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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 2000
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
-------------------
NABISCO GROUP HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 1-10215 13-3490602
(State or other (Commission file (I.R.S. Employer Identification
jurisdiction of number) No.)
incorporation or
organization)
</TABLE>
7 CAMPUS DRIVE
PARSIPPANY, NJ 07054-0311
(973) 682-5000
(Address, including zip code, and telephone number, including area code,
of the principal executive offices of Nabisco Group Holdings Corp.)
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH
EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------- ----------------
<S> <C>
NABISCO GROUP HOLDINGS CORP.
Common Stock, par value $.01 per share New York
NABISCO GROUP HOLDINGS CAPITAL TRUST II
9.5% Trust Originated Preferred Securities New York
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
INDICATE BY CHECK MARK WHETHER THE REGISTRANTS (1) HAVE FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANTS WERE REQUIRED TO FILE SUCH REPORTS), AND (2) HAVE BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO __
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]
THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF NABISCO
GROUP HOLDINGS CORP. ON MARCH 15, 2000 WAS APPROXIMATELY $3.1 BILLION.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANTS'
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE: MARCH 15, 2000:
NABISCO GROUP HOLDINGS CORP.: 326,442,347 SHARES OF COMMON STOCK, PAR VALUE $.01
PER SHARE
-------------------
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE DEFINITIVE PROXY STATEMENT OF NABISCO GROUP HOLDINGS CORP. TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO REGULATION 14A OF
THE SECURITIES EXCHANGE ACT OF 1934 ON OR PRIOR TO APRIL 30, 2000 ARE
INCORPORATED BY REFERENCE INTO PART III OF THIS REPORT.
- --------------------------------------------------------------------------------
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<PAGE>
INDEX
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PAGE
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PART I
Item 1. Business.................................................... 1
(a) General Development of Business..................... 1
(b) Financial Information about Industry Segments....... 2
(c) Narrative Description of Business................... 2
Other Matters..................................... 6
(d) Financial Information about Foreign and Domestic
Operations........................................ 6
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 6
Item 4. Submission of Matters to a Vote of Security Holders......... 7
Executive Officers of the Registrants....................... 8
PART II
Item 5. Market for Registrants' Common Equity and Related
Stockholder Matters....................................... 9
Item 6. Selected Financial Data..................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition
and
Results of Operations..................................... 12
Item 7a. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 21
Item 8. Financial Statements and Supplementary Data................. 23
Item 9. Changes in and Disagreements with Accountants on Accounting
and
Financial Disclosure...................................... 23
PART III
Item 10. Directors and Executive Officers of the Registrants......... 23
Item 11. Executive Compensation...................................... 23
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 23
Item 13. Certain Relationships and Related Transactions.............. 23
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................. 24
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
The operating subsidiaries of Nabisco Group Holdings Corp. ("NGH") comprise
one of the largest food companies in the world. In the United States, the
packaged food business is conducted by Nabisco Holdings Corp.'s ("Nabisco
Holdings") wholly-owned subsidiary, Nabisco, Inc. ("Nabisco"), the largest
manufacturer and marketer of cookies and crackers. NGH owns 100% of the
outstanding Class B Common Stock of Nabisco Holdings, which represents
approximately 80.6% of the economic interest and 97.6% of the combined voting
power of all of the outstanding Common Stock as of March 15, 2000.
Food operations outside the United States are conducted by Nabisco
International, Inc. and Nabisco Ltd., subsidiaries of Nabisco. For financial
information with respect to operations in various geographic locations, see Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 18 to the Consolidated Financial Statements, and the
related notes thereto, of NGH as of December 31, 1999 and 1998 and for each of
the years in the three-year period ended December 31, 1999 (the "Consolidated
Financial Statements").
RJR Nabisco, Inc., which has been renamed R.J. Reynolds Tobacco Holdings
Inc. ("RJR") was incorporated as a holding company in 1970 holding the stock of
R.J. Reynolds Tobacco Company ("Reynolds Tobacco") and other companies that have
since been sold. It acquired Nabisco Holdings (formerly Nabisco Brands, Inc.) in
1985. RJR Nabisco Holdings Corp., which has been renamed Nabisco Group Holdings
Corp. ("NGH") was organized as a Delaware corporation in 1988 to effect the
acquisition of RJR, which was completed on April 28, 1989. As a result of this
acquisition, RJR became an indirect, wholly-owned subsidiary of NGH. After a
series of holding company mergers completed on December 17, 1992, RJR became a
direct, wholly-owned subsidiary of NGH.
During the second quarter of 1999, a series of reorganization transactions
were completed, as a result of which NGH, Nabisco Holdings, Nabisco and their
subsidiaries are no longer affiliated with RJR and its subsidiaries. The
principal transactions in this reorganization that affected NGH are the
following:
- On May 12, 1999, RJR and Reynolds Tobacco completed the sale of the
international tobacco business to Japan Tobacco Inc. for $8 billion,
including the assumption of approximately $200 million of net debt.
Proceeds from the sale were used to reduce debt and for general corporate
purposes.
- On May 18, 1999, RJR transferred all of the outstanding Class B Common
Stock of Nabisco Holdings, together with approximately $1.6 billion in net
cash proceeds from the international tobacco sale, to NGH through a merger
transaction.
- On June 14, 1999, NGH distributed all of the outstanding shares of RJR
common stock to NGH common stockholders of record as of May 27, 1999.
In 1999, a subsidiary of Nabisco acquired the stock of Canale S.A.,
Argentina's fourth largest biscuit company. Also in 1999, Nabisco acquired
certain assets and liabilities of Favorite Brands International, Inc., the
fourth largest non-chocolate candy company in the United States. The acquisition
further strengthened our leadership position in non-chocolate candy.
NGH will continue to assess its businesses to evaluate their consistency
with strategic objectives. Although NGH may acquire and divest additional
businesses in the future, no decisions have been made with respect to any such
acquisitions or divestitures except as described in the subsequent events
section of Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note 20 to the Consolidated Financial Statements.
Under the provisions of Nabisco Holdings' existing credit agreements, however,
there are restrictions on the sale or disposition of all, substantially all or
any
1
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substantial portion of certain domestic businesses of Nabisco. See Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
For information about operating segments for the years 1997 through 1999,
see Note 18 to the Consolidated Financial Statements.
(C) NARRATIVE DESCRIPTION OF BUSINESS
NGH is a holding company whose operating subsidiaries are owned indirectly
through Nabisco Holdings. NGH owns 100% of the outstanding Class B Common Stock
of Nabisco Holdings, which represents approximately 80.6% of the economic
interest and 97.6% of the total voting power of Nabisco Holdings' outstanding
common stock. Nabisco's businesses in the United States are comprised of the
Nabisco Biscuit Company and the U.S. Foods Group. Nabisco's businesses outside
the United States are conducted by Nabisco Ltd and Nabisco International, Inc.
Food products are sold under trademarks owned or licensed by Nabisco and
brand recognition is considered essential to their successful marketing.
Wal-Mart Stores, Inc. and its affiliates accounted for approximately 11% of
consolidated net sales in 1999 and no customer accounted for 10% or more of
consolidated net sales in 1998 and 1997.
NABISCO BISCUIT COMPANY
The Nabisco Biscuit Company is the largest manufacturer and marketer in the
United States cookie and cracker industry with seven of the top ten selling
brands. Overall, in 1999, Nabisco Biscuit had a 39.1% share of the domestic
cookie category and a 51.6% share of the domestic cracker category (in the
aggregate more than two times the share of its closest competitor). The combined
1999 cookie and cracker market share of 44.5% was 0.5 points above 1998. Leading
Nabisco Biscuit cookie brands include OREO, CHIPS AHOY!, NEWTONS and
SNACKWELL'S. Leading Nabisco Biscuit cracker brands include RITZ, PREMIUM,
TRISCUIT, WHEAT THINS and NABISCO HONEY MAID GRAHAMS.
OREO and CHIPS AHOY! are the two largest selling cookies in the United
States. OREO, the leading sandwich cookie, is Nabisco Biscuit's largest selling
cookie brand. Seasonal line extensions such as SPRING OREO, HALLOWEEN OREO and
the OREO MILLENIUM TIN, in addition to the "Don't Eat the Winning Oreo"
promotion, continue to increase the brand's appeal. CHIPS AHOY! is the leader in
the chocolate chip cookie segment driven by its base CHIPS AHOY! business along
with CHEWY CHIPS AHOY! and line extensions such as HOLIDAY CHIPS AHOY!
NEWTONS, the oldest Nabisco Biscuit cookie brand, is the fourth leading
cookie brand in the United States. Product improvements made in the first half
of the year provided a consumer preferred moister cookie.
SNACKWELL'S cookies and crackers, on a combined basis, is the eighth leading
brand in the United States. The recent more indulgent product introductions,
Mint Creme and Caramel Delights, have been solid contributors to the SNACKWELL'S
portfolio. SNACKWELL'S continues to maintain the leading share of the
better-for-you cookie segment.
Nabisco Biscuit's cracker business is led by RITZ, the largest selling
cracker in the United States. Successful product line extensions such as RITZ
BITS, RITZ BITS SANDWICHES and REDUCED FAT RITZ, helped drive the brand's
growth. The RITZ product line accounted for 13.9% of cracker sales in the United
States in 1999, compared to 13.4% in 1998. PREMIUM, the oldest Nabisco cracker
brand and the leader in the saltine cracker segment, is joined by TRISCUIT,
WHEAT THINS, NABISCO HONEY MAID GRAHAMS, and AIR CRISPS to comprise, along with
RITZ, six of the eight largest selling cracker brands in the United States.
2
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Nabisco Biscuit's other cookie and cracker brands, which include NUTTER
BUTTER, TEDDY GRAHAMS, NILLA, STELLA D'ORO, CHEESE NIPS, BETTER CHEDDARS and
BARNUM'S ANIMAL CRACKERS, compete in consumer niche segments. Many are the first
or second largest selling brands in their respective segments. Substantial
growth by TEDDY GRAHAMS in 1999 resulted from the brand restage and launch of
the TEDDY GRAHAMS CHOCOLATEY CHIP line extension. CHEESE NIPS also showed
strength with its line extensions, CHEESE NIPS EXTRA CHEDDAR, CHEESE NIPS
THREE-CHEESE PIZZA and CHEESE NIPS CATDOG.
Nabisco Biscuit's products in the breakfast snack category include
SNACKWELL'S cereal bars and KOOL STUF toaster pastries. Both lines had product
improvements during the year with an improved topping and increased shelf life
on SNACKWELL'S HEARTY FRUIT 'N GRAIN CEREAL BARS and improved icing for KOOL
STUF.
Nabisco Biscuit's products are manufactured in 11 Nabisco Biscuit owned
facilities, 13 facilities with which Nabisco Biscuit has production agreements
with contract manufacturers throughout the United States and through Nabisco
affiliates in Canada. Nabisco Biscuit also operates a flour mill in Toledo,
Ohio, which supplies approximately 85% of its flour needs.
Nabisco Biscuit's products are sold to major grocery and other large retail
chains through Nabisco Biscuit's direct store delivery system. The system is
supported by a distribution network utilizing 12 warehouses which supply 108
shipping branches where shipments are consolidated for delivery to approximately
63,000 separate delivery points.
U.S. FOODS GROUP
Nabisco manages its non-biscuit food operations in the U.S. through the U.S.
Foods Group which is comprised of the following operating units:
SALES & INTEGRATED LOGISTICS GROUP. The Sales & Integrated Logistics Group
handles sales and distribution for the LifeSavers and Planters Specialty
Companies and distribution for the Food Service Company. It sells to major
grocery chains, national drug and mass merchandisers, convenience channels and
warehouse clubs through a direct sales force. It also sells to small retail
grocery chains and regional mass merchandisers through independent brokers. The
products are distributed from 12 distribution centers located throughout the
United States.
PLANTERS SPECIALTY COMPANY. The Planters Specialty Company produces and
markets a broad range of food products. These products include nuts and salty
snacks largely for sale in the United States, primarily under the PLANTERS
trademark. Planters, the only nut brand sold nationally, is the clear leader in
the packaged nut category. The Planters Specialty Company also manufactures and
markets sauces and condiments, pet snacks, hot cereals, dry mix desserts, and
gelatins. Many of the Planters Specialty Company products are first or second in
their product categories. Well-known brand names include A.1. steak sauces, GREY
POUPON mustards, MILK-BONE pet snacks, CREAM OF WHEAT hot cereals, CORNNUTS
crispy corn kernel snacks, ROYAL desserts and KNOX gelatines.
Planters Specialty Company's primary entries in the steak sauce and mustard
segments are A.1., A.1. BOLD, A.1. THICK AND HEARTY and A.1. SWEET AND TANGY
steak sauces, the leading line of steak sauces, and GREY POUPON mustards, which
include the leading Dijon mustard.
Planters Specialty Company is the largest manufacturer of pet snacks in the
United States with MILK-BONE dog biscuits and dog snacks. MILK-BONE products
include MILK-BONE ORIGINAL BISCUITS, FLAVOR SNACKS, SUPER PREMIUM BISCUITS, DOG
TREATS and DOGGIE BAG TREATS.
The Planters Specialty Company, a leading manufacturer of hot cereals,
participates in the cook-on-stove and mix-in-bowl segments of the category.
CREAM OF WHEAT, the leading wheat-based hot
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cereal, and CREAM OF RICE participate in the cook-on-stove segment. INSTANT
CREAM OF WHEAT participates in the mix-in-bowl segment and includes varieties
such as BANANA NUT BREAD, BLUEBERRY MUFFIN and RASPBERRY DANISH. Quaker Oats
Company is the most significant participant in the hot cereal category.
Planters Specialty Company manufactures products in 6 plants and sources
products from a number of contract manufacturers.
LIFESAVERS COMPANY. The LifeSavers Company manufactures and markets
non-chocolate candy and gum primarily for sale in the United States. LifeSavers'
well-known brands include LIFE SAVERS candy, ICE BREAKERS gum, BREATH SAVERS
sugar free mints, CARE*FREE sugarless gum, CREME SAVERS candy, BUBBLE YUM bubble
gum, GUMMI SAVERS fruit chewy candy, NOW & LATER fruit chewy taffy and FRUIT
STRIPE gum. LIFE SAVERS is the largest selling non-chocolate candy brand in the
United States, with a 1999 share of 5.3%, compared to 5.1% in 1998, of the
non-chocolate candy category. BREATH SAVERS is the largest selling sugar free
breath mint in the United States and BUBBLE YUM is among the largest selling
bubble gum brands in the United States.
LifeSavers Company manufactures its products in 4 owned plants and utilizes
4 primary contract manufacturers.
FOOD SERVICE COMPANY. The Food Service Company utilizes a direct national
sales force to sell a variety of specially packaged food products of the Nabisco
Biscuit Company and U.S. Foods Group including cookies, crackers, confections,
hot cereals, nuts and condiments to the food service and vending machine
industries.
FAVORITE BRANDS. Favorite Brands is a non-chocolate confection and snack
business acquired from Favorite Brands International, Inc. in 1999. Its products
include TROLLI gummi candies, SATHERS and FARLEY'S general line candy brands,
JET-PUFFED marshmallows, and FARLEY'S FRUIT SNACKS. These products are produced
and marketed in the United States and sold to major grocery chains, national
drug and mass merchandisers, convenience channels and warehouse clubs through
independent brokers and small direct sales force for the SATHERS candy brands.
The products are distributed from 10 distribution centers located throughout the
United States. The business will be integrated into the other U.S. Foods Group
operating units in 2000.
Favorite Brands manufactures its products in 11 plants and sources products
from a number of contract manufacturers.
INTERNATIONAL FOOD GROUP
Nabisco's businesses outside the United States are conducted by Nabisco Ltd
and Nabisco International, Inc. ("Nabisco International" and together with
Nabisco Ltd, the "International Food Group").
NABISCO LTD. Nabisco Ltd conducts Nabisco's Canadian operations through its
Snack and Grocery Divisions. Excluding private label brands, the Snack Division
produced nine of the top ten in each of the cookies and crackers categories in
Canada in 1999. Nabisco Ltd's cookie and cracker brands in Canada include OREO,
CHIPS AHOY!, SNACKWELL'S, FUDGEE-O, PEEK FREANS, DAD'S, DAVID, PREMIUM PLUS,
RITZ, AIR CRISPS, TRISCUIT and STONED WHEAT THINS. These products are
manufactured in four bakeries in Canada and are sold through a direct store
delivery system, utilizing 10 sales offices and distribution centers and a
combination of company trucks and common carriers.
The Snack Division also uses a separate selling and marketing organization
which offers a variety of specially packaged food products to non-grocery
outlets, wherever the consumer may have opportunity to consume food products
outside of the home. The products are sourced from both the Snack and Grocery
Divisions and include cookies, crackers, canned fruits, vegetables, pasta and
condiments.
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Nabisco Ltd's Grocery Division produces and markets canned fruits and
vegetables, fruit juices and drinks, pet snacks, pasta and other Italian food
products. The Grocery Division is the leading canned fruit producer and second
largest canned vegetable producer in Canada. Canned fruits and vegetables, as
well as fruit juices and drinks, are marketed under the DEL MONTE trademark
pursuant to a license from the Del Monte Corporation, and under the AYLMER
trademark. Dry pasta and other Italian food products are marketed under the
PRIMO trademark, which is the number two pasta brand in Canada. The Grocery
Division also markets MILK-BONE pet snacks, CREAM OF WHEAT hot cereals and MAGIC
baking powder, each a leading brand in Canada. Nabisco Ltd's Grocery Division
operated seven manufacturing facilities in 1999. Five produced canned products,
principally fruits and vegetables, one produced pet snacks and one produced
pasta. The Grocery Division's products are sold directly to retail chains and
are distributed through four regional warehouses.
NABISCO INTERNATIONAL. Nabisco International is a leading producer of
biscuits, powdered dessert and drink mixes, baking powder, pasta, juices, milk
products and other grocery items, as well as industrial yeast and bakery
ingredients. Nabisco International's operations in Latin America represented
more than 70% of Nabisco International's sales in 1999. Nabisco International
also operates growing businesses in Asia, Iberia, Middle East and South Africa.
Additionally, Nabisco International exports a variety of Nabisco Biscuit Company
and U.S. Foods Group products to markets primarily in the Caribbean and Asia.
The biscuits category represented over 50% of Nabisco International's sales
in 1999. Nabisco International is growing global brands like OREO, CHIPS AHOY!
and RITZ in various markets as part of Nabisco International's strategy to focus
growth in biscuits. Local brands such as TERRABUSI, ARTIACH, MARBU and LUCKY are
also part of this category. Nabisco International is the biscuit market leader
in Argentina, Venezuela, Puerto Rico, Peru, Ecuador, Nicaragua, Uruguay, Spain,
Taiwan and Beijing, China.
In 1999, Nabisco International increased its Latin American biscuit
operations through the acquisition of Argentina's fourth largest biscuit
company, Canale S.A.
In Asia, Nabisco International operates its Chinese biscuit business through
joint ventures in Beijing and a wholly-owned subsidiary in Suzhou. In Indonesia,
Nabisco International operates a plant which is 70% owned by Nabisco and 30%
owned by its partner and distributor.
Dessert mixes, drink mixes and baking powder are sold under the ROYAL brand,
yeast and bakery ingredients under the FLEISCHMANN's brand, processed milk
products under the GLORIA brand and juice under the MAGUARY brand. Nabisco
International is the market leader in powdered desserts in Spain and most of
Latin America and is the market leader in baking powder and yeast throughout
Latin America.
Nabisco International's grocery and biscuit products are sold to retail
outlets through its own local country sales forces and independent wholesalers
and distributors. Industrial yeast and bakery products are sold to the bakery
trade through Nabisco International's own local country sales forces and
independent distributors.
Nabisco International's largest market is Brazil, where it operates 13
manufacturing facilities out of a total of 35 manufacturing facilities in Latin
America and 49 worldwide.
RAW MATERIALS
Agricultural commodities constitute the principal raw materials used by
Nabisco in its food businesses. These raw materials are normally purchased
through supplier contracts, while the commodities market is utilized to hedge
prices for a large portion of North American and certain International
anticipated future requirements. Prices of agricultural commodities tend to
fluctuate due to seasonal, climactic and economic factors which generally also
affect Nabisco's competitors. NGH and its subsidiaries believe that the raw
5
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materials for Nabisco products are in plentiful supply and are readily available
from a variety of independent suppliers.
COMPETITION
Generally, the markets in which the Nabisco Biscuit Company, U.S. Foods
Group and the International Food Group conduct their business are highly
competitive. Competition consists of large domestic and international companies,
local and regional firms and generic and private label products of food
retailers. Competition is conducted on the basis of brand recognition, brand
loyalty, quality and price. Substantial advertising and promotional expenditures
are required to maintain or improve a brand's market position or to introduce a
new product.
The trademarks under which the Nabisco Biscuit Company, U.S. Foods Group and
the International Food Group market their products are generally registered in
the United States and other countries in which such products are sold and are
generally renewable indefinitely. Nabisco and certain of its subsidiaries have
from time to time granted various parties exclusive licenses to use one or more
of their trademarks in particular locations. NGH and its subsidiaries do not
believe that such licensing arrangements have a material effect on the conduct
of its domestic or international businesses.
OTHER MATTERS
EMPLOYEES
At December 31, 1999, NGH and its subsidiaries had approximately 50,700 full
time employees. Most of the unionized workers at Nabisco's domestic locations
are represented under a national contract with the Bakery, Confectionery and
Tobacco Workers International Union, which was ratified in August 1996 and which
will expire in August 2001. Other unions represent the employees at a number of
Nabisco locations. NGH believes that Nabisco's relations with these employees
and with their unions are good.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
For information about foreign and domestic operations for the years 1997
through 1999, see Note 18 to the Consolidated Financial Statements.
ITEM 2. PROPERTIES
For information on properties, see Item 1. For additional information
pertaining to the location of NGH's assets as of December 31, 1999 and 1998, see
Note 18 to the Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
NGH has been named as a defendant in a number of lawsuits (40 as of
March 20, 2000) as a result of its now severed relationship with the tobacco
business conducted by Reynolds Tobacco or its subsidiaries. For information
about this litigation see Note 12 to the Consolidated Financial Statements and
Exhibit 99 to this Form 10-K, which is available at the U.S. Securities and
Exchange Commission's website at http://www.sec.gov.
Some of the claims against NGH in the tobacco-related litigation noted above
seek recovery of hundreds of millions and possibly billions of dollars. This is
also true of litigation pending against Reynolds Tobacco and RJR, former
subsidiaries of NGH. NGH believes that it has a number of valid defenses to any
such actions and intends to defend all of them vigorously. Litigation is subject
to many uncertainties. While management believes it has strong defenses in the
litigation against NGH, management is unable to predict the outcome of the
litigation against NGH, or to derive a meaningful estimate of the amount or
range of any possible loss in any quarterly or annual period or in the
aggregate.
6
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Nabisco Holdings and Nabisco, both subsidiaries of NGH, are defendants in
various lawsuits arising in the ordinary course of business. In the opinion of
management, resolution of these matters is not expected to have a material
adverse effect on those companies' or on NGH's financial condition or results of
operations.
Nabisco Holdings or certain of its subsidiaries have been named "potentially
responsible parties" ("PRP") with third parties under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") or may have
indemnification obligations with respect to 14 sites. Liability under CERCLA is
joint and several. Although it is difficult to identify precisely the estimated
cost of resolving these CERCLA and indemnification matters, such expenditures or
costs are not expected to have a material adverse effect on those companies' or
NGH's financial condition or results of operations.
In addition, in April 1995, NGH was named a PRP with certain third parties
under CERCLA with respect to a superfund site at which a former subsidiary of
RJR had operations. A subsidiary of NGH may also have indemnification
obligations to a third party with respect to certain lawsuits arising from this
same CERCLA site although the subsidiary itself is not named in the lawsuits.
Management cannot currently predict the likelihood that it will have to
contribute as a PRP or perform on these obligations or what the magnitude of the
obligations would be.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF THE REGISTRANTS
The following table sets forth certain information concerning the executive
officers of Nabisco Group Holdings:
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING PAST FIVE YEARS
NAME AGE AND OTHER INFORMATION
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<S> <C> <C>
James M. Kilts 52 President and Chief Executive Officer of NGH since December
1999; President and Chief Executive Officer of Nabisco
Holdings and of Nabisco since January 1998; prior thereto
Executive Vice President-Worldwide Food of Philip Morris
Companies, January 1994-March 1997; President of Kraft
USA, 1989-1994. Member of the Board of Directors of
Nabisco Holdings and of Nabisco since January 1998, NGH
since July 1999, the May Department Stores Company since
November 1998 and The Whirlpool Corporation since April
1999.
Richard H. Lenny 48 Executive Vice President of Nabisco Holdings and of Nabisco
and President of Nabisco Biscuit Company since February
1998; prior thereto President of Pillsbury North America,
November 1996-January 1998; President of Pillsbury
Specialty Brands, February 1995-
November 1996; Senior Vice President-Sales & Customer
Service of Kraft Foods, May 1994-February 1995.
Douglas R. Conant 48 Executive Vice President of Nabisco Holdings and of Nabisco
since June 1995 and President of Nabisco U.S. Foods Group
since February 1997; previously President of Sales &
Integrated Logistics Group, 1994-June 1995; Senior Vice
President-Marketing of Nabisco Biscuit Company, 1993-1994.
James E. Healey 58 Senior Vice President and Chief Financial Officer of NGH
since September 1999; Executive Vice President and Chief
Financial Officer of Nabisco Holdings and of Nabisco since
June 1997; prior thereto, Vice President and Treasurer of
Bestfoods (formerly CPC International), 1995-1997;
Comptroller of Bestfoods, 1987-1995. Member of the Board
of Directors of Interchange Financial Services Corp. since
1994.
James A. Kirkman III 58 Senior Vice President and Secretary of NGH since July 1999;
General Counsel of NGH since October 1999; Executive Vice
President, General Counsel and Secretary of Nabisco
Holdings and of Nabisco since April 1995; previously
Senior Vice President, General Counsel and Secretary of
Nabisco Holdings, October 1994-April 1995, and of Nabisco,
1992-April 1995.
Thomas J. Pesce 48 Senior Vice President and Controller of NGH since November
1999; Senior Vice President and Controller of Nabisco
Holdings and of Nabisco since November 1999; previously
Senior Vice President, Finance of Nabisco Biscuit Company,
October 1996-October 1999; Senior Vice President and Chief
Financial Officer of Nabisco International, 1990-September
1996.
Robert A. Schiffner, Jr. 50 Senior Vice President and Treasurer of NGH since August
1999; Senior Vice President and Treasurer of Nabisco
Holdings and of Nabisco since July 1998; previously Senior
Vice President and Controller of Nabisco Holdings and of
Nabisco, March 1997-June 1998; Vice President and
Controller of Nabisco Holdings and of Nabisco,
April 1995-February 1997; Senior Director-Finance and
Business Development, Specialty Products Company, January
1994-March 1995.
</TABLE>
8
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of NGH, par value $.01 per share (the "Common Stock"), is
listed and traded on the New York Stock Exchange (the "NYSE").
As of March 15, 2000, there were approximately 45,000 record holders of the
Common Stock. The Common Stock closing price on the NYSE on March 15, 2000 was
$9 3/8.
The following table sets forth, for the calendar periods indicated, the high
and low sales prices per share for the Common Stock on the NYSE Composite Tape,
as reported in the WALL STREET JOURNAL.
<TABLE>
<CAPTION>
CASH
DIVIDENDS
1999 HIGH LOW DECLARED
- ---- ------------- ------------- ---------
<S> <C> <C> <C>
First Quarter........................................ $ 30 7/8 $ 25 $ .5125
Second Quarter--prior to spin-off of RJR............. $ 33 9/16 $ 24 $ .5125
Second Quarter--after spin-off of RJR................ $ 22 $ 19 5/16 $ --
Third Quarter........................................ $ 20 13/16 $ 14 11/16 $ .1225
Fourth Quarter....................................... $ 15 3/4 $ 9 3/4 $ .1225
1998
- -----------------------------------------------------
First Quarter........................................ $ 38 1/16 $ 30 $ .5125
Second Quarter....................................... $ 31 5/16 $ 23 1/2 $ .5125
Third Quarter........................................ $ 27 3/8 $ 21 5/16 $ .5125
Fourth Quarter....................................... $ 31 15/16 $ 24 $ .5125
</TABLE>
During the second quarter of 1999, a series of reorganization transactions
were completed, as a result of which NGH, Nabisco Holdings, Nabisco and their
subsidiaries are no longer affiliated with RJR and its subsidiaries. The
principal transactions in this reorganization that affected NGH are the
following:
- On May 12, 1999, RJR and Reynolds Tobacco completed the sale of the
international tobacco business to Japan Tobacco Inc. for $8 billion,
including the assumption of approximately $200 million of net debt.
Proceeds from the sale were used to reduce debt and for general corporate
purposes.
- On May 18, 1999, RJR transferred all of the outstanding Class B Common
Stock of Nabisco Holdings, together with approximately $1.6 billion in net
cash proceeds from the international tobacco sale, to NGH through a merger
transaction.
- On June 14, 1999, NGH distributed all of the outstanding shares of RJR
common stock to NGH common stockholders of record as of May 27, 1999. Each
record holder received one share of RJR stock for every three shares of
NGH stock. The average of the high and low trading prices for the common
stock of NGH was $21.53 on June 15, 1999, the first trading day following
the distribution.
As a result of the reorganization transactions, NGH owns only food
businesses through Nabisco Holdings and its subsidiaries, and therefore NGH
decreased its annual common dividend rate to $.49 from $2.05 per share,
effective with the October 1, 1999 dividend payment.
NGH is dependent on the earnings and cash flow of Nabisco Holdings and its
subsidiaries to satisfy its obligations and other cash needs. Nabisco Holdings'
dividend payable to NGH increased from approximately $149 million annually to
$160 million annually, commencing with the April 1, 1999 dividend payment, when
Nabisco Holdings increased its quarterly dividend payment to $.1875 per share or
$.75 per share annually, from its previous level of $.70 per share. For
information concerning limitations on
9
<PAGE>
dividends, see Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations"--Liquidity and Financial Condition and
Note 11 to the Consolidated Financial Statements. NGH does not believe that
Nabisco Holdings' credit arrangements will limit NGH's ability to pay its
anticipated quarterly dividends.
