<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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: APRIL 27, 1999:
<TABLE>
<C> <S>
NABISCO HOLDINGS CORP.: 51,603,940 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 March 31, 1999 and 1998......... 1
Consolidated Condensed Statements of Comprehensive Income--Three Months Ended March 31, 1999 and
1998.......................................................................................... 2
Consolidated Condensed Statements of Cash Flows--Three Months Ended March 31, 1999 and 1998..... 3
Consolidated Condensed Balance Sheets--March 31, 1999 and December 31, 1998..................... 4
Notes to Consolidated Condensed Financial Statements............................................ 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk...................................... 12
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............................................. 14
Item 6. Exhibits and Reports on Form 8-K................................................................ 14
Signatures................................................................................................. 15
</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
MARCH 31, 1999 MARCH 31, 1998
----------------------- -----------------------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
NET SALES................................................................... $ 1,855 $ 1,855 $ 1,962 $ 1,962
---------- ----------- ---------- -----------
Costs and expenses:
Cost of products sold..................................................... 1,027 1,027 1,125 1,125
Selling, advertising, administrative and general expenses................. 641 641 599 599
Amortization of trademarks and goodwill................................... 53 53 56 56
---------- ----------- ---------- -----------
OPERATING INCOME...................................................... 134 134 182 182
Interest and debt expense................................................... (65) (65) (80) (80)
Other income (expense), net................................................. (10) (10) (9) (9)
---------- ----------- ---------- -----------
Income before income taxes............................................ 59 59 93 93
Provision for income taxes.................................................. 23 23 38 38
---------- ----------- ---------- -----------
NET INCOME............................................................ $ 36 $ 36 $ 55 $ 55
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
NET INCOME PER COMMON SHARE--BASIC.......................................... $ .14 $ .21
---------- ----------
---------- ----------
NET INCOME PER COMMON SHARE--DILUTED........................................ $ .13 $ .21
---------- ----------
---------- ----------
DIVIDENDS DECLARED PER COMMON SHARE......................................... $ .1875 $ .175
---------- ----------
---------- ----------
Average number of common shares outstanding (in thousands):
Basic..................................................................... 264,736 264,266
---------- ----------
---------- ----------
Diluted................................................................... 267,042 267,263
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
1
<PAGE>
NABISCO HOLDINGS CORP.
NABISCO, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
----------------------- -----------------------
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
NET INCOME.................................................................. $ 36 $ 36 $ 55 $ 55
Other comprehensive income:
Foreign currency translation.............................................. (135) (135) (11) (11)
---------- ----------- ---------- -----------
Other comprehensive income (loss) before income taxes....................... (135) (135) (11) (11)
Provision (benefit) for income taxes...................................... -- -- -- --
---------- ----------- ---------- -----------
OTHER COMPREHENSIVE INCOME (LOSS) NET OF INCOME TAX......................... (135) (135) (11) (11)
---------- ----------- ---------- -----------
Comprehensive income (loss)................................................. $ (99) $ (99) $ 44 $ 44
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</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>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
------------------------ ------------------------
<S> <C> <C> <C> <C>
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
----------- ----------- ----------- -----------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income............................................................. $ 36 $ 36 $ 55 $ 55
Adjustments to reconcile net income to net cash flows from operating
activities:
Depreciation of property, plant and equipment...................... 67 67 68 68
Amortization of intangibles........................................ 53 53 56 56
Deferred income tax provision...................................... 16 16 22 22
Restructuring payments............................................. (18) (18) -- --
Accounts receivable, net........................................... (8) (8) 26 26
Inventories........................................................ (73) (73) (17) (17)
Prepaid expenses................................................... (1) (1) (19) (19)
Accounts payable................................................... (172) (172) (216) (216)
Accrued liabilities................................................ (48) (46) (74) (87)
Income taxes accrued............................................... (4) (4) (39) (39)
Other, net......................................................... 3 3 (4) (4)
