Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Bruce Carbonari - Chairman, Chief Executive Officer and Chairman of Executive Committee

Craig Omtvedt - Chief Financial Officer and Senior Vice President

Analysts

Judy Hong - Goldman Sachs Group Inc.

Peter Lisnic - Robert W. Baird & Co. Incorporated

Michael Rehaut - JP Morgan Chase & Co

Christine Farkas - BofA Merrill Lynch

Eric Bosshard - Cleveland Research Company

David S. MacGregor

Dennis McGill - Zelman & Associates

Kevin Dreyer - Gabelli

Fortune Brands (FO) Q1 2011 Earnings Call May 5, 2011 10:00 AM ET

Operator

Good morning, my name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fortune Brands' First Quarter Earnings Conference Call. [Operator Instructions] Now I would like to turn the call over to Bruce Carbonari, Chairman and CEO of Fortune Brands. Sir, you may begin your conference.

Bruce Carbonari

Thank you, Michelle. Good morning. Welcome to our discussion of Fortune Brands' 2011 first quarter results. Before we begin, let's note that our presentation includes forward-looking statements. These statements are subject to risks and uncertainties, including those listed in the cautionary language at the end of our news release, and our actual results could differ materially from those targeted. This presentation also includes certain non-GAAP measures that are reconciled to the most closely comparable GAAP measures in our news release or in the supplemental information linked to the Webcast page on our website.

Fortune Brands continues to deliver strong growth in sales and earnings as each of our three businesses outperformed their respective markets in the quarter. Our businesses are pursuing strategies designed to outperform their markets, and they're executing at a high-level. As a result, we're on track to deliver another year of strong earnings growth in 2011.

Our Beam Spirits business delivered mid-single-digit comparable sales growth, excluding the benefit of initial sale of inventory related to the establishment of an enhanced Australian distribution agreement with Coca-Cola Amatil. On this basis, our global power brands grew at a high-single digit rate, driven by strong growth for Jim Beam, Maker’s Mark, Courvoisier and Teacher's. The company outperformed key markets, including the U.S., U.K., Spain, Germany, Australia and India. Comparable operating income grew at a low-single-digit rate as expected, reflecting our double-digit increase in brand investment to support new product launches and long-term brand building initiatives. We're also pleased that we added the Skinnygirl cocktail brand to our portfolio and continue to launch innovative new products in the quarter.

Against the challenging comparisons of a double-digit sales increase in the year-ago quarter sales for Fortune Brands Home & Security rose 2% in a market that was softer than anticipated. Results included strong gains from new cabinetry businesses we've earned and growth for Master Lock security products. These gains more than offset modest decreases for faucets and advanced material windows and doors, categories that faced particularly challenging comparisons to strong growth in the year-ago quarter. Operating income in Home & Security reflected higher costs for commodities and our planned strategic investments to support new business and brand-building programs.

Our Acushnet golf business began the year with comparable sales that grew 17% and comparable operating income that grew more than 30%. Sales achieved a first quarter record as successful new products drove strong growth in each product category. Sales for the Titleist brand were sharply higher on very strong initial demand for the new Pro V1 golf balls and 910 medals, while sales of the new DryJoy Tour golf shoes as well as gloves and performance outerwear drove robust growth for FootJoy.

We're performing very well in the marketplaces across our consumer categories. And we're building on our competitive strength as we position our businesses to create even greater value as independent companies. Each of our businesses has a powerful strategy, a proven management team and prospects for strong growth and returns and strong capital structures. We are now targeting that our proposed separation plan to spinoff Home & Security to either sell or spinoff Acushnet and to move forward as a strong pure-play spirits company, will be approved and completed by early in the fourth quarter.

Now let's take a closer look at the numbers. Net sales were $1.76 billion, up 8%. Sales were up 6% on a comparable basis. That measure excludes excise tax, foreign exchange, acquisition and divestitures and further adjusted for the startup benefit of the Australian spirits distribution agreement, which involved an initial sale of inventory. By brand group, comparable net sales on that basis were up 5% in Spirits, up 1% in Home & Security and up 17% in Golf.

Net income for the quarter was $81.2 million or $0.52 per diluted share, results included some charges and gains that Craig will touch on a little later. Excluding charges and gains, diluted earnings per share was $0.59, that's up 20% from $0.49 in the year-ago quarter, when diluted earnings per share before charges and gains increased 63%.

Reported operating income came in at $160.5 million. On a before charges and gains basis, operating income was $177.3 million for the quarter, up 10% versus the year-ago quarter. Reviewing our asset and investment return measures, after-tax return on net tangible assets before charges and gains was 17%. Working capital efficiency came in at 35%. Asset maturing inventories for Spirits, working capital efficiency was 18%, a year-over-year improvement of 190 basis points. Return on equity before charges and gains was 8% and return on invested capital before charges and gains was 6%.

Craig will take you through the performance of each businesses in a few minutes. But first, an update on our key strategic initiatives. The plan we announced in December to separate our three businesses are proceeding very well. As we've said before, we're exploring the potential sale or spinoff of our industry-leading Acushnet golf business. It's fair to say there is very active interest from a broad range of perspective buyers for Acushnet business. At the same time, we're proceeding with our plan for a tax-free spinoff of our Home & Security business.

We've already made significant progress to prepare for the spinoff. First, we've determined the corporate organization requirements for Home & Security to become an independent company. Second, we've sought confirmation from the IRS that the spinoff of Home & Security will be tax-free to Fortune Brands and its U.S. shareholders. And third, we expect Fortune Brands and Home & Security will file the initial draft Form 10 with the SEC tomorrow. More on that in a moment.

Regarding the ongoing company, we are preparing Fortune Brands to become the pure-play spirits business, operating under the name Beam, following the separation. So our separation plan is on track, we're confident each business will be ready to hit the ground running on day one, and as I mentioned earlier, we're now targeting that this initiative will be complete by early in the fourth quarter. Naturally, this remains subject to completion of detailed separation plans, customary regulatory approvals and final board approval. We expect each business to be equipped to compete and grow on its own, with their management, strong capital structure and growth and returns prospects necessary to drive success and create even greater value for our shareholders.

Let me take a few moments to review the strong position at each of these businesses to compete and create value as independent companies.

First, our Beam Spirits business. Beam is a leader that has the unique combination of scale with agility and a focused strategy that positions us well to outperform and consistently deliver strong profitable long-term growth. Our scale in Spirits comes from our strong portfolio of premium brand and leading market position. Already the fourth largest spirits company in the world and the largest U.S.-based spirits company, Beam is building momentum with our strategic focus on creating famous brands, building winning markets and further fueling growth with operational efficiency.

Our agility comes from our development of an organization that's simpler, smarter, faster and closer to customers and consumers. As a result, we're able to bring new products to market faster, set and respond to consumer trends and leverage assets like our flavor expertise and strong route to markets. New products drove approximately a quarter of our 2010 sales growth in spirits and we're continuing our innovation momentum in 2011.

