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, 1999 (October 21, 1999)
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Date of Report (Date of earliest event reported)
FORTUNE BRANDS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-9076 13-3295276
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
l700 East Putnam Avenue, Old Greenwich, Connecticut 06870-0811
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 698-5000
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<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
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Registrant's press release dated October 21, 1999 is filed herewith as
Exhibit 20 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
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(c) Exhibits.
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20. Press release of Registrant dated October 21, 1999.
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SIGNATURE
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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.
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(Registrant)
By /s/ Craig P. Omtvedt
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Craig P. Omtvedt
Senior Vice President and
Chief Accounting Officer
Date: October 21, 1999
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EXHIBIT INDEX
Sequentially
Exhibit Numbered Page
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20. Press release of Registrant dated
October 21, 1999.
Exhibit 20
[FORTUNE BRANDS LOGO] NEWS RELEASE
NEWS RELEASE
Fortune Brands, Inc., 1700 East Putnam Avenue, Old Greenwich, CT 06870
NEWS RELEASE
Contact:
Media Relations: Investor Relations:
Clarkson Hine Anthony J. Diaz
(203) 698-5148 (203) 698-5553
FORTUNE BRANDS ANNOUNCES RECORD THIRD QUARTER RESULTS
EPS Grows 16% Before Charges and Benefit of Lower Goodwill;
Company Expects Double-Digit EPS Growth
for Fourth Quarter, Full Year and 2000
Old Greenwich, CT, October 21, 1999 - Fortune Brands, Inc. (NYSE: FO), the
consumer products company, today reported strong 1999 third quarter earnings
growth propelled by record operating company contribution from the home, golf
and spirits and wine businesses. Diluted EPS before charges reached 42 cents, up
31% from 32 cents a year ago. Excluding a five cent per share benefit from lower
goodwill amortization, diluted EPS before charges grew 16%.
The continued strong performance of the company's best-selling brands - Moen
faucets, Titleist golf equipment, Jim Beam bourbon and Aristokraft cabinets --
bolstered by successful new products, helped drive the gains. Shareholder value
initiatives, including aggressive cost reductions and substantial share
repurchases, contributed to the earnings growth.
Third quarter financial highlights include:
o Sales +3% to $1.34 billion
o Record operating company contribution, +6% to $194 million
o Income from operations before charges +26% to $72 million (+12% excluding the
benefit of lower goodwill amortization)
o Diluted EPS before charges +31% to 42 cents (+16% excluding a 5 cent per
share benefit from lower goodwill amortization)
o 1999 share repurchases through October 20th total 9.6 million shares, 6% of
shares outstanding
o Dividend increased 5% to indicated annual rate of 92 cents
In the quarter, the company recorded restructuring and nonrecurring charges of
$37.5 million, primarily associated with the relocation to lower cost
manufacturing facilities for certain home products, the consolidation of golf
club facilities and the downsizing and relocation of the corporate office to
lower cost facilities. Including these charges, reported net earnings were $48
million, or 28 cents per share.
<PAGE>
FORTUNE BRANDS ANNOUNCES RECORD THIRD QUARTER RESULTS
Page 2
"Once again, our brand leadership, innovation and commitment to shareholder
value helped generate excellent results, driving the company to its 10th
straight solid growth quarter since we began trading as Fortune Brands," said
Chairman and Chief Executive Officer Tom Hays. "With extraordinary performance
from Moen faucets and Aristokraft and Schrock kitchen and bath cabinets, our
home products business continues to exceed expectations. Our acquisition this
week of NHB cabinets will further strengthen this growing business," Hays added.
"Sales of Jim Beam bourbon continue to grow, and our Maxxium international
spirits and wine distribution joint venture, now in its third month, is already
increasing volumes. With a host of successful new products, Titleist is leading
our golf business to another record contribution year."
"Ongoing structural changes are creating dramatic cost reductions company-wide,
which are promoting efficiency and greater shareholder value," said President
and Chief Operating Officer Norm Wesley. "Projects initiated already this year
are expected to generate cost savings in excess of $50 million per year. While
the majority of these savings will flow to the bottom line, we'll also reinvest
a significant amount to further build our brands," added Wesley, who will become
Chairman and Chief Executive Officer at year end. "Looking ahead, our outlook is
excellent. In the fourth quarter and for the full year, we anticipate delivering
double-digit EPS growth before charges and the benefit of lower goodwill
amortization, and we expect 2000 to be an excellent year with solid double-digit
EPS growth."
