-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QaVwreAbY86eU61Y7Meku4XuREq2HqEKHXzxYcOAhstLn1v5APUzfqZwSg95F7rw p9LFQ8A2FZH9a4flLOVRJA== 0000893838-99-000173.txt : 19990630 0000893838-99-000173.hdr.sgml : 19990630 ACCESSION NUMBER: 0000893838-99-000173 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORTUNE BRANDS INC CENTRAL INDEX KEY: 0000789073 STANDARD INDUSTRIAL CLASSIFICATION: HEATING EQUIP, EXCEPT ELEC & WARM AIR & PLUMBING FIXTURES [3430] IRS NUMBER: 133295276 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-09076 FILM NUMBER: 99655752 BUSINESS ADDRESS: STREET 1: 1700 E PUTNAM AVE CITY: OLD GREENWICH STATE: CT ZIP: 06870-0811 BUSINESS PHONE: 2036985000 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN BRANDS INC /DE/ DATE OF NAME CHANGE: 19920703 11-K 1 ============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 11-K ANNUAL REPORT ------------------ Pursuant to Section 15(d) of the Securities Exchange Act of 1934 ------------------ For the Fiscal Year Ended December 31, 1998 Commission file number 1-9076 ------------------ Full Title of the Plan: DEFINED CONTRIBUTION PLAN OF FORTUNE BRANDS, INC. AND PARTICIPATING OPERATING COMPANIES ------------------ Name of issuer of the securities held pursuant to the plan And the address of its principal executive office: FORTUNE BRANDS, INC. 1700 East Putnam Avenue Old Greenwich, Connecticut 06870 ================================================================================ DEFINED CONTRIBUTION PLAN OF FORTUNE BRANDS, INC. AND PARTICIPATING OPERATING COMPANIES INDEX TO FINANCIAL STATEMENTS AND EXHIBIT FILED AS REQUIRED BY ITEM 4 OF FORM 11-K --------------- Page(s) ------- Report of Independent Accountants 2 Financial Statements: Statement of Net Assets Available for Benefits as of December 31, 1998 and 1997 3-4 Statement of Changes in Net Assets Available for Benefits for the years ended December 31, 1998 and 1997 5-6 Notes to Financial Statements 7-19 Exhibit 23 - Consent of Independent Accountants 21 Note: Supplemental schedules required by the Employee Retirement Income Security Act will be filed by the Fortune Brands, Inc. Master Defined Contribution Plan Trust. REPORT OF INDEPENDENT ACCOUNTANTS To the Corporate Employee Benefits Committee of Fortune Brands, Inc. In our opinion the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies (the "Plan"), as of December 31, 1998 and 1997, and the changes in net assets available for benefits for the years then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Corporate Employee Benefits Committee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The fund information in the statement of net assets available for benefits and the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The fund information is the responsibility of the Corporate Employee Benefits Committee. The fund information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP 11 Madison Avenue New York, New York 10010 June 25, 1999 -2-
Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Statement of Net Assets Available for Benefits with Fund Information December 31, 1998 (In Thousands) Large- Small- Growth Value- Corporate Cap Cap Inter- S&P Oriented Oriented /Govern- Govern- Fortune Value Growth Growth national 500 Diversi- Diversi- ment ment Stock Equity Equity Equity Equity Index fied fied Bond Securities Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund ---- ---- ---- ------ ------- ---- ----- ------ ----- -------- Assets Beneficial interest in Fortune Brands Inc. Master Trust net assets $22,191 $121,324 $58,188 $65,706 $11,296 $44,146 $97,300 $22,957 $13,904 $41,979 Receivables: Company contributions 648 1,154 954 1,235 239 876 849 340 150 332 Member contributions 41 177 112 156 18 102 134 25 (3) 96 Interest and dividends 4 143 1 - - - 493 1 64 218 Loan principal receivable 10 41 22 34 1 8 47 1 (4) 54 (payable) -------- --------- --------- --------- -------- -------- --------- -------- --------- --------- Total assets 22,894 122,839 59,277 67,131 11,554 45,132 98,823 23,324 14,111 42,679 -------- --------- --------- --------- -------- -------- --------- -------- --------- --------- Liabilities Accrued expenses 3 115 10 11 1 7 102 4 2 48 -------- --------- --------- --------- -------- -------- --------- -------- --------- --------- Total liabilities 3 115 10 11 1 7 102 4 2 48 -------- --------- --------- --------- -------- -------- --------- -------- --------- --------- Net assets available for $22,891 $122,724 $59,267 $67,120 $11,553 $45,125 $98,721 $23,320 $14,109 $42,631 benefits ======== ========= ========= ========= ======== ======== ========= ======== ======== ========
Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Statement of Net Assets Available for Benefits with Fund Information (Continued) December 31, 1998 (In Thousands) Short- Term Invest- Frozen Gallaher ment Fixed ADR Loan Fund Fund Fund Fund Total ---- ---- ---- ------ ------- Assets Beneficial interest in Fortune Brands Inc. Master Trust net assets $18,021 $3,915 $11,313 $12,872 $545,112 Receivables: Company contributions 508 - - - 7,285 Member contributions 38 - - - 896 Interest and dividends 80 - - - 1,004 Loan principal receivable 18 - - (232) - (payable) ------- -------- -------- --------- --------- Total assets 18,665 3,915 11,313 12,640 554,297 ------- -------- -------- --------- --------- Liabilities Accrued expenses 3 1,338 2 - 1,646 ------- -------- -------- --------- --------- Total liabilities 3 1,338 2 - 1,646 ------- -------- -------- --------- --------- Net assets available for benefits $18,662 $2,577 $11,311 $12,640 $552,651 ======= ======== ======== ======== =========
The accompanying notes are an integral part of the financial statements -3-
Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Statement of Net Assets Available for Benefits with Fund Information December 31, 1997 (In Thousands) Large- Small- Growth Value- Corporate Cap Cap Inter- S&P Oriented Oriented /Govern- Govern- Fortune Value Growth Growth national 500 Diversi- Diversi- ment ment Stock Equity Equity Equity Equity Index fied fied Bond Securities Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund ---- ---- ---- ------ ------- ---- ----- ------ ----- --------- Assets Beneficial interest in Fortune Brands Inc. Master Trust net assets $24,982 $97,278 $39,586 $57,931 $9,603 $27,986 $75,182 $20,711 $8,459 $38,494 Receivables: Company contributions 851 1,254 1,177 1,629 309 820 988 420 158 294 Member contributions 19 102 30 54 16 45 70 22 4 37 Interest and dividends 12 124 2 4 4 1 488 - 1 562 Loan principal receivable (payable) 6 42 7 12 5 8 24 3 - 18 -------- --------- --------- --------- --------- --------- --------- -------- --------- --------- Total assets 25,870 98,800 40,802 59,630 9,937 28,860 76,752 21,156 8,622 39,405 -------- --------- --------- --------- --------- --------- --------- -------- --------- --------- Liabilities Accrued expenses 6 118 9 14 3 7 106 5 4 54 -------- --------- --------- --------- --------- --------- --------- -------- --------- --------- Total liabilities 6 118 9 14 3 7 106 5 4 54 -------- --------- --------- --------- --------- --------- --------- -------- --------- --------- Net assets available for benefits $25,864 $98,682 $40,793 $59,616 $9,934 $28,853 $76,646 $21,151 $8,618 $39,351 ======== ========= ========= ======== ======== ======== ======== ======== ======== =========
Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Statement of Net Assets Available for Benefits with Fund Information (Continued) December 31, 1997 (In Thousands) Short- Term Invest- Frozen Gallaher ment Fixed ADR Loan Fund Fund Fund Fund Total ---- ---- ---- ------ ------- Assets Beneficial interest in Fortune Brands Inc. Master Trust net assets $14,848 $3,705 $10,734 $12,275 $441,774 Receivables: Company contributions 727 - - - 8,627 Member contributions 22 - - - 421 Interest and dividends 72 - - - 1,270 Loan principal receivable (payable) 11 - - (136) - -------- -------- --------- --------- --------- Total assets 15,680 3,705 10,734 12,139 452,092 -------- -------- --------- --------- --------- Liabilities Accrued expenses 3 1,124 10 - 1,463 -------- -------- --------- --------- --------- Total liabilities 3 1,124 10 - 1,463 -------- -------- --------- --------- --------- Net assets available for benefits $15,677 $2,581 $10,724 $12,139 $450,629 ======== ======== ========= ========= =========
The accompanying notes are an integral part of the financial statements -4-
Defined Contribution Plan of Fortune Brands, Inc and Participating Operating Companies Statement of Changes in Net Assets Available for Benefits with Fund Information December 31, 1998 (In Thousands) Large- Small- Growth Value- Corporate Cap Cap Inter- S&P Oriented Oriented /Govern- Govern- Fortune Value Growth Growth national 500 Diversi- Diversi- ment ment Stock Equity Equity Equity Equity Index fied fied Bond Securities Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund ---- ---- ---- ------ ------- ---- ----- ------ ----- --------- Additions Plan share in interest and dividends $ 735 $ 1,783 $ 381 $ 144 $ 163 $ 628 $ 2,296 $ 753 $ 623 $ 2,393 Net appreciation (depreciation) in fair value of (3,801) 26,117 14,180 7,941 1,498 8,363 21,411 630 307 273 investments Company contributions 1,016 2,696 1,933 2,668 474 1,665 2,004 694 304 984 Member contributions 1,247 4,767 3,003 4,239 753 2,664 3,207 1,808 611 1,650 --------- --------- --------- --------- --------- --------- -------- -------- --------- -------- Total additions (803) 35,363 19,497 14,992 2,888 13,320 28,918 3,885 1,845 5,300 --------- --------- --------- --------- --------- --------- -------- -------- --------- -------- Deductions Benefits paid to members 1,699 7,793 1,849 2,542 346 572 5,932 621 484 3,703 --------- --------- --------- --------- --------- --------- -------- -------- --------- -------- Total deductions 1,699 7,793 1,849 2,542 346 572 5,932 621 484 3,703 --------- --------- --------- --------- --------- --------- -------- -------- --------- -------- Net transfers Loans to members (279) (1,190) (677) (920) (128) (578) (897) (212) (77) (699) Loan repayments 292 1,121 600 978 103 473 860 201 67 647 Interfund transfers (484) (3,459) 903 (5,004) (898) 3,629 (874) (1,084) 4,140 1,735 --------- --------- --------- --------- --------- --------- -------- -------- --------- -------- Total net transfers (471) (3,528) 826 (4,946) (923) 3,524 (911) (1,095) 4,130 1,683 --------- --------- --------- --------- --------- --------- -------- -------- --------- -------- Increase (decrease) in net assets (2,973) 24,042 18,474 7,504 1,619 16,272 22,075 2,169 5,491 3,280 Net assets available for benefits beginning of year 25,864 98,682 40,793 59,616 9,934 28,853 76,646 21,151 8,618 39,351 --------- --------- --------- --------- --------- --------- -------- -------- --------- -------- Net assets available for benefits end of year $22,891 $122,724 $59,267 $67,120 $11,553 $45,125 $98,721 $23,320 $14,109 $42,631 ========= ========= ========= ========= ========= ========= ======== ======== ======== ========
