THE FBHS ADVANTAGE & STRONG HOUSING
DRIVING OUTPERFORMANCE
Investor Presentation April 2021
Learn About the Opportunities
Our Commitment to ESG
FBHS Overview
The FBHS Advantage
The Housing Market
Financial Outperformance and Outlook
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This presentation contains forward-looking statements and uses Non-GAAP information. For more, please read our Disclaimer Message at the end of this presentation.
Elevating our Focus on ESG to Drive Long-term Shareholder Value
Environmental● Suite of eco-friendly plumbing,
doors, and decking products contribute to efforts in water and forest conservation
● Transitioned to a more robust Environmental, Health & Safety web platform to improve data collection and decision making
● Evaluating the TCFD framework and developing a carbon mitigation strategy and goals
View our ESG Report:www.fbhs.com/
global-citizenship/esg
Social● Laser-focused on worker safety,
especially during pandemic; FBHS OSHA recordable incident and lost-time rates are better than benchmarks
● Commitment to be a leader in social change, including unconscious bias training for employees, employee resource groups, joining the CEO Action for Diversity & Inclusion and the Kellogg Foundation Expanding Equity Program
Governance● Broadened ESG oversight
through the Nominating, Environmental, Social & Governance Committee of the Board of Directors
● Adopted aspects of GRI and SASB as key guideposts to frame ESG initiatives and strategic plan
● Board member refreshment increased diversity and independent oversight
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Fulfilling the Dreams of HomeFortune Brands (NYSE: FBHS) is a home and security products company built on industry-leading brands and innovative products for kitchens, bathrooms, entryways and outdoor living spaces.
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Products that are made from recycled materials
Products that conserve energy
Products that protect people
Products that support the critical home industry
#1 Market share
in N.A. cabinets
#1 Fiberglass & storm door
system brands
#1 North American padlocks brand
Leadingcap. composite
& PVC eco-decking &
railing brand
Products that save water
#1 North American
consumer faucet brand
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Company Overview
Attractive, consumer-driven categories with leading brands and strong channel positions
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51%
27%
22%
PlumbingCabinetsOutdoors & Security
FBHS Net Profit Source% Of Total FBHS as of YE 2020
Plumbing $2.2BCabinets $2.5BOutdoors & Security $1.4B
FY20 Sales
Business Mix by Channel*
Business Mix by End Market*
U.S. Home Centers 30%Wholesale 25%Dealer & Specialty Retail 19%Other Retail 6%Builder Direct 4%International 16%
Repair & Remodel 50%SF New Construction 23%Multi-Family & Commercial 10%International 16%
Within our Key N.A. Residential Market*
Repair & Remodel 65%New Construction 35%
*Company data for the year ended December 31, 2020.
$6.1BNet Sales YE 2020
Net Profit represents segment operating income before charges and gains, excluding Corporate G&A expense.
Increasing Shareholder Value: Leveraging the FBHS Advantage to drive outsized opportunities in a strong housing market
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Growth Above Market
Margin Improvement
Lower Organic
Volatility
Increasing Shareholder Value
Driving Outperformance
=
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The FBHS AdvantageThe
FBHS Advantage + Strong
Housing Market
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The FBHS Advantage:It's What Sets Us Apart –Outperforming in All Cycles
The FBHS
Advantage
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Deploying the FBHS Advantage Across the Organization to Drive Revenue & Profit Growth● Strong foundation of consumer-driven categories,
industry-leading brands and strong channel positions
● Leveraging core capabilities / centers of excellence. Examples include:
– Business simplification
– Category management– E-commerce / digital enablement
– Supply chain & next-gen sourcing
● Prioritizing investments to the most attractive opportunities
● Leveraging synergies across brands from channel and distribution expertise and broad market insight
● Re-basing cost platforms with more efficient SG&A
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The FBHS Advantage in Action
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Acquired Fiberon and leveraged Therma-Tru's strong wholesale distribution network to grow Fiberon brand awareness and customer reach.
Recent acquisition of LARSON to benefit from synergies as being part of larger Outdoors & Security business.
Brand Building and Channel / Distribution Synergies
FBHS' advantaged portfolio approach allows for synergies created within our operating companies. Operating Councils across brands share best practices and common core capabilities to create fuel for growth and enhance margins – a significant investment made and a multiplying effect on returns.
