Fortune Brands, Inc., which owns Titleist, among other brands, reported net sales for the first quarter of 2010 increased 13%, reflecting strong sales gains for spirits and home products. Management said sales benefited from market share gains, improving consumer markets, rebuilding of inventories by channel partners in certain home products categories, foreign exchange and favorable year-over-year comparisons. Golf sales improved slightly to $353.6 million from $347.0 million a year ago. Operating earnings for the Golf segment improved to $44.0 million from $9.0 million a year ago.
These strong results were driven by the powerful combination of higher volumes and lower costs, as each of our three brand groups outperformed our expectations, said Bruce Carbonari, chairman and chief executive officer of Fortune Brands. Over the course of the downturn, we focused sharply on positioning Fortune Brands for strong growth when the economy recovers, and those initiatives are clearly taking hold. Our innovations and strategic brand investments are helping fuel top-line growth, and were driving even stronger growth at the bottom line as we leverage our lower cost structures and enhance our productivity. Were pleased that the momentum we saw in the fourth quarter continued to build as we began 2010.
Were seeing consumers getting more active, which reinforces our confidence that this is an excellent time to invest in brand growth, Carbonari continued. Our strategic investments in spirits helped drive growth for our brand portfolio in all global regions, including share gains in key markets for brands such as Jim Beam, Makers Mark and Sauza. In home products, better-than-expected remodeling activity, share gains at home centers, rebuilding of inventories by customers for faucets and doors, and favorable comparisons helped drive double-digit sales gains for our cabinetry brands as well as Moen faucets, Therma-Tru doors and Simonton windows. In golf, successful new products helped drive higher sales for Titleist golf clubs and FootJoy shoes.
For the first quarter of 2010:
Net income was $72.2 million, or 47 cents per diluted share, compared to $5 cents per share in the year-ago quarter.
Comparisons were favorably impacted by lower net charges in the current quarter (2 cents per share) versus the year-ago period (25 cents per share).
Excluding charges and gains in both the current and prior-year periods, diluted EPS was 49 cents, up 63% from 30 cents in the year-ago quarter.
Net sales were $1.63 billion, up 13%.
On a comparable basis-excluding excise taxes, foreign exchange, acquisitions/divestitures, and the impact of required accounting for the companys new international spirits distribution structure-total net sales would have been up 7%.
Comparable net sales by business unit were: spirits up 7%; home & security up 13%; golf down 3%.
Operating income was $156.4 million.
Operating income before charges/gains was $161.1 million, up 33%.
Return on equity before charges/gains was 8%.
Return on invested capital before charges/gains was 6%.
Outlook for Earnings Growth in 2010
Our goal entering the year was for Fortune Brands to return to EPS growth in 2010, and our first quarter results enhance our confidence in achieving that goal, said Carbonari. Earlier this week, as a result of our strong first quarter, we raised the bottom end of our earnings target range. While there is still uncertainty in global economies-and it remains to be seen how the expiration of U.S. government stimulus programs will impact home products demand-we feel well positioned to deliver improved results. We expect the markets for each of our brand groups will be up at a low-single-digit rate for the year, and were aiming to outperform our categories by continuing to invest in our brands and leverage our lower cost structures.
As announced on Tuesday, Fortune Brands is now targeting to deliver diluted EPS before charges/gains for 2010 in the range of $2.50-2.80. The companys full-year target range reflects the impact of factors including raw materials costs, foreign exchange and continued strategic investments. The companys diluted EPS before charges/gains for 2009 was $2.43.
The company today also reaffirmed its target for free cash flow for 2010 (cash flow from operations less net capital expenditures) to be in the range of $375-475 million, excluding the proceeds from the sale of Cobra assets.
