Fortune Brands Inc (FO)

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  Sales and Earnings Turn Positive in Fourth Quarter
  


• 
  Earnings and Cash Flow Exceed High End of Target Ranges
  


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  New Products, Cost Containment & Stabilizing Home Products Market
  Enhance Performance in Challenging Economy
  

DEERFIELD, Ill.--(BUSINESS WIRE)--
Fortune Brands, Inc. (NYSE: FO), the company behind leading consumer
brands including Jim Beam, Titleist and Moen, today reported results for
the fourth quarter and full-year 2009. Reflecting higher sales of
spirits and golf products and stabilizing market conditions for home
products, the company reported its first quarterly sales increase in the
past eight quarters. Net sales were up 1% for the quarter and were down
12% for the full year.

Reported fourth quarter earnings were $0.08 per diluted share, an
improvement of $1.96 versus the year-ago quarter due to lower charges in
the current period. Reported full-year earnings for 2009 were $1.60 per
diluted share, up from $1.03 for continuing operations in 2008.

On a before charges/gains basis, diluted EPS increased 3% to $0.66 for
the fourth quarter and was $2.43 for the full year. These results
exceeded the company????s most recent target for diluted EPS before
charges/gains to be in the range of $2.10-2.30 for 2009.

Strong Close to 2009

????Fortune Brands is emerging from the recession in a strong position, and
we closed 2009 with our best quarter of the year,????? said Bruce Carbonari,
chairman and chief executive officer of Fortune Brands. ????Total sales
turned positive in the quarter, each of our businesses performed above
our fourth-quarter profit expectations, and we delivered results above
the top end of our full-year target ranges for EPS and free cash flow.
While consumers remain cautious, particularly when it comes to
big-ticket discretionary purchases, we????ve continued to see stabilization
in the home products market. We????re on offense in all of our businesses
with a focus on outperforming our categories, investing to grow
profitable market share and leveraging our lower cost structures.
Notably, these initiatives helped our home and security business deliver
operating income growth in the quarter.

????Our foundation of enduring and trusted brands, combined with our
brand-building and new-product initiatives, continued to benefit us in
the fourth quarter,????? Carbonari said. ????Despite challenges in select
international markets, total spirits sales were higher in the quarter on
gains for Jim Beam and Maker????s Mark in the U.S., and the benefit of the
weaker U.S. dollar. Our home and security business delivered its best
performance in eight quarters, led by a high-single-digit sales increase
for Moen and a strong double-digit gain for Simonton Windows. While our
golf business faced low operating leverage in its seasonally smallest
quarter, double-digit sales increases for Titleist golf balls and
FootJoy shoes, along with strong growth in Asia, helped our golf brands
outperform the market. Each of our businesses also demonstrated
impressive management of cash and working capital. Cash management,
which included a full-year reduction of approximately $250 million in
working capital, helped Fortune Brands generate $572 million of free
cash in 2009.?????

For the fourth quarter:

• 
  Net income was $11.5 million ($0.08 per diluted share) versus a loss
  of $281.3 million ($1.88 per diluted share) in the year-ago quarter.
  
  
  
  
  • 
    Comparisons were favorably impacted by lower net charges versus
    the year-ago period. In the current-year period, the company
    recorded a net charge of $0.58 per share, reflecting non-cash
    write-downs of $66.8 million after tax (principally related to
    more moderate industry expectations for future growth of the
    tequila category), and restructuring and restructuring-related
    charges of $21.9 million after tax.
    
  
  
  
  


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  Excluding charges and gains in both the current and prior-year
  periods, diluted EPS was $0.66, up 3% from $0.64 in the year-ago
  quarter.
  


• 
  Net sales were $1.80 billion, up 1%.
  
  
  
  
  • 
    Foreign exchange benefited net sales by 3%.
    
  
  
  • 
    Comparable net sales by business unit were: spirits down 4%; home
    & security down 4%; golf up 2%. Comparable net sales exclude
    excise taxes, foreign exchange, acquisitions/divestitures, and the
    impact of required accounting related to spirits route-to-market
    initiatives.
    
  
  
  
  


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  Operating income was $47.3 million.
  
  
  
  
  • 
    Operating income before charges was $181.7 million.
    
  
  
  
  

For the full year 2009:

• 
  Net income from continuing operations was $242.8 million, or $1.60 per
  diluted share, up from $1.03 in 2008.
  


• 
  Diluted EPS before charges/gains was $2.43, down 35% from $3.75 in
  2008.
  


• 
  Net sales were $6.69 billion, down 12%.
  


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  Operating income was $505.2 million.
  
  
  
  
  • 
    Operating income before charges was $718.9 million.
    
  
  
  
  


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  Free cash flow was $572 million after dividends and net capital
  expenditures.
  


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  Return on equity before charges/gains was 7%.
  


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  Return on invested capital before charges/gains was 5%.
  

Outlook for 2010

????Fortune Brands enters 2010 with strong brands, efficient cost
structures and teams built to win,????? Carbonari continued. ????Our goals in
the year ahead are to return to growth in earnings per share before
charges/gains, outperform our markets in growth and returns, and
generate strong free cash flow. We????ve been proactive in the marketplace
and on the cost side throughout the downturn, and we see the front end
of a recovery as an excellent time to invest to fuel further momentum
and gain long-term competitive advantage across our businesses. We
intend to boost brand-building investment in 2010, with the level
dependent on the extent of consumer recovery and our earnings growth as
the year unfolds.

????While we are encouraged by the macroeconomic improvement in the fourth
quarter, we believe consumers will remain cautious while employment,
credit markets, home values and consumer confidence continue to mend.
Accordingly, we????re currently targeting to deliver diluted EPS before
charges/gains for 2010 in the range of $2.30 to $2.80. We begin 2010
with an assumption that the markets for each of our three brand groups
will be flat to up at a low-single-digit rate. We also expect that
higher costs for energy and raw materials will likely offset the
expected benefits of foreign exchange,????? said Carbonari.

????Looking at the first quarter, earnings could be lower year over year,
reflecting the impact of substantially higher brand investment in
spirits versus the low level in the first quarter of 2009, as well as
the final quarter of incremental costs associated with our international
route-to-market transition.

????Over the longer term, we????re strongly positioned to accelerate growth as
we benefit from our attractive consumer categories, powerful brand
positions, flexible supply chains and the leverage of our lower cost
base as consumer demand builds,????? Carbonari concluded.

The company also announced that it is targeting to deliver free cash
flow (cash flow from operations less net capital expenditures) in the
range of $375-475 million in 2010, which would represent an
earnings-to-free-cash-flow conversion rate of more than 100%. Using the
company????s prior free cash flow measure that was after both dividends and
net capital expenditures, the company????s target would be in the range of
$260-360 million at the current dividend rate.

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,
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.