UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549



                                   FORM 10-Q



               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period                        Commission file number 1-9076
ended June 30, 2001

                             FORTUNE BRANDS, INC.
  ---------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)



           DELAWARE                                          13-3295276
  -------------------------------                      ----------------------
  (State or other jurisdiction of                         (I.R.S. Employer
   incorporation or organization)                       Identification No.)

             300 Tower Parkway, Lincolnshire, Illinois 60069-3640
  ---------------------------------------------------------------------------
  (Address of principal executive offices)                      (Zip Code)



Registrant's telephone number, including area code:  (847) 484-4400

                                 ------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X]  No [_]

The number of shares outstanding of the Registrant's common stock, par value
$3.125 per share, at July 31, 2001 was 152,012,210 shares.


                         PART I. FINANCIAL INFORMATION


Item 1.  FINANCIAL STATEMENTS.
------   --------------------

                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEET
                    ---------------------------------------
                                 (In millions)



                                                                           June 30,                December 31,
                                                                             2001                     2000
                                                                        -------------             ------------
                                                                                      (Unaudited)
                                                                                         
Assets
  Current assets
   Cash and cash equivalents                                            $   71.0                  $   20.9
   Accounts receivable, net                                                966.8                     952.1

   Inventories
    Bulk whiskey                                                           295.6                     297.9
    Other raw materials, supplies and
     work in process                                                       271.3                     303.7
    Finished products                                                      471.4                     477.6
                                                                        --------                  --------
                                                                         1,038.3                   1,079.2

  Other current assets                                                     217.4                     212.3
                                                                        --------                  --------
    Total current assets                                                 2,293.5                   2,264.5

  Property, plant and equipment, net                                     1,199.5                   1,205.1

  Intangibles resulting from
   business acquisitions, net                                            1,960.2                   1,989.4

  Other assets                                                             362.6                     305.1
                                                                        --------                  --------
   Total assets                                                         $5,815.8                  $5,764.1
                                                                        ========                  ========











           See Notes to Condensed Consolidated Financial Statements.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEET
                    ---------------------------------------
                    (In millions, except per share amounts)




                                                                              June 30,               December 31,
                                                                                2001                     2000
                                                                            ------------             -----------
                                                                                         (Unaudited)
                                                                                              
Liabilities and stockholders' equity

 Current liabilities
  Notes payable to banks                                                     $    54.8                 $    41.7
  Commercial paper                                                               400.1                     751.9
  Current portion of long-term debt                                                6.4                      12.4
  Accounts payable                                                               285.2                     291.8
  Accrued taxes                                                                  476.9                     387.3
  Accrued expenses and other liabilities                                         483.7                     554.8
                                                                              --------                  --------
   Total current liabilities                                                   1,707.1                   2,039.9


Long-term debt                                                                   951.3                   1,151.8
Deferred income                                                                  240.8                         -
Deferred income taxes                                                                -                      54.9
Postretirement and other liabilities                                             379.4                     367.2
                                                                              --------                  --------
   Total liabilities                                                           3,278.6                   3,613.8
                                                                              --------                  --------

Minority interest in consolidated
 subsidiaries                                                                    389.3                      14.4

Stockholders' equity
 $2.67 Convertible Preferred stock -
  redeemable at Company's option                                                   8.9                       9.2
 Common stock, par value $3.125 per
  share, 229.6 shares issued                                                     717.4                     717.4
Paid-in capital                                                                  119.1                     125.9
Accumulated other
 comprehensive loss                                                             (106.4)                    (79.6)
Retained earnings                                                              4,010.1                   3,919.7
Treasury stock, at cost                                                       (2,601.2)                 (2,556.7)
                                                                              --------                  --------
   Total stockholders' equity                                                  2,147.9                 $ 2,135.9
                                                                              --------                 ---------

    Total liabilities and
      stockholders' equity                                                   $ 5,815.8                 $ 5,764.1
                                                                              ========                 =========





           See Notes to Condensed Consolidated Financial Statements.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENT OF INCOME
                for the Six Months Ended June 30, 2001 and 2000
             -----------------------------------------------------
                    (In millions, except per share amounts)
                                  (Unaudited)



                                                                                     2001                       2000
                                                                                   ---------                 ---------
                                                                                                     
Net sales                                                                          $ 2,734.4                 $ 2,854.0

 Cost of products sold                                                               1,474.7                   1,518.5
 Excise taxes on spirits and wine                                                      171.4                     170.6
 Advertising, selling, general and
  administrative expenses                                                              759.5                     776.4
 Amortization of intangibles                                                            31.5                      39.8
 Restructuring charges                                                                  12.0                       8.1
 Interest and related expenses                                                          58.9                      65.7
 Other (income) expenses, net                                                           (2.7)                      1.2
                                                                                   ---------                 ---------
Income before income taxes                                                             229.1                     273.7

  Income taxes                                                                          61.3                     109.6
  Minority interests                                                                     3.4                       2.4
                                                                                   ---------                 ---------
Net income                                                                         $   164.4                 $   161.7
                                                                                   =========                 =========

Earnings per share

 Basic                                                                             $    1.07                 $    1.01
                                                                                   =========                 =========

 Diluted                                                                           $    1.05                 $    1.00
                                                                                   =========                 =========

Dividends paid per share                                                           $    0.48                 $    0.46
                                                                                   =========                 =========
Average number of shares outstanding

 Basic                                                                                 153.2                     159.7
                                                                                       =====                     =====
 Diluted                                                                               156.4                     162.1
                                                                                       =====                     =====


           See Notes to Condensed Consolidated Financial Statements.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENT OF INCOME
               for the Three Months Ended June 30, 2001 and 2000
             -----------------------------------------------------
                    (In millions, except per share amounts)
                                  (Unaudited)



                                                                                           2001                    2000
                                                                                        ----------              ----------

                                                                                                         
Net sales                                                                               $ 1,433.4              $ 1,496.6

     Cost of products sold                                                                  786.2                  791.1
     Excise taxes on spirits and wine                                                        88.2                   90.3
     Advertising, selling, general and
       administrative expenses                                                              381.0                  391.2
     Amortization of intangibles                                                             15.8                   19.9
     Restructuring charges                                                                   12.0                    5.6
     Interest and related expenses                                                           27.1                   33.8
     Other (income) expenses, net                                                            (2.5)                   1.5
                                                                                        ---------                -------
Income before income taxes                                                                  125.6                  163.2


     Income taxes                                                                            20.8                   64.5
     Minority interests                                                                       1.9                    1.3
                                                                                         --------                -------
Net income                                                                               $  102.9                $  97.4
                                                                                         ========                =======
Earnings per share

     Basic                                                                               $   0.67                $  0.61
                                                                                         ========                =======

     Diluted                                                                             $   0.66                $  0.61
                                                                                         ========                =======
Dividends paid per share                                                                 $   0.24                $  0.23
                                                                                         ========                =======
Average number of shares outstanding
     Basic                                                                                  152.7                  158.3
                                                                                            =====                  =====
     Diluted                                                                                156.1                  160.6
                                                                                            =====                  =====






           See Notes to Condensed Consolidated Financial Statements.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                for the Six Months Ended June 30, 2001 and 2000
             -----------------------------------------------------
                                 (In millions)
                                  (Unaudited)



                                                                                                   2001                  2000
                                                                                                ---------             ---------
                                                                                                              
