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What changed in Fortune Brands Innovations, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Fortune Brands Innovations, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+375 added−245 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in Fortune Brands Innovations, Inc.'s 2023 10-K

375 paragraphs added · 245 removed · 186 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

32 edited+151 added−8 removed32 unchanged
Biggest changeBusiness Segments Following the Separation, we have two business segments: Water Innovations (previously referred to as Plumbing) and Outdoors & Security. Our segments compete on the basis of innovation, fashion, quality, price, service and responsiveness to distributor, retailer and installer needs, as well as end-user consumer preferences. Our markets are very competitive.
Biggest changeOur segments compete on the basis of innovation, fashion, quality, price, service and responsiveness to distributor, retailer and installer needs, as well as end-user consumer preferences. Our markets are very competitive. Approximately 20% of 2023 net sales were to international markets, and sales to two of the Company’s customers, Lowe’s Companies, Inc. (“Lowe’s”) and The Home Depot, Inc.
Driving value through talent. The Company has built a diverse and talented leadership team that is well positioned to execute on our transformation to a more aligned operating model. We believe that investing in our employees is a critical component of our business strategy.
Driving value through talent. The Company has built a diverse and talented leadership team that is well positioned to continue to execute on our transformation to a more aligned operating model. We believe that investing in our employees is a critical component of our business strategy.
Volatility in the prices of commodities and energy used in making and distributing our products impacts the cost of manufacturing our products. Segment Raw Materials Water Innovations Brass, zinc, resins, stainless steel and aluminum Outdoors & Security Wood, aluminum, steel, plastics, resins, glass, vinyl and insulating foam Intellectual property.
Volatility in the prices of commodities and energy used in making and distributing our products impacts the cost of manufacturing our products. Segment Raw Materials Water Brass, zinc, resins, stainless steel and aluminum Outdoors Wood, aluminum, steel, plastics, resins, glass, vinyl and insulating foam Security Steel, zinc, brass and resins Intellectual property.
As part of the Company’s reorganization and shift to a more aligned operating model under one leadership team, we expect to further prioritize activities that are core to brand, innovation, and channel . • Global Supply Chain Excellence - Leveraging our robust, global supply chain to strategically drive scale efficiencies with cutting-edge capabilities. • Digital Transformation - Supporting our products of the future with best-in-class services, technology, data and analytics and using data science to unlock valuable consumer and business insights.
As part of the Company’s reorganization and shift to a more aligned operating model under one leadership team, we expect to continue to prioritize activities that are core to brand, innovation, and channel . • Global Supply Chain Excellence - Leveraging our robust, global supply chain to strategically drive scale efficiencies with cutting-edge capabilities. • Digital Transformation - Supporting our products of the future with best-in-class services, technology, data and analytics and using data science to unlock valuable consumer and business insights.
This includes integrating our digital organization to improve speed to market and further develop a culture that fosters innovation, collaboration and value creation, and developing products supported by service technology, data and analytics. 4 We continue to grow our competencies in these areas, allowing each of our businesses to take advantage of available opportunities for revenue growth and margin improvement, no matter the market environment.
This includes integrating our digital organization to improve speed to market and further develop a culture that fosters innovation, collaboration and value creation, and developing products supported by service technology, data and analytics. 2 We continue to grow our competencies in these areas, allowing each of our businesses to take advantage of available opportunities for revenue growth and margin improvement, no matter the market environment.
The Company provides associates with relevant skills training and provides leadership training for production and distribution associates in a 7 supervisory role and for mid-level office associates.
The Company provides associates with relevant skills training and provides leadership training for production and distribution associates in a supervisory role and for mid-level office associates.
Statements that include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “outlook,” “positioned” 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.
Statements that include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “outlook,” “positioned”, “confident,” and “opportunity” 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.
Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations for our business, operations, financial performance or financial condition, in addition to statements regarding our general business strategies, the market potential of our brands, trends in the housing market, the potential impact of costs, including material and labor costs, the potential impact of inflation, expected capital spending, expected pension contributions, the expected impact of acquisitions, dispositions and other strategic transactions including the expected benefits and costs of the spin-off of MasterBrand, Inc. and the tax-free nature of the spin-off transaction, the anticipated effects of recently issued accounting standards on our financial statements, and other matters that are not historical in nature.
Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations for our business, operations, financial performance or financial condition, in addition to statements regarding our expectations for the markets in which we operate, general business strategies, the market potential of our brands, trends in the housing market, the potential impact of costs, including material and labor costs, the potential impact of inflation, expected capital spending, expected pension contributions, the expected impact of acquisitions, dispositions and other strategic transactions including the expected benefits and costs of the spin-off of MasterBrand, Inc. and the tax-free nature of the spin-off transaction, the anticipated effects of recently issued accounting standards on our financial statements, and other matters that are not historical in nature.
In 2022, we took steps to enhance our benefit plans to further enhance inclusivity by providing enhanced parental support benefits for our U.S. associates, including fertility benefits and specialized support from adoption and surrogacy assistance to pregnancy and post-partum. Many of our businesses also offer paid parental leave.
We recently took steps to enhance our benefit plans to further enhance inclusivity by providing enhanced parental support benefits for our U.S. associates, including fertility benefits and specialized support from adoption and surrogacy assistance to pregnancy and post-partum. Many of our businesses also offer paid parental leave.
Unless the context otherwise requires, references in this Annual Report on Form 10-K to “Fortune Brands,” the “Company,” “we,” “our” or “us” refer to Fortune Brands Innovations, Inc. (formerly known as Fortune Brands Home & Security, Inc.) and its consolidated subsidiaries.
Unless the context otherwise requires, references in this Annual Report on Form 10-K to “Fortune Brands,” the “Company,” “we,” “our” or “us” refer to Fortune Brands Innovations, Inc. and its consolidated subsidiaries.
We continue to look for ways to improve our ESG programs and practices by focusing on ways to improve water conservation, waste reduction, and carbon and climate impact, keep our employees safe, and create a culture where all employees are treated with dignity and respect.
We continue to look for ways to improve our ESG programs and practices by focusing on ways to improve water conservation, waste reduction, and carbon and climate impact, keep our employees safe, and create a culture where all employees are treated with dignity and respect. Business Segments We have three business segments: Water Innovations ("Water"), Outdoors and Security.
As a result of sales seasonality and associated timing of working capital fluctuations, our cash flow from operating activities is typically higher in the second half of the year. Environmental matters.
As a result of sales seasonality and associated timing of working capital fluctuations, our cash flow from operating activities is typically higher in the second half of the year. Laws and Regulations Affecting Our Business.
Our Outdoors & Security segment manufactures and sells fiberglass and steel entry door systems under the Therma-Tru brand, storm, screen and security doors under the Larson brand, composite decking, railing and cladding under the Fiberon brand, and urethane millwork under the Fypon brand.
Our Outdoors segment manufactures and sells fiberglass and steel entry door systems under the Therma-Tru brand, storm, screen and security doors under the Larson brand, composite decking, railing and cladding under the Fiberon brand, urethane millwork under the Fypon brand and wide-opening exterior door systems and outdoor enclosures under the Solar Innovations brand.
Our Employee Safety & Environmental Stewardship Principles set standards for how we maintain a safe work environment and guides our business operations. The Company also has an Environmental, Health & Safety Leadership council composed of representatives from across the Company’s businesses that share best practices and is responsible for driving environmental, health and safety strategy.
Our Employee Safety & Environmental Stewardship Principles set standards for how we maintain a safe work environment and guides our business operations. The Company also has an Environmental, Health & Safety network composed of representatives from across the Company’s businesses that shares best practices and implements environmental, health and safety strategy.
As of December 31, 2022, Fortune Brands had more than 11,200 full-time and part-time employees worldwide (excluding contract workers). Approximately 59% of our workforce is composed of hourly production and distribution associates and the remaining population is composed of associates in an office role. Approximately 3% of employees in the U.S. work under collective bargaining agreements.
As of December 30, 2023, Fortune Brands had more than 11,700 full-time and part-time employees worldwide (excluding contract workers). Approximately 60% of our workforce is composed of hourly production and distribution associates and the remaining population is composed of associates in an office role. Approximately 1% of employees in the U.S. work under collective bargaining agreements.
This segment is increasingly investing in digital trends and “smart” home capabilities. In aggregate, sales to The Home Depot and Lowe’s comprised approximately 22% of net sales of the Water Innovations segment in 2022. This segment’s chief competitors include Masco, Kohler, LIXIL Group, InSinkErator (owned by Whirlpool Corporation), Huida, Hgill, and Jomoo and imported private-label brands. Outdoors & Security.
In aggregate, sales to The Home Depot and Lowe’s comprised approximately 18% of net sales of the Water segment in 2023. This segment’s chief competitors include Masco, Kohler, LIXIL Group, InSinkErator (owned by Whirlpool Corporation), Huida, Hgill, and Jomoo and imported private-label brands. Outdoors.
In aggregate, sales to The Home Depot and Lowe’s comprised approximately 26% of net sales of the Outdoors & Security segment in 2022. 5 Therma-Tru, Larson, Fiberon and Fypon brands compete with Masonite, JELD-WEN, Andersen, Trex, Azek, Plastpro, Pella, and various regional and local suppliers. The Master Lock brand competes with Abus, W.H.
In aggregate, sales to The Home Depot and Lowe’s comprised approximately 29% of net sales of the Outdoors segment in 2023. Therma-Tru, Larson, Fiberon, Fypon and Solar Innovations compete with Masonite, JELD-WEN, Andersen, Trex, Azek, Plastpro, Pella, and various regional and local suppliers. 3 Security.
This segment’s principal customers are home centers, hardware and other retailers, millwork building products and wholesale distributors, industrial distributors and specialty dealers that provide products to the residential new construction market, as well as to the remodeling and renovation markets. In addition, it sells lock systems and fire-resistant safes to locksmiths, industrial and institutional users, and original equipment manufacturers.
This segment sells products principally in the U.S. and Canada. This segment’s principal customers are home centers, hardware and other retailers, millwork building products and wholesale distributors, industrial distributors and specialty dealers that provide products to the residential new construction market, as well as to the remodeling and renovation markets.
Below is a summary of the number of employees by segment and role: Segment Production and Distribution Office Total Water Innovations 1,724 2,123 3,847 Outdoors & Security 4,915 2,310 7,225 Corporate — 164 164 We believe our associates are the key to our success.
Below is a summary of the number of employees by segment and role: Segment Production and Distribution Office Total Water 2,398 2,714 5,112 Outdoors 3,052 999 4,051 Security 1,640 714 2,354 Corporate — 212 212 We believe our associates are the key to our success.
All people leaders were included in our unconscious bias learning program over the past two years, and bi-annual engagement survey fosters our employee listening strategy, providing routine feedback and meaningful action to drive improvement in our culture and DEI awareness. The Company also continued to expand its employee resource groups and diverse partnerships during 2022.
All people leaders were included in our unconscious bias learning program over the past two years, and a bi-annual engagement survey fosters our employee listening strategy, providing routine feedback and meaningful action to drive improvement in our culture and DEI awareness. As of December 30, 2023, Fortune Brands’ workforce is composed of 40% women.
