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
January 20, 2000 (January 20, 2000)
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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.)
300 Tower Parkway, Lincolnshire, Illinois 60069
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 484-4400
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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 January 20, 2000 is filed herewith as
Exhibit 20 and is incorporated herein by references.
Item 7. Financial Statements and Exhibits.
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(c) Exhibits.
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20. Press release of Registrant dated January 20, 2000.
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.
---------------------
(Registrant)
By /s/ C. P. Omtvedt
--------------------------------
C. P. Omtvedt
Senior Vice President and
Chief Financial Officer
Date: January 20, 2000
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered Page
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20. Press release of Registrant dated
January 20, 2000.
Exhibit 20
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NEWS RELEASE
[COMPANY LOGO] NEWS RELEASE
- ------------------------------------------------------------- NEWS RELEASE
Fortune Brands, Inc., 300 Tower Parkway, Lincolnshire, IL 60069
Contact:
Media Relations: Investor Relations:
Clarkson Hine Anthony J. Diaz
(847) 484-4415 (847) 484-4410
FORTUNE BRANDS DELIVERS RECORD
FOURTH QUARTER AND FULL YEAR RESULTS
Diluted EPS Up 22% for Quarter and Up 19% for 1999, Before Charges;
Company Expects Solid Double-Digit EPS Growth for 2000
Lincolnshire, IL, January 20, 2000 - Fortune Brands, Inc. (NYSE: FO), the
consumer products company, today reported record fourth quarter and full-year
1999 results, fueled by record full-year performance from the home, golf, and
spirits and wine businesses. For the quarter, diluted EPS before net charges
increased 22% to 67 cents, up from 55 cents a year ago. For the full year 1999,
diluted EPS before net charges surged 19% to $1.99.
"We targeted full-year double-digit earnings growth throughout 1999 and we're
delivering," said Chairman and Chief Executive Officer Norm Wesley. "We're
continuing to build on our brand leadership to drive strong results. The
excellent quarter and year demonstrate the success of our strategic commitment
to growth, innovation, relentless business improvements and increased returns.
We're enhancing that success with additional aggressive shareholder value
initiatives that have reduced shares outstanding and increased the dividend.
"Looking ahead, we expect to extend Fortune Brands' track record of solid
double-digit earnings growth with another excellent year in 2000," Wesley added.
Fourth quarter financial highlights include:
o Record sales +4% to $1.47 billion (+7% adjusting for sales through the new
Maxxium international spirits and wine joint venture, which are now net of
distribution expense and excise tax)
o Record operating company contribution +3% to $245 million
o Income from operations before net charges +17% to $112 million (+9%
excluding the benefit of lower goodwill amortization)
o Diluted EPS before net charges +22% to 67 cents (+13% excluding a 5 cent
per share benefit from lower goodwill amortization)
o Diluted cash earnings, before net charges, were even higher at 78 cents per
share (excluding intangible amortization)
(more)
www.fortunebrands.com
<PAGE>
Fortune Brands Delivers Record Fourth Quarter and Full Year Results
Page 2
Full year 1999 financial highlights include:
o Record sales +5% to $5.52 billion (+7% adjusting for sales through the new
Maxxium international spirits and wine joint venture, which are now net of
distribution expense and excise tax)
o Record operating company contribution +4% to $829 million
o Income from operations before net charges +16% to $340 million (+7%
excluding the benefit of lower goodwill amortization)
o Diluted EPS before net charges +19% to $1.99 (+11% excluding a 14 cent per
share benefit from lower goodwill amortization)
o Diluted cash earnings, before net charges, were even higher at $2.46 per
share (excluding intangible amortization)
o 1999 share repurchases totaled 11 million, more than 6% of shares
outstanding
o Dividend increased another 5% in 1999 to indicated annual rate of 92 cents
In the fourth quarter, the company recorded net pre-tax charges of $18.1
million. Restructuring and nonrecurring pre-tax charges of $49.7 million related
primarily to a reorganization in the spirits and wine business resulting from
the previously-announced Maxxium international distribution joint venture, as
well as the relocation and downsizing of the corporate office, product line
discontinuances, and manufacturing relocation in office products. The company
also reported a $31.6 million pre-tax gain from the sale of a financing vehicle.