NGH, RJR and Reynolds Tobacco entered into several agreements governing the
relationships among the parties after the distribution of RJR's shares to NGH
stockholders, including the provision of intercompany services by Nabisco to
NGH, certain tax matters indemnification rights and obligations and other
matters among the parties.
These agreements replaced a predecessor intercompany services agreement, a
predecessor tax sharing agreement and a predecessor corporate agreement that had
previously been in place between Nabisco Holdings and RJR. NGH does not
anticipate that these new agreements will have a material effect on its
financial condition or results of operations.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data of NGH presented below as of
December 31, 1999 and 1998 and for each of the years in the three-year period
ended December 31, 1999 were derived from the consolidated financial statements
of NGH (the "Consolidated Financial Statements") set forth herein, which have
been audited by Deloitte & Touche LLP, independent auditors. In addition, the
selected consolidated financial data of NGH presented below as of December 31,
1997, 1996 and 1995 and for each of the years in the two year period ended
December 31, 1996 were derived from audited consolidated financial statements of
NGH, not presented herein. The data should be read in conjunction with the
Consolidated Financial Statements, related notes and other financial information
included herein.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
IN MILLIONS, EXCEPT PER SHARE AMOUNTS 1999 1998 1997 1996 1995
- ------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales................................................. $ 8,268 $ 8,400 $ 8,734 $ 8,889 $ 8,294
------- ------- ------- ------- -------
Cost of products sold..................................... 4,502 4,683 4,950 5,226 4,776
Selling, advertising, administrative and general
expenses................................................ 2,751 2,670 2,469 2,528 2,389
Amortization of trademarks and goodwill................... 213 221 226 228 227
Restructuring charges (credits)........................... (67) 530 -- 428 --
------- ------- ------- ------- -------
Operating income........................................ 869 296 1,089 479 902
Interest and debt expense................................. (324) (401) (421) (424) (376)
Other income (expense), net............................... (19) (29) (32) (31) (15)
------- ------- ------- ------- -------
Income (loss) before income taxes....................... 526 (134) 636 24 511
Provision (benefit) for income taxes...................... 201 (2) 257 62 208
------- ------- ------- ------- -------
Income (loss) from continuing operations before minority
interest.............................................. 325 (132) 379 (38) 303
Less minority interest in income (loss) of Nabisco
Holdings................................................ 70 (14) 84 3 59
------- ------- ------- ------- -------
Income (loss) from continuing operations.................. 255 (118) 295 (41) 244
Discontinued operations:
Income (loss) from operations of discontinued
businesses, net of income taxes....................... 24 (459) 107 652 383
Gain on sale of discontinued business, net of income
taxes................................................. 2,970 -- -- -- --
------- ------- ------- ------- -------
Income (loss) before extraordinary items................ 3,249 (577) 402 611 627
Extraordinary items - loss on early extinguishment of
debt, net of income taxes and minority interest......... (281) -- (21) -- (16)
------- ------- ------- ------- -------
Net income (loss)....................................... $ 2,968 $ (577) $ 381 $ 611 $ 611
======= ======= ======= ======= =======
PER SHARE DATA
Net income (loss) per common share - basic:
Income (loss) from continuing operations................ $ .76 $ (.49) $ .78 $ (.26) $ .41
Income (loss) from discontinued operations.............. 9.21 (1.42) .33 2.01 1.18
Extraordinary items..................................... (.86) -- (.06) -- (.05)
------- ------- ------- ------- -------
Net income (loss)..................................... $ 9.11 $ (1.91) $ 1.05 $ 1.75 $ 1.54
======= ======= ======= ======= =======
Net income (loss) per common share - diluted:
Income (loss) from continuing operations................ $ .75 $ (.49) $ .76 $ (.26) $ .41
Income (loss) from discontinued operations.............. 9.21 (1.42) .33 2.01 1.17
Extraordinary items..................................... (.86) -- (.06) -- (.05)
------- ------- ------- ------- -------
Net income (loss)..................................... $ 9.10 $ (1.91) $ 1.03 $ 1.75 $ 1.53
======= ======= ======= ======= =======
Dividends declared per common share....................... $ 1.27 $ 2.05 $ 2.05 $ 1.85 $ 1.50
Dividends declared per share--Series C preferred stock.... -- -- $ 2.25 $ 6.01 $ 6.01
<CAPTION>
BALANCE SHEET DATA (AT END OF PERIOD)
Working capital. $ 30 $ 6,309 $ 508 $ 445 $ 436
<S> <C> <C> <C> <C> <C>
Total assets.............................................. 11,961 17,845 19,832 20,574 20,811
Total debt................................................ 4,187 5,132 5,488 5,442 5,409
Stockholders' equity...................................... 3,161 8,014 9,631 10,148 10,329
</TABLE>
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion and analysis of NGH's financial condition and
results of operations. The discussion and analysis for sales, operating company
contribution and operating income includes information as reported in the
historical financial statements, followed by items that management believes
impact the comparability of historical results, ongoing results and management's
discussion and analysis of ongoing results. Ongoing results are presented on a
basis consistent with how the ongoing businesses are managed. They exclude
sales, operating company contribution and operating income from divested
businesses, restructuring charges and credits, restructuring-related expenses
and net gains on divested businesses that management believes affect the
comparability of the results of operations. The ongoing results of operations
should not be viewed as a substitute for the historical results of operations
but as a tool to better understand the underlying trends in the business. The
discussion and analysis of NGH's financial information and the related notes
thereto are included in the Consolidated Financial Statements.
NGH's business is conducted by Nabisco Holdings Corp.'s ("Nabisco Holdings")
wholly-owned subsidiary Nabisco, Inc. ("Nabisco"). Nabisco's businesses in the
United States are comprised of Biscuit and the U.S. Foods Group. Nabisco's
businesses outside the United States are conducted by Nabisco Ltd and Nabisco
International, Inc. ("Nabisco International" and together with Nabisco Ltd, the
"International Food Group").
NET SALES
<TABLE>
<CAPTION>
% CHANGE
FROM
YEARS ENDED DECEMBER 31, PRIOR YEAR
------------------------ --------------------
DOLLARS IN MILLIONS 1999 1998 1997 1999 1998
- ------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
REPORTED NET SALES:
Biscuit.............................................. $3,640 $3,542 $3,545 3% --%
U.S. Foods Group..................................... 2,246 2,334 2,604 (4)% (10)%
International Food Group............................. 2,382 2,524 2,585 (6)% (2)%
------ ------ ------
Total................................................ 8,268 8,400 8,734 (2)% (4)%
------ ------ ------
NET SALES FROM DIVESTED BUSINESSES:
U.S. Foods Group..................................... -- 287 616
International Food Group............................. -- 11 16
------ ------ ------
Total................................................ -- 298 632
------ ------ ------
NET SALES FROM ONGOING BUSINESSES:
Biscuit.............................................. 3,640 3,542 3,545 3% --%
U.S. Foods Group..................................... 2,246 2,047 1,988 10% 3%
International Food Group............................. 2,382 2,513 2,569 (5)% (2)%
------ ------ ------
Total................................................ $8,268 $8,102 $8,102 2% --%
====== ====== ======
</TABLE>
THE FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON NET SALES FROM ONGOING
BUSINESSES:
1999 VS. 1998. NGH's net sales of $8.27 billion were up 2% compared to 1998
net sales.
- Biscuit's net sales increased 3% versus the prior year. The sales increase
reflects the carryover effect of 1998 price increases and volume increases
in cookie and cracker brands behind increased marketing spending and the
continued efforts of Biscuit's redesigned direct store delivery sales
force. Partially offsetting this increase was a decline in breakfast snack
volumes.
12
<PAGE>
- The U.S. Foods Group's net sales increased 10% versus the prior year. The
sales increase was paced by strong volume gains from nuts, confections,
condiments and pet snacks. The inclusion of Favorite Brands, acquired in
November 1999, contributed 2% points to the overall increase.
- The International Food Group's net sales decreased 5% versus the prior
year. The sales decline was primarily driven by unfavorable foreign
currency translation rates, principally in Brazil. Excluding the impact of
unfavorable foreign currency translation, sales increased 5%. The increase
was primarily due to price increases partially offset by volume declines.
The price increases, paced by Brazil, were across all regions, with the
exception of Argentina which experienced competitive pricing pressures.
The volume declines were primarily in Brazil, the Andean region and Spain
offset in part by volume gains in Canada, the Caribbean and Mexico.
1998 VS. 1997. NGH's net sales were flat at $8.10 billion.
- Biscuit's net sales were flat at $3.54 billion versus the prior year
reflecting price increases and volume gains in cookies and crackers
largely offset by lower volumes in SnackWell's and breakfast snacks.
Although net sales were flat versus the prior year, momentum was
reestablished in the second half of 1998 and after adjusting selling days
to an equal days basis, Biscuit's net sales rose nearly 5% in the fourth
quarter of 1998 versus the same period a year ago. These sales reflect the
impact of increased marketing spending and the efforts of Biscuit's
redesigned direct store delivery sales force which was approximately
one-third in place at December 31, 1998.
- The U.S. Foods Group's net sales increased 3% primarily due to the
inclusion of Cornnuts snacks acquired in December 1997 and increased
volume for Planters nuts, A.1. steak sauces and pet snacks, partially
offset by lower volume for confections.
- The International Food Group's net sales decreased by 2% in 1998 versus
1997. Excluding the impact of foreign currency translation, net sales were
up 2% in 1998 versus the prior year primarily due to price increases and
increased volumes in several Latin American markets partially offset by
volume declines in Brazil, Argentina and Asia.
13
<PAGE>
OPERATING COMPANY CONTRIBUTION
<TABLE>
<CAPTION>
% CHANGE FROM
YEARS ENDED DECEMBER 31, PRIOR YEAR
------------------------ -------------------
DOLLARS IN MILLIONS 1999 1998 1997 1999 1998
- ------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
REPORTED OPERATING COMPANY CONTRIBUTION(1):
Biscuit.................................... $ 504 $ 500 $ 691 1% (28)%
U.S. Foods Group........................... 329 335 386 (2)% (13)%
International Food Group................... 186 210 231 (11)% (9)%
Other...................................... (4) 2 7 (71)%
------ ------ ------
Total........................................ 1,015 1,047 1,315 (3)% (20)%
------ ------ ------
ITEMS EXCLUDED FROM ONGOING OPERATING COMPANY
CONTRIBUTION:
Biscuit:
Restructuring-related expenses........... (53) (42) --
U.S. Foods Group:
Restructuring-related expenses........... (9) (6) (24)
Results from divested businesses......... -- 38 97
Net gain on divested businesses.......... -- 2 32
International Food Group:
Restructuring-related expenses........... (14) (8) (7)
Results from divested businesses......... -- 1 2
Net gain on divested businesses.......... -- 12 --
------ ------ ------
Total........................................ (76) (3) 100
------ ------ ------
OPERATING COMPANY CONTRIBUTION FROM ONGOING
BUSINESSES:
Biscuit...................................... 557 542 691 3% (22)%
U.S. Foods Group............................. 338 301 281 12% 7%
International Food Group..................... 200 205 236 (2)% (13)%
Other........................................ (4) 2 7 (71)%
------ ------ ------
Total........................................ $1,091 $1,050 $1,215 4% (14)%
====== ====== ======
</TABLE>
- ------------------------
(1) Operating company contribution represents operating income before
amortization of trademarks and goodwill and restructuring charges (credits).
THE FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON OPERATING COMPANY
CONTRIBUTION FROM ONGOING BUSINESSES:
1999 VS. 1998. NGH's operating company contribution increased 4% to
$1.09 billion compared to 1998.
- Biscuit's operating company contribution increased 3% versus the prior
year. The increase reflects the carryover effects of 1998 price increases
and lower manufacturing overhead costs resulting from ongoing productivity
programs, along with volume gains for both cookies and crackers. Lower
breakfast snack volumes, increased marketing spending and increased
selling costs associated with the implementation of the redesigned direct
store delivery sales force partially offset these gains. Also impacting
the 1999 results was a one-time charge of $6 million reflecting the
settlement with the Department of Labor regarding overtime pay for sales
personnel.
14
<PAGE>
- The U.S. Foods Group's operating company contribution increased 12% versus
the prior year. The results were primarily due to strong volume gains from
nuts, confections, condiments and pet snacks partially offset by increased
advertising and consumer promotion spending. The impact of productivity
programs on fixed selling costs also contributed to the favorable results.
- The International Food Group's operating company contribution decreased 2%
versus the prior year. The decrease was principally due to higher
marketing investment across most regions and lower volume and higher raw
material costs in the Andean region. The decrease was offset in part by
earnings improvements in Asia due to volume, in Argentina resulting from
productivity improvements and in Spain due to pricing actions. The
unfavorable foreign currency impact at operating company contribution,
primarily in Brazil, was mitigated in large part by favorable pricing
actions by the Brazilian business.
1998 VS. 1997. NGH's operating company contribution decreased 14% to
$1.05 billion in 1998.
- Biscuit's operating company contribution declined 22% to $542 million,
largely the result of increased marketing spending invested behind core
brands including the SnackWell's line. Higher costs associated with
strengthening and redesigning the direct store delivery sales organization
also significantly contributed to the profit decline.
- The U.S. Foods Group's operating company contribution in 1998 increased 7%
to $301 million from $281 million in 1997 primarily due to gains in
Planters nuts, A.1. steak sauces, pet snacks and the acquisition of
Cornnuts in December 1997, partially offset by declines in confections.
- The International Food Group's operating company contribution decreased
13% to $205 million. The decrease in operating company contribution was
principally due to unfavorable foreign currency translation of $20 million
and lower earnings, exclusive of foreign currency translation, in Spain,
Asia and Canada which more than offset increased earnings in Brazil and
Argentina as progress was made in lowering costs in these operating units.
OPERATING INCOME
<TABLE>
<CAPTION>
% CHANGE
FROM
YEARS ENDED DECEMBER 31, PRIOR YEAR
------------------------ -------------------
DOLLARS IN MILLIONS 1999 1998 1997 1999 1998
- ------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
REPORTED OPERATING INCOME.............................. $ 869 $ 296 $1,089 194% (73)%
------ ------ ------
OPERATING INCOME(EXPENSE) EXCLUDED FROM ONGOING
BUSINESSES:
Restructuring (charge) credit........................ 67 (530) --
Restructuring-related expenses....................... (76) (56) (31)
Net gain on divested businesses...................... -- 14 32
Results from divested businesses..................... -- 33 87
------ ------ ------
Total................................................ (9) (539) 88
------ ------ ------
OPERATING INCOME FROM ONGOING BUSINESSES............... $ 878 $ 835 $1,001 5% (17)%
====== ====== ======
</TABLE>
THE FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON OPERATING INCOME FROM
ONGOING BUSINESSES:
1999 VS. 1998. NGH's operating income was $878 million for 1999, an
increase of 5% versus last year. The increase reflects higher operating company
contribution discussed previously.
1998 VS. 1997. NGH's operating income decreased to $835 million in 1998
versus $1,001 million in 1997 as a result of the 14% decline in operating
company contribution cited earlier.
15
<PAGE>
RESTRUCTURING
Savings objectives set in Nabisco's 1998 restructuring programs are on
target despite lower than anticipated spending to date. The June 1998 program
was substantially completed in 1999 and the December 1998 program is expected to
be substantially completed by mid-year 2000. Pre-tax savings in 1999 were
approximately $90 million including cash savings of $86 million and, after
completion of the programs, are expected to be approximately $145 million
annually including cash savings of $135 million. In 1999, Nabisco recorded a net
restructuring credit of $67 million reflecting higher than anticipated proceeds
from the sale of facilities closed as part of the 1998 restructuring programs,
lower costs and cash outlays than originally estimated for certain of these
programs and minor project cancelations. This credit reduced the restructuring
charges to $463 million. As the remaining projects from the December 1998
restructuring program are completed, Nabisco will continue to analyze the actual
spending and the estimated cost to complete the programs. The results of that
analysis will determine what further adjustments, if any, will be necessary.
Cumulative cash expenditures to date have totaled $103 million with $65 million
expended in 1999. The cash component of the restructuring charge for the
programs will be approximately $140 million including an estimated $37 million
expenditure in 2000. For a further discussion of the restructuring programs, see
Note 4 to the Consolidated Financial Statements.
INTEREST AND DEBT EXPENSE
1999 VS. 1998. Consolidated interest and debt expense of $324 million in
1999 decreased by $77 million or 19% from 1998 as a result of lower average
borrowing levels and lower average interest rates. Debt levels were reduced by
the application of net proceeds from businesses sold in the third quarter of
1998, along with funds from continuing operations, the repurchase and redemption
of trust preferred securities in the second quarter of 1999, and lower capital
spending. Debt levels edged upward in the second half of 1999 due to borrowings
to finance the acquisitions of Canale S.A. and certain assets and liabilities of
Favorite Brands International, Inc.
1998 VS. 1997. Consolidated interest and debt expense of $401 million in
1998 decreased by $20 million from 1997 primarily due to the paydown of
commercial paper with the net proceeds from businesses sold in the third quarter
of 1998 and the replacement of fixed rate debt at lower rates partially offset
by the August 1998 issuance of trust preferred securities and a reduction in
capitalized interest in 1998.
OTHER INCOME (EXPENSE), NET
1999 VS. 1998. Consolidated other income (expense), net amounted to
$19 million of expense in 1999 versus $29 million of expense in 1998, an
decrease of $10 million in expense. The lower level of expense in 1999 reflects
higher interest income and lower financing costs.
1998 VS 1997. Consolidated other income (expense), net amounted to
$29 million of expense in 1998 versus $32 million of expense in 1997, a decrease
of $3 million in expense. The lower level of expense in 1998 reflects higher
interest income partially offset by an increase in foreign exchange losses.
PROVISION FOR INCOME TAXES
1999 VS. 1998. The reported effective tax rate for 1999 was 38.2% compared
to 1.5% for 1998. Excluding the tax related impact of restructuring credits
recorded in 1999 and restructuring charges and net gain from divestitures in
1998, the effective rates are 39.7% and 40.5% for 1999 and 1998, respectively.
1998 VS. 1997. The reported effective tax rate for 1998 was 1.5% compared
to 40.4% for 1997. Excluding the tax related impact of restructuring charges and
net gain from divestitures in 1998, the effective rates are 40.5% and 40.4% for
1998 and 1997, respectively.
16
<PAGE>
DISCONTINUED OPERATIONS
Total income from discontinued operations increased approximately $3.5
billion in 1999 compared to 1998. The increase was due primarily to the gain on
the sale of Reynolds International in May of 1999 and profitable tobacco results
prior to the sale and distribution in 1999 compared to a loss for all of 1998.
EXTRAORDINARY LOSS
The extraordinary loss in 1999 includes a loss of approximately $384 million
($250 million after tax) on the repurchase of approximately $4 billion of debt
securities by RJR and a loss of approximately $44 million ($29 million after
tax) related to the purchase and redemption of NGH's trust preferred securities.
1999 also includes a loss of $5 million ($2 million after tax, net of minority
interest) on the early redemption of Nabisco's debt.
NET INCOME (LOSS)
1999 VS. 1998. NGH's net income of $2.97 billion for 1999 compares to a net
loss of $577 million for 1998. The increase primarily reflects the net gain on
the sale of the international tobacco business and increased operating income
partially offset by a provision for income taxes in 1999 compared to a slight
tax benefit in 1998. Also contributing to the increase were profitable tobacco
results prior to the sale and distribution in 1999 compared to a loss for all of
1998, and lower interest and debt expense partially offset by an extraordinary
loss in 1999.
1998 VS. 1997. NGH's net loss of $577 million for 1998 compares to net
income of $381 million for 1997. The decrease is principally due to lower
operating income partially offset by a slight tax benefit in 1998 compared to a
tax provision in 1997, and unprofitable tobacco results in 1998 compared to
income in 1997.
SEASONALITY
NGH's business is seasonal, with generally higher sales levels in the fourth
quarter. For information concerning seasonality, see Note 19 to the Consolidated
Financial Statements.
LIQUIDITY AND FINANCIAL CONDITION
Net cash flows from continuing operating activities amounted to
$533 million for 1999 compared to $563 million for 1998. The decrease in net
cash flows from continuing operating activities primarily reflects the 1999
extraordinary losses on debt extinguishments and increased restructuring
payments, partially offset by increased income from continuing operations and
lower working capital requirements.
Net cash flows from continuing operating activities amounted to
$563 million for 1998 compared to $520 million for 1997. The increase in net
cash flows from continuing operating activities primarily reflects lower working
capital requirements.
Net cash flows from discontinued operating activities amounted to
$2,284 million for 1999 compared to $546 million for 1998. The 1999 amount
reflects the gain on sale of Reynolds International and profitable tobacco
results prior to the sale and distribution in 1999 compared to a loss for all of
1998.
Cash flows used in investing activities were $894 million in 1999 compared
to cash inflows of $200 million in 1998. The $1,094 million change in cash flows
was primarily due to increased spending for business acquisitions in 1999 and
the absence in 1999 of proceeds from the sale of businesses partially offset by
lower capital expenditures and higher proceeds from the sale of assets.
Net cash flows from investing activities in 1998 increased $595 million from
1997 levels to $200 million, primarily due to increased net proceeds of $500
million from the sale of food businesses, and reduced levels of capital
expenditures and acquisition spending in 1998.
17
<PAGE>
Net cash flows used in financing activities were $1,773 million for 1999,
compared to $1,318 million of cash flows used in financing activities for 1998.
The $455 million change in cash flows in 1999 is principally due to the 1999
redemptions of preferred securities, partially offset by an increase in net
borrowings in 1999 of $263 million versus a reduction in net borrowings of
$717 million in 1998.
Net cash flows used in financing activities were $1,318 million for 1998,
compared to $676 million of cash flows used in financing activities in 1997. The
increase in 1998 is primarily due to debt repayments of $717 million in 1998
versus borrowings of $39 million in 1997.
Capital expenditures were $241 million in 1999. Management expects that the
level of capital expenditures for 2000 will be approximately $250 million, which
is sufficient to support the strategic and operating needs of Nabisco Holdings'
businesses. Management also expects that cash flow from operations will be
sufficient to support its planned capital expenditures in 2000. Nabisco
Holdings' long-term commitments for capital expenditures are not material.
In August 1997, Nabisco issued $200 million of floating rate (5.38% at
December 31, 1998) notes due August 2009. During the third quarter of 1999
Nabisco exercised a call option to redeem these notes. An extraordinary loss of
$5 million ($2 million after tax, net of minority interest) was recognized by
NGH. This redemption was refinanced with commercial paper.
In December 1997, Nabisco completed a tender offer and redeemed $432 million
of its $538 million outstanding 8.3% notes due 1999 and $541 million of its $688
million outstanding 8% notes due 2000. An extraordinary loss of $43 million ($21
million after tax, net of minority interest) was recorded for this transaction.
The redemption of these notes was refinanced with additional short-term
borrowings, which in turn were refinanced by the issuance of long-term debt in
January 1998.
In January 1998, Nabisco issued $400 million of 6% notes due February 15,
2011 which are putable and callable on February 15, 2001; $300 million of 6 1/8%
notes due February 1, 2033 which are putable and callable on February 1, 2003;
and $300 million of 6 3/8% notes due February 1, 2035 which are putable and
callable on February 1, 2005. Unless the notes are put, the interest rates on
the 6% notes, the 6 1/8% notes and the 6 3/8% notes are reset on the applicable
put/call date at 5.75%, 6.07% and 6.07%, respectively, plus, in each case,
Nabisco's future credit spread on treasury notes at a fixed rate resulting in a
yield to maturity of comparable maturities. Nabisco no longer retains the right
to call these notes, as these options were sold at issuance for $41 million. The
net proceeds from these notes and the sale of call options were used to repay
commercial paper borrowings.
In August 1998, a newly formed wholly-owned subsidiary trust of NGH issued
$374 million principal amount of preferred securities. The proceeds from the
sale of the preferred securities and the original capital contribution were
invested by the trust in approximately $385 million principal amount of 9 1/2%
junior subordinated debentures of NGH. The junior subordinated debentures are
redeemable by NGH at $25 per debenture on or after September 30, 2003 and are
due in September 2047. Cash distributions on the preferred securities are
cumulative at an annual rate of 9 1/2% of the liquidation amount of $25 per
security and are payable quarterly in arrears. In October 1998, NGH used $301
million of the proceeds from the issuance of the junior subordinated debentures
to redeem its outstanding Series B preferred stock.
On April 13, 1999, NGH offered to purchase any and all of its 9 1/2% trust
preferred securities and sought consents from the holders of those securities to
waive certain covenants that might have prevented some of the reorganization
transactions described in Note 2 to the Consolidated Financial Statements. The
consent offer expired on May 17, 1999 and resulted in the tender of
approximately $276 million of the total $374 million trust preferred securities.
The total cost to tender the preferred securities, including accrued interest,
premium fees and consent fees was approximately $314 million. NGH invested
approximately $114 million of the proceeds received from RJR from the
international tobacco sale in U.S. government
18
<PAGE>
securities and highly rated commercial paper which is intended to service future
principal and interest payments through 2003 on the trust securities not
tendered.
On May 18, 1999, NGH called for redemption all of its $949 million 10% trust
preferred securities outstanding. NGH completed the redemption of the full
amount of the securities on June 18, 1999.
The purchase and redemption of the 9 1/2 and 10% trust preferred securities
resulted in an extraordinary loss of approximately $44 million ($29 million
after tax).
On May 18, 1999, NGH called for redemption of all of its outstanding ESOP
convertible preferred stock at $16.25 per share, plus accrued dividends. A total
of 12,412,767 shares were redeemed at a cost of approximately $202 million. NGH
completed this transaction on June 10, 1999. The 406,200 remaining shares were
repurchased at $16.00 per share.
Nabisco maintains a three-year $1.5 billion revolving credit facility, of
which no borrowings were outstanding at December 31, 1999, and a 364-day $1.10
billion credit facility primarily to support commercial paper borrowings of $902
million. Accordingly, $198 million was available at December 31, 1999. At the
end of the 364-day period, any borrowings outstanding under the 364-day credit
facility are convertible into a three-year term loan at Nabisco's option. Unless
extended, the revolving credit facility expires in October 2002 and the 364-day
credit facility expires in October 2000. The commitments under the revolving
credit facility decline to approximately $1.46 billion in the final year. The
revolving credit facility also provides for the issuance of up to $300 million
of letters of credit, of which none was issued at December 31, 1999.
Availability under the revolving credit facility is reduced by the amount of any
borrowings outstanding and letters of credit issued under the facility and by
the amount of outstanding commercial paper in excess of $1.10 billion.
NGH currently anticipates that it will pay a regular quarterly cash dividend
that is approximately equal to the amount of the regular Nabisco Holdings'
quarterly cash dividend that NGH expects to receive. However, the dividend
payable on each NGH common share will be less than the dividend payable on each
Nabisco Holdings' common share because the number of outstanding NGH common
shares exceeds the number of Nabisco Holdings' shares owned by NGH. Passing
through Nabisco Holdings' current annual dividend of $0.75 per share of NGH's
213,250,000 shares of Nabisco Holdings' stock yield's an annual dividend of
approximately $0.49 per share on the 326,146,847 shares of NGH stock outstanding
on December 31, 1999.
Nabisco Holdings' credit facilities restrict dividends and distributions
after January 1, 1999 by Nabisco Holdings to holders of its equity securities by
requiring a minimum net worth amount. As of December 31, 1999, Nabisco Holdings'
actual net worth, as defined, exceeded required net worth by approximately
$915 million. Nabisco Holdings does not believe that its credit arrangements
will limit its ability to pay dividends.
Nabisco's credit facilities limit the ability of Nabisco Holdings and its
subsidiaries to incur indebtedness, engage in transactions with stockholders and
affiliates, create liens, acquire, sell or dispose of certain assets and
securities and engage in certain mergers or consolidations. Nabisco Holdings and
Nabisco believe that they are currently in compliance with all covenants and
restrictions imposed by the terms of their indebtedness.
Nabisco filed a shelf registration statement with the Securities and
Exchange Commission for $1.0 billion of debt which was declared effective on
December 10, 1999.
At December 31, 1999, NGH's total debt (notes payable and long-term debt,
including current maturities and mandatorily redeemable preferred securities)
and total capital (total debt and stockholders' equity) amounted to
approximately $4.2 billion and $7.3 billion, respectively, of which total debt
is lower by approximately $945 million and total capital is lower by
$5,798 million than at December 31, 1998. NGH's
19
<PAGE>
ratios of total debt to stockholders' equity and total debt to total capital
were 1.32 to 1 and .57 to 1, respectively.
The 1998 restructuring programs will require cash expenditures of
approximately $140 million, of which $103 million has been spent through
December 31, 1999. The remaining amount of $37 million will be expended
primarily in 2000. In addition, the programs required additional expenditures of
$132 million, of which $76 million was incurred in 1999. These additional
expenses were principally for implementation and integration of the programs and
included costs for relocation of employees and equipment and training. Nabisco
expects to incur capital expenditures of approximately $85 million over the
programs' duration, of which $69 million has been incurred since the programs'
inception. All cash requirements are expected to be funded from operations.
At December 31, 1999, there was $802 million of accumulated and
undistributed income of foreign subsidiaries. No applicable U.S. taxes have been
provided because management intends for these earnings to be reinvested abroad
indefinitely. The accumulated and undistributed earnings have funded and will
continue to fund international acquisitions, new product introductions and other
business building opportunities.
INFLATION
Inflation has not had a material effect on Nabisco's business in recent
years.
YEAR 2000 ISSUE
The Year 2000 Issue was a result of computer applications that were written
using two digits rather than four digits to define the applicable year. The
issue was whether computer systems would properly interpret date-sensitive
information when the year changed to 2000. Nabisco recognized the issues
associated with the Year 2000 problem and the need to ensure that its operations
would not be adversely impacted by Year 2000 software failures. Comprehensive
reviews of all systems and applications, including those of key third parties
(suppliers, service providers and customers) were conducted and detailed plans
were developed for required system modifications and replacements.
Incremental costs, which included contractor costs to modify or replace
existing systems, and costs of internal resources dedicated to achieving Year
2000 compliance were charged to expense as incurred and were funded from
operating cash flows. The total cost of achieving Year 2000 compliance was
$40 million, of which $24 million was incurred in 1999.
Nabisco's Year 2000 implementation plan, including contingency measures,
were completed in all material respects by the end of 1999. The Year 2000 issue
did not have a material effect on Nabsico's business, results of operations,
cash flows or financial condition.
