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Fortune Brands Inc (FBI)

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Wednesday 22 January, 2003

Fortune Brands Inc

Final Results

Final Results 

    LINCOLNSHIRE, Ill.--(BUSINESS WIRE)--Jan. 22, 2003--


       Fortune Brands Reports Record Fourth Quarter & Full Year
      Results; Company Achieves Strong Double-Digit EPS Growth in
       2002, Generates More Than $400 Million in Free Cash Flow

Fortune Brands, Inc. (NYSE:FO), a leading consumer brands company,
today reported record results for the fourth quarter and full year
2002. The company's performance in 2002 benefited from successful
strategic initiatives that generated strong growth in home products,
share gains for home and golf brands, more effective and lower cost
distribution for spirits and wine, and a profit turnaround in the
office products unit. The company's top-selling brands, including
Moen, Titleist, Jim Beam and Aristokraft, all drove top-line sales
growth.

For the full year:

- Net income was $525.6 million, or $3.41 per diluted share, up 37%
from $2.49 a year ago. Net income benefited from strong operating
performance, lower goodwill amortization and higher net gains from
special items.

- Reported results include an after-tax net gain of $35 million, or
22 cents per share, resulting from a tax refund that exceeded
full-year restructuring-related charges.

- Excluding net gains in both years, diluted earnings per share would
have been $3.19, matching the consensus estimate of Wall Street
securities analysts, and up from $2.41 a year ago.

- Reported sales of $5.68 billion were up 2%.

- Operating income was $786.6 million, up 48%.

- Free cash flow grew to $420 million, even after dividends and
restructuring spending.

- Return on equity increased to more than 22%.

For the fourth quarter:

- Net income was $131.4 million, or 86 cents per diluted share, up
from 84 cents a year ago.

- Reported results include restructuring-related charges of $6.9
million (after tax), or 5 cents per diluted share, related to the
previously announced repositioning plan in the office products
business.

- Excluding these items, diluted earnings per share would have been
91 cents, matching the consensus estimate of Wall Street securities
analysts.

- Reported sales of $1.43 billion were off 0.6%.

- Operating income was $223.5 million, up from $74 million a year
ago. Operating income benefited from lower restructuring-related
charges and lower intangible amortization and write-downs.

'2002 was an excellent year for Fortune Brands,' said Chairman & Chief
Executive Officer Norm Wesley. 'We continued to win in the marketplace
by building our powerful consumer brands. We developed innovative new
products and gained market share, especially with our home and golf
brands. We strengthened our businesses with high-impact strategic
initiatives to accelerate growth, most notably our extremely
successful Omega cabinets acquisition and our profit turnaround in
office products. We generated huge cash flow that we can use to make
acquisitions, repurchase shares and pay dividends. We leveraged higher
volumes, improved productivity and managed inventory better, all of
which significantly improved our asset returns. Above all, we created
substantial value for our shareholders.' 

The company reduced shares outstanding 4% in 2002 by repurchasing a
total of 5.7 million shares, including 2.6 million in the fourth
quarter.

Double-Digit EPS Growth Target for 2003

'Like nearly all companies in 2003, we'll face economic uncertainty
and the headwinds of higher costs for pension expense, employee health
care plans and insurance. But with solid business momentum, we feel
well positioned to achieve our long-term goals of double-digit EPS
growth and improved returns in 2003,' Wesley said. 'For the first
quarter, we expect solid double-digit EPS growth, benefiting partly
from the final incremental quarter of the Omega acquisition.' The
company's earnings goals exclude any special charges or gains.

Fortune Brands, Inc. is a consumer products company with annual sales
exceeding $5.6 billion. Its operating companies have premier brands
and leading market positions in home and hardware products, spirits
and wine, golf equipment and office products. Home and hardware brands
include Moen faucets, Aristokraft, Schrock and Omega cabinets, Master
Lock padlocks and Waterloo tool storage sold by units of MasterBrand
Industries, Inc. Major spirits and wine brands sold by units of Jim
Beam Brands Worldwide, Inc. include Jim Beam and Knob Creek bourbons,
DeKuyper cordials, The Dalmore single malt Scotch, Vox vodka and
Geyser Peak and Canyon Road wines. Acushnet Company's golf brands
include Titleist, Cobra and FootJoy. Office brands include Day-Timer,
Swingline, Kensington and Wilson Jones sold by units of ACCO World
Corporation. 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 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, returns on pension
assets, 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, as well as other risks and
uncertainties detailed from time to time in the Company's Securities
and Exchange Commission filings. 