Brady, Hampton, Allegion, Assa Abloy and various imports. The SentrySafe brand competes with Magnum, Fortress and Interlocks. Other Information Raw materials. The table below indicates the principal raw materials used by each of our segments. These materials are available from a number of sources.
Master Lock, American Lock, Yale and August compete s with Abus, W.H. Brady, Hampton, Kwikset, Schlage and various imports, and SentrySafe competes with First Alert, Magnum, Fortress, Stack-On and Fire King. Other Information Raw materials. The table below indicates the principal raw materials used by each of our segments. These materials are available from a number of sources.
Talent Development and Succession We aim to inspire and equip our associates to be successful in their current roles within the organization and help them to develop the skills to build on opportunities to grow their career.
Approximately 38% of hourly production and distribution employees are people of color and 16% of employees in an office role are people of color as of December 30, 2023. 5 Talent Development and Succession We aim to inspire and equip our associates to be successful in their current roles within the organization and help them to develop the skills to build on opportunities to grow their careers.
Historically, Fortune Brands operated a Cabinets business segment that manufactured and sold cabinets and vanities for the kitchen, bath and other parts of the home. On December 14, 2022, the Company completed the separation of its Cabinets business, MasterBrand, Inc. ("MasterBrand"), via a tax-free spin-off transaction (the "Separation"). The Separation created two independent, publicly traded companies.
Comparative prior period amounts have been recast to conform to the new segment presentation. 1 Historically, Fortune Brands operated a Cabinets business segment that manufactured and sold cabinets and vanities for the kitchen, bath and other parts of the home. On December 14, 2022, the Company completed the separation of its Cabinets business, MasterBrand, Inc.
Our Company We are a leading home, security and commercial building products company that competes in attractive long-term growth markets in our product categories.
Our Company We are a leading innovation company focused on creating smarter, safer and more beautiful homes and lives that competes in attractive long-term growth markets in our product categories.
We have leading brands with what we believe to be sustainable competitive advantages in many of our product categories, which we sell primarily in North America and China.
See Note 5, Discontinued Operations, in the consolidated financial statements in Item 8 for additional information. Our Strategy Building on leading business and brand positions in attractive growth and return categories . We have leading brands with what we believe to be sustainable competitive advantages in many of our product categories, which we sell primarily in North America and China.
Although this segment sells products principally in the U.S., China and Canada, this segment also sells in Europe, Mexico, Southeast Asia and South America. Approximately 29% of 2022 net sales were to international markets. This segment sells directly through its own sales force and indirectly through independent manufacturer's representatives, primarily to wholesalers, home centers and mass merchandisers.
Approximately 28% of 2023 net sales were to international markets. This segment sells directly through its own sales force and indirectly through independent manufacturer's representatives, primarily to wholesalers, home centers and mass merchandisers. This segment is increasingly investing in digital trends and “smart” home capabilities.
We also endeavor to create a culture where doing the right thing is embedded in the way we conduct business. Fortune Brands does this through the programs summarized below, and the objectives and related risks of each is overseen by our Board of Directors or its committees.
Fortune Brands does this through the programs summarized below, and the objectives and related risks of each is overseen by our Board of Directors or its committees. 4 Health and Safety Safety is a critical element to Fortune Brands’ growth strategy, integral to Company culture and one of our core values.
In 2022, sales to our top ten customers represented approximately one-half of total sales. Water Innovations. Our Water Innovations segment manufactures or assembles and sells faucets, accessories, kitchen sinks and waste disposals, predominantly under the Moen, ROHL, Riobel, Victoria+Albert, Perrin & Rowe, Aqualisa and Shaws brands.
Our Water segment manufactures or assembles and sells faucets, accessories, kitchen sinks and waste disposals, predominantly under the Moen, ROHL, Riobel, Victoria+Albert, Perrin & Rowe, Aqualisa, Shaws, Emtek and Schaub brands. Although this segment sells products principally in the U.S., China and Canada, this segment also sells in Europe, Mexico, Southeast Asia and South America.
It also manufactures, sources and distributes locks, safety and security devices, and electronic security products under the Master Lock and American Lock brands and fire-resistant safes, security containers and commercial cabinets under the SentrySafe brand. This segment sells products principally in the U.S., Canada, Europe, Central America and Australia. Approximately 10% of 2022 net sales were to international markets.
This segment sells products principally in the U.S., Canada, Europe, Central America, Japan and Australia. Approximately 23% of 2023 net sales of the Security segment were to international markets.
Approximately 20% of 2022 net sales were to international markets, and sales to two of the Company’s customers, Lowe’s Companies, Inc. (“Lowe’s”) and The Home Depot, Inc. (“The Home Depot”), accounted for 12.0% and 11.7% of the Company’s net sales, respectively, in 2022. Sales to all U.S. home centers in the aggregate were approximately 27% of net sales in 2022.
(“The Home Depot”), accounted for 10.9% and 10.2% of the Company’s net sales, respectively, in 2023. Sales to all U.S. home centers in the aggregate were approximately 25% of net sales in 2023. In 2023, sales to our top ten customers represented approximately one-half of total sales. Water.
For the year 6 ended December 31, 2022, our TRIR was 1.16, compared to 1.65 for the year ended December 31, 2021, and our LTR was 0.45, compared to 0.66 for the year ended December 31, 2021. The year-over-year decrease in these numbers is reflective of the focus on improving newly acquired businesses.
For 2023 our TRIR was 0.99, compared to 1.16 for the year ended December 31, 2022 (herein referred to as “2022”), and our LTR was 0.31, compared to 0.45 for 2022 (which figures do not include the ASSA Businesses we acquired from ASSA in 2023).
Reports filed with the SEC are also made available on its website at www.sec.gov. 8
Reports filed with the SEC are also made available on its website at www.sec.gov. 6 I tem 1A. Risk Factors. There are inherent risks and uncertainties associated with our business that could adversely affect our business, financial condition or operating results.
Removed
See Note 5, Discontinued Operations, in the consolidated financial statements in Item 8 for additional information. 3 In addition, during 2022, the Company underwent a reorganization and shifted from a decentralized structure with separate businesses to a more aligned operating model that prioritizes activities that are core to brand, innovation, and channel and placed our global supply chain resources under one leadership team to fully leverage the scale and execution excellence of our total business.
Added
On January 19, 2023, the Board of Directors of the Company approved a change to the Company’s fiscal year end from December 31 to a 52- or 53-week fiscal year ending on the Saturday closest but not subsequent to December 31 of each year, effective as of the commencement of the Company’s fiscal year on January 1, 2023.
Removed
We believe that the newly aligned structure will allow the Company to better drive accelerated growth and productivity. Our Strategy Building on leading business and brand positions in attractive growth and return categories .
Added
This change was made in order to align the Company’s fiscal year with that of its operating businesses and to align the Company’s reporting calendar with how the Company evaluates its businesses. The Company's fiscal 2023 year end is the 52-weeks ended December 30, 2023 (herein referred to as "2023").
Removed
Health and Safety Safety is a critical element to Fortune Brands’ growth strategy, integral to Company culture and one of our core values. This is reflected in our goal of zero safety incidents and through our efforts to create an injury-free workplace.
Added
Effective in the first quarter of 2023, the Company revised its segment reporting from two reportable segments, Water Innovations (referred to as Water) and Outdoors & Security, to three reportable segments, Water, Outdoors and Security.
Removed
The Company is committed to increasing representation of professionals of color and women through new hires and promotions, ensuring an inclusive culture by reducing the barriers to inclusion through our policies, programs, business practices and education and by demonstrating support for racial equality in our communities through outreach and investment.
Added
The change in segment reporting was made to align with changes made in the manner our chief operating decision maker reviews the Company’s operating results in assessing performance and allocating resources.
Removed
As of December 31, 2022, Fortune Brands’ workforce is composed of 40% women. Approximately 25% of hourly production and distribution employees are people of color and 10% of employees in an office role are people of color.
Added
("MasterBrand"), via a tax-free spin-off transaction (the "Separation"). The Separation created two independent, publicly traded companies.
Removed
We now have a dedicated employee resource group for our Women, Black, Hispanic, LGBTQ, Military, and Parents and Caregivers employees that are focused on activating and educating leaders and accelerating an inclusive culture. Our partnerships with Network of Executive Women (Next Up), Plexus and The Historic Alliance for Career Advancement (HACE) support our employee resource groups and talent acquisition teams.
Added
Our Security segment’s products consist of locks, safety and security devices, and electronic security products manufactured, sourced and distributed primarily under the Master Lock, American Lock, Yale and August brands and fire resistant safes, security containers and commercial cabinets manufactured, sourced and distributed under the SentrySafe brand.
Removed
These actions supplement the Company’s (i) inclusive culture councils, which are responsible for setting priorities and initiatives that support an inclusive work environment, and (ii) employee resource groups that support DEI initiatives and provide networking and professional development opportunities.
Added
This segment manufactures and sells key-controlled and combination padlocks, bicycle and cable locks, built-in locker locks, keyed and keyless smart locks, door hardware, automotive, trailer and towing locks, electronic access control solutions, and other specialty safety and security devices for consumer use to hardware, home center and other retail outlets.
Removed
We believe that the cost of complying with the present environmental protection laws, before considering estimated recoveries either from other potentially responsible parties under Superfund or similar state laws or from insurance, will not have a material adverse effect on our competitive position, results of operations, cash flows or financial condition. Available Information. The Company’s website address is www.FBIN.com.
Added
In addition, the segment sells lock systems and fire resistant safes to locksmiths, industrial and institutional users, residential and multi-family housing hardware and service providers, and original equipment manufacturers. In aggregate, sales to The Home Depot and Lowe’s comprised approximately 17% of the net sales of the Security segment in 2023.
Added
We also endeavor to create a culture where doing the right thing is embedded in the way we conduct business.
Added
The Company is committed to increasing representation of qualified professionals of color and women by ensuring an inclusive culture. The Company has a cross-functional inclusive culture council, which sets priorities and initiatives. The Company reinforces fair, equitable, and effective practices across our entire organization through training, enterprise-wide Employee Resource Groups and partnerships with external groups.
Added
Our operations are subject to numerous federal, state and local laws and regulations, both within and outside the U.S., in areas such as environmental protection and climate change, international trade, data privacy, tax, consumer protection, government contracts and others.
Added
We are also subject to import and export controls, tariffs, and other trade-related regulations and restrictions in the countries in which we have operations or otherwise do business. For a more detailed description of the various laws and regulations that impact our business, see Item 1A. Risk Factors.
Added
In the normal course of business, we are also involved in various legal proceedings, including relating to environmental issues.
Added
Compliance with government regulations, including environmental and climate change regulations, has not had, and based on current information and the applicable laws and regulations currently in effect, is not expected to have, a material effect on our capital expenditures, results of operations or competitive position.
Added
However, laws and regulations may be changed, accelerated or adopted in a manner that could impose significant operational restrictions and compliance requirements upon us and that could negatively impact our operating results and financial condition. Available Information. The Company’s website address is www.FBIN.com.