Let's take a look at some of our newest innovations. We're revolutionizing the bourbon category with innovations like Red Stag and Maker's 46, and we're keeping our foot on the gas here in 2011. We've expanded our leadership in the small batch category with the launch of Knob Creek Single Barrel Reserve, which is significantly exceeding our expectations. In the second quarter, we will introduce Jim Beam's Devil's Cut in the U.S., which uses a proprietary process that extracts the liquid and the rich flavors trapped inside the wood of the barrel to create the finely balanced smooth 90 proof Devil's Cut bourbon. And building on its success in U.S., we're now rolling out Red Stag in Germany and other European markets.

We're attacking the fast-growing flavored vodka category two ways. First, we're very excited about the development and launch of a new unique Puckers flavored vodka line. We've used our award winning flavor expertise to create the bold natural fruit flavors and distinctive drinking experience offered by the Pucker Vodka line. And second, we've extended our EFFEN Vodka brand with EFFEN Cucumber, which has sold out its initial production.

We're continuing to innovate on the cognac category as well, with the upcoming launch of Courvoisier Rosé. We're rolling out 100% agave Sauza Blue tequila in the U.S., and Sauza Gold and Silver in Mexico. We're continuing to successfully expand the Sauza -- excuse me, the Sourz brand in Europe and we're fueling further growth for Canadian club in Australia with new RTD [ready-to-drink] products.

We're also excited about the addition of the Skinnygirl cocktail brand, which we acquired in the quarter. This premium brand, created by popular entrepreneur, Bethenny Frankel, is a leader in the fast-growing low calorie cocktail segment with Skinnygirl margarita. We have an excellent opportunity to leverage our strong distribution on behalf of Skinnygirl and the brand also provides a powerful platform for further innovation.

In 2011, we're continuing to step up our brand-building investments. These investments are supporting the creation and execution of impactful brand-building campaigns that are highly targeted, rolled into our consumers and markets around the world and building strong positions. A few examples of these programs are: in the U.S., the new bold choice campaign for Jim Beam, the new Jim Beam Live Music Series; and our successful multi-platform ESPN partnership are connecting with consumers in new ways and generating incredible buzz for the brand.

In the coming weeks, we will launch the first-ever television advertising for Maker’s Mark. At the same time in Australia, the world's second largest bourbon market, we're launching new television advertising to support Jim Beam, which is Australia's number one spirits brand of any kind. We're also continuing to support Canadian Club RTD in Australia. We've built Canadian Club into the market's fastest-growing spirits brand. And in India, we're boosting investments in our brand activation platform for Teacher's Scotch, which we've built into one of the strongest and most respected brands in that emerging market. Our brand-building strategies combined with our enhanced global route to market are positioning us very well in the three global regions by which we manage this business. They are North America, Europe, Middle East and Africa, and Asia Pacific and South America.

In the quarter, we've established our enhanced long-term distribution agreement with Coca-Cola Amatil in Australia, which will leverage their unrivaled customer reach and expertise and our consumer understanding in an agreement that provides mutual incentives to further drive profitable growth. Naturally we see great opportunity in the emerging markets and our focus on these opportunities has enabled us to drive double-digit growth in key markets like India, Brazil and Russia.

As Craig will detail in a moment, we're building some nice momentum in a lot of areas at Beam. Our investments are paying off and our confidence in the prospects for Beam to outperform as a stand-alone company is further reinforced by the strong team and powerful strategy we have in place. We also believe Beam will continue to generate excellent cash flow, deliver operating margins that's among the best in the industry and have a strong capital structure that will give us the flexibility to evaluate opportunities to further enhance our portfolio.

Turning to Fortune Brands Home & Security. We've built an industry leader that is outperforming and has tremendous upside potential as the housing market improves. Home & Security's success starts with the strong fundamental -- excuse me, strong foundation of leading brands and market positions, lean and flexible supply chains and highly effective strategy and talented and proven management team. As a reminder, annual sales for Home & Security exceed $3 billion and 90% of our sales benefit from number one market positions, including: our industry-leading cabinetry business; Moen, the number one faucet brand in North America; Therma-Tru, the most preferred residential entry door brand in the U.S.; and the legendary Master Lock. In the U.S. housing market, where recovery remains gradual and uneven, Home & Security continues to take a proactive approach that has kept the business playing offense.

First we're focused on exciting consumers. Investing to build on our leading market positions and drive share gains with organic growth initiatives. These include targeted consumer advertising, such as the return to television advertising for Moen in the first quarter and an upcoming campaign for Master Lock Work Truck security products featuring well-known personality Mike Rowe.

We're also investing to support new business we have won over the last -- over the past 12 or 14 -- excuse me 18 months. We expect this new business, which includes Martha Stewart Living, Thomasville, Canada, and Decora kitchen cabinetry at the Home Depot, along with design stock cabinetry program at Lowe's, new programs for kitchen and bath dealers, along with the Waterloo garage organization at the Depot will amount to hundreds of millions of dollars in annual sales.

We're investing in our innovation pipeline as well across these product categories. As a result, we've delivered recent innovations such as Moen's spot resistant finish, Moen's new Reflex pull down faucet kitchen system, new Moen bath vanities for the Chinese market, the Classic-Craft Canvas paintable door from Therma-Tru and great new styles across our cabinetry brands. We're also pleased that Moen last week won a best of the KBIS [ph] award at the Kitchen & Bath Show for Moen's innovation of new Flushmount body sprays. We're expanding brands into adjacent product categories as well, such as electronic security and commercial safety for Master Lock and garage organization for Waterloo.

And we're expanding into international markets. Moen is the number three faucet brand in China and we'll continue to expand Moen's footprint in China with a planned 20% increase in showrooms in 2011, as well as in India and in Latin America. And we're building Master Lock's global presence particularly in Europe, Latin America and China. These are among our fastest growth initiatives in Home & Security and more than a quarter of Moen and Master Lock sales now come from international markets.

Second, we're focused on leveraging our lean and flexible global supply chains to deliver excellent customer service and drive profitable growth as volume returns. We've substantially improved our cost structure since the outset of the downturn. At the same time, we've enhanced our flexibility and productivity with the use of lean manufacturing, distributive assembly and design-to-manufacturer techniques. As a result, we deliver among the best lead times in our industry with advantaged cost structures, excellent quality and better improved asset efficiency.

Also, our lean and flexible supply chains have enabled us to ramp up production to accommodate the new business wins. As I mentioned, we plan to begin the process of registering Fortune Brands Home & Security stock with the SEC. Filing the Form 10 registration statement is another important milestone as we move towards the proposed tax-free spinoff of Home & Security. The Form 10 will dive deeper into historical operating result as well as the strategy and fundamentals that we believe position Home & Security to create substantial value for shareholders as the Home Products market recovers.