Operating activities
 Net income                                                                                     $  164.4              $  161.7
 Depreciation and amortization                                                                     110.1                 118.3
 Restructuring charges                                                                              12.0                   8.1
 Increase in accounts receivable                                                                   (16.0)                (49.9)
 Decrease (increase) in inventories                                                                 30.0                 (48.6)
 Decrease in accounts payable, accrued
  expenses and other liabilities                                                                  (111.8)                (56.1)
 Increase in accrued taxes                                                                          90.0                  25.1
 Other operating activities, net                                                                  (111.0)                (40.9)
                                                                                               ----------            ----------
  Net cash provided from operating activities                                                      167.7                 117.7
                                                                                               ----------            ----------
Investing activities
 Additions to property, plant and equipment                                                        (84.6)                (95.3)
 Acquisitions and investment in joint venture,
  net of cash acquired                                                                              (6.5)                (25.6)
 Proceeds from contribution of assets to joint
  venture                                                                                          270.0                     -
 Other investing activities, net                                                                     2.8                   5.3
                                                                                               ----------            ----------
  Net cash provided (used) by investing activities                                                 181.7                (115.6)
                                                                                               ----------            ----------

Financing activities
 Proceeds from sale of minority interest in
  wholly-owned subsidiary                                                                          375.0                     -
 (Decrease) increase in short-term debt, net                                                      (537.8)                271.4
 Issuance of long-term debt                                                                          0.2                     -
 Repayment of long-term debt                                                                        (6.7)                (42.0)
 Dividends to stockholders                                                                         (74.0)                (74.2)
 Cash purchases of common stock for treasury                                                       (69.7)               (139.9)
 Proceeds received from exercise of stock options                                                   19.0                   0.8
                                                                                               ----------            ----------
  Net cash (used) provided by financing activities                                                (294.0)                 16.1
                                                                                               ----------            ----------
Effect of foreign exchange rate changes on cash                                                     (5.3)                 (0.6)
                                                                                               ----------            ----------
 Net increase in cash and cash equivalents                                                          50.1                  17.6

Cash and cash equivalents at beginning of period                                                    20.9                  71.9
                                                                                               ----------            ----------
Cash and cash equivalents at end of period                                                      $   71.0              $   89.5
                                                                                               ==========            ==========





           See Notes to Condensed Consolidated Financial Statements.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                for the Six Months Ended June 30, 2001 and 2000
         -------------------------------------------------------------
                                 (In millions)
                                  (Unaudited)




                                          $2.67                              Accumulated
                                    Convertible                                    other                       Treasury
                                      Preferred     Common      Paid-in    comprehensive        Retained         stock,
                                          stock      stock      capital             loss        earnings        at cost        Total
====================================================================================================================================
                                                                                                          
Balance at December 31, 1999              $9.9      $717.4      $130.8           $(14.9)       $4,205.2      $(2,310.2)    $2,738.2

Comprehensive income
    Net income                               -           -           -                -           161.7              -        161.7
    Foreign currency adjustments             -           -           -            (42.4)              -              -        (42.4)
                                         -----       -----      ------          -------        --------       --------     --------
Total comprehensive (loss) income            -           -           -            (42.4)          161.7              -        119.3
                                         -----       -----      ------          -------        --------       --------     --------
Dividends                                    -           -           -                -           (74.2)             -        (74.2)
Purchases                                    -           -           -                -               -         (144.5)      (144.5)
Conversion of preferred stock and
    delivery of stock plan shares         (0.4)          -        (2.7)               -               -            4.6          1.5
                                         -----      ------      ------          -------        --------      ---------     --------
Balance at June 30, 2000                  $9.5      $717.4      $128.1           $(57.3)       $4,292.7      $(2,450.1)    $2,640.3
                                         =====      ======      ======          =======        ========      =========     ========


Balance at December 31, 2000              $9.2      $717.4      $125.9          $ (79.6)       $3,919.7      $(2,556.7)    $2,135.9

Comprehensive income
    Net income                               -           -           -                -           164.4              -        164.4
    Foreign currency adjustments             -           -           -            (26.8)              -              -        (26.8)
                                         -----       -----      ------          -------        --------       --------     --------
Total comprehensive (loss) income            -           -           -            (26.8)          164.4              -        137.6
                                         -----       -----      ------          -------        --------       --------     --------
Dividends                                    -           -           -                -           (74.0)             -        (74.0)
Purchases                                    -           -           -                -               -          (71.6)       (71.6)
Conversion of preferred stock and
    delivery of stock plan shares         (0.3)          -        (6.8)               -               -           27.1         20.0
                                         -----      ------      ------          -------        --------      ---------     --------
Balance at June 30, 2001                  $8.9      $717.4      $119.1          $(106.4)       $4,010.1      $(2,601.2)    $2,147.9
                                         =====      ======      ======          =======        ========      =========     ========



           See Notes to Condensed Consolidated Financial Statements.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 1.    Principles of Consolidation

          The condensed consolidated balance sheet as of June 30, 2001, the
       related condensed consolidated statements of income for the three month
       and six month periods ended June 30, 2001 and 2000, and the related
       condensed consolidated statements of cash flows and stockholders' equity
       for the six month periods ended June 30, 2001 and 2000 are unaudited. In
       the opinion of management, all adjustments necessary for a fair
       presentation of such financial statements have been included. Such
       adjustments included restructuring and other nonrecurring charges and
       normal recurring items. Interim results may not be indicative of results
       for a full year.

          The condensed consolidated financial statements and notes are
       presented as permitted by Form 10-Q and do not contain certain
       information included in the Company's annual consolidated financial
       statements and notes. The year-end condensed consolidated balance sheet
       was derived from the Company's audited financial statements, but does not
       include all disclosures required by generally accepted accounting
       principles. This Form 10-Q should be read in conjunction with the
       Company's consolidated financial statements and notes incorporated by
       reference in its 2000 Annual Report on Form 10-K.

2.     Reclassifications

       Certain reclassifications were made to the prior year income statements
       for the three months and six months ending June 30, 2000.

3.     Accounting Changes

       Derivative Financial Instruments
       --------------------------------

          Effective January 1, 2001, the Company adopted FAS Statement No. 133
       "Accounting for Derivative Instruments and Hedging Activities" and its
       related amendment FAS Statement No. 138, "Accounting for Certain
       Derivative Instruments and Certain Hedging Activities". These statements
       establish accounting and reporting standards for derivative instruments,
       including certain derivative instruments embedded in other contracts, and
       for hedging activities. It requires recognition of all derivatives as
       either assets or liabilities on the balance sheet and the measurement of
       those instruments at fair value. If the derivative is designated as a
       fair value hedge and is effective, the changes in the fair value of the
       derivative and of the hedged item attributable to the hedged risk are
       recognized in earnings in the same period. If the derivative is
       designated as a cash flow hedge, the effective portions of changes in the
       fair value of the derivative are


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


3.     Accounting Changes (Concluded)

       recorded in other comprehensive income (OCI) and are recognized in the
       income statement when the hedged item affects earnings. Ineffective
       portions of changes in the fair value of cash flow hedges are recognized
       in earnings.

          The impact of the adoption of FAS 133 and 138 on January 1, 2001, was
       not material.

          Derivative gains or losses included in OCI are reclassified into
       earnings at the time the forecasted revenue or expense is recognized.
       During the three and six months ended June 30, 2001, minimal gain amounts
       were reclassified to cost of sales. The Company estimates that $0.6
       million of derivative gain included in OCI will be reclassified to
       earnings within the next twelve months.

       Foreign Currency Risk

          Certain forecasted transactions, assets and liabilities are exposed to
       foreign currency risk. The Company continually monitors its foreign
       currency exposures in order to maximize the overall effectiveness of its
       foreign currency hedge positions. Principal currencies hedged include the
       Pound sterling, the Euro, the Canadian dollar and the Australian dollar.

       Interest Rate Risk

          The Company may, from time to time, enter into interest rate swap
       agreements to manage its exposure to interest rate changes. The swaps
       involve the exchange of fixed and variable interest rate payments without
       exchanging the notional principal amounts. The Company records the
       payments or receipts on the agreements as adjustments to interest
       expense. As of June 30, 2001, the Company did not have any outstanding
       interest rate swap agreements.