Added
Set forth below are descriptions of those risks and uncertainties that we currently believe to be material, but the risks and uncertainties described below are not the only risks and uncertainties that could adversely affect our business, financial condition or operating results. If any of these risks materialize, our business, financial condition or operating results could suffer.
Added
In this case, the trading price of our common stock could decline, and you may lose all or part of your investment. Industry Risks Our business primarily relies on North American and Chinese home improvement, repair and remodel, and new home construction activity levels, all of which are impacted by risks associated with fluctuations in the housing market.
Added
Downward changes in the general economy or the housing market, or unfavorable interest rates or other business conditions, could adversely affect our results of operations, cash flows and financial condition. Our business primarily relies on home improvement, repair and remodel, and new home construction activity levels, principally in North America and China.
Added
Those housing markets are sensitive to changes in economic conditions and other factors, such as the level of employment, access to and the cost of labor, consumer confidence, demographic changes, consumer income, government tax programs, availability of financing, inflation and interest rate levels.
Added
Adverse changes in any of these conditions generally, or in any of the markets where we operate, could decrease consumer demand and could adversely impact our businesses by: causing consumers to delay or decline to pursue home ownership; making consumers more price conscious, resulting in a shift in demand to smaller, less expensive homes; making consumers more reluctant to make investments in their existing homes or causing them to delay investments, including kitchen and bath repair and remodel projects; or making it more difficult for consumers to secure loans for major home renovations.
Added
Due to heightened inflation and increases in interest rates, combined with labor and supply chain constraints, during 2022 and 2023, the pace of single-family and existing home sales activity and new home construction and repair and remodel activities has slowed, which adversely impacted our results, and, although interest rates have decreased in recent months, it is uncertain when such activities will recover.
Added
We operate in very competitive consumer and trade brand categories. The markets in which we operate are very competitive.
Added
Although we believe that competition in our businesses is based largely on product quality, consumer and trade brand reputation, customer service and product features, as well as fashion trends, innovation and ease of installation, price is a significant factor for consumers as well as our trade customers.
Added
Some of our competitors may resort to price competition to sustain or grow market share and manufacturing capacity utilization. Also, certain large customers continue to offer private-label brands that compete with some of our product offerings as a lower-cost alternative.
Added
The strong competition that we face in all of our businesses may adversely affect our profitability and revenue levels, as well as our results of operations, cash flows and financial condition. We may not successfully execute on our strategic plans, and our strategies may not prove effective in the face of business competition or yield the intended results.
Added
The success of our business and business strategies depends on meeting consumer needs and anticipating changes in consumer preferences with successful new products and product improvements. We aim to introduce products and new or improved production processes proactively to offset obsolescence and decreases in sales of existing products.
Added
We may not be successful in product development and our new products may not be commercially successful. In addition, it is possible that competitors may improve their products or processes more rapidly or effectively, which could adversely affect our sales.
Added
Furthermore, market demand may decline as a result of consumer preferences trending away from our categories or trending down within our brands or product categories, which could adversely impact our results of operations, cash flows and financial condition. 7 In connection with the Separation, we shifted from a decentralized structure with separate businesses to a more aligned operating model that prioritizes activities that are core to brand, innovation, and channel, among other changes.
Added
Although we believe that this transition allows us to fully leverage the scale and execution excellence of our total business, such transitions can be inherently difficult to manage, and may result in a diversion of management’s focus and attention from other aspects of our business.
Added
In addition, our new operating model may not yield the intended results, and may have unexpected consequences, which could negatively affect our business and results of operations and make it more difficult for us to execute on our strategic plans.
Added
Our businesses rely on the performance of wholesale distributors and dealers, retailers and other marketing arrangements and could be adversely affected by poor performance or other disruptions in our distribution channels and customers. We rely on a distribution network comprised of consolidating customers.
Added
Any disruption to the existing distribution channels could adversely affect our results of operations, cash flows and financial condition. The consolidation of distributors or retailers or the financial instability or default of a distributor or one of its major customers could potentially cause such a disruption.
Added
In addition to our own sales force, we offer our products through a variety of third-party distributors, representatives and retailers. Certain of our distributors, representatives or retailers may also market other products that compete with our products.
Added
In addition, one or more retailers may stop carrying certain of our products, reduce the volume of purchases of our products and/or replace certain of our products with the products of our competitors.
Added
The loss or termination of, or significant reduction in sales to, one or more of our major distributors, representatives or retailers, the failure of one or more of our distributors, representatives or retailers to effectively promote our products, or changes in the financial or business condition of these distributors, representatives or retailers could adversely affect our ability to bring products to market and our results of operations, cash flows and financial condition.
Added
Rapidly evolving technological change and our ability to react effectively may present significant competitive risks. Technological change continues to progress at a rapid pace.
Added
The creation, development, advancement and implementation of new technologies such as internet of things, 5G data networks, artificial intelligence, data analytics, 3-D printing, robotics, sensor technology, data storage, automation technologies and augmented reality, amongst others, has impacted and may continue to impact our processes, products and services.
Added
We evaluate on an ongoing basis new and emerging technologies that we believe are applicable to our business to potentially integrate them into our current and future products, services, processes and operations. The integration of any such new technologies into our business, even if successful, may require significant financial and operational resources.
Added
If we fail to compete with our peers in effectively integrating these or other new technologies into our business, or fail to guard against new competitors disrupting our business using such technologies, such failure may adversely affect our business and results of operations.
Added
Operational and Sourcing Risks Risks associated with our ability to improve organizational productivity and global supply chain efficiency and flexibility could adversely affect our results of operations, cash flows and financial condition.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSegment Manufacturing Facilities Distribution Centers and Warehouses Owned Leased Total Owned Leased Total Water Innovations 7 5 12 7 23 30 Outdoors & Security 14 3 17 4 18 22 Totals 21 8 29 11 41 52 We are of the opinion that the properties are suitable to our respective businesses and have production capacities adequate to meet the current needs of our businesses.
Biggest changeSegment Manufacturing Facilities Distribution Centers and Warehouses Owned Leased Total Owned Leased Total Water 7 6 13 2 17 19 Outdoors 11 3 14 3 11 14 Security 4 — 4 1 7 8 Totals 22 9 31 6 35 41 We are of the opinion that the properties are suitable to our respective businesses and have production capacities adequate to meet the current needs of our businesses. 18
Item 2. P roperties. Our principal executive office is located in Deerfield, Illinois. We operate 15 U.S. manufacturing facilities in 8 states and have 14 manufacturing facilities in international locations (4 in Mexico, 4 in Europe, 4 in Africa, 1 in Asia and 1 in Canada).
Item 2. P roperties. Our principal executive office is located in Deerfield, Illinois. We operate 16 U.S. manufacturing facilities in 9 states and have 15 manufacturing facilities in international locations (4 in Mexico, 4 in Europe, 4 in Africa, 2 in Asia and 1 in Canada).
In addition, we have 52 distribution centers and warehouses worldwide, of which 41 are leased. The following table provides additional information with respect to these properties.
In addition, we have 41 distribution centers and warehouses worldwide, of which 35 are leased. Some of our facilities are considered to be multi-use and have been included in more than one facility category. The following table provides additional information with respect to these properties.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeHallinan has served as Executive Vice President & Chief Financial Officer of Fortune Brands since July 2017. From January 2017 to July 2017, Mr. Hallinan served as Senior Vice President of Finance of Fortune Brands. Cheri M. Phyfer has served as Executive Vice President and Group President of Fortune Brands since September 2022. From March 2019 to September 2022, Ms.
Biggest changeFink served as President of the Company’s Water Innovations business. David V. Barry has served as Executive Vice President & Chief Financial Officer since March 2023 and has served as the Company's principal accounting officer since January 29, 2024. From April 2021 to March 2023, Mr. Barry served as Senior Vice President of Finance and Investor Relations.
Donoghue served as Vice President & Deputy General Counsel of Baxter International Inc., a healthcare company, from November 2018 to December 2021. Prior to that, Ms. Donoghue held various positions as a legal advisor at Walgreen Co., from October 2007 to November 2018, including most recently as Vice President, Corporate and M&A Legal from October 2017 to November 2018.
Donoghue served as Vice President & Deputy General Counsel of Baxter International Inc., a healthcare company, from November 2018 to December 2021. Prior to that, Ms. Donoghue held various positions as a legal advisor at Walgreen Co., including most recently as Vice President, Corporate and M&A Legal. Sheri R.
Item 4. Mine Sa fety Disclosures. Not applicable. 17 Infor mation about our current Executive Officers As of the date of this filing, our executive officers are: Name Age Position Nicholas I. Fink 48 Chief Executive Officer Patrick D. Hallinan 55 Executive Vice President & Chief Financial Officer* Cheri M. Phyfer 51 Executive Vice President and Group President Hiranda S.
Item 4. Mine Sa fety Disclosures. Not applicable. Infor mation about our current Executive Officers As of the date of this filing, our executive officers are: Name Age Position Nicholas I. Fink 49 Chief Executive Officer David V. Barry 42 Executive Vice President and Chief Financial Officer Hiranda S.
Wilson served as Vice President of Operations for ABB, an electrification and automation technology company, from June 2018 to April 2019 and as Vice President of Operations for the Industrial Solutions business of General Electric, an industrial technology company, from January to June 2018.
Wilson served as Vice President of Operations for ABB, an electrification and automation technology company, from June 2018 to April 2019. 20 PART II
Wilson joined Fortune Brands as Senior Vice President of Global Operations of the Company’s Water Innovations segment from November 2019 to September 2022. Prior to that, Mr.
Ron Wilson has served as Executive Vice President and Chief Supply Chain Officer of Fortune Brands since September 2022. Mr. Wilson joined Fortune Brands as Senior Vice President of Global Operations of the Company’s Water Innovations segment in November 2019 and served in that role until September 2022. Prior to that, Mr.
Lee served as Senior Vice President, Global Growth & Development of the Water Innovations segment from July 2016 to January 2020. Ron Wilson has served as Executive Vice President and Chief Supply Chain Officer of Fortune Brands since September 2022. Mr.
Lee served as Senior Vice President, Global Growth & Development of the Water Innovations segment from July 2016 to January 2020. 19 Kristin E. Papesh has served as Executive Vice President and Chief Human Resources Officer of Fortune Brands since November 2023. Prior to that, Ms.
Phyfer served as President of the Company's Water Innovations segment. Ms. Phyfer served as President of Moen’s U.S. business from February 2018 to March 2019. Prior to that, Ms.
From March 2019 to September 2022, Ms. Phyfer served as President of the Company's Water Innovations segment. Ms. Phyfer served as President of Moen’s U.S. business from February 2018 to March 2019. Prior to that, Ms. Phyfer held various positions at the Sherwin-Williams Company, a manufacturer of paint and coatings products.
Fink has served as Chief Executive Officer since January 2020. From March 2019 to January 2020, Mr. Fink served as President and Chief Operating Officer of Fortune Brands. From July 2016 to March 2019, Mr. Fink served as President of the Company’s Water Innovations business. Patrick D.