Defined Contribution Plan of Fortune Brands, Inc and Participating Operating Companies Statement of Changes in Net Assets Available for Benefits with Fund Information (Continued) December 31, 1998 (In Thousands) Short- Term Invest- Frozen Gallaher ment Fixed ADR Loan Fund Fund Fund Fund Total ---- ---- ---- ------ ------- Additions Plan share in interest and dividends $ 959 $ 137 $ 27 $ 1,039 $ 12,061 Net appreciation (depreciation) in fair value of - - 2,670 - 79,589 investments Company contributions 835 - - - 15,273 Member contributions 709 - - - 24,658 -------- -------- --------- --------- --------- Total additions 2,503 137 2,697 1,039 131,581 -------- -------- --------- --------- --------- Deductions Benefits paid to members 2,000 141 932 945 29,559 -------- -------- --------- --------- --------- Total deductions 2,000 141 932 945 29,559 -------- -------- --------- --------- --------- Net transfers Loans to members (306) - (91) 6,054 - Loan repayments 305 - - (5,647) - Interfund transfers 2,483 - (1,087) - - -------- -------- --------- --------- --------- Total net transfers 2,482 - (1,178) 407 - -------- -------- --------- --------- --------- Increase (decrease) in net 2,985 (4) 587 501 102,022 assets Net assets available for benefits beginning of year 15,677 2,581 10,724 12,139 450,629 -------- -------- --------- --------- --------- Net assets available for benefits end of year $18,662 $2,577 $11,311 $ 12,640 $ 552,651 ======== ======== ========= ========= =========
The accompanying notes are an integral part of the financial statements -5-
Defined Contribution Plan of Fortune Brands, Inc and Participating Operating Companies Statement of Changes in Net Assets Available for Benefits with Fund Information December 31, 1997 (In Thousands) Large- Small- Growth Value- Corporate Cap Cap Inter- S&P Oriented Oriented /Govern- Govern- Fortune Value Growth Growth national 500 Diversi- Diversi- ment ment Stock Equity Equity Equity Equity Index fied fied Bond Securities Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund ---- ---- ---- ------ ------- ---- ----- ------ ----- --------- Additions Plan share in interest $ 918 $ 967 $ 279 $ 29 $ 119 $ 393 $ 1,499 $ 647 $ 471 $ 2,261 and dividends Net appreciation (depreciation) in fair value of 3,541 22,988 7,541 10,011 131 5,599 13,469 2,599 266 156 investments Company contributions 1,188 2,594 1,969 2,970 539 1,319 2,232 720 283 1,077 Member contributions 817 4,047 2,713 4,353 759 1,864 3,010 1,070 422 1,891 --------- -------- -------- --------- --------- -------- --------- -------- --------- --------- Total additions 6,464 30,596 12,502 17,363 1,548 9,175 20,210 5,036 1,442 5,385 --------- -------- -------- --------- --------- -------- --------- -------- --------- --------- Deductions Benefits paid to members 2,989 5,991 2,160 2,596 716 1,497 6,575 1,257 838 6,091 --------- -------- -------- --------- --------- -------- --------- -------- --------- --------- Total deductions 2,989 5,991 2,160 2,596 716 1,497 6,575 1,257 838 6,091 --------- -------- -------- --------- --------- -------- --------- -------- --------- --------- Net transfers Loans to members (269) (1,321) (480) (748) (131) (294) (1,102) (188) (70) (969) Loan repayments 264 1,083 545 1,027 163 358 880 213 72 671 Interfund transfers (10,264) 717 463 (2,132) (771) 3,457 (7,728) 4,825 544 (2,611) --------- -------- -------- --------- --------- -------- --------- -------- --------- --------- Total net transfers (10,269) 479 528 (1,853) (739) 3,521 (7,950) 4,850 546 (2,909) --------- -------- -------- --------- --------- -------- --------- -------- --------- --------- Increase (decrease) in net (6,794) 25,084 10,870 12,914 93 11,199 5,685 8,629 1,150 (3,615) assets Net assets available for benefits beginning of year 32,658 73,598 29,923 46,702 9,841 17,654 70,961 12,522 7,468 42,966 --------- -------- -------- --------- --------- -------- --------- -------- --------- --------- Net assets available for benefits end of year $25,864 $98,682 $40,793 $59,616 $9,934 $28,853 $ 76,646 $21,151 $ 8,618 $ 39,351 ======== ======== ======== ========= ========= ======== ========= ======== ========= =========
Defined Contribution Plan of Fortune Brands, Inc and Participating Operating Companies Statement of Changes in Net Assets Available for Benefits with Fund Information (Continued) December 31, 1997 (In Thousands) Short- Term Invest- Frozen Gallaher ment Fixed ADR Loan Fund Fund Fund Fund Total ---- ---- ---- ------ ------- Additions Plan share in interest and dividends $ 967 $ 129 $ 13 $ 893 $ 9,585 Net appreciation (depreciation) in fair value of investments - - 1,634 - 67,935 Company contributions 1,034 - - - 15,925 Member contributions 711 - - - 21,657 -------- --------- --------- --------- ---------- Total additions 2,712 129 1,647 893 115,102 -------- --------- --------- --------- ---------- Deductions Benefits paid to members 5,849 122 322 1,278 38,281 -------- --------- --------- --------- ---------- Total deductions 5,849 122 322 1,278 38,281 -------- --------- --------- --------- ---------- Net transfers Loans to members (230) - (61) 5,863 - Loan repayments 242 - - (5,518) - Interfund transfers 4,040 - 9,460 - - -------- --------- --------- --------- ---------- Total net transfers 4,052 - 9,399 345 - -------- --------- --------- --------- ---------- Increase (decrease) in net assets 915 7 10,724 (40) 76,821 Net assets available for benefits beginning of year 14,762 2,574 - 12,179 373,808 -------- --------- --------- --------- ---------- Net assets available for benefits end of year $15,677 $ 2,581 $10,724 $12,139 $450,629 ======== ========= ========= ========= ==========
