Fortune Brands, Inc. (NYSE:FO, www.fortunebrands.com), a leading consumer brands company, today announced record third quarter earnings propelled by top-line sales growth of 5%, and successful brand building and shareholder value initiatives. Diluted EPS before charges reached 51 cents, up 21% from 42 cents a year ago.
Robust demand for the company’s kitchen and bath cabinet and super-premium spirits brands, and strong sales for market leading brands including Moen, Master Lock, FootJoy and Jim Beam, contributed to the company’s performance. The company increased return on equity by more than 100 basis points.
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“Fortune Brands delivered another quarter of strong results, supported by solid fundamentals and a strategy sharply focused on maximizing shareholder value,” said Chairman & Chief Executive Officer Norm Wesley. “We’re building our leading consumer brands with innovative new products, creative marketing, high-impact advertising and a commitment to unsurpassed customer service. We’re executing our major supply-chain restructuring program to increase operating efficiencies, strengthen competitiveness and generate savings. To drive shareholder value even higher, we’re improving returns, repurchasing shares, paying an attractive dividend and progressing the strategic evolution of our business portfolio.” The company announced on October 9th that it is exploring strategic options for its office products unit.
“We believe the strength of our brands and our sustained operational improvements position Fortune Brands well to navigate ongoing challenges related to foreign exchange rates, interest rates and energy costs,” Wesley added. “Fortune Brands remains on track to deliver solid double-digit earnings per share growth for the full year 2000. For 2001 and beyond, our key goals continue to be double-digit EPS growth and improved returns.”
Third quarter financial highlights include:
-- Record sales +5% to $1.4 billion, on a reported and comparable
basis
-- Record operating company contribution +5% to $204 million (+6%
comparable)
-- Corporate expense reduced by 46%
-- Diluted EPS +21% to 51 cents
-- Excluding the impact of adverse foreign exchange, diluted EPS
would have been +26% to 53 cents
-- Diluted cash earnings were even higher at 63 cents per share
-- Dividend increased 4 cents to an indicated annual rate of 96
cents
The company also announced that its year 2000 share repurchases
now total 8.3 million shares. Since January 1999, Fortune Brands has
bought back a total of 19.3 million shares, reducing shares
outstanding by more than 11%.
In the third quarter, the company recorded net restructuring and
non-recurring charges of $7.7 million, related primarily to ongoing
supply chain restructuring initiatives. Including these charges,
reported net income was $73.3 million, or 46 cents per diluted share.
Operational highlights include:
-- With strong performance from every major brand, the home
products business generated another record quarter of solid
double-digit sales and contribution growth. Vigorous demand
from wholesale, dealer and home center accounts drove
double-digit sales increases for the cabinet brands, led by
Aristokraft, Schrock and Decora (combined #2 in North
America). Innovative Moen products continued to drive growth
for the #1 faucet brand in North America. Successful new
products, record back-to-school demand and supply chain
restructuring benefits boosted performance for Master Lock.
New products and aggressive promotions contributed to another
strong sales increase for Waterloo, the #1 manufacturer of
tool storage products.
-- Spirits and wine contribution increased to a record and was up
9% on a comparable basis. While reported sales were off 4%,
comparable sales were up 4%, excluding foreign exchange,
excise taxes and the impact of sales through the Maxxium
international joint venture - which are now net of
distribution expense and excise taxes. Strong brand investment
in Jim Beam, the world's #1 bourbon, and the ongoing success
of DeKuyper cordials (#1 in the U.S.) contributed to the
underlying performance. Increasing demand for Knob Creek, the
#1 small batch bourbon, Vox ultra-premium vodka and Geyser
Peak wines drove rapid growth for the company's high-margin
super-premium spirits and premium wines. International
distribution through Maxxium continues to generate significant
cost savings.
-- The golf products business performed in line with
expectations. Sales and contribution trailed the year-ago
quarter as lower golf club results and sustained investments
to defend golf ball share more than offset gains in golf shoes
and accessories. Titleist - the number one ball in golf -
maintained its overwhelming market leadership position.
Titleist accelerated its golf ball technology and performance
leadership with the launch of the next generation Tour
Distance SF and the initial PGA Tour success of the
breakthrough multi-component Titleist Pro V1, scheduled for
consumer introduction in 2001. With the Professional, Tour
Prestige and Pro V1 models, Titleist is now the #1 ball of
choice in both the wound and solid construction categories on
the PGA Tour. FootJoy - the #1 shoe and #1 glove in golf -
achieved record market share in the U.S. on and off-course
golf shoe channels on the strength of successful new products
and sustained sales momentum.
-- Sales for the office products business increased 7%, and were
up 4% on a comparable basis. While comparable contribution was
off slightly, adverse foreign exchange pushed results down 8%.
The challenges of a competitive pricing environment in the
U.S. offset improved performance in international markets.
