Earnings call transcript: Fortune Brands Q2 2025 sees revenue dip, stock rises

Fortune Brands Innovations (FBIN) reported its Q2 2025 earnings, unveiling a slight decline in net revenue to $1.2 billion, down 3% year-over-year. Despite the revenue dip, the company’s stock rose by 3.51% to close at $48.12, reflecting investor optimism. Earnings per share stood at $1.00, while the company maintained its full-year EPS guidance between $3.75 and $3.95. The aftermarket saw a minor decline with a 1.14% drop in premarket trading. According to InvestingPro analysis, the stock appears undervalued, trading near its 52-week low of $47.21, with a P/E ratio of 15.71x.

Key Takeaways

• Fortune Brands’ Q2 revenue decreased by 3% year-over-year.
• Stock price increased by 3.51% post-earnings announcement.
• Full-year EPS guidance remains at $3.75 to $3.95.
• Digital business projected to achieve $250 million in sales for 2025.
• U.S. housing and repair markets face a downtrend.

Company Performance

Fortune Brands reported a challenging Q2 2025, with net revenue falling to $1.2 billion, marking a 3% drop from the previous year. Despite the revenue decrease, the company managed to outperform its end markets by over 200 basis points, particularly in the Water and Outdoors segments. The company continues to leverage its strong North American manufacturing base and focus on digital transformation. InvestingPro data reveals the company maintains strong fundamentals with a current ratio of 1.97, indicating healthy liquidity. The company has also maintained dividend payments for 13 consecutive years, demonstrating consistent shareholder returns.

Financial Highlights

• Revenue: $1.2 billion, down 3% year-over-year
• Operating income: $199 million, down 8%
• Operating margin: 16.5%
• Earnings per share: $1.00
• Effective tax rate for Q2: 31%

Outlook & Guidance

Fortune Brands maintained its full-year EPS guidance between $3.75 and $3.95. The company expects net sales to remain flat or decline by up to 2% for the full year. Strategic initiatives include continuing investments in growth areas such as digital platforms and luxury product segments. The company also anticipates fully mitigating tariff impacts in 2025 and 2026.

Executive Commentary

CEO Nicholas Fink emphasized the transformation strategy, stating, "We are evolving from a siloed operation with isolated strengths into a unified, agile growth engine." CFO John Baksht expressed confidence in overcoming tariff challenges, noting, "We continue to expect to fully mitigate the anticipated in-year and annualized impacts."

Risks and Challenges

• Macroeconomic uncertainty affecting consumer demand.
• U.S. housing market projected to decline by 4-2%.
• Repair and remodel market expected to drop by 3-1%.
• Potential supply chain disruptions impacting cost management.
• Tariff impacts requiring strategic mitigation.

Q&A

During the earnings call, analysts inquired about the company’s tariff mitigation strategies and the growth trajectory of its digital business. Executives addressed the challenges in the China market and provided insights into segment-specific performance, highlighting the company’s ongoing transformation efforts.

Fortune Brands continues to navigate a complex market environment, balancing strategic investments with cost-saving measures to drive future growth. With a beta of 1.41 and an Altman Z-Score of 4.54, the company shows resilience despite market volatility. Investors seeking deeper insights into Fortune Brands’ valuation and growth potential can access additional ProTips and comprehensive financial analysis through InvestingPro.

Full transcript - Fortune Brands Home & Security Inc (FBIN) Q2 2025:

Paul, Conference Operator: Afternoon everyone. My name is Paul and I will be your conference operator today. Welcome to the Fortune Brands Innovations second quarter 2025 earnings conference call. All lines are muted to prevent background noise. Following the speaker’s remarks, we will open the call for a Q&A session. At this time, I’ll turn the call over to Curt Worthington, Vice President of Finance and Investor Relations. Curt, please go ahead. Good afternoon everyone and welcome to the Fortune Brands Innovations second quarter earnings call. Hopefully everyone has had a chance to review the earnings release. The earnings release and the audio replay of this call can be found on the Investors section of our FBIN.com website.

I want to remind everyone that the forward-looking statements we make on the call today, either in our prepared remarks or in the associated question and answer session, are based on current expectations and market outlook and are subject to certain risks and uncertainties that may cause actual results to differ materially from those currently anticipated. These risks are detailed in our various filings with the SEC. The company does not undertake any obligation to update or revise any forward-looking statements except as required by law. Any references to operating profit or margin, earnings per share, or free cash flow on today’s call will focus on our results on a before charges and gains basis unless otherwise specified. Please visit our website for our reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

With me on the call today are Nicholas Fink, our Chief Executive Officer, and John Baksht, our Chief Financial Officer. Following our prepared remarks, we have allowed time to address some questions. I will now turn the call over to Nick. Nick.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Thanks Curt and good afternoon to everyone. Thank you for joining our call. On today’s call, I will start with the strategic actions that we are taking to generate growth while flexing our cost structure in response to market conditions. I will also provide an update on the tariff landscape and our mitigation strategy, which is on track to fully offset the anticipated impact of tariffs this year and on an annualized basis. In addition to covering our execution and the drivers of our above market performance within the quarter, I will also share my thoughts around the remarkable progress that we have made in our multi-year transformation. I’ll close by discussing the macroeconomic environment and summarize our performance in the quarter. John will then review our financial results in more detail and provide color on our updated guidance for the remainder of 2025.

In the second quarter, Fortune Brands Innovations delivered solid execution and outperformed our end market with impressive share gains across many of our businesses, including in our core Water and Outdoors businesses. In a market environment that continues to be dynamic, we have demonstrated our ability to respond quickly and decisively. At the same time, we have maintained a relentless focus on our key strategic priorities and have continued to invest in our brands, accelerate innovation, and drive operational excellence. We have made significant progress on our multi-year transformation into a highly aligned and efficient growth company, which I will detail shortly, and are driving our strategy to grow the core and accelerate digital. By harnessing best-in-class consumer and customer insights, we can anticipate market trends and meet evolving needs with precision.