Phyfer 52 Executive Vice President and Group President Ron Wilson 58 Executive Vice President and Chief Supply Chain Officer Nicholas I. Fink has served as Chief Executive Officer since January 2020. From March 2019 to January 2020, Mr. Fink served as President and Chief Operating Officer of Fortune Brands. From July 2016 to March 2019, Mr.
Sheri R. Grissom has served as Executive Vice President, Chief Human Resources and Transformation Officer of Fortune Brands since February 2015. John D. Lee has served as Executive Vice President, Chief Strategy and Growth Officer of Fortune Brands since January 2020. Mr.
Lee has served as Executive Vice President, Chief Growth and Digital Officer of Fortune Brands since May 2023. From January 2020 to May 2023, Mr. Lee served as Executive Vice President, Chief Strategy & Global Growth Officer. Mr.
Donoghue 44 Executive Vice President, Chief Legal Officer & Corporate Secretary Sheri R. Grissom 58 Executive Vice President, Chief Human Resources and Transformation Officer John D. Lee 50 Executive Vice President, Chief Strategy and Growth Officer Ron Wilson 57 Executive Vice President and Chief Supply Chain Officer Dan Luburic 51 Vice President and Corporate Controller Nicholas I.
Donoghue 45 Executive Vice President, Chief Legal Officer & Corporate Secretary Sheri R. Grissom 59 Executive Vice President and Chief Transformation Officer John D. Lee 51 Executive Vice President, Chief Growth and Digital Officer Kristin E. Papesh 49 Executive Vice President and Chief Human Resources Officer Cheri M.
Phyfer held various positions at the Sherwin-Williams Company, a manufacturer of paint and coatings products, including President of the Consumer Brands Group in 2017 and President & General Manager – Diversified Brands from 2013 to 2017. Hiranda S. Donoghue has served as Executive Vice President, Chief Legal Officer & Corporate Secretary of Fortune Brands since December 2021. Ms.
From 2017 to 2021, he was Chief Financial Officer and Senior Vice President for the Water Innovations segment. Hiranda S. Donoghue has served as Executive Vice President, Chief Legal Officer & Corporate Secretary of Fortune Brands since December 2021. Ms.
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Dan Luburic has served as Vice President and Corporate Controller of Fortune Brands since October 2011. *As previously announced, Mr. Patrick D. Hallinan notified the Company of his intention to resign as Executive Vice President and Chief Financial Officer of the Company and Mr. David V. Barry has been appointed by the Board of Directors to succeed Mr.
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Grissom has served as the Executive Vice President and Chief Transformation Officer of Fortune Brands since November 2023. She transitioned to this role after serving as Executive Vice President, Chief Human Resources and Transformation Officer since December 2022. Prior to that, Ms. Grissom served as Senior Vice President, Chief Human Resources since February 2015. John D.
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Hallinan, each effective on March 2, 2023. 18 PART II
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Papesh held various positions at retail pharmacy Walgreens Boots Alliance from March 2021 to November 2023, including most recently as Senior Vice President, HR Business Partnering from July 2022 to November 2023.
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Prior to that, she served in various roles at Pfizer Inc., a research-based, global biopharmaceutical company, from September 2015 to March 2021, including most recently as the Vice President of Human Resources from November 2018 to March 2021. Cheri M. Phyfer has served as Executive Vice President and Group President of Fortune Brands since September 2022.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers Below are the repurchases of common stock by the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) for the three months ended December 31, 2022: Three Months Ended December 31, 2022 Total number of shares purchased (a) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (a) Approximate dollar value of shares that may yet be purchased under the plans or programs (a) October 1 – October 31 689,000 $ 56.54 689,000 $ 584,610,783 November 1 – November 30 — — — 584,610,783 December 1 – December 31 — — — 584,610,783 Total 689,000 $ 56.54 689,000 (a) Information on the Company’s share repurchase program follows: Authorization date Announcement date Authorization amount of shares of outstanding common stock Expiration date March 2, 2022 March 2, 2022 $750,000,000 March 2, 2024 19 Stock Performance The above graph compares the relative performance of our common stock, the S&P 500 Index, the S&P MidCap 400 Index, our Peer Group and the S&P MidCap 400 Consumer Durables Index.
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers Below are the repurchases of common stock by the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) for the thirteen weeks ended December 30, 2023: Thirteen Weeks Ended December 30, 2023 Total number of shares purchased (a) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (a) Approximate dollar value of shares that may yet be purchased under the plans or programs (a) October 1 – October 28 331,799 $ 60.19 331,799 $ 434,580,518 October 29 – November 25 — — — 434,580,518 November 26 – December 30 — — — 434,580,518 Total 331,799 $ 60.19 331,799 (a) Information on the Company’s share repurchase program in effect during the period covered by the table above follows: Authorization date Announcement date Authorization amount of shares of outstanding common stock Expiration date March 1, 2022 March 2, 2022 $750,000,000 March 1, 2024 In addition, on January 29, 2024, the Company's Board of Directors authorized the repurchase of up to $650 million of shares of the Company’s outstanding common stock over the next two years on the open market or in privately negotiated transactions or otherwise (including pursuant to a Rule 10b5-1 trading plan, block trades and accelerated share repurchase transactions), in accordance with applicable securities laws.
On February 10, 2023, there were 7,691 record holders of the Company’s common stock, par value $0.01 per share. A substantially greater number of holders of the Company’s common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers or other financial institutions.
On February 9, 2024, there were 7,229 record holders of the Company’s common stock, par value $0.01 per share. A substantially greater number of holders of the Company’s common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers or other financial institutions.
In December 2022, our Board of Directors announced a quarterly cash dividend of $0.23 per share of our common stock. Our Board of Directors will continue to evaluate dividend payment opportunities on a quarterly basis.
In December 2023, our Board of Directors announced a quarterly cash dividend payable to stockholders of $0.24 per share of our common stock. Our Board of Directors will continue to evaluate dividend payment opportunities on a quarterly basis.
This graph covers the period from December 31, 2017 through December 31, 2022. This graph assumes $100 was invested in the stock or the index on December 31, 2017 and also assumes the reinvestment of dividends.
This graph assumes $100 was invested in the stock or the index on December 31, 2018 and also assumes the reinvestment of dividends, including the effect of the Separation.
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As a result of the Separation, we are no longer considered a component of the S&P 500 Index as of December 31, 2022 and will no longer provide a comparison to that index in future years.
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The $650 million share repurchase authorization is in addition to the approximately $435 million remaining as of January 30, 2024 from the existing authorization described above expiring on March 1, 2024. The new purchases, if made, will occur from time to time depending on market conditions.
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We will also no longer provide a comparison to our selected peer group index, as we believe that this group is no longer representative of our peers following the Separation.
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The newly announced share repurchase authorization does not obligate the Company to repurchase any dollar amount or number of shares of common stock.
Removed
We have selected the S&P MidCap 400 Index and S&P MidCap 400 Consumer Durables Index for comparison going forward due to the similarities of the companies in those indexes with respect to our market capitalization and line of business, respectively.
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The authorization is in effect until January 29, 2026, and may be suspended or discontinued at any time. 21 Stock Performance The above graph compares the relative performance of our common stock, the S&P MidCap 400 Index and S&P MidCap 400 Consumer Durables Index. This graph covers the period from December 31, 2018 through December 30, 2023.
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The 2022 peer group is composed of the following publicly traded companies corresponding to the Company’s core businesses: Armstrong World Industries Inc., Fastenal Co., American Woodmark, Masonite, Leggett & Platt Inc., Lennox International Inc, Masco Corp, Mohawk Industries, Inc., Newell Brands, Sherwin-Williams Co., and Stanley Black & Decker, Inc. 20 Calculation of Peer Group Index The weighted-average total return of the entire peer group, for the period of December 31, 2017 through December 31, 2022, is calculated in the following manner: (1) The total return of each peer group member is calculated by dividing the change in market value of a share of its common stock during the period, assuming reinvestment of any dividends, by the value of a share of its common stock at the beginning of the period; and (2) Each peer group member’s total return is then weighted within the index based on its market capitalization relative to the market capitalization of the entire index, and the sum of such weighted returns results in a weighted-average total return for the entire Peer Group Index.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. Reserved . 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 22 Results of Operations . 24 Liquidity and Capital Resources. 30 Critical Accounting Estimates . 36 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 41 Item 8. Financial Statements and Supplementary Data. 43 Notes to Consolidated Financial Statements . 53
Biggest changeItem 6. Reserved . 22 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 23 Results of Operations . 25 Liquidity and Capital Resources. 31 Critical Accounting Estimates . 36 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 42 Item 8. Financial Statements and Supplementary Data. 43 Notes to Consolidated Financial Statements . 53

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIn 2021, financial results included: • the impact of foreign exchange primarily due to movement in the Canadian dollar, Mexican peso, British pound and Chinese yuan, which had a favorable impact compared to 2021, of approximately $55 million on net sales and of approximately $21 million on operating income; and • restructuring and other charges of $12.8 million before tax ($10.0 million after tax), largely related to severance costs associated with the relocation of manufacturing facilities within the Outdoors & Security segment.
Biggest changeIn 2023, financial results included: • restructuring and other charges of $54.2 million before tax ($41.3 million after tax), largely related to costs associated with the planned closure of a manufacturing facility within our Security segment and headcount actions across all segments; 25 • asset impairment charges of $33.5 million related to the impairment of two indefinite-lived tradenames within our Outdoors segment, which were primarily the result of a decline in forecasted sales; • the impact of foreign exchange primarily due to movement in the Canadian dollar, Mexican peso, British pound and Chinese yuan, which had an unfavorable impact compared to 2022 of approximately $24 million on net sales and of approximately $7.9 million on both operating income and net income; and • Transaction expenses related to the acquisition of the ASSA Businesses of $19.7 million.
The discussion of consolidated results of operations should be read in conjunction with the discussion of segment results of operations and our financial statements and notes thereto included in this Annual Report on Form 10-K.
Results of Operations The discussion of consolidated results of operations should be read in conjunction with the discussion of segment results of operations and our financial statements and notes thereto included in this Annual Report on Form 10-K.
We typically generate most of our operating cash flow in the third and fourth quarters of each year. We use operating cash in the first quarter of the year.
We typically generate most of our operating cash flow in the third and fourth quarters of each year and we typically use operating cash in the first quarter of the year.
The significant assumptions that are used to determine the estimated fair value of reporting units for impairment testing are forecasted revenue growth rates, operating income margins, market-participant discount rates, EBITDA multiples and revenue multiples.
The significant assumptions that are used to determine the estimated fair value of reporting units for impairment testing are forecasted revenue growth rates, operating income margins, market-participant discount rates and EBITDA multiples.
We continue to believe our most attractive opportunities are to invest in profitable organic growth initiatives, pursue accretive strategic acquisitions, non-controlling equity investments, and joint ventures, and return cash to stockholders through a combination of dividends and repurchases of shares of our 22 common stock under our share repurchase program as explained in further detail under “Liquidity and Capital Resources” below.
We continue to believe our most attractive opportunities are to invest in profitable organic growth initiatives, pursue accretive strategic acquisitions, non-controlling equity investments, and joint ventures, and return cash to stockholders through a combination of dividends and repurchases of shares of our common stock under our share repurchase program as explained in further detail under “Liquidity and Capital Resources” below.
