Nicholas Fink
Chief Executive Officer at Fortune Brands Home & Security
Thank you, Dave, and thank you to everyone for joining us on the call today. I hope that everyone had a safe and enjoyable Holiday season and best wishes for 2022. Following an extraordinary 2020, our teams once again delivered outstanding performance in 2021. Our strong fourth quarter results capped a remarkable year at Fortune Brands, including exceptional sales, operating income and earnings per share growth. I'm particularly proud of how we delivered for our employees, customers and consumers, while also achieving 50 basis points of operating margin improvement. We accomplished these results despite facing numerous external headwinds. Including supply chain disruptions and extreme inflation. Importantly, we also made progress in our Fortune Brands Advantage capabilities and continued investing in our leading brands to drive innovation, expand capacity and to serve our customers. As a result of our team's outstanding work in 2021, the company is well-positioned to continue outperforming a strong housing market in the years to come.
In the fourth quarter sales grew over 18%, or 13% organically, with all of our businesses delivering double-digit growth driven by continued strong POS demand across all channels. Operating income grew 7% and EPS grew 6% as operating leverage in the quarter was impacted by labor availability constraints, supply chain inefficiencies and inflation ahead of price. Despite these challenges, we made full-year operating margin progress and delivered a 37% increase in full-year earnings per share versus 2020. Additionally, in 2021, we increased our investments in the business by $85 million, returned over $590 million of capital to shareholders, executed capacity expansions across the portfolio and recently acquired Solar Innovations, a leading producer of wide opening door systems and outdoor enclosures that would join our Therma-Tru family.
The pandemic period now into its ninth quarter continues to cause a variety of challenges, one constant remains our ability to meet these challenges head-on and get results for our shareholders notwithstanding the environment. Our Fortune Brands Advantage capabilities leveraged across the portfolio helped offset extreme inflation by reducing cost, executing strategic price increases and building stronger, deeper, supplier relationships. Our people, driven by our culture of excellence continue to position our portfolio of leading brands to capture the upside in the strong housing market. Additionally, we will remain agile in our response to any short-term headwinds that may come our way.
We continue to see strong demand for our products and our team is working hard at meeting that demand. We're making progress on strategic initiatives and later in the call, Pat will provide details around our 2022 investments, which further position us for profitable growth. The work that we've done to position the company to outperform extends beyond our exceptional financial results. We continue to advance our key environmental, social and governance focus areas. In addition to our work on safety, diversity and inclusion, water conservation and recycling, we recently took an important step in mitigating climate change by setting carbon emission reduction and renewable energy goals. Furthermore, during 2021, we partnered with the W.K. Kellogg Foundation to expanding equity program to enhance our comprehensive equity strategy and further our diversity, equity and inclusion initiatives which will have a measurable impact in 2022 and beyond.
We are acutely aware of the responsibility we have of keeping all of our associates safe. Our safety records among the best in the industry and we invest to ensure that all newly acquired companies meet our extremely high safety standards as quickly as possible. This is one of ESG synergies that we bring to bear when we acquire a business. Our safety performance is a point of pride for us and our entire team is committed to keeping the bar high. We look forward to highlighting our full ESG progress in our upcoming 2021 ESG report, which will be released next quarter.
All of our work is being recognized. We've seen consistent improvement in our scores by key ESG raters. For the third consecutive year, Newsweek's named Fortune Brands as one of America's Most Responsible Companies. And just today, we have once again been named as one of Fortune Magazine's World's Most Admired Companies. I'm proud to lead a company where our associates are so passionate about realizing our purpose and Fulfilling Dreams of Home in an ethical, responsible and sustainable way.
As we look to the year ahead, all of the progress that we have made over the past 2 years has positioned us extremely well to create further value for all of our stakeholders. POS demand remains strong, and our commitment to further expand and develop our Fortune Brands Advantage capabilities will bolster our operating model and create extra fuel for growth. We aim to further our momentum in 2022 by identifying additional strategic investment opportunities, including our digital transformation. This initiative will be the next core competency in our suite of Fortune Brands Advantage capabilities, and we are developing a Digital Centre of Excellence to further enhance brand and innovation, accelerate growth and improve operating efficiency. This strategy developed in earnest in 2021 will be executed in 2022 and beyond.
I'm very excited to announce that May Russell will be joining our company in the coming weeks as our first ever Chief Digital Officer. May joins us from Ford, where she was a senior technology executive serving as the Chief Technology Officer for Ford Commercial Solutions and had global responsibility for the award-winning Ford and Lincoln apps, the digital consumer interface for all vehicles, vehicle connectivity safety and security products and for the digitization of fleet management. Our ability to attract a talent like May speaks to the tremendous opportunity that we have to transform Fortune Brands into a consumer-first digitally enabled growth platform. We believe the potential for digital transformation within our portfolio is remarkable, and I'm excited to speak more about our digital initiative throughout the year.
