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After a breakthrough in , NIO Inc. NYSE: NIO hit the roadblock in , with periods of extreme volatility — typical for a high growth stock in a dynamic environment. They are the flag carriers of our culture, which drive our resiliency and results. Thank you to all who worked so 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're seeing in the home products market.

I will then highlight key takeaways from our third quarter and provide additional color on what drove the result. Finally, Pat will provide highlights on our financial results, balance sheet strength and liquidity as well as thoughts around our updated guidance to our financial outlook for the full year. Now, turning to our view on the housing market.

Long-term fundamentals for housing and home products remained very favorable. The significant deficit of homes available for sale and the structural under-building that is contributing to the current housing situation has been elongated by increasing labor, supply chain and material availability headwinds. While these challenges have made global headlines and will take time to normalize it will take much longer, years in fact, to work through the significant under-supply up-to-date homes relative to demand.

We saw some moderation in the pace of home sales versus Q3 of We view this moderation is a net positive as it allows for more sustainable long-term expansion of housing products, while still driving very strong demand.

Notwithstanding for moderation, demand for our products continued to persist ahead of supply. We will also experienced some rebalancing of demand across channels and between the rebalancing and the very strong but moderating home purchasing market we believe the overall marketplace is on an even healthier footing for long-term sustainable growth than it was this time last year. Within both the new construction and repair and remodel markets we continue to see consumers focusing investment on the home.

Demand for larger ticket and pro-oriented projects remains elevated which squarely aligns with much of our product portfolio. These product categories are sold mostly through the trade, wholesale and builder channels and we experienced strong sustained momentum since before the pandemic.

With our excellent relationships and preferred positioning in those channels coupled with market leadership for our premium brands we expect this momentum to continue and demand for our products to remain robust. We also saw consumers continue to spend up the price spectrum into premium offerings. We have seen this multi-quarter trend in both Plumbing and Cabinets and I'll also seeing this trend play out within our premium offerings in decking and doors.

This sign of continued consumer confidence to invest in the home reflects both the health of the consumer and household balance sheets as well as consumers growing aspirations for what the home can become.

Whether it be a new construction or repair and remodel markets, we believe we are optimally positioned to capture accelerated share leverage by the best home product portfolio in the U. Driven by an advantage set of channel positions, significant growth capital to deploy and supported by our world-class people we could not be more excited about the future.

With that market backdrop some thoughts on the recent quarter. We had a stellar quarter even in the face of incremental supply chain headwinds. Demand was robust through the quarter and remain strong today across the whole portfolio. Our teams are working tirelessly to offset the numerous supply chain and labor constraints and we're taking incremental actions to deliver both near-term results and long-term growth and margin objectives.

Cumulatively, labor shortages and freight constraints were almost acute pressure points across the portfolio and they are more challenging than even 90 days ago. We are responding with stronger measures in human capital attraction and retention strategies, at the same time we are also leveraging our Fortune Brands Advantaged capabilities to reduce complexity and minimize dependence on labor. We're also utilizing our scale and capabilities in global sourcing and logistics to optimize freight efficiency.

We're further developing and deploying our Fortune Brands Advantage capabilities and are funding strategic investments in key growth priorities, including in our digital journey, brand building and product innovation as well as in capacity and distribution expansion. These investments are contributing to our resiliency and as conditions normalize we expect to continue to increase sales and margin allowing for stronger capital deployment and investment, which will drive our perpetual outperformance engine for the long-term.

Now, let me turn to our individual businesses and how we're positioning for long-term growth, starting with Plumbing. Our Global Plumbing Group once again significantly outperformed the global and U. A strong Plumbing sales drove operating leverage, resulting in a Our North American wholesale and e-commerce channels delivered strong double-digit growth and we continue to grow in retail despite very elevated comps from the prior year.

We are winning share in generating incremental investment dollars to pursue further above market growth and margin. In North America, our Plumbing business has never been stronger. We continue to be an industry leader in both innovation and key metrics and brand awareness, purchase intent and loyalty among customers. Moen continues to lead in innovation and design and push new on trend styles and functionality, including the recently launched Nebia by Moen's by Quattro product line.

This cutting-edge shower gives consumers the power to customize their experience, while incorporating the Nebia by Moen's proprietary water saving technology, delivering on our water saving initiatives and ESG strategy. As our business grows, we are also investing in incremental capacity across the supply chain, including a new distribution center opening this quarter. In China, Moen achieved strong double-digit growth as our investments behind the Moen brand, category expansion and innovation continue to resonate the Chinese consumer.