Cost of products sold Cost of products sold decreased by $50.5 million, or 1.8%, due to lower sales volume, productivity improvements, a gain on the sale of a previously closed manufacturing facility within our Outdoors & Security segment and the absence of Larson's 2021 acquisition-related inventory fair value adjustment amortization of $3.3 million, which did not recur in 2022.
Cost of products sold Cost of products sold decreased by $50.5 million, or 1.8%, due to lower sales volume, productivity improvements, a gain on the sale of a previously closed manufacturing facility within our Outdoors segment and the absence of Larson's 2021 acquisition-related inventory fair value adjustment amortization of $3.3 million, which did not recur in 2022.
Volume allowances are accrued based on management’s estimates of customer volume achievement and other factors incorporated into customer agreements, such as new products, store sell-through, merchandising support, levels of returns and customer training. Management periodically reviews accruals for these rebates and allowances, and adjusts accruals when circumstances indicate (typically as a result of a change in volume expectations).
Volume allowances are accrued based on management’s estimates of customer volume achievement and other factors incorporated into customer agreements, such as new products, store sell-through, merchandising support, levels of returns and customer training. Management periodically reviews accruals for these rebates and allowances, and adjusts accruals when circumstances indicate (typically as a result of a change in volume expectations). 41
A 25 basis point change in the long-term rate of return on plan assets used in accounting for our pension plans would have a $1.2 million impact on pension expense. In addition, if required, actuarial gains and losses will be recorded in accordance with our defined benefit plan accounting method as previously described.
A 25 basis point change in the long-term rate of return on plan assets used in accounting for our pension plans would have a $1.1 million impact on pension expense. In addition, if required, actuarial gains and losses will be recorded in accordance with our defined benefit plan accounting method as previously described.
Impairment losses are recorded to the extent that the carrying value of the reporting unit exceeds its fair value. The Company’s reporting units are operating segments, or one level below operating segments when appropriate. To evaluate the recoverability of goodwill, we first assess qualitative factors to determine whether it is more likely than not that goodwill is impaired.
Impairment losses are recorded to the extent that the carrying value of the reporting unit exceeds its fair value. The Company’s reporting units are operating segments, or one level below operating segments when appropriate. 37 To evaluate the recoverability of goodwill, we first assess qualitative factors to determine whether it is more likely than not that goodwill is impaired.
Operating income decreased by $15.1 million, or 2.4%, due to lower net sales, the impact of higher commodity, freight and restructuring costs and unfavorable foreign exchange of approximately $11 million. These factors were partially offset by lower employee-related costs, lower advertising and marketing costs, and favorable geographic channel mix.
Operating income decreased by $15.1 million, or 2.4%, due primarily to lower net sales, the impact of higher commodity, freight and restructuring costs and unfavorable foreign exchange of approximately $11 million. These factors were partially offset by lower employee-related costs, lower advertising and marketing costs, and favorable geographic channel mix.
The bond portfolio used for the selection of the discount rate is from the top quartile of bonds rated by nationally recognized statistical rating organizations, and includes only non-callable bonds and those that are deemed to be sufficiently marketable with a Moody’s credit rating 39 of Aa or higher.
The bond portfolio used for the selection of the discount rate is from the top quartile of bonds rated by nationally recognized statistical rating organizations, and includes only non-callable bonds and those that are deemed to be sufficiently marketable with a Moody’s credit rating of Aa or higher.
We have been and may continue to be impacted by near-term supply, labor and freight constraints, a volatile global supply chain environment, as well as sustained increased rates of inflation, rising interest rates, unfavorable fluctuations in foreign exchange rates and the ongoing costs of tariffs.
We have been and may continue to be impacted by near-term supply, labor and freight constraints, a volatile global supply chain environment, as well as sustained increased rates of inflation, increased interest rates, unfavorable fluctuations in foreign exchange rates and the ongoing costs of tariffs.
We believe that our current cash position, cash flow generated from operations, and amounts available under our revolving credit facility should be sufficient for our operating requirements and enable us to fund our capital expenditures, share repurchases dividend payments, and any required long-term debt payments.
We believe that our current cash position, cash flow generated from operations, and amounts available under our revolving credit facility should be sufficient for our operating requirements and enable us to fund our capital expenditures, share repurchases dividend payments, and required long-term debt payments.
In 2022, financial results included: • the impact of foreign exchange primarily due to movement in the Canadian dollar, Mexican peso, British pound and Chinese yuan, which had an unfavorable impact compared to 2021, of approximately $41 million on net sales and of approximately $12 million both on operating income and net income; and • restructuring and other charges of $26.8 million before tax ($19.6 million after tax), largely related to severance, asset impairment and other costs associated with plant closures and headcount actions across both segments, net of a gain on the sale of a previously closed manufacturing facility within our Outdoors & Security segment of approximately $6 million.
In 2022, financial results included: • restructuring and other charges of $26.8 million before tax ($19.6 million after tax), largely related to severance, asset impairment and other costs associated with plant closures and headcount actions across all segments, net of a gain on the sale of a previously closed manufacturing facility within our Outdoors segment of approximately $6 million; and • the impact of foreign exchange primarily due to movement in the Canadian dollar, Mexican peso, British pound and Chinese yuan, which had an unfavorable impact compared to 2021 of approximately $41 million on net sales and of approximately $12 million on both operating income and net income.
Business Combinations We account for business combinations under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, which requires an allocation of the consideration we paid to the identifiable assets, intangible assets and liabilities based on the estimated fair values as of the closing 36 date of the acquisition.
Business Combinations We account for business combinations under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, which requires an allocation of the consideration we paid to the identifiable assets, intangible assets and liabilities based on the estimated fair values as of the closing date of the acquisition.
In future periods, changes 40 in facts, circumstances, and new information may require us to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in the consolidated statement of income and consolidated balance sheet in the period in which such changes occur.
In future periods, changes in facts, circumstances, and new information may require us to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in the consolidated statement of income and consolidated balance sheet in the period in which such changes occur.
The Company’s 2022 Revolving Credit Agreement is the liquidity backstop for the repayment of any notes issued under the Commercial Paper Program, and as such, borrowings under the Commercial Paper Program are included in Long-term debt in the consolidated balance sheets.
The Company’s 2022 Revolving Credit Agreement is the liquidity backstop for the repayment of any notes issued under the Commercial Paper Program, and as such, borrowings under the Commercial Paper Program are included in Long-term debt in the condensed consolidated balance sheets.
These benefits are partially offset by the impact of raw material cost increases, the impact of acquisitions and labor cost increases, as well as an unfavorable inventory-related expense write-off in our Outdoors & Security segment.
These benefits are partially offset by the impact of raw material cost increases, the impact of acquisitions and labor cost increases, as well as an unfavorable inventory-related expense write-off in our Outdoors segment.
Results By Segment Water Innovations Net sales decreased by $191.0 million, or 6.9%, due to slowing housing market activity in China, lower sales unit volume driven by inventory reductions by our distribution channel partners, lower sales demand in the U.S. and Canada, and higher promotion and sales rebate costs, as well as unfavorable foreign exchange of approximately $30 million.
Results By Segment Water Net sales decreased by $191.0 million, or 6.9%, due primarily to slowing housing market activity in China, lower sales unit volume driven by inventory reductions by our distribution channel partners, lower sales demand in the U.S. and Canada, and higher promotion and sales rebate costs, as well as unfavorable foreign exchange of approximately $30 million.
Income taxes The 2022 effective income tax rate was unfavorably impacted by state and local income taxes, foreign income taxed at higher rates, as well as non-deductible executive compensation. This expense was offset by favorable benefits for the release of uncertain tax positions, primarily related to audit closures and statute of limitations lapses, share-based compensation and a valuation allowance decrease.
This expense was offset by favorable benefits for the release of uncertain tax positions, primarily related to audit closures and statute of limitations lapses, share-based compensation and a valuation allowance decrease. The 2021 effective income tax rate was unfavorably impacted by state and local income taxes, foreign income taxed at higher rates, as well as non-deductible executive compensation.
Under the 2022 Revolving Credit Agreement, the Company is required to maintain a minimum ratio of consolidated EBITDA to consolidated interest expense of 3.0 to 1.0. Consolidated EBITDA is defined as consolidated net income before interest expense, income taxes, depreciation, amortization of intangible assets, losses from asset impairments and certain other one-time adjustments.
Under the 2022 Revolving Credit Agreement, the Company is required to maintain a minimum ratio of consolidated EBITDA to consolidated interest expense of 3.0 to 1.0. Consolidated EBITDA is defined as consolidated net income before interest expense, income taxes, depreciation, amortization of intangible assets, losses from asset impairments, and certain other adjustments.
For the foreseeable future, we believe that we have sufficient liquidity to meet the minimum funding that may be required by the Pension Protection Act of 2006. Foreign Exchange We have operations in various foreign countries, principally Canada, Mexico, the United Kingdom, China, South Africa, France and Japan.
For the foreseeable future, we believe that we have sufficient liquidity to meet the minimum funding that may be required by the Pension Protection Act of 2006. Foreign Exchange We have operations in various foreign countries, principally Canada, Mexico, the United Kingdom, China, South Africa, Vietnam and France.
On March 18, 2022, the Company entered into a Second Amendment and Incremental Agreement to the 2021 Term Loan (the "Second Amendment") increasing the principal amount from $600 million to $1.1 billion. All other terms and conditions remained the same under the First Amendment and Second Amendment.
On March 18, 2022, the Company entered into a Second Amendment and Incremental Agreement to the 2021 Term Loan (the “Second Amendment”), increasing the principal amount from $600 million to $1.1 billion. All other terms and conditions remained the same under the First Amendment and Second Amendment.
These factors were partially offset by price increases to help mitigate the impact of cumulative commodity and transportation cost increases in both of our segments and the benefit from the Solar and Aqualisa acquisitions ($50.2 million combined).
These factors were partially offset by price increases to help mitigate the impact of cumulative commodity and transportation cost increases in all our segments and the benefit from the Solar and Aqualisa acquisitions ($50.2 million combined).
Significant actuarial losses in future periods would be expected if discount rates decline, actual returns on plan assets are lower than our expected return, or a combination of both occurs. A 25 basis point change in our discount rate assumption would lead to an increase or decrease in our pension and postretirement liability of approximately $14 million.
Significant actuarial losses in future periods would be expected if discount rates decline, actual returns on plan assets are lower than our expected return, or a combination of both occurs. 40 A 25 basis point change in our discount rate assumption would lead to an increase or decrease in our pension and postretirement liability of approximately $12 million.
This section also provides a discussion of our contractual obligations, other purchase commitments and customer credit risk that existed at December 31, 2022, as well as a discussion of our ability to fund our future commitments and ongoing operating activities through internal and external sources of capital. • Critical Accounting Estimates: This section identifies and summarizes those accounting policies that significantly impact our reported results of operations and financial condition and require significant judgment or estimates on the part of management in their application.
