UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 21, 1997 (October 21, 1997)
---------------------------------------------------------------------------
Date of Report (Date of earliest event reported)
FORTUNE BRANDS, INC.
---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9076 13-3295276
---------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
l700 East Putnam Avenue, Old Greenwich, Connecticut 06870-0811
---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 698-5000
----------------------
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
- ------ ------------
Registrant's press release dated October 21, 1997 is filed herewith as
Exhibit 20 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
- ------ ---------------------------------
(c) Exhibits.
--------
20. Press release of Registrant dated October 21, 1997.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Current Report to be signed on its
behalf by the undersigned thereunto duly authorized.
FORTUNE BRANDS, INC.
--------------------
(Registrant)
By C. P. Omtvedt
--------------------------------
C. P. Omtvedt
Vice President and
Chief Accounting Officer
Date: October 21, 1997
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered Page
- ------- -------------
20. Press release of Registrant dated
October 21, 1997.
EXHIBIT 20
NEWS RELEASE
NEWS RELEASE
Fortune Brands, Inc., 1700 East Putnam Avenue, Old Greenwich, CT 06870
NEWS RELEASE
Media Relations: Investor Relations:
Roger W. W. Baker Daniel A. Conforti
(203)698-5148 (203)698-5132
FORTUNE BRANDS THIRD QUARTER PRO FORMA E.P.S. UP 16%;
COMPARABLE SALES UP 5%;
REAFFIRMS STRONG EARNINGS GROWTH OUTLOOK
Old Greenwich, CT, October 21, 1997 -- Fortune Brands, Inc. (NYSE-
FO), the international consumer products company, today announced
strong third quarter results, reaffirmed the outlook for
excellent growth for the full year 1997 and expressed optimism
about the outlook for 1998 and beyond. Following the spin-off of
the U.K.-based Gallaher tobacco business, American Brands changed
its name to Fortune Brands. Fortune Brands began trading on the
New York Stock Exchange on June 2, 1997.
The Company reported a strong 16% increase in pro forma
primary and fully diluted earnings per Common share to 29 cents
for the quarter ended September 30, 1997, versus 25 cents a year
earlier. Cash earnings (pro forma E.P.S. plus 15 cents per share
of goodwill amortization) were 44 cents per share, 52% higher
than pro forma earnings.
Pro forma E.P.S. excludes restructuring and other
nonrecurring pre-tax charges of $38 million for the quarter and
$127 million for the nine months and is adjusted to reflect the
net cash payment Gallaher made to the Company and the assumption
that these proceeds were used to repay debt and purchase shares
at the beginning of 1996.
For the nine months, pro forma earnings per share were
$1.01, up 16% from 87 cents last year. Pro forma fully diluted
earnings per share rose 15% to 99 cents. Cash earnings,
including 44 cents (43 cents fully diluted) of goodwill
amortization, were $1.45 per share ($1.42 cents fully diluted).
Consolidated net sales, excluding acquisitions and
divestitures, were up 5% for the three and nine months. The nine
month comparison also excludes an extra month of Whyte & Mackay
operations in the 1996 second quarter related to a change to a
calendar year-end reporting basis.
"Fortune Brands is performing very well," noted Chairman and
Chief Executive Officer Thomas C. Hays. "We're achieving
comparable top-line growth of 5%. We posted another strong
increase in pro forma earnings. We're solidly on track to
achieve our 1997 E.P.S. growth target of 13-15%, and our long-
term outlook is very bright.
"For the quarter, pro forma E.P.S. was up 16%. Operating
company contribution was a record, backed by gains in all brand
categories. Comparable contribution, excluding acquisitions and
divestitures, was up 11%.
"Our long-term goal is to generate E.P.S. growth in the
range of 13-15%, assuming a satisfactory economic and pricing
environment, and we've been moving decisively to strengthen our
prospects. Across our brands, we're tightly focused on three
driving forces: sales growth, cost initiatives and asset
management. We're moving solidly ahead on all three fronts, with
accelerated new product development, restructuring to assure
globally competitive manufacturing and sourcing, and aggressive
programs to enhance working capital efficiency.
