- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 ENDED JUNE 30, 1996
-------------------
NABISCO HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-13556 13-3077142
(State or other jurisdiction of (Commission file number) (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
NABISCO, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEW JERSEY 1-1021 13-1841519
(State or other jurisdiction of (Commission file number) (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
7 CAMPUS DRIVE
PARSIPPANY, NEW JERSEY 07054
(201) 682-5000
(Address, including zip code, and telephone number, including area code,
of the principal executive offices of Nabisco Holdings Corp. and Nabisco, Inc.)
-------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANTS (1) HAVE 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
REGISTRANTS WERE REQUIRED TO FILE SUCH REPORTS), AND (2) HAVE BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X, NO __.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANTS' CLASSES
OF COMMON STOCK AS OF THE LATEST PRACTICABLE DATE: JUNE 30, 1996:
<TABLE>
<C> <C> <S>
NABISCO HOLDINGS CORP.: 51,804,981 SHARES OF CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
213,250,000 SHARES OF CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE
NABISCO, INC.: 100 SHARES OF COMMON STOCK, PAR VALUE $2.50 PER SHARE
</TABLE>
-------------------
NABISCO, INC. MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(A) AND
(B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.
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<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Income--Three Months Ended June 30, 1996
and 1995................................................................... 1
Consolidated Condensed Statements of Income--Six Months Ended June 30, 1996
and 1995................................................................... 2
Consolidated Condensed Statements of Cash Flows--Six Months Ended June 30,
1996 and 1995.............................................................. 3
Consolidated Condensed Balance Sheets--June 30, 1996 and
December 31, 1995.......................................................... 4
Notes to Consolidated Condensed Financial Statements......................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 7
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................................... 11
Signatures............................................................................ 12
</TABLE>
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
NABISCO HOLDINGS CORP.
NABISCO, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
------------------- -------------------
<S> <C> <C> <C> <C>
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
-------- ------- -------- -------
NET SALES............................................... $ 2,178 $2,178 $ 2,057 $2,057
-------- ------- -------- -------
Costs and expenses:
Cost of products sold................................. 1,271 1,271 1,171 1,171
Selling, advertising, administrative and general
expenses.............................................. 617 617 599 602
Amortization of trademarks and goodwill............... 57 57 56 55
Restructuring expense................................. 428 428 -- --
-------- ------- -------- -------
OPERATING INCOME (LOSS)........................... (195) (195) 231 229
Interest and debt expense............................... (81) (81) (89) (87)
Other income (expense), net............................. (8) (8) (5) (6)
-------- ------- -------- -------
Income (loss) before income taxes................. (284) (284) 137 136
Provision (benefit) for income taxes.................... (68) (68) 58 58
-------- ------- -------- -------
NET INCOME (LOSS)................................. $ (216) $ (216) $ 79 $ 78
-------- ------- -------- -------
-------- ------- -------- -------
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT
SHARE................................................... $ (.81) $ .30
-------- --------
-------- --------
Dividends declared per common share..................... $ .1550 $ .1375
-------- --------
-------- --------
Average number of common and common equivalent shares
outstanding (in thousands).............................. 265,048 265,367
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
1
<PAGE>
NABISCO HOLDINGS CORP.
NABISCO, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
------------------- -------------------
<S> <C> <C> <C> <C>
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
-------- ------- -------- -------
NET SALES............................................... $ 4,168 $4,168 $ 3,900 $3,900
-------- ------- -------- -------
Costs and expenses:
Cost of products sold................................. 2,453 2,453 2,221 2,221
Selling, advertising, administrative and general
expenses.............................................. 1,187 1,187 1,147 1,151
Amortization of trademarks and goodwill............... 114 114 113 112
Restructuring expense................................. 428 428 -- --
-------- ------- -------- -------
OPERATING INCOME (LOSS)........................... (14) (14) 419 416
Interest and debt expense............................... (165) (165) (184) (179)
Other income (expense), net............................. (15) (15) (14) (17)
-------- ------- -------- -------
Income (loss) before income taxes................. (194) (194) 221 220
Provision (benefit) for income taxes.................... (31) (31) 94 94
-------- ------- -------- -------
NET INCOME (LOSS)................................. $ (163) $ (163) $ 127 $ 126
-------- ------- -------- -------
-------- ------- -------- -------
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT
SHARE................................................... $ (.62) $ .49
-------- --------
-------- --------
Dividends declared per common share..................... $ .2925 $ .1375
-------- --------
-------- --------
Average number of common and common equivalent shares
outstanding (in thousands).............................. 265,030 257,862
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
NABISCO HOLDINGS CORP.