This section also provides a discussion of our contractual obligations, other purchase commitments and customer credit risk that existed at December 30, 2023, as well as a discussion of our ability to fund our future commitments and ongoing operating activities through internal and external sources of capital. • Critical Accounting Estimates: This section identifies and summarizes those accounting policies that significantly impact our reported results of operations and financial condition and require significant judgment or estimates on the part of management in their application.
We currently have uncommitted bank lines of credit in China, which provide for unsecured borrowings for working capital of up to $20.5 million in aggregate as of December 31, 2022 and December 31, 2021, of which there were no outstanding balances as of December 31, 2022 and 2021.
We currently have uncommitted bank lines of credit in China, which provide for unsecured borrowings for working capital of up to $30.5 million in aggregate as of December 30, 2023 and $20.5 million in aggregate as of December 31, 2022, of which there were no outstanding balances as of December 30, 2023 and December 31, 2022.
Continued growth in the U.S. market for our home products will largely depend on consumer confidence, employment, wage growth, home prices, stable mortgage rates and credit availability. Recent increases in inflation and mortgage rates have slowed the pace of single-family and existing home sales activity and new home construction and repair and remodel activities.
Continued growth in the U.S. market for our home products will largely depend on consumer confidence, employment, wage growth, home prices, stable mortgage rates and credit availability. Increases in inflation and mortgage rates during the preceding years have slowed the pace of single-family and existing home sales activity and new home construction and repair and remodel activities.
The Company used the net proceeds from the 2022 Notes offering to pay down a portion of the outstanding balance on the 2021 Term Loan (as defined below). 30 At December 31, 2022, the Company had aggregate outstanding notes in the principal amount of $2.7 billion, with varying maturities (the “Notes”). The Notes are unsecured senior obligations of the Company.
The Company used the net proceeds from the 2022 Notes offering to redeem a portion of the outstanding balance on the 2021 Term Loan (as defined below). 31 At December 30, 2023, the Company had aggregate outstanding notes in the principal amount of $2.7 billion, with varying maturities (the “Notes”). The Notes are unsecured senior obligations of the Company.
Long-Term Debt In March 2022, the Company issued $900 million in aggregate principal amount of senior unsecured notes in a registered public offering consisting of $450 million of 4.00% senior unsecured notes maturing in 2032 and $450 million of 4.50% senior unsecured notes maturing in 2052 (together, the “2022 Notes”).
In March 2022, the Company issued $900 million in aggregate principal amount of senior unsecured notes in a registered public offering consisting of $450 million of 4.00% senior unsecured notes maturing in 2032 and $450 million of 4.50% senior unsecured notes maturing in 2052 (together, the “2022 Notes”).
Amounts available under the Commercial Paper Program may be borrowed, repaid and re-borrowed, with the aggregate principal amount outstanding at any time, including borrowings under the 2022 Revolving Credit Agreement, not to exceed $1.25 billion. The Company plans to use net proceeds from any issuances under the Commercial Paper Program for general corporate purposes.
Amounts available under the Commercial Paper Program may be borrowed, repaid and re-borrowed, with the aggregate principal amount outstanding at any time, including borrowings under the 2022 Revolving Credit Agreement, not to exceed $1.25 billion. The Company expects to use any issuances under the Commercial Paper Program for general corporate purposes.
The long-term outlook for our products remain favorable, and our strategic advantages, including the set of capabilities we refer to as the Fortune Brands Advantage, has helped us to continue to achieve profitable organic growth.
The long-term outlook for our products remains favorable, and our strategic advantages, including the set of capabilities we refer to as the Fortune Brands Advantage, has helped us to continue to achieve profitable organic growth over time.
Restructuring charges Restructuring charges of $32.4 million in 2022 are largely related to severance, asset impairment and other costs associated with plant closures and headcount actions across both segments. Restructuring charges of $9.3 million in 2021 were largely related to severance costs associated with the relocation of manufacturing facilities within our Outdoors & Security segment.
Restructuring charges Restructuring charges of $32.4 million in 2022 are largely related to severance, asset impairment and other costs associated with plant closures and headcount actions primarily in the Water and Outdoors segments. Restructuring charges of $9.3 million in 2021 were largely related to severance costs associated with the relocation of manufacturing facilities within our Outdoors and Security segments.
Refer to Note 5, Discontinued Operations, in the consolidated financial statements in Item 8 in this Annual Report on Form 10k for additional details.
Refer to Note 5, Discontinued Operations, in the consolidated financial statements in Item 8 in this Annual Report on Form 10-K for additional details.
Refer to Note 5, Discontinued Operations, in the consolidated financial statements in Item 8 in this Annual Report on Form 10K for additional details.
Refer to Note 5, Discontinued Operations, in the consolidated financial statements in Item 8 in this Annual Report on Form 10-K for additional details.
The maturity date of the facility is August 2027. Interest rates under the 2022 Revolving Credit Agreement are variable based on SOFR at the time of the borrowing and the Company’s long-term credit rating, and can range from SOFR + 1.02% to SOFR + 1.525%.
The maturity date of the facility is August 2027. Interest rates under the 2022 Revolving Credit Agreement are variable based on the Secured Overnight Financing Rate (“SOFR”) at the time of the borrowing and the Company’s long-term credit rating and can range from SOFR + 1.02% to SOFR + 1.525%.
The expected rate of return on plan assets is determined based on the nature of the plans’ investments, our current asset allocation and our expectations for long-term rates of return. The weighted-average long-term expected rate of return on pension plan assets for the years ended December 31, 2022 and 2021 was 4.4% and 4.4%, respectively.
The expected rate of return on plan assets is determined based on the nature of the plans’ investments, our current asset allocation and our expectations for long-term rates of return. The weighted-average long-term expected rate of return on pension plan assets for the years ended December 30, 2023 and December 31, 2022 was 6.1% and 4.4%, respectively.
The following table provides a summary of the Company’s outstanding Notes, including the carrying value of the Notes, net of underwriting commissions, price discounts and debt issuance costs as of December 31, 2022 and December 31, 2021: (in millions) Net Carrying Value Coupon Rate Principal Amount Issuance Date Maturity Date December 31, 2022 December 31, 2021 4.000% Senior Notes $ 500.0 June 2015 June 2025 $ 498.1 $ 497.4 4.000% Senior Notes 600.0 September 2018 September 2023 599.2 598.2 3.250% Senior Notes 700.0 September 2019 September 2029 695.0 694.2 4.000% Senior Notes 450.0 March 2022 March 2032 445.8 - 4.500% Senior Notes 450.0 March 2022 March 2052 435.4 - Total Senior Notes $ 2,700.0 $ 2,673.5 $ 1,789.8 Credit Facilities In August 2022, the Company entered into a third amended and restated $1.25 billion revolving credit facility (the “2022 Revolving Credit Agreement”), and borrowings thereunder will be used for general corporate purposes.
The following table provides a summary of the Company’s outstanding Notes, including the carrying value of the Notes, net of underwriting commissions, price discounts and debt issuance costs as of December 30, 2023 and December 31, 2022: (in millions) Net Carrying Value Coupon Rate Principal Amount Issuance Date Maturity Date December 30, 2023 December 31, 2022 4.000% Senior Notes $ 500.0 June 2015 June 2025 $ 498.9 $ 498.1 4.000% Senior Notes $ 600.0 September 2018 September 2023 - 599.2 3.250% Senior Notes $ 700.0 September 2019 September 2029 695.7 695.0 4.000% Senior Notes $ 450.0 March 2022 March 2032 446.2 445.8 4.500% Senior Notes $ 450.0 March 2022 March 2052 435.9 435.4 5.875% Senior Notes $ 600.0 June 2023 June 2033 593.4 - Total Senior Notes $ 2,670.1 $ 2,673.5 Credit Facilities In August 2022, the Company entered into a third amended and restated $1.25 billion revolving credit facility (the “2022 Revolving Credit Agreement”), and borrowings thereunder will be used for general corporate purposes.
Pension Plans Subsidiaries of Fortune Brands sponsor their respective defined benefit pension plans, related to our continuing operations, that are funded by a portfolio of investments maintained within our benefit plan trust. In 2022, 2021 and 2020 we contributed $9.0 million, $18.5 million and $34.6 million, respectively, to our qualified pension plans.
Pension Plans Subsidiaries of Fortune Brands sponsor their respective defined benefit pension plans, related to our continuing operations, that are funded by a portfolio of investments maintained within our benefit plan trust. In 2023, 2022 and 2021 we voluntarily contributed $4.0 million, $9.0 million and $18.5 million, respectively, to our qualified pension plans.
The share repurchase program does not obligate the Company to repurchase any specific dollar amount or number of shares and may be suspended or discontinued at any time. 32 Dividends In 2022, we paid dividends in the amount of $145.6 million to the Company’s stockholders. Our Board of Directors will continue to evaluate dividend payment opportunities on a quarterly basis.
The share repurchase program does not obligate the Company to repurchase any specific dollar amount or number of shares and may be suspended or discontinued at any time. Dividends In 2023, we paid dividends in the amount of $116.8 million to the Company’s stockholders. Our Board of Directors will continue to evaluate dividend payment opportunities on a quarterly basis.
Compensation increases reflect expected future compensation trends. The discount rate used to measure obligations is based on a spot-rate yield curve on a plan-by-plan basis that matches projected future benefit payments with the appropriate interest rate applicable to the timing of the projected future benefit payments.
The discount rate used to measure obligations is based on a spot-rate yield curve on a plan-by-plan basis that matches projected future benefit payments with the appropriate interest rate applicable to the timing of the projected future benefit payments.
In addition to the contractual obligations and commitments described above, we also had other commercial commitments for which we are contingently liable as of December 31, 2022.
In addition to the contractual obligations and commitments described above, we also had other commercial commitments for which we are contingently liable as of December 30, 2023.
A 50 basis point change in the discount rate or long-term revenue growth rate assumptions, or a decrease in multiple of 0.2 in the EBITDA multiple or revenue multiple assumptions, during the year ended December 31, 2022 would not have resulted in an impairment being recognized when estimating the fair value of our reporting unit goodwill.
A 50 basis point change in the discount rate or long-term revenue growth rate assumptions, or a decrease in multiple of 1.0 in the EBITDA multiple assumption, during the year ended December 30, 2023 would not have resulted in an impairment being recognized when estimating the fair value of our reporting unit goodwill.
The pre-tax recognition of actuarial losses (gains) was $1.3 million and $(0.6) million in 2022 and 2021, respectively. The total net actuarial losses in accumulated other comprehensive income for all defined benefit plans were $49.2 million as of December 31, 2022, compared to $32.0 million as of December 31, 2021.
The pre-tax recognition of actuarial gains was $0.6 million and $1.3 million in 2023 and 2022, respectively. The total unrecognized net actuarial losses in accumulated other comprehensive income for all defined benefit plans were $35.8 million as of December 30, 2023, compared to $49.2 million as of December 31, 2022.
(b) Represents estimated percentage of sales a market-participant would pay to license the tradenames that were tested quantitatively. (c) Selected long-term revenue growth rate within 10-year projection period of the tradenames that were tested quantitatively.
(b) Represents estimated percentage of sales a market-participant would pay to license the tradenames that were tested quantitatively. (c) Selected long-term revenue growth rate of the tradenames that were tested quantitatively.