"We're also building on our leading positions with high
return, add-on acquisitions. Over the past three months, we
completed three add-on acquisitions and announced a fourth: Nobo
Group greatly strengthens our presence in presentation products
and equipment in Europe, May Tag & Label gives us a strong
foothold in the growing ink jet and laser label category, and
Bobby Grace putters fills out the Cobra golf line with a world-
renowned putter. (These acquisitions will be reflected in
operating results beginning with the fourth quarter.) Late last
month, we announced agreement to acquire CSI-Donner, a leader in
bathroom accessories that enhances our category-leading Moen
faucets. We also profitably sold two nonstrategic office product
units.
"These actions, backed by our powerful consumer brand
portfolio and strong financial resources, give us confidence as
we look ahead. We expect to conclude 1997 with another strong
earnings gain in the fourth quarter, compared with the 43 cents
(42 cents fully diluted) pro forma E.P.S. posted in last year's
quarter, and we are optimistic about the outlook for 1998 and
beyond. Accordingly, we have increased the dividend on the
Common stock, effective with the December 1 payment, by 5% to an
indicated annual rate of 84 cents per share."
Brand Highlights
:::Home and Office Products Brands:::
Home and office products sales and contribution on a
comparable basis (excluding acquisitions and dispositions) were
up 6% and 12%, respectively, in the quarter. We are identifying
significant new business and cost reduction opportunities
associated with the coordinated management of these brands. Home
and office products represent nearly half of consolidated
contribution and have solid growth characteristics.
---Office Products ---
Comparable sales and contribution from the office products
brands were up 11% and 25%, respectively, in the quarter. ACCO,
the global leader in office supplies, recently completed the
acquisition of Nobo Group and May Tag & Label and profitably
divested two nonstrategic businesses. These acquired brands,
along with Advanced Gravis, a leader in personal computer
joysticks and game pads acquired late last year, strengthen our
position in fast-growing product categories.
The solid overall increase for the office products brands
was led by particularly strong and broad-based gains in North
America, where overall sales were up 15% on a comparable basis,
with the U.S., Canada and Mexico all registering double-digit
gains. The Day-Timer brand, a leader in time-management, was up
29% on the strength of a significant increase in sales at retail
and growth in the direct mail business. Kensington, a world
leading computer accessories brand, was up 38%, benefiting from
the successful sell-in of innovative new products, including
Smart Sockets and the Orbit trackball, and share gains at key
retailers. Internationally, office products sales in the U.K.
and Australia, where we are the category leader, were up 8% and
10%, respectively, offsetting continuing softness in continental
Europe.
During the quarter, ACCO negotiated an agreement that will
result in the closing of the Swingline brand facilities in New
York City and shifting production to Mexico. This move is
necessary to keep Swingline, the world's leading stapler brand,
competitive.
We're investing in new product development for the office
products brands at a record pace, and that's already producing
significant incremental sales. We expect another strong
contribution increase in the fourth quarter from these brands,
concluding an excellent double-digit growth year.
---Home Products ---
Contribution from the home products brands increased 7%,
with increases at Moen, Aristokraft and Waterloo partly offset by
the expected decline at Master Lock. Sales were up slightly in
spite of significant price cuts this past January on Master Lock,
the world's leading padlock brand.
Master Lock continues to show an encouraging rebound. Unit
volume was up in the quarter, backed by solid response at retail
to the lower prices and promotional packaging. Over the coming
months, Master will be initiating the most extensive series of
new product launches in the brand's history, targeted at high-
security applications and at retail consumers. Progress
continued in developing initiatives to reduce costs and enhance
profitability through foreign manufacturing and sourcing
arrangements.
Aristokraft, which is number 2 in kitchen and bath cabinets,
posted another double-digit contribution increase, achieved
significant new distribution for its products and a solid
increase in working capital efficiency. Waterloo, the world
leader in tool storage, also had a fine quarter, bolstered by
very strong sell-through at retail. The transfer of Waterloo
production to a new, lower cost plant in Oklahoma is proceeding
very well.
Contribution from Moen, the number 1 faucet brand in North
America, rose modestly in the quarter. A series of new kitchen
faucet product introductions, the most extensive in Moen's
history, was launched beginning in late June. Excellent
placement of the new products was achieved with key retailers and
wholesalers as the quarter progressed. With consumers
increasingly buying matching faucets and other bathroom
accessories, the pending acquisition of the Donner brand offers
substantial potential to introduce complementary lines. Moen
results in the quarter were adversely affected by trade inventory
reductions, but sell-through remained strong.