Given our broad product offering, diverse channel exposure and increasingly relevant consumer brand, we see continued growth in China despite headwinds from the slowing new construction market. As we've demonstrated in the past, our sales growth was driven by our innovation and category expansion efforts is not tied tightly to the overall market.

Additionally, we built the resilient China business with a cost structure that can flex to preserve margin delivery. While we anticipate that there may be interim slowing of that marketplace, we are well equipped outperform as we did during the last slowdown in To keep up with this demand, we recently approved an investment to modernize and add capacity to our House of Rohl manufacturing facilities.

Material and labor availability headwinds increased in the third quarter and continue to impact operations across all brands, including material shortages caused by Hurricane Ida. Our teams are hard at work to offset these challenges, which have restrained us from achieving targeted output. Doors delivered mid single-digit sales growth in the quarter, reflecting constraints in labor and materials and very elevated comps due to the shift in sales from Q2 to Q3 last year as our channels reopened more fully after COVID shutdowns.

Adjusting for the shift, sales increased mid-teens. Production interruptions are key component suppliers caused by Hurricane Ida affected supply in the quarter, but we work diligently across our supply chain to resolve these challenges going forward. Underlying demand remained strong across channels and we continue to work to service our customers at a high level.

Turning to decking, Fiberon sales grew mid single-digits off of a very strong quarter last year that also included the shift of sales from Q2 to Q3 due to channel reopening. Our strategy of leveraging our deep customer relationships to partner with the leading distributors in each region continues to pay dividends as we remain in a sold-out position. We continued to leverage Fortune Brands Advantage capabilities and other internal synergies to increase output and streamline costs.

Our ecofriendly composite decking continues to resonate with consumers and remains in high demand as we take additional share from traditional with decking. Finally, within security, we experienced continued success and momentum with high single-digit sales growth in the quarter as commercial, back to school and travel markets continued to rebound. Our key North American retail market for both Locks and Safes continues at levels stronger than prior to the start of the pandemic.

The business is delivery on the Fortune Brands Advantages investments made over the last couple of years and is now generating incremental fuel for reinvestment.

Now, turning to Cabinets. In an extremely tough environment sales grew sequentially after the strong Q2 and margins performed at industry-leading levels. Demand was equally strong on both the stock and make to order with the strongest momentum continuing in our premium offerings. While labor challenges, material and freight inflation increased further all are manageable and we continue to take price and deploy continuous improvement initiatives to offset these headwinds.

Cabinets margin performance in such a challenging and fast evolving environment is a testament to how well our pivot plan and Fortune Brands Advantage capabilities are delivering. As the pace of challenges moderates and our pricing actions take further hold the business will accelerate its progress toward its long-term margin objective. Labor shortages and freight availability remain the biggest challenges impacting performance in margins in our Cabinets business.

Our teams are deploying lean methodologies and complexity reduction strategies to ease the supply chain and labor limitations. Significant order backlog exists across the business and will be worked through into We remain committed to our long-term margin goals for Cabinets and the business simplification progress that we made this year within our facilities will prove beneficial as we continue to solve our labor challenges and price realization catches up during the fourth quarter and into early In summary, we continue to see very strong demand for our products and believe the housing cycle has being further elongated by current short-term acute headwinds.

We're very focused on overcoming challenges and delivering in the short-term and we have built this company and its strong culture to win for the long term. Our commitment to excellence, each other and our brands leveraged by innovation, investment, and most importantly, purpose drives everything that we do. Our products positively impact to people's lives every day and we do not take that for granted. We are committed to growing stronger together and we'll do so in a sustainable way.

As we near the end of and look to and beyond the actions that we are taking now and the investments that we're making and expect to make in the future should drive above market growth and a stronger margin profile.

We have a strong balance sheet and the ability to deploy a significant amount of capital over the next few years. We're excited about the housing market and for the future of our company. We will remain steadfast in our mandate to create value regardless of the environment. With that, I will turn the call over to Pat who will speak to our financial results and updated guidance.

Thanks, Nick. And as a reminder, the majority of my comments will focus on income before charges and gains in order to best reflect ongoing business performance. Additionally, all comparisons will be made against the same quarter last year unless otherwise noted.

Let me start with our third quarter results. These results reflect our teams' tremendous performance in a highly disruptive environment, a testament to our culture of safety and outperformance across the organization. Now, let me provide more color on our segment results, beginning with Plumbing.

