UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 24, 1995 (January 24, 1995)
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Date of Report (Date of earliest event reported)
AMERICAN BRANDS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-9076 13-3295276
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
l700 East Putnam Avenue, Old Greenwich, Connecticut 06870-0811
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 698-5000
----------------------
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
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Registrant's press release dated January 24, 1995 is filed
herewith as Exhibit 20 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
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(c) Exhibits.
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20. Press release of Registrant dated January 24, 1995.
This Current Report shall not be construed as a waiver of the
right to contest the validity or scope of any or all of the provisions of
the Securities Exchange Act of 1934 under the Constitution of the United
States, or the validity of any rule or regulation made or to be made under
such Act.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Current Report to be
signed on its behalf by the undersigned thereunto duly authorized.
AMERICAN BRANDS, INC.
---------------------
(Registrant)
By Robert L. Plancher
--------------------------------
Robert L. Plancher
Senior Vice President
and Chief Accounting Officer
Date: January 24, 1995
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered Page
- ------- -------------
20. Press release of Registrant dated
January 24, 1995.
EXHIBIT 20
----------
FOR IMMEDIATE RELEASE
Contact: Roger W. W. Baker
(203) 698-5148
Daniel A. Conforti
(203) 698-5132
AMERICAN BRANDS REPORTS SHARPLY HIGHER EARNINGS;
FURTHER DISPOSITIONS ANNOUNCED
Old Greenwich, CT, January 24 -- American Brands, Inc. today
announced that earnings per Common share from continuing
operations for the quarter ended December 31, 1994 rose 44% to
$1.02 per share, excluding a $1.32 net gain on disposal of
businesses, compared with 71 cents per share for the fourth
quarter of 1993. Sales were up 7% to $3.8 billion.
During the quarter, the Company completed the sale of The
American Tobacco Company for $1 billion and announced an
agreement for the sale of the Franklin Life Insurance business
for $1.17 billion. The life insurance business is now accounted
for as a discontinued operation. Including discontinued
operations and 1993 accounting changes, net income for the
quarter rose 44% to $269 million, or $1.33 per share, from $187
million, or 92 cents per share, a year earlier. The sale of The
American Tobacco Company does not meet the technical accounting
definition of a 'discontinued operation,' since Gallaher Tobacco
in Europe is part of the American Brands group.
For the year, earnings per share from continuing operations,
excluding the $1.32 net gain on disposal of businesses, rose 15%
to $3.06 per share, compared with $2.67 per share for 1993.
Sales increased 4% to $13.1 billion.
Fluctuations in exchange rates for foreign currencies,
primarily the British pound, favorably affected sales, income
from continuing operations and E.P.S. by $160 million, $13
million and 6 cents, respectively, in the quarter, and $186
million, $15 million and 7 cents, respectively, for the year.
The Company announced that it intends to dispose of a number
of nonstrategic businesses and product lines. A pretax charge,
substantially non-cash, aggregating $245 million (essentially the
same after taxes) was recorded against the fourth quarter on the
"Gain on Disposal of Businesses, Net" line, partially offsetting
the $578 million pretax gain on the sale of American Tobacco.
The charge is based on an assumption of aggregate cash proceeds
in the range of $150-175 million with respect to the anticipated
dispositions. These businesses and product lines, which include
U.K.-based Prestige and Forbuoys, had combined sales of $752
million and a $3 million net loss on the contribution line for
the year 1994.
Chairman and Chief Executive Officer Thomas C. Hays said:
"We have moved aggressively to dramatically reposition American
Brands as a focused consumer products company with powerhouse
brands and leading market positions. As a result, the 'new'
American Brands has significantly enhanced growth prospects.
"The 1994 dispositions of The American Tobacco Company and
the U.K.-based optical group together with the pending sale of
Franklin Life, which is proceeding on schedule and should be
completed shortly, give American Brands a much sharper focus on
highly profitable businesses with excellent prospects. The
planned dispositions announced today further reflect our
aggressive commitment to enhance value for our stockholders.
"With the sale of The American Tobacco Company, which was
completed on December 22, American Brands no longer owns a
tobacco business in the United States. We note with great
admiration and appreciation the outstanding performance, in spite
of fierce competition and prolonged uncertainty, of our former
American Tobacco associates. Similarly, we salute the fine
contributions of our Franklin associates over the years.
"As to our ongoing business segments, each achieved record
sales in the fourth quarter, and each achieved profit growth in
both the quarter and the year.
