<PAGE>
DRAFT 8-12-98
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1998
-------------------
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
jurisdiction of number) Identification No.)
incorporation or
organization)
</TABLE>
7 CAMPUS DRIVE
PARSIPPANY, NEW JERSEY 07054
(973) 682-5000
(Address, including zip code, and telephone number, including area code,
of the principal executive offices of Nabisco Holdings Corp.)
------------------------
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: JULY 31, 1998:
<TABLE>
<C> <S>
NABISCO HOLDINGS CORP.: 51,387,369 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, 1998 and 1997...................................................................... 1
Consolidated Condensed Statements of Income--Six Months Ended
June 30, 1998 and 1997...................................................................... 2
Consolidated Condensed Statements of Cash Flows--Six Months Ended
June 30, 1998 and 1997...................................................................... 3
Consolidated Condensed Balance Sheets--June 30, 1998 and
December 31, 1997........................................................................... 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.............................................................. 12
Signatures............................................................................................... 13
</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, 1998 JUNE 30, 1997
----------------------- -----------------------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
NET SALES................................................................... $ 2,131 $ 2,131 $ 2,191 $ 2,191
---------- ----------- ---------- -----------
Costs and expenses:
Cost of products sold..................................................... 1,187 1,187 1,239 1,239
Selling, advertising, administrative and general expenses................. 691 691 632 632
Amortization of trademarks and goodwill................................... 57 57 56 56
Restructuring charge...................................................... 406 406 -- --
---------- ----------- ---------- -----------
OPERATING INCOME (LOSS)............................................... (210) (210) 264 264
Interest and debt expense................................................... (78) (78) (82) (82)
Other income (expense), net................................................. (3) (3) (8) (8)
---------- ----------- ---------- -----------
Income (loss) before income taxes..................................... (291) (291) 174 174
Provision (benefit) for income taxes........................................ (91) (91) 71 71
---------- ----------- ---------- -----------
NET INCOME (LOSS)..................................................... $ (200) $ (200) $ 103 $ 103
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
NET INCOME (LOSS) PER COMMON SHARE.......................................... $ (.76) $ .39
---------- ----------
---------- ----------
NET INCOME (LOSS) PER COMMON SHARE ASSUMING DILUTION........................ $ (.76) $ .39
---------- ----------
---------- ----------
Dividends declared per common share......................................... $ .175 $ .175
---------- ----------
---------- ----------
Average number of common shares outstanding (in thousands).................. 264,620 265,070
---------- ----------
---------- ----------
Average number of common shares outstanding assuming dilution (in
thousands)................................................................ 264,620 267,143
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
1
<PAGE>
NABISCO HOLDINGS CORP.
NABISCO, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------- -----------------------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
NET SALES................................................................... $ 4,093 $ 4,093 $ 4,096 $ 4,096
---------- ----------- ---------- -----------
Costs and expenses:
Cost of products sold..................................................... 2,312 2,312 2,348 2,348
Selling, advertising, administrative and general expenses................. 1,290 1,290 1,175 1,175
Amortization of trademarks and goodwill................................... 113 113 113 113
Restructuring charge...................................................... 406 406 -- --
---------- ----------- ---------- -----------
OPERATING INCOME (LOSS)............................................... (28) (28) 460 460
Interest and debt expense................................................... (158) (158) (163) (163)
Other income (expense), net................................................. (12) (12) (16) (16)
---------- ----------- ---------- -----------
Income (loss) before income taxes..................................... (198) (198) 281 281
Provision (benefit) for income taxes........................................ (53) (53) 114 114
---------- ----------- ---------- -----------
NET INCOME (LOSS)..................................................... $ (145) $ (145) $ 167 $ 167
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
NET INCOME (LOSS) PER COMMON SHARE.......................................... $ (.55) $ .63
---------- ----------
---------- ----------
NET INCOME (LOSS) PER COMMON SHARE ASSUMING DILUTION........................ $ (.55) $ .63
---------- ----------
---------- ----------
Dividends declared per common share......................................... $ .35 $ .33
---------- ----------
---------- ----------