----- ----- ----- -----
Net cash flows (used in) operating activities........................ (149) (147) (142) (155)
----- ----- ----- -----
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures................................................... (47) (47) (78) (78)
Other, net............................................................. 2 2 3 3
----- ----- ----- -----
Net cash flows (used in) investing activities........................ (45) (45) (75) (75)
----- ----- ----- -----
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net proceeds from the issuance of long-term debt....................... 233 233 999 999
Repayments of long-term debt........................................... (7) (7) (804) (804)
Increase in notes payable.............................................. 5 5 44 44
Proceeds from the sale of call options on long-term debt............... -- -- 41 41
Dividends paid on common stock......................................... (46) (46) (46) (46)
Net proceeds from issuance of Class A common stock..................... 2 -- 15 --
Repurchases of Class A common stock.................................... -- -- (26) --
----- ----- ----- -----
Net cash flows from financing activities............................. 187 185 223 234
----- ----- ----- -----
Effect of exchange rate changes on cash and cash equivalents............. (6) (6) (4) (4)
----- ----- ----- -----
Net change in cash and cash equivalents.............................. (13) (13) 2 --
Cash and cash equivalents at beginning of period......................... 111 111 127 127
----- ----- ----- -----
Cash and cash equivalents at end of period............................... $ 98 $ 98 $ 129 $ 127
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
3
<PAGE>
NABISCO HOLDINGS CORP.
NABISCO, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
---------------------- ----------------------
<S> <C> <C> <C> <C>
NABISCO NABISCO
HOLDINGS NABISCO HOLDINGS NABISCO
----------- --------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 98 $ 98 $ 111 $ 111
Accounts receivable, net............................................ 482 482 506 506
Deferred income taxes............................................... 80 80 98 98
Inventories......................................................... 803 803 753 753
Prepaid expenses.................................................... 69 68 70 69
----------- --------- ----------- ---------
TOTAL CURRENT ASSETS............................................ 1,532 1,531 1,538 1,537
----------- --------- ----------- ---------
Property, plant and equipment--at cost................................ 4,737 4,737 4,806 4,806
Less accumulated depreciation......................................... (1,878) (1,878) (1,859) (1,859)
----------- --------- ----------- ---------
Net property, plant and equipment................................... 2,859 2,859 2,947 2,947
----------- --------- ----------- ---------
Trademarks, net of accumulated amortization of $1,129 and $1,102,
respectively........................................................ 3,335 3,335 3,368 3,368
Goodwill, net of accumulated amortization of $933 and
$910, respectively.................................................. 3,132 3,132 3,182 3,182
Other assets and deferred charges..................................... 86 86 82 82
----------- --------- ----------- ---------
$ 10,944 $ 10,943 $ 11,117 $ 11,116
----------- --------- ----------- ---------
----------- --------- ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable....................................................... $ 67 $ 67 $ 68 $ 68
Accounts payable.................................................... 239 239 407 407
Accrued liabilities................................................. 960 910 1,043 997
Intercompany payable to Nabisco Holdings............................ -- 12 -- 5
Current maturities of long-term debt................................ 265 265 118 118
Income taxes accrued................................................ 115 115 111 111
----------- --------- ----------- ---------
TOTAL CURRENT LIABILITIES....................................... 1,646 1,608 1,747 1,706
----------- --------- ----------- ---------
Long-term debt (less current maturities).............................. 3,692 3,692 3,619 3,619
Other noncurrent liabilities.......................................... 706 706 704 704
Deferred income taxes................................................. 1,161 1,161 1,162 1,162
Stockholders' equity:
Class A common stock (51,537,723 and 51,434,872 shares issued and
outstanding at March 31, 1999 and December 31, 1998,
respectively)..................................................... 1 -- 1 --
Class B common stock (213,250,000 shares issued and outstanding at
March 31, 1999 and December 31, 1998)............................. 2 -- 2 --
Paid-in capital..................................................... 4,092 4,141 4,092 4,141
Retained earnings (deficit)......................................... (21) (45) (5) (31)
Treasury stock, at cost............................................. (13) -- (18) --
Accumulated other comprehensive income.............................. (320) (320) (185) (185)
Notes receivable on common stock purchases.......................... (2) -- (2) --
----------- --------- ----------- ---------
TOTAL STOCKHOLDERS' EQUITY...................................... 3,739 3,776 3,885 3,925
----------- --------- ----------- ---------
$ 10,944 $ 10,943 $ 11,117 $ 11,116
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</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 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.
