Avenue Vine

Fortune Brands, Inc. (NYSE: FO), a leading consumer brands company, today announced record results for the fourth quarter and full year 2006. Quarterly results benefited from strong performance for the company’s premium and super-premium spirits and wine brands plus continued share gains in key home products and golf categories. Results also reflected a net gain due to a one-time deferred tax benefit related to reduced international tax rates.

“The advantage of Fortune Brands’ unique breadth and balance continued to deliver powerful benefits, as we comfortably achieved the fourth-quarter EPS target we announced three months ago as well as the full-year target we established a year ago,” said Fortune Brands chairman and chief executive officer Norm Wesley.

“Fortune Brands recorded its 22nd consecutive quarter of double-digit growth in EPS before charges/gains as each of our three businesses performed in line with our expectations. The strong fourth-quarter performance of brands like Jim Beam, Maker’s Mark, Courvoisier, Clos du Bois, Titleist and FootJoy helped offset the increasing impact of the U.S. housing market on our home products brands.

“We’re building brands and outperforming our markets with share-gain initiatives that include developing successful new products, extending brands into new markets and expanding customer relationships,” Wesley continued. “As expected, the benefits of our spirits and wine acquisition accelerated as the year unfolded. Notably, this was the first full year in our history in which spirits and wine was our largest profit contributor, reflecting the success of our major acquisition."

“Even though comparable sales for our home and hardware brands were down at a mid-single-digit rate in the quarter, our faucet, cabinetry and security brands performed well and continued to gain share. We faced challenging marketplace conditions for our home products brands, but our proactive cost controls helped limit the adverse impact on margins in Home & Hardware to about one-half percent on an underlying basis,” Wesley added.

For the fourth quarter:
-- Net income was $252 million, or $1.62 per diluted share, up 38% from $1.17 in the year-ago quarter.
-- Comparisons benefited from a net gain (23 cents per share) from a deferred tax benefit (31 cents per share) related to reduced international tax rates, partly offset by restructuring-related charges (8 cents per share) principally for supply-chain initiatives in the home products business.
-- Excluding one-time items in both the current and prior-year periods, EPS before charges/gains was $1.39, up 14% from $1.22 in the year-ago quarter.
-- These results comfortably achieved the company's previously announced fourth quarter target of high-single-digit to low-double-digit growth and were four cents above the mean estimate of Wall Street securities analysts (source: Thomson First Call).
-- Net sales were $2.28 billion, up 16%.
-- 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 risen modestly in constant currency.
-- Operating income was $381 million, up 25%.

For the full year, on a continuing operations basis:
-- Net income was $824 million, or $5.39 per diluted share, up 39% from $3.87 in 2005.
-- Excluding one-time items in both years, EPS before charges/gains was $5.30, up 15% from $4.62 in 2005.
-- Net sales were $8.77 billion, up 24%.
-- On a comparable basis, the company estimates total net sales for Fortune Brands would have risen in the range of 4-5% in constant currency.
-- Operating income was $1.50 billion, an increase of 29%.
-- Free cash flow reached $584 million after dividends and capital expenditures, above the top of the company's previously announced target range of $450-500 million and well above the $385 million in free cash flow generated in 2005.
-- Return on equity before charges/gains was 18%.
-- Return on invested capital before charges/gains was 10%.
-- The dividend increased 8% to an annual rate of $1.56 per share.

Breadth & Balance to Benefit 2007 Results:
“Looking to 2007, our breadth and balance will continue to be an important advantage, especially as we confront the strong headwinds of lower housing activity in the U.S.,” Wesley continued. “Our continued global growth in the premium spirits and wine market, our technological and brand leadership in golf, and our share-gain and new-market initiatives across attractive home products categories position us well to navigate the challenges 2007 will bring.

“As we’ve previously announced, our Home & Hardware business will face very challenging market conditions, as well as very tough comparisons, especially in the first half of 2007. Importantly – while our current assumption is that the overall home products market could decline at a double-digit rate in 2007 – we believe our brands will continue to outperform the market. We also expect second-half results in our home products business – while potentially down – will be better than the first half as market conditions begin to improve and our comparisons ease. In this environment, we’re aggressively managing costs, aligning supply chains with expected demand and partly offsetting higher commodities costs with select price increases."