Our Plumbing business continues to gain share and drive growth across all major brands, channels and geographies. Door sales were up mid single-digits in the third quarter, driven by wholesale and would have been up mid-teens adjusting for the shift of sales from the second quarter to the third quarter in Reported results would have been even stronger within the quarter were not for labor and material constraints, the latter of the result of Hurricane Ida.

Decking sales were up mid single-digits in the quarter as Fiberon continued to sell out. We expect incremental capacity to come online in the fourth quarter and are also increasing throughput by deploying process improvement. Security sales continue to trend nicely with high single-digit growth in the quarter, driven by returning strength in commercial, back to school and travel markets.

Segment operating margin decreased 80 basis points to We again saw strong demand across all price points during the quarter. Backlogs and lead times have extended during the quarter and demand for contractor-led projects such as Cabinets remains very healthy. Operating margin for the quarter was 9.

We expect this relationship to improve significantly during the fourth quarter. By the first quarter of , we expect continuous improvement in pricing actions to offset inflation fully and our rate of margin enhancement in Cabinets to reaccelerate to our targeted objective. We remain well positioned to win in North America versus domestic competitors and imports. We expect to win increasing share and achieve our long-term margin objectives. Before turning to the balance sheet and updated financial guidance, some thoughts on demand, supply and the current environment.

Demand continues to be strong across the portfolio. Increasing headwinds from labor, freight availability and certain supply constrained materials are being addressed. We are and expect to stay nimble as the situation warrants. We have made significant investments to serve continued strong demand and to increased service levels. We are also making further progress in deployment of our Fortune Brands Advantage capabilities to leverage synergies across the portfolio in sourcing and other improvement initiatives.

We are keenly focused on the current dynamic environment contributing toward rising COGS and freight inflation. The decisive actions we are taking will allow us to offset fully these headwinds, maintain our long-term margin trajectory and will put us in an advantage position for Through a combination of continuous improvement and thoughtful pricing actions we plan to offset all inflationary headwinds during the first quarter of and to continue to target around plus basis points of margin improvement during Turning to the balance sheet.

We are advantageously positioned to deploy capital to the highest returning opportunities. Our investment grade balance sheet and strong free cash flow provide fuel for continued investment into our businesses, propelling the flywheel of outperformance on the top line and accelerating common capability building and deployment across our portfolio to achieve higher margins.

I would now like to address our updated market and financial outlook. Demand for our products remains strong in a sound housing market. However, increasing headwinds from labor shortages, supply chain challenges and inflation have adjusted our expectations for full year Based on these assumptions, our revised full year sales growth outlook is expected to be We continue to target meaningful margin progress and expect to deliver around 50 basis points of margin improvement during despite inflation that is almost 3 times what we expected at the beginning of this year.

We are tracking to our longer term margin objectives, demonstrating our ability to accelerate value creation regardless of the environment. Specifically, our outlook for each business as it relates to our updated guidance includes, Plumbing that sales growth of The revised full year EPS outlook includes the following assumptions.

While short-term market challenges persist, we have the talent and capabilities to manage and offset these headwinds and we'll continue to adjust quickly to the dynamic environment as merited.

We delivered a record year in a challenging and we'll deliver a record year again in We are doing the hard work and making the critical investments necessary to outperform the market and to achieve our margin objectives. You can count on us to capture value and effectively manage the business regardless of the speed bumps along the way.

Thanks, Pat. That concludes our prepared remarks on the third quarter. We will now begin taking a limited number of questions. I will now turn the call back over to the operator to begin the question-and-answer session. Operator, will you please open the line for questions. Thank you. Yes, sir. Thanks very much guys. Appreciate all the color and good results. I was particularly intrigued by your comment about the 75 basis points of operating margin improvement in fiscal ' I think you said beginning in the first quarter as well.

Can you give us a sense for how that kind of -- how you kind of walk to that. How much of that might be from improving cost mix? How much of it might be from incrementals, volume incrementals and things like that?

Hey, Stephen, it's Pat. Our reference to that was the full year objective. We remain on track for our longer term objectives and what has been a challenging year and a particularly challenging back half we wanted to be very clear on that. And we have as a team already been working on cost improvement and pricing actions to address some of the back half inflation.

And when we look to the first quarter of '21 we could see with the actions we have already put in place or are being put in place right now and we expect very much to be in place in the early part of this quarter that we're fully covering inflation in the first quarter with cost improvements and pricing actions in the first quarter.