Fortune Brands, Inc. is a consumer products company with annual
sales exceeding $5.5 billion. Its operating companies have premier
brands and leading market positions in home products, office products,
golf equipment and spirits and wine. Home brands include Moen faucets,
Master locks and Aristokraft and Schrock cabinets sold by units of
MasterBrand Industries, Inc. Office brands include Day-Timer,
Swingline, Kensington and Wilson Jones sold by units of ACCO World
Corporation. Acushnet Company's golf brands include Titleist, Cobra
and FootJoy. Major spirits and wine brands sold by units of Jim Beam
Brands Worldwide, Inc. include Jim Beam and Knob Creek bourbons,
DeKuyper cordials, Whyte & Mackay Scotch and Geyser Peak and Canyon
Road wines. Fortune Brands, headquartered in Lincolnshire, Illinois,
is traded on the New York Stock Exchange under the ticker symbol FO
and is included in the S&P 500 Index.
To hear an Internet replay of the company's quarterly earnings
conference call presentation, or to receive company news releases by
e-mail, please visit www.fortunebrands.com.
This press release contains statements relating to future results,
which are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Readers are
cautioned that these forward-looking statements speak only as of the
date hereof. Actual results may differ materially from those projected
as a result of certain risks and uncertainties, including but not
limited to changes in general economic conditions, foreign exchange
rate fluctuations, changes in interest rates, competitive product and
pricing pressures, trade consolidations, the impact of excise tax
increases with respect to distilled spirits, regulatory developments,
the uncertainties of litigation, changes in golf equipment regulatory
standards, the impact of weather, particularly on the home products
and golf brand groups, expenses and disruptions related to shifts in
manufacturing to different locations and sources, challenges in the
integration of acquisitions and joint ventures, risks associated with
the Company's implementation of strategic options for ACCO World
Corporation, as well as other risks and uncertainties detailed from
time to time in the Company's Securities and Exchange Commission
filings.
FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Three Months Ended September 30,
2000 1999 % Change
Net Sales 1,403.3 1,339.3 4.8
Cost of goods sold 746.9 698.1 7.0
Excise taxes on
spirits and wine 83.7 94.0 (11.0)
Advertising, selling, general
and administrative expenses 378.3 370.4 2.1
Amortization of intangibles 19.8 19.2 3.1
Restructuring and other
nonrecurring charges 12.3 37.5 -
Interest expense 34.8 26.2 32.8
Other (income) expense, net 2.7 2.6 3.8
Income (Loss) Before Taxes 124.8 91.3 36.7
Income taxes 51.5 43.1 19.5
Net Income (Loss) 73.3 48.2 52.1
Earnings Per Common Share
Basic
Income from operations 0.52 0.43 20.9
Restructuring and other
nonrecurring charges (0.05) (0.14) 64.3
Net Income (loss) 0.47 0.29 62.1
Diluted
Income from operations 0.51 0.42 21.4
Restructuring and other
nonrecurring charges (0.05) (0.14) 64.3
Net Income (loss) 0.46 0.28 64.3
Avg. Common Shares Outstanding
Basic 156.5 165.9 (5.7)
Diluted 158.8 169.4 (6.3)
FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Nine Months Ended September 30,
2000 1999 % Change
Sales 4,267.7 4,052.3 5.3
Cost of goods sold 2,260.1 2,106.0 7.3
Excise taxes on
spirits and wine 254.3 297.3 (14.5)
Advertising, selling, general
and administrative expenses 1,160.4 1,117.2 3.9
Amortization of intangibles 59.6 65.7 (9.3)
Write-down of goodwill - 1,126.0 -
Restructuring and other
nonrecurring charges 30.4 146.3 -
Interest expense 100.5 77.4 29.8
Other (income) expense, net 6.3 2.6 -
Income (Loss) Before Taxes 396.1 (886.2) -
Income taxes 161.1 105.6 52.6
Net Income (Loss) 235.0 (991.8) -
Earnings Per Common Share
Basic
Income from operations 1.60 1.35 18.5
Write-down of goodwill - (6.71) -
Restructuring and other
nonrecurring charges (0.12) (0.56) -
Net Income (loss) 1.48 (5.92) -
Diluted
Income from operations 1.58 1.35 17.0
Write-down of goodwill - (6.71) -
Restructuring and other
nonrecurring charges (0.12) (0.56) -
Net Income (loss) 1.46 (5.92) -
Avg. Common Shares Outstanding
Basic 158.6 167.6 (5.4)
Diluted 161.0 167.6 (3.9)
Actual Common Shares Outstanding
Basic 155.8 164.9 (5.5)
Diluted 158.4 167.5 (5.4)
FORTUNE BRANDS, INC.
(In millions, except per share amounts)
(Unaudited)
SEGMENT DATA
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 % Change 2000 1999 % Change
Net Sales
Home Products $ 541.2 $ 474.9 14.0 $ 1,589.0 $1,379.9 15.2
Office Products 362.2 338.9 6.9 1,020.3 963.2 5.9
Golf Products 208.3 222.0 (6.2) 793.4 801.6 (1.0)
Spirits
and Wine(b) 291.6 303.5 (3.9)/(1.4)(b) 865.0 907.6 (4.7)/1.0(b)
Total(b) $1,403.3 1,339.3 4.8/5.3(b) $4,267.7 $4,052.3 5.3/6.6(b)
Operating Company Contribution (a)
Home Products $84.1 $71.3 18.0 $ 241.2 $ 210.9 14.4
Office Products 23.2 25.1 (7.6) 49.2 47.0 4.7
Golf Products 25.5 28.9 (11.8) 137.9 139.5 (1.1)
Spirits and Wine 71.2 69.1 3.0 196.7 186.7 5.4
Total $204.0 $194.4 4.9 $625.0 $584.1 7.0
(a) Operating company contribution (OCC) is net sales less all
costs and expenses other than restructuring and other nonrecurring
charges, amortization of intangibles, corporate administrative
expense, interest and related expenses, other (income) expense, net
and income taxes.