NABISCO, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995
------------------- -------------------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
-------- ------- -------- -------
<S> <C> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income (loss)..................................... $ (163) $(163) $ 127 $ 126
Adjustments to reconcile net income (loss) to cash
flows from operating actvities:
Depreciation of property, plant and equipment..... 130 130 117 117
Amortization of intangibles....................... 114 114 113 112
Deferred income tax provision (benefit)........... (108) (108) 37 37
Restructuring expense, net of cash payments....... 418 418 -- --
Changes in working capital items, net............. (248) (248) (394) (392)
Other, net........................................ 3 3 5 5
-------- ------- -------- -------
Net cash flows from operating activities............ 146 146 5 5
-------- ------- -------- -------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures.................................. (216) (216) (194) (194)
Acquisition of businesses............................. (122) (122) -- --
Other, net............................................ 6 6 2 2
-------- ------- -------- -------
Net cash flows (used in) investing activities....... (332) (332) (192) (192)
-------- ------- -------- -------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net proceeds from the issuance of long-term debt...... 172 172 3,765 3,765
Repayments of long-term debt.......................... (53) (53) (1,197) (1,197)
Increase (decrease) in notes payable.................. 116 116 8 8
Dividends paid on common stock........................ (73) (73) -- (79)
Net repayments under the
1994 Nabisco Credit Agreement....................... -- -- (1,350) (1,350)
Payment of intercompany debt.......................... -- -- (2,237) (2,158)
Net proceeds from issuance of Class A common stock.... -- -- 1,201 --
Nabisco Holdings capital contribution................. -- -- -- 1,201
-------- ------- -------- -------
Net cash flows from financing activities............ 162 162 190 190
-------- ------- -------- -------
Effect of exchange rate changes on cash and cash
equivalents........................................... (1) (1) 2 2
-------- ------- -------- -------
Net change in cash and cash equivalents............. (25) (25) 5 5
Cash and cash equivalents at beginning of period........ 121 121 245 245
-------- ------- -------- -------
Cash and cash equivalents at end of period.............. $ 96 $ 96 $ 250 $ 250
-------- ------- -------- -------
-------- ------- -------- -------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
NABISCO HOLDINGS CORP.
NABISCO, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
-------------------- --------------------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
--------- ------- --------- -------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 96 $ 96 $ 121 $ 121
Accounts and notes receivable, net.................. 552 552 523 523
Deferred income taxes............................... 116 116 64 64
Inventories......................................... 866 866 865 865
Prepaid expenses.................................... 67 67 51 51
--------- ------- --------- -------
TOTAL CURRENT ASSETS............................ 1,697 1,697 1,624 1,624
--------- ------- --------- -------
Property, plant and equipment, net.................... 3,193 3,193 3,132 3,132
Trademarks, net....................................... 3,903 3,903 3,977 3,977
Goodwill, net......................................... 3,423 3,423 3,477 3,477
Other assets and deferred charges..................... 138 138 93 93
--------- ------- --------- -------
$ 12,354 $12,354 $ 12,303 $12,303
--------- ------- --------- -------
--------- ------- --------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable....................................... $ 194 $ 194 $ 76 $ 76
Accounts payable and accrued liabilities............ 1,466 1,456 1,393 1,383
Current maturities of long-term debt................ 27 27 24 24
Income taxes accrued................................ 132 132 131 131
--------- ------- --------- -------
TOTAL CURRENT LIABILITIES....................... 1,819 1,809 1,624 1,614
--------- ------- --------- -------
Long-term debt (less current maturities).............. 4,505 4,505 4,355 4,355
Other noncurrent liabilities.......................... 744 744 724 724
Deferred income taxes................................. 1,296 1,296 1,356 1,356
Stockholders' equity:
Class A common stock (51,804,981 shares issued and
outstanding at June 30, 1996)..................... 1 -- 1 --
Class B common stock (213,250,000 shares issued and
outstanding at June 30, 1996)..................... 2 -- 2 --
Paid-in capital..................................... 4,087 4,174 4,085 4,174
Retained earnings (deficit)......................... (55) (131) 186 110
Cumulative translation adjustment................... (43) (43) (30) (30)
Notes receivable on common stock purchases.......... (2) -- -- --
--------- ------- --------- -------
TOTAL STOCKHOLDERS' EQUITY...................... 3,990 4,000 4,244 4,254
--------- ------- --------- -------
$ 12,354 $12,354 $ 12,303 $12,303
--------- ------- --------- -------
--------- ------- --------- -------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
NABISCO HOLDINGS CORP.
NABISCO, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1--INTERIM REPORTING AND RESULTS OF OPERATIONS
For interim reporting purposes, certain costs and expenses are charged to
operations in proportion to the estimated total annual amount expected to be
incurred.
Certain prior year amounts have been reclassified to conform to the 1996
presentation.
In management's opinion, the accompanying unaudited consolidated condensed
financial statements (the "Consolidated Condensed Financial Statements") of
Nabisco Holdings Corp. ("Nabisco Holdings") and Nabisco, Inc. ("Nabisco" and
together with Nabisco Holdings, the "Registrants") contain all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of the results for the interim periods presented. The Consolidated Condensed
Financial Statements should be read in conjunction with the consolidated
financial statements and footnotes included in the Annual Report on Form 10-K
of Nabisco Holdings and Nabisco for the year ended December 31, 1995.
