Pursuant to Rule 424(b)(2)
Reg. No. 33-57571
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 15, 1995
120,000,000 SHARES
RJR NABISCO HOLDINGS CORP.
[RJR LOGO]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
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All of the 120,000,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of RJR Nabisco Holdings Corp., a Delaware corporation
("Holdings" or the "Company"), are being offered by Borden, Inc., a New Jersey
corporation (the "Selling Stockholder" or "Borden"). The Selling Stockholder is
offering all of the shares of Common Stock it owns and upon completion of this
offering will no longer be a holder of any Common Stock. See "Selling
Stockholder".
The Company will not receive any proceeds from the sale of the Common Stock.
The Common Stock is listed on the New York Stock Exchange under the symbol
"RN". The reported last sale price of the Company's Common Stock on the New York
Stock Exchange on February 15, 1995 was $5.75 per share.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The shares of Common Stock offered hereby (the "Shares") will be purchased
from the Selling Stockholder by Goldman, Sachs & Co. as the Underwriter at a
price of $5.625 per share, less a commision of $0.105 per share ($662,400,000
aggregate net proceeds to the Selling Stockholder). The Company will pay certain
expenses of the offering estimated at $502,000.
The Shares may be offered by the Underwriter from time to time in one or
more transactions (which may involve block transactions) on the New York Stock
Exchange or on other national securities exchanges on which the Common Stock is
traded, in the over-the-counter market, through negotiated transactions or
otherwise at market prices prevailing at the time of the sale or at prices
otherwise negotiated, subject to prior sale, when, as and if delivered to and
accepted by the Underwriter. See "Plan of Distribution" herein.
The Company and the Selling Stockholder have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
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SEE "SIGNIFICANT CONSIDERATIONS" FOR A DISCUSSION OF THE IMPACT ON HOLDERS
OF COMMON STOCK OF CERTAIN POTENTIAL TRANSACTIONS AND OTHER IMPORTANT
CONSIDERATIONS.
The shares of Common Stock are offered, subject to prior sale, when, as and
if accepted by the Underwriter and subject to approval of certain legal matters
by Davis Polk & Wardwell, counsel for the Underwriter. It is expected that
the shares of Common Stock will be ready for delivery in New York, New York on
or about February 24, 1995.
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GOLDMAN, SACHS & CO.
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The date of this Prospectus Supplement is February 16, 1995.
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR
BY THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. NO ACTION HAS BEEN OR
WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY, THE SELLING STOCKHOLDER OR BY
THE UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE SHARES OF THE
SECURITIES OFFERED HEREBY OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN
ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE
UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED
BY THE COMPANY, THE SELLING STOCKHOLDER AND THE UNDERWRITER TO INFORM
THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE
SECURITIES OFFERED HEREBY AND THE DISTRIBUTION OF THIS PROSPECTUS.
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Significant Considerations.......................................... S-3
Recent Developments................................................. S-7
Selling Stockholder................................................. S-8
Plan of Distribution................................................ S-8
Legal Matters....................................................... S-9
PROSPECTUS
Available Information............................................... 2
Incorporation of Certain Documents by Reference..................... 2
The Company......................................................... 4
Summary Historical Consolidated Financial Data...................... 8
Price Range of Common Stock and Dividends........................... 10
Use of Proceeds..................................................... 11
Description of Holdings Capital Stock............................... 11
Selling Stockholder................................................. 17
Plan of Distribution................................................ 18
Legal Matters....................................................... 19
Experts............................................................. 20
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE COMMON STOCK
OR THE DEPOSITARY SHARES REPRESENTING THE COMPANY'S SERIES C CONVERSION
PREFERRED STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
CERTAIN OTHER EXCHANGES OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
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SIGNIFICANT CONSIDERATIONS
Prospective investors should carefully consider the following factors in
connection with their decision to invest in Common Stock.
TOBACCO-RELATED CONSIDERATIONS
GENERAL. R.J. Reynolds Tobacco Company ("RJRT"), an operating subsidiary of
Holdings owned through RJR Nabisco, Inc. ("RJRN"), is the second largest
cigarette manufacturer in the United States, and in the year ended December 31,
1994, RJRT's domestic tobacco business comprised approximately 30% of Holdings'
net sales and approximately 44% of Holdings' operating income from continuing
operations before corporate expenses, amortization of trademarks and goodwill
and restructuring expense. Domestic cigarette industry retail unit sales have
declined in the last four calendar years at an average rate of approximately
1.9% per year. Holdings believes that the decline is due to a number of factors,
including excise tax increases, asserted adverse health effects of smoking,
diminishing social acceptance of smoking and governmental and private
restrictions on smoking. For many years, the advertising, sale and use of
cigarettes has been under attack by government and health officials in the
United States and in other countries, principally due to claims that cigarette
smoking is harmful to health. This attack has resulted in a number of
substantial restrictions on the marketing, advertising and use of cigarettes,
diminishing social acceptability of smoking and activities by anti-smoking
groups designed to inhibit cigarette sales, the form and content of cigarette
advertising and the testing and introduction of new cigarette products. Together
with substantial increases in state and federal excise taxes on cigarettes, this
attack has had and will likely continue to have an adverse effect on cigarette
sales.
POSSIBLE LEGISLATIVE AND REGULATORY ACTIVITIES. During the last Congress,
the Clinton Administration and federal legislators introduced bills that would
have significantly increased the federal excise tax on cigarettes, eliminated
the income tax deductibility of a portion of the cost of tobacco advertising,
banned smoking in public buildings and workplaces, added additional health
warnings on cigarette packaging and advertising, further restricted the
marketing of tobacco products and authorized the Attorney General of the United
States to seek to recover federal Medicaid and Medicare payments used to treat
illnesses allegedly related to the use of tobacco products from their
manufacturers.
In January 1993, the U.S. Environmental Protection Agency released a report
on the respiratory effects of environmental tobacco smoke ("ETS") which
concludes that ETS is a known human lung carcinogen in adults and in children
causes increased respiratory tract disease and middle ear disorders and
increases the severity and frequency of asthma. In March 1994, the U.S.
Occupational Safety and Health Administration ("OSHA") announced proposed
regulations that would restrict smoking in the workplace to designated smoking
rooms that are separately exhausted to the outside. Although RJRT cannot predict
the form of any regulations that may be finally adopted by OSHA, if the proposed
regulations are adopted, RJRT expects that many employers who have not already
done so will prohibit smoking in the workplace rather than make expenditures
necessary to establish designated smoking areas to accommodate smokers. Because
many employers currently do not permit smoking in the workplace, RJRT cannot
predict the effect of any regulations that may be adopted, but incremental
restrictions on smokers could have an adverse effect on cigarette sales and
RJRT.
In February 1994, the Commissioner of the U.S. Food and Drug Administration
(the "FDA"), which historically has refrained from asserting jurisdiction over
cigarette products, stated that he intended to cause the FDA to work with the
U.S. Congress to resolve the regulatory status of cigarettes under the Food,
Drug and Cosmetic Act. During the second quarter of 1994, hearings were held in
this regard, and RJRT and other members of the United States cigarette industry
were asked to provide voluntarily certain documents and other information to
Congress. RJRT is unable
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to predict the outcome of any Congressional deliberations or the likelihood that
the FDA will assert jurisdiction over cigarettes in some manner. Were the FDA to
assert jurisdiction in a manner that materially restricts the availability of
cigarettes to consumers, it would likely have a significant adverse effect on
RJRT and Holdings.
It is not possible to determine what additional federal, state, local or
foreign legislation or regulations relating to smoking or cigarettes will be
enacted or to predict any resulting effect thereof on RJRT, R.J. Reynolds
Tobacco International, Inc., another operating subsidiary of Holdings owned
through RJRN ("Tobacco International"), or the cigarette industry generally, but
such legislation or regulations could have an adverse effect on RJRT, Tobacco
International or the cigarette industry generally.
TOBACCO-RELATED LITIGATION. Various legal actions, proceedings and claims
are pending or may be instituted against RJRT or its affiliates or indemnitees,
including those claiming that lung cancer and other diseases have resulted from
the use of or exposure to RJRT's tobacco products. The plaintiffs in these
actions seek recovery on a variety of legal theories, including strict liability
in tort, design defect, negligence, breach of warranty, failure to warn, fraud,
misrepresentation, unfair trade practices, conspiracy, unjust enrichment,
indemnity and common law public nuisance. Eight of these cases purport to be
class actions brought on behalf of thousands of individuals. Purported classes
include individuals claiming to be addicted to cigarettes, flight attendants
alleging personal injury from exposure to ETS in their workplace, and, in one
case, parents claiming that Joe Camel advertising constitutes an unfair trade
practice. In two such cases, Florida state court judges granted plaintiffs'
motions to certify a class. Defendants have appealed both of these rulings to
the Florida District Court of Appeals. In addition, three states, acting through
their attorneys general, have sued RJRT (and in two cases, RJRN) and other
industry members on various theories to recoup expenses incurred by the states
in the treatment of diseases purportedly associated with cigarette smoking and
to enjoin certain marketing practices. A fourth state has enacted legislation
which would facilitate the filing of such an action in that state. RJRT has been
advised that such a suit may be filed in the near future. Litigation is subject
to many uncertainties, and it is possible that some of the tobacco-related
legal actions, proceedings or claims could be decided against RJRT or its
affiliates or indemnitees. Determinations of liability or adverse rulings
against other cigarette manufacturers that are defendants in similar
actions, even if such rulings are not final, could adversely affect the
litigation against RJRT and its affiliates or indemnitees and increase the
number of such claims. Although it is impossible to predict the outcome of such
events or their effect on RJRT, a significant increase in litigation activities
could have an adverse effect on RJRT. RJRT believes that it has a number of
valid defenses to any such actions, and intends to defend vigorously all such
actions. Holdings believes that the ultimate outcome of all pending tobacco
litigation matters should not have a material adverse effect on the financial
position of Holdings; however, it is possible that the results of operations or
cash flows of Holdings in particular quarterly or annual periods or the
financial condition of Holdings could be materially affected by the ultimate
outcome of certain pending litigation matters.
For an additional discussion of legislation and litigation relating to the
cigarette industry and RJRT, see Holdings' Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 under "Business--Tobacco--Legislation and
Other Matters Affecting the Cigarette Industry" and "--Litigation Affecting The
Cigarette Industry" incorporated herein by reference.