Average number of common shares outstanding (in thousands).................. 264,443 265,070
---------- ----------
---------- ----------
Average number of common shares outstanding assuming dilution (in
thousands)................................................................ 264,443 267,167
---------- ----------
---------- ----------
</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, 1998 JUNE 30, 1997
------------------------ ------------------------
<S> <C> <C> <C> <C>
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
----------- ----------- ----------- -----------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income (loss)...................................................... $ (145) $ (145) $ 167 $ 167
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
Depreciation of property, plant and equipment...................... 137 137 140 140
Amortization of intangibles........................................ 113 113 113 113
Deferred income tax provision (benefit)............................ (112) (112) 25 25
Restructuring charge, net of cash payments......................... 401 401 (83) (83)
Changes in working capital items, net.............................. (238) (254) (335) (335)
Other, net......................................................... (37) (37) (18) (18)
----- ----- ----- -----
Net cash flows from operating activities............................. 119 103 9 9
----- ----- ----- -----
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures................................................... (168) (168) (143) (143)
Acquisition of business................................................ (9) (9) -- --
Proceeds from sale of businesses....................................... -- -- 50 50
Other, net............................................................. 5 5 10 10
----- ----- ----- -----
Net cash flows (used in) investing activities........................ (172) (172) (83) (83)
----- ----- ----- -----
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt........................... 1,102 1,102 88 88
Proceeds from the sale of call options on long-term debt............... 41 41 -- --
Repayments of long-term debt........................................... (977) (977) (14) (14)
Increase in notes payable.............................................. (28) (28) 67 67
Dividends paid on common stock......................................... (93) (93) (82) (82)
Repurchases of Class A common stock.................................... (38) -- -- --
Proceeds from exercise of Class A common stock options................. 22 -- -- --
----- ----- ----- -----
Net cash flows from financing activities............................. 29 45 59 59
----- ----- ----- -----
Effect of exchange rate changes on cash and cash equivalents............. (5) (5) (2) (2)
----- ----- ----- -----
Net change in cash and cash equivalents.............................. (29) (29) (17) (17)
Cash and cash equivalents at beginning of period......................... 127 127 93 93
----- ----- ----- -----
Cash and cash equivalents at end of period............................... $ 98 $ 98 $ 76 $ 76
----- ----- ----- -----
----- ----- ----- -----
</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, 1998 DECEMBER 31, 1997
---------------------- ----------------------
<S> <C> <C> <C> <C>
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
----------- --------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 98 $ 98 $ 127 $ 127
Accounts and notes receivable, net................................. 516 516 521 521
Intercompany receivable from Nabisco Holdings...................... -- 44 -- --
Deferred income taxes.............................................. 24 24 27 27
Inventories........................................................ 832 832 865 865
Prepaid expenses................................................... 76 76 59 59
----------- --------- ----------- ---------
TOTAL CURRENT ASSETS........................................... 1,546 1,590 1,599 1,599
----------- --------- ----------- ---------
Property, plant and equipment, net................................... 3,146 3,146 3,327 3,327
Trademarks, net...................................................... 3,682 3,682 3,725 3,725
Goodwill, net........................................................ 3,309 3,309 3,343 3,343
Other assets and deferred charges.................................... 114 114 133 133
----------- --------- ----------- ---------
$ 11,797 $ 11,841 $ 12,127 $ 12,127
----------- --------- ----------- ---------
----------- --------- ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable...................................................... $ 143 $ 143 $ 180 $ 180
Accounts payable and accrued liabilities........................... 1,249 1,251 1,318 1,263
Intercompany payable to Nabisco Holdings........................... -- -- -- 13
Current maturities of long-term debt............................... 120 120 21 21
Income taxes accrued............................................... 109 109 131 131
----------- --------- ----------- ---------
TOTAL CURRENT LIABILITIES...................................... 1,621 1,623 1,650 1,608
----------- --------- ----------- ---------
Long-term debt (less current maturities)............................. 4,356 4,356 4,334 4,334
Other noncurrent liabilities......................................... 721 721 646 646
Deferred income taxes................................................ 1,169 1,169 1,293 1,293
Stockholders' equity:................................................
