Fortune Brands Inc. the parent of Titleist, FootJoy and Cobra Golf, slashed its quarterly dividend by 57 percent but gave a much better-than-expected preview of first-quarter results. Despite the strong first quarter, the company kept its prior full-year profit forecast, but raised its full-year target for free cash flow.
Those golf brands are part of its Acushnet Co. division. Other brands owned by the conglomerate include Jim Beam, Makers Mark bourbon, Sauza tequila in its major spirits group. Moen faucets, Aristokraft, Omega, Diamond and Kitchen Craft
cabinetry, Therma-Tru door systems, Simonton windows, Master Lock
security products and Waterloo tool storage are sold by units of Fortune
Brands Home & Hardware LLC.
Fortune cut its dividend to an annual rate of 76 cents a share from $1.76, saving $110 million over the balance of 2009 and $150 million on an annualized basis.
“One of the undeniable truths of the current economic environment is that 'cash is king,'” Chief Executive Bruce Carbonari said in a statement.
The Deerfield, Illinois-based company said it expected to post a first-quarter profit of about 30 cents a share before one-time items, topping Wall Street's consensus forecast of 16 cents. On a net basis, the company said it would report first-quarter earnings of about 5 cents per share.
“Each of our businesses performed at or above our expectations in
navigating what we expected to be the most difficult quarter of the
year,” said Bruce Carbonari, chairman and chief executive officer of
Fortune raised its 2009 target for free cash flow to around $400 million from its prior outlook of $100 million to $200 million. At the same time, the company affirmed its full-year forecast for a profit of $2.00 to $2.50 per share before one-time items, which compares with the analysts' average forecast of $2.20.
The company said a series of initiatives designed to increase
free cash flow will strengthen its balance sheet and enhancing
its ability to pay down debt and capitalize on potential value-creating
“As we position Fortune Brands to create value in this challenging
economy and beyond, one of the undeniable truths of the current economic
environment is that cash is king,” Carbonari continued. “Enhancing
financial flexibility in this climate is a strategic imperative that
increases our ability to create value for shareholders.
“Weve taken a proactive approach to cash management in two important
ways,” said Carbonari. “First, were sharpening our focus on cash flow
generation across all of our businesses, targeting an additional $125
million of free cash this year by further tightening capital
expenditures and enhancing our use of working capital.
“Second, our board of directors has approved a reduction in the dividend
to an annual rate of 76 cents per share payable 19 cents per quarter
enabling Fortune Brands to retain an additional $150 million on an
annualized basis, which represents $110 million over the balance of
2009. This change results in a current payout ratio in the range of
30-38% based on our 2009 earnings target range. This is not an action we
took lightly. However, we believe aligning our dividend with our
historical payout ratio is a prudent course of action in the current
environment and is in the best long-term interest of our shareholders. I
also want to underscore that we remain committed to a meaningful
dividend, and we look forward to building on it in the future,”