       Net Sales
       ---------

          Net sales reflect the effect of a reclassification of amounts billed
       to cover shipping and handling costs and sales incentives provided to
       customers primarily from the category "advertising, selling and general
       and administrative expenses". These reclassifications, which reduced
       reported net sales by $4.0 and $10.4 million for the three months and six
       months ending June 30, 2000, respectively, were required by the Emerging
       Issues Task Force Issue No. 00-10 and No. 00-22. These reclassifications
       did not result in a change in the Company's operating company
       contribution, earnings or earnings per share in any of the periods
       presented.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.     Joint Ventures

          On May 31, 2001, the Company's spirits and wine business completed
       transactions with Vin & Sprit AB of Sweden (V&S) creating a joint
       venture, named Future Brands LLC (the "LLC"), to distribute both
       companies' spirits and wine brands in the United States. V&S paid $270
       million to gain access to Beam's U.S. distribution network and to acquire
       a 49% interest in the LLC and paid $375 million to purchase a 10% equity
       interest in Jim Beam Brands Worldwide ("JBBW") in the form of convertible
       preferred stock. The shares of JBBW convertible preferred stock issued to
       V&S is convertible into 10% of the JBBW common stock and has voting power
       equivalent to a 10% interest in JBBW common stock. The preferred stock is
       entitled to a dividend equal to the greater of 10% of the dividend paid
       upon JBBW common stock or 3% of the preferred stock's face value ($375
       million) plus unpaid accrued dividends; no dividends may be paid on JBBW
       common stock unless all unpaid accrued JBBW preferred stock dividends
       have been paid. V&S also received a 3-year option to increase its equity
       stake in JBBW by up to an additional 9.9%. V&S may require the Company to
       purchase the JBBW preferred stock in whole or in part at any time after
       May 31, 2004, or upon a change in control of JBBW or Jim Beam Brands Co.,
       or certain other events. The Company has accounted for the $270 million
       gain on the sale of 49% of the LLC as deferred income and the resulting
       tax on sale as a deferred income tax asset. Starting in June 2001, these
       amounts will be amortized to other (income) expenses, net on a straight-
       line basis over the next ten years as JBBW has continuing operating
       obligations to the joint venture.

          In addition, V&S invested 107 million euros to acquire a one-fourth
       interest in our international sales and distribution joint venture, named
       Maxxium International B.V. Maxxium was formed in 1999 by JBBW, Remy-
       Cointreau and Highland Distillers to distribute and sell premium wines
       and spirits in key markets outside the United States.

          In January 2000, JBBW made a cash investment of $25.6 million in
       Maxxium towards its total investment of $110 million.


5.     Income Taxes

          The Company recorded a tax reserve reversal of $31.0 million during
       the three and six months ended June 30, 2001, as the IRS examinations for
       the years 1990 - 1992 were effectively concluded during the second
       quarter. A review and approval of the 1990-1992 examinations by the IRS
       Joint Committee is anticipated to occur in the second half of 2001
       potentially triggering final adjustments related to these examinations.



                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.     Information on Business Segments

          Net sales and operating company contribution are as follows:



                                                                            Six Months Ended June 30,
                                                                           ---------------------------
                                                                                                           Operating
                                                                        Net                                 Company
                                                                       Sales                             Contribution
                                                              -----------------------               -----------------------
                                                              2001               2000               2001               2000
                                                              ----               ----               ----               ----
                                                                                                        
                                                                                      (In millions)
                        Home products                       $1,008.7          $1,024.5              $138.3             $157.1
                        Office products                        590.0             662.5                14.6               26.0
                        Golf products                          554.6             593.6                91.8              112.4
                        Spirits and wine                       581.1             573.4               133.9              125.5
                                                            --------          --------              ------             ------
                                                            $2,734.4          $2,854.0              $378.6             $421.0
                                                            ========          ========              ======             ======


                                                                               Three Months Ended June 30,
                                                                         -----------------------------------------
                                                                                                           Operating
                                                                         Net                                Company
                                                                        Sales                             Contribution
                                                               ----------------------                ----------------------
                                                               2001               2000               2001               2000
                                                               ----               ----               ----               ----
                                                                                                        
                                                                                      (In millions)
                        Home products                       $  537.6          $  533.1              $ 76.8             $ 82.3
                        Office products                        292.2             333.9                 7.3               10.5
                        Golf products                          300.4             328.8                58.3               74.2
                        Spirits and wine                       303.2             300.8                75.1               71.5
                                                            --------          --------              ------             ------
                                                            $1,433.4          $1,496.6              $217.5             $238.5
                                                            ========          ========              ======             ======


Operating company contribution is net sales less all costs and expenses other
than restructuring and other nonrecurring charges, amortization of intangibles,
corporate administrative expense, interest and related expenses, other (income)
expenses, net and income taxes.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.     Information on Business Segments (Concluded)

          A reconciliation of operating company contribution to consolidated
       income before income taxes is as follows:



                                                                                   Six Months Ended June 30,
                                                                             --------------------------------------
                                                                               2001                           2000
                                                                               ----                           ----
                                                                                           (In millions)
                                                                                                      
         Operating company contribution                                        $378.6                        $421.0
         Amortization of intangibles                                             31.5                          39.8
         Restructuring charges                                                   12.0                           8.1
         Other nonrecurring charges                                              30.3                          10.0
         Interest and related expenses                                           58.9                          65.7
         Non-operating expenses                                                  16.8                          23.7
                                                                               ------                        ------
         Income before income taxes                                            $229.1                        $273.7
                                                                               ======                        ======


                                                                                     Three Months Ended June 30,
                                                                                  ---------------------------------
                                                                                 2001                           2000
                                                                                 ----                           ----
                                                                                            (In millions)
                                                                                                        
         Operating company contribution                                        $217.5                          $238.5
         Amortization of intangibles                                             15.8                            19.9
         Restructuring charges                                                   12.0                             5.6
         Other nonrecurring charges                                              30.3                             5.5
         Interest and related expenses                                           27.1                            33.8
         Non-operating expenses                                                   6.7                            10.5
                                                                               ------                          ------
         Income before income taxes                                            $125.6                          $163.2
                                                                               ======                          ======



                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


7.     Earnings Per Share

          The computation of basic and diluted earnings per common share
       for "Net income" is as follows:




                                                                      Six Months Ended             Three Months Ended
                                                                       June 30,                         June 30,
                                                                   -----------------               ------------------
                                                                   2001         2000                2001         2000
                                                                   ----         ----                ----         ----
                                                                        (In millions, except per share amounts)
                                                                                                  
Net income                                                        $ 164.4       $  161.7         $  102.9     $   97.4
    Less:  Preferred stock dividends                                  0.4            0.4              0.2          0.2
                                                                  -------       --------         --------     --------
Income available to common
    stockholders - basic                                            164.0          161.3            102.7         97.2
Convertible Preferred stock
    dividend requirements                                             0.4            0.4              0.2          0.2
                                                                  -------       --------         --------     --------
Income available to common
    stockholders - diluted                                        $ 164.4       $  161.7         $  102.9     $   97.4
                                                                  =======       ========         ========     ========

Weighted average number of common
    shares outstanding - basic                                      153.2          159.7            152.7        158.3
Conversion of Convertible
    Preferred stock                                                   1.8            2.0              1.9          1.9
Exercise of stock options                                             1.4            0.4              1.5          0.4
                                                                  -------       --------         --------     --------
Weighted average number of common
     shares outstanding - diluted                                   156.4          162.1            156.1        160.6
                                                                  =======       ========         ========     ========

Earnings per common share
     Basic                                                       $   1.07       $   1.01         $   0.67     $   0.61
                                                                 ========       ========         ========     ========
     Diluted                                                     $   1.05       $   1.00         $   0.66     $   0.61
                                                                 ========       ========         ========     ========


8.     Restructuring and Other Nonrecurring Charges

          Restructuring and Other Nonrecurring Charges Program - 1999
          -----------------------------------------------------------

               During 2000, the Company recorded $73.0 million of pre-tax
         restructuring and other nonrecurring charges. These included employee
         termination costs, asset write-offs, lease termination costs,
         relocation costs for certain manufacturing facilities, inventory
         write-offs due to discontinuance of certain product lines and
         relocation costs associated with establishing a new corporate
         headquarters.