Operational highlights for the third quarter include:
o Sales and contribution for home products surged to records, boosted by
record demand for Moen faucets and Aristokraft and Schrock kitchen and bath
cabinets. Strong sales to home centers, innovative new products and ongoing
productivity improvements boosted results for the cabinet brands and for
Moen, the company's top-selling brand and the #1 faucet brand in North
America.
o Continued strong performance for Titleist golf balls and clubs, including
successful new products, helped drive the golf business to records in sales
and contribution. The company's brands maintained commanding share in a
growing golf ball market, despite new entrants into the category. Market
share for FootJoy, the #1 shoe in golf, reached record levels.
o The spirits and wine business achieved record operating company
contribution, its 11th consecutive quarterly increase. The results were
fueled by continued strong global demand for Jim Beam, the world's leading
bourbon, and double-digit growth in shipments for the DeKuyper Pucker line
of cordials and for super-premium spirits brands. Adjusting for the impact
of sales through Maxxium, which are net of distribution expense and excise
taxes, total spirits and wine sales increased 5%.
o Softness in the U.S. and U.K. markets for traditional office supplies and
transitional costs related to major cost saving initiatives adversely
affected third quarter performance for office products. Notwithstanding
pricing pressures, particularly in
<PAGE>
FORTUNE BRANDS ANNOUNCES RECORD THIRD QUARTER RESULTS
Page 3
the U.K., unit sales in most categories are higher. The company believes
its office products business will return to solid contribution growth in
2000, even though it now expects that fourth quarter contribution will be
down from a year ago. With the ongoing transition to low cost manufacturing
and continued emphasis on faster growing product categories and new product
development, the company is aggressively positioning the office products
business for long-term growth.
* * *
Fortune Brands, Inc. is a consumer products company with headquarters in Old
Greenwich, Connecticut. Its operating companies have premier brands and leading
market positions in home and 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. Office brands include
Day-Timer, Swingline 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.
* * *
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, 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, delays in the integration
of recent acquisitions, the timely resolution of the Year 2000 issue, as well as
other risks and uncertainties detailed from time to time in the Company's
Securities and Exchange Commission filings.
# # #
<PAGE>
FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1999 1998 % Change
<S> <C> <C> <C>
Net Sales $1,339.3 $1,300.3 3.0
Cost of goods sold 698.1 681.0 2.5
Excise taxes on spirits
and wine 94.0 107.5 (12.6)
Advertising, selling, general
and administrative expenses 370.4 346.3 7.0
Amortization of intangibles 19.2 27.3 (29.7)
Write-down of goodwill - - -
Restructuring and other
nonrecurring charges 37.5 - -
Interest expense 26.2 26.2 -
Other (income) expense, net 2.6 2.6 -
Income (Loss) Before Taxes 91.3 109.4 (16.5)
Income taxes 43.1 52.6 (18.1)
Income (Loss) Before
Extraordinary Items 48.2 56.8 (15.1)
Extraordinary items * - - -
Net Income (Loss) 48.2 $56.8 (15.1)
Earnings Per Common Share
Basic
Income from operations $0.43 $0.33 30.3
Write-down of goodwill - - -
Restructuring and other
nonrecurring charges (0.14) - -
Income (loss) before
extraordinary items 0.29 0.33 (12.1)
Extraordinary items * - - -
Net income (loss) $0.29 $0.33 (12.1)
Diluted
Income from operations $0.42 $0.32 31.3
Write-down of goodwill - - -
Restructuring and other
nonrecurring charges (0.14) - -
Income (loss) before
extraordinary items 0.28 0.32 (12.5)
Extraordinary items * - - -
Net income (loss) $0.28 $0.32 (12.5)
Avg. Common Shares Outstanding
Basic 165.9 172.3 (3.7)
Diluted 169.4 175.9 (3.7)
</TABLE>
* Extraordinary items amounts represent charges for the early extinguishment
of debt.