This press release presents measures not derived in accordance with
generally accepted accounting principles, including earnings per share
before net gains or charges, free cash flow and return on equity. Such
measures should not be considered substitutes for any measures derived
in accordance with generally accepted accounting principles, and may
also be inconsistent with similar measures presented by other
companies. Reconciliation of these non-GAAP measures to the most
nearly comparable GAAP measures, if applicable, is presented in the
attached pages.

-0- 
*T

                         FORTUNE BRANDS, INC.
                   CONSOLIDATED STATEMENT OF INCOME
                (In millions, except per share amounts)
                              (Unaudited)

                                  Three Months Ended December 31,
                                   2002        2001      % Change
                                 ---------------------------------
Net Sales (1)                    $1,431.6    $1,440.1       (0.6)
                                 ---------------------------------
  Cost of goods sold                750.5       807.4       (7.0)

  Excise taxes on spirits and wine   85.9        95.2       (9.8)

  Advertising, selling, general
   and administrative expenses (1)  356.1       319.1       11.6

  Amortization of intangibles         4.7        15.3      (69.3)

  Write-down of identifiable 
   intangibles/goodwill               -          73.3        -

  Restructuring and special items    10.9        55.8      (80.5)
                                 ---------------------------------
Operating Income                    223.5        74.0      202.0
                                 ---------------------------------
  Interest expense                   17.9        17.7        1.1

  Other (income) expense, net        (8.1)      (47.3)      82.9

  Income taxes                       77.7       (29.4)       -

  Minority interests                  4.6         4.2        9.5
                                 ---------------------------------
Net Income                          131.4       128.8        2.0
                                 ---------------------------------

Earnings Per Common Share
                                 ---------------------------------
  Basic                               0.88        0.87       1.1
  Diluted                             0.86        0.84       2.4
                                 ---------------------------------

Avg. Common Shares Outstanding
                                 ---------------------------------
  Basic                             148.4       148.6       (0.1)
  Diluted                           152.6       152.8       (0.1)
                                 ---------------------------------

                         FORTUNE BRANDS, INC.
                   CONSOLIDATED STATEMENT OF INCOME
                (In millions, except per share amounts)
                              (Unaudited)

                                  Twelve Months Ended December 31,
                                 ---------------------------------
                                    2002        2001      % Change
                                 ---------------------------------
Net Sales (1)                    $5,677.7    $5,559.6        2.1
                                 ---------------------------------
  Cost of goods sold              3,066.4     3,090.3       (0.8)

  Excise taxes on spirits and wine  311.1       360.4      (13.7)

  Advertising, selling, general
   and administrative expenses(1) 1,441.7     1,343.5        7.3

  Amortization of intangibles        16.1        62.7      (74.3)

  Write-down of identifiable 
   intangibles/goodwill               -          73.3        -

  Restructuring and special items    55.8        98.1      (43.1)
                                 ---------------------------------
Operating Income                    786.6       531.3       48.1
                                 ---------------------------------
  Interest expense                   74.1        96.8      (23.5)

  Other (income) expense, net       (43.7)      (57.4)      23.9

  Income taxes                      214.2        94.4        -

  Minority Interests                 16.4        11.5       42.6
                                 ---------------------------------
Net Income                          525.6       386.0       36.2
                                 ---------------------------------

Earnings Per Common Share
                                 ---------------------------------
  Basic                               3.51        2.55      37.6
  Diluted                             3.41        2.49      36.9
                                 ---------------------------------

Avg. Common Shares Outstanding
                                 ---------------------------------
  Basic                             149.4       151.7       (1.5)
  Diluted                           154.0       155.3       (0.8)
                                 ---------------------------------
Actual Common Shares Outstanding
                                 ---------------------------------
  Basic                             147.0       148.0       (0.7)
  Diluted                           151.0       152.3       (0.9)
                                 ---------------------------------

(1) Prior periods restated to reflect the January 1, 2002 required
    adoption of EITF issue No. 00-14 relating to the accounting for
    certain sales incentives and No. 00-25 relating to the accounting 
    for consideration from a vendor. This reclassification does not 
    result in a change in the Company's earnings or earnings per 
    common share.