Overall from the home products brands, we expect modest
contribution growth for the fourth quarter and full year, even
including the projected decline at Master Lock. Excluding Master
Lock, we expect contribution growth approaching double-digits for
the full year.
:::Golf Brands:::
The golf brands achieved another double-digit contribution
increase in the quarter, up 21% to a record. We are the
worldwide leader in this category, and the strong gain reflects
continued sales increases in golf balls, golf shoes, golf gloves
and golf clubs by the Titleist, Foot-Joy, Cobra and Pinnacle
brands. Overall, sales were up 7% for the quarter and 12% for
the nine months, both to records.
Worldwide, golf ball sales were up 10% for the quarter and
nine months, fueled by increases in the U.S., U.K., continental
Europe and Japan. Gains for Titleist, the number 1 ball in golf,
were led by a 35% volume increase year-to-date for the premium-
positioned Titleist Professional, which is played by Tiger Woods,
Ernie Els and Davis Love III. Worldwide, Pinnacle golf ball
units were up 21% year-to-date. At the PGA Merchandise Show last
month, significant new product introductions included the new
Titleist Professional, Titleist Tour Distance and Pinnacle Gold
LS. For the nine months, Titleist ranks as the number 1 ball in
wins on the worldwide professional tours, winning more than 5
times as many events as the nearest competitor, number 1 in
worldwide players and number 1 in money won.
Titleist golf clubs accelerated their powerful sales growth,
up 32% in the quarter and 22% for the nine months, driven by
strong demand in all major markets for the Titleist DCI irons and
for the Scotty Cameron by Titleist putter. Unit sales of
Titleist irons were up 29% in the quarter and 25% for the nine
months. The new Titleist Titanium 975D and 976R drivers were
launched at the PGA Merchandise Show and have already won 9 times
on 5 professional tours, finishing 1 and 2 at the PGA
Championship. Scotty Cameron by Titleist putters have been the
putter of choice at 32 of 39 PGA Tour events and rank number 1 on
the PGA Tour in wins.
The Cobra brand posted good sales growth for the nine
months, even though the sales comparison for the quarter was
adversely affected by the timing of shipments and product
introductions last year. Cobra margins were up in the quarter,
reflecting manufacturing and operating efficiencies. At the PGA
Merchandise Show, Cobra introduced an array of new and enhanced
products, including King Cobra II irons with the Hump Steel
shaft, Men's King Cobra Ti and King Cobra Ti Offset woods, and
Men's King Cobra Deep Face and King Cobra Offset stainless steel
woods. In August, Cobra capitalized on its acquisition of Bobby
Grace putters, which have amassed 40 Tour wins worldwide,
introducing 6 new Bobby Grace by Cobra putters.
Foot-Joy, the number 1 golf shoe and golf glove, posted a
strong 13% sales increase in the quarter. Foot-Joy has taken a
leadership role in fashion, which has become an important trend
in golf footwear. This year, Foot-Joy has introduced five new
lines in the U.S., including Continental Classics, the Foot-Joy
Europa Collection and Soft-Joys Sports, offering unique styling
targeted at niche markets. A special line of welted shoes,
European Classics, was introduced in European markets, and every
existing line has been updated with new styles.
We expect double-digit contribution growth from these brands
for the full year, with a particularly strong increase in the
fourth quarter.
:::Distilled Spirits Brands:::
Contribution from the distilled spirits brands was up 6% in
the quarter, reflecting a strong performance for the North
American operations. Sales excluding excise taxes increased 3%
in both the quarter and nine months, benefiting from price
increases and favorable product mix. The nine month comparison
also excludes an additional month of sales in the 1996 second
quarter to shift the U.K.-based Whyte & Mackay operations to a
calendar year basis.
Worldwide, total distilled spirits case volume declined 1%
in the quarter and nine months. Volume for Jim Beam, the number
1 Bourbon in the world, held steady for the nine months, and Jim
Beam premixed cocktails, sold primarily in the international
markets, posted a 13% gain. Small Batch Bourbons continued to
achieve strong gains, with volume up 35% for the nine months.
