Fortune Brands Home & Security, Inc. (NYSE:FBHS) Q2 2019 Earnings Conference Call - Final Transcript

Aug 01, 2019 • 04:30 pm ET


Fortune Brands Home & Security, Inc. (NYSE:FBHS) Q2 2019 Earnings Conference Call - Final Transcript


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Patrick Hallinan

of, demand drivers critical to the US housing market, in particular, housing affordability, employment and wage growth, and by our business performance, specifically the momentum of our Plumbing business in the US and China. the demand strength in the market segments to which we are pivoting our Cabinet business. And Fiberon's distribution gain. We expect 2019 free cash flow of approximately $480 million to $500 million, which includes the accelerated investments in capacity and inventory to support new composite decking customers. We anticipate a cash conversion rate at or above 95%.

The annual EPS outlook includes the following assumptions; interest expense of around $94 million, a tax rate between 25% and 26%, and average fully diluted shares of approximately 142 million.

In summary, our businesses are executing well in a soft market and continuing to deliver structural improvement that will better reflect as we move into the fourth quarter and next year. During 2019, we anticipate our balanced approach of cost management, supply chain changes and price will fully offset tariff and other inflation within the year. We will improve our overall margin by approximately 50 basis points and drive 5.5% to 6.5% sales growth or approximately 4% growth on an organic basis in a market growing 2% to 2.5%. Our teams continue to execute well and manage expenses tightly while making rapid progress on our strategic initiatives.

I will now pass the call back to Chris for some closing remarks.

Christopher Klein

Before we begin the Q&A session, let me build on Pat's closing comments and leave you with a few high level thoughts as well. We are operating at a very intense level right now across our company, transforming supply chains, executing pricing actions, simultaneously ramping up and taking down capacity to reposition businesses, launching innovation, expanding and growing categories and channels, integrating acquisitions and partnerships and winning new business.

Over the past nine months, we've been doing this in a decelerating market with tight controls on expenses and capital. As we turn the corner and move into a gradually accelerating home products market in the latter part of this year and into 2020, we will see some significant leverage and an even higher degree of impact from all of the actions we've taken to position the business for the next wave of growth. And while I'm pleased with our first half results, I'm even more excited about the growth and margin opportunities in front of us.

With that, I will now pass the call back to Brian.

Brian Lantz

Thanks, Chris. That concludes our prepared remarks in the second quarter of 2019. We will now begin taking a limited number of questions. Since there maybe a number of you would like to ask a question, I'll ask that you limit your initial questions to two and then re-enter the queue to ask additional questions.

I will now turn the call back over to the operator to begin the question-and-answer session. Operator?