Through focused investment in our leading brands and targeted innovation, we are driving product leadership and differentiation across key categories. At the same time, our ongoing digital transformation allows us to introduce and refine digital products and solutions with supercharged growth trajectories. In addition to accelerating growth, this transformation continues to improve our operational efficiency, strengthen relationships with consumers and customers, attract top talent, and help us uncover new opportunities in a rapidly evolving world. As a consequence, we believe Fortune Brands Innovations is well positioned to deliver long-term exceptional opportunities for all of our stakeholders. I am proud of our team’s focus and commitment, and of their agility in addressing the challenging near-term market dynamics. During the second quarter, we executed several key growth and efficiency initiatives across our portfolio, which I will detail shortly.

We’re already starting to see the positive impact from many of these actions, and we expect that we will continue to see the benefits throughout the remainder of the year and beyond. Starting with our Water business, in the second quarter we significantly outperformed our core North American market. We won new business as well as commitments for increased share with several large national builders with our powerful Moen brand. We also expanded our offerings in product categories targeted at the retail and e-commerce channels, which we expect will help us gain additional share over time from a brand and product positioning standpoint. We continue to build momentum for the third and fourth quarters with multiple wins in both wholesale and retail, and we recently launched the important refresh of our market-leading Chateau collection.

These initiatives and wins are testament to the strength of our Moen and House of Rohl brands, our unique ability to manage diverse and complex channels, and to the depth of our customer relationships. In Outdoors, we launched a new comprehensive brand collective for Outdoors brands. We expect the initiative to enhance our go-to-market strategy, accelerate innovation, and drive growth by providing a cohesive platform for building professionals seeking innovative and trusted products, and it is a great example of the power of the aligned Fortune Brands Innovations structure. In addition, we continue to roll out our LARSON Perfect Aisle reset in retail with great early results by focusing on understanding why consumers purchase storm and screen doors and what attributes are most meaningful to them.

In this category, we were able to deliver an entirely new in-aisle experience with innovative product, and we are already seeing both accelerated growth and share gains as a result. Within Security, we had a number of successful designs and product updates during the quarter. We launched our Master Lock brand campaign for Master Lock and have already seen a 60% increase in our website traffic compared to the same time last year, which we expect to translate into growth in the coming quarters. This is our first major brand campaign in many years and was made possible by our newly aligned organizational structure. We’ve also made focused investments in redesigning the retail shelf and product strategy for Master Lock to see the additional future growth in the channel. We expect our refreshed brand strategy will result in sales uplifts across our channels.

During the second half, we’re seeing the results of our renewed focus on everyday great execution. For example, in our important back to school category for security, we are seeing double-digit improvement versus last year as the team developed more focused action plans under its new leadership and executed them with excellence. It will take a little more time before the full benefits are realized, but the progress is evident and concrete. Turning to our digital business, we now have around 5 million active users. We continue to see solid momentum, and in the second quarter of 2025, we had around 220,000 digital device activations. Turning first to Flow, we expect to reach an important milestone in our digital journey with the pilot of a new subscription model during the third quarter.

Designed to offer an attractive entry point for new Flow customers, it will also provide us with a high-quality recurring revenue stream that has the potential to serve as a model for other portions of our connected business. We continue to secure new partnerships with leading insurance companies and are on track to more than double our sales through the insurance channel this calendar year. Additionally, we’ve concluded a study with a top three insurance carrier that again supports our value proposition of dramatically reducing preventable water damage claims for insurers, and we expect a white paper on this to be published shortly. Flow has consistently demonstrated impressive growth, including over 70% growth in the second quarter, and the opportunity pipeline is robust and keeps growing as the value proposition becomes more widely understood. We also successfully launched our new Yale Smart Lock with Matter designed for Google Home.

This is a significant milestone in our long-standing partnership with Google and the evolution of the original Nest by Yale Lock. It is also the culmination of a multi-year collaboration between Google and Yale to bring a more approachable, easy-to-use smart lock to market and will be the first product with the Google Home Preferred Product Badge. We see great potential for the future product roadmap and an opportunity to expand applications for the Yale Smart Lock with Matter. We expect to see good results from this business as these partnerships continue to ramp up and we lap the discontinuation of the older generation Google product. Overall, our digital business is very strong, and we are on track to deliver significant year-over-year growth in 2025 as a result of slower load ins.

We now expect our digital sales to be around $250 million and expect annualized sales approaching $300 million in 2025. Our digital business remains a key differentiator for us, and we continue to expect this growth platform to only get stronger as we continue to build our scale and capabilities and drive awareness of these important and highly innovative products. Moving to tariffs, the landscape continues to evolve, but our core strategies remain intact and are delivering. We remain on track to fully offset the anticipated in-year impact in 2025 and the annualized impact in 2026 of tariffs. Through a combination of supply chain actions, cost out opportunities, and strategic pricing actions across our portfolio, we are employing a surgical approach to strike the right balance between price, demand elasticity, and overall profitability in light of a dynamic external environment.

We’re taking a long-term and highly strategic view, continuing to position ourselves as market leaders in categories where brands, quality, and innovation really matter, and are working to preserve pricing integrity for our partners. We have accelerated investments in our revenue growth management and category management capabilities and expect to become even more agile and precise with our pricing strategies. As a result, we have a proven track record of cost discipline, allowing us to focus our investments and flex our cost structure to deliver solid operating margins and fuel for growth. The second quarter was no different as we successfully navigated an uncertain consumer demand backdrop by delivering decremental margins in line with our expectations.

As we outlined in our first quarter results, we have identified opportunities to control the pace of hiring related to our transition to our new headquarters campus, which will not only result in SG&A savings through the second half of 2025, but will also accelerate our efforts to create a more efficient and agile organization that will foster increased collaboration and ideation. Before I turn to the macro environment and provide an overview of our second quarter results, I want to take a moment to put our multi-year transformation into context and provide additional clarity on the remaining milestones ahead. Fortune Brands Innovations is evolving from a siloed operation with isolated strengths into a unified, agile growth engine centered on brand-driven innovation, accelerated digital capabilities, and shared organizational strengths while preserving the unique identity of each business and brand.

