<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1999
-------------------
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. 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: JULY 30, 1999:
<TABLE>
<C> <S>
NABISCO HOLDINGS CORP.: 51,371,284 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, 1999 and 1998........................................................................ 1
Consolidated Condensed Statements of Income--Six Months Ended
June 30, 1999 and 1998........................................................................ 2
Consolidated Condensed Statements of Comprehensive Income--Three Months and
Six Months Ended June 30, 1999 and 1998....................................................... 3
Consolidated Condensed Statements of Cash Flows--Six Months Ended
June 30, 1999 and 1998........................................................................ 4
Consolidated Condensed Balance Sheets--June 30, 1999 and
December 31, 1998............................................................................. 5
Notes to Consolidated Condensed Financial Statements............................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................................... 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk...................................... 15
PART II-- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................................................ 17
Signatures................................................................................................. 18
</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, 1999 JUNE 30, 1998
----------------------- -----------------------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
NET SALES................................................................... $ 2,023 $ 2,023 $ 2,131 $ 2,131
---------- ----------- ---------- -----------
Costs and expenses:
Cost of products sold..................................................... 1,089 1,089 1,187 1,187
Selling, advertising, administrative and general expenses................. 703 703 691 691
Amortization of trademarks and goodwill................................... 54 54 57 57
Restructuring charge...................................................... -- -- 406 406
---------- ----------- ---------- -----------
OPERATING INCOME (LOSS)............................................... 177 177 (210) (210)
Interest and debt expense................................................... (64) (64) (78) (78)
Other income (expense), net................................................. (5) (5) (3) (3)
---------- ----------- ---------- -----------
Income (loss) before income taxes..................................... 108 108 (291) (291)
Provision (benefit) for income taxes........................................ 43 43 (91) (91)
---------- ----------- ---------- -----------
NET INCOME (LOSS)..................................................... $ 65 $ 65 $ (200) $ (200)
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
NET INCOME (LOSS) PER COMMON SHARE--BASIC................................... $ .25 $ (.76)
---------- ----------
---------- ----------
NET INCOME (LOSS) PER COMMON SHARE--DILUTED................................. $ .24 $ (.76)
---------- ----------
---------- ----------
DIVIDENDS DECLARED PER COMMON SHARE......................................... $ .1875 $ .175
---------- ----------
---------- ----------
Average number of common shares outstanding (in thousands):
Basic..................................................................... 264,664 264,620
---------- ----------
---------- ----------
Diluted................................................................... 266,894 264,620
---------- ----------
---------- ----------
</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, 1999 JUNE 30, 1998
----------------------- -----------------------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
NET SALES................................................................... $ 3,878 $ 3,878 $ 4,093 $ 4,093
---------- ----------- ---------- -----------
Costs and expenses:
Cost of products sold..................................................... 2,116 2,116 2,312 2,312
Selling, advertising, administrative and general expenses................. 1,344 1,344 1,290 1,290
Amortization of trademarks and goodwill................................... 107 107 113 113
Restructuring charge...................................................... -- -- 406 406
---------- ----------- ---------- -----------
OPERATING INCOME (LOSS)............................................... 311 311 (28) (28)
Interest and debt expense................................................... (129) (129) (158) (158)
Other income (expense), net................................................. (15) (15) (12) (12)
---------- ----------- ---------- -----------
Income (loss) before income taxes..................................... 167 167 (198) (198)
Provision (benefit) for income taxes........................................ 66 66 (53) (53)
---------- ----------- ---------- -----------
NET INCOME (LOSS)..................................................... $ 101 $ 101 $ (145) $ (145)
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
NET INCOME (LOSS) PER COMMON SHARE--BASIC................................... $ .38 $ (.55)
---------- ----------
---------- ----------
NET INCOME (LOSS) PER COMMON SHARE--DILUTED................................. $ .38 $ (.55)
---------- ----------
---------- ----------
DIVIDENDS DECLARED PER COMMON SHARE......................................... $ .375 $ .35
---------- ----------
---------- ----------
Average number of common shares outstanding (in thousands):
Basic..................................................................... 264,700 264,443
---------- ----------
---------- ----------
Diluted................................................................... 266,968 264,443
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
2
<PAGE>
NABISCO HOLDINGS CORP.