"Our international tobacco business, U.K.-based Gallaher
Tobacco, continued to perform well, with record sales and
contribution in the quarter. Over the year, Gallaher maintained
its position as the number one tobacco company in the U.K., with
the two best-selling brands in that market, while also achieving
strong growth in exports.
"Gallaher's worldwide cigarette volume rose 6.2% in the
quarter, with a 54% increase in exports more than offsetting a
small (0.9%) decline in the U.K. For the year, U.K. volume
declined 10.4%, largely as a result of a 1993 change in the
timing of the U.K. government budget. In the U.K., where the
market as measured by consumer sales is estimated to have
declined less than 3% in 1994, Gallaher's share of consumer sales
continued to approximate 40%. Exports were up 70%, reflecting a
full year of Benson and Hedges shipments to Continental Europe
and a substantial increase in shipments to the C.I.S. Exports
represented 21% of total units in 1994, up significantly from 13%
in 1993.
"Distilled spirits contribution was a record, up slightly
for the quarter and up 3% for the year. Jim Beam Brands has a
powerful position as the second largest spirits company in the
U.S., and it has strong and rapidly growing international
operations. Whyte & Mackay has a major worldwide position in
Scotch whisky and is number two in the U.K.
"Jim Beam Brands achieved record contribution, up 3%, in the
quarter, and continued to realize solid margin growth in the face
of an extremely competitive pricing environment. Beam's results
reflect an outstanding performance in international markets,
tight cost controls and aggressive but focused marketing
programs.
"Jim Beam bourbon, which is heavily promoting its 200th
anniversary in 1995, had a fine performance in 1994. Jim Beam
continues to rank as the number one bourbon in the world, and its
worldwide sales exceeded five million cases for the first time.
Beam's Small Batch bourbons -- Booker's, Baker's, Knob Creek and
Basil Hayden -- achieved solid growth in consumer acceptance.
"Beam's international operations posted a 36% increase in
contribution in the quarter and a 41% gain for the year, backed
by volume gains in all major regions. Export branded case sales
rose 9.4% in the quarter and 14.8% for the year, mostly
offsetting declines in the U.S.; worldwide cases were down 0.7%
and 2.4% in the quarter and year, respectively. For Whyte &
Mackay, the intensely competitive promotional and pricing
environment continued to pressure margins, but cased sales
increased sharply as a result of the inclusion of Invergordon for
the full year in 1994, compared with only one month in 1993.
Fourth quarter contribution at Whyte & Mackay also benefited from
one-time bulk sales.
"The MasterBrand hardware and home improvement group
continued to perform very well, with record contribution, up 7%
and 11% in the quarter and year, respectively, backed by broad
gains. The largest selling brand, Moen, achieved solid increases
in the quarter and year, benefiting from excellent acceptance of
recently introduced products as well as the strong economy and
improved operating productivity. Although U.S. and Canadian
operations still represent the bulk of its sales and profit, Moen
has growing sales in the Pacific region and Latin America.
Master Lock, the number 1 quality padlock brand in the world, now
has national distribution at Sears, and Master door locks are now
carried nationally by The Home Depot. Aristokraft strengthened
its position as the number two kitchen and bath cabinet maker in
the U.S., with continued market share gains, shipping over two
million cabinets for the first time; Aristokraft has now achieved
sales records in 35 of the past 36 months. Waterloo, the world's
leading manufacturer of tool storage products, had another
excellent year, with strong sell-through of its products at
Sears, a significant increase in branded products, and rapid
growth in exports off a small base.
"The ACCO World office products group capped an outstanding
year with contribution up 16% to a record in the quarter. For
the year, contribution rose 13%, the third successive year of
solid profit growth, reflecting volume increases and market share
gains, increased penetration in the fastest growing distribution
channels, such as superstores, and additional benefits from
ongoing restructuring activities. ACCO achieved sales records,
up 10% and 7% in the quarter and year, respectively, with strong
results achieved by both domestic and international operations.
Strong acceptance was achieved by significant new products,
including the Day-Timer Organizer software line, a line of Day-
Timer products for retail distribution, new lines of vinyl
binders for both retail and contract distribution, and Kensington
computer mouse products.
"Titleist and Foot-Joy, which has achieved double digit
compound profit growth since we acquired it in 1976, had another
superb quarter and year, with contribution up 42% and 15%,
respectively. Titleist, the number one ball in professional
golf, and Pinnacle are, together, the top grade leader in the
U.S. market with a combined 34% share and, worldwide, with a
share of about 26%. Worldwide unit sales of golf balls reached a
record 181 million, up 8%, and Titleist was the winning golf ball
at over 100 worldwide professional golf events in 1994, more wins
than all other golf balls combined. Titleist, Pinnacle, Foot-Joy
and DryJoys are four of the most highly recognized premium
positioned brands in the worldwide golf industry.