New Accounting Pronouncements
On January 1, 1996, Nabisco Holdings and Nabisco adopted Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of ("SFAS No. 121").
The adoption of the SFAS No. 121 did not have a material impact on the financial
position or results of operations of Nabisco Holdings and Nabisco.
On January 1, 1996, Nabisco Holdings and Nabisco adopted Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("SFAS No. 123"). Nabisco Holdings and Nabisco elected to continue to apply the
intrinsic value based method for recognizing compensation expense for
stock-based employee compensation plans.
Acquisitions
During 1996, subsidiaries of Nabisco acquired the stock of the Mayco and
Capri biscuit businesses in Argentina and the stock of Pilar, a Brazilian
biscuit business. In addition, Nabisco formed the Nabisco Taiwan Corporation
which purchased the biscuit, confectionery and snack food assets of a
Taiwan-based manufacturer. The aggregate purchase price for these acquisitions
was $150 million.
Restructuring Expense
In the second quarter of 1996, Nabisco Holdings recorded a pre-tax
restructuring expense of $428 million ($300 million after tax) related to a
program announced on June 24, 1996. The restructuring program, which was
undertaken to streamline operations and improve profitability, commenced during
the second quarter of 1996 and will be substantially completed during 1997. The
$428 million restructuring expense will require cash expenditures of
approximately $230 million. In addition to the restructuring expense, the
program will require additional cash expenditures of approximately $81 million,
of which $10 million ($6 million after tax) was recorded in the second quarter
of 1996, for implementation and integration expenses, principally for relocation
of employees and equipment and training. After completion of the restructuring
program, pre-tax savings are expected to be approximately $200 million annually.
The major components of the $428 million restructuring expense are domestic
and international severance and related benefits associated with workforce
reductions totaling 5,850 employees (approximately $194 million), estimated
losses from disposals of equipment and inventory related to product line
5
<PAGE>
NABISCO HOLDINGS CORP.
NABISCO, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--INTERIM REPORTING AND RESULTS OF OPERATIONS--(CONTINUED)
rationalizations (approximately $116 million), estimated loss to write-down the
carrying value of several non-strategic product lines prior to sale
(approximately $51 million), estimated costs to terminate manufacturing supply
and distribution contracts (approximately $45 million) and estimated losses
from disposals of property related to international plant closures and domestic
and international facility reorganizations (approximately $22 million).
As of June 30, 1996, approximately $31 million of the restructuring accruals
were utilized as follows: $10 million for severance and related benefits, $14
million for product line rationalizations, $6 million for contract terminations
and $1 million for facility reorganization.
NOTE 2--INVENTORIES
The major classes of inventory are shown in the table below:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
<S> <C> <C>
Finished products...................................................... $519 $526
Raw materials.......................................................... 198 199
Other.................................................................. 149 140
-------- -----
$866 $865
-------- -----
-------- -----
</TABLE>
NOTE 3--STOCKHOLDERS' EQUITY
During 1996, 54,981 shares of Class A common stock were sold in connection
with purchase stock grants awarded under the Nabisco Holdings 1994 Long Term
Incentive Plan (the "Nabisco LTIP"). The shares were purchased at their fair
market value for a total of $1,882,491. Under the terms of the Nabisco LTIP, the
purchasers, one an executive of the Registrants, and one an executive and
director of RJR Nabisco, Inc. and both directors of the Registrants, borrowed
the total amount of the purchase price on a secured basis from Nabisco Holdings
at an average annual interest rate of approximately 6.2%, which rate was set at
the applicable federal rate for long-term loans at the purchase dates. The
indebtedness, plus accrued interest and applicable taxes, must be repaid upon
the earlier of the sale of the shares covered by the loan or termination of
plan participation. As of June 30, 1996, the entire amount remains outstanding
and is presented as notes receivable in stockholders' equity.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of Nabisco Holdings' financial
condition and results of operations should be read in conjunction with the
historical financial information included in the Consolidated Condensed
Financial Statements.
The food business is conducted by operating subsidiaries of Nabisco
Holdings. Nabisco's businesses in the United States are comprised of the Nabisco
Biscuit Company, the Specialty Products Company, the LifeSavers Company, the
Planters Company, the Food Service Company and the Refrigerated Foods Company
(formerly the Fleischmann's Company) (collectively, the "Domestic Food Group").
Nabisco's businesses outside the United States are conducted by Nabisco Ltd and
Nabisco International, Inc. ("Nabisco International," and together with Nabisco
Ltd, the "International Food Group").
