— Strong Sales Growth Across Consumer Categories Fuels 21st
Consecutive Quarter of Double Digit Growth in EPS Before
Charges/Gains
— Company Achieves 3rd Quarter Growth Goal, Reaffirms Target for
Full Year
Fortune Brands, Inc. (NYSE: FO), the company behind leading consumer brands such as Moen, Jim Beam and Titleist, today reported strong growth in sales and earnings for the third quarter of 2006. Net sales increased 23% and diluted earnings per share from continuing operations increased 88%. Results benefited from sales growth for the company’s home, spirits and golf brands, margin expansion for the company’s enhanced spirits and wine portfolio, acquisitions, a lower effective tax rate, and lower one-time items. Excluding one-time items, diluted EPS from continuing operations increased 16% to $1.30.
“Fortune Brands once again demonstrated the benefits of our
breadth and balance across great consumer categories by delivering our
21st consecutive quarter of double-digit growth in earnings per share
before charges/gains,” said Norm Wesley, chairman and chief executive
officer of Fortune Brands. “This was a very good quarter that achieved
the EPS growth target we announced three months ago, as each of our
three businesses performed in line with what we expected. We’re
continuing to outperform our categories with a sharp focus on organic
growth and share-gain initiatives, including: successful new product
innovations, high-impact marketing, expanded customer relationships,
extending brands into adjacent markets, and growth in new
international markets. Importantly, our expansion and organic growth
in the high-return premium spirits and wine category is helping us
offset the impact of a softening housing market.”
Broad-Based Sales Growth
“Strong sales gains for leading brands across our portfolio -
including our kitchen and bath cabinetry brands, Moen, Master Lock,
Jim Beam, Sauza, Maker’s Mark, Titleist and Cobra - fueled our third
quarter performance,” Wesley continued. “We said three months ago that
we expected to see slower underlying growth for our home products
brands in the second half of 2006, and we certainly saw that as the
quarter progressed. Even as weakening new-home construction impacted
sales of doors and windows, our home products brands generated
low-single-digit comparable sales growth, driven by continued share
gains in the kitchen and bath segment, our focus on consumer-oriented
home products categories, plus our strength in the replace-and-remodel
segment of the market.
“At the same time, we drove strong profit growth and higher
margins in spirits and wine, benefiting from a strong increase in
worldwide case volumes and the synergy benefits of last year’s
acquisition. And golf sales grew 7% on strong gains for Titleist golf
balls plus the timing of new Titleist and Cobra product introductions
that drove golf club sales up double digits.”
For the third quarter, on a continuing operations basis:
– Net income was $151 million, or $0.98 per diluted share, up 88%
from $0.52 in the year-ago quarter.
– Comparisons benefited from lower one-time items in the
current-year quarter (32 cents per diluted share) versus the
prior-year period (60 cents per diluted share). After-tax
charges in the current-year quarter were: $48 million (non-cash,
31 cents per diluted share) associated with required accounting
for an increase in the value of V&S Group’s minority interest in
the company’s spirits and wine business; and $2 million (1 cent
per diluted share) related to restructuring initiatives in the
home and hardware business.
– Excluding the net charges in both the current and prior-year
periods, EPS before charges/gains was $1.30, up 16% from $1.12 in
the year-ago quarter.
– These results achieved the company’s previously announced
third-quarter target of double-digit growth in EPS before
charges/gains.
– Net sales were $2.22 billion, up 23%.
– On a comparable basis - assuming the company had owned
acquired brands in the year-ago quarter, and excluding excise
taxes - the company estimates total net sales for Fortune Brands
would have risen in the range of 3-4% in constant currency.
– Operating income was $379 million, up 29%.
– Return on equity before charges/gains was 20%.
– Return on invested capital before charges/gains was 10%.
Establishing Target for Fourth Quarter, Reaffirming Target for
Full Year
“Moving forward, our breadth and balance will continue to be a
strategic advantage and stabilizing force for Fortune Brands,
especially given our expectation of further softening in the market
for our home products,” Wesley said. “While we expect the softening
housing environment will create challenging comparisons for our home
products brands through the first half of 2007, we believe that we
will continue to outperform the broader home products market. We’re
also confident that our enhanced premium position in the spirits and
wine category, and our sustained leadership in golf, will help us
offset softer home products results.
“We’re pleased with the year-to-date performance of all of our
businesses and Fortune Brands remains on track to deliver very strong
full-year results. For the fourth quarter, including the first-time
impact of stock options expense, we’re targeting EPS before
charges/gains to grow at a high-single-digit to low-double-digit rate.