"As we look to 1995 and beyond, we have been substantially
sharpening our focus with the 1994 and planned 1995 dispositions,
and we are very optimistic about our prospects.
"The outlook for 1995 is excellent. From our operations, we
anticipate continued overall growth. The hardware and home
improvement, office products and golf and leisure businesses have
excellent momentum and should achieve good profit growth in 1995.
Jim Beam has been achieving strong growth internationally, and
that momentum is expected to continue. Distilled spirits as well
as international tobacco continue to contend with highly
competitive pricing environments in their home markets, though
both businesses generate tremendous cash flow, which favorably
affects earnings per share.
"Share purchases will also contribute to E.P.S. growth. In
connection with the December 22 sale of American Tobacco, the
Board authorized the purchase of up to 10 million shares of our
Common stock. We have already purchased nearly 3 million shares,
and we intend to continue to be active in the marketplace. The
Board also authorized the purchase of up to an additional 10
million shares, subject to the closing of the Franklin
transaction. The combined 20 million share purchase authority
would amount to about 10% of the shares outstanding at the end of
1994.
"As noted, the sale of The American Tobacco Company does not
meet the technical accounting definition of a 'discontinued
operation.' Consequently, reported comparisons in 1995 will be
negatively affected by the absence of American Tobacco. On a
comparable basis, treating American Tobacco as if it were a
discontinued operation, 1994 earnings per share from continuing
operations would have been $2.37, up 13% from 1993 restated on
the same basis. Assuming economic conditions and an exchange
rate for the British pound reasonably comparable to 1994, we
expect to exceed in 1995 that 13% growth rate from the $2.37
base, with share purchases and lower interest expense
contributing to the anticipated growth.
"We expect that the 1994 and planned 1995 dispositions will
have no material impact on the ability of the Company to pay
dividends. While the payout ratio is currently higher than it
has been in the past, we hope to bring it down over time through
growth in earnings per share."
* * * * *
American Brands is a focused consumer products company with
powerhouse brands and leading market positions in international
tobacco, distilled spirits, hardware and home improvement
products, office products and golf and leisure products.
The international tobacco business, Gallaher Tobacco, is the
number 1 tobacco company in the U.K. and has an expanding
presence on the European continent. Gallaher's major brands
include Benson and Hedges, Silk Cut and Berkeley.
In distilled spirits, leading brands include Jim Beam and
Old Grand-Dad bourbons, DeKuyper and Leroux cordials and
liqueurs, Windsor and Lord Calvert Canadian whiskies, Kessler
American Blended Whiskey, Gilbey's gin and vodka, Kamchatka,
Wolfschmidt and Vladivar vodkas and Ronrico rum along with The
Dalmore, The Claymore and Whyte & Mackay Special Reserve Scotch
whiskies. The MasterBrand Industries hardware and home
improvement business includes Moen, Master Lock, Aristokraft and
Waterloo. ACCO World office product brands include Swingline,
Wilson Jones, Day-Timers, Rexel and Twinlock. Golf and leisure
brands include Titleist, Pinnacle and Foot-Joy and DryJoys golf
products.
# # #
1/24/95
<PAGE>
AMERICAN BRANDS, INC.
(In millions, except per share amounts)
Three Months Ended December 31,
1994 1993 % Change
Net Sales (Restated)
Ongoing Operations $3,362.8 $3,151.5 6.7
Domestic Tobacco 387.3 358.4 8.1
---------- ---------- ----------
Total Continuing Operations 3,750.1 3,509.9 6.8
========== ========== ==========
Operating Company Contribution
Ongoing Operations 365.2 354.6 3.0
Domestic Tobacco 73.4 10.5 0.0
---------- ---------- ----------
Total Continuing Operations 438.6 365.1 20.1
========== ========== ==========
Amortization of Intangibles 24.4 31.1 (21.5)
---------- ---------- ----------
Operating Income 414.2 334.0 24.0
Gain on Disposal of
Businesses, Net 332.9 0.0 0.0
Income Before Income Taxes 677.6 244.9 0.0
Income Taxes 205.7 101.0 0.0
Income From Continuing Opers. 471.9 143.9 0.0
Discontinued Opers.,Net of Taxes (202.8) 40.9 0.0
Accounting Changes, Net of Taxes 0.0 2.6 0.0
---------- ---------- ----------
Net Income 269.1 187.4 43.6
========== ========== ==========
Earnings per Common Share
Primary
Income From Continuing Opers. $1.02 $0.71 43.7
Gain on Disposal of Businesses 1.32 0.00 0.0
---------- ---------- ----------
Total Income from
Continuing Operations 2.34 0.71 0.0
Discontinued Operations (1.01) 0.20 0.0
Accounting Changes 0.00 0.01 0.0
---------- ---------- ----------
Net Income $1.33 $0.92 44.6
Fully diluted
Income From Continuing Opers. $0.98 $0.70 40.0
Gain on Disposal of Businesses 1.25 0.00 0.0
---------- ---------- ----------
Total Income from
Continuing Operations 2.23 0.70 0.0
Discontinued Operations (0.95) 0.20 0.0
Accounting Changes 0.00 0.01 0.0
---------- ---------- ----------
Net Income $1.28 $0.91 40.7
Average Common
Shares Outstanding 201.4 201.7 (0.1)
(NOTES FOLLOW)
<PAGE>
AMERICAN BRANDS, INC.