North American contribution was up 11% in the quarter and 6%
for the nine months, benefiting from improved gross margins and
lower operating expenses. DeKuyper cordial volume soared 18% in
the quarter and 6% for the nine months, led by strong consumer
acceptance of Sour Apple Pucker, introduced earlier this year.
Altogether, the three Pucker flavors, including two introduced
last year, exceeded 200,000 cases for the nine months.
International contribution was up slightly in the quarter,
following a very strong second quarter gain. For the nine
months, international contribution was up 8%, driven by solid
gains in Australia. Jim Beam Bourbon volume was up a solid 5%
for the nine months in Australia, where it is the number 1
selling distilled spirit.
We expect continued solid contribution growth from the
distilled spirits brands in the fourth quarter and for the full
year. With strong cash flow, the distilled spirits brands
generate significantly faster increases in pre-tax income.
* * * *
Fortune Brands, Inc. is an international consumer products
company with headquarters in Old Greenwich, Connecticut. Its
operating companies have powerhouse brands and leading market
positions. Home and office products consist of hardware and home
improvement brands -- including Moen faucets, Master locks and
Aristokraft cabinets sold by units of MasterBrand Industries --
and office products brands -- including ACCO World Corporation's
Day-Timer and Swingline. Acushnet
Company's golf brands include Titleist, Cobra and Foot-Joy.
Major distilled spirits brands sold by units of JBB Worldwide,
Inc. include Jim Beam and the Small Batch Bourbons, DeKuyper
cordials and Whyte & Mackay Scotch.
* * *
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.
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, competitive product and pricing
pressures, the impact of excise tax increases with respect to
distilled spirits, regulatory developments, the uncertainties of
litigation, 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,
1997 1996 % Change
Net Sales $1,185.5 $1,158.1 2.4
Cost of sales 713.2 711.4 0.3
Advertising, selling, general
and administrative expenses 318.5 305.8 4.2
Amortization of intangibles 26.0 25.7 1.2
Restructuring and other
nonrecurring charges 38.1 - -
Interest and related expenses 24.0 43.1 (44.3)
Other (income) expenses, net 4.7 2.9 62.1
Income From Continuing Operations
Before Income Taxes 61.0 69.2 (11.8)
Income taxes 33.0 38.0 (13.2)
Income From Continuing Operations 28.0 31.2 (10.3)
Income from discontinued operations - 105.5 -
Extraordinary items - - -
Net Income $28.0 $136.7 (79.5)
Earnings Per Common Share
Primary
Income from operations $0.29 $0.19 52.6
Restructuring and other
nonrecurring charges (0.13) - -
Income from continuing operations 0.16 0.19 (15.8)
Income from discontinued opers. - 0.61 -
Extraordinary items - - -
Net income $0.16 $0.80 (80.0)
Fully Diluted
Income from operations $0.29 $0.19 52.6
Restructuring and other
nonrecurring charges (0.13) - -
Income from continuing operations 0.16 0.19 (15.8)
Income from discontinued opers. - 0.60 -
Extraordinary items - - -
Net income $0.16 $0.79 (79.7)
Avg. Common Shares Outstanding
Primary 171.3 170.4 0.5
Fully diluted 176.3 173.9 1.4
FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Nine Months Ended September 30,
1997 1996 % Change
Net Sales $3,526.1 $3,420.9 3.1
Cost of sales 2,102.7 2,078.5 1.2
Advertising, selling, general
and administrative expenses 959.9 915.5 4.8
Amortization of intangibles 77.9 76.9 1.3
Restructuring and other
nonrecurring charges 127.4 - -
Interest and related expenses 92.7 122.6 (24.4)
Other (income) expenses, net 7.5 3.2 134.4
Income From Continuing Operations
Before Income Taxes 158.0 224.2 (29.5)
Income taxes 90.7 105.2 (13.8)
Income From Continuing Operations 67.3 119.0 (43.4)
Income from discontinued operations 65.1 263.8 (75.3)
Extraordinary items - (10.3) -
Net Income $132.4 $372.5 (64.5)
Earnings Per Common Share
Primary
Income from operations $0.90 $0.68 32.4
Restructuring and other
nonrecurring charges (0.51) - -
Income from continuing operations 0.39 0.68 (42.6)
Income from discontinued opers. 0.38 1.51 (74.8)
Extraordinary items - (0.06) -
Net income $0.77 $2.13 (63.8)
Fully Diluted
Income from operations $0.89 $0.68 30.9
Restructuring and other
nonrecurring charges (0.50) - -
Income from continuing operations 0.39 0.68 (42.6)
Income from discontinued opers. 0.36 1.47 (75.5)
Extraordinary items - (0.06) -
Net income $0.75 $2.09 (64.1)
Avg. Common Shares Outstanding
Primary 171.6 174.3 (1.5)
Fully diluted 175.7 178.8 (1.7)
(NOTES FOLLOW)
FORTUNE BRANDS, INC.