NABISCO, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE
MONTHS
THREE MONTHS ENDED
ENDED JUNE 30,
JUNE 30, 1999 1998
-------------------------- -----------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS
------------- ----------- -----------
<S> <C> <C> <C>
NET INCOME (LOSS).............................................................. $ 65 $ 65 $ (200)
--- --- -----
Other comprehensive income (loss):
Foreign currency translation................................................. 19 19 (25)
--- --- -----
Other comprehensive income (loss) before income taxes.......................... 19 19 (25)
Provision (benefit) for income taxes......................................... -- -- --
--- --- -----
OTHER COMPREHENSIVE INCOME (LOSS) NET OF INCOME TAX............................ 19 19 (25)
--- --- -----
Comprehensive income (loss).................................................... $ 84 $ 84 $ (225)
--- --- -----
--- --- -----
<CAPTION>
NABISCO
-----------
<S> <C>
NET INCOME (LOSS).............................................................. $ (200)
-----
Other comprehensive income (loss):
Foreign currency translation................................................. (25)
-----
Other comprehensive income (loss) before income taxes.......................... (25)
Provision (benefit) for income taxes......................................... --
-----
OTHER COMPREHENSIVE INCOME (LOSS) NET OF INCOME TAX............................ (25)
-----
Comprehensive income (loss).................................................... $ (225)
-----
-----
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1999 JUNE 30, 1998
------------------------ ------------------------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET INCOME (LOSS).............................................................. $ 101 $ 101 $ (145) $ (145)
----- ----- ----- -----
Other comprehensive (loss):
Foreign currency translation................................................. (116) (116) (36) (36)
----- ----- ----- -----
Other comprehensive (loss) before income taxes................................. (116) (116) (36) (36)
Provision (benefit) for income taxes......................................... -- -- -- --
----- ----- ----- -----
OTHER COMPREHENSIVE INCOME (LOSS) NET OF INCOME TAX............................ (116) (116) (36) (36)
----- ----- ----- -----
Comprehensive (loss)........................................................... $ (15) $ (15) $ (181) $ (181)
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
3
<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, 1999 JUNE 30, 1998
------------------------ ------------------------
<S> <C> <C> <C> <C>
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
----------- ----------- ----------- -----------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income (loss)...................................................... $ 101 $ 101 $ (145) $ (145)
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
Depreciation of property, plant and equipment...................... 132 132 137 137
Amortization of intangibles........................................ 107 107 113 113
Deferred income tax provision (benefit)............................ 18 18 (112) (112)
Restructuring charge, net of cash payments......................... (41) (41) 401 401
Accounts receivable, net........................................... 3 3 (2) (2)
Inventories........................................................ (86) (86) 1 1
Prepaid expense.................................................... (3) (3) (17) (17)
Accounts payable................................................... (121) (121) (177) (177)
Accrued liabilities................................................ 38 33 (28) (44)
Income taxes accrued............................................... 17 17 (15) (15)
Other, net......................................................... 4 4 (37) (37)
----- ----- ----- -----
Net cash flows from operating activities............................. 169 164 119 103
----- ----- ----- -----
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures................................................... (99) (99) (168) (168)
Proceeds on sale of assets............................................. 14 14 5 5
Acquisition of business................................................ -- -- (9) (9)
----- ----- ----- -----
Net cash flows (used in) investing activities........................ (85) (85) (172) (172)
----- ----- ----- -----
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net proceeds from the issuance of long-term debt....................... 192 192 1,102 1,102
Proceeds from the sale of call options on long-term debt............... -- -- 41 41
Repayments of long-term debt........................................... (116) (116) (977) (977)
Decrease in notes payable.............................................. (10) (10) (28) (28)
Dividends paid on common stock......................................... (146) (146) (93) (93)
Repurchases of Class A common stock.................................... (12) -- (38) --
Proceeds from exercise of Class A common stock options................. 7 -- 22 --
----- ----- ----- -----
Net cash flows from (used in) financing activities................... (85) (80) 29 45
----- ----- ----- -----
Effect of exchange rate changes on cash and cash equivalents............. (6) (6) (5) (5)
----- ----- ----- -----
Net change in cash and cash equivalents.............................. (7) (7) (29) (29)
Cash and cash equivalents at beginning of period......................... 111 111 127 127
----- ----- ----- -----
Cash and cash equivalents at end of period............................... $ 104 $ 104 $ 98 $ 98
----- ----- ----- -----
----- ----- ----- -----
Income taxes paid, net of refunds........................................ $ 30 $ 30 $ 73 $ 73
Interest paid............................................................ $ 132 $ 132 $ 131 $ 131
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
4
<PAGE>
NABISCO HOLDINGS CORP.
NABISCO, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
---------------------- ----------------------
<S> <C> <C> <C> <C>
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
----------- --------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 104 $ 104 $ 111 $ 111
Accounts receivable, net............................................ 470 470 506 506
Intercompany receivable from Nabisco Holdings....................... -- 45 -- --
Deferred income taxes............................................... 98 98 98 98
Inventories......................................................... 819 819 753 753
Prepaid expenses.................................................... 70 69 70 69
----------- --------- ----------- ---------
TOTAL CURRENT ASSETS............................................ 1,561 1,605 1,538 1,537
----------- --------- ----------- ---------
Property, plant and equipment--at cost................................ 4,765 4,765 4,806 4,806
Less accumulated depreciation......................................... (1,926) (1,926) (1,859) (1,859)
----------- --------- ----------- ---------
Net property, plant and equipment................................... 2,839 2,839 2,947 2,947
----------- --------- ----------- ---------
Trademarks, net of accumulated amortization of $1,157 and $1,102,
respectively........................................................ 3,315 3,315 3,368 3,368
Goodwill, net of accumulated amortization of $959 and
$910, respectively.................................................. 3,093 3,093 3,182 3,182
Other assets and deferred charges..................................... 90 90 82 82
----------- --------- ----------- ---------
$ 10,898 $ 10,942 $ 11,117 $ 11,116
----------- --------- ----------- ---------
----------- --------- ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable....................................................... $ 52 $ 52 $ 68 $ 68
Accounts payable.................................................... 295 295 407 407
Accrued liabilities................................................. 977 977 1,043 997
Intercompany payable to Nabisco Holdings............................ -- -- -- 5
Current maturities of long-term debt................................ 160 160 118 118
Income taxes accrued................................................ 131 131 111 111
----------- --------- ----------- ---------
TOTAL CURRENT LIABILITIES....................................... 1,615 1,615 1,747 1,706
----------- --------- ----------- ---------
Long-term debt (less current maturities).............................. 3,644 3,644 3,619 3,619
Other noncurrent liabilities.......................................... 714 714 704 704
Deferred income taxes................................................. 1,158 1,158 1,162 1,162
Stockholders' equity:
Class A common stock (51,366,084 and 51,434,872 shares issued and
outstanding at June 30, 1999 and December 31, 1998,
respectively)..................................................... 1 -- 1 --
Class B common stock (213,250,000 shares issued and outstanding at
June 30, 1999 and December 31, 1998).............................. 2 -- 2 --
Paid-in capital..................................................... 4,093 4,141 4,092 4,141
Retained earnings (accumulated deficit)............................. (7) (29) (5) (31)
Treasury stock, at cost............................................. (19) -- (18) --
Accumulated other comprehensive income (loss)....................... (301) (301) (185) (185)
Notes receivable on common stock purchases.......................... (2) -- (2) --
----------- --------- ----------- ---------
TOTAL STOCKHOLDERS' EQUITY...................................... 3,767 3,811 3,885 3,925
----------- --------- ----------- ---------
$ 10,898 $ 10,942 $ 11,117 $ 11,116
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
5
<PAGE>
NABISCO HOLDINGS CORP.
