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Exhibit 20
[COMPANY LOGO] NEWS RELEASE
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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 REPORTS RECORD SECOND QUARTER RESULTS
Diluted EPS Before Charges Up 12%:
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Solid Top-Line Sales Growth and Improved Returns Boost Performance;
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Company Reaffirms Outlook, Expects
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Solid Double-Digit EPS Growth for 2nd Half and Full Year
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Lincolnshire, IL, July 20, 2000 - Fortune Brands, Inc. (NYSE: FO,
www.fortunebrands.com), the consumer products company, today announced record
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second quarter 2000 earnings driven by 6% sales growth, supply chain initiatives
and enhanced asset management. Diluted EPS before charges increased to 65 cents,
up 12% from 58 cents a year ago.
Earnings growth benefited from successful new products across the company and
double-digit sales increases for several brands, including Aristokraft and
Schrock kitchen and bath cabinets, Master Lock, FootJoy and super-premium
spirits. Return on equity increased 120 basis points and corporate expense was
nearly 50% lower than a year ago.
"Fortune Brands continued to generate strong momentum in the second quarter by
executing our strategy that is building great consumer brands, reducing costs
and improving returns," said Chairman and Chief Executive Officer Norm Wesley.
"We're reinvesting savings from our major supply chain restructuring to increase
market share, to develop innovative new products and for targeted capacity
expansion. We're creating additional value for our shareholders with share
repurchases and our sharp focus on improving returns."
"Fortune Brands' outlook remains excellent," Wesley added. "Even with current
adverse rates of foreign exchange and the recent interest rate increases, we
expect to deliver solid double-digit earnings per share growth for the second
half and the full year."
Second quarter financial highlights include:
. Record sales +6% to $1.5 billion (+7% adjusting for sales through the new
Maxxium international spirits and wine joint venture)
. Record operating company contribution +9% to $239 million
. Diluted EPS +12% to 65 cents
. Diluted cash earnings were even higher at 76 cents per share
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Fortune Brands Reports Record Second Quarter Results
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The company also announced that it has now repurchased 6.5 million shares in
2000. Share repurchases since January 1999 total 17.5 million shares, reducing
shares outstanding by more than 10%.
In the second quarter, the company recorded restructuring and non-recurring
charges of $11.1 million, related primarily to ongoing supply chain
restructuring and facilities reorganization. Including these charges, reported
earnings per share reached 61 cents. Under the current restructuring program,
which will conclude in the second half, the company has taken $214 million in
charges since the second quarter of 1999. The company now expects these
initiatives to generate annual cost savings exceeding $70 million in 2001, up
from more than $60 million in 2000.
Operational highlights include:
. The home products business achieved its highest ever sales and contribution on
strong performance from every brand. With robust double-digit sales increases,
the Aristokraft, Schrock and NHB cabinet brands (combined #2 in North America)
continued to gain strength in all major distribution channels. The success of
new kitchen and bath products at Moen (#1 faucet in North America) grew sales
at major home centers. New Titanium Series locks and automotive products
helped Master Lock - the world's leading padlock - secure a double-digit sales
increase. Accelerated benefits of Master Lock's supply chain restructuring
further enhanced results. Sales for Waterloo - the #1 manufacturer of tool
storage products - were sharply higher on vigorous demand at Sears and major
home center accounts.
. Strategic focus on premium brands and strong brand investment generated record
contribution for the spirits and wine business. Brand investment in Jim Beam,
the world's number one bourbon, and DeKuyper, the leading domestic line of
cordials, helped drive solid U.S. sales growth. Led by Knob Creek - the number
one small batch bourbon - and the new Vox ultra-premium vodka, depletions
(sales from distributors to retailers) for high-margin super-premium spirits
brands increased more than 30%. Results for premium wines reflected continued
strong demand from retailers. Adjusting for sales through the new Maxxium
international joint venture - which are now net of distribution expense and
excise taxes -total spirits and wine sales increased 2%.
. The golf products business performed as expected in the quarter, delivering
contribution that matched last year's record level. Titleist - the number one
ball in golf - remained the overwhelming market leader as the company's golf
ball brands achieved record sales for the first half of the year. With a
strong double-digit sales increase, FootJoy - the number one shoe in golf -
has increased its year-to-date dollar share of the golf shoe market by more
than 10 points. Innovative new products, including the advanced technology
Titleist HP series golf balls and FootJoy DryI.C.E. golf shoe, contributed to
the quarterly performance. Year-to-date sales gains in golf balls, shoes,
gloves, accessories and Titleist golf clubs were offset by a decline in sales
of Cobra brand golf clubs.
