<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1997
-------------------
NABISCO HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-13556 13-3077142
(State or other (Commission file (I.R.S. Employer
jurisdiction of number) 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 (Commission file (I.R.S. Employer Identification
jurisdiction of number) 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, 1997:
<TABLE>
<C> <S>
NABISCO HOLDINGS CORP.: 51,819,653 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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, 1997 and 1996...................................................................... 1
Consolidated Condensed Statements of Income--Six Months Ended
June 30, 1997 and 1996...................................................................... 2
Consolidated Condensed Statements of Cash Flows--Six Months Ended June 30, 1997 and 1996...... 3
Consolidated Condensed Balance Sheets--June 30, 1997 and
December 31, 1996........................................................................... 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 THREE MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------- -----------------------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
NET SALES............................................................. $ 2,191 $ 2,191 $ 2,178 $ 2,178
---------- ----------- ---------- -----------
Costs and expenses:
Cost of products sold............................................... 1,239 1,239 1,271 1,271
Selling, advertising, administrative and general expenses........... 632 632 617 617
Amortization of trademarks and goodwill............................. 56 56 57 57
Restructuring expense............................................... -- -- 428 428
---------- ----------- ---------- -----------
OPERATING INCOME (LOSS)......................................... 264 264 (195) (195)
Interest and debt expense............................................. (82) (82) (81) (81)
Other income (expense), net........................................... (8) (8) (8) (8)
---------- ----------- ---------- -----------
Income (loss) before income taxes............................... 174 174 (284) (284)
Provision (benefit) for income taxes.................................. 71 71 (68) (68)
---------- ----------- ---------- -----------
NET INCOME (LOSS)............................................... $ 103 $ 103 $ (216) $ (216)
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE.............. $ .38 $ (.81)
---------- ----------
---------- ----------
Dividends declared per common share................................... $ .175 $ .155
---------- ----------
---------- ----------
Average number of common and common equivalent shares outstanding (in
thousands).......................................................... 268,521 265,048
---------- ----------
---------- ----------
</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 SIX MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996
------------------------ ------------------------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES............................................................ $ 4,096 $ 4,096 $ 4,168 $ 4,168
----------- ----------- ----------- -----------
Costs and expenses:
Cost of products sold.............................................. 2,348 2,348 2,453 2,453
Selling, advertising, administrative and general expenses.......... 1,175 1,175 1,187 1,187
Amortization of trademarks and goodwill............................ 113 113 114 114
Restructuring expense.............................................. -- -- 428 428
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS)........................................ 460 460 (14) (14)
Interest and debt expense............................................ (163) (163) (165) (165)
Other income (expense), net.......................................... (16) (16) (15) (15)
----------- ----------- ----------- -----------
Income (loss) before income taxes.............................. 281 281 (194) (194)
Provision (benefit) for income taxes................................. 114 114 (31) (31)
----------- ----------- ----------- -----------
NET INCOME (LOSS).............................................. $ 167 $ 167 $ (163) $ (163)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE............. $ .62 $ (.62)
----------- -----------
----------- -----------
Dividends declared per common share.................................. $ .33 $ .2925
----------- -----------
----------- -----------
<CAPTION>
Average number of common and common equivalent shares outstanding (in
thousands)......................................................... 268,563 265,030
<S> <C> <C> <C> <C>
----------- -----------
----------- -----------
</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, 1997 JUNE 30, 1996
------------------------ ------------------------
<S> <C> <C> <C> <C>
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
----------- ----------- ----------- -----------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income............................................................. $ 167 $ 167 $ (163) $ (163)
Adjustments to reconcile net income to net cash flows from operating
activities:
Depreciation of property, plant and equipment...................... 140 140 130 130
Amortization of intangibles........................................ 113 113 114 114
Deferred income tax provision (benefit)............................ 25 25 (108) (108)
Restructuring expense, net of cash payments........................ (83) (83) 418 418
Changes in working capital items, net.............................. (335) (335) (248) (248)
Other, net......................................................... (18) (18) 3 3
----- ----- ----- -----
Net cash flows from operating activities............................. 9 9 146 146
----- ----- ----- -----
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures................................................... (143) (143) (216) (216)
Acquisition of businesses.............................................. -- -- (122) (122)
Proceeds from sale of businesses....................................... 50 50 -- --
Other, net............................................................. 10 10 6 6
----- ----- ----- -----
Net cash flows (used in) investing activities........................ (83) (83) (332) (332)
----- ----- ----- -----
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net proceeds from the issuance of long-term debt....................... 88 88 172 172
Repayments of long-term debt........................................... (14) (14) (53) (53)
Increase (decrease) in notes payable................................... 67 67 116 116
Dividends paid on common stock......................................... (82) (82) (73) (73)
----- ----- ----- -----
Net cash flows from financing activities............................. 59 59 162 162
----- ----- ----- -----
Effect of exchange rate changes on cash and cash equivalents............. (2) (2) (1) (1)
----- ----- ----- -----
Net change in cash and cash equivalents.............................. (17) (17) (25) (25)
Cash and cash equivalents at beginning of period......................... 93 93 121 121
----- ----- ----- -----
Cash and cash equivalents at end of period............................... $ 76 $ 76 $ 96 $ 96
----- ----- ----- -----
----- ----- ----- -----
</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, 1997 DECEMBER 31, 1996
---------------------- ----------------------
<S> <C> <C> <C> <C>
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
----------- --------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 76 $ 76 $ 93 $ 93
Accounts receivable, net........................................... 562 562 556 556
Deferred income taxes.............................................. 25 25 55 55
Inventories........................................................ 912 912 879 879
Prepaid expenses................................................... 86 86 46 46
----------- --------- ----------- ---------
TOTAL CURRENT ASSETS........................................... 1,661 1,661 1,629 1,629
----------- --------- ----------- ---------
Property, plant and equipment, net................................... 3,246 3,246 3,287 3,287
Trademarks, net...................................................... 3,782 3,782 3,856 3,856
Goodwill, net........................................................ 3,400 3,400 3,451 3,451
Other assets and deferred charges.................................... 68 68 67 67
----------- --------- ----------- ---------
$ 12,157 $ 12,157 $ 12,290 $ 12,290
----------- --------- ----------- ---------
----------- --------- ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable...................................................... $ 313 $ 313 $ 251 $ 251
Accounts payable and accrued liabilities........................... 1,287 1,277 1,582 1,572
Current maturities of long-term debt............................... 25 25 24 24
Income taxes accrued............................................... 116 116 112 112
----------- --------- ----------- ---------
TOTAL CURRENT LIABILITIES...................................... 1,741 1,731 1,969 1,959
----------- --------- ----------- ---------
Long-term debt (less current maturities)............................. 4,283 4,283 4,213 4,213
Other noncurrent liabilities......................................... 696 696 708 708
Deferred income taxes................................................ 1,307 1,307 1,316 1,316
Stockholders' equity:................................................
Class A common stock (51,819,653 shares issued and outstanding at
June 30, 1997)................................................... 1 -- 1 --
Class B common stock (213,250,000 shares issued and outstanding at
June 30, 1997)................................................... 2 -- 2 --
Paid-in capital.................................................... 4,087 4,141 4,087 4,141
Retained earnings.................................................. 123 80 43 --
Cumulative translation adjustment.................................. (81) (81) (47) (47)
Notes receivable on common stock purchases......................... (2) -- (2) --
----------- --------- ----------- ---------
TOTAL STOCKHOLDERS' EQUITY..................................... 4,130 4,140 4,084 4,094
----------- --------- ----------- ---------
$ 12,157 $ 12,157 $ 12,290 $ 12,290
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</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 1997
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, 1996.
