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Fortune Brands Inc (FBI)

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Wednesday 23 January, 2002

Fortune Brands Inc

Final Results

Fortune Brands Inc
23 January 2002


( BW)(IL-FORTUNE-BRANDS)(FO) Fortune Brands Reports Record Fourth

Quarter & Full Year Earnings Per Share



    Business Editors



   LINCOLNSHIRE, Ill.--(BUSINESS WIRE)--Jan. 23, 2002--Fortune Brands

Reports Record Fourth Quarter & Full Year Earnings Per Share



   --  Diluted EPS Up 10% in Quarter and Up 5% for Full Year

   --  Market Share Gains, Jim Beam-ABSOLUT Alliance Enhance Results

   --  Significantly Stronger Balance Sheet; Free Cash Flow Climbs to

        $311 Million



   Fortune Brands, Inc. (NYSE: FO), a leading consumer brands

company, today reported record earnings per share for both the fourth

quarter and full year 2001. Diluted EPS for the fourth quarter was 78

cents before net gains from one-time items, up 10% from 71 cents a

year ago. Fourth quarter results reflect a benefit of approximately

four cents per share from successful full-year state tax initiatives

finalized in the quarter, more than offset by dilution from the

October sale of the U.K.-based private-label Scotch business. For the

full year 2001, diluted EPS reached $2.41 before net gains, up 5% from

$2.29.

   In addition to solid top-line performance by the company's leading

consumer brands in a challenging environment, fourth quarter and

full-year EPS growth benefited from the success of the company's

global spirits and wine distribution alliance with ABSOLUT vodka,

aggressive cost controls and productivity improvements, lower interest

expense, lower goodwill amortization and fewer shares outstanding.

Reflecting significant improvement in inventory management, the

company generated $311 million in free cash flow in 2001, a

year-over-year increase of 39%.

   Reported sales were $1.47 billion for the quarter and $5.68

billion for the year, trailing year-ago records by 2% and 1%

respectively. On a comparable basis - excluding divestiture of the

private label Scotch business, excise taxes, foreign exchange and

sales of ABSOLUT vodka recorded on an interim basis - sales were off

4% in the quarter and 3% for the year. Reported operating company

contribution was $228 million in the quarter and $806 million for the

year, off 9% and 8% respectively. On a comparable basis, operating

company contribution trailed year-ago results by just 1% in the

quarter and 4% for the year.

   'In a difficult economic environment that got the best of many

other companies, Fortune Brands more than held its own in 2001,'

Fortune Brands Chairman & Chief Executive Officer Norm Wesley said.

'We gained share in key markets and developed industry-leading new

products. We made major strategic progress, especially in our spirits

and wine business. We also substantially strengthened an already

attractive balance sheet.'

   'Let me underscore that in addition to our $311 million in free

cash, our major strategic initiatives delivered nearly one billion

dollars in proceeds in 2001. That cash enabled us to cut our debt in

half and buy back 7.5 million shares in 2001. The strength of our

balance sheet is a powerful resource as we look to drive shareholder

value even higher in 2002.'



   Outlook for 2002



   'As Fortune Brands enters 2002, our prospects are excellent,'

Wesley added. 'We feel the disciplined strategy that delivered another

year of solid performance positions us well to succeed in an economic

environment that remains uncertain. Assuming some measure of economic

recovery in the second half, we're targeting full-year performance

consistent with analysts' current expectations. For the year, the

current range of analysts' estimates - adjusted to include 31 cents of

lower goodwill amortization for the new FAS 142 goodwill accounting

standards that will impact all companies - would be $2.84 to $3.06.

Our full-year target is in that range. For the first quarter, the

current range of analysts' estimates would be 45 cents to 51 cents,

adjusted 8 cents for FAS 142. We're targeting first quarter

performance at or above the high end of that range, benefiting from

our successful Jim Beam-ABSOLUT alliance and lower borrowing costs.'