RESULTS OF OPERATIONS
Summarized financial data for Nabisco Holdings is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ ------------------------------
(DOLLARS IN MILLIONS) 1996 1995 % CHANGE 1996 1995 % CHANGE
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales:
Domestic Food Group............ $1,553 $1,502 3% $2,987 $2,866 4%
International Food Group....... 625 555 13% 1,181 1,034 14%
------ ------ ------ ------
Total Nabisco Holdings......... $2,178 $2,057 6% $4,168 $3,900 7%
------ ------ ------ ------
------ ------ ------ ------
Operating Company
Contribution(1):
Domestic Food Group(2)......... $ 227 $ 230 (1)% $ 415 $ 431 (4)%
International Food Group....... 63 57 11% 113 101 12%
------ ------ ------ ------
Total Nabisco Holdings......... $ 290 $ 287 1% $ 528 $ 532 (1)%
------ ------ ------ ------
------ ------ ------ ------
Operating Income (Loss)(3):
Domestic Food Group............ $ (177) $ 180 $ (40) $ 329
International Food Group....... (18) 51 26 90
------ ------ ------ ------
Total Nabisco Holdings......... $ (195) $ 231 $ (14) $ 419
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
- ------------
(1) Operating company contribution represents operating income (loss) before
amortization of trademarks and goodwill and is exclusive of restructuring
expense.
(2) Each 1996 period includes $10 million of restructuring related expenses
associated with the implementation of the June 1996 restructuring program.
(3) Each 1996 period includes the June 1996 restructuring expense of $428
million, consisting of $353 million for the Domestic Food Group and $75
million for the International Food Group.
Nabisco Holdings reported net sales of $2.18 billion in the second quarter
of 1996, an increase of 6% from the second quarter of 1995 level of $2.06
billion, and $4.17 billion in the first six months of 1996, an increase of 7%
from the first six months of 1995 level of $3.90 billion, with the Domestic Food
Group up 3% and 4%, respectively, and the International Food Group up 13% and
14%, respectively. The Domestic Food Group's second quarter net sales increase
was primarily attributable to higher selling prices which accounted for 2
percentage points of the total increase from last year. The impact of the
October 1995 Parkay margarine acquisition, offset by the impact of 1995 product
line disposals, principally Ortega, accounted for the other percentage point of
growth. The Domestic Food Group's net sales increase for the six months was
primarily attributable to higher selling prices which accounted for 3 percentage
points of the total increase from last year. The impact of the 1995 acquisition,
offset by the 1995 product line disposals, accounted for the other percentage
point of growth. The International Food
7
<PAGE>
Group's net sales increases for the second quarter and first six months were
primarily driven by the fourth quarter 1995 business acquisitions, principally
Primo in Canada and Royal Beech-Nut in South Africa, and the 1996 business
acquisitions in Latin America.
Nabisco Holdings' operating company contribution was $290 million in the
second quarter of 1996, an increase of $3 million from the second quarter 1995
level of $287 million, and $528 million in the first six months of 1996, a
decrease of 1% from the first six months of 1995 level of $532 million, with the
International Food Group up 11% and 12%, respectively and the Domestic Food
Group down 1% from last year's second quarter and down 4% for the comparable six
month period. Operating company contribution for the second quarter and first
six months of 1996 includes $10 million of restructuring related expense in the
Domestic Food Group associated with the implementation of the June 1996
restructuring program. Excluding this expense, Nabisco Holdings' and the
Domestic Food Group's operating company contributions were $300 million and $237
million in the second quarter of 1996, an increase of 5% and 3%, respectively
from the second quarter of 1995, and $538 million and $425 million in the first
six months of 1996, an increase of 1% and a decrease of 1%, respectively from
the first six months of 1995. Excluding the impact of restructuring related
expenses, the operating company contribution for the Domestic Food Group
increased $7 million for the second quarter of 1996 compared with the
corresponding period of the prior year as a result of higher net sales. On the
same basis, the Domestic Food Group's decrease of $6 million for the first six
months of 1996 was primarily due to higher fixed manufacturing and selling costs
at the Nabisco Biscuit Company. The International Food Group's increase in
operating company contribution for the second quarter of 1996 was primarily due
to the profit impact from business acquisitions. The International Food Group's
increase in operating company contribution for the first six months of 1996 was
primarily due to the profit impact from business acquisitions and improved
results in Iberia, Brazil and Canada.
Nabisco Holdings' operating loss in the second quarter and first six months
of 1996 includes $428 million of restructuring expense. Excluding the June 1996
restructuring expense and an additional $10 million of related restructuring
implementation expenses incurred in the 1996 second quarter, operating income
was $243 million for the second quarter of 1996 and $424 million for the first
six months of 1996, an increase of 5% and 1%, respectively over the comparable
1995 period, reflecting higher operating company contribution.