In June 1997, Nabisco sold certain domestic regional brands for $50 million
that resulted in a $32 million gain ($19 million after tax). In addition,
non-recurring expenses of $31 million ($18 million after tax) were recognized
which included a $14 million provision for an additional write-down of a
business held for sale; $10 million expense for the reorganization of the U.S.
Foods Group selling organization; and $7 million expense for International
headquarters relocation. The net $1 million pre-tax gain from these items is
included in selling, advertising, administrative and general expenses in the
Consolidated Condensed Financial Statements.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share, which established
new standards for computing and presenting net income per common share and
replaced the standards previously found in Accounting Principles Board Opinion
No. 15, Earnings Per Share. Nabisco Holdings will begin reporting net income per
common share and net income per common share assuming dilution according to this
new standard in the fourth quarter of 1997. For Nabisco Holdings, net income per
common share and net income per common share assuming dilution, for the first
quarter of 1997 and all prior periods presented, computed under the new
standard, are equal to the corresponding net income per common share amounts
reported under the previous standard. Net income per common share and net income
per common share assuming dilution for the second quarter and first six months
of 1997 under the new standard would be one cent per common share higher than
the corresponding amounts under the previous standard.
RESTRUCTURING EXPENSE
In 1996, Nabisco Holdings recorded a restructuring expense of $428 million
($300 million after tax), including cash expenditures of approximately $230
million, related to a program announced on June 24, 1996. The restructuring
program, which was undertaken to streamline operations and improve
profitability, will be substantially completed by the end of 1997. 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 expenses are domestic
and international severance and related benefits associated with workforce
reductions totaling approximately 6,000 employees (approximately $194 million),
estimated losses from disposals of equipment and packaging materials related to
product line rationalizations, which will eliminate production of more than 300
SKU's (stock
5
<PAGE>
keeping units) of slow-moving products (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, 1997, approximately $260 million of the restructuring
accruals were utilized as follows: $146 million for severance and related
benefits, $82 million for product line rationalizations, $26 million for
contract terminations and $6 million for plant closures.
NOTE 2--INVENTORIES
The major classes of inventory are shown in the table below:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ---------------
<S> <C> <C>
Finished products........................................................... $ 554 $ 536
Raw materials............................................................... 207 199
Other....................................................................... 151 144
----- -----
$ 912 $ 879
----- -----
----- -----
</TABLE>
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 and the U.S. Foods Group (collectively, the "Domestic Food
Group"). The U.S. Foods Group is comprised of Specialty Products, LifeSavers,
Planters, Tablespreads and Food Service Companies. 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 SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------------------- ---------------------------------
1997 1996 % CHANGE 1997 1996 % CHANGE
--------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Millions)
Net Sales:
Biscuit........................................... $ 907 $ 914 (1%) $ 1,708 $ 1,785 (4%)
U.S. Foods Group.................................. 647 639 1% 1,174 1,202 (2%)
--------- --------- --------- ---------
Domestic Food Group............................... 1,554 1,553 -- 2,882 2,987 (4%)
International Food Group.......................... 637 625 2% 1,214 1,181 3%
--------- --------- --------- ---------
Total Nabisco Holdings............................ $ 2,191 $ 2,178 1% $ 4,096 $ 4,168 (2%)
--------- --------- --------- ---------
--------- --------- --------- ---------
Operating Company Contribution (1):
Biscuit (2)....................................... $ 183 $ 146 25% $ 317 $ 271 17%
U.S. Foods Group (3).............................. 93 81 15% 158 144 10%
--------- --------- --------- ---------
Domestic Food Group............................... 276 227 22% 475 415 14%
International Food Group (4)...................... 44 63 (30%) 98 113 (13%)
--------- --------- --------- ---------
Total Nabisco Holdings............................ $ 320 $ 290 10% $ 573 $ 528 9%
--------- --------- --------- ---------
--------- --------- --------- ---------
Operating Income (Loss) (5):
Domestic Food Group............................... $ 226 $ (177) $ 374 $ (40)
International Food Group.......................... 38 (18) 86 26
--------- --------- --------- ---------
Total Nabisco Holdings............................ $ 264 $ (195) $ 460 $ (14)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Operating income (loss) before amortization of trademarks and goodwill and
exclusive of restructuring expense.
(2) Each 1996 period includes $4 million of restructuring related expenses
associated with the June 1996 restructuring program.
(3) Each 1996 period includes $6 million of restructuring related expenses
associated with the June 1996 restructuring program. Each 1997 period
includes a net $8 million gain.
(4) Each 1997 period includes $7 million of non-recurring expense.
(5) Each 1996 period includes the June restructuring expense of $428 million,
consisting of $353 million for the Domestic Food Group and $75 million for
the International Food Group.
7
<PAGE>
Nabisco Holdings reported net sales of $2.19 billion in the second quarter
of 1997, an increase of 1% from the second quarter 1996 level of $2.18 billion
and $4.10 billion in the first six months of 1997, a decrease of 2% from the
first six months of 1996 level of $4.17 billion. The Domestic Food Group
reported that sales were flat for the second quarter and 4% lower for the first
six months, while the International Food Group's sales increased 2% and 3%,
respectively. Within the Domestic Food Group, Nabisco Biscuit net sales declined
1% in the second quarter and 4% in the first six months versus the prior year,
primarily due to volume declines in SnackWell's and breakfast snacks, which more
than offset volume increases in core cookie and cracker brands. The U.S. Foods
Group's net sales increased 1% in the second quarter primarily due to higher
volume for nuts, candy and gum which was partially offset by lower sales volume
for tablespreads and condiments. The 2% decline in net sales for the first six
months of 1997 was primarily due to lower sales volume for tablespreads and
condiments, partially offset by higher sales volume for nuts, candy and gum. The
International Food Group's net sales increases for the second quarter and first
six months were primarily driven by the second half 1996 business acquisitions,
principally Lucky in Taiwan and Fontaneda in Spain, and improved results in
Mexico, China and Venezuela. Partially offsetting these gains were volume
declines in Brazil, resulting from aggressive competitive activity in the
biscuit and milk categories, and Argentina.
Nabisco Holdings' operating company contribution was $320 million in the
second quarter of 1997, an increase of 10% from the second quarter 1996 level of
$290 million, and $573 million in the first six months of 1997, an increase of
9% versus the $528 million generated in the first six months of 1996. The
Domestic Food Group's operating company contribution increased 22% and 14%
versus the second quarter and first six months of last year respectively, while
the International Food Group's operating company contribution decreased 30% and
13%, respectively. 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 (Nabisco Biscuit $4 million and U.S. Foods Group $6
million) associated with implementation of the June 1996 restructuring program.
Operating company contribution for the second quarter and first six months of
1997 includes a $32 million gain from the sale of certain U.S. Foods Group
regional brands and non-recurring expenses of $31 million. The non-recurring
expenses for the U.S. Foods Group totalled $24 million consisting of a $14
million provision for the additional write-down of a business held for sale and
$10 million of expense for the reorganization of its selling organization. The
International Food Group results include a $7 million non-recurring expense to
relocate its headquarters from New York City to New Jersey. Excluding the 1997
non-recurring items and the 1996 restructuring related expenses, Nabisco
Holdings' and the Domestic Food Group's respective operating company
contributions were $319 million and $268 million in the second quarter of 1997
versus $300 million and $237 million in the second quarter of 1996, an increase
of 6% and 13%, respectively. For the first six months of 1997, Nabisco Holdings
and the Domestic Food Group generated operating company contribution of $572
million and $467 million respectively versus $538 million and $425 million in
the first six months of 1996, an increase of 6% and 10%, respectively. Excluding
the impact of the 1997 non-recurring expense, the International Food Group's
decrease in operating company contribution for the second quarter and first six
months of 1997 was 19% and 7%, respectively.