This transformation began about three years ago and consists of three main pillars. Our first pillar was centered around redefining and focusing our portfolio on high-growth segments of the market driven by leadership in brand and innovation. This was achieved through our spin-off of MasterBrand Cabinets and the acquisition of Yale and Emtek, which massively accelerated our luxury and digital transformation. Next, we focused on creating a business unit-led organization supported by operational Centers of Excellence, which allow the organization to prioritize our greatest opportunities and deploy best-in-class resources accordingly. Finally, our last pillar focuses on accelerating our execution and growth through our simplified leadership structure, One HQ initiative, and our talent transition and upskilling. As of today, we have completed the first two pillars and are midway through executing the third pillar.

I’m proud of the momentum that we have generated along the way, and I’m excited to fully unlock the tremendous growth potential of our company. Through these first two pillars, we crystallized the Fortune Brands advantage capabilities, which include category management, business simplification, global supply chain excellence, and digital transformation. We emphasize collaborating with channel partners to drive performance, leveraging our leading brand portfolio to optimize market positioning and capture share. Further, we streamlined operations to improve efficiency and agility. We have a robust North America-focused supply chain with reduced reliance on China or single points of failure, allowing us to swiftly adapt to tariffs and other disruptions. Finally, we have been accelerating digital product development and integrating data science, technology, and analytics to enhance pricing strategies, speed to market, and customer engagement.

This year we initiated the third pillar of our transformation focused on re-accelerating our execution and growth through a simplified leadership structure and a transition to a new unified campus in the Chicago area. Our new structure and leadership team are in place and are highly aligned and energized, focusing on our innovation, solidifying our channel partnerships, and working to continually elevate our operational excellence. As our team builds momentum on these initiatives, I am confident that this will translate to continued above-market performance over the long term. While we are executing on the One HQ initiative transition, we are taking a very thoughtful approach to ensure continuity of institutional knowledge among our associates while maintaining laser focus on our operations and customer relationships. I want to recognize and acknowledge the tremendous efforts of our entire team in helping us ensure a smooth transition to our new headquarters.

It is because of their contributions that we are in this position to take Fortune Brands Innovations to the next stage of our transformation. At the same time, I continue to be amazed by the exceptional quality of the talent we are attracting to the organization since we made the One HQ initiative announcement earlier this year. Coupled with our outstanding legacy talent, I am confident our highly engaged and energized workforce will drive exceptional results. We expect this pillar of our transformation will extend into 2026 as we complete the headquarters move ahead of schedule. Turning now to our economic outlook, from a macroeconomic perspective, we continue to see broader uncertainty weigh on consumer demand. This has been evident in the monthly trends for single-family new construction and repair and remodel activity through the second quarter as home buyers and homeowners are hesitant to invest in the current environment.

However, we are encouraged by more recent improving data points for R&R spending. Looking beyond the near-term uncertainty, the intermediate and longer-term fundamentals for our sector remain extremely attractive, marked by significant underbuild in the U.S. housing stock and historically elevated home equity values, which point to a multi-year pent-up demand for our core products. In addition, our strategy remains to build out new idiosyncratic growth platforms less tied to macro concerns such as connected platforms and luxury products, which offer compelling value to customers and create additional value streams that augment our core businesses. Turning to our second quarter performance, Fortune Brands Innovations outperformed our end market with impressive share gains in our core Water and Outdoors businesses excluding China. We estimate that we outperformed the end market for our products by over 200 basis points, and we returned to positive point of sale growth across Water and Outdoors.

Net revenue was $1.2 billion, down 3% versus the second quarter of 2024, or down 1% excluding the impact of China. We achieved these above market results as we gained share in core product categories and built momentum in connected products. We effectively balanced tariff-related pricing actions with strategic promotional activity and leveraged our channel partnerships to deliver value to our customers and consumers. Additionally, we focused on everyday great execution to maintain our strong balance sheet by managing our cost structure and delivering decremental margins consistent with our targets. Our operating income was $199 million, and our operating margin was 16.5%. Our earnings per share were $1. Turning now to our individual business results, starting with Water, excluding the impact of China, the segment saw net sales growth of 2% driven by strong results in Moen North America and House of Rohl.

Net sales declined 2% including the impact of China, as the Chinese residential construction market was weaker than anticipated. Water point of sale outperformed the market and was up slightly excluding China compared to the broader market, which we estimate was down low single digit to mid single digit. Our core Moen business clearly outperformed the market and gained share, with retail point of sale up low single digit, and we continue to see excellent brand recognition and loyalty in our retail business, especially among pro consumers. We recently commissioned a study to evaluate the strength of our Moen brand with the pro. The study confirmed that the pro consumer strongly prefers the Moen brand on the basis of Moen’s quality, reliability, customer service, and warranty programs. In fact, our research indicates that 70% of pros would change their shopping habits if Moen, their preferred brand, was unavailable. Our U.S.

Luxury business again performed well as the higher end consumer remains resilient and continues to choose products based on craftsmanship, design, and brand prestige, demonstrating demand that is less influenced by price sensitivity in the housing market and more by lifestyle alignment. Our House of Rohl brand is the most highly rated with designers and leads on brand perception for luxury, trust, and innovation. Point of sale for House of Rohl was up an impressive high single digits, which compares very favorably to the broader market, which we estimate was down low single digits. We’re still in the early innings of building this business into a global luxury powerhouse. Looking forward to the remainder of 2025, we expect Moen to benefit from the newly won business with large national builders and several large retail promotional events that we were awarded for the second half of 2025.

We still expect choppiness as the market adjusts to tariff pricing and consumer confidence normalizes, but we are well positioned for long term share growth underpinned by our great portfolio and improved execution. Finally, our luxury brands exited the second quarter with excellent momentum, which we expect to build upon in the second half. Turning to outdoors, we had a strong second quarter with low single digit point of sale growth outpacing our core addressable markets, which we estimate were down low single digits during the quarter. This was offset by lower channel inventory levels versus the second quarter of 2024, which resulted in a 3% decline in sales for outdoors compared to last year.

Our market outperformance was driven by Therma-Tru doors, which had very strong performance in retail and wholesale, and LARSON as our LARSON Perfect Aisle continued to roll out and drive meaningful outperformance as we reinvigorated an entire category. We also saw very strong wholesale demand for decking towards the end of the quarter and coming into July. Looking forward to the remainder of 2025, we are optimistic about the solid momentum being built across outdoors. Our outdoors brands have a very robust and vertically integrated North American and U.S. supply chain footprint, and we expect that this will continue to be a significant differentiator for us, particularly in fiberglass doors. As cheap Chinese import inventory dwindles for Therma-Tru, we are seeing incremental demand for slab doors from distributor and wholesale customers, which we expect to accelerate through the second half of the year as tariffs take full effect.