“In 2007 we expect continued strong performance in Spirits & Wine and growth in Golf will help offset lower results in our Home & Hardware segment,” Wesley said. “For the full year, we expect earnings per share before charges/gains for Fortune Brands will be in the range of down mid-single digits to up low-single digits. Underlying our goal are these full-year targets for our businesses:

Spirits & Wine operating income before charges up in the mid-to-high single-digit range.

Home & Hardware operating income before charges down in the mid-to-high single-digit range.

Golf operating income before charges up in the low-to-mid single-digit range.

“We expect the first quarter will be the most challenging quarter of the year for our home products brands, especially as compared to last year’s very strong first quarter when operating income before charges in Home & Hardware rose 19%. We also expect to be adversely impacted by higher year-over-year costs for certain raw materials. We’re implementing price increases to help offset these higher costs, but we do not expect to bridge the gap in the first quarter. For the first quarter, we expect diluted earnings per share before charges/gains for Fortune Brands may be down in the range of 20%, principally as a result of the challenging home products market, difficult comparisons in Home & Hardware and the impact of commodities costs,” Wesley concluded.

About Fortune Brands:
Fortune Brands, Inc. is a leading consumer brands company with annual sales exceeding $8 billion. Its operating companies have premier brands and leading market positions in spirits and wine, home and hardware products, and golf equipment. Beam Global Spirits & Wine, Inc. is the company’s spirits and wine business. Major spirits and wine brands include Jim Beam and Maker’s Mark bourbons, Sauza tequila, Canadian Club whisky, Courvoisier cognac, DeKuyper cordials, Starbucks™ liqueurs, Laphroaig single malt Scotch and Clos du Bois and Geyser Peak wines. Home and hardware brands include Moen faucets, Aristokraft, Omega, Diamond and Schrock cabinets, Therma-Tru door systems, Simonton windows, Master Lock padlocks and Waterloo tool storage sold by units of Fortune Brands Home & Hardware LLC. Acushnet Company’s golf brands include Titleist, Cobra and FootJoy. Fortune Brands, headquartered in Deerfield, Illinois, is traded on the New York Stock Exchange under the ticker symbol FO and is included in the S&P 500 Index, the MSCI World Index and the Ocean Tomo 300™ Patent Index.

Forward-Looking Statements:
This press release contains statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Readers are cautioned that these forward-looking statements speak only as of the date hereof, and the company does not assume any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date of this release. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to: competitive market pressures (including pricing pressures); consolidation of trade customers; successful development of new products and processes; ability to secure and maintain rights to intellectual property; risks pertaining to strategic acquisitions and joint ventures, including the potential financial effects and performance of such acquisitions or joint ventures, and integration of acquisitions and the related confirmation or remediation of internal controls over financial reporting; ability to attract and retain qualified personnel; general economic conditions, including the U.S. housing market; weather; risks associated with doing business outside the United States, including currency exchange rate risks; interest rate fluctuations; commodity and energy price volatility; costs of certain employee and retiree benefits and returns on pension assets; dependence on performance of distributors and other marketing arrangements; the impact of excise tax increases on distilled spirits and wines; changes in golf equipment regulatory standards and other regulatory developments; potential liabilities, costs and uncertainties of litigation; impairment in the carrying value of goodwill or other acquired intangibles; historical consolidated financial statements that may not be indicative of future conditions and results due to the recent portfolio realignment; any possible downgrades of the company’s credit ratings; as well as other risks and uncertainties detailed from time to time in the company’s Securities and Exchange Commission filings.

Fortune Brands Website: www.fortunebrands.com

For Complete Report Contacts :
Fortune Brands, Inc.
Media Relations:
Clarkson Hine
(847) 484-4415
or
Investor Relations:
Tony Diaz
(847) 484-4410

To receive company news releases by e-mail, please visit www.fortunebrands.com.

Source: “Fortune Brands Reports Record Fourth Quarter and Full Year Results,” Fortune Brands, Inc. (NYSE: FO), DEERFIELD, Ill.--January 31, 2007 07:04