Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
| May 24, 2004 | ||
| Date of Report (Date of earliest event reported) |
| FORTUNE BRANDS, INC. | ||
| (Exact name of registrant as specified in its charter) |
| Delaware | 1-9076 | 13-3295276 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
||
| 300 Tower Parkway, Lincolnshire, Illinois | 60069 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (847) 484-4400
TABLE OF CONTENTS
| INFORMATION TO BE INCLUDED IN THE REPORT | ||||||||
| Item 7. Financial Statements and Exhibits. | ||||||||
| Item 9. Regulation FD Disclosure. | ||||||||
| SIGNATURE | ||||||||
| EXHIBIT INDEX | ||||||||
| Investor Brochure of Registrant | ||||||||
Table of Contents
INFORMATION TO BE INCLUDED IN THE REPORT
Item 7. Financial Statements and Exhibits.
| (c) | Exhibits. |
| 99. | Investor Brochure dated May 20, 2004. |
Item 9. Regulation FD Disclosure.
On May 21, 2004, the Registrant began distribution of the investor brochure attached as Exhibit 99 relating to the Registrant and its business.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned thereunto duly authorized.
| FORTUNE BRANDS, INC. | ||
| (Registrant) | ||
By |
/s/ C.P. Omtvedt | |
| C.P. Omtvedt | ||
| Senior Vice President and | ||
| Chief Financial Officer | ||
Date: May 24, 2004
Table of Contents
EXHIBIT INDEX
| Sequentially | ||
| Exhibit |
Numbered Page |
|
99. Investor brochure of Registrant dated May 20, 2004. |
Fortune Brands, Inc.
Reconciliation of Underlying Net Sales to GAAP Net Sales
| 1996 |
1997 |
1997 |
1998 |
1998 |
1999 |
1999 |
2000 |
2000 |
2001 |
2001 |
2002 |
2002 |
2003 |
|||||||||||||||||||||||||||||||||||||||||||
Underlying Net Sales |
$ | 4,254.9 | $ | 4,408.8 | $ | 4,660.7 | $ | 4,845.7 | $ | 4,947.5 | $ | 5,152.8 | $ | 5,203.7 | $ | 5,517.6 | $ | 5,176.6 | $ | 5,050.6 | $ | 5,059.5 | $ | 5,293.6 | $ | 5,502.5 | $ | 5,775.0 | ||||||||||||||||||||||||||||
Net impact acqs. & divestitures |
18.3 | 24.1 | (234.9 | ) | — | (150.3 | ) | (59.9 | ) | (80.8 | ) | (52.0 | ) | 235.0 | 150.1 | (19.9 | ) | 53.4 | (135.9 | ) | 0.6 | |||||||||||||||||||||||||||||||||||
Impact of foreign exchange rates |
— | (7.1 | ) | — | (48.5 | ) | — | (16.9 | ) | — | (84.6 | ) | — | (72.2 | ) | — | 19.6 | — | 136.9 | |||||||||||||||||||||||||||||||||||||
Spirits & Wine excise taxes |
444.5 | 418.7 | 418.7 | 443.7 | 443.7 | 448.7 | 401.8 | 394.8 | 340.4 | 344.9 | 314.7 | 311.1 | 311.1 | 302.0 | ||||||||||||||||||||||||||||||||||||||||||
Interim Absolut sales |
— | — | — | — | — | — | — | — | — | 205.3 | 205.3 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
EITF Restatements |
— | — | — | 39.2 | 39.2 | (24.1 | ) | (24.1 | ) | (140.4 | ) | (116.6 | ) | (119.1 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||
GAAP Net Sales |
$ | 4,717.7 | $ | 4,844.5 | $ | 4,844.5 | $ | 5,280.1 | $ | 5,280.1 | $ | 5,500.6 | $ | 5,500.6 | $ | 5,635.4 | $ | 5,635.4 | $ | 5,559.6 | $ | 5,559.6 | $ | 5,677.7 | $ | 5,677.7 | $ | 6,214.5 | ||||||||||||||||||||||||||||
% Change Underlying Sales |
3.6 | % | 4.0 | % | 4.1 | % | 6.0 | % | -2.4 | % | 4.6 | % | 5.0 | % | ||||||||||||||||||||||||||||||||||||||||||
% Change GAAP Net Sales |
2.7 | % | 9.0 | % | 4.2 | % | 2.5 | % | -1.3 | % | 2.1 | % | 9.5 | % | ||||||||||||||||||||||||||||||||||||||||||
| (1) | Underlying Net Sales is a non-GAAP measure and reflects year to year performance of our current businesses. It is equal to net sales excluding changes in foreign currency exchange rates, spirits & wine excise taxes, interim Absolut sales, results from divestitures in both periods, and excludes the adoption of accounting standards (EITF) not effective when the period was publicly reported. It includes the results from acquisitions in the prior period. Management believes that this measure is useful in analyzing the Company’s performance from year to year. In assessing this measure, investors should note that the net impact of acquisitions and divestitures, the impact of foreign exchange as well as the impact of excise taxes and interim Absolut sales have been excluded in order to provide an additional measure to investors seeking to evaluate the Company’s underlying financial performance from year to year. |
Fortune Brands, Inc.