A few highlights, the Form 10 will break out results for the four segments by which Home & Security will report results as a stand-alone company. Those are the kitchen and bath, the cabinetry, plumbing and accessories, advanced material windows and door systems and security and storage. You will see that each of these segments looked solidly profitable in 2010 as competitively well-positioned with excellent prospects to leverage and drive growth and returns. You'll also see the basis for which we believe will certainly be strong capital structure for Fortune Brands Home & Security. Again, that will be filed and publicly available tomorrow.

As Home & Security looks to become a stand-alone company, the business is outperforming in the marketplace. On top of that, while we continue to see challenged markets this year, the longer-term prospects for Home & Security markets are supported by favorable long-term demographic trends. And we believe shareholders will be enthusiastic about the long-term prospect growth for this business, as high cash flow and a substantial opportunity drives shareholder value over time.

Our industry-leading Acushnet Golf business is driven by the iconic Titleist and FootJoy brands and by the best management and sales organization in the industry, we're continuing to build on this strong foundation in golf by investing in two key areas: innovation and international expansion. Successful execution of this strategy has expanded our track record of outperformance in golf into early 2011. New product introductions launched in the first quarter included the new Pro V1 family of golf balls, the new Titleist 910 Fairways and Hybrids, and the new DryJoy Tour golf shoe. These innovations are helping us gain profitable market share. And FootJoy has just announced that it will enter the golf apparel category in 2012, building on its succes in performance outerwear, including the successful FootJoy layering system.

Nearly half of our golf sales now come from outside the U.S., and our investments in priority international markets continues to pay off in our strongest growth. We've invested to build our sales and marketing infrastructure in markets like Korea, China and Japan. We're expanding our customer fitting capabilities to these markets, and we are serving these markets with the new ball plant we opened last year in Thailand.

One note on Japan, we've been working closely with our retail partners in Japan to help them recover from the tragic earthquake and tsunami. As Craig will discuss, we actually had a very strong first quarter in Japan although the industry can expect rounds of play in Japan to suffer over the next few months, we believe Japan will be a resilient market and will recover. Over the course of 2011, we see upside in other markets that will offset any impact in Japan.

We expect to continue outperforming the global golf market in 2011 and the Acushnet Company continues to enhance its prospects to deliver substantial upside over the long term. As you can see, we are confident in the future of each of these businesses and excited about the potential opportunities for shareholders. We're very pleased with the reaction we have had to our separation plan from both long-time and new shareholders as well as our associates.

Now here's Craig with a closer look at our markets and the performance for each of our segments.

Craig Omtvedt

Thanks, Bruce. I will start with the Beam Spirits business. We entered 2011 with an assumption that the global market for spirits would grow at a low-single-digit rate. That remains our expectation. Drilling down, we've seen some favorable trends in the U.S., including modest improvements in the on-premise and a continued return to premiumization. Markets in Europe are mixed, with strength in central and Eastern Europe, as well as Russia. Australia remains challenged by flood recovery and low consumer sentiment while conditions are robust in emerging markets such as India, Southeast Asia and Brazil.

Looking at the first quarter, our reported spirit sales came in at $673 million, that's up 17%. Sales in the quarter were boosted by the startup benefit of our new Australia distribution agreement as well as excise taxes and favorable foreign exchange. I'd highlight here that under this new agreement, our sales in Australia moving forward will be recorded net of distribution cost and excise taxes. On a comparable basis, which includes an adjustment for the Australia distribution benefit, sales were up 5%. Regionally, sales on this basis increased at a low- to mid-single-digit rate in our North America and Asia Pacific, South America regions and at a double-digit rate in our Europe, Middle East, Africa region. We're benefiting there from both share gains as well as the timing of sales. We estimate that we gained share in key markets including the U.S., where our mix improved, as well as Canada, the U.K., Germany, Spain, Russia, India and Australia. We're seeing improvement in price mix as we benefit from favorable mix, driven by our premium innovations and some degree of premiumization by consumers.

At the operating income line, OI [operating income] before charges was $151 million, up 27%. Again on a comparable basis, and excluding the Australia benefit we've discussed, OI increased at a low-single-digit rate, reflecting our planned double-digit increase in brand investments to fuel strong long-term sales and profit growth. We also were impacted to a degree by higher-than-anticipated commodity cost. Looking at the performance of our key brands on a year-to-date basis, and starting with our power brands, which are global brands with annual case sales in the millions. These are Jim Beam, Maker’s Mark, Sauza, Courvoisier, Canadian Club and Teacher’s. Together, these brands delivered comparable net sales that grew at a high single-digit rate adjusted for the Australia inventory movement.

Sales of our power brands grew faster than volumes, reflecting the mix impact of our successful innovations and trading up. Our rising stars are brands with excellent growth profiles that we're investing in to fuel profitable growth. These brands consist of Hornitos Tequila, Cruzan Rum, Laphroaig Scotch, Knob Creek bourbon, Sourz liqueurs and EFFEN Vodka together with two exciting new additions, Skinnygirl cocktails and the new Pucker Vodka. Collectively, our rising stars increase comparable status at a double-digit rate.

Our local jewels, DeKuyper, Larios and Whisky DYC are brands with particular strength in the single market, comparable sales for this collection of brands were all at a low-single-digit rate. Sales for all other brands were lower at a low- to mid-single-digit rate.

OI margins before charges at 22.4% on a reported basis and 28.7% excluding excise taxes were a touch above our expectations. Looking ahead, and similar to Q1, our second quarter OI results will be impacted by the timing of our planned boost in brand investment. For the full year, we expect higher cost for commodities and our increase in brand investments will be offset by favorable foreign exchange and the benefit of the Australia distribution agreement. Accordingly, we're now targeting Beam to grow operating income before charges at a mid-single-digit rate in 2011 and that's versus our prior target of low- to mid-single digits.

Now turning to Home & Security and starting with the market. What we're seeing is that new construction, which represents about 20% of the market, is softer than we anticipated three months ago, but that replace/remodel activity is better. Adding in continued consumer caution on big-ticket discretionary purchases, we estimate the market for our products was off at a mid-single digit rate in the first quarter. With regard to the full year, we now expect replace/remodel for 2011 will be up low-single digits and that new construction will be relatively flat for the year. We also continue to expect that the window market following expiration of the energy efficiency tax credit will be down at a mid-single digit rate.

All in, while the mix is different, and the overall market is somewhat softer than we originally projected, our assumption continues to be that the market for our Home & Security products will grow at a low single-digit rate in 2011. We also expect that the market will be stronger in the back half of the year than in the first half as the market cycles against softer conditions in the second half of 2010. Looking at our results, sales in Home & Security were $714 million, that's up 2% against the year-ago quarter when sales jumped 15% on the benefit of share gains and customer inventory rebuilding ahead of the mid-year expiration of the U.S. home builder tax credit. Let me underscore that the 2% sales increase is against an overall market for our products that was down at a mid-single-digit rate, so we continue to outperform. Drilling down, sales reflected increases for cabinetry and security and storage products that more than offset modest decreases in faucets, windows and doors.