Class A common stock (51,819,653 shares issued).................... 1 -- 1 --
Class B common stock (213,250,000 shares issued
and outstanding)................................................. 2 -- 2 --
Paid-in capital.................................................... 4,092 4,141 4,087 4,141
Retained earnings.................................................. 15 (13) 268 225
Treasury stock, at cost............................................ (22) -- (32) --
Accumulated other comprehensive income............................. (156) (156) (120) (120)
Notes receivable on common stock purchases......................... (2) -- (2) --
----------- --------- ----------- ---------
TOTAL STOCKHOLDERS' EQUITY..................................... 3,930 3,972 4,204 4,246
----------- --------- ----------- ---------
$ 11,797 $ 11,841 $ 12,127 $ 12,127
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</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 1998
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, 1997.
RESTRUCTURING CHARGE
In the second quarter of 1998, Nabisco recorded a restructuring charge of
$406 million ($268 million after tax) related to a program announced on June 8,
1998. The restructuring program, which was undertaken to streamline operations
and improve profitability, commenced during the second quarter of 1998 and will
be substantially completed during 1999. The $406 million restructuring expense
will require cash expenditures of approximately $164 million. In addition to the
restructuring charge, the program will require additional cash expenditures of
approximately $118 million, of which $6 million ($4 million after tax) was
incurred in the second quarter of 1998. These additional expenses are
principally for implementation and integration of the program and include costs
for relocation of employees and equipment and training. After completion of the
restructuring program, pre-tax savings in 2000 and thereafter are expected to be
approximately $100 million annually.
The major components of the $406 million restructuring charge are $162
million for domestic and international severance and related benefits associated
with workforce reductions totaling approximately 4,300 employees, $186 million
for estimated losses from disposals of property related to domestic and
international plant closures, $43 million for estimated losses from disposals of
equipment and packaging materials related to non-strategic product line
rationalizations, and $15 million for estimated costs to terminate distribution
related contracts.
As of June 30, 1998, $7 million of the restructuring accruals were utilized
as follows: $5 million for severance and related benefits; and $2 million for
product line rationalizations.
NOTE 2--INVENTORIES
The major classes of inventory are shown in the table below:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ---------------
<S> <C> <C>
Finished products............................................................ $ 494 $ 540
Raw materials................................................................ 197 182
Other........................................................................ 141 143
----- -----
$ 832 $ 865
----- -----
----- -----
</TABLE>
5
<PAGE>
NOTE 3--COMPREHENSIVE INCOME
On January 1, 1998, Nabisco Holdings and Nabisco adopted Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income, which
established standards for reporting and display of comprehensive income and its
components in a full set of financial statements. Comprehensive income is
defined as the change in stockholders' equity during a period from transactions
from nonowner sources. Comprehensive income consists of net income and other
comprehensive income, which includes all other nonowner changes in stockholders'
equity. For Nabisco Holdings and Nabisco, other comprehensive income consists of
foreign currency translation adjustments that amounted to charges of $25 million
and $11 million for the three months ended June 30, 1998 and 1997, respectively,
and $36 million and $34 million for the six months ended June 30, 1998 and 1997,
respectively. The Cumulative Translation Adjustment amount previously reported
as a separate component of stockholders' equity is now included in Accumulated
Other Comprehensive Income in the Consolidated Condensed Balance Sheets.
Comprehensive loss for the three and six months ended June 30, 1998 amounted to
$225 million and $181 million, respectively. Comprehensive income for the three
and six months ended June 30, 1997 amounted to $92 million and $133 million,
respectively.
NOTE 4--LONG-TERM DEBT
In January 1998, Nabisco issued $400 million of 6% notes due February 15,
2011 which are putable and callable on February 15, 2001; $300 million of 6 1/8%
notes due February 1, 2033 which are putable and callable on February 1, 2003;
and $300 million of 6 3/8% notes due February 1, 2035 which are putable and
callable on February 1, 2005. Unless the notes are put, the interest rates on
the 6% notes, the 6 1/8% notes and the 6 3/8% notes are reset on the applicable
put/call date at 5.75%, 6.07% and 6.07%, respectively, plus, in each case,
Nabisco's future credit spread on treasury notes of comparable maturities. The
$1,039 million proceeds from these notes, which includes $41 million as
compensation for the sale of the call options, were used to repay commercial
paper.
