basis points over the third quarter of 2019.

Balance Sheet and Liquidity

At the end of the quarter net debt was $1.6 billion and net debt to EBITDA was 1.7x. The Company had $465 million in cash and $1.35 billion of availability under its revolving credit agreements. The total outstanding on both the Company's original $1.25 billion and supplemental $400 million revolving credit facilities was $300 million at the end of the third quarter.

"We are leveraging this strong market to increase market share and profitability as we position for 2021 and beyond," said Patrick Hallinan, chief financial officer, Fortune Brands. "The permanent efficiency improvements we have made over the past six months will serve as a foundation for future margin improvement and enable us to capture the opportunities presented by what we expect to be a prolonged period of housing market strength. With this momentum, we have the ability to make investments and deploy capital to accelerate growth and stakeholder value creation."

2020 Outlook

While clear COVID-19 and macroeconomic risks remain, the Company is reinitiating formal 2020 financial guidance. For the full year, the Company expects net sales growth between 4 percent and 5 percent and earnings per share of $4.03 to $4.11, with an operating margin of approximately 14 percent. The Company expects to generate free cash flow of approximately $590 to $620 million for the full year 2020, which includes accelerated investments in capacity to support our customers.

"We have clearly entered a new phase of demographics-driven housing growth," said Fink. "I am incredibly excited about how our teams are poised to drive growth, capture share, grow margins and deploy capital to create even more stakeholder value over the next few years."

About Fortune Brands

Fortune Brands Home & Security, Inc. (NYSE: FBHS), headquartered in Deerfield, IL., creates products and services that fulfill the dreams of home. The Company's operating segments are Plumbing, Cabinets, and Doors & Security. Its trusted brands include Moen, Riobel, Perrin & Rowe, Shaws, Victoria + Albert and Rohl under the Global Plumbing Group (GPG); more than a dozen core brands under MasterBrand Cabinets; Therma-Tru entry door systems, Fiberon composite decking and Master Lock and SentrySafe security products in the Doors & Security segment. Fortune Brands holds market leadership positions in all of its segments. Fortune Brands is a Fortune 500 Company and part of the S&P 500 Index. For more information, please visit www.FBHS.com. To learn more about how Fortune Brands is embracing and accelerating its environmental, social and governance duties, please visit our ESG section and report at www.FBHS.com/global-citizenship.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains certain "forward-looking statements" regarding statements related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of the government, consumers, and the Company, on our business, financial condition and results of operations as well as general business strategies, market potential, future financial performance, the potential of our brands and other matters. Statements preceded by, followed by or that otherwise include the words "believes," "positioned," "expects," "estimates," "plans," "look to," "outlook," and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward-looking in nature and not historical facts. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of our management. Although we believe that these statements are based on reasonable assumptions, they are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those indicated in such statements. Important factors that could affect performance and cause results to differ materially from management's expectations, or could affect the Company's ability to achieve its strategic goals, include the uncertainties relating to the impact of COVID-19 on the Company's business, operations and employees and the other factors discussed in our securities filings, including in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, all filed with the Securities and Exchange Commission. The forward-looking statements included in this release are made as of the date hereof, and except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect events, new information or circumstances occurring after the date of this release.

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, operating margin before charges / gains, net debt, net debt to EBITDA and free cash flow. 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.

Source: Fortune Brands Home & Security, Inc.

FORTUNE BRANDS HOME & SECURITY, INC.

(In millions, except per share amounts)

(Unaudited)

Net Sales

Three Months Ended September Nine Months Ended September 30, 30, 2020 2019 % 2020 2019 % Change Change

Net Sales Net Sales (GAAP) (GAAP) Plumbing $ 590.6 $ 514.1 15 Plumbing $ 1,564.4 $ 1,478.8 6

Doors & 406.7 355.2 14 Doors & 1,052.7 1,017.6 3 Security Security Cabinets 654.8 589.7 11 Cabinets 1,813.5 1,797.7 1

Total Net $ 1,652.1 $ 1,459.0 13 Total Net $ 4,430.6 $ 4,294.1 3 Sales Sales Current Quarter Operating Income

