Nicholas Fink
Chief Executive Officer at Fortune Brands Home & Security
Thanks, Dave, and thank you to everyone for joining us on the call today. I hope that you're all enjoying your summer while continuing to stay safe and healthy. Our teams once again delivered an exceptional quarter driving outperformance on both the top and bottom lines. Our second quarter results demonstrated that we are delivering market beating growth and margin progression even in the face of numerous external challenges. We remain on track to achieve both our near and long-term performance objectives across all metrics. For the quarter, our company sales increased 41% in total and 32% organically, with all segments driving strong growth. That includes organic growth of 21% versus 2019 and over 9% sequentially versus our excellent first quarter of 2021. Current demand for our products remains robust and our teams continue to drive accelerated share gains across the portfolio. Operating margin increased 110 basis points to 15.4% and earnings per share increased 66%. Headwinds from inflation and supply chain constraints were significant in the quarter, making these results even more remarkable. Across our company, we're diligently working to meet demand and keep our customers served with our industry-leading brands. On the back of a strong market and our accelerating the outperformance, we are again increasing our full-year 2021 sales and EPS guidance, while maintaining our operating margin goal of around 15%., Pat will go in to further detail on our increased guidance later in the call.
While this quarter provided an easier comp given the COVID-related shutdowns in North America and Europe last year, each segment also delivered sequential sales growth and operating margin improvement versus a strong first quarter of 2021. We now expect full-year organic sales growth to be in the high teens as favorable demand trends persist. We continue to deliver on our strategic agenda including accelerating our margin improvement and growth initiatives by our Fortune Brands Advantage capabilities while also investing for future growth to drive increasing stakeholder value. These outstanding results would not have been possible without our exceptional team of people who continue to make the difference putting safety first, going above and beyond to serve our channel partners and customers and operating with a culture of excellence.
Thank you to all who work hard each day standing proudly behind our world-class brands that make an increasingly positive impact on people's homes, safety and communities.
Turning to the remainder of our remarks today. First, I will discuss what we are seeing in the home products market. I will then highlight key takeaways from our second quarter and provide additional color on what drove the results. Finally, Pat will provide highlights on our financial results, balance sheet strength and liquidity, as well as thoughts around our increased guidance to our financial outlook for the year.
Now turning to our view on the housing market. The long-term fundamentals for US housing and home products remain very favorable. The US housing stock is under built by millions of homes and builders are currently pacing orders and managing backlogs to alleviate constraints on labor, commodities and affordability while completing communities under construction. The demand remains extremely robust. This pacing will result in a further elongation of demand that will provide a long-term momentum to many of our leading brands, which are the preferred choice for builders and the trade. Our strong positioning across all channels, including the wholesale and dealer channel which service pros and builders is differentiating us and gives us exposure to the additional torque from new construction growth. With low inventory and builders pacing supply, homeowners are buying existing homes from a very aged housing stock requiring repair and remodel investment. We have seen the strengthening of larger ticket R&R as the channels historically serving that demand have more fully opened.
Within the retail channel, there has been some market commentary regarding demand normalizing and consumer spending shifting to other categories as the economy opens further. While the retail channel may be showing some recent signs of normalization for certain product categories, demand is shifting back towards the trade channels that were largely closed at this time last year. We are still expecting robust activity for the remainder of the year as reflected by our increased market and financial guidance. As we continue to make progress on our objectives, it is important not to lose sight of the long-term demographic tailwinds supporting this prolonged housing group. The two largest segments of the population; millennials and baby boomers both have significant need for housing and home products. Millennials, the largest segment of the population will be a great force for years to come in forming and upgrading households accelerating the need for homebuilding and driving investment in new homes and R&R. This demographic is still in the early stages of fueling housing growth. Meanwhile, baby boomers are retiring large numbers with record equity in their homes and retirement accounts and are upgrading and adjusting their homes for their next phase of life. Given the sheer size of these demographics and severity of the US under booked, we expect these fundamentals to play out over many years to come. Our portfolio is excellently positioned from a product mix, price point and channel exposure standpoint to take advantage of the long-term secular trends in new construction and R&R. We intend to outperform this market consistent with our long track record. With that market backdrop, some thoughts on the recent quarter.
As I mentioned, we had an excellent quarter. Our leading brands continue to resonate with consumers who are looking for world-class products driven by purpose and innovation. When consumers buy our products, they expect more than just functionality. They buy our brands, because our brands are built with purpose. When they buy Moen they're buying the brand that continuously innovates to advance water efficiency and conservation. When they buy Fiberon decking, they are buying eco-friendly boards that are over 94% made from recycled materials. When they buy MasterBrand Cabinets, they're buying quality craftsmanship using responsibly sourced materials. Our Therma-Tru door systems are energy efficient and our security products keep people and possession safe. This sense of purpose and greater good for all resonates from our amazing employee base. Our recent ESG report has received accolades from investors and I'm very proud of the contributions our brands and people make to the environment and our communities. We are committed to doing even more in the future.
Operationally, we continue to execute our Fortune Brands Advantage capabilities that fund investment in key growth priorities including in our brand-building and product innovation, digital initiatives and capacity and distribution expansion. Those capabilities are contributing to our performance in the first half of 2021 and we'll continue to accelerate in the years ahead. Inflation, whether it'd be for material freight or labor increased as we move through the second quarter; however, as you can see from our strong performance, we're pulling every lever available to us to offset these headwinds and serve our customers. We prioritize our continuous improvement in supply chain programs to offset inflation and then turn to price where necessary. We've been thoughtful about where and when we take price so as to maintain constructive customer relationships. As we have demonstrated over the past few years, our brands and products are desired by consumers and are capable of sustaining price increases while growing share. Our ability to mitigate and overcome challenges are the demand, supply or inflationary in nature has been proven through our consistent delivery of results. We will continue to be laser focused on execution driving stakeholder value across the organization, no matter the environment. I mentioned it last quarter and I will state it again, we are committed to offsetting inflationary and supply chain headwinds for the full year.