Finally, our Security segment sales decreased 7% in the quarter, primarily due to market softness, destocking, and a first half headwind from prior execution challenges in 2024, which have been addressed. This was partially offset by our commercial and professional business as well as the e-commerce channel, where we gained share across all of our product categories. Looking forward to the remainder of 2025, we expect to benefit from the ramp up of the new Yale Smart Lock with Matter, including with Google. We also see tremendous opportunity to capitalize on the branding investments from the past year to expand share in retail and e-commerce. We have line of sight to new retail customer wins during the second half that we expect to contribute to our results this year and to carry into 2026 under new and refocused leadership.

We have realigned our general management organizations to drive direct accountability and have seen excellent momentum with our customers, which we expect will lead to incremental growth in the second half. As I mentioned earlier with respect to back to school, we are already seeing the initial results of our focus on everyday great execution. Additionally, from a year-over-year growth perspective, we expect to benefit from easier comparisons in the second half as we lap the impact of destocking and last year’s execution issues as well as other one-time events. To recap, I’m encouraged by our results, the progress we made on our strategic priorities, and our solid market outperformance during the second quarter. Our agility in addressing the impact of tariffs, coupled with our commitment to innovation, operational excellence, and cost management, put us in an excellent position to navigate the current environment and strengthen our position going forward.

Throughout our multi-year transformational effort, our underlying value proposition has remained the same. Our brands are synonymous with innovation, trust, and design. We aspire to be a true partner for our customers and are committed to meeting the changing needs of our consumers. Finally, we have inherent secular growth drivers that we expect will allow us to gain share and generate above market returns in the long term as we finalize the last leg of our transformation and accelerate execution. This is a great time to be at Fortune Brands Innovations. I couldn’t be more excited for the future of our company, and I’m confident in our team’s ability to execute on our strategic priorities with excellence. I will now turn the call over to John.

Paul, Conference Operator: Thank you, Nick. Before I begin my discussion of our financial results, I’d like to take a moment to thank Nick and the broader Fortune Brands Innovations team for such a warm welcome to the company. Over the past three months, I’ve been extremely impressed by the extraordinary talent throughout the organization and the shared sense of purpose felt by all our associates. All the positive attributes that I observed from the outside have only been reinforced. I’m excited to join this organization at such an impactful inflection point for the company. I was initially drawn to Fortune Brands Innovations by the foundational strengths of the company, the enduring brands, high margin profile, and strong free cash flow generation among many others. Overlaying the innovation story and upside growth potential with the connected business made the opportunity even more compelling.

Nick described the three pillars in the ongoing transformation that is entering the third phase. In my initial interactions with various stakeholders, I believe one aspect that’s underestimated is the value that will be created by moving from a holding company structure to an operating company structure, of which the One HQ initiative is a part. In the quarter-to-quarter world of public companies, that value won’t always be visible immediately and the returns won’t be realized in a straight line, but I’m confident those along for the journey will be rewarded over the long term. We’re taking this opportunity to build out a best-in-class platform across the portfolio, starting with a simplified and standardized data layer feeding modern systems, leveraging AI with streamlined and standardized processes run by a passionate team with a shared vision for innovation and excellence.

This next stage in our transformation will drive improved insights into the business with improved analytics, which will ultimately drive enhanced financial performance, returns, and value creation. I’m grateful to be a part of such a talented and collaborative leadership team and I’m excited about our opportunity to drive additional momentum as the team comes together at our new campus. Now let me discuss our second quarter results. As a reminder, my comments will focus on results before charges and gains to best reflect ongoing business performance. Additionally, comparisons will be made against the same period last year unless otherwise noted. In the second quarter, sales were $1.2 billion, down 3% in total and down 1% excluding China. Consolidated operating income was $199 million, down 8%. Total company operating margin was 16.5% and earnings per share were $1.

Our effective tax rate was elevated this quarter at 31% due to withholding tax triggered by a repatriation of cash from China. As we previewed last quarter, on a full year basis, we anticipate an effective tax rate between 26.5% and 27.5%. Our second quarter sales performance was mostly driven by low single-digit point of sale declines, which was indicative of the broader demand environment. Excluding China, our POS was essentially flat. Importantly, our POS performance in the quarter surpassed the market, reflecting the strength of our brand and the solid execution across our teams. Turning to our segments, beginning with Water, sales were $647 million, down 2% but up 2% excluding China. Our results reflect positive POS, which was up slightly excluding China, and channel inventory improvements in wholesale and retail, as well as the impact of disciplined pricing actions across our portfolio.

Within our Water segment, Moen and House of Rohl outperformed the market. Water’s operating income was $165.5 million, an increase of 8% compared to last year. Operating margin was 25.6%, up 230 basis points as productivity improvements from strategic sourcing initiatives, manufacturing efficiencies, and lower SG&A were able to offset the lower sales revenue. For the full year, we are targeting operating margins to be 23% to 24%. Turning to Outdoors, sales were $379 million, down 3% as reduced channel inventories offset low single-digit POS growth. During the quarter, we made significant progress in the rollout of our LARSON Perfect Aisle reset, which was largely complete at the end of the second quarter. The initial results have exceeded our expectations and have also led to share gains. Outdoor segment operating income was $48.6 million, down 23% from the prior year quarter.

The primary driver of the decline in operating income was the lag effect of higher cost inventory from the second half of 2023 flowing through our cost of sales. During the second quarter, Q2 segment operating margin was 12.8% and we are targeting 14% to 15% for the full year. In Security, our second quarter sales were $178 million and declined 7%, driven by mid single-digit POS declines, which largely reflect a first half headwind from prior execution challenges. In 2024 we saw solid growth in our e-commerce channel where we gained share across all product categories. During the quarter, segment operating income was $26.3 million, down 27%, and segment operating margin was 14.8%, reflecting the impact of lower volumes as well as increased investment in branding and advertising for Master Lock and SentrySafe.