Before Charges & Gains GAAP

Three Months Ended September Three Months Ended September 30, 30,

Operating Income (loss) 2020 2019 % Operating 2020 2019 % Before Change Income Change Charges/ (loss) Gains ^ (a) Plumbing $ 123.0 $ 112.0 10 Plumbing $ 116.6 $ 112.0 4

Doors & 66.6 51.6 29 Doors & 66.8 50.1 33 Security Security Cabinets 80.0 58.8 36 Cabinets 82.1 25.1 227

Corporate (25.4 ) (19.2 ) (32 ) Corporate (25.3 ) (19.2 ) (32 ) Expenses Expenses Total Operating Total Income $ 244.2 $ 203.2 20 Operating $ 240.2 $ 168.0 43 Before Income Charges/ (GAAP) Gains Earnings Per Share Diluted Before EPS Charges/ (GAAP) Gains ^ (b) Diluted $ 1.19 $ 0.95 25 Diluted $ 1.17 $ 0.75 56 EPS EBITDA Before $ 284.1 $ 242.2 17 Net $ 165.8 $ 105.7 57 Charges/ Income Gains ^ (GAAP) (c) Year to Date Operating Income

Before Charges & Gains GAAP

Nine Months Ended September Nine Months Ended September 30, 30,

Operating Income (loss) 2020 2019 % Operating 2020 2019 % Before Change Income Change Charges/ (loss) Gains ^ (a) Plumbing $ 350.9 $ 317.0 11 Plumbing $ 330.6 $ 307.9 7

Doors & 147.2 127.9 15 Doors & 143.5 122.5 17 Security Security Cabinets 179.9 170.7 5 Cabinets 163.1 134.0 22

Corporate (67.3 ) (58.4 ) (15 ) Corporate (69.0 ) (58.4 ) (18 ) Expenses Expenses Total Operating Total Income $ 610.7 $ 557.2 10 Operating $ 568.2 $ 506.0 12 Before Income Charges/ (GAAP) Gains Earnings Per Share Diluted Before EPS Charges/ (GAAP) Gains ^ (b) Diluted $ 2.94 $ 2.60 13 Diluted $ 2.78 $ 2.32 20 EPS EBITDA Before $ 726.6 $ 672.3 8 Net $ 390.8 $ 327.3 19 Charges/ Income Gains ^ (GAAP) (c) (a) (b) (c) For definitions of Non-GAAP measures, see Definitions of Terms page FORTUNE BRANDS HOME & SECURITY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (GAAP)

(In millions)

(Unaudited)

September December 30, 31,

2020 2019

Assets Current assets Cash and cash equivalents $ 464.5 $ 387.9

Accounts receivable, net 765.2 624.8

Inventories 738.3 718.6

Other current assets 170.0 166.9

Total current assets 2,138.0 1,898.2

Property, plant and equipment, net 791.7 824.2

Goodwill 2,085.2 2,090.2

Other intangible assets, net of accumulated 1,111.2 1,168.9 amortization Other assets 392.9 309.8

Total assets $ 6,519.0 $ 6,291.3

Liabilities and equity Current liabilities Short-term debt $ - $ 399.7

Accounts payable 544.1 460.0

Other current liabilities 590.9 549.6

Total current liabilities 1,135.0 1,409.3

Long-term debt 2,086.5 1,784.6

Deferred income taxes 149.2 157.2

Other non-current liabilities 519.7 512.4

Total liabilities 3,890.4 3,863.5

Stockholders' equity 2,628.6 2,426.6

Noncontrolling interests - 1.2

Total equity 2,628.6 2,427.8

Total liabilities and equity $ 6,519.0 $ 6,291.3

FORTUNE BRANDS HOME & SECURITY, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions)(Unaudited) Nine Months Ended September 30,

2020 2019

Operating activities Net income $ 390.8 $ 327.3

Depreciation and 116.9 112.7 amortization Recognition of actuarial 0.6 2.1 losses Non-cash lease expense 26.6 26.5

Deferred taxes (17.0 ) (1.8 )