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 3,825 positions were
eliminated as of March 31, 1999. The restructuring programs will require cash
expenditures of approximately $205 million. In addition, the programs will
require additional expenses of approximately $134 million. $71 million ($42
million after tax) was incurred since the programs' inception, of which $15
million ($9 million after tax) was incurred in the first quarter of 1999. These
additional expenses are principally for implementation and integration of the
programs and include costs for relocation of employees and equipment and
training. Pre-tax savings in 1999 will be approximately $80 million and, after
completion of the programs, are expected to be approximately $145 million
annually.
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
Three months ended March 31, 1999................... 17 1 9 6 33
----- --- ----- --- ---------
Total charges and payments...................... 51 4 21 18 94
----- --- ----- --- ---------
March 31, 1999 Balance.............................. $ 157 $ 14 $ 236 $ 29 $ 436
----- --- ----- --- ---------
----- --- ----- --- ---------
</TABLE>
5
<PAGE>
The charges applied against the restructuring reserves included cash
expenditures of $57 million, $16 million of which was incurred in the first
quarter of 1999.
- - Sales force reorganizations consist of $35 million for Biscuit to reorganize
its direct store delivery sales force to improve its effectiveness and $5
million for the International Food Group, principally Latin America.
- - Distribution reorganizations consist of plans to exit a number of domestic
and international distribution and warehouse facilities, principally $19
million for Biscuit and $14 million for the International Food Group.
- - Headquarters and operating unit staff reductions consist of realignments,
functional consolidations and eliminations of positions throughout the
Company. Amounts are: $37 million for the U.S. Foods Group; $26 million for
International headquarters, Canada and other foreign units; $15 million for
corporate headquarters; and $8 million for Biscuit.
- - Manufacturing cost reduction initiatives consist of a number of domestic and
international programs to increase productivity, principally $19 million for
Biscuit and $7 million for Canada.
- - Plant closure accruals are for the closure and future sale of 18 production
facilities in order to improve manufacturing efficiencies and reduce costs.
Amounts are: Biscuit $217 million; U.S. Foods Group $12 million; and
International Food Group $52 million. As of March 31, 1999, production had
ceased in 6 facilities which are being actively marketed for sale. Other exit
costs consist of carrying costs to be incurred prior to sale.
- - Product line rationalizations consist of exit costs to discontinue a number
of domestic and international product lines. Other exit costs are principally
write-offs for disposals of various discontinued products. Amounts are: U.S.
Foods Group $34 million; Biscuit $14 million; and International Food Group
$12 million.
1996 RESTRUCTURING CHARGE
The 1996 restructuring program undertaken to streamline operations and
improve profitability has been completed and the $2 million balance remaining at
December 31, 1998 for severance costs was paid during the first quarter of 1999.