IMPACT OF COMPETITIVE ACTIVITY
RJRT's largest U.S. competitor announced competitive initiatives in April
1993 that ultimately resulted in significant changes in the U.S. cigarette
market. These competitive actions and responses by RJRT and other competitors
effectively lowered the retail price of full price cigarette brands and raised
the price of the most highly discounted brands in the second half of 1993. This
resulted in a market comprised of a full price tier and a lower price tier of
products (as opposed to
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the three or more tiers that had previously existed) and in smaller relative
price differences between brands in different tiers.
The costs of responding to these competitive initiatives and the decrease in
list prices for full price cigarette brands of approximately 40 cents per pack
were primarily responsible for the sharp decline in RJRT's 1993 operating
company contribution because net price increases of approximately 12 cents per
pack (including the price increase referenced below) in the most highly
discounted brands did not and are not expected to offset the lower margins on
full price brands. Notwithstanding these lower margins, full price brands remain
more profitable than lower price brands, which consist of certain national
brands designed to have a lower price and of private label brands for retailers
and distributors. The private label brands are generally the least profitable of
RJRT's brands, but are important to facilitate RJRT's service to wholesale and
retail customers.
Although RJRT's full price volume as a percentage of total volume declined
to 56% in 1993 from 65% in 1992, lower retail prices on full price brands since
the third quarter of 1993 have resulted in an increase in full price volume as a
percentage of total volume to 60% in 1994. The higher mix of full price volume
occurred despite significantly reduced promotional expenses on full price brands
during this period.
During the fourth quarter of 1993, RJRT increased the list price of its
brands by 4 cents per pack, a move that its competitors generally matched. The
increases reflected an improvement in the stability of the competitive
environment that began in the fourth quarter of 1993. This improved stability
continued through 1994 and, together with operating cost reductions and
favorable product mix shifts, improved margins. However, 1994 profit margins
remained below first quarter 1993 levels and experienced some deterioration in
the last quarter of 1994 as a result of increases in marketing expenses to
protect and build market share. RJRT is unable to predict whether 1994's pricing
stability and profit margins are sustainable.
The effect of a law requiring U.S. manufacturers to use at least 75%
American-grown tobacco in their cigarettes produced after 1993 increased RJRT's
raw material costs for all brands, with a larger effect on costs for lower price
brands since these brands historically have contained a higher percentage of
lower cost foreign-grown tobacco than full price brands. The cost increase was
more than offset by higher revenues for lower price brands resulting from the
fourth quarter price increase referenced above. The same result occurred for
full price brands. In December 1994, Congress enacted legislation (the Uruguay
Round Agreements Act) to replace this domestic content requirement with a tariff
rate quota system that keys tariffs to import volumes. The tariff rate quotas
are currently being negotiated between the United States and overseas tobacco
producers. Compliance with import restrictions may continue to increase raw
material costs in the future. For additional information, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Tobacco--1993 Competitive Activity" and "Business--Other Matters--
Competition" in Holdings' Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 incorporated herein by reference.
LEVERAGE AND DEBT SERVICE
Holdings, together with its subsidiaries, had, at December 31, 1994, a ratio
of consolidated total debt to total stockholders' equity of 1.0-to-1 without
giving effect to the initial public offering of shares of Nabisco Holdings Corp.
("Nabisco") and related transactions, which was consummated on January 26, 1995.
Although Holdings has significantly reduced its consolidated indebtedness
and improved its consolidated debt-to-equity ratios since the acquisition of
Holdings (the "Acquisition") by the Common Stock Partnerships (as defined
herein) in 1989, the indebtedness and debt-to-equity ratio of Holdings and its
subsidiaries continue to have the effect, generally, of restricting the
flexibility of Holdings and its subsidiaries in responding to changing business
and economic conditions insofar
S-5
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as they affect the financial condition and financing requirements of Holdings
and its subsidiaries. Moreover, the Credit Agreement dated as of December 19,
1991 and the Credit Agreement dated as of April 5, 1993 and the terms governing
certain other indebtedness (including indebtedness of its subsidiaries) impose
significant operating and financial restrictions on Holdings and its
subsidiaries. These restrictions limit the ability of Holdings and its
subsidiaries to incur indebtedness, pay dividends, engage in transactions with
stockholders and affiliates, create liens, sell certain assets and certain
subsidiaries' stock, engage in certain mergers or consolidations and make
investments in unrestricted subsidiaries. See "Description of Capital
Stock--Contractual Restrictions and Policies on Payment of Dividends" in the
Prospectus.
HOLDING COMPANY STRUCTURE
Holdings' cash flow and consequent ability to meet its obligations under its
indebtedness and to pay future dividends on the Common Stock, if any, are
substantially dependent upon the earnings and cash flow available after debt
service of RJRN and the availability of such earnings and cash flows to Holdings
by way of dividends, distributions, loans and other advances. The Common Stock
is junior in right of payment to all existing and future liabilities,
obligations (whether or not for borrowed money) and preferred stock of Holdings,
and is structurally subordinate to all existing and future liabilities and
obligations (whether or not for borrowed money) of RJRN and its subsidiaries. As
of December 31, 1994, total current liabilities and long-term debt of Holdings'
subsidiaries were approximately $14.4 billion.
KKR OWNERSHIP OF COMMON STOCK
As of December 31, 1994 (after the exchange of 206,532,285 shares of Common
Stock for 90,131,307 shares of Common Stock of Borden ("Borden Common Stock")
pursuant to an exchange offer (the "Exchange Offer") by Borden Acquisition Corp.
(the "Purchaser"), a subsidiary of Whitehall Associates L.P. (the
"Partnership"), an affiliate of Kohlberg Kravis Roberts & Co ("KKR"), for all
outstanding Borden Common Stock which expired on December 20, 1994 and the
exercise in full of a right (the "Option") to acquire 28,138,000 shares of
Borden Common Stock pursuant to a Conditional Purchase/Stock Option Agreement,
dated as of September 23, 1994 (the "Conditional Purchase/Option Agreement"),
among the Partnership, the Purchaser and Borden, in exchange for 51,106,768
shares of Common Stock), an aggregate of approximately 24.95% (approximately
20.27% on a fully diluted basis), including the 51,106,768 shares of Common
Stock owned by Borden as a result of the exercise of the Option, of the total
voting power of Holdings was held or controlled by the Partnership and KKR
Partners II, L.P. (together, the "Common Stock Partnerships"). After the
projected completion of the proposed merger of the Purchaser with and into
Borden (the "Merger") and assuming that, after January 26, 1995, no further
options for Borden Common Stock are exercised, an aggregate of approximately
16.50% (approximately 13.41% on a fully diluted basis), including the 51,106,768
shares of Common Stock owned by Borden as a result of exercise of the Option, of
the total voting power of Holdings would have been held or controlled by the
Common Stock Partnerships. Currently, seven of Holdings' sixteen directors are
partners or executives of KKR.
After the transfer of an additional 68,893,232 shares of Common Stock by the
Common Stock Partnerships to Borden, the sale of the shares of Common Stock
offered hereby and the completion of the proposed Merger, the Common Stock
Partnerships are expected to own or control an aggregate of approximately
7.95% (approximately 6.46% on a fully diluted basis) of the total voting power
of Holdings, based upon the number of shares outstanding as of December
31, 1994.
POTENTIAL CONFLICTS OF INTEREST
As a result of the ownership of a significant percentage of the total voting
power of Holdings by the Common Stock Partnerships and having partners or
executives of KKR as board members of Holdings as described under "--KKR
Ownership of Common Stock" above, it is possible that conflicts or potential
conflicts of interest may arise between the Common Stock Partnerships and KKR on
the one hand and Holdings on the other. Holdings believes that any such
conflicts or potential conflicts which may arise will be resolved in compliance
with Delaware law, which
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provides, among other things, that each director has a fiduciary duty to act in
the best interests of the corporation.
For information concerning the decision by Holdings not to pursue a
transaction with Borden, see "RJR Nabisco Holdings Corp.--Recent Developments"
in the Prospectus.
SIGNIFICANT INCREASE IN SHARES AVAILABLE FOR TRADING
Of the 1,361,656,883 shares of Common Stock outstanding as of December 31,
1994, approximately 1.001 billion shares are being held by persons that are not
affiliates or management of Holdings or Borden and are freely tradeable,
including an aggregate of, as of December 31, 1994, 206,532,285 shares of Common
Stock that were exchanged for an aggregate of 90,131,307 shares of Borden Common
Stock pursuant to the Exchange Offer. After completion of the Merger, an
aggregate of an additional approximately 118,572,299 shares of Common Stock will
be freely tradeable.
In addition, upon exercise in full of the Option, Borden received 51,106,768
of the 120,000,000 shares of Common Stock being offered hereby. Furthermore, the
Common Stock Partnerships have made an additional equity investment in Borden in
the form of 68,893,232 shares of Common Stock of the 120,000,000 shares of
Common Stock being offered hereby. The entire 120,000,000 shares of Common Stock
offered hereby will be freely tradeable
As a result of these transactions, as well as in the event of any further
increase in the Common Stock Partnerships' equity investment in Borden through a
transfer to Borden of additional shares of Common Stock, the number of shares of
Common Stock that are freely tradeable will increase significantly over time.
Holdings is unable to predict the effect that the increase in freely tradeable
shares of Common Stock will have on the market value of such shares, although
such increase may cause temporary volatility or a decline in the market price of
the Common Stock unrelated to the operating performance of Holdings.
RECENT DEVELOPMENTS
The following description of recent developments with respect to the Company
supplements the portion of the Prospectus entitled "Recent Developments" to
which reference is hereby made.
POSSIBLE TRANSACTIONS WITH RESPECT TO PUBLIC DEBT
Certain provisions in approximately $6 billion of RJRN's publicly held debt
limit the ability of Nabisco to incur long-term debt. RJRN is currently seeking
to pursue a transaction in which it would seek to obtain consents to remove such
limitations in order to permit Nabisco to establish long-term borrowing capacity
independent of its parent and to reduce its intercompany debt. It is anticipated
that such a consent would be sought in connection with offers by Nabisco or RJRN
to exchange debt of Nabisco for, or to pay certain cash solicitation fees in
respect of, all or a portion of such RJRN debt. RJRN believes that any such
transaction would not materially change the amount of consolidated indebtedness
of either RJRN or Nabisco, although any newly issued debt of RJRN or Nabisco
incurred in connection with the transaction may have maturities, interest rates
or other terms that are less attractive to RJRN or Nabisco, respectively, than
the terms of their existing debt. No assurance can be given that any such
restructuring will be pursued or consummated or as to the timing of any such
restructuring.