                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.     Restructuring and Other Nonrecurring Charges (Continued)


          Reconciliation of the 1999 restructuring program, as of June 30, 2001
is as follows:




                                           Balance at           2001                 Cash             Non-Cash         Balance at
                                            12/31/00          Provision          Expenditures        Write-offs          6/30/01
                                           ----------         ----------         ------------        ----------        ----------
                                                                                 (In millions)
                                                                                                        
Rationalization of
   operations
     Employment
       termination costs (1)                   $ 14.3               $  -              $ (7.0)            $ (0.6)            $ 6.7
International distribution
  and lease agreements   (2)                      7.6                  -                (1.0)              (5.6)              1.0
Loss on disposal of assets                        1.6                  -                   -               (0.9)              0.7
                                               ------             ------              ------             ------            ------
                                               $ 23.5               $  -              $ (8.0)            $ (7.1)            $ 8.4
                                               ======             ======              =======            ======            ======


          (1)  Of the 2,307 positions planned for elimination, 2,238 had been
               eliminated as of June 30, 2001.

          (2)  $5.4 of the $5.6 classified as non-cash write-offs for the six
               months ending June 30, 2001 represents the reclassification of
               lease payments on various lease agreements to long-term.

            The Company expects that substantially all remaining payments will
     be made within the next twelve months.


     Restructuring and Other Nonrecurring Charges Program - 2001
     -----------------------------------------------------------
     (Office Products)
     -----------------

            On April 19, 2001, the Company announced that as a result of its
     evaluation of strategic options for its office products business, it would
     immediately begin implementing a plan designed to improve both financial
     results and the long-term value of the business. The Company determined
     that it would not divest its office products business due to weakness in
     the overall economy and current conditions in the office products industry.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.     Restructuring and Other Nonrecurring Charges (Concluded)

       As a result of this plan, the Company recorded total pre-tax
       restructuring and other nonrecurring charges of $42.3 million, during the
       second quarter, as follows:




                                                                           Six Months Ended
                                                                             June 30, 2001
                                                   ----------------------------------------------------------------
                                                                              Nonrecurring
                                                                    -------------------------------
                                                                     Cost of                SG&A
                                                  Restructuring      Sales Charges          Charges        Total
                                                  -------------      -------------          --------        -----
                                                                    (In millions)
                                                                                               
       Office products                                $12.0              $17.8              $12.5           $42.3
                                                      -----              -----               ----          ------
                 Total                                $12.0              $17.8              $12.5           $42.3
                                                      =====              =====              =====           =====


          The charges principally relate to product line discontinuances,
       rationalization of operations, expenses associated with the
       exploration of strategic options for the office products business and
       workforce reduction initiatives across its operations.

          Reconciliation of the 2001 restructuring program, as of June 30, 2001
       is as follows:




                                                                   Six Months Ended
                                                                     June 30, 2001
                                                                   -----------------

                                                      2001               Cash              Non-Cash        Balance at
                                                   Provision         Expenditures         Write-offs         6/30/01
                                                   ----------        ------------         ----------       ----------
                                                                                               
Rationalization of
   operations
     Employment
       termination costs (1)                         $   3.5              $  (1.5)          $     -           $  2.0
     Other                                               2.0                    -                 -              2.0
Loss on disposal of assets                               6.5                 (0.1)             (1.5)             4.9
                                                     -------              -------           -------           ------
                                                     $  12.0              $  (1.6)          $  (1.5)          $  8.9
                                                     =======              =======           =======           ======


          (1)  Of the 223 positions planned for elimination, 211 had been
               eliminated as of June 30, 2001.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 9.    Comprehensive Loss

          The components of accumulated other comprehensive loss are as follows:

                                Foreign        Minimum           Accumulated
                               currency   pension liability         other
                              adjustments     adjustment     comprehensive loss
                              ----------- ----------------   -------------------
                                            (In millions)

Balance at December 31, 1999  $ (11.9)         $ (3.0)            $ (14.9)
Changes in six months           (42.4)              -               (42.4)
                              -------         -------             -------
Balance at June, 2000         $ (54.3)         $ (3.0)            $ (57.3)
                              =======         =======             =======

Balance at December 31, 2000  $ (75.4)         $ (4.2)            $ (79.6)
Changes in six months           (26.8)              -               (26.8)
                              -------         -------             -------
Balance at June 30, 2001      $(102.2)         $ (4.2)            $(106.4)
                              =======         =======             =======

              Included in the foreign currency adjustments balance at June 30,
         2001 is total deferred derivative gain of $0.6 million. (See Note 3.)

              For the three month periods ended June 30, 2001 and 2000, total
         comprehensive income resulted in income of $99.8 million and $68.5
         million, respectively.


10.      Pending Litigation

         Tobacco Litigation and Indemnification

              On December 22, 1994, the Company sold The American Tobacco
         Company subsidiary to Brown & Williamson Tobacco Corporation, a
         wholly-owned subsidiary of B.A.T Industries p.l.c. In connection with
         the sale, Brown & Williamson Tobacco Corporation and The American
         Tobacco Company ("the Indemnitors") agreed to indemnify the Company
         against claims including legal expenses arising from smoking and health
         and fire safe cigarette matters relating to the tobacco business of The
         American Tobacco Company.

              The Company is a defendant in numerous actions based upon
         allegations that human ailments have resulted from tobacco use.
         Management believes that there are meritorious defenses to the pending
         actions, including the fact that the Company never made or sold
         tobacco, and these actions are being vigorously contested. However, it
         is not possible to predict the outcome of the pending litigation,


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Concluded)


10.    Pending Litigation (Concluded)

       and it is possible that some of these actions could be decided
       unfavorably. Management is unable to make a meaningful estimate of the
       amount or range of loss that could result from an unfavorable outcome of
       the pending litigation. Management believes that the pending actions will
       not have a material adverse effect upon the results of operations, cash
       flows or financial condition of the Company as long as the Indemnitors
       continue to fulfill their obligations to indemnify the Company under the
       aforementioned indemnification agreement.

       Other Litigation

       In addition to the lawsuits described above, the Company and its
       subsidiaries are defendants in lawsuits associated with their business
       and operations. It is not possible to predict the outcome of the pending
       actions, but management believes that there are meritorious defenses to
       these actions and that these actions will not have a material adverse
       effect upon the results of operations, cash flows or financial condition
       of the Company. These actions are being vigorously contested.

11.    Environmental

         The Company is subject to laws and regulations relating to the
       protection of the environment. The Company provides for expenses
       associated with environmental remediation obligations when such amounts
       are probable and can be reasonably estimated. Such accruals are adjusted
       as new information develops or circumstances change and are not
       discounted. While it is not possible to quantify with certainty the
       potential impact of actions regarding environmental matters, particularly
       remediation and other compliance efforts that the Company's subsidiaries
       may undertake in the future, in the opinion of management, compliance
       with the present environmental protection laws, before taking into
       account estimated recoveries from third parties, will not have a material
       adverse effect upon the results of operations, cash flows or financial
       condition of the Company.