(In millions, except per share amounts)
NOTES:
(1) PRO FORMA FINANCIAL INFORMATION
On May 30, 1997, the international tobacco operations were spun off and to
allocate the overall debt burden of the Company at the time of the
spin-off, Gallaher borrowed and paid to the Company an amount that will
ultimately result in approximately $1.25 billion, after taxes. The Company
used the proceeds initially to pay down short-term debt.
The following sets forth income from continuing operations excluding
restructuring and other nonrecurring charges and adjusted to reflect the
net cash payment Gallaher made to the Company and the assumption that such
proceeds were used to purchase 2.5 million Common shares and repay debt as
of January 1, 1996. The ultimate use of the proceeds may differ from that
described herein.
PRO FORMA FINANCIAL INFORMATION
Three Months Ended September 30,
1997 1996 %Change
Income from Operations $51.0 $41.4 23.2
Earnings Per Common Share-
Primary $0.29 $0.25 16.0
Fully Diluted 0.29 0.25 16.0
Nine Months Ended September 30,
1997 1996 %Change
Income from Operations $172.8 $149.8 15.4
Earnings Per Common Share-
Primary $1.01 $0.87 16.1
Fully Diluted 0.99 0.86 15.1
Previously published pro forma amounts, which reflected an assumed purchase
of 10 million Common shares, have been adjusted to reflect an assumed
purchase of 2.5 million Common shares. The impact to E.P.S. for the three
months and nine months ended September 30, 1996 is negligible. The impact
on primary and fully diluted E.P.S. for the year 1996 is a reduction of two
cents to $1.30 and $1.28, respectively.
FORTUNE BRANDS, INC.
(In millions)
NOTES (CONTINUED):
(1) PRO FORMA FINANCIAL INFORMATION (Concluded)
Amortization of intangibles included in pro forma primary and fully diluted
earnings per share for the three month periods ended September 30, 1997 and
1996 amounted to 15 cents. For the nine months ended September 30, 1997
amortization of intangibles included in primary and fully diluted earnings
per share amounted to 44 cents and 43 cents, and for the 1996 period,
amounted to 43 cents and 42 cents, respectively.
(2) INFORMATION ON BUSINESS SEGMENTS
Net sales by business segment:
Three Months Ended September 30,
1997 1996 %Change
Home Products $ 352.4 $ 349.1 0.9
Office Products 316.4 304.3 4.0
Home and Office Products 668.8 653.4 2.4
Golf Products 208.7 195.5 6.8
Distilled Spirits (a) 308.0 309.2 (0.4)
Total (b) $1,185.5 $1,158.1 2.4
Nine Months Ended September 30,
1997 1996 %Change
Home Products $1,016.6 $1,005.8 1.1
Office Products 891.9 853.3 4.5
Home and Office Products 1,908.5 1,859.1 2.7
Golf Products 750.0 669.1 12.1
Distilled Spirits (a) 867.6 892.7 (2.8)
Total (b) $3,526.1 $3,420.9 3.1
(a) Federal and foreign excise taxes included in net sales and cost of
sales for the three months ended September 30, 1997 and 1996 amounted
to $100.9 and $107.4, and for the nine months ended September 30, 1997
and 1996 amounted to $286.7 and $309.7, respectively.
Distilled Spirits net sales, excluding excise taxes, were up 3% for
the three months and also excluding an extra month in the second
quarter last year at Whyte & Mackay U.K. operations (change to
calendar year-end), were up 3% for the nine months ended September 30,
1997.