With an even stronger 2021 outlook, we are accelerating investment behind our core strategies to continually deliver market beating growth and margin expansion over the long run.
Now, let me turn to our individual businesses and how we're positioning for long-term growth. Starting with Plumbing. Our Global Plumbing Group continue to significantly outperform the global and US markets this past quarter taking share in every geographic region in which we operate. The business is firing on all cylinders with sales growth of 38% or 33% excluding FX. Our strong plumbing sales drove operating leverage, resulting in a 24.3% operating margin for the quarter notwithstanding increased investment in brand, innovation and customer service. To put this margin performance into context, we delivered this results inclusive of increased brand investment of a low double-digit millions over last year and significant expenditures related to improving our service levels to our customers. We achieved very strong double-digit sales growth across all brands, channels and regions. We are winning share and generating incremental investment dollars to pursue further above market growth and margin in both North America and in China. In North America, our Plumbing business has never been stronger. We continue to be an industry leader in both innovation and key metrics on brand awareness, purchase intent, and loyalty among customers. Our momentum in the smart home plumbing market, including continued adoption by builders, insurance companies and consumers of our Flo by Moen technology is driving further core growth propelling the flywheel of top and bottom line performance. In China, Moen achieved double-digit growth on a very tough comp to Q2 last year as the Chinese market was reopening in this quarter a year ago. We continue to invest to position Moen as a leading brand with Chinese consumers and are increasing our total addressable market by expanding our product adjacencies. We are also making incremental investments in capacity and distribution. Finally, the House of ROHL sales nearly doubled globally and increased double digit sequentially in all regions. The brands achieved these results despite many showrooms remaining appointment only. We are seeing a clear uptrend in premium and luxury demand not only in plumbing but across our entire portfolio. Signaling consumer demand is strengthening for big ticket R&R.
Turning to outdoors and security. Sales increased by over 60% and operating margin was 14.7%. Organically, sales increased 26%. These exceptional results were driven by strong double-digit decking and security growth and double-digit growth in doors. Supply chain and labor availability continue to impact operations across multiple brands within the segment. Our teams are hard at work to offset these headwinds, which held us back from achieving full capacity production. integration of Larson continues to progress well and the business is performing as we expected. As with our other operations, the Larson team met the supply chain and select material availability constraints in the quarter head on. Our teams across outdoors and security are working together to advance integration are capturing planned synergies.
Turning to decking, Fiberon grew nearly 30% for the second quarter versus a strong quarter a year ago and we continue to operate in the sold-out environment. Incremental mid-year [Phonetic] capacity will be utilized quickly and we continue to take price and accelerate capacity expansion plans. Market share conversion from lumber to higher performing eco-friendly composites continue to trend higher. Sales in Doors experienced double-digit growth in the quarter, and would have been even better had operations not been constrained by labor and materials. As a leader in serving the new construction market, activity remained robust as it had for much of the past year. Similar to our decking operations, we're currently in near sold out conditions and are working to optimize our supply chains to meet this high level of demand.
Turning to Security, sales accelerate this past quarter growing strong double digits versus a year ago and led by US retail POS and the continued recovery of commercial and international markets. Our key North American retail market is back above 2019 levels and we continue to leverage Fortune Brands Advantage capabilities within security to drive our momentum.
Finally, turning to cabinets. Our Cabinets operations again delivered excellent performance in the past quarter with sales running 31% and operating margin of 10.9%. Even when compared to a very strong first quarter, the business achieved sales and operating margin growth. This now marks four consecutive quarters of double-digit above market growth as the market leader. Demand was impressive in both value and made to order. Our current record backlog in cabinets is a clear sign of the strong demand for our products. Our advantage dealer network has continued to drive increasing sales and margin progression for much of the past year. Additionally, our new facility in Georgia is fully open and ramping up production to serve demand. Mantra [Phonetic] continues to perform well and is demonstrating the competitiveness of our low cost global supply chain. In addition to strong demand, both Fortune Brands Advantaged capabilities and a culture of continuous improvement have driven cabinets performance. We are on track to continued margin progression this year, and in the future as we progress towards our goal of mid-teens margins as the market leader in the industry.
In summary, we continue to see very strong demand for our products driven by fundamentals and demographics. Our performance has been accelerated by the strengths and culture of our company, brand building and consumer led innovation, expertise in channel development and a relentless focus on people, execution and continuous improvement. The operating environment has been quite challenging in 2021 but it was also challenging a year ago. We have faced these challenges head-on and then plan for future scenarios with our eyes wide open. While there may be other short-term obstacles and bumps in this long-term multi-year housing expansion, our team has proven its ability to overcome and emerge stronger time and time again. In addition to outperforming operationally, we are also well positioned with a strong balance sheet to continue to pursue future growth whether organically or inorganically. Our stakeholders can count on our experienced management team to continue to create value regardless of the environment. We expect to capture the upside of the long-term expansion in housing as we continue to build a great company for our stakeholders.
With that I will turn the call over to Pat who will speak to our financial results and updated guidance. Pat.