RESTRUCTURING EXPENSE
In the second quarter of 1996, Nabisco Holdings recorded a pre-tax
restructuring expense of $428 million ($300 million after tax) related to a
program announced on June 24, 1996. The restructuring program, which was
undertaken to streamline operations and improve profitability, commenced during
the second quarter of 1996 and will be substantially completed during 1997. The
$428 million restructuring expense will require cash expenditures of
approximately $230 million. In addition to the restructuring expense, the
program will require additional cash expenditures of approximately $81 million,
of which $10 million ($6 million after tax) was recorded in the
second quarter of 1996, for implementation and integration expenses, principally
for relocation of employees and equipment and training. After completion of
the restructuring program, pre-tax savings are expected to be approximately $200
million annually.
The major components of the $428 million restructuring expense are domestic
and international severance and related benefits associated with workforce
reductions totaling 5,850 employees (approximately $194 million), estimated
losses from disposals of equipment and inventory related to product line
rationalizations (approximately $116 million), estimated loss to write-down the
carrying value of several non-strategic product lines prior to sale
(approximately $51 million), estimated costs to terminate manufacturing supply
and distribution contracts (approximately $45 million) and estimated
8
<PAGE>
losses from disposals of property related to international plant closures and
domestic and international facility reorganizations (approximately $22 million).
As of June 30, 1996, approximately $31 million of the restructuring
accruals were utilized as follows: $10 million for severance and related
benefits; $14 million for product line rationalizations; $6 million for
contract terminations and $1 million for facility reorganizations.
INTEREST AND DEBT EXPENSE
Consolidated interest expense of $81 million in the second quarter of 1996
and $165 million for the first six months of 1996 decreased 9% and 10%,
respectively, from the corresponding 1995 periods, primarily as a result of the
application of the net proceeds from the sale and issuance of Class A Common
Stock to retire debt in January 1995, lower market interest rates and the
completion of certain 1995 debt restructuring transactions.
NET INCOME (LOSS)
Nabisco Holdings net losses for the second quarter and first six months of
1996 include after tax expenses of $306 million related to the June 1996
restructuring program. Excluding the effects of this program, second quarter
1996 net income would have been $90 million, an increase of 14% from the 1995
second quarter level of $79 million, and $143 million in the first six months
of 1996, an increase of 13% from the 1995 first six months level of $127
million, reflecting improved operating income and lower interest expense in
the 1996 periods.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 1996 Nabisco Holdings and Nabisco adopted SFAS No. 121 and
SFAS No. 123. See Note 1 to the Consolidated Condensed Financial Statements.
LIQUIDITY AND FINANCIAL CONDITION
Net cash flows from operating activities amounted to $146 million for the
first six months of 1996 compared to $5 million for the first six months of
1995. The increase in net cash flows from operating activities primarily
reflects lower working capital requirements.
Cash flows used in investing activities increased $140 million in the first
six months of 1996 to $332 million from the first six months of 1995, primarily
as a result of 1996 business acquisitions of approximately $122 million and
increased capital expenditures of approximately $22 million.
Capital expenditures were $216 million in the first six months of 1996.
Management expects that the current level of capital expenditures planned for
1996 will be approximately $425 million, which is sufficient to support the
strategic and operating needs of Nabisco Holdings' businesses. Management also
expects that cash flow from operations, together with borrowings from Nabisco's
bank credit facilities, will be sufficient to support its planned capital
expenditures in 1996.
Cash flows from financing activities for the first six months of 1996
decreased $28 million to $162 million from the first six months of 1995,
reflecting lower borrowings and the use of existing cash.
The Credit Agreement, dated April 28, 1995, among Nabisco Holdings,
Nabisco and various financial institutions, provides for lending commitments
of $2.0 billion for five years and the issuance of up to $300 million of
irrevocable letters of credit. Availability is reduced by the aggregate
amount of borrowings outstanding and letters of credit issued. At June 30,
1996, the full $2.0 billion remained available.
The Commercial Paper Facility, dated November 3, 1995, among Nabisco
Holdings, Nabisco and various financial institutions, provides a 364 day $1.5
billion credit facility primarily to support the
9
<PAGE>
issuance of commercial paper. Availability is reduced by an amount equal to
the aggregate amount of outstanding Nabisco commercial paper. At June 30, 1996,
approximately $1,462 million of commercial paper was outstanding. Accordingly,
$38 million was available under the Commercial Paper Facility. At the end of
the 364 day period, any bank borrowing outstanding under the Commercial Paper
Facility is convertible into a three-year term loan at Nabisco's option.
On June 20, 1996, the Registrants amended certain terms of the Credit
Agreement and the Commercial Paper Facility to accommodate the June
restructuring program. The Registrants believe that they are currently in
compliance with all covenants and restrictions imposed by the terms of their
indebtedness.
At June 30, 1996, Nabisco Holdings' outstanding consolidated debt (notes
payable and long-term debt, including current maturities) and total capital
(total debt and total stockholders' equity) amounted to approximately $4.73
billion and $8.72 billion, respectively, of which total debt is higher by
approximately $271 million and total capital is higher by approximately $17
million than their respective balances at December 31, 1995. Approximately $4.47
billion of this debt was issued by Nabisco of which $63 million was secured
debt. The $256 million balance was issued by various Nabisco subsidiaries.