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REVERSE STOCK SPLIT
The Board of Directors of the Company has approved a one-for-five reverse
stock split of the Common Stock, which will be submitted to the Company's
stockholders for approval at the Company's annual meeting in April. If approved,
the reverse stock split would result in a share price, dividend and earnings per
share that are five times higher, with a corresponding reduction in the number
of shares outstanding.
HEADQUARTERS REALIGNMENT
During the fourth quarter of 1994, the Company approved and adopted a plan
to realign its headquaters' functions, transferring certain responsibilities
to the operating companies and significantly streamlining the holding company.
The plan reflects expectations of a lower level of financings and other
activities at the holding company as Holdings concludes the post-LBO period.
The costs and expenses associated with this decision resulted in a charge of
approximately $65 million before tax, a significant portion of which is a cash
expense. The majority of the charge is related to accrued employee termination
benefits for the 25% of headquarters' employees terminated (approximately $40
million). This cost was incurred pursuant to a continuing plan for employee
termination benefits that provides for the payment of specified amounts of
severance and benefits to terminated employees. The remainder of the charge
(approximately $25 million) is related to the abandonment of leases of certain
corporate office facilities as a result of the realignment and streamlining and
the reduced need for office space. The plan was implemented in the first
quarter of 1995 and will be completed by year-end 1995. Anticipated annual
future cash savings flowing from the plan are estimated at approximately $25
million before tax (approximately $16 million after tax).
SELLING STOCKHOLDER
The following information with respect to the Selling Stockholder
supplements the portion of the Prospectus entitled "Selling Stockholder" to
which reference is made.
After the transfer of 68,893,232 shares of Common Stock by the Common Stock
Partnerships to Borden, the sale of the shares of Common Stock offered hereby
and the completion of the proposed Merger, the Common Stock Partnerships are
expected to own or control an aggregate of approximately 7.95% (approximately
6.46% on a fully diluted basis) of the total voting power of Holdings, based
upon the number of shares outstanding as of December 31, 1994.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Purchase Agreement, the
Selling Stockholder has agreed to sell, and the Underwriter has agreed to
purchase, the Shares. Under the terms and conditions of the Purchase Agreement,
the Underwriter is committed to take and pay for all of the Shares being sold if
any are taken.
It is expected that all or a substantial portion of the Shares may be sold
by the Underwriter to institutional purchasers in one or more transactions
(which may involve block transactions) on the New York Stock Exchange or on
other national securities exchanges on which the Common Stock is traded or
otherwise. The distribution of the Shares may also be effected from time to time
in special offerings, exchange distributions and/or secondary distributions
pursuant to and in accordance with the rules of the New York Stock Exchange or
such other exchanges, in the over-the-counter market, in negotiated transactions
through the writing of options on Shares (whether such options are listed on an
options exchange or otherwise) or otherwise, or in a combination of such at
prevailing market prices or at negotiated prices. The Underwriter may effect
such transactions by selling Shares to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the Underwriter and/or the purchasers of such Shares for whom they may act as
agent or to whom they may sell as principal.
In connection with the sale of the Shares, the Underwriter will receive
compensation from the Selling Stockholder in the form of an underwriting
discount of $0.105 per share, including selling concessions of $ 0.10, and may
receive compensation from purchasers of the Shares for whom it may act as agent
or to whom it may sell as principal in the form of commissions or discounts, in
each case in amounts which will not exceed those customary in the types of
transactions involved. Underwriters and dealers that participate in the
distribution of the Shares may be deemed to be underwriters, and any discounts
received by them from the Selling Stockholder and any compensation received by
them on the resale of the Shares by them may be deemed to be underwriting
discounts and commission under the Securities Act.
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LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Jo-Ann Ford, Vice President, Assistant General Counsel and Secretary
of the Company, and will be passed upon for the Underwriter by Davis Polk &
Wardwell. Ms. Ford owns and has options to purchase shares of Common Stock which
represent less than 0.1% of the currently outstanding shares of Common Stock.
Davis Polk & Wardwell has in the past provided, and may continue to provide,
legal service to the Company and its affiliates. A partner of Davis Polk &
Wardwell has been appointed General Counsel of the Company, effective March 3,
1995. Such partner shall remain a partner of Davis Polk & Wardwell thereafter.
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PROSPECTUS
[RJR LOGO] 120,000,000 SHARES
RJR NABISCO HOLDINGS CORP.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
Borden, Inc. ("Borden" or the "Selling Stockholder") may offer from time to
time up to 120,000,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of RJR Nabisco Holdings Corp. (the "Company" or "Holdings").
When an offering of all or part of the Common Stock offered hereby is made, a
supplement to this Prospectus (the "Prospectus Supplement") will be delivered
with this Prospectus. The Prospectus Supplement will set forth the terms of the
offering of the Common Stock, the initial offering price and the net proceeds to
the Selling Stockholder of the sale thereof.
The Common Stock is traded on the New York Stock Exchange, Inc. ("NYSE")
under the symbol "RN."
See "Certain Significant Considerations" in the Prospectus Supplement for a
description of certain factors that should be considered by purchasers of the
Common Stock offered hereby.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------
The Common Stock offered hereby may be sold directly to purchasers
(including, in the event that the Selling Stockholder sells securities of its
own which are convertible, exchangeable or redeemable into or for the Common
Stock, upon conversion, exchange or redemption of such securities of the Selling
Stockholder) or through agents designated from time to time by the Selling
Stockholder or to or through one or more underwriters. If any agents of the
Selling Stockholder or any underwriters are involved in the sale of Common Stock
in respect of which this Prospectus is being delivered, the names of such agents
or underwriters and any applicable commissions or discounts will be set forth in
the Prospectus Supplement.
-------------------
The date of this Prospectus is February 15, 1995.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Holdings with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should be available at the Commission's Regional Offices at 7 World Trade
Center, 13th Floor, New York, New York 10048, and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material also can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, material filed by
Holdings can be inspected at the offices of the New York Stock Exchange, Inc.,
20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the Common
Stock. Statements contained herein concerning the provisions of any document are
not necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Holdings (File No.
1-10215) pursuant to the Exchange Act or the Securities Act, as applicable, are
incorporated by reference in this Prospectus:
1. Holdings' Annual Report on Form 10-K for the year ended December 31,
1993 (which incorporates by reference certain information from Holdings'
Proxy Statement relating to the 1994 Annual Meeting of Stockholders);
2. Holdings' Quarterly Reports on Form 10-Q for the three months ended
March 31, 1994, the six months ended June 30, 1994 and the nine months ended
September 30, 1994;
3. Holdings' Current Report on Form 8-K/A filed April 27, 1994;
4. The Consolidated Financial Statements of Holdings as of December 31,
1993 and 1992 and for each of the years in the three year period ended
December 31, 1993 and the related notes thereto, and Management's Discussion
and Analysis of Financial Condition and Results of Operations, included in
the Registration Statement on Form S-3 (Registration No. 33-52381), at the
time such Registration Statement was declared effective by the Commission;
and
5. The Selected Pro Forma Consolidated Financial Data included in
Post-Effective Amendment No. 2 to the Registration Statement on Form S-4
(Registration No. 33-55767), at the time such Registration Statement was
declared effective by the Commission.
Each document filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock pursuant hereto shall be
deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of filing of such document. Any statement
contained in this Prospectus or in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes
2
<PAGE>
of the Registration Statement and this Prospectus to the extent that a statement
contained in this Prospectus or the Prospectus Supplement, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference in this Prospectus, modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents that are incorporated by reference in this
Prospectus, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to RJR Nabisco, Inc., 1301 Avenue of the Americas, New York, New York
10019 (telephone number (212) 258-5600), Attention: Investor Relations
Department.
The Registration Statement is being filed by Holdings at the request of the
Selling Stockholder pursuant to the terms of a Registration Rights Agreement
among Holdings, certain affiliates of Kohlberg Kravis Roberts & Co. ("KKR") and
others dated as of February 9, 1989.
THE COMPANY
As used herein, "Holdings" means RJR Nabisco Holdings Corp. and its
consolidated subsidiaries unless the context otherwise requires.
RJR NABISCO HOLDINGS CORP.
The operating subsidiaries of Holdings owned through RJR Nabisco, Inc.
("RJRN") comprise one of the largest tobacco and food companies in the world. In
the United States, the tobacco business is conducted by R.J. Reynolds Tobacco
Company ("RJRT"), the second largest manufacturer of cigarettes, and the
packaged foods business is conducted by Nabisco Holdings Corp. through Nabisco,
Inc., a wholly owned subsidiary of Nabisco Holdings Corp. ("Nabisco"), the
largest manufacturer and marketer of cookies and crackers. RJRN owns
approximately 80.5% of the economic interest and approximately 97.6% of the
voting power of Nabisco. Tobacco operations outside the United States are
conducted by R.J. Reynolds Tobacco International, Inc. ("Tobacco International")
and packaged food operations outside the United States and Canada are conducted
by Nabisco International, Inc. ("Nabisco International"), a subsidiary of
Nabisco. Together, RJRT's and Tobacco International's tobacco products are sold
around the world under a variety of brand names. Food products are sold in the
United States, Canada, Latin America and certain other international markets.
TOBACCO
RJRT's largest selling cigarette brands in the United States include
WINSTON, DORAL, CAMEL, SALEM, MONARCH and VANTAGE. RJRT's other cigarette
brands, including MORE, NOW, BEST VALUE, STERLING, MAGNA and CENTURY, are
marketed to meet a variety of smoker preferences. All RJRT brands are marketed
in a variety of styles. Tobacco International operates in over 160 markets
around the world and is the second largest of two international cigarette
producers that have significant positions in the American Blend segment of the
international tobacco market.
FOOD
Nabisco's domestic operations represent one of the largest packaged food
businesses in the world. Through its domestic divisions, Nabisco manufactures
and markets cookies, crackers, snack foods, hard and bite-size candy, gum, nuts,
hot cereals, margarine, pet foods, dry-mix dessert products and other grocery
products under established and well-known trademarks, including OREO, CHIPS
AHOY!, NEWTONS, SNACKWELL'S, RITZ, PREMIUM, LIFE SAVERS, PLANTERS, A.1, GREY
POUPON, MILK-BONE, ORTEGA, CREAM OF WHEAT, FLEISCHMANN'S and
3
<PAGE>
BLUE BONNET. Nabisco International is also a leading producer of powdered
dessert and drink mixes, biscuits, baking powder and other grocery items,
industrial yeast and bakery ingredients in many of the 17 Latin American
countries in which it has operations.
