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
October 22, 1996 (October 22, 1996)
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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 October 22, 1996 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 October 22, 1996.
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: October 22, 1996
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EXHIBIT INDEX
Sequentially
Exhibit Numbered Page
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20. Press release of Registrant dated
October 22, 1996.
Exhibit 20
Media Relations: Investor Relations:
Roger W. W. Baker Daniel A. Conforti
(203) 698-5148 (203) 698-5132
AMERICAN BRANDS REPORTS THIRD QUARTER E.P.S. UP 11%
EXCLUDING 1995 GAIN ON DISPOSAL OF BUSINESSES;
REAFFIRMS STRONG OUTLOOK
Solid Sales and Contribution Increases Delivered by Both Gallaher
Tobacco and Non-tobacco Operations, Which Will Become Fortune Brands
Following Gallaher Spin Off
Old Greenwich, CT, October 22, 1996 -- American Brands, Inc.
(NYSE-AMB) today announced that earnings per Common share rose
11% to 80 cents for the quarter ended September 30, 1996,
compared with 72 cents in the third quarter of 1995. Fully
diluted earnings per share rose 11% to 79 cents. These
comparisons exclude a 10 cent (9 cents fully diluted) gain on
disposal of businesses in last year's third quarter.
For the nine months, earnings per share were $2.19, up 12%
from $1.95 last year. Fully diluted earnings per share rose 12%
to $2.15. The nine month comparisons exclude the 1995 gain on
disposal of businesses as well as extraordinary charges relating
to the retirement of debt of 1 and 6 cents per share in 1995 and
1996, respectively.
Net sales, excluding foreign exchange impact and businesses
sold in 1995, rose 6% in the third quarter and 7% for the nine
months. Operating company contribution on the same basis was up
7% in the third quarter and 8% for the nine months. Last year,
U.K. retailing and housewares operations, which generated
substantial sales, were sold. Including foreign exchange impact
and the disposed businesses, sales were up 1% and down 2% in the
quarter and nine months, respectively, and contribution was up 6%
in both periods.
Income before the gain on disposal of businesses was up 2%
in the quarter, and, also excluding the extraordinary charges,
was up 4% in the nine months. Including the extraordinary
charges and last year's gain on disposal of businesses, net
income declined 11% and 4% in the quarter and nine months,
respectively.
Fluctuations in exchange rates for foreign currencies,
primarily the British pound, adversely affected sales by $26
million and $153 million in the quarter and nine months,
respectively, and E.P.S. for the nine months by 3 cents (no
impact in the quarter). Conversely, an 8% decline in average
primary Common shares outstanding in both the quarter and nine
months benefited primary E.P.S. by 6 cents and 17 cents.
Additionally, reflecting the redemption of a convertible
debenture issue, fully diluted shares declined 9% in the quarter
and 10% year-to-date, favorably affecting fully diluted E.P.S. by
8 cents and 21 cents, respectively.
Chairman and Chief Executive Officer Thomas C. Hays said:
"American Brands again achieved excellent growth in earnings per
share. E.P.S. was up 11% in the third quarter and 12% year-to-
date, and we posted higher operating company contribution in
every category."
Proposed Gallaher Spin Off
"From this strong foundation," Hays noted, "we announced
plans two weeks ago to spin off our U.K.-based Gallaher tobacco
business to shareholders and, when that transaction is
consummated, to change the name American Brands to Fortune
Brands." Completion of the transaction is contingent upon
receipt of favorable tax rulings and relevant stockholder
approvals.
:::Significant Dividend Benefit:::
For shareholders, there will be a significant dividend
benefit following consummation of the transaction. The combined
initial annualized dividend per share currently contemplated by
the management of both companies (Fortune Brands and Gallaher)
will equal, based on a $1.56 sterling exchange rate, the existing
$2.00 per share American Brands dividend. U.S. and eligible U.K.
taxpayers will effectively receive about another 30 cents, or
15%, for a total of about $2.30. This added benefit comes in the
form of a refund or credit of the U.K. Advance Corporation Tax
that is paid by Gallaher on its dividends. Future dividends for
Fortune Brands and Gallaher will be determined by the respective
Boards of each company following the spin off.