Reconciliation of Underlying Operating Income to GAAP Operating Income
| 1996 |
1997 |
1997 |
1998 |
1998 |
1999 |
1999 |
2000 |
2000 |
2001 |
2001 |
2002 |
2002 |
2003 |
|||||||||||||||||||||||||||||||||||||||||||
Underlying Operating Income (O.I.) |
$ | 603.3 | $ | 665.7 | $ | 676.5 | $ | 728.1 | $ | 727.3 | $ | 753.6 | $ | 760.9 | $ | 840.5 | $ | 784.9 | $ | 742.8 | $ | 768.5 | $ | 835.1 | $ | 871.8 | $ | 927.9 | ||||||||||||||||||||||||||||
Restructuring related items |
— | (298.2 | ) | (298.2 | ) | — | — | (196.0 | ) | (196.0 | ) | (73.0 | ) | (73.0 | ) | (98.1 | ) | (98.1 | ) | (55.8 | ) | (55.8 | ) | (33.7 | ) | |||||||||||||||||||||||||||||||
Net impact acqs. & divestitures |
(0.2 | ) | 0.9 | (14.9 | ) | — | (11.3 | ) | (6.8 | ) | — | 35.9 | 23.5 | (16.2 | ) | — | (29.4 | ) | — | |||||||||||||||||||||||||||||||||||||
Impact of foreign exchange rates |
— | (5.0 | ) | — | (12.1 | ) | — | 0.5 | — | (19.7 | ) | — | (12.6 | ) | — | 7.3 | — | 35.3 | ||||||||||||||||||||||||||||||||||||||
FAS 142 amortization benefit as of 1/1/96 |
(91.9 | ) | (92.9 | ) | (92.9 | ) | (96.4 | ) | (96.4 | ) | (73.2 | ) | (73.2 | ) | (66.5 | ) | (66.5 | ) | (49.6 | ) | (49.6 | ) | — | — | — | |||||||||||||||||||||||||||||||
Writedown of intangibles |
— | — | — | — | — | (1,126.0 | ) | (1,126.0 | ) | (502.6 | ) | (502.6 | ) | (73.3 | ) | (73.3 | ) | — | — | (12.0 | ) | |||||||||||||||||||||||||||||||||||
EITF 0-09 restatement |
— | — | — | — | — | — | — | (0.9 | ) | (0.9 | ) | (1.4 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
GAAP Operating Income |
$ | 511.2 | $ | 270.5 | $ | 270.5 | $ | 619.6 | $ | 619.6 | $ | (641.1 | ) | $ | (641.1 | ) | $ | 177.8 | $ | 177.8 | $ | 531.3 | $ | 531.3 | $ | 786.6 | $ | 786.6 | $ | 917.5 | ||||||||||||||||||||||||||
% Change Underlying Operating Income |
10.3 | % | 7..6 | % | 3.6 | % | 10.5 | % | -5.4 | % | 8.7 | % | 6.4 | % | ||||||||||||||||||||||||||||||||||||||||||
% Change Net
GAAP Operating Income |
-47.1 | % | 129.1 | % | — | — | 198.8 | % | 48.1 | % | 16.6 | % | ||||||||||||||||||||||||||||||||||||||||||||
| (2) | Underlying Operating Income is a non-GAAP measure and reflects year to year performance of our current businesses. It is equal to operating income excluding restructuring and restructuring-related items, changes in foreign currency exchange rates, results of divestitures in both periods, and the adoption of accounting standards (EITF 01-09) not effective when the period was publicly reported. It includes results from acquisitions in the prior period. Amortization of intangibles 1996-2002 is based on current intangible values and current FAS 142 goodwill accounting (adopted 1/1/02). Management believes that this measure is useful in analyzing the Company’s performance from year to year. In assessing this measure, investors should note that the net impact of restructuring and restructuring-related items, the writedown of intangibles, acquisitions and divestitures, and foreign exchange have been excluded, as well as amortization expense has been restated, in order to provide an additional measure to investors seeking to evaluate the Company’s underlying financial performance from year to year. |
6
Fortune Brands, Inc.