Equity in losses of 4.7 - affiliate Gains on equity investments (6.6 ) -

Asset impairment charges 22.5 31.2

Other noncash items 38.1 24.3

Changes in assets and (69.8 ) (168.5 ) liabilities, net Net cash provided by $ 506.8 $ 353.8 operating activities Investing activities Capital expenditures $ (66.2 ) $ (82.4 )

Proceeds from the 1.5 4.2 disposition of assets Cost of investments in (59.4 ) - equity securities Other investing activities, - 0.1 net Net cash used in investing $ (124.1 ) $ (78.1 ) activities Financing activities Increase in debt, net $ (100.0 ) $ 14.3

Proceeds from the exercise 56.0 6.9 of stock options Treasury stock purchases (150.0 ) (100.0 )

Dividends to stockholders (99.9 ) (92.3 )

All other (14.9 ) (30.8 )

Net cash used in financing $ (308.8 ) $ (201.9 ) activities Effect of foreign exchange 1.9 (1.2 ) rate changes on cash Net increase in cash and $ 75.8 $ 72.6 cash equivalents Cash, cash equivalents and 394.9 270.7 restricted cash* at beginning of period Cash, cash equivalents and $ 470.7 $ 343.3 restricted cash* at end of period Nine Months Ended September 2020 Full Year FREE CASH FLOW 30,

2020 2019 Approximation

Free Cash Flow** $ 498.1 $ 282.5 $ 590.0 - 620.0

Add:

Capital expenditures 66.2 82.4 120.0 - 150.0

Less:

Proceeds from the 1.5 4.2 1.5 disposition of assets Proceeds from the exercise 56.0 6.9 56.0 of stock options Cash Flow From Operations $ 506.8 $ 353.8 $ 652.5 - 712.5 (GAAP) * Restricted cash of $1.0 million and $5.2 million is included in Other current assets and Other assets, respectively, as of September 30, 2020 and restricted cash of $0.8 million and $6.3 million is included in Other current assets and Other assets, respectively, as of September 30, 2019. ** Free cash flow is cash flow from operations calculated in accordance with U.S. generally accepted accounting principles ("GAAP") less net capital expenditures (capital expenditures less proceeds from the disposition of assets including property, plant and equipment, and the proceeds from the exercise of stock options). Free cash flow does not include 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.CONDENSED CONSOLIDATED STATEMENTS OF INCOME (GAAP)

(In millions, except per share amounts)

(Unaudited)

Three Months Ended September Nine Months Ended September 30, 30,

2020 2019 % 2020 2019 % Change Change

Net Sales $ 1,652.1 $ 1,459.0 13 $ 4,430.6 $ 4,294.1 3

Cost of 1,071.5 934.8 15 2,873.9 2,773.5 4 products sold Selling, general and 328.3 311.3 5 918.4 943.9 (3 ) administrative expenses Amortization 10.5 9.9 6 31.1 30.0 4 of intangible assets Asset - 29.5 (100 ) 22.5 29.5 (24 ) impairment charges Restructuring 1.6 5.5 (71 ) 16.5 11.2 47 charges Operating 240.2 168.0 43 568.2 506.0 12 income Interest 20.1 23.6 (15 ) 64.4 71.8 (10 ) expense Other income, (2.1 ) (0.3 ) (600 ) (13.4 ) (2.2 ) (509 ) net Income before 222.2 144.7 54 517.2 436.4 19 taxes Income tax 54.0 39.0 38 121.7 109.1 12

Income after $ 168.2 $ 105.7 59 $ 395.5 $ 327.3 21 tax Equity in 2.4 - 100 4.7 - 100 losses of affiliate Net income $ 165.8 $ 105.7 57 $ 390.8 $ 327.3 19

Less: 1.2 0.1 1,100 1.3 (0.5 ) 360 Noncontrolling interests Net income attributable to Fortune Brands $ 164.6 $ 105.6 56 $ 389.5 $ 327.8 19 Home & Security, Inc. Earnings Per Common Share, Diluted: Net income $ 1.17 $ 0.75 56 $ 2.78 $ 2.32 20