For the full year 2006, we continue to expect that Fortune Brands will
comfortably achieve our goal of double-digit growth in EPS before
charges/gains.”
The company also announced that it is targeting free cash flow for
2006 in the range of $450-500 million after dividends and capital
expenditures. The target continues to include approximately $50
million in net costs resulting from acquisition-related items and
one-time credits that won’t be repeated.
About Fortune Brands
Fortune Brands, Inc. is a leading consumer brands company with
annual sales exceeding $8 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, Simonton windows, Master Lock
padlocks and Waterloo tool storage sold by units of Fortune Brands
Home & Hardware LLC. Beam Global Spirits and 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.
FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Three Months Ended September 30,
--------------------------------
2006 2005 % Change
---------- ---------- ----------
Net Sales $2,218.5 $1,801.6 23.1
Cost of goods sold 1,198.4 986.3 21.5
Excise taxes on spirits and
wine 111.6 85.9 29.9
Advertising, selling, general
and administrative expenses 513.3 418.7 22.6
Amortization of intangibles 12.4 8.6 44.2
Restructuring and
restructuring-related items 3.3 7.6 (56.6)
---------- ---------- ----------
Operating Income 379.5 294.5 28.9
---------- ---------- ----------
Interest expense 85.6 52.1 64.3
Other (income) expense, net (9.8) 73.5 (113.3)
---------- ---------- ----------
Income from Continuing Operations
before income taxes and minority
interests 303.7 168.9 79.8
---------- ---------- ----------
Income taxes 99.0 86.3 14.7
Minority interests 53.4 3.3 -
---------- ---------- ----------
Income from Continuing Operations 151.3 79.3 90.8
---------- ---------- ----------
Income from Discontinued Operations - 12.9 -
---------- ---------- ----------
Net Income $151.3 $92.2 64.1
---------- ---------- ----------
Earnings Per Common Share, Basic:
Income from continuing operations 1.00 0.54 85.2
Income from discontinued
operations - 0.09 -
---------- ---------- ----------
Net Income 1.00 0.63 58.7
---------- ---------- ----------
Earnings Per Common Share, Diluted:
Income from continuing operations 0.98 0.52 88.5
Income from discontinued
operations - 0.09 -
---------- ---------- ----------
Net Income 0.98 0.61 60.7
---------- ---------- ----------
Avg. Common Shares Outstanding
Basic 150.9 146.0 3.4
Diluted 154.5 151.1 2.3
Nine Months Ended September 30,
--------------------------------
2006 2005 % Change
---------- ---------- ----------
Net Sales $6,492.4 $5,102.2 27.2
Cost of goods sold 3,462.7 2,782.8 24.4
Excise taxes on spirits and
wine 336.0 222.0 51.4
Advertising, selling, general
and administrative expenses 1,526.7 1,206.2 26.6
Amortization of intangibles 31.5 25.0 26.0
Restructuring and
restructuring-related items 15.5 7.6 103.9
---------- ---------- ----------
Operating Income 1,120.0 858.6 30.4
---------- ---------- ----------
Interest expense 247.9 91.3 171.5
Other (income) expense, net (29.9) 87.3 (134.2)
---------- ---------- ----------
Income from Continuing Operations
before income taxes and minority
interests 902.0 680.0 32.6
---------- ---------- ----------
Income taxes 267.3 262.0 2.0
Minority interests 62.2 12.3 405.7
---------- ---------- ----------
Income from Continuing Operations 572.5 405.7 41.1
---------- ---------- ----------
Income from Discontinued Operations - 39.5 -
---------- ---------- ----------
Net Income $572.5 $445.2 28.6
---------- ---------- ----------
Earnings Per Common Share, Basic:
Income from continuing operations 3.86 2.79 38.4
Income from discontinued
operations - 0.27 -
---------- ---------- ----------
Net Income 3.86 3.06 26.1
---------- ---------- ----------
Earnings Per Common Share, Diluted:
Income from continuing operations 3.76 2.70 39.3
Income from discontinued
operations - 0.26 -
---------- ---------- ----------
Net Income 3.76 2.96 27.0
---------- ---------- ----------
Avg. Common Shares Outstanding
Basic 148.3 145.4 2.0
Diluted 152.1 150.4 1.1
Actual Common Shares Outstanding
Basic 151.2 146.1 3.5
Diluted 155.0 151.1 2.6
FORTUNE BRANDS, INC.