Reconciliation of EPS Before Charges/Gains to GAAP EPS
| 1996 |
1997 |
1997 |
1998 |
1998 |
1999 |
1999 |
2000 |
2000 |
2001 |
2001 |
2002 |
2002 |
2003 |
|||||||||||||||||||||||||||||||||||||||||||
Diluted EPS Before Charges/Gains |
$ | 1.28 | $ | 1.48 | $ | 1.48 | $ | 1.67 | $ | 1.67 | $ | 1.99 | $ | 1.99 | $ | 2.29 | $ | 2.29 | $ | 2.41 | $ | 2.41 | $ | 2.88 | $ | 3.19 | $ | 3.79 | ||||||||||||||||||||||||||||
Tax-related special items |
— | — | — | — | — | — | — | 0.19 | 0.19 | 0.78 | 0.78 | 0.46 | 0.46 | 0.28 | ||||||||||||||||||||||||||||||||||||||||||
Restructuring-related items |
— | (1.16 | ) | (1.16 | ) | — | — | (0.75 | ) | (0.75 | ) | (0.30 | ) | (0.30 | ) | (0.41 | ) | (0.41 | ) | (0.24 | ) | (0.24 | ) | (0.16 | ) | |||||||||||||||||||||||||||||||
Gain/(loss) on divestitures |
— | — | — | — | — | 0.13 | 0.13 | — | — | 0.14 | 0.14 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Writedown of intangibles |
— | — | — | — | — | (6.76 | ) | (6.76 | ) | (3.09 | ) | (3.09 | ) | (0.43 | ) | (0.43 | ) | — | — | (0.05 | ) | |||||||||||||||||||||||||||||||||||
Benefit from FAS 142 (1/1/02) |
— | — | — | — | — | — | — | — | — | — | — | 0.31 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Impact of dilutive shares |
— | — | — | — | — | 0.04 | 0.04 | 0.03 | 0.03 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
1/96 benefit Gallaher payment |
(0.25 | ) | (0.09 | ) | (0.09 | ) | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Diluted GAAP EPS |
$ | 1.03 | $ | 0.23 | $ | 0.23 | $ | 1.67 | $ | 1.67 | ($5.35 | ) | ($5.35 | ) | ($0.88 | ) | ($0.88 | ) | $ | 2.49 | $ | 2.49 | $ | 3.41 | $ | 3.41 | $ | 3.86 | ||||||||||||||||||||||||||||
%Change EPS Before Charges/Gains |
15.6 | % | 12.8 | % | 19.2 | % | 15.1 | % | 5.2 | % | 19.5 | % | 18.8 | % | ||||||||||||||||||||||||||||||||||||||||||
%Change GAAP Diluted EPS |
-77.7 | % | 626.1 | % | — | — | — | 36.9 | % | 13.2 | % | |||||||||||||||||||||||||||||||||||||||||||||
| (3) | Diluted EPS Before Charges and Gains is a non-GAAP measure and indicates the underlying performance of our businesses prior to costs associated with our restructuring initiatives, writedowns of intangibles or goodwill, tax credits or charges, gains or losses on divestitures, and assuming a 1/1/96 benefit from the net cash payment Gallaher made to us in connection with its spin-off on 5/31/97. Management believes that this measure is useful in analyzing the Company’s performance from year to year. In assessing this measure, investors should note that the net impact of tax-related special items, restructuring and restructuring-related items, gains/losses on the sale of certain operations, writedowns of identifiable intangibles and goodwill, and the interim period benefit from the net cash payment received from Gallaher Group Plc have been excluded. |
Fortune Brands, Inc.