Operating income before charges in Home & Security came in at $6 million versus $24 million in the year-ago quarter. The Home & Security OI shortfall is primarily a function of higher commodity costs and fuel costs, along with our planned strategic spending to support proactive growth initiatives, including new business wins and consumer brand building.

Looking at the brands, sales for our industry-leading kitchen and bath cabinetry business grew at a high single-digit rate against a double-digit gain in the year-ago quarter. We continue to benefit from the success of new cabinetry programs at home centers, including Martha Stewart Living cabinetry and Decora cabinetry at the Home Depot and new in-stock cabinetry programs at Lowe's. Our strong double-digit gains in the home center channel more than offset results that tracked the market in other channels of distribution. Sales from Moen were off low- to mid-single digits against a double-digit gain a year ago.

The number one faucet brand in America grew at a double digit rate at retail on the success of new products like the spot-resistant stainless finish and benefiting from expanded shelf space, as well as continued double-digit growth in Asia. These gains were offset by lower results in the wholesale channel, which faced an inventory build that we called out that last year. Our advanced material windows and door brands were off at a low-single-digit rate compared to the year-ago quarter double-digit increase. We're pleased that Simonton Windows maintained some sales momentum and gained share in the quarter even though we saw the expiration at the year end of the consumer tax credit for purchases of energy-efficient home products. At Therma-Tru, favorable product mix and strength in the home center channel partly offset lower results in channels serving the new construction market.

Rounding things out with our security and storage brands, strong gains for Master Lock more than offset a modest decrease for Waterloo storage and organizational products. Master Lock benefited from strength in retail and commercial channels, entrance into adjacent security categories and a double-digit increase in international markets. Waterloo benefited from the continued success of its new garage organization products and expanded offerings in the home center channel.

We're continuing to stay on the offense in our Home & Security business. And we continue to believe that Home & Security is well positioned to outperform the market again in 2011. That said, we are seeing greater-than-expected year-over-year commodities and transportation costs. We now expect these costs to be in the range of $75 million and that's up from our earlier estimate of $40 million or so. We're striving to offset as much of the increase as we can with selective price increases, but as usual, there's a lag effect, and as such we don't expect to completely offset the incremental increases in commodity and transportations here in 2011.

Accordingly, reflecting both a modestly softer market and higher commodity cost, we're now targeting operating income before charges at Home & Security to grow at a mid-single digit to both double-digit rates versus the prior target in the high-single digit to high-teens range. Our target continues to reflect our higher year-over-year strategic investments, which are required to support new business, new products and our brand building initiatives. Absent both the lag effect of price increases and our incremental higher strategic investments, we believe that this business would lever approximately at our 30% long-term target levels. We also continue to believe that as this business approaches the $5 billion range with a market that's fully recovered that we will be approaching our historical 15% operating margins.

Now before moving on, let me remind everybody that here in Q2, in addition to commodity costs and strategic brand investments, we're facing challenging comparisons as we comp against strong results in the year-ago quarter that were boosted by consumer pull forward in advance of the expiration of the home buyer tax credit.

Now closing things out with golf, we continue to expect the global golf market will be up at a low-single-digit rate again in 2011, and we expect that our Acushnet Company golf business will outperform the market. Our reported first quarter sales in golf came in at $370 million, up 5%. On a comparable basis in constant-currency and excluding the Cobra brand we divested in April of last year, our sales were up 17%. Geographically, comparable sales for Titleist and FootJoy were up at a mid-teens rate in the U.S. and up high teens internationally in constant currency, reflecting growth in all regions with particularly strong gains in Korea, Japan, the Pac Basin [Pacific Basin] and Canada.

At the OI line, operating income before charges came in at $44 million and was up more than 30% on a comparable basis. OI benefited from favorable product mix and favorable foreign exchange. Looking at our brand performance, both the Titleist and FootJoy brands built very strong momentum in the first quarter as successful new products fueled significant growth for each brand. Robust demand for the new next-generation Pro V1 and Pro V1x drove a strong gain in sales of golf balls. Sales of Titleist clubs grew at a double-digit rate on very strong sell-ins for the 910 Fairways and Hybrids that we launched in the quarter. The 910 driver launched in the fourth quarter are continuing their strong performance in the marketplace as well. The FootJoy brand continued its momentum in shoes, outerwear and gloves with double-digit growth in the quarter. The first quarter launch of the DryJoy Tour golf shoe in the U.S. and strong shipments of the new flagship ICON shoe line in Asia benefited results.

Looking at the full year in golf, we're off to a strong start and we expect significantly outperform the market in 2011. As Bruce mentioned, while the natural disaster in Japan will have impacts to second quarter results, we expect any near-term impacts in Japan will be offset over the course of the year by upside in other markets. We're continuing to target that comparable operating income in golf will grow at a double-digit rate. On a reported basis, including comparisons to Cobra's results in early 2010, and factoring in our further investments in Asia, as well as other strategic initiatives, we're targeting OI before charges/gains to be flat.

Now before we turn things back to Bruce, just a few additional items. Reviewing charges and gains for the quarter, we recorded an after-tax net charge of $11.3 million or $0.07 per share. That includes $7.8 million in after-tax costs or $0.05 per share associated with our separation plan. It also includes $4.6 million or $0.03 per share as associated with restructuring initiatives. These charges were partly offset by a tax gain of $1.1 million or $0.01 per share. With regard to our tax rate, for the quarter, our before charges/gains tax rate came in at 26.4%, and we continue to expect the full year will be in the range of 27% to 28%.

Lastly on cash flow, as you see in our press release, Q1 cash flow was approximately $100 million lower than last year. That's principally driven by higher receivables due to the timing of sales. For the full year, absent our separation plan, we continue to target free cash flow in the range of $450 million to $525 million. And again, that would represent an earnings to free cash flow conversion rate of 100% or more.

Now let me turn it back to Bruce.

Bruce Carbonari

Thanks, Craig. Looking through the balance of 2011, we continue to expect that the markets for each of our three businesses will grow at a low-single-digit rate. And our first quarter results reinforce our confidence in the prospects for our businesses to outperform their respective market.

In our Beam Spirits business we plan to sustain our double-digit increase in brand investment to build our brand as we deliver and support innovations like Puckers Vodka, Jim Beam Devil's Cut and Red Stag, and develop our most promising global markets. We expect Fortune Brands Home & Security will continue to outperform in the success of its new business programs, innovative new products, strong customer service and lean and flexible supply chain.

In golf, we anticipate continued strong worldwide demand for the iconic Titleist and FootJoy brands, including our outstanding lineup of new product innovations. For the full year, we expect the impact of the lower golf activity in Japan will be offset by strong momentum we're building for our golf brands in other global markets.

