Exhibit 99.1
Fortune Brands Reports Record First Quarter Results; Growth Initiatives Across
Consumer Categories Drive Double-Digit EPS Growth; Moen, Titleist, Jim Beam,
Therma-Tru and Cabinetry Brands Fuel Robust Top-Line Growth
DEERFIELD, Ill.--(BUSINESS WIRE)--April 28, 2006--Fortune Brands,
Inc., (NYSE:FO), a leading consumer brands company, today reported
record results for the first quarter of 2006. Earnings per share from
continuing operations rose 21%, benefiting from strong organic sales
gains, the addition and growth of newly acquired spirits and wine
brands, and a net gain from one-time items. Double-digit sales growth
for brands including Moen, Titleist, Aristokraft, Omega, Therma-Tru,
Master Lock, Jim Beam and Maker's Mark fueled share gains and strong
top-line growth.
"Fortune Brands fired on all cylinders in the first quarter with
excellent momentum across our consumer categories," said chairman and
chief executive officer Norm Wesley. "Our strong start to 2006
exceeded our first quarter earnings targets as each of our businesses
performed at or above our expectations."
Gaining Market Share
"Our first quarter results reflect a determination to grow faster
than our consumer categories," Wesley continued. "Across Fortune
Brands, we're successfully creating new growth opportunities,
including developing innovative new products, extending brands into
adjacent product segments, expanding customer relationships, and
focusing on international markets where we have room to grow. These
initiatives continued to pay off in robust top-line growth and gains
in market share. We're focused on growing in the most attractive
segments of the home products industry, and our home products brands
grew sales double digits. The integration of our new spirits and wine
brands is proceeding well with no surprises, and we drove solid volume
growth for our enhanced portfolio of premium brands. Excellent initial
reception for new high-performance products from Titleist and Cobra
fueled a record first quarter for our golf brands."
For the first quarter, on a continuing operations basis:
-- Net income was $173 million, or $1.15 per diluted share, up
21% from $0.95 in the year-ago quarter. Results reflected a
net gain of 9 cents per share from one-time items. The net
gain resulted from credits associated with favorable
resolution of the routine IRS review of the company's
2002-2003 tax returns (15 cents per share), partly offset by
restructuring and restructuring-related items (5 cents per
share) and currency mark-to-market expense (1 cent per share)
related to the previously disclosed purchase price adjustment
for the 2005 spirits and wine acquisition.
-- Excluding the net gain, diluted EPS before charges/gains was
$1.06, up 12%. These results were 4 cents above the mean
estimate of Wall Street securities analysts (source: Thomson
First Call).
-- Net sales increased 33% to $2.0 billion. On an adjusted basis
- assuming the company had owned the acquired spirits and wine
brands in the year-ago quarter, and excluding excise taxes and
foreign exchange - the company estimates total sales for
Fortune Brands would have risen at a low double-digit rate.
-- Operating income was $307 million, up 33%.
-- Return on equity before charges/gains was 20.4%.
-- Return on invested capital before charges/gains was 10.5%.
While results in the Spirits and Wine segment continue to be
impacted by acquisition-related transition arrangements, first quarter
results for the acquired spirits and wine brands are reported on a
fully consolidated basis and results no longer reflect FIN 46 variable
interest accounting requirements.
Confident Outlook
"Fortune Brands is off to a strong start in 2006," Wesley
continued. "While we continue to believe our Home products business
will return to more normalized growth rates, it's pretty clear from
our record first quarter results that we have not seen a slowdown to
date in our Home segment, and we feel well positioned to continue
growing faster than the market. As we look to the balance of the year,
we believe our breadth in attractive markets, our share-gain and new
market initiatives, and the increasing benefits of our spirits and
wine acquisition will continue to enhance our performance. In
addition, our pending acquisition of SBR/Simonton Windows is on track
to close in the second quarter, and we continue to expect the
acquisition will add 6-8 cents to EPS in the first 12 months after the
deal closes.
"Our better-than-expected first quarter gives us greater
confidence that we'll achieve our target of double-digit growth in EPS
before charges/gains for the full year - and note that our earnings
targets reflect the first-time impact of stock options expense, which
we estimate will be about 18 cents per share for 2006.
"For the second quarter, including stock options expense in 2006,
we're targeting EPS before charges/gains to grow at a
high-single-digit to low-double-digit rate," Wesley said.
The company also announced that it is targeting to generate free
cash flow for 2006 in the range of $400-500 million after dividends
and capital expenditures. The company's 2006 target is impacted by
approximately $125 million in spirits and wine acquisition-related
payments that won't be repeated.