Nabisco Holdings' ratios of total debt to total stockholders' equity and total
debt to total capital at June 30, 1996 were 1.18 to 1 and .54 to 1,
respectively.
On June 5, 1996, Nabisco Holdings announced a 13% increase in its quarterly
dividend to an annual rate of $.62 per share from $.55 per share. At that
rate, the aggregate amount of dividends to be paid would be approximately
$164 million. Nabisco Holdings believes that its internally generated cash
and borrowings under its bank credit agreements and any other lines of credit
it may establish will provide adequate funds for working capital, interest
expense, capital expenditures and payment of its anticipated quarterly
dividends. Nabisco Holdings expects to finance future acquisitions primarily
from internally generated cash, borrowings or issuances of additional equity.
-------------------
The foregoing discussion in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contains forward-looking
statements which reflect management's current views with respect to future
events and financial performance. These forward-looking statements are subject
to certain risks and uncertainties, including, but not limited to, the effect on
financial performance and future events of competitive pricing for products,
success of new product innovations and acquisitions, local economic conditions
and the effects of currency fluctuations in countries in which Nabisco Holdings
and its subsidiaries do business, the effects of domestic and foreign government
regulation and ratings of Nabisco's securities. Due to such uncertainties and
risks, readers are cautioned not to place undue reliance on such forward-looking
statements, which speak only as of the date hereof.
10
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*10.1 Amendments dated as of June 20, 1996, to the Credit Agreements among
Nabisco Holdings Corp., Nabisco, Inc., Bankers Trust Company, The
Chase Manhattan Bank, N.A., Chemical Bank, Citibank, N.A. and the Fuji
Bank, Limited as Senior Managing Agents and various lending
institutions, dated as of April 28, 1995.
*11 Nabisco Holdings Corp. Computation of Earnings Per Share for the three
months and six months ended June 30, 1996 and 1995.
*12 Nabisco, Inc. Computation of Ratio of Earnings to Fixed
Charges/Deficiency in the Coverage of Fixed Charges by Earnings Before
Fixed Charges for the six months ended June 30, 1996.
*27.1 Nabisco Holdings Corp. Financial Data Schedule.
*27.2 Nabisco, Inc. Financial Data Schedule.
- ------------
* Filed herewith.
(b) Reports on Form 8-K
None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NABISCO HOLDINGS CORP.
NABISCO, INC.
(Registrants)
<TABLE>
<S> <C>
Date: July 31, 1996 /s/ CHRISTOPHER J. COUGHLIN
.............................................
Christopher J. Coughlin,
Executive Vice President and
Chief Financial Officer
/s/ ROBERT A. SCHIFFNER
.............................................
Robert A. Schiffner
Vice President and Controller
</TABLE>
12
EXHIBIT 11
NABISCO HOLDINGS CORP.
COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 1996(A) JUNE 30, 1995
----------------------- -----------------------
PRIMARY FULLY DILUTED PRIMARY FULLY DILUTED
------- ------------- ------- -------------
<S> <C> <C> <C> <C>
Average number of common and common equivalent shares
outstanding during the period (in thousands):
Common Stock issued and outstanding at beginning of
period............................................. 265,040 265,040 265,000 265,000
Average number of shares of common stock issued
during the period.................................. 8 8 -- --
Average number of stock options outstanding during
the period......................................... -- 2,174 367 367
------- ------------- ------- -------------
Average number of common and common equivalent shares
outstanding during the period...................... 265,048 267,222 265,367 265,367
------- ------------- ------- -------------
------- ------------- ------- -------------
Net income (loss) applicable to common stock.......... $(216) $(216) $79 $79
------- ------------- ------- -------------
------- ------------- ------- -------------
Net income (loss) per common and common equivalent
share................................................. $(.81) $(.81) $.30 $.30
------- ------------- ------- -------------
------- ------------- ------- -------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1996(A) JUNE 30, 1995
----------------------- -----------------------
PRIMARY FULLY DILUTED PRIMARY FULLY DILUTED
------- ------------- ------- -------------
<S> <C> <C> <C> <C>
Average number of common and common equivalent shares
outstanding during the period (in thousands):
Common Stock issued and outstanding at beginning of
period............................................... 265,000 265,000 213,250 213,250
Average number of shares of common stock issued
during the period.................................. 30 30 44,275 44,275
Average number of stock options outstanding during
the period......................................... -- 1,990 337 399
------- ------------- ------- -------------
Average number of common and common equivalent shares
outstanding during the period...................... 265,030 267,020 257,862 257,924
------- ------------- ------- -------------
------- ------------- ------- -------------
Net income (loss) applicable to common stock.......... $(163) $(163) $127 $127
------- ------------- ------- -------------
------- ------------- ------- -------------
Net income (loss) per common and common equivalent
share................................................. $(.62) $(.61) $.49 $.49
------- ------------- ------- -------------
------- ------------- ------- -------------
</TABLE>
- -------------------
(A) The calculations of fully diluted earnings per share for the three and six
months ended June 30, 1996 are presented in accordance with Regulation S-K
item 601(b)(11) and include the average number of common equivalent shares
although it is contrary to paragraph 40 of APB Opinion No. 15 because it
produces an antidilutive result for these net loss periods.