NOTE 5--SUBSEQUENT EVENTS
In July 1998, Nabisco sold its College Inn brand of canned broths and signed
agreements, which are subject to certain conditions, to sell its U.S. and
Canadian tablespreads and U.S. egg substitute businesses and the Del Monte brand
canned vegetable business in Venezuela. In 1997, net sales from these businesses
totaled approximately $550 million. Subject to completion, these transactions
will be recorded in the third quarter of 1998 and are expected to result in a
net after-tax gain.
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 the Sales & Integrated Logistics
Group and the 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,
--------------------------------- ---------------------------------
(DOLLARS IN MILLIONS) 1998 1997 % CHANGE 1998 1997 % CHANGE
--------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales:
Biscuit........................................... $ 864 $ 907 (5%) $ 1,714 $ 1,708 --
U.S. Foods Group.................................. 637 647 (2%) 1,167 1,174 (1%)
--------- --------- --------- ---------
Domestic Food Group............................... 1,501 1,554 (3%) 2,881 2,882 --
International Food Group.......................... 630 637 (1%) 1,212 1,214 --
--------- --------- --------- ---------
Total Nabisco Holdings............................ $ 2,131 $ 2,191 (3%) $ 4,093 $ 4,096 --
--------- --------- --------- ---------
--------- --------- --------- ---------
Operating Company Contribution(1):
Biscuit(2)........................................ $ 125 $ 183 (32%) $ 268 $ 317 (15%)
U.S. Foods Group(3)............................... 81 93 (13%) 144 158 (9%)
--------- --------- --------- ---------
Domestic Food Group............................... 206 276 (25%) 412 475 (13%)
International Food Group(4)....................... 47 44 7% 79 98 (19%)
--------- --------- --------- ---------
Total Nabisco Holdings............................ $ 253 $ 320 (21%) $ 491 $ 573 (14%)
--------- --------- --------- ---------
--------- --------- --------- ---------
Operating Income (Loss)(5):
Domestic Food Group............................... $ (203) $ 226 $ (47) $ 374
International Food Group.......................... (7) 38 19 86 (78%)
--------- --------- --------- ---------
Total Nabisco Holdings............................ $ (210) $ 264 $ (28) $ 460
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Operating income (loss) before amortization of trademarks and goodwill and
exclusive of restructuring expense.
(2) Each 1998 period includes $4 million of restructuring related expenses
associated with the June 1998 restructuring program.
(3) Each 1998 period includes $2 million of restructuring expenses associated
with the June 1998 restructuring program. Each 1997 period includes a net $8
million gain.
(4) Each 1997 period includes $7 million of non-recurring expense.
(5) Each 1998 period includes the June restructuring charge of $406 million,
consisting of $358 million for the Domestic Food Group (Biscuit $268 million
and U.S. Foods Group $90 million) and $48 million for the International Food
Group.
Nabisco Holdings reported net sales of $2.13 billion in the second quarter
of 1998, a decrease of 3% from the second quarter 1997 level of $2.19 billion
and $4.09 billion in the first six months of 1998,
7
<PAGE>
approximately the same level as 1997. The Domestic Food Group's net sales
declined 3% for the second quarter and were flat for the first six months, while
the International Food Group's net sales declined 1% in the second quarter and
were flat for the first six months. Within the Domestic Food Group, Nabisco
Biscuit net sales declined 5% in the second quarter and were slightly higher in
the first six months versus the prior year. The second quarter's decrease was
primarily due to volume declines in the SnackWell's line and breakfast snacks.
The small increase in net sales for the first six months of 1998 reflects price
increases, volume increases in core cookie and cracker brands, largely offset by
lower volumes in SnackWell's and breakfast snacks. Net sales for the first six
months of 1998 were favorably impacted by more selling days. Without these extra
days, net sales would have declined 3% due to lower volumes. The U.S. Foods
Group's net sales decrease of 2% in the second quarter and 1% for the first six
months of 1998 was primarily due to the 1997 disposal of certain regional brands
and Plush Pippin pies in 1998. Excluding the impact of these disposals, net
sales would have risen 1% in the second quarter and 2% in the six month period.