                       REPORT OF INDEPENDENT ACCOUNTANTS
                       ---------------------------------

      To the Board of Directors and Stockholders of Fortune Brands, Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of
Fortune Brands, Inc. and its Subsidiaries as of June 30, 2001, the related
condensed consolidated statements of income for each of the three-month and
six-month periods ended June 30, 2001 and June 30, 2000, and the condensed
consolidated statements of cash flows and stockholders' equity for the six month
periods ended June 30, 2001 and June 30, 2000. These financial statements are
the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
for them to be in conformity with accounting principles generally accepted in
the United States of America.

We previously audited in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of December
31, 2000, and the related consolidated statements of income, cash flows and
stockholders' equity for the year then ended (not presented herein), and in our
report dated January 24, 2001 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 2000,
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.


         PricewaterhouseCoopers LLP




         Chicago, Illinois 60601
         July 18, 2001


Item 2.             MANAGEMENT'S DISCUSSION AND ANALYSIS OF
------           FINANCIAL CONDITION AND RESULTS OF OPERATIONS
           -----------------------------------------------------------

                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                     -------------------------------------
 Results of Operations for the Six Months Ended June 30, 2001 as Compared to
                      the Six Months Ended June 30, 2000
--------------------------------------------------------------------------------
                                                      Operating Company
                              Net Sales               Contribution/(1)/
                          ----------------           -------------------
                          2001        2000            2001         2000
                          ----        ----            ----         ----
                                         (In millions)

Home products          $1,008.7     $1,024.5         $138.3       $157.1
Office products           590.0        662.5           14.6         26.0
Golf products             554.6        593.6           91.8        112.4
Spirits and wine          581.1        573.4          133.9        125.5
                       --------     --------         ------       ------
                       $2,734.4     $2,854.0         $378.6       $421.0
                       ========     ========         ======       ======

(1)  Operating company contribution is net sales less all costs and expenses
     other than restructuring and other nonrecurring charges, amortization of
     intangibles, corporate administrative expense, interest and related
     expenses, other (income) expenses, net and income taxes.

CONSOLIDATED
------------

Net sales decreased $119.6 million, or 4%, principally due to volume declines in
certain existing product lines, particularly in the office, golf and home
products segments, and unfavorable foreign exchange rates ($53 million). These
decreases were partly offset by the introduction of new products and line
extensions. Operating company contribution decreased $42.4 million, or 10%, as
lower volumes in certain existing product lines were spread across our existing
fixed cost base and unfavorable foreign exchange rates ($9 million).

Additionally, we experienced an increase in deferred income and minority
interest in consolidated subsidiaries as of June 30, 2001 as compared with
December 31, 2000. The change in deferred income arose from the payment of $270
million from V&S to gain access to Beam's U.S. distribution network and to
acquire a 49% interest in Future Brands, LLC. This amount will be amortized to
other (income) expenses, net on a straight line basis over the next ten years as
Jim Beam Brands Worldwide has continuing operating obligations to the joint
venture.



                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
           ---------------------------------------------------------

CONSOLIDATED (Continued)
------------

In connection with the repositioning of the office products business, we
recorded, for the six months ended June 30, 2001, pre-tax restructuring and
other nonrecurring charges of $42.3 million, $27.8 million after-tax, or 18
cents per share. These charges principally relate to product line
discontinuances, rationalization of operations, expenses associated with the
exploration of strategic options and workforce reduction initiatives across its
operations.

For the six months ended June 30, 2000, we recorded pre-tax restructuring and
other nonrecurring charges of $18.1 million, $11.5 million after-tax, or seven
cents per share. These charges principally relate to the downsizing and
relocation of the Corporate office, product discontinuances and manufacturing
consolidation in the golf segment, rationalization of operations in the home
segment, relocation costs for manufacturing facilities in the office segment and
other workforce reduction initiatives across these segments.

Interest and related expenses decreased $6.8 million, or 10%, primarily due to
lower interest rates and the repayment of debt using proceeds received from V&S.

The effective income tax rate comparison was distorted by the reversal of a
$31.0 million tax reserve as the IRS examinations for the years 1990 - 1992 were
effectively concluded in the second quarter, and the restructuring and other
nonrecurring charges taken in the second quarter of 2001 and the first six
months of 2000. Excluding these, the effective income tax rates for the six
months ended June 30, 2001 and 2000 were 39.4% and 39.8%, respectively. A review
and approval of the 1990-1992 examinations by the IRS Joint Committee is
anticipated to occur in the second half of 2001 potentially triggering final
adjustments related to these examinations.

Net income of $164.4 million, or $1.07 basic and $1.05 diluted per share,
compared with net income of $161.7 million, or $1.01 basic and $1.00 diluted per
share, for the same six month period last year.

Income from operations before net gains and charges was $161.2 million, or $1.05
basic and $1.03 diluted per share for 2001, compared with $173.2 million, or
$1.08 basic and $1.07 diluted per share for 2000. Income from operations before
net gains and charges for six months ended June 30, 2001 represents income
before the $42.3 million ($27.8 million after-tax) restructuring and other
nonrecurring charges and a $31.0 tax reserve reversal that was no longer
required as the audits for the 1990-1992 were


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
           ---------------------------------------------------------

CONSOLIDATED (Concluded)
------------

effectively concluded in the second quarter. Income from operations before net
gains and charges for the six months ended June 30, 2000 represents income
before the $18.1 million ($11.5 million after-tax) restructuring and other
nonrecurring charges.

The Emerging Issues Task Force ("EITF") issued EITF 00-14, "Accounting for
Certain Sales Incentives" which addresses the recognition, measurement and
statement of earnings classification for certain sales incentives, and will be
effective in the first quarter of 2002. As a result, certain items previously
included in cost of sales and in selling and administrative costs on the
consolidated statement of operations will be recorded as a reduction of sales.
We are currently in the process of determining the impact of adoption or
subsequent application of EITF 00-14. Upon adoption, prior period amounts will
be reclassified to conform to the new requirements. In April 2001, the EITF
reached a consensus on Issue EITF 00-25, "Vendor Income Statement
Characterization of Consideration to a Purchaser of the Vendor's Products or
Services." EITF Issue No. 00-25 requires that certain expenses included in cost
of sales and in selling and administrative costs be recorded as a reduction of
sales and will be effective in the first quarter of 2002. We are currently in
the process of determining the impact of EITF Issue No. 00-25.

In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations," and No. 142
"Goodwill and Other Intangible Assets." Effective January 1, 2002, we will no
longer be required to amortize goodwill and certain intangible assets as a
charge to earnings. In addition, we will be required to review goodwill and
other intangible assets for potential impairment. We are currently in the
process of quantifying the impact of the new standard. However, we currently
anticipate that substantially all amortization of goodwill will be eliminated.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
           ---------------------------------------------------------

Home Products
-------------

Net sales declined $15.8 million, or 2%. The decrease was caused by overall
volume declines, higher customer rebates and unfavorable foreign exchange rates
($3 million) partially offset by an increase in average selling prices. The
overall volume decline reflected lower volume in some existing products partly
offset by line extensions and the introduction of new products. Operating
company contribution decreased $18.8 million, or 12%. The reduction in operating
company contribution was primarily attributable to the lower sales, reduced
operating leverage as our infrastructure supported lower volumes, and higher
operating expenses. The higher operating expenses principally reflected
increased freight costs and distribution and general and administrative
expenses.

Office Products
---------------

Net sales decreased $72.5 million, or 11%. The decline resulted primarily from
lower volumes in the U.S. across all product categories, lower average foreign
exchange rates ($21 million) partly offset by the introduction of new products,
an increase in average selling prices and lower rebates. Operating company
contribution declined $11.4 million, or 44%, principally due to adverse
operating leverage, the lower sales and unfavorable foreign exchange rates ($1
million) partially offset by a decline in operating expenses and savings
achieved as a result of our restructuring actions. The decline in operating
expenses reflected lower freight costs and distribution expenses, due to the
lower volumes in the U.S., and lower selling and advertising and marketing
expenses.