Including the net charges, reported net earnings were $101.2 million, or 61
cents per share.
Operational highlights include:
o Strong demand by leading retail customers, successful new products,
productivity improvements and improved asset management contributed to the
excellent results for home products. With double-digit increases in sales,
Moen faucets and MasterBrand cabinets generated their best ever quarterly
and full-year results. Ongoing supply chain restructuring at Master Lock
and robust holiday demand for Waterloo tool storage products helped drive
improved performance for the quarter and full-year.
o The spirits & wine business achieved another year of record contribution.
Strong demand for Jim Beam bourbon, a strategic mix shift towards premium
brands, and double-digit increases in shipments for Knob Creek bourbon, the
DeKuyper Pucker line of cordials and Geyser Peak wines boosted results.
Adjusting for the impact of sales through the new Maxxium international
joint venture, which are net of distribution expense and excise taxes,
total spirits and wine sales increased 5% for the quarter and 5% for the
year.
o The golf business achieved another year of record contribution with
double-digit fourth quarter sales gains for Titleist golf balls and clubs
and FootJoy golf shoes and gloves. Excellent response to innovative new
products - including the Titleist DCI 990 irons and FootJoy Dry I.C.E. golf
shoes -- contributed to the results. In the quarter, Titleist and Cobra
completed the cost-saving consolidation of golf club facilities from six to
three, capitalizing on synergies in manufacturing, distribution and other
operations.
(more)
<PAGE>
Fortune Brands Delivers Record Fourth Quarter and Full Year Results
Page 3
o Despite solid growth for the Kensington computer accessories brand,
industry-wide competitive pricing pressures, lower Day-Timer sales and
continued softness in the U.K. market adversely affected fourth quarter
results. The company continues to believe that its office products business
will return to solid contribution growth in 2000, and the company continues
to position the business for long-term growth through the transition to
low-cost manufacturing and emphasis on faster growing and higher return
product categories.
* * *
Fortune Brands, Inc. is a consumer products company with annual sales exceeding
$5.5 billion. Its operating companies have premier brands and leading market
positions in home products, 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. Fortune Brands, headquartered in
Lincolnshire, Illinois, is traded on the New York Stock Exchange under the
ticker symbol FO.
* * *
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 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.
# # #
<PAGE>
FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998 % Change
<S> <C> <C> <C>
Net Sales $1,472.4 $1,410.9 4.4
Cost of goods sold 736.1 700.2 5.1
Excise taxes on spirits and wine 104.5 136.7 (23.6)
Advertising, selling, general
and administrative expenses 397.2 353.9 12.2
Amortization of intangibles 19.8 27.7 (28.5)
Write-down of goodwill - - -
Restructuring and other
nonrecurring charges 49.7 - -
Interest expense 29.4 26.1 12.6
Other (income) expense, net (29.8) 1.3 -
Income (Loss) Before Taxes 165.5 165.0 0.3
Income taxes 64.3 69.1 (6.9)
Income (Loss) Before
Extraordinary Items 101.2 95.9 5.5
Extraordinary items * - - -
Net Income (Loss) $ 101.2 $95.9 5.5
Earnings Per Common Share
Basic
Income from operations $0.68 $0.56 21.4
Gain on sale of financing