SUBSEQUENT EVENTS
JOINT VENTURE
On December 14, 1999, Nabisco announced its participation in a joint
venture, Burlington Biscuits plc ("Burlington"), with Hicks, Muse, Tate & Furst
Limited ("HMTF"), an investment firm, to bid for 100% of United Biscuits
(Holdings) plc ("UB"). Subsequently, Burlington acquired 29.9% of UB. As
announced on March 20, 2000, Nabisco and HMTF have entered into definitive
agreements under which: (i) Nabisco and HMTF will join a consortium of
investors, Finalrealm Limited ("Finalrealm"), also bidding for UB; (ii) an
associate of Finalrealm will acquire Burlington's 29.9% interest in UB, giving
Finalrealm a 47.6% interest in UB; (iii) Finalrealm's cash offer of 265 pence
per UB share becomes a Final Offer under the City Code and is extended until
April 5, 2000; (iv) subject to Finalrealm being entitled to exercise compulsory
acquisition rights in respect of minority interests in UB and regulatory
competition clearance,
20
<PAGE>
Nabisco will contribute approximately $45 million in cash and its operations in
Spain, Portugal and the Middle East (in 1999, these operations had net sales of
approximately $290 million) to an associate of Finalrealm; (v) Finalrealm has
agreed to procure the sale to Nabisco of UB's operations in China, Hong Kong and
Taiwan conditional on the Final Offer becoming or being declared wholly
unconditional (in 1999, these operations had net sales of approximately
$66 million); and (vi) following completion of the Final Offer and its related
transactions, Nabisco would have an equity interest of 24.6% in the joint
venture.
Upon completion, the joint venture will be comprised of UB businesses in the
United Kingdom, France and the Benelux countries, Nabisco's operations named
above and HMTF's UK Horizon Biscuits business.
STOCKHOLDER RIGHTS PLAN
On March 13, 2000, the Board of Directors ("Board") of NGH adopted a
stockholder rights plan. Under the plan, the Board declared a dividend of one
preferred stock purchase right ("Right") for each share of NGH common stock
outstanding on March 20, 2000, and authorized the distribution of one Right for
each subsequently issued common share. Each Right entitles the holder to
purchase from NGH one one-hundredth of a share of a new series of preferred
stock at an initial purchase price of $30. The Board authorized the issuance of
4,400,000 preferred shares under this plan, none of which has been issued. The
Rights will become exercisable at a specified period of time after any person
becomes the beneficial owner of 10% or more of the common stock of NGH or
commences a tender or exchange offer which, if consummated, would result in any
person becoming the beneficial owner of 10% or more of the common stock. If any
person becomes the beneficial owner of 10% or more of the common stock, each
Right will entitle the holder, other than the acquiring person, to purchase, for
$30, a number of shares of NGH common stock having a market value of $60. For
persons who as of March 13, 2000 beneficially owned 10% or more of the common
stock, the plan "grandfathers" their current level of ownership, so long as they
do not purchase additional shares. Unless earlier redeemed, the Rights will
expire on March 13, 2002.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the consolidated
financial position, results of operations or cash flows of Nabisco due to
adverse changes in financial and commodity market prices and rates. In the
ordinary course of business, Nabisco is exposed to market risk in the areas of
foreign currency exchange rates, interest rates and commodity prices. These
exposures are directly related to its international operations, its use of
agricultural commodities in its operations, and its normal investing and funding
activities. Nabisco has established various policies and procedures to manage
its exposure to market risks, including the use of financial and commodity
derivatives, which are highly correlated to its underlying exposures. The
counterparties in these transactions are highly rated financial institutions.
The fair value of derivative financial instruments is monitored based on the
amounts the company would receive or pay when settling the contracts. Additional
information regarding our use of financial instruments is included in Notes 1
and 15 to the Consolidated Financial Statements.
Nabisco estimates its market risk due to changes in foreign currency rates,
interest rates and commodity prices utilizing financial models called Value at
Risk ("VaR"). Nabisco employs a variance/co-variance approach to its calculation
of VaR, which is a statistical measure of the potential loss in terms of fair
value, cash flows or earnings of market risk sensitive instruments over a
one-year horizon using a 95% confidence interval for changes in market rates and
prices. The model assumes that financial returns are normally distributed. For
options and instruments with non-linear returns, the model uses the delta/gamma
method to approximate the financial return.
21
<PAGE>
The VaR model is a risk analysis tool and does not purport to represent
actual losses in fair value or pre-tax earnings that will be incurred by
Nabisco, nor does it consider the potential effect of favorable changes in
market factors.
INTEREST RATE EXPOSURE
Nabisco manages its debt structure and interest rate risk through the use of
fixed and floating rate debt, and through the use of derivatives. Nabisco uses
interest rate swaps and caps to hedge its exposure to interest rate changes, and
also to lower its financing costs. Nabisco is exposed to changes in interest
rates primarily as a result of its borrowing activities which include commercial
paper, short-term borrowings and long-term fixed rate debt used to maintain
liquidity and fund its business operations. The 1999 average VaR associated with
the fair value of financial instruments resulting from changes in interest rates
was a $216 million after-tax loss. At December 31, 1999, it was a $221 million
after-tax loss, a decrease of $25 million from the December 31, 1998 amount.
This change is primarily due to the decrease in price volatility of long-term
U.S. treasuries which are used to estimate the VaR of Nabisco's interest rate
sensitive financial instruments.
Nabisco does not believe that reasonably possible near-term changes in
interest rates will have a material effect on the future earnings or cash flows
of Nabisco.
FOREIGN EXCHANGE EXPOSURE
Foreign currency fluctuations can affect Nabisco's net investments, earnings
and cash flows denominated in foreign currencies. Nabisco primarily uses foreign
currency forward contracts and option contracts to hedge certain international
subsidiary debt and protect Nabisco from the risk that eventual dollar cash
flows resulting from transactions with international third parties will be
adversely affected by changes in exchange rates. Nabisco's primary exchange rate
exposure is with various Latin American currencies and the Canadian dollar
against the U.S. dollar.
Upon reviewing its derivatives and other foreign currency instruments, based
on historical foreign currency rate movements, Nabisco does not believe that
reasonably possible near-term changes in foreign currency will result in a
material effect on the future earnings, fair values or cash flows of Nabisco.
COMMODITY PRICE EXPOSURE
The acquisition of certain raw materials used in Nabisco's products exposes
it to commodity price changes. Nabisco utilizes purchase orders, non-cancelable
contracts, futures contracts and futures options to manage its commodity price
risk. Nabisco's primary commodity price exposures are to wheat, sugar, cocoa and
vegetable oils.
The VaR associated with Nabisco's derivative commodity instruments due to
reasonably possible near-term changes in commodity prices, based on historical
commodity price movements, would not result in a material effect on the future
earnings of Nabisco.
The VaR associated with Nabisco's net commodity exposure (anticipated future
purchases less derivatives, inventory and firm purchase commitments) would
result in a potential loss in pre-tax earnings of $30 million at December 31,
1999, an increase of $12 million from the December 31, 1998 amount primarily due
to the volatility of soy oil and wheat commodity prices on our underlying
positions in those commodities. For 1999, the average VaR associated with
Nabisco's net commodity exposure was a pre-tax loss of $36 million.
The VaR associated with either Nabisco's derivative commodity instruments or
its net commodity exposure would not have a material effect on the fair values
or cash flows of Nabisco.
------------------------
22
<PAGE>
The foregoing discussion in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contains forward-looking
statements concerning, among other things, the amount of savings from
restructuring programs, the level of future capital expenditures, and the level
of dividends. These statements reflect management's current views with respect
to future events and financial performance. These forward-looking statements are
based on many assumptions and factors including competitive pricing for
products, commodity prices, success of new product innovations and acquisitions,
economic conditions in countries where NGH's subsidiaries do business, the
effects of currency fluctuations and the effects of government regulation. Any
changes in such assumptions or factors could produce significantly different
results.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to the Index to Financial Statements and Financial Statement Schedules
on page 26 for the required information.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Item 10 is hereby incorporated by reference to NGH's Definitive Proxy
Statement to be filed with the Securities and Exchange Commission on or prior to
April 30, 2000. Reference is also made regarding the executive officers of the
Registrants to "Executive Officers of the Registrants" following Item 4 of Part
I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
Item 11 is hereby incorporated by reference to NGH's Definitive Proxy
Statement to be filed with the Securities and Exchange Commission on or prior to
April 30, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 12 is hereby incorporated by reference to Nabisco Group Holdings'
Definitive Proxy Statement to be filed with the Securities and Exchange
Commission on or prior to April 30, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13 is hereby incorporated by reference to Nabisco Group Holdings'
Definitive Proxy Statement to be filed with the Securities and Exchange
Commission on or prior to April 30, 2000.
23
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C>
(A) 1. The financial statements listed in the accompanying Index to
Financial Statements are filed as part of this report.
2. The financial statement schedules listed in the accompanying
Index to Financial Statements and Financial Statement
Schedules are filed as part of this report.
3. The exhibits listed in the accompanying Index to Exhibits
are filed as part of this report.
(B) REPORTS ON FORM 8-K FILED IN FOURTH QUARTER 1999
None.
(C) EXHIBITS
See Exhibit Index.
(D) FINANCIAL STATEMENT SCHEDULES
See Index to Financial Statements and Financial Statement
Schedules.
</TABLE>
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the Township of
Parsippany, State of New Jersey on March 21, 2000.
<TABLE>
<S> <C> <C>
NABISCO GROUP HOLDINGS CORP.
By: /s/ JAMES E. HEALEY
...........................................
(James E. Healey)
Senior Vice President and
Chief Financial Officer
/s/ THOMAS J. PESCE
...........................................
(Thomas J. Pesce)
Senior Vice President
and Controller
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 21, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE SIGNATURE TITLE
--------- ----- --------- -----
<S> <C> <C> <C>
* President and Chief Executive
......................... Officer (principal
(James M. Kilts) executive officer) and
Director
/s/ JAMES E. HEALEY Senior Vice President and
......................... Chief Financial Officer
(James E. Healey)
/s/ THOMAS J. PESCE Senior Vice President and
......................... Controller (principal
(Thomas J. Pesce) accounting officer)
* Director * Director
......................... .........................
(John T. Chain, Jr.) (David B. Jenkins)
* Director * Director
......................... .........................
(Julius L. Chambers) (Fred H. Langhammer)
* Director * Director
......................... .........................
(John L. Clendenin) (H. Eugene Lockhart)
* Chairman of the * Director
......................... Board of Directors .........................
(Steven F. Goldstone) (Theodore E. Martin)
* Director * Director
......................... .........................
(Ray J. Groves) (Rozanne L. Ridgway)
</TABLE>
<TABLE>
<S> <C> <C>
*By: /s/ JAMES A. KIRKMAN III
...........................................
(James A. Kirkman III)
Attorney-in-Fact
</TABLE>
25
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----------------------
<S> <C>
FINANCIAL STATEMENTS
Management's Responsibility for Financial Statements...... F-1
Report of Deloitte & Touche LLP, Independent Auditors..... F-1
Consolidated Statements of Income--Years Ended
December 31, 1999, 1998 and 1997........................ F-2
Consolidated Statements of Comprehensive Income--Years
Ended December 31, 1999, 1998 and 1997.................. F-3
Consolidated Statements of Cash Flows--Years Ended
December 31, 1999, 1998 and 1997........................ F-4
Consolidated Balance Sheets--December 31, 1999 and 1998... F-5 - F-6
Consolidated Statements of Stockholders' Equity--Years
Ended December 31, 1999, 1998 and 1997.................. F-7
Notes to Consolidated Financial Statements................ F-8 - F-37
FINANCIAL STATEMENT SCHEDULES
For the years ended December 31, 1999, 1998 and 1997:
Schedule I--Condensed Financial Information of
Registrant.............................................. S-1 - S-4
</TABLE>
26
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The financial statements presented in this report have been prepared by
management in accordance with generally accepted accounting principles using,
where appropriate, management's best estimates and judgment. Management
maintains a system of internal controls to provide reasonable assurance that the
Company's assets are safeguarded and transactions are executed as authorized and
properly recorded. The system includes established policies and procedures, a
program of internal audits, management reviews and careful selection and
training of qualified personnel.
The audit committee is comprised solely of outside directors. It meets
periodically with management, the internal auditors, and the independent
auditors, Deloitte & Touche LLP, to discuss and address internal accounting
control, auditing and financial reporting matters. Both independent and internal
auditors have unrestricted access to the audit committee.
James M. Kilts
President and
Chief Executive Officer
James E. Healey
Senior Vice President and
Chief Financial Officer
REPORT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
Nabisco Group Holdings Corp.:
We have audited the accompanying consolidated balance sheets of Nabisco
Group Holdings Corp. ("NGH") as of December 31, 1999 and 1998, and the related
consolidated statements of income, comprehensive income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of NGH at
December 31, 1999 and 1998, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31, 1999
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 2, 2000
F-1
<PAGE>
NABISCO GROUP HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
NET SALES................................................... $ 8,268 $ 8,400 $ 8,734
------- ------- -------
Costs and expenses:
Cost of products sold..................................... 4,502 4,683 4,950
Selling, advertising, administrative and general
expenses................................................ 2,751 2,670 2,469
Amortization of trademarks and goodwill................... 213 221 226
Restructuring charges (credits) (Note 4).................. (67) 530 --
------- ------- -------
OPERATING INCOME...................................... 869 296 1,089
Interest and debt expense................................... (324) (401) (421)
Other income (expense), net................................. (19) (29) (32)
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES..................... 526 (134) 636
Provision (benefit) for income taxes........................ 201 (2) 257
------- ------- -------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
MINORITY
INTEREST............................................ 325 (132) 379
Less minority interest in income (loss) of Nabisco
Holdings.................................................. 70 (14) 84
------- ------- -------
INCOME (LOSS) FROM CONTINUING OPERATIONS.............. 255 (118) 295
Discontinued operations:
Income (loss) from operations of discontinued businesses,
net of income taxes..................................... 24 (459) 107
Gain on sale of discontinued business, net of income
taxes................................................... 2,970 -- --
------- ------- -------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS.............. 3,249 (577) 402
Extraordinary items--loss on early extinguishment of debt,
net of income taxes and minority interest................. (281) -- (21)
------- ------- -------
NET INCOME (LOSS)..................................... $ 2,968 $ (577) $ 381
======= ======= =======
NET INCOME (LOSS) PER COMMON SHARE--BASIC:
Income (loss) from continuing operations.................. $ .76 $ (.49) $ .78
Income (loss) from discontinued operations................ 9.21 (1.42) .33
Loss from extraordinary items............................. (.86) -- (.06)
------- ------- -------
Net income (loss)......................................... $ 9.11 $ (1.91) $ 1.05
======= ======= =======
NET INCOME (LOSS) PER COMMON SHARE--DILUTED:
Income (loss) from continuing operations.................. $ .75 $ (.49) $ .76
Income (loss) from discontinued operations................ 9.21 (1.42) .33
Loss from extraordinary items............................. (.86) -- (.06)
------- ------- -------
Net income (loss)......................................... $ 9.10 $ (1.91) $ 1.03
======= ======= =======
DIVIDENDS DECLARED PER SHARE:
Common stock.............................................. $ 1.27 $ 2.05 $ 2.05
Series C preferred stock.................................. $ -- $ -- $ 2.25
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
NABISCO GROUP HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
NET INCOME (LOSS)........................................... $2,968 $ (577) $ 381
------ ------ ------
Other comprehensive income (loss):
Cumulative translation adjustment......................... (84) (56) (158)
Recognition of Reynolds International cumulative
translation adjustment upon sale........................ 218
Recognition of RJR's minimum pension liability adjustment
upon distribution of RJR Stock.......................... 6
Minimum pension liability adjustment...................... 1 4 (15)
------ ------ ------
Other comprehensive income (loss) before income taxes....... 141 (52) (173)
Provision (benefit) for income taxes...................... 1 (5) 7
------ ------ ------
OTHER COMPREHENSIVE INCOME (LOSS) NET OF INCOME TAX......... 140 (47) (180)
------ ------ ------
COMPREHENSIVE INCOME (LOSS)................................. $3,108 $ (624) $ 201
====== ====== ======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE>
NABISCO GROUP HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income (loss)......................................... $ 2,968 $ (577) $ 381
Less (income) loss from discontinued operations........... (2,994) 459 (107)
------- ------- -------
Income (loss) from continuing operations.................. (26) (118) 274
Adjustments to reconcile to net cash flows from continuing
operating activities:
Depreciation of property, plant and equipment........... 265 273 277
Amortization of intangibles............................. 213 221 226
Deferred income tax provision (benefit)................. 84 (188) 12
Restructuring and restructuring-related expenses, net of
cash payments......................................... (157) 459 (179)
Accounts receivable..................................... (147) (5) 6
Inventories............................................. (102) 44 (12)
Accounts payable and accrued liabilities, including
income taxes.......................................... (86) (61) (131)
Other, net.............................................. 57 (62) 4
Extraordinary loss...................................... 432 -- 43
------- ------- -------
Total adjustments..................................... 559 681 246
------- ------- -------
Net cash flows from continuing operations............... 533 563 520
Net cash flows from discontinued operations............. 2,284 546 592
------- ------- -------
Net cash flows from operating activities................ 2,817 1,109 1,112
------- ------- -------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures...................................... (241) (340) (392)
Acquisitions of businesses................................ (578) (9) (46)
Purchase of investments, net of maturities................ (107) -- --
Other, net................................................ 36 12 15
Proceeds from sale of food businesses..................... -- 550 50
Repurchases of Nabisco Holdings' common stock............. (12) (38) (22)
Net proceeds from exercise of Nabisco Holdings' common
stock options........................................... 8 25 --
------- ------- -------
Net cash flows from (used in) investing activities...... (894) 200 (395)
------- ------- -------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net proceeds from issuance of long-term debt.............. 777 1,279 1,229
Repayments of long-term debt.............................. (491) (1,893) (1,145)
Increase (decrease) in notes payable...................... (23) (103) (45)
Proceeds (redemption) of trust originated preferred
securities.............................................. (1,265) 374 --
Redemption of Series B preferred stock.................... -- (301) --
Redemption of ESOP preferred stock........................ (202) -- --
Dividends paid on common and preferred stock.............. (633) (742) (755)
Other, net................................................ 64 68 40
------- ------- -------
Net cash flows used in financing activities............. (1,773) (1,318) (676)
------- ------- -------
Effect of exchange rate changes on cash and cash
equivalents............................................... (8) (6) (8)
------- ------- -------
Net change in cash and cash equivalents................. 142 (15) 33
Cash and cash equivalents at beginning of period............ 112 127 94
------- ------- -------
Cash and cash equivalents at end of period.................. $ 254 $ 112 $ 127
======= ======= =======
Income taxes paid, net of refunds........................... $ 113 $ 188 $ 209
Interest paid............................................... $ 324 $ 381 $ 453
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
NABISCO GROUP HOLDINGS CORP
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 254 $ 112
Short-term investment..................................... 6 --
Accounts receivable, net.................................. 681 522
Deferred income taxes..................................... 114 101
Inventories............................................... 898 753
Prepaid expenses and other current assets................. 79 70
Net assets of discontinued businesses (Note 2)............ -- 6,696
------- -------
TOTAL CURRENT ASSETS.................................. 2,032 8,254
------- -------
Property, plant and equipment--at cost.................... 5,074 4,806
Less accumulated depreciation............................. (1,985) (1,859)
------- -------
Net property, plant and equipment....................... 3,089 2,947
------- -------
Trademarks, net of accumulated amortization of
$1,214 and $1,102, respectively......................... 3,443 3,368
Goodwill, net of accumulated amortization of
$1,007 and $910, respectively........................... 3,159 3,182
Other assets and deferred charges......................... 238 94
------- -------
$11,961 $17,845
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
NABISCO GROUP HOLDINGS CORP
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable............................................. $ 39 $ 68
Accounts payable.......................................... 642 407
Accrued liabilities....................................... 1,056 1,231
Current maturities of long-term debt...................... 158 118
Income taxes accrued...................................... 107 121
------- -------
TOTAL CURRENT LIABILITIES............................... 2,002 1,945
------- -------
Long-term debt (less current maturities).................... 3,892 3,619
Minority interest in Nabisco Holdings....................... 763 752
Other noncurrent liabilities................................ 768 962
Deferred income taxes....................................... 1,277 1,226
Contingencies (Note 12)
NGHs' obligated mandatorily redeemable preferred securities
of subsidiary trusts holding solely junior subordinated
debentures*............................................... 98 1,327
Stockholders' equity:
ESOP preferred stock...................................... -- 205
Common stock (326,146,847 and 325,007,848 shares issued
and outstanding at December 31, 1999 and 1998,
respectively)........................................... 3 3
Paid-in capital........................................... 3,459 9,004
Retained earnings (deficit)............................... 125 (577)
Accumulated other comprehensive income (loss)............. (320) (460)
Treasury stock, at cost................................... (100) (100)
Other stockholders' equity................................ (6) (61)
------- -------
TOTAL STOCKHOLDERS' EQUITY............................ 3,161 8,014
------- -------
$11,961 $17,845
======= =======
</TABLE>
- ------------------------
* The sole asset of the subsidiary trust is the junior subordinated debentures
of Nabisco Group Holdings Corp. The remaining outstanding junior
subordinated debentures have an aggregate principal amount of approximately
$101 million, an annual interest rate of 9 1/2%, and mature in September
2047. The preferred securities will be manditorily redeemed upon redemption
of the junior subordinated debentures. See Note 11 regarding the partial
tender and redemption of these securities.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
NABISCO GROUP HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
CAPITAL PAID-IN RETAINED COMPREHENSIVE TREASURY
STOCK* CAPITAL EARNINGS INCOME STOCK OTHER TOTAL
-------- -------- -------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997.................... $ 540 $ 10,050 $ -- $(233) $(100) $(109) $ 10,148
Net income.................................. 381 381
Cumulative translation adjustment, net of
tax expense of $12........................ (170) (170)
Minimum pension liability, net of tax
benefit of $5............................. (10) (10)
Retirement of 843,970 shares of ESOP
preferred stock........................... (14) (14)
Conversion of 26,675,000 shares of Series C
preferred stock into 53,350,000 shares of
common stock.............................. (3) 3 --
Issuance of 405,532 shares of common
stock..................................... 10 10
Cancellation of 171,750 shares of common
stock..................................... (5) (5)
Dividends................................... (361) (381) (742)
ESOP note payments received................. 36 36
Other....................................... (7) 4 (3)
----- -------- ------- ----- ----- ----- --------
BALANCE AT DECEMBER 31, 1997.................. 523 9,690 -- (413) (100) (69) 9,631
Net loss.................................... (577) (577)
Cumulative translation adjustment, net of
tax benefit of $6......................... (50) (50)
Minimum pension liability, net of tax
expense of $1............................. 3 3
Retirement of 895,983 shares of ESOP
preferred stock........................... (14) (14)
Redemption of 12,043,940 shares of Series B
preferred stock........................... (301) (301)
Issuance of 1,264,058 shares of common
stock..................................... 41 41
Cancellation of 37,000 shares of common
stock..................................... (1) (1)
Dividends................................... (704) (704)
ESOP note payments received................. 33 33
Other....................................... (22) (25) (47)
----- -------- ------- ----- ----- ----- --------
BALANCE AT DECEMBER 31, 1998.................. 208 9,004 (577) (460) (100) (61) 8,014
Net income.................................. 2,968 2,968
Cumulative translation adjustment........... (84) (84)
Minimum pension liability, net of tax
expense of $1............................. --
Exercise of stock options................... 28 28
Retirement of 12,818,967 shares of ESOP
preferred stock........................... (205) (2) (207)
Cash dividends declared..................... (421) (421)
ESOP note payments received................. 34 34
Recognition of Reynolds International
cumulative translation adjustments upon
sale...................................... 218 218
Distribution of RJR stock................... (7,417) 6 7 (7,404)
Reclassify retained earnings debit
balance................................... (5,572) 5,572 --
Other....................................... 1 14 15
----- -------- ------- ----- ----- ----- --------
BALANCE AT DECEMBER 31, 1999.................. $ 3 $ 3,459 $ 125 $(320) $(100) $ (6) $ 3,161
===== ======== ======= ===== ===== ===== ========
</TABLE>
* Includes $3 million of common stock for each reporting period presented.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Summary of Significant Accounting Policies below and the other notes to
the consolidated financial statements on the following pages are integral parts
of the accompanying consolidated financial statements of Nabisco Group Holdings
Corp. ("NGH") and its majority owned subsidiaries, including 80.6% of Nabisco
Holdings Corp. ("Nabisco Holdings") and Nabisco, Inc. ("Nabisco"), its direct
wholly-owned subsidiary (the "Consolidated Financial Statements").
CONSOLIDATION AND USE OF ESTIMATES
The Consolidated Financial Statements include the accounts of NGH and its
subsidiaries. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the balance sheet date and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Certain prior year amounts have been reclassified to conform to the 1999
presentation.
CASH AND CASH EQUIVALENTS
Cash equivalents include all short-term, highly liquid investments that are
readily convertible to known amounts of cash and that have original maturities
of three months or less. Cash equivalents at December 31, 1999 and 1998, valued
at cost (which approximated market value), totaled $198 million and $71 million,
respectively.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
principally under the first-in, first-out method.
COMMODITY CONTRACTS
Due to wide fluctuations in the market prices for various agricultural
commodities, Nabisco frequently enters into futures contracts to hedge the price
risk associated with anticipated purchases. Nabisco realizes changes in the
market value of futures contracts that qualify as hedges as an addition to, or
reduction from, the raw material inventory cost. Realized gains and losses are
recorded in cost of products sold when the related finished products are sold.
The amount of hedging losses deferred as of December 31, 1999 and 1998 was
$7 million and $5 million, respectively. Any futures contracts that do not
qualify for hedge accounting treatment are marked-to-market each reporting
period with the resulting market change reflected in cost of products sold in
the current period.
DEPRECIATION
For financial reporting purposes, depreciation expense is generally provided
on a straight-line basis, using estimated useful lives of up to 20 years for
land improvements, 20 to 40 years for buildings and leasehold improvements and 3
to 30 years for machinery and equipment.
TRADEMARKS AND GOODWILL
Values assigned to trademarks and goodwill are amortized on a straight-line
basis principally over a 40-year period.
LONG-LIVED ASSETS
Long-lived assets are comprised of intangible assets and property, plant and
equipment. Long-lived assets, including certain identifiable intangibles and
goodwill related to those assets to be held and used,
F-8
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. An estimate of
undiscounted future cash flows produced by the asset, or the appropriate
grouping of assets, is compared to the carrying value to determine whether an
impairment exists. If an asset is determined to be impaired, the loss is
measured based on quoted market prices in active markets, if available. If
quoted market prices are not available, the estimate of fair value is based on
various valuation techniques, including a discounted value of estimated future
cash flows and fundamental analysis. Assets to be disposed of are reported at
the lower of their carrying value or estimated net realizable value.
REVENUE RECOGNITION
Revenue is recognized when title to finished product passes to the customer.
Revenue is recognized as the net amount to be received after deducting estimated
amounts for discounts and product returns.
OTHER INCOME (EXPENSE), NET
Other income (expense), net includes interest income, certain foreign
currency gains and losses, expenses related to the sales of accounts receivable,
and fees related to banking and borrowing programs.
ADVERTISING
Advertising costs are generally expensed as incurred. Advertising expense
was $250 million, $226 million and $223 million for the years ended December 31,
1999, 1998 and 1997, respectively.
RESEARCH AND DEVELOPMENT
Research and development expenses, which are expensed as incurred, were $96
million, $100 million and $95 million for the years ended December 31, 1999,
1998 and 1997, respectively.
INTEREST RATE FINANCIAL INSTRUMENTS
Interest rate swaps and caps are used to effectively hedge certain interest
rate exposures. In both types of hedges, the differential to be paid or received
is accrued and recognized in interest expense and may change as market interest
rates change. Any premium paid or received is amortized over the duration of the
hedged instrument. If an arrangement is terminated or effectively terminated
prior to maturity, then the realized or unrealized gain or loss is effectively
recognized over the remaining original life of the agreement if the hedged item
remains outstanding, or immediately, if the underlying hedged instrument does
not remain outstanding. If the arrangement is not terminated or effectively
terminated prior to maturity, but the underlying hedged instrument is no longer
outstanding, then the unrealized gain or loss on the related interest rate swap
or cap is recognized immediately.
FOREIGN CURRENCY FINANCIAL INSTRUMENTS
The forward foreign exchange contracts and other hedging arrangements
entered into by NGH and its subsidiaries generally mature at the time the hedged
foreign currency transactions are settled. Gains or losses on forward foreign
currency transactions are determined by changes in market rates and are
generally included at settlement in the basis of the underlying hedged
transaction. To the extent that the foreign currency transaction does not occur,
gains and losses are recognized immediately.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During the second quarter of 1998, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Instruments
F-9
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
and Hedging Activities, which was required to be adopted by January 1, 2000,
with early adoption permitted. In June 1999, the FASB issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of SFAS No. 133, which amended SFAS No. 133 to delay its
effective date one year. SFAS No. 133 requires that all derivative instruments
be recorded on the consolidated balance sheet at their fair value. Changes in
the fair value of derivatives will be recorded each period in earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. NGH has not
yet determined the impact, if any, that adoption or subsequent application of
SFAS No. 133 will have on its financial position or results of operations.
NET INCOME PER SHARE
Per share data has been computed and presented pursuant to the provisions of
Statement of Financial Accounting Standards No. 128, Earnings per Share, which
was adopted in the fourth quarter of 1997. Net income per common share--basic is
calculated by dividing net income less preferred stock dividends by the weighted
average number of common shares outstanding during the period. Net income per
common share--diluted is calculated by dividing net income less preferred stock
dividends by the weighted average number of common shares and common equivalent
shares for stock options outstanding during the period.
INCOME TAXES
During the second quarter of 1999, RJR Nabisco, Inc., which has been renamed
R.J. Reynolds Tobacco Holdings, Inc. ("RJR"), and RJR Nabisco Holdings Corp.,
which has been renamed Nabisco Group Holdings Corp. ("NGH") completed a series
of reorganization transactions as described in Note 2 to the Consolidated
Financial Statements. As part of those transactions, NGH, Nabisco Holdings and
RJR entered into a tax sharing agreement that sets forth, among other things,
each company's rights and obligations relating to tax payments and refunds for
periods before and after those transactions, certain tax indemnification
arrangements and other tax matters such as the filing of tax returns and the
handling of audits and other tax proceedings.