:::Share Repurchases:::
Hays said that, following the transaction, Fortune Brands
will consider repurchasing up to 10 million shares, depending on
market conditions and other investment opportunities. He pointed
out that American Brands has recently invested nearly $1.8
billion to reduce fully diluted shares by over 12 million, or 7%,
in 1996, and by 30 million, or more than 14%, in 1995. Last
week, the Company announced that, on December 12, it will redeem
three Eurodollar convertible debenture issues with a currently
outstanding aggregate principal amount of less than $20 million.
Outlook
Hays noted that "we are on track for another excellent year
in 1996, with E.P.S. growth, excluding one-time items, in line
with our long-term growth goal for American Brands in the range
of 10%. Following the spin off of Gallaher and assuming a
satisfactory economic and pricing environment, our long-term
E.P.S. growth goal for Fortune Brands will be substantially
higher -- in the range of 13-15%."
Fortune Brands Highlights
Fortune Brands, which will consist of American Brands' non-
tobacco operations, will be a premier international consumer
products company with a strong growth outlook and a formidable
array of category-leading brands. About a third of operating
income will come from hardware and home improvement brands, a
third from distilled spirits brands, and the remaining third
split between golf and office products brands.
Each of these categories has achieved record sales and
higher contribution in 1996, both in the third quarter and for
the nine months. Overall, the Fortune Brands operations had
sales in the quarter of $1.16 billion and contribution of $160
million, up 8% and 9%, respectively. For the nine months, sales
were $3.4 billion and contribution was $489 million, up 8% and
11%, respectively.
:::Hardware and home improvement brands:::
Led by particularly robust gains for Moen, the number 1
kitchen and bath faucet in North America, the hardware and home
improvement brands achieved a 10% gain in contribution on record
sales in the quarter. Moen achieved double-digit sales and
contribution increases, driven by strong consumer demand and
solid increases with wholesalers, who are responding to a
positive housing environment. Sales also increased significantly
in Canada, reflecting a stronger economy, market share gains and
a return to more normal trade inventory levels. Contribution
benefited from a gain on the sale of Moen's joint venture
interest in Taiwan and from the implementation of assemble-to-
demand processes, which allow Moen to produce finished goods
based on orders received.
Aristokraft, which is the number 2 kitchen and bath cabinet
manufacturer, posted a strong double-digit contribution increase
in the quarter. Sales of the Decora brand were up over 20% year-
to-date, supported by widespread acceptance by builders and
remodelers of its new Keystone line. The Aristokraft and Decora
brands are benefiting from implementation of continuous flow
manufacturing, which, over the past year, has resulted in a 22%
decrease in inventories and significant reductions in scrap and
waste.
Master Lock, which has the number 1 padlock in the world,
achieved record sales in the quarter, although increased brand
spending on sales and pricing programs in response to intensely
competitive conditions resulted in a substantial decline in
contribution. Master Lock's international sales were up 13% in
the quarter and 11% year-to-date, with solid progress in European
markets.
Even with the pressure on Master Lock, we expect modest
overall increases in sales and contribution from the hardware and
home improvement category for the full year. Long term, the
fundamentals driving this category remain attractive, and these
brands have excellent market positions.
:::Distilled spirits brands:::
The distilled spirits brands had record sales and
contribution in both periods. These brands are benefiting from
continued international growth, price increases and new product
introductions. International contribution now accounts for about
30% of total distilled spirits contribution. Year-to-date
results also benefited from the inclusion in the second quarter
of an additional month of Whyte & Mackay results (change in
fiscal year); this change will have an immaterial impact on
results for the full year.