(In millions, except per share amounts)
Twelve Months Ended December 31,
1994 (1) 1993 % Change
Net Sales (Restated)
Ongoing Operations $11,551.8 $11,129.0 3.8
Domestic Tobacco 1,594.7 1,501.5 6.2
---------- ---------- ----------
Total Continuing Operations 13,146.5 12,630.5 4.1
========== ========== ==========
Operating Company Contribution
Ongoing Operations 1,161.1 1,103.8 5.2
Domestic Tobacco 247.6 169.2 46.3
---------- ---------- ----------
Total Continuing Operations 1,408.7 1,273.0 10.7
========== ========== ==========
Amortization of Intangibles 96.3 92.4 4.2
---------- ---------- ----------
Operating Income 1,312.4 1,180.6 11.2
Gain on Disposal of
Businesses, Net 332.9 0.0 0.0
Income Before Income Taxes 1,351.2 875.4 54.4
Income Taxes 466.1 334.2 39.5
Income From Continuing Opers. 885.1 541.2 63.5
Discontinued Opers.,Net of Taxes (151.0) 127.0 0.0
Accounting Changes, Net of Taxes 0.0 (198.4) 0.0
---------- ---------- ----------
Net Income 734.1 469.8 56.3
========== ========== ==========
Earnings per Common Share
Primary
Income From Continuing Opers. $3.06 $2.67 14.6
Gain on Disposal of Businesses 1.32 0.00 0.0
---------- ---------- ----------
Total Income from
Continuing Operations 4.38 2.67 64.0
Discontinued Operations (0.75) 0.63 0.0
Accounting Changes 0.00 (0.98) 0.0
---------- ---------- ----------
Net Income $3.63 $2.32 56.5
Fully diluted
Income From Continuing Opers. $2.99 $2.63 13.7
Gain on Disposal of Businesses 1.25 0.00 0.0
---------- ---------- ----------
Total Income from
Continuing Operations 4.24 2.63 61.2
Discontinued Operations (0.71) 0.60 0.0
Accounting Changes 0.00 (0.94) 0.0
---------- ---------- ----------
Net Income $3.53 $2.29 54.1
Average Common
Shares Outstanding 201.6 201.8 (0.1)
(NOTES FOLLOW)
<PAGE>
AMERICAN BRANDS, INC.