NGH will file a Federal consolidated return for 1999 that will include the
results of Nabisco Holdings and its subsidiaries for the entire year and RJR and
its subsidiaries for the period from January 1 up to and including June 14.
Any adjustments to federal and state income tax liabilities for years after
1989 and prior to June 15, 1999 are the responsibility of RJR or Nabisco, as
applicable. Any adjustments to federal and state income tax liabilities for 1989
or earlier are the obligation of RJR. RJR will pay to NGH any tax refunds
received by RJR and attributable to NGH for years after 1989.
F-10
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--THE REORGANIZATION
On March 9, 1999, RJR and Reynolds Tobacco entered into a definitive
agreement to sell the international tobacco business for approximately $8
billion, including the assumption of approximately $200 million of net debt, to
Japan Tobacco Inc. ("Japan Tobacco"). The sale was substantially completed on
May 12, 1999 and resulted in a net gain of approximately $2.97 billion, after
income taxes of approximately $1.9 billion, subject to post-closing adjustments.
Under the terms of the agreement, Japan Tobacco acquired substantially all of
the business, including intellectual property rights of Reynolds International,
including the international rights to the CAMEL, WINSTON and SALEM brand names.
Proceeds from the sale were used to reduce debt and for general corporate
purposes. The repurchase of approximately $4 billion of debt securities by RJR
resulted in an extraordinary loss of approximately $384 million ($250 million
after-tax) during the period.
Also on March 9, 1999, NGH announced that its board of directors had
approved a plan to separate the domestic tobacco business conducted by Reynolds
Tobacco, from the food business conducted by Nabisco's operating subsidiaries.
Under the plan, the separation was accomplished by the transfer on May 18, 1999
of RJR's 80.5% interest in Nabisco, together with approximately $1.6 billion in
proceeds from the international tobacco sale, to NGH through a merger
transaction, followed by a spin-off on June 14, 1999 to NGH stockholders of
shares in RJR. The merger transaction and subsequent spin-off are intended to be
tax-free. An additional $200 million of proceeds from the international tobacco
sale was transferred by RJR to NGH prior to the spin-off in satisfaction of
certain liabilities assumed by NGH.
Upon completion of the spin-off, NGH was legally renamed Nabisco Group
Holdings Corp. and continues to exist as a holding company, owning 80.6% of
Nabisco. The renamed Nabisco Group Holdings Corp. (symbol: NGH) and Nabisco
(symbol: NA) each will continue to trade as separate companies on The New York
Stock Exchange. Shares of RJR (symbol: RJR), as the owner of 100% of Reynolds
Tobacco, are also trading separately under the changed name of R.J. Reynolds
Tobacco Holdings, Inc.
NGH, RJR and Reynolds Tobacco have entered into several agreements governing
the relationships among the parties after the distribution of RJR's shares to
NGH stockholders, including the provision of intercompany services by Nabisco to
NGH, certain tax matters, indemnification rights and obligations and other
matters among the parties.
On April 13, 1999, NGH offered to purchase any and all of its 9 1/2% trust
preferred securities and sought consents from the holders of those securities to
waive certain covenants that might have prevented some of the transactions
described above. The consent offer expired on May 17, 1999 and resulted in the
tender of approximately $276 million of the total $374 million trust preferred
securities. The total cost to tender the preferred securities, including accrued
interest, premium fees and consent fees was approximately $314 million. NGH
invested approximately $114 million of the proceeds received from RJR from the
international tobacco sale in highly rated U.S. government securities and
commercial paper which is intended to service future principal and interest
payments through 2003 on the trust securities not tendered.
On May 18, 1999, NGH called for redemption all of its $949 million 10% trust
preferred securities outstanding. NGH completed the redemption of the full
amount of the securities on June 18, 1999.
The purchase and redemption of the 9 1/2% and 10% trust preferred securities
resulted in an extraordinary loss of approximately $44 million ($29 million
after tax).
On or about May 18, 1999, NGH called for redemption of all of its
outstanding ESOP convertible preferred stock at $16.25 per share, plus accrued
dividends. A total of 12,412,767 shares were redeemed at
F-11
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--THE REORGANIZATION (CONTINUED)
a cost of approximately $202 million. NGH completed this transaction on
June 10, 1999. The 406,200 remaining shares were repurchased at $16.00 per
share.
In connection with the reorganization transactions, the assets and
liabilities of the Retirement Plan for Employees of RJR Nabisco, Inc. (the "old
plan") were split into two plans. One plan covers employees and former employees
of Nabisco Holdings, Nabisco and NGH ("the Nabisco Plan") and the other plan
covers employees and former employees of RJR. For additional information, see
Note 16 to the Consolidated Financial Statements.
Summarized operating results of the discontinued businesses are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Net sales................................................... $4,210 $8,637
Provision benefit for income taxes.......................... 123 (21)
Net income (loss)........................................... 24 (459)
</TABLE>
Assets and liabilities of the discontinued businesses are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Current assets.............................................. $ 2,987
Property, plant and equipment, net.......................... 2,351
Trademarks and goodwill, net................................ 12,165
Other assets and deferred charges........................... 341
Current liabilities......................................... (2,859)
Long-term debt (less current maturities).................... (5,036)
Deferred income taxes....................................... (1,936)
Other noncurrent liabilities................................ (1,317)
-------
Net assets of discontinued businesses..................... $ 6,696
=======
</TABLE>
----------------------------
F-12
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--NET INCOME PER SHARE
The components of the calculation of earnings per share for income (loss)
from continuing operations are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1999 1998 1997
------------------- ------------------- -------------------
BASIC DILUTED BASIC DILUTED BASIC DILUTED
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing operations applicable to
common stock:
Income (loss) from continuing operations.................. $ 255 $ 255 $ (118) $ (118) $ 295 $ 295
Preferred stock dividends................................. (8) (8) (40) (40) (44) (47)
-------- -------- -------- -------- -------- --------
$ 247 $ 247 $ (158) $ (158) $ 251 $ 248
======== ======== ======== ======== ======== ========
Weighted average number of common and common equivalent
shares outstanding (in thousands):
Common shares............................................. 324,930 324,930 323,853 323,853 323,787 323,787
Assumed exercise of NGH's stock options................... -- 214 -- -- -- 1,531
-------- -------- -------- -------- -------- --------
324,930 325,144 323,853 323,853 323,787 325,318
======== ======== ======== ======== ======== ========
</TABLE>
Shares of ESOP convertible preferred stock of 13,214,133 were not included
in computing diluted earnings per share for 1998, because the effect would have
been antidilutive. Common shares also exclude 385,000 and 954,600 shares of
restricted stock as the vesting provisions had not been met at December 31, 1999
and 1998, respectively.
NOTE 4--OPERATIONS
ACQUISITIONS
In recent years, subsidiaries of Nabisco Holdings have completed a number of
acquisitions to expand the domestic and international food businesses, all of
which have been accounted for using the purchase method of accounting for
business combinations. In September 1999, a subsidiary of Nabisco acquired the
stock of Canale S.A., Argentina's fourth largest biscuit company for
approximately $134 million resulting in goodwill of $45 million. In November
1999, Nabisco also acquired certain assets and liabilities of Favorite Brands
International, Inc., the fourth largest non-chocolate candy company in the
United States for approximately $480 million. As of December 31, 1999, a
preliminary purchase price allocation was completed, resulting in goodwill of
approximately $68 million, subject to finalization of integration plans which
could result in an adjustment to goodwill in 2000. In 1998, a subsidiary of
Nabisco acquired the assets of the Jamaican biscuit and snacking company,
Butterkist, Ltd. for $9 million. The fair value of the assets acquired
approximated the purchase price. In December, 1997, Nabisco acquired the stock
of Cornnuts, Inc., a manufacturer of crispy corn kernel snacks, for
approximately $51 million. As of December 31, 1997, the acquisition was carried
in other assets in the consolidated balance sheet pending completion of the
purchase price allocation. During 1998 the purchase price was allocated
resulting in goodwill of $30 million, including $4 million for a plant closure.
The Consolidated Statements of Income and Comprehensive Income do not
include any revenues or expenses related to the acquisitions described above
prior to their respective closing dates. The acquisitions were financed through
commercial paper borrowings. The following are NGH's unaudited pro forma
F-13
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--OPERATIONS (CONTINUED)
results of operations for 1999 and 1998, assuming that the 1999 acquisition of
certain assets and liabilities of Favorite Brands International, Inc. had
occurred on January 1, 1998.
<TABLE>
<CAPTION>
(UNAUDITED)
YEARS ENDED DECEMBER 31,
-------------------------
IN MILLIONS, EXCEPT PER SHARE AMOUNTS 1999 1998
- ------------------------------------- ----------- -----------
<S> <C> <C>
Net sales................................................... $8,890 $9,146
Income (loss) from continuing operations before
extraordinary items....................................... $ 220 $ (149)
Income (loss) per common share from continuing operations:
Basic..................................................... $ .65 $ (.58)
Diluted................................................... $ .65 $ (.58)
</TABLE>
These pro forma results of operations have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the acquisition occurred on the date
indicated, or which may result in the future.
FOOD DIVESTITURES AND OTHER CHARGES
The 1998 cost of products sold includes a $35 million net gain ($15 million
after tax, net of minority interest) related to businesses sold and a
$21 million charge ($14 million after tax, net of minority interest) to exit
non-strategic businesses. Both items were recorded in the third quarter.
Businesses sold in 1998 include the College Inn brand of canned broths, Plush
Pippin frozen pies, the U.S. and Canadian tablespreads and U.S. egg substitute
businesses (formerly included in the U.S. Foods Group operating segment) and the
Del Monte brand canned vegetable business in Venezuela (formerly included in the
International Food Group operating segment) for net proceeds of approximately
$550 million.
In June 1997, Nabisco sold certain domestic regional brands for $50 million
that resulted in a $32 million gain ($15 million after tax, net of minority
interest). In addition, non-recurring expenses of $31 million ($15 million after
tax, net of minority interest) were recognized. These included a $14 million
additional provision to write-down property, plant and equipment ($10 million),
intangibles ($2 million) and inventory ($2 million) of the Plush Pippin frozen
pie business sold in 1998 at its approximate carrying value of $5 million;
$10 million of severance and related benefits for approximately 80 sales persons
in the U.S. Foods Group sales organization; and $7 million of exit costs
resulting from the relocation of Nabisco International's headquarters from New
York City to New Jersey consisting of $6 million for lease abandonment costs and
$1 million for employee severance benefits. The net $1 million pre-tax gain from
these items is included in selling, advertising, administrative and general
expenses in the Consolidated Statements of Income. 1997 net sales from the Plush
Pippin frozen pie business were $40 million and operating income was not
material.
Net sales for 1998 and 1997 from all food divestitures in both years by
Nabisco were $298 million and $632 million, respectively. Operating income for
1998 and 1997 from the divested businesses was $33 million and $87 million,
respectively.
F-14
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--OPERATIONS (CONTINUED)
1998 RESTRUCTURING CHARGES
In the second and fourth quarters of 1998, Nabisco recorded restructuring
charges of $406 million ($216 million after tax, net of minority interest) and
$124 million ($75 million after tax, net of minority interest), respectively.
These restructuring programs were undertaken to streamline operations and
improve profitability and will result in a workforce reduction of approximately
6,900 employees of which 6,100 positions were eliminated as of December 31,
1999. The headcount reduction represents a slight increase from the original
projection of 6,500. The increase resulted from higher than anticipated
eliminations as projects were completed and is primarily due to projects in
International manufacturing locations and to a lesser extent the Biscuit sales
force reorganization. The increase in the number of positions eliminated did not
result in incremental spending as higher costs for these projects were offset by
lower costs and cash outlays overall, as described below.
The June 1998 program was substantially completed in 1999 and the December
1998 program is expected to be substantially completed by mid-year 2000. The
restructuring programs when completed will require net cash expenditures of
approximately $140 million. In addition, the programs required additional
restructuring-related expenses of $132 million ($64 million after tax, net of
minority interest), of which $76 million ($37 million after tax, net of minority
interest) was incurred in the twelve months ended December 31, 1999, and are now
completed. These additional expenses were principally for implementation and
integration of the programs and included costs for relocation of employees and
equipment and training.
In 1999, Nabisco recorded a net restructuring credit of $67 million
($39 million after tax, net of minority interest), related to the Biscuit, U.S.
Foods Group and International businesses of $30 million, $18 million and
$19 million, respectively. The credit primarily reflects higher than anticipated
proceeds from the sale of facilities closed as part of the 1998 restructuring
programs, lower costs and cash outlays than originally estimated for certain of
these programs and minor project cancellations offset to a minor extent by
increased costs in certain programs.
The major components of the credit were lower severance and benefit costs
for: the sales force reorganization of $21 million; staff reductions at
headquarters and operating units of $24 million; and distribution
reorganizations of $5 million. The reduced costs reflected unanticipated staff
reductions through voluntary separations rather than planned terminations and
other net changes in cost estimates. In addition, asset impairment costs were
lower by $14 million reflecting higher proceeds and anticipated proceeds from
the sales of facilities.
F-15
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--OPERATIONS (CONTINUED)
The key elements of the restructuring programs include:
<TABLE>
<CAPTION>
SEVERANCE CONTRACT ASSET OTHER EXIT
IN MILLIONS AND BENEFITS TERMINATIONS IMPAIRMENTS COSTS TOTAL
- ----------- ------------ ------------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Sales force reorganizations.............. $ 37 $ 3 $ -- $-- $ 40
Distribution reorganizations............. 16 8 9 33
Staff reductions......................... 83 3 86
Manufacturing costs reduction
initiatives............................ 22 8 30
Plant closures........................... 46 3 217 15 281
Product line rationalizations............ 4 4 20 32 60
---- --- ---- --- -----
Total 1998 restructuring reserves.... 208 18 257 47 530
1999 net restructuring credit............ (50) 1 (14) (4) (67)
---- --- ---- --- -----
158 19 243 43 463
---- --- ---- --- -----
Charges and Payments:
Year ended December 31, 1998............. (34) (3) (12) (12) (61)
Year ended December 31, 1999............. (98) (11) (221) (23) (353)
---- --- ---- --- -----
Total charges and payments, net of
cash proceeds...................... (132) (14) (233) (35) (414)
---- --- ---- --- -----
Reserve and valuation account balances as
of December 31, 1999................... $ 26 $ 5 $ 10 $ 8 $ 49
==== === ==== === =====
</TABLE>
- Sales force reorganizations consist of $35 million for the Nabisco Biscuit
Company to reorganize its direct store delivery sales force to improve its
effectiveness and $5 million for the International Food Group, principally
Latin America.
- Distribution reorganizations consist of plans to exit a number domestic
and international distribution and warehouse facilities, principally
$19 million for the Nabisco Biscuit Company and $14 million for the
International Food Group.
- Staff reductions consist of headquarters and operating unit realignments,
functional consolidations and eliminations of positions throughout the
Company. Amounts are: $37 million for the U.S. Foods Group; $26 million
for Nabisco International headquarters, Canada and other foreign units;
$15 million for corporate headquarters; and $8 million for the Nabisco
Biscuit Company.
- Manufacturing cost reduction initiatives consist of a number of domestic
and international programs to increase productivity, principally
$19 million for the Nabisco Biscuit Company and $7 million for Canada.
- Plant closure accruals are for the closure and future sale of 18
production facilities in order to improve manufacturing efficiencies and
reduce costs. Amounts are: Nabisco Biscuit Company $217 million; U.S.
Foods Group $12 million; and International Food Group $52 million. Other
exit costs consist of carrying costs to be incurred prior to sale.
F-16
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--OPERATIONS (CONTINUED)
- Product line rationalizations consist of exit costs to discontinue a
number of domestic and international product lines. Other exit costs are
principally write-offs for disposals of various discontinued products.
Amounts are: U.S. Foods Group $34 million; Nabisco Biscuit Company
$14 million; and International Food Group $12 million.
The key elements of the restructuring programs, after the restructuring
credit of $67 million include:
<TABLE>
<CAPTION>
SEVERANCE CONTRACT ASSET OTHER EXIT
IN MILLIONS AND BENEFITS TERMINATIONS IMPAIRMENTS COSTS TOTAL
- ----------- ------------ ------------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Sales force reorganizations............. $ 16 $ 3 $ -- $ -- $ 19
Distribution reorganizations............ 11 4 7 22
Staff reductions........................ 59 1 4 64
Manufacturing costs reduction
initiatives........................... 19 8 27
Plant closures.......................... 51 6 203 15 275
Product line rationalizations........... 2 5 21 28 56
------ ----- ------ ----- ------
Total restructuring charges......... $ 158 $ 19 $ 243 $ 43 $ 463
====== ===== ====== ===== ======
</TABLE>
Total charges and payments include cash expenditures, non-cash charges
primarily for asset impairments and committed severance and benefits to be paid.
The total cash payments, net of cash proceeds applied against the restructuring
reserves totaled $103 million, which is comprised of cumulative cash
expenditures of $124 million and cumulative cash proceeds of $21 million. For
the year ended December 31, 1999, cash payments, net of cash proceeds totaled
$65 million, which is comprised of $86 million of cash expenditures and
$21 million of cash proceeds which were applied against the restructuring
reserves.
Asset impairments in connection with the restructuring program were
identified and measured in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. In
instances where the held and used method was applied, which includes all plant
closures, the fair value of impaired assets was determined using the discounted
cash flows generated from assets while still in use and the estimated proceeds
from their ultimate sale.
As of December 31, 1999, production had ceased in 16 of the 18 facilities
identified under the programs. Nabisco decided not to close the remaining two
small facilities in the International Food Group due to volatile economic
conditions and a highly inflationary economy which made the economic benefit
unachievable.
NOTE 5--ACCOUNTS RECEIVABLE
Nabisco maintains an arrangement to sell for cash substantially all of its
domestic trade accounts receivable to a financial institution. In addition,
similar arrangements have been established for the sale of trade accounts
receivable by certain foreign subsidiaries.
F-17
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--INVENTORIES
The major classes of inventory are shown in the table below:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
IN MILLIONS 1999 1998
- ----------- ------------ ------------
<S> <C> <C>
Finished products........................................... $ 551 $ 457
Raw materials............................................... 199 164
Other....................................................... 148 132
------ ------
Total................................................... $ 898 $ 753
====== ======
</TABLE>
NOTE 7--PROPERTY, PLANT AND EQUIPMENT
Components of property, plant and equipment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
IN MILLIONS 1999 1998
- ----------- ------------ ------------
<S> <C> <C>
Land and land improvements.................................. $ 196 $ 192
Buildings and leasehold improvements........................ 967 937
Machinery and equipment..................................... 3,612 3,385
Construction-in-process..................................... 299 292
------- -------
5,074 4,806
Less accumulated depreciation............................... (1,985) (1,859)
------- -------
Net property, plant and equipment....................... $ 3,089 $ 2,947
======= =======
</TABLE>
NOTE 8--NOTES PAYABLE
Notes payable consist of notes payable to banks by foreign subsidiaries and
$5 million of commercial paper borrowings by certain foreign subsidiaries as of
December 31, 1999 and $9 million of commercial paper borrowings by certain
foreign subsidiaries as of December 31, 1998. The weighted average interest rate
on all notes payable and commercial paper borrowings was 8.2% and 8.0% at
December 31, 1999 and 1998, respectively. The weighted average interest rates
include borrowing rates in countries with high inflation, primarily in Latin
America and South Africa.
NOTE 9--ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
IN MILLIONS 1999 1998
- ----------- ------------ ------------
<S> <C> <C>
Payroll and employee benefits............................... $ 385 $ 270
Marketing and advertising................................... 272 231
Restructuring............................................... 35 202
Insurance................................................... 53 50
Dividends payable........................................... 49 220
Taxes, other than income taxes.............................. 53 47
Interest.................................................... 69 70
All other................................................... 140 141
------ ------
Total............................................... $1,056 $1,231
====== ======
</TABLE>
F-18
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--INCOME TAXES
The provision (benefit) for income taxes before extraordinary item consisted
of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
IN MILLIONS 1999 1998 1997
- ----------- -------- -------- --------
<S> <C> <C> <C>
Current:
Federal................................................... $ 52 $116 $174
Foreign and other......................................... 65 70 71
---- ---- ----
117 186 245
---- ---- ----
Deferred:
Federal................................................... 76 (172) 3
Foreign and other......................................... 8 (16) 9
---- ---- ----
84 (188) 12
---- ---- ----
Provision for income taxes.................................. $201 $ (2) $257
==== ==== ====
</TABLE>
The components of the deferred income tax (assets) and liabilities at
December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
IN MILLIONS 1999 1998
- ----------- -------- --------
<S> <C> <C>
Current deferred income tax assets:
Accrued liabilities and other............................. $ (119) $ (106)
Valuation allowance....................................... 5 5
------ ------
Net current deferred income tax assets................ (114) (101)
------ ------
Non-current deferred income tax assets:
Pension liabilities....................................... (20) (25)
Other postretirement liabilities.......................... (151) (149)
Other non-current liabilities............................. (89) (141)
------ ------
Total non-current deferred income tax assets before
valuation allowance................................. (260) (315)
Valuation allowance, primarily foreign net operating
losses.................................................. 85 83
------ ------
Net non-current deferred income tax assets............ (175) (232)
------ ------
Non-current deferred income tax liabilities:
Property, plant and equipment............................. 276 322
Trademarks................................................ 1,005 1,027
Other..................................................... 171 109
------ ------
Total non-current deferred income tax liabilities..... 1,452 1,458
------ ------
Net non-current deferred income tax liabilities....... $1,277 $1,226
====== ======
</TABLE>
F-19
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--INCOME TAXES (CONTINUED)
Pre-tax income (loss) before extraordinary item for domestic and foreign
operations is shown in the following table:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
IN MILLIONS 1999 1998 1997
- ----------- -------- -------- --------
<S> <C> <C> <C>
Domestic (includes U.S. exports)............................ $ 315 $(182) $465
Foreign..................................................... 211 48 171
----- ----- ----
Pre-tax income (loss)....................................... $ 526 $(134) $636
===== ===== ====
</TABLE>
The differences between the provision for income taxes and income taxes
computed at statutory U.S. federal income tax rates are explained as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Reconciliation from statutory rate to effective rate:
Income taxes computed at statutory U.S. federal income
tax rates................................................. $184 $(48) $223
State taxes, net of federal benefit......................... 15 17 21
Goodwill amortization....................................... 30 30 30
Taxes on foreign operations at rates other than statutory
U.S. federal rate......................................... (24) 11 (10)
Other items, net............................................ (4) (12) (7)
---- ---- ----
Provision for income taxes.................................. $201 $ (2) $257
==== ==== ====
Effective tax rate.......................................... 38.2% 1.5% 40.4%
==== ==== ====
</TABLE>
1999 VS. 1998. The reported effective tax rate for 1999 was 38.2% compared
to 1.5% for 1998. Excluding the tax related impact of restructuring credits
recorded in 1999 and restructuring charges and net gain from divestitures in
1998, the effective rates are 39.7% and 40.5% for 1999 and 1998, respectively.
At December 31, 1999, there was $802 million of accumulated and
undistributed income of foreign subsidiaries. These earnings are intended by
management to be reinvested abroad indefinitely. Accordingly, no applicable U.S.
federal deferred income taxes have been provided nor is a determination of the
amount of unrecognized U.S. federal deferred income taxes practicable.
F-20
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
IN MILLIONS 1999 1998
- ----------- ------------ ------------
<S> <C> <C>
Commercial paper, average interest rates of 6.4%
and 5.7%.................................................. $ 902 $ 174
8.3% notes due April 15, 1999............................... -- 106
8.0% notes due January 15, 2000............................. 148 148
6.24% pound sterling notes due August 12, 2001.............. -- 163
6.8% notes due September 1, 2001............................ 80 80
6.7% notes due June 15, 2002................................ 400 400
6.85% notes due June 15, 2005............................... 400 400
7.05% notes due July 15, 2007............................... 400 400
5.38% notes due August 26, 2009............................. -- 200
6.0% notes due February 15, 2011............................ 400 400
7.55% debentures due June 15, 2015.......................... 399 399
6.13% notes due February 1, 2033............................ 299 299
6.38% notes due February 1, 2035............................ 299 299
Other long-term debt........................................ 323 269
Less current maturities..................................... (158) (118)
------ ------
Total..................................................... $3,892 $3,619
====== ======
</TABLE>
The payment of long-term debt through December 31, 2004 is due as follows
(in millions):
2001-$139; 2002-$1,399; 2003-$52 and 2004-$97.
Nabisco Holdings and Nabisco maintain a $1.5 billion revolving credit
facility and a 364-day $1.10 billion credit facility primarily to support
commercial paper issuances. At the end of the 364-day period, any borrowings
outstanding under the 364-day credit facility are convertible into a three-year
term loan at Nabisco's option. The commitments under the revolving credit
facility decline to approximately $1.46 billion on October 31, 2001 for the
final year. Borrowings under the revolving credit facility bear interest at
rates which vary with the prime rate or LIBOR. Borrowings under the 364-day
credit facility bear interest at rates which vary with LIBOR. At December 31,
1999, the full $1.5 billion was available under the revolving credit facility
and $198 million was available under the 364-day credit facility. Similar
facilities were in place during 1998 and 1997.
Commercial paper borrowings have been included under long-term debt based on
Nabisco's intention, and ability under its credit facilities, to refinance these
borrowings for more than one year.
The Nabisco Holdings' credit facilities restrict dividends and distributions
after January 1, 1999 by Nabisco Holdings to holders of its equity securities by
requiring a minimum net worth amount. As of December 31, 1999, actual net worth,
as defined, exceeded required net worth by approximately $915 million.
The Nabisco Holdings' credit facilities also limit the ability of Nabisco
Holdings and its subsidiaries to incur indebtedness, engage in transactions with
stockholders and affiliates, create liens, acquire, sell or dispose of certain
assets and securities and engage in certain mergers or consolidations. Nabisco
and Nabisco Holdings believe that they are currently in compliance with all
covenants and restrictions imposed by the terms of their indebtedness.
F-21
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--LONG-TERM DEBT (CONTINUED)
In August 1997, Nabisco issued $200 million of floating rate (5.38% at
December 31, 1998) notes due August 2009. During the third quarter of 1999
Nabisco exercised a call option to redeem these notes. An extraordinary loss of
$5 million ($2 million after tax, net of minority interest) was recognized by
NGH. This redemption was refinanced with commercial paper.
In December 1997, Nabisco completed a tender offer and redeemed $432 million
of its $538 million 8.3% notes due 1999 and $541 million of its $688 million
outstanding 8% notes due 2000. An extraordinary loss of $43 million ($21 million
after tax, net of minority interest) was recorded for this transaction. The
redemption of these notes was financed with additional short-term borrowings,
which in turn were refinanced by the issuance of long-term debt in January 1998.
In January 1998, Nabisco issued $400 million of 6% notes due February 15,
2011 which are putable and callable on February 15, 2001; $300 million of 6 1/8%
notes due February 1, 2033 which are putable and callable on February 1, 2003;
and $300 million of 6 3/8% notes due February 1, 2035 which are putable and
callable on February 1, 2005. Unless the notes are put, the interest rates on
the 6% notes, the 6 1/8% notes and the 6 3/8% notes are reset on the applicable
put/call date at 5.75%, 6.07% and 6.07%, respectively, plus, in each case,
Nabisco's future credit spread on treasury notes of comparable maturities.
Nabisco no longer retains the right to call these notes as these options were
sold at issuance for $41 million. The net proceeds from these notes and the sale
of call options were used to repay commercial paper borrowings.
In August 1998, a newly formed wholly-owned subsidiary trust of NGH issued
$374 million principal amount of preferred securities. The proceeds from the
sale of the preferred securities and the original capital contribution were
invested by the trust in approximately $385 million principal amount of 9 1/2%
junior subordinated debentures of NGH. The junior subordinated debentures are
redeemable by NGH at $25 per debenture on or after September 30, 2003 and are
due in September 2047. Cash distributions on the preferred securities are
cumulative at an annual rate of 9 1/2% of the liquidation amount of $25 per
security and are payable quarterly in arrears. In October 1998, NGH used $301
million of the proceeds from the issuance of the junior subordinated debentures
to redeem its outstanding Series B preferred stock.
Nabisco filed a shelf registration statement with the Securities and
Exchange Commission for $1.0 billion of debt which was declared effective on
December 10, 1999.
The estimated fair value of long-term debt, including current maturities at
December 31, 1999 and 1998 was approximately $4.0 billion for both years.
Considerable judgment was required in interpreting market data to develop the
estimates of fair value. In addition, the use of different market assumptions
and/or estimation methodologies may have had a material effect on the estimated
fair value amounts. Accordingly, the estimated fair value of long-term debt as
of December 31, 1999 and 1998 is not necessarily indicative of the amounts that
Nabisco could realize in a current market exchange.
F-22
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--CONTINGENCIES
TOBACCO LITIGATION
As of March 20, 2000, NGH was a defendant in 40 lawsuits arising out of its
now severed relationship with the tobacco business conducted by Reynolds Tobacco
or its subsidiaries. These cases name NGH on a variety of theories, not always
specificially pled, that seek to impose liability on NGH for injuries allegedly
caused by the use, sale, distribution, manufacture, development, advertising,
marketing or health effects of, exposure to, or research, statements or warnings
regarding cigarettes.
Fifteen of the active suits were brought in state courts by claimants
seeking recovery of health care costs they incurred for large numbers of
beneficiaries whose illnesses are allegedly related to cigarettes. The
plaintiffs in these cases include groups of union health-benefit trust funds, a
Native American tribe and two foreign countries or political subdivisions. Four
of the cases are non-union class action suits, one in Pennsylvania federal
court, one in Indiana state court, one in New York federal court and one in
Missouri state court. Another purported class action brought in Lagos, Nigeria
was dismissed by the Lagos court in February 2000 as to all the non-Nigerian
defendants.
In addition, as of March 20, 2000, 18 anti-trust cases have been served on
NGH as well as a number of cigarette manufacturers and their present or former
parent companies in two federal courts and various state courts. These cases,
all of which seek to be certified as class actions, allege violations of state
and federal anti-trust law and are brought by plaintiffs who claim to represent
direct purchasers, indirect purchasers and retail purchasers of cigarettes.
NGH's defenses in all the cigarette cases in which it is named include the
merits defenses of Reynolds Tobacco plus separate arguments that NGH is a
holding company that does not engage in any of the activities for which
plaintiffs seek to impose liability. NGH also seeks to be dismissed from some of
these cases based on the fact that it has no presence in the state in which a
particular case is pending and therefore should not be subject to the
jurisdiction of the applicable court.