RJRN was acquired in 1989 by an indirect, wholly owned subsidiary of
Holdings at the direction of KKR. KKR is a private investment firm organized as
a Delaware limited partnership.
The principal executive office of Holdings is located at 1301 Avenue of
Americas, New York, New York 10019; its telephone number is (212) 258-5600.
RECENT DEVELOPMENTS
NABISCO INITIAL PUBLIC OFFERING AND RELATED TRANSACTIONS. On January 26,
1995, Nabisco completed its initial public offering of 51,750,000 shares of
Class A Common Stock at an initial offering price of $24.50 per share (the
"Nabisco Public Offering"). The net proceeds to Nabisco from the offering were
approximately $1.2 billion. Following the public offering, Holdings beneficially
owned 100% of Nabisco's outstanding Class B Common Stock, which represents
approximately 80.5% of the economic interest in Nabisco. Holders of Class A
Common Stock of Nabisco generally have identical rights to holders of Class B
Common Stock except that holders of Class A Common Stock are entitled to one
vote per share while holders of Class B Common Stock are entitled to ten votes
per share on all matters submitted to a vote of stockholders.
The Nabisco Public Offering was part of a broader proposed initiative of
Holdings designed to reduce consolidated debt of Holdings by approximately $1
billion and establish a separately traded common stock for Nabisco. Holdings
also anticipates commencing a quarterly cash dividend on its common stock of
$.075 per share or $.30 per share on a annualized basis. See "Price Range of
Common Stock and Dividends."
Following the public offering, Nabisco had approximately $4.0 billion of
intercompany debt and approximately $149 million of borrowings under a
short-term bank credit agreement. The net proceeds of the public offering were
used by Nabisco to repay a portion of the borrowings under its bank facility.
As part of the initiative, RJRN redeemed approximately $1.9 billion of debt
securities with borrowings under its existing credit facilities, proceeds from
Holdings' Series C Conversion Preferred Stock (the "Series C Preferred Stock")
offering completed on May 6, 1994 and internally generated cash flow.
As another part of the initiative, RJRN expects to seek to restructure
approximately $6 billion of its domestic publicly held debt which currently
limits the ability of Nabisco to incur long-term debt other than intercompany
debt. The restructuring, which would require consent of public debtholders and
lenders under bank facilities, may include one or more offers to exchange
Nabisco debt securities for a portion of such debt. The goal of the exchange
offers would be to permit Nabisco to establish long-term borrowing capacity
independent of its parent and to reduce its intercompany debt. No assurance can
be given that any such restructuring will be consummated.
TERMINATION OF AGREEMENT IN PRINCIPLE RELATING TO BORDEN. On October 25,
1994, Holdings and KKR concluded that they were unable to reach a definitive
agreement for the transaction contemplated by their agreement in principle for
Holdings to acquire a minority interest in Borden, as had been previously
announced on September 12, 1994. The September 12, 1994 announcement indicated
that, following KKR's successful acquisition of Borden, Holdings would issue to
Borden approximately $500 million of newly issued common shares of Holdings for
newly issued shares of Borden common stock representing a 20% pro forma interest
in Borden and a warrant to acquire an additional 10% pro forma interest in
Borden. The inability to reach agreement resulted from various complexities
affecting the transaction, including certain accounting issues. In particular,
because Holdings would have been required to account for its investment in
Borden using the equity method (thereby being required to reflect a portion of
Borden's potentially low or volatile
4
<PAGE>
earnings in its financial statements) and to amortize a substantial amount of
goodwill resulting from the transaction, the proposed transaction would likely
have had a dilutive effect on Holdings' near-term earnings. Attempts to resolve
these issues by restructuring the transaction were unsuccessful. Holdings could
in the future explore a basis on which it or its Nabisco subsidiary may acquire
a minority equity interest in Borden in exchange for common stock of Holdings.
However, Holdings is not currently engaged in any such negotiations, and there
is no assurance that Holdings will seek to pursue any such negotiations or that
any such negotiations will be successful.
RESULTS OF OPERATIONS FOR 1994
OVERVIEW. Holdings' net sales for 1994 increased 2 percent to $15.4 billion
from $15.1 billion in 1993. Operating income for 1994 increased 85 percent to
$2.6 billion from $1.4 billion in 1993. Net income for 1994 amounted to $519
million compared to a net loss of $145 million in 1993. Earnings per share for
1994 amounted to $.25 per common share on a primary basis compared to a net loss
of $.15 per primary common share in 1993 after including Series A Depositary
Shares as common stock equivalents. Earnings per primary common share in 1993
after excluding Series A Depositary Shares as common stock equivalents would
have amounted to a net loss of $.34 per share. Included in the 1994 results is a
pre-tax charge of $65 million ($42 million after-tax) related to the realignment
and decentralization of corporate headquarters' functions. Also included in the
1994 results is an extraordinary loss of $245 million related to the early
extinguishment of debt, net of income taxes. Included in the 1993 results were a
pre-tax restructuring expense of $730 million ($467 million after-tax) and an
extraordinary loss of $142 million related to the early extinguishment of debt,
net of income taxes. Full-year comparisons of per share results reflect a higher
number of average shares outstanding from the issuance of Series C Preferred
Stock in May 1994 and an increase in preferred dividend payments during 1994.
FOURTH QUARTER RESULTS. Holdings' fourth quarter net income was $62 million
or $.02 per primary common share in 1994, compared with a net loss of $461
million or $.36 per primary common share in 1993 after including Series A
Depositary Shares as common stock equivalents. Earnings per primary common share
for the fourth quarter of 1993 after excluding Series A Depositary Shares as
common stock equivalents would have amounted to a net loss of $.47 per share.
For the fourth quarter of 1994, a pre-tax charge of approximately $65
million ($42 million after-tax) is included in corporate administrative
expenses, reflecting a streamlining of the holding company. This action is a
result of expectations for a lower level of financing and other activities as
Holdings concludes the post-leveraged buyout period. Holdings believes the
headquarters changes are consistent with its ongoing commitment to decentralized
management.
Holdings recorded operating income of $565 million in the fourth quarter of
1994 compared with an operating loss of $318 million in the fourth quarter of
1993.
TOBACCO RESULTS. Holdings' worldwide tobacco businesses reported profit
gains in 1994, although sales and volume performance was mixed. Worldwide
operating company contribution (operating income before amortization of
trademarks and goodwill and excluding the restructuring expense in 1993)
increased 21 percent in 1994, to $2.23 billion from $1.84 billion in 1993.
Worldwide tobacco volume was level with 1993 and net sales were $7.67 billion, a
5 percent decline from net sales of $8.08 billion last year.
For Tobacco International, full-year operating company contribution was $755
million, a 17 percent gain from the prior year, due to volume gains, lower
product costs and reduced promotional spending. Volume increased 6 percent with
notably strong gains in the former Soviet Union, Turkey, Malaysia, and Spain.
Net sales were $3.10 billion, a slight decline from the year-earlier period.
For RJRT, operating company contribution of $1.48 billion was 23 percent
greater than the $1.20 billion reported last year. Full-year net sales of $4.57
billion were 8 percent less than the
5
<PAGE>
$4.95 billion reported in 1993. RJRT's volume declined 7 percent primarily due
to RJRT's de-emphasis on lower-margin savings brands.
RJRT's product mix improved in 1994, with higher-margin, full-price brands
representing 60 percent of RJRT's product sold, compared to 56 percent during
the prior year. RJRT's total retail share declined about 2.0 points for the
year. However, RJRT's core brands' share either improved or stabilized, with
CAMEL and DORAL, in particular, showing strong gains for the year. RJRT's
overall domestic share declined, mainly due to its de-emphasis on certain
lower-margin savings brands.
For the fourth quarter, operating company contribution for the worldwide
tobacco businesses of $498 million increased 73 percent compared to the prior
year. Fourth quarter 1994 net sales of $1.90 billion were 9 percent less than in
the comparable 1993 period.
For Tobacco International, fourth quarter operating company contribution was
$198 million, a 25 percent gain over the prior year's quarter primarily
attributable to reduced product costs and lower marketing and selling expense.
For the quarter, international volume and net sales were both down 16 percent
compared to 1993 due to trade inventory adjustments, mix, and a change in fiscal
year end. Adjusting for the change in fiscal year end, volume and net sales rose
11 percent and 5 percent, respectively.
RJRT's fourth quarter operating company contribution of $300 million
increased 131 percent from the prior year's quarter. Net sales for the same
period of $1.08 billion declined 1 percent, as favorable pricing and a more
favorable product mix only partially offset a volume decline of 10 percent.
FOOD RESULTS. For full-year 1994, worldwide net sales for the Nabisco food
businesses were $7.70 billion, up 10 percent from net sales of $7.03 billion in
1993. Full-year operating company contribution for the food businesses exceeded
the billion-dollar mark for the first time: $1.16 billion or 16 percent higher
than the $995 million reported in 1993.
The food business posted strong gains in U.S. markets, which account for the
majority of Nabisco's sales and operating company contribution, during the year.
Nabisco Biscuit Company, the company's largest operating unit, posted record
results with volume up 7 percent versus 1993.
Total U.S. cookie and cracker market share increased to 47 percent from 46
percent in 1993. The company's SNACKWELL'S brand family of reduced-fat and
fat-free products, first introduced in 1992, generated more than $375 million in
sales in 1994.
Including the Canadian operations, Nabisco's international sales grew 28
percent in 1994, reaching the $2 billion level. Operating company contribution
was up 26 percent.
In Brazil, a strong, second-half economic recovery spurred a turnaround of
Nabisco's business there. In Colombia, Nabisco launched a new biscuit business,
capturing almost 10 percent of the market in just over one year. In Argentina,
Nabisco acquired the remaining interest in Establecimiento Modelo Terrabusi
S.A., a leading biscuit and pasta company.
Recent improvements in Nabisco's Mexican operations were hampered by
negative developments toward year-end in that country's economy and devaluation
of its currency. The peso devaluation's cost to earnings was not material.
Worldwide food businesses' fourth quarter operating company contribution was
$359 million, an increase of 17 percent compared with $308 million in 1993. Net
sales of $2.15 billion were an increase of 9 percent over the prior year's net
sales of $1.98 billion.
