# Fortune Brands Innovations, Inc.: Form 10-Q for the period ended Mar 31, 2020

- Company: [Fortune Brands Innovations, Inc.](/companies/fbin.md) (CIK 1519751)
- Form: 10-Q
- Filed: 2020-05-01
- Accepted by EDGAR: May 1, 2020, 16:08 ET
- Period: 2020-03-31
- Accession: 0001564590-20-020502
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1519751/000156459020020502/fbhs-10q_20200331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1519751/000156459020020502/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-01-01 to 2020-03-31 | $1.40bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2020-01-01 to 2020-03-31 | $909.5m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2020-01-01 to 2020-03-31 | $313.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2020-01-01 to 2020-03-31 | $155.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2020-01-01 to 2020-03-31 | $22.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2020-01-01 to 2020-03-31 | $29.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-01-01 to 2020-03-31 | $109.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-01-01 to 2020-03-31 | $0.77 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2020-01-01 to 2020-03-31 | $0.78 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2020-01-01 to 2020-03-31 | 140,800,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2020-01-01 to 2020-03-31 | −$13.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2020-01-01 to 2020-03-31 | $26.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2020-01-01 to 2020-03-31 | $33.5m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2020-01-01 to 2020-03-31 | $150.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2020-03-31 | $359.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-03-31 | $1.91bn | us-gaap:AssetsCurrent |
| Total assets | at 2020-03-31 | $6.30bn | us-gaap:Assets |
| Current liabilities | at 2020-03-31 | $1.25bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2020-03-31 | $3.94bn | us-gaap:Liabilities |
| Long-term debt | at 2020-03-31 | $2.04bn | us-gaap:LongTermDebtNoncurrent |
| Short-term borrowings | at 2020-03-31 | $399.9m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2020-03-31 | $2.36bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 27,450 characters.

### MANAGEMENT’S DISCUSSION AND ANALYSIS OF

### FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto, which are included in this report, as well as our audited consolidated financial statements for the year ended December 31, 2019, which are included in our Annual Report on Form 10-K for the year ended December 31, 2019.

This discussion contains forward-looking statements that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding the expected or potential impact of the novel coronavirus pandemic (“COVID-19”) on our business, operations or financial condition. In addition, statement regarding our general business strategies, market potential, future financial performance, the potential of our brands and other matters, expected capital spending, expected pension contributions, the anticipated impact of recently issued accounting standards on our financial statements, planned business strategies, anticipated market potential, future financial performance, impact of acquisitions and other matters. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on current expectations, estimates, assumptions and projections about our industry, business and future financial results, available at the time this report is filed with the Securities and Exchange Commission. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including but not limited to: (i) the uncertainties relating to the impact of COVID-19 on the Company’s business, operations and financial results, (ii) our reliance on the North American home improvement, repair and new home construction activity levels, and the North American and global economies generally, (iii) the competitive nature of consumer and trade brand businesses, (iv) risks associated with our ability to improve organizational productivity and global supply chain efficiency and flexibility, (v) our ability to develop new products or processes and improve existing products and processes, (vi) risks associated with global commodity and energy availability and price volatility, as well as the possibility of sustained inflation, (vii) risks associated with doing business internationally, including changes in trade-related tariffs and risks with uncertain trade environments, (viii) changes in government and industry standards, (ix) risks associated with entering into potential strategic acquisitions and integrating acquired property, (x) our ability to secure and protect our intellectual property rights, (xi) our reliance on key customers and suppliers, including wholesale distributors and dealers, (xii) risks associated with the disruption of operations, (xiii) our inability to obtain raw materials and finished goods in a timely and cost-effective manner, (xiv) our ability to attract and retain qualified personnel and other labor constraints, (xv) impairments in the carrying value of goodwill or other acquired intangible assets, (xvi) delays or outages in our information technology system or computer networks, (xvii) risk of increases in our defined benefit-related costs and funding requirements, (xviii) future tax law changes or the interpretation of existing tax laws, (xix) potential liabilities and costs from claims and litigation and (xx) our ability to access the capital markets on terms acceptable to us. These and other factors are discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019 and as described in Item 1A “Risk Factors” below. We undertake no obligation to, and expressly disclaim any such obligation to, update or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or changes to future results over time or otherwise, except as required by law.