The accompanying notes are an integral part of the financial statements -6- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements 1. Description of Plan: General: The Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies (the "Plan") is designed to encourage and facilitate systematic savings and investment by eligible employees. Fortune Brands, Inc. ("Fortune") and each of its operating company subsidiaries participating in the Plan are referred to collectively as the "Companies" and individually as a "Company". The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Effective May 30, 1997, American Brands, Inc. completed the spin-off of its Gallaher Group Plc subsidiary and changed its name to Fortune Brands, Inc. The spin-off resulted in a dividend of one Gallaher American Depositary Receipt (ADR) which was paid as a dividend for each share of common stock held in the Fortune Stock Fund of the Plan. The financial statements present the net assets available for benefits as of December 31, 1998 and 1997, and the changes in net assets available for benefits for the years then ended of the Plan, respectively. The assets of the Plan are included in a pool of investments known as the Fortune Brands, Inc. Defined Contribution Plan Trust ("Master Trust"), along with the assets of the MasterBrand Industries, Inc. Hourly Employee Savings Plan. The Master Trust investments are administered by The Northern Trust Company, as trustee (the "Trustee"). There are fourteen investment funds established pursuant to the Plan at December 31, 1998 and 97: (1) the Fortune Stock Fund, invested by the Trustee solely in Common stock of Fortune (certain classes of short-term obligations may be purchased by the Trustee pending such investment); (2) the Value Equity Fund, a portfolio of common stocks invested by a professional investment manager; (3) the Large-Cap Growth Equity Fund, invested in a mutual fund consisting primarily of a portfolio of stocks of medium to large-size companies; (4) the Small-Cap Growth Equity Fund, invested in a mutual fund consisting primarily of a portfolio of stocks of small to medium-size companies that are early in their life cycle; (5) the International Equity Fund, invested in a mutual fund consisting primarily of stock of companies incorporated outside the United States; (6) the S&P 500 Index Fund, invested in a mutual fund that invests in the 500 stocks that make up the Standard & Poor's 500 Index; (7) the Growth-Oriented Diversified Fund, invested by a professional investment manager in other securities, including primarily common and preferred stocks, bonds, and government securities; (8) the Value-Oriented Diversified Fund, invested in a mutual fund consisting primarily of a portfolio of stocks and bonds of companies which have a low price relative to the respective company's earnings or cash flow, or relative to the past price history of the stock; (9) the Corporate/Government Bond Fund, invested in a mutual fund consisting primarily of investment grade corporate bonds, bonds issued by the United States Government or its agencies, domestic bank obligations and commercial paper; (10) the Government Securities Fund, a portfolio of U.S., state and local government and government agency securities with maturities ranging from 1 to 3 years, invested by a professional investment manager; (11) the Short-Term Investment Fund, invested by the Trustee in a pooled fund of various short-term instruments; (12) the Frozen Fixed Fund, invested in guaranteed income contracts acquired prior to 1996; (13) the Gallaher ADR Fund, invested by the Trustee solely in American Depositary Receipts of Gallaher Group Plc; and (14) the Loan Fund, invested in obligations of members who have borrowed from the Plan. -7- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Continued) 1. Description of Plan (Continued): Contributions: The Plan is a defined contribution plan. Contributions are held by the Trustee and accumulated in separate member accounts. Members may generally make tax deferred contributions under Section 401(k) of the Internal Revenue Code (the "Code") of up to 21% (17% prior to September 1, 1998) of eligible compensation subject to lower limits for employees of Fortune and certain participating companies. Members' annual tax deferred contributions are limited by the Code to $10,000 in 1998 and $9,500 in 1997. Members of MasterBrand Industries, Inc. and its participating operating subsidiaries ("MasterBrand Participating Employers") may also make after-tax contributions, but the sum of tax deferred contributions and after-tax contributions may not exceed 21% (17% prior to September 1, 1998) of eligible compensation. Fortune provides a matching contribution equal to 50% of the member's tax deferred contributions, not to exceed 6% of eligible compensation. (See Note 4 "Plan Amendments") Each MasterBrand Participating Employer other than Schrock Cabinet Company provides a matching contribution equal to 50% of the member's tax deferred contributions and after-tax contributions, not to exceed 6% of eligible compensation. Schrock Cabinet Company provides a matching contribution of 50% of the member's tax deferred contributions up to 5% of eligible compensation and an additional 50% of the member's tax deferred contributions up to 3% of eligible compensation. ACCO World Corporation and its participating operating subsidiaries ("ACCO Participating Employers") provide a matching contribution equal to 30% of the member's tax deferred contributions, not to exceed 6% of eligible compensation. Acushnet Company and its participating operating subsidiaries ("Acushnet Participating Employers") provide a matching contribution of 50% of the member's tax deferred contributions up to 5% of eligible compensation and an additional 50% of the member's tax deferred contributions up to 2% of eligible compensation. Jim Beam Brands Worldwide, Inc. and its participating operating subsidiaries ("Beam Participating Employers") do not provide matching contributions. Profit-sharing contributions are made by certain participating employers and allocated to their members in proportion to eligible compensation. Acushnet and MasterBrand Participating Employers do not provide an annual profit-sharing contribution. Fortune contributes on an annual basis, 1/6 of 1% of its Adjusted Income from Continuing Operations (as defined in the Plan). The ACCO and Beam Participating Employers make a determination each year as to the amount of their profit-sharing contribution. Profit-sharing contributions are subject to certain Plan and statutory