Diluted 140.5 140.9 - 140.0 141.4 (1 ) Average Shares Outstanding DILUTED EPS BEFORE CHARGES/GAINS RECONCILIATION For the three months ended September 30, 2020, diluted EPS before charges/ gains is net income less noncontrolling interests calculated on a diluted per-share basis excluding $4.0 million ($4.6 million after tax or $0.03 per diluted share) of restructuring and other charges, the impact from actuarial losses associated with our defined benefit plans of $0.6 million ($0.4 million after tax or $0.01 per diluted share) and a net tax benefit of $2.1 million ($0.02 per diluted share). For the nine months ended September 30, 2020, diluted EPS before charges/ gains is net income less noncontrolling interests calculated on a diluted per-share basis excluding $20.0 million ($16.7 million after tax or $0.11 per diluted share) of restructuring and other charges, intangible asset impairment charges of $22.5 million ($17.6 million after tax or $0.13 per diluted share), gains on equity investments of $11.0 million ($8.3 million net of tax or $0.06 per diluted share), the impact from actuarial losses associated with our defined benefit plans of $0.6 million ($0.4 million after tax) and a tax benefit of $4.2 million ($0.02 per diluted share). For the three months ended September 30, 2019, diluted EPS before charges/ gains is net income less noncontrolling interests calculated on a diluted per-share basis excluding $5.7 million ($4.4 million after tax or $0.03 per diluted share) of restructuring and other charges, intangible asset impairment charges of $29.5 million ($22.5 million after tax or $0.16 per diluted share), the impact from actuarial losses associated with our defined benefit plans of $2.1 million ($1.6 million after tax or $0.01 per diluted share) and a tax benefit of $0.2 million. For the nine months ended September 30, 2019, diluted EPS before charges/ gains is net income less noncontrolling interests calculated on a diluted per-share basis excluding $21.7 million ($16.6 million after tax or $0.11 per diluted share) of restructuring and other charges, intangible asset impairment charges of $29.5 million ($22.5 million after tax or $0.16 per diluted share), the impact from actuarial losses associated with our defined benefit plans of $2.1 million ($1.6 million after tax or $0.01 per diluted share) and a net tax benefit of $0.6 million. Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 % 2020 2019 % Change Change Earnings Per Common Share - Diluted Diluted EPS Before $ 1.19 $ 0.95 25 $ 2.94 $ 2.60 13 Charges/Gains ^(b) Restructuring and (0.03 ) (0.03 ) - (0.11 ) (0.11 ) - other charges Asset impairment - (0.16 ) 100 (0.13 ) (0.16 ) 19 charges ^(d) Gains on equity - - - 0.06 - - investments ^(e) Defined benefit plan (0.01 ) (0.01 ) - - (0.01 ) 100 actuarial losses Tax items 0.02 - - 0.02 - -

Diluted EPS (GAAP) $ 1.17 $ 0.75 56 $ 2.78 $ 2.32 20

RECONCILIATION OF FULL YEAR 2020 EARNINGS GUIDANCE TO GAAP The Company is targeting diluted EPS before charges/gains to be in the range of $4.03 to $4.11 per share. For the full year, on a GAAP basis, the Company is targeting diluted EPS to be in the range of $3.85 to $3.93 per share and including the full year impact of previously announced restructuring actions. Reconciliation of non-GAAP diluted EPS guidance to GAAP diluted EPS guidance cannot be provided without unreasonable efforts on a forward-looking basis due to the high variability and low visibility with respect to gains and losses associated with our defined benefit plans and restructuring and other charges, which are excluded from the diluted EPS before charges/gains. In addition, the Company's GAAP EPS range assumes the Company incurs no gains or losses associated with its defined benefit plans during 2020. (b) (d) (e) For definitions of Non-GAAP measures, see Definitions of Terms page FORTUNE BRANDS HOME & SECURITY, INC.