EXHIBIT 12
NABISCO, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES/DEFICIENCY IN THE COVERAGE OF
FIXED CHARGES BY EARNINGS BEFORE FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1996
-------------
<S> <C>
Earnings before fixed charges:
Net (loss)................................................................... $(163)
Provision (benefit) for income taxes......................................... (31)
------
Income (loss) before income taxes............................................ (194)
Interest and debt expense.................................................... 165
Interest portion of rental expense........................................... 12
------
Earnings before fixed charges.................................................. $ (17)
------
------
Fixed charges:
Interest and debt expense.................................................... $ 165
Interest portion of rental expense........................................... 12
Capitalized interest......................................................... 6
------
Total fixed charges........................................................ $ 183
------
------
Deficiency in the coverage of fixed charges by earnings before fixed charges... $(200)
------
------
</TABLE>
Exhibit 10.1
THIRD AMENDMENT TO THE 5 YEAR CREDIT AGREEMENT
----------------------------------------------
FIRST AMENDMENT TO THE 364 DAY CREDIT AGREEMENT
-----------------------------------------------
AMENDMENT (this "Amendment"), dated as of June 20, 1996, among NABISCO
HOLDINGS CORP., a Delaware corporation ("Holdings"), NABISCO, INC., a New Jersey
corporation (the "Borrower"), and the lending institutions party to the 5 Year
Credit Agreement referred to below and the 364 Day Credit Agreement referred to
below. All capitalized terms used herein and not otherwise defined herein shall
have the respective meanings provided such terms in the 5 Year Credit Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Holdings, the Borrower and various lending institutions
(the "5 Year Banks") are parties to a Credit Agreement, dated as of April 28,
1995 (as amended, modified and supplemented to the date hereof, the "5 Year
Credit Agreement");
WHEREAS, Holdings, the Borrower and various lending institutions (the
"364 Day Banks"; and together with the 5 Year Banks, the "Banks") are parties to
a Credit Agreement, dated as of November 3, 1995 (the "364 Day Credit Agreement"
and, together with the 5 Year Credit Agreement, the "Credit Agreements");
WHEREAS, Holdings, the Borrower and the 5 Year Banks wish to enter
into the amendments with respect to the 5 Year Credit Agreement as herein
provided;
WHEREAS, Holdings, the Borrower and the 364 Day Banks wish to enter
into amendments with respect to the 364 Day Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to the 5 Year Credit Agreement.
-----------------------------------------
1. The definition of "Adjusted Operating Income" appearing in Section
10 of the 5 Year Credit Agreement shall be amended by (a) deleting the word
"and" appearing at the end of clause (i) of the proviso contained therein and
inserting a comma in lieu thereof and (b) inserting at the end of such
definition, immediately following clause (ii) thereof, the following new clause
(iii):
"and (iii) for all purposes, for any period which includes
any Restructuring Charge Quarter there shall be excluded in
determining
<PAGE>
Adjusted Operating Income any portion of the 1996
Restructuring Charge which reduced the consolidated
operating income of Holdings and its Subsidiaries for such
period.
2. The definition of "Consolidated Net Worth" appearing in
Section 10 of the 5 Year Credit Agreement shall be amended by inserting
the following after the second appearance of the word "date" therein:
"plus any 1996 Restructuring Charge deducted in determining
Consolidated Net Worth of Holdings as of such date".
3. The definition of "Cumulative Consolidated Net Income" appearing
in Section 10 of the 5 Year Credit Agreement shall be amended by inserting at
the end of such definition, immediately following clause (ii) thereof, the
following:
"plus (iii) any 1996 Restructuring Charge deducted in
determining Consolidated Net Income of Holdings for
the period referred to in clause (i) above".
4. Section 10 of the 5 Year Credit Agreement is hereby amended by
inserting the following new definitions in appropriate alphabetical order:
"1996 Restructuring Charge" shall mean the restructuring
expenses and related costs and expenses in an aggregate
amount not in excess of $500,000,000 recorded or accrued
during Holdings' 1996 fiscal year.
"Restructuring Charge Quarter" shall mean any fiscal quarter
of Holdings during its 1996 fiscal year in which it has
taken some or all of the 1996 Restructuring Charge.