Excluding the $4 million impact of the 1996 restructuring related expenses,
the operating company contribution for Nabisco Biscuit increased $33 million, or
22%, for the second quarter of 1997 and increased $42 million, or 15%, for the
first six months of 1997. These increases resulted largely from restructuring
driven margin improvements and on-going productivity initiatives. Excluding the
1997 non-recurring items and the 1996 restructuring related expense, the U.S.
Foods Group's operating company contribution decreased $2 million for the second
quarter of 1997 and was even with last year's level for the first six months of
1997. The quarter's decline was primarily due to reduced sales of higher margin
condiment products, while the first six months' profit level was maintained due
to restructuring efficiencies and lower consumer promotion expense. Excluding
the impact of the 1997 non-recurring expense, the International Food Group's
decline in operating company contribution for the second quarter and first six
months of 1997 was principally due to lower earnings in Latin America, most
notably Brazil, due to lower
8
<PAGE>
sales, and Argentina, due to lower sales and increased marketing expenses.
Higher expansion costs in China and Indonesia also affected International Food
Group's results unfavorably.
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 and the 1997
non-recurring items, operating income was $263 million for the second quarter of
1997 and $459 million for the first six months of 1997, compared to the
respective 1996 amounts of $243 million and $424 million, an increase of 8% over
each comparable 1996 period. The increase in operating income for both periods
reflects higher operating company contribution.
RESTRUCTURING EXPENSE
In 1996, Nabisco Holdings recorded a restructuring expense of $428 million
($300 million after tax), including cash expenditures of approximately $230
million, related to a program announced on June 24, 1996. The restructuring
program, which was undertaken to streamline operations and improve
profitability, will be substantially completed by the end of 1997. After
completion of the restructuring program, pre-tax savings are expected to be
approximately $200 million annually. The restructuring program is discussed
further in Note 1 to the Consolidated Condensed Financial Statements.
INTEREST AND DEBT EXPENSE
Consolidated interest expense and debt expense of $82 million in the second
quarter of 1997 increased $1 million, or 1%, from the same 1996 period primarily
as a result of lower capitalized interest in 1997. The $163 million expense for
the first six months of 1997 decreased $2 million, or 1%, from the same 1996
period primarily as a result of lower borrowing levels.
NET INCOME (LOSS)
Nabisco Holdings' net loss for the second quarter and first six months of
1996 include after tax restructuring and restructuring related expenses of $306
million related to the June 1996 restructuring program. Excluding the effects of
this program and the 1997 net gain of $1 million, second quarter 1997 net income
of $102 million was 13% higher than the 1996 second quarter level of $90
million, and net income of $166 million in the first six months of 1997
increased 16% from the 1996 first six months level of $143 million, reflecting
improved operating income.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share, which established
new standards for computing and presenting net income per common share and
replaced the standards previously found in Accounting Principles Board Opinion
No. 15, Earnings Per Share. Nabisco Holdings will begin reporting net income per
common share and net income per common share assuming dilution according to this
new standard in the fourth quarter of 1997. For Nabisco Holdings, net income per
common share and net income per common share assuming dilution, for the first
quarter of 1997 and all prior periods presented, computed under the new
standard, are equal to the corresponding net income per common share amounts
reported under the previous standard. Net income per common share and net income
per common share assuming dilution for the second quarter and first six months
of 1997 under the new standard would be one cent per common share higher than
the corresponding amounts under the previous standard.
LIQUIDITY AND FINANCIAL CONDITION
Net cash flows from operating activities amounted to $9 million for the
first six months of 1997 compared to $146 million for the first six months of
1996. The decrease in net cash flows from operating
9
<PAGE>
activities primarily reflects higher 1997 payments related to the restructuring
program of $104 million and higher working capital requirements, partially
offset by the 1997 increase in net income.
Cash flows used in investing activities for the first six months of 1997
decreased $249 million to $83 million from the first six months of 1996,
primarily because there was no spending on business acquisitions in 1997, in
contrast to the $122 million spent in 1996, a decrease in capital expenditures
from 1996 to 1997 of $73 million and the collection in 1997 of $50 million of
proceeds from the sale of certain regional brands.
Capital expenditures were $143 million in the first six months of 1997.
Management expects that the current level of capital expenditures planned for
1997 will be approximately $450 million, which is sufficient to support the
strategic and operating needs of Nabisco Holdings' businesses. Management also
expects that cash flow from operations will be sufficient to support its planned
capital expenditures in 1997.
Cash flows from financing activities for the first six months of 1997
decreased $103 million to $59 million from the first six months of 1996,
principally due to reduced net borrowings resulting from a decrease in investing
activities.
The credit agreement, dated October 31, 1996, among Nabisco Holdings,
Nabisco and various financial institutions, provides lending commitments of $1.5
billion for five years and permits 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 and by the amount of
outstanding Nabisco commercial paper in excess of $1.5 billion. At June 30,
1997, the full $1.5 billion remained available.
The commercial paper facility, dated October 31, 1996, among Nabisco
Holdings, Nabisco and various financial institutions, provides a 364 day $1.5
billion credit facility primarily to support the issuance of commercial paper
borrowings. Availability is reduced by an amount equal to the aggregate amount
of outstanding Nabisco commercial paper. At June 30, 1997, approximately $1.155
billion of commercial paper was outstanding. Accordingly, $345 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.
The Registrants believe that they are currently in compliance with all
covenants and restrictions imposed by the terms of their indebtedness.
At June 30, 1997, Nabisco Holdings' total debt (notes payable and long-term
debt, including current maturities) and total capital (total debt and total
stockholders' equity) amounted to approximately $4.62 billion and $8.75 billion,
respectively, of which total debt is higher by $133 million and total capital is
higher by $179 million than their respective balances at December 31, 1996.
Approximately $4.25 billion of this debt was issued by Nabisco, of which $58
million was secured debt. The $373 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, 1997 were 1.12 to 1 and .53
to 1, respectively.
On June 5, 1997, Nabisco Holdings announced a 13% increase in its quarterly
dividend to an annual rate of $.70 per share from $.62 per share. At that rate,
the aggregate amount of dividends to be paid would be approximately $175 million
during 1997.
------------------------
The foregoing discussion in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contains forward-looking
statements concerning, among other things, the level and sufficiency of funding
for capital expenditures, the adequacy of cash flows from operations to fund
such expenditures and the amount of future savings expected as a result of the
1996 restructuring program. These statements reflect management's current views
with respect to future events and financial performance. These forward-looking
statements are based on many assumptions and factors including competitive
pricing for products, commodity prices, success of new product innovations and
acquisitions, economic conditions in countries where Nabisco Holdings'
subsidiaries do business, the effects of currency fluctuations and the effects
of government regulation. Any changes in such assumptions or factors could
produce significantly different results.
10
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PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
*10.1 Nabisco Holdings Corp. 1994 Long Term Incentive Plan, as amended and restated
effective April 17, 1997.
<S> <C>
*10.2 Form of Non-Qualified Stock Option Agreement between Nabisco Holdings Corp.
and the Director named therein dated as of April 17, 1997.
*11 Nabisco Holdings Corp. Computation of Earnings Per Share for the three months
and six months ended June 30, 1997 and 1996.