Leveraging Cross-Company Experience
Global and indirect sourcing, freight and other common core competencies are centrally developed and leveraged at FBHS to get advantaged cost efficiencies for our leading brands.
Global Supply Chain Synergies
The FBHS Advantage Drives Outperformance and Increases Shareholder Value Creation
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● Fuel high-potential growth engines and innovation
● Build on sustainable competitive advantages
Growth Above Market
Margin Improvement
Lower Organic Volatility
● Maintain healthy core business
● Take proactive steps to maximize agility and flexibility in a dynamic market
● Be prepared to respond quickly for upside and downside scenarios
● Drive excellence in FBHS Advantage capabilities to unlock fuel and margin
● Ensure lean and continuous improvement culture
Prioritize investment to best projects
Significant free cash flow generation creates consistent fuel for growth
Return cash to shareholders
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Deploy Capital
Lean operating model
FBHS Advantage capabilities
• Business simplification
• Category management
• E-commerce & digital
• Supply chain & sourcing
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Fuel
Deploying the FBHS Advantage: Execute to Drive Outperformance
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Strong brands
Leading markets (U.S., China)
New product vitality
Advantaged routes to markets
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Grow
Culture of performance, safety & continuous improvement
Empowered, diverse & inclusive teams
Leadership in ESG
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Execute
Housing is a Great
Place to Be
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Strong HousingMarket
Multi-Year Opportunity to Address Significant Shortage in Housing SupplyOur key U.S. housing market has been fundamentally underbuilt over the last decade
Yearly & Cumulative Over/(Under)-Build (In Millions)
-0.6
0.61.0
2003 2004
-3.2
0.30.7
2005 2007
1.3
-0.3
-3.2
0.80.7
2006 20182008
1.0
2009 2010 20142011
0.90.4
-0.5
20162012
-0.6-0.4
0.1
2013
0.4
-0.7-1.4
2015
0.1
-2.0
-0.1
-2.5
2017
-0.3
-2.9
2019
-3.1
2020 2021F
-0.6
0.9
-0.6
0.1 0.0
-0.5-0.8
-0.7 -0.4 -0.1
Cumulative Over/(Under)-Build
Yearly Over/(Under)-Build
2003
0.7
20062005
0.7
2004 2007 2008 20102009 2011 2012 2013 2014 20162015
1.3
0.7
1.6
2018 2019 2020
2.2
2021F
2.4
1.0
1.71.5
1.1 1.21.6
1.31.7 1.7 1.8 1.7 1.7
2017
Housing Demand (In Millions)
Note: Housing demand equals the sum of HH formations, net depletions, natural vacancies and second homes
14Source: U.S. Census, HUD, FBHS Analysis
Attractive Fundamentals Drive Housing Market that is Strong Now and Into the Future
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Favorable Demographics for Housing Formation
Underlying Strong Fundamentals Support Housing & R&R Growth
Affordability & Financing Support Housing Market Growth
Favorable Demographics for Housing Formation
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Millennials: Age 25-35 Population (In Millions)
26.3 26.526.8
27.528.0
28.428.8 29.0 29.1
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25
26
27
28
29
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20182017 2019 2020 2023 20242021 2022 2025
Source: US Census Population Projections
Prime age for first home purchase
● Higher demand for aging-in-place products
● COVID-19 driving demand for independent living
Baby Boomers: Age 60-80 Population (In Millions)
59.861.7
63.565.4
67.168.8 70.2 71.4 72.6
50
55
60
65
70
75
20242017 2018 20232019 202220212020 2025
Living independently longer
● Higher demand for entry-level and first step-up single-family homes
● Continued migration to ex-burbs and suburbs
● Demand for smart home technology
Affordability & Financing Support Housing Market Growth
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Low RelativeInterest RatesFED expected to keep fed fund rates near zero through 2022
High Levels of Home EquityAmericans sitting on record $7T+ of untapped home equity
Healthy Consumer Balance SheetsConsumer balance sheets up $2T during COVID-19
Source: Federal Reserve, Black Knight, J.P. Morgan
Underlying Strong Fundamentals Support R&R Spend
Aging housing stock
High home equity and homeprice appreciation
Tight housing supply
Prioritization of home functionality
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New Construction
R&R65%
Two-thirds of our North American residential sales are tied to the stable and growing R&R market
35%FBHS benefits from R&R stability while capturing upside from new construction activity
Stability + Growth
0%
5%
10%
15%
Families Consistently Spend on R&R through a Variety of Cycles
19Source: HIRI, U.S. Census, FBHS analysis.*Market growth expectations reflect our best estimates of end-market growth for our products and services, weighted based on our exposure.