In addition, higher sales for nuts and the inclusion of Cornnuts snacks acquired
in December 1997 were offset by lower sales volume for confections and other
products.
The International Food Group's net sales decrease in the second quarter and
first six months of 1998 resulted from unfavorable foreign exchange rates,
particularly in Spain and Canada, and from declines in Argentina due to
competitive activity, in Spain due to trade consolidations, in Canada due to
sluggish biscuit sales and in Asia due to the impact of the regional economic
downturn, partially offset by improvements in Venezuela and Mexico.
Nabisco Holdings' operating company contribution was $253 million in the
second quarter of 1998, a decrease of 21% from the first quarter 1997 level of
$320 million, and $491 million in the first six months of 1998, a decrease of
14% versus the $573 million generated in the first six months of 1997. The
Domestic Food Group's operating company contribution decreased 25% and 13%
versus the second quarter and first six months of last year, respectively, while
the International Food Group's operating company contribution increased 7% and
decreased 19%, respectively. Operating company contribution for the second
quarter and first six months of 1998 includes $6 million of restructuring
related expense in the Domestic Food Group (Nabisco Biscuit $4 million and U.S.
Foods Group $2 million) associated with the implementation of the June 1998
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 totaled $24 million, consisting
of a $14 million provision for the additional write-down of a business held for
sale and $10 million expense for the reorganization of its selling organization.
The International Food Group's 1997 results include a $7 million non-recurring
expense to relocate its headquarters from New York City to New Jersey. Excluding
the 1998 restructuring related expenses and the 1997 non-recurring items,
Nabisco Holdings' and the Domestic Food Group's respective operating company
contributions were $259 million and $212 million in the second quarter of 1998
versus $319 million and $268 million in the second quarter of 1997, a decrease
of 19% and 21%, respectively. On the same basis, for the first six months of
1998, Nabisco Holdings and the Domestic Food Group generated operating company
contribution of $497 million and $418 million respectively versus $572 million
and $467 million in the first six months of 1997, a decrease of 13% 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 1998 was 8% and 25%, respectively.
Excluding the $4 million impact of the 1998 restructuring related expenses,
the operating company contribution for Nabisco Biscuit decreased $54 million, or
30%, for the second quarter of 1998 and decreased $45 million, or 14%, for the
first six months of 1998. These declines resulted largely from the impact of
lower sales in the second quarter and higher selling related expenses in both
periods. Excluding the 1998 restructuring related expense and 1997 non-recurring
items, the U.S. Foods Group's operating company contribution decreased $2
million for the second quarter of 1998 and $4 million the first six months of
1998, primarily due to the impact of the 1997 disposal of certain regional
brands. Excluding the
8
<PAGE>
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
1998 was principally due to the net sales decline discussed above coupled with
higher marketing expense in Canada, which more than offset improvements in
Venezuela and Mexico.
Nabisco Holdings' operating loss in the second quarter and first six months
of 1998 includes a $406 million restructuring charge. Excluding the June 1998
restructuring charge and an additional $6 million of restructuring related
implementation expenses incurred in the 1998 second quarter and the 1997 non-
recurring items, operating income was $202 million for the second quarter of
1998 and $384 million for the first six months of 1998, compared to the
respective 1997 amounts of $263 million and $459 million, a decrease of 23% and
16%, respectively. The decrease in operating income for both periods reflects
lower operating company contribution.
In the June 8, 1998 announcement of the restructuring program, Nabisco
Holdings also announced that marketing initiatives in Nabisco Biscuit would be
increased by 30% in the second half of 1998 over year ago levels. These
initiatives, which started in July, and the restructuring program discussed
below will significantly impact anticipated earnings for 1998.