Finally, I want to sincerely thank our dedicated team members who continue to work so hard to keep our people safe and our facilities operating. I am so proud of our teams who were not only caring for each other, but who are doing so while serving strong demand for home products. Our people are the foundation upon which our business is booked and they drove our outstanding results in 2021.
Turning to the remainder of our remarks today. First, I will share what we are seeing in housing and the home products market. I'll then highlight key takeaways from our fourth quarter and full year results as well as discuss our key initiatives across the portfolio and how we expect these to evolve over time. Pat will then provide highlights on our financial results and thoughts around our future financial performance expectations for 2022.
Now turning to some thoughts on the housing market. As I've mentioned, demand remain strong due to demographic and fundamental trends favoring both new construction and repair and remodel, we expect the long term expansion of housing and building products to continue. New construction activity had a robust year in 2021 and would have been even stronger if unimpeded by labor availability and supply chain inefficiencies, with all time record low existing housing inventory in the US. inventory is turning over nearly as fast as it is becoming available. There are simply not enough homes to purchase.
Our wholesale and builder momentum which persisted through all of 2021 is showing signs of continued strength as we begin 2022. Our exposure to the new construction industry continues to give us incremental tailwinds and a powerful installed base. Repair and remodel activity remains robust across our product categories and our POS was strong during the fourth quarter. With record low supply and and aged housing stock more homes are requiring significant R&R spending. We saw clear above market growth across our portfolio as our leading brands are centered around the most in-focused spending areas of the house, the kitchen, the bathroom and the outdoors. R&R has been supported by tremendous home equity wealth which has grown by trillions of dollars in the past year. While we expect interest rates to increase as the Federal Reserve works to combat inflation, 30-year mortgage rates which currently hover around 3% remain attractive. Coupled with compelling demographics, this financial backdrop is supportive of continued new construction and R&R spend.
We continue to believe in the long term run rate for housing expansion driven by demographics and fundamentals and underpinned by low supply and aged homes. This multi-year run rate for growth provides a significant long-term opportunity for new construction and R&R; we intend to outperform the strong market and will stay agile to both capture opportunities and quickly respond if short-term headwinds arise.
Now let me turn to our performance in the fourth quarter and full-year as well as how we're positioning ourselves to be even stronger across our portfolio. Total company sales were up over 18% for the fourth quarter, capping off a superb year of 26% revenue growth versus a year ago. This performance is demonstrative of strong demand, but also of our ability to source, manufacture and ship in a complex supply chain environment. Sales were up double digits across all businesses during the quarter compared to a strong fourth quarter last year. Operating margins were 13.4% for the fourth quarter and 14.6% for the full year. As I mentioned earlier, consistent with our long-term strategy to deliver for shareholders, we made 50 basis points of overall margin progression in 2021 despite numerous headwinds during the year and investing an additional $85 million in strategic initiatives.
Now turning to our individual businesses, starting with Plumbing. Our Global Plumbing Group continue to outperform its global and U.S. markets with sales up double digits in the quarter, by the wholesale channel in the U.S. for both Moen and House of Rohl brands. Operating margins were 20.8%, we experienced sales growth across all brands and regions, including growth in China despite the slowing market. Full year results were exceptional, delivering sales growth of over 25% and operating margin of 22.9%, momentum remained strong across the group.
We invested heavily in Plumbing in 2021 further perpetuating the flywheel of top and bottom line outperformance for this world-class business. Investments in marketing and innovation clearly resonate with consumers and continue to fuel our remarkable results. Additional investments in capacity and distribution will further elevate customer service and provide additional opportunities for growth. In the fourth quarter, we opened a new retail-focused distribution center. And in 2022, we expect to invest in the new West Coast distribution center and to expand capacity for growth at our UK manufacturing sites.
We are also very excited about the innovation taking place in Plumbing today. Our Moen Smart Water Network was unveiled at the Consumer Electronics Show and is the first step in enabling consumers to digitally controlled water throughout home. We have a strong leadership position and are in the early stages of what we expect to be widespread adoption of Smart Home Water Management by consumers, builders and insurers. Our growing Smart Water Ecosystem will continue to add inventive products and services at an increasing rate leveraging our growing digital capabilities.