6
<PAGE>
The following table sets forth certain operating data for Holdings and
should be read in conjunction with the other financial information and the notes
thereto included or incorporated by reference herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
(UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net Sales:
Tobacco--Domestic....................... $ 1,075 $ 1,091 $ 4,570 $ 4,949
--International................. 822 984 3,097 3,130
---------- ---------- ---------- ----------
Total Tobacco........................... 1,897 2,075 7,667 8,079
Total Food.............................. 2,147 1,976 7,699 7,025
---------- ---------- ---------- ----------
Consolidated.......................... $ 4,044 $ 4,051 $ 15,366 $ 15,104
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Operating Company Contribution:
Tobacco--Domestic....................... $ 300 $ 130 $ 1,475 $ 1,200
--International................. 198 158 755 644
---------- ---------- ---------- ----------
Total Tobacco........................... 498 288 2,230 1,844
Total Food.............................. 359 308 1,156 995
Headquarters(1)......................... (132) (25) (207) (106)
---------- ---------- ---------- ----------
Operating company contribution........ 725 571 3,179 2,733
Amortization of trademarks and
goodwill................................ (160) (159) (629) (625)
Restructuring expense(2)................ 0 (730) 0 (730)
---------- ---------- ---------- ----------
Operating income...................... 565 (318) 2,550 1,378
Interest and debt expense............... (237) (299) (1,065) (1,209)
Other (expense) income, net............. (29) (54) (110) (58)
---------- ---------- ---------- ----------
Income before income taxes............ 299 (671) 1,375 111
Provision for income taxes.............. 137 (242) 611 114
---------- ---------- ---------- ----------
Income before extraordinary item...... 162 (429) 764 (3)
Extraordinary item--loss on early
extinguishments of debt, net of income
taxes................................... (100) (32) (245) (142)
---------- ---------- ---------- ----------
Net income(2)......................... 62 (461) 519 (145)
Less preferred stock dividends.......... 33 35 131 68
---------- ---------- ---------- ----------
Net income applicable to common
stock................................... $ 29 $ (496) $ 388 $ (213)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income (loss) per common and common
equivalent share on a primary basis:
Income before extraordinary item(3)... $ 0.08 $ (0.34) $ 0.41 $ (0.05)
Extraordinary item.................... (0.06) (0.02) (0.16) (0.10)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income.......................... $ 0.02 $ (0.36) $ 0.25 $ (0.15)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Average number of common and common
equivalent shares outstanding (in
thousands).............................. 1,634,999 1,350,668 1,538,127 1,349,196
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
- ------------
(1) 1994 includes the effect of the realignment and decentralization of
corporate headquarters' functions of $65 million ($42 million after tax).
(2) 1993 includes the effect of a restructuring expense of $730 million ($467
million after tax).
(3) If calculated on a fully diluted basis, income before extraordinary item per
common and common equivalent share amounted to $.08 and ($.33) for the three
months ended December 31, 1994 and 1993, respectively, and $.42 and ($.02)
for the twelve months ended December 31, 1994 and 1993, respectively.
7
<PAGE>
RJR NABISCO HOLDINGS CORP.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below as of September 30,
1994 and for the nine months ended September 30, 1994 and 1993 were derived from
Holdings consolidated condensed financial statements incorporated herein by
reference. The summary consolidated financial data presented below as of
December 31, 1993 and 1992 and for each of the years in the three-year period
ended December 31, 1993 for Holdings were derived from the historical
consolidated financial statements of Holdings and notes thereto (the "Holdings
Consolidated Financial Statements"), incorporated herein by reference, which
have been audited by Deloitte & Touche LLP, independent auditors. In addition,
the summary consolidated financial data as of December 31, 1991, 1990 and 1989,
for the year ended December 31, 1990 and for the period from February 9, 1989
through December 31, 1989 for Holdings and for the period from January 1, 1989
through February 8, 1989 for RJRN were derived from the audited consolidated
financial statements of Holdings and RJRN as of December 31, 1991, 1990 and
1989, for the year ended December 31, 1990 and for each of the periods within
the one-year period ended December 31, 1989 and are not presented or
incorporated herein by reference. The data should be read in conjunction with
the Holdings Consolidated Financial Statements and the historical consolidated
condensed financial statements of Holdings and notes thereto (the "Holdings
Consolidated Condensed Financial Statements") incorporated herein by reference.
<TABLE>
<CAPTION>
HOLDINGS RJRN
------------------------------------------------------------------------ ----------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
(DOLLARS IN MILLION EXCEPT PER ----------------- -----------------------------------------------------------------
SHARE AMOUNTS) 1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------------------------
2/9 TO 12/31 1/1 TO 2/8
------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales...................... $11,322 $11,053 $15,104 $15,734 $14,989 $13,879 $ 12,114 $ 650
------- ------- ------- ------- ------- ------- ------ -----
Cost of products sold.......... 5,079 4,709 6,640 6,326 6,088 5,652 5,241 332
Selling, advertising,
administrative and general
expenses........................ 3,789 4,182 5,731 5,788 5,358 4,801 4,276 295
Amortization of trademarks
and goodwill................. 469 466 625 616 609 608 557 10
Restructuring expense.......... -- -- 730 106 -- -- -- --
------- ------- ------- ------- ------- ------- ------ -----
Operating income(1).......... 1,985 1,696 1,378 2,898 2,934 2,818 2,040 13
Interest and debt expense...... (828) (910) (1,209) (1,449) (2,217) (3,176) (3,340) (44)
Change in control costs........ -- -- -- -- -- -- -- (247)
Other income (expense), net.... (81) (4) (58) 7 (69) (44) 169 15
------- ------- ------- ------- ------- ------- ------ -----
Income (loss) from continuing
operations before income
taxes........................... 1,076 782 111 1,456 648 (402) (1,131) (263)
Provision (benefit) for income
taxes........................... 474 356 114 680 280 60 (156) (66)
------- ------- ------- ------- ------- ------- ------ -----
Income (loss) from continuing
operations...................... 602 426 (3) 776 368 (462) (975) (197)
Income (loss) from operations
of discontinued businesses,
net of income taxes(2)....... -- -- -- -- -- -- (1) 24
Extraordinary item--(loss) gain
on early extinguishments of
debt, net of income taxes.... (145) (110) (142) (477) -- 33 -- --
------- ------- ------- ------- ------- ------- ------ -----
Net income (loss).............. 457 316 (145) 299 368 (429) (976) (173)
Preferred stock dividends...... 98 33 68 31 173 50 -- 4
------- ------- ------- ------- ------- ------- ------ -----
Net income (loss) applicable to
common stock................. $ 359 $ 283 $ (213) $ 268 $ 195 $ (479) $ (976) $ (177)
------- ------- ------- ------- ------- ------- ------ -----
------- ------- ------- ------- ------- ------- ------ -----
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
HOLDINGS RJRN
------------------------------------------------------------------------ ----------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
(DOLLARS IN MILLION EXCEPT PER ----------------- -----------------------------------------------------------------
SHARE AMOUNTS) 1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------------------------
2/9 TO 12/31 1/1 TO 2/8
------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Income (loss) from continuing
operations per common and
common equivalent share...... $ .33 $ .29 $ (.05) $ .55 $ .22 $ (1.19) $ (3.21) $ (.89)
Dividends per share of Series A
Preferred Stock(3).............. 2.51 2.51 3.34 3.34 .49 -- -- --
Dividends per share of Series C
Preferred Stock(3).............. 2.44 -- -- -- -- -- -- --
BALANCE SHEET DATA (AT END OF
PERIODS)
Working capital................ $ 358 -- $ 202 $ 730 $ 165 $(1,089) $ 106 --
Total assets................... 31,851 -- 31,295 32,041 32,131 32,915 36,412 --
Total debt..................... 11,205 -- 12,448 14,218 14,531 18,918 25,159 --
Redeemable preferred
stock(4)........................ -- -- -- -- -- 1,795 -- --
Stockholders' equity(5)........ 10,957 -- 9,070 8,376 8,419 2,494 1,237 --
Book value per common share
after conversion of Series A
Preferred Stock and Series C
Preferred Stock................. 5.94 -- 5.77 -- -- -- -- --
</TABLE>
- ------------
(1) The 1992 amount includes a gain of $98 million on the sale of the
ready-to-eat cold cereal business.
(2) The 1989 amount for Holdings includes $237 million of interest expense
allocated to discontinued operations.
(3) On November 8, 1991, Holdings issued 52,500,000 shares of Series A Preferred
Stock and sold 210,000,000 Series A Depositary Shares. On May 6, 1994,
Holdings issued 26,675,000 shares of Series C Preferred Stock and sold
266,750,000 Series C Depositary Shares. Because Series A Preferred Stock and
Series C Preferred Stock mandatorily convert into Holdings Common Stock,
dividends on such shares are reported similar to common equity dividends.
(4) On December 16, 1991, an amendment to the Amended and Restated Certificate
of Incorporation of Holdings was filed which deleted the provisions
providing for the mandatory redemption of the redeemable preferred stock of
Holdings on November 1, 2015. Accordingly, such securities were presented as
a component of Holdings' stockholders' equity as of December 31, 1992 and
1991. Such securities were redeemed on December 6, 1993.
(5) Holdings' stockholders' equity at September 30, 1994 and December 31 of each
year from 1993 to 1989 includes non-cash expenses related to accumulated
trademark and goodwill amortization of $3.484 billion, $3.015 billion,
$2.390 billion, $1.774 billion, $1.165 billion and $557 million,
respectively.
See Notes to Holdings Consolidated Financial Statements and Holdings
Consolidated Condensed Financial Statements incorporated herein by reference.
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PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed and principally traded on the NYSE (Symbol: RN).
The following table sets forth the high and low sales prices per share of the
Common Stock as reported on the NYSE Composite Tape.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
- ----------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
1993
First Quarter............................................ $ 9 1/4 $ 7 5/8
Second Quarter........................................... 8 1/8 5 1/8
Third Quarter............................................ 5 7/8 4 1/2
Fourth Quarter........................................... 7 3/8 4 3/8
1994
First Quarter............................................ $ 8 1/8 $ 5 5/8
Second Quarter........................................... 7 5 1/2
Third Quarter............................................ 7 1/8 5 5/8
Fourth Quarter........................................... 7 1/4 5 5/16
1995
First Quarter (through February 15, 1995)................ $ 6 $ 5 3/8
</TABLE>
At December 31, 1994, there were 1,361,656,883 shares of Common Stock
outstanding held by approximately 63,000 stockholders of record. A recent
closing sale price for shares of the Common Stock will be set forth on the cover
page of the Prospectus Supplement.