RESTRUCTURING CHARGE
In the second quarter of 1998, Nabisco recorded a restructuring charge of
$406 million ($268 million after tax) related to a program announced on June 8,
1998. The restructuring program, which was undertaken to streamline operations
and improve profitability, commenced during the second quarter of 1998 and will
be substantially completed during 1999. The restructuring charge for the
Domestic Food Group amounted to $358 million and consisted of $268 million for
the Nabisco Biscuit Company, $30 million for the LifeSavers Company, $15 million
for the Specialty Products Company and the remaining $45 million for corporate
headquarters operations, the Sales & Integrated Logistics Group and other
business units. The restructuring expense for the International Food Group
amounted to $48 million and consisted of $37 million for Latin American
operations, including $15 million for Brazil and $15 million for Argentina, and
$7 million for Canada.
The $406 million restructuring charge will require cash expenditures of
approximately $164 million. In addition to the restructuring expense, the
program will require additional expenditures of approximately $118 million, of
which $6 million ($4 million after tax) was recorded in the second quarter of
1998. These additional expenses are principally for implementation and
integration of the program and also include costs for relocation of employees
and equipment and training. Key components of the restructuring program include
the disposal of plant and distribution assets in the United States and Latin
America, including facilities in Argentina and Brazil; the reconfiguring of
sales organizations to improve their effectiveness and drive revenue growth; the
downsizing of departmental organizations and operating company structures; and
the discontinuance of certain non-strategic product lines. After completion of
the restructuring program, pre-tax savings in 2000 and thereafter are expected
to be approximately $100 million annually.
The major components of the $406 million restructuring charge are discussed
further in Note 1 to the Condensed Consolidated Financial Statements.
Management of Nabisco Holdings is continuing to explore ways to increase
efficiency and productivity and to reduce the cost structures of its respective
businesses, actions that, if implemented, could affect future results, including
results in 1998.
9
<PAGE>
INTEREST AND DEBT EXPENSE
Consolidated interest and debt expense of $78 million in the second quarter
of 1998 and $158 million for the first six months of 1998 decreased 5% and 3%,
respectively, from the same 1997 period primarily as a result of replacing fixed
rate debt at lower rates.
OTHER INCOME (EXPENSE), NET
Other income (expense), net amounted to expense of $3 million and $12
million for the second quarter and first six months of 1998, a decrease of $5
million and $4 million, respectively, from the comparable 1997 period primarily
due to lower foreign exchange losses and higher interest income.
NET INCOME (LOSS)
Nabisco Holdings' net loss for the second quarter and first six months of
1998 includes after tax restructuring and restructuring related charges of $272
million related to the June 1998 restructuring program. Excluding the effects of
this program and a 1997 net gain of $1 million, second quarter 1998 net income
of $72 million was 29% lower than the 1997 second quarter level of $102 million,
and net income of $127 million in the first six months of 1998 decreased 23%
from the 1997 first six months level of $166 million, reflecting lower operating
income.
COMPREHENSIVE INCOME (LOSS)
Comprehensive loss of $225 million and $181 million in the second quarter
and first six months of 1998 compares with comprehensive income of $92 million
and $133 million for the same 1997 periods. Both 1998 periods were impacted by
the $272 million for the restructuring program, lower net earnings from
operations and higher foreign currency translation losses in 1998 of $14 million
and $2 million, respectively.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENT
On January 1, 1998, Nabisco Holdings and Nabisco adopted Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income. See Note
3 to the Consolidated Condensed Financial Statements.
LIQUIDITY AND FINANCIAL CONDITION
Net cash flows from operating activities amounted to $119 million for the
first six months of 1998 compared to $9 million for the first six months of
1997. The increase in net cash flows from operating activities primarily
reflects lower 1998 payments related to the 1998 restructuring program versus
the 1997 payments related to the 1996 restructuring program of $78 million and
lower working capital requirements.
Cash flows used in investing activities for the first six months of 1998
increased $89 million to $172 million from the first six months of 1997,
primarily due to the collection in 1997 of $50 million of proceeds from the sale
of certain regional brands and an increase in capital expenditures in 1998 of
$25 million.
Capital expenditures were $168 million in the first six months of 1998.
Management expects that the current level of capital expenditures planned for
1998 will be approximately $350 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 1998.
Cash flows from financing activities were $29 million for the first six
months of 1998, a decrease of $30 million from the first six months of 1997. The
decrease in 1998 was due to lower inflows from net
10
<PAGE>
borrowings and higher outflows for dividends and stock repurchases, partially
offset by the 1998 proceeds from the sale of call options on debt.