(In millions)(Unaudited) RECONCILIATION OF EBITDA BEFORE CHARGES/GAINS TO NET INCOME Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 % Change 2020 2019 % Change

EBITDA BEFORE $ 284.1 $ 242.2 17 $ 726.6 $ 672.3 8 CHARGES/GAINS ^ (c)

Depreciation* $ (26.7 ) $ (26.7 ) - $ (81.8 ) $ (80.8 ) (1 )

Amortization of (10.5 ) (9.9 ) (6 ) (31.1 ) (30.0 ) (4 ) intangible assets Restructuring (4.0 ) (5.7 ) 30 (20.0 ) (21.7 ) 8 and other charges Interest (20.1 ) (23.6 ) 15 (64.4 ) (71.8 ) 10 expense Asset - (29.5 ) 100 (22.5 ) (29.5 ) 24 impairment charges ^(d) Equity in (2.4 ) - (100 ) (4.7 ) - (100 ) losses of affiliate Gains on equity - - - 11.0 - 100 investments ^ (e) Defined benefit (0.6 ) (2.1 ) 71 (0.6 ) (2.1 ) 71 plan actuarial losses Income taxes (54.0 ) (39.0 ) (38 ) (121.7 ) (109.1 ) (12 )

Net Income $ 165.8 $ 105.7 57 $ 390.8 $ 327.3 19 (GAAP) * Depreciation excludes accelerated depreciation expense of ($2.1) million and ($4.0) million for the three and nine months ended September 30, 2020, respectively. For the nine months ended September 30, 2019 depreciation excludes accelerated depreciation expense of ($1.9) million. Accelerated depreciation is included in restructuring and other charges. CALCULATION OF NET DEBT-TO-EBITDA BEFORE CHARGES/GAINS RATIO As of September 30, 2020 Short-term debt - ** Long-term debt 2,086.5 ** Total debt 2,086.5

Less: Cash and cash 464.5 equivalents ** Net debt (1) 1,622.0

For the twelve months ended September 30, 2020 EBITDA before 974.2 charges/gains (2) ^(c) Net debt-to-EBITDA 1.7 before charges/ gains ratio (1/ 2) ** Amounts are per the unaudited Condensed Consolidated Balance Sheet as of September 30, 2020. Three Nine Twelve Months Months Months Ended Ended Ended December September September 31, 30, 30, 2019 2020 2020

EBITDA BEFORE $ 247.6 $ 726.6 $ 974.2 CHARGES/GAINS ^ (c) Depreciation*** $ (28.6 ) $ (81.8 ) $ (110.4 )

Amortization of (11.4 ) (31.1 ) (42.5 ) intangible assets Restructuring (2.3 ) (20.0 ) (22.3 ) and other charges Interest (22.4 ) (64.4 ) (86.8 ) expense Asset (12.0 ) (22.5 ) (34.5 ) impairment charges ^(d) Equity in - (4.7 ) (4.7 ) losses of affiliate Gains on equity - 11.0 11.0 investments ^ (e) Defined benefit (32.0 ) (0.6 ) (32.6 ) plan actuarial losses Income taxes (34.9 ) (121.7 ) (156.6 )

Net Income $ 104.0 $ 390.8 $ 494.8 (GAAP) *** Depreciation excludes accelerated depreciation expense of ($4.0) million for the nine months ended September 30, 2020. Accelerated depreciation is included in restructuring and other charges. (c) (d) (e) For definitions of Non-GAAP measures, see Definitions of Terms page FORTUNE BRANDS HOME & SECURITY, INC.(In millions, except per share amounts)(Unaudited) Three Months Ended September Nine Months Ended September 30, 30, 2020 2019 % 2020 2019 % Change Change Net Sales (GAAP) Plumbing $ 590.6 $ 514.1 15 $ 1,564.4 $ 1,478.8 6

Doors & 406.7 355.2 14 1,052.7 1,017.6 3 Security Cabinets 654.8 589.7 11 1,813.5 1,797.7 1

Total Net $ 1,652.1 $ 1,459.0 13 $ 4,430.6 $ 4,294.1 3 Sales Operating Income (loss) Plumbing $ 116.6 $ 112.0 4 $ 330.6 $ 307.9 7

Doors & 66.8 50.1 33 143.5 122.5 17 Security Cabinets 82.1 25.1 227 163.1 134.0 22