The sales impact of our customers' continued reduction of inventories together
with the strength of the U.S. dollar is offsetting otherwise significant
improvement in the office products business's cost structure. Headcount
reductions have totaled more than 2,100 positions, or 22%, since its peak in
December 1999.

In the first quarter of 2001, several major customers reduced inventories and
announced plans to close stores and slow the growth in new store openings. These
factors, along with economic weakness in the United States and abroad, continued
to negatively impact sales of our office products business.

In October 2000, we announced that we were exploring strategic options for our
office products group. We have decided not to divest our office products
business at this time due to weakness in the overall economy and current
conditions in the office products industry. We have begun implementing a plan to
improve both financial results and the long-term value of the business. Under
this plan, our office products group will



                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
           ---------------------------------------------------------

Office Products (Concluded)
---------------

realign and streamline its North American operations, intensify its focus on
growing profitable core product categories, divest or discontinue non-strategic
and low-return product categories and reduce overhead expenses and excess
capacity. As a result of this plan, the Company recorded total pre-tax
restructuring and other nonrecurring charges of $42.3 million, $27.8 million
after-tax, during the second quarter. The Company is currently evaluating
additional restructuring alternatives, which may result in additional
restructuring charges.

Golf Products
-------------

Net sales decreased $39.0 million, or 7%, principally due to volume declines in
some existing products, a mix shift to lower-priced products and unfavorable
foreign exchange rates ($13 million). These declines were partly offset by new
product introductions in golf balls, golf clubs and golf shoes coupled with line
extensions. Retail sell-through was adversely affected by unfavorable weather
conditions resulting in a significant decline in rounds played. Operating
company contribution declined $20.6 million, or 18%, on the lower sales, certain
product line discontinuances and unfavorable product mix, partly offset by
reduced operating expenses.


Competitors whose products have significant brand awareness have introduced golf
balls into their product offerings in the past two years. The combined share of
Titleist and Pinnacle in the domestic golf ball market fell by approximately 2%
in 2000, but has recently increased on a month over month basis as a result of
rapid sales growth for the Titleist Pro V1 golf ball, a technologically advanced
non-wound golf ball for which demand has exceeded supply. The golf ball industry
is experiencing increased price competition. Titleist has responded by lowering
prices of some models. It is not possible to predict the long-term effect of
these events on our golf ball business, but continued new product introductions,
such as the Pro V1 and NXT golf balls, as well as significant research and
development and marketing expenditures to defend ball market share, will
continue.

The United States Golf Association (USGA) establishes standards for golf
equipment used in competitive play in the United States. On November 2, 1998,
the USGA announced the immediate implementation of a new golf club performance
rule that established a rebound velocity standard for driving clubs. The Royal
and Ancient Golf Club (R&A) establishes standards for


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
           ---------------------------------------------------------

Golf Products (Concluded)
-------------

golf equipment used in competitive play outside the United States and Mexico. On
September 21, 2000, the R&A issued a Notice to Manufacturers announcing its
decision not to adopt the USGA's rebound velocity standard or any new rule or
test protocol for driving clubs. The R&A's decision not to adopt the rule
implemented by the USGA has resulted in conflicting conformance standards for
driving clubs in the United States and the rest of the world. The divergence
between the USGA and the R&A on this issue may cause confusion to consumers and
could be disruptive to the United States and world markets for driving clubs. In
addition, the USGA rule could hamper innovation and make it more difficult to
use technological advances to produce USGA conforming products. However, it is
not possible to determine whether in the long term the USGA rule or the
divergence in rules will have a material effect on the golf club industry and
our golf products business.

Each of the USGA and the R&A has announced its intention to propose new rules
addressing the initial velocity and overall distance standards for golf balls.
Until more details regarding such potential rule changes become available, we
cannot determine whether they would have a material effect on our group's golf
ball business and/or the golf ball industry. However, the new rules being
considered could incorporate rules that would shorten the overall distance that
golf balls are allowed to travel and that could hamper innovation in the design
and manufacture of golf balls. The adoption of any such rules could materially
impact our golf products business and/or the golf ball industry.

Spirits and Wine
----------------

Net sales increased $7.7 million, or 1%, principally as a result of an interim
distribution arrangement with V&S due to the formation of the Future Brands
joint venture. This increase was offset by lower average foreign exchange rates
($16 million). The overall increase in sales was also aided by volume increases
in certain existing product lines and an increase in average selling prices. The
volume increases included gains in our Jim Beam pre-mix product in Australia,
cordials in the United Kingdom and premium and super-premium product lines in
the United States. These benefits were partly offset by the continued weakness
of our Scotch whisky brands in Europe.

Operating company contribution increased $8.4 million, or 7%, primarily due to
the increase in average selling prices, the volume increases and lower


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
           ---------------------------------------------------------

Spirits and Wine (Concluded)
----------------

operating expenses partly offset by unfavorable foreign exchange rates ($5
million). The lower operating expenses were principally a result of a decline in
general and administrative and selling expenses partly offset by an increase in
brand spending.

On May 31, 2001, the Company's spirits and wine business completed transactions
with Vin & Sprit AB of Sweden (V&S) creating a joint venture, named Future
Brands LLC (the "LLC"), to distribute both companies' spirits and wine brands in
the United States. V&S paid $270 million to gain access to Beam's U.S.
distribution network and to acquire a 49% interest in the LLC and paid $375
million to purchase a 10% equity interest in Jim Beam Brands Worldwide ("JBBW")
in the form of convertible preferred stock. The shares of JBBW convertible
preferred stock issued to V&S is convertible into 10% of the JBBW common stock
and has voting power equivalent to a 10% interest in JBBW common stock. The
preferred stock is entitled to a dividend equal to the greater of 10% of the
dividend paid upon JBBW common stock or 3% of the preferred stock's face value
($375 million) plus unpaid accrued dividends; no dividends may be paid on JBBW
common stock unless all unpaid accrued JBBW preferred stock dividends have been
paid. V&S also received a 3-year option to increase its equity stake in JBBW by
up to an additional 9.9%. V&S may require the Company to purchase the JBBW
preferred stock in whole or in part at any time after May 31, 2004, or upon a
change of control of JBBW or Jim Beam Brands Co., or certain other events. The
Company has accounted for the $270 million gain on the sale of 49% of the LLC as
deferred income and the resulting tax on sale as a deferred income tax asset.
Starting in June 2001, these amounts will be amortized to other (income)
expenses, net on a straight-line basis over the next ten years as JBBW has
continuing operating obligations to the joint venture.

In addition, V&S invested 107 million euros to acquire a one-fourth interest in
our international sales and distribution joint venture, named Maxxium
International B.V. Maxxium was formed in 1999 by JBBW, Remy-Cointreau and
Highland Distillers to distribute and sell premium wines and spirits in key
markets outside the United States. (See Note 4.)

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Net cash provided from operating activities was $167.7 million for the six
months ended June 30, 2001 compared with $117.7 million for the same six month
period last year. The principal reasons for the increase were: reductions in
inventory levels, specifically in office products and home products as a result
of concerted efforts in inventory management, and timing of taxes associated
with the sale of 49% of the LLC to V&S.

Net cash provided by investing activities for the six months ended June 30, 2001
was $181.7 million, as compared with net cash used by investing activities of
$115.6 million in the same six month period last year. The increase principally
reflects the proceeds of $270 million from the sale of



                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
           ---------------------------------------------------------

LIQUIDITY AND CAPITAL RESOURCES (Concluded)
-------------------------------

49% of the LLC to V&S in connection with the formation of the Future Brands
joint venture.