It’s important to note that these investments are effectively a reset of our marketing strategy with the brands and represent the largest investment in these brands in several years. For the full year, we are targeting operating margins of 16.5% to 17.5%. Turning to the balance sheet, we are managing our capital structure with the objective of balancing our cost of capital, returns, and overall flexibility. Our balance sheet remains solid with cash of $235 million, net debt of $2.6 billion, and our net debt to EBITDA leverage of 2.8 times. We continue to expect our net debt to EBITDA to be between 2.2x and 2.5 times at year end, demonstrating the strong free cash flow generation of the business. During the quarter, we paid off our $500 million 2025 senior notes through a combination of commercial paper borrowings and cash on hand.

We also have $613 million available on our revolver at quarter end. In the second quarter, we returned $93 million to shareholders, including $63 million in share repurchases. We have spent $238 million on share repurchases through the second quarter year to date. Our second quarter free cash flow was approximately $119 million, reflecting a seasonal uplift from first quarter. Before turning to our outlook, I’ll provide an update on our tariff exposure. Based on tariff rates as of July 29 and assuming country specific rate changes that have been announced on or prior to July 29 take effect on August 1, we anticipate unmitigated impact of approximately $80 million in 2025 and $260 million on an annualized basis. Of the anticipated $260 million of annualized impact, approximately half is related to China and the balance is rest of world.

Consistent with our previous guidance, we continue to expect to fully mitigate the anticipated in-year and annualized impacts. As a predominantly North America based manufacturer, our footprint leaves us very well positioned to both service our customers at a high level and take share in the current environment. Since 2017 we have reduced our spend from China by over 60% and by end of the year we continue to expect our China cost of goods sold to be around 10%. Turning now to our outlook, over the past quarter we have taken decisive actions to mitigate the impact of tariffs and have worked with our customers and suppliers to find win-win solutions to address the challenges in the process. We have progressed our expectations for 2025 performance and believe we have improved visibility into the range of potential outcomes for the remainder of the year.

As a result, we are using this opportunity to provide updated full year 2025 guidance. We expect full year net sales to be flat to down 2%, and we expect full year EPS within the range of $3.75 to $3.95. Our guidance is driven by our view on the markets for 2025. We expect the global market for our products to be down 4% to down 2%, with the U.S. housing market to be down 4% to down 2%. Within this market forecast, we expect U.S. repair and remodel to be down 3% to down 1%, and U.S. single family new construction to be down 6% to down 5%. Compared to our initial guidance from February, the most notable change is U.S. single family new construction, which at the start of the year we had forecast to be down 2% to up 2%.

This incorporates the single family new construction trends observed during the first half. We’ve reduced our expectations for the other primary metrics by approximately 1% to 2% each. Looking ahead to the second half, we expect our results to benefit from market outperformance in each of our segments, with momentum carrying into the third and fourth quarters. These are underpinned by the pull-through of customer commitments in Water, highly visible incremental demand in Outdoors, and new product launches and brand campaigns in Security. We also benefit from lapping of one-time events that impacted our results in the second half of last year, particularly in Outdoors and Security. Throughout the cycle, we are continuing to invest for growth and committed to delivering shareholder value. That said, we are also highly aware that the external environment remains very dynamic and that the consumer is cautious and sensitive to volatility.

Overall, we remain thoughtfully optimistic as we have good line of sight about our ability to address what is in our control. While the long-term fundamentals of our market continue to be attractive, the near-term consumer demand environment remains dynamic. As we have in prior periods of uncertainty, we are focused on outperforming our markets, thoughtfully managing expenses while continuing to make key strategic investments and generating cash. In conclusion, our teams continue to execute at a high level across our businesses, and we remain well positioned to capitalize on future growth opportunities. As we have highlighted, the market backdrop continues to be dynamic, and the tariff-related uncertainty continues to weigh on consumer sentiment. Despite these challenges, our second quarter performance demonstrates the resilience of our business and Fortune Brands Innovations’ ability to deliver sustainable results.

In addition, we reiterate our expectation to fully offset the anticipated impact of tariffs in 2025 as well as in 2026. We remain confident in the long-term outlook for our core end markets and our ability to continue to generate shareholder value into the future. I will now pass the call back to Curt to open the call for questions. Thanks, John. That concludes our prepared remarks. We will now begin taking a limited number of questions. Since there may be a number of you who would like to ask a question, I will ask that you limit your initial questions to 2 and then re-enter the queue to ask additional questions. I will now turn the call back over to the operator to begin the question and answer session. Operator, can you open the line for questions? Thank you. We’ll now be conducting a question and answer session.

If you’d like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: You may press star 2 to remove your.

Paul, Conference Operator: Question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Matthew Bouley with Barclays. Good evening, everyone. Thanks for taking the questions. Wanted to start out actually on the connected products business. I think a lot of promising progress that you spoke to, including that subscription model coming. Would love to hear more detail on that, I think on the numbers. I think I heard you say the updated sales guide for this year is $250 million, but you still expect to get to that $300 million run rate. Just any more details on kind of the pluses and minuses that are impacting 2025 as you get all these initiatives coming through and you get to that run rate.

Any early thoughts on how the business is shaping up perhaps for 2026?

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Thank you. Sure, Matt, happy to jump in there and describe a little bit of what’s going on. Firstly, we’re super pleased with the connected results. We’ve invested heavily in the space in the last few years, and it’s just great to see this momentum and scale continue to build, not just frankly on the sales line, but also the team that we’ve built, the digital fluency, the entire organization that’s come along the journey with them, and now the leverage of that knowledge into the legacy business in terms of driving AI tools and processes into the business with the strength of the connected business itself. I would say the performance this year, you’re right, $250 million is our expectation for the year, but the run rate we think will close out the year closer to $300 million.

As we look at the pipeline, I would say it’s both broader and a little bit slower than we expected. Broader in that we’re touching on even more space and opportunity than we had anticipated, more insurance partners coming into the mix, more adjacencies in terms of areas that we can impact with the connected portfolio, including the recent launch of our connected lockout tagout portfolio and finding some huge white space there that we can go after, and then learning that as we build this giant pipeline of opportunity and contracts that we built, converting those into sales and driving that process, the teams are very, very focused on that bottom end of the funnel and that conversion piece. As you touched on, we’re also very excited to be launching the subscription test this quarter.