                         FORTUNE BRANDS, INC.
                (In millions, except per share amounts)
                              (Unaudited)

NET SALES AND OPERATING COMPANY CONTRIBUTION
-------------------------------------------
                                          Three Months Ended    
                                             December 31,       
                                ------------------------------------
                                   2002        2001       % Change 
                                ------------------------------------ 
Net Sales (a)
  Home Products                 $   653.5   $   550.7       18.7   
  Spirits and Wine                  296.7       394.9      (24.9)(d)  
  Golf Products                     170.5       173.6       (1.8)  
  Office Products                   310.9       320.9       (3.1)
                                ------------------------------------  
    Total                       $ 1,431.6   $ 1,440.1       (0.6)  
                                ------------------------------------

Operating Company Contribution (b)
                                ------------------------------------
  Home Products                 $   113.4   $    91.7       23.7   
  Spirits and Wine                   92.0        99.4       (7.4)(d) 
  Golf Products                      11.1        13.7      (19.0)   
  Office Products                    33.7        22.2       51.8    
Less: Other Operating
 Expenses (c)                        26.7       153.0      (82.5)   
                                ------------------------------------
Operating Income                $   223.5   $    74.0      202.0     
                                ------------------------------------


                                          Twelve Months Ended    
                                             December 31,         
                                ------------------------------------
                                   2002        2001       % Change  
                                ------------------------------------
Net Sales (a)                                            
  Home Products                 $ 2,532.2   $ 2,068.8       22.4    
  Spirits and Wine                1,032.5     1,368.0      (24.5)(d) 
  Golf Products                   1,007.6       946.5        6.5    
  Office Products                 1,105.4     1,176.3       (6.0)   
                                ------------------------------------
    Total                       $ 5,677.7   $ 5,559.6        2.1   
                                ------------------------------------
                                       
Operating Company Contribution (b)                            
                                ------------------------------------
  Home Products                 $   416.6   $   316.7       31.5    
  Spirits and Wine                  285.1       306.0       (6.8)(d)
  Golf Products                     132.6       131.3        1.0    
  Office Products                    69.6        50.1       38.9   
Less: Other Operating
 Expenses (c)                       117.3       272.8      (57.0)  
                                ------------------------------------
Operating Income                $   786.6   $   531.3       48.1  
                                ------------------------------------

(a) Prior periods restated to reflect the January 1, 2002 required
    adoption of EITF issue No. 00-14 relating to the accounting for
    certain sales incentives and No. 00-25 relating to the accounting
    for consideration from a vendor. This reclassification did not
    result in a change in the Company's operating company
    contribution, earnings, or earnings per common share.

(b) Operating company contribution (OCC) is net sales less all costs
    and expenses other than restructuring and special items,
    amortization of intangibles, corporate administrative expense,
    interest expense, other (income) expense, net, income taxes and
    minority interests. OCC is not a measure under generally accepted
    accounting principles and should not be considered as a substitute
    for any measure derived in accordance with generally accepted
    accounting principles. This measure may also be inconsistent with
    similar measures presented by other companies. In assessing this
    measure, investors should note that restructuring charges and
    special items that impact the Company's earnings have been
    excluded in order to provide an additional measure to investors
    seeking to evaluate the Company's underlying financial performance
    from year to year.

(c) Other operating expenses include restructuring and special items,
    intangible amortization, write-off of goodwill, and corporate
    administrative expenses.

(d) Net sales and OCC reflect the impact of the Q4 2001 divestiture of
    the U.K. - based Scotch Whisky business and sales of Absolut
    recorded in 2001 on an interim basis. Excluding these items, the
    three and twelve months' adjusted percentages for Spirits and Wine
    would be a 1.0% and 2.0% net sales increase and a (7.4)% OCC
    decrease and 1.5% OCC increase, respectively.