And I would say, as we look to not just thousand '22 but beyond, I would tell you, we continue to drive that formula of margin improvement pretty equally across three levers, whether that innovation and brand building, structural cost change in addition to the marginal cost improvement we do with Fortune Brands capabilities, we still have structural levers.

We plan to pull across a number of our businesses and then also leverage from volume. It is not purely a leverage from volume formula nor is it purely a pricing formula.

Okay, thanks for that, Pat. Just to clarify, though, the 75 basis points you were referring to, was that just from price mix improvement or is that sort of including these other three levers as well?

And sometimes evolve of the longer term margin journey and so we sort of laid out this roadmap of Fortune Brands Advantage capabilities is really helping drive a combination of margin accretion and fuel for reinvestment, a lot of which we've deployed this year, significantly up investment in our strategic priorities.

And so it build on 50 basis points of improvement this year, targeting 75 basis points improvement next year and then staying on track consistent with the long-term goals that we laid out earlier. Thanks for that, Nick. Yeah, it was impressive that you achieved what you did despite these investments, particularly in Plumbing. The second question relates to just the general environment. I think I was curious if you could provide some color for -- as to which categories do you see demand having the most sustained momentum.

And what are the fundamental drivers behind this relative outperformance that you foresee for some of the -- some of these -- for some of those categories? Let me take that kind of two parts of that -- where we're seeing it and then what's driving that performance. I'd tell you this just the highest level. The demand has really been solid across the board, both across categories, price points and channels.

I mean, it's probably for the most consistent demand we've seen anywhere. And it still backed the long-term favorable trends we've talked about up for a long time. The demographics continue to drive a lot of people into housing a boomers living longer. The market is significantly under booked to aging housing stock and so people are taking record levels of home equity in reinvesting.

All of that continue to be true. And I think as we look through this and through the quarter because there were some lapsed from some really heavy comps this time last year as channels start to reopen.

And I'd say we never saw growth at stopped -- moderated for a little bit as we work through those comps and then picked right back up and sensing the gain. And so we're seeing it continue to hold very sustainably and we're seeing it really kind of across the board.

And I think that really speaks to the confidence the consumers have as well as just the fundamental need for either new or updated housing. We are seeing elevated demand for pro-oriented projects as well as a lot of demand I think for premium offerings. We talked a bit about that. I think last quarter we saw that continue to ruin true, and again it speaks to consumers of confidence in the home. And then what's delivering the sustained momentum and outperformance for us, I think it's a combination of factors.

I mean, one, we talked about taking funds and really driving reinvestment. And so it's not for not that is going to drive the top line harder. I mean, you see the Plumbing results those organic numbers just outstanding. We've had that flywheel going for a while. And then the other part I think is really across the supply chain. I mean, it's been painful. We're tough on ourselves. But I think the fact that we continued to perform at these elevated levels and the fact that we've continue to gain share speaks to the fact that we are most likely outperforming from supply chain perspective as well and serving customers and consumers.

And so I think when you bring those two things together, the performance we had at this pricing level as well as the performance in driving brand innovation, category management, type of capabilities across the top, you're getting the results that you're seeing now. Good afternoon, everyone. First question, just wanted to get a little bit through the -- maybe little bit better clarity in terms of price cost timing and obviously as you kind of noted before Nick despite tremendous incremental investment the margins that you're putting are strong, but you highlighted the fact that you have the further opportunity to better offset inflation in the fourth quarter into the first.

So, just wanted to be clear, maybe clarification, that when you say in Cabinets, I believe you said, or by the first quarter fully offset to me that means flat. I don't know if that's not what you meant.

But -- and then for the full year of '22, are you get on a consolidated basis as well. The 75 bps then obviously result in something stronger than 75 bps in the coming quarters.

Just wanted to make sure it's the right way to think about that and if that even then further momentum into ' Hey, Mike, it's Pat.

What I would tell you is for the Group for our enterprise and for Cabinets will more than offset in the first quarter. It's not flat, because we'll be playing a bit of catch-up and we had some inflation in the first quarter of last -- of this year, but we'll be lapping.

So, it will be more on a whole year-over-year basis. We will more than offset with cost improvement and pricing actions the inflation we anticipate in the first quarter of next year and I would say that's true for the full year. But that's not the only lever that's going to help the 75 basis points of growth next year. We will also be pursuing other cost improvement and structural cost improvement initiatives in the business plus we will be growing better than mid single-digits next year.

I am not here to give '22 guidance, but we will get some volume leverage. I wouldn't expecting even 75 basis points of growth -- of margin improvement each quarter next year.



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