After the prospect -- the proposal separation for our businesses, we continue to estimate that diluted earnings per share before charges and gains for Fortune Brands would grow at a high-single digit to high-teens rate for the full year. While we expect to benefit from the favorable foreign exchange, we still expect the results will reflect the increased headwinds of higher cost for energy and raw materials, as well as our planned higher strategic investments across our businesses to support long-term growth.

In addition to these factors, second quarter results will face challenging comparisons as we cycle against 2010 results that benefited by approximately $0.10 to $0.15 per share from both the pull forward in Home & Security sales due to the midyear expiration of the home buyers' tax credit and the timing of spirits orders. We expect second quarter results will also be impacted by approximately $0.05 due to the natural disaster in Japan and the sale of Cobra in 2010. So while we face challenges in the second quarter all of our businesses are on track to deliver strong full year growth.

Thank you again for joining us. Now Craig and I will be happy to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Eric Bosshard from Cleveland Research Company.

Eric Bosshard - Cleveland Research Company

On the Spirits side of the business, can you -- I guess, I say simply conclude why you're raising your full year profit targets. What's different in the business that's allowing you to have a more bullish outlook now than you did 90 days ago?

Craig Omtvedt

Yes, I think a couple of things here. One, obviously, I mean we solidified the Australia distribution arrangements so that certainly is a plus. We're benefiting from FX, and candidly, as we look at what's going on out in the marketplace, with the benefit of our product innovations, as well as the initiatives that we have on some of our core brands has given us greater confidence and we feel pretty comfortable with the target we currently have.

Eric Bosshard - Cleveland Research Company

From a end-market perspective, is the end market the same or is there something different within the end-market that also is impacting this at all?

Bruce Carbonari

Yes. I would -- let's go market by market here. In the U.S., I think we see the continual move to on-premise. It's been gradual whether we see it coming in the momentum continued through the first quarter. We're also seeing the price mix improving both from our innovations, as well as just better price promotion activity levels here in the U.S. So U.S. is gaining health, and we are encouraged by that.

Craig Omtvedt

And Eric, as you look at the numbers, I mean you look at the Nielsen data for the kind of the 13 weeks, I mean, that's positive, a bit ahead of kind of what we were thinking. And the NAFTA [ph] is better as well. Now admittedly in the NAFTA [ph] data, you've got select markets that had incremental sales days this year. But all in all, we think it looks a little better.

Bruce Carbonari

Yes. When you move to Europe, a little bit more spotty. We had a very strong first quarter in Europe. But you still have challenged markets like Spain, which are not growing, although we're performing well in Spain but the market is more challenged. With the U.K., Germany are becoming more healthy, but again in a gradual level. And then where we're positioned in our emerging markets Russia, India, Brazil, those continue to be very strong markets. And Australia, although despite the floods and New Zealand with the earthquake, had a bit of a challenging first quarter, the health there seems to be gradually improving as well.

Eric Bosshard - Cleveland Research Company

Great. And then secondly if I could, on the Home side, it looks like you're affirming your full year revenue growth expectation, and the news a little worse. And I guess you're suggesting that the remodels are a little better, can you just flesh out a little bit of your confidence or what you're seeing in the business on where the remodel spending is going in your categories?

Bruce Carbonari

Sure, first off, yes, you're right. We see a softer new construction market than we had anticipated going into the year, but we're seeing a stronger R&R [repair and remodeling] market, mostly driven by home centers. The traffic in home centers has picked up. Cautiously optimistic there, but I don't think it's translating to orders as frequently as we'd all want. But the traffic is picking up and we are seeing better pull-through on the faucet business, cabinet to some extent. Again, the cabinet projects are -- or the what we call in and out as the smaller projects, not the big wall-to-wall type of -- blow-up-the-kitchen type of projects but what we've been seeing for the last couple of years. So it's a little bit different than we thought but at the end it kind of makes up pretty much what we had thought, in total, for the market. Again, as you know, Eric, 20% of the market is new construction and 80% of the market's R&R.

Operator

Your next question comes from the line of Christine Farkas from Bank of America.

Christine Farkas - BofA Merrill Lynch

Looking at the Spirits business, I'm wondering if you can give us a little bit more color, you appear to have reported today as well suggesting similarly a recovery in premium brands and on-trade trends. Could you comment a little bit about the promotional environment and whether you think the market could withstand some price hikes this year?

Bruce Carbonari

Sure. Again, I think probably talking about the U.S. market or we can talk about markets as well, but first of all, the promotional market -- first off, first quarter is again not the biggest quarter of the year. The fourth quarter is obviously the biggest quarter of the year. The price promotion activity and what's causing the promotional activity is getting back to what I would call normal. We had a period, maybe, 18 months ago where it was much more active in promotional side, it carried into a little bit of last year. But I think during the holiday season and now through the first quarter, I think we're getting back to a much more normal type price promotion type of balance. We are seeing premiumization, for us, that's coming obviously for our higher premium products but also through innovation. A lot of our innovation is targeted at more premium pricing and so that's reflecting well in the mix of our businesses. We are out there making selective price increases, they are selective, they might be state-by-state. And we think that with our brand building efforts we've had now for a couple of years, we're building equity in our brands, and we expect that this industry will be able to go back to a more normal pricing environment here very soon.

Christine Farkas - BofA Merrill Lynch

Can you talk about what's driving the bourbon category? We've seen some improved momentum in recent months, and I realize your innovation may be a big part of that. But is there something else you are seeing that might be boosting that category?

Bruce Carbonari

Yes, I think our innovation is a big part of that. I just look at what Red Stag has done, Maker's 46 and now Devil's Cut coming right behind it, we think we've created excitement in the category. And what I believe is happening is also that we are bringing new drinkers into the category, not only male but female. I think one of our biggest surprises with the Red Stag is how many females have migrated to that product, and that's a category, like many brown spirits, that hasn't been female friendly in the past. So beyond moving from beer to bourbon and we are also seeing females being more attracted to the category as well.

Christine Farkas - BofA Merrill Lynch

That's helpful. Thanks. If I could, just want a clarification on the separation process. You commented briefly on Golf with respect to a sale or spin, do you foresee that timing being in line with the spin of Home, earlier than Home or has anything changed on that front?

Bruce Carbonari

Nothing's really changed on that front. We are looking growth at the spin and the sale simultaneously for the Golf business. Our preference would be to do that before the spin of Home & Security. But we'll see how it plays out.

Operator

Your next question comes from the line of Michael Rehaut, JPMorgan.

Michael Rehaut - JP Morgan Chase & Co

First question, just on Home & Security, I was wondering if it was possible to kind of step back, and particularly, as you look at the cabinets and the faucets segment in the U.S., can you give us a sense of the share gains that you've been able to achieve, let's say, in aggregate over the last three years? And maybe, roughly where you -- on an overall basis where you kind of peg your market share?