limitations. Members may direct investment of their tax deferred contributions, after-tax contributions, matching contributions, profit-sharing contributions, if any, and their Plan account balances in the investment funds, excluding the Frozen Fixed Fund and the Gallaher ADR Fund, described above. Vesting: Salaried employees of the Companies may generally participate in the Plan upon completion of one year of service. Members are immediately vested in their own contributions and the Company's matching contributions plus actual earnings thereon. Vesting in the Companies' annual profit-sharing contribution plus actual earnings thereon is based on the earlier of the -8- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Continued) 1. Description of Plan (Continued): Vesting (Continued): following occurrences: (1) retirement; (2) death; (3) disability; (4) attainment of age 65; or (5) years of service (as summarized in the schedule below):
Number of Full JBB Years of Service Fortune Worldwide ACCO Acushnet * MasterBrand * ---------------- ------- --------- ---- -------- ----------- Less than 1 0% 0% 0% 1 but less than 2 0 0 20 2 but less than 3 0 0 40 3 but less than 4 0 20 60 4 but less than 5 0 40 80 5 but less than 6 100 60 100 6 but less than 7 100 80 100 7 or more 100 100 100
* Acushnet and MasterBrand Participating Employers do not provide an annual profit-sharing contribution. Forfeitures: Company contributions forfeited by nonvested terminated members are retained by the Plan and used to reduce subsequent Company contributions. If a terminated member returns to the Plan within a specified period of time (generally 5 years), the member's previously forfeited amount will be reinstated to their account. Loans: A member may apply for a loan of at least $1,000 from the vested portion of the member's account balances in an amount which does not exceed one-half of the member's vested balance, provided that the loan also may not exceed $50,000 reduced by any other loan outstanding under the Plan within the previous twelve months. Whenever all or any part of an account balance is borrowed, the amount is transferred to the Loan Fund and the dollars, representing the account balance or part thereof, are canceled. The term of any loan shall not exceed five years, unless the loan is related to the purchase of the member's principal residence. No more than one home residence loan and one loan for any other purpose may be outstanding at any one time. A new loan may not be applied for until 90 days after any prior loan is repaid in full. Each loan bears a rate of interest fixed by the Corporate Employee Benefits Committee at the time the loan is made. Each loan must be collateralized by a portion of the member's account balances and evidenced by a written obligation payable to the Trustee which is invested in the Loan Fund. Repayment is made by payroll deduction so that the loan is repaid over the term of the loan in substantially level installments not less frequently than quarterly. No loan may be made from the Frozen Fixed Fund. -9- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Continued) 1. Description of Plan (Concluded): Distributions and Withdrawals: Benefits are payable from a member's account under the Plan provisions, upon a member's death, retirement or other termination of employment in a lump sum or in installment payments. The Plan also permits withdrawals to be made by members who have incurred a "hardship" as defined in the Plan or after attainment of age 59 1/2. Distributions and withdrawals to which a member is entitled are those, subject to certain eligibility and forfeiture provisions, that can be provided by the aggregate of employer and employee contributions and the income thereon (including net realized and unrealized investment gains and losses) allocated to such member's account. Other: Although they have not expressed any intent to do so, the Companies have the right under the Plan to discontinue contributions at any time and Fortune has the right to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, members will become fully vested in their accounts. For changes effective during 1998 and 1999, see "Plan Amendments" (Note 4). For a complete description of the Plan, members should refer to the specific provisions in the Company's Plan document or to the prospectus/summary plan description, each of which is available from the Plan Administrator at 1700 East Putnam Ave., Old Greenwich, Connecticut 06870. 2. Summary of Significant Accounting Policies: Presentation: Certain 1997 reclassifications have been made to conform with the current year presentation. The accompanying financial statements have been prepared on the accrual basis of accounting. The Plan presents in the statement of changes in net assets available for benefits, the net appreciation (depreciation) in the fair value of its beneficial interest in investments held by the Master Trust, which consists of the realized gains (losses) and the unrealized appreciation (depreciation) on those investments. Investment Valuation and Income: The Master Trust's investments in securities (bonds, debentures, notes and stocks) traded on a national securities exchange are valued at the last reported sale price on the last business day of the year; securities traded in the over-the-counter market are valued at the last reported bid price; and listed securities for which no sale was reported on that date are valued at the mean between the last reported bid and asked prices. Participations in collective trust -10- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued): Investment Valuation and Income (Continued): funds are stated at the Master Trust's beneficial interest in the aggregate fair value of assets held by the fund, as reported by the fund's manager. Purchases