NOTE 2--INVENTORIES
The major classes of inventory are shown in the table below:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
IN MILLIONS 1999 1998
- ---------------------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Finished products....................................................................... $ 472 $ 457
Raw materials........................................................................... 202 164
Other................................................................................... 129 132
----- -----
$ 803 $ 753
----- -----
----- -----
</TABLE>
6
<PAGE>
NOTE 3--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
ENDED MARCH 31,
-------------------------
IN MILLIONS 1999 1998
- ---------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
Net sales from external customers:
Biscuit............................................................................... $ 867 $ 850
U.S. Foods Group...................................................................... 435 407
International Food Group.............................................................. 553 580
----------- ------------
Total ongoing..................................................................... 1,855 1,837
----------- ------------
U.S. Foods Group...................................................................... -- 123
International Food Group.............................................................. -- 2
----------- ------------
Total divested.................................................................... -- 125
----------- ------------
Total........................................................................... $ 1,855 $ 1,962
----------- ------------
----------- ------------
Operating company contribution before restructuring-related expenses:
Biscuit............................................................................... $ 121 $ 143
U.S. Foods Group...................................................................... 49 44
International Food Group.............................................................. 32 32
----------- ------------
Total ongoing..................................................................... 202 219
----------- ------------
U.S. Foods Group...................................................................... -- 19
----------- ------------
Total divested.................................................................... -- 19
----------- ------------
Segment operating company contribution before restructuring-related expenses............ 202 238
Restructuring-related expenses.......................................................... (15) --
Amortization of trademarks and goodwill................................................. (53) (56)
----------- ------------
Consolidated operating income........................................................... 134 182
Interest and debt expense............................................................... (65) (80)
Other income (expense), net............................................................. (10) (9)
----------- ------------
Income (loss) before income taxes....................................................... $ 59 $ 93
----------- ------------
----------- ------------
<CAPTION>
AS OF
MARCH 31, DECEMBER 31,
IN MILLIONS 1999 1998
- ---------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
Segment assets:
Biscuit............................................................................... $ 2,124 $ 2,124
U.S. Foods Group...................................................................... 871 840
International Food Group.............................................................. 2,422 2,579
----------- ------------
Total segment assets.................................................................. 5,417 5,543
Unallocated intangibles, net (1)...................................................... 5,527 5,574
----------- ------------
Consolidated assets................................................................... $ 10,944 $ 11,117
----------- ------------
----------- ------------
</TABLE>
- ------------------------
(1) Represents unallocated goodwill, trademarks and tradename resulting from the
1989 acquisition of RJRN.
7
<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 of the results
of operations is divided into separate sections for sales, operating company
contribution and operating income. Each section 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").
SALES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------------------
(IN MILLIONS) 1999 1998 % CHANGE
- ----------------------------------------------------------------------------------- --------- --------- -------------
<S> <C> <C> <C>
REPORTED NET SALES:
Biscuit.......................................................................... $ 867 $ 850 2%
U.S. Foods Group................................................................. 435 530 (18)%
International Food Group......................................................... 553 582 (5)%
--------- ---------
Total............................................................................ $ 1,855 $ 1,962 (5)%
--------- ---------
--------- ---------
NET SALES FROM DIVESTED BUSINESSES:
U.S. Foods Group................................................................. $ -- $ 123
International Food Group......................................................... -- 2
--------- ---------
Total............................................................................ $ -- $ 125
--------- ---------
--------- ---------
NET SALES FROM ONGOING BUSINESSES:
Biscuit.......................................................................... $ 867 $ 850 2%
U.S. Foods Group................................................................. 435 407 7%
International Food Group......................................................... 553 580 (5)%
--------- ---------
Total............................................................................ $ 1,855 $ 1,837 1%
--------- ---------
--------- ---------
</TABLE>
THE FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON NET SALES FROM ONGOING
BUSINESSES.
<TABLE>
<C> <S>
- Biscuit net sales increased 2% reflecting price increases and volume gains in core cookies
and crackers partially offset by lower volumes in SnackWell's and breakfast snacks. Net
sales increased 4% after adjusting for fewer selling days in the first quarter of 1999.
- U.S. Foods Group's net sales increased 7% due to increased volumes from Planters nuts,
Life Savers candy, and A.1. steak sauces.
- International's net sales decreased 5% primarily due to currency devaluation in Brazil and
Canada, and volume declines in Brazil, Argentina, Colombia and Ecuador partially offset by
price increases in Brazil, and volume gains in Canada, Mexico, and the Caribbean.