As of June 30, 1998, the five-year $1.5 billion revolving credit facility
was unutilized and fully available. In addition, the 364-day $1.381 billion
credit facility was utilized to support outstanding commercial paper borrowings
of $1.025 billion, and accordingly, $356 million was available.
Registrants believe that they are currently in compliance with all covenants
and restrictions imposed by the terms of their indebtedness.
At June 30, 1998, 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 $4.6 billion and $8.5 billion,
respectively, of which total debt is higher by $84 million and total capital is
lower by $190 million than their respective balances at December 31, 1997.
Nabisco Holdings' ratios of total debt to total stockholders' equity and total
debt to total capital at June 30, 1998 were 1.2 to 1 and .54 to 1, respectively.
Nabisco Holdings currently pays regular quarterly dividends on its common
stock at an annual rate of $.70 per share. At that rate, the aggregate amount of
dividends to be paid would be approximately $185 million during 1998.
In July 1998, Nabisco sold its College Inn brand of canned broths and signed
agreements, which are subject to certain conditions, to sell its U.S. and
Canadian tablespreads and U.S. egg substitute businesses and the Del Monte brand
canned vegetable business in Venezuela. In 1997, net sales from these businesses
totaled approximately $550 million. Subject to completion, these transactions
will be recorded in the third quarter of 1998 and are expected to result in a
net after-tax gain.
Management of Nabisco Holdings is continuing to review various strategic
transactions, including but not limited to, acquisitions, divestitures, mergers
and joint ventures.
YEAR 2000 ISSUE
Reviews of systems and applications, including key suppliers and vendors,
are being conducted, implementation plans to resolve any issues are being
formulated and certain remedial actions are being undertaken.
Nabisco Holdings expects its Year 2000 compliance programs, which began in
1996, to be substantially completed in all material respects by mid-1999. The
total cost of achieving Year 2000 compliance is currently estimated to be
approximately $30 million to $35 million. All modification costs are expensed as
incurred. Through June 30, 1998, approximately $9 million has been expensed.
------------------------
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 impact of Year 2000 on systems
and applications, the level of restructuring-related expenses and savings from
the program, the level of future capital expenditures, and the level of
dividends. 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.
11
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
10.1 First Amendment to the Revolving Credit Agreement and the Second Amendment to
the 364 Day Facility, dated May 19, 1998, among Nabisco Holdings Corp.,
Nabisco Inc., and the lending institutions parties thereto.
10.2 Form of Non-qualified Stock Option Agreement between Nabisco Holdings Corp.
and the Director named therein, dated April 15, 1998 (1998 annual grant).
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, 1998.
27.1 Nabisco Holdings Corp. Financial Data Schedule.
27.2 Nabisco, Inc. Financial Data Schedule.
</TABLE>
----------------------------
(b) Reports on Form 8-K
None.
12
<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 14, 1998 /s/ JAMES E. HEALEY
......................................
James E. Healey
Executive Vice President and
Chief Financial Officer
/s/ IAN E. LEE-LEVITEN
......................................
Ian E. Lee-Leviten
Senior Vice President and Controller
</TABLE>
13
<PAGE>
Exhibit 10.1
FIRST AMENDMENT TO THE 5 YEAR CREDIT AGREEMENT
SECOND AMENDMENT TO THE 364 DAY CREDIT AGREEMENT
AMENDMENT (this "Amendment"), dated as of May 19, 1998, 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 October 31, 1996
(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 October 31, 1996 (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
the 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 ending on or before December
31, 2000, there shall be excluded in determining Adjusted Operating
1
<PAGE>
Income any portion of the 1998 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 third appearance of the word "date" therein:
"plus any 1998 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 (iii) thereof, the
following:
"plus (iv) any 1998 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 definition in appropriate alphabetical order:
"1998 Charge" shall mean (i) certain restructuring expenses and
related costs and expenses and (ii) certain losses incurred in
connection with the sale of any branch or line of business not a part of
the Nabisco Biscuit Division, to the extent that the aggregate amount
of all costs, expenses and losses described in clauses (i) and (ii)
above do not exceed $600,000,000 and are recorded or accrued during
Holdings' 1998 or 1999 fiscal year.