NABISCO, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1--INTERIM REPORTING
GENERAL
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 1999
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"
together with Nabisco Holdings, the "Companies") 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, 1998 and Form 8-K
filed June 16, 1999.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
On January 1, 1999, Nabisco Holdings and Nabisco adopted SOP No. 98-5,
Reporting on the Costs of Start-Up Activities. SOP No. 98-5 established
standards on accounting for start-up and organization costs and, in general,
requires such costs to be expensed as incurred. The adoption of SOP No. 98-5 did
not have a material effect on Nabisco Holdings' or Nabisco's financial position
or results of operations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During the second quarter of 1998, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Instruments and Hedging Activities, which was required
to be adopted by January 1, 2000, with early adoption permitted. In June 1999,
the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of SFAS No. 133, which amended SFAS
No. 133 to delay its effective date one year. SFAS No. 133 requires that all
derivative instruments be recorded on the consolidated balance sheet at their
fair value. Changes in the fair value of derivatives will be recorded each
period in earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. Nabisco Holdings and Nabisco have not yet determined the
impact, if any, that adoption or subsequent application of SFAS No. 133 will
have on its financial position or results of operations.
NOTE 2--REORGANIZATION OF NABISCO HOLDINGS' PARENTS
The former direct and indirect parents of the registrants, RJR Nabisco, Inc.
(which has been renamed R.J. Reynolds Tobacco Holdings, Inc.--"RJR") and RJR
Nabisco Holdings Corp. (which has been renamed Nabisco Group Holdings
Corp.--"NGH") have recently completed a series of reorganization transactions.
The principal transactions in this reorganization that affect Nabisco Holdings
and Nabisco, are the following:
- On May 18, 1999, RJR transferred all of the outstanding Class B Common
Stock of Nabisco Holdings to NGH through a merger transaction. The Class B
Common Stock currently represents approximately 80.5% of the economic
interest and approximately 97.7% of the voting interest in Nabisco
Holdings.
6
<PAGE>
- On June 14, 1999, NGH paid a dividend of 100% of the common stock of RJR
to record holders of NGH common stock as of May 27, 1999, the record date
for the distribution. As a result of the distribution, Nabisco Holdings
and Nabisco and their subsidiaries are no longer affiliated with RJR and
its subsidiaries.
RELATED PARTY AGREEMENTS
NGH, RJR and Reynolds Tobacco have entered into several agreements governing
the relationships among the parties after the distribution of RJR's shares to
NGH stockholders, including the provision of intercompany services by Nabisco to
NGH, certain tax matters, indemnification rights and obligations and other
matters among the parties as disclosed in the Form 8-K filed by Nabisco Holdings
and Nabisco on June 16, 1999.
These agreements replace a predecessor intercompany services agreement, a
predecessor tax sharing agreement and a predecessor corporate agreement that had
previously been in place between Nabisco Holdings and RJR. Nabisco Holdings and
Nabisco, Inc. do not anticipate that Nabisco Holdings entry into these new
agreements will have a material effect on either entity's financial condition or
results of operations.
IMPACT OF THE REORGANIZATION ON THE RETIREMENT PLAN FOR EMPLOYEES OF RJR
NABISCO, INC.
In connection with the reorganization transactions, the assets and
liabilities of the Retirement Plan for Employees of RJR Nabisco, Inc. (the "old
plan") were split into two plans. One plan covers employees and former employees
of Nabisco Holdings, Nabisco and NGH ("the Nabisco Plan") and the other plan
covers employees and former employees of RJR.
The split of the assets and liabilities of the old plan was in accordance
with a May 1999 agreement between the Pension Benefit Guaranty Corporation
("PBGC") and RJR Nabisco Holdings Corp. Based on this agreement and as required
by Section 414(1) of the Internal Revenue Code, the assets of the old plan were
allocated in proportion to the benefit obligations of each of the respective
plans. The use of this methodology resulted in a lower actual transfer of assets
to the Nabisco Plan of approximately $70 million and the assumption of higher
actual benefit obligations of approximately $30 million than the allocated
amounts used in the December 31, 1998 consolidated financial statements. The
impact of this change, an increase in unfunded liability of $100 million, will
be recognized in net periodic benefit costs over future periods. As a result,
net periodic benefit cost for full year 1999 is expected to increase by
approximately $7 million. The PBGC agreement did not require Nabisco to make
additional contributions to the Nabisco Plan.