The modest 2% year-to-date increase in contribution was
achieved in spite of a 16% increase in marketing, primarily in
support of new products in the North American market and of Whyte
& Mackay branded products in the U.K.
Worldwide case volume was off slightly in the quarter. A
4.5% volume decline in North America was mostly offset by a 7%
increase in international markets.
Contribution benefited from price increases on key products,
including Jim Beam, the number one bourbon in the world, and
DeKuyper, America's leading cordial brand. In addition, North
American results benefited from higher volume of two high margin
new products - After Shock, a cinnamon liqueur introduced last
year, and Avalanche Blue, a peppermint liqueur introduced in the
second quarter of 1996.
The 7% international case volume increase in the quarter was
backed by strong gains in Australia, where Jim Beam is the
nation's top selling spirit brand, in Germany, and in the U.K.
private label business. Year-to-date, international case
shipments were up 4% on a comparable basis.
Worldwide shipments of Jim Beam bourbon increased in the
quarter, and export shipments of Jim Beam were up in both the
quarter and nine months. In India, the Whyte & Mackay joint
venture began bottling in September and is commencing
distribution this month.
For the fourth quarter and full year, we continue to expect
a small increase in contribution from the distilled spirits
brands, even after adding back the one-time $17.8 million
restructuring charge taken in the fourth quarter of 1995.
:::Golf brands:::
The golf brands achieved record sales and contribution in
both the quarter and nine month periods, reflecting continued
excellent performance by Titleist and Foot-Joy as well as the
January 1996 acquisition of Cobra. For the quarter, contribution
was up 20%.
This month, golf's most sensational young star, Tiger Woods,
entered into a multi-year equipment and endorsement agreement to
use exclusively Titleist and Cobra products, including Titleist
golf balls, Titleist and Cobra Golf clubs and a Titleist golf
bag. Tiger played the Titleist golf ball in all six of his USGA
Amateur Championships. Using his King Cobra driver and Titleist
ball, Tiger has been the longest driver in every event he has
played as a professional and has already won two of his first
seven starts on the PGA Tour.
For the quarter, Titleist brand sales were up 10% on the
strength of a 7% increase in top grade ball sales and a 42%
increase in Titleist golf club sales. Titleist, the number 1
ball in golf, is having an outstanding year, with more than 150
tournament wins and as the ball of choice of 70% of tour
professionals worldwide. The strong growth in Titleist golf club
sales has been led by excellent gains for the Titleist DCI iron
and Scotty Cameron putter. The DCI iron has achieved strong
market share gains on course, reaching a record 11.6% in the most
recent measured two-month period and was the number 1 iron at the
1996 PGA Club Professional Championship for the fourth
consecutive year. The Scotty Cameron by Titleist putter has been
the number 1 (most played) putter on the PGA Tour five times this
year, the first time in 30 years that any putter other than Ping
has been number 1.
The Foot-Joy brand continued its strong worldwide leadership
in golf footwear and gloves with year-to-date unit increases of
7% and 15%, respectively. Particularly strong growth was
achieved in Europe and Asia, each up over 20% in both shoes and
gloves.
Cobra, the leader in oversize irons, began shipping in mid-
September the next generation of King Cobra oversize irons, the
King Cobra II with the Integrated Quad System. The King Cobra
II, introduced with a high-energy presence last month at the Las
Vegas PGA Show, has generated tremendous excitement, strong
opening orders and excellent initial sell-through. Early this
year, Cobra launched the King Cobra Ti titanium metal wood.
Production problems relating to the use of titanium in the King
Cobra Ti increased production costs and diverted manufacturing
resources, somewhat delaying marketing of the Ti metal woods and
the launch of the new irons. While these problems have now been
resolved, and product mix is now well aligned with consumer
demand, 1996 contribution from Cobra will fall short of our
original expectations. Longer term, we remain highly encouraged
by the strong new products and the excellent response to the King
Cobra II introduction.
