FORTUNE BRANDS REPORTS FIRST QUARTER RESULTS
Strong Growth in Sales, Operating Income and Earnings Per Share
Company Benefiting from Share-Gain Initiatives, Lower Cost Structures and Improving Consumer Environment
Deerfield, Illinois, April 29, 2010 - Fortune Brands, Inc. (NYSE: FO), the company behind leading consumer brands including Jim Beam, Titleist and Moen, today reported results for the first quarter of 2010. Net sales increased 13%, reflecting strong sales gains for spirits and home products. Sales benefited from market share gains, improving consumer markets, rebuilding of inventories by channel partners in certain home products categories, foreign exchange and favorable year-over-year comparisons. Operating income grew faster than sales as the company benefited from lower cost structures. Diluted earnings per share were $0.47, and diluted EPS before charges/gains was $0.49, up 63%.
"These strong results were driven by the powerful combination of higher volumes and lower costs, as each of our three brand groups outperformed our expectations," said Bruce Carbonari, chairman and chief executive officer of Fortune Brands. "Over the course of the downturn, we focused sharply on positioning Fortune Brands for strong growth when the economy recovers, and those initiatives are clearly taking hold. Our innovations and strategic brand investments are helping fuel top-line growth, and we're driving even stronger growth at the bottom line as we leverage our lower cost structures and enhance our productivity. We're pleased that the momentum we saw in the fourth quarter continued to build as we began 2010.
"We're seeing consumers getting more active, which reinforces our confidence that this is an excellent time to invest in brand growth," Carbonari continued. "Our strategic investments in spirits helped drive growth for our brand portfolio in all global regions, including share gains in key markets for brands such as Jim Beam, Maker's Mark and Sauza. In home products, better-than-expected remodeling activity, share gains at home centers, rebuilding of inventories by customers for faucets and doors, and favorable comparisons helped drive double-digit sales gains for our cabinetry brands as well as Moen faucets, Therma-Tru doors and Simonton windows. In golf, successful new products helped drive higher sales for Titleist golf clubs and FootJoy shoes."
For the first quarter of 2010:
Outlook for Earnings Growth in 2010
"Our goal entering the year was for Fortune Brands to return to EPS growth in 2010, and our first quarter results enhance our confidence in achieving that goal," said Carbonari. "Earlier this week, as a result of our strong first quarter, we raised the bottom end of our earnings target range. While there is still uncertainty in global economies - and it remains to be seen how the expiration of U.S. government stimulus programs will impact home products demand - we feel well positioned to deliver improved results. We expect the markets for each of our brand groups will be up at a low-single-digit rate for the year, and we're aiming to outperform our categories by continuing to invest in our brands and leverage our lower cost structures."
As announced on Tuesday, Fortune Brands is now targeting to deliver diluted EPS before charges/gains for 2010 in the range of $2.50-2.80. The company's full-year target range reflects the impact of factors including raw materials costs, foreign exchange and continued strategic investments. The company's diluted EPS before charges/gains for 2009 was $2.43.
The company today also reaffirmed its target for free cash flow for 2010 (cash flow from operations less net capital expenditures) to be in the range of $375-475 million, excluding the proceeds from the sale of Cobra assets.
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 security,
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. The brands of Fortune Brands Home & Security LLC 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. Acushnet Company's golf brands include Titleist 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.
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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, 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; the impact of changes in U.S. government stimulus programs; 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.