About Fortune Brands
Fortune Brands, Inc. is a leading consumer brands company with
annual sales exceeding $7 billion. Its operating companies have
premier brands and leading market positions in home and hardware
products, spirits and wine, and golf equipment. Home and hardware
brands include Moen faucets, Aristokraft, Omega, Diamond and Schrock
cabinets, Therma-Tru door systems, Master Lock padlocks and Waterloo
tool storage sold by units of Fortune Brands Home & Hardware LLC. Beam
Global Spirits & Wine, Inc. is the company's spirits and wine
business. Major spirits and wine brands include Jim Beam and Maker's
Mark bourbons, Sauza tequila, Canadian Club whisky, Courvoisier
cognac, DeKuyper cordials, Starbucks(TM) liqueurs, Laphroaig single
malt Scotch and Clos du Bois and Geyser Peak wines. 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: competitive
market pressures (including pricing pressures); consolidation of trade
customers, particularly in the home and hardware industry; 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 integration of
the spirits and wine acquisition and the related confirmation or
remediation of internal controls over financial reporting; ability to
attract and retain qualified personnel; various external conditions,
including general economic conditions, weather and business
conditions; risks associated with doing business outside the United
States, including currency exchange rate risks; interest rate
fluctuations; 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
and wines; 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 may not be indicative of future conditions and
results due to the recent portfolio realignment; 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 diluted earnings per share before
charges/gains, return on equity before charges/gains, return on
invested capital before charges/gains, and free cash flow, measures
not derived in accordance with generally accepted accounting
principles ("GAAP"). 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.
Proposed Acquisition
Fortune Brands has filed a Registration Statement on Form S-4, as
amended by Pre-Effective Amendment Nos. 1 and 2 thereto (File No.
333-131990), with the Securities and Exchange Commission containing a
proxy statement/prospectus in connection with the proposed acquisition
of SBR, Inc. and the proposed related mergers. Investors and security
holders are urged to read the proxy statement/prospectus which
contains important information, including detailed risk factors. The
proxy statement/prospectus and other documents filed by Fortune Brands
with the Securities and Exchange Commission are available free of
charge at the SEC's website, www.sec.gov, or by directing a request to
Fortune Brands, Inc., 520 Lake Cook Road, Deerfield, Illinois 60015,
Attention: Investor Relations.
FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Three Months Ended March 31,
-----------------------------
2006 2005 % Change
-----------------------------
Net Sales $2,016.8 $1,517.8 32.9
-----------------------------
Cost of goods sold 1,079.9 836.5 29.1
Excise taxes on spirits and wine 120.8 64.8 86.4
Advertising, selling, general
and administrative expenses 488.6 376.7 29.7
Amortization of intangibles 10.0 8.2 22.0
Restructuring and
restructuring-related items 10.6 - -
-----------------------------
Operating Income 306.9 231.6 32.5
-----------------------------
Interest expense 79.1 19.1 314.1
Other (income) expense, net (10.0) (13.0) 23.1
-----------------------------
Income from Continuing Operations before
income taxes and minority interests 237.8 225.5 5.5
-----------------------------
Income taxes 59.7 78.0 (23.5)
Minority interests 4.7 4.9 (4.1)
-----------------------------
Income from Continuing Operations 173.4 142.6 21.6
-----------------------------
Income from Discontinued Operations - 10.1 -
-----------------------------
Net Income $173.4 $152.7 13.6
-----------------------------
Earnings Per Common Share, Basic:
Income from continuing operations 1.18 0.98 20.4
Income from discontinued operations - 0.07 -
Net Income 1.18 1.05 12.4
-----------------------------
Earnings Per Common Share, Diluted:
Income from continuing operations 1.15 0.95 21.1
Income from discontinued operations - 0.07 -
Net Income 1.15 1.02 12.7
-----------------------------
Avg. Common Shares Outstanding
Basic 146.4 144.8 1.1
Diluted 150.4 149.6 0.5
-----------------------------
Actual Common Shares Outstanding
Basic 146.6 145.1 1.0
Diluted 150.7 149.8 0.6
-----------------------------
FORTUNE BRANDS, INC.
