SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
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Pursuant to Section 15(D) of the
Securities Exchange Act of 1934
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For the fiscal year ended December 31, 2001
Commission file number 1-9076
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Full Title of the Plan:
FORTUNE BRANDS RETIREMENT SAVINGS PLAN
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Name of the issuer of the securities held pursuant to the plan
and the address of its principal executive office:
FORTUNE BRANDS, INC.
300 Tower Parkway
Lincolnshire, Illinois 60069
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FORTUNE BRANDS RETIREMENT SAVINGS PLAN
FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2001 AND 2000
FORTUNE BRANDS RETIREMENT SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
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PAGE(S)
Report of Independent Accountants 1
Financial Statements:
Statement of Net Assets Available for Plan Benefits as of
December 31, 2001 and 2000 2
Statement of Changes in Net Assets Available for Plan Benefits
for the years ended December 31, 2001 and 2000 3
Notes to Financial Statements 4-11
Note: Supplemental schedules required by the Employee Retirement Income
Security Act that have not been included herein will be filed by the
Fortune Brands, Inc. Savings Plans Master 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 plan
benefits and the related statements of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
plan benefits of the Fortune Brands Retirement Savings Plan (the "Plan") at
December 31, 2001 and 2000, and the changes in net assets available for plan
benefits for the years then ended in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Plan's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, 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 our opinion.
May 24, 2002
FORTUNE BRANDS RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 2001 AND 2000
(IN THOUSANDS)
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2001 2000
Assets:
Beneficial interest in Fortune Brands, Inc.
Savings Plans Master Trust net assets $545,956 $605,585
Receivables:
Company contributions 4,930 6,836
Participant contributions 22 257
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Total assets 550,908 612,678
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Net assets available for Plan benefits $550,908 $612,678
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The accompanying notes are an integral part of the financial statements.
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FORTUNE BRANDS RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(IN THOUSANDS)
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2001 2000
Additions:
Company contributions $ 14,433 $ 16,263
Participant contributions 32,163 33,615
Transfers to the Plan (Note 5) 163 2,770
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Total additions 46,759 52,648
Deductions:
Allocated share of Fortune Brands, Inc. Savings
Plans Master Trust investment losses 33,026 26,411
Benefits paid to participants 54,713 67,926
Transfers from the Plan (Note 5) 20,790 -
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Total deductions 108,529 94,337
Decrease in net assets (61,770) (41,689)
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Net assets available for Plan benefits, beginning of year 612,678 654,367
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Net assets available for Plan benefits, end of year $ 550,908 $ 612,678
========= =========
The accompanying notes are an integral part of the financial statements.
-3-
FORTUNE BRANDS RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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1. DESCRIPTION OF PLAN
GENERAL
The Fortune Brands Retirement Savings Plan (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". Operating company
subsidiaries include: MasterBrand Industries, Inc. ("MasterBrand"), ACCO
World Corporation ("ACCO"), Acushnet Company ("Acushnet"), and Jim Beam
Brands Worldwide, Inc. ("Beam"). The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA").
The following provides a brief description of the Plan. For a complete
description of the Plan, participants should refer to the specific
provisions in the Plan document or to the Prospectus/ Summary Plan
Description, each of which is available from the Plan Administrator at 300
Tower Parkway, Lincolnshire, Illinois 60069.
The financial statements present the net assets available for Plan benefits
as of December 31, 2001 and 2000 and the changes in net assets available
for Plan benefits for the years then ended. The assets of the Plan are
included in a pool of investments known as the Fortune Brands, Inc. Savings
Plans Master Trust (the "Master Trust"), along with the assets of the
Fortune Brands Hourly Employee Retirement Savings Plan and the Future
Brands LLC Retirement Savings Plan. The Master Trust investments are
administered by The Fidelity Management Trust Company (the "Trustee").
CONTRIBUTIONS
The Plan is a defined contribution plan. Contributions are held by the
Trustee and accumulated in separate participant accounts. Participants may
generally make tax deferred contributions under Section 401(k) of the
Internal Revenue Code (the "Code") of up to 21% of eligible compensation,
subject to lower limits for highly compensated employees of Fortune and
certain participating Companies. Participants' annual tax deferred
contributions are limited by the Code to $10,500 in both 2001 and 2000.
Participants of MasterBrand 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% of eligible compensation. Each MasterBrand
Participating Employer, other than Schrock Cabinet Division ("Schrock") and
NHB Industries, Inc., formerly NHB Holdings, Inc., ("NHB"), provides a
matching contribution equal to 50% of the participant's tax deferred
contributions and after-tax contributions, not to exceed 6% of eligible
compensation. Schrock provides a matching contribution of 50% of the
participant's tax deferred and after-tax contributions up to 5% of eligible
compensation and an additional 50% of the participant's tax deferred and
after-tax contributions up to 3% of eligible compensation. NHB provides a
matching contribution of 30% of the participant's tax deferred and
after-tax contributions up to 4% of eligible compensation.