and sales of securities are recorded on a trade-date basis. Gains or losses on sales of securities are based on average cost. Dividend income is recorded on the ex-dividend date. Income from other investments is recorded as earned on an accrual basis. The ratio of the Plan's assets to the fair value of all assets held in each fund in the Master Trust is used to allocate interest income, dividend income, realized gains (losses) and unrealized appreciation (depreciation) in market value of investments on a monthly basis. In 1998 and 1997, certain expenses incurred by the Plan were netted against earnings prior to allocation to member accounts. These include investment manager, trust, and recordkeeper expenses. Benefits are recorded when paid. 3. Reconciliation of Financial Statements to Form 5500: The following is a reconciliation of net assets available for benefits as stated in the financial statements to Form 5500 at December 31, 1998 and 1997:
1998 1997 ----------------- ----------------- (In Thousands) Net assets available for benefits as stated in the financial statements $552,651 $450,629 Less distributions payable to terminated employees and amounts payable applicable to Plan members who have retired or terminated employment but elected to have their assets remain in the Plan 104,979 73,052 ================= ================= Net assets available for benefits as stated in Form 5500 $447,672 $377,577 ================= =================
-11- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Continued) 3. Reconciliation of Financial Statements to Form 5500 (Continued): The following is a reconciliation of benefits paid to members as stated in the statement of changes in net assets available for benefits to the Form 5500 at December 31, 1998 and 1997:
1998 1997 ----------------- ----------------- (In Thousands) Benefits paid to members as stated in the financial statements $29,559 $38,281 Add: Amounts payable to terminated employees and amounts applicable to Plan members who have retired or terminated employment but elected to have their assets remain in the Plan as of current year-end 104,979 73,052 Less: Amounts payable to terminated employees and amounts applicable to Plan members who have retired or terminated employment but elected to have their assets remain in the Plan as of prior year-end 73,052 50,778 ================= ================= Benefits paid to members as stated in Form 5500 $61,486 $60,555 ================= =================
4. Plan Amendments and Subsequent Events: The Plan was amended as of January 1, 1998 to: o include Day-Timers, Inc., Fortune Brands Home & Office, Inc. and May Tag & Label Corp. as ACCO Participating Employers; o provide that employees of May Tag & Label Corp. who participated in the May Tag & Label Corp. 401(k) Savings Plan shall participate in this Plan on January 1, 1998 and be credited with eligibility and vesting service for their period of employment with May Tag & Label Corp. before it became affiliated with the Fortune Brands' group of companies; o provide that a Day-Timers' employee hired between December 1, 1996 and December 1, 1997 shall receive a full year 1998 profit-sharing allocation rather than merely for the period in 1998 during which the employee was a member; o provide for a 1997 profit-sharing contribution of 3% of compensation for members employed by Sax Arts and Crafts, Inc.; o provide that a member who terminated employment and is reemployed shall be eligible for participation immediately upon reemployment; o change the top-heavy minimum contribution formula to provide for a greater top-heavy minimum contribution in the event that a member also participates in a top-heavy defined benefit plan; and -12- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Continued) 4. Plan Amendments and Subsequent Events (Continued): o provide that the profit-sharing contribution for Beam Participating Employers will be determined from year to year on a discretionary basis. The Plan was amended effective as of June 12, 1998 to permit participation by certain employees of Schrock Cabinet Company. The Plan was amended effective as of August 23, 1998 to permit participation by certain employees of Peak Wines International, Inc. The Plan was amended effective as of September 1, 1998 to increase the maximum 401(k) contribution rate from 17% of compensation of 21% of compensation. The Plan was amended effective September 29, 1998 to: o provide that the Corporate Employee Benefits Committee of Fortune, rather than the Board of Directors of Fortune, shall have the authority to amend the Plan solely with respect to matters affecting Participating Employers other than Fortune and to approve Plan mergers; and o provide for immediate distribution to alternate payees under qualified domestic relations orders. The Plan was amended effective as of December 31, 1998 to exclude participation by employees of the ACCO Presentation Products Group. The Plan was amended effective as of January 1, 1999 to permit participation by employees of Creative Specialties, Inc. and to provide for the merger into the Plan of the CSI Donner 401(k) Retirement Plan. The Plan was amended effective as of June 1, 1999 to permit partial repayment of loans by terminated members. The Plan was amended effective as of January 1, 1999 to include amounts received under the Performance Recognition Program as Plan earnings. The Plan was amended to comply with the Small Business Job Protection Act, the Uniformed Services Employment and Reemployment Rights Act, the Uruguay Round Agreements Act, the Taxpayer Relief Act of 1997 and the IRS Restructuring and Reform Act, including: o increasing the voluntary cash-out amount from $3,500 to $5,000 (effective as of January 1, 1999); o eliminating mandatory in-service distributions at age 70 1/2 (effective as of January 1, 1997); -13- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Continued) 4. Plan Amendments and Subsequent Events (Continued): o 401(k) and flexible benefit plan amounts in compensation for purposes of determining maximum contribution limits (effective as of January 1, 1998); o changing the definition of highly compensated employee to those earning more than $80,000 annually and eliminating family aggregation rules (effective as of January 1, 1997); and o eliminating the limitation aggregating defined benefits plan and defined contribution amounts (effective as of January 1, 2000). 