*12 Nabisco, Inc. Computation of Ratio of Earnings to Fixed Charges for the six
months ended June 30, 1997.
*27.1 Nabisco Holdings Corp. Financial Data Schedule.
*27.2 Nabisco, Inc. Financial Data Schedule.
</TABLE>
- ------------------------
* 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.
<TABLE>
<S> <C>
NABISCO HOLDINGS CORP.
NABISCO, INC.
(Registrants)
Date: August 1, 1997 /s/ JAMES E. HEALEY
...........................................................................................
James E. Healey
Executive Vice President and
Chief Financial Officer
/s/ ROBERT A. SCHIFFNER
...........................................................................................
Robert A. Schiffner
Senior Vice President and Controller
</TABLE>
12
<PAGE>
PLAN DOCUMENT
NABISCO HOLDINGS CORP. 1994
LONG TERM INCENTIVE PLAN
(As amended and restated
effective April 17, 1997)
1. Purpose of Plan
The Nabisco Holdings Corp. 1994 Long Term Incentive Plan (the "Plan"), as
amended and restated effective April 17, 1997, subject to the approval of
Nabisco's shareholders (the "Plan"), is designed:
(a) to promote the long term financial interests and growth of Nabisco
Holdings Corp. and subsidiaries (the "Corporation") by attracting and retaining
management personnel with the training, experience and ability to enable them to
make a substantial contribution to the success of the Corporation's business;
(b) to motivate management personnel by means of growth-related incentives
to achieve long range goals; and
(c) to further the identity of interests of participants with those of the
stockholders of the Corporation through opportunities for increased stock, or
stock-based, ownership in the Corporation.
2. Definitions
As used in the Plan, the following words shall have the following meanings:
(a) "Base Value" means not less than the Fair Market Value on the date a
Stock Appreciation Right is granted, or, in the case of a Stock Appreciation
Right granted retroactively in tandem with (or in replacement of) an outstanding
stock option, not less than the exercise price of such option;
1
<PAGE>
(b) "Board of Directors" means the Board of Directors of Nabisco;
(c) "Code" means the Internal Revenue Code of 1986, as amended;
(d) "Committee" means the Compensation Committee of the Board of
Directors;
(e) "Common Stock" or "Share" means Class A common stock of Nabisco which
may be authorized but unissued, or issued and reacquired;
(f) "Dividend Equivalent Rights" shall have the meaning set forth in
Section 5(f);
(g) "Effective Date" shall have the meaning set forth in Section 12;
(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended;
(i) "Fair Market Value" means such value of a Share as reported for
stock exchange transactions and/or determined in accordance with any
applicable resolutions or regulations of the Committee in effect at the
relevant time;
(j) "Grant" means an award made to a Participant pursuant to the Plan
and described in Paragraph 5, including, without limitation, an award of an
Incentive Stock Option, Stock Option, Stock Appreciation Right, Dividend
Equivalent Right, Restricted Stock, Purchase Stock, Performance Units,
Performance Shares or Other Stock-Based Grant, or any combination of the
foregoing;
(k) "Grant Agreement" means an agreement between Nabisco and a
Participant that sets forth the terms, conditions and limitations applicable
to a Grant;
(l) "Incentive Stock Options" shall have the meaning set for in Section
5(a);
(m) "Nabisco" means Nabisco Holdings Corp.;
(n) "Other Stock Based Grants" shall have the meaning set for in Section
5(i);
(o) "Other Stock Options" shall have meaning set forth in Section 5(b);
(p) "Participant" means an employee, or other person having a unique
relationship with Nabisco or one of its Subsidiaries, to whom Grants may be made
in accordance with Paragraph 4, or to whom one or more Grants have been made and
such Grants have not all been forfeited or terminated under the Plan; provided,
however, a non-employee director of RJRN, Nabisco or one of its Subsidiaries may
not be a Participant;
(q) "Performance Units" shall have the meaning set forth in Section 5(g);
2
<PAGE>
(r) "Performance Shares" shall have the meaning set forth in Section 5(h);
(s) "Purchase Stock" shall have the meaning set forth in Section 5(e);
(t) "Restricted Stock" shall have the meaning set forth in Section 5(d);
(u) "RJRN" means RJR Nabisco Holdings Corp.;
(v) "Stock Appreciation Rights" shall have the meaning set forth in
Section 5(c);
(w) "Subsidiary" means any corporation other than Nabisco in an unbroken
chain of corporations beginning with Nabisco if each of the corporations other
than the last corporation in the unbroken chain owns 50% or more of the voting
stock in one of the other corporations in such chain.
3. Administration of Plan
(a) The Plan shall be administered by the Committee or, in lieu of the
Committee, the Board of Directors. The Committee may adopt its own rules of
procedure, and the action of a majority of the Committee, taken at a meeting or
taken without a meeting by a writing signed by such majority, shall constitute
action by the Committee. The Committee shall have the power and authority to
administer, construe and interpret the Plan, to make rules for carrying it out
and to make changes in such rules. Any such interpretations, rules, and
administration shall be consistent with the basic purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer and to other
senior officers of the Corporation its duties under the Plan subject to such
conditions and limitations as the Committee shall prescribe except that only the
Committee may designate and make Grants to Participants who are subject to
Section 16 of the Exchange Act.
(c) The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, Nabisco, and the officers
and directors of Nabisco shall be entitled to rely upon the advise, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Participants, Nabisco and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good
3
<PAGE>
faith with respect to the Plan or the Grants, and all members of the Committee
shall be fully protected by Nabisco with respect to any such action,
determination or interpretation.
4. Eligibility
The Committee may from time to time make Grants under the Plan to such
employees, or other persons having a unique relationship with Nabisco or any of
its Subsidiaries, and in such form and having such terms, conditions and
limitations as the Committee may determine. No Grants may be made under this
Plan to non-employee directors of RJRN, Nabisco or any of its Subsidiaries.
Grants may be granted singly, in combination or in tandem. The terms,
conditions and limitations of each Grant under the Plan shall be set forth in a
Grant Agreement, in a form approved by the Committee, consistent, however, with
the terms of the Plan; provided, however, such Grant Agreement shall contain
provisions dealing with the treatment of Grants in the event of the termination,
death or disability of a Participant, and may also include provisions concerning
the treatment of Grants in the event of a change of control of Nabisco.
5. Grants
From time to time, the Committee will determine the forms and amounts of
Grants for Participants. Such Grants may take the following forms in the
Committee's sole discretion:
(a) Incentive Stock Options - These are stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended ("Code"), to
purchase Common Stock. In addition to other restrictions contained in the Plan,
an option granted under this Section 5(a), (i) may not be exercised more than 10
years after the date it is granted, (ii) may not have an option price less than
the Fair Market Value of Common Stock on the date the option is granted, (iii)
must otherwise comply with Code Section 422, and (iv) must be designated as an
"Incentive Stock Option" by the Committee. The maximum aggregate Fair Market
Value of Common Stock (determined at the time of each Grant) with respect to
which any Participant may first exercise Incentive Stock Options under this Plan
and any Incentive Stock Options granted to the Participant for such year under
any plans of RJRN, Nabisco or any Subsidiary in any calendar year is $100,000.
Payment of the option price shall be made in cash or in shares of Common
4
<PAGE>
Stock, or a combination thereof, in accordance with the terms of the Plan,
the Grant Agreement, and of any applicable guidelines of the Committee in
effect at the time. No Participant may receive Grants of Incentive Stock
Options in any calendar year to purchase more than one million shares.