   Net Gain from One-Time Items



   In the fourth quarter, the company recorded an after-tax net gain

of $10 million from one-time items. Gains included $22 million from

the previously announced gain on the sale of the private label Scotch

business, a previously disclosed tax refund of $17 million for the

1990 to 1992 tax years, and a net tax credit of $73 million that

flowed from a successful recapitalization of the company's office

products subsidiary. Related to the recapitalization, the company sold

shares representing a small minority interest in the subsidiary (less

than 2%) to a passive investor, enabling the company to access a tax

loss that helped offset the capital gains taxes generated by the

spirits and wine alliance with Vin & Sprit. These fourth quarter

credits more than offset one-time charges: $35 million in after-tax

restructuring and non-recurring charges related principally to the

repositioning of the office products business and the downsizing of

specialty plumbing parts operations; and an after-tax charge of $67

million to write down select finite-lived intangibles within the

office and home products businesses.

   Including the net gain from one-time items, the company reported

fourth quarter net income of $129 million, or 84 cents per diluted

share. Including an after-tax net gain of $13 million for the year,

net income was $386 million, or $2.49 per diluted share.



   Fortune Brands, Inc. is a consumer products company with annual

sales exceeding $5 billion. Its operating companies have premier

brands and leading market positions in home and hardware products,

office products, golf equipment and spirits and wine. Home and

hardware brands include Moen faucets, Aristokraft and Schrock

cabinets, Master locks 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, 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, as well as other risks

and uncertainties detailed from time to time in the Company's

Securities and Exchange Commission filings.

-0-

*T



                         FORTUNE BRANDS, INC.

                   CONSOLIDATED STATEMENT OF INCOME

                (In millions, except per share amounts)

                              (Unaudited)



                                  Three Months Ended December 31,

                                  ------------------------------

                              2001            2000         % Change

                           -------------------------------------------

Net Sales(1)               1,472.0         1,500.5             (1.9)

                           ----------------------------------------

    Cost of goods sold       807.4           792.3              1.9



    Excise taxes on

      spirits and wine        95.2            98.4             (3.3)



    Advertising, selling,

      general and administrative

      expenses(1)            350.5           368.9             (5.0)



    Amortization of

      intangibles             15.3            20.0            (23.5)



    Write-down of identifiable

      intangibles/goodwill    73.3           502.6                -



    Restructuring and other

      nonrecurring charges    55.8            42.6                -



    Interest expense          17.7            33.3            (46.8)



    Other (income) expense,

      net(2)                 (46.8)           (2.0)               -

                             --------------------------------------

Income (Loss) Before Taxes   103.6          (355.6)               -

                             --------------------------------------

    Income taxes             (29.4)           15.5                -



    Minority interests         4.2             1.6                -

                             --------------------------------------

Net Income (Loss)            128.8          (372.7)               -

                             --------------------------------------

Earnings Per Common Share



    Basic



    Income from operations    0.80            0.72             11.1

                              -------------------------------------

   Tax credit                 0.49               -                -

    Reversal of prior year tax

      reserve no longer

      required                   -            0.19                -



    Gain on sale UK Private

      Label Scotch            0.15               -                -

    Write-down of identifiable

      intangibles/goodwill   (0.45)          (3.15)            85.7

    Interest income on

      tax refund              0.12               -                -

    Restructuring and other

      nonrecurring charges   (0.24)          (0.17)           (41.2)

                             --------------------------------------

    Net Income (loss)         0.87           (2.41)               -

                             --------------------------------------

    Diluted



    Income from operations    0.78            0.72              8.3

                             --------------------------------------

    Tax credit                0.48               -                -

    Reversal of prior year tax

      reserve no longer

      required                   -            0.19                -

    Gain on sale UK Private

      Label Scotch            0.14               -                -

    Write-down of identifiable

      intangibles/goodwill   (0.44)          (3.15)            86.0

   Interest income on

      tax refund              0.11               -                -

    Restructuring and other

      nonrecurring charges   (0.23)          (0.17)           (35.3)