Bruce Carbonari

Yes, for competitive reasons, I won't get into specifics but I will give you some color. First off is if you look at our business before the downturn, roughly 40%, let's say 45% of the business was from businesses that were number one positioned in their respective categories. We now sit here 3-plus years later, 4, 3.5, 4 years later that 90% of our businesses are from the number one position in the market.

Craig Omtvedt

Michael, that's total Home we're talking about.

Bruce Carbonari

That's total Home, yes. So and obviously, we've had significant gains. And I want to reflect on a couple of things. First off, when you look at what we did, we continue to focus on the consumers that are out there, although the market has contracted there's still a lot of activity out there. You look at the cabinet business that might have been -- industry that might have been $12 billion at its peak is now more about $7 billion, there's still $7 billion of sales out there with a very female-focused purchaser, we kept in investing behind that, the innovation and styles and functionality of that to keep them excited. Second thing, we did our restructuring early. We were done by December of 2009. And we were very aggressive about what we did and how we kind of changed the rules of the game in that particular industry, in cabinetry especially, but also in the faucet category, in some sense, the door category, and we've been rewarded for that. We are ready to grow. We have the flexibility to scale up. Our quality and our service through all the restructuring was excellent. And I think our customers basically rewarded us for that. So a lot of the initiatives that we put in place with new products, with new programs. We're excited not only the home centers but our kitchen bath dealers and some of our showroom partners as well. So all in all, I think that we've done a good job from a very, very tough market.

Michael Rehaut - JP Morgan Chase & Co

All right. I mean, I guess just on the faucet side also kind of any sense of share gains over the last couple of years or where you stand on an overall basis?

Bruce Carbonari

Yes, sure. We -- Moen's share, we are the number one player here in North America in both U.S. and Canada. I would say, and I'm just giving you rough numbers here, that we're up more than a couple of points in share over the last couple of years. Cabinets, it's more significant probably as much as 5 share points and growing. A lot of this new multi-hundreds of millions of dollars of new business is still to come, so we expect that to continue to grow. So those are, obviously, things that we're very proud of. And what we're really proud of this is very profitable share. So this is not buying business, if you will, these are done through innovations and programming and new cost structures that allow us to continue to have good returns on those businesses and create value for our shareholders.

Michael Rehaut - JP Morgan Chase & Co

Great. And second question, just going on towards the -- talking about the separation of the businesses, there's been talk about -- out there about Spirits in and of itself being a target potentially or how it would fit or be attractive for other major global companies. Has the sale of Spirits or the remaining entity ever been discussed on a board level as part of the thought process? And how do you think about that relative to, if there have been any kind of a discussions or talks or if you have been approached in fact?

Bruce Carbonari

We wouldn't speculate on that at all. This is a business that we put a lot of investment in the last several years. You've seen us invest in the route to markets. You've seen us invest in new management. You've seen us invest in innovation. You've seen us invest behind the brand. I'm not sure why we'd sell it -- why we would make those investments if we were going to sell it? It's a unique asset. It's got a phenomenal portfolio of brands. It's one of the few assets that are out there that are not family controlled. It is controlled by our shareholders. So it is a unique asset and that's, in this industry, I think that causes a lot of speculation, not -- as well as of the fact that we are going through the separation process. But the reality of the monies that we put into this business and the returns now that we are getting out of the business, I'm not sure that we would have done that if, in fact, we were going to position it to sell.

Craig Omtvedt

Right, and Michael, I mean the bottom line here is everything we do and we've done over the years is to position all of our businesses to drive shareholder value. And as you look at the things we're doing in the Spirits business right now, whether it'd be the acquisition of Skinnygirl, the innovation -- product innovations that we've launched, the investments that we're making for the building of the business, they are all things that are driving the value of that business. And that's the way we think about it. And now, and as Bruce said, I mean hell, the spirits industry is always rife with speculation, that's just the nature of the beast.

Michael Rehaut - JP Morgan Chase & Co

But you haven't been approached by anyone on that thought?

Craig Omtvedt

I cannot even comment on that.

Bruce Carbonari

We can't comment on that.

Michael Rehaut - JP Morgan Chase & Co

Okay. Very good. Had to try.

Operator

Your next question comes from the line of Judy Hong from Goldman Sachs.

Judy Hong - Goldman Sachs Group Inc.

Just going back to the Spirits business, on the price mix, the trends. So clearly, you're looking at improved price mix for the industry as a whole and for you guys, but it looks like, at least on the measure channel, that your price mix growth is still lagging the industry growth. So I'm just wondering if that characterization or observation across all your channel is appropriate, and then, how do you think about closing that gap going forward?

Craig Omtvedt

First of all, I don't know what data you're looking at, but the point is, I mean as we've said, our expectation this year is that there will be good performance on price mix. From the price standpoint, we're not anticipating that 2011 is going to be a big year for price increases. I mean, we're doing some things selectively and are seeing that some others are as well. The real benefit for us this year is going to be coming both from just premiumization and people trading up, as well as the benefit of our new product innovations. But we're quite comfortable with what our performance is right now and how it's trending.

Bruce Carbonari

And let me give you some comfort here, the -- again, you're most likely looking at Nielsen's which is...

Judy Hong - Goldman Sachs Group Inc.

Yes, it's the food score data for Nielsen, seems to be all...

Bruce Carbonari

[indiscernible] all portion [ph] with big chains. if you look at a wider breadth of information, which we have access to, you'll see that in the first quarter that our price mix was a plus-2 point.

Judy Hong - Goldman Sachs Group Inc.

Okay. That's helpful. And then just on the faucet side. So when I look at your guidance for the Spirits being up mid-single digit comparable operating profit for the full year, it implies kind of a flat to down for the balance of the year. And just coming after, I guess, low-single digits in Q1. If you exclude the benefit related to Australian distribution, and then just looking at -- differently, if I just look at the mid-single digit operating profit growth guidance, backing out the $30 million or so, I think, is our estimate of how much you benefited from the Australian distribution. It looks like your, again, underlying growth is kind of flattish. So I guess I know this is a year where you've got sort of step-up brands investments, and you've got commodities, but can you just help us understand sort of how much is really the commodity headwinds and then the brand investment? Is it coming in actually? Are you planning to invest more some of the sales upside or distribution gain upside that you're getting on the Spirits business this year?