In the health-care cost-recovery cases of the kind noted above, defendants
also argue that the case should be dismissed because of the settled law that one
who pays an injured person's medical expenses is legally too remote to maintain
an action against the person allegedly responsible for the injury. Most courts
that have decided motions to dismiss based on this argument, including the
federal courts of appeals for the Second, Third, Fifth, Seventh and Ninth
Circuits, have granted motions to dismiss on these "remoteness" grounds. Ten of
these union cases, all pending in New York State courts, have been consolidated
and, on March 6, 2000, defendants' motion to dismiss these cases on "remoteness"
grounds was granted. Plaintiffs' time to appeal has not expired.
As of March 20, 2000, no case in which NGH is a named defendant was
scheduled for trial in 2000. Two cases in which Reynolds Tobacco is a defendant
are in the process of being tried and it is likely that several more will be
tried during the course of the year.
NGH's litigation defense costs as well as any liabilities it might incur as
a result of the cases pending against it are to be paid by RJR and Reynolds
Tobacco under the indemnification provisions of an agreement between NGH, RJR
and Reynolds Tobacco. NGH's costs of defense, as well as any liabilities
incurred as a result of the cases brought by plaintiffs based on sales of
cigarettes outside the United States, are generally also subject to an indemnity
from Japan Tobacco Inc. as provided under the sale agreement among Japan
Tobacco, Reynolds Tobacco and RJR. If RJR and Reynolds Tobacco and Japan Tobacco
F-23
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--CONTINGENCIES (CONTINUED)
cannot fulfill their respective indemnity obligations, NGH could be required to
make the relevant payments itself.
In addition to the cases pending against NGH, there are several hundred
lawsuits relating to cigarettes in which Reynolds Tobacco, and sometimes RJR,
are named defendants. One Florida class action case, in which Reynolds Tobacco
is a defendant, ENGLE VS. R.J. REYNOLDS TOBACCO COMPANY, is being tried in
several phases. A jury found against Reynolds Tobacco and the other cigarette
company defendants in the first phase. The second phase, considering the claims
of class representatives, is ongoing and may be completed in late March, 2000.
Thereafter, the same jury will hear the case for an award of punitive damages,
which would be a lump sum for the class as a whole. A decision on this award may
be made during April 2000. It is not possible to estimate the size of such an
award if made, but it could be in the billions of dollars. No payment of damages
should be required until the end of the trial and appellate process. If Reynolds
Tobacco and RJR are unable to satisfy their payment obligations for any adverse
judgments against them in some or all of these cases, it is possible that
plaintiffs in these cases would seek to recover the unsatisfied obligations from
the assets of NGH by bringing lawsuits on various theories.
Some of the claims against NGH seek recovery of hundreds of millions and
possibly billions of dollars. This is also true of the litigation pending
against Reynolds Tobacco and RJR. Litigation is subject to many uncertainties.
Management is unable to predict the outcome of the litigation against NGH, or to
derive a meaningful estimate of the amount or range of any possible loss in any
quarterly or annual period or in the aggregate.
For a detailed list of the tobacco-related lawsuits pending against NGH, see
exhibit 99 to this Form 10-K, which is available through the U.S Securities and
Exchange Commission's website at
http://www.sec.gov/.
ENVIRONMENTAL MATTERS
Nabisco Holdings or certain of its subsidiaries have been named "potentially
responsible parties" ("PRP") with third parties under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") or may have
indemnification obligations with respect to 14 sites. Liability under CERCLA is
joint and several. Although it is difficult to identify precisely the estimated
cost of resolving these CERCLA matters, such expenditures or costs are not
expected to have a material adverse effect on those companies' or NGH's
financial condition or results of operations.
In addition, in April 1995, NGH was named a PRP with certain third parties
under CERCLA with respect to a superfund site at which a former subsidiary of
RJR had operations. A subsidiary of NGH may also have indemnification
obligations to a third party with respect to certain lawsuits arising from this
same CERCLA site although the subsidiary itself is not named in the lawsuits.
Management cannot currently predict the likelihood that it will have to
contribute as a PRP or perform on these obligations or what the magnitude of the
obligations would be.
F-24
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--RELATED PARTY TRANSACTIONS
NGH, RJR and R.J. Reynolds Tobacco entered into several agreements governing
the relationships among the parties after the distribution of RJR's shares to
NGH stockholders, including the provision of intercompany services by Nabisco to
NGH, certain tax matters, indemnification rights and obligations and other
matters among the parties.
These agreements replaced a predecessor intercompany services agreement, a
predecessor tax sharing agreement and a predecessor corporate agreement that had
previously been in place between Nabisco Holdings and RJR.
NOTE 14--COMMITMENTS
At December 31, 1999, other commitments totaled approximately $245 million,
principally for minimum operating lease commitments, the purchase of machinery
and equipment and other contractual arrangements. Rent expense, including
operating leases was $102 million, $89 million and $84 million for the three
years ended December 31, 1999, 1998 and 1997, respectively.
NOTE 15--FINANCIAL INSTRUMENTS
INTEREST RATE
Nabisco manages its debt structure and interest rate risk through the use of
fixed and floating rate debt, and through the use of derivatives. Nabisco uses
interest rate swaps and caps to hedge its exposure to interest rate changes, and
also to lower its financing costs.
At December 31, 1999, outstanding interest rate caps had an aggregate
notional principal amount of $700 million and expire in June 2000. The estimated
fair values of these financial instruments as of December 31, 1999, and similar
financial instruments as of December 31, 1998, were favorable by less than $1
million.
At December 31, 1999, outstanding fixed to floating interest rate swaps for
$102 million notional principal amount had estimated fair values which were
unfavorable by approximately $4 million. These swaps expire as follows:
$29 million in 2003; and $73 million in 2004. At December 31, 1998, similar
financial instruments for $565 million had estimated fair values which were
favorable by approximately $11 million.
Estimated fair values for all interest rate financial instruments were based
on calculations by independent third parties.
FOREIGN CURRENCY
At December 31, 1999 and 1998, Nabisco had outstanding forward foreign
exchange contracts with banks to purchase and sell an aggregate amount of
$5 million and $21 million, respectively. Such contracts were primarily entered
into to hedge certain international subsidiary debt. The purpose of Nabisco's
foreign currency hedging activities is to protect Nabisco from risk that the
eventual U.S. dollar cash flows resulting from transactions with international
parties will be adversely affected by changes in exchange rates. Based on
calculations from independent third parties, the estimated fair value of these
financial instruments as of December 31, 1999 was favorable by less than
$1 million and as of December 31, 1998 was unfavorable by approximately
$1 million.
F-25
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARKET AND CREDIT RISK
The outstanding interest rate and foreign currency financial instruments
involve, to varying degrees, elements of market risk as a result of potential
changes in interest and foreign currency exchange rates. To the extent that the
financial instruments entered into remain outstanding as effective hedges of
existing interest rate and foreign currency exposure, the impact of such
potential changes in interest rates and foreign currency exchange rates on the
financial instruments entered into would offset the related impact on the items
being hedged. Also, Nabisco may be exposed to credit losses in the event of
non-performance by the counterparties to these financial instruments. However,
management continually monitors its positions and the credit rating of its
counterparties and therefore, does not anticipate any non-performance.
There are no significant concentrations of credit risk with any individual
counterparties or groups of counterparties as a result of any financial
instruments entered into including those financial instruments discussed above.
NOTE 16--RETIREMENT BENEFITS
Nabisco and its subsidiaries sponsor a number of non-contributory and
contributory defined benefit pension plans covering most U.S. and certain
foreign employees and former employees of Nabisco, Nabisco Holdings and NGH.
Additionally, Nabisco and its subsidiaries participate in several (i) multi-
employer plans, which provide benefits to certain union employees, and
(ii) defined contribution plans, which provide benefits to certain employees in
foreign countries. Nabisco also provides certain other postretirement health and
life insurance benefits for retired employees of Nabisco, Nabisco Holdings and
NGH and their dependents.
In connection with the reorganization transactions described in Note 2 to
the Consolidated Financial Statements, the assets and liabilities of the
Retirement Plan for Employees of RJR Nabisco, Inc. (the "old plan") were split
into two plans. One plan covers employees and former employees of Nabisco,
Nabisco Holdings and NGH (the "Nabisco Plan") and the other plan covers
employees and former employees of RJR.
The split of assets and liabilities of the old plan was in accordance with a
May 1999 agreement between the Pension Benefit Guaranty Corporation ("PBGC") and
RJR Nabisco Holdings Corp. (now known as NGH). Based on this agreement and as
required by Section 414(l) of the Internal Revenue Code, the assets of the old
plan were allocated in proportion to the benefit obligations of each of the
respective plans. The use of this methodology resulted in a lower actual net
transfer of assets to the Nabisco Plan of $69 million and assumption of higher
actual benefit obligations of $30 million than the allocated amounts used in the
December 31, 1998 consolidated financial statements. These amounts have been
reflected as transfers between other members of a controlled group in the
following disclosures. The impact of this change, an increase in the unfunded
pension liability of $99 million, will be recognized in net periodic benefit
costs over future periods. As a result, the 1999 net periodic benefit cost for
Nabisco increased by approximately $7 million. The PBGC agreement did not
require Nabisco to make additional contributions to the Nabisco Plan.
F-26
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16--RETIREMENT BENEFITS (CONTINUED)
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------------- ----------------------
DECEMBER 31, DECEMBER 31,
---------------------- ----------------------
IN MILLIONS 1999 1998 1999 1998
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at January 1........................... $1,693 $1,718 $ 460 $ 531
Service cost.............................................. 50 46 6 6
Interest cost............................................. 112 114 32 33
Plan amendments........................................... -- (6) -- --
Actuarial (gain) loss..................................... (206) (6) (31) (68)
Foreign currency translation.............................. 15 (15) 2 (2)
Benefits paid............................................. (158) (158) (44) (40)
Transfer from other members of controlled group........... 58 -- 4 --
------ ------ ------ ------
Obligations at December 31................................ 1,564 1,693 429 460
------ ------ ------ ------
CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1.................... 1,576 1,568 -- --
Actual return on plan assets.............................. 247 141 -- --
Employer contributions.................................... 36 40 44 40
Plan participants' contributions.......................... 1 1 -- --
Foreign currency translation.............................. 17 (16) -- --
Benefits paid............................................. (158) (153) (44) (40)
Settlements............................................... -- (5) -- --
Transfer to other members of controlled group............. (69) -- -- --
------ ------ ------ ------
Fair value of plan assets at December 31.................. 1,650 1,576 -- --
------ ------ ------ ------
FUNDED STATUS
Funded status at December 31.............................. 86 (117) (429) (460)
Unrecognized transition asset............................. (1) (2) (2) (3)
Unrecognized prior service cost........................... 4 5 -- --
Unrecognized (gain) loss.................................. (189) 35 8 37
------ ------ ------ ------
Net amount recognized..................................... $ (100) $ (79) $ (423) $ (426)
====== ====== ====== ======
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS
Prepaid benefit cost...................................... $ 22 $ 19 $ -- $ --
Accrued benefit liability................................. (135) (112) (423) (426)
Intangible asset.......................................... 2 2 -- --
Accumulated other comprehensive income.................... 11 12 -- --
------ ------ ------ ------
Net amount recognized..................................... $ (100) $ (79) $ (423) $ (426)
====== ====== ====== ======
</TABLE>
F-27
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16--RETIREMENT BENEFITS (CONTINUED)
Plan assets consist primarily of a diversified portfolio of fixed-income
investments, debt and equity securities and cash equivalents. The projected
benefit obligation, accumulated benefit obligation, and fair value of plan
assets for the pension plans with accumulated benefit obligations in excess of
plan assets were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
IN MILLIONS 1999 1998
- ----------- -------- --------
<S> <C> <C> <C> <C>
Projected benefit obligation................................ $67 $ 95
Accumulated benefit obligation.............................. $67 $ 92
Fair value of plan assets................................... $ 3 $ 40
</TABLE>
The components of net periodic benefit cost are as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------------------ --------------------------------------
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
------------------------------ --------------------------------------
IN MILLIONS 1999 1998 1997 1999 1998 1997
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Service cost.................................. $ 50 $ 46 $ 39 $ 6 $ 6 $ 7
Employee contributions........................ (1) -- -- -- -- --
Interest cost................................. 112 114 116 32 33 36
Expected return on plan assets................ (133) (135) (129) -- -- --
Amortization of transition (asset)
obligation.................................. (1) (1) (1) (3) (2) (3)
Amortization of prior service cost............ 3 3 3 -- -- --
Amortization of net (gain) loss............... 1 (2) (2) 1 -- --
Settlement (gain) loss........................ -- 2 -- -- -- --
----- ----- ----- --- --- ---
Net periodic benefit cost..................... 31 27 26 $36 $37 $40
=== === ===
Multi-employer and defined contribution
plans....................................... 32 32 33
----- ----- -----
Total pension benefit cost.................... $ 63 $ 59 $ 59
===== ===== =====
</TABLE>
The principal plans used the following weighted average actuarial
assumptions for accounting purposes:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Discount rate.............................................. 7.9% 6.9% 8.0% 6.8%
Expected return on plan assets............................. 9.3% 9.3%
Rate of compensation increase.............................. 4.6% 4.7%
</TABLE>
The assumed health care cost trend rate was 5.5% in 1999 and 5% in 2000 and
thereafter. Assumed health care cost trend rates have a significant effect on
the amounts reported for the health care plan. A
F-28
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16--RETIREMENT BENEFITS (CONTINUED)
one-percentage-point change in the assumed health care cost trend rates would
have had the following impact on 1999 amounts:
<TABLE>
<CAPTION>
1-PERCENTAGE- 1-PERCENTAGE-
POINT POINT
IN MILLIONS INCREASE DECREASE
- ----------- ------------- -------------
<S> <C> <C>
Increase (decrease) in postretirement benefit cost.......... $ 3 $ (2)
Increase (decrease) in postretirement benefit obligation.... $ 31 $(27)
</TABLE>
NOTE 17--STOCKHOLDERS' EQUITY
The authorized capital stock of NGH consists of (a) 440,000,000 shares of
Common Stock, par value $.01 per share, of which 329,524,147 shares were issued
as of December 31, 1999, and (b) 150,000,000 shares of preferred stock, par
value $.01 per share, of which no shares have been issued.
NGH redeemed 12,044 shares of its Series B preferred stock on October 13,
1998, resulting in the redemption of 12,043,940 shares of its Series B
depositary shares at $25 per Series B depositary share plus accrued and unpaid
dividends. Each share of Series B preferred stock paid cash dividends of
$2,312.50 per share per annum until the shares were redeemed.
NGH and its subsidiaries sponsored a defined contribution plan in which
matching contributions to eligible employees were made in the form of ESOP
preferred stock. Every five shares of ESOP preferred stock was generally
convertible into one share of common stock of NGH, and was entitled to
cumulative dividends at 7.8125% of stated value per annum at least until
April 10, 1999, payable semi-annually in arrears. NGH matched $.50 for every
pre-tax dollar contributed by each eligible employee, up to a maximum of 6% of
the employee's pay. During 1999, 1998 and 1997, approximately $39 million, $28
million and $32 million, respectively, was contributed to the ESOP by NGH and
approximately $8 million, $17 million and $18 million, respectively, of ESOP
dividends were used to service the ESOP's debt to NGH that was incurred in
connection with the initial formation of the ESOP. On June 10, 1999, NGH
completed the redemption of all its outstanding ESOP preferred stock at $16.25
per share, plus accrued dividends, at a total cost of approximately $200
million.
STOCK PLANS
NGH's 1989 stock plan provides for grants of options to purchase common
stock of NGH to non-employee directors, directors and key employees. A maximum
of 6 million shares may be issued under this plan. The options granted under the
plan generally vest over three years, are separately exercisable for primarily
ten years from the date of grant and are exercisable at a price that is
generally the fair market value of the stock at the grant date.
NGH's 1990 long-term incentive plan ("LTIP") provides for grants of
incentive stock options, other stock options, stock appreciation rights,
restricted stock, purchase stock, dividend equivalent rights, performance units,
performance shares and other stock-based grants to key employees. A maximum of
33 million shares of common stock of NGH may be issued under the LTIP. The
options granted under the plan generally vest over three years, are exercisable
for 10-15 years from date of grant, and are exercisable at a price that is
generally the fair market value of the stock at the grant date. As of
December 31, 1999, purchase stock, stock options other than incentive stock
options, restricted stock and other stock-based grants have been granted under
the LTIP.
F-29
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17--STOCKHOLDERS' EQUITY (CONTINUED)
Nabisco Holdings' 1994 long-term incentive plan is similar to the LTIP
except that stock-based awards are denominated in shares of Class A common stock
of Nabisco Holdings.
As of December 31, 1999, 10,658,210 shares were available for future grants
under NGH's stock plans. The changes in stock options under the stock plans were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- -------------------- --------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS IN THOUSANDS OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
- -------------------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year........... 17,490 $29.72 17,378 $29.54 17,783 $29.54
Granted................................ 2,618 22.20 657 35.78 590 32.37
Exercised.............................. (1,144) 25.36 (271) 26.37 (396) 25.81
Cancelled.............................. (48) 28.16 (274) 35.87 (599) 34.68
Distribution adjustment................ 1,290
------ ------- -------
Balance at end of year................. 20,206 $19.53 17,490 $29.72 17,378 $29.54
====== ======= =======
Exercisable at end of year............. 16,855 $19.39 15,394 $29.05 5,684 $31.09
====== ======= =======
</TABLE>
On June 15, 1999, as a result of the distribution to shareholders, options
held by employees to purchase RJR Nabisco Holdings Corp.'s common stock
(17,065,066 options) were equitably adjusted into options covering NGH shares
(18,354,932 options) and options covering RJR shares (5,456,114 options) in a
manner intended to preserve the aggregate benefits under the options.
As of December 31, 1999, 9,108,434 shares of Class A common stock were
available for future grants under Nabisco Holdings' stock plans. Outstanding
stock options have exercise prices from $24.50 to $52.88 per share and a
weighted-average remaining contractual life of 8.7 years. The changes in stock
options under the stock plan were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997
-------------------- -------------------- --------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS IN THOUSANDS OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
- -------------------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year........... 15,514 $32.75 14,160 $30.15 11,728 $28.57
Granted................................ 3,604 42.61 2,831 45.51 2,759 37.22
Exercised.............................. (278) 28.89 (833) 27.50 -- --
Cancelled.............................. (528) 42.62 (644) 38.59 (327) 33.13
------ ------- -------
Balance at end of year................. 18,312 $34.46 15,514 $32.75 14,160 $30.15
====== ======= =======
Exercisable at end of year............. 10,222 $28.52 7,806 $26.67 --
====== ======= =======
</TABLE>
F-30
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17--STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------------
OPTIONS IN THOUSANDS, LIFE IN YEARS NUMBER WEIGHTED-AVERAGE
- ----------------------------------- OUTSTANDING REMAINING WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES AT 12/31/99 CONTRACTUAL LIFE EXERCISE PRICE
- ------------------------ ----------- ---------------- ----------------
<S> <C> <C> <C>
$15.50 - $17.35.................................... 6,436 10.3 $17.34
$17.63 - $19.76.................................... 5,721 9.3 18.37
$21.13 - $22.25.................................... 3,342 8.8 20.40
$22.41 - $33.73.................................... 4,707 6.6 23.33
------
20,206 8.9 $19.53
======
</TABLE>
NGH and its subsidiaries recognize and measure compensation costs related to
employee stock plans utilizing the intrinsic value based method. Had
compensation expense been determined based upon the fair value of awards granted
during 1999, 1998 and 1997, NGH's results would have been as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997
-------------------- -------------------- --------------------
AS PRO AS PRO AS PRO
REPORTED FORMA REPORTED FORMA REPORTED FORMA
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) (in millions)... $2,968 $2,944 $ (577) $ (602) $ 381 $ 354
Net income (loss) per
share--basic.................... $ 9.11 $ 9.04 $(1.91) $(1.98) $1.05 $ 0.96
Net income (loss) per
share--diluted.................. $ 9.10 $ 9.02 $(1.91) $(1.98) $1.03 $ 0.94
Weighted-average fair value of
options granted during the year:
NGH............................. -- $ 6.65 -- $ 7.33 -- $ 6.79
Nabisco Holdings................ -- $13.17 -- $14.27 -- $12.55
</TABLE>
Had compensation expense been determined based upon the fair value of awards
granted to employees of NGH's continuing businesses, results from continuing
operations would have been as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1999 1998 1997
------------------- ------------------- -------------------
AS PRO AS PRO AS PRO
REPORTED FORMA REPORTED FORMA REPORTED FORMA
IN MILLIONS, EXCEPT PER SHARE AMOUNTS -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) from continuing
operations............................... $ 255 $ 237 $ (118) $ (133) $ 295 $ 280
Net income (loss) per share from continuing
operations--basic........................ $ .76 $ .70 $ (.49) $ (.53) $ .78 $ .73
Net income (loss) per share from continuing
operations--diluted...................... $ .75 $ .70 $ (.49) $ (.53) $ .76 $ .72
</TABLE>
For the years ended December 31, 1998 and 1997, all options granted to
employees of NGH's continuing businesses were granted under Nabisco Holdings'
stock plans.
F-31
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17--STOCKHOLDERS' EQUITY (CONTINUED)
For options granted, fair value was determined using the Black-Scholes
option pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
------------------- ------------------- -------------------
NABISCO NABISCO NABISCO
NGH HOLDINGS NGH HOLDINGS NGH HOLDINGS
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Dividend yield.................................. 3.7% 1.9% 5.8% 1.7% 5.8% 1.7%
Expected volatility............................. 34% 26% 31% 23% 31% 23%
Risk-free interest rate......................... 5.7% 5.1% 5.8% 5.7% 6.4% 6.6%
Expected option life (years).................... 7 7 5 7 5 7
</TABLE>
In 1998, NGH granted 954,600 shares of restricted stock to eligible
employees, net of forfeitures. During 1999, 40,500 shares were forfeited and
529,100 shares were vested in connection with the June 1999 distribution to
shareholders. The market price of the stock at the date of grant was charged to
stockholders' equity as unearned compensation. Compensation expense of
approximately $28 million and $6 million was recorded in 1999 and 1998,
respectively, and was reflected in operations of discontinued businesses.
Restrictions on the stock lapse as follows: 2003 -- 185,000 shares and 2006 --
200,000 shares. The unvested portion remaining in stockholders' equity at
December 31, 1999 was $6 million.
NOTE 18--SEGMENT INFORMATION
OPERATING SEGMENT DATA
NGH is a holding company whose majority-owned subsidiaries are engaged in
the manufacture, distribution and sale of cookies, crackers, and other food
products. NGH is organized and reports its results of operations in three
business segments: Nabisco Biscuit, the U.S. Foods Group and the International
Food Group which are segregated by both product and geographic area.
The Company evaluates performance and allocates resources based on ongoing
operating company contribution ("OCC"). Ongoing OCC for each reportable segment
is operating income before amortization of intangibles and exclusive of
restructuring charges and credits, restructuring-related expenses, and net gains
on divested food businesses. The accounting policies of the segments are the
same as those described in Note 1.
Nabisco Biscuit manufacturers and markets cookies and crackers in the United
States. Its products are sold to major grocery and other large retail chains
through its own direct store delivery system. The U.S. Foods Group represents
other food operations in the United States and manufactures and markets sauces
and condiments, pet snacks, hot cereals, dry mix desserts, gelatins,
non-chocolate candy, gum, nuts and salty snacks. It sells to major grocery
chains, national drug and mass merchandisers, convenience channels and warehouse
clubs through a direct sales force. It also sells to small retail grocery chains
and regional mass merchandisers through independent brokers. The International
Food Group conducts Nabisco's international operations, outside the United
States, primarily in markets in Latin America, Canada, certain markets in
Europe, the Middle East, Africa and Asia. The International Food Group primarily
produces and markets biscuits, powdered dessert and dry mixes, baking powder,
pasta, juices, milk products and other grocery items.
F-32
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 18--SEGMENT INFORMATION (CONTINUED)
One of Nabisco's customers accounted for approximately 11% of consolidated
net sales in 1999 and no customer accounted for 10% or more of consolidated net
sales in 1998 and 1997. Sales to this customer are included in the net sales
amount for each of our business segments.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
IN MILLIONS 1999 1998 1997
- ----------- -------- -------- --------
<S> <C> <C> <C>
Net sales from external customers:
Biscuit................................................... $ 3,640 $ 3,542 $ 3,545
U.S. Foods Group.......................................... 2,246 2,047 1,988
International Food Group.................................. 2,382 2,513 2,569
------- ------- -------
Total ongoing........................................... 8,268 8,102 8,102
------- ------- -------
U.S. Foods Group.......................................... -- 287 616
International Food Group.................................. -- 11 16
------- ------- -------
Total divested.......................................... -- 298 632
------- ------- -------
Total................................................. $ 8,268 $ 8,400 $ 8,734
======= ======= =======
Segment operating company contribution
Biscuit................................................... $ 557 $ 542 $ 691
U.S. Foods Group.......................................... 338 301 281
International Food Group.................................. 200 205 236
Other..................................................... (4) 2 7
------- ------- -------
Total ongoing........................................... 1,091 1,050 1,215
------- ------- -------
U.S. Foods Group.......................................... -- 38 97
International Food Group.................................. -- 1 2
------- ------- -------
Total divested.......................................... -- 39 99
------- ------- -------
Total segment operating company contribution................ 1,091 1,089 1,314
Restructuring-related expenses.............................. 76 56 31
Net gain on divested businesses............................. -- (14) (32)
Amortization of trademarks and goodwill..................... 213 221 226
Restructuring charge (credit)............................... (67) 530 --
------- ------- -------
Consolidated operating income............................... 869 296 1,089
Interest and debt expense................................... 324 401 421
Other expense, net.......................................... 19 29 32
------- ------- -------
Income (loss) before income taxes........................... $ 526 $ (134) $ 636
======= ======= =======
</TABLE>
F-33
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 18--SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
IN MILLIONS 1999 1998 1997
- ----------- -------- -------- --------
<S> <C> <C> <C>
Depreciation:
Nabisco Biscuit........................................... $ 146 $ 146 $ 148
U.S. Food Group........................................... 42 46 49
International Food Group.................................. 77 81 80
------- ------- -------
Total..................................................... $ 265 $ 273 $ 277
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
IN MILLIONS 1999 1998 1997
- ----------- -------- -------- --------
<S> <C> <C> <C>
Capital expenditures:
Nabisco Biscuit........................................... $ 128 $ 188 $ 206
U.S. Food Group........................................... 42 49 64
International Food Group.................................. 71 103 122
------- ------- ------
Total..................................................... $ 241 $ 340 $ 392
======= ======= ======
<CAPTION>
DECEMBER 31,
-------------------
IN MILLIONS 1999 1998
- ----------- -------- --------
Segment assets:
<S> <C> <C> <C>
Nabisco Biscuit........................................... $ 2,170 $ 2,124
U.S. Foods Group.......................................... 1,506 840
International Food Group.................................. 2,644 2,579
Corporate................................................. 254 32
------- -------
Total Segment Assets...................................... 6,574 5,575
Unallocated intangibles, net (1).......................... 5,387 5,574
Net assets of discontinued businesses..................... -- 6,696
------- -------
Consolidated assets....................................... $11,961 $17,845
======= =======
</TABLE>
GEOGRAPHIC SEGMENT INFORMATION
<TABLE>
<CAPTION>
NET SALES NET PROPERTY
YEARS ENDED DECEMBER 31, DECEMBER 31,
------------------------------ -------------------
IN MILLIONS 1999 1998 1997 1999 1998
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
United States....................................... $5,886 $5,876 $6,149 $2,190 $2,023
Latin America....................................... 1,249 1,428 1,438 499 550
Other............................................... 1,133 1,096 1,147 400 374
------ ------ ------ ------ ------
$8,268 $8,400 $8,734 $3,089 $2,947
====== ====== ====== ====== ======
</TABLE>
- ------------------------
(1) Represents unallocated goodwill, trademarks and tradename resulting from the
1989 acquisition of Nabisco Holdings' parent company.
F-34
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 19--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of 1999 and 1998 quarterly results of operations
and per share data for NGH:
<TABLE>
<CAPTION>
IN MILLIONS, EXCEPT PER SHARE AMOUNTS FIRST SECOND THIRD FOURTH
- ------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1999(1)
Net sales.............................................. $ 1,855 $ 2,023 $ 2,057 $ 2,333
Gross profit........................................... 828 934 924 1,080
Operating income....................................... 134 177 250 308
Income from continuing operations...................... 10 38 94 113
Income from discontinued operations, net of income
taxes................................................ 66 2,928 -- --
Income before extraordinary item....................... 76 2,966 94 113
Net income............................................. 76 2,687 92 113
PER SHARE DATA:
Net income per share - basic:
Continuing operations................................ $ .02 $ .10 $ .29 $ .35
Discontinued operations.............................. .20 9.01 -- --
Net income............................................. .22 8.25 .28 .35
Net income per share - diluted:
Continuing operations................................ .02 .10 .29 .35
Discontinued operations.............................. .20 9.01 -- --
Net income............................................. .22 8.25 .28 .35
Dividends declared..................................... .5125 .5125 .1225 .1225
Market price
High................................................. 30 7/8 33 9/16 20 13/16 15 3/4
Low.................................................. 25 19 5/16 14 11/16 9 3/4
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1998(2)
Net sales.............................................. $ 1,962 $ 2,131 $ 2,098 $ 2,209
Gross profit........................................... 837 944 932 1,004
Operating income (loss)................................ 183 (210) 185 138
Income (loss) from continuing operations............... 32 (177) 32 (5)
Income (loss) from discontinued operations, net of
income taxes......................................... (52) 47 126 (580)
Net income (loss)...................................... (20) (130) 158 (585)
PER SHARE DATA:
Net income (loss) per share - basic:
Continuing operations................................ $ .06 $ (.58) $ .06 $ (.04)
Discontinued operations.............................. (.16) .14 .39 (1.79)
Net income (loss)...................................... (.10) (.44) .45 (1.83)
Net income (loss) per share - diluted:
Continuing operations................................ .06 (.58) .06 (.04)
Discontinued operations.............................. (.16) .14 .39 (1.79)
Net income (loss)...................................... (.10) (.44) .45 (1.83)
Dividends declared..................................... .5125 .5125 .5125 .5125
Market price
High................................................. 38 1/16 31 5/16 27 3/8 31 15/16
Low.................................................. 30 23 1/2 21 5/16 24
</TABLE>
F-35
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 19--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (CONTINUED)
- ------------------------
(1) The first quarter of 1999 includes $15 million ($7 million after tax, net of
minority interest or $.02 per share) of restructuring related expenses.