### OVERVIEW

References to “Fortune Brands,” “the Company,” “we,” “our” and “us” refer to Fortune Brands Home & Security, Inc. and its consolidated subsidiaries as a whole, unless the context otherwise requires. The Company is a leading home and security products company with a portfolio of leading branded products used for residential home repair, remodeling, new construction and security applications.

While, to the Company’s knowledge, the COVID-19 pandemic did not significantly impact our business, operations or financial results in the first quarter of 2020, it may have far-reaching impacts on many aspects of the Company’s operations in the future including the continued operation of our facilities across the globe, the ability of our suppliers to manufacture key inputs, as well as potential other impacts on customer behaviors, the Company’s employees and the market generally. While we produced strong results in our 2020 first quarter, the COVID-19 pandemic is expected to negatively impact our financial results in the second quarter and in later periods of 2020; we had some disruption in our plumbing business due to factory closures in China during the first quarter and have already seen a decline in orders and increased inefficiencies in some of our plants. A number of countries and US states have issued orders requiring nonessential businesses to close and persons who were not engaged in essential businesses to stay at home. Most states and jurisdictions have, to date, designated our products, our retail channel partners and residential construction as essential business activities. A small number of jurisdictions where we operate did not deem our products as part of an essential business, impacting both our ability to manufacturer as well as the demand for some of our products.

Due to the inherent uncertainty surrounding COVID-19, including the rapidly changing governmental directives, public health challenges and market reactions, it is challenging to estimate the future performance of our business and the financial impacts of COVID-19 in one or more periods in 2020 compared to the corresponding prior-year periods and compared to our expectations at the beginning of our 2020 fiscal year.

Our first priority with regard to COVID-19 is to ensure the safety, health and hygiene of our employees, customers, suppliers and others with whom we partner in our business activities. Subject to our comprehensive use of appropriate risk mitigation and safety practices, we are doing everything we can to continue our business operations in this unprecedented business environment. We continue to believe that the Company has certain competitive advantages including market-leading brands, a diversified mix of channels, lean and flexible supply chains, a decentralized business model and a strong capital structure. We believe these long-held strengths will enable us to compete effectively during and after the COVID-19 pandemic. We will continue to focus on outperforming our markets in growth, profitability and returns in order to drive increased shareholder value. We believe the Company’s track record reflects the long-term attractiveness and potential of the categories we serve and our leading brands.

We believe long-term our most attractive opportunities are to invest in profitable organic growth initiatives. We also believe that we have the potential to generate additional growth from leveraging our cash flow and balance sheet strength by pursuing accretive strategic acquisitions, non-controlling equity investments and joint ventures, and by returning cash to shareholders through a combination of dividends and common stock repurchases under our share repurchase program as explained in further detail under “Liquidity and Capital Resources” below.

The U.S. market for our products primarily consists of spending on both new home construction and repair and remodel activities within existing homes, with a majority of the markets we serve consisting of repair and remodel spending. Growth in the U.S. market for our products will largely depend on consumer confidence, employment, home prices, stable mortgage rates and credit availability, all of which may be further impacted by COVID-19 for an unknown duration.

In addition to the potential COVID-19 impacts noted above, we may be impacted by fluctuations in raw material and transportation costs, changes in foreign exchange and promotional activity among our competitors. We strive to offset the potential unfavorable impact of these items with productivity improvement initiatives and price increases.

### RESULTS OF OPERATIONS

### Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

*(In millions)*

|  | Net Sales 2020 | 2019 | % Change vs. Prior Year |
| --- | ---: | ---: | ---: |
| Cabinets | $620.0 | $573.0 | 8.2% |
| Plumbing | 469.0 | 458.6 | 2.3 |
| Doors & Security | 313.7 | 296.3 | 5.9 |
| Net sales | $1,402.7 | $1,327.9 | 5.6% |

|  | Operating Income (Loss) 2020 | 2019 | % Change vs. Prior Year |
| --- | ---: | ---: | ---: |
| Cabinets | $43.7 | $43.2 | 1.2% |
| Plumbing | 104.5 | 89.2 | 17.2 |
| Doors & Security | 31.5 | 22.4 | 40.6 |
| Less: Corporate expenses | (24.7) | (19.2) | (28.6) |
| Operating income | $155.0 | $135.6 | 14.3% |

The following discussion of consolidated results of operations and segment results refers to the three months ended March 31, 2020 compared to the three months ended March 31, 2019. Consolidated results of operations should be read in conjunction with segment results of operations.