FREE CASH FLOW AND RETURN ON EQUITY
----------------------------------

The term 'free cash flow' as used in this press release is cash flow
from operations less net capital expenditures and dividends to
stockholders. The term 'ROE' (return on equity) is net income over the
past 12 months before charges/gains divided by a four-quarter average
of total stockholders' equity before charges/gains. Free cash flow and
return on equity are not measures under generally accepted accounting
principles and should not be considered as substitutes for any measure
derived in accordance with generally accepted accounting principles.
These measures may also be inconsistent with similar measures
presented by other companies.

INCOME BEFORE GAINS & CHARGES, NET
---------------------------------

The following sets forth net income before gains & charges, net, which
in 2002 represents income before the $10.9 million ($6.9 million after
tax) and $55.8 million ($36.2 million after tax) restructuring and
special items taken in the three-month and twelve-month periods ended
December 31, 2002, respectively. Net income before gains and charges,
net, is adjusted to exclude a $61.7 million tax refund and interest
income on tax receivable of $14.9 million ($9.6 million after tax)
taken in the twelve-month period ended December 31, 2002.

The following sets forth net income before gains & charges, net, which
in 2001 represents income before the $55.8 million ($35.5 million
after tax) and $98.1 million ($63.3 million after tax) restructuring
and special items taken in the three-month and twelve-month periods
ended December 31, 2001, respectively. Income from operations before
charges is adjusted to exclude a $72.9 million tax credit and a $31.0
million tax reserve reversal taken in the twelve-month period ended
December 31, 2001. In addition, net income before gains and charges,
net, is adjusted to exclude $73.3 million ($67.1 million after tax)
identifiable intangibles write-down, $28.5 million ($17.3 million
after tax) interest income on tax refund, and $16.6 ($21.8 million
after tax gain) from sale of UK Private Label Scotch for three and
twelve-month periods ended December 31, 2001.


                                  Three Months Ended December 31,
                                ----------------------------------
                                   2002        2001       % Change
                                ----------------------------------
Income before Gains & Charges, 
 net (2)                        $   138.3   $   119.3       15.9
                                ----------------------------------
Earnings Per Common Share - Basic
Income from operations                0.93        0.80      16.3
Tax Credit                            -           0.49       -
Reversal of prior year tax
 reserve no longer required           -           -          -
Gain on sale UK Private 
 Label Scotch                         -           0.15       -
Write-down of identifiable 
 intangibles                          -          (0.45)      -
Tax & interest income receivable      -           0.12       -
Restructuring and special items      (0.05)      (0.24)     79.2

Net Income                            0.88        0.87       1.1
                                ----------------------------------

                                ----------------------------------
Earnings Per Common Share - Diluted
Income from operations                0.91        0.78      16.7
Tax Credit                            -           0.48       -
Reversal of prior year tax
   reserve no longer required         -           -          -
Gain on sale UK Private 
 Label Scotch                         -           0.14       -
Write-down of identifiable 
 intangibles                          -          (0.44)      -
Tax & interest income receivable      -           0.11       -
Restructuring and special items      (0.05)      (0.23)     78.3

Net Income                            0.86        0.84       2.4
                                ----------------------------------

                                 Twelve Months Ended December 31,
                                ----------------------------------
                                  2002        2001       % Change
                                ----------------------------------
Income before Gains & Charges, 
 net (2)                        $   490.5   $   373.4       31.4
                                ----------------------------------
Earnings Per Common Share - Basic
Income from operations                3.28        2.46      33.3
Tax Credit                            -           0.48       -
Reversal of prior year tax
   reserve no longer required         -           0.21       -
Gain on sale UK Private 
 Label Scotch                         -           0.15       -
Write-down of identifiable 
 intangibles                          -          (0.44)      -
Tax & interest income receivable      0.47        0.11       -
Restructuring and special items      (0.24)      (0.42)     42.9

Net Income                            3.51        2.55      37.6
                                ----------------------------------

                                ----------------------------------
Earnings Per Common Share - Diluted
Income from operations                3.19        2.41      32.4
Tax Credit                            -           0.47       -
Reversal of prior year tax
 reserve no longer required           -           0.20       -
Gain on sale UK Private 
 Label Scotch                         -           0.14       -
Write-down of identifiable 
 intangibles                          -          (0.43)      -
Tax & interest income receivable      0.46        0.11       -
Restructuring and special items      (0.24)      (0.41)     41.5

Net Income                            3.41        2.49      36.9
                                ----------------------------------