(b) Consolidated net sales, excluding nonstrategic businesses sold and the
Advanced Gravis acquisition, were up 5% for the three and nine months
ended September 30, 1997. The nine month comparison also excludes an
extra month in the second quarter last year at Whyte & Mackay U.K.
operations (change to calendar year-end).
FORTUNE BRANDS, INC.
(In millions)
NOTES (CONTINUED):
(2) INFORMATION ON BUSINESS SEGMENTS (Concluded)
Operating company contribution by business segment:
Three Months Ended September 30,
1997 1996 %Change
Home Products $ 55.3 $ 51.8 6.8
Office Products 26.1 24.5 6.5
Home and Office Products 81.4 76.3 6.7
Golf Products 26.7 22.0 21.4
Distilled Spirits 64.8 61.4 5.5
Total (c) $172.9 $159.7 8.3
Nine Months Ended September 30,
1997 1996 %Change
Home Products $158.9 $153.0 3.9
Office Products 69.9 65.0 7.5
Home and Office Products 228.8 218.0 5.0
Golf Products 126.3 116.6 8.3
Distilled Spirits 164.8 154.6 6.6
Total (c) $519.9 $489.2 6.3
Operating company contribution is operating income excluding
restructuring, other nonrecurring charges and amortization of
intangibles.
(c) Consolidated operating company contribution, excluding nonstrategic
businesses sold and the Advanced Gravis acquisition, was up 11% and 7%
for the three and nine months ended September 30, 1997, respectively.
FORTUNE BRANDS, INC.
(In millions)
NOTES (CONTINUED):
(3) DISCONTINUED OPERATIONS
On May 30, 1997 the international tobacco operations were spun off and the
name of the Company was changed to Fortune Brands, Inc. As a result, the
Company's stockholders owned shares in two publicly-traded companies -
Fortune Brands, Inc. and Gallaher Group Plc.
The financial statements were reclassified at May 30, 1997, to identify
tobacco operations as discontinued operations for all periods. Summarized
results of operations for the international tobacco operations, net of
allocation of interest expense based on a ratio of Gallaher's net assets to
consolidated net assets of the Company, is as follows:
Three Months Ended Nine Months Ended
Results Of Operations September 30, September 30,
1996 1997* 1996
Net Sales $1,762.0 $2,575.0 $4,723.1
Income Before Taxes $161.9 $193.4 $405.6
Spin-off Expenses - (67.2) -
Income Taxes (56.4) (61.1) (141.8)
Income From
Discontinued Opers. $105.5 $65.1 $263.8
* Reflects results through spin-off date, May 30, 1997.
In connection with the spin-off, the conversion rate of each share of $2.67
Convertible Preferred stock was adjusted from 4.08 shares of American
Brands, Inc. Common stock to 6.205 shares of Fortune Brands Common stock.
In connection with the spin-off, 63.18% of each shareholder's tax basis in
American Brands common shares should be allocated to Fortune Brands common
shares and 36.82% should be allocated to Gallaher Group Plc shares.
FORTUNE BRANDS, INC.
(In millions, except per share amounts)
NOTES (CONTINUED):
(4) RESTRUCTURING AND OTHER NONRECURRING CHARGES
As previously announced, the Company has been reviewing
productivity-enhancing restructuring opportunities and, during the three
months and nine months ended September 30, 1997, recorded pre-tax charges
of $38.1 and $127.4, respectively.
Restructuring and other nonrecurring charges by business segment:
Three Months Ended
September 30, 1997
Nonrecurring
Cost of Sales
Restructuring Charges Total
Home Products $ 6.8 $ - $ 6.8
Golf Products 11.6 19.7 31.3
Total $18.4 $19.7 $38.1
Income Tax Benefit $15.1
Net Charge $23.0
Charge Per Common Share
Primary $0.13
Fully Diluted $0.13
Nine Months Ended
September 30, 1997
Nonrecurring
Cost of
Sales
Restructuring Charges Total
Home Products $15.9 $ 8.3 $ 24.2
Office Products 23.5 - 23.5
Home and Office Products 39.4 8.3 47.7
Golf Products 11.6 19.7 31.3
Distilled Spirits 23.2 25.2 48.4
Total $74.2 $53.2 $127.4
Income Tax Benefit $39.0
Net Charge $88.4
Charge Per Common Share
Primary $0.51
Fully Diluted $0.50
FORTUNE BRANDS, INC.