NOTE 3--1998 RESTRUCTURING CHARGES
In the second and fourth quarters of 1998, Nabisco recorded restructuring
charges of $406 million ($268 million after tax) and $124 million ($94 million
after tax), respectively. These restructuring programs were undertaken to
streamline operations and improve profitability and will result in a workforce
reduction of approximately 6,500 employees of which 4,575 positions were
eliminated as of June 30, 1999. The restructuring programs will require net cash
expenditures of approximately $205 million. In addition, the programs will
require additional restructuring-related expenses of approximately $134 million.
$90 million ($53 million after tax) was incurred since the programs' inception,
of which $19 million ($11 million after tax) and $34 million ($21 million after
tax), respectively, were incurred in the three months and six months ended June
30, 1999. These additional expenses are principally for implementation and
integration of the programs and include costs for relocation of employees and
equipment and training.
7
<PAGE>
The key elements of the $530 million restructuring programs include:
<TABLE>
<CAPTION>
SEVERANCE CONTRACT ASSETS TO BE OTHER EXIT
IN MILLIONS AND BENEFITS TERMINATIONS DISPOSED OF COSTS TOTAL
- ---------------------------------------------------- ------------- --------------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Sales force reorganizations......................... $ 37 $ 3 $ -- $ -- $ 40
Distribution reorganizations........................ 16 8 9 33
Staff reductions.................................... 83 3 86
Manufacturing cost reduction initiatives............ 22 8 30
Plant closures...................................... 46 3 217 15 281
Product line rationalizations....................... 4 4 20 32 60
----- --- ----- --- ---------
Total restructuring reserves.................... 208 18 257 47 530
----- --- ----- --- ---------
Charges and Payments:
Year ended December 31, 1998........................ 34 3 12 12 61
Six months ended June 30, 1999...................... 32 3 58 14 107
----- --- ----- --- ---------
Total charges and payments, net of cash
proceeds...................................... 66 6 70 26 168
----- --- ----- --- ---------
Reserve balances as of June 30, 1999................ $ 142 $ 12 $ 187 $ 21 $ 362
----- --- ----- --- ---------
----- --- ----- --- ---------
</TABLE>
The charges and payments, net of cash proceeds applied against the
restructuring reserves included cash expenditures of $78 million and cash
proceeds of $6 million. $39 million of cash expenditures and $6 million of cash
proceeds were applied against the restructuring reserves in the first six months
of 1999.
As of June 30, 1999, production had ceased in 8 facilities of which 3 were
sold.
NOTE 4--INVENTORIES
The major classes of inventory are shown in the table below:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
IN MILLIONS 1999 1998
- ----------------------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Finished products........................................................................ $ 487 $ 457
Raw materials............................................................................ 195 164
Other.................................................................................... 137 132
----- -----
$ 819 $ 753
----- -----
----- -----
</TABLE>
8
<PAGE>
NOTE 5--SEGMENT INFORMATION
OPERATING SEGMENT DATA
Nabisco Holdings is a holding company whose subsidiaries are engaged in the
manufacture, distribution and sale of cookies, crackers and other food products.
Nabisco Holdings is organized and reports its results of operations in three
business segments: Biscuit, the U.S. Foods Group and the International Food
Group which are segregated by both product and geographic area.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------- -------------------------
IN MILLIONS 1999 1998 1999 1998
- ------------------------------------------------------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales from external customers:
Biscuit.................................................... $ 897 $ 864 $ 1,764 $ 1,714
U.S. Foods Group........................................... 547 514 982 921
International Food Group................................... 579 625 1,132 1,205
----------- ------------ ----------- ------------
Total ongoing.......................................... 2,023 2,003 3,878 3,840
----------- ------------ ----------- ------------
U.S. Foods Group........................................... -- 123 -- 246
International Food Group................................... -- 5 -- 7
----------- ------------ ----------- ------------
Total divested......................................... -- 128 -- 253
----------- ------------ ----------- ------------
Total................................................ $ 2,023 $ 2,131 $ 3,878 $ 4,093
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
Operating company contribution before restructuring-related
expenses:
Biscuit.................................................... $ 129 $ 129 $ 250 $ 272
U.S. Foods Group........................................... 73 67 122 111
International Food Group................................... 48 47 80 79
----------- ------------ ----------- ------------
Total ongoing.......................................... 250 243 452 462
----------- ------------ ----------- ------------
U.S. Foods Group........................................... -- 16 -- 35
----------- ------------ ----------- ------------
Total divested......................................... -- 16 -- 35
----------- ------------ ----------- ------------
Segment operating company contribution before
restructuring-related expenses............................. 250 259 452 497
Restructuring-related expenses............................... (19) (6) (34) (6)
Amortization of trademarks and goodwill...................... (54) (57) (107) (113)
Restructuring charge......................................... -- (406) -- (406)
----------- ------------ ----------- ------------
Consolidated operating income (loss)......................... 177 (210) 311 (28)
Interest and debt expense.................................... (64) (78) (129) (158)
Other income (expense), net.................................. (5) (3) (15) (12)
----------- ------------ ----------- ------------
Income (loss) before income taxes............................ $ 108 $ (291) $ 167 $ (198)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion and analysis of Nabisco Holdings' financial
condition and results of operations. The discussion and analysis for sales,
operating company contribution and operating income includes information as
reported in the historical financial statements, followed by items that
management believes impact the comparability of historical results, ongoing
results and management's discussion and analysis of ongoing results. Ongoing
results are presented on a basis consistent with how the ongoing businesses are
managed. They exclude sales, operating company contribution and operating income
from divested businesses and restructuring-related expenses that management
believes affect the comparability of the results of operations. The ongoing
results of operations should not be viewed as a substitute for the historical
results of operations but as a tool to better understand the underlying trends
in the business. The discussion and analysis of Nabisco Holdings' financial
condition and results of operations should be read in conjunction with the
historical financial information and the related notes thereto included in the
Consolidated Condensed Financial Statements.
