(Source: Business Wire)
Fortune Brands, Inc. (NYSE: FO), the company behind leading consumer
brands including Jim Beam, Titleist and Moen, today reported results for
the third quarter of 2009. Net sales for the third quarter were $1.72
billion, down 11%, reflecting flat sales for the company's spirits
business, and more moderate revenue decreases for the golf and home
products brands. Diluted earnings per share were $0.82, and excluding
one-time items, diluted EPS before charges/gains was $0.77.
Given its third-quarter performance and signs of stabilization in the
U.S. new-home construction market, the company raised the bottom end of
its full-year earnings target range. The company is now targeting to
deliver EPS before charges/gains for 2009 of $2.10-2.30 versus its
previous target of $2.00-2.30.
"Despite the challenges of the global economy and the overall U.S.
housing market, Fortune Brands continued to deliver results and
operating margins at the forefront of our categories," said Bruce
Carbonari, chairman and chief executive officer of Fortune Brands. "Each
of our businesses performed at or above our expectations in the quarter.
"Consumers are clearly remaining cautious, but our innovative
new-product programs, trusted brands and compelling value propositions
are helping us compete successfully in the marketplace," Carbonari
continued. "In the third quarter, we also remained focused on our
successful initiatives to reduce cost structures, improve global supply
chains and enhance our cash position. These initiatives are benefiting
Fortune Brands and helping position the company for future growth.
"Spirits sales were flat in the quarter, benefiting from higher sales of
Jim Beam bourbon and Canadian Club whisky, the Cruzan acquisition, and
strong growth in emerging markets, offset by soft results in other
international markets," Carbonari added. The company's spirits revenues
also benefited from previously disclosed required accounting for the
company's route-to-market initiatives, largely offset by unfavorable
foreign exchange. "Amidst signs the U.S. housing downturn is
decelerating, our share-gain initiatives across product categories
helped sales in our home products business decline at a more moderate
pace than in the prior two quarters. And in golf, we outperformed the
industry with successful new products and double-digit constant-currency
sales gains in Europe and Korea that partly offset a double-digit
decrease in the United States," said Carbonari. Notable new products
contributing to the company's results included the first full quarter of
Red Stag by Jim Beam, eco-friendly Moen faucets, energy-efficient
Simonton windows, innovative Master Lock products, the new Titleist Pro
V1 family of golf balls, and the Titleist 909 series of drivers,
fairways and hybrid clubs.
Operating income in the spirits business reflected the impact of
previously disclosed costs associated with the company's route-to-market
initiatives. In both the home products and golf segments, operating
income reflected adverse operating leverage, tempered by the impact of
lower cost structures in these businesses.
For the third quarter of 2009:
Net income was $124.1 million, or $0.82 per diluted share, compared to
$2.21 per diluted share in the year-ago quarter.
Comparisons were adversely impacted by a net gain, including
discontinued operations, of $1.10 per diluted share in the
year-ago quarter that more than offset a net gain of $0.05 per
share in the current period.
Excluding one-time items in both the current and prior-year periods,
diluted EPS before charges/gains was $0.77 compared to $1.11 in the
year-ago quarter.
Foreign exchange adversely impacted EPS by $0.07 per share.
Net sales were $1.72 billion, down 11%.
On a comparable basis -- excluding excise taxes, foreign exchange,
acquisitions/divestitures, and the impact of required accounting
related to spirits route-to-market initiatives -- total net sales
would have remained down 11%.
Comparable net sales by business unit were: spirits down 4%; golf
down 7%; home & hardware down 17%.
Operating income was $204.5 million.
Operating income before charges/gains was $212.6 million.
Return on equity before charges/gains was 7%.
Return on invested capital before charges/gains was 5%.
Raising Low End of Earnings Target &
Reaffirming Free Cash Flow Target
"Looking to the balance of 2009, we now believe EPS before charges/gains
will be in the range of $2.10-2.30 for 2009, as compared to our previous
target of $2.00-2.30," Carbonari continued. "While we are encouraged by
the continued stability of our spirits business and signs of
stabilization in new-home construction, we anticipate that consumers
will remain cautious in the months ahead, and that the overall home
products market -- particularly for big-ticket remodeling purchases -- will continue to be challenging into 2010. In addition, our fourth
quarter results will also reflect the impact of adverse operating
leverage in the seasonally small quarter for golf and home products, as
well as a double-digit year-over-year boost in brand investment behind
key spirits brands."
