Fortune Brands, Inc. second quarter of 2007 net income was $232 million, or $1.48 per diluted share, versus $248 million or $1.63 per diluted share, in the year-ago quarter. Net sales were $2.35 billion, up 4%. 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 2% in constant currency.
Comparisons were impacted by a restructuring-related charge (5 cents per share) in the current-year quarter and the absence of a net gain ($0.08 per share) from one-time items in the prior-year quarter. Excluding one-time items in both the current and prior-year periods, diluted EPS before charges/gains was $1.53, down 1% from $1.55 in the year-ago quarter.
These results were above the top of the company's previously announced target range for diluted EPS before charges/gains to be off in the mid-single-digit-to-low-double-digit range.
* Operating income was $428 million, down 1%.
* Return on equity before charges/gains was 17%.
* Return on invested capital before charges/gains was 9%.
“Reflecting rising consumer demand for premium brands including Jim
Beam, Sauza, Maker's Mark, Teacher's and Clos du Bois, our year-to-date
spirits-and-wine case volumes are up at a mid-single-digit rate,”
Wesley continued. “Operating income for spirits and wine benefited in
the quarter from the timing of brand spending that will accelerate in
the second half as we launch several new marketing programs. Newly
introduced products from Titleist, Cobra and FootJoy drove
second-quarter golf sales up double digits. Our strength in the
replace-remodel segment and share gains for Moen, Therma-Tru, Master
Lock and our cabinetry brands helped us outperform the home products
market. We're pleased that in the challenging environment facing our
home products – and also against challenging comparisons to last year's
very strong results – we achieved results above the high end of our EPS
target range for the quarter.”
Outlook for Third Quarter and Full Year
“Looking ahead to the balance of the year, we continue to expect that our second-half results will be better than the first half,” Wesley said. “Reflecting the advantages of our breadth and balance, we'll continue to benefit from the global growth of our premium and super-premium spirits brands, our high-performance golf brands, sustained share gains in home products and our strength in the more stable replace-remodel segment of the home products market. Additionally, we'll face less challenging comparisons to last year's second half results.
“For the third quarter, we're targeting diluted EPS before charges/gains to be in the range of up mid-single digits to down mid-single digits, and that takes into account our planned acceleration of brand spending in Spirits & Wine. With the first half behind us, we're in a position to fine-tune our target range for the full year. We're now targeting that Fortune Brands will deliver diluted EPS before charges/gains for 2007 in the flat-to-down-mid-single-digit range as strong full-year performance in Spirits & Wine and Golf help offset lower but improving full-year results in Home & Hardware,” Wesley concluded.
The company also reaffirmed its full-year target for free cash flow to be in the range of $500-600 million after dividends and capital expenditures.