On February 15, 1995, the Board of Directors of the Company declared the
first, regular quarterly cash dividend of $0.075 per share on the Common Stock
or $.30 per share on an annualized basis. The dividend is payable April 1, 1995
to Stockholders of record on March 10, 1995.
In addition, Holdings has announced certain policies affecting dividends on
the Common Stock. One policy provides that Holdings will limit, until December
31, 1998, the aggregate amount of cash dividends on its capital stock. Under
this policy, during that period Holdings will not pay any extraordinary cash
dividends and will limit the amount of its cash dividends, cash distributions
and repurchases for cash of capital stock and subordinated debt to an amount
equal to the sum of $500 million plus (i) 65% of Holdings' cumulative
consolidated net income before extraordinary gains or losses and restructuring
charges and (ii) net cash proceeds of up to $250 million in any year from the
sale of capital stock of Holdings or its subsidiaries (other than proceeds from
the Nabisco Public Offering) to the extent used to repay, purchase or redeem
debt or preferred stock. Another policy provides that Holdings will not declare
a dividend or distribution to its stockholders of the shares of capital stock of
a subsidiary before December 31, 1996. Another policy sets forth the intention
of Holdings that it will not make such a distribution prior to December 31, 1998
if that distribution would cause the ratings of the senior indebtedness of RJRN
to be reduced from investment grade to non-investment grade or if, after giving
effect to such distribution, any publicly held senior indebtedness of the
distributed company would not be rated investment grade. There is no assurance
that any such distribution will take place. Additional policies provide that an
amount equal to the net cash proceeds from any issuance and sale of equity by
Holdings or from any sale outside the ordinary course of business of material
assets owned or used by subsidiaries in the tobacco business, in each case
before December 31, 1998, will be used either to repay, purchase or redeem
consolidated indebtedness or to acquire properties, assets or businesses to be
used in existing or new lines of business and that an amount equal to the net
cash proceeds of any secondary sale of shares of Nabisco before December 31,
1998 will be used to repay, purchase or redeem consolidated debt. No assurance
can be given that Holdings will issue or sell any equity or
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<PAGE>
sell any material assets outside the ordinary course of business. See
"Description of Holdings Capital Stock--Contractual and Policy Restrictions on
Payment of Dividends."
RJRN's credit agreement, dated as of December 1, 1991, as amended (the "1991
Credit Agreement") and its credit agreement, dated as of April 5, 1993, as
amended (the "1993 Credit Agreement" and, together with the 1991 Credit
Agreement, the "Credit Agreements") restrict cash dividends and other
distributions on the Common Stock. In addition, the $1.5 billion short-term
credit facility (the "Nabisco Credit Agreement") of Nabisco, Inc., Nabisco's
immediate subsidiary, restricts the payment of dividends to RJRN. See
"Description of Holdings Capital Stock-- Contractual and Policy Restrictions on
Payment of Dividends."
The timing, amount and form of future dividends, if any, will depend, among
other things, upon the effect of applicable restrictions on the payment of
dividends, results of operations, financial condition, cash requirements,
prospects and other factors deemed relevant by the Board of Directors of
Holdings.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Common
Stock offered by the Selling Stockholder.
DESCRIPTION OF HOLDINGS CAPITAL STOCK
The authorized capital stock of Holdings consists of 2,200,000,000 shares of
Common Stock and 150,000,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock"). As of December 31, 1994, 1,361,656,883 shares of Common
Stock were outstanding. As of such date, 42,042,114 shares of Preferred Stock
were outstanding, of which 50,000 shares were Series B Cumulative Preferred
Stock (the "Series B Preferred Stock"), 26,675,000 shares were Series C
Preferred Stock and 15,322,114 shares were ESOP Convertible Preferred Stock (the
"ESOP Preferred Stock").
The following is a description of the terms of the capital stock of
Holdings. This description does not purport to be complete and is qualified in
its entirety by reference to Holdings' Amended and Restated Certificate of
Incorporation, as amended (the "Holdings Certificate of Incorporation"), which
has been incorporated by reference as an exhibit to the Registration Statement
of which this Prospectus is a part and is incorporated by reference herein.
Holdings believes that the summaries of the Holdings Certificate of
Incorporation set forth below are accurate and complete summaries of the
material terms of such instruments.
COMMON STOCK
Each share of Common Stock is entitled to one vote at all meetings of
stockholders of Holdings for the election of directors of Holdings and on all
other matters. Dividends may be paid to the holders of Common Stock when, as and
if declared by the Board of Directors of Holdings out of funds legally available
therefor. The Common Stock has no preemptive or similar rights. Holders of
Common Stock are not liable to further call or assessment. Upon liquidation,
dissolution or winding up of the affairs of Holdings, any assets remaining after
provision for payment of creditors (and any liquidation preference of any
outstanding preferred stock) would be distributed pro rata among holders of the
Common Stock.
Holdings has not paid any cash dividends on shares of the Common Stock.
Holdings has indicated that it anticipates commencing payment of a quarterly
cash dividend on the Common Stock of Holdings of $.075 per share or $.30 per
share on an annualized basis after the completion of the Nabisco Public
Offering, which was completed on January 26, 1995. The timing, amount and
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<PAGE>
form of future dividends, if any, will depend, among other things, upon the
effect of applicable restrictions on the payment of dividends, results of
operations, financial condition, cash requirements, prospects and other factors
deemed relevant by the board of directors of Holdings. See "Description of
Holdings Capital Stock--Contractual and Policy Restrictions on Payment of
Dividends."
The Common Stock is listed on the NYSE. First Chicago Trust Company of New
York is the registrar and transfer agent for the Common Stock.
PREFERRED STOCK
SERIES B PREFERRED STOCK
Each share of Series B Preferred Stock is entitled to receive, when, as and
if declared by the Board of Directors of Holdings, out of funds legally
available therefor, cumulative preferential cash dividends at the rate per annum
of 9.25%, payable quarterly in arrears. On and after August 19, 1998, Holdings,
at its option upon not less than 30 nor more than 60 days' notice, may redeem
shares of the Series B Preferred Stock, as a whole or in part, at any time, at a
redemption price equivalent to $25,000 per share, plus accrued and unpaid
dividends thereon to the date fixed for redemption, without interest, to the
extent Holdings will have funds legally available therefor.
The Series B Preferred Stock has no stated maturity and is not subject to
any sinking fund or mandatory redemption. The Series B Preferred Stock is not
convertible into, or exchangeable for, shares of any other class or series of
stock of Holdings.
The holders of the Series B Preferred Stock do not have any voting rights,
except as otherwise provided by law and under certain other limited
circumstances.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of Series B Preferred Stock will be entitled to receive
$25,000 per share, plus an amount equal to any accrued and unpaid dividends,
before any distribution is made on any class of junior securities, including
Common Stock.
SERIES C PREFERRED STOCK
Each share of Series C Preferred Stock is entitled to receive, when, as and
if declared by the Board of Directors of Holdings, out of funds legally
available therefor, cumulative preferential cash dividends accruing at a rate of
$6.012 per annum, payable quarterly in arrears. Each share of Series C Preferred
Stock will mandatorily convert into ten shares of Common Stock on May 15, 1997,
subject to adjustment in certain events (the "Series C Common Stock
Equivalent"), plus accrued and unpaid dividends on the Series C Preferred Stock
until the date of conversion. In addition, each share of Series C Preferred
Stock may be redeemed by Holdings, in whole or in part, at any time or from time
to time prior to the mandatory conversion date at a redemption price to be paid
in shares of Common Stock (or following certain circumstances, other
consideration), plus accrued and unpaid dividends. The optional redemption price
declines from $112.286 per share by $.01656 per share on each day following May
6, 1994 to $95.246 per share on March 15, 1997, and is $94.25 thereafter (the
"Call Price").
Immediately prior to a merger or consolidation of Holdings (other than a
merger or consolidation of Holdings with or into a wholly owned subsidiary of
Holdings) that results in the conversion or exchange of Common Stock into other
securities or property, outstanding Series C Preferred Stock may be converted at
the option of Holdings into (i) shares of Common Stock at a rate equal to the
Series C Common Stock Equivalent (currently ten shares for each share of Series
C Preferred Stock), in effect immediately prior to such merger or consolidation,
plus (ii) the right to receive an amount in cash (which may, at the option of
Holdings, be payable in shares of Common Stock) equal to all accrued and unpaid
dividends on such Series C Preferred Stock to and including the
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<PAGE>
Settlement Date, plus (iii) the right to receive an amount of cash (which may,
at the option of Holdings, be payable in shares of Common Stock) initially equal
to $18.036 per share, declining by $.01656 on each day following May 6, 1994 to
$.996 on March 15, 1997 and equal to zero thereafter. The shares of Common Stock
issuable under clause (i) above will be reduced, if necessary, so that the value
of the aggregate consideration described in clauses (i) and (iii) above does not
exceed the Call Price on the Settlement Date. Alternatively, Holdings may cause
the Series C Preferred Stock to remain outstanding or convert into a
substantially similar security of Holdings or of the entity issuing the
consideration in such merger or consolidation. In that event, each holder of a
share of Series C Preferred Stock may elect to convert the Series C Preferred
Stock into Common Stock at a rate equal to the Series C Common Stock Equivalent
immediately prior to the merger or consolidation (provided that the number of
shares of Common Stock issuable will be reduced, if necessary, so that the value
of such shares does not exceed the Call Price on the Settlement Date), plus the
right to receive an amount of cash (which may, at the option of Holdings, be
payable in shares of Common Stock) equal to all accrued and unpaid dividends on
such Series C Preferred Stock to and including the Settlement Date.
If Holdings has recommended acceptance of (or has expressed no opinion and
is remaining neutral toward) a tender offer which would result in the ownership
by the bidder (or an affiliate of the bidder) of more than 50% of the then
outstanding Common Stock, then each holder of Series C Preferred Stock will have
the option to convert such shares, in whole (but not in part), into Common Stock
at the Series C Common Stock Equivalent in effect at the close of business on
the day prior to the date of expiration or termination of such tender offer;
provided that the number of shares of Common Stock issuable upon such conversion
will be reduced if necessary, so that the value of such shares does not exceed
the Call Price on such date.