subsidiary 0.13 - -
Write-down of goodwill - - -
Restructuring and other
nonrecurring charges (0.19) - -
Income (loss) before
extraordinary items 0.62 0.56 10.7
Extraordinary items * - - -
Net income (loss) $0.62 $0.56 10.7
Diluted
Income from operations $0.67 $0.55 21.8
Gain on sale of financing
subsidiary 0.13 - -
Write-down of goodwill - - -
Restructuring and other
nonrecurring charges (0.19) - -
Income (loss) before
extraordinary items 0.61 0.55 10.9
Extraordinary items * - - -
Net income (loss) $0.61 $0.55 10.9
Avg. Common Shares Outstanding
Basic 163.8 171.1 (4.3)
Diluted 166.7 174.6 (4.5)
</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>
Twelve Months Ended December 31,
1999 1998 % Change
<S> <C> <C> <C>
Net Sales $5,524.7 $5,240.9 5.4
Cost of goods sold 2,842.1 2,667.9 6.5
Excise taxes on spirits and wine 401.8 443.7 (9.4)
Advertising, selling, general
and administrative expenses 1,514.4 1,401.5 8.1
Amortization of intangibles 85.5 108.2 (21.0)
Write-down of goodwill 1,126.0 - -
Restructuring and other
nonrecurring charges 196.0 - -
Interest expense 106.8 102.7 4.0
Other (income) expense, net (27.2) 5.0 -
Income (Loss) Before Taxes (720.7) 511.9 -
Income taxes 169.9 218.3 (22.2)
Income (Loss) Before
Extraordinary Items (890.6) 293.6 -
Extraordinary items * - (30.5) -
Net Income (Loss) $ (890.6) $263.1 -
Earnings Per Common Share
Basic
Income from operations $2.03 $1.70 19.4
Gain on sale of financing
subsidiary 0.13 - -
Write-down of goodwill (6.76) - -
Restructuring and other
nonrecurring charges (0.75) - -
Income (loss) before
extraordinary items (5.35) 1.70 -
Extraordinary items * - (0.18) -
Net income (loss) ($5.35) $1.52 -
Diluted
Income from operations $2.03 $1.67 21.6
Gain on sale of financing
subsidiary 0.13 - -
Write-down of goodwill (6.76) - -
Restructuring and other
nonrecurring charges (0.75) - -
Income (loss) before
extraordinary items (5.35) 1.67 -
Extraordinary items * - (0.18) -
Net income (loss) ($5.35) $1.49 -
Avg. Common Shares Outstanding
Basic 166.6 172.2 (3.3)
Diluted 166.6 176.2 (5.4)
Actual Common Shares Outstanding
Basic 163.2 170.9 (4.5)
Diluted 166.1 173.9 (4.5)
</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
December 31,
1999 1998 % Change
<S> <C> <C> <C>
SEGMENT DATA
NET SALES
Home Products $ 542.7 $ 481.1 12.8
Office Products 404.0 401.2 0.7
Golf Products 163.7 142.8 14.6
Spirits and Wine** 362.0 385.8 (6.2)
Total** $1,472.4 $1,410.9 4.4
OPERATING COMPANY CONTRIBUTION*
Home Products $ 89.3 $ 80.3 11.2
Office Products 41.5 55.0 (24.5)
Golf Products 7.5 5.3 41.5
Spirits and Wine 106.9 96.9 10.3
Total $245.2 $237.5 3.2
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
1999 1998 % Change
<S> <C> <C> <C>
SEGMENT DATA
NET SALES
Home Products $ 1,922.6 $ 1,624.4 18.4
Office Products 1,367.2 1,387.7 (1.5)
Golf Products 965.3 962.9 0.2
Spirits and Wine** 1,269.6 1,265.9 0.3
Total** $ 5,524.7 $ 5,240.9 5.4
OPERATING COMPANY CONTRIBUTION*
Home Products $300.2 $252.5 18.9
Office Products 88.5 134.0 (34.0)
Golf Products 147.0 142.9 2.9
Spirits and Wine 293.6 268.9 9.2
Total $829.3 $798.3 3.9
</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 new 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
$42.6 million higher in the fourth quarter and $59.9 million higher for
the twelve months. The adjusted sales percentage improvement for Spirits
and Wine would be an increase to 4.9% in the fourth quarter and 5.0% for
the twelve months. For the consolidated Company, comparable fourth quarter
net sales would have increased to 7.4% and 6.6% for the twelve months.