</TABLE>
8
<PAGE>
OPERATING COMPANY CONTRIBUTION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------------------
(IN MILLIONS) 1999 1998 % CHANGE
--------- --------- -------------
<S> <C> <C> <C>
REPORTED OPERATING COMPANY CONTRIBUTION(1):
Biscuit.......................................................................... $ 108 $ 143 (24)%
U.S. Foods Group................................................................. 48 63 (24)%
International Food Group......................................................... 31 32 (3)%
--------- ---------
Total............................................................................ $ 187 $ 238 (21)%
--------- ---------
--------- ---------
ITEMS EXCLUDED FROM ONGOING OPERATING COMPANY CONTRIBUTION:
Biscuit.......................................................................... $ -- $ --
Restructuring-related expenses................................................. (13) --
U.S. Foods Group:
Restructuring-related expenses................................................. (1) --
Results from divested businesses............................................... -- 19
International Food Group:
Restructuring-related expenses................................................. (1) --
Results from divested businesses............................................... -- --
--------- ---------
Total............................................................................ $ (15) $ 19
--------- ---------
--------- ---------
OPERATING COMPANY CONTRIBUTION FROM ONGOING BUSINESSES:
Biscuit.......................................................................... $ 121 $ 143 (15)%
U.S. Foods Group................................................................. 49 44 11%
International Food Group......................................................... 32 32 --%
--------- ---------
Total............................................................................ $ 202 $ 219 (8)%
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) Operating company contribution represents operating income before
amortization of trademarks and goodwill and restructuring charges.
THE FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON OPERATING COMPANY CONTRIBUTION
FROM ONGOING BUSINESSES:
<TABLE>
<C> <S>
- Biscuit's operating company contribution decreased 15% primarily due to increased
marketing spending for core brands and higher costs associated with the implementation of
the redesigned direct store delivery sales force. Price increases and lower manufacturing
fixed overhead costs resulting from restructuring programs partially offset these higher
costs.
- U.S. Foods Group's operating company contribution increased 11% as a result of volume
gains in Planters nuts, Life Savers candy and A.1. steak sauces. Also contributing to the
improvement was the impact of restructuring programs on fixed overhead costs partially
offset by increased marketing costs.
- International's operating company contribution remained unchanged from a year ago.
Although earnings increased in Brazil as a result of the elimination of unprofitable
product lines and lower fixed overhead costs, the net impact of operations in other Latin
American countries and Canada offset these gains.
</TABLE>
9
<PAGE>
OPERATING INCOME
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------------------
(IN MILLIONS) 1999 1998 % CHANGE
--------- --------- -------------
<S> <C> <C> <C>
REPORTED OPERATING INCOME:
Total............................................................................ $ 134 $ 182 (26)%
--------- ---------
--------- ---------
OPERATING INCOME EXCLUDED FROM ONGOING BUSINESSES:
Restructuring-related expenses................................................. $ (15) $ --
Results from divested businesses............................................... -- 16
--------- ---------
Total............................................................................ $ (15) $ 16
--------- ---------
--------- ---------
OPERATING INCOME FROM ONGOING BUSINESSES:
--------- ---------
Total............................................................................ $ 149 $ 166 (10)%
--------- ---------
--------- ---------
</TABLE>
THE FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON OPERATING INCOME FROM ONGOING
BUSINESSES:
<TABLE>
<C> <S>
- Nabisco Holdings' operating income was $149 million in the first quarter of 1999, a
decrease of 10% from the first quarter 1998 level of $166 million, as a result of the
decrease in operating company contribution discussed previously.
</TABLE>
INTEREST AND DEBT EXPENSE
Consolidated interest expense of $65 million in the first quarter of 1999
decreased 19% from the first quarter of 1998, primarily due to the paydown of
long-term debt with the net proceeds from businesses sold in the third quarter
of 1998.
NET INCOME
Nabisco Holdings reported net income of $36 million in the first quarter of
1999, a decrease of 35% when compared with net income of $55 million for the
first quarter of 1998. This decrease resulted primarily from lower operating
income and lower interest and debt expense.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income decreased $143 million to a loss of $99 million in the
first quarter of 1999 when compared to income of $44 million for the first
quarter of 1998. This decrease was due to higher foreign currency translation
losses in 1999 of $124 million and lower 1999 net income of $19 million.