For the golf brands overall, we expect substantial
contribution growth for the fourth quarter and full year,
reflecting the addition of Cobra and continued excellent growth
from the Titleist, Pinnacle and Foot-Joy brands.
:::Office Products:::
The office products brands continued their sustained growth,
with a 12% contribution increase in the quarter. Ongoing sales,
excluding a divested operation, were up 5%, led by a 8% increase
for ACCO North America. Overseas, particularly strong growth was
achieved in Australia, where ACCO is the market leader. Overall,
ACCO World is the global leader in office supplies.
The margin improvement resulted from improved operating
efficiencies and continued tight cost control. With continued
strong emphasis on enhancing returns, inventories declined 9%,
even excluding the favorable impact of the divestiture.
The sales gain was broad-based, with the ACCO and Rexel
brands achieving strong growth, the Wilson Jones and Swingline
brands recording double-digit increases, and the Kensington
computer products brand posting outstanding growth. Key new
product introductions included an innovative see-through
Swingline electronic stapler, a new portable computer security
lock marketed under the Master Lock brand, and upgrades to the
award-winning Kensington track ball computer mouse and Day-Timer
Organizer software.
We expect that the office products brands will continue to
generate excellent growth in the fourth quarter, resulting in
another excellent year.
Gallaher Highlights
Gallaher, the number 1 tobacco company in the U.K., posted
another solid contribution gain, improved operating margin, and
an increase in cigarette market share. Contribution was up 6% in
sterling (5% in dollars), and sales were up 4% in sterling (3% in
dollars) in the quarter. The sales increase reflected record
export sales, an additional month (change in fiscal year) for
Gallaher Dublin -- the number 1 tobacco company in Ireland -- and
higher selling prices. Contribution further benefited from a
shift in export mix towards higher margin European markets,
effective cost control and enhanced productivity. For the
quarter, the operating margin (excluding excise taxes) increased
from 40.2% to 41.4%.
Gallaher's worldwide cigarette volume declined 0.5% in the
quarter but increased 0.9% for the nine months. In the U.K.,
Gallaher's estimated share of consumer sales increased to 39.2%
in the quarter, compared with 39.0% a year earlier. Gallaher has
maintained its powerful 54% share of the premium sector, largely
reflecting the continued success of the Benson and Hedges Gratis
gift program, while virtually doubling its share of the low-price
sector to nearly 11%. With ongoing trading down by some
consumers, the premium sector accounted for about 48% of the
market in the third quarter, compared with 50.2% a year earlier.
In the low-price sector, Mayfair's share has increased to
7.3%, compared with 5.6% a year ago. Sovereign, which was just
introduced in March, had achieved a 4.5% share of the sector by
August, equivalent to 1.3% of the total market. A line
extension, Sovereign Lights, will be introduced next month.
Exports increased 2% in the quarter. The gain reflected
strong volume gains in European Duty Free and France and was
achieved despite a substantial decline in the former Soviet Union
(FSU). The FSU decline was due largely to market uncertainty
around the Presidential election and temporary difficulties with
the movement of goods within the FSU. Despite these
difficulties, the Sovereign brand has established a substantial
market share, estimated at 8%, in Kazakhstan. Gallaher is
continuing to pursue potential joint venture discussions in the
FSU and a possible venture in China.
We expect continued solid contribution growth in sterling
and very strong cash flow from Gallaher's brands for the full
year.
* * * *
American Brands is an international consumer products
holding company with headquarters in Old Greenwich, Connecticut.
Its operating companies have powerhouse brands and leading market
positions. MasterBrand Industries has leading hardware and home
improvement brands including Moen faucets, Master locks and
Aristokraft cabinets. Major distilled spirits brands sold by
units of JBB Worldwide, Inc. include Jim Beam and Old Grand-Dad
bourbons, DeKuyper cordials and Whyte & Mackay Scotch. Acushnet
Company's golf brands include Titleist, Cobra, Pinnacle and Foot-
Joy. ACCO World Corporation's major office product brands
include Day-Timer and Swingline. Gallaher Limited sells tobacco
products internationally, principally in Europe, where its major
brands include Benson and Hedges and Silk Cut.