The company also reaffirmed its 2009 target to generate free cash flow
in the range of $400 million after dividends and net capital
expenditures. Benefiting from factors including its free-cash-flow
initiatives and bond issuance in June, the company is now in an undrawn
position on its existing revolving credit facility and remains in a
strong liquidity position.
About Fortune Brands
Fortune Brands, Inc. is a leading consumer brands company. Its operating
companies have premier brands and leading market positions in distilled
spirits, home and hardware, and golf products. Beam Global Spirits &
Wine, Inc. is the company's premium spirits business. Major spirits
brands include Jim Beam and Maker's Mark bourbon, Sauza tequila,
Canadian Club whisky, Courvoisier cognac, Cruzan rum, Teacher's and
Laphroaig Scotch, EFFEN vodka and DeKuyper cordials. Home and hardware
brands include Moen faucets, Aristokraft, Omega, Diamond and Kitchen
Craft cabinetry, Therma-Tru door systems, Simonton windows, Master Lock
security products and Waterloo storage and organization products sold by
units of Fortune Brands Home & Hardware LLC. Acushnet Company's golf
brands include Titleist, Cobra and FootJoy. Fortune Brands,
headquartered in Deerfield, Illinois, is traded on the New York Stock
Exchange under the ticker symbol FO and is included in the S&P 500 Index
and the MSCI World Index.
To receive company news releases by e-mail, please visit www.fortunebrands.com.
Forward-Looking Statements
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, and
the company does not assume any obligation to update, amend or clarify
them to reflect events, new information or circumstances occurring after
the date of this release. Actual results may differ materially from
those projected as a result of certain risks and uncertainties,
including but not limited to: general economic conditions, including the
U.S. housing and remodeling market; competitive market pressures
(including pricing pressures); customer defaults and related bad debt
expense; consolidation of trade customers; successful development of new
products and processes; ability to secure and maintain rights to
intellectual property; risks pertaining to strategic acquisitions and
joint ventures, including the potential financial effects and
performance of such acquisitions or joint ventures, and integration of
acquisitions and the related confirmation or remediation of internal
controls over financial reporting; changes related to the company's
spirits business organization, including its U.S. and international
distribution structure; ability to attract and retain qualified
personnel; weather; risks associated with doing business outside the
United States, including currency exchange rate risks; commodity and
energy price volatility; costs of certain employee and retiree benefits
and returns on pension assets; dependence on performance of distributors
and other marketing arrangements; the impact of excise tax increases on
distilled spirits; changes in golf equipment regulatory standards and
other regulatory developments; potential liabilities, costs and
uncertainties of litigation; impairment in the carrying value of
goodwill or other acquired intangibles; historical consolidated
financial statements that may not be indicative of future conditions and
results; interest rate fluctuations; volatility of financial and credit
markets, which could affect access to capital for the company, its
customers and consumers; any possible downgrades of the company's credit
ratings; as well as other risks and uncertainties detailed from time to
time in the company's Securities and Exchange Commission filings.
Use of Non-GAAP Financial Information
This press release includes measures not derived in accordance with
generally accepted accounting principles ("GAAP"), such as diluted
earnings per share before charges/gains, operating income before
charges/gains, comparable net sales, return on equity before
charges/gains, return on invested capital before charges/gains, and free
cash flow. These measures should not be considered in isolation or as a
substitute for any measure derived in accordance with GAAP, and may also
be inconsistent with similar measures presented by other companies.
Reconciliation of these measures to the most closely comparable GAAP
measures, and reasons for the company's use of these measures, are
presented in the attached pages.
FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 % Change 2009 2008 % Change
Net Sales $ 1,717.9 $ 1,921.8 (10.6 ) $ 4,897.6 $ 5,823.3 (15.9 )
Cost of goods sold 892.7 1,005.4 (11.2 ) 2,569.6 3,080.2 (16.6 )
Excise taxes on spirits 125.3 122.5 2.3 350.0 346.3 1.1
Advertising, selling, general
and administrative expenses 478.8 488.8 (2.0 ) 1,415.6 1,506.8 (6.1 )
Amortization of intangibles 8.5 12.4 (31.5 ) 25.2 37.3 (32.4 )
Asset impairment charges - - - - 324.3 (100.0 )
Restructuring
and restructuring-related items 8.1 37.9 (78.6 ) 79.3 62.4 27.1
Operating Income 204.5 254.8 (19.7 ) 457.9 466.0 (1.7 )
Interest expense 55.1 60.4 (8.8 ) 161.0 179.2 (10.2 )
Other (income) expense, net (6.9 ) (285.1 ) (97.6 ) 7.2 (271.0 ) 102.7
Income from Continuing Operations
before income taxes 156.3 479.5 (67.4 ) 289.7 557.8 (48.1 )
Income tax expense 31.1 171.4 (81.9 ) 55.0 185.4 (70.3 )
Income from Continuing Operations, net of tax $ 125.2 $ 308.1 (59.4 ) $ 234.7 $ 372.4 (37.0 )
Income from Discontinued Operations, net of tax - 30.2 (100.0 ) - 152.5 (100.0 )
Net Income $ 125.2 $ 338.3 (63.0 ) $ 234.7 $ 524.9 (55.3 )
Less: Net Loss/(Income) attributable to noncontrolling interests 1.1 2.4 (54.2 ) 3.4 (67.5 ) 105.0
Net Income attributable to Fortune Brands $ 124.1 $ 335.9 (63.1 ) $ 231.3 $ 592.4 (61.0 )
Amounts attributable to Fortune Brands
common shareholders:
Income from continuing operations, net of tax $ 124.1 $ 305.7 (59.4 ) $ 231.3 $ 439.9 (47.4 )
Discontinued operations, net of tax - 30.2 (100.0 ) - 152.5 (100.0 )
Net income $ 124.1 $ 335.9 (63.1 ) $ 231.3 $ 592.4 (61.0 )
Earnings Per Common Share, Basic:
Income from continuing operations attributable to
Fortune Brands common shareholders $ 0.82 $ 2.04 (59.8 ) $ 1.54 $ 2.89 (46.7 )
Income from discontinued operations attributable to
Fortune Brands common shareholders - 0.20 (100.0 ) - 1.00 (100.0 )
Net Income attributable to Fortune Brands
common shareholders $ 0.82 $ 2.24 (63.4 ) $ 1.54 $ 3.89 (60.4 )
Earnings Per Common Share, Diluted:
Income from continuing operations attributable to
Fortune Brands common shareholders $ 0.82 $ 2.01 (59.2 ) $ 1.53 $ 2.85 (46.3 )
Income from discontinued operations attributable to
Fortune Brands common shareholders - 0.20 (100.0 ) - 0.98 (100.0 )
Net Income attributable to Fortune Brands
common shareholders $ 0.82 $ 2.21 (62.9 ) $ 1.53 $ 3.83 (60.1 )
Avg. Common Shares Outstanding
Basic 150.3 150.0 0.2 150.2 152.3 (1.4 )
Diluted 152.0 151.9 0.1 151.7 154.5 (1.8 )
Actual Common Shares Outstanding
Basic 150.3 149.9 0.3
Diluted 152.0 151.7 0.2
-------------------------------------------------------------------------------
FORTUNE BRANDS, INC.