If Holdings distributes to holders of Common Stock the capital stock of a
subsidiary representing all or substantially all of either of Holdings' two
present principal lines of business (the "Spinoff Company"), Holdings will
(subject to the final sentence of this paragraph) convert each share of Series C
Preferred Stock into one-half of a share of the existing Series C Preferred
Stock and one-half of a share of a substantially equivalent security of the
Spinoff Company. In such case, the conversion rate per share of the new Series C
Preferred Stock will be equal to a fraction, of which the numerator will be the
product of the market price of Common Stock prior to the distribution and the
Series C Common Stock Equivalent and of which the denominator will be the excess
of the market price of Common Stock prior to the distribution over the market
value of a share of the Spinoff Company. The conversion rate per share of the
new security of the Spinoff Company will be equal to a fraction, of which the
numerator will be the product of the market price of Common Stock prior to the
distribution and the Series C Common Stock Equivalent and of which the
denominator will be the market value of a share of the Spinoff Company.
Alternatively, Holdings may elect to distribute to each holder of Series C
Preferred Stock the number of shares of capital stock of the Spinoff Company
that such holder would have been entitled to receive if the Series C Preferred
Stock had been converted to Common Stock immediately prior to the distribution
at the Series C Common Stock Equivalent then in effect. In the event that either
(a) the fair value of the shares of the Spinoff Company distributed are greater
than or equal to 95% of the market price of Common Stock prior to the
distribution or (b) the record date for the distribution is fixed less than
twenty-one trading days prior to such record date, then Holdings must elect to
distribute the shares of the Spinoff Company to the holders of the shares of
Series C Preferred Stock in accordance with the preceding sentence.
Holders of Series C Preferred Stock have the right, voting together with the
holders of Common Stock (and any other class of capital stock of Holdings
entitled to vote together with the Common Stock, including the ESOP Preferred
Stock) as one class, to vote in the election of directors and upon each other
matter coming before any meeting of the stockholders on the basis initially of
one vote (equal to one-tenth of the Series C Common Stock Equivalent) for each
Series C
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<PAGE>
Preferred Stock held; provided that the holders of Series C Preferred Stock are
not entitled to vote on any increase or decrease in the number of authorized
shares of any class or classes of stock. In the event dividends on all series of
Preferred Stock, including the Series C Preferred Stock, were in arrears and
unpaid for six quarterly periods, the holders of Series C Preferred Stock,
together with the holders of all other outstanding series of Preferred Stock
entitled to vote thereon, were entitled to elect two additional directors to the
Board of Directors of Holdings until all cumulative dividends on all series of
Preferred Stock, have been paid or declared and set aside for payment; provided
that such directors may not have exceeded 25% of the total Board of Directors or
be less than one director. While such holders were entitled to elect two
directors, they were not entitled to participate with the holders of Common
Stock in the election of any other directors, but would have continued to vote
with the holders of Common Stock upon each other matter coming before any
meeting of the stockholders.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of Series C Preferred Stock will be entitled to receive $60.50
per share, plus an amount equal to any accrued and unpaid dividends, before any
distribution is made on any class of junior securities, including Common Stock.
ESOP PREFERRED STOCK
Each share of ESOP Preferred Stock is entitled to receive, when, as and if
declared by the Board of Directors of Holdings, out of funds legally available
therefor, cumulative cash dividends at a rate of 7.8125% of stated value per
annum ($1.25 per annum) at least until April 10, 1999, payable semi-annually in
arrears. Each share of ESOP Preferred Stock is convertible into one share of
Common Stock, subject to adjustment in certain events. The ESOP Preferred Stock
is redeemable at the option of Holdings, in whole or in part, at any time on or
after April 10, 1999, at an initial optional redemption price of $16.25 per
share, declining thereafter on an annual basis in the amount of $.125 a year to
$16 per share on April 10, 2001, plus accrued and unpaid dividends. Under
certain other circumstances, the ESOP Preferred Stock is subject to redemption
at any time. Holders of ESOP Preferred Stock have voting rights which are
generally consistent with those of the holders of Series C Preferred Stock.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of ESOP Preferred Stock will be entitled to receive $16.00 per
share, plus an amount equal to any accrued and unpaid dividends, before any
distribution is made on any class of junior securities, including Common Stock.
CONTRACTUAL AND POLICY RESTRICTIONS ON PAYMENT OF DIVIDENDS
Holdings is subject to various contractual restrictions on its ability to
pay dividends on its Preferred Stock and Common Stock.
Under the Credit Agreements, Holdings may (i) issue shares of Common Stock
upon the exercise of any warrants or options or upon the conversion or
redemption of any convertible or redeemable preferred stock and, in connection
with any such exercise, conversion or redemption, Holdings may pay cash in lieu
of issuing fractional shares of Common Stock; (ii) if no event of default
existed under the Credit Agreements, repurchase Common Stock (and/or options or
warrants in respect thereof) pursuant to, and in accordance with the terms of,
management and/or employee stock plans; (iii) if no event of default existed
under the Credit Agreements, declare and pay, or otherwise effect, any other
cash dividend or other dividend or distribution, or repurchase or redeem any
capital stock, provided that the aggregate amount of such dividends,
distributions, repurchases and redemptions, when added to all dividends,
distributions, repurchases and redemptions made in accordance with this clause
(iii) after November 22, 1994, would not exceed an amount equal to the sum of
(x) $1 billion plus (y) 50% of the sum of (A) consolidated net income
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<PAGE>
of Holdings and its subsidiaries for the period (taken as one accounting period)
from January 1, 1995 to the last day of the last fiscal quarter of Holdings then
ended plus (B) all losses from debt retirement deducted in determining
consolidated net income of Holdings and its subsidiaries for the period referred
to in clause (A) above plus (z) the aggregate cash proceeds (net of underwriting
discounts and commissions) received by Holdings after November 22, 1994 from
issuances of its equity securities (provided that the aggregate amount of such
aggregate net cash proceeds received in any twelve-month period shall be deemed
not to exceed $250 million for purposes of this clause (iii)(z)), in each case
determined at the time of the declaration thereof, provided that such dividend,
distribution or redemption payment was paid within 45 days of the making of such
declaration; (iv) issue and exchange shares of any class or series of its common
stock now or hereafter outstanding for shares of any other class or series of
its common stock now or hereafter outstanding; and (v) in connection with any
reclassification of its common stock and any exchange permitted by clause (v)
above, pay cash in lieu of issuing fractional shares of any class or series of
its common stock. The Nabisco Credit Agreement also limits payment of dividends
by Nabisco, Inc. to $300 million plus 50% of the cumulative consolidated net
income of Nabisco, Inc. commencing January 1, 1995.
In addition to the contractual restrictions referred to above, the Board of
Directors of Holdings has adopted a policy, under which Holdings will limit,
until December 31, 1998, the aggregate amount of cash dividends on its Capital
Stock. Under this policy, Holdings:
(a) will not pay any extraordinary cash dividends;
(b) will not make any Restricted Payment if, after giving effect to such
Restricted Payment, the aggregate amount expended for all Restricted
Payments subsequent to December 31, 1994 exceeds the sum of (i) $500
million, plus (ii) 65% of Consolidated Net Income of Holdings on a
cumulative basis subsequent to December 31, 1994, plus (iii) aggregate cash
proceeds of up to $250 million received in any year subsequent to December
31, 1994 by Holdings or a Subsidiary from the issuance and sale (other than
to a Subsidiary) of Holdings' or such Subsidiary's Capital Stock (or of
other securities that are subsequently converted into or exchanged for
Holdings' or such Subsidiary's Capital Stock) (other than proceeds from the
Nabisco Public Offering), it being understood that any aggregate net cash
proceeds from any issuance and sale of any Capital Stock will be counted
only up to the amount of any indebtedness or preferred stock of Holdings or
any Subsidiary that has been repaid, purchased, redeemed or otherwise
acquired for value by Holdings or any Subsidiary within one year before or
after such issuance and sale. If Holdings or a Subsidiary repays, purchases,
redeems or otherwise acquires for value indebtedness or preferred stock of
Holdings or a Subsidiary in exchange for Capital Stock of Holdings or a
Subsidiary, Holdings or such Subsidiary shall be deemed to have received the
net cash proceeds equal to the market value of the Capital Stock so issued
in exchange (such market value to be determined by Holdings' Board of
Directors, whose good faith determination shall be conclusive);
(c) will use an amount equal to the net cash proceeds received prior to
December 31, 1998 from (i) the issuance and sale by Holdings of any Capital
Stock (other than to a Subsidiary or current, future or former directors,
officers or employees of Holdings or any Subsidiary (or their estates or
beneficiaries under their estates)) or (ii) any sale outside the ordinary
course of business of material assets owned or used by any of its
Subsidiaries in the tobacco business (other than to another Subsidiary)
either to repay, purchase, redeem or otherwise acquire for value
indebtedness of Holdings or a Subsidiary or to acquire properties, assets or
businesses to be used in existing or new lines of business of Holdings or
its Subsidiaries; and
(d) will use an amount equal to the net cash proceeds received by
Holdings or RJRN prior to December 31, 1998 from the sale to third parties
of shares of common stock of Nabisco
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<PAGE>
held by either of them to repay, purchase, redeem or otherwise acquire for
value indebtedness of Holdings or a Subsidiary.
The foregoing policy will not prevent the payment of a cash dividend within
90 days of its declaration if, at the time of declaration, such payment would
have complied with the foregoing policy or the purchase, redemption,
acquisition, cancellation or other retirement for value of Capital Stock,
options on Capital Stock, stock appreciation rights or similar securities held
by current, future or former directors, officers or employees of Holdings or any
Subsidiary or certain trusts or estates for their benefit.
Holdings has also adopted a policy to the effect that it will not declare a
dividend or distribution on its Capital Stock prior to December 31, 1996 that is
paid in Capital Stock of a Subsidiary owned by Holdings or a Subsidiary and that
it is its intent not to make such a distribution to its stockholders prior to
December 31, 1998 if (a) such distribution would cause the ratings of RJRN's
publicly held senior indebtedness to be reduced from investment grade to
non-investment grade or (b) any publicly held senior indebtedness of the
distributed Subsidiary would, after giving effect to such distribution, be rated
non-investment grade.
For purposes of the foregoing policies:
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock and any rights
(other than debt securities convertible into capital stock), warrants or
options to acquire such Capital Stock.
"Consolidated Net Income" of Holdings means, for any period, the
aggregate consolidated net income of Holdings and its Subsidiaries for such
period, determined on a consolidated basis in accordance with generally
accepted accounting principles as in effect from time to time, adjusted by
excluding (to the extent not otherwise excluded in calculating consolidated
net income) any net extraordinary gain or net extraordinary loss, as the
case may be, and any restructuring charges.