In millions, except per share amounts)
Three Months Ended December 31,
1994 1993 % Change
(Restated)
Net Sales
International Tobacco $2,015.1 $1,776.1 13.5
Distilled Spirits 428.8 386.4 11.0
Hardware & Home Improve. Prods. 338.3 312.6 8.2
Office Prods. 324.0 294.8 9.9
Golf & Leisure Prods. 89.6 76.8 16.7
Other 167.0 304.8 (45.2)
---------- ---------- ----------
Ongoing Operations 3,362.8 3,151.5 6.7
Domestic Tobacco 387.3 358.4 8.1
---------- ---------- ----------
Total Continuing Operations $3,750.1 $3,509.9 6.8
========== ========== ==========
Operating Company Contribution
International Tobacco $160.3 $144.4 11.0
Distilled Spirits 106.1 105.7 0.4
Hardware & Home Improve. Prods. 53.2 49.5 7.5
Office Prods. 43.0 37.1 15.9
Golf & Leisure Prods. 3.4 2.4 41.7
Other (0.8) 15.5 0.0
---------- ---------- ----------
Ongoing Operations 365.2 354.6 3.0
Domestic Tobacco 73.4 10.5 0.0
---------- ---------- ----------
Total Continuing Operations $438.6 $365.1 20.1
========== ========== ==========
Twelve Months Ended December 31,
1994 (1) 1993 % Change
(Restated)
Net Sales
International Tobacco $6,168.9 $5,940.0 3.9
Distilled Spirits 1,268.2 1,194.6 6.2
Hardware & Home Improve. Prods. 1,270.6 1,119.5 13.5
Office Prods. 1,049.7 977.2 7.4
Golf & Leisure Prods. 507.1 452.7 12.0
Other 1,287.3 1,445.0 (10.9)
---------- ---------- ----------
Ongoing Operations 11,551.8 11,129.0 3.8
Domestic Tobacco 1,594.7 1,501.5 6.2
---------- ---------- ----------
Total Continuing Operations $13,146.5 $12,630.5 4.1
========== ========== ==========
Operating Company Contribution
International Tobacco $522.3 $488.8 6.9
Distilled Spirits 255.1 246.9 3.3
Hardware & Home Improve. Prods. 206.6 185.6 11.3
Office Prods. 95.0 84.1 13.0
Golf & Leisure Prods. 74.4 64.6 15.2
Other 7.7 33.8 (77.2)
---------- ---------- ----------
Ongoing Operations 1,161.1 1,103.8 5.2
Domestic Tobacco 247.6 169.2 46.3
---------- ---------- ----------
Total Continuing Operations $1,408.7 $1,273.0 10.7
========== ========== ==========
(NOTES FOLLOW)
<PAGE>
AMERICAN BRANDS, INC.
(Dollars in millions, except per share amounts)
(Restated) 1 9 9 4
1st 2nd 3rd 4th
Qtr Qtr Qtr Qtr Y e a r
Net Sales ------- ------- ------- ------- --------
International Tobacco (2) 1,330.3 1,215.4 1,608.1 2,015.1 6,168.9
Distilled Spirits (2) 240.6 292.9 305.9 428.8 1,268.2
Hardware & Home
Improve. Prods. 289.3 309.0 334.0 338.3 1,270.6
Office Prods. 232.9 232.7 260.1 324.0 1,049.7
Golf & Leisure Prods. 133.5 167.9 116.1 89.6 507.1
Other (5) 397.8 417.4 305.1 167.0 1,287.3
------- ------- ------- ------- --------
Ongoing Operations 2,624.4 2,635.3 2,929.3 3,362.8 11,551.8
Domestic Tobacco (2)(6) 376.5 405.6 425.3 387.3 1,594.7
------- ------- ------- ------- --------
Total Continuing Operations 3,000.9 3,040.9 3,354.6 3,750.1 13,146.5
======= ======= ======= ======= ========
Operating Company Contribution
International Tobacco 126.2 94.1 141.7 160.3 522.3
Distilled Spirits 38.4 53.2 57.4 106.1 255.1
Hardware & Home
Improve. Prods. 48.6 52.7 52.1 53.2 206.6
Office Prods. 19.4 12.5 20.1 43.0 95.0
Golf & Leisure Prods. 21.5 33.1 16.4 3.4 74.4
Other (5) 5.3 4.7 (1.5) (0.8) 7.7
------- ------- ------- ------- --------
Ongoing Operations 259.4 250.3 286.2 365.2 1,161.1
Domestic Tobacco (6) 55.4 70.2 48.6 73.4 247.6
------- ------- ------- ------- --------
Total Continuing Operations 314.8 320.5 334.8 438.6 1,408.7
======= ======= ======= ======= ========
Amortization of Intangibles 23.9 23.9 24.1 24.4 96.3
------- ------- ------- ------- --------
Operating Income 290.9 296.6 310.7 414.2 1,312.4
------- ------- ------- ------- --------
Interest and Related Charges 57.3 55.5 52.7 46.6 212.1
Corporate Admin. Expenses 7.7 21.0 24.0 17.2 69.9
Gain on Disposal of
Businesses, Net (5)(6)(7) 0.0 0.0 0.0 332.9 332.9
Other Expenses (Income), Net 2.7 2.2 1.5 5.7 12.1
------- ------- ------- ------- --------
Income Before Income Taxes 223.2 217.9 232.5 677.6 1,351.2
Income Taxes (8) 93.7 66.0 100.7 205.7 466.1
------- ------- ------- ------- --------
Income From Continuing Opers. 129.5 151.9 131.8 471.9 885.1
Discontinued Opers.,
Net of Taxes (9) 19.7 12.0 20.1 (202.8) (151.0)
------- ------- ------- ------- --------
Net Income 149.2 163.9 151.9 269.1 734.1
======= ======= ======= ======= ========
Earnings per Common Share
Primary
Income From Continuing Ops. $0.64 $0.75 $0.65 $2.34 $4.38
Discontinued Opers. (9) 0.10 0.06 0.10 (1.01) (0.75)
------- ------- ------- ------- --------
Net Income $0.74 $0.81 $0.75 $1.33 $3.63
Fully diluted
Income From Continuing Ops. $0.63 $0.74 $0.64 $2.23 $4.24
Discontinued Opers. (9) 0.09 0.06 0.09 (0.95) (0.71)
------- ------- ------- ------- --------
Net Income $0.72 $0.80 $0.73 $1.28 $3.53
======= ======= ======= ======= ========
(NOTES FOLLOW)
<PAGE>
AMERICAN BRANDS, INC.