The second quarter of 1999 includes $19 million ($9 million after tax, net
of minority interest or $.03 per share) of restructuring related expenses
and a $279 million after-tax extraordinary loss on the early extinguishment
of debt.
The third quarter of 1999 includes $12 million ($6 million after tax, net of
minority interest or $.02 per share) of restructuring related expenses, a
credit of $59 million ($35 million after tax, net of minority interest or
$.11 per share) applicable to the June and December 1998 restructuring
programs and an extraordinary loss on the early extinguishment of debt of
$2 million after tax, net of minority interest.
The fourth quarter of 1999 includes $30 million ($15 million after tax, net
of minority interest or $.04 per share) of restructuring related expenses
and a credit of $8 million ($4 million after tax, net of minority interest
or $.01 per share) applicable to the June and December 1998 restructuring
programs.
(2) The second quarter of 1998 includes a $406 million ($216 million after tax,
net of minority interest or $.67 per share) restructuring charge and
$6 million ($3 million after tax, net of minority interest or $.01 per
share) of restructuring related expenses.
The third quarter of 1998 includes a net gain of $14 million ($1 million
after tax, net of minority interest) from divestitures and $15 million
($7 million after tax, net of minority interest or $.02 per share) of
restructuring related expenses.
The fourth quarter of 1998 includes a $124 million ($75 million after tax,
net of minority interest or $.23 per share) restructuring charge and
$35 million ($17 million after tax, net of minority interest or $.06 per
share) of restructuring related expenses.
F-36
<PAGE>
NABISCO GROUP HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 20--SUBSEQUENT EVENTS (UNAUDITED)
JOINT VENTURE
On December 14, 1999, Nabisco announced its participation in a joint
venture, Burlington Biscuits plc ("Burlington"), with Hicks, Muse, Tate & Furst
Limited ("HMTF"), an investment firm, to bid for 100% of United Biscuits
(Holdings) Plc ("UB"). Subsequently, Burlington acquired 29.9% of UB. As
announced on March 20, 2000, Nabisco and HMTF have entered into definitive
agreements under which: (i) Nabisco and HMTF will join a consortium of
investors, Finalrealm Limited ("Finalrealm"), also bidding for UB; (ii) an
associate of Finalrealm will acquire Burlington's 29.9% interest in UB, giving
Finalrealm a 47.6% interest in UB; (iii) Finalrealm's cash offer of 265 pence
per UB share becomes a Final Offer under the City Code and is extended until
April 5, 2000; (iv) subject to Finalrealm being entitled to exercise compulsory
acquisition rights in respect of minority interests in UB and regulatory
competition clearance, Nabisco will contribute approximately $45 million in cash
and its operations in Spain, Portugal, and the Middle East (in 1999, these
operations had net sales of approximately $290 million) to an associate of
Finalrealm; (v) Finalrealm has agreed to procure the sale to Nabisco of UB's
operations in China, Hong Kong and Taiwan conditional on the Final Offer
becoming or being declared wholly unconditional (in 1999, these operations had
net sales of approximately $66 million); and (vi) following completion of the
Final Offer and its related transactions, Nabisco would have an equity interest
of 24.6% in the joint venture.
Upon completion, the joint venture will be comprised of UB businesses in the
United Kingdom, France and the Benelux countries, Nabisco's operations named
above and HMTF's UK Horizon Biscuits business.
STOCKHOLDER RIGHTS PLAN
On March 13, 2000, the Board of Directors ("Board") of NGH adopted a
stockholder rights plan. Under the plan, the Board declared a dividend of one
preferred stock purchase right ("Right") for each share of NGH common stock
outstanding on March 20, 2000, and authorized the distribution of one Right for
each subsequently issued common share. Each Right entitles the holder to
purchase from NGH one one-hundredth of a share of a new series of preferred
stock at an initial purchase price of $30. The Board authorized the issuance of
4,400,000 preferred shares under this plan, none of which has been issued. The
Rights will become exercisable at a specified period of time after any person
becomes the beneficial owner of 10% or more of the common stock of NGH or
commences a tender or exchange offer which, if consummated, would result in any
person becoming the beneficial owner of 10% or more of the common stock. If any
person becomes the beneficial owner of 10% or more of the common stock, each
Right will entitle the holder, other than the acquiring person, to purchase, for
$30, a number of shares of NGH common stock having a market value of $60. For
persons who as of March 13, 2000 beneficially owned 10% or more of the common
stock, the plan "grandfathers" their current level of ownership, so long as they
do not purchase additional shares. Unless earlier redeemed, the Rights will
expire on March 13, 2002.
F-37
<PAGE>
SCHEDULE I
NABISCO GROUP HOLDINGS CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1999 1998 1997
- ----------------------- -------- -------- --------
<S> <C> <C> <C>
Interest and debt expense................................... $ (65) $(108) $ (98)
Other income (expense), net................................. 7 2 7
------ ----- -----
Loss before income taxes................................ (58) (106) (91)
Benefit for income taxes.................................... (21) (42) (36)
------ ----- -----
Loss before equity in income (loss) from subsidiaries... (37) (64) (55)
Equity in income (loss) from subsidiaries, net of income
taxes..................................................... 3,286 (513) 457
------ ----- -----
Income (loss) before extraordinary item................. 3,249 (577) 402
Extraordinary item--loss on early extinguishment of debt of
subsidiary,
net of income taxes....................................... (281) -- (21)
------ ----- -----
NET INCOME (LOSS)........................................... 2,968 (577) 381
------ ----- -----
Other comprehensive income (loss):
Cumulative translation adjustment......................... (84) (56) (158)
Recognition of Reynolds International cumulative
translation adjustment upon sale........................ 218 -- --
Recognition of RJR's minimum pension liability adjustment
upon distribution of RJR Stock.......................... 6 -- --
Minimum pension liability adjustment...................... 1 4 (15)
------ ----- -----
Other comprehensive income (loss) before income taxes....... 141 (52) (173)
Provision (benefit) for income taxes...................... 1 (5) 7
------ ----- -----
OTHER COMPREHENSIVE INCOME (LOSS) NET OF INCOME TAX......... 140 (47) (180)
------ ----- -----
COMPREHENSIVE INCOME (LOSS)................................. $3,108 $(624) $ 201
====== ===== =====
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL INFORMATION.
S-1
<PAGE>
SCHEDULE I
NABISCO GROUP HOLDINGS CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1999 1998 1997
- ----------------------- -------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income (loss)......................................... $2,968 $ (577) $ 381
------ ------ ------
Adjustments to reconcile net income (loss) to net cash
flows from operating activities:
Deferred income tax provision (benefit)................. 37 -- 1
Extraordinary items..................................... 281 -- 43
Equity in income (loss) from subsidiaries, net of income
taxes................................................. (3,286) 513 (457)
Dividends received from subsidiary...................... 471 607 834
Other, net.............................................. (15) (20) 16
------ ------ ------
Total adjustments................................... (2,512) 1,100 437
------ ------ ------
Net cash flows from operating activities................ 456 523 818
------ ------ ------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchase of investments, net of maturities................ (107) -- --
------ ------ ------
Net cash flows used in investing activities............. (107) -- --
------ ------ ------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Repurchase of ESOP preferred stock........................ (202) -- --
Redemption of Trust preferred certificates................ (1,265) -- --
Dividends paid on common and preferred stock.............. (595) (706) (721)
Proceeds from issuance of junior subordinated
debentures.............................................. -- 385 --
Redemption of Series B preferred stock.................... -- (301) --
Other, net--primarily intercompany transfers and
payments................................................ 1,856 100 (98)
------ ------ ------
Net cash flows used in financing activities............... (206) (522) (819)
------ ------ ------
Net change in cash and cash equivalents................... 143 1 (1)
Cash and cash equivalents at beginning of period............ 1 -- 1
------ ------ ------
Cash and cash equivalents at end of period.................. $ 144 $ 1 $ --
====== ====== ======
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL INFORMATION.
S-2
<PAGE>
SCHEDULE I
NABISCO GROUP HOLDINGS CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31 1999 1998
- ----------- -------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 144 $ 1
Short-term investments.................................... 6 --
Accounts receivable, net.................................. 40 16
------ ------
TOTAL CURRENT ASSETS.................................. 190 17
------ ------
Investment in subsidiaries.................................. 3,173 9,937
Other assets................................................ 106 12
------ ------
$3,469 $9,966
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 78 $ 191
Income taxes accrued...................................... 5 7
------ ------
TOTAL CURRENT LIABILITIES............................. 83 198
------ ------
Intercompany (receivable) payable, net...................... (1) 322
Other noncurrent liabilities................................ 24 --
Deferred income taxes....................................... 101 64
Junior subordinated debentures.............................. 101 1,368
Commitments and contingencies (Note C)
Stockholders' equity:
Preferred stock........................................... -- 205
Common stock--(1999--329,524,147 shares issued,
1998--328,385,148 shares issued......................... 3 3
Paid-in capital........................................... 3,459 9,004
Retained earnings (accumulated deficit)................... 125 (577)
Accumulated other comprehensive income:
Cumulative translation adjustment....................... (314) (441)
Minimum pension liability............................... (6) (19)
------ ------
Accumulated other comprehensive income.................. (320) (460)
------ ------
Treasury stock, at cost................................... (100) (100)
Other stockholders' equity................................ (6) (61)
------ ------
TOTAL STOCKHOLDERS' EQUITY............................ 3,161 8,014
------ ------
$3,469 $9,966
====== ======
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL INFORMATION.
S-3
<PAGE>
SCHEDULE I
NABISCO GROUP HOLDINGS CORP.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
NOTE A--BASIS OF PRESENTATION
Certain prior years' amounts have been reclassified to conform to the 1999
presentation.
See Note 2 to the consolidated financial statements regarding the sale by
NGH and RJR of the international tobacco business and the separation of the
domestic tobacco and food businesses.
NOTE B--JUNIOR SUBORDINATED DEBENTURES
See Note 11 to the consolidated financial statements for information
regarding the issuance of the junior subordinated debentures.
NGH's obligations under the junior subordinated debentures are unsecured and
subordinate to all senior indebtedness of NGH, but junior to all future stock
issuances and stock guarantees. As of December 31, 1999, Nabisco Group Holdings
had no senior indebtedness. Nabisco Group Holdings guarantees all distributions
made by its subsidiary trusts, subordinate to any distributions to any senior
debenture holders and junior subordinated debenture holders.
Interest on the junior subordinated debentures is payable quarterly in
arrears. The junior subordinated debentures may be redeemed by NGH on or after
September 30, 2003 and mature in September 2047. Covenants applicable to the
junior subordinated debentures limit NGH ability to enter into certain capital
stock transactions, among other things, if NGH is in default of any payments or
guarantees with respect to the junior subordinated debentures.
NOTES C--CONTINGENCIES
For disclosure of additional contingent liabilities, see Note 12 to the
Consolidated Financial Statements.
S-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
2.1 Certificate of Ownership and Merger merging Nabisco Group
Holdings Corp. into RJR Nabisco Holdings Corp. filed
June 14, 1999 (incorporated by reference to Exhibit 2.1 of
the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1999 (the "Second Quarter
1999 10-Q")).
2.1(a) Certificate and Plan of Merger dated as of June 14, 1999
between RJR Nabisco Holdings Corp. and Nabisco Group
Holdings Corp. (incorporated by reference to Exhibit 2.1 of
the Registrant's Form 8-K filed on June 16, 1999).
3.1(a) Restated Certificate of Incorporation of Nabisco Group
Holdings Corp. dated June 16, 1999 (incorporated by
reference to Exhibit 3.1 of the Second Quarter 1999 10-Q).
*3.1(b) Certificate of Designation of Series A Participating
Cumulative Preferred Stock of Nabisco Group Holdings Corp.
*3.2 Amended By-Laws of Nabisco Group Holdings Corp. as amended
effective January 1, 2000.
4.1 Indenture (the "TOPrS Indenture"), dated as of September 21,
1995, between RJR Nabisco Holdings Corp. and the Bank of New
York (incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 of RJR Nabisco Holdings
Corp. and RJR Nabisco Holdings Capital Trust I, Registration
Nos. 33-60415 and 33-60415-01, filed June 20, 1995 (the
"TOPrS Registration Statement")).
4.2 Form of Second Supplemental Indenture to the TOPrS Indenture
(incorporated by reference to Exhibit 4.3 to the
Registration Statement on Form S-3 of RJR Nabisco Holdings
Corp. and RJR Nabisco Holdings Capital Trusts II-IV, File
No. 333-60811, filed on August 6, 1998 (the "TOPrS II-VI
Registration Statement")).
4.3 Form of Amended and Restated Declaration of Trust of RJR
Nabisco Holdings Capital Trust II (incorporated by reference
to Exhibit 4.5 to the TOPrS II-VI Registration Statement).
4.4 Form of Preferred Security of RJR Nabisco Holdings Capital
Trust II (included in Exhibit 4.3 above).
4.5 Form of Junior Subordinated Debenture (included in Exhibit
4.2 above).
4.6 Form of Guarantee Agreement with respect to Preferred
Securities between RJR Nabisco Holdings Corp. and the Bank
of New York as the Guarantee Trustee (incorporated by
reference to Exhibit 4.15 to the TOPrS II-VI Registration
Statement).
4.7 Indenture, dated as of June 5, 1995, between Nabisco, Inc.
and Citibank, N.A., (incorporated by reference to Exhibit
4.1 to Amendment No. 1 to the Registration Statement on Form
S-4 of Nabisco, Inc., Registration No. 33-90224, filed March
29, 1995).
4.8 The Registrant agrees to furnish copies of any instrument
defining the rights of holders of long-term debt of the
Registrant and its consolidated subsidiaries that does not
exceed 10 percent of the total assets of the Registrant and
its consolidated subsidiaries to the Commission upon
request.
4.9 Rights Agreement dated as of March 13, 2000 between Nabisco
Group Holdings Corp. and EquiServe Trust Company, N.A., as
Rights Agent (incorporated by reference to Exhibit 1 to the
Registration Statement on Form 8-A of Nabisco Group Holdings
Corp. filed on March 20, 2000).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
10.1 Nabisco Group Holdings Corp. 1990 Long Term Incentive Plan
as Amended and Restated effective June 15, 1999
(incorporated by reference to Exhibit 10.1 on Form 10-Q of
RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the
fiscal quarter ended June 30, 1999 (the "Second Quarter
1999 10-Q")).
10.2 Form of Stock Option Agreement between Nabisco Group
Holdings Corp. and the Executives named therein, dated July
14, 1999 (incorporated by reference to Exhibit 10.1 on
Form 10-Q of RJR Nabisco Holdings Corp. and RJR Nabisco,
Inc. for the fiscal quarter ended September 30, 1999 (the
"Third Quarter 1999 10-Q")).
10.3(a) Credit Agreement (the "Revolving Credit Agreement"), dated
as of October 31, 1996, among Nabisco Holdings Corp.,
Nabisco, Inc. and the lending institutions parties thereto
(incorporated by reference to Exhibit 10.1 to Annual Report
on Form 10-K of Nabisco Holdings Corp. and Nabisco, Inc. for
the fiscal year ended December 31, 1996, filed March 10,
1997 (the "1996 Nabisco Form 10-K")).
10.3(b) Credit Agreement (the "364 Day Facility"), dated as of
October 31, 1996, as amended as of October 28, 1999, among
Nabisco Holdings Corp., Nabisco, Inc. and the lending
institutions parties thereto (incorporated by reference to
Exhibit 10.2 of the Annual Report on Form 10-K of Nabisco
Holdings Corp. and Nabisco, Inc. for the fiscal year ended
December 31, 1999 (the "1999 Nabisco Form 10-K")).
10.3(c) First Amendment to the Revolving Credit Agreement and Second
Amendment to the 364 Day Facility, dated May 19, 1998, among
Nabisco Holdings Corp., Nabisco, Inc. and the lending
institutions parties thereto (incorporated by reference to
Exhibit 10.1 to Quarterly Report on Form 10-Q of Nabisco
Holdings Corp. and Nabisco, Inc. for the fiscal quarter
ended June 30, 1998, filed August 14, 1998 (the "June 1998
Nabisco Form 10-Q")).
10.3(d) Second Amendment to the Revolving Credit Agreement and
Fourth Amendment to the 364 Day Facility, dated April 25,
1999, among Nabisco Holdings Corp., Nabisco, Inc. and the
lending institutions parties thereto (incorporated by
reference to the 1999 Nabisco Form 10-K).
10.3(e) Third Amendment to the Revolving Credit Agreement, dated
October 28, 1999, among Nabisco Holdings Corp., Nabisco,
Inc. and the lending institutions parties thereto
(incorporated by reference to the 1999 Nabisco Form 10-K).
10.4 Tax Sharing Agreement dated as of June 14, 1999 among RJR
Nabisco Holdings Corp., R.J. Reynolds Tobacco Holdings,
Inc., R.J. Reynolds Tobacco Company and Nabisco Holdings
Corp. (incorporated by reference to Exhibit 10.1 to
Form 8-K of Nabisco Group Holdings Corp. filed on June 16,
1999).
10.5 Corporate Agreement dated as of June 14, 1999 among RJR
Nabisco Holdings Corp., Nabisco Holdings Corp., and
R.J. Reynolds Tobacco Holdings, Inc. (incorporated by
reference to Exhibit 10.2 to Form 8-K of Nabisco Group
Holdings Corp. filed on June 16, 1999).
10.6 Intercompany Services Agreement dated as of June 14, 1999
among RJR Nabisco Holdings Corp., Nabisco Holdings Corp.,
and R.J. Reynolds Holdings Inc. (incorporated by reference
to Exhibit 10.3 to Form 8-K of Nabisco Group Holdings Corp.
filed on June 16, 1999).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
10.7 Third Supplemental Indenture and Waiver dated as of May 18,
1999 between RJR Nabisco Holdings Corp. and The Bank of New
York, to the Indenture dated as of September 21, 1995
between RJR Nabisco Holdings Corp. and The Bank of New York,
as supplemented by the First Supplemental Indenture thereto
dated as of September 21, 1995 and the Second Supplemental
Indenture thereto dated as of September 16, 1998
(incorporated by reference to Exhibit 10.4 to Form 8-K of
Nabisco Group Holdings Corp. filed on June 16, 1999).
10.8 Purchase Agreement dated March 9, 1999 among R.J. Reynolds
Tobacco Company, RJR Nabisco, Inc. and Japan Tobacco Inc.
(incorporated by reference to Exhibit 2.1 on Form 8-K of RJR
Nabisco Holdings Corp. and R.J. Reynolds Tobacco Holdings,
Inc. dated May 12, 1999 and filed on May 28, 1999).
10.9 RJR Nabisco, Inc. Annual Incentive Award Plan, as amended
and restated effective January 1, 1997 (incorporated by
reference to Exhibit 10.2 of the Third Quarter 1997 Form
10-Q).
10.10 RJR Nabisco Holdings Corp. 1990 Long Term Incentive Plan as
amended and restated effective April 16, 1997 (incorporated
by reference to Exhibit 10.1 of the Second Quarter 1997 Form
10-Q).
10.11 Form of Deferred Stock Unit Agreement between RJR Nabisco
Holdings Corp. and the Director named therein dated as of
April 16, 1997 (incorporated by reference to Exhibit 10.2 of
the Second Quarter 1997 Form 10-Q).
10.12 Form of Deferred Stock Unit Agreement, dated May 13, 1998,
between various unnamed grantees and RJR Nabisco Holdings
Corp. in connection with the Equity Incentive Award Plan for
Directors and Key Employees of RJR Nabisco Holdings Corp.
and Subsidiaries (incorporated by reference to Exhibit 10.4
to the Second Quarter 1998 Form 10-Q).
10.13 Form of Stock Option Agreement, dated May 13, 1998, between
various unnamed optionees and RJR Nabisco Holdings Corp. in
connection with the Equity Incentive Award Plan for
Directors and Key Employees of RJR Nabisco Holdings Corp.
and Subsidiaries (incorporated by reference to Exhibit 10.5
to the Second Quarter 1998 Form 10-Q).
10.14 Retention Trust Agreement, dated May 13, 1998 by and between
RJR Nabisco, Inc. and Wachovia Bank, N.A. (incorporated by
reference to Exhibit 10.6 to the Second Quarter 1998 Form
10-Q).
10.15 Form of Non-Qualified Stock Option Agreement between RJR
Nabisco Holdings Corp. and the Director named therein dated
as of April 16, 1997 (incorporated by reference to Exhibit
10.3 of the Second Quarter 1997 Form 10-Q).
10.16 Form of Performance Unit Agreement between RJR Nabisco
Holdings Corp. and the grantee named therein (1997 grant-1
year period) dated as of February 28, 1997 (incorporated by
reference to Exhibit 10.4 of the Second Quarter 1997 Form
10-Q).
10.17 Form of Performance Unit Agreement between RJR Nabisco
Holdings Corp. and the grantee named therein (1998 grant--1
year period) dated as of February 6, 1998 (incorporated by
reference to Exhibit 10.3 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
1998, filed May 15, 1998 (the "First Quarter 1998 Form
10-Q")).
10.18 Form of Restricted Stock Unit Agreement between RJR Nabisco
Holdings Corp. and the grantee named therein dated as of
June 16, 1997 (incorporated by reference to Exhibit 10.5 of
the Second Quarter 1997 Form 10-Q).
10.19 Intentionally left blank
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
10.20 Form of Performance Appreciation Right Agreement between RJR
Nabisco Holdings Corp. and the grantee named therein
(incorporated by reference to Exhibit 10.2 of the First
Quarter 1997 Form 10-Q).
10.21 Form of Performance Appreciation Right Agreement between RJR
Nabisco Holdings Corp. and the grantee named therein (1998
Grant) (incorporated by reference to Exhibit 10.8 to the
First Quarter 1998 Form 10-Q).
10.22 Restricted Stock Unit Agreement dated March 24, 1997 between
RJR Nabisco Holdings Corp. and David B. Rickard
(incorporated by reference to Exhibit 10.3 of the First
Quarter 1997 Form 10-Q).
10.23 Form of Performance Unit Agreement between RJR Nabisco
Holdings Corp. and the grantee named therein (1996;
three-year period) (incorporated by reference to Exhibit
10.2 of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1996, filed on May 1,
1996 (the "First Quarter 1996 Form 10-Q")).
10.24 Form of Non-Qualified Stock Option Agreement between RJR
Nabisco Holdings Corp. and the grantee named therein (1996
grant-regular) incorporated by reference to Exhibit 10.3 of
the First Quarter 1996 Form 10-Q.
10.25 Form of Non-Qualified Stock Option Agreement between RJR
Nabisco Holdings Corp. and the grantee named therein (1996
grant-insider) (incorporated by reference to Exhibit 10.4 of
the First Quarter 1996 Form 10-Q).
10.26 Form of Non-Qualified Stock Option Agreement between RJR
Nabisco Holdings Corp. and the grantee named therein (1996
grant-executive) (incorporated by reference to Exhibit 10.5
of the First Quarter 1996 Form 10-Q).
10.27 Amendment to Form of Non-Qualified Stock Option Agreement
between RJR Nabisco Holdings Corp. and the grantee named
therein (1996 grant-insider) (incorporated by reference to
Exhibit 10.5 to the Second Quarter 1996 Form 10-Q).
10.28 Retirement Trust Agreement, made as of October 12, 1988,
between RJR Nabisco, Inc. and Wachovia Bank and Trust
Company, N.A. (incorporated by reference to Exhibit 10.6 to
the Registration Statement on Form S-4 of RJR Holdings Corp.
and RJR Holdings Group, Inc., Registration No. 33-27894,
filed April 5, 1989, as amended (the "Form S-4, Registration
No. 33-27894")).
10.29 Trust Agreement between RJR Nabisco, Inc. and Wachovia Bank
and Trust Company, N.A., Trustee, dated January 27, 1989
(incorporated by reference to Exhibit 10(d)(iv) to the
Registrants' Annual Report on Form 10-K for the fiscal year
ended December 31, 1988, filed March 9, 1989 (the "1988 Form
10-K")).
10.30 Master Trust Agreement, as amended and restated as of
October 12, 1988, between RJR Nabisco, Inc. and Wachovia
Bank and Trust Company, N.A. (incorporated by reference to
Exhibit 10.18 to the Form S-4, Registration No. 33-27894).
10.31(a) Amendment No. 1 to Master Trust Agreement, dated January 27,
1989 (incorporated by reference to Exhibit 10(g)(ii) to the
1988 Form 10-K).
10.31(b) Amendment No. 2 to Master Trust Agreement, dated January
27,1989 (incorporated by reference to Exhibit 10(g)(iii) to
the 1988 Form 10-K).
10.32 Excess Benefit Master Trust Agreement, as amended and
restated as of October 12, 1988, between RJR Nabisco, Inc.
and Wachovia Bank and Trust Company, N.A. (incorporated by
reference to Exhibit 10.21 to the Form S-4, Registration No.
33-27894).
10.33 Amendment No. 1 to Excess Benefit Master Trust Agreement,
dated January 27, 1989 (incorporated by reference to Exhibit
10(h)(ii) to the 1988 Form 10-K).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
10.34 RJR Nabisco, Inc. Supplemental Executive Retirement Plan, as
amended on July 21, 1988 (incorporated by reference to
Exhibit 10.32 to the Form S-4, Registration No. 33-27894).
10.35(a) Amendment to Supplemental Executive Retirement Plan, dated
November 23, 1988 (incorporated by reference to Exhibit
10(m)(ii) to the 1988 Form 10-K).
10.35(b) Amendment No. 2 to Supplemental Executive Retirement Plan,
dated January 27, 1989 (incorporated by reference to Exhibit
10(m)(iii) to the 1988 Form 10-K).
10.35(c) Amendment to Supplemental Executive Retirement Plan, dated
April 10, 1993 (incorporated by reference to the
Registrants' Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No.'s I- 10215 and I-6388
filed on February 24, 1994 (the "1993 Form 10-K")).
10.36 Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and James M. Kilts, dated as of January 2,
1998 (incorporated by reference to Exhibit 10.6 to the First
Quarter 1998 Form 10-Q).
10.37 Engagement Agreement (dated March 3, 1995) between RJR
Nabisco Holdings Corp. and Steven F. Goldstone (incorporated
by reference to Exhibit 10.38 of the 1995 Form 10-K).
10.38 Amended and Restated Employment Agreement (dated December 5,
1995) by and among RJR Nabisco Holdings Corp., and RJR
Nabisco, Inc. and Steven F. Goldstone (incorporated by
reference to Exhibit 10.40 of the 1995 Form 10-K).
10.39 Contingent Performance Share Agreement (dated December 5,
1995) between RJR Nabisco Holdings Corp. and Steven F.
Goldstone (incorporated by reference to Exhibit 10.42 of the
1995 Form 10-K).
10.40 Secured Promissory Note (dated December 5, 1995) of Steven
F. Goldstone in favor of RJR Nabisco Holdings Corp.
(incorporated by reference to Exhibit 10.43 of the 1995 Form
10-K).
10.41 Secured Promissory Note (dated May 15, 1996) of Steven F.
Goldstone in favor of Nabisco Holdings Corp. (incorporated
by reference to Exhibit 10.6 to the Third Quarter 1996 Form
10-Q).
10.42 Non-Qualified Stock Option Agreement dated January 10, 1997
between RJR Nabisco Holdings Corp. and Steven F. Goldstone
(incorporated by reference to Exhibit 10.1 of the
Registrants' Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997, filed May 13, 1997 (the "First
Quarter 1997 Form 10-Q"))
10.43 Restricted Stock Agreement between RJR Nabisco Holdings
Corp. and Steven F. Goldstone, dated as of January 15, 1998
(incorporated by reference to Exhibit 10.1 to the First
Quarter 1998 Form 10-Q).
10.44 Non-Qualified Stock Option Agreement between Nabisco
Holdings Corp. and Steven F. Goldstone, dated as of January
15, 1998 (incorporated by reference to Exhibit 10.2 to the
First Quarter 1998 Form 10-Q).
10.45 Amendment to Contingent Performance Share Agreement (dated
October 14, 1998) between RJR Nabisco Holdings Corp. and
Steven F. Goldstone (incorporated by reference to Exhibit
10.56 to the Annual Report on Form 10-K of RJR Nabisco
Holdings Corp. and RJR Nabisco, Inc. for the fiscal year
ended December 31, 1998 filed March 26, 1999).
10.46 Amended and Restated Employment Agreement (dated January 1,
1997) among RJR Nabisco Holdings Corp., RJR Nabisco, Inc.
and Steven F. Goldstone (incorporated by reference to
Exhibit 10.7 to the First Quarter 1998 Form 10-Q).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
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<C> <S>
*10.47 Letter Agreement, dated as of October 27, 1999, between the
Registrant and Steven F. Goldstone.
10.48 Restricted Stock Agreement between RJR Nabisco Holdings
Corp. and David B. Rickard, dated as of January 15, 1998
(incorporated by reference to Exhibit 10.9 to the First
Quarter 1998 Form 10-Q).
10.49 Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and David B. Rickard, dated as of January 15,
1998 (incorporated by reference to Exhibit 10.10 to the
First Quarter 1998 Form 10-Q).
*10.50 Letter Agreement, dated as of August 10, 1999, between the
Registrant and David B. Rickard.
10.51 Employment Agreement (dated January 15, 1998) among RJR
Nabisco Holdings Corp., RJR Nabisco, Inc. and William L.
Rosoff (incorporated by reference to Exhibit 10.5 to the
First Quarter 1998 Form 10-Q).
10.52 Restricted Stock Agreement between RJR Nabisco Holdings
Corp. and William L. Rosoff, dated as of January 15, 1998
(incorporated by reference to Exhibit 10.11 to the First
Quarter 1998 Form 10-Q).
10.53 Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and William L. Rosoff, dated as of January
15, 1998 (incorporated by reference to Exhibit 10.12 to the
First Quarter 1998 Form 10-Q).
*10.54 Letter Agreement, dated as of September 24, 1999, between
the Registrant and William L. Rosoff.
10.55 Amended and Restated Deferred Compensation Plan for RJR
Directors (dated as of September 1, 1996) (incorporated by
reference to Exhibit 10.2 of the Third Quarter 1996 Form
10-Q).