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FORTUNE BRANDS RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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ACCO and its participating operating subsidiaries ("ACCO Participating
Employers") provide a matching contribution equal to 30% of the
participant's tax deferred contributions, not to exceed 6% of eligible
compensation. Acushnet and its participating operating subsidiaries
("Acushnet Participating Employers") provide a matching contribution of 50%
of the participant's tax deferred contributions up to 5% of eligible
compensation and an additional 50% of the participant's tax deferred
contributions up to 2% of eligible compensation. Beam and its participating
operating subsidiaries ("Beam Participating Employers") do not provide
matching contributions. Fortune provides a matching contribution equal to
50% of the participant's tax deferred contributions, not to exceed 6% of
eligible compensation.
Profit-sharing contributions are made by Fortune and certain participating
operating subsidiaries and allocated to their participants in proportion to
eligible compensation. Acushnet Participating Employers, MasterBrand
Participating Employers, and Boone International, Inc. ("Boone"), an ACCO
Participating Employer, 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 Participating Employers 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.
Participants may direct the investment of their tax deferred contributions,
after-tax contributions, matching contributions, profit-sharing
contributions, if any, and their Plan account balances in the available
investment funds, excluding the Gallaher ADR Fund.
Participant account balances are maintained to reflect each participant's
beneficial interest in the Plan's funds. Participant account balances are
increased by participant and Company contributions (including rollovers
from other plans) and decreased by the amount of withdrawals and
distributions. Income and losses on Plan assets and certain administrative
expenses are allocated to participants' accounts based on the ratio of each
participant's account balance invested in an investment fund to the total
of all participants' account balances invested in that fund as of the
preceding valuation date.
VESTING
Participants are immediately vested in their own contributions plus
earnings thereon. Vesting in the Companies' matching contributions plus
earnings thereon occurs after one year of service. Vesting in the
Companies' annual profit-sharing contribution plus actual earnings thereon
is based on the earliest of the following occurrences: (1) retirement; (2)
death; (3) disability; (4) attainment of age 65; (5) termination of
employment without fault, or (6) years of service (as summarized in the
schedule below):
NUMBER OF FULL YEARS OF SERVICE * FORTUNE BEAM ACCO
------- ---- ----
Less than 1 0% 0% 0%
1 but less than 2 20% 0% 20%
2 but less than 3 40% 0% 40%
3 but less than 4 60% 20% 60%
4 but less than 5 80% 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, MasterBrand and Boone Participating Employers do not provide
an annual profit-sharing contribution.
-5-
FORTUNE BRANDS RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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FORFEITURES
Company contributions forfeited by nonvested terminated participants are
retained by the Plan and used to reduce subsequent Company contributions.
If a terminated participant returns to the Plan within a specified period
of time (generally 5 years), the participant's previously forfeited amount
will be reinstated to the participant's account.
LOANS
A participant may apply for a loan of at least $1,000 from the vested
portion of the participant's account balance in an amount which does not
exceed one-half of the participant's vested balance, provided that the loan
also does not exceed $50,000. Any loans applied for are also reduced by any
other loan outstanding under the Plan within the previous twelve months.
The term of any loan shall not exceed five years, unless the loan is
related to the purchase of the participant'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 30 days after any prior loan is
repaid in full. Each loan bears a rate of interest equal to the prime rate
on the last day of the previous quarter at the time the loan is made, as
quoted in the Wall Street Journal. Each loan must be collateralized by a
portion of the participant's account balance 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.
DISTRIBUTIONS AND WITHDRAWALS
Benefits are payable from a participant's account under the Plan
provisions, upon a participant'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 participants who have incurred a "hardship" as
defined in the Plan or after attainment of age 59 1/2.
Distributions and withdrawals to which a participant 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 participant's account. Distributions and
withdrawals are recorded when paid.
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, as Plan Sponsor and Administrator, has the right to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become fully vested in their accounts.
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FORTUNE BRANDS RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles.
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 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.
Certain expenses incurred by the Plan are netted against earnings prior to
allocation to participant accounts. These include investment manager,
trust, and recordkeeper expenses.
3. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for Plan benefits
as stated in the financial statements to Form 5500 at December 31, 2001 and
2000 (in thousands):
2001 2000
Net assets available for Plan benefits
as stated in the accompanying financial statements $550,908 $612,678
Less: Amounts payable to terminated employees and
Plan participants who have retired or terminated
employment but elected to have their
assets remain in the Plan 98,313 104,219
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Net assets available for Plan benefits as stated in
Form 5500 $452,595 $508,459
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FORTUNE BRANDS RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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The following is a reconciliation of benefits paid to participants as
stated in the financial statements to the Form 5500 at December 31, 2001
and 2000 (in thousands):
2001 2000
Benefits paid to participants as stated $ 54,713 $ 67,926
in the financial statements
Add: Amounts payable to terminated employees and
Plan participants who have retired or terminated
employment but elected to have their assets remain 98,313 104,219
in the Plan as of current year-end
Less: Amounts payable to terminated employees and Plan
participants who have retired or terminated employment
but elected to have their assets remain
in the Plan as of prior year-end 104,219 136,994
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Benefits paid to participants as stated in Form 5500 $ 48,807 $ 35,151
======== ========
4. PLAN AMENDMENTS
The Plan was amended effective December 10, 2001 to comply with new
regulations on the minimum distribution requirements of Section 401(a)(9)
of the Internal Revenue Code.
