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
April 24, 1995 (April 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
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<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
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Registrant's press release dated April 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 April 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
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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.
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(Registrant)
By Robert L. Plancher
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Robert L. Plancher
Senior Vice President
and Chief Accounting Officer
Date: April 24, 1995
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EXHIBIT INDEX
Sequentially
Exhibit Numbered Page
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20. Press release of Registrant dated
April 24, 1995.
EXHIBIT 20
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FOR IMMEDIATE RELEASE
Contact: Roger W. W. Baker
(203) 698-5148
Daniel A. Conforti
(203) 698-5132
AMERICAN BRANDS FIRST QUARTER EARNINGS;
E.P.S. FROM ONGOING OPERATIONS UP 22%
Old Greenwich, CT, April 24 -- American Brands, Inc. today
announced that earnings per Common share from ongoing operations
for the quarter ended March 31, 1995 rose 22% to 60 cents per
share (59 cents fully diluted), compared with 49 cents per share
(primary and fully diluted) for the first quarter of 1994.
Income from ongoing operations rose 18% to $117 million, and
sales from ongoing operations rose 6% to $2.8 billion.
Ongoing operations for 1994 excludes results from Franklin
Life, which was sold in January 1995 and was accounted for as a
discontinued operation, and treats The American Tobacco Company,
which was sold in December 1994, as if it were a discontinued
operation. Net income, compared with 1994 results including
discontinued operations and The American Tobacco Company,
declined 22%.
The impact of our higher Common stock price on the valuation
of stock appreciation rights along with the benefit in last
year's quarter of the reversal of accruals, notably for
nontobacco legal fees and a headquarters workforce reduction
accomplished in 1994, resulted in an increase in corporate
administrative expense. The change in "other (income) expenses,
net" is due to interest income on proceeds from the dispositions.
Fluctuations in exchange rates for foreign currencies, primarily
the British pound, favorably affected sales, net income and
E.P.S. by $121 million, $7 million and 3 cents, respectively.
Lower average Common shares outstanding benefited E.P.S. by 2
cents.
Chairman and Chief Executive Officer Thomas C. Hays said:
"The new American Brands is off to a great start following the
recent dispositions of The American Tobacco Company and Franklin
Life. Underlying our strong first quarter E.P.S. growth was a
10% increase in ongoing operating company contribution, with most
of our principal brands achieving solid gains. Our three fastest
growing operations -- hardware and home improvement products,
office products and golf and leisure -- all achieved double-digit
growth in sales and operating company contribution.
"We also have been moving decisively to invest the proceeds
from the recent dispositions of The American Tobacco Company and
our Franklin life insurance business. The Board authorized the
purchase of up to 20 million shares of our Common stock in
connection with the dispositions, and, since late December, we
have purchased 12.8 million shares. In addition, on April 11,
holders of the $200 million 5.75% Convertible Debentures due
April 2005 exercised a one-time put; this will have the effect of
reducing fully diluted shares by 5.1 million.
"Our U.K.-based Gallaher Tobacco brands had an excellent
quarter, with operating company contribution up 18% in dollars
and 11% in sterling. Distortions in trade buying related to U.K.
budget announcements substantially benefited the first quarter
and will not be repeated in the second quarter. In the U.K.,
where Gallaher has a powerful position as the market leader with
the top two cigarette brands, unit volume was up 0.3%. However,
consumer sales were estimated to have declined in the range of
2.5%, and Gallaher's estimated share was unchanged from the
fourth quarter of 1994 at 39.5%. Gallaher is also benefiting
from ongoing productivity improvements, and an April 3, 1995
price increase represented a weighted average increase to
Gallaher of approximately 5%, excluding excise taxes.
"To add value to premium-priced Benson and Hedges, the top
selling brand in the U.K., Gallaher introduced a major gift
program, called Gratis, last October. Benson and Hedges
maintained its estimated share of consumer sales in the first
quarter.