INCOME FROM OPERATIONS BEFORE NET CHARGES
The following sets forth income from operations before net charges, which
represents income (loss) before extraordinary items, adjusted to exclude the
$1,126.0 million goodwill write-down taken in April 1999, the $49.7 million
($32.3 million after tax) and $196.0 million ($125.6 million after tax)
restructuring and other nonrecurring charges taken in the three-month and
twelve-month periods ended December 31, 1999, respectively, and the $31.6
million gain on the sale of a financing subsidiary in the fourth quarter ($21.2
million after tax).
As a result of the charges, the Company reported a net loss for the twelve-month
period ended December 31, 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
December 31,
1999 1998 % Change
<S> <C> <C> <C>
Income from Operations
Before Net Charges $112.2 $95.9 17.0
Earnings Per
Common Share
Basic $0.68 $0.56 21.4
Diluted 0.67 0.55 21.8
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
1999 1998 % Change
<S> <C> <C> <C>
Income from Operations
Before Net Charges $339.7 $293.6 15.7
Earnings Per
Common Share
Basic $2.03 $1.70 19.4
Diluted 1.99 1.67 19.2
</TABLE>
<PAGE>
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.
As a result of this change, the Company recorded a non-cash write-down of
goodwill and unidentifiable intangibles of $1,126.0 million ($6.76 per share
basic and diluted for the twelve-month period ended December 31, 1999). The
estimated annualized effect, as a result of this change, will be a $32.0 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 months and twelve months ended December 31, 1999, the Company
recorded pre-tax restructuring and nonrecurring charges of $49.7 million and
$196.0 million, respectively. The charges by segment, as shown below,
principally relate to the downsizing and relocation of the Corporate office,
product discontinuations and manufacturing consolidation in the golf segment,
rationalization of operations in the home and spirits and wine segments and
other workforce reduction initiatives across these segments.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1999
(In millions, except per share amounts)
Nonrecurring
----------------
Cost of
Sales SG&A
Restructuring Charges Charges Total
<S> <C> <C> <C> <C>
Home Products $ 0.4 $ 2.2 $ 1.0 $ 3.6
Office Products 10.9 2.3 4.5 17.7
Golf Products - 1.3 - 1.3
Spirits and Wine 18.8 - - 18.8
Corporate Office - - 8.3 8.3
Total $30.1 $5.8 $13.8 49.7
Income Tax Benefit 17.4
Net Charge $32.3
Charge Per Common Share
Basic $0.19
Diluted $0.19
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended
December 31, 1999
(In millions, except per share amounts)
Nonrecurring
----------------
Cost of
Sales SG&A
Restructuring Charges Charges Total
<S> <C> <C> <C> <C>
Home Products $ 24.0 $ 3.5 $ 1.7 $ 29.2
Office Products 16.2 2.3 5.1 23.6
Golf Products 11.4 25.2 5.5 42.1
Spirits and Wine 18.8 - - 18.8
Corporate Office 66.4 - 15.9 82.3
Total $136.8 $31.0 $28.2 196.0
Income Tax Benefit 70.4
Net Charge $125.6
Charge Per Common Share
Basic $0.75
Diluted $0.75
</TABLE>
<PAGE>
FORTUNE BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $71.9 $40.3
Accounts receivable, net 956.5 919.9
Inventories 1,061.4 1,087.6
Other current assets 223.0 217.5
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Total current assets 2,312.8 2,265.3
Property, plant and equipment, net 1,176.5 1,119.9
Intangibles resulting from
business acquisitions, net 2,592.1 3,761.3
Other assets 335.7 213.2
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Total assets $6,417.1 $7,359.7
========= =========
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $637.3 $321.4
Current portion of long-term debt 2.7 183.3
Other current liabilities 1,362.9 1,339.9
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Total current liabilities 2,002.9 1,844.6
Long-term debt 1,204.8 981.7
Other long-term liabilities 471.2 435.9
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Total liabilities 3,678.9 3,262.2
Stockholders' equity 2,738.2 4,097.5
--------- ---------
Total liabilities and
stockholders' equity $6,417.1 $7,359.7
========= =========
</TABLE>