(b) Other Stock Options - These are options to purchase Common Stock which
are not designated by the Committee as "Incentive Stock Options". At the time
of the Grant the Committee shall determine, and shall have contained in the
Grant Agreement or other Plan rules, the option exercise period, the option
price, and such other conditions or restrictions on the grant or exercise of the
option as the Committee deems appropriate, which may include the requirement
that the grant of options is predicated on the acquisition of Purchase Stock
under Section 5(e) by the Optionee. In addition to other restrictions contained
in the Plan, an option granted under this Section 5(b), (i) may not be exercised
more than 15 years after the date it is granted and (ii) may not have an option
exercise price less than 50% of the Fair Market Value of Common Stock on the
date the option is granted. Payment of the option price shall be made in cash
or in shares of Common Stock, or a combination thereof, in accordance with
the terms of the Plan and of any applicable guidelines of the Committee in
effect at the time. Payment of the option price may also be made by tender
of an amount equal to the full exercise price which has been borrowed from
Nabisco or one of its Subsidiaries if the Participant also authorizes the
concurrent sale of the exercised Common Stock by a broker (through an
arrangement established by Nabisco, or one of its Subsidiaries, for
Participants) and repays the borrowing, all in accordance with any applicable
guidelines of the Committee. No participant may receive Grants of options in
any calendar year to purchase more than one million Shares.
(c) Stock Appreciation Rights - These are rights that on exercise entitle
the holder to receive the excess of (i) the Fair Market Value of a share of
Common Stock on the date of exercise over (ii) the Base Value multiplied by
(iii) the number of rights exercised in cash, stock or a combination thereof as
determined by the Committee. Stock Appreciation Rights granted under the Plan
may, but need not be, granted in conjunction with an option under Paragraphs
5(a) or 5(b). The Committee, in the Grant Agreement or by other Plan rules, may
impose such conditions or restrictions on the exercise of Stock Appreciation
Rights as it deems appropriate, and may terminate, amend, or suspend such Stock
Appreciation Rights at any time. No Stock
5
<PAGE>
Appreciation Right granted under this Plan may be exercised more than 15 years
after the date it is granted. To the extent that any Stock Appreciation Right
that shall have become exercisable, but shall not have been exercised or
canceled or, by reason of any termination of employment, shall have become
non-exercisable, it shall be deemed to have been exercised automatically,
without any notice of exercise, on the last day of which it is exercisable,
provided that any conditions or limitations on its exercise are satisfied (other
than (i) notice of exercise and (ii) exercise or election to exercise during the
period prescribed) and the Stock Appreciation Right shall then have value. Such
exercise shall be deemed to specify that, the holder elects to receive cash and
that such exercise of a Stock Appreciation Right shall be effective as of the
time of automatic exercise. Stock Appreciation Rights will be granted for no
consideration. No Participant may receive Grants of more than one million Stock
Appreciation Rights in any calendar year.
(d) Restricted Stock - Restricted Stock is a Grant of Common Stock or
stock units equivalent to Common Stock subject to such conditions and
restrictions as the Committee shall determine. Any rights to dividends or
dividend equivalents accruing due to a grant of Restricted Stock shall also be
determined by the Committee. The number of shares of Restricted Stock and the
restrictions or conditions on such shares shall be as the Committee determines,
in the Grant Agreement or by other Plan rules, and the certificate for the
Restricted Stock shall bear evidence of the restrictions or conditions. No
Participant may receive Grants of more than 100,000 shares of Restricted Stock
in any calendar year.
(e) Purchase Stock - Purchase Stock are shares of Common Stock offered to
a Participant at such price as determined by the Committee, the acquisition of
which may make him eligible to receive other grants under the Plan, including,
but not limited to, Stock Options; provided, however, that the price of such
Purchase Shares may not be less than 50% of the Fair Market Value of the Common
Stock on the date such shares of Purchase Stock are offered. No Participant may
receive Grants of more than one million shares of Purchase Stock in any calendar
year.
(f) Dividend Equivalent Rights - These are rights to receive cash payments
from Nabisco at the same time and in the same amount as any cash dividends paid
on an equal number of
6
<PAGE>
shares of Common Stock to shareholders of record during the period such rights
are effective. The Committee, in the Grant Agreement or by other Plan rules,
may impose such restrictions and conditions on the Dividend Equivalent Rights,
including the date such rights will terminate, as it deems appropriate, and may
terminate, amend, or suspend such Dividend Equivalent Rights at any time. No
Participant may receive Grants of Dividend Equivalent Rights on the equivalent
of more than one million Shares in any calendar year.
(g) Performance Units - These are rights to receive at a specified future
date, payment in cash or stock of an amount equal to all or a portion of the
value of a unit granted by the Committee. At the time of the Grant, in the
Grant Agreement or by other Plan rules, the Committee must determine the base
value of the unit, the performance factors applicable to the determination of
the ultimate payment value of the unit and the period over which Corporation
performance will be measured. The performance factors for any specific Grants
hereunder shall be determined in the discretion of the Committee, and may be
based on any of the following:. price of Common Stock or the stock of any
affiliate, shareholder return; return on equity; return on investment; return on
capital; return on invested capital; economic profit; economic value added; net
income; cash net income; free cash flow; earnings per share; cash earnings per
share; operating company contribution or market share. These factors must
include a minimum performance standard for the Corporation below which no
payment will be made and may include a maximum performance level above which no
increased payment will be made. No Participant may receive Grants of
Performance Units in any calendar year with a maximum payment (if maximum
performance level is attained) in excess of $8 million. The term over which
Corporation performance will be measured shall not exceed ten years.
(h) Performance Shares - These are rights to receive at a specified future
date, payment in cash or Common Stock, as determined by the Committee, of an
amount equal to all or a portion of the Fair Market Value for all days that the
Common Stock is traded during the last forty-five (45) days of the specified
period of performance of a specified number of shares of Common Stock at the end
of a specified period based on Corporation performance during the period. At
the time of the Grant, the Committee, in the Grant Agreement or by Plan rules,
will determine the factors which will govern the portion of the rights so
payable and the period over which
7
<PAGE>
Corporation performance will be measured. The performance factors for any
specific Grants hereunder shall be determined in the discretion of the
Committee, and may be based on any of the following: return on equity; net
income; cash net income; free cash flow; earnings per share; cash earnings per
share; or operating company contribution. The factors will be based on
Corporation performance and must include a minimum performance standard for the
Corporation below which no payment will be made and a maximum performance level
above which no increased payment will be made. No Participant may receive
Grants of Performance Shares in any calendar year with a maximum payment (if the
maximum performance level is attained) of more than 300,000 Shares (or its cash
equivalent). The term over which Corporation performance will be measured shall
be not less than six months. Performance Shares will be granted for no
consideration.
(i) Other Stock-Based Grants - The Committee may make other Grants under
the Plan pursuant to which shares of Common Stock (which may, but need not, be
shares of Restricted Stock pursuant to Paragraph 5(d)), are or may in the future
be acquired, or Grants denominated in stock units, including ones valued using
measures other than market value. Other Stock-Based Grants may be granted with
or without consideration; provided, however, that the price of any such Grant
made for consideration that provides for the acquisition of shares of Common
Stock or other equity securities of the Corporation may not be less than 50% of
the Fair Market Value of the Common Stock or such other equity securities on the
date of grant of such Grant. Such Other Stock-Based Grants may be made alone,
in addition to or in tandem with any Grant of any type made under the Plan and
must be consistent with the purposes of the Plan. No Participant may receive
Other Stock-Based Grants of more than one million shares in any calendar year.