Historical R&R Growth* (Average of HIRI Home Improvement & Retail Sales of Building Materials)
'11 '14 '15 '16 '17 '18 '19'13'12 '20 '21-23F
Re-value of home driving growth above historical average of 4-6%
FBHS market forecast:5.5% to 7.5% CAGR
Existing Housing Market & Home Investment Trends Have Accelerated and Sustained During COVID-19
20Source: The Farmsworth Group, Harvard Joint Center, Census, John Burns
61%70% 70% 65% 66%
40%
50%
60%
70%
Jul ’20Mar ’20 Mar ‘21May ’20 Sep ’20
Over 90% of homeowners say “the quality and comfort of my home is AS or MOREIMPORTANT to me now compared to before COVID”
DIY Activity Remains Strong(% of Homeowners Starting Projects)
Consumer R&R Priorities
1. Kitchen
2. Backyard
3. Bathroom
4. Flooring
5. Decor (paint, furniture)
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Financial Outperformance and Outlook
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$777
$855 $868$920
$1,018
0
200
400
600
800
1,000
1,20031%Five-Year Growth
2016 2017 2018 2019
Value Continues to Be Created for Stakeholders
Total Net Sales$6.1B
22%
Operating Income$857M
34%
Earnings Per Share$4.19
52%EBITDA
(In Millions) 22
2020
Five-Year Growth
Note: EBITDA, Operating Income and EPS are on a before charges / gains basis
Driving Outperformance in a Variety of Macro Environments in 2020
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Financial Performance Comparison
FY 2020 vs. PY
Net Sales EBITDA EPS
FBHS 6% 11% 29%
Peer Average(1) (~0%) 7% (-12%)
Outperformance +600 BPS +400 BPS +4100 BPS(1) Peers not reporting on calendar fiscal cycles were adjusted to match comparable calendar periods. EPS is GAAP EPS. Source: IHS Markit
Total Shareholder Return (2020)
FBHS
33%Peer Avg.
21%S&P 500
18%
Peer A 45%Peer B 35%Peer C 27%Peer D 26%Peer E 25%Peer F 21%Peer G 18%
Peer H 18%Peer I 17%Peer J 17%Peer K 16%Peer L 14%Peer M 12%Peer N 10%
Peer O 4%Peer P 4%Peer Q 3%Peer R -5%Peer S -9%Peer T -9%
Peer set includes Allegion, AO Smith, Ball, BorgWarner, Dover, Ingersoll-Rand, JELD-WEN, Leggett & Platt, Lennox, Masco, Mohawk, Newell Brands, Owens Corning, Parker Hannifin, Pentair, RPM, Sherwin-Williams, Snap-On, Stanley Black-Decker, Whirlpool; Total shareholder return peer average is weighted by market capitalization
We anticipate Strong End Markets for our Products and Services, Especially in the U.S.
● Expecting +6% to +8% CAGRGlobal Market Outlook
2021 to 2023 Market Growth Expectations*
*Market growth expectations reflect our best estimates of end-market growth for our products and services, weighted based on our exposure. The percentages above reflect 3-year CAGR off 2020 market performance.
● Expecting +6.5% to +8.5% CAGR● U.S. Repair and Remodel (R&R): +5.5% to +7.5%● U.S. New Construction: +8% to +11%
U.S. Market Outlook
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After Strong Execution in 2020, Expecting Leading Growth and Profitability in a Strong Housing Market
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Global Plumbing
Group
Cabinets
Outdoors & Security
FBHS
1 LARSON sales not included in 2020 sales figures2020-2023 net sales growth ranges reflect estimated compound annual growth rates (CAGR) from 2020-2023 based off 2020 performance.