Reconciliation of Return On Invested Capital (ROIC) Before Charges/Gains to GAAP ROIC
| 1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
||||||||||||||||||||||
ROIC Before Charges/Gains |
11.6 | % | 10.7 | % | 11.9 | % | 12.3 | % | 13.3 | % | 16.0 | % | 16.5 | % | ||||||||||||||
Adjusted Net Income before after-tax interest |
$ | 466.6 | $ | 424.8 | $ | 480.8 | $ | 517.8 | $ | 484.6 | $ | 537.7 | $ | 616.2 | ||||||||||||||
Net (charge)/gain |
(201.0 | ) | — | (1,230.3 | ) | (503.9 | ) | 12.6 | 35.0 | 95 | ||||||||||||||||||
FAS 142 amortization benefit as of 1/1/96 |
(92.9 | ) | (96.4 | ) | (73.2 | ) | (66.5 | ) | (49.6 | ) | — | — | ||||||||||||||||
GAAP Net Income before after-tax interest |
$ | 172.7 | $ | 328.4 | ($822.7 | ) | ($52.6 | ) | $ | 447.6 | $ | 572.7 | $ | 625.7 | ||||||||||||||
Adjusted Invested Capital |
$ | 4,024.6 | $ | 3,965.1 | $ | 4,049.1 | $ | 4,201.6 | $ | 3,642.6 | $ | 3,365.3 | $ | 3,740.8 | ||||||||||||||
Cumulative net (charge)/gain |
1,521.8 | 1,450.6 | 756.9 | 379.2 | 5.1 | 71.2 | 26.0 | |||||||||||||||||||||
GAAP Invested Capital |
$ | 5,546.4 | $ | 5,415.7 | $ | 4,806.0 | $ | 4,580.8 | $ | 3,647.7 | $ | 3,436.5 | $ | 3,766.8 | ||||||||||||||
GAAP ROIC |
3.1 | % | 6.1 | % | -17.1 | % | -1.1 | % | 12.3 | % | 16.7 | % | 16.6 | % | ||||||||||||||
| (4) | Return On Invested Capital (ROIC) represents the sum of net income before charges and gains plus after-tax interest divided by the 13-point average of the sum of total debt less cash plus total stockholders equity. The impact of improved returns attributable to current FAS 142 goodwill accounting and the writedowns of intangibles have been excluded by restating invested capital and net income as they would appear if current FAS 142 accounting had gone into effect and the writedowns had occurred on 1/1/96. Management believes that this measure is useful in analyzing the Company’s performance from year to year. In assessing this measure, investors should note that Net Income excludes after-tax interest, the net impact of tax-related special items, restructuring and restructuring-related items, gains/losses on the sale of certain operations and writedowns of intangibles, and amortization expense has been restated to reflect current FAS 142 accounting (adopted 1/1/02) and intangible values. For further details on charges and gains, see the GAAP reconciliation of EPS Before Charges/Gains. |
7
Fortune Brands, Inc.