See Note 5, Discontinued Operations, in the consolidated financial statements in Item 8 for additional information on the cash flow for discontinued operations.
See Note 5, "Discontinued Operations", in the consolidated financial statements in Item 8 for additional information.
The weighted-average discount rate for defined benefit liabilities as of December 31, 2022 and 2021 was 5.2% and 2.9%, respectively. For postretirement benefits, our health care trend rate assumption is based on historical cost increases and expectations for long-term increases.
The weighted-average discount rate for defined benefit liabilities as of December 30, 2023 and 2022 was 5.0% and 5.2%, respectively. For the postretirement benefits obligation, our health care trend rate assumption is based on historical cost increases and expectations for long-term increases.
As of December 31, 2021, for postretirement medical and prescription drugs in the next year, our assumption was an assumed rate of increase of 6.3% for pre-65 retirees and 6.7% for post-65 retirees, declining until reaching an ultimate assumed rate of increase of 4.5% per year in 2028.
As of December 30, 2023, for postretirement medical and prescription drugs in the next year, our assumption was an assumed rate of increase of 7.3% for pre-65 retirees and 6.9% for post-65 retirees, declining until reaching an ultimate assumed rate of increase of 4.5% per year in 2033.
Outdoors & Security Net sales increased by $112.9 million, or 5.5%, due to price increases to help mitigate the impact of cumulative commodity and transportation cost increases and the benefit from the Solar acquisition ($28.5 million).
Outdoors Net sales increased by $100.9 million, or 7.1%, due primarily to price increases to help mitigate the impact of cumulative commodity and transportation cost increases and the benefit from the Solar acquisition ($28.5 million).
If this comparison indicates that there is an impairment, the amount of the impairment is calculated based on fair value. Fair value is estimated primarily using discounted expected future cash flows on a market-participant basis. No impairments of long-lived assets were recorded during 2022.
If this comparison indicates that there is an impairment, the amount of the impairment is calculated based on fair value. Fair value is estimated primarily using discounted expected future cash flows on a market-participant basis. No material impairments related to long-lived assets were recorded in 2023, 2022 or 2021.
Discount rates in 2022 used to determine benefit obligations increased by an average of 230 basis points for pension benefits. Discount rates for 2022 postretirement benefits increased by an average of 190 basis points . Discount rates in 2021 used to determine benefit obligations increased by an average of 30 basis points for pension benefits.
Discount rates for 2023 postretirement benefits increased by an average of 20 basis points . Discount rates in 2022 used to determine benefit obligations increased by an average of 230 basis points for pension benefits. Discount rates for 2022 postretirement benefits decreased an average of 190 basis points.
As a result of the Separation, our former Cabinets segment was disposed of and the operating results of the Cabinets business are reported as discontinued operations for all periods presented within this Annual Report on Form 10-K. All amounts, percentages and disclosures for all periods presented reflect only the continuing operations of the Company unless otherwise noted.
As a result of the Separation, our former Cabinets segment was disposed of, and the operating results of the Cabinets business are reported as discontinued operations for all periods presented unless otherwise noted. All amounts, percentages and disclosures for all periods presented reflect only the continuing operations of the Company unless otherwise noted.
Determining the fair value of acquired intangibles involves significant estimates and assumptions, including forecasted revenue growth rates, EBITDA margins, percentage of revenue attributable to the tradename, contributory asset charges, customer attrition rate, market-participant discount rates and the assumed royalty rates.
Determining the fair value of acquired intangibles involves significant estimates and assumptions, including forecasted revenue growth rates, earnings before interest and taxes (EBIT) margins, percentage of revenue attributable to the tradename, contributory asset charges, customer attrition rate, market-participant discount rates, the assumed royalty rates and income tax rates.
The Company intends to finance the transaction with cash on hand and borrowings under our existing credit facility. In July 2022, we acquired 100% of the outstanding equity of Aqualisa for a purchase price of $156.0 million, net of cash acquired of $4.8 million. The results of Aqualisa are reported as part of the Water Innovations segment.
In July 2022, we acquired 100% of the outstanding equity of Aqualisa for a purchase price of $156.0 million, net of cash acquired of $4.8 million. The results of Aqualisa are reported as part of the Water segment. We financed the transaction with borrowings under our existing credit facility.
These contingent commitments are not expected to have a significant impact on our liquidity. Debt payments due during the next five years as of December 31, 2022 are $600 million in 2023, zero in 2024, $500 million in 2025, zero in 2026, zero in 2027 and $1,600 million in 2028 and beyond.
These contingent commitments are not expected to have a significant impact on our liquidity. 35 Debt payments due during the next five years as of December 30, 2023 are zero in 2024, $500 million in 2025, zero in 2026, zero in 2027, zero in 2028 and $2,200 million in 2029 and beyond.
The increase in cash provided of $501.1 million from 2021 to 2022 was primarily due to dividends received from MasterBrand as a result of the Separation ($940.0 million), partly offset by lower net borrowings in 2022 compared to 2021 ($172.1 million), higher share repurchases in 2022 compared to 2021 ($132.4 million increase), cash retained by MasterBrand after the Separation ($56.3 million), a decrease in the proceeds from the exercise of stock options and the final payment for the remaining equity interest in Flo ($16.7 million).
The increase in net cash provided by financing activities of $501.1 million from 2021 to 2022 was primarily due to the dividend received from MasterBrand, partially offset by lower net borrowings in 2022 compared to 2021 ($172.1 million), higher share repurchases in 2022 compared to 2021 ($132.4 million increase), cash retained by MasterBrand after the Separation ($56.3 million), a decrease in the proceeds from the exercise of stock options and the final payment for the remaining equity interest in Flo.
Growth in operating income was primarily due to higher sales volume, changes to our portfolio of businesses, control over our operating expenses and the benefits of manufacturing productivity programs. During 2022, the U.S. home products market grew due to increases in repair and remodel and new home construction activity.
Growth in operating income over this period was primarily due to higher sales volume, changes to our portfolio of businesses, control over our operating expenses and the benefits of manufacturing productivity programs. 24 During 2023, the U.S. home products market contracted due to decreases in repair and remodel and new home construction activity.
Due to the uncertainty of the timing of settlement with taxing authorities, we are unable to make reasonably reliable estimates of the period of cash settlement of unrecognized tax benefits. Therefore, $33.4 million of unrecognized tax benefits as of December 31, 2022 have been excluded from the paragraph above.
Due to the uncertainty of the timing of settlement with taxing authorities, we are unable to make reasonably reliable estimates of the period of cash settlement of unrecognized tax benefits. Therefore, $25.6 million of unrecognized tax benefits as of December 30, 2023 have been excluded from the paragraph above.
Based 35 on foreign exchange rates as of December 31, 2022, we estimate that $2.3 million of net derivative gain included in accumulated other comprehensive income ("AOCI") as of December 31, 2022, will be reclassified to earnings within the next twelve months.
Based on foreign exchange rates as of December 30, 2023, we estimate that $9.9 million of net derivative gain included in accumulated other comprehensive income ("AOCI") as of December 30, 2023, will be reclassified to earnings within the next twelve months.
As of December 31, 2022, the components of our long-term debt were as follows: (In millions) 2022 2021 Notes (due 2023 to 2052) $ 2,673.5 $ 1,789.8 2022 Revolving Credit Agreement — 520.0 2021 Term Loan — 400.0 Total debt 2,673.5 2,709.8 Less: current portion 599.2 400.0 Total long-term debt $ 2,074.3 $ 2,309.8 In our debt agreements, there are normal and customary events of default which would permit the lenders to accelerate the debt if not cured, in certain cases within applicable grace periods, such as failure to pay principal or interest when due or a change in control of the Company.
Components of our long-term debt were as follows: (In millions) 2023 2022 Notes (due 2025 to 2052) $ 2,670.1 $ 2,673.5 Less: current portion — 599.2 Total long-term debt $ 2,670.1 $ 2,074.3 In our debt agreements, there are normal and customary events of default which would permit the lenders to accelerate the debt if not cured, in certain cases within applicable grace periods, such as failure to pay principal or interest when due or a change in control of the Company.
The weighted-average interest rates on these borrowings were zero in 2022 and 2021. 31 Commercial Paper In November 2021, the Company established a commercial paper program (the “Commercial Paper Program”) pursuant to which the Company may issue unsecured commercial paper notes.
The weighted-average interest rates on these borrowings were zero in 2023 and 2022. 32 Commercial Paper The Company operates a commercial paper program (the “Commercial Paper Program”) pursuant to which the Company may issue unsecured commercial paper notes.
MD&A is organized as follows: • Overview: This section provides a general description of our business and a discussion of management’s general outlook regarding market demand, our competitive position and product innovation, as well as recent developments we believe are important to understanding our results of operations and financial condition or in understanding anticipated future trends. • Basis of Presentation: This section provides a discussion of the basis on which our consolidated financial statements were prepared. • Results of Operations: This section provides an analysis of our results of operations for the years ended December 31, 2022, 2021 and 2020. • Liquidity and Capital Resources: This section provides a discussion of our financial condition and an analysis of our cash flows for each of the three years ended December 31, 2022, 2021 and 2020.
MD&A is organized as follows: • Recent Developments: This section provides a summary of noteworthy recent developments in the most recently completed fiscal year in the operation of the business, including changes in segment reporting and significant acquisitions. • Overview: This section provides a general description of our business and a discussion of management’s general outlook regarding market demand, our competitive position and product innovation, as well as additional recent developments we believe are important to understanding our results of operations and financial condition or in understanding anticipated future trends. • Basis of Presentation: This section provides a discussion of the basis on which our consolidated financial statements were prepared. • Results of Operations: This section provides an analysis of our results of operations for the fiscal years ended December 30, 2023, December 31, 2022 and December 31, 2021. • Liquidity and Capital Resources: This section provides a discussion of our financial condition as of December 30, 2023 and an analysis of our cash flows for each of the three years ended December 30, 2023, December 31, 2022 and December 31, 2021.
Therefore, changes in the value of the related currencies affect our financial statements when translated into U.S. dollars. Contractual Obligations and Other Commercial Commitments The following summarizes our contractual obligations and commitments as of December 31, 2022. Purchase obligations were $561.3 million, of which $534.0 million is due within one year.
Therefore, changes in the value of the related currencies affect our financial statements when translated into U.S. dollars. Contractual Obligations and Other Commercial Commitments The following summarizes our contractual obligations and commitments as of December 30, 2023. Purchase obligations were $635.3 million, of which $622.8 million is due within one year.
The 2021 effective income tax rate was unfavorably impacted by state and local income taxes, foreign income taxed at higher rates, as well as non-deductible executive compensation. The 2021 expense was offset by favorable benefits for the release of uncertain tax positions, primarily related to statute of limitations lapses, and share-based compensation.
This expense was offset by favorable benefits for the release of uncertain tax positions of statute of limitations lapses and federal tax credits. The 2022 effective income tax rate was unfavorably impacted by state and local income taxes, foreign income taxed at higher rates, as well as non-deductible executive compensation.
