Fortune Brands reported record results for the first quarter of 2004. Successful new products, expanded customer relationships and productivity gains helped drive broad-based earnings growth. High-return acquisitions and favorable foreign exchange added to the company's underlying performance.
Net income increased 40% to $139.7 million, and diluted earnings per share were $0.92, up 39% from $0.66 a year ago. Diluted EPS before charges/gains was $0.91, up 32% from $0.69 and 9 cents above the mean estimate of Wall Street securities analysts. Net sales were $1.7 billion, up 23%. Acquisitions benefited sales by 9% and favorable foreign exchange benefited sales by 3%.
Operating income was $229.6 million, up 33%. Return on equity was 24.3%. Return on invested capital was 16.3%. Year-to-date share repurchases total 1.0 million shares.
“Fortune Brands started 2004 with outstanding first quarter results,” said Fortune Brands chairman & CEO Norm Wesley. “From home products to golf products to distilled spirits, we saw broad-based demand for our portfolio of leading consumer brands. Underlying sales grew double digits, and each of our businesses performed above our expectations – with significant upside from our home & hardware and golf brands. Our largest brands – including Moen, Titleist, Jim Beam, Aristokraft and Master Lock – all fueled significant growth.
“Our results reflect the success of our brand investments, share-gain initiatives and enhanced productivity. We're winning in the marketplace by developing successful new products and sharpening our consumer insights. We're gaining additional share with expanded customer relationships. And we're driving profit growth higher with improved cost structures, highly-efficient supply chains and our office products recovery program,” Wesley added. Raising Full-Year Guidance to Strong Double-Digit Growth in EPS Before Charges/Gains
“Our first quarter performance, our breadth of leading consumer brands and the success of our strategy position us well to outperform our long-term growth target and further enhance our returns in 2004,” Wesley said. “Even though we expect to see a lessening benefit from foreign exchange and higher costs for certain commodities over the balance of the year, we anticipate that targeted price increases and supply chain efficiencies will help offset these factors. We expect to benefit from an improving economy, as well. For the second quarter and the full year, we now expect that our EPS before charges/gains will grow strong double digits.”
FORTUNE BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
----------------------------
Three Months Ended March 31,
2004 2003 %Change
----------------------------
Net Sales $1,707.8 $1,392.1 22.7
----------------------------
Cost of goods sold 937.6 766.4 22.3
Excise taxes on spirits and wine 78.5 70.5 11.3
Advertising, selling, general
and administrative expenses 442.8 371.3 19.3
Amortization of intangibles 11.1 4.8 131.3
Restructuring
and restructuring-related items 8.2 6.5 26.2
--------------------------
Operating Income 229.6 172.6 33.0
--------------------------
Interest expense 21.7 18.2 19.2
Other (income) expense, net (19.0) (8.9) (113.5)
Income taxes 82.5 59.5 38.7
Minority interests 4.7 4.3 9.3
--------------------------
Net Income 139.7 99.5 40.4
--------------------------
Earnings Per Common Share --------------------------
Basic 0.95 0.68 39.7
Diluted 0.92 0.66 39.4
--------------------------
Avg. Common Shares Outstanding --------------------------
Basic 146.3 146.2 0.1
Diluted 151.2 150.2 0.7
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Actual Common Shares Outstanding --------------------------
Basic 146.1 145.2 0.6
Diluted 151.3 149.1 1.5
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FORTUNE BRANDS, INC.
(In millions, except per share amounts)
(Unaudited)
NET SALES AND OPERATING INCOME
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----------------------------
Three Months Ended March 31,
----------------------------
2004 2003 % Change
----------------------------
Net Sales
Home and Hardware $ 821.5 $ 620.6 32.4
Spirits and Wine 276.5 239.2 15.6
Golf 338.9 282.4 20.0
Office 270.9 249.9 8.4
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Total $1,707.8 $1,392.1 22.7
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Operating Income
Home and Hardware $ 113.7 $ 88.3 28.8
Spirits and Wine 66.8 57.9 15.4
Golf 51.0 32.7 56.0
Office 16.0 8.0 100.0
Corporate expenses 17.9 14.3 25.2
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Total $ 229.6 $ 172.6 33.0
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Operating Income Before Charges (a)
Home and Hardware $ 114.1 $ 88.3 29.2
Spirits and Wine 66.8 57.9 15.4
Golf 53.1 32.7 62.4
Office 21.7 14.5 49.7
Less:
Corporate expenses 17.9 14.3 25.2
Restructuring and
restructuring-related items 8.2 6.5 26.2
-----------------------------
Operating Income $ 229.6 $ 172.6 33.0
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