<PAGE>
FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 1998 % Change
<S> <C> <C> <C>
Net Sales $4,052.3 $3,830.0 5.8
Cost of goods sold 2,106.0 1,967.7 7.0
Excise taxes on spirits
and wine 297.3 307.0 (3.2)
Advertising, selling, general
and administrative expenses 1,117.2 1,047.6 6.6
Amortization of intangibles 65.7 80.5 (18.4)
Write-down of goodwill 1,126.0 - -
Restructuring and other
nonrecurring charges 146.3 - -
Interest expense 77.4 76.6 1.0
Other (income) expense, net 2.6 3.7 (29.7)
Income (Loss) Before Taxes (886.2) 346.9 -
Income taxes 105.6 149.2 (29.2)
Income (Loss) Before
Extraordinary Items (991.8) 197.7 -
Extraordinary items * - (30.5) -
Net Income (Loss) (991.8) $167.2 -
Earnings Per Common Share
Basic
Income from operations $1.35 $1.14 18.4
Write-down of goodwill (6.71) - -
Restructuring and other
nonrecurring charges (0.56) - -
Income (loss) before
extraordinary items (5.92) 1.14 -
Extraordinary items * - (0.18) -
Net income (loss) ($5.92) $0.96 -
Diluted
Income from operations $1.35 $1.12 20.5
Write-down of goodwill (6.71) - -
Restructuring and other
nonrecurring charges (0.56) - -
Income (loss) before
extraordinary items (5.92) 1.12 -
Extraordinary items * - (0.18) -
Net income (loss) ($5.92) $0.94 -
Avg. Common Shares Outstanding
Basic 167.6 172.5 (2.8)
Diluted 167.6 176.8 (5.2)
Actual Common Shares Outstanding
Basic 164.9 171.4 (3.8)
Diluted 167.5 174.3 (3.9)
</TABLE>
* Extraordinary items amounts represent charges for the early extinguishment
of debt.
<PAGE>
FORTUNE BRANDS, INC.
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------------------------------
<S> <C> <C> <C>
1999 1998 % Change
---- ---- --------
SEGMENT DATA
NET SALES
Home Products $ 474.9 $ 433.8 9.5
Office Products 338.9 346.3 (2.1)
Golf Products 222.0 214.7 3.4
Spirits and Wine** 303.5 305.5 (0.7)
Total** $1,339.3 $1,300.3 3.0
OPERATING COMPANY CONTRIBUTION*
Home Products $ 71.3 $ 61.1 16.7
Office Products 25.1 30.1 (16.6)
Golf Products 28.9 27.1 6.6
Spirits and Wine 69.1 65.2 6.0
Total $194.4 $183.5 5.9
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
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1999 1998 % Change
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<S> <C> <C> <C>
SEGMENT DATA
NET SALES
Home Products $1,379.9 $1,143.3 20.7
Office Products 963.2 986.5 (2.4)
Golf Products 801.6 820.1 (2.3)
Spirits and Wine** 907.6 880.1 3.1
Total** $4,052.3 $3,830.0 5.8
OPERATING COMPANY CONTRIBUTION*
Home Products $210.9 $172.2 22.5
Office Products 47.0 79.0 (40.5)
Golf Products 139.5 137.6 1.4
Spirits and Wine** 186.7 172.0 8.5
Total** $584.1 $560.8 4.2
</TABLE>
* Operating company contribution (OCC) is net sales less all costs and
expenses other than restructuring and other nonrecurring charges,
write-down of goodwill, amortization of intangibles, corporate
administrative expense, interest expense, other (income) expense, net
and income taxes.
** With the transfer of certain distribution to the 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 $17.3
million higher. The adjusted sales percentage improvement for Spirits
and Wine would be an increase to 5.0% in the third quarter and 5.1% for
<PAGE>
the nine months. For the consolidated Company, comparable third quarter
net sales would have increased to 4.3% and 6.3% for the nine months.
INCOME FROM OPERATIONS BEFORE CHARGES
The following sets forth income from operations before charges, which represents
income (loss) before extraordinary items, adjusted to exclude the $1,126.0
million goodwill write-down taken in April 1999 and the $37.5 million ($23.4
million after tax) and the $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, respectively.