(In millions, except per share amounts)
(Unaudited)
NET SALES AND OPERATING INCOME
-------------------------------------
Three Months Ended September 30,
--------------------------------
2006 2005 % Change
---------- ---------- ----------
Net Sales
Home and Hardware $1,265.7 $1,073.6 17.9
Spirits and Wine 655.0 449.6 45.7
Golf 297.8 278.4 7.0
---------- ---------- ----------
Total $2,218.5 $1,801.6 23.1
---------- ---------- ----------
Operating Income
Home and Hardware $197.5 $181.7 8.7
Spirits and Wine 170.6 95.8 78.1
Golf 30.3 28.6 5.9
Corporate expenses 18.9 11.6 62.9
---------- ---------- ----------
Total $379.5 $294.5 28.9
---------- ---------- ----------
Operating Income Before Charges (a)
Home and Hardware $200.8 $181.7 10.5
Spirits and Wine 170.6 103.4 65.0
Golf 30.3 28.6 5.9
Less:
Corporate expenses 18.9 11.6 62.9
Restructuring and
restructuring-related items 3.3 7.6 (56.6)
---------- ---------- ----------
Operating Income $379.5 $294.5 28.9
---------- ---------- ----------
(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 September 30,
--------------------------------
2006 2005
--------------- ----------------
Free Cash Flow (b) $331.0 $169.3
Add:
Net Capital
Expenditures 1.9 49.3
Dividends Paid 58.9 52.7
--------------- ----------------
Cash Flow From Operations $391.8 $271.3
--------------- ----------------
(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 $1.56 dividend rate and basic shares
outstanding on September 30, 2006.
NET SALES AND OPERATING INCOME
-------------------------------------
Nine Months Ended September 30,
--------------------------------
2006 2005 % Change
---------- ---------- ----------
Net Sales
Home and Hardware $3,491.9 $3,025.0 15.4
Spirits and Wine 1,904.7 1,013.0 88.0
Golf 1,095.8 1,064.2 3.0
---------- ---------- ----------
Total $6,492.4 $5,102.2 27.2
---------- ---------- ----------
Operating Income
Home and Hardware $547.2 $485.5 12.7
Spirits and Wine 456.1 243.0 87.7
Golf 170.8 177.9 (4.0)
Corporate expenses 54.1 47.8 13.2
---------- ---------- ----------
Total $1,120.0 $858.6 30.4
---------- ---------- ----------
Operating Income Before Charges (a)
Home and Hardware $559.7 $485.5 15.3
Spirits and Wine 459.1 250.6 83.2
Golf 170.8 177.9 (4.0)
Less:
Corporate expenses 54.1 47.8 13.2
Restructuring and
restructuring-related items 15.5 7.6 103.9
---------- ---------- ----------
Operating Income $1,120.0 $858.6 30.4
---------- ---------- ----------
(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
--------------------------
Nine Months Ended September 30,
-------------------------------
2006 2005
--------------- ---------------
Free Cash Flow (b) $349.4 $305.0
Add:
Net Capital
Expenditures 89.4 150.3
Dividends Paid 164.7 148.8
--------------- ---------------
Cash Flow From Operations $603.5 $604.1
--------------- ---------------
2006 Full Year
---------------
Targeted Range
---------------
Free Cash Flow (b) $450-500
Add:
Net Capital
Expenditures 200-225
Dividends Paid 225 (c)
---------------
Cash Flow From Operations $875-950
---------------
(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 $1.56 dividend rate and basic shares
outstanding on September 30, 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,
restructuring-related and one-time items.
For the third quarter of 2006, on a continuing operations basis,
EPS Before Charges/Gains is Income from Continuing Operations
calculated on a per-share basis excluding $3.3 million ($2.1 million
after tax) of restructuring and restructuring-related items and a
$47.8 million ($47.8 million after tax) non-cash charge associated
with the required accounting for an increase in the value of V&S
Group’s minority interest in our Beam Global Spirits and Wines business.
For the nine-month period ended September 30, 2006, EPS Before
Charges/Gains excludes $15.5 million ($9.8 million after tax) of
restructuring and restructuring-related items, the $47.8 million
minority interest charge, currency mark-to-market expense of $2.8
million and $38.2 million of tax-related credits principally
associated with the favorable conclusion of the IRS review of our
2002-2003 tax returns and routine state tax audits.
For the third quarter of 2005, on a continuing operations basis,
EPS Before Charges/Gains is Income from Continuing Operations
calculated on a per-share basis excluding the $7.6 million ($4.9
million after tax) restructuring and acquisition-related items,
currency hedging program costs of $4.7 million ($3.0 million after
tax) and currency hedge accounting expense of $82.7 million ($82.7
million after tax). For the nine-month period ended September 30,
2005, EPS Before Charges/Gains excludes the $7.6 million ($4.9 million
after tax) restructuring and acquisition-related items, currency
hedging program costs of $33.0 million ($21.1 million after tax),
currency hedge accounting expense of $87.9 million ($87.9 million
after tax) and $7.7 million in a tax-related credit.