6. Limitations and Conditions
(a) The number of Shares available for Grants under this Plan shall be
28.3 million shares of the authorized Common Stock as of the effective date of
the Plan. The number of Shares subject to Grants under this Plan to any one
Participant during the term of this Plan shall not be more than 10 million
shares. No more than 1% of the authorized Common Stock as of the effective date
of the Plan may be granted as Incentive Stock Options as described in Paragraph
5(a). Shares related to Grants that are forfeited, terminated, canceled, expire
unexercised, settled
8
<PAGE>
in cash in lieu of stock or in such manner that all or some of the Shares
covered by a Grant are not issued to a Participant, shall immediately become
available for Grants; provided, however, that the number of Shares available for
Grants shall be limited to the extent necessary to satisfy Section 16 of the
Exchange Act. Subject to the overall limitation on the number of shares of
Common Stock that may be delivered under this Plan, the Committee may use
available shares of Common Stock as the form of payment for compensation, grants
or rights earned or due under any other compensation plans or arrangements of
Nabisco, including the plan of any entity acquired by Nabisco.
(b) No Grants shall be made under the Plan beyond ten years after the
effective date of the Plan, but the terms of Grants made on or before the
expiration thereof may extend beyond such expiration. At the time a Grant is
made or amended or the terms or conditions of a Grant are changed, the Committee
may provide for limitations or conditions on such Grant.
(c) Nothing contained herein shall affect the right of the Corporation to
terminate any Participant's employment at any time or for any reason.
(d) Deferrals of Grant payouts may be provided for, at the sole discretion
of the Committee, in the Grant Agreements.
(e) Except as otherwise prescribed by the Committee, the amounts of the
Grants for any employee of a Subsidiary, along with interest, dividend, and
other expenses accrued on deferred Grants shall be charged to the Participant's
employer during the period for which the Grant is made. If the Participant is
employed by more than one Subsidiary or by both Nabisco and a Subsidiary during
the period for which the Grant is made, the Participant's Grant and related
expenses will be allocated between the companies employing the Participant in a
manner prescribed by the Committee.
(f) No benefit under the Plan shall, prior to receipt thereof by the
Participant, be in any manner liable for or subject to the debts, contracts,
liabilities, engagements, or torts of the Participant.
(g) Except to the extent otherwise provided in any other retirement or
benefit plan, any grant under this Plan shall not be deemed compensation for
purposes of computing benefits or
9
<PAGE>
contributions under any retirement plan of Nabisco or its Subsidiaries and shall
not affect any benefits under any other benefit plan of any kind or subsequently
in effect under which the availability or amount of benefits is related to level
of compensation. This Plan is not a "Retirement Plan" or "Welfare Plan" under
the Employee Retirement Income Security Act of 1974, as amended.
(h) Unless the Committee determines otherwise, no benefit or promise under
the Plan shall be secured by any specific assets of Nabisco or any of its
Subsidiaries, nor shall any assets of Nabisco or any of its Subsidiaries be
designated as attributable or allocated to the satisfaction of Nabisco's
obligations under the Plan.
(i) In the event of a Participant's death, the right to receive benefits
or exercise awards shall pass to the Participant's spouse, and if the
Participant does not have a spouse at the date of death, to the Participant's
designated beneficiary under the Company's SELECT Core Life Insurance Plan.
7. Transfers and Leaves of Absence
For purposes of the Plan: (a) a transfer of a Participant's employment
without an intervening period of separation from Nabisco to a Subsidiary or vice
versa, or from one Subsidiary to another, shall not be deemed a termination of
employment, and (b) a Participant who is granted in writing a leave of absence
shall be deemed to have remained in the employ of the Corporation during such
leave of absence.
8. Adjustments
(a) In the event of any change in the outstanding Common Stock by reason
of a stock split, spin-off, stock dividend, stock combination or
reclassification, recapitalization or merger, or similar event, the Committee
may adjust appropriately the number of Shares subject to the Plan and available
for or covered by Grants and Share prices related to outstanding Grants and make
such other revisions to outstanding Grants as it deems are equitably required.
(b) In the event of a Change of Control (as defined in paragraph 8 (c)
hereof), except as otherwise set forth in the terms of a Grant:
10
<PAGE>
(i) Stock options granted pursuant to paragraphs 5 (a) or 5 (b)
hereof shall become fully vested and exercisable (subject to
paragraph 5 (b) (iii)); provided; however, that the Committee may
elect to make a cash payment to Participants in lieu of the
delivery of shares upon exercise, equal to the product of (x) and
(y), where (x) is the excess of the fair market value of Common
Stock on the date of exercise over the exercise price, and (y) is
the number of Shares subject to the stock options being
exercised;
(ii) Stock Appreciation Rights granted pursuant to paragraph 5 (c)
hereof shall become fully vested and exercisable;
(iii)Performance Units granted pursuant to paragraph 5 (g) hereof
whose performance periods ends after the date of the Change of
Control shall become vested as to a percentage of performance
units granted equal to the number of months (including partial
months) in the performance period before the date of the Change
of Control, divided by the total number of months in the
performance period. The value of the performance units shall be
equal to the greater of the target value of the units or the value
derived from the actual performance as of the date of the Change
of Control; and
(iv) the Committee shall have authority to establish or revise the
terms of any other Grant as it, in it's discretion, deems
appropriate; provided; however, that the Committee may not make
revisions that are adverse to the Participant without the
Participant's consent unless such revision is provided for or
contemplated in the terms of the Grant.
(c) For purposes of the Plan, a "Change of Control" shall be deemed to
occur on the date upon which one of the following events occurs:
(i) Any individual, corporation, partnership, group, associate or
other entity or "person" as such term is defined in Section 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"),
other than Nabisco, RJRN or any of its subsidiaries, or any
employee benefit plan(s) sponsored by Nabisco, RJRN or any of its
subsidiaries, is or becomes the "beneficial owner" (as defined in
Rule 13D-3
11
<PAGE>
under the Exchange Act), directly or indirectly, of 50% or more
of the combined voting power of Nabisco's outstanding securities
ordinarily having the right to vote at elections of directors;
(ii) Individuals who constitute the Board of Nabisco on April 13, 1995
(the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by Nabisco's shareholders, was approved
by a vote of at least three-quarters of the directors comprising
that Incumbent Board (either by a specific vote or by approval of
the proxy statement of Nabisco in which such person is named a
nominee for director, without objection to such nominates) shall
be, for purposes of this paragraph 8(c)(ii) considered as though
such person were a member of the Incumbent Board; or
(iii) The approval by the shareholders of Nabisco of a plan or
agreement providing (I) for a merger or consolidation of Nabisco
other than with a wholly-owned subsidiary or with RJRN, Nabisco
or any of its subsidiaries, and other than a merger or
consolidation that would result in the voting securities of
Nabisco outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of Nabisco or
such surviving entity outstanding immediately after such merger
or consolidation or (II) for a sale, exchange or other
disposition of all or substantially all of the assets of Nabisco.
If any of the events enumerated in this paragraph 8(c) (iii)
occur, the Board of Directors shall determine the effective date
of the Change of Control resulting therefrom for purposes of the
Plan.
9. Amendment and Termination
The Committee shall have the authority to make such amendments to any terms
and conditions applicable to outstanding Grants as are consistent with this Plan
provided that, except for adjustments under Paragraph 8 hereof, no such action
shall modify such Grant in a manner
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<PAGE>
adverse to the Participant without the Participant's consent except as such
modification is provided for or contemplated in the terms of the Grant.
The Board of Directors may amend, suspend or terminate the Plan.