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Fortune Brands Reports Record Second Quarter Results
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. The office products business recorded improved sales and contribution in its
seasonally slowest quarter. The acquisition of Boone presentation products,
increased international sales, higher back-to-school sales in North America
and lower one-time costs related to supply chain improvements contributed to
the results.
* * *
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, Inc. Office brands include
Day-Timer, Swingline, Kensington 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 and is included in the S&P 500 Index.
To hear an Internet replay of the company's quarterly earnings conference call
presentation, or to receive company news releases by e-mail, please visit
www.fortunebrands.com.
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* * *
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.
# # #
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FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Three Months Ended June 30,
2000 1999 % Change
Net Sales 1,500.6 1,420.7 5.6
Cost of goods sold 787.7 730.2 7.9
Excise taxes on spirits and wine 90.3 106.6 (15.3)
Advertising, selling, general
and administrative expenses 393.1 382.5 2.8
Amortization of intangibles 19.9 19.2 3.6
Write-down of goodwill - 1,126.0 -
Restructuring and other
nonrecurring charges 11.1 108.8 -
Interest expense 33.8 25.9 30.5
Other (income) expense, net 2.8 (0.9) -
Income (Loss) Before Taxes 161.9 (1,077.6) -
Income taxes 64.5 18.5 -
Net Income (Loss) 97.4 (1,096.1) -
Earnings Per Common Share
Basic
Income from operations 0.65 0.60 8.3
Write-down of goodwill - (6.74) -
Restructuring and other
nonrecurring charges (0.04) (0.42) -
Net Income (loss) 0.61 (6.56) -
Diluted
Income from operations 0.65 0.60 8.3
Write-down of goodwill - (6.74) -
Restructuring and other
nonrecurring charges (0.04) (0.42) -
Net Income (loss) 0.61 (6.56) -
Avg. Common Shares Outstanding
Basic 158.3 167.0 (5.2)
Diluted 160.6 167.0 (3.8)
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FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Six Months Ended June 30,
2000 1999 % Change
Net Sales 2,864.4 2,713.0 5.6
Cost of goods sold 1,513.2 1,407.9 7.5
Excise taxes on spirits and wine 170.6 203.3 (16.1)
Advertising, selling, general
and administrative expenses 782.1 746.8 4.7
Amortization of intangibles 39.8 46.5 (14.4)
Write-down of goodwill - 1,126.0 -
Restructuring and other
nonrecurring charges 18.1 108.8 -
Interest expense 65.7 51.2 28.3
Other (income) expense, net 3.6 - -
Income (Loss) Before Taxes 271.3 (977.5) -
Income taxes 109.6 62.5 75.4
Net Income (Loss)
161.7 (1,040.0) -
Earnings Per Common Share
Basic
Income from operations 1.08 0.92 17.4
Write-down of goodwill - (6.68) -
Restructuring and other
nonrecurring charges (0.07) (0.42) -
Net Income (loss) 1.01 (6.18) -
Diluted
Income from operations 1.07 0.92 16.3
Write-down of goodwill - (6.68) -
Restructuring and other
nonrecurring charges (0.07) (0.42) -
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Net Income (loss) 1.00 (6.18) -
Avg. Common Shares Outstanding
Basic 159.7 168.4 (5.2)
Diluted 162.1 168.4 (3.7)
Actual Common Shares Outstanding
Basic 157.6 166.7 (5.5)
Diluted 159.8 170.6 (6.3)
FORTUNE BRANDS, INC.
(In millions, except per share amounts)
(Unaudited)
SEGMENT DATA
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 % Change 2000 1999 % Change
Net Sales
Home Products $ 544.0 $ 463.8 17.3 $1,047.8 $ 905.0 15.8
Office Products 331.8 309.1 7.3 658.1 624.3 5.4
Golf Products 324.0 329.5 (1.7) 585.1 579.6 0.9
Spirits and Wine 300.8 318.3 (5.5)/2.1** 573.4 604.1 (5.1)/2.3**
Total $1,500.6 $1,420.7 5.6/7.3** $2,864.4 $2,713.0 5.6/7.2**
Operating Company Contribution*
Home Products $ 82.3 $ 70.9 16.1 $ 157.1 $ 139.6 12.5
Office Products 10.5 6.4 64.1 26.0 21.9 18.7
Golf Products 74.2 74.1 0.1 112.4 110.6 1.6
Spirits and Wine 71.5 67.5 5.9 125.5 117.6 6.7
Total $ 238.5 $ 218.9 9.0 $ 421.0 $ 389.7 8.0
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*Operating company contribution (OCC) is net sales less all costs and expenses
other than restructuring and other nonrecurring charges, amortization of
intangibles, corporate administrative expense, interest and related expenses,
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 $24.1 million higher
in the second quarter and $44.4 million higher for six months. The adjusted
sales percentage improvement for Spirits and Wine would be an increase to 2.1%
in the second quarter and 2.3% for the six months. For the consolidated
Company, comparable net sales would have increased 7.3% in the second quarter
and 7.2% for the six months.