                             --------------------------------------

    Net Income (loss)         0.84           (2.41)               -

                             --------------------------------------

Avg. Common Shares Outstanding

    Basic                    148.6           154.5             (3.8)

                             --------------------------------------

    Diluted                  152.8           154.5             (1.1)

                             --------------------------------------

(1) Prior periods restated to reflect the January 1, 2001 required

    adoption of EITF issue No. 00-22 relating to the classification of

    certain sales incentives. This reclassification does not result in

    a change in the Company's earnings or earnings per common share.



(2) Prior periods restated to exclude minority interests now

    classified separately.



                         FORTUNE BRANDS, INC.

                   CONSOLIDATED STATEMENT OF INCOME

                (In millions, except per share amounts)

                              (Unaudited)



                                 Twelve Months Ended December 31,

                                 -------------------------------

                              2001            2000         % Change

                           -------------------------------------------

Net Sales(1)               5,678.7         5,752.0             (1.3)



    Cost of goods sold     3,090.3         3,052.4              1.2



    Excise taxes on spirits

      and wine               360.4           352.7              2.2



    Advertising, selling, general

      and administrative

      expenses(1)          1,461.2         1,513.1             (3.4)



    Amortization of

      intangibles             62.7            79.6            (21.2)



    Write-down of identifiable

      intangibles/goodwill    73.3           502.6            (85.4)



    Restructuring and other

      nonrecurring charges    98.1            73.0             34.4



    Interest expense          96.8           133.8            (27.7)



    Other (income)

      expense, net(2)        (56.0)            0.8                -



Income (Loss) Before Taxes   491.9            44.0                -

                             --------------------------------------

    Income taxes              94.4           176.6            (46.5)



    Minority interests        11.5             5.1                -

                             --------------------------------------

Net Income (Loss)            386.0          (137.7)               -

                             --------------------------------------

Earnings Per Common Share



    Basic



    Income from operations    2.46            2.32              6.0

                             --------------------------------------

   Tax credit                 0.48               -                -

    Reversal of prior year

      tax reserve no longer

      required                0.21            0.19             10.5

    Gain on sale UK Private

      Label Scotch            0.15               -                -

    Write-down of identifiable

      intangibles/goodwill   (0.44)          (3.09)            85.8

   Interest income on tax

      refund                  0.11               -                -

   Restructuring and other

      nonrecurring charges   (0.42)          (0.30)           (40.0)

                             --------------------------------------

   Net Income (loss)          2.55           (0.88)               -

                             --------------------------------------

    Diluted



    Income from operations    2.41            2.32              3.9

                             --------------------------------------

   Tax credit                 0.47               -                -

   Reversal of prior year

     tax reserve no longer

     required                 0.20            0.19              5.3

   Gain on sale UK Private

     Label Scotch             0.14               -                -

   Write-down of identifiable

     intangibles/goodwill    (0.43)          (3.09)            86.1

   Interest income on

     tax refund               0.11               -                -

   Restructuring and other

     nonrecurring charges    (0.41)          (0.30)           (36.7)

                             --------------------------------------

    Net Income (loss)         2.49           (0.88)               -

                             --------------------------------------

Avg. Common Shares Outstanding

    Basic                    151.7           157.6             (3.7)

                             --------------------------------------

    Diluted                  155.3           157.6             (1.5)

                             --------------------------------------

Actual Common Shares Outstanding

    Basic                    148.0           153.5             (3.6)

                             --------------------------------------

    Diluted                  152.3           156.4             (2.6)

                             --------------------------------------

(1) Prior periods restated to reflect the January 1, 2001 required

    adoption of EITF issue No. 00-22 relating to the classification of

    certain sales incentives. This reclassification does not result in

    a change in the Company's earnings or earnings per common share.