Corporate (25.3 ) (19.2 ) (32 ) (69.0 ) (58.4 ) (18 ) expenses Total $ 240.2 $ 168.0 43 $ 568.2 $ 506.0 12 Operating Income (GAAP) OPERATING INCOME BEFORE CHARGES/GAINS RECONCILIATION Operating Income (loss) Before Charges/Gains ^(a) Plumbing $ 123.0 $ 112.0 10 $ 350.9 $ 317.0 11

Doors & 66.6 51.6 29 147.2 127.9 15 Security Cabinets 80.0 58.8 36 179.9 170.7 5

Corporate (25.4 ) (19.2 ) (32 ) (67.3 ) (58.4 ) (15 ) expenses Total Operating 244.2 203.2 20 610.7 557.2 10 Income Before Charges/Gains ^(a) Restructuring and other (4.0 ) (5.7 ) 30 (20.0 ) (21.7 ) 8 charges ^(1) (2) Asset - (29.5 ) 100 (22.5 ) (29.5 ) 24 impairment charges ^(d) Total $ 240.2 $ 168.0 43 $ 568.2 $ 506.0 12 Operating Income (GAAP) (1) Restructuring charges are costs incurred to implement significant cost reduction initiatives and include workforce reduction costs. (2) "Other charges" represent charges or gains 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, accelerated depreciation expense, impairments related to previously closed facilities and losses on the sale of closed facilities. In total, we recognized a charge of $2.4 million and $3.5 million for the three and nine months ended September 30, 2020, respectively, and $0.2 million and $10.5 million for the three and nine months ended September 30, 2019, respectively.

In our Doors & Security segment, other charges also includes an acquisition-related inventory step-up expense (Fiberon) classified in cost of products sold of $1.8 million for the nine months ended September 30, 2019. (a) (d) For definitions of Non-GAAP measures, see Definitions of Terms page FORTUNE BRANDS HOME & SECURITY, INC.Reconciliation of Income Statements - GAAP to Before Charges/Gains InformationThree Months Ended September 30,in millions, except per share amounts(unaudited) Before Charges/Gains adjustments Restructuring Defined Asset Before benefit

plan Tax Charges/ GAAP and other actuarial impairments items Gains (2)

(unaudited) charges (1) losses (Non-GAAP)

2020 THIRD QUARTER

Net Sales $ 1,652.1 - - - -

Cost of 1,071.5 (2.4 ) - - - products soldSelling,general & 328.3 - - - - administrativeexpensesAmortization 10.5 - - - - of intangibleassetsRestructuring 1.6 (1.6 ) - - - charges Operating 240.2 4.0 - - - 244.2Income Interest 20.1 - - - - expenseOther income, (2.1 ) - (0.6 ) - - netIncome before 222.2 4.0 0.6 - - 226.8taxes Income tax 54.0 1.2 0.2 - 2.1

Income after $ 168.2 2.8 0.4 - (2.1 ) $ 169.3tax Equity in 2.4 (0.6 ) - - - losses ofaffliate Net Income 165.8 - - - -

Less: 1.2 (1.2 ) - - - Noncontrollinginterests (1) Net Incomeattributableto Fortune $ 164.6 4.6 0.4 - (2.1 ) $ 167.5Brands Home &Security, Inc. Diluted 140.5 140.5Average SharesOutstanding Diluted EPS 1.17 1.19

2019

Net Sales $ 1,459.0 - - - -

Cost of 934.8 0.2 - - - products soldSelling,general & 311.3 (0.4 ) - - - administrativeexpensesAmortization 9.9 - - - - of intangibleassetsAsset 29.5 - - (29.5 ) - impairmentchargesRestructuring 5.5 (5.5 ) - - - charges Operating 168.0 5.7 - 29.5 - 203.2Income Interest 23.6 - - - - expenseOther income, (0.3 ) - (2.1 ) - - netIncome before 144.7 5.7 2.1 29.5 - 182.0taxes Income tax 39.0 1.4 0.5 7.0 0.2

Income after $ 105.7 4.3 1.6 22.5 (0.2 ) $ 133.9tax Equity in - - - - - losses ofaffliate Net Income 105.7 - - - -