(Dollars in millions, except per share amounts)
Unaudited
(Restated) 1 9 9 3
1st 2nd 3rd 4th
Qtr Qtr Qtr Qtr Y e a r
Net Sales ------- ------- ------- ------- --------
International Tobacco (2)(3) 1,889.3 815.4 1,459.2 1,776.1 5,940.0
Distilled Spirits (2)(4) 246.6 289.3 272.3 386.4 1,194.6
Hardware & Home
Improve. Prods. 258.8 259.8 288.3 312.6 1,119.5
Office Prods. 228.4 216.5 237.5 294.8 977.2
Golf & Leisure Prods. 121.9 147.4 106.6 76.8 452.7
Other 343.2 430.9 366.1 304.8 1,445.0
------- ------- ------- ------- --------
Ongoing Operations 3,088.2 2,159.3 2,730.0 3,151.5 11,129.0
Domestic Tobacco (2)(3) 407.5 419.4 316.2 358.4 1,501.5
------- ------- ------- ------- --------
Total Continuing Operations 3,495.7 2,578.7 3,046.2 3,509.9 12,630.5
======= ======= ======= ======= ========
Operating Company Contribution
International Tobacco (3) 165.1 44.6 134.7 144.4 488.8
Distilled Spirits (4) 44.9 52.0 44.3 105.7 246.9
Hardware & Home
Improve. Prods. 44.6 46.7 44.8 49.5 185.6
Office Prods. 18.4 11.4 17.2 37.1 84.1
Golf & Leisure Prods. 18.8 29.0 14.4 2.4 64.6
Other 5.5 9.4 3.4 15.5 33.8
------- ------- ------- ------- --------
Ongoing Operations 297.3 193.1 258.8 354.6 1,103.8
Domestic Tobacco (3) 102.5 90.7 (34.5) 10.5 169.2
------- ------- ------- ------- --------
Total Continuing Operations 399.8 283.8 224.3 365.1 1,273.0
======= ======= ======= ======= ========
Amortization of Intangibles 20.1 20.1 21.1 31.1 92.4
------- ------- ------- ------- --------
Operating Income 379.7 263.7 203.2 334.0 1,180.6
------- ------- ------- ------- --------
Interest and Related Charges 57.8 57.6 55.9 56.3 227.6
Corporate Admin. Expenses 5.0 19.2 26.5 27.4 78.1
Other Expenses (Income), Net (5.7) (1.0) 0.8 5.4 (0.5)
------- ------- ------- ------- --------
Income Before Income Taxes 322.6 187.9 120.0 244.9 875.4
Income Taxes (8) 106.3 68.6 58.3 101.0 334.2
------- ------- ------- ------- --------
Income From Continuing Opers. 216.3 119.3 61.7 143.9 541.2
Discontinued Opers.,
Net of Taxes (9) 30.8 32.0 23.3 40.9 127.0
Accounting Changes,
Net of Taxes (10) (201.0) 0.0 0.0 2.6 (198.4)
Net Income 46.1 151.3 85.0 187.4 469.8
======= ======= ======= ======= ========
Earnings per Common Share
Primary
Income From Continuing Ops. $1.07 $0.59 $0.30 $0.71 $2.67
Discontinued Opers. (9) 0.15 0.16 0.12 0.20 0.63
Accounting Changes (10) (0.99) 0.00 0.00 0.01 (0.98)
------- ------- ------- ------- --------
Net Income $0.23 $0.75 $0.42 $0.92 $2.32
Fully diluted
Income From Continuing Ops. $1.04 $0.58 $0.31 $0.70 $2.63
Discontinued Opers. (9) 0.14 0.15 0.11 0.20 0.60
Accounting Changes (10) (0.95) 0.00 0.00 0.01 (0.94)
------- ------- ------- ------- --------
Net Income $0.23 $0.73 $0.42 $0.91 $2.29
======= ======= ======= ======= ========
(NOTES FOLLOW)
<PAGE>
AMERICAN BRANDS, INC.