The food business is conducted by the operating subsidiaries of Nabisco
Holdings. Nabisco's businesses in the United States are comprised of Biscuit and
the U.S. Foods Group. Nabisco's businesses outside the United States are
conducted by Nabisco Ltd and Nabisco International, Inc. ("Nabisco
International" together with Nabisco Ltd, the "International Food Group").
NET SALES
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------------------- -----------------------------------
(IN MILLIONS) 1999 1998 % CHANGE 1999 1998 % CHANGE
- --------------------------------------------------- --------- --------- ------------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
REPORTED NET SALES:
Biscuit.......................................... $ 897 $ 864 4% $ 1,764 $ 1,714 3%
U.S. Foods Group................................. 547 637 (14%) 982 1,167 (16%)
International Food Group......................... 579 630 (8%) 1,132 1,212 (7%)
--------- --------- --------- ---------
Total............................................ $ 2,023 $ 2,131 (5%) $ 3,878 $ 4,093 (5%)
--------- --------- --------- ---------
NET SALES FROM DIVESTED BUSINESSES:
U.S. Foods Group................................. -- 123 -- 246
International Food Group......................... -- 5 -- 7
--------- --------- --------- ---------
Total............................................ -- 128 -- 253
--------- --------- --------- ---------
NET SALES FROM ONGOING BUSINESSES:
Biscuit.......................................... $ 897 $ 864 4% $ 1,764 $ 1,714 3%
U.S. Foods Group................................. 547 514 6% 982 921 7%
International Food Group......................... 579 625 (7%) 1,132 1,205 (6%)
--------- --------- --------- ---------
Total............................................ $ 2,023 $ 2,003 1% $ 3,878 $ 3,840 1%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
THE FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON NET SALES FROM ONGOING
BUSINESSES:
- Biscuit's net sales increased 4% in the second quarter and 3% in the first
six months versus the prior year. The increase in the second quarter
reflects price increases and volume gains in core cookies and crackers
partially offset by lower volumes in breakfast snacks. The sales
performance for the first six months reflects price increases and volume
increases in core cookie and cracker brands, partially offset by lower
volume in SnackWell's and breakfast snacks.
- U.S. Foods Group's net sales increased 6% in the second quarter and 7% in
the first six months versus the prior year. The increase in the second
quarter was paced by strong volume gains from Planters nuts and
condiments. The key contributors to the sales performance for the first
six months
10
<PAGE>
reflects increased sales volume of Planters nuts, Life Savers candy,
condiments, pet snacks and hot cereals.
- International's net sales decreased 7% in the second quarter and 6% in the
first six months versus the prior year. The decrease in the second quarter
was primarily driven by unfavorable foreign currency translation in
Brazil, Spain and Canada. Excluding the impact of foreign currency
translation, sales increased 1%, reflecting solid volume gains in Canada,
Asia, the Caribbean and several Latin American countries. The factors
influencing decreased sales for the first six months were unfavorable
foreign currency translation in Brazil and Canada along with volume
declines in Brazil, Argentina, and the Andean region. Price increases in
Brazil and solid volume gains in Canada, Mexico and the Caribbean helped
minimize the impact on sales.
OPERATING COMPANY CONTRIBUTION
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------------------- --------------------
(IN MILLIONS) 1999 1998 % CHANGE 1999 1998
- ----------------------------------------------------------- --------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
REPORTED OPERATING COMPANY CONTRIBUTION(1):
Biscuit.................................................... $ 114 $ 125 (9%) $ 222 $ 268
U.S. Foods Group........................................... 71 81 (12%) 119 144
International Food Group................................... 46 47 (2%) 77 79
--------- --------- --------- ---------
Total...................................................... $ 231 $ 253 (9%) $ 418 $ 491
--------- --------- --------- ---------
ITEMS EXCLUDED FROM ONGOING OPERATING COMPANY CONTRIBUTION:
Biscuit
Restructuring-related expenses......................... (15) (4) (28) (4)
U.S. Foods Group:
Restructuring-related expenses......................... (2) (2) (3) (2)
Results from divested businesses....................... -- 16 -- 35
International Food Group:
Restructuring-related expenses......................... (2) -- (3) --
Results from divested businesses....................... -- -- -- --
--------- --------- --------- ---------
Total...................................................... (19) 10 (34) 29
--------- --------- --------- ---------
OPERATING COMPANY CONTRIBUTION FROM ONGOING BUSINESSES:
Biscuit.................................................... $ 129 $ 129 -- $ 250 $ 272
U.S. Foods Group........................................... 73 67 9% 122 111
International Food Group................................... 48 47 2% 80 79
--------- --------- --------- ---------
Total...................................................... $ 250 $ 243 3% $ 452 $ 462
--------- --------- --------- ---------
--------- --------- --------- ---------
<CAPTION>
(IN MILLIONS) % CHANGE
- ----------------------------------------------------------- -------------
<S> <C>
REPORTED OPERATING COMPANY CONTRIBUTION(1):
Biscuit.................................................... (17%)
U.S. Foods Group........................................... (17%)
International Food Group................................... (3%)
Total...................................................... (15%)
ITEMS EXCLUDED FROM ONGOING OPERATING COMPANY CONTRIBUTION:
Biscuit
Restructuring-related expenses.........................