The Plan was amended effective April 1, 2001 to allow participants
transferred from a Beam participating employer to Future Brands LLC to
receive withdrawals and obtain loans.
The Plan was amended effective January 1, 2001 to provide that participant
account additions made in excess of the maximum may be distributed to
participants or former participants if permitted under regulations issued
by the Secretary of Treasury pursuant to the provisions of Section 415 of
the Internal Revenue Code.
The Plan was amended effective January 1, 2001 to permit participation in
profit sharing for all Fortune employees who are employed to work at least
20 hours per week.
The Plan was amended effective January 1, 2001 to provide a matching
contribution to NHB participants equal to 30% of the participant's tax
deferred and after-tax contributions, not to exceed 4% of eligible
compensation.
5. TRANSFERS TO AND FROM THE PLAN
During 2001, certain employees transferred from Beam to Future Brands, a
joint venture between Beam and Vin & Sprit AB of Sweden. The value of
participant accounts transferred to the Future Brands LLC Retirement
Savings Plan on April 1, 2001 totalled $20,759,274. The remaining transfers
relate to transactions in the ordinary course of business between the Plan
and the Fortune Brands Hourly Employee Retirement Savings Plan.
-8-
FORTUNE BRANDS RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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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 approximately
91.11% and 95.60% in the Master Trust's net assets at December 31, 2001 and
2000, respectively.
Master Trust assets at December 31, 2001 and 2000 are as follows (in
thousands):
2001 2000
Interest and dividends receivable $ 511 $ 829
Common stock - corporate:
Employer stock 38,950 35,351
Non-employer stock 126,964 151,241
U.S. Government securities 11,080 18,830
Corporate debt instruments 16,202 18,601
Registered investment companies 340,987 354,237
Collateralized promissory notes from participants 16,254 16,635
Interest bearing cash 49,045 38,418
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Total assets 599,993 634,142
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Administrative expenses payable (786) (679)
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Total net assets of the Master Trust available for benefits $ 599,207 $ 633,463
========= =========
Investments that represent 5% or more of the Master Trust's net assets are
separately identified in the Master Trust filing.
The net appreciation (depreciation) in fair value of investments, interest
income, dividend income, and administrative expenses related to the Master
Trust for the years ended December 31, 2001 and 2000 is as follows (in
thousands):
2001 2000
Net appreciation (depreciation) in fair value:
Common stock - corporate $ (14,308) $ (21,895)
U. S. Government securities (34) 1,640
Corporate debt instruments 402 (154)
Registered investment companies (24,973) (13,708)
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Net depreciation in fair value of
investments of the Master Trust (38,913) (34,117)
Interest income 5,026 6,073
Dividend income 2,715 2,980
Administrative expenses (2,328) (2,536)
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Total net loss of the Master Trust $ (33,500) $ (27,600)
========= =========
-9-
FORTUNE BRANDS RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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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 participants'
account balances and the amounts reported in the statement of net assets
available for Plan benefits and the statement of changes in net assets
available for Plan benefits.
8. USE OF ESTIMATES
The preparation of the Plan's financial statements in conformity with
generally accepted accounting principles requires the Plan Administrator to
make estimates and assumptions that affect the reported amounts of net
assets available for benefits at the date of the financial statements and
the changes in net assets available for benefits during the reporting
period and, when applicable, the disclosures of contingent assets and
liabilities at the date of the financial statements. Actual results could
differ from those estimates.
9. 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.
10. TAX STATUS
The Internal Revenue Service ("IRS") issued a determination letter dated
January 8, 1998 to Fortune 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. The Plan has been amended since
receiving the determination letter. However, the Plan Administrator
believes that the Plan is currently designed and operated in compliance
with the applicable requirements of the Code. Generally, distributions and
withdrawals under the Plan are taxable to Participants or their
beneficiaries in accordance with Section 402 of the Code.
-10-
FORTUNE BRANDS RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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11. RELATED-PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by The Fidelity
Management Trust Company. The Fidelity Management Trust Company is the
trustee as defined by the Plan and, therefore, these transactions qualify
as party-in-interest transactions. Fees paid by the Plan for recordkeeping
and investment management services amounted to $1,398,262 and $911,802 for
the years ended December 31, 2001 and 2000, respectively. In addition, fees
payable to the trustee as of December 31, 2001 and 2000 were $188,928 and
$191,635, respectively.
-11-
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.
FORTUNE BRANDS RETIREMENT SAVINGS PLAN
By: /s/ Frank J. Cortese
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Frank J. Cortese, Chairman
Corporate Employee Benefits Committee of
Fortune Brands, Inc.
Date: June 28, 2002