INCOME FROM OPERATIONS BEFORE NET CHARGES
The following sets forth income from operations before net charges, which
represents income before the $11.1 million ($7.0 million after tax) and $18.1
million ($11.5 million after tax) restructuring and other nonrecurring charges
taken in the three-month and six-month periods ended June 30, 2000,
respectively.
In addition, the following sets forth 1999 income from operations before
charges, adjusted to exclude both the $1,126.0 million goodwill write-down and
the $108.8 million ($69.9 million after tax) restructuring and other
nonrecurring charges taken in the second quarter and six months ended June 30,
1999.
As a result of the charges, the Company reported a net loss in 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 chart below shows the result of including the dilutive
instruments.
Three Months Ended June 30,
2000 1999 % Change
Income from Operations Before
Net Charges $ 104.4 $ 99.8 4.6
Earnings Per Common Share
Basic $ 0.65 $ 0.60 8.3
Diluted 0.65 0.58 12.1
Six Months Ended June 30,
2000 1999 % Change
Income from Operations Before
Net Charges $ 173.2 $155.9 11.1
Earnings Per Common Share
Basic $ 1.08 $ 0.92 17.4
Diluted 1.07 0.90 18.9
RESTRUCTURING AND OTHER NONRECURRING CHARGES
In connection with the Company's previously announced restructuring
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program, the Company recorded pre-tax restructuring and nonrecurring charges of
$11.1 million and $18.1 million in the three-month and six-month periods ended
June 30, 2000, 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 segment and other workforce reduction
initiatives across these segments.
Three Months Ended
June 30, 2000
(In millions, except per share amounts)
Nonrecurring
Cost of
Sales
Restructuring Charges SG&A Charges Total
Home Products $2.4 $1.3 $2.7 $ 6.4
Office Products 2.5 1.4 - 3.9
Golf Products 0.7 0.1 - 0.8
Corporate Office - - -
Total $5.6 $2.8 $2.7 $11.1
Income Tax Benefit 4.1
Net Charge $ 7.0
Charge Per Common
Share
Basic $ 0.04
Diluted $ 0.04
Six Months Ended
June 30, 2000
(In millions, except per share amounts)
Nonrecurring
Cost of
Sales
Restructuring Charges SG&A Charges Total
Home Products $2.4 $2.6 $2.9 $ 7.9
Office Products 3.8 1.9 - 5.7
Golf Products 1.9 0.2 0.1 2.2
Spirits and Wine - - - -
Corporate Office - - 2.3 2.3
Total $8.1 $4.7 $5.3 $18.1
Income Tax Benefit 6.6
Net Charge $11.5
Charge Per Common
Share
Basic $ 0.07
Diluted $ 0.07
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FORTUNE BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
June 30, December 31,
2000 1999
(Unaudited)
Assets
Current assets
Cash and cash equivalents $89.5 $71.9
Accounts receivable, net 988.9 956.5
Inventories 1,087.3 1,061.4
Other current assets 234.4 223.0
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Total current assets 2,400.1 2,312.8
Property, plant and equipment, net 1,171.0 1,176.5
Intangibles resulting from
business acquisitions, net 2,537.8 2,592.1
Other assets 339.1 335.7
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Total assets $6,448.0 $6,417.1
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Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $907.1 $637.3
Current portion of long-term debt 7.7 2.7
Other current liabilities 1,268.7 1,362.9
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Total current liabilities 2,183.5 2,002.9
Long-term debt 1,157.4 1,204.8
Other long-term liabilities 466.8 471.2
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Total liabilities 3,807.7 3,678.9
Stockholders' equity 2,640.3 2,738.2
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Total liabilities and
stockholders' equity $6,448.0 $6,417.1
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