(2) Prior periods restated to exclude minority interests now

    classified separately.



                         FORTUNE BRANDS, INC.

                (In millions, except per share amounts)

                              (Unaudited)



SEGMENT DATA

------------

                     Three Months Ended        Twelve Months Ended

                        December 31,               December 31,

                --------------------------  --------------------------

                  2001     2000   % Change    2001     2000   % Change

                 ------   ------  --------   ------   ------  --------

Net Sales(1)



Home Products   $  558.8  $  569.5   (1.9)  $2,106.8  $2,122.5   (0.7)



Office Products    344.6     407.5  (15.4)   1,256.1   1,435.4  (12.5)



Golf Products      173.6     159.6    8.8      946.5     965.2   (1.9)



Spirits and Wine   395.0     363.9    8.5    1,369.3   1,228.9   11.4

                --------  --------  ------  --------  --------   -----

Total           $1,472.0  $1,500.5   (1.9)  $5,678.7  $5,752.0   (1.3)



Operating Company Contribution(2)



Home Products   $   92.2  $   99.2   (7.1)  $  318.1  $  340.4   (6.6)



Office Products     22.2      30.3  (26.7)      50.1      79.5  (37.0)



Golf Products       13.7       7.3   87.7      131.3     145.2   (9.6)



Spirits and Wine    99.4     112.4  (11.6)     306.0     309.1   (1.0)

                --------  --------  ------  --------  --------   -----

Total           $  227.5  $  249.2   (8.7)  $  805.5  $  874.2   (7.9)



   (1) Prior periods restated to reflect the January 1, 2001 required

        adoption of EITF issue No. 00-22 relating to the

        classification of certain sales incentives. This

        reclassification did not result in a change in the Company's

        operating company contribution, earnings, or earnings per

        common share.



   (2) Operating company contribution (OCC) is net sales less all

        costs and expenses other than restructuring and other

        nonrecurring charges, write-downs of identifiable intangibles

        and goodwill, amortization of intangibles, corporate

        administrative expense, interest and related expenses, other

        (income) expense, net, income taxes and minority interests.



   INCOME FROM OPERATIONS BEFORE NET GAINS & CHARGES



   The following sets forth income from operations before net gains &

charges, 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 other nonrecurring charges 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, income from

operations before charges 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

million ($21.8 million after tax gain) from sale of UK Private Label

Scotch for the three and twelve-month periods ended December 31, 2001.



   In addition, the following sets forth income from operations

before net gains & charges in 2000, which represents income before the

$42.6 million ($27.4 million after tax) and $73.0 million ($46.6

million after tax) restructuring and other nonrecurring charges taken

in the three-month and twelve-month periods ended December 31, 2000,

respectively. Income from operations before charges was adjusted to

exclude $502.6 million ($487.3 million after tax) goodwill write-down

and a $30.0 million tax reserve reversal taken in the three-month and

twelve-month periods ended December 31, 2000.



                                  Three Months Ended December 31,

                                  -------------------------------

                                     2001       2000    % Change

                                    ------     ------   ---------

Income from Operations Before

 Net Gains & Charges               $ 119.3    $ 112.0      6.5

                                   -------    -------    -------

Earnings Per Common Share

Basic                              $  0.80    $  0.72     11.1

Diluted                               0.78       0.71      9.9





                                  Twelve Months Ended December 31,

                                  --------------------------------

                                     2001       2000    % Change

                                    ------     ------   ---------

Income from Operations Before

 Net Gains & Charges               $ 373.4    $ 366.2      2.0

                                   -------    -------    -------

Earnings Per Common Share

Basic                              $  2.46    $  2.32      6.0

Diluted                               2.41       2.29      5.2



RESTRUCTURING AND OTHER NONRECURRING CHARGES

--------------------------------------------



The Company recorded pre-tax restructuring and nonrecurring charges of

$98.1 million in the twelve-month period ended December 31, 2001. The

charges principally relate to product line discontinuations and

rationalization of operations in the office segment, workforce

reductions and rationalization of operations in the home segment and

capacity reductions in select technology platforms in the golf

segment.