(2) Income Before Gains and Charges, net indicates the underlying
    performance of our businesses prior to costs associated with our
    restructuring initiatives and write-downs of identifiable
    intangibles and goodwill, and special items. The Company believes
    that this measure is useful in analyzing the Company's performance
    from year to year. Management uses this measure in evaluating the
    performance of the Company. It is not a measure under generally
    accepted accounting principles and should not be considered as a
    substitute for any measure derived in accordance with generally
    accepted accounting principles. This measure may also be
    inconsistent with similar measures presented by other companies.
    In assessing this measure, investors should note that
    restructuring charges and special items that impact the Company's
    earnings have been excluded in order to provide an additional
    measure to investors seeking to evaluate the Company's underlying
    financial performance from year to year.

RESTRUCTURING AND SPECIAL ITEMS
------------------------------

The Company recorded pre-tax restructuring and special items of $10.9
million ($6.9 million after tax) and $55.8 million ($36.2 million
after tax) in the three-month and twelve-month periods ended December
31, 2002. The charges relate to rationalization of operations in the
office segment and the sale and discontinuation of marginal product
lines in the home and spirits segments.

                          Three Months Ended
                           December 31, 2002
                (In millions, except per share amounts)

                                        Special Items
                   -------------------------------------------
                                 Cost of Sales
                   Restructuring    Charges     SG & A Charges   Total
                   ---------------------------------------------------

Office Products    $   9.8       $   0.2        $   0.9       $   10.9
                   ---------------------------------------------------
Total              $   9.8       $   0.2        $   0.9       $   10.9
                   ---------------------------------------------------
Income Tax Benefit                                                 4.0
                                                              --------
Net Charge                                                    $    6.9
Charge Per Common Share                                       --------
 Basic                                                        $   0.05
 Diluted                                                      $   0.05



                          Twelve Months Ended
                           December 31, 2002
                (In millions, except per share amounts)

                                        Special Items
                   -------------------------------------------
                                 Cost of Sales
                   Restructuring    Charges     SG & A Charges   Total
                   ---------------------------------------------------

Home Products      $  10.9       $   4.4        $  (0.3)      $   15.0
Office Products       34.3           3.9            1.9           40.1
Spirits and Wine       0.7           -              -              0.7
                   ---------------------------------------------------
Total              $  45.9       $   8.3        $   1.6       $   55.8

Income Tax Benefit                                                19.6
                                                              --------
Net Charge                                                    $   36.2
Charge Per Common Share                                       --------
 Basic                                                        $   0.24
 Diluted                                                      $   0.24



                         FORTUNE BRANDS, INC.
                 CONDENSED CONSOLIDATED BALANCE SHEET
                             (In millions)

                                      December 31,     December 31,
                                          2002             2001
                                      ------------     ------------
                                               (Unaudited)
Assets
  Current assets
    Cash and cash equivalents           $   15.4         $   48.7
    Accounts receivable, net               845.1            860.6
    Inventories                            835.8            856.6
    Other current assets                   206.8            203.7
                                      ------------     ------------
      Total current assets               1,903.1          1,969.6

  Property, plant and equipment, net     1,189.6          1,158.4
  Intangibles resulting from
   business acquisitions, net            2,332.7          1,789.6
  Other assets                             396.8            383.3
                                      ------------     ------------
      Total assets                      $5,822.2         $5,300.9

Liabilities and Stockholders' Equity

  Current liabilities
    Short-term debt                     $  161.3         $   37.8
    Current portion of long-term debt      132.9              1.4
    Other current liabilities            1,249.9          1,219.2
                                      ------------     ------------
      Total current liabilities          1,544.1          1,258.4

  Long-term debt                           841.7            950.3
  Other long-term liabilities              724.3            598.7
  Minority Interests                       398.9            390.8
                                      ------------     ------------
      Total liabilities                  3,509.0          3,198.2

  Stockholders' equity                   2,313.2          2,102.7
                                      ------------     ------------
      Total liabilities and
       stockholders' equity             $5,822.2         $5,300.9
                                      ------------     ------------
*T

   Short Name: Fortune Brands Inc
   Category Code: FR
   Sequence Number: 00001658
   Time of Receipt (offset from UTC): 20030121T230503+0000

                                                  

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