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:
FUTURE BRANDS LLC 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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FUTURE BRANDS LLC
RETIREMENT SAVINGS PLAN
REPORT ON AUDIT OF FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 2001
FUTURE BRANDS LLC 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 2
Statement of Changes in Net Assets Available for Plan Benefits
for the period April 1, 2001 through December 31, 2001 3
Notes to Financial Statements 4-9
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 Future Brands LLC
In our opinion, the accompanying statement of net assets available for plan
benefits and the related statement of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
plan benefits of the Future Brands LLC Retirement Savings Plan (the "Plan") at
December 31, 2001, and the changes in net assets available for plan benefits for
the period April 1, 2001 through December 31, 2001, 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 audit. We conducted our audit 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 audit provides a
reasonable basis for our opinion.
May 17, 2002
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FUTURE BRANDS LLC RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 2001
(IN THOUSANDS)
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Assets:
Beneficial interest in Fortune Brands, Inc.
Savings Plans Master Trust net assets $22,322
Receivables:
Company contributions 1,545
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Total assets 23,867
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Net assets available for Plan benefits $23,867
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The accompanying notes are an integral part of the financial statements.
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FUTURE BRANDS LLC RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE PERIOD APRIL 1, 2001 THROUGH DECEMBER 31, 2001
(IN THOUSANDS)
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Additions:
Allocated share of Fortune Brands, Inc. Savings Plans
Master Trust investment income $ 941
Company contributions 1,571
Participant contributions 767
Transfers to the Plan (Note 5) 20,759
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Total additions 24,038
Deductions:
Benefits paid to participants 171
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Total deductions 171
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Increase in net assets 23,867
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Net assets available for Plan benefits, beginning of period --
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Net assets available for Plan benefits, end of period $23,867
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The accompanying notes are an integral part of the financial statements.
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FUTURE BRANDS LLC RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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1. DESCRIPTION OF PLAN:
GENERAL
The Future Brands LLC Retirement Savings Plan (the "Plan"), established
effective April 1, 2001 for employees of Future Brands LLC ("Future"), is
designed to encourage and facilitate systematic savings and investment by
eligible employees. 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 510 Lake Cook Road,
Deerfield, Illinois 60015-4964.
The financial statements present the net assets available for Plan benefits
as of December 31, 2001 and the changes in net assets available for Plan
benefits for the year 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 Fortune Brands 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 15% of eligible compensation,
subject to lower limits for highly compensated employees of Future.
Participants' annual tax deferred contributions are limited by the Code to
$10,500 in 2001.
Profit-sharing contributions are made by Future and allocated to its
participants in proportion to eligible compensation. Future makes a
determination each year as to the amount of its profit-sharing contribution.
Profit-sharing contributions are subject to certain Plan and statutory
limitations.
Participants may direct the investment of their tax deferred contributions,
rollover 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.
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FUTURE BRANDS LLC RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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VESTING
Participants are immediately vested in their own contributions plus earnings
thereon. Vesting in the Company's annual profit-sharing contribution plus
actual earnings thereon is based on the earliest of the following
occurrences: (1) retirement; (2) termination of employment without fault; (3)
death; (4) disability; (5) attainment of age 65; or (6) years of service (as
summarized in the schedule below):
VESTING
NUMBER OF FULL YEARS OF SERVICE PERCENTAGE
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Less than 3 0%
3 but less than 4 20%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
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 may
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.
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FUTURE BRANDS LLC RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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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, Future has the right
under the Plan to discontinue contributions at any time and Future, 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.
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.
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FUTURE BRANDS LLC RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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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 (in
thousands):
Net assets available for Plan benefits as stated
in the accompanying financial statements $23,867
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 (406)
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Net assets available for Plan benefits as stated in Form 5500 $23,461
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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 (in
thousands):
Benefits paid to participants as stated in the
financial statements $ 171
Add: 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 current year-end 406
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Benefits paid to participants as stated in Form 5500 $ 577
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4. PLAN AMENDMENTS
The Plan was amended effective April 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.
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FUTURE BRANDS LLC RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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5. ASSETS HELD IN MASTER TRUST
The investments of the Master Trust are maintained under a trust agreement
with the Trustee. The Plan had a beneficial interest of approximately 3.73%
in the Master Trust's net assets at December 31, 2001. Master Trust assets at
December 31, 2001 are as follows (in thousands):
Interest and dividends receivable $ 511
Common stock - corporate:
Employer stock 38,950
Non-employee stock 126,964
U.S. Government securities 11,080
Corporate debt instruments 16,202
Registered investment companies 340,987
Collateralized promissory notes from participants 16,254
Interest bearing cash 49,045
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Total assets 599,993
Administrative expenses payable (786)
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Total net assets of the Master Trust available for benefits $ 599,207
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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 year ended December 31, 2001 is as follows (in thousands):
Net appreciation (depreciation) in fair value:
Common stock - corporate $(14,308)
U.S. Government securities (34)
Corporate debt instruments 402
Registered investment companies (24,973)
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Net depreciation in fair value of investments
in the Master Trust (38,913)
Interest income 5,026
Dividend income 2,715
Administrative expenses (2,328)
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Total net loss of the Master Trust $(33,500)
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6. TRANSFERS TO THE PLAN
The value of participant accounts transferred to the Future Brands LLC
Retirement Savings Plan from the Fortune Brands Retirement Savings Plan on
April 1, 2001 totalled $20,759,274.
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FUTURE BRANDS LLC 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
October 24, 2001 to Future 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.
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 the investment
management and recordkeeping services amounted to $29,634 for the year ended
December 31, 2001. In addition, fees payable to the trustee as of December
31, 2001 were $4,937.
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SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, Future Brands LLC has duly caused this annual report to be signed on
its behalf by the undersigned thereunto duly authorized.
FUTURE BRANDS LLC RETIREMENT
SAVINGS PLAN
By: /s/ Michael P. Donohue
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Michael P. Donohue
President and Chief Executive Officer
Future Brands LLC
Date: June 28, 2002