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 September 30,
--------------------------------
2006 2005 % Change
---------- ---------- ----------
Continuing Operations - Income
Before Charges/Gains $201.2 $169.9 18.4
---------- ---------- ----------
Earnings Per Common Share - Basic
Income from Continuing Operations
Before Charges/Gains 1.33 1.16 14.7
Minority Interest charge (0.32) - -
Net acquisition currency hedge
costs - (0.59) 100.0
Restructuring and
restructuring-related items (0.01) (0.03) 66.7
Income from Continuing Operations 1.00 0.54 85.2
---------- ---------- ----------
Income from Discontinued Operations - 0.09 (100.0)
---------- ---------- ----------
Net Income 1.00 0.63 58.7
---------- ---------- ----------
Earnings Per Common Share - Diluted
Income from Continuing Operations
Before Charges/Gains 1.30 1.12 16.1
Minority Interest charge (0.31) - -
Net acquisition currency
hedge costs - (0.57) 100.0
Restructuring and
restructuring-related items (0.01) (0.03) 66.7
Income from Continuing Operations 0.98 0.52 88.5
---------- ---------- ----------
Income from Discontinued Operations - 0.09 (100.0)
---------- ---------- ----------
Net Income 0.98 0.61 60.7
---------- ---------- ----------
Nine Months Ended September 30,
--------------------------------
2006 2005 % Change
---------- ---------- ----------
Continuing Operations - Income
Before Charges/Gains $594.7 $511.9 $16.2
---------- ---------- ----------
Earnings Per Common Share - Basic
Income from Continuing Operations
Before Charges/Gains 4.01 3.52 13.9
Minority Interest charge (0.32) - -
Tax-related credits 0.26 0.05 420.0
Net acquisition currency hedge
costs - (0.75) 100.0
Currency mark-to-market
expense (0.02) - -
Restructuring and
restructuring-related items (0.07) (0.03) (133.3)
Income from Continuing Operations 3.86 2.79 38.4
---------- ---------- ----------
Income from Discontinued Operations - 0.27 (100.0)
---------- ---------- ----------
Net Income 3.86 3.06 26.1
---------- ---------- ----------
Earnings Per Common Share - Diluted
Income from Continuing Operations
Before Charges/Gains 3.91 3.40 15.0
Minority Interest charge (0.31) - -
Tax-related credits 0.25 0.05 400.0
Net acquisition currency hedge
costs - (0.72) 100.0
Currency mark-to-market
expense (0.02) - -
Restructuring and
restructuring-related items (0.07) (0.03) (133.3)
Income from Continuing Operations 3.76 2.70 39.3
---------- ---------- ----------
Income from Discontinued Operations - 0.26 (100.0)
---------- ---------- ----------
Net Income 3.76 2.96 27.0
---------- ---------- ----------
FORTUNE BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
(Unaudited)
September 30, December 31,
2006 2005 1)
------------- -------------
Assets
Current assets
Cash and cash equivalents $218.5 $93.6
Accounts receivable, net 1,267.4 1,115.6
Inventories 2,111.3 1,663.1
Other current assets 382.0 320.4
------------- -------------
Total current assets 3,979.2 3,192.7
Property, plant and equipment, net 1,926.1 1,679.6
Intangibles resulting from business
acquisitions, net 8,251.2 6,880.5
Other assets 399.0 1,448.7
------------- -------------
Total assets $14,555.5 $13,201.5
------------- -------------
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $767.0 $637.2
Current portion of long-term debt 301.0 296.9
Other current liabilities 1,845.8 1,883.8
------------- -------------
Total current liabilities 2,913.8 2,817.9
Long-term debt 5,037.8 4,889.9
Other long-term liabilities 1,617.3 1,473.3
Minority interests 561.4 374.8
------------- -------------
Total liabilities 10,130.3 9,555.9
Stockholders' equity 4,425.2 3,645.6
------------- -------------
Total liabilities and
stockholders' equity $14,555.5 $13,201.5
------------- -------------
1) 2005 line items reflect FIN 46 (R) accounting for the Spirits &
Wine acquisition.