(In millions, except per share amounts)
(Unaudited)
NET SALES AND OPERATING INCOME
------------------------------
Three Months Ended March 31,
-----------------------------
2006 2005 % Change
-----------------------------
Net Sales
Home and Hardware $1,032.4 $902.5 14.4
Spirits and Wine 611.9 272.7 124.4
Golf 372.5 342.6 8.7
-----------------------------
Total 2,016.8 1,517.8 32.9
-----------------------------
Operating Income
Home and Hardware $139.8 $124.5 12.3
Spirits and Wine 128.2 68.5 87.2
Golf 58.4 56.7 3.0
Corporate expenses 19.5 18.1 7.7
-----------------------------
Total 306.9 231.6 32.5
-----------------------------
Operating Income Before Charges (a)
Home and Hardware $148.6 $124.5 19.4
Spirits and Wine 130.0 68.5 89.8
Golf 58.4 56.7 3.0
Less:
Corporate expenses 19.5 18.1 7.7
Restructuring and
restructuring-related items 10.6 - -
-----------------------------
Operating Income $306.9 $231.6 32.5
-----------------------------
(a) Operating Income Before Charges is Operating Income derived in
accordance with GAAP excluding restructuring and restructuring-related
items. Operating Income Before Charges 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
underlying 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
March 31, 2006 Full Year
------------------------------------
2006 2005 Targeted Range
------------------------------------
Free Cash Flow (b) $(174.2) $(132.9) $400-500
Add:
Net Capital Expenditures 58.5 47.8 200-225
Dividends Paid 52.8 48.0 220(c)
------------------------------------
Cash Flow From Operations $(62.9) $(37.1) $820-945
------------------------------------
(b) Free Cash Flow is Cash Flow from Operations less net capital
expenditures and dividends paid to stockholders.
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.
(c) Assumes current dividend rate and basic shares outstanding on
March 31, 2006.
EPS BEFORE CHARGES/GAINS ON A CONTINUING OPERATIONS BASIS
EPS Before Charges/Gains is Income from Continuing Operations
calculated on a per share basis excluding restructuring and
restructuring-related items.
For the first quarter of 2006, on a continuing operations basis,
EPS Before Charges/Gains is Income from Continuing Operations
calculated on a per share basis excluding $10.6 million ($6.6 million
after tax) of restructuring and restructuring-related items, currency
mark-to-market expense of $2.0 million (after tax) and $22.9 million
of tax-related credits principally associated with the favorable
conclusion of the IRS review of our 2002-2003 tax returns.
For the first quarter of 2005, there were no restructuring or
restructuring-related items reported.
EPS Before Charges/Gains is a measure not derived in accordance
with GAAP. Management uses this measure to evaluate the overall
performance of the company and believes this measure provides
investors with helpful supplemental information regarding the
underlying performance of the company from year-to-year. This measure
may be inconsistent with similar measures presented by other
companies.
Three Months Ended March 31,
------------------------------
2006 2005 % Change
------------------------------
Continuing Operations - Income Before
Charges/Gains $159.1 $142.6 11.6
------------------------------
Earnings Per Common Share - Basic
Income from Continuing Operations
Before Charges/Gains 1.09 0.98 11.2
Tax-related credits 0.15 - -
Currency mark-to-market expense (0.01) - -
Restructuring and
restructuring-related items (0.05) - -
------------------------------
Income from Continuing Operations 1.18 0.98 20.4
------------------------------
Income from Discontinued Operations - 0.07 (100.0)
------------------------------
Net Income 1.18 1.05 12.4
------------------------------
Earnings Per Common Share - Diluted
Income from Continuing Operations
Before Charges/Gains 1.06 0.95 11.6
Tax-related credits 0.15 - -
Currency mark-to-market expense (0.01) - -
Restructuring and
restructuring-related items (0.05) - -
------------------------------
Income from Continuing Operations 1.15 0.95 21.1
------------------------------
Income from Discontinued Operations - 0.07 (100.0)
------------------------------
Net Income 1.15 1.02 12.7
------------------------------
RECONCILIATION OF 2006 EARNINGS GUIDANCE TO GAAP
For the second quarter of 2006, including stock option expense in
2006, the company is targeting EPS before charges/gains to grow at a
high-single-digit to low-double-digit rate. On a GAAP basis, the
company is targeting EPS to grow at a double-digit rate for the second
quarter.
For the full year, the company is targeting EPS before
charges/gains to grow at a double-digit rate. On a GAAP basis, the
company is targeting EPS to grow at a strong double-digit rate,
benefiting from lower charges/gains in 2006.
RESTRUCTURING AND RESTRUCTURING-RELATED ITEMS
The company recorded pre-tax restructuring and
restructuring-related items of $10.6 million ($6.6 million after tax)
in the three-month period ended March 31, 2006. The charges
principally relate to supply chain initiatives in the Home and
Hardware segment and to the integration of the Spirits and Wine
acquisition.