We think it’s a win-win, obviously a win for us to get people onto subscription. Recurring revenue now at 5 million users plus, so that is a big part of the future. Our consumer research tells us it’s a win for the consumer too. They much prefer from the research the lower entry point of a subscription to a one-time purchase. We want to test it and see if it works. If it works, not only will it help us accelerate sales and penetration, it’s going to put the company on a really solid recurring revenue footing. We’re very, very excited about it. Beyond that piece, also just the new partnership with Google. Sunsetting that older first generation Google product, a lot of which was sunsetted last year, which is a part of the headwind that we went through is that sunset before the new product came online.

With that hitting the market now, we think it’s a really great product that’s going to do some exciting things.

Paul, Conference Operator: Okay, great. No, that’s really helpful. Thank you for that, Nick. Secondly, jumping over to the water business, I wanted to ask around market share. It sounded like POS outperformed the market. I heard you say you won maybe some new business with large builders and there might be some offerings coming down the pike here that would be targeted for retail, I think E-commerce as well. Maybe if you can just sort of level set us on what’s happening with market share in the water business across your channels and sort of what the impact of some of these wins may have as we think about the.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Second half of the year. Thank you. Sure, happy to do that. Why don’t I start with Moen, as you mentioned, build a business. We saw some really nice performance out of the team, both getting increased commitment for share from existing as well as converting new and, as you know, very large business. For us to see that continued conversion, I think it really speaks to the strength of the ecosystem. It’s the product, the support, the service, the warranty, the professional support, and belief in the product. That came through very strongly. I’m happy with that. Retail performance also very strong in the quarter, so very pleased. We think that’s just the beginning. We’ve done a lot to reinvigorate the work that we’re doing with our retail partners, and I think we can elevate that even further. A lot of focus from the team coming.

I think that will play out well through this year, really get some acceleration in 2026, and then some opportunity, I think, still around e-commerce. I talked on the last call about how we had really started to enforce much stronger pricing discipline in e-commerce. That takes time, and it takes discipline, frankly is the word, to stick to it and to enforce it. Over time, as that discipline starts to stick and we’re able to then go in and really win on the basis of product and our ability to optimize search and do promos in the right way, we expect will be a tailwind in the future. I think some more work for the team to do there. If I flip over to the House of Rohl, really strong resilience with that luxury consumer. We saw excellent results out of the House of Rohl.

Really delighted with the performance that the team has driven to continue to bring that to life in the portfolio and see that performance really compounding and growing into the back half of the year. Resilient with that end luxury consumer, and I think the portfolio is really just answering the consumer needs and the designer needs. Really good performance there.

Paul, Conference Operator: All right. Thanks, Nick.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Good luck, guys. Thank you.

Paul, Conference Operator: Our next question is from Susan McClary with Goldman Sachs. Thank you. Good afternoon, everyone. My first question is on the security segment. It sounds like you’ve had some really.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Nice initiatives there as you’re gaining in.

Paul, Conference Operator: That e-commerce channel. Can you talk a bit about some of those retail wins as well in the second half, and how we should be thinking about this new launch and focus on the brand coming together?

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: The next couple quarters? Yeah. Great question. As a reminder, you know, been on a journey with Security. We really set out even way back when we did the last investigation, talking about how we were going to take this segment on a journey to really, through some supply chain initiatives, rebuild the margin of the business to create fuel for growth, to then start to reinvest in brand. As you see the margin profile now coming through, that gives us much more room to make those investments. Through our One HQ initiative of bringing this company together, we’re now able to leverage our marketing expertise to really bring the first major refresh and brand campaign to Security in several decades. We’re very excited about what’s coming. The monster campaign, as I mentioned on the call, we’ve seen a 60% uptick in website visits.

I think I mentioned on the last call, even in SentrySafe we’re early experimenting around doing some work there. We saw a double-digit uptick in website visits there translating into double-digit point of sale growth in that quarter. This stuff works. What you should expect from us is this campaign to now roll out not just above the line but all the way through the funnel with a very consistent, much clearer shelf set and product set and messaging to the consumer that allows them to navigate this category, which we do captain as the leader, in a very simple way where they can understand the value of the different price points of our product. We think that’s going to be a really great opportunity. New leadership in there. A lot’s been done to really reorient that business, drive accountability with the GMs inside of that business.

As we get through the headwinds of some of the executional issues last year, we think as we get into the back half of this year, we’re going to see some really solid performance. That performance is really just building momentum into 2026 and beyond.

Paul, Conference Operator: Okay, that’s very helpful. Color, Nick. Maybe turning to the margins, the consolidated margin. Can you talk a bit about the cost savings efforts that you are pursuing, where we are in that process, how we should think about those benefits coming through, and then any color on the.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Path for profitability in the back half of this year. Yeah. Why don’t I start with some high level thoughts. I’m going to hand it over to John to take us through some of the detail, but a couple things. One thing is this management team feels that it’s very much our duty to manage the P&L with discipline in a category that at times can have headwinds. Certainly the last couple of years there’ve been more headwinds than we’ve expected. I think we’re proud of the way in which we’ve managed the P&L tightly, not just to deliver for shareholders from a margin perspective, but also to create the fuel to reinvest in the business. We’ve continued to make those investments in brand and innovation and in digital. That’s very much the philosophy of the team, including our Presidents and General Managers. That’s sort of part of the DNA.

I think as we got into this year, this One HQ initiative, which we’re more than halfway through now, actually ended up giving us flexibility as we were moving people and at the same time rehiring people to control the pace of that and really think deeply about exactly what capabilities we needed and when. That’s given us flexibility as we’ve built the cost base for this year and hopefully will allow us to leverage that as we get into next. I don’t know if you want to add some color to that.

Paul, Conference Operator: Yeah, sure, yeah. Just looking at the cost structure going into the back part of the year, we touched on in the opening remarks that we’re moving into the new headquarters here in the fall. We’ve got move-in dates starting out in September. As we do that, there’s going to be some efficiencies that we’re going to gain from just consolidating some of the operations there from a corporate basis. If you look at some of the business units in the segments, for example, both Outdoors and Security are going to see higher margins as we go into the back part of the year. Different factors are driving each of them. Within Outdoors, one of the dynamics that impacted the first half this year was frankly just some higher costs that were in the back part of last year for inventory.