5. Fund Performance: The annual rate of return earned for each Fund was as follows (unaudited): Year Ended December 31 Funds 1998 1997 - --------------------------------------------- ----------------- ---------------- Fortune Stock Fund (11.9)% 21.7% Value Equity Fund 28.8 32.9 Large-Cap Growth Equity Fund 34.5 25.9 Small-Cap Growth Equity Fund 13.5 22.1 International Equity Fund 16.6 3.3 S & P 500 Index Fund 28.3 31.7 Growth-Oriented Diversified Fund 31.9 23.1 Value-Oriented Diversified Fund 6.4 20.3 Corporate/Government Bond Fund 9.5 10.1 Government Securities Fund 6.7 6.4 Short-Term Investment Fund 5.5 6.0 Frozen Fixed Fund 5.1 5.1 Gallaher ADR Fund 34.3 20.9 -14- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Continued) 6. Assets Held In Master Trust: The investments of the Master Trust are maintained under a trust agreement with the Trustee. The Plan had a total beneficial interest of 96.85% and 97.15% in the Master Trust's net assets at December 31, 1998 and 1997, respectively. 1998 1997 ----------------- ------------ (In Thousands) Common stock - corporate $221,887 $181,507 U.S. Government securities 56,037 54,540 Corporate debt instruments 19,921 12,032 Insurance company general account 3,890 3,700 Registered investment companies 219,389 165,307 Collateralized promissory notes from 15,025 13,771 members Interest bearing cash 28,681 25,622 ================= ============= Total $564,830 $456,479 ================= ============= Investments held by the Master Trust, in which the Plan has an interest at December 31, are summarized below at fair market value. Investments that represent 5% or more of the Master Trust's net assets are separately identified in the Master Trust filing. 1998 1997 ----------------- ------------- (In Thousands) Fortune Stock Fund: Common stock - corporate $22,159 $24,332 Interest bearing cash 1,092 823 ----------------- ------------- Total $23,251 $25,155 ================= ============= Plan Interest 98.43% 99.16% ================= ============= - -------------------------------------------------------------------------------- Value Equity Fund: Common stock - corporate $125,388 $96,469 Interest bearing cash 1,956 3,559 ----------------- ------------- Total $127,344 $100,028 ================= ============= Plan Interest 96.88% 97.26% ================= ============= - -------------------------------------------------------------------------------- Large-Cap Growth Equity Fund: Registered investment companies $58,758 $39,701 Interest bearing cash 76 644 ----------------- ------------- Total $58,834 $40,345 ================= ============= Plan Interest 97.84% 98.74% ================= ============= - -------------------------------------------------------------------------------- -15- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Continued) 6. Assets Held In Master Trust (Continued): 1998 1997 ----------------- ------------- (In Thousands) Small-Cap Growth Equity Fund: Registered investment companies $68,308 $58,923 Interest bearing cash 75 76 ----------------- ------------- Total $68,383 $58,999 ================= ============= Plan Interest 97.86% 98.25% ================= ============= - -------------------------------------------------------------------------------- International Equity Fund: Registered investment companies $11,724 $9,679 Interest bearing cash 91 - ================= ============= Total $11,815 $9,679 ================= ============= Plan Interest 98.29% 99.29% ================= ============= - -------------------------------------------------------------------------------- S & P 500 Index Fund: Registered investment companies $45,022 $28,409 Interest bearing cash 78 62 ----------------- ------------- Total $45,100 $28,471 ================= ============= Plan Interest 97.39% 98.66% ================= ============= - -------------------------------------------------------------------------------- Growth-Oriented Diversified Fund: Common stock - corporate $63,342 $50,188 U. S. Government securities 14,806 11,781 Corporate debt instruments 19,921 12,032 Interest bearing cash 2,064 3,770 ----------------- ------------- Total $100,133 $77,771 ================= ============= Plan Interest 96.84% 97.11% ================= ============= - -------------------------------------------------------------------------------- Value-Oriented Diversified Fund: Registered investment companies $23,297 $20,385 Interest bearing cash 90 547 ----------------- ------------- Total $23,387 $20,932 ================= ============= Plan Interest 98.87% 99.30% ================= ============= - -------------------------------------------------------------------------------- -16- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Continued) 6. Assets Held In Master Trust (Continued): 1998 1997 ----------------- ----------------- (In Thousands) Corporate/Government Bond Fund: Registered investment companies $12,280 $8,210 Interest bearing cash 91 311 ----------------- ----------------- Total $12,371 $8,521 ================= ================= Plan Interest 98.03% 99.61% ================= ================= - -------------------------------------------------------------------------------- Government Securities Fund: U. S. Government