                                   Three Months Ended

                                    December 31, 2001

                        ----------------------------------------------

                           (In millions, except per share amounts)

                        ----------------------------------------------



                                              Nonrecurring

                        ----------------------------------------------

                        Restructuring   Cost of Sales    SG & A  Total

                                           Charges       Charges

                        ----------------------------------------------

Home Products                  $ 15.2          $  9.0    $    - $ 24.2

Office Products                  15.2            10.0       2.2   27.4

Golf Products                     3.0             1.2         -    4.2

                        ----------------------------------------------

    Total                      $ 33.4          $ 20.2    $  2.2 $ 55.8

                        ----------------------------------------------



Income Tax Benefit                                                20.3

                                                               -------

Net Charge                                                     $  35.5

                                                               -------

Charge Per Common Share

  Basic                                                        $  0.24

  Diluted                                                      $  0.23

                                                               -------



                                     Twelve Months Ended

                                      December 31, 2001

                        ----------------------------------------------

                           (In millions, except per share amounts)

                        ----------------------------------------------



                                              Nonrecurring

                        ----------------------------------------------

                        Restructuring   Cost of Sales    SG & A  Total

                                           Charges       Charges

                        ----------------------------------------------

Home Products                  $ 15.2          $  9.0    $    - $ 24.2

Office Products                  27.2            27.8      14.7   69.7

Golf Products                     3.0             1.2         -    4.2

                        ----------------------------------------------

    Total                      $ 45.4          $ 38.0    $ 14.7 $ 98.1

                        ----------------------------------------------



Income Tax Benefit                                                34.8

                                                               -------

Net Charge                                                      $ 63.3

                                                               -------

Charge Per Common Share

  Basic                                                         $ 0.42

                                                               -------

  Diluted                                                       $ 0.41

                                                               -------



                         FORTUNE BRANDS, INC.

                 CONDENSED CONSOLIDATED BALANCE SHEET

                             (In millions)



                                     December 31,         December 31,

                                        2001                 2000

                                     (Unaudited)

Assets                               ------------         ------------

  Current assets

    Cash and cash equivalents               $48.7                $20.9

    Accounts receivable, net                860.6                952.1

    Inventories                             856.6              1,079.2

    Other current assets                    203.7                212.3

                                     ------------         ------------



      Total current assets                1,969.6              2,264.5



  Property, plant and equipment, net      1,158.4              1,205.1

  Intangibles resulting from

   business acquisitions, net             1,789.6              1,989.4

  Other assets                              383.3                305.1

                                     ------------         ------------



      Total assets                       $5,300.9             $5,764.1

                                     ------------         ------------



Liabilities and Stockholders' Equity



  Current liabilities

    Short-term debt                         $37.8               $793.6

    Current portion of long-term debt         1.4                 12.4

    Other current liabilities             1,219.2              1,233.9

                                     ------------         ------------



      Total current liabilities           1,258.4              2,039.9



   Long-term debt                           950.3              1,151.8

   Other long-term liabilities(1)           598.7                422.1

   Minority interests                       390.8                 14.4

                                     ------------         ------------



      Total liabilities                   3,198.2              3,628.2



   Stockholders' equity                   2,102.7              2,135.9

                                     ------------         ------------



      Total liabilities

       and stockholders' equity          $5,300.9             $5,764.1

                                     ------------         ------------



(1) Prior period restated to exclude minority interests now classified

    separately.

*T



    --30--bpm/cgo* vs/cgo ym/cgo cee/cgo



    CONTACT: Fortune Brands

             Clarkson Hine (MR), 847/484-4415

                    or

             Anthony J. Diaz (IR), 847/484-4410





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