"Restricted Payment" means (i) any payment of any cash dividend or
distribution by Holdings on its Capital Stock, (ii) any purchase, redemption
or other acquisition for cash by Holdings of its Capital Stock (other than
any such purchase, redemption or acquisition for value in exchange for, or
in an amount equal to the proceeds of, an offering of Capital Stock of
Holdings or any Subsidiary or, in the case of Holdings' Series B Preferred
Stock or any other non-convertible preferred stock of Holdings outstanding
from time to time), for indebtedness of Holdings or any Subsidiary and (iii)
any purchase, redemption or other acquisition for cash by Holdings of any
Subordinated Debt prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment (other than any such purchase, redemption or
other acquisition for value in exchange for, or in an amount equal to the
proceeds of, an offering of Capital Stock or Subordinated Debt of Holdings
or any Subsidiary).
"Subordinated Debt" means any indebtedness of Holdings or any Subsidiary
which by its terms is expressly subordinated in right of payment to any
other indebtedness of Holdings or any Subsidiary, provided, however, that
the term Subordinated Debt shall not include any intercompany indebtedness.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time
directly or indirectly owned by Holdings.
CERTAIN STATUTORY AND BY-LAW PROVISIONS
Holdings is subject to the "business combination" statute of the Delaware
General Corporation Law (the "DGCL"). In general, Section 203 of the DGCL
prohibits a publicly held Delaware
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corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless (a) prior to such
date the Board of Directors of the corporation approved either the "business
combination" or the transaction which resulted in the stockholder becoming an
"interested stockholder," (b) upon consummation of the transaction which
resulted in the stockholder becoming an "interested stockholder," the
"interested stockholder" owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (i)
by persons who are directors and also officers and (ii) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer, or (c) on or subsequent to such date the "business combination" is
approved by the Board of Directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested stockholder." A
"business combination" includes mergers, certain stock or asset sales and
certain other transactions resulting in a financial benefit to, or increase in
voting power held by, the "interested stockholders." An "interested stockholder"
is a person who, together with affiliates and associates, owns (or if such
person is an affiliate or associate of the corporation within three years, did
own) 15% or more of the corporation's voting stock.
Holdings' By-laws establish an advance notice procedure for stockholders to
make nominations of candidates for election as directors, or to bring other
business before an annual meeting of stockholders of Holdings. The By-laws
provide that only persons who are nominated by, or at the direction of, the
Board of Directors of Holdings or any committee designated by the Board of
Directors of Holdings, or by a stockholder who has given timely written notice
to the Secretary of Holdings prior to the meeting at which directors are to be
elected, will be eligible for election as directors of Holdings. The By-laws
also provide that in order to properly submit any business to an annual meeting
of stockholders, a stockholder must give timely written notice to the Secretary
of Holdings of such stockholder's intention to bring such business before such
meeting. Generally, for notice of stockholder nominations or other business to
be made at an annual meeting to be timely under the By-laws, such notice must be
received by Holdings (i) not less than 120 days nor more than 150 days before
the first anniversary date of Holdings' proxy statement in connection with the
last annual meeting of stockholders or (ii) if no annual meeting was held in the
previous year or the date of the applicable annual meeting has been changed by
more than 30 days from the date contemplated at the time of the previous year's
proxy statement, not less than a reasonable time, as determined by the Board of
Directors of Holdings, prior to the date of the applicable annual meeting. Under
the By-laws, a stockholder's notice must also contain certain information
specified in the By-laws.
The provisions described above, together with certain terms of Holdings
outstanding Preferred Stock and its ability to issue additional Preferred Stock,
may have the effect of delaying stockholder actions with respect to certain
business combinations and the election of new members of the Board of Directors
of Holdings. As such, the provisions could have the effect of discouraging open
market purchases of Common Stock because they may be considered disadvantageous
by a stockholder who desires to participate in a business combination or elect a
new director.
SELLING STOCKHOLDER
At January 26, 1995, Borden owned 51,106,768 shares of Common Stock, or
approximately 3.7% of the total number of shares of Common Stock outstanding.
Borden acquired such shares upon the exercise by the Whitehall Associates, L.P.
(the "Partnership") and KKR Partners II, L.P. (collectively, the "Common Stock
Partnerships"), affiliates of KKR, of an option (the "Option") to purchase
shares of common stock, par value $.625 per share, of Borden (the "Borden Common
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Stock") in exchange for shares of Common Stock. The Common Stock Partnerships
have agreed to make an additional equity investment in Borden in the form of
additional shares of Common Stock. Such additional equity investment is expected
to be made prior to the consummation of the merger of a subsidiary of the
Partnership ("BAC") with and into Borden (the "Merger") pursuant to a merger
agreement (the "Merger Agreement") among the Partnership, BAC and Borden. After
giving effect to such additional equity investment, Borden is expected to own up
to the number of shares of Common Stock registered for sale under the
Registration Statement of which this Prospectus forms a part. If Borden disposes
of all the Common Stock to be offered hereby, Borden will not own any shares of
Common Stock. However, Borden may issue securities which are convertible,
exchangeable or redeemable at some future date into or for all of the shares of
Common Stock owned by Borden. See "Plan of Distribution."
As of January 26, 1995, the Common Stock Partnerships held an aggregate of
approximately 69.6% of the total voting power of Borden. The Merger will require
the approval of holders of not less than 66 2/3% of the outstanding Borden
Common Stock, including the shares of Borden Common Stock held by the Common
Stock Partnerships. The Common Stock Partnerships intend to vote their shares of
Borden Common Stock in favor of approval of the Merger Agreement and the Merger.
The Common Stock Partnerships own sufficient shares of Borden Common Stock to
approve the Merger and, accordingly, no action by any other shareholder is
required to approve the Merger. Assuming the Merger is approved, the Common
Stock Partnerships will exchange approximately 118,500,000 shares of Common
Stock for all of the outstanding shares of Borden Common Stock not already held
by the Common Stock Partnerships. Accordingly, after completion of the proposed
Merger, the Common Stock Partnerships will be the sole shareholders of Borden.
As of December 31, 1994, the Common Stock Partnerships owned or controlled
an aggregate of approximately 24.95% (approximately 20.27% on a fully diluted
basis) of the total voting power of Holdings, including the 51,106,768 shares of
Common Stock owned by Borden discussed above. After completion of the proposed
Merger, the Common Stock Partnerships are expected to own or control an
aggregate of approximately 16.6% (approximately 13.5% on a fully diluted basis)
of the total voting power of Holdings, including the 51,106,768 shares of Common
Stock owned by the Borden. After the completion of an offering by the Selling
Stockholder of any of the Common Stock covered hereby, the Common Stock
Partnership's control of the voting power of Holdings will be reduced in
proportion to the number of shares of Common Stock sold. Currently, seven of
Holdings' sixteen directors are partners or executives of KKR.
PLAN OF DISTRIBUTION
The Company has been advised that the distribution of the Common Stock by
the Selling Stockholder may be effected in and/or outside the United States: (i)
through underwriters or dealers; (ii) directly to a limited number of purchasers
or to a single purchaser; (iii) through agents; or (iv) in the event that the
Selling Stockholder sells securities of its own which are convertible,
exchangeable or redeemable into or for the Common Stock, upon the conversion,
exchange or redemption of such securities of the Selling Stockholder. The
Prospectus Supplement with respect to the Common Stock being offered (the
"Offered Shares") will set forth the terms of the offering of the Offered
Shares, including the name or names of any underwriters or agents, the purchase
price of the Offered Shares and the proceeds to the Selling Stockholder from
such sale, any delayed delivery arrangements, any underwriting discounts and
other items constituting underwriters' compensation, any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers.
Any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
The Company has been further advised that, if underwriters are used in the
sale, the Offered Shares will be acquired by the underwriters for their own
account and may be resold from time to
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time in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
Common Stock may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of Common Stock will be named in the Prospectus
Supplement relating to such offering and, if an underwriting syndicate is used,
the managing underwriter or underwriters, will be set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters to purchase the Offered
Shares will be subject to conditions precedent and the underwriters will be
obligated to purchase all the Offered Shares if any are purchased.
If dealers are utilized in the sale of Offered Shares in respect of which
this Prospectus is delivered, the Company has been advised that the Selling
Stockholder will sell such Offered Shares to the dealers as principals. The
dealers may then resell such Offered Shares to the public at varying prices to
be determined by such dealers at the time of resale. The names of the dealers
and the terms of the transaction will be set forth in the Prospectus Supplement
relating thereto.
In addition, the Company has been advised that the Common Stock may be sold
directly by the Selling Stockholder or through agents designated by the Selling
Stockholder from time to time. Any agent involved in the offer or sale of the
Offered Shares in respect of which this Prospectus is delivered will be named,
and any commissions payable by the Selling Stockholder to such agent will be set
forth, in the Prospectus Supplement.
Agents and underwriters may be entitled under agreements entered into with
the Company and the Selling Stockholder to indemnification by the Company and
the Selling Stockholder against certain civil liabilities, including liabilities
under the Securities Act, or to contribution with respect to payments which the
agents or underwriters may be required to make in respect thereof. Agents and
underwriters may be customers of, may engage in transactions with, or perform
services for, the Company and the Selling Stockholder in the ordinary course of
business.
In connection with the sale of the Common Stock, underwriters or agents may
be deemed to have received compensation from the Selling Stockholder in the form
of underwriting discounts or commissions and may also receive commissions from
purchasers of the Common Stock for whom they may act as agent. Underwriters or
agents may sell the Common Stock to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters or commissions from the purchasers for whom they may act as
agent.
Any underwriters, dealers or agents participating in the distribution of the
Common Stock may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Common Stock
may be deemed to be underwriting discounts and commissions under the Securities
Act of 1933.
LEGAL MATTERS
The validity of the Common Stock being offered hereby will be passed upon
for Holdings by Jo-Ann Ford, Vice President, Assistant General Counsel and
Secretary of Holdings and for the underwriters, brokers or agents by counsel to
such underwriters, brokers or agents. Ms. Ford owns options to purchase shares
of Common Stock which represent less than 0.1% of the currently outstanding
shares of Common Stock.
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EXPERTS
The consolidated financial statements of Holdings as of December 31, 1993
and 1992 and for each of the years in the three year period ended December 31,
1993 incorporated in this Prospectus by reference from (1) Holdings'
Registration Statement No. 33-52381 on Form S-3, at the time such Registration
Statement was declared effective and (2) Holdings' Annual Report on Form 10-K
for the year ended December 31, 1993 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
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