#### Net sales

Net sales increased by $74.8 million, or 5.6%, due to the benefit of higher sales volume, including growth in stock cabinetry and price increases to help mitigate the impact of higher tariffs. These benefits were partially offset by unfavorable mix, lower sales volume related to COVID-19, principally in China, higher promotion and rebate costs, and unfavorable foreign exchange of $4 million.

#### Cost of products sold

Cost of products sold increased by $40.4 million, or 4.6%, due to the higher net sales and the impact of higher tariffs, partially offset by the benefit from productivity improvements and product mix.

#### Selling, general and administrative expenses

Selling, general and administrative expenses increased by $1.9 million, or 0.6%, due to higher employee related costs, COVID-19 related expenses and higher transportation costs. These increases were partially offset by the benefits from the favorable impact of restructuring initiatives and lower advertising costs.

#### Amortization of intangible assets

Amortization of intangible assets increased by $0.3 million.

#### Asset impairment charges

Asset impairment charge of $9.5 million related to an indefinite-lived tradename in our Cabinets segment.

#### Restructuring charges

Restructuring charges of $4.5 million in the three months ended March 31, 2020 primarily related to severance costs across all our segments. Restructuring charges of $1.2 million in the three months ended March 31, 2019 primarily related to severance costs within our Cabinets segment.

#### Operating income

Operating income increased by $19.4 million, or 14.3%, primarily due to higher net sales and productivity improvements. These benefits were partially offset by unfavorable mix, the impact of tariffs, an asset impairment charge and higher rebates.

### RESULTS OF OPERATIONS (Continued)

#### Interest expense

Interest expense decreased $1.6 million to $22.1 million due to lower average borrowings and lower average interest rates.

#### Other income, net

Other income, net, was $6.1 million in the three months ended March 31, 2020, compared to $1.2 million in the three months ended March 31, 2019. The increase in other income, net is primarily due to gains related to our investment in Flo partially offset by unfavorable foreign currency adjustments.

#### Income taxes

The effective income tax rates for the three months ended March 31, 2020 and 2019 were 21.5% and 25.3%, respectively. The effective income tax rate in 2020 was favorably impacted by a benefit related to share-based compensation.

#### Net income attributable to Fortune Brands

Net income attributable to Fortune Brands was $109.1 million in the three months ended March 31, 2020 compared to $84.7 million in the three months ended March 31, 2019. The increase was due to higher operating income, higher other income and lower interest expense, partly offset by higher income tax expenses.

### Results By Segment

### Cabinets

Net sales increased by $47.0 million, or 8.2%, due to higher sales unit volume of stock cabinetry products, net of COVID-19 related volume losses, and price increases to help mitigate the impact of tariffs. These factors were partly offset by unfavorable mix and increased promotional costs.

Operating income increased by $0.5 million, or 1.2%, due to higher net sales and the benefit from productivity improvements. These factors were partly offset by unfavorable mix, asset impairment charges during the three months ended March 31, 2020 ($9.5 million), COVID-19 related production interruptions, higher rebate costs, and COVID-19 related expenses.

### Plumbing

Net sales increased by $10.4 million, or 2.3%, due to price increases to mitigate increased tariffs and higher sales volume in the U.S. and Canada. These benefits were partially offset by lower sales volume in China driven by impacts of COVID-19 and higher rebate costs as well as unfavorable foreign exchange of approximately $3 million.

Operating income increased by $15.3 million, or 17.2%, due to higher net sales and the benefit from productivity improvements. These benefits were partially offset by the impact of higher tariffs and rebate costs.