Craig Omtvedt

Sure, sure, sure. And let me take that. One of the reasons that we made the comments we did in the prepared remarks are to help people understand what the offsets are going to be. I mean the fact is the core -- individual quarters themselves are going to be a little bit choppy just because of the one-offs that are going on and I mean fundamentally, there's the top 4. One is obviously, our step up in brand spend to really get us to the level that we want to have in terms of brand spend going forward as a percent of sales. Commodity costs, now we came into the year with a mindset that we would largely, primarily be seeing just the increases that were related to the mature spirits that we're bottling this year. I mean as we've mentioned before, 4 years ago when we were buying corn, we had a uptick in the prices and so that now is reflecting itself. But on top of that, we're seeing, at least at the moment, higher costs on both molasses, sugar, wheat. And so our best estimate is where we came into the year thinking we have like $5 million to $10 million, we now think that number is going to be in the range of say $15 million to $20 million. So I mean that's the commodity piece. The FX benefit right now, we're estimating is in the range of say $25 million or so, and that's with the Aussie dollar at about $1.04 higher than that right now, the euro at $1.42, the pound at $1.60. But -- and then, we've got the CCA arrangement and that's covered under a confidentiality agreement. For competitive reasons, I mean, we wouldn't breakout the specific numbers for either the brand spend or the CCA agreement out in Australia. But at the end of the day as I indicated, we're saying right now that the impact of the brand spend and the higher commodity costs are largely going to be offset for the full year by the benefit of FX and CCA, so the mid-single digit number that we have for the full year is the right number. We are going to see higher levels of brand spend in the coming quarters as we ramp up over the course of the year. So hopefully that gives a little bit of sense of what's going on, and particularly here in Q2, we're going to have a significant uplift in terms of brand spend year-over-year.

Bruce Carbonari

But those were all initially planned. We haven't increased it from our initial plan.

Craig Omtvedt

Yes, the commodity cost and the FX obviously are a little bit more than we are originally targeting, but the others were, as Bruce said, planned.

Judy Hong - Goldman Sachs Group Inc.

Okay. So the benefit that you got in Q1 is related to the inventory sort of the build in Australia that you had incorporated into that low- to mid-single digit profit guidance?

Craig Omtvedt

Yes.

Judy Hong - Goldman Sachs Group Inc.

Okay, got it. All right.

Operator

Your next question comes from the line of Dennis McGill from Zelman & Associates.

Dennis McGill

Just a quick one on the separation, I think based on your comments earlier, it sounds like the timing is similar, but for Home if everything processes as expected, the completion of that spin would match up with what you talked about for all the businesses, early fourth?

Bruce Carbonari

Yes.

Dennis McGill - Zelman & Associates

Okay. And then separately on the faucets business you talked about kind of where you guys have been gaining market share early last couple of years but there's been some various data points that are kind of near-term, and I was just hoping for your opinion. Your biggest competitor, I think, talked about their volumes being up or their business being up double digits and had another competitor that has a big loss here at the home centers. And then more broadly, kind of interested in your opinion on where private label fits into the picture over the next couple of years and how you guys kind of address that mix shift down?

Bruce Carbonari

Sure. Let's start with the private label piece. The private label has -- from a share standpoint, hasn't changed much over the last horizon, maybe 3 to 5 years. Where it's sold has somewhat changed, but its share of the market is roughly the same, and it's also been consolidated. So retailers, instead of having maybe multiple brands, now have maybe one of their own house brands. So they had various types of programs with core manufacturers as well. So private label is not -- we don't see that growing. The shifts within the shares in the market place, I think that the big are getting bigger and then stronger, and they have invested behind their brands, and invested behind the innovation. I think they're winning out there, ourselves are part of that, I think some of the other larger payers are part of that as well, and to the casualty of some of the, maybe, 4 or #5, #6 players out there. And we're seeing that in most of the categories, not just faucet categories, but of the strength of, maybe, our balance sheet and maybe our -- we mentioned the management that has been through these cycles before and know how to operate during these particular cycles. So I think generally, that's kind of the things that we're seeing out there.

Operator

Your next question comes from the line of Peter Lisnic from Robert W. Baird.

Peter Lisnic - Robert W. Baird & Co. Incorporated

On the Home & Security business strength in cabinets and Moen in retail or home center, just wondering if, one, you think that's structural for the industry? And then number two, if indeed it is or even if not, what sort of the impact is on your structural mix or margin as we look at the business going forward?

Bruce Carbonari

Yes, is it structural. To some extent as smaller projects -- and when I say smaller projects I'm talking dollar-wise as well as size-wise relate more to a home center type of environment. The service element of the value creation there isn't as high as you get in a big project. So if you were doing -- let me do it in a different way, if you're doing a big remodel of your home, a big kitchen remodel, it's a much more involved process and you would most likely go to kitchen and bath dealer than you might necessarily go to a home center. So right now the way the market is and what we're seeing is a lot more sales that are related to smaller projects, which fits the home center profile very well. So I think if, in fact, we do get back to a market that is a little bit more balanced with big and small, I think you'll see the natural reversion back because of the high level of service content in a big remodel project. So yes, maybe a little bit has shifted, it definitely has shifted now. Will it go back, I think eventually it will go back, maybe not to the same level as before. But again, I also think at the same time, the home centers are getting much better at -- with their designs, with their designers, with their add-on sales. The heart of the home is the kitchen and the heart of the kitchen project is the cabinet, it starts there, and so there's add-on sales of countertops and appliances and things like that. And as you know, most of the home centers now are heavily into the appliance businesses, heavily into lighting, heavily into the flooring, so they can do the whole project. And I think they're learning and developing those add-on sales as well. So they are becoming better and more efficient as a supplier and servicer of that market. But again, I think when you get to the big high-end projects you're going to see that more on the kitchen and bath dealer side.

Peter Lisnic - Robert W. Baird & Co. Incorporated

Okay. And in the past you've commented that there's really not a significant margin differential between the channels, is that -- that read the same nowadays?

Bruce Carbonari

Yes, generally the same. When you -- yes, generally the same.

Peter Lisnic - Robert W. Baird & Co. Incorporated

Okay. All right. Fair enough. And then if I look at some of the new businesses that you've been able to win or are pursuing in Home & Security, Martha Stewart, the in-stock at Lowe's, at what point -- I would assume some of these front end costs are pretty significant and the volumes not there yet, at what point do you think you might get to sort of a breakeven on some of those programs where you could see an inflection in the margin as those programs become a bit more profitable?

Craig Omtvedt

Well, I think the real, real, real, kind of planing level is really going to start to come in 2012 as we annualize.

Peter Lisnic - Robert W. Baird & Co. Incorporated

Okay. And so in theory, as we look at '12, we should get better than your standard 30% incremental, is that a good way of looking at it?

Craig Omtvedt

I think that's too hard to call, when you start to -- I mean the point is we think 30% is a good way to think about it. What the bandwidth will be in terms of the annualized benefit of the price increases that we've taken, where we're going to be with commodity costs and others, I think, it's just too hard to try to call that with precision. But certainly, as we move forward, it's certainly giving us more comfort and confidence with this 30% leverage target that we've set.

Peter Lisnic - Robert W. Baird & Co. Incorporated

Okay. All right. Perfect.

Operator

Your next question comes from the line of Kevin Dreyer from GAMCO Asset Management.