U.S. Foods Group:
Restructuring-related expenses.........................
Results from divested businesses.......................
International Food Group:
Restructuring-related expenses.........................
Results from divested businesses.......................
Total......................................................
OPERATING COMPANY CONTRIBUTION FROM ONGOING BUSINESSES:
Biscuit.................................................... (8%)
U.S. Foods Group........................................... 10%
International Food Group................................... 1%
Total...................................................... (2%)
</TABLE>
- ------------------------
(1) Operating company contribution represents operating income before
amortization of trademarks and goodwill and restructuring charges.
11
<PAGE>
THE FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON OPERATING COMPANY CONTRIBUTION
FROM ONGOING BUSINESSES:
- Biscuit's operating company contribution was flat in the second quarter
and decreased 8% in the first six months versus the prior year. Both the
quarter and year to date periods were impacted by increased advertising,
consumer promotion spending and increased selling costs associated with
the implementation of the redesigned direct store delivery sales force.
Price increases and lower manufacturing overhead costs resulting from
restructuring programs, along with volume gains in the second quarter for
both cookies and crackers partially offset these higher costs.
- U.S. Foods Group's operating company contribution increased 9% in the
second quarter and 10% in the first six months versus the prior year. The
second quarter improvements were primarily due to increased earnings for
condiments, pet snacks and hot cereals. The first six months' improvement
was primarily due to gains in condiments, pet snacks and hot cereals. Both
periods were impacted by increased expenses associated with marketing
programs partially offset by the impact of restructuring programs on fixed
overhead costs.
- International's operating company contribution increased 2% in the second
quarter and 1% in the first six months of 1999 versus the prior year. The
second quarter increase was primarily due to increased earnings in Asia
due to price increases and volume gains, and lower overhead costs in
Brazil and Argentina partially offset by lower earnings in the Andean
region principally due to volume declines. The first six months' increase
was primarily due to increased earnings in Brazil, principally as a result
of higher prices and lower fixed overhead costs which more than offset
unfavorable foreign currency translation, and Asia due to price increases
and volume gains, offset by lower earnings in the Andean region due to
volume declines.
OPERATING INCOME
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------------------- ---------------------------------
(IN MILLIONS) 1999 1998 % CHANGE 1999 1998 % CHANGE
- --------------------------------------------------------- --------- --------- --------------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
REPORTED OPERATING INCOME (LOSS)......................... $ 177 $ (210) $ 311 $ (28)
--------- --------- --------- ---------
OPERATING INCOME (LOSS) EXCLUDED FROM ONGOING BUSINESS:
Restructuring charge................................. -- (406) -- (406)
Restructuring-related expenses....................... (19) (6) (34) (6)
Results from divested business....................... -- 14 -- 30
--------- --------- --------- ---------
Total (19) (398) (34) (382)
--------- --------- --------- ---------
OPERATING INCOME FROM ONGOING BUSINESS................... $ 196 $ 188 4% $ 345 $ 354 (3%)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
THE FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON OPERATING INCOME FROM ONGOING
BUSINESSES:
- Nabisco Holdings' operating income was $196 million and $345 million for
the second quarter and the first six months of 1999, an increase of 4% and
a decrease of 3%, respectively, from the same 1998 periods. The increase
in the second quarter was a result of higher operating company
contribution discussed previously. The decrease in the first six months
reflects lower operating company contribution discussed previously.
12
<PAGE>
INTEREST AND DEBT EXPENSE
Consolidated interest and debt expense of $64 million and $129 million for
the second quarter and first six months of 1999 both decreased 18% from the same
1998 periods primarily due to the paydown of long-term debt with the net
proceeds from businesses sold in the third quarter of 1998 and with funds
generated from operating cash flows.
OTHER INCOME (EXPENSE), NET
Other income (expense), net amounted to $5 million expense and $15 million
expense for the second quarter and first six months of 1999, an increase of $2
million and $3 million, respectively, principally due to higher foreign exchange
losses.
NET INCOME (LOSS)
Nabisco Holdings' net income for the second quarter and first six months of
1999 includes after tax restructuring-related expenses of $11 million and $20
million, respectively. Net income for the second quarter and first six months of
1998 includes net income from divested businesses of $10 million and $21
million, respectively. Both 1998 periods also include $272 million of after tax
restructuring charges and related expenses. Excluding the effects of these
items, net income of $76 million and $121 million, for the second quarter and
first six months of 1999, increased $14 million and $15 million, respectively,
from the same 1998 periods. The second quarter increase is primarily due to
increased operating company contribution and lower interest and debt expense.
The six month increase principally reflects lower interest and debt expense
partially offset by lower operating company contribution.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income of $84 million and comprehensive loss of $15 million
for the second quarter and first six months of 1999 compares to a comprehensive
loss of $225 million and $181 million for the same 1998 periods. The second
quarter reflects higher net income and the favorable impact of foreign currency
translation. The first six months reflects higher net income offset by the
unfavorable impact of foreign currency translation.
RESTRUCTURING
Savings objectives set in our 1998 restructuring programs are on target
despite lower than anticipated spending to date. The June 1998 program is
expected to be substantially completed in 1999 and the December 1998 program is
expected to be substantially completed by mid-year 2000. Pre-tax savings in 1999
will be approximately $80 million including cash savings of $73 million and,
after completion of the programs, are expected to be approximately $145 million
annually including cash savings of $135 million. For a further discussion of
restructuring programs see Note 3 to the Consolidated Condensed Financial
Statements.