Net cash used by financing activities for the six months ended June 30, 2001 was
$294.0 million, as compared with net cash provided by financing activities of
$16.1 in the same six month period last year. The change was primarily
attributable to the repayment of debt in the current year period partly offset
by the proceeds received from the sale of 10% of JBBW to V&S. During the six
months ended June 30, 2001, we purchased 2,059,200 shares of our common stock
through open market purchases.

Total debt at June 30, 2001 was $1.4 billion, a decline of $545.2 million from
December 31, 2000. The decline was caused by the repayment of debt using the
proceeds received from V&S partially offset by share repurchases ($70 million)
and the purchase of certain spirits distribution rights ($7 million). The ratio
of total debt to total capital was 39.7% as of June 30, 2001 versus 47.8% as of
December 31, 2000. We believe that our internally generated funds, together with
access to global credit markets, are adequate to meet our capital needs.


Item 2.             MANAGEMENT'S DISCUSSION AND ANALYSIS OF
------           FINANCIAL CONDITION AND RESULTS OF OPERATIONS
           -----------------------------------------------------------

                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                     -------------------------------------

Results of Operations for the Three Months Ended June 30, 2001 as Compared to
                     the Three Months Ended June 30, 2000
--------------------------------------------------------------------------------
                                                      Operating Company
                              Net Sales               Contribution/(1)/
                          ----------------           -------------------
                          2001        2000            2001         2000
                          ----        ----            ----         ----
                                         (In millions)

Home products          $  537.6     $  533.1         $ 76.8       $ 82.3
Office products           292.2        333.9            7.3         10.5
Golf products             300.4        328.8           58.3         74.2
Spirits and wine          303.2        300.8           75.1         71.5
                       --------     --------         ------       ------
                       $1,433.4     $1,496.6         $217.5       $238.5
                       ========     ========         ======       ======

(1)  Operating company contribution is net sales less all costs and expenses
     other than restructuring and other nonrecurring charges, amortization of
     intangibles, corporate administrative expense, interest and related
     expenses, other (income) expenses, net and income taxes.

CONSOLIDATED
------------

Net sales decreased $63.2 million, or 4%, principally due to declines in certain
existing product lines and lower average foreign exchange ($25 million)
partially offset by the introduction of new products, line extensions and an
overall increase in average selling prices. Operating company contribution
declined $21.0 million, or 9%, due to the lower volumes spread across our fixed
cost base, continued price competition and lower average foreign exchange rates
($4 million) partly offset by reduced selling and general and administrative
expenses.

During the three-month period ended June 30, 2001, the Company recorded pre-tax
restructuring and nonrecurring charges of $42.3 million, $27.8 million
after-tax, or 18 cents basic and diluted per share. (See Note 8 and the section
on "Consolidated" describing the six months results for additional information
on restructuring.)


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
           ---------------------------------------------------------

CONSOLIDATED (Concluded)
------------

Interest and related expenses decreased $6.7 million, or 20%, reflecting lower
interest rates and the repayment of debt using proceeds received from V&S.

The effective income tax rate comparison was distorted by the reversal of a
$31.0 million tax reserve as the IRS examinations for the years 1990 - 1992 were
effectively concluded in the second quarter, and the restructuring and other
nonrecurring charges taken in the second quarter of 2001 and 2000. Excluding
these, the effective income tax rates for the three months ended June 30, 2001
and 2000 were 39.5% and 39.4%, respectively. A review and approval of the 1990-
1992 examinations by the IRS Joint Committee is anticipated to occur in the
second half of 2001 potentially triggering final adjustments related to these
examinations.

Net income of $102.9 million, or 67 cents basic and 66 cents diluted per share,
compared with net income of $97.4 million, or 61 cents per share, for the same
three month period last year.

Income from operations before net gains and charges was $99.7 million, or 65
cents basic per share and 64 cents diluted per share for 2001, compared with
$104.4 million, or 65 cents per share for 2000. Income from operations before
net gains and charges for three months ended June 30, 2001 represents income
before the $42.3 million ($27.8 million after-tax) restructuring and other
nonrecurring charges and a $31.0 tax reserve reversal that was no longer
required as the audits for the 1990-1992 were effectively concluded in the
second quarter. Income from operations before net gains and charges for the
three months ended June 30, 2000 represents income before the $11.1 million
($7.0 million after-tax) restructuring and other nonrecurring charges.


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
           ---------------------------------------------------------

Home Products
-------------

Net sales increased $4.5 million, or 1%. The increase was primarily attributable
to a slight increase in overall volumes partly offset by higher customer
rebates. The overall volume increase reflects higher volume due to line
extensions and the introduction of new products partly offset by declines in
some existing products. Operating company contribution decreased $5.5 million,
or 7%. The decline was primarily attributable to adverse operating leverage and
increased freight costs partially offset by the higher sales.

Office Products
---------------

Net sales declined $41.7 million, or 13%. The lower sales resulted from reduced
volumes in the U.S. across all product categories and unfavorable foreign
exchange rates ($8 million) partially offset by the introduction of new
products, an increase in average selling prices and lower rebates. Operating
company contribution decreased $3.2 million, or 31%. The decline was a result of
adverse operating leverage, the lower sales and unfavorable product mix. These
factors were partly offset by restructuring-related savings and declines in
selling and advertising and marketing expenses and lower freight costs.

Golf Products
-------------

Net sales decreased $28.4 million, or 9%. The lower sales in the current period
were primarily due to lower overall volumes, a mix shift to lower-priced
products and unfavorable foreign exchange ($7 million). Additionally, the
current year period was negatively impacted by the discontinuance of certain
product lines. Operating company contribution declined $15.9 million, or 21%,
due to the lower sales, certain product line discontinuances and unfavorable
product mix, partly offset by reduced operating expenses.



                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
           ---------------------------------------------------------

Spirits and Wine
----------------

Net sales increased $2.4 million, or 1%, principally as a result of an interim
distribution arrangement with V&S due to the formation of the Future Brands
joint venture and an increase in average selling prices. These benefits were
partly offset by unfavorable foreign exchange rates ($8 million) and lower
overall volumes, including continued declines in our Scotch whisky business in
Europe.

Operating company contribution increased $3.6 million, or 5%. These results
benefited from favorable price changes in the United States and a decline in
general and administrative expenses, partly offset by an increase in brand
spending and the foreign exchange impact of a strong U.S. dollar ($2 million).


                     FORTUNE BRANDS, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
           ---------------------------------------------------------

CAUTIONARY STATEMENT
--------------------

This annual report contains statements relating to future results. They are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Readers are cautioned that these forward-looking
statements speak only as of the date hereof. Actual results may differ
materially from those projected as a result of certain risks and uncertainties,
including but not limited to changes in general economic conditions, foreign
exchange rate fluctuations, changes in interest rates, competitive product and
pricing pressures, trade consolidations, the impact of excise tax increases with
respect to distilled spirits, regulatory developments, the uncertainties of
litigation, changes in golf equipment regulatory standards, the impact of
weather, particularly on the home products and golf brand groups, expenses and
disruptions related to shifts in manufacturing to different locations and
sources, challenges in the integration of acquisitions and joint ventures, risks
associated with the Company's implementation of the repositioning plan for ACCO
World Corporation, as well as other risks and uncertainties detailed from time
to time in the Company's Securities and Exchange Commission filings.


                          PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS.
---------------------------

          (a)  Smoking and Health Proceedings

Indemnification Agreement

          On December 22, 1994, Registrant sold The American Tobacco Company
("ATCO") to Brown & Williamson Tobacco Corporation ("B&W"), at the time a
wholly-owned subsidiary of B.A.T. Industries p.l.c. In connection with the sale,
B&W and ATCO (collectively, the "Indemnitors") agreed to indemnify Registrant
against claims including legal expenses arising from smoking and health and fire
safe cigarette matters relating to the tobacco business of ATCO.