(In millions, except per share amounts)
(Unaudited)
NET SALES AND OPERATING INCOME
Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 % Change 2009 2008 % Change
Net Sales
Spirits $ 636.9 $ 636.3 0.1 $ 1,723.2 $ 1,759.5 (2.1 )
Home and Hardware 802.4 977.6 (17.9 ) 2,183.0 2,907.1 (24.9 )
Golf 278.6 307.9 (9.5 ) 991.4 1,156.7 (14.3 )
Total Net Sales $ 1,717.9 $ 1,921.8 (10.6 ) $ 4,897.6 $ 5,823.3 (15.9 )
Operating Income/(Loss)
Spirits $ 145.4 $ 150.4 (3.3 ) $ 414.3 $ 417.6 (0.8 )
Home and Hardware 70.8 95.9 (26.2 ) 51.9 (45.9 ) 213.1
Golf 9.7 24.0 (59.6 ) 62.3 143.6 (56.6 )
Corporate expenses (21.4 ) (15.5 ) (38.1 ) (70.6 ) (49.3 ) (43.2 )
Total Operating Income $ 204.5 $ 254.8 (19.7 ) $ 457.9 $ 466.0 (1.7 )
Operating Income Before Charges/Gains( (a))
Spirits $ 149.2 $ 172.4 (13.5 ) $ 421.7 $ 451.6 (6.6 )
Home and Hardware 74.7 111.8 (33.2 ) 95.5 306.8 (68.9 )
Golf 10.1 24.0 (57.9 ) 86.9 143.6 (39.5 )
Less:
Corporate expenses (21.4 ) (15.5 ) (38.1 ) (66.9 ) (49.3 ) (35.7 )
Operating Income Before Charges/Gains 212.6 292.7 (27.4 ) 537.2 852.7 (37.0 )
Restructuring and
restructuring-related items (8.1 ) (37.9 ) 78.6 (79.3 ) (62.4 ) (27.1 )
Asset impairment charges - - - - (324.3 ) (100.0 )
Operating Income $ 204.5 $ 254.8 (19.7 ) $ 457.9 $ 466.0 (1.7 )
(a) Operating Income Before Charges/Gains is Operating Income derived in accordance with GAAP excluding restructuring, restructuring-related items and other one-time items. Operating Income Before Charges/Gains is a measure not derived in accordance with GAAP. Management uses this measure to determine the returns generated by our operating segments and to evaluate and identify cost reduction initiatives. Management believes this measure provides investors with helpful supplemental information regarding the performance of the company from year-to-year. This measure may be inconsistent with similar measures presented by other companies.
FREE CASH FLOW
Three Months Ended September 30, Nine Months Ended September 30, 2009 Full Year
2009 2008 2009 2008 Targeted Range
Free Cash Flow (b) $ 326.3 $ 482.7 $ 414.0 $ 370.5 $ 375 - 425
Add:
Discontinued Operations - Sale of Wine Business - 17.0 - (31.0 ) -
Net Capital Expenditures 27.4 29.8 76.8 94.9 180
Dividends Paid 28.6 66.1 123.5 195.1 152*
Cash Flow From Operations $ 382.3 $ 595.6 $ 614.3 $ 629.5 $ 707 - 757
(b) Free Cash Flow is Cash Flow from Operations less net capital expenditures and dividends paid to stockholders. It additionally excludes credits and payments of taxes on the discontinued operation sale of the wine business. Free Cash Flow is a measure not derived in accordance with GAAP. Management believes that Free Cash Flow provides investors with helpful supplemental information about the company's ability to fund internal growth, make acquisitions, repay debt and repurchase common stock. This measure may be inconsistent with similar measures presented by other companies.
* Assumes current dividend rate and basic shares outstanding on September 30, 2009.
-------------------------------------------------------------------------------
EPS BEFORE CHARGES/GAINS
EPS from Continuing Operations Before Charges/Gains is Net Income from Continuing Operations calculated on a per-share basis excluding restructuring, restructuring-related and other one-time items.
For the third quarter of 2009, EPS from Continuing Operations Before Charges/Gains is Net Income from Continuing Operations calculated on a per-share basis excluding $8.1 million ($5.4 million after tax or $0.03 per diluted share) of restructuring and restructuring-related items and a gain of $12.5 million ($0.08 per diluted share) related to a dividend distribution from our Maxxium investment.
For the nine month period ended September 30, 2009, EPS from Continuing Operations Before Charges/Gains is Net Income from Continuing Operations calculated on a per-share basis excluding $79.3 million ($49.8 million after tax or $0.32 per diluted share) of restructuring and restructuring-related items and a gain of $12.5 million ($0.08 per diluted share) related to a dividend distribution from our Maxxium investment.
A service of YellowBrix, Inc.