### Doors & Security

Net sales increased by $17.4 million, or 5.9%, due to higher sales volume in Doors and Decking and price increases to help mitigate tariffs. These benefits were partially offset by lower sales unit volume in security products and unfavorable mix. Foreign exchange was unfavorable by approximately $1 million.

Operating income increased by $9.1 million, or 40.6%, due to higher net sales in Doors and Decking, the absence in 2020 of amortization expense related to Fiberon’s inventory fair value adjustment ($1.8 million in 2019) and an expense due to a fair value adjustment associated with an idle manufacturing facility ($1.7 million in 2019). These benefits were partially offset by the impact of tariffs.

### Corporate

Corporate expenses increased by $5.5 million, or 28.6%, due to higher employee-related costs, including higher severance costs.

### LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are cash on hand, cash flows from operating activities, cash borrowed under our credit facilities and cash from debt issuances in the capital markets. Our operating income is generated by our subsidiaries. We believe our operating cash flows, including funds available under our credit facilities and access to capital markets, provide sufficient liquidity to support the Company’s liquidity and financing needs, which are to support working capital requirements, fund capital expenditures and service indebtedness, as well as to finance acquisitions, repurchase shares of our common stock and pay dividends to stockholders, as the Board of Directors deems appropriate.

Our cash flows from operations, borrowing availability and overall liquidity are subject to certain risks and uncertainties, including those described in the section of our Annual Report on Form 10-K for the year-ended December 31, 2019 entitled “Item 1A. Risk Factors” and those described in Item 1A – Risk Factors below. In addition, we cannot predict whether or when we may enter into acquisitions, joint ventures or dispositions, make any purchases of shares of our common stock under our share repurchase programs, or pay dividends, or what impact any such transactions could have on our results of operations, cash flows or financial condition, whether as a result of the issuance of debt or equity securities, or otherwise.

#### Long-Term Debt

At March 31, 2020, the Company had aggregate outstanding notes in the amount of $2.2 billion, with varying maturities (the “Notes”). The Notes are unsecured senior obligations of the Company. The following table provides a summary of the Company’s outstanding Notes, including the net carrying value of the Notes, net of underwriting commissions, price discounts and debt issuance costs as of March 31, 2020 and December 31, 2019:

*(in millions)*

| Coupon Rate | Principal Amount | Issuance Date | Maturity Date | Net Carrying Value March 31, 2020 | December 31, 2019 |
| --- | ---: | --- | --- | ---: | ---: |
| 3.000% Senior Notes | $400.0 | June 2015 | June 2020 | $399.9 | $399.7 |
| 4.000% Senior Notes | 500.0 | June 2015 | June 2025 | 496.0 | 495.8 |
| 4.000% Senior Notes (the “2018 Notes”) | 600.0 | September 2018 | September 2023 | 596.3 | 596.1 |
| 3.250% Senior Notes (the “2019 Notes”) | 700.0 | September 2019 | September 2029 | 692.9 | 692.7 |
| Total Senior Notes | $2,200.0 |  |  | $2,185.1 | $2,184.3 |

In September 2019, the Company issued $700 million of unsecured senior notes (“2019 Notes”) in a registered public offering. The 2019 Notes are due in 2029 with a coupon rate of 3.25%. The Company used the proceeds from the 2019 Notes offering to repay in full the Company’s $350 million term loan and to pay down outstanding balances under our revolving credit facility. The Company expects to repay or refinance the 3.000% Senior Notes prior to the June 2020 maturity date.

#### Credit Facilities

In April 2020, the Company entered into a 364-day, $400 million revolving credit facility (the “2020 Revolving Credit Agreement”), and borrowings thereunder will be used for general corporate purposes. Given the uncertain nature and duration of the COVID-19 pandemic, this was a proactive step taken out of an abundance of caution to provide ample liquidity for the business. The terms and conditions of the 2020 Revolving Credit Agreement are essentially the same as the Company’s existing $1.25 billion revolving credit facility except for additional provisions related to cash hoarding and the use of debt issuance proceeds. Interest rates under the 2020 Revolving Credit Agreement are variable based on LIBOR at the time of the borrowing and the Company’s long-term credit rating and can range from LIBOR + 1.40% to LIBOR + 1.8%. The 2020 Revolving Credit Agreement includes a covenant under which the Company is required to maintain a minimum ratio of consolidated EBITDA to consolidated interest expense of 3.0 to 1.0. Consolidated EBITDA is defined as consolidated net income before interest expense, income taxes, depreciation, amortization of intangible assets, losses from asset impairments, and certain other one-time adjustments. In addition, the 2020 Revolving Credit Agreement includes a covenant under which the Company’s ratio of consolidated total indebtedness minus certain cash and cash equivalents to consolidated EBITDA generally may not exceed 3.5 to 1.0.