Three Months Ended March 31, 2006
(In millions, except per share amounts)
-----------------------------------------------
Restructuring-Related Items
---------------------------
Cost of SG & A
Restructuring Sales Charges Charges Total
-----------------------------------------------
Home and Hardware $4.1 $4.7 $ - $8.8
Spirits and Wine - - 1.8 1.8
-----------------------------------------------
Total $4.1 $4.7 $1.8 $10.6
-----------------------------------------------
Income tax benefit 4.0
--------
Net charge $6.6
--------
Charge per common share
Basic $0.05
Diluted $0.05
--------
FORTUNE BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
(Unaudited)
March 31, March 31,
2006 2005
----------- -----------
Assets
Current assets
Cash and cash equivalents $175.0 $121.6
Accounts receivable, net 1,151.0 848.9
Inventories 2,106.5 948.5
Other current assets 349.3 282.2
Current assets of
discontinued operations - 545.3
----------- -----------
Total current assets 3,781.8 2,746.5
Property, plant and equipment, net 1,830.7 1,221.6
Intangibles resulting from
business acquisitions, net 7,618.0 3,229.6
Other assets 392.6 410.4
Noncurrent assets of
discontinued operations - 368.4
----------- -----------
Total assets $13,623.1 $7,976.5
----------- -----------
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $702.2 $798.1
Current portion of long-term debt 297.1 0.3
Other current liabilities 1,737.3 952.7
Current liabilities of
discontinued operations - 233.6
----------- -----------
Total current liabilities 2,736.6 1,984.7
Long-term debt 5,110.8 1,237.4
Other long-term liabilities 1,629.5 1,050.9
Minority interests 361.0 358.5
Noncurrent liabilities of
discontinued operations - 70.0
----------- -----------
Total liabilities 9,837.9 4,701.5
Stockholders' equity 3,785.2 3,275.0
----------- -----------
Total liabilities and
stockholders' equity $13,623.1 $7,976.5
----------- -----------
FORTUNE BRANDS, INC.
Reconciliations of ROE based on Net Income From Continuing Operations
Before Charges/Gains to ROE based on GAAP Net Income
March 31, 2006
Amounts in millions
(Unaudited)
Rolling twelve ROE based on
months Net Income Net Income
From Continuing From Continuing
Operations Before Operations
Charges/Gains less Before
Preferred Dividends Equity Charges/Gains
------------------- ------ -------------
Fortune Brands $711.4 / $3,494.0 = 20.4%
Rolling twelve
months GAAP
Net Income less ROE based on
Preferred Dividends Equity GAAP Net Income
------------------- ------ ---------------
Fortune Brands $641.1 / $3,536.9 = 18.1%
Return on Equity - or ROE - Before Charges/Gains is net income from
continuing operations less preferred dividends derived in accordance
with GAAP excluding restructuring and restructuring-related items
divided by the twelve month average of GAAP common equity (total
equity less preferred equity) excluding restructuring and
restructuring-related items.
FORTUNE BRANDS, INC.
Reconciliations of ROIC based on Net Income From Continuing Operations
Before Charges/Gains to ROIC based on GAAP Net Income
March 31, 2006
Amounts in millions
(Unaudited)
Rolling twelve ROIC based on
months Net Income Net Income
From Continuing From Continuing
Operations Before Operations
Charges/Gains plus Invested Before
Interest Expense Capital Charges/Gains
---------------- ------- -------------
Fortune Brands $852.1 / $8,137.5 = 10.5%
Rolling twelve
months GAAP Net
Income plus Invested ROIC based on
Interest Expense Capital GAAP Net Income
---------------- ------- ---------------
Fortune Brands $784.1 / $8,187.2 = 9.6%
Return on Invested Capital - or ROIC - Before Charges/Gains is net
income from continuing operations plus interest expense derived in
accordance with GAAP excluding restructuring and restructuring-related
items divided by the twelve month average of GAAP Invested Capital
(net debt plus equity) excluding restructuring and
restructuring-related items.
ROE From Continuing Operations Before Charges/Gains and ROIC From
Continuing Operations Before Charges/Gains are measures not derived in
accordance with GAAP. Management uses these measures to determine the
returns generated by the company and to evaluate and identify
cost-reduction initiatives. Management believes these measures provide
investors with helpful supplemental information regarding the
underlying performance of the company from year-to-year. These
measures may be inconsistent with similar measures presented by other
companies.
CONTACT: Fortune Brands, Inc.
Clarkson Hine (Media Relations), 847-484-4415
or
Tony Diaz (Investor Relations), 847-484-4410