(In millions, except per share amounts)
NOTES (CONTINUED):
(4) RESTRUCTURING AND OTHER NONRECURRING CHARGES (CONCLUDED)
Home Products include charges related to the discontinuance of certain
product lines and operations, the consolidation of facilities and the
write-down of property, plant and equipment.
Office Products include charges, principally resulting from the
discontinuance and rationalization of businesses and product lines, lease
cancellation costs and related assets and the write-down of property, plant
and equipment, partly offset by the pre-tax gain on the sale of Sax Arts
and Crafts, Inc. and Don Gresswell Limited.
Golf Products include charges related to the discontinuance of certain
product lines and the rationalization of operations.
Distilled Spirits include charges resulting from the realignment and
harmonization of domestic and international operations and relates to the
standardization of bulk inventory valuations, and costs related to
international distribution and lease agreements.
Consistent with current accounting guidelines for restructuring activities,
the Company currently expects to record additional charges during the
fourth quarter of 1997 of approximately $90 (pre-tax) as formal
restructuring plans are approved and communicated.
(5) EXTRAORDINARY ITEMS
In March 1996, the Company redeemed $149.6 of its $150 7- 5/8% Eurodollar
Convertible Debentures, Due 2001, at a redemption price of 103.8125% of the
principal amount plus accrued interest and redeemed its $150 9-1/8%
Debentures, Due 2016, at a redemption price of 104.4375% of the principal
amount plus interest. In connection with the redemptions, the Company
recorded a charge of $10.3 ($15.8 pre-tax), or six cents per Common share.
FORTUNE BRANDS, INC.
NOTES (CONCLUDED):
(6) PENDING LITIGATION
The Company and its subsidiaries are defendants in various lawsuits
associated with their business and operations and the Company is a
defendant in actions based upon allegations that human ailments have
resulted from tobacco use. It is not possible to predict the outcome of the
pending litigation, but management believes that there are meritorious
defenses to the pending actions and that the pending actions will not have
a material adverse effect upon the results of operations, cash flow or
financial condition of the Company. These actions are being vigorously
contested.
On December 22, 1994, the Company sold The American Tobacco Company
subsidiary to Brown & Williamson Tobacco Corporation, a wholly-owned
subsidiary of B.A.T Industries p.l.c. In connection with the sale, Brown &
Williamson Tobacco Corporation and The American Tobacco Company agreed to
indemnify the Company against claims arising from smoking and health and
fire safe cigarette matters relating to the tobacco business of The
American Tobacco Company.
In connection with the spin-off of Gallaher Group Plc on May 30, 1997,
Gallaher Group Plc and Gallaher Limited agreed to indemnify the Company
against claims arising from smoking and health and fire safe cigarette
matters relating to the tobacco business of Gallaher and its subsidiaries.
FORTUNE BRANDS, INC.
CONDENSED CONSOLIDATED
BALANCE SHEET
(In millions)
September 30, December 31,
1997 1996
(Unaudited) (Restated)
Assets
Current assets
Cash and cash equivalents $66.4 $34.9
Accounts receivable, net 836.0 892.4
Inventories 950.8 1,037.9
Net assets of discontinued operations - 683.3
Other current assets 172.7 193.6
--------- ---------
Total current assets 2,025.9 2,842.1
Property, plant and equipment, net 934.6 972.6
Intangibles resulting from
business acquisitions, net 3,611.0 3,730.7
Other assets 232.0 191.9
--------- ---------
Total assets $6,803.5 $7,737.3
========= =========
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $100.2 $728.3
Current portion of long-term debt 173.0 53.9
Other current liabilities 1,223.9 1,285.9
--------- ---------
Total current liabilities 1,497.1 2,068.1
Long-term debt 834.1 1,598.3
Other long-term liabilities 428.9 386.7
--------- ---------
Total liabilities 2,760.1 4,053.1
Stockholders' equity 4,043.4 3,684.2
--------- ---------
Total liabilities and
stockholders' equity $6,803.5 $7,737.3
========= =========