Less: 0.1 (0.1 ) - - - Noncontrollinginterests (1) Net Incomeattributableto Fortune $ 105.6 4.4 1.6 22.5 (0.2 ) $ 133.9Brands Home &Security, Inc. Diluted 140.9 140.9Average SharesOutstanding Diluted EPS 0.75 0.95

(1) Restructuring and other charges includes a loss in 2020 that reflectsquarterly amortization of differences between our investment in FloTechnologies and the carrying value of their equity. Includes noncontrollinginterests share of restructuring and other charges in our China plumbingoperations.(2) Tax items for the three months ended September 30, 2020 representadjustments to previously recorded restructuring-related charges and foreignexchange movement related to the impact of the Tax Cuts and Jobs Act of 2017(the "Tax Act") recorded in earlier periods. Tax items for the three monthsended September 30, 2019 represent foreign exchange movement related to theimpact of the Tax Act recorded in earlier periods. FORTUNE BRANDS HOME & SECURITY, INC.Reconciliation of Income Statements - GAAP to Before Charges/Gains InformationNine Months Ended September 30,in millions, except per share amounts(unaudited) Before Charges/Gains adjustments Restructuring Defined Asset Equity Before benefit plan Tax Charges/ GAAP and other actuarial impairments investment items Gains (2) (unaudited) charges (1) losses (Non-GAAP) 2020 YEAR TO DATE

Net Sales $ 4,430.6 - - - - -

Cost of 2,873.9 (4.7 ) - - - - products soldSelling,general & 918.4 1.2 - - - - administrativeexpensesAmortization 31.1 - - - - - of intangibleassetsAsset 22.5 - - (22.5 ) - - impairmentchargesRestructuring 16.5 (16.5 ) - - - - charges Operating 568.2 20.0 - 22.5 - - 610.7Income Interest 64.4 - - - - - expenseOther income, (13.4 ) - (0.6 ) - 11.0 - netIncome before 517.2 20.0 0.6 22.5 (11.0 ) - 549.3taxes Income taxes 121.7 5.6 0.2 4.9 (2.7 ) 4.2

Income after $ 395.5 14.4 0.4 17.6 (8.3 ) (4.2 ) $ 415.4tax Equity in 4.7 (1.0 ) - - - - losses ofaffiliate Net Income 390.8 - - - - -

Less: 1.3 (1.3 ) - - - - Noncontrollinginterests (1) Net Incomeattributableto Fortune $ 389.5 16.7 0.4 17.6 (8.3 ) (4.2 ) $ 411.7Brands Home &Security, Inc. Diluted 140.0 140.0Average SharesOutstanding Diluted EPS 2.78 2.94

2019

Net Sales $ 4,294.1 - - - - -

Cost of 2,773.5 (7.1 ) - - - - products soldSelling,general & 943.9 (3.4 ) - - - - administrativeexpensesAmortization 30.0 - - - - - of intangibleassetsAsset 29.5 - - (29.5 ) - - impairmentchargesRestructuring 11.2 (11.2 ) - - - - charges Operating 506.0 21.7 - 29.5 - - 557.2Income Interest 71.8 - - - - - expenseOther income, (2.2 ) - (2.1 ) - - - netIncome before 436.4 21.7 2.1 29.5 - - 489.7taxes Income taxes 109.1 4.7 0.5 7.0 - 0.6

Income after $ 327.3 17.0 1.6 22.5 - (0.6 ) $ 367.8tax Net Income 327.3 - - - - -

Less: (0.5 ) 0.4 - - - - Noncontrollinginterests (1) Net Incomeattributableto Fortune $ 327.8 16.6 1.6 22.5 - (0.6 ) $ 367.9Brands Home &Security, Inc. Diluted 141.4 141.4Average SharesOutstanding Diluted EPS 2.32 2.60

(1) Restructuring and other charges includes a loss in 2020 that reflectsquarterly amortization of differences between our investment in FloTechnologies and the carrying value of their equity. Includes noncontrollinginterests share of restructuring and other charges in our China plumbingoperations.(2) Tax items for the nine months ended September 30, 2020 representadjustments to previously recorded restructuring-related charges, and activityrelated to the Tax Cuts and Jobs Act of 2017 (the "Tax Act") recorded inearlier periods, including foreign exchange impact. Tax items for the ninemonths ended September 30, 2019 represent foreign exchange movement related tothe impact of the Tax Act recorded in earlier periods. FORTUNE BRANDS HOME & SECURITY, INC. BEFORE CHARGES/GAINS OPERATING MARGIN TO OPERATING MARGIN (Unaudited) Three Months Ended September 30, 2020 2019 Change