We under absorbed last year in the back part of the year, which led to higher cost of goods sold for this, particularly in the decking segment. We’re going to see that roll off going into the second half of the year, which should lead to some better margin performance there. On Security, we talked about some of the investments we’ve been making in the marketing and the branding there. Those are investments that we made largely in Q2. We’re going to continue to invest to drive that growth. If you look at some of the margin that we’re expecting to get back going into the back part of the year, we’re expecting to get some of the benefits of that incremental spend this quarter, seeing that really translate next half. Okay, that’s helpful color. Thank you both and good luck with the quarter.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Thanks.

Paul, Conference Operator: Our next question is from John Lovallo with UBS. Hi guys. Thank you for taking my questions as well. The first one is just on the Water segment. A 25.6% margin I think is among the highest probably you guys have achieved. I know you talked about productivity.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Manufacturing efficiencies, SG&A, things of that nature.

Paul, Conference Operator: Just curious if there was anything, you know, kind of one time in nature in that number, you know, anything related to pre buy or things like that. Also, you know, what level of pricing have you guys realized here ahead of the tariffs? Yeah, I can start, John. No, it’s a great question. We’re really proud of the 25.5%, 25.6% that we achieved this quarter. There really weren’t any one times that were flowing through there. It was all those things that you mentioned and that we prepared, that we mentioned in prepared remarks. All of those are a factor.

I would say from a kind of breakdown within there, the House of Rohl segment was a nice example of an area that we’ve touched on in the luxury segment where the consumer really has been more resilient and we’ve been able to see some price increases, volume increases there within that segment, which has really helped drive some of that increase. The other piece that I would point to, just broadly speaking, you know, we’re going to be taking some, we’re going to be factoring in some other promotional events and other things to drive further sales going into the back part of the year, which, you know, we’ve guided to 23% to 24% on a full year basis.

Not a large decremental margin, but, you know, that is going to normalize as we get into the back part of the year with that and some of the new business that we’ve won.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: I’d just add on your question of pricing, we really try to be disciplined across the businesses and take pricing in a regular way and in an incremental way where we don’t have to do large catch up prices, et cetera. You saw us do that during the supply chain shocks post Covid, and here we’ve really done our best to sort of keep it in the mid single digit range on average as John mentioned, target margin for the year 2023-2024. We’re not going to try to overshoot the mark. We’re going to try to stay really competitive for our customers and our consumers. To the extent there’s quote like this that allows us to continue to do so also while we invest to continue to drive the brand and innovation across this portfolio. Okay, that’s helpful.

Paul, Conference Operator: On the updated tariff numbers, the $80 million in 2025 and the.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: 260 in 2026 unmitigated maybe just help us understand the plan to offset maybe the mix between pricing, cost savings, supply chain initiatives in each year would be helpful. Thank you. Yeah, I’ll start and try to get some color. That says obviously for competitive reasons we don’t break that down, but we are working the supply chain piece the hardest. Our goal is to get supply chain savings where we can, reorient the supply chain where we can, do all the work. I mean, the work that the team has done has really been second to none. The speed at which they’ve gone after this, and you can see it right in the offsets, really again leveraging the digital investments that we’ve made in our own systems, the ability to draw that data, analyze that data, and act on that data has been second to none.

We’ve been able to make a lot of progress there. We look to price to cover, but we will keep going back to the cost and supply chain opportunities and keep working them over. To the extent that that then starts to over deliver, that’s going to give us more flex on the price piece, either to put that price back to work in promo or reinvest it for branded growth.

Paul, Conference Operator: Sure.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Just add maybe a little bit.

Paul, Conference Operator: Of color in terms of where those tariffs are coming from. We mentioned in the prepared remarks that our exposure to China as part of our cost of goods sold is roughly 10%. Now, to put that into perspective, of the $260 million annualized number, about half of that impact is China. To the effect that we are able to manage that supply chain to mitigate that risk and looking through optimization there, that’s a big part of those mitigation efforts.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Great, thanks very much, guys.

Paul, Conference Operator: Our next question is from McLaren Hayes with Zelman and Associates. Hey, how’s it going guys? I was just wondering first on the tariffs, has that lower annualized number impacted the way that you guys are thinking about going after some of those cost out actions and balancing that with the investments you’re making?

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Yeah, I mean every day, like every day we’re rerunning the model, it seems like.

Paul, Conference Operator: Absolutely.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Look, it changes the mix of what you’re doing, but what it doesn’t change is the principle of what we’re doing. What we’re doing is aiming to build a regionalized supply chain with redundancy that doesn’t make us dependent on any one geography or any one single point of failure. That philosophy stays the same and we are going to continue to invest to make that happen. Fortunately, we are starting from a phenomenal place, which is one of the strongest, if not the strongest, U.S. North American manufacturing base of any of our competitors. What we’ve seen is a lot of customers come to us and say, how can we leverage what you guys have in the U.S.? How can we leverage what you guys have inside a USMCA to really drive it further?

A lot of the work we’re doing is about what product sets we bring inside of that regional fence, if you will, and how over time we can use that to drive the business further. I think there’s what we’ve done today, which I’d say is fairly tactical. We’ve done it very quickly. The future, even if we cover off on all the tariffs, we won’t stop here. The future is the strategic element, which is how we keep driving CI out of this supply chain and build the most resilient and lowest cost supply chain that we possibly can and then use those funds to reinvest to make our products competitive and to build our brands and drive our innovation. Awesome, thanks.

Paul, Conference Operator: On China within water, I guess, any update on what you guys are seeing on the ground there?

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Of how the outlook is shaping up the back half? Yeah, looking at China, if we looked at all of last year, it was interesting because the comps were up and down 2024 versus 2023, but the net sales line was very, very steady. I mean every quarter almost exactly the same and we saw it very steady. We definitely saw it take a step down in Q1 of this year. I think directly attributable to a lot of the uncertainty driven by these tariff wars and that is impacting the consumer over there who’s been much more cautious. We are working that with the China team and that really is around the developer business. If we look at things like our showroom channel and what we call our designer channel, those are showing growth.