"Distilled spirits contribution declined 7%, principally
reflecting the impact on Whyte & Mackay of significant price
decreases last year on buyers-own-brands in the U.K. and lower
volume. Jim Beam Brands achieved a 4% increase in contribution
in the quarter on a 4% increase in its worldwide branded case
sales. Comparisons are distorted, as last year Beam was affected
by a planned reduction in domestic trade inventory levels. In
the U.S., Beam's volume was up 5%, led by a 21% increase for the
flagship Jim Beam bourbon, which is celebrating its 200th
anniversary this year with the largest marketing effort in the
history of the brand. Jim Beam is the number one bourbon in the
world, and its worldwide volume was up 15%. Beam's international
volume and profits both registered increases that were
comparatively modest due to the timing of shipments.
"The MasterBrand hardware and home improvement group had an
excellent quarter, with contribution up 10% to a record $54
million. Solid sales increases were achieved by all key brands,
with excellent consumer acceptance of new product lines. In
addition, Waterloo, the world leader in tool storage products,
posted particularly strong growth as a result of very strong
sell-through of its products at Sears. Moen, which is contending
for the number 1 position in the U.S. faucet market, achieved
substantial volume increases with the Monticello two-handle
faucet line and the One Touch line. Master Lock posted a 27%
increase in sales of door hardware, a strategic extension of its
leadership position in padlocks. Aristokraft, the second largest
manufacturer of kitchen and bath cabinets in the U.S., continues
to introduce an array of successful new products and has achieved
sales records in 38 of the past 39 months.
"ACCO, the world leader in office supplies, continued to
achieve very strong market and profit gains. Contribution rose
16% in the quarter. Sales were up 23% on substantial volume
gains, benefiting in part from inventory building by some
customers. Adjusting for minor gains on the disposal of assets
in last year's quarter, ACCO's contribution growth would have
paralleled its sales growth. All major geographic regions posted
strong sales increases, benefiting from new products and share
increases, particularly in North America, which registered the
fastest growth. Especially robust increases were achieved by the
Wilson Jones brand of ring binders, indexes and filing supplies,
the ACCO brand of punches and fastening products, and Swingline
stapling products. The rollout of Day-Timer time management
products to superstores was initiated in the first quarter and
should benefit results to an increasing extent as the year
progresses. In Europe, very positive results on the Continent
augmented modest growth in the U.K. market. In Australia, ACCO's
operations again outperformed the market and achieved excellent
sales and contribution growth.
"Titleist and Foot-Joy continue to build on their worldwide
leadership positions in golf. Titleist posted a 10% increase in
contribution, with double-digit volume increases in golf balls,
shoes and gloves -- categories in which it is the leader -- as
well as in clubs. Titleist has been investing aggressively to
develop its golf club business, and club sales were up 28%,
backed by important new product introductions. The supersize
Titleist Howitzer titanium drivers have achieved excellent
consumer response and are off to a strong start. Scotty Cameron
by Titleist putters, introduced early this year, are already
established as a strong number 2 on the U.S. P.G.A. tour.
"Overall, the outlook for American Brands is exciting.
Significant new product introductions are enhancing the vitality
of major franchises and establishing promising beachheads for the
future. We are actively deploying the more than $2 billion in
proceeds from our recent dispositions and have moved decisively
on share purchases. Subject to market conditions, we intend to
complete purchases under the 20 million share authorization
during 1995. We have also been proceeding aggressively to divest
nonstrategic businesses and product lines, as we announced in
January.
"Longer term, our strong cash flow and balance sheet give us
tremendous financial flexibility to build shareholder value. Our
operations are generating excellent returns on net operating
assets, so our principal focus is on internal growth and
investment. We are also seeking high return acquisitions, with
the principal objective of accelerating the growth of our
hardware and home improvement, office products, golf and leisure
and distilled spirits businesses. We will also consider whether
further share purchases would be in the best interest of our
shareholders when purchases under the current authorization are
completed.
"Fundamentally, our optimism derives from the strength of
our operations' brands. In every major category, these key
brands are very profitable market leaders with excellent
prospects, even though they are contending with significant
challenges, including sharp and widespread raw material price
increases and a softening economic outlook. Encouragingly, most
of these higher costs have been offset thus far through price
increases.