In September 2019, the Company entered into a second amended and restated $1.25 billion revolving credit facility (the “2019 Revolving Credit Agreement”), and borrowings thereunder will be used for general corporate purposes. The terms and conditions of the 2019 Revolving Credit Agreement, including the total commitment amount, essentially remained the same as under the previous credit agreement, except that the maturity date was extended to September 2024. Borrowings amounting to $165.0 million were rolled-over from the prior revolving credit facility into the 2019 Revolving Credit Agreement. Interest rates under the 2019 Revolving Credit Agreement are variable based on LIBOR at the time of the borrowing and the Company’s long-term credit rating and can range from LIBOR + 0.91% to LIBOR + 1.4%. This amendment and restatement of the credit agreement was a non-cash transaction for the Company. On March 31, 2020 our outstanding borrowings under this facility was $250 million. On December 31, 2019 our outstanding borrowings under this facility was zero. This facility is included in Long-term debt in the condensed consolidated balance sheets. As of March 31, 2020, we were in compliance with all covenants under this facility.

In September 2019, the Company used the proceeds from the 2019 Notes to repay the full outstanding balance on the Term Loan entered into in March 2018 and subsequently amended in August 2018 and March 2019 (the “Term Loan”). Following the March 2019 amendment, the Term Loan provided for borrowings of $350 million and matured in March 2020. At March 31, 2020 and December 31, 2019, amounts due under the Term Loan were zero.

#### Cash and Seasonality

On March 31, 2020, we had cash and cash equivalents of $359.7 million, of which $256.8 million was held at non-U.S. subsidiaries. We manage our global cash requirements considering (i) available funds among the subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances. The repatriation of non-U.S. cash balances from certain subsidiaries could have adverse tax consequences as we may be required to pay and record tax expense on those funds that are repatriated.

Our operating cash flows are significantly impacted by the seasonality of our business. We typically generate most of our operating cash flow in the third and fourth quarters of each year. We use operating cash in the first quarter of the year. Additionally, as noted in the overview section above, we are uncertain of the impact of COVID-19 to our net sales, supply chain, manufacturing, and distribution as well as overall new construction, repair and remodel, and consumer spending.

We believe that our current cash position, cash flow generated from operations, and amounts available under our revolving credit facilities should be sufficient for our operating requirements and enable us to fund our capital expenditures, dividend payments, and any required long-term debt payments. In addition, we believe that we have the ability to obtain alternative sources of financing if required. We expect capital expenditures during 2020 to be in the range of $110 to $130 million. Given the current uncertainty related to COVID-19, we may adjust our capital expenditures as necessary or appropriate to support the operations of the business.

#### Share Repurchases

In the first quarter of 2020, we repurchased 2.5 million shares of our outstanding common stock under the Company’s share repurchase programs for $150.0 million. As of March 31, 2020, the Company’s total remaining share repurchase authorization under the remaining program was approximately $164 million. The share repurchase program does not obligate the Company to repurchase any specific dollar amount or number of shares and may be suspended or discontinued at any time.

#### Dividends

In the first three months of 2020, we paid dividends in the amount of $33.5 million to the Company’s shareholders. Our Board of Directors will continue to evaluate dividend payment opportunities on a quarterly basis. There can be no assurance as to when and if future dividends will be paid, and at what level, because the payment of dividends is dependent on our financial condition, results of operations, cash flows, capital requirements and other factors deemed relevant by our Board of Directors. There are no restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Fortune Brands.

#### Acquisitions

We periodically review our portfolio of brands and evaluate potential strategic transactions and other capital initiatives to increase shareholder value.