(b)With the transfer of certain distribution to the new Maxxium
joint venture, product is now sold to the venture net of distribution
costs and excise taxes. On a comparable basis to prior periods, net
sales would be $7.6 million higher in the third quarter and $52.0
million higher for nine months. The adjusted sales percentage for
Spirits and Wine would be a decrease of 1.4% in the third quarter and
an increase of 1.0% for the nine months. For the consolidated Company,
comparable net sales would have increased 5.3% in the third quarter
and 6.6% for the nine months.
INCOME FROM OPERATIONS BEFORE NET CHARGES
The following sets forth income from operations before net
charges, which represents income before the $12.3 million ($7.7
million after tax) and $30.4 million ($19.2 million after tax)
restructuring and other nonrecurring charges taken in the three-month
and nine-month periods ended September 30, 2000, respectively.
In addition, the following sets forth 1999 income from operations
before charges, adjusted to exclude both the $1,126.0 million goodwill
write-down and the $37.5 million ($23.4 million after tax) and $146.3
million ($93.3 million after tax) restructuring and other nonrecurring
charges taken in the three-month and nine-month periods ended
September 30, 1999.
As a result of the charges, the Company reported a net loss in
1999. Because of this, the calculation of reported earnings per share
on a diluted basis excludes the impact of the convertible preferred
stock and stock options. For comparative purposes, however, the impact
of convertible preferred stock and stock options should be considered.
The chart below shows the result of including the dilutive
instruments.
Three Months Ended September 30,
2000 1999 % Change
Income from Operations Before
Net Charges $81.0 $71.6 13.1
Earnings Per Common Share
Basic $0.52 $0.43 20.9
Diluted 0.51 0.42 21.4
Nine Months Ended September 30,
2000 1999 % Change
Income from Operations Before
Net Charges $254.2 $227.5 11.7
Earnings Per Common Share
Basic $1.60 $1.35 18.5
Diluted 1.58 1.33 18.8
RESTRUCTURING AND OTHER NONRECURRING CHARGES
In connection with the Company's previously announced
restructuring program, the Company recorded pre-tax restructuring and
nonrecurring charges of $12.3 million and $30.4 million in the
three-month and nine-month periods ended September 30, 2000,
respectively. The charges by segment, as shown below, principally
relate to the downsizing and relocation of the Corporate office,
product discontinuations and manufacturing consolidation in the golf
segment, rationalization of operations in the office and home segments
and other workforce reduction initiatives across all segments.
Three Months Ended
September 30, 2000
(In millions, except per share amounts)
Nonrecurring
Cost of
Sales
Restructuring Charges SG & A Charges Total
Home Products $1.2 $3.2 $0.2 $4.6
Office Products - 4.5 1.8 6.3
Golf Products 0.9 - 0.5 1.4
Corporate Office - - - -
Total $2.1 $7.7 $2.5 $12.3
Income Tax Benefit 4.6
Net Charge $7.7
Charge Per Common Share
Basic $0.05
Diluted $0.05
Nine Months Ended
September 30, 2000
(In millions, except per share amounts)
Nonrecurring
Cost of
Sales
Restructuring Charges SG & A Charges Total
Home Products $3.6 $6.4 $2.5 $12.5
Office Products 3.8 6.4 1.8 12.0
Golf Products 2.8 0.2 0.6 3.6
Corporate Office - - 2.3 2.3
Total $10.2 $13.0 $7.2 $30.4
Income Tax Benefit 11.2
Net Charge $19.2
Charge Per Common Share
Basic $0.12
Diluted $0.12
FORTUNE BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
September 30, December 31,
2000 1999
(Unaudited)
Assets
Current assets
Cash and cash equivalents $84.9 $71.9
Accounts receivable, net 894.5 956.5
Inventories 1,113.4 1,061.4
Other current assets 239.3 223.0
Total current assets 2,332.1 2,312.8
Property, plant and equipment, net 1,164.8 1,176.5
Intangibles resulting from
business acquisitions, net 2,516.6 2,592.1
Other assets 333.7 335.7
Total assets $6,347.2 $6,417.1
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $858.4 $637.3
Current portion of long-term debt 12.5 2.7
Other current liabilities 1,290.5 1,362.9
Total current liabilities 2,161.4 2,002.9
Long-term debt 1,152.5 1,204.8
Other long-term liabilities 454.8 471.2
Total liabilities 3,768.7 3,678.9
Stockholders' equity 2,578.5 2,738.2
Total liabilities and
stockholders' equity $6,347.2 $6,417.1