* * *
This press release contains statements relating to future
results, which are forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those projected as a
result of certain risks and uncertainties, including but not
limited to changes in general economic conditions, foreign
exchange rate fluctuations, competitive product and pricing
pressures, the impact of excise tax increases with respect to
international tobacco and distilled spirits, regulatory
developments, the uncertainties of litigation, as well as other
risks and uncertainties detailed from time to time in the
Company's Securities and Exchange Commission filings.
# # #
AMERICAN BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Three Months
Ended September 30,
1996 1995 % Change
Net Sales $2,920.1 $2,895.3 0.9
Cost of sales 2,210.1 2,205.2 0.2
Advertising, selling, general
and administrative expenses 408.8 410.8 (0.5)
Amortization of intangibles 26.9 23.6 14.0
Interest and related expenses 43.4 36.1 20.2
Other (income) expenses, net (0.2) (5.4) (96.3)
Gain on disposal of
businesses, net - 20.0 -
Income Before Income Taxes 231.1 245.0 (5.7)
Income taxes 94.4 91.7 2.9
Income Before Extraordinary Items 136.7 153.3 (10.8)
Extraordinary items - - -
Net Income 136.7 153.3 (10.8)
Earnings Per Common Share
Primary
Income from operations $0.80 $0.72 11.1
Businesses disposed - 0.10 -
Income before extraordinary items 0.80 0.82 (2.4)
Extraordinary items - - -
Net income $0.80 $0.82 (2.4)
Fully diluted
Income from operations $0.79 $0.71 11.3
Businesses disposed - 0.09 -
Income before extraordinary items 0.79 0.80 (1.3)
Extraordinary items - - -
Net income $0.79 $0.80 (1.3)
Avg. Common Shares Outstanding
Primary 170.4 184.7 (7.7)
Fully diluted 173.9 191.7 (9.3)
AMERICAN BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Nine Months
Ended September 30,
1996 1995 % Change
Net Sales $8,144.0 $8,282.5 (1.7)
Cost of sales 6,087.6 6,227.2 (2.2)
Advertising, selling, general
and administrative expenses 1,216.4 1,269.5 (4.2)
Amortization of intangibles 80.3 71.8 11.8
Interest and related expenses 133.4 122.2 9.2
Other (income) expenses, net (3.5) (21.4) (83.6)
Gain on disposal of
businesses, net - 20.0 -
Income Before Income Taxes 629.8 633.2 (0.5)
Income taxes 247.0 244.2 1.1
Income Before Extraordinary Items 382.8 389.0 (1.6)
Extraordinary items (10.3) (2.7) -
Net Income 372.5 386.3 (3.6)
Earnings Per Common Share
Primary
Income from operations $2.19 $1.95 12.3
Businesses disposed - 0.10 -
Income before extraordinary items 2.19 2.05 6.8
Extraordinary items (0.06) (0.01) -
Net income $2.13 $2.04 4.4
Fully diluted
Income from operations $2.15 $1.92 12.0
Businesses disposed - 0.09 -
Income before extraordinary items 2.15 2.01 7.0
Extraordinary items (0.06) (0.01) -
Net income $2.09 $2.00 4.5
Avg. Common Shares Outstanding
Primary 174.3 189.1 (7.8)
Fully diluted 178.8 198.3 (9.8)
(NOTES FOLLOW)
AMERICAN BRANDS, INC.
NOTES:
(1) Net sales by business segment are as follows (in millions):
Three Months
Ended Sept. 30,
1996 1995 %Change
International Tobacco (a) $1,762.0 $1,711.5 3.0
Distilled Spirits (a) 309.2 307.3 0.6
Hardware & Home Improve. 349.1 327.9 6.5
Prods.