PLUMBING Before charges/gains 20.8% 21.8% (100) bps operating margin Restructuring (1.1%) - & other charges Operating 19.7% 21.8% (210) bps margin



DOORS & SECURITY Before charges/gains 16.4% 14.5% 190 bps operating margin Restructuring - (0.4%) & other charges Operating 16.4% 14.1% 230 bps margin



CABINETS

Before charges/gains 12.2% 10.0% 220 bps operating margin Restructuring 0.3% (0.7%) & other charges Asset - (5.0%) impairment charges Operating 12.5% 4.3% 820 bps margin



TOTAL COMPANY

Before charges/gains 14.8% 13.9% 90 bps operating margin Restructuring (0.3%) (0.4%) & other charges Asset - (2.0%) impairment charges Operating 14.5% 11.5% 300 bps margin Operating margin is calculated as operating income derived in accordance with GAAP divided by GAAP net sales. Before charges/gains operating margin is operating income derived in accordance with GAAP excluding restructuring and other charges and asset impairment charges, divided by GAAP net sales. Before charges/gains operating margin is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the returns generated by FBHS and its business segments. 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. FORTUNE BRANDS HOME & SECURITY, INC. BEFORE CHARGES/GAINS OPERATING MARGIN TO OPERATING MARGIN (Unaudited) Twelve Months Ended

December 31,

2020

PLUMBING Before charges/gains operating 22.0% margin Restructuring & other charges (0.4%)

Asset Impairment charge (0.6%)

Operating margin 21.0%

TOTAL COMPANY Before charges/gains operating 13.9% margin Restructuring & other charges (0.4%)

Asset impairment charges (0.3%)

Operating margin 13.2%

Operating margin is calculated as operating income derived in accordance with GAAP divided by GAAP net sales. Before charges/gains operating margin is operating income derived in accordance with GAAP excluding restructuring and other charges and asset impairment charges, divided by GAAP net sales. Before charges/gains operating margin is a measure not derived in accordance with GAAP. Management uses this measure to evaluate the returns generated by FBHS and its business segments. 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.

Definitions of Terms: Non-GAAP Measures (a) Operating income before charges/gains is operating income 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 evaluate the returns generated by the Company and its business segments. 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) Diluted EPS before charges/gains is net income less noncontrolling interests calculated on a diluted per-share basis excluding restructuring and other charges, asset impairment charges, gains on equity investments, amortization of differences between equity investment and the carrying value of equity, actuarial losses associated with our defined benefit plans and tax items. 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. (c) EBITDA before charges/gains is net income derived in accordance with GAAP excluding depreciation, amortization of intangible assets, restructuring and other charges, interest expense, asset impairment charges, equity in loss of affiliate, gains on equity investments, defined benefit plan actuarial losses and income taxes. EBITDA before charges/gains is a measure not derived in accordance with GAAP. Management uses this measure to assess returns generated by the Company. 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. (d) Asset impairment charges for the nine months ended September 30, 2020 represent pre-tax impairment charges of $22.5 million related to indefinite-lived tradenames in our Cabinets and Plumbing segments. Asset impairment charges for the three and nine months ended September 30, 2019 represent a pre-tax impairment of $29.5 million related to an indefinite-lived tradename in our Cabinets segment. It also includes a $1.7 million fair value asset impairment expense classified in cost of products sold, for the nine months ended September 30, 2019 associated with an idle manufacturing facility in our Doors & Security segment. (e) Gains on equity investments for the three and nine months ended September 30, 2020 represents gains related to our 2020 investments in Flo Technologies. View source version on businesswire.com: https://www.businesswire.com/news/home/20201028006084/en/

CONTACT: INVESTOR and MEDIA CONTACT: Matthew Skelly 847-484-4573 Investor.Questions@FBHS.com