For the year ended December 31, 2022, net sales based on country of destination were: (In millions) United States $ 3,763.6 80 % China 363.9 8 Canada 368.2 8 Other international 227.3 4 Total $ 4,723.0 100 % We believe that the Company has certain competitive advantages including market-leading brands, a diversified mix of channels, lean and flexible supply chains and a strong capital structure, as well as a tradition of strong innovation and customer service.
For the year ended December 30, 2023, net sales based on country of destination were: (In millions) United States $ 3,708.0 80 % Canada 352.4 8 China 335.2 7 Other international 230.6 5 Total $ 4,626.2 100 % We believe that the Company has certain competitive advantages including market-leading brands, a diversified mix of channels, lean and flexible supply chains and a strong capital structure, as well as a tradition of strong innovation and customer service.
As a result, the remaining carrying value of this tradename is being amortized over its estimated useful life of 30 years. The fair values of the impaired tradenames were measured using the relief-from-royalty approach, which estimates the present value of royalty income that could be hypothetically earned by licensing the tradename to a third party over its remaining useful life.
The fair values of the impaired tradenames were measured using the relief-from-royalty approach, which estimates the present value of royalty income that could be hypothetically earned by licensing the tradename to a third party over its remaining useful life.
(In millions) 2022 2021 2020 Net cash provided by operating activities $ 566.3 $ 688.7 $ 825.7 Net cash used in investing activities (455.5 ) (207.1 ) (923.5 ) Net cash provided by (used in) financing activities 72.5 (428.6 ) 111.6 Effect of foreign exchange rate changes on cash (11.1 ) (1.9 ) 16.3 Net increase in cash, cash equivalents and restricted cash $ 172.2 $ 51.1 $ 30.1 Net cash provided by operating activities was $566.3 million in 2022, compared to $688.7 million in 2021.
(In millions) 2023 2022 2021 Net cash provided by operating activities $ 1,055.8 $ 566.3 $ 688.7 Net cash used in investing activities (1,037.8 ) (455.5 ) (207.1 ) Net cash provided by (used in) financing activities (271.3 ) 72.5 (428.6 ) Effect of foreign exchange rate changes on cash 0.5 (11.1 ) (1.9 ) Net increase in cash, cash equivalents and restricted cash $ (252.8 ) $ 172.2 $ 51.1 Net cash provided by operating activities was $1,055.8 million in 2023, compared to $566.3 million in 2022.
During the three years ended December 31, 2022, our net sales grew at a compounded annual rate of 11.8% as we benefited from a growing U.S. home products market, acquisitions and growth in international markets. Operating income grew at a compounded annual rate of 14.2% with consolidated operating margins between 15% and 17% from 2020 to 2022.
During the three fiscal years ended December 30, 2023, our net sales grew at a compounded annual rate of 8.5% as we benefited from a growing U.S. home products market, acquisitions and growth in international markets. Operating income grew at a compounded annual rate of 2.7% with consolidated operating margins ranging between 13% and 17% from 2021 to 2023.
We believe our operating cash flows, including funds available under the credit facility and access to capital markets, provide sufficient liquidity to support the Company’s working capital requirements, capital expenditures and service of indebtedness, as well as to finance acquisitions, repurchase shares of our common stock and pay dividends to stockholders, as the Board of Directors deems appropriate.
We believe our operating cash flows, including funds available under the credit facility and access to capital markets, provide sufficient liquidity to support the Company’s working capital requirements, capital expenditures, other contractual commitments and service of indebtedness, as well as to finance acquisitions, repurchase shares of our common stock and pay dividends to stockholders, as the Board of Directors deems appropriate, both for the 12-month period following the 2023 fiscal year, and in the long-term.
As of December 31, 2022, we had liabilities for unrecognized tax benefits pertaining to uncertain tax positions totaling $33.4 million. It is reasonably possible that the unrecognized tax benefits may decrease by $9.8 million in the next 12 months primarily as a result of the lapse of statutes of U.S. federal, state and foreign income taxes.
As of December 30, 2023, we had liabilities for unrecognized tax benefits pertaining to uncertain tax positions totaling $25.6 million. It is reasonably possible that the unrecognized tax benefits may decrease by $7.7 million in the next 12 months primarily as a result of the lapse of the statute of limitations of U.S. federal, state and foreign income taxes.
Derivative Financial Instruments In accordance with Accounting Standards Codification ("ASC") requirements for Derivatives and Hedging, we recognize all derivative contracts as either assets or liabilities on the balance sheet, and the measurement of those instruments is at fair value.
“Quantitative and Qualitative Disclosures about Market Risk” in this Annual Report on Form 10-K. Derivative Financial Instruments In accordance with Accounting Standards Codification ("ASC") requirements for Derivatives and Hedging, we recognize all derivative contracts as either assets or liabilities on the balance sheet, and the measurement of those instruments is at fair value.
We measure the fair value of identifiable intangible assets upon acquisition and we review for impairment annually in the fourth quarter and whenever market or business events indicate there may be a potential impairment of that intangible. Impairment losses are recorded to the extent that the carrying value of the indefinite-lived intangible asset exceeds its fair value.
We measure the fair value of identifiable intangible assets upon acquisition and we review for impairment annually in the fourth quarter and whenever market or business events indicate there may be a potential impairment of that intangible.
Principal currencies hedged include the Canadian dollar, the Mexican peso, the British pound and the Chinese yuan. We regularly monitor our foreign currency exposures in order to maximize the overall effectiveness of our foreign currency hedge positions. For additional information on this risk, see Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in this Annual Report on Form 10-K.
Principal currencies hedged include the Canadian dollar, the Mexican peso, the British pound, Chinese yuan and the South African rand. We regularly monitor our foreign currency exposures in order to maximize the overall effectiveness of our foreign currency hedge positions. For additional information on this risk, see Item 7A.
Net cash provided by financing activities was $72.5 million in 2022 compared to cash used in financing activities of $428.6 million in 2021.
Net cash used in financing activities was $271.3 million in 2023 compared to net cash provided by financing activities of $72.5 million in 2022.
The $244.1 million increase in cash used related to continuing operations reflects our cost of acquisitions ($217.6 million in 2022) and an increase in capital expenditures, partly offset by proceeds from the sale of previously closed manufacturing facilities.
The increase in net cash used in investing activities of $248.4 million from 2021 to 2022 reflects our cost of acquisitions ($217.6 million in 2022) and an increase in capital expenditures, partly offset by proceeds from the sale of previously closed manufacturing facilities.
Other expense (income), net Other expense (income), net, was expense of $0.4 million in 2021, compared to income of $15.3 million in 2020.
Other (income) expense, net Other (income) expense, net, was income of $12 million in 2022, compared to expense of $0.4 million in 2021.
These assumptions represent level 3 inputs of the fair value hierarchy (refer to Note 9). 38 The assumptions used to estimate the fair values of the tradenames tested quantitatively during the year ended December 31, 2022 were as follows: 2022 Unobservable Input Minimum Maximum Weighted Average (a) Discount rates 12.2 % 13.1 % 12.9 % Royalty rates (b) 3.5 % 3.5 % 3.5 % Long-term revenue growth rates (c) 3.0 % 3.0 % 3.0 % (a) Weighted by the relative fair value of the tradenames that were tested quantitatively.
The assumptions used to estimate the fair values of the tradenames tested quantitatively during the year ended December 30, 2023 were as follows: 2023 Unobservable Input Minimum Maximum Weighted Average (a) Discount rates 11.1 % 14.5 % 13.6 % Royalty rates (b) 2.5 % 3.5 % 3.3 % Long-term revenue growth rates (c) 2.0 % 3.0 % 2.1 % (a) Weighted by the relative fair value of the tradenames that were tested quantitatively.
Other corporate commercial commitments include standby letters of credit of $31.6 million, in the aggregate, all of which expire in less than one year, and surety bonds of $24.0 million, of which $16.2 million matures in less than one year and $7.8 million matures in 1-3 years.
Other corporate commercial commitments include standby letters of credit of $30.8 million, in the aggregate, all of which expire in less than one year, and surety bonds of $25.7 million, all of which matures in less than one year.
Interest payments due during the next five years as of December 31, 2022 are $105 million in 2023, $152 million in 2024 through 2025, $122 million in 2026 through 2027 and $642 million in 2028 and beyond. Foreign Currency Risk Certain anticipated transactions, assets and liabilities are exposed to foreign currency risk.
Interest payments due during the next five years as of December 30, 2023 are $116.3 million in 2024, $202.5 million in 2025 through 2026, $192.5 million in 2027 through 2028 and $723.5 million in 2029 and beyond. Foreign Currency Risk Certain anticipated transactions, assets and liabilities are exposed to foreign currency risk.
Preparation of the financial statements requires us to make judgments, estimates and assumptions that affect the amounts of assets and liabilities reflected in the financial statements and revenues and expenses reported for the relevant reporting periods.
The consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Preparation of the financial statements requires us to make judgments, estimates and assumptions that affect the amounts of assets and liabilities reflected in the financial statements and revenues and expenses reported for the relevant reporting periods.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe estimated maximum one-day loss in the fair value of the Company’s foreign currency exchange contracts using the VAR model was $1.3 million at December 31, 2022. The 95% confidence interval signifies our degree of confidence that actual losses under foreign exchange contracts would not exceed the estimated losses.
Biggest changeThe estimated maximum one-day loss in the fair value of the Company’s foreign currency exchange contracts using the VAR model was $1.4 million at December 30, 2023. The 95% confidence interval signifies our degree of confidence that actual losses under foreign exchange contracts would not exceed the estimated losses.
The estimated fair value of foreign currency contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices. 41 The estimated potential loss under foreign exchange contracts from movement in foreign exchange rates would not have a material impact on our results of operations, cash flows or financial condition.
The estimated fair value of foreign currency contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices. The estimated potential loss under foreign exchange contracts from movement in foreign exchange rates would not have a material impact on our results of operations, cash flows or financial condition.
The VAR model is a risk analysis tool and should not be construed as an endorsement of the VAR model or the accuracy of the related assumptions. 42 Commodity Price Risk We are subject to commodity price volatility caused by weather, supply conditions, geopolitical and economic variables, and other unpredictable external factors.
The VAR model is a risk analysis tool and should not be construed as an endorsement of the VAR model or the accuracy of the related assumptions. Commodity Price Risk We are subject to commodity price volatility caused by weather, supply conditions, geopolitical and economic variables, and other unpredictable external factors.
From time to time, we use derivative contracts to manage our exposure to commodity price volatility.
From time to time, we use derivative contracts to manage our exposure to commodity price volatility. 42
We do not enter into derivatives or other financial instruments for trading or speculative purposes. We enter into financial instruments to manage and reduce the impact of changes in foreign currency exchange rates and commodity prices. The counterparties are major financial institutions. Interest Rate Risk The Company did not have any external variable rate borrowings as of December 31, 2022.
We do not enter into derivatives or other financial instruments for trading or speculative purposes. We enter into financial instruments to manage and reduce the impact of changes in foreign currency exchange rates and commodity prices. The counterparties are major financial institutions. Interest Rate Risk The Company did not have any external variable rate borrowings as of December 30, 2023.

Other FBIN 10-K year-over-year comparisons