Individual Cases

          On August 1, 2001, there were approximately 97 smoking and health
cases pending on behalf of individual plaintiffs in which Registrant has been
named as one of the defendants, compared with approximately 93 such cases as of
March 1, 2001, as reported by Registrant in its Annual Report on Form 10-K for
the fiscal year ended December 31, 2000.

Class Actions

          As of August 1, 2001, there were approximately 22 purported smoking
and health class actions pending in which Registrant has been named as one of
the defendants, compared with approximately 18 such cases on March 1, 2001, as
reported by Registrant in its Annual Report on Form 10-K for the fiscal year
ended December 31, 2000.

Health Care Cost Recovery Actions

          As of August 1, 2001, there were approximately four health care cost
recovery actions pending in which Registrant had been name as one of the
defendants, compared with approximately four such cases as of March 1, 2001, as
reported by Registrant in its Annual Report on Form 10-K for the fiscal year
ended December 31, 2000.

List of Pending Cases

          See Exhibit 99 to this Form 10-Q for a list of additional proceedings
involving the smoking and health controversy in which Registrant has been named
as a defendant and not previously reported.

List of Terminated Cases

          See Exhibit 99 to this Form 10-Q for a list of smoking and health
proceedings, in which Registrant has been named as a defendant, which have been
terminated and have not previously been reported as such.


Conclusion

          Management believes that there are meritorious defenses to the above-
mentioned pending actions, including the fact that the Company never made or
sold tobacco, and these actions are being vigorously contested. However, it is
not possible to predict the outcome of the pending litigation, and it is
possible that some of these actions could be decided unfavorably. Management is
unable to make a meaningful estimate of the amount or range of loss that could
result from an unfavorable outcome of the pending litigation. Management
believes that the pending actions will not have a material adverse effect upon
the results of operations, cash flows or financial condition of Registrant as
long as the Indemnitors continue to fulfill their obligations to indemnify
Registrant under the aforementioned indemnification agreement.

          (b)  Reference is made to Note 10, "Pending Litigation", in the Notes
               to Condensed Consolidation Financial Statements set forth in Part
               I, Item 1 of this Quarterly Report on Form 10-Q.

Item 3.   QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------   --------------------------------------------------------

          There are no material changes in the information provided in Item 7A
          of the Company's Form 10-K for the fiscal year ended December 31,
          2000.

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------   ---------------------------------------------------

          (a)  The Annual Meeting of Stockholders was held on April 24, 2001.

          (b)  Registrant's Certificate of Incorporation provides for the
               classification of the Board of Directors into three classes, as
               nearly equal in number as possible, with staggered terms of
               office and provides that upon the expiration of the term of
               office for a class of directors, nominees for such class shall be
               elected for a term of three years or until their successors are
               duly elected and qualified. The three nominees for Class III
               directors, Ms. Anne M. Tatlock, Norman H. Wesley and Mr. Peter M.
               Wilson, were duly elected at the 2001 Annual Meeting for a term
               of office expiring at the 2004 Annual Meeting. The term of office
               of the Class I directors, Mr. Thomas C. Hays, Mr. Sidney
               Kirschner, Mr. Mr. Gordon R. Lohman and Mr. Charles H. Pistor,
               and the term of office of the Class II directors, Ms. Patricia O.
               Ewers, Mr. John W. Johnstone, Jr., Mr. Eugene A. Renna and Mr.
               David M. Thomas also continued after the 2001 Annual Meeting.

          (c)  (i) The three nominees for Class III directors were elected by a
               plurality of the combined votes cast by the holders of
               Registrant's Common Stock and $2.67 Convertible Preferred Stock
               voting thereon: (A) Ms. Tatlock: 133,059,041 votes for and
               1,220,462 votes withheld; (B) Mr. Wesley: 133,057,916


               votes for and 1,221,587 votes withheld; (C) Mr. Wilson:
               133,061,675 votes for and 1,217,828 votes withheld;

               (ii)   A proposal (designated Item 2 and set forth in
               Registrant's Proxy Statement), approved by the Board of
               Directors, to elect PricewaterhouseCoopers LLP independent
               accountants of Registrant for the year 2001, was approved by a
               majority of the combined votes cast by the holders of
               Registrant's Common Stock and $2.67 Convertible Preferred Stock
               voting thereon: 132,752,905 affirmative votes; 912,975 negative
               votes; and 613,623 votes abstained.

               (iii)  A proposal (designated Item 3 and set forth in
               Registrant's Proxy Statement), approved by the Board of
               Directors, to approve the Registrant's 2002 Non-Employee Director
               Stock Option Plan, was approved by a majority of the combined
               votes cast by the holders of Registrant's Common Stock and $2.67
               Convertible Preferred Stock voting thereon: 118,645,049
               affirmative votes; 14,030,270 negative votes; and 1,581,573 votes
               abstained.

Item 6.        EXHIBITS AND REPORTS ON FORM 8-K.
-------        ---------------------------------

     (a)  Exhibits

10a1.     Five-Year Revolving Credit Agreement, dated as of July 12, 2001, by
          and among Registrant and Fortune Brands Finance UK, plc as Borrowers,
          The Chase Manhattan Bank as Administrative Agent, Citibank, N.A. as
          Syndication Agent and 14 financial institutions as Lenders.

10b1.     364-Day Revolving Credit Agreement, dated as of July 12, 2001, by and
          among Registrant as Borrower, The Chase Manhattan Bank as
          Administrative Agent, Citibank, N.A. as Syndication Agent and 14
          financial institutions as Lenders.

  12.     Statement re computation of ratio of earnings to fixed charges.

  15.     Letter from PricewaterhouseCoopers LLP dated August 10, 2001 re
          unaudited financial information.

  99.     List of Pending/Terminated Cases.


          In lieu of filing certain instruments with respect to long-term debt
of the kind described in Item 601(b)(4) of Regulation S-K, Registrant agrees to
furnish a copy of such instruments to the Securities and Exchange Commission
upon request.


     (b)  Reports on Form 8-K
          -------------------

Registrant filed a Current Report on Form 8-K, dated April 19, 2001, in respect
of Registrant's press release dated April 19, 2001 announcing Registrant's
financial results for the three month period ended March 31, 2001 (Items 5 and 7
(c)).

Registrant filed a Current Report on Form 8-K, dated June 15, 2001, in respect
of certain transactions between Vin & Sprit AB, Registrant and their
subsidiaries.

                                   SIGNATURE
                                   ---------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized.


                                                  FORTUNE BRANDS, INC.
                                                  --------------------
                                                       (Registrant)


Date:  August 14, 2001                            By /s/ C. P. Omtvedt
     -------------------                            --------------------
                                                  C. P. Omtvedt
                                                  Senior Vice President
                                                  and Chief Financial Officer


                                 EXHIBIT INDEX
                                 -------------

                                                                   Sequentially
Exhibit                                                            Numbered Page
-------                                                            -------------

10a1.     Five-Year Revolving Credit Agreement, dated as of July 12, 2001, by
          and among Registrant and Fortune Brands Finance UK, plc as Borrowers,
          The Chase Manhattan Bank as Administrative Agent, Citibank, N.A. as
          Syndication Agent and 14 financial institutions as Lenders.

10b1.     364-Day Revolving Credit Agreement, dated as of July 12, 2001, by and
          among Registrant as Borrower, The Chase Manhattan Bank as
          Administrative Agent, Citibank, N.A. as Syndication Agent and 14
          financial institutions as Lenders.

  12.     Statement re computation of ratio of earnings to fixed charges.

  15.     Letter from PricewaterhouseCoopers LLP dated August 10, 2001 re
          unaudited financial information.

  99.     List of Pending/Terminated Cases.