10.56 Amended and Restated Equity Incentive Award Plan for
Directors and Key Employees of RJR Nabisco Holdings Corp.
and Subsidiaries (dated as of September 1, 1996)
(incorporated by reference to Exhibit 10.3 to the Third
Quarter 1996 Form 10-Q).
10.57 Performance Unit Program under RJR Nabisco Holdings Corp.
1990 Long Term Incentive Plan (incorporated by reference to
Exhibit 10.3 to the First Quarter 1994 Form 10-Q).
10.58 Amendment to Non-Qualified Stock Option Agreements dated
prior to October 11, 1995 (incorporated by reference to
Exhibit 10.75 of the 1995 Form 10-K).
10.59 Form of Non-Qualified Stock Option Agreement dated April 27,
1995 between RJR Nabisco Holdings Corp. and the grantee
named therein (Reissued options) (incorporated by reference
to Exhibit 10.77 of the 1995 Form 10-K).
10.60 Form of Non-Qualified Stock Option Agreement dated April 27,
1995 between RJR Nabisco Holdings Corp. and the grantee
named therein (Premium options) (incorporated by reference
to Exhibit 10.78 of the 1995 Form 10-K).
10.61 Form of Non-Qualified Stock Option Agreement between RJR
Nabisco Holdings Corp. and the grantee named therein
(incorporated by reference to Exhibit 10.79 of the 1995 Form
10-K).
10.62 Form of Deferred Stock Unit Agreement between RJR Nabisco
Holdings Corp. and the grantee named therein dated as of May
31, 1996 (incorporated by reference to Exhibit 10.5 to the
Third Quarter 1996 Form 10-Q).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
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<C> <S>
10.63 Amendment dated July 10, 1995 to Executive Equity Program
Agreement under the 1990 Long Term Incentive Plan between
RJR Nabisco Holdings Corp. and the grantee named therein
(incorporated by reference to Exhibit 10.82 of the 1995 Form
10-K).
10.64 Form of Employment Agreement dated October 11, 1995
(incorporated by reference to Exhibit 10.83 of the 1995 Form
10-K).
10.65 Form of Employment Agreement dated November 1, 1995
(incorporated by reference to Exhibit 10.84 of the 1995 Form
10-K).
10.66 Form of Non-Qualified Stock Option Agreement between RJR
Nabisco Holdings Corp., and Director named therein (Election
version) (incorporated by reference to Exhibit 10.86 of the
1995 Form 10-K).
10.67 Form of Non-Qualified Stock Option Agreement between RJR
Nabisco Holdings Corp., and Director named therein (Annual
version) (incorporated by reference to Exhibit 10.87 of the
1995 Form 10-K).
*12.1 Nabisco Group Holdings Corp. Computation of Ratio of
Earnings to Combined Fixed Charges and Preferred Stock
Dividends/Deficiency in the Coverage of Combined Fixed
Charges and Preferred Stock Dividends by Earnings Before
Fixed Charges for each of the periods within the five year
period ended December 31, 1999.
*12.2 Nabisco Group Holdings Corp. Computation of Ratio of
Earnings to Fixed Charges/ Deficiency in the Coverage of
Fixed Charges By Earnings Before Fixed Charges for each of
the periods within the five year period ended December 31,
1999.
*21. Subsidiaries of the Registrants.
*23. Consent of Independent Auditors.
*24. Powers of Attorney.
*27.1 Financial Data Schedule of Nabisco Group Holdings Corp.
*99 Expanded Tobacco Litigation Disclosure
</TABLE>
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* Filed herewith.
<PAGE>
Exhibit 3.1(b)
CERTIFICATE OF DESIGNATION
OF
SERIES A PARTICIPATING CUMULATIVE
PREFERRED STOCK
OF
NABISCO GROUP HOLDINGS CORP.
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
We, James M. Kilts, President and Chief Executive Officer, and James A.
Kirkman III, Senior Vice President, General Counsel and Secretary, of Nabisco
Group Holdings Corp., a corporation organized and existing under the General
Corporation Law of the State of Delaware ("DELAWARE LAW"), in accordance with
the provisions thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, the Board of Directors on
March 13, 2000, adopted the following resolution creating a series of Preferred
Stock in the amount and having the designation, voting powers, preferences and
relative, participating, optional and other special rights and qualifications,
limitations and restrictions thereof as follows:
SECTION 1. DESIGNATION AND NUMBER OF SHARES. The shares of such series
shall be designated as "Series A Participating Cumulative Preferred Stock, par
value $0.01 per share" (the "SERIES A PREFERRED STOCK"), and the number of
shares constituting such series shall be 4,400,000. Such number of shares of the
Series A Preferred Stock may be increased or decreased by resolution of the
Board of Directors; PROVIDED that no decrease shall reduce the number of shares
of Series A Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares issuable upon exercise or conversion of
outstanding rights, options or other securities issued by the Corporation.
<PAGE>
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends
payable on January 1, April 1, July 1 and October 1 of each year (each
such date being referred to herein as a "QUARTERLY DIVIDEND PAYMENT
DATE"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of any share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of $1.00 and subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends or other distributions and 100 times the
aggregate per share amount of all non-cash dividends or other
distributions (other than a dividend payable in shares of Common Stock,
par value $0.01 per share, of the Corporation (the "COMMON STOCK") or a
subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise)), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. If the
Corporation shall at any time after March 13, 2000 (the "RIGHTS
DECLARATION DATE") pay any dividend on Common Stock payable in shares
of Common Stock or effect a subdivision or combination of the
outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under clause
2(a)(ii) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph 2(a) above
immediately after it declares a dividend or distribution on the Common
Stock (other than as described in clauses 2(a)(ii)(A) and 2(a)(ii)(B)
above); PROVIDED that if no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date (or, with respect to the first Quarterly Dividend Payment
Date, the period between the first issuance of any share or fraction of
a share of Series A Preferred Stock and such first Quarterly Dividend
Payment Date), a dividend of $1.00 per share on the Series A
2
<PAGE>
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares
of Series A Preferred Stock, unless the date of issue of such shares is
on or before the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue and
be cumulative from the date of issue of such shares, or unless the date
of issue is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and on or before such Quarterly Dividend Payment
Date, in which case dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on shares of Series A Preferred
Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall not be more than 60 days prior to the date fixed for the
payment thereof.
SECTION 3. VOTING RIGHTS. In addition to any other voting rights
required by law, the holders of shares of Series A Preferred Stock shall have
the following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of stockholders
of the Corporation. If the Corporation shall at any time after the
Rights Declaration Date pay any dividend on Common Stock payable in
shares of Common Stock or effect a subdivision or combination of the
outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number
of shares of Common Stock that were outstanding immediately prior to
such event.
3
<PAGE>
(b) Except as otherwise provided herein or by law, the holders
of shares of Series A Preferred Stock and the holders of shares of
Common Stock shall vote together as a single class on all matters
submitted to a vote of stockholders of the Corporation.
(c) (i) If at any time dividends on any Series A Preferred
Stock shall be in arrears in an amount equal to six quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of
a period (herein called a "DEFAULT PERIOD") which shall extend until
such time when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly dividend
period on all shares of Series A Preferred Stock then outstanding shall
have been declared and paid or set apart for payment. During each
default period, all holders of Preferred Stock and any other series of
Preferred Stock then entitled as a class to elect directors, voting
together as a single class, irrespective of series, shall have the
right to elect two Directors.
(ii) During any default period, such voting right of
the holders of Series A Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph
3(c)(iii) hereof or at any annual meeting of stockholders, and
thereafter at annual meetings of stockholders; PROVIDED that
neither such voting right nor the right of the holders of any
other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be
exercised unless the holders of 10% in number of shares of
Preferred Stock outstanding shall be present in person or by
proxy. The absence of a quorum of holders of Common Stock
shall not affect the exercise by holders of Preferred Stock of
such voting right. At any meeting at which holders of
Preferred Stock shall exercise such voting right initially
during an existing default period, they shall have the right,
voting as a class, to elect Directors to fill such vacancies,
if any, in the Board of Directors as may then exist up to two
Directors or, if such right is exercised at an annual meeting,
to elect two Directors. If the number which may be so elected
at any special meeting does not amount to the required number,
the holders of the Preferred Stock shall have the right to
make such increase in the number of Directors as shall be
necessary to permit the election by them of the required
number. After the holders of the Preferred Stock shall have
exercised their right to elect Directors in any default period
and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote
of the holders of Preferred Stock as herein provided or
4
<PAGE>
pursuant to the rights of any equity securities ranking senior
to or PARI PASSU with the Series A Preferred Stock.
(iii) Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised
their right to elect Directors, the Board of Directors may
order, or any stockholder or stockholders owning in the
aggregate not less than 10% of the total number of shares of
Preferred Stock outstanding, irrespective of series, may
request, the calling of a special meeting of holders of
Preferred Stock, which meeting shall thereupon be called by
the President, a Vice President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting
at which holders of Preferred Stock are entitled to vote
pursuant to this paragraph 3(c)(iii) shall be given to each
holder of record of Preferred Stock by mailing a copy of such
notice to him at his last address as the same appears on the
books of the Corporation. Such meeting shall be called for a
time not earlier than 20 days and not later than 60 days after
such order or request or in default of the calling of such
meeting within 60 days after such order or request, such
meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than 10% of the
total number of shares of Preferred Stock outstanding,
irrespective of series. Notwithstanding the provisions of this
paragraph 3(c)(iii), no such special meeting shall be called
during the period within 60 days immediately preceding the
date fixed for the next annual meeting of stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the Corporation if
applicable, shall continue to be entitled to elect the whole
number of Directors until the holders of Preferred Stock shall
have exercised their right to elect two Directors voting as a
class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided
in paragraph 3(c)(ii) hereof) be filled by vote of a majority
of the remaining Directors theretofore elected by the holders
of the class of stock which elected the Director whose office
shall have become vacant. References in this paragraph 3(c) to
Directors elected by the holders of a particular class of
stock shall include Directors elected by such Directors to
fill vacancies as provided in clause (y) of the foregoing
sentence.
5
<PAGE>
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock as a
class to elect Directors shall cease, (y) the term of any
Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such
number as may be provided for in the certificate of
incorporation or bylaws irrespective of any increase made
pursuant to the provisions of paragraph 3(c)(ii) hereof (such
number being subject, however, to change thereafter in any
manner provided by law or in the certificate of incorporation
or bylaws). Any vacancies in the Board of Directors effected
by the provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining
Directors.
(d) The Certificate of Incorporation of the Corporation shall
not be amended in any manner (whether by merger or otherwise) so as to
adversely affect the powers, preferences or special rights of the
Series A Preferred Stock without the affirmative vote of the holders of
a majority of the outstanding shares of Series A Preferred Stock,
voting separately as a class.
(e) Except as otherwise provided herein, holders of Series A
Preferred Stock shall have no special voting rights, and their consent
shall not be required for taking any corporate action.
SECTION 4. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on outstanding
shares of Series A Preferred Stock shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
dividends paid ratably on the Series A
6
<PAGE>
Preferred Stock and all such other parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then
entitled;
(iii) redeem, purchase or otherwise acquire for value
any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock; PROVIDED that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of stock of the
Corporation ranking junior (as to dividends and upon
dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value
any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A
Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board
of Directors) to all holders of Series A Preferred Stock and
all such other parity stock upon such terms as the Board of
Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for value any shares of
stock of the Corporation unless the Corporation could, under paragraph
4(a), purchase or otherwise acquire such shares at such time and in
such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock without designation as to series and may be
reissued as part of a new series of Preferred Stock to be created by resolution
or resolutions of the Board of Directors as permitted by the Certificate of
Incorporation or as otherwise permitted under Delaware Law.
SECTION 6. LIQUIDATION, DISSOLUTION AND WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made
7
<PAGE>
(1) to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock
unless, prior thereto, the holders of shares of Series A Preferred Stock shall
have received $1.00 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment; PROVIDED that the holders of shares of Series A Preferred Stock
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of Common Stock, or (2) to the
holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all such
other parity stock in proportion to the total amounts to which the holders of
all such shares are entitled upon such liquidation, dissolution or winding up.
If the Corporation shall at any time after the Rights Declaration Date pay any
dividend on Common Stock payable in shares of Common Stock or effect a
subdivision or combination of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. If the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged for or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash or any other property, as the case may be, into which or for
which each share of Common Stock is changed or exchanged. If the Corporation
shall at any time after the Rights Declaration Date pay any dividend on Common
Stock payable in shares of Common Stock or effect a subdivision or combination
of the outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each such
case the amount set forth in the preceding sentence with respect to the exchange
or change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
8
<PAGE>
SECTION 8. NO REDEMPTION. The Series A Preferred Stock shall not be
redeemable.
SECTION 9. RANK. The Series A Preferred Stock shall rank junior (as to
dividends and upon liquidation, dissolution and winding up) to all other series
of the Corporation's preferred stock except any series that specifically
provides that such series shall rank junior to the Series A Preferred Stock.
SECTION 10. FRACTIONAL SHARES. Series A Preferred Stock may be issued
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
9
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
this 15th day of March, 2000.
/s/ James M. Kilts
--------------------------------------------
Name: James M. Kilts
Title: President and Chief Executive Officer
Attest:
/s/ James A. Kirkman III
- ----------------------------------------
Name: James A. Kirkman III
Title: Senior Vice President,
General Counsel and Secretary
10
<PAGE>
Exhibit 3.2
NABISCO GROUP HOLDINGS CORP.
BY-LAWS
As Amended Effective January 1, 2000
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders of the
Corporation shall be held at such place either within or without the State of
Delaware as the Board of Directors may determine.
Section 2. ANNUAL AND SPECIAL MEETINGS. Annual meetings of
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors and
to transact such other business as may properly come before the meeting. Special
meetings of stockholders may be called by the Chairman for any purpose and shall
be called by the Chairman or the Secretary if directed by the Board of Directors
or requested in writing by holders of not less than 25% of the common stock of
the Corporation. Each such stockholder request shall state the purpose of the
proposed meeting.
Section 3. NOTICE. Except as otherwise provided by law or by the
Certificate of Incorporation, written notice shall be given to each stockholder
entitled to vote at least 10 and not more than 60 days before each meeting of
stockholders, such notice to include the time, date and place of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called.
Section 4. QUORUM. At any meeting of stockholders, the holders
of record, present in person or by proxy, of a majority of the Corporation's
stock issued and outstanding and entitled to vote shall constitute a quorum for
the transaction of business, except as otherwise provided by law or by the
Certificate of Incorporation. In the absence of a quorum, any officer entitled
to preside at or to act as secretary of the meeting shall have power to adjourn
the meeting from time to time until a quorum is present.
<PAGE>
Section 5. CONDUCT OF MEETING AND ORDER OF BUSINESS. The
Chairman or, at the Chairman's request, the Chief Executive Officer, shall act
as chairman at all meetings of stockholders. The Secretary of the Corporation
or, in his or her absence, an Assistant Secretary shall act as secretary at all
meetings of stockholders. The chairman of the meeting shall have the right and
authority to determine and maintain the rules, regulations and procedures for
the proper conduct of the meeting, including but not limited to restricting
entry to the meeting after it has commenced, maintaining order and the safety of
those in attendance, opening and closing the polls for voting, dismissing
business not properly submitted, and limiting time allowed for discussion of the
business of the meeting.
Business to be conducted at annual meetings of stockholders
shall be limited to that properly submitted to the meeting either by or at the
direction of the Board of Directors or by any stockholder of the Corporation who
shall be entitled to vote at such meeting and who complies with the notice
requirements set forth in Section 6 of this Article I. If the chairman of the
meeting shall determine that any business was not properly submitted in
accordance with the terms of Section 6 of this Article I, he or she shall
declare to the meeting that such business was not properly submitted and would
not be transacted at that meeting.
Section 6. ADVANCE NOTICE OF STOCKHOLDER PROPOSALS. In order to
properly submit any business to an annual meeting of stockholders, a stockholder
must give timely notice in writing to the Secretary of the Corporation. To be
considered timely, a stockholder's notice must be delivered either in person or
by United States certified mail, postage prepaid, and received at the principal
executive offices of the Corporation (a) not less than 60 days nor more than 90
days before the first anniversary of the Corporation's last annual meeting of
stockholders or (b) 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
such anniversary date, not less than a reasonable time, as determined by the
Board of Directors, prior to the date of the applicable annual meeting. In no
event shall the public announcement of a postponement or adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above.
Nomination of persons for election to the Board of Directors may
be made by the Board of Directors or any committee designated by the Board of
Directors or by any stockholder entitled to vote for the election of directors
at the applicable meeting of stockholders. However, nominations other than those
made by the Board of Directors or its designated committee must comply with the
procedures set forth in this Section 6, and no person shall be eligible for
election as a director unless nominated in accordance with the terms of this
Section 6.
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A stockholder may nominate a person or persons for election to
the Board of Directors by giving written notice to the Secretary of the
Corporation in accordance with the procedures set forth above. In addition to
the timeliness requirements set forth above for notice to the Corporation by a
stockholder of business to be submitted at an annual meeting of stockholders,
with respect to any special meeting of stockholders called for the election of
directors, written notice must be delivered in the manner specified above and
not later than the close of business on the seventh day following the date on
which notice of such meeting is first given to stockholders.
The Secretary of the Corporation shall deliver any stockholder
proposals and nominations received in a timely manner for review by the Board of
Directors or a committee designated by the Board of Directors.
A stockholder's notice to submit business to an annual meeting
of stockholders shall set forth (i) the name and address of the stockholder,
(ii) the class and number of shares of stock beneficially owned by such
stockholder, (iii) the name in which such shares are registered on the stock
transfer books of the Corporation, (iv) a representation that the stockholder
intends to appear at the meeting in person or by proxy to submit the business
specified in such notice, (v) any material interest of the stockholder in the
business to be submitted and (vi) a brief description of the business desired to
be submitted to the annual meeting, including the complete text of any
resolutions to be presented at the annual meeting, and the reasons for
conducting such business at the annual meeting. In addition, the stockholder
making such proposal shall promptly provide any other information reasonably
requested by the Corporation.
In addition to the information required above to be given by a
stockholder who intends to submit business to a meeting of stockholders, if the
business to be submitted is the nomination of a person or persons for election
to the Board of Directors then such stockholder's notice must also set forth, as
to each person whom the stockholder proposes to nominate for election as a
director, (a) the name, age, business address and, if known, residence address
of such person, (b) the principal occupation or employment of such person, (c)
the class and number of shares of stock of the Corporation which are
beneficially owned by such person, (d) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors or is otherwise required by the rules and regulations of the
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934, as amended, (e) the written consent of such person to be named in the
proxy statement as a nominee and to serve as a director if elected and (f) a
description of all arrangements or understandings between such stockholder and
each nominee and any other person
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or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder.
Any person nominated for election as director by the Board of
Directors or any committee designated by the Board of Directors shall, upon the
request of the Board of Directors or such committee, furnish to the Secretary of
the Corporation all such information pertaining to such person that is required
to be set forth in a stockholder's notice of nomination.
Notwithstanding the foregoing provisions of this Section 6, a
stockholder who seeks to have any proposal included in the Corporation's proxy
statement shall comply with the requirements of Regulation 14A under the
Securities Exchange Act of 1934, as amended.
Section 7. VOTING. Except as otherwise provided by law or by the
Certificate of Incorporation, all matters submitted to a meeting of stockholders
shall be decided by vote of the holders of record, present in person or by
proxy, of a majority of the Corporation's stock issued and outstanding and
entitled to vote.
A proxy shall be executed in writing by the stockholder or by
his or her duly authorized attorney-in-fact and shall be delivered to the
secretary of the meeting at or prior to the time designated by the chairman of
the meeting. No stockholder may designate more than four persons to act on his
or her behalf at a meeting of stockholders.
Section 8. INSPECTORS OF ELECTION. Prior to any meeting of
stockholders, the Board of Directors shall appoint one or more inspectors to act
at the meeting and make a written report thereof in accordance with the Delaware
General Corporation Law. The Board of Directors may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath to execute faithfully the duties of inspector with strict
impartiality and according to the best of his or her ability.
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ARTICLE II
DIRECTORS
Section 1. NUMBER, ELECTION AND REMOVAL OF DIRECTORS. The number
of Directors that shall constitute the Board of Directors shall be not less than
one nor more than seventeen. The first Board of Directors shall consist of three
Directors. Thereafter, within the limits specified above, the number of
Directors shall be determined by the Board of Directors or by the stockholders.
The Directors shall be elected by the stockholders at their annual meeting and
shall serve until the next annual meeting of stockholders and until their
successors are elected and shall qualify. Vacancies and newly created
directorships resulting from any increase in the number of Directors may be
filled by a majority of the Directors then in office, although less than a
quorum, or by the sole remaining Director or by the stockholders, and any
Director so chosen shall serve until the next annual meeting of stockholders and
until his or her successor shall be elected and shall qualify. A Director may be
removed with or without cause by the stockholders.
Section 2. MEETINGS. Regular meetings of the Board of Directors
shall be held at such times and places as may from time to time be fixed by the
Board of Directors or as may be specified in a notice of meeting. Special
meetings of the Board of Directors may be held at any time upon the call of the
Chairman or the Chief Executive Officer and shall be called by the Chairman, the
Chief Executive Officer or the Secretary if directed by the Board of Directors.
A meeting of the Board of Directors may be held without notice immediately after
the annual meeting of stockholders. Notice need not be given of regular or
special meetings of the Board of Directors.
Section 3. QUORUM. One-third of the total number of Directors
shall constitute a quorum for the transaction of business. If a quorum is not
present at any meeting of the Board of Directors, the Directors present may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until such a quorum is present. Except as otherwise provided by
law, the Certificate of Incorporation of the Corporation, these By-Laws or any
contract or agreement to which the Corporation is a party, the act of a majority
of the Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors.
Section 4. EXECUTIVE COMMITTEE. The Board of Directors, by
resolution adopted by a majority of the entire Board, may appoint from among its
members an Executive Committee consisting of the Chief Executive Officer, if
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such officer is a member of the Board of Directors, or the Chairman, if the
Chief Executive Officer is not a member of the Board of Directors, and at least
two other Directors. Meetings of the Executive Committee shall be held without
notice at such dates, times and places as shall be determined by the Executive
Committee. The Executive Committee shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation that are permitted by law to be exercised by a
committee of the Board of Directors, including the power to declare dividends,
to authorize the issuance of stock and to adopt a certificate of ownership and
merger of parent corporation and subsidiary or subsidiaries; provided, however,
that the Executive Committee shall not have the power or authority of the Board
of Directors in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation with respect to the Corporation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
amending the By-Laws of the Corporation or adopting a certificate of ownership
and merger of the Corporation (other than a certificate of ownership and merger
of parent corporation and subsidiary or subsidiaries). The majority of the
members of the Executive Committee shall constitute a quorum. Minutes shall be
kept of the proceedings of the Executive Committee, which shall be reported at
meetings of the Board of Directors. The Executive Committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors of the Corporation, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series.
Section 5. OTHER COMMITTEES OF DIRECTORS. The Board of Directors
may, by resolution adopted by a majority of the Board of Directors, designate
one or more other committees to have and exercise such power and authority as
the Board of Directors shall specify. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or she or they constitute a
quorum, may unanimously appoint another Director to act at the meeting in place
of any such absent or disqualified member.
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ARTICLE III
OFFICERS
Section 1. DESCRIPTION AND TERMS. The officers of the
Corporation shall be the President, who shall be the Chief Executive Officer of
the Company, a Secretary, a Treasurer and such other additional officers with
such titles as the Board of Directors shall determine, all of whom shall be
chosen by and serve at the pleasure of the Board of Directors; provided that the
Chief Executive Officer may appoint Senior Vice Presidents, Vice Presidents or
Assistant Officers at his or her discretion. Subject to such limitations as may
be imposed by the Board of Directors, the Chief Executive Officer shall have
full executive power and authority with respect to the Corporation. The
President, if separate from the Chief Executive Officer, shall have such powers
and authority as the Chief Executive Officer may determine. If the Chief
Executive Officer is absent or incapacitated, the Executive Committee shall
determine the person who shall have all the power and authority of the Chief
Executive Officer. Other officers shall have the usual powers and shall perform
all the usual duties incident to their respective offices. All officers shall be
subject to the supervision and direction of the Board of Directors. The
authority, duties or responsibilities of any officer of the Corporation may be
suspended by the Chief Executive Officer with or without cause. Any officer
elected or appointed by the Board of Directors may be removed by the Board of
Directors with or without cause. Subject to such limitations as the Board of
Directors may provide, each officer may further delegate to any other officer or
any employee or agent of the Corporation such portions of his or her authority
as the officer shall deem appropriate, subject to such limitation as the officer
shall specify, and may revoke such authority at any time.
Section 2. STOCKHOLDER CONSENTS AND PROXIES. The Chairman, the
Chief Executive Officer, each Vice Chairman, the President, the Secretary and
the Treasurer, or any one of them, shall have the power and authority on behalf
of the Corporation to execute any stockholders' consents or proxies and to
attend and act and vote in person or by proxy at any meetings of stockholders of
any corporation in which the Corporation may own stock, and at any such meetings
shall possess and may exercise any and all of the rights and powers incident to
the ownership of such stock which as the owner thereof the Corporation might
have possessed and executed if present. The Board of Directors by resolution
from time to time may confer like powers upon any other officer.
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ARTICLE IV
INDEMNIFICATION
To the fullest extent permitted by the Delaware General
Corporation Law, the Corporation shall indemnify any current or former Director
or officer of the Corporation and may, at the discretion of the Board of
Directors, indemnify any current or former employee or agent of the Corporation
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or her in connection
with any threatened, pending or completed action, suit or proceeding brought by
or in the right of the Corporation or otherwise, to which he or she was or is a
party or is threatened to be made a party by reason of his or her current or
former position with the Corporation or by reason of the fact that he or she is
or was serving, at the request of the Corporation, as a director, officer,
partner, trustee, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The right to indemnification conferred in
this Article shall be a contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any such action, suit or
proceeding in advance of its final disposition unless such action, suit or
proceeding was initiated by the person seeking advances of expenses or was
brought by or in the right of the Corporation with the approval of the Board of
Directors or the Chief Executive Officer; provided however, that if the Delaware
General Corporation Law then so requires, the payment of such expenses incurred
by a Director or officer of the Corporation in advance of the final disposition
of such action, suit or proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such Director or officer, to
repay all amounts so advanced if it should be determined ultimately that such
Director or officer is not entitled to be indemnified under this Article or
otherwise.
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ARTICLE V
GENERAL PROVISIONS
Section 1. NOTICES. Whenever any statute, the Certificate of
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notice is to be given in writing by mail, addressed to such
Director or stockholder at his or her address as it appears on the records of
the Corporation, with postage thereon prepaid. Such notice shall be deemed to
have been given when it is deposited in the United States mail. Notice to
Directors may also be given by telegram or facsimile transmission or be
delivered personally or by telephone.
Section 2. FISCAL YEAR. The fiscal year of the Corporation shall
be fixed by the Board of Directors.
Section 3. CERTIFICATES OF STOCK. Certificates representing
shares of the Corporation shall be signed by the Chairman or the Chief Executive
Officer and by the Secretary or an Assistant Secretary. Any and all signatures
on such certificates, including signatures of officers, transfer agents and
registrars, may be facsimile.
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Exhibit 10.47
[LETTERHEAD OF NABISCO GROUP HOLDINGS]
October 27, 1999
Steven F. Goldstone
Chairman and Chief Executive Officer
Nabisco Group Holdings Corp.
Dear Steven:
This letter agreement (together with Schedule A hereto, the "Agreement")
constitutes the entire agreement between NABISCO GROUP HOLDINGS CORP. (the
"Company"), its predecessors, successors, affiliates, former affiliates
and/or assigns, and you regarding the termination of your employment
relationship with the Company. It implements the provisions of your
Amended and Restated Employment Agreement dated January 1, 1997 (the
"Employment Agreement").
Please read the rest of this letter carefully. If you agree to be bound by
its terms, please sign the copy of this letter agreement where indicated
and return it to me by November 15, 1999.
1. a) You will continue as a regular full-time employee through your
"Termination Date" of December 30, 1999. Effective December 31,
1999, you will cease to be actively employed as Chief Executive
Officer of the Company, although you will continue to serve as
(non-executive) Chairman of the Board of Directors of the Company.
b) As soon as practicable following your Termination Date and unless
otherwise deferred by you under a deferral plan provided by the
Company and/of its affiliates, you shall receive a lump sum
Severance Payment. You specifically acknowledge that upon receipt of
your Severance Payment, any Company obligation to make a cash
severance payment to you shall have been satisfied.
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c) Your "Benefit Continuation", as summarized below, commences December
31, 1999 and continues through December 31, 2002. Except as
otherwise noted, Benefit Continuation as described herein continues
through December 31, 2002 regardless of whether or not you become
employed by an employer not affiliated with the Company.
2. If you die during Benefit Continuation, any survivor benefits shall be
governed by the terms of applicable individual benefit plan provisions. If
you die before December 31, 1999, any survivor benefits shall be
determined in accordance with Section 6.3 of the Employment Agreement.
3. The Company will make a lump-sum payment to you in January 2000, in
satisfaction of the Company's obligation with respect to your unused and
accrued vacation days. You will not accrue any further vacation after
December 30, 1999.
4. During Benefit Continuation, you may continue to participate in the
employee welfare benefit programs in which you participated as of your
Termination Date except as otherwise provided in this Agreement or by the
terms of the individual program. You may participate as though you were an
active employee, subject to applicable contributions by you. The term
"employee welfare benefit programs" does not include the SELECT Short Term
or Long Term Disability Plans, the Annual Incentive Award Plan ("AlA"),
the Long Term Incentive Plan ("LTIP"), the Retirement Plan for Employees
of RJR Nabisco, Inc. ("PEP") or the Capital Investment Plan ("CIP"), the
dispositions of which are detailed in other provisions of this Agreement.
Unless otherwise specified by the Company in its sole discretion, changes
in the employee welfare benefit programs after the date of this letter
will not apply to you, unless otherwise required by law. New benefit
programs which replace or supercede current programs will apply to you if
the Company chooses not to continue to make the current programs available
to employees; provided however such employee welfare benefit programs
shall be no less favorable, in the aggregate, than provided to you on the
date of this Agreement.