NOTES:
(1) All figures are subject to completion of audit.
(2) Federal and foreign excise taxes included in net sales for the
three months and twelve months ended December 31 are as follows
(in millions):
Three Months Twelve Months
1994 1993 1994 1993
-------- -------- -------- --------
International Tobacco $1,557.6 $1,357.9 $4,742.6 $4,548.0
Domestic Tobacco 111.5 97.0 425.3 360.9
Distilled Spirits 162.6 162.5 488.9 505.0
-------- -------- -------- --------
$1,831.7 $1,617.4 $5,656.8 $5,413.9
======== ======== ======== ========
(3) On June 30, 1993, the Benson and Hedges cigarette trademark in
Europe was acquired in exchange for the assignment of the Lucky
Strike and Pall Mall overseas cigarette trademarks and $107.2
million in cash, including expenses, and contingent future
payments based on volumes. Results from the Benson and Hedges
trademark were included in international tobacco from the date
of acquisition. A pretax gain of $25.5 million was recognized
in domestic tobacco as a result of the assignment of the Lucky
Strike and Pall Mall trademarks. Certain of the contingent
payments were guaranteed and, accordingly, their present value
was included in the initial $183 million of intangibles
recorded. Any payments in excess of the guarantees will also
be amortized over periods not to exceed 40 years.
(4) During the fourth quarter of 1993, Whyte & Mackay, a subsidiary
of Gallaher Limited, completed its acquisition of Invergordon
Distillers Group PLC by purchasing the remaining outstanding
shares. The aggregate cost of Invergordon of 377.1 million
pounds sterling (approximately $599.1 million), exceeded the
fair value of net assets acquired by 305.9 million pounds
sterling (approximately $492.9 million). The financial
statements for prior periods were not restated because the
effect was not material. Operations, including a $15.8 million
benefit in contribution resulting from the application of the
equity method to prior periods, were consolidated from December
1, 1993.
(5) On July 12, 1994, Dollond & Aitchison Group PLC, a subsidiary
of Gallaher Limited, was sold for total consideration of about
94 million pounds ($146 million) which approximated the
carrying value of the company.
(6) On December 22, 1994, the Company sold The American Tobacco
Company for total consideration of $1 billion. A gain of
$508.3 million (net of income taxes of $69.6 million) or $2.52
per Common share was recognized on the transaction. The
proceeds from the sale, depending on market conditions, are
expected to be used for share purchases, debt reduction,
strategic acquisitions or other general corporate purposes.
American Tobacco's operating company contribution increased
significantly for the quarter ended December 31, 1994,
reflecting changing conditions which resulted in the reversal
of accruals relating to returned goods, coupon redemption and
other marketing programs. Fourth quarter results for 1993 reflected
the impact for a full quarter of the major price reductions in the
U.S. cigarette market.
Operating company contribution for 1993 included a $29.9
million charge associated with a one-time buy-down of trade
inventories, and a $44 million restructuring provision for
early retirement costs partly offset by a gain of $25.5 million
as a result of the assignment of the Lucky Strike and Pall Mall
trademarks.
Also on December 22, 1994, the Company's subsidiary in the
U.K., Gallaher Limited, sold its Silk Cut trademark rights
outside Europe in exchange for a long-term manufacturing
arrangement.
(7) The Company announced that it intends to dispose of a number of
nonstrategic businesses and product lines. A pretax charge,
substantially non-cash, aggregating $245 million (essentially
the same after taxes) was recorded against the fourth quarter
on the "Gain on Disposal of Businesses, Net" line partially
offsetting the $577.9 million pretax gain on the sale of
American Tobacco. The charge is based on an assumption of
aggregate cash proceeds in the range of $150-175 million with
respect to the anticipated dispositions. These businesses and
product lines, which include U.K.-based Prestige and Forbuoys,
had combined sales of $752 million and a $3 million net loss on
the contribution line for the year 1994.