Cash Flows

Below is a summary of cash flows for the three months ended March 31, 2020 and 2019.

*(In millions)*

|  | Three Months Ended March 31, 2020 | 2019 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(13.8) | $(89.7) |
| Net cash used in investing activities | (77.0) | (25.3) |
| Net cash provided by financing activities | 77.3 | 129.4 |
| Effect of foreign exchange rate changes on cash | (15.0) | 3.8 |
| Net (decrease) increase in cash and cash equivalents | $(28.5) | $18.2 |

Net cash used in operating activities of $13.8 million in the three months ended March 31, 2020, compared to net cash used in operating activities of $89.7 million in the three months ended March 31, 2019. The decrease in cash used of $75.9 million was primarily due to decreases in inventory during the first quarter of 2020 due to supply chain disruptions arising from COVID-19 compared with an increase during comparable prior year period ($67 million benefit) and stronger than planned sales.

Net cash used in investing activities was $77.0 million in the three months ended March 31, 2020, compared to net cash used in investing activities of $25.3 million in the three months ended March 31, 2019. The increase in cash used of $51.7 million was primarily due to the acquisition of additional shares of Flo Technologies in January 2020.

Net cash provided by financing activities was $77.3 million in the three months ended March 31, 2020, compared to cash provided by financing activities of $129.4 million in the three months ended March 31, 2019. The decrease in cash provided of $52.1 million was primarily due to higher share repurchases in 2020 compared to 2019, partly offset by lower net borrowings and higher proceeds from the exercise of stock options.

### Pension Plans

Subsidiaries of Fortune Brands sponsor their respective defined benefit pension plans that are funded by a portfolio of investments maintained within our benefit plan trust. As of December 31, 2019, the fair value of our total pension plan assets was $677.2 million, representing 77% of the accumulated benefit obligation liability. In 2020, we expect to make pension contributions of approximately $23 million. For the foreseeable future, we believe that we have sufficient liquidity to meet the minimum funding that may be required by the Pension Protection Act of 2006.

### Foreign Exchange

We have operations in various foreign countries, principally Canada, China, Mexico, the United Kingdom, France, Australia, Japan and South Africa. Therefore, changes in the value of the related currencies affect our financial statements when translated into U.S. dollars.

### RECENTLY ISSUED ACCOUNTING STANDARDS

The adoption of recent accounting standards, as discussed in Note 2, “Recently Issued Accounting Standards,” to our Consolidated Financial Statements, has not had and is not expected to have a significant impact on our revenue, earnings or liquidity.

## Market risk

As filed, 220 characters.

There have been no material changes in the information provided in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2019.

## Controls and procedures

As filed, 951 characters.

### (a) Evaluation of Disclosure Controls and Procedures.

The Company’s management has evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report.

### (b) Changes in Internal Control Over Financial Reporting.

There have not been any changes in the Company's internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

## Risk factors

As filed, 1,503 characters.

*The current outbreak of the novel coronavirus (“COVID-19”) has impacted our business and is expected to cause further disruptions to our business, financial performance and operating results.*

The COVID-19 pandemic may have far-reaching impacts on many aspects of the Company’s operations in the future including the continued operation of our facilities across the globe, the ability of our suppliers to manufacture key inputs, as well as potential other impacts on customer behaviors, the Company’s employees and the market generally. Our business could be negatively impacted over the longer term if the disruptions related to COVID-19 decrease consumer confidence and housing investments; or precipitate a prolonged economic downturn and/or an extended rise in unemployment or tempering of wage growth, any of which could lower demand for our products. Risks related to negative economic conditions are described in "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019.

The inherent uncertainty surrounding COVID-19, due in part to rapidly changing governmental directives, public health challenges and progress, and market reactions also makes it more challenging for our management to estimate the future performance of our business and the economic impact of the COVID-19 pandemic, including but not limited to, possible impairment, restructuring, and other charges. Accordingly, future developments may materially impact our current estimates of such charges.

Filed May 1, 2020.
Source: SEC EDGAR, the filing index for accession 0001564590-20-020502. Last ingested by Listed: Nov 10, 2026, 02:09 ET. No prices; not investment advice.