"Our long-term goal for our hardware and home improvement,
office products and golf brands is double-digit overall
contribution growth. Each achieved that in the first quarter,
and we expect good profit growth for the full year.
"Gallaher Tobacco is contending with an unusual situation
that resulted in two U.K. excise tax increases at the end of
1994, stimulating further trading down by consumers in a market
that is already intensely competitive. Nevertheless, we are
encouraged by market acceptance of the price increase earlier
this month and by Gallaher's first quarter performance.
"In distilled spirits, Jim Beam Brands and Whyte & Mackay
are coping with difficult home market conditions, but both have
powerful assets. Beam is the number two distilled spirits
company in the U.S., and Whyte & Mackay is number two in scotch
whisky in the U.K. Beam, which has a significant international
business with fast growth potential, achieved overall
contribution growth in the first quarter, and we expect modest
growth from Beam for the full year. For Whyte & Mackay, some
nonrecurring items benefited 1994 results, principally one-time
bulk sales late in the year. So, reported comparisons will be
distorted through the year, and it will be very challenging for
Whyte & Mackay to report growth in 1995.
"Overall, last year's second quarter benefited from the
reversal of a tax provision no longer required, which resulted in
an unusually low 30.3% effective tax rate (restated) in that
quarter. This is likely to adversely affect comparisons in this
year's second quarter, but we continue to expect growth for the
full year to exceed 13% from the $2.37 per share ($2.34 fully
diluted) ongoing 1994 base. Our long-term goal is to generate
compound E.P.S. growth in the range of 10%, assuming the key
economies remain sound, the exchange rate for the pound remains
reasonably stable and there is a satisfactory pricing
environment."
* * * * *
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.
# # #
4/24/95
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AMERICAN BRANDS, INC.
(In millions, except per share amounts)
(Unaudited)
Three Months Ended March 31,
1995 1994 % Change
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Net Sales
International Tobacco (2) $1,523.1 $1,330.3 14.5
Distilled Spirits (2) 255.2 240.6 6.1
Hardware & Home Improve. Prods. 322.3 289.3 11.4
Office Products 285.5 232.9 22.6
Golf & Leisure Products 149.9 133.5 12.3
Other Businesses (3)(5) 256.5 397.8 (35.5)
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Ongoing Operations 2,792.5 2,624.4 6.4
Domestic Tobacco (2)(4) 0.0 376.5 (100.0)
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Total Continuing Operations 2,792.5 3,000.9 (6.9)
========= ========= =======
Operating Company Contribution
International Tobacco 148.8 126.2 17.9
Distilled Spirits 35.8 38.4 (6.8)
Hardware & Home Improve. Prods. 53.5 48.6 10.1
Office Products 22.5 19.4 16.0
Golf & Leisure Products 23.7 21.5 10.2
Other Businesses (3)(5) 2.0 5.3 (62.3)
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Ongoing Operations 286.3 259.4 10.4
Domestic Tobacco (4) 0.0 55.4 (100.0)
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Total Continuing Operations 286.3 314.8 (9.1)
========= ========= =======
Amortization of Intangibles 24.1 23.9 0.8
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Operating Income 262.2 290.9 (9.9)
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Interest and Related Expenses 46.0 57.3 (19.7)
Corporate Admin. Expenses 22.2 7.7 188.3
Other (Income) Expenses, Net (7.1) 2.7 (363.0)
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Income Before Income Taxes 201.1 223.2 (9.9)
Income Taxes 84.5 93.7 (9.8)
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Income From Continuing Opers.(1) 116.6 129.5 (10.0)
Discontinued Opers., Net of Taxes (6) 0.0 19.7 (100.0)
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Net Income 116.6 149.2 (21.8)
========= ========= =======
Earnings per Common Share
Primary
Income From Continuing Opers.(1) $0.60 $0.64 (6.3)
Discontinued Operations (6) 0.00 0.10 (100.0)
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Net Income $0.60 $0.74 (18.9)
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Fully diluted
Income From Continuing Opers.(1) $0.59 $0.63 (6.3)
Discontinued Operations (6) 0.00 0.09 (100.0)
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Net Income $0.59 $0.72 (18.1)
========= ========= =======
Avg. Common Shares Outstanding 194.5 201.8 (3.6)
(NOTES FOLLOW)
<PAGE>
AMERICAN BRANDS, INC.
