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
May 3, 1999 (April 27, 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.)
1700 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 April 27, 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 April 27, 1999.
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/ Mark A. Roche
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Mark A. Roche
Senior Vice President and
General Counsel
Date: May 3, 1999
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20. Press release of Registrant dated
April 27, 1999.
NEWS RELEASE
NEWS RELEASE
Fortune Brands, Inc., 1700 East Putnam Avenue, NEWS RELEASE
Old Greenwich, CT 06870
Contact:
Media Relations: Investor Relations:
Clarkson Hine Anthony J. Diaz
(203) 698-5148 (203) 698-5553
FORTUNE BRANDS ANNOUNCES
HEADQUARTERS RELOCATION AND DOWNSIZING;
GOODWILL ACCOUNTING CHANGE
Old Greenwich, CT, April 27, 1999 -- Fortune Brands, Inc. (NYSE-FO), the
consumer products company, announced that its Board of Directors today approved
plans to substantially downsize the corporate headquarters, move the
headquarters to its lower cost facility in Lincolnshire, Illinois and change the
method of accounting for goodwill and intangibles.
Fortune Brands expects to complete the corporate office downsizing and move by
the end of 1999, reducing corporate office personnel by about 1/3, with total
projected annualized savings in the range of $25-30 million. Currently, about
185 people are employed in the corporate office, including about 150 in Old
Greenwich. A voluntary early retirement incentive program was announced today,
and the company has indicated that this will be followed by a
reduction-in-force.
In connection with the downsizing and move, the company expects to record
restructuring and other nonrecurring charges of approximately $60-70 million
over the remainder of 1999.
The company also intends to initiate further restructuring actions to reduce the
cost structure in its operations. These steps will be initiated over the next
12-18 months, with corresponding charges recorded as actions are initiated. The
review of potential projects is still underway, and Fortune Brands currently
estimates that the additional restructuring charge could be in the range of
$100-150 million, with substantial savings when fully implemented. The company
expects to reinvest much of these savings back into its brands.
Fortune Brands has also elected to change the method of accounting for
evaluating the recovery of goodwill and other intangibles. The change, from an
undiscounted cash flow basis to a discounted cash flow basis, will result in a
non-cash charge of approximately $1.2 billion in the second quarter of 1999. The
goodwill write-down will have the effect of reducing annual goodwill
amortization by approximately 21 cents per share, in 2000. For full year 1999 (9
months remaining), amortization will be reduced by 15 cents, from approximately
60 cents per diluted share, to 45 cents.
"Maintaining leadership in globally competitive markets demands decisive
actions," said Chairman and Chief Executive Officer Thomas C. Hays. "The
relocation and downsizing of our corporate office extend the aggressive cost
initiatives that collectively complement the new product and other marketing
initiatives that are driving excellent performance at Fortune Brands. Our
massive restructuring over the past several years has fundamentally changed our
company, and the headquarters transition will result in a corporate office
appropriate to today's globally competitive business environment.
"Enhancing the cost effectiveness of the move," Hays said, "the corporate office
will reside in the same building in Lincolnshire that already serves as the
headquarters of our home and office businesses, and our spirits and wine
business operates from nearby Deerfield, Illinois. Together, these three
businesses represent over 80% of our operating company contribution. But even
with these compelling benefits, this was a difficult decision that will affect
many dedicated associates and the community, and was only reached after
extensive consideration."
Regarding the change in the basis for evaluating goodwill, Hays noted that the
discounted cash flow basis reflects current trends in accounting and in
investment decisions. "We evaluate acquisitions as well as capital projects on a
discounted cash flow basis. We'll now also value goodwill on that same basis,"
he added.
"Moreover, this change will better expose our very strong cash earnings. The
change will reduce goodwill amortization next year from approximately 60 cents a
share to about 39 cents. Last year, Fortune Brands reported cash earnings
(excluding amortization) that were 35% higher than reported diluted earnings per
share of $1.67. The change also better exposes the strong underlying returns of
our business and better aligns our return on equity (R.O.E.) with our very
strong return on net tangible assets."
The $1.2 billion noncash charge associated with the change in accounting
consists of $1.1 billion split approximately evenly between golf and spirits,
with the remaining balance in the office products segment. Hays noted that "in
each of these categories, we have premier brands with leading positions. We
achieved record contribution in each of these categories in 1998, and we expect
solid long-term growth from each. The charge resulting from the change in
accounting method reflects no change in our current or long-term prospects,
which are excellent."
Last Friday, the company announced first quarter results, with earnings per
diluted share of 32 cents, up 7%, and reaffirmed the outlook for double-digit
E.P.S. growth for the full year. Today's announcements further enhance the
outlook.
* * * *
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 and office brands include Moen faucets, Master locks and Aristokraft and
Schrock cabinets sold by units of MasterBrand Industries and 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 bourbon, 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, the
impact of excise tax increases with respect to spirits and wine, 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.
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