Reconciliation of ROE Before Charges/Gains to GAAP ROE
| 1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
||||||||||||||||||||||
ROE Before Charges/Gains |
15.3 | % | 15.0 | % | 17.4 | % | 20.1 | % | 20.2 | % | 22.5 | % | 23.5 | % | ||||||||||||||
Adjusted Net Income |
$ | 334.3 | $ | 389.0 | $ | 412.1 | $ | 431.9 | $ | 422.2 | $ | 489.8 | $ | 568.6 | ||||||||||||||
Net (charge)/gain |
(144.0 | ) | (30.5 | ) | (1,230.4 | ) | (504.0 | ) | 12.6 | 35.0 | 9.5 | |||||||||||||||||
FAS 142 amortization benefit as of 1/1/96 |
(92.9 | ) | (96.4 | ) | (73.2 | ) | (66.5 | ) | (49.6 | ) | — | — | ||||||||||||||||
GAAP Net Income after preferred dividends |
$ | 97.4 | $ | 262.1 | $ | (891.5 | ) | $ | (138.6 | ) | $ | 385.2 | $ | 524.8 | $ | 578.1 | ||||||||||||
Adjusted Equity |
$ | 2,185.5 | $ | 2,601.1 | $ | 2,366.6 | $ | 2,151.2 | $ | 2,087.8 | $ | 2,180.2 | $ | 2,416.9 | ||||||||||||||
Cumulative net (charge)/gain |
1,730.7 | 1,438.8 | 755.5 | 395.2 | 18.8 | 84.7 | 26.0 | |||||||||||||||||||||
GAAP Equity |
$ | 3,916.2 | $ | 4,039.9 | $ | 3,122.1 | $ | 2,546.4 | $ | 2,106.6 | $ | 2,264.8 | $ | 2,442.9 | ||||||||||||||
GAAP ROE |
2.5 | % | 6.5 | % | -28.6 | % | -5.4 | % | 18.3 | % | 23.2 | % | 23.7 | % | ||||||||||||||
| (5) | Return on Equity (ROE) represents the sum of net income before charges and gains divided by the 13-point average of the sum of equity. The impact of improved returns attributable to current FAS 142 goodwill accounting and writedowns of intangibles have been excluded by restating equity and net income as they would appear if current FAS 142 accounting had gone into effect and the writedowns had occurred on 1/1/96. Management believes that this measure is useful in analyzing the Company’s performance from year to year. In assessing this measure, investors should note that Net Income excludes the net impact of tax-related special items, restructuring and restructuring-related items, gains/losses on the sale of certain operations and writedowns of intangibles, and amortization expense has been restated to reflect current FAS 142 accounting (adopted 1/1/02) and intangible values. For further details on charges and gains, see the GAAP reconciliation of EPS Before Charges/Gains. |
Fortune Brands, Inc.
Reconciliation of Free Cash Flow to GAAP Cash Flow Provided By
Operating Activities
| 1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
||||||||||||||||||||||
Free Cash Flow (after dividends) |
$ | 95.8 | $ | 11.4 | $ | 121.5 | $ | 112.5 | $ | 286.7 | $ | 447.2 | $ | 441.9 | ||||||||||||||
Net capital expenditures (net of proceeds) |
191.4 | 245.4 | 217.3 | 212.2 | 204.0 | 186.4 | 181.9 | |||||||||||||||||||||
Dividends Paid to Stockholders |
139.1 | * | 147.4 | 149.6 | 147.7 | 148.0 | 153.4 | 166.9 | ||||||||||||||||||||
GAAP Cash Flow Provided by Operating Activities |
$ | 426.3 | $ | 404.2 | $ | 488.4 | $ | 472.4 | $ | 638.7 | $ | 787.0 | $ | 790.7 | ||||||||||||||
| (6) | Free cash flow indicates the resources of our current business to invest in internal growth, make acquisitions, repay debt and repurchase stock. Management believes that this measure is useful in analyzing the Company’s performance from year to year. | |||
| * | Pro forma for interim period spin-off Gallaher Group Plc (5/30/97), utilizing Fortune Brands’ 80¢ indicated annual rate for American Brands’ 1997 dividend payments (results in a $104.3mm deduction to the $243.4mm GAAP figure). | |||
| (7) | “Return on Net Tangible Assets” is a measure of operating returns. It represents after-tax (36.3% rate) GAAP Operating Income divided by a 12 month average of GAAP assets less intangibles, accounts payable and other non-interest bearing liabilities. | |||
| (8) | Excludes benefit of lower goodwill expense (FAS 142). | |||
| (9) | Based on indicated annual rate at end of period. | |||
| (10) | 1996 pro forma for ‘97 Gallaher spin-off as if done 1/1/96. | |||
| (11) | GAAP diluted EPS compound growth rates 96-03: Fortune Brands, 21%; S&P 500, 3%. Fortune Brands’ 17% EPS growth rate before charges/gains benefited 3% points from lower goodwill expense, including from FAS 142. S&P 500’s goodwill benefit over period is not available. Standard & Poors is source for S&P 500 data. | |||
| (12) | While the Company currently expects net charges in the range of $0.15-0.17 per share in 2004 versus a net gain of $0.07 per share from charges/gains in 2003, favorable resolution of the routine audit of the Company’s 1997-2001 tax returns could result in a further benefit to earnings in 2004. | |||
| (13) | All brand sales are based on full year ‘03 sales rounded to nearest $50mm (Therma-Tru acquired 11/03). | |||