As a result of the charges, the Company reported a net loss for the nine-month
period ended September 30, 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 below
chart shows the result of including the dilutive instruments.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------------------------------
1999 1998 % Change
---- ---- --------
<S> <C> <C> <C>
Income from Operations
Before Charges $71.6 $56.8 26.1
Earnings Per
Common Share
Basic $0.43 $0.33 30.3
Diluted 0.42 0.32 31.3
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------------------------
1999 1998 % Change
---- ---- --------
<S> <C> <C> <C>
Income from Operations
Before Charges $227.5 $197.7 15.1
Earnings Per
Common Share
Basic $1.35 $1.14 18.4
Diluted 1.33 1.12 18.8
</TABLE>
CHANGE IN ACCOUNTING FOR GOODWILL AND
UNIDENTIFIABLE INTANGIBLES
Effective April 1, 1999, the Company elected to change its method for assessing
recoverability and impairment of goodwill and unidentifiable intangibles from
one based on undiscounted cash flows to one based on discounted cash flows. The
Company determined that using a discounted cash flow methodology is a preferable
policy.
As a result of this change, the Company recorded a non-cash write-down of
goodwill and unidentifiable intangibles of $1,126.0 million ($6.71 per share
basic and diluted for the nine-month period ended September 30, 1999). The
<PAGE>
estimated annualized effect, as a result of this change, will be a $32 million
reduction of goodwill amortization, or $0.20 and $0.19 per share basic and
diluted, respectively.
The write-down represents the amounts required to write-down the carrying values
of the goodwill and unidentifiable intangibles in certain of the Company's
business segments as follows: Spirits and Wine - $502.7 million, Golf Products -
$517.7 million and Office Products - $105.6 million.
RESTRUCTURING AND OTHER NONRECURRING CHARGES
In connection with the Company's previously announced restructuring program,
during the three and nine months ended September 30, 1999, the Company recorded
pre-tax restructuring and nonrecurring charges of $37.5 million and $146.3
million, respectively. The charges by segment, as shown below, principally
relate to the downsizing and relocation of the Corporate office, product
discontinuations and manufacturing consolidations in the golf segment,
rationalization of operations in the home segment and other workforce reduction
initiatives across these segments.
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1999
(In millions, except per share amounts)
Nonrecurring
-------------------------
Cost of
Sales SG&A
Restructuring Charges Charges Total
------------- -------- ------- -----
<S> <C> <C> <C> <C>
Home Products $ 21.5 $ 1.3 $0.7 $23.5
Office Products 0.2 - 0.6 0.8
Golf Products 5.1 0.5 - 5.6
Corporate Office - - 7.6 7.6
------ ------ ------ ------
Total $26.8 $ 1.8 $8.9 37.5
Income Tax Benefit 14.1
Net Charge $23.4
Charge Per Common Share
Basic $0.14
Diluted $0.14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999
(In millions, except per share amounts)
Nonrecurring
------------------------
Cost of
Sales SG&A
Restructuring Charges Charges Total
------------- ------- ------- -----
<S> <C> <C> <C> <C>
Home Products $ 23.6 $ 1.3 $ 0.7 $25.6
Office Products 5.3 - 0.6 5.9
Golf Products 11.4 23.9 5.5 40.8
Corporate Office 66.4 - 7.6 74.0
------ ------ ------ ------
Total $106.7 $25.2 $14.4 146.3
Income Tax Benefit 53.0
Net Charge $93.3
Charge Per Common Share
Basic $0.56
Diluted $0.56
</TABLE>
<PAGE>
FORTUNE BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
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(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $69.3 $40.3
Accounts receivable, net 910.7 919.9
Inventories 1,029.1 1,087.6
Other current assets 266.8 217.5
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Total current assets 2,275.9 2,265.3
Property, plant and equipment, net 1,107.2 1,119.9
Intangibles resulting from
business acquisitions, net 2,536.9 3,761.3
Other assets 277.1 213.2
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Total assets $6,197.1 $7,359.7
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Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $709.7 $321.4
Current portion of long-term debt 1.5 183.3
Other current liabilities 1,359.7 1,339.9
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Total current liabilities 2,070.9 1,844.6
Long-term debt 969.7 981.7
Other long-term liabilities 472.7 435.9
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Total liabilities 3,513.3 3,262.2
Stockholders' equity 2,683.8 4,097.5
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Total liabilities and
stockholders' equity $6,197.1 $7,359.7
========= =========
</TABLE>