RESTRUCTURING
The 1998 restructuring programs are proceeding as scheduled. The June 1998
program is expected to be completed in 1999 and the December 1998 program is
expected to be completed by mid year 2000. For a further discussion of
restructuring programs see Note 1 to the Consolidated Condensed Financial
Statements.
LIQUIDITY AND FINANCIAL CONDITION
Net cash flows used in operating activities amounted to $149 million for the
first quarter of 1999 compared to $142 million for the first quarter of 1998.
The increase in net cash flows used in operating activities primarily reflects
payments related to restructuring in 1999 and the 1999 decrease in net income
partially offset by lower outflow of working capital.
10
<PAGE>
Cash flows used in investing activities decreased $30 million in the first
quarter of 1999 to $45 million from the first quarter of 1998, primarily because
of lower capital expenditures.
Capital expenditures were $47 million in the first quarter of 1999.
Management expects that capital expenditures for 1999 will be approximately $200
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
1999.
Cash flows from financing activities for the first quarter of 1999 decreased
$36 million to $187 million from the first quarter of 1998, principally due to
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.
As of March 31, 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 $407 million, and accordingly, $703 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 March 31, 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 $4.0 billion and $7.8 billion,
respectively, of which total debt is higher by $219 million and total capital is
higher by $73 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 March 31, 1999 were 1.1 to 1 and .52 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 is exposed to the current volatility of financial markets in Brazil,
which impacted the International Food Group's financial position. As of March
31, 1999, Brazil's currency, the REAL, suffered a devaluation of approximately
50% from December 31, 1998, compared to the U.S. Dollar, which resulted in an
unfavorable foreign currency translation adjustment of approximately $125
million.
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 is continuing to assess and inventory its financial, information and
operational systems, including equipment with embedded microprocessors, and is
developing detailed plans for required systems modifications or replacements.
The inventory and assessment process for information technology systems ("IT
systems") has been completed. Management estimates that this process for
non-information technology systems with embedded technology ("non-IT systems")
is 97% complete and scheduled to be 100% complete by the end of the second
quarter 1999.
Software remediation is ongoing and, in the case of IT systems, is
approximately 98% complete. Management expects this phase of Year 2000 readiness
to be complete by the end of the second quarter 1999. In the case of non-IT
systems, hardware and software remediation is in its early stages with an
estimated completion date of the third quarter of 1999.
11
<PAGE>
Software testing following remediation is approximately 92% complete for IT
systems. Management expects that testing will be complete by the second quarter
of 1999, with the exception of certain stand-alone systems which are anticipated
to be completed in the third quarter of 1999. With respect to non-IT systems,
testing is ongoing and is expected to be complete by the third quarter of 1999.
Approximately 90% of IT systems are remediated and in production. Management
expects the remainder to be completed and in production by the second quarter of
1999, with the exception of certain stand-alone systems which are anticipated to
be completed in the third quarter of 1999. 79% of non-IT systems are compliant
as of March 31, 1999 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 $35 million to $40
million, of which $20 million has been spent through March 31, 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 consists 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 March 31, 1999, Nabisco had sent correspondence to
100% of these third parties. As of March 31, 1999, Nabisco has received
responses from 37% of all third parties, with 35% indicating compliance.
Responses from all third parties are expected to be received by the third
quarter of 1999.
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 are being developed, which will include
development of backup procedures, identification of alternate suppliers and
possible increases in safety inventory levels. These plans will be complete by
the second quarter of 1999. 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.
12
<PAGE>
The VaR, which is the potential loss in fair value associated with Nabisco's
exposure to changing interest rates was $215 million after tax at March 31,
1999, a decrease of $30 million from the December 31, 1998 amount.
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.
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 $24 million at March 31, 1999, an increase of $6
million from the December 31, 1998 amount.
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.