Office Products 304.3 300.1 1.4
Golf & Leisure Products (b) 195.5 136.5 43.2
2,920.1 2,783.3 4.9
Businesses Disposed (c) - 112.0 -
$2,920.1 $2,895.3 0.9
Nine Months
Ended Sept. 30,
1996 1995 %Change
International Tobacco (a) $4,723.1 $4,568.6 3.4
Distilled Spirits (a) 892.7 877.8 1.7
Hardware & Home Improve. 1,005.8 962.4 4.5
Prods.
Office Products 853.3 844.6 1.0
Golf & Leisure Products (b) 669.1 478.8 39.7
8,144.0 7,732.2 5.3
Businesses Disposed (c) - 550.3 -
$8,144.0 $8,282.5 (1.7)
Operating company contribution by business segment are as follows (in
millions):
Three Months
Ended Sept. 30,
1996 1995 %Change
International Tobacco $160.2 $153.2 4.6
Distilled Spirits 61.5 59.9 2.7
Hardware & Home Improve. 51.8 47.1 10.0
Prods.
Office Products 24.5 21.8 12.4
Golf & Leisure Products (b) 22.0 18.4 19.6
320.0 300.4 6.5
Businesses Disposed (c) - 1.6 -
$320.0 $302.0 6.0
Nine Months
Ended Sept. 30,
1996 1995 %Change
International Tobacco $413.1 $403.6 2.4
Distilled Spirits 154.6 152.2 1.6
Hardware & Home Improve. 153.0 150.2 1.9
Prods.
Office Products 65.0 58.1 11.9
Golf & Leisure Products (b) 116.6 79.1 47.4
902.3 843.2 7.0
Businesses Disposed (c) - 7.5 -
$902.3 $850.7 6.1
AMERICAN BRANDS, INC.
NOTES (CONTINUED):
(a) Federal and foreign excise taxes included in net sales and cost of
sales are as follows (in millions):
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
1996 1995 1996 1995
International
Tobacco $1,375.4 $1,330.4 3,675.4 $3,528.0
Distilled
Spirits 107.4 112.1 309.7 331.5
$1,482.8 $1,442.5 3,985.1 $3,859.5
(b) In January 1996, the Company acquired Cobra Golf for an aggregate
cost of approximately $715 million in cash, including fees and
expenses. These costs exceeded the fair value of net assets acquired
by approximately $650 million. Cobra's operations have been included
in consolidated results from the date of acquisition.
(c) Businesses disposed includes the results of operations of
nonstrategic businesses, principally U.K.-based Retail distribution
(Forbuoys sold July 24, 1995) and Housewares (Prestige sold May 2,
1995).
(2) On October 8, 1996, the Company announced plans to spin off its
U.K.-based Gallaher tobacco business. When the spin off is completed, the
name of the Company will be changed to Fortune Brands. Following the
transaction, the Company's shareholders will own shares in two
publicly-traded companies - Gallaher and Fortune Brands.
To allocate the overall debt burden of the Company at the time of the
spin off, Gallaher will borrow and pay to Fortune Brands approximately
$1.4 billion. Fortune will use the proceeds (approximately $1.25 billion
after taxes) initially to pay down short-term debt. The Gallaher debt
will be in addition to its seasonal working capital requirements.
Completion of the transaction is contingent upon receipt of favorable tax
rulings and relevant stockholder approvals. The transaction is expected
to be completed in approximately six to ten months.
AMERICAN BRANDS, INC.