LIQUIDITY AND FINANCIAL CONDITION
Net cash flows from operating activities amounted to $169 million for the
first six months of 1999 compared to $119 million for the first six months of
1998. The increase in net cash flows from operating activities primarily
reflects lower working capital requirements offset by higher 1999 payments
related to the 1998 restructuring programs.
Cash flows used in investing activities for the first six months of 1999
decreased $87 million to $85 million from the first six months of 1998,
primarily because of lower capital expenditures.
Capital expenditures were $99 million in the first six months of 1999.
Management expects that the current level of net investment for property, plant
and equipment will be $200 million, as spending for
13
<PAGE>
capital expenditures will be approximately $225 million offset by proceeds from
asset sales, 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
1999.
Cash flows used in financing activities were $85 million for the first six
months of 1999, an increase of $114 million from the first six months of 1998,
principally due to the early payout of Nabisco Holdings' second quarter 1999
dividend and the absence in 1999 of proceeds from the sale of call options on
long-term debt issued in January 1998, partially offset by Class A treasury
stock activity.
During the third quarter of 1999 Nabisco expects to exercise a call option
to redeem $200 million of floating rate notes due August 2009 and recognize an
after tax extraordinary loss of approximately $3 million. This redemption is
expected to be refinanced with commercial paper.
As of June 30, 1999, the $1.5 billion revolving credit facility was
unutilized and available to support borrowings. In addition, the 364-day $1.11
billion credit facility was utilized to support outstanding commercial paper
borrowings of $364 million, and accordingly, $746 million was available.
The companies believe that they are currently in compliance with all
covenants and restrictions imposed by the terms of their indebtedness.
At June 30, 1999, 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 $3.9 billion and $7.6 billion,
respectively, of which total debt is higher by $51 million and total capital is
lower by $67 million than their respective balances at December 31, 1998.
Nabisco Holdings' ratios of total debt to total stockholders' equity and total
debt to total capital at June 30, 1999 were 1.02 to 1 and .51 to 1,
respectively.
Nabisco Holdings currently pays regular quarterly dividends on its common
stock at an annual rate of $.75 per share. At that rate, the aggregate amount of
dividends to be paid would be approximately $196 million during 1999.
FOREIGN MARKET RISK
Nabisco's international businesses are exposed to financial market
volatility in the countries in which it operates, principally in Brazil, which
can impact the International Food Group's financial position. As of June 30,
1999, Brazil's currency, the Real, devalued approximately 46% from December 31,
1998, compared to the U.S. Dollar, which resulted in an unfavorable foreign
currency translation adjustment of approximately $104 million for the six months
ended June 30, 1999.
YEAR 2000 ISSUE
Nabisco has developed plans to address the implications of the Year 2000 on
its computer systems and business operations. The Year 2000 Issue stems from
computer applications that were written using two digits rather than four digits
to define the applicable year. The issue is whether computer systems will
properly interpret date-sensitive information when the year changes to 2000.
Nabisco has completed an inventory and assessment of its financial,
information and operational systems, including equipment with embedded
microprocessors, and has developed detailed plans for required systems
modifications or replacements.
Software remediation of information technology systems ("IT systems") has
been completed and remediation of non-information technology systems with
embedded technology ("non-IT systems") is 70% complete and scheduled to be 100%
complete by the end of the third quarter of 1999.
Software testing following remediation is approximately 95% complete for IT
systems and is scheduled to be completed by the end of the third quarter of
1999. With respect to non-IT systems, testing is 50% complete and is expected to
be complete by the third quarter of 1999.
14
<PAGE>
Approximately 95% of IT systems are remediated and in production. Management
expects the remainder to be completed and in production by the third quarter of
1999. 95% of non-IT systems are compliant and are expected to be fully Year 2000
compliant by November 1999.
Incremental costs, which include contractor costs to modify or replace
existing systems, and costs of internal resources dedicated to achieving Year
2000 compliance are charged to expense as incurred and are funded by operating
cash flows. Costs are expected to total approximately $40 million to $45
million, of which $27 million has been spent through June 30, 1999.
In 1998 Nabisco began a process of contacting key third parties (suppliers,
services providers and customers) to determine their progress on Year 2000
compliance issues and to assess the potential impact on operations if key third
parties are not successful in converting their systems in a timely manner. In
early 1999, Nabisco initiated an effort to gain greater assurance that it will
not suffer any material adverse affects of third party non-compliance. This
effort consisted of re-contacting these third parties and contacting additional
selected third parties to obtain more accurate and up-to-date status of their
Year 2000 compliance. As of June 30, 1999, Nabisco had sent correspondence to
100% of these third parties. As of June 30, 1999, Nabisco has received responses
from 60% of all third parties, with 58% of all third parties indicating
compliance. Responses from all third parties are expected to be received by the
third quarter of 1999. For third parties who have not responded or where
non-compliance was indicated, management has considered this in their assessment
of risk.
Progress against Year 2000 compliance plans is monitored by management as
well as the internal audit department. Results are reported to the Board of
Directors on a regular basis.