RESTRUCTURING AND RESTRUCTURING-RELATED ITEMS
The company recorded pre-tax restructuring and
restructuring-related items of $3.3 million ($2.1 million after tax)
and $15.5 million ($9.8 million after tax) in the three-month and
nine-month periods ended September 30, 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 September 30, 2006
(In millions, except per share amounts)
----------------------------------------------
Restructuring-Related
Items
---------------------
Cost of
Sales SG & A
Restructuring Charges Charges Total
------------- ---------- ---------- ----------
Home and Hardware $1.9 $1.0 $0.4 $3.3
Spirits and Wine - - - -
------------- ---------- ---------- ----------
Total $1.9 $1.0 $0.4 $3.3
------------- ---------- ---------- ----------
Income tax benefit 1.2
----------
Net charge $2.1
----------
Charge per common share
Basic $0.01
Diluted $0.01
----------
Nine Months Ended September 30, 2006
(In millions, except per share amounts)
----------------------------------------------
Restructuring-Related
Items
---------------------
Cost of
Sales SG & A
Restructuring Charges Charges Total
------------- ---------- ---------- ----------
Home and Hardware $6.0 $5.7 $0.8 $12.5
Spirits and Wine (0.1) - 3.1 3.0
------------- ---------- ---------- ----------
Total $5.9 $5.7 $3.9 $15.5
------------- ---------- ---------- ----------
Income tax benefit 5.7
----------
Net charge $9.8
----------
Charge per common share
Basic $0.07
Diluted $0.07
----------
RECONCILIATION OF 2006 COMPARABLE SALES TO GAAP
For the third quarter of 2006, Home & Hardware’s Comparable Sales
grew at a low-single-digit rate. On a GAAP basis, Home & Hardware’s
Net Sales grew at a double-digit rate.
For the third quarter of 2006, Comparable Sales for Fortune Brands
grew an estimated 3-4%. On a GAAP basis, Fortune Brands’ Net Sales
grew at a double-digit rate.
Comparable Sales is Net Sales derived in accordance with GAAP
excluding changes in foreign currency exchange rates, spirits & wine
excise taxes and duties and the net sales from divested entities.
Comparable Sales also includes net sales from acquisitions for the
comparable prior-year period.
Comparable Sales 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.
RECONCILIATION OF 2006 EARNINGS GROWTH TARGETS TO GAAP
For the fourth quarter of 2006, including stock options expense,
the company is targeting Diluted EPS Before Charges/Gains to grow at a
high-single-digit to low-double-digit rate. On a GAAP basis, the
company is targeting Diluted EPS from Continuing Operations to grow at
a double-digit rate, benefiting from lower charges in 2006.
For the full year, the company is targeting Diluted EPS Before
Charges/Gains to grow at a double-digit rate. On a GAAP basis, the
company is targeting Diluted EPS from Continuing Operations to grow at
a strong-double-digit rate, benefiting from lower net charges in 2006.
FORTUNE BRANDS, INC.
Reconciliation of ROE based on Net Income From Continuing Operations
Before Charges/Gains
to ROE based on GAAP Net Income
September 30, 2006
Amounts in millions
(Unaudited)
Rolling twelve months
Net Income From ROE based on Net
Continuing Operations Income From
Before Charges/Gains Continuing
less Preferred Operations Before
Dividends Equity Charges/Gains
---------------------- --------- -------------------
Fortune Brands $777.8 / $3,941.1 = 19.7%
Rolling twelve months
GAAP Net Income less ROE based on GAAP
Preferred Dividends Equity Net Income
---------------------- --------- -------------------
Fortune Brands $747.9 / $3,906.8 = 19.1%
Return on Equity - or ROE - Before Charges/Gains is net income
from continuing operations less preferred dividends derived in
accordance with GAAP excluding any restructuring and non-recurring
items divided by the twelve month average of GAAP common equity (total
equity less preferred equity) excluding any restructuring and
non-recurring items.
FORTUNE BRANDS, INC.
Reconciliation of ROIC based on Net Income From Continuing Operations
Before
Charges/Gains to ROIC based on GAAP Net Income
September 30, 2006
Amounts in millions
(Unaudited)
ROIC based on Net
Rolling twelve months Income From
Net Income From Continuing
Continuing Operations Operations
Before Charges/Gains Invested Before
plus Interest Expense Capital Charges/Gains
---------------------- --------- -------------------
Fortune Brands $981.2 / $9,994.6 = 9.8%
Rolling twelve months
GAAP Net Income plus Invested ROIC based on GAAP
Interest Expense Capital Net Income
---------------------- --------- -------------------
Fortune Brands $950.4 / $9,959.2 = 9.5%
Return on Invested Capital - or ROIC - Before Charges/Gains is net
income from continuing operations plus interest expense derived in
accordance with GAAP excluding any restructuring and non-recurring
items divided by the twelve month average of GAAP Invested Capital
(net debt plus equity) excluding any restructuring and non-recurring
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.
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