10. Foreign Options and Rights
(a) The Committee may make Grants to employees who are subject to the tax
laws of nations other than the United States, which Grants may have terms and
conditions that differ from the terms thereof as provided elsewhere in the Plan
for the purpose of complying with the foreign tax laws. Grants of Options may
have terms and conditions that differ from Incentive Stock Options and Other
Stock Options for the purposes of complying with the foreign tax laws.
(b) The terms and conditions of Options granted under Paragraph 10(a) may
differ from the terms and conditions which the Plan would require to be imposed
upon Incentive Stock Options and Other Stock Options if the Committee determines
that the Grants are desirable to promote the purposes of the Plan for the
employees identified in Paragraph 10(a); provided that the Committee may not
grant such Options or Stock Appreciation Rights that do not comply with the
limitations of Paragraph 6.
11. Withholding Taxes
The Corporation shall have the right to deduct from any payment or
settlement made under the Plan any federal, state or local income or other taxes
required by law to be withheld with respect to such payment.
12. Effective Date and Termination Dates
The Plan shall be effective on and as of April 17, 1997, subject to
approval by the stockholders of Nabisco and shall terminate ten years later,
subject to earlier termination by the Board of Directors pursuant to Paragraph
9. The terms of Grants made on or before the expiration of the Plan shall extend
beyond such expiration. Grants made under the Plan prior to the Effective Date
shall be governed by the terms of the Plan as in effect on the date such Grant
was made.
13
<PAGE>
NA Director's Option
'97 (Annual)
STOCK OPTION PLAN FOR DIRECTORS
OF
NABISCO HOLDINGS CORP. AND SUBSIDIARIES
STOCK OPTION AGREEMENT
-------------------
DATE OF GRANT: April 17, 1997
W I T N E S S E T H :
1. Grant of Option. Pursuant to the provisions of the Stock Option Plan
for Directors of Nabisco Holdings Corp. and Subsidiaries (the "Plan"), Nabisco
Holdings Corp. (the "Company") on the above date has granted to
name (the "Optionee"),
subject to the terms and conditions which follow and the terms and conditions of
the Plan, the right and option to exercise from the Company a total of
1,200 shares
of Class A Common Stock of the Company ("Common Stock") at the exercise price of
$40.00 per share (the "Option"). A copy of the Plan is attached and made a part
of this Agreement with same effect as if set forth in the Agreement itself. All
capitalized terms used herein shall have the meaning set forth in the Plan,
unless the context requires a different meaning.
2. Exercise of Option.
(a) Shares may be purchased by giving the Corporate Secretary of the
Company written notice of exercise, on a form prescribed by the
Company, specifying the number of whole shares to be purchased. The
notice of exercise shall be accompanied by:
(i) tender to the Company of cash for the full purchase price of the
shares with respect to which such Option or portion thereof is
exercised; together with payment for taxes pursuant to Section 9
herein; or
<PAGE>
(ii) the unsecured, demand borrowing by the Optionee from the Company on an
open account maintained solely for this purpose in the amount of the
full exercise price together with the instruction from the Optionee to
sell the shares exercised on the open market through a duly registered
broker-dealer with which the Company makes an arrangement for the sale
of such shares under the Plan. This method is known as the
"broker-dealer exercise method" and is subject to the terms and
conditions set forth herein, in the Plan and in guidelines established
by the Committee. The Option shall be deemed to be exercised
simultaneously with the sale of the shares by the broker-dealer. If
the shares purchased upon the exercise of an Option or a portion
thereof cannot be sold for a price equal to or greater than the full
exercise price plus direct costs of the sales, then there is no
exercise of the Option. Election of this method authorizes the
Company to deliver shares to the broker-dealer and authorizes the
broker-dealer to sell said shares on the open market. The
broker-dealer will remit proceeds of the sale to the Company which
will remit net proceeds to the Optionee after repayment of the
borrowing, deduction of costs, if any, and withholding of taxes. The
Optionee's borrowing from the Company on an open account shall be a
personal obligation of the Optionee which shall bear interest at the
published Applicable Federal Rate (AFR) for short-term loans and shall
be payable upon demand by the Company. Such borrowing may be
authorized by telephone or other telecommunications acceptable to the
Company. Upon such borrowing and the exercise of the Option or
portion thereof, title to the shares shall pass to the Optionee whose
election hereunder shall constitute instruction to the Company to
register the shares in the name of the broker-dealer or its nominee.
The Company reserves the right to discontinue this broker-dealer
exercise method at any time for any reason whatsoever. The Optionee
agrees that if this broker-dealer exercise method under this paragraph
is used, the Optionee promises unconditionally to pay the Company the
full balance in his open account at any time upon demand. Optionee
also agrees to pay interest on the account balance at the AFR for
short-term loans from and after demand.
(b) This Option shall vest in three installments. The first installment
shall vest on the first anniversary following the Date of Grant for
33% of the number of shares of Common Stock subject to this Option.
Thereafter, on each subsequent anniversary, an installment shall vest
for 33% and 34%, respectively, of the number of shares subject to this
Option until the option has become fully vested. Notwithstanding the
foregoing, the Option may not be exercised, in whole or in part, prior
to three years after the Date of Grant, and thereafter, subject to
Section 2(d) herein and to applicable securities regulations, shall be
exercisable in full. To the extent that any of the above installments
is not exercised when it becomes exercisable, it shall not expire, but
shall continue to be exercisable at any time thereafter until this
Option shall terminate, expire or be surrendered. An exercise shall
be for whole shares only.
2
<PAGE>
(c) If any shares of the Common Stock are to be disposed of in accordance
with Rule 144 under the Securities Act of 1933 or otherwise, the
Optionee shall promptly notify the Company of such intended
disposition and shall deliver to the Company at or prior to the time
of such disposition such documentation as the Company may reasonably
request in connection with such sale and, in the case of a disposition
pursuant to Rule 144, shall deliver to the Company an executed copy of
any notice on Form 144 required to be filed with the SEC.
(d) Notwithstanding provisions for regular exercise, if more than 80% of
the aggregate value of all classes of Company common stock is owned,
directly or indirectly, by RJR Nabisco Holdings Corp. on the date of
exercise then the Company may, in its absolute discretion, make a cash
payment to the Optionee equal to the product of (x) and (y), where (x)
is the excess of the fair market value of Common Stock on the date of
exercise over the exercise price, and (y) is the number of shares
subject to the Option(s) being exercised. Such cash payment shall be
in lieu of delivery of shares.
3. Rights in the Event of Resignation or Non-Election to the Board.
Except as may be otherwise provided in this Section 3, after the Optionee's
resignation or non-election to the Board of Directors of the Company (the
"Board"), the Option shall not become vested as to any shares in addition to
those already vested pursuant to the schedule described in Section 2(b).
Notwithstanding the foregoing, if a non-election of the Optionee to the Board is
due to death or Permanent Disability (as defined in the Company's Long Term
Disability Plan), the Option shall immediately become vested as to all shares.
4. Expiration of Option. The Option shall expire or terminate and may not
be exercised to any extent by the Optionee after the tenth anniversary of the
Date of Grant.
5. Transferability. Other than as specifically provided with regard to
the death of the Optionee, this Agreement and any benefit provided or accruing
hereunder shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge; and any attempt to do so
shall be void. No such benefit shall, prior to receipt thereof by the Optionee,
be in any manner liable for or subject to the debts, contracts, liabilities,
engagements or torts of the Optionee.