An analysis of "Gain on disposal of businesses, net" is as
follows (in millions, except per share amounts):
Pretax Income Net Primary
Gain (Loss) Taxes Income EPS
----------- ------ ------- -------
Domestic Tobacco $577.9 $69.6 $508.3 $2.52
Other businesses (245.0) (3.7) (241.3) (1.20)
------ ----- ------ -----
$332.9 $65.9 $267.0 $1.32
====== ===== ====== =====
(8) The effective income tax rate for the quarter ended December
31, 1994 was 30.4% compared with 41.2% a year ago. This year's
quarter was affected by a low effective tax rate on the
disposal of businesses and the proportionately lower impact of
nondeductible goodwill on higher income. For 1994, the
effective tax rate was 34.5% as compared with 38.2% in 1993,
and reflected the above items, partly offset by this year's
lower reversal of tax provisions no longer required.
(9) On November 30, 1994, the Company entered into an agreement to
sell its Franklin Life Insurance business for $1.17 billion in
cash before related expenses. The transaction is subject to
antitrust and insurance regulatory approvals and is expected to
close shortly. The results of operations of Franklin have been
reclassified to discontinued operations and prior period
results have been restated accordingly.
The estimated loss on the disposal, which includes income
expected during the period from December 1, 1994 to the sale
date, is expected to approximate $206.8 million. The estimated
loss is partly offset by $55.8 million of income from
operations (net of income taxes of $35.5 million) up to the
November 30, 1994 agreement date.
(10) Effective January 1, 1993, the Company adopted FAS 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," requiring accrual of the expected costs during the
years that employees render the service that qualifies them for
coverage. Also, effective January 1, 1993, the Company adopted
FAS 112, "Employers' Accounting for Postemployment Benefits,"
requiring accrual of the expected costs of benefits provided to
former or inactive employees after employment but before
retirement.
On December 31, 1993, the Company elected early adoption of FAS
115, "Accounting for Certain Investments in Debt and Equity
Securities," under which trading securities purchased with the
intent of being sold in the near term are carried at fair value
and the applicable unrealized gains and losses are recorded in
income.
The initial effects of adopting these statements were recorded
as cumulative changes in accounting principles as follows (in
millions, except per share amounts):
FAS Statements No.
106 112 115 Total
------ ----- ----- ------
Pretax charges (credit) $310.0 $15.0 $(4.1) $320.9
Income taxes 119.0 5.0 (1.5) 122.5
------ ----- ----- ------
Net loss (income) $191.0 $10.0 $(2.6) $198.4
====== ===== ===== ======
Effect on earnings per
Common share $.94 $.05 $(.01) $.98
==== ==== ===== ====
(11) The Company and its subsidiaries are defendants in various
lawsuits associated with their business and operations,
including actions based upon allegations that human ailments
have resulted from tobacco use. It is not possible to predict
the outcome of the pending litigation, but management believes
that there are meritorious defenses to the pending actions and
that the pending actions will not have a material adverse
effect upon the results of operations, cash flow or financial
condition of the Company. These actions are being vigorously
contested.
On December 22, 1994, the Company sold The American Tobacco
Company subsidiary to Brown & Williamson Tobacco Corporation, a
wholly-owned subsidiary of B.A.T Industries p.l.c. Brown &
Williamson Tobacco Corporation and The American Tobacco Company
have agreed to indemnify the Company against claims arising
from smoking and health or fire safe cigarette matters relating
to the tobacco business of The American Tobacco Company.
<PAGE>
AMERICAN BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
December 31, December 31,
1994 1993
Assets (Unaudited)
Current Assets
Accounts Receivable, Net $1,067.9 $1,241.6
Inventories 2,015.7 2,043.2
Net Assets of Discontinued Operations 1,170.0 0.0
Other Current Assets 417.3 448.3
-------- --------
Total Current Assets 4,670.9 3,733.1
Property, Plant and Equipment, Net 1,212.7 1,472.1
Intangibles Resulting From Business
Acquisitions 3,549.1 3,637.9
Net Assets of Discontinued Operations 0.0 1,344.0
Other Assets 361.7 379.4
-------- ---------
Total Assets $9,794.4 $10,566.5
======== =========
Liabilities and Stockholders' Equity
Current Liabilities
Short-Term Debt $180.6 $1,010.2
Current Portion - Long-term Debt $525.2 $172.7
Other Current Liabilities 2,409.7 1,974.8
-------- --------
Total Current Liabilities 3,115.5 3,157.7
Long-Term Debt 1,512.1 2,492.4
Other Long-Term Liabilities 529.3 645.0
-------- --------
Total Liabilities 5,156.9 6,295.1
Stockholders' Equity 4,637.5 4,271.4
-------- ---------
Total Liabilities and Stockholders' Equity $9,794.4 $10,566.5
======== =========
* December 31, 1993 restated for discontinued operations.