Kevin Dreyer - Gabelli

Just wanted to follow-up, again, on the Golf business, I guess this separation plan has been in place since December, and I'm wondering if that business is going to be sold is there any reason that we wouldn't get announcement on that in the next month or 2?

Bruce Carbonari

Yes, I would say you're in the range. It depends on a number of things. We have a very robust process going on. We have exactly what we thought we have. We have, at this point, strategic players. We have private equity. We have Asian investors involved. And so we are managing a process here that is very robust, and we're going to take advantage of that, and we'll see how that plays out here over the next months to come. But again, as I said earlier, our hope is that we will announce it before the actual announce -- finalization of the spin process of Home & Security.

Kevin Dreyer - Gabelli

Okay. Great. Also just with the Amatil deal, can you give -- I mean, you gave us a sense of the magnitude, but can you give me a sense of exactly what was the nature of the boost for the quarter? Is it a -- some sort of a contractual shipping arrangement? I mean I assume you're shipping ahead of demand, and does that imply we're going to be then lapping this next year? Is this a one-time quarterly event or sort of an ongoing benefit for a few quarters?

Craig Omtvedt

Yes, the lion share of it is first quarter and it's pretty simple and straightforward. Similar to what we have here in the U.S. They now take ownership as we ship products to them, where in the past they were largely an agent distributing our products. The beauty of the new arrangement is it really ties us more closely together in terms of driving overall profitability of the brands rather than just volume, so we're very enthused about it. As I mentioned in the prepared remarks, we are going to be selling to them on different terms so given the fact that we will sell to them net of excise tax and distributor commissions, our distributor expense, the likely impact over the remainder of the year will be lower sales in the bandwidth of we think, right now, is kind of a good number to use would be, say, $10 million to $15 million of sales impact over the balance of the year but it's an arrangement we're very enthused about.

Kevin Dreyer - Gabelli

Okay. Great. And then just final question on Spirits, in the tequila category, which obviously you're a big player in, Brown-Forman has some new packaging that they put through for their Herradura product. And there is obviously the talk that the Diageo may buy in Cuervo potentially. Just curious, one, if you're see anything competitively currently of note? And secondly, does that give you cause for concern that Diageo then becomes a lot more aggressive as an actual owner of Cuervo?

Bruce Carbonari

Bring it on. We're ready. We have a lot of innovation coming through that category. And we feel real good about the growth that we've added in our Sauza family. I think that the bigger challenges here are, not the packaging and so much Diageo, what they will or won't do, I think it really -- there's a glut of agave right now, which, in a couple of years, will totally reverse itself and who's going to be positioned well then? Because the pricing and promotion activity that we saw over the last 18 months in tequila in particular was really driven by this glut of agave. So any which way, we think it's a great category. We have a good position there, here in the U.S. and Mexico. We're trying to expand it internationally as well. We have some innovation that's coming there. And we talked about the Blue Agave, 100% Blue Agave Sauza and we have some other things coming out later in the year. So we think it's a great category and I think the competitors are all good competitors. And I think we'll continue to battle the way we battle.

Craig Omtvedt

The other thing I'd add there is with the recent acquisition of Skinnygirl, we think the prospects for our position are nothing short of phenomenal and the reception we've already had on Skinnygirl benefiting from our national distribution capability just gives us real, real, real, confidence in what our prospects are going forward.

Bruce Carbonari

Our orders for the first month of ownership have just blown us away on Skinnygirl.

Kevin Dreyer - Gabelli

Good. Everyone getting ready for Cinco de Mayo, I guess.

Bruce Carbonari

Yes. Exactly.

Craig Omtvedt

And low cal [calories] drinks.

Operator

And your last question comes from the line of David MacGregor from Longbow Research.

David S. MacGregor

I realize you're going to file your Form 10 tomorrow, but I was just wondering if there's anything you could say today about the capital structures over these 3 businesses, and also the expected tax rates?

Craig Omtvedt

Sure...

Bruce Carbonari

Before you start, we are going to file it in the morning, so that you at least have -- you won't ruin your whole weekend.

David S. MacGregor

No.

Craig Omtvedt

At least you'll get part of the day tomorrow to look at it. Yes, as we've indicated before in terms of as things stand today, our thinking is that on the spin of the Home businesses, we want to have both businesses positioned but strong capital structures. Our thinking right now is that on the spin, we likely would declare a dividend back up to Fortune Brands from spin of, say, something in the range of, say, $500 million to $750 million, I think what you're going to see in the Form 10 is $500 million. That would position us with a very modest debt-to-EBITDA ratio, that would be in the range of say 1.5x or so. We're targeting right now, that given what we think are the future prospects for that business both in terms of what may be attractive acquisitions, possibly even some share buyback and benefiting from strong cash flow, that we won't be having a dividend initially in Spin Co. [ph] the $0.76 that we have right now remains with Remain Co. [ph] but obviously, I mean, those are things we'll tighten down on as we go through the balance of the year.

David S. MacGregor

Great.

Craig Omtvedt

And just in terms of -- and so, let me just round that up too, because we've said previously we have an expectation that we're going to have a very strong capital structure in Remain Co. [ph] as well. And we do continue to expect that, that will be the case. We'll speak to that more in the future as we finalize were we are with Golf. And then with regard to tax rates, given the more U.S. nature of Spin Co. [ph], we will be looking at a tax rate that is likely in the kind of mid-30s, mid- to high-30s range. On the Remain Co. [ph] side, then we'll be looking at something that's more in the kind of mid-20s or so. So hopefully that helps you

David S. MacGregor

Yes. It does.

Craig Omtvedt

Oh, let me -- one other thing that I just wanted to highlight on here. Because we've spoken to this before. People have asked what's going to be the incremental corporate expense? And our run rate today, Fortune Brands is in the $75 million to $80 million range. We've said that this interfuse, if you were spinning out all three businesses, we'd put that number at the $90 million to say $100 million range. If you said okay about $15 million to $20 million of that would go to Golf, that leaves approximately, let's just say, $80 million. And our view right now is that -- and this is incremental now, that for Home, the incremental would be in the range of, say, $45 million or so. And that we're looking at, say, $35 million or so for what's going to be Remain Co. [ph]. You are going to see in the Form 10 where we speak to something that would aggregate to around say $60 million to $65 million for Spin Co. [ph], but the reality is about $15 million to $20 million of that number is just a reallocation of expense within the group, it's the expense that's there today plus some changes in the way we're going to account for some things, pension and others, that becomes just a reallocation of expense. So hopefully, that helps.

David S. MacGregor

Yes, that does.

Operator

There are no further questions at this time. Mr. Carbonari, I turn the call back over to you.

Bruce Carbonari

Thank you Michelle. Thank you again for joining us. We look forward to discussing our second quarter results with you in early August. Have a great day.

Operator

This concludes today's conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Fortune Brands' CEO Discusses Q1 2011 Results - Earnings Call Transcript
This Transcript
All Transcripts