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 new
clause (iii):
"and (iii) for all purposes, for any period ending on or before December
31, 2000, there shall be excluded in determining Adjusted Operating
Income any portion of the 1998 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 third appearance of the word "date" therein:
"plus any 1998 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 (iii)
thereof, the following:
"plus (iv) any 1998 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 definition in appropriate alphabetical order:
"1998 Charge" shall mean (i) certain restructuring expenses and
related costs and expenses and (ii) certain losses incurred in
connection with the sale of any branch or line of business not a part of
the Nabisco Biscuit Division, to the extent that the aggregate amount of
all costs, expenses and losses described in clauses (i) and (ii) above
do not exceed $600,000,000 and are recorded or accrued during Holdings'
1998 or 1999 fiscal year.
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 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: Ms. Jacquiline Lawrence (Facsimile No.:
(212) 354-8113).
4
<PAGE>
Exhibit 10.2
NA Director's Option
`98 (Annual)
STOCK OPTION PLAN FOR DIRECTORS
OF
NABISCO HOLDINGS CORP. AND SUBSIDIARIES
STOCK OPTION AGREEMENT
---------------------------
DATE OF GRANT: April 15, 1998
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
900 shares
of Class A Common Stock of the Company ("Common Stock") at the exercise price of
$51.125 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.
<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.
<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 AGREEMENT
REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF
LAWS.
<PAGE>
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:
- --------------------------------------
- --------------------------------------
- --------------------------------------
<PAGE>
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, 1998
---------------
<S> <C>
Earnings before fixed charges:
Net (loss)....................................................................................... $ (145)
Provision (benefit) for income taxes............................................................. (53)
-----
Income (loss) before income taxes................................................................ (198)
Interest and debt expense........................................................................ 158
Interest portion of rental expense............................................................... 14
-----
Earnings (loss) before fixed charges............................................................... $ (26)
-----
-----
Fixed charges:
Interest and debt expense........................................................................ $ 158
Interest portion of rental expense............................................................... 14
Capitalized interest............................................................................. 2
-----
Total fixed charges............................................................................ $ 174
-----
-----
Deficiency in the coverage of fixed charges by earnings before fixed charges....................... $ (200)
-----
-----
</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 FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH STATEMENTS.
</LEGEND>
<CIK> 0000932130
<NAME> NABISCO HOLDINGS CORP.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 98
<SECURITIES> 0
<RECEIVABLES> 516
<ALLOWANCES> 0
<INVENTORY> 832
<CURRENT-ASSETS> 1,546
<PP&E> 3,146
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,797
<CURRENT-LIABILITIES> 1,621
<BONDS> 4,356
0
0
<COMMON> 3
<OTHER-SE> 3,927
<TOTAL-LIABILITY-AND-EQUITY> 11,797
<SALES> 4,093
<TOTAL-REVENUES> 4,093
<CGS> 2,312
<TOTAL-COSTS> 2,312
<OTHER-EXPENSES> 113
<LOSS-PROVISION> 406
<INTEREST-EXPENSE> 158
<INCOME-PRETAX> (198)
<INCOME-TAX> (53)
<INCOME-CONTINUING> (145)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (145)
<EPS-PRIMARY> (.55)
<EPS-DILUTED> (.55)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS OF NABISCO, INC. WHICH WERE FILED WITH THE 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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 98
<SECURITIES> 0
<RECEIVABLES> 516
<ALLOWANCES> 0
<INVENTORY> 832
<CURRENT-ASSETS> 1,590
<PP&E> 3,146
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,841
<CURRENT-LIABILITIES> 1,623
<BONDS> 4,356
0
0
<COMMON> 0
<OTHER-SE> 3,972
<TOTAL-LIABILITY-AND-EQUITY> 11,841
<SALES> 4,093
<TOTAL-REVENUES> 4,093
<CGS> 2,312
<TOTAL-COSTS> 2,312
<OTHER-EXPENSES> 113
<LOSS-PROVISION> 406
<INTEREST-EXPENSE> 158
<INCOME-PRETAX> (198)
<INCOME-TAX> (53)
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