* Solid Profit Growth in Spirits & Wine Tempers Impact of Lower
Home Products Results;
* Company Expects Progressive Improvement in Results Following
Most Challenging Quarter of 2007, Reaffirms Full-Year Earnings Target
Fortune Brands, Inc. (NYSE: FO), a leading consumer brands company, today reported results for the first quarter of 2007. Despite strong profit performance for the company’s
spirits and wine brands, earnings per share were lower than a year ago due primarily to the impact of the housing downturn in the United States and higher year-over-year commodities costs for home products.
“As anticipated, the strong headwinds of lower housing activity in the
U.S. and the impact of higher raw materials costs for home products
weighed on our first quarter results, and sales and earnings per share
were both down from the record levels we posted a year ago,” said
Fortune Brands chairman and chief executive officer Norm Wesley.
“Comparisons were also adversely impacted by our very strong results in
last year’s first quarter.” First quarter net sales of $1.95 billion
were down 3%. Earnings per diluted share were $0.77 and, excluding
one-time items, EPS before charges/gains was $0.81 compared with $1.06
in the year-ago quarter.
“Our results were in line with what we expected and were consistent with
the earnings target we announced three months ago,” Wesley added. “On
an operating basis, each of our businesses performed at or above our
expectations, but that upside was offset by an unfavorable
mark-to-market expense for commodities hedges that amounted to about 3
cents per share. While we will continue to face tough market conditions
for our home products brands, we believe that performance for Fortune
Brands will get progressively better and that our most challenging
quarter of the year is now behind us.”
Spirits & Wine Case Volumes Grow at Mid-Single-Digit Rate
“Fortune Brands continued to benefit from our unique breadth and balance
in the first quarter as solid profit growth for our spirits and wine
brands partly offset lower results for our home products brands. In
Spirits & Wine, while reported revenue comparisons were lower due to certain one-time factors, underlying sales were up low-single digits and operating income grew at a
mid-single-digit rate. In the marketplace, strong global consumer
demand for our premium and super-premium spirits and wine brands drove
mid-single-digit growth in distributor case volume shipments, led by
double-digit growth for Sauza, Courvoisier and Teacher’s. While
comparable sales for our Home products brands were off in the range of
10%, it’s notable that we continued to outperform the market with share
gains for Moen, Master Lock and our cabinetry brands. Sales in Golf
were relatively flat due largely to the timing of new-product launches
that we expect will benefit the second quarter.”
For the first quarter of 2007:
* Net income was $120.2 million, or $0.77 per diluted share,
versus $173.4 million ($1.15 per diluted share) in the year-ago quarter.
* Comparisons were impacted by a tax-related gain in the
year-ago quarter and modest restructuring-related charges in both
periods.
* Excluding one-time items in both the current and prior-year
periods, diluted EPS before charges/gains was $0.81, down 24% from $1.06
in the year-ago quarter.
* These results were consistent with the company’s
previously announced estimate that diluted EPS before charges/gains
could be down in the range of 20%.
* Net sales were $1.95 billion, down 3%.
* 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 been off
approximately 8% in constant currency.
* Operating income was $260.3 million, down 15%.
* Return on equity before charges/gains was 18%.
* Return on invested capital before charges/gains was 10%.
Outlook for Second Quarter; Reaffirming Full-Year Target
“As challenging as the home products market remains, we expect that
results for Fortune Brands - while still down - will get better in the
second quarter,” Wesley continued. “We expect to continue benefiting
from the sustained global growth of our premium and super-premium
spirits brands and the success of our powerful golf brands. We’ll also
fully benefit from targeted price increases that we’ve successfully
implemented to mitigate higher commodities costs.
“For the second quarter, we expect diluted earnings per share before
charges/gains could be down in the mid-single-digit-to-low-double-digit
range, as strength in our Spirits & Wine and Golf segments and the
benefit of price increases in home products temper the impact of lower
but gradually improving results in Home & Hardware.
“For the full year, we continue to believe strong performance in Spirits
& Wine and growth in Golf will help offset lower results for our home
products brands. Accordingly, we’re reaffirming our expectation that
earnings per share before charges/gains for Fortune Brands will be in
the range of down mid-single digits to up low-single digits. That’s
against the EPS before charges/gains of $5.33 that Fortune Brands
delivered in 2006,” Wesley concluded.
The company also announced that it is continuing to target free cash
flow for 2007 in the range of $500-600 million after dividends and
capital expenditures.
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 spirits and wine, home and hardware
products, and golf equipment. 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.
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. 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, the MSCI World
Index and the Ocean Tomo 300(tm) Patent Index.
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