Turning to Outdoors & Security. For the fourth quarter and full year, sales were up over 40% or high teens excluding LARSON. doors, decking and security, all grew double-digits in the quarter and for the full year highlighting widespread strength across the business. Operating margin was 15.9% for the fourth quarter and 14, 9% for the year increases over previous year in both cases. Outdoor living continues to show the same momentum and we are focused on expanding our presence in this attractive category. Sales in our legacy door operations grew high teens in the quarter, driven by strong wholesale sales. Our robust distribution network is a differentiator in both our doors and decking brands and we continue to deepen our ties with our key channel partners.
At LARSON, we delivered a successful year of integration performed ahead of our acquisition expectations and are enthusiastic about the ability for LARSON and Therma-Tru to work together to achieve further synergies in 2022 and beyond. To further expand our leadership position in entry openings, we recently acquired Solar Innovations, a leading producer of wide opening door systems and outdoor enclosures. We are excited to bring their leading product innovations into our door portfolio and to welcome their employees to the Fortune Brands family.
Our Fiberon decking brand continues to perform very well growing above 20% for the quarter and the full year. Our success in decking is the result of the strong channel building and product development that we have executed since acquiring the brand. Conversion from wood to advanced composite materials accelerated over the past few years as the benefits are increasingly resonating with consumers. Additional capacity has come online during the fourth quarter and we will expand capacity incrementally throughout 2022. To further accelerate our growth, we will be developing a greenfield facility with construction beginning in 2022. This investment will be executed in phases, and we will control the pace of capacity additions based on the demand outlook which we forecast to be very strong for years to come.
Turning to Security. Strong performance continued as sales increased low-double digits in the quarter, driven by continued recovery and outperformance in commercial and international channels bolstered by solid performance in our core North American retail market. The Security team continues to make progress towards its strategic goals, including innovation-led growth and margin expansion. As you can see, the Outdoors & Security team executed well across multiple initiatives in 2021 and are set-up to achieve even more into the future.
Finally, turning to Cabinets. Sales increased at mid-teens for the fourth quarter and full year with growth across product lines at all price points. Full-year operating margin was 10.1%. The cabinets industry has been exposed to particularly high levels of variability during the pandemic, and yet our team is overcoming labor availability challenges, supply chain constraints and extreme material and freight inflation. While our margin performance was short of the targeted progress that we wished to make in 2021, it is also a testament to how agile the business has become given the challenges it faced and overcame in a very short amount of time. Demand remained strong and we continue to work through our elevated order backlog. We are progressing well with our margin enhancement initiatives and the results will be even more evident as the pace of supply chain volatility subsides.
Our business is well-positioned across price points to win the share that we want and we are executing strategies to increase efficiency and to align our growth with the highest returning opportunities. Within our value price point cabinets, we continue to win versus both domestic players and from importers who are shipping into the U.S. at longer lead times and at significantly higher costs. Our MANTRA line continues to take share and the sales of this brand more than doubled in 2021. Demand remains strong in our make-to-order segment especially within premium, though operations were impacted by labor availability and freight costs in the fourth quarter.
We continue to make progress on our strategic initiatives, and we expect to drive margin progression in 2022. The trajectory of this margin progression will be concentrated in the back half of the year as we continue to work through labor and supply chain headwinds and realize incremental price as we reduce our backlog. We are deploying Fortune Brands Advantage tools, including complexity reduction to advance our margin progress and we remain on-track to achieve our long-term margin targets.
In summary, in 2021, we celebrated 10 years as a public company. We have consistently produced exceptional results while simultaneously investing in key strategic initiatives that will drive the business for the future. We have the team to continue to deliver above-market growth and outperformance and we will maintain the discipline, agility and execution for which we have become known. Our future looks every bit as bright or brighter as we look forward to the next 10 years. As noted, the U.S. remains millions of homes short of demand and Fortune Brands is well-positioned to capture an increasing share of that expansion. We will undoubtedly face challenges in the future, just as we have over the past decade. However, in the face of those challenges, our team will do what we do best, leverage our amazing brands, innovation and operating efficiency to produce products which enrich the lives of millions are delivering for stakeholders.
Our 2022 outlook, which Pat will speak to in greater detail, reflects our confidence in the strength of our markets and business we expect continued top-line growth driving leverage through the P&L, increasing margins and creating further value for our stakeholders. Our investment in CapEx outlook is reflective of our burgeoning opportunity set with profitable growth levers to pull at each of our brands. Our balance sheet is strong and positions us to continue to drive incremental value organically and inorganically. We are very excited for the future.
With that, I will turn the call over to Pat who will speak to our financial results and outlook. Pat?