Net Sales: +5.7%1
OI Margin: 14.1%
Net Sales: +8% to +11%OI Margin: 16% to 17%
Net Sales: +8.6%
OI Margin: 22.2%
Net Sales: +7% to +9%OI Margin:
22%+
Net Sales: +3.4%
OI Margin: 10.4%
Net Sales: +6.5% to +9.5%
OI Margin: 14%
Net Sales:+5.2%1
OI Margin:14.5%
Net Sales: +14% to +17%
OI Margin: 17% to 19%
2020 2020-2023 CAGR
Based on 3-Year Market Growth CAGR:
● Global Market: +6% to +8%
● U.S. Market: +6.5% to +8.5%, of which:
– U.S. Repair and Remodel: +5.5% to +7.5%
– U.S. New Construction: +8% to +11%
Based on Market Assumptions:
Fortress Balance Sheet Driving Value for Stakeholders
Long History of Dividend Growth
Strong Free Cash
Flow Generation
Accretive & Strategic Share
Repurchases
No Near-Term Debt
Maturities
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Almost $6 Billion Deployed since 2012
Potential to deploy $3B-$5B+ of capital through 2023 to drive further value creation –almost equaling the amount deployed since the 2011 spin
($ in Millions)
Potential Capital Allocation
Acquisitions & Share Repurchases $2,500 - 4,700
Dividends ~500
Total $3,000 - 5,200
Net Debt to EBITDA 2.0x to 2.5x
Capital Deployment2012 to 20201
Deployment Potential2021 to 20231,2
1 EBITDA is before charges / gains on a continuing operations basis. Potential deployment includes $255 million of share repurchases2 M&A debt capacity assumes target acquired at 10x EV/EBITDA multiple and levered at 2.5x3 Net Debt to EBITDA as of year-end 2020
Significant Capital Deployment Over Next Three Years Drives Growth and Outperformance
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Cash Available to Drive Incremental Value
Source:
Cash $2,200 - 2,500
Added Debt 800 - 2,700
Total $3,000 - 5,200
Capital Allocation
Acquisitions $2,810
Share Repurchases 2,174
Dividends 797
Total $5,781
Net Debt to EBITDA3 2.1x
Cash Deployed
Source:
Cash $3,924
Added Debt 1,857
Total $5,781
($ in Millions)
Our Opportunities Have Never Been Greater
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Brand Expansion Opportunities● New core businesses● Adjacent categories● E-commerce● Cross-branding● China growth
Leading Home Innovation & Trends● Connected products● Digitization of water● Material-conversion / Outdoor living● Home investment trends
External Growth● Generate & strategically deploy capital● M&A and partnerships
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2
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Environment, Social & Governance (ESG) Matters Permeate our Business● ESG principals are foundational to FBHS being
a profitable company, respected employer and responsible corporate citizen.
● Our ESG Report provides a resource to address questions related to specific ESG metrics and initiatives we believe are meaningful to our business, including:
– Safety Targets and Safety Programs
– Employee Health & Wellness Benefits
– Diversity, Equity & Inclusion and Development
– Energy and Water Usage
– Waste and Recycling
– Manufacturing Responsible Products
– Environmentally-Friendly Innovations
– Ethical Standards for Employees & Partners
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View our ESG Report at:
www.fbhs.com/global-citizenship/esg
Disclaimer
Notice on Forward-Looking Statements
This presentation contains certain "forward-looking statements" regarding business strategies, market potential, future financial performance and other matters, including all statements with respect to "next phase," "plan," "plan to win," "continued performance," "what we see," "expected growth," "outlook," "future," "target," "potential" and "guidance" and statements with words such as "will," "believe," "capability," "should," "could," "expect," "estimates" or "projected" or the letter "E". 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 at the time of this presentation. Our views about future performance involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements.
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, including but not limited to changes in the housing market and North American economies, levels of new home construction and repair and remodel, our ability to maintain our competitive positions in our industry, risks associated with acquisitions and other strategic initiatives and investments, access to and availability of labor and raw materials, risks associated with doing business globally, our ability to successfully innovate and other risks described in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or changes to future results over time or otherwise.
Use of Non-GAAP Financial Information
This presentation may include financial measures, including EBITDA before charges/gains, operating income before charges/gains, free cash flow, operating margin before charges/gains, and diluted EPS before charges/gains that are derived based on methodologies other than in accordance with U.S. generally accepted accounting principles (GAAP). We offer these measures to assist investors in assessing our financial performance and liquidity under GAAP, but investors should not rely on these measures as a substitute for any GAAP measure, including net income or operating income. In addition, these measures may be inconsistent with similarly titled measures presented by other companies. All financial information presented herein is unaudited. All data in this report is from continuing operations. For more information, including reconciliations of these non-GAAP financial measures to the most comparable GAAP measures, please visit the "Investor Center" section of the Company's website at www.FBHS.com.
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