II. Amendments to the 364 Day Credit Agreement.
------------------------------------------
1. The definition of "Adjusted Operating Income" appearing in
Section 10 of the 364 Day Credit Agreement shall be amended by (a) deleting
the word "and" appearing at the end of clause (i) of the proviso contained
therein and inserting a comma in lieu thereof and (b) inserting at the end
of such definition, immediately following clause (ii) thereof, the following:
"and (iii) for all purposes, for any period which includes
any Restructuring Charge Quarter there shall be excluded in
determining Adjusted Operating Income any portion of the
1996 Restructuring Charge which reduced the consolidated
operating income of Holdings and its Subsidiaries for such
period".
-2-
<PAGE>
2. The definition of "Consolidated Net Worth" appearing in Section 10
of the 364 Day Credit Agreement shall be amended by inserting the following
after the second appearance of the word "date" therein:
"plus any 1996 Restructuring Charge deducted in determining
Consolidated Net Worth of Holdings as of such date".
3. The definition of "Cumulative Consolidated Net Income" appearing
in Section 10 of the 364 Day Credit Agreement shall be amended by inserting at
the end of such definition, immediately following clause (ii) thereof, the
following:
"plus (iii) any 1996 Restructuring Charge deducted in
determining Consolidated Net Income of Holdings for
the period referred to in clause (i) above".
4. Section 10 of the 364 Day Credit Agreement is hereby amended by
inserting the following new definitions in appropriate alphabetical order:
"1996 Restructuring Charge" shall mean the
restructuring expense and the related costs and expenses in
an aggregate amount not in excess of $500,000,000 recorded
or accrued during Holdings' 1996 fiscal year.
"Restructuring Charge Quarter" shall mean any fiscal
quarter of Holdings during its 1996 fiscal year in which it
has taken some or all of the 1996 Restructuring Charge.
III. Miscellaneous Provisions
------------------------
1. In order to induce the Banks to enter into this Amendment, each
Credit Party hereby (i) makes each of the representations, warranties and
agreements contained in Section 6 of each Credit Agreement and (ii) represents
and warrants that there exists no Default or Event of Default, (as defined in
each credit agreement) in each case on the Amendment Date (as defined below),
both before and after (as defined in each credit agreement) giving effect to
this Amendment.
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of either Credit
Agreement or any other Credit Document (as defined in each Credit Agreement).
3. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with Holdings and the Payments Administrator.
-3-
<PAGE>
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Amendment shall become effective as of the date first written
above on the date (the "Amendment Date") when (i) each of the Credit Parties,
(ii) 5 Year Banks constituting Required Banks under the 5 Year Credit Agreement
and (iii) 364 Day Banks constituting Required Banks under the 364 Day Credit
Agreement, shall have signed a copy hereof (whether the same or different
copies) and shall have delivered (including by way of facsimile transmission)
the same to White & Case, 1155 Avenue of the Americas, New York, New York 10036,
Attention: Mr. Kevin Wong (Facsimile No.: (212)354-8113).
* * *
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF NABISCO HOLDINGS CORP., WHICH
WERE FILED WITH SEC FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
NABISCO HOLDINGS CORP.
(Dollars in Millions Except Per Share Amounts)
</LEGEND>
<CIK> 0000932130
<NAME> NABISCO HOLDINGS CORP.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 96
<SECURITIES> 0
<RECEIVABLES> 552
<ALLOWANCES> 0
<INVENTORY> 866
<CURRENT-ASSETS> 1,697
<PP&E> 3,193
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,354
<CURRENT-LIABILITIES> 1,819
<BONDS> 4,505
0
0
<COMMON> 3
<OTHER-SE> 3,987
<TOTAL-LIABILITY-AND-EQUITY> 12,354
<SALES> 4,168
<TOTAL-REVENUES> 4,168
<CGS> 2,453
<TOTAL-COSTS> 2,453
<OTHER-EXPENSES> 542
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 165
<INCOME-PRETAX> (194)
<INCOME-TAX> (31)
<INCOME-CONTINUING> (163)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (163)
<EPS-PRIMARY> (.62)
<EPS-DILUTED> (.61)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF NABISCO, INC. WHICH WERE FILED
WITH SEC FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
NABISCO, INC.
(Dollars in Millions Except Per Share Amounts)
</LEGEND>
<CIK> 0000069526
<NAME> NABISCO, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 96
<SECURITIES> 0
<RECEIVABLES> 552
<ALLOWANCES> 0
<INVENTORY> 866
<CURRENT-ASSETS> 1,697
<PP&E> 3,193
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,354
<CURRENT-LIABILITIES> 1,809
<BONDS> 4,505
0
0
<COMMON> 0
<OTHER-SE> 4,000
<TOTAL-LIABILITY-AND-EQUITY> 12,354
<SALES> 4,168
<TOTAL-REVENUES> 4,168
<CGS> 2,453
<TOTAL-COSTS> 2,453
<OTHER-EXPENSES> 542
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 165
<INCOME-PRETAX> (194)
<INCOME-TAX> (31)
<INCOME-CONTINUING> (163)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (163)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