13
<PAGE>
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The matters below were voted upon at the annual meeting of stockholders of
Nabisco Holdings Corp. held on May 4, 1999. At the meeting, 32,837,194 shares of
Class A Common Stock and 213,250,000 shares of Class B Common Stock were
represented in person or by proxy. Class A Common Stock and Class B Common Stock
are entitled to one (1) vote and ten (10) votes per share, respectively, and
vote together as a single class.
(a) Election of six Directors.
<TABLE>
<CAPTION>
NAME VOTES FOR VOTES WITHHELD
- -------------------- -------------- --------------
<S> <C> <C>
Herman Cain 2,172,410,212 38,734
John T. Chain, Jr. 2,172,410,212 38,734
Steven F. Goldstone 2,172,410,212 38,734
David B. Jenkins 2,172,410,312 38,634
James M. Kilts 2,172,410,312 38,634
Kay Koplovitz 2,172,410,312 38,634
</TABLE>
(b) Ratification of appointment of Deloitte & Touche LLP as independent
auditors.
<TABLE>
<S> <C>
For: 2,172,424,905
Against: 12,398
Abstain: 11,643
</TABLE>
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 three
months ended March 31, 1999.
*27.1 Nabisco Holdings Corp. Financial Data Schedule for the first quarter of 1999.
*27.2 Nabisco, Inc. Financial Data Schedule for the first quarter of 1999.
</TABLE>
----------------------------
* Filed herewith.
(b) Reports on Form 8-K
None.
14
<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)
/s/ JAMES E. HEALEY
......................................
James E. Healey
Executive Vice President and
Chief Financial Officer
Date: May 4, 1999 /s/ IAN E. LEE-LEVITEN
......................................
Ian E. Lee-Leviten
Senior Vice President and Controller
</TABLE>
15
<PAGE>
EXHIBIT 12
NABISCO, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, 1999
-----------------
<S> <C>
Earnings before fixed charges:
Net income...................................................................................... $ 36
Provision for income taxes...................................................................... 23
-----
Income before income taxes...................................................................... 59
Interest and debt expense....................................................................... 65
Interest portion of rental expense.............................................................. 7
-----
Earnings before fixed charges..................................................................... $ 131
-----
-----
Fixed charges:
Interest and debt expense....................................................................... $ 65
Interest portion of rental expense.............................................................. 7
Capitalized interest............................................................................ 1
-----
Total fixed charges........................................................................... $ 73
-----
-----
Ratio of earnings to fixed charges................................................................ 1.8
-----
-----
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 98
<SECURITIES> 0
<RECEIVABLES> 482
<ALLOWANCES> 0
<INVENTORY> 803
<CURRENT-ASSETS> 1,532
<PP&E> 2,859
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,944
<CURRENT-LIABILITIES> 1,646
<BONDS> 3,692
0
0
<COMMON> 3
<OTHER-SE> 3,736
<TOTAL-LIABILITY-AND-EQUITY> 10,944
<SALES> 1,855
<TOTAL-REVENUES> 11,855
<CGS> 1,027
<TOTAL-COSTS> 1,027
<OTHER-EXPENSES> 53
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65
<INCOME-PRETAX> 59
<INCOME-TAX> 23
<INCOME-CONTINUING> 36
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36
<EPS-PRIMARY> .14
<EPS-DILUTED> .13
</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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 98
<SECURITIES> 0
<RECEIVABLES> 482
<ALLOWANCES> 0
<INVENTORY> 803
<CURRENT-ASSETS> 1,531
<PP&E> 2,859
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,943
<CURRENT-LIABILITIES> 1,608
<BONDS> 3,692
0
0
<COMMON> 0
<OTHER-SE> 3,776
<TOTAL-LIABILITY-AND-EQUITY> 10,943
<SALES> 1,855
<TOTAL-REVENUES> 1,855
<CGS> 1,027
<TOTAL-COSTS> 1,027
<OTHER-EXPENSES> 53
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65
<INCOME-PRETAX> 59
<INCOME-TAX> 23
<INCOME-CONTINUING> 36
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