NOTES (CONTINUED):
The combined initial annualized dividend per share currently
contemplated by the management of both companies (Fortune
Brands and Gallaher) will equal, based on a $1.56 sterling
exchange rate, the existing $2.00 per share American Brands
dividend. U.S. and eligible U.K. taxpayers will effectively
receive about another 30 cents, or 15%, for a total of about
$2.30. This added benefit comes in the form of a refund or
credit of the U.K. Advance Corporation Tax that is paid by
Gallaher on its dividends. U.S. taxpayers will be entitled
to a cash refund of the A.C.T. paid by Gallaher less
applicable U.K. withholding taxes which can be credited
against their U.S. income tax liability. The U.S. foreign
tax credit is subject to complicated limitations. Future
dividends for Fortune Brands and Gallaher will be determined
by the respective Boards of each company following the spin
off.
(3) The Company completed its previously announced disposition of
nonstrategic businesses and product lines in 1995 and, as a result, $20
million that was provided in 1994 in connection with the disposition was
reversed in the third quarter of 1995. The effects of this reversal were
as follows (in millions):
Three Months Nine Months
Ended Ended
1996 1995 % Change 1996 1995 % Change
Income:
Income from opers. $136.7 $133.5 2.4 $382.8 $369.3 3.7
Businesses disposed - (0.2) - - (0.3) -
Gain on disposal of
businesses, net - 20.0 - - 20.0 -
Income before
extraordinary items $136.7 $153.3 (10.8) $382.8 $389.0 (1.6)
(4) On December 12, 1996, the Company will redeem its 7-3/4% Eurodollar
Convertible Debentures, Due 2002, its 5-3/8% Eurodollar Convertible
Debentures, Due 2003 and its 5-3/4% Eurodollar Convertible Debentures,
Due 2005. The aggregate principal amount currently outstanding of these
debentures is less than $20 million and total shares issuable upon
conversion are less than 600,000. The costs related to the redemption of
these debentures will be immaterial.
AMERICAN BRANDS, INC.
NOTES (CONCLUDED):
On March 5, 1996, the Company redeemed its $150 million 7- 5/8%
Eurodollar Convertible Debentures, Due 2001 at a redemption price of
103.8125% of the principal amount plus accrued interest. On March 1,
1996, the Company redeemed its $150 million 9-1/8% Debentures, Due 2016,
at a redemption price of 104.4375% of the principal amount plus interest.
In connection with the redemptions, the Company recorded an extraordinary
items charge of $10.3 million ($15.8 million pretax), or six cents per
Common share, and reduced the number of fully diluted shares outstanding
by 2.8 million.
On April 11, 1995, holders of $199.5 million of the $200 million 5-3/4%
Eurodollar Convertible Debentures, Due 2005, 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. In connection with this exercise, the
Company recorded an extraordinary item charge of $2.7 million ($4.1
million pretax), or one cent per Common share, and reduced the number of
fully diluted shares outstanding by 5.1 million.
(5) 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.
AMERICAN BRANDS, INC.
CONDENSED CONSOLIDATED
BALANCE SHEET
(In millions)
September 30, December 31,
1996 1995
Assets (Unaudited)
Current Assets
Cash and Cash Equivalents $159.2 $139.9
Accounts Receivable, Net 1,454.8 984.4
Inventories 1,353.5 1,840.2
Other Current Assets 241.3 199.5
-------- --------
Total Current Assets 3,208.8 3,164.0
Property, Plant and Equipment, Net 1,141.1 1,137.3
Intangibles Resulting From
Business Acquisitions, Net 3,890.8 3,305.2
Other Assets 447.3 414.7
-------- --------
Total Assets $8,688.0 $8,021.2
========= =========
Liabilities and Stockholders' Equity
Current Liabilities
Short-Term Debt $758.9 $297.4
Current Portion - Long-Term Debt 78.1 413.4
Other Current Liabilities 2,098.6 1,700.5
-------- --------
Total Current Liabilities 2,935.6 2,411.3
Long-Term Debt 1,590.9 1,154.6
Other Long-Term Liabilities 566.5 578.1
-------- --------
Total Liabilities 5,093.0 4,144.0
Stockholders' Equity 3,595.0 3,877.2
-------- --------
Total Liabilities and Stockholders' Equity $8,688.0 $8,021.2
========= =========