What we are going to do is really work with the team over there to understand how much of that developer business we expect, where do we expect it to land and how do we expect it to then grow from there and what’s the point at which this becomes a growth vehicle for our organization? I’ll just add at this point the team there has done such a great job managing the cost basis as the top line has declined that we do not have much exposure from an EPS perspective. It’s not like there’s a lot of EPS risk for us in China. They’ve managed it really, really well and it does give us exposure to a lot of interesting product and innovation and we like that window that that business gives us, so optionality for growth and access to innovation.

The objective there is really to keep building these other channels that are growing while we start to find the bottom of the developer channel and then grow from there and really turn what’s been a headwind into a tailwind for the business.

Paul, Conference Operator: Thank you. Our next question is from Stephen King with Evercore ISI.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Hi, this is Atishant for Steve.

Paul, Conference Operator: Thanks for taking the question.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Just going back to the topic of tariffs, and thanks for all the detail there. On the last call, it was mentioned that the incremental tariff impact would be.

Paul, Conference Operator: Offset by the mitigation actions, including mid.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Single digit pricing across the business on average. Is that pricing expectation changed given that updated tariff expectations? The tariffs have shifted around a lot, but I would say the pricing across the portfolio on average we’ve been able to maintain around that mid single digit mark. To the extent that we’re able to further mitigate the tariff impact, we’ll certainly look to that and work hard to be as competitive as we can in the marketplace.

Paul, Conference Operator: The only thing I’d add is that’s not a peanut butter spread across the portfolio across different channels. We’re being very surgical around how we implement those tariffs price actions and how we can best realize some recovery there. Hey guys, it’s Steve. Just to follow up on that, why, if the pricing action is going to remain the same but the tariff gross headwind is less, why wouldn’t you be able to, why wouldn’t you be effectively over mitigating under that circumstance? I’m just trying to make sure I’m understanding conceptually what the change is.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Yeah, again, we run this model almost daily. Right. I would say it’s very early stages to say, hey, it’s set and we know that we don’t have enough, we have too much, we can start to move things around. That is certainly the objective. I said all of our pricing is in at this point, by and large. I’m sure there’s probably a couple accounts out there that are still being discussed. I think by and large all the pricing is in. As we work those mitigations, if there’s opportunity, we’ll leverage that opportunity. I think that’s the way to think about it. As John just said, it’s not a peanut butter spread either. There are places where we’ve had to take more and we’ll see where those mitigations come out. There are other places. Look at the Outdoors business, U.S. manufacturing, fully vertically integrated.

We had a lot of competition in the last couple of years, frankly, some of it dumping in the market. Now that business will be hugely advantaged by the geopolitical and tariff opportunity. Thinking through there, how do you manage that? We have the largest facility. How are we going to handle the volume that might come our way and how do we balance that with pricing? That’s a different way of thinking about the similar issue that’s impacted by the tariff thing in a very different way.

Paul, Conference Operator: Yeah. Steven, the one thing I would add is when you’re looking at the math just from last quarter to this quarter, the one thing to also keep in mind is when the tariff rates come down. A lot of them have come down since the last quarterly call. Some have gone up, but several have come down and meaningfully down. The mitigation actions from the supply chain effects that we’ve put into place also come down because we measured those last call off of the baseline higher tariff rates for certain countries than they are today. To Nick’s point, we’re running these models every day, so there’s a lot of factors that go into it. Gotcha. Okay, thanks so much.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Sure.

Paul, Conference Operator: Our next question is from Mike Dahl with RBC Capital Markets. Thanks for taking my questions. Just to follow up with a couple more on tariffs. Sorry to beat the horse here on the ex China piece. Can you give us an update? Some of these tariff rates have been moving around, kind of what your largest country exposures are. I didn’t hear you mention copper as being contemplated. There’s obviously some moving pieces and puts and takes with copper, but if you’ve done any quick work to give us a sense of how that would impact, probably not this year, but as you think about kind of an annual impact, maybe look into next year.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Yeah, I’ll just start with the copper and then I’ll hand it over to John. I’d say at this point, what we understand to be contemplated by copper does not have a material impact. We’ll see the HTS codes when they come out, but that’s not our understanding of what’s come out this far. We don’t see that as a huge impact now. Let’s give it a few more days or a week or whatever it is before we see that. We didn’t see anything particularly alarming in the copper piece.

Paul, Conference Operator: Yeah. As it relates to the rest of the world piece, just to give you some more color there, it’s a longer tail. China is the most meaningful one at about half. Beyond that, it’s really a lot of different countries. If you were to take number two, it’s probably Mexico, non-USMCA Mexico. Again, it’s not nearly as material. It is a long tail.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: Okay.

Paul, Conference Operator: Would the largest beyond Mexico be the other Southeast Asia countries? I guess that’s just clarifying. The second question, again, given some of these moving pieces, if there’s any help you can provide in terms of you often give some quarterly directional cadence around how to be thinking about margins and sales by business.

Nicholas Fink, Chief Executive Officer, Fortune Brands Innovations: I think that would help just given it’s such a dynamic environment. I’ll just start on the other countries and John can answer the other piece. I just recall and I say where you come from, a lot of people in our sector are importing finished goods from Southeast Asian countries. We certainly have some Southeast Asian countries in the mix. For the most part, we’re a U.S. manufacturer and U.S. assembler. Most of our tariff exposure is coming from that remaining piece of the supply chain that today was only made in China. That’s like getting down to the 10% that we then bring over here and assemble in the U.S., and that is the vast majority of the exposure. What we’ll do is work over time to create other sources for that component and then continue to leverage what is ultimately U.S. manufacturing. That’s our goal.

Paul, Conference Operator: If you’re looking for some of the back half, some guidance, if you look at our earnings release, we did reintroduce the table there that does have segment breakdowns for the full year that can give you some information around what we’re expecting for the back half of the year. If you look at Water, for example, just starting there for the full year, we’re looking at negative 3% to negative 1% on net sales and operating margins for the year at 23% to 24%. Outdoors, we’re net sales basis flat to 2% with operating margin to 14% to 15%, and Security, net sales negative 1% to 2% and margins at 16.5% to 17.5%. Thank you both. Thank you. This concludes our question and answer session. Thank you for joining today’s conference call. You may now disconnect.

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