6. Consideration to the Company. In consideration of the granting of this
Option by the Company, the Optionee agrees to render faithful and efficient
services to the Company, with such duties and responsibilities as shall from
time to time prescribe. Nothing in this Agreement or in the Plan shall confer
upon the Optionee any right to continue in the service of the Company or any
Subsidiary as a director or in any other capacity or shall interfere with or
restrict in any way the rights of the Company and its Subsidiaries and their
respective shareholders, which are hereby expressly reserved, in connection with
the removal of the Optionee from the Board of Directors of the Company or any
Subsidiary at any time for any reason whatsoever, with or without cause, subject
to applicable law and the relevant certificate of incorporation and bylaws.
3
<PAGE>
7. Adjustments in Option. In the event that the outstanding shares of the
Common Stock subject to the Option are, from time to time, changed into or
exchanged for a different number or kind of shares of the Company or other
securities by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares, or
otherwise, the Committee shall make an appropriate and equitable adjustment in
the number and kind of shares or other consideration as to which the Option, or
portions thereof then unexercised, shall be exercisable. Any adjustment made by
the Committee shall be final and binding upon the Optionee, the Company and all
other interested persons.
8. Application of Laws. The granting and the exercise of this Option and
the obligations of the Company to sell and deliver shares hereunder shall be
subject to all applicable laws, rules, and regulations and to such approvals of
any governmental agencies as may be required.
9. Taxes. Any taxes required by federal, state, or local laws to be
withheld by the Company on exercise by the Optionee of the Option for Common
Stock shall be paid to the Company before delivery of the Common Stock is made
to the Optionee. When the Option is exercised under the broker-dealer exercise
method, the full amount of any taxes required to be withheld by the Company on
exercise of stock options shall be deducted by the Company from the proceeds.
10. Notices. Any notices required to be given hereunder to the Company
shall be addressed to The Secretary, Nabisco Holdings Corp., 7 Campus Drive,
Parsippany, NJ 07054 and any notice required to be given hereunder to the
Optionee shall be sent to the Optionee's address as shown on the records of the
Company.
11. Administration and Interpretation. In consideration of the grant, the
Optionee specifically agrees that the Committee shall have the exclusive power
to interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan and Agreement as are
consistent therewith and to interpret or revoke any such rules. All actions
taken and all interpretations and determinations made by the Committee shall be
final, conclusive, and binding upon the Optionee, the Company and all other
interested persons. No member of the Committee shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan or the Agreement. The Committee may delegate its interpretive
authority to an officer or officers of the Company.
12. Other Provisions.
a) Titles are provided herein for convenience only and are not to
serve as a basis for interpretation of the Agreement.
b) This Agreement may be amended only by a writing executed by the
parties hereto which specifically states that it is amending this Agreement.
c) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE
INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS
4
<PAGE>
AGREEMENT REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF
CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the
Optionee have executed this Agreement as of the date of Grant first above
written.
NABISCO HOLDINGS CORP.
By
---------------------------------
Authorized Signatory
- ----------------------------------
Optionee
Optionee's Taxpayer Identification Number:
- ----------------------------------
Optionee's Home Address:
- ----------------------------------
- ----------------------------------
- ----------------------------------
5
<PAGE>
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, 1997 JUNE 30, 1996(A)
----------------------- -----------------------
<S> <C> <C> <C> <C>
FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED
--------- ------------ --------- ------------
Average number of common and common equivalent shares
outstanding during the period (in thousands):
Common Stock issued and outstanding at beginning of period... 265,070 265,070 265,040 265,040
Average number of shares of common stock issued during the
period..................................................... -- -- 8 8
Average number of stock options outstanding during the
period..................................................... 3,451 3,474 -- 2,174
--------- ------------ --------- ------------
Average number of common and common equivalent shares
outstanding during the period.............................. 268,521 268,544 265,048 267,222
--------- ------------ --------- ------------
--------- ------------ --------- ------------
Net income (loss) applicable to common stock................... $103 $103 $(216) $(216 )
--------- ------------ --------- ------------
--------- ------------ --------- ------------
Net income (loss) per common and common equivalent share....... $.38 $.38 $(.81) $(.81 )
--------- ------------ --------- ------------
--------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996(A)
----------------------- -----------------------
<S> <C> <C> <C> <C>
FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED
--------- ------------ --------- ------------
Average number of common and common equivalent shares
outstanding during the period (in thousands):
Common Stock issued and outstanding at beginning of period... 265,070 265,070 265,000 265,000
Average number of shares of common stock issued during the
period..................................................... -- -- 30 30
Average number of stock options outstanding during the
period..................................................... 3,493 3,586 -- 1,990
--------- ------------ --------- ------------
Average number of common and common equivalent shares
outstanding during the period.............................. 268,563 268,656 265,030 267,020
--------- ------------ --------- ------------
--------- ------------ --------- ------------
Net income (loss) applicable to common stock................... $167 $167 $(163) $(163 )
--------- ------------ --------- ------------
--------- ------------ --------- ------------
Net income (loss) per common and common equivalent share....... $.62 $.62 $(.62) $(.61 )
--------- ------------ --------- ------------
--------- ------------ --------- ------------
</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.
<PAGE>
EXHIBIT 12
NABISCO, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1997
-----------------
<S> <C>
Earnings before fixed charges:
Net income...................................................................................... $ 167
Provision for income taxes...................................................................... 114
-----
Income before income taxes...................................................................... 281
Interest and debt expense....................................................................... 163
Interest portion of rental expense.............................................................. 13
-----
Earnings before fixed charges..................................................................... $ 457
-----
-----
Fixed charges:
Interest and debt expense....................................................................... $ 163
Interest portion of rental expense.............................................................. 13
Capitalized interest............................................................................ 3
-----
Total fixed charges........................................................................... $ 179
-----
-----
Ratio of earnings to fixed charges................................................................ 2.6
-----
-----
</TABLE>
<TABLE> <S> <C>
<PAGE>
<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 FROM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000932130
<NAME> NABISCO HOLDINGS CORP.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 76
<SECURITIES> 0
<RECEIVABLES> 562
<ALLOWANCES> 0
<INVENTORY> 912
<CURRENT-ASSETS> 1,661
<PP&E> 3,246
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,157
<CURRENT-LIABILITIES> 1,741
<BONDS> 4,283
0
0
<COMMON> 3
<OTHER-SE> 4,127
<TOTAL-LIABILITY-AND-EQUITY> 12,157
<SALES> 4,096
<TOTAL-REVENUES> 4,096
<CGS> 2,348
<TOTAL-COSTS> 2,348
<OTHER-EXPENSES> 113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 163
<INCOME-PRETAX> 281
<INCOME-TAX> 114
<INCOME-CONTINUING> 167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167
<EPS-PRIMARY> .62
<EPS-DILUTED> .62
</TABLE>
<TABLE> <S> <C>
<PAGE>
<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.
</LEGEND>
<CIK> 0000069526
<NAME> NABISCO, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 76
<SECURITIES> 0
<RECEIVABLES> 562
<ALLOWANCES> 0
<INVENTORY> 912
<CURRENT-ASSETS> 1,661
<PP&E> 3,246
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,157
<CURRENT-LIABILITIES> 1,731
<BONDS> 4,283
0
0
<COMMON> 0
<OTHER-SE> 4,140
<TOTAL-LIABILITY-AND-EQUITY> 12,157
<SALES> 4,096
<TOTAL-REVENUES> 4,096
<CGS> 2,348
<TOTAL-COSTS> 2,348
<OTHER-EXPENSES> 113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 163
<INCOME-PRETAX> 281
<INCOME-TAX> 114
<INCOME-CONTINUING> 167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