NOTES:
(1) Ongoing operations comparison, excluding results of Franklin
Life which was accounted for as a discontinued operation and
treating The American Tobacco Company as if it were a
discontinued operation is as follows:
Three Months Ended March 31,
1995 1994 %Change
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(In Millions, except EPS)
Income from Continuing Operations
Ongoing Operations $116.6 $ 99.0 17.8
Domestic Tobacco - 30.5 -
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$116.6 $129.5 (10.0)
====== ====== =====
Earning per Common share
Primary
Income from Continuing Operations
Ongoing Operations $0.60 $0.49 22.4
Domestic Tobacco - 0.15 -
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$0.60 $0.64 (6.3)
===== ===== ====
Fully Diluted
Income from Continuing Operations
Ongoing Operations $0.59 $0.49 20.4
Domestic Tobacco - 0.14 -
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$0.59 $0.63 (6.3)
===== ===== ====
(2) Federal and foreign excise taxes included in net sales for the
three months ended March 31 are as follows (in millions):
1995 1994
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International Tobacco $1,175.9 $1,028.3
Domestic Tobacco - 96.3
Distilled Spirits 101.8 90.7
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$1,277.7 $1,215.3
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(3) On July 12, 1994, Dollond & Aitchison Group PLC, a subsidiary
of Gallaher Limited, was sold for total consideration of $146
million which approximated the carrying value of the company.
(4) On December 22, 1994, the Company sold The American Tobacco
Company, its domestic tobacco business, for $1 billion in cash
before related expenses. 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 in the fourth quarter of 1994.
(5) The Company plans to dispose of a number of nonstrategic
businesses and product lines, including U.K.-based Prestige and
Forbuoys, and in the fourth quarter of 1994 recorded a loss,
substantially non-cash, based on the anticipated sale of these
businesses for proceeds in the range of $150-$175 million.
(6) 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 sale was completed on
January 31, 1995. The results of operations of Franklin for
1994 have been reclassified to discontinued operations.
(7) 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. In
connection with the sale, Brown & Williamson Tobacco
Corporation and The American Tobacco Company agreed to
indemnify the Company against claims arising from smoking and
health and fire safe cigarette matters relating to the tobacco
business of The American Tobacco Company.
<PAGE>
AMERICAN BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
March 31, December 31,
1995 1994
(Unaudited)
Assets ----------- ------------
Current Assets
Cash and Cash Equivalents $903.5 $110.1
Accounts Receivable, Net 1,554.2 1,067.9
Inventories 1,450.8 2,015.7
Net Assets of Discontinued Operations 0.0 1,170.0
Other Current Assets 205.3 307.2
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Total Current Assets 4,113.8 4,670.9
Property, Plant and Equipment, Net 1,220.2 1,212.7
Intangibles Resulting From Business
Acquisitions 3,548.8 3,549.1
Other Assets 398.1 361.7
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Total Assets $9,280.9 $9,794.4
========= =========
Liabilities and Stockholders' Equity
Current Liabilities
Short-Term Debt $131.6 $180.6
Current Portion - Long-term Debt (1) 513.8 525.2
Other Current Liabilities 2,362.4 2,409.7
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Total Current Liabilities 3,007.8 3,115.5
Long-Term Debt 1,458.8 1,512.1
Other Long-Term Liabilities 542.8 529.3
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Total Liabilities 5,009.4 5,156.9
Stockholders' Equity 4,271.5 4,637.5
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Total Liabilities and Stockholders' Equity $9,280.9 $9,794.4
========= =========
(1) On April 11, 1995, holders of $199.5 million of the $200 million 5 3/4%
Eurodollar Convertible Debentures exercised their right to "put" their
debentures at a price of 114.74%, plus accrued interest. This resulted in
a total payment by the Company of $240.4 million, including premium and
accrued interest, and will have the effect of reducing fully diluted
shares by 5.1 million.