Nabisco's existing systems risk management program includes emergency backup
and recovery procedures to be followed in the event of failure of a
business-critical system. In addition, contingency plans to protect the business
from Year 2000-related interruptions have been developed, which will include
development of backup procedures, identification of alternate suppliers and
possible increases in safety inventory levels. The possible consequences of
Nabisco or key third parties not being fully Year 2000 compliant include
temporary plant closings, delays in the delivery of products or receipt of
supplies, invoice and collection errors, and inventory obsolescence. However,
Nabisco believes its Year 2000 implementation plan, including contingency
measures, should be completed in all material respects by the end of 1999,
thereby reducing the possible material adverse effects of the Year 2000 on
Nabisco's business, results of operations, cash flows or financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE EXPOSURE
Nabisco is exposed to changes in interest rates primarily as a result of its
borrowing activities which include commercial paper, short-term borrowings and
long-term fixed rate debt used to maintain liquidity and fund its business
operations. Nabisco employs a variance/co-variance approach to its calculation
of Value at Risk ("VaR"), which is a statistical measure of potential loss in
terms of fair value, cash flows, or earnings of interest rate sensitive
financial instruments over a one year horizon using a 95% confidence interval
for changes in interest rates. The model assumes that financial returns are
normally distributed. For options and instruments with non-linear returns, the
model uses the delta/gamma method to approximate the financial return.
The VaR of the potential loss in fair value associated with Nabisco's
exposure to changing interest rates was $221 million after tax at June 30, 1999,
a decrease of $25 million from the December 31, 1998 amount. This exposure is
primarily related to long-term debt with fixed interest rates.
The VaR model is a risk analysis tool and does not purport to represent
actual losses in fair value that will be incurred by Nabisco, nor does it
consider the potential effect of favorable changes in market factors.
15
<PAGE>
COMMODITY PRICE EXPOSURE
The VaR associated with Nabisco's derivative commodity instruments due to
reasonably possible near-term changes in commodity prices, based on historical
commodity price movements, would not result in a material effect on the future
earnings of Nabisco.
The VaR associated with Nabisco's net commodity exposure (derivatives plus
physical contracts less anticipated future consumption) would result in a
potential loss in earnings of $44 million after tax at June 30, 1999, an
increase of $26 million from the December 31, 1998 amount primarily due to the
volatility of soy oil and wheat commodity prices on our underlying position in
those commodities.
The VaR associated with either Nabisco's derivative commodity instruments or
its net commodity exposure would not have a material effect on the fair values
or cash flows of Nabisco.
------------------------
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 the amount of
savings from the restructuring 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.
16
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
*12 Nabisco, Inc. Computation of Ratio of Earnings to Fixed Charges for the Six
Months ended June 30, 1999.
*27.1 Nabisco Holdings Corp. Financial Data Schedule for the second quarter of
1999.
*27.2 Nabisco, Inc. Financial Data Schedule for the second quarter of 1999.
</TABLE>
----------------------------
* Filed herewith
(b) Reports on Form 8-K filed in the Second Quarter of 1999
Report on Form 8-K dated June 14, 1999, filing notice of transfer of
Nabisco Holdings Corp. Class B common stock from RJR Nabisco, Inc. (which
has been renamed R.J. Reynolds Tobacco Holdings, Inc.) to RJR Nabisco
Holdings Corp. (which has been renamed Nabisco Group Holdings Corp.).
17
<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 13, 1999 /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>
18
<PAGE>
EXHIBIT 12
NABISCO, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1999
---------------
<S> <C>
Earnings before fixed charges:
Net income....................................................................................... $ 101
Provision for income taxes....................................................................... 66
-----
Income before income taxes....................................................................... 167
Interest and debt expense........................................................................ 129
Interest portion of rental expense............................................................... 14
-----
Earnings before fixed charges...................................................................... $ 310
-----
-----
Fixed charges:
Interest and debt expense........................................................................ $ 129
Interest portion of rental expense............................................................... 14
Capitalized interest............................................................................. 1
-----
Total fixed charges............................................................................ $ 144
-----
-----
Ratio of earnings to fixed charges................................................................. 2.2
-----
-----
</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 THE SEC FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000932130
<NAME> NABISCO HOLDINGS
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 104
<SECURITIES> 0
<RECEIVABLES> 470
<ALLOWANCES> 0
<INVENTORY> 819
<CURRENT-ASSETS> 1,561
<PP&E> 2,839
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,898
<CURRENT-LIABILITIES> 1,615
<BONDS> 3,644
0
0
<COMMON> 3
<OTHER-SE> 3,764
<TOTAL-LIABILITY-AND-EQUITY> 10,898
<SALES> 3,878
<TOTAL-REVENUES> 3,878
<CGS> 2,116
<TOTAL-COSTS> 2,116
<OTHER-EXPENSES> 107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 129
<INCOME-PRETAX> 167
<INCOME-TAX> 66
<INCOME-CONTINUING> 101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101
<EPS-BASIC> .38
<EPS-DILUTED> .38
</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 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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 104
<SECURITIES> 0
<RECEIVABLES> 470
<ALLOWANCES> 0
<INVENTORY> 819
<CURRENT-ASSETS> 1,605
<PP&E> 2,839
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,942
<CURRENT-LIABILITIES> 1,615
<BONDS> 3,644
0
0
<COMMON> 0
<OTHER-SE> 3,811
<TOTAL-LIABILITY-AND-EQUITY> 10,942
<SALES> 3,878
<TOTAL-REVENUES> 3,878
<CGS> 2,116
<TOTAL-COSTS> 2,116
<OTHER-EXPENSES> 107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 129
<INCOME-PRETAX> 167
<INCOME-TAX> 66
<INCOME-CONTINUING> 101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