securities $41,231 $42,759 Interest bearing cash 4,146 - ----------------- ----------------- Total $45,377 $42,759 ================= ================= Plan Interest 90.94% 90.88% ================= ================= - -------------------------------------------------------------------------------- Short-Term Investment Fund: Interest bearing cash $18,245 $15,472 ================= ================= Plan Interest 98.37% 96.44% ================= ================= - -------------------------------------------------------------------------------- Frozen Fixed Fund: Insurance company general account $3,890 $3,700 Interest bearing cash 36 28 ----------------- ----------------- Total $3,926 $3,728 ================= ================= Plan Interest 99.75% 99.39% ================= ================= - -------------------------------------------------------------------------------- Gallaher ADR Fund: Common stock - corporate $10,998 $10,518 Interest bearing cash 641 330 ----------------- ----------------- Total $11,639 $10,848 ================= ================= Plan Interest 99.28% 99.24% ================= ================= - -------------------------------------------------------------------------------- Loan Fund: Collateralized promissory notes $15,025 $13,771 from members ================= ================= Plan Interest 91.73% 92.16% ================= ================= - -------------------------------------------------------------------------------- -17- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Continued) 6. Assets Held In Master Trust (Continued): The changes in the Master Trust for the years ended December 31 are as follows: 1998 1997 -------------- ----------------- (In Thousands) Additions: Member contributions $24,046 $24,398 Company contributions 15,883 11,681 Interest 6,699 6,126 Dividends 4,349 4,269 Net appreciation in the fair value 83,671 69,605 of investments Other income and net loan activity 5,672 2,767 ------------- ----------------- Total additions 140,320 118,846 ------------- ----------------- Deductions: Benefits paid to members (30,168) (37,557) Administrative expenses (1,801) (1,456) ------------- ----------------- Total deductions (31,969) (39,013) ------------- ----------------- Net increase 108,351 79,833 Net assets available for benefits, Beginning of year 456,479 376,646 ============= ================= Net assets available for benefits, End of year $564,830 $456,479 ============= ================= Net appreciation on Master Trust investments for the years ended December 31, 1998 and 1997 were as follows: 1998 1997 -------------- ----------------- (In Thousands) Common stock - corporate $48,272 $42,249 U. S. Government securities 1,234 652 Corporate debt instruments 195 88 Registered investment companies 33,970 26,616 ============== ================= Total $83,671 $69,605 ============== ================= -18- Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies Notes To Financial Statements (Concluded) 7. Risks and Uncertainties: The Plan provides for various investment options in any combination of stocks, bonds, fixed income securities, mutual funds and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in market value could materially affect members' account balances and the amounts reported in the statement of net assets available for benefits and the statement of changes in net assets available for benefits. 8. Credit Risks: The Master Trust invests primarily in equity and fixed income funds. The fund managers invest in a large number of corporations, industries and other instruments in an attempt to limit exposure to significant loss. The funds maintain a diverse portfolio of common stock across various industry groups and a broad range of debt securities in terms of maturity and industry groups in order to maintain diversity in Master Trust investments. The Plan, however, is subject to risk of loss up to its proportionate share of such assets in the Master Trust. 9. Tax Status: The Internal Revenue Service issued a determination letter dated January 8, 1998 to the Company stating that the Plan meets the requirements of Section 401(a) of the Code and that the Trust is exempt from federal income taxes under Section 501(a) of the Code. Generally, distributions and withdrawals under the Plan are taxable to members or their beneficiaries in accordance with Section 402 of the Code. -19- SIGNATURE The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the Corporate Employee Benefits Committee of Fortune Brands, Inc. has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies By /s/ Anne C. Linsdau ----------------------------------------- Anne C. Linsdau, Chairman Corporate Employee Benefits Committee of Fortune Brands, Inc. Date: June 29, 1999 -20- EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in (a) the Registration Statement on Form S-8 (Registration No. 33-64071) relating to the Defined Contribution Plan of Fortune Brands, Inc. and Participating Operating Companies, the Registration Statement on Form S-8 (Registration No. 33-64075) relating to the MasterBrand Industries, Inc. Hourly Employee Savings Plan, the Registration Statement on Form S-8 (Registration No. 33-58865) relating to the 1990 Long-Term Incentive Plan of Fortune Brands, Inc., the Registration Statement on Form S-8 (Registration No. 333-51173) relating to the Fortune Brands, Inc. Non-Employee Director Stock Option Plan, and the prospectuses related thereto, and (b) the Registration Statements on Form S-3 (Registration Nos. 333-76371, 33-50832, 33-42397, 33-23039 and 33-3985) of Fortune Brands, Inc., of our report dated June 25, 1999, relating to the financial statements, which appear in this Form 11-K. /s/ PricewaterhouseCoopers LLP 11 Madison Avenue New York, New York 10010 June 28, 1999 -21- -----END PRIVACY-ENHANCED MESSAGE-----