5. a) Your participation in the Company's Executive Medical Plan and in
the SELECT Flexible Benefits Program will continue until December
31, 2002, provided you make any required Plan contributions in the
manner
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specified by the Company. If your Benefits Continuation period
continues into a new SELECT Plan Year, you will be required to
re-enroll in the same manner as active employees. Should you become
employed by an employer not affilated with the Company, health care
coverage provided by your new employer will be coordinated with
health care benefits provided by the Company. If you elect COBRA
(Consolidated Omnibus Budget Reconciliation Act of 1985)
continuation coverage under SELECT after December 31, 2002, the
monthly premium will be equal to the full 102% of the then actual
plan cost. Specific costs and details will be provided on request.
You may elect COBRA coverage for 18 months.
b) You will not be eligible for Short or Long Term Disability benefits
during Benefits Continuation.
c) If at the end of your Benefit Continuation the Company provides
retiree medical, dental and/or life insurance for its retirees, you
shall be eligible for such insurance at the Company and retiree
contribution rate for a retiree (i) of your actual age and (ii) with
service equal to the maximum creditable years of service.
6. You are fully vested in your account under the CIP. Your lump sum
Severance Payment is compensation subject to elective contributions to
CIP. If and to the extent that your lump sum Severance Payment is not
recognized as compensation under CIP, a non-qualified Company matching
payment will be made to you in accordance with your elected deferral
percentage. This non-qualified Company matching payment will be
distributed to you as soon as possible following your Termination Date,
less withholding taxes and other applicable deductions, unless otherwise
deferred by you under a deferral plan provided by the Company and/or its
affiliates. Following your Termination Date, you may elect to receive a
distribution of your CIP account balance in accordance with the terms of
CIP. If you elect to leave your account balance in CIP, you will retain
all rights under the Plan as a terminated employee, including the right to
transfer investments between fluids and to request a distribution from
CIP.
7. a) You are fully vested in the PEP. You are also entitled to a
Supplemental Pension pursuant to Section 5 of the Employment
Agreement Annuities representing the after-tax lump sum value of
your Supplemental Pension accrued benefit as of December 31, 1998
have already been purchased for your benefit and are held in the
Excess Benefit Master Trust dated
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February 5, 1988, as amended through January 27, 1989 (the "Secular
Trust"). The annuities will be delivered to you on or about December 31,
1999 (your "Retirement Date").
b) As provided in Section 5 of the Employment Agreement, on or about
your Retirement Date the Company shall fully fund and deliver to you
the after-tax lump sum value of the Supplemental Pension benefit
provided in Section 5(d)(ii) of the Employment Agreement. The
funding may be accomplished by direct cash payment to you or by the
purchase of additional annuities subject to the terms of Section 5
of the Employment Agreement.
8. a) You will be paid the full value of your Flexible Perquisite Program
for a period of tree years in a lump sum as soon as practicable
following your Termination Date. This lump sum payment shall not be
included in any benefit plan calculations.
b) No new car or lease will be provided during Benefit Continuation;
provided, however, the car currently leased for you by the Company
shall be transferred to you as soon a practicable following your
Termination Date, plus a cash tax equalization payment equal to the
applicable tax liability to you of such transfer (and equalization
payments) as determined by the Company. Car related expenses after
the foregoing transfer shall be your responsibility. Company car
insurance under the Flexible Perquisite Program shall be available
to you during the Benefit Continuation provided applicable premiums
are paid by you.
9. a) The Paragon Group Universal Life Insurance policies on your life may
be retained by the respective insurance trusts after your
Termination Date by payment of applicable premium Details regarding
direct billing to the insurance rusts will be made available prior
to your Termination Date.
b) In connection with the $3,000,000 of life insurance coverage
provided under the Equitable Variable Life Insurance contract
pursuant to Section 4.5 of the Employment Agreement, the payments
required under Section 4.5(a) of the Employment Agreement will be
made to you (rather than to the owner of the policy) by the Company
on a tax adjusted basis as provided in Section 4.5(b) of the
Employment Agreement provided, however, that the Company's
obligation to make each payment required under Section 4.5(a) of the
Employment Agreement shall be contingent
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upon an amount equal to the immediately preceding payment (exclusive
of any such tax adjustment payment) being invested in said contract
prior to such next payment.
10. a) Your annual bonus for 1999 will be determined pursuant to the
Performance Unit Grant Agreement dated March 19,1999 and, unless
otherwise deferred by you under a deferral plan provided by the
Company and/or its affiliates, will be paid as soon as practicable
following your Termination Date at 150% of target. This payment is
includable for benefit calculation purposes. Your lump sum Severance
Payment described above includes a full payment for annual bonuses
for the full period of severance, so no further payment for annual
bonuses will be made after your Termination Date.
b) Your previously awarded Special Bonus has been credited for your
benefit under Nabisco's Deferred Compensation Plan. The Special
Bonus is not includable in any benefit plan calculations.
11. a) Your unvested stock options, if any, will be fully vested on your
Termination Date, and your vested stock options may be exercised
anytime up to the exercise expiration date. The exercise of your
stock options is governed by the terms of your Stock Option
Agreements and the LTIP.
b) Your Performance Notes will be fully vested on your Termination Date
and shall be calculated and paid as soon as practicable following
your Termination Date in accordance with your applicable Performance
Note Agreements, unless otherwise deferred by you under a deferral
plan provided by the Company and/or its affiliates. Your Performance
Notes are includable for benefit calculation purposes.
c) As part of the "Chairmanship Agreement" between you and the Company
dated as of January 1,2000, the restricted stock agreement between
you and the Company dated January 15, 1999 (the "Restricted Stock
Agreement") is mended to provide that the Restricted Stock shall not
vest on your Termination Date. The Restricted Stock shall vest upon
termination of the Chairmanship Agreement, unless you voluntarily
terminate the Chairmanship Agreement without the consent of the
Company's Board of Directors. Except for the foregoing, the terms of
the
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Restricted Stock Agreement (including the vesting provisions in
Section 3 therein) shall remain in full force and effect.
d) Your Contingent Performance Share Agreement, as amended and restated
effective July 14, 1999 will remain in effect subject to the terms
thereof.
12. Following termination of the Chairmanship Agreement, the Company will
provide you with a fully functional office and one secretary until you
attain age sixty-five (65) and will hold you harmless from any taxes that
may be due as a result of this arrangement. The office will be located at
570 Lexington Ave., New York, NY (the Company's New York headquarters)
unless otherwise agreed by the parties hereto.
13. You are entitled to the use of the outplacement counseling services
designated by the Company for a period of twelve (12) months after your
Termination Date for which the Company will pay the fee, which may not
exceed 18% of your Base Salary (as set forth in Section 3.1 of the
Employment Agreement) Such assistance must be started within three (3)
months of your Termination Date and will end twelve (12) months after
commencement of such services or upon your acceptance of new employment,
whichever comes first. This benefit may not be converted into a cash
award.
14. a) You have outstanding indebtedness to Nabisco Group Holdings Corp.
under a secured "Promissory Note" dated December 5, 1995. The
indebtedness becomes due and payable on your Termination Date and,
at your election, may be satisfied by either (i) a cash payment by
you to Nabisco Group Holdings Corp. or (ii) the sale of
collateralized stock and use of the proceeds to repay the
indebtedness. If and to the extent that, the indebtedness exceeds
the sale proceeds you will be responsible to repay the remaining
indebtedness in accordance with the terms of the Promissory Note.
b) You have outstanding indebtedness to Nabisco Holdings Corp. under a
secured promissory note dated May 15, 1996 (The "NHC Promissory
Note"). The indebtedness becomes due and payable when your service
as a director terminates and, at your election, may be satisfied by
either (i) a cash payment by you to Nabisco Holdings Corp. or (ii)
the sale of collateralized stock and use of the proceeds to repay
the indebtedness. If,
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and to the extent that, the indebtedness exceeds the sale proceeds
you will be responsible to repay the remaining indebtedness in
accordance with the terms of the NHC Promissory Note.
15. The provisions of Section 6.1(c) of the Employment Agreement (regarding
golden parachute tax) shall apply in the event that any "golden parachute"
tax is imposed on you by any federal, state or local taxing authority as a
result of any of the payments made to you by the Company in connection
with your employment under the Employment Agreement. You agree to
cooperate fully with the Company in any protest or appeal by the Company
in the event of the imposition of such golden parachute tax.
16. Section 4.3 of the Employment Agreement (regarding Directors and Officers
liability and indemnification programs) shall remain in full force and
effect.
17. a) The provisions of Section 14 of the Employment Agreement (regarding
non-disclosure of confidential information and non-competition) will
remain in effect in accordance with its terms.
b) You agree that any breach of the covenants contained or referred to
in this Section 17 would irreparably injure the Company.
Accordingly, the Company may, in addition to pursuing any other
remedies it may have in law or in equity obtain an injunction
against you from any court having jurisdiction over the matter,
restraining any further violation of this letter agreement by you.
18. Except as otherwise stated herein, no benefits (other than those provided
by a tax-qualified plan or trust) or promise hereunder shall be secured by
any specific assets of the Company. The payments under this Agreement
shall not be assigned by you or anticipated in any way and any such
attempted assignment will be void.
19. IN CONSIDERATION OF THE PAYMENT OF THE COMPENSATION AND BENEFITS SET FORTH
IN THIS AGREEMENT AND PURSUANT TO YOUR EMPLOYMENT AGREEMENT, YOU
VOLUNTARILY, KNOWINGLY AND WILLINGLY RELEASE AND FOREVER DISCHARGE THE
COMPANY, ITS PARENTS, SUBSIDIARIES AND AFFILIATES, TOGETHER WITH THEIR
RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS, AND
EACH OF
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THEIR PREDECESSORS, SUCCESSORS AND ASSIGNS, FROM ANY AND ALL CHARGES,
COMPLAINTS, CLAIMS, PROMISES, AGREEMENTS, CONTROVERSIES, CAUSES OF ACTION
AND DEMANDS OF ANY NATURE WHATSOEVER WHICH AGAINST THEM YOU OR YOUR
EXECUTORS, ADMINISTRATORS, SUCCESSORS OR ASSIGNS EVER HAD, NOW HAVE OR
HEREAFTER CAN, SHALL OR MAY HAVE BY REASON OF ANY MATTER, CAUSE OR THING
WHATSOEVER ARISING TO THE TIME YOU SIGN THIS AGREEMENT. YOU FURTHER AGREE
THAT YOU WILL NOT SEEK OR BE ENTITLED TO ANY AWARD OF EQUITABLE OR
MONETARY RELIEF IN ANY PROCEEDING OF ANY NATURE BROUGHT ON YOUR BEHALF
ARISING OUT OF ANY OF THE MATTERS RELEASED BY THIS PARAGRAPH. THIS RELEASE
INCLUDES, BUT IS NOT LIMITED TO, ANY RIGHTS OR CLAIMS RELATING IN ANY WAY
TO YOUR EMPLOYMENT RELATIONSHIP WITH THE COMPANY, OR THE TERMINATION
THEREOF, OR UNDER ANY STATUTE, INCLUDING THE AGE DISCRIMINATION IN
EMPLOYMENT ACT, TITLE VII OF THE CIVIL RIGHTS ACT, THE AMERICANS WITH
DISABILITIES ACT, THE NEW YORK STATE AND CITY HUMAN RIGHTS LAWS OR ANY
OTHER FEDERAL, STATE OR LOCAL LAW.
20. By signing this Agreement, you represent that you have not commenced any
proceeding against the Company in any forum (administrative or judicial)
concerning your employment or the termination thereof. You further
acknowledge that you were given sufficient notice under the Worker
Adjustment and Retraining Notification Act (the "WARN Act") and that the
termination of your employment does not give rise to any claim or right to
notice, or pay or benefits in lieu of notice under the WARN Act. In the
event any WARN Act issue does exist or arises in the future, you agree and
acknowledge that the payments and benefits set forth in this Agreement
shall be applied to any pay or benefits in lieu of notice required by the
WARN Act, provided that any such offset shall not impair or affect the
validity of any provision of this Agreement, including the release set
forth in paragraph 19.
21. The Company advises you that you may wish to consult with an attorney of
your choosing prior to signing this Agreement. You understand and agree
that you have the right and have been given the opportunity to review this
Agreement and, specifically, the release in paragraph 19, with an attorney
of
-8-
<PAGE>
your choice should you so desire. You have entered into this Agreement
freely, knowingly and voluntarily and specifically in consideration of the
additional benefits provided to you under the Agreement.
22. You will be reimbursed for travel, food, lodging or similar out-of-pocket
expense incurred at the Company's request in discharging any of your
obligations under this Agreement. The Company, or its designated
representative thereof, shall have exclusive authority to interpret this
Agreement. The decision of the Company, or its designated representative,
with respect to any question arising as to the amount, term, form and time
of payment of benefits under this Agreement or any other matter concerning
this Agreement shall be final, conclusive and binding on both you and the
Company.
23. This Agreement may not be amended except in writing signed by you and the
Company and no amendments or modifications are contemplated at this time.
This Agreement shall not be construed to provide any rights to anyone
other than you and the Company.
24. You have at least twenty-one days to consider the terms of this Agreement,
although you may sign and return it sooner if you wish. This Agreement may
be revoked by you for a period of seven (7) consecutive calendar days
after you have signed and dated it, and after such seven (7) days, it
becomes final.
Please indicate your acceptance of the terms of this Agreement by signing this
letter and returning it to me.
Sincerely,
NABISCO GROUP HOLDINGS CORP.
/s/ Gerald I. Angowitz
----------------------------------------
Gerald I. Angowitz
Senior Vice President,
Human Resources and Administration
Understood and Agreed:
/s/ Steven F. Goldstone
- -----------------------------------
Date: 10/27/99
------------------------------
-9-
<PAGE>
[LETTERHEAD OF NABISCO GROUP HOLDINGS]
SCHEDULE A
This Schedule A is intended to address the financial implications of certain
provisions of the foregoing Agreement. The items addressed below are subject in
all respects to the terms and conditions of the Agreement.
1) Section 1(b) of the Agreement
Your lump sum Severance Payment will be $7,500,000, less withholding taxes
and other applicable deductions. You may defer your Severance Payment
under a deferral plan provided by the Company and/or its affiliates.
2) Section 3 of the Agreement
As of December 31, 1999, you will have 40 days of unused and accrued
vacation. You will receive a lump-sum payment in January 2000 of $192,308
for these vacation days, based on your annual base salary of $1,250,000.
3) Section 6 of the Agreement
The non-qualified Company matching payment in respect of your Severance
Payment will be approximately $225,000, equal to 3% of your Severance
Payment. This non-qualified Company matching payment will be distributed
to you as soon as possible following your Termination Date, less
withholding taxes and other applicable deductions, unless otherwise
deferred by you under a deferral plan provided by the Company and/or its
affiliates.
4) Section 7 of the Agreement
In accordance with Section 5(d)(ii) of the Employment Agreement, the
Supplemental Pension benefit payable upon your Retirement Date is equal to
the present value of the maximum 50% SERP benefit that would have been
paid to you commencing on the third anniversary of your Retirement Date.
The present value reflects the acceleration of payments by 36 months, but
without any other reduction under the SERP formula for early commencement
of payment prior to age 60.
Based on the maximum Federal, New York State and New York City
(nonresident) tax rates, your Supplemental Pension benefit expressed as an
after-tax lump-sum payment as of your Retirement Date would be
approximately $14.8 million. Annuities representing the after-tax lump
sum
<PAGE>
value of approximately $10.3 million have already been purchased for your
benefit, are held in the Secular Trust and will be distributed to you on
or about December 31, 1999. The supplemental amount required to fully fund
the after-tax lump sum value of your Supplemental Pension benefit is
approximately $8.4 million, of which approximately $3.9 million represents
a tax equalization payment. This amount will be funded and distributed to
you on or about December 31, 1999 and will fully discharge the Company's
obligations to you under Section 5 of the Employment Agreement.
5) Section 8 of the Agreement
The amount of your lump-sum Flexible Perquisite payment is $185,250, less
taxes and applicable deductions, payable as soon as practicable following
your Termination Date, unless otherwise deferred by you under a deferral
plan provided by the Company and/or its affiliates.
6) Section 9(b) of the Agreement
The annual premium on the $3,000,000 of life insurance is approximately
$73,400. Based on the maximum Federal, New York State and New York City
(nonresident) tax rates, the annual tax equalization payment will be
approximately $64,175.
7) Section 10(a) of the Agreement
Your annual bonus for 1999, determined at 150% of target, is $2,575,000.
8) Section 10(b) of the Agreement
Your Special Bonus is $3,000,000, which has been credited for your benefit
under Nabisco's Deferred Compensation Plan.
9) Section 12(a) of the Agreement
The following is an outline of your LTIP stock options:
----------------------------------------------------------------
Grant Exercise
Year Type Outstanding Vested Price
----------------------------------------------------------------
1999 NGH 1,059,876 1,059,876 $17.949
----------------------------------------------------------------
1997 NGH 716,108 716,108 $20.719
----------------------------------------------------------------
1996 NGH 622,702 622,702 $22.406
----------------------------------------------------------------
1995 NGH 311,296 311,296 $19.434
----------------------------------------------------------------
1995 NGH 155,676 155,676 $20.719
----------------------------------------------------------------
1995 NGH 155,665 155,665 $18.069
----------------------------------------------------------------
Total NGH 3,021,323 3,021,323
----------------------------------------------------------------
-2-
<PAGE>
----------------------------------------------------------------
Grant Exercise
Year Type Outstanding Vested Price
----------------------------------------------------------------
1999 NA 100,000 100,000 $39.938
----------------------------------------------------------------
1998 NA 100,000 100,000 $47.625
----------------------------------------------------------------
1997 NA 60,000 60,000 $37.000
----------------------------------------------------------------
1996 NA 200,000 200,000 $33.375
----------------------------------------------------------------
Total NA 460,000 460,000
----------------------------------------------------------------
10) Section 12(b) of the Agreement
Your 1997 Performance Notes are valued at $270,703. Your 1998 Performance
Notes are valued at $305,278.
11) Section 14(a) of the Agreement
As of December 31, 1999, your outstanding indebtedness to Nabisco Group
Holdings Corp is expected to be approximately $642,671, which is secured
by 16,529 shares of Nabisco Group Holdings Corp. common stock and 5,509
shares of R.J. Reynolds Tobacco Holdings, Inc common stock.
12) Section 14(b) of the Agreement
As of December 31, 1999, your outstanding indebtedness to Nabisco Holdings
Corp is expected to be approximately $635,565, which is secured by 14,981
shares of Nabisco Holdings Corp. common stock.
This Schedule A is an integral part of the Agreement and may be amended only by
mutual written agreement of the parties hero.
NABISCO GROUP HOLDINGS CORP.
/s/ Gerald I. Angowitz
----------------------------------------
Gerald I. Angowitz
Senior Vice President,
Human Resources and Administration
Understood and Agreed:
/s/ Steven F. Goldstone
- -----------------------------------
Date: 10/27/99
------------------------------
-3-
<PAGE>
Exhibit 10.50
[LETTERHEAD OF NABISCO GROUP HOLDINGS]
August 10, 1999
David Rickard
40 Riverside Road
Greenwich, CT 06831
Dear Dave:
This letter constitutes the entire agreement between NABISCO GROUP
HOLDINGS CORP. (the "Company"), its predecessors, successors, affiliates,
former affiliates and/or assigns, and you regarding the termination of
your employment relationship with the Company, and implements the
provisions of the Headquarters Protection Program. The severance-related
compensation and/or benefits as described in this letter represent the
Company's entire severance obligation to you and are in lieu of any such
compensation and/or benefits to which you would otherwise have been
entitled under the RJR Nabisco, Inc. Salary and Benefit Continuation
Program (the "SBC"), your non-qualified pension benefits under the
Company's Additional Benefits Plan and Supplemental Benefits Plan and/or
your Employment Agreement dated June 23, 1998 (copy attached) with the
Company.
Please read the rest of this letter carefully; if you agree to be bound by
its terms, please sign the copy of this letter agreement where indicated
on the last page and return it to me by August 31, 1999.
1. a) You specifically acknowledge that you have received your Completion
Bonus of $522,750.00, less withholding taxes and other applicable
deductions, and, therefore, the Company's obligation to pay you a
Completion Bonus has been satisfied. The Completion Bonus is not
includable in any benefit plan calculations.
b) Your Termination Date is August 31, 1999 or such other date as
determined by the Chief Executive Officer of the Company. You will
continue as a regular full-time employee through your Termination Date and
are expected prior to your Termination Date to provide a transition of
your job duties and responsibilities. If you voluntarily quit or are
terminated by
<PAGE>
the Company for violation of Company rules, policies, guides or standards
of conduct before your Termination Date or if you fail to provide
reasonable job transition assistance, as determined by the Senior Vice
President, Human Resources, you will not receive the benefits described
below.
c) Your Benefit Continuation, as summarized below, commences the day after
your Termination Date and continues through August 31, 2002, which will be
your official "Separation Date" for Company records.
As soon as practicable following your Termination Date and unless
otherwise deferred by you under a deferral plan provided by the Company
and/or its affiliates, you shall receive a lump sum Severance Payment of
$2,091,000.00, less withholding taxes and other applicable deductions. You
shall also receive $5,556.00 as a lump sum settlement of your Cost of
Living Adjustment ("COLA") for the period of Benefit Continuation. You
specifically acknowledge that upon receipt of your Severance Payment, any
Company obligation to make a cash severance payment to you shall have been
satisfied.
d) As soon as practicable following your Termination Date and unless
otherwise deferred by you under a deferral plan provided by the Company
and/or its affiliates, you shall receive your Cash Retention Grant from
the Retention Incentive Program in two payments for a total of
$2,614,000.00, less withholding taxes and other applicable deductions. The
Cash Retention Grant shall not be included in any benefit plan
calculations. You specifically acknowledge that upon receipt of your Cash
Retention Grant, the Company's and the Retention Trust's obligation to pay
you such a grant shall have been satisfied.
e) As soon as practicable following your Termination Date and unless
otherwise deferred by you under a deferral plan provided by the Company
and/or its affiliates, you shall receive your Departure Bonus in the
amount of $1,000,000.00, less withholding taxes and other applicable
deductions.
f) Benefit Continuation through your Separation Date is provided in order
to preserve the Company's access to you although you will have been
relieved of all your normal duties and responsibilities. You agree that
you will personally provide reasonable assistance and cooperation in
locating or obtaining information concerning the Company (past or present)
about which you are knowledgeable, and specifically, you will assist your
successor, if any, on an as needed basis.
2
<PAGE>
g) You acknowledge that as of your Termination Date, your active
employment with the Company and/or its affiliates or former affiliates
will end irrevocably and will not resume again at any time in the future.
h) Except as otherwise noted, Benefit Continuation as described herein
continues through your Separation Date regardless of whether or not you
become employed by an employer not affiliated with the Company.
2. If you die during Benefit Continuation, any survivor benefits shall be
governed by the terms of applicable individual benefit plan provisions. If
you die after the Completion Date, but before your Termination Date, all
cash payments shall be made to your beneficiary designated under the
Company's Core Life Insurance Program, unless you have specifically
elected otherwise in writing.
3. As of your Termination Date, you will cease to accrue any further
vacation. Unused 1999 vacation plus vacation for 2000 accrued in 1999 up
to your Termination Date will be paid in a lump sum as soon as practicable
following your Termination Date and is not includable for any benefit plan
calculations. Vacation accrues up to your Termination Date at 1/12 of your
vacation entitlement for each full or partial month of active employment.
Your vacation entitlement is determined as of the beginning of the
calendar year. Vacation taken prior to your Termination Date will reduce
this amount.
4. a) During Benefit Continuation, you may continue to participate in the
employee welfare benefit programs in which you participated as of your
Termination Date except as otherwise provided in this Agreement or by the
terms of the individual program. You may participate as though you were an
active employee, subject to applicable contributions by you. The term
"employee welfare benefit programs" does not include the SELECT Long Term
Disability Plan, the Annual Incentive Award Plan ("AIAP'), the Long Term
Incentive Plan ("LTIP"), the Retirement Plan for Employees of RJR Nabisco,
Inc. ("PEP") or the Capital Investment Plan ("CIP"), the dispositions of
which are detailed in other provisions of this Agreement.
Unless otherwise specified by the Company in its sole discretion, changes
in the employee welfare benefit programs after the date of this letter
will not apply to you, unless otherwise required by law. New benefit
programs which replace or supersede current programs will apply to you if
the Company chooses not to continue to make the current programs available
to employees; provided however, such employee welfare benefit programs
shall be no less
3
<PAGE>
favorable, in the aggregate, than provided to you on the date of this
Agreement.
b) The following is a summary of benefit continuation:
Your participation in the Company's Executive Medical Plan and in the
SELECT Flexible Benefits Program will continue until your Separation Date,
provided you make any required Plan contributions in the manner specified
by the Company. You will not be eligible for Short or Long Term Disability
benefits during your Benefits Continuation Period. If your Benefits
Continuation period continues into a new SELECT Plan Year, you will be
required to re-enroll in the same manner as active employees. Should you
become employed by an employer not affiliated with the Company, health
care coverage provided by your new employer will be coordinated with
health care benefits provided by the Company. If you elect COBRA
(Consolidated Omnibus Budget Reconciliation Act of 1985) continuation
coverage under SELECT after your Separation Date, the monthly premium is
equal to the full 102% of the actual plan cost. Specific costs and details
will be provided on request. You may elect COBRA coverage for 18 months.
If at the end of your Benefit Continuation, you are at least age 50 with
five (5) years of service and the Company provides retiree medical, dental
and life insurance for its retirees, you shall be eligible for such
insurance at the Company and retiree contribution rate for a retiree (i)
of your actual age and (ii) with service equal to the greater of ten (10)
years or actual years of service.
Should you have any questions about Benefit Continuation after
Headquarters is closed, you should contact Nabisco Employee Benefit
Administration at (973) 503-4676.
You are vested in the PEP. After your Termination Date, you will have an
irrevocable choice of receiving your PEP benefit as a lump sum or an
immediate annuity, or electing a deferred annuity which can commence no
earlier than age 65. Appropriate election forms will be provided to you
within two (2) months after your Termination Date.
You shall be paid a lump sum benefit of $739,828.00 (subject to final
adjustment) as soon as practicable following your Termination Date in
satisfaction of all benefits payable under all of the non-tax qualified
defined benefit plans of the Company. This payment is in lieu of any
benefit entitlement you may have under the Company's Additional Benefits
Plan or
4
<PAGE>
Supplemental Benefits Plan. The calculation of this benefit includes your
lump sum Severance Payment and credit for the period between your
Termination Date and Separation Date. You specifically acknowledge that
upon receipt of payment for your lump sum benefit, the Company's
obligation to pay a non-tax qualified defined benefit payment shall have
been satisfied.
Your lump sum Severance Payment is compensation subject to elective
contributions to CIP. If your compensation for 1999 exceeds $160,000, a
non-qualified Company matching payment will be made to you in accordance
with your elected deferral percentage and will be distributed to you as
soon as possible following your Termination Date, less withholding taxes
and other applicable deductions, unless otherwise deferred by you under a
deferral plan provided by the Company and/or its affiliates. Following
your Termination Date, you may elect to receive a distribution of your CIP
account balance in accordance with the terms of CIP. If you elect to leave
your account balance in CIP, you will retain all rights under the Plan as
a terminated employee, including the right to transfer investments between
funds and to request a distribution from CIP. You are fully vested in your
CIP account.
5. a) You will be paid the full value of your Flexible Perquisite Program for
a period of three years in a lump sum as soon as practicable following
your Termination Date. The amount of your lump sum Flexible Perquisite
payment is $142,500.00, less taxes and applicable deductions, payable as
soon as practicable following your Termination Date, unless otherwise
deferred by you under a deferral plan provided by the Company and/or its
affiliates. This lump sum payment shall not be included in any benefit
plan calculations.
b) No new car or lease will be provided during Benefit Continuation;
provided, however, the car currently leased for you by the Company shall
be transferred to you as soon as practicable following your Termination
Date, and the value of the car, as determined by the Company, shall be
grossed up for all applicable taxes. Car related expenses after the
foregoing transfer shall be your responsibility. Company car insurance
under the Flexible Perquisite Program shall be available to you during the
Benefit Continuation provided applicable premiums are paid by you.
c) Your Paragon and Group Universal Life Insurance policies may be
retained by you after your Termination Date by payment of applicable
premiums. Details regarding direct billing to you will be made available
prior to your Termination Date.
5
<PAGE>
d) If applicable, you may remain a member of the Equitable Athletic & Swim
Club until the last day of the month in which you are terminated. You may
continue as a member after your Termination Date at your own expense
without an initiation fee.
e) If you were relocated at the Company's request during or after 1989,
you may be eligible for relocation benefits to a new job location pursuant
to the Company's relocation program. Your application for relocation
benefits must be made within twelve (12) months following your Termination
Date and will be offset by any relocation benefits provided by a new
employer. Contact Nabisco Relocation with any questions at (973) 503-3097.
6. You will be paid as soon as practicable following your Termination Date an
award under the AIAP for your months of active employment during the 1999
plan year at 150% of target in the amount of $430,500.00, less taxes and
applicable deductions, unless otherwise deferred by you under a deferral
plan provided by the Company and/or its affiliates. This payment is
includable for benefit calculation purposes. Your lump sum Severance
Payment described above includes a full payment for AIAP awards for the
full period of severance, so no further payment for AIAP will be made
after your Termination Date.
7. Prior to your Termination Date, you are expected to submit Expense Reports
for all outstanding travel, entertainment and other business expenses. If
any expense report(s) reflect any amounts owing to the Company, such
expense will be deducted from payments under this Agreement, as necessary.
In addition, prior to your Termination Date you must return all Company
equipment requested from you by the Company or the value of such
equipment, as determined by the Company, shall be deducted from the
calculation of your lump sum Severance Payment.
8. a) Under LTIP, your vested Non-Qualified Stock Option Agreements may be
exercised anytime up to the exercise expiration date. Your unvested
options, if any, will be fully vested on your Termination Date. The
exercise of your stock options is governed by the terms of your
Non-Qualified Stock Option agreements. No further LTIP Awards will be made
to you.
b) Your PARS and Performance Notes will be fully vested on your
Termination Date and shall be calculated and paid as soon as practicable
following your Termination Date in accordance with your applicable PAR and
Performance Note Agreements, unless otherwise deferred by you under a
6
<PAGE>
deferral plan provided by the Company and/or its affiliates. Your
Performance Notes are includable for benefit calculation purposes.
c) Your Restricted Stock shall vest on your Termination Date and shall be
handled in accordance with the terms of your Restricted Stock Agreement.
9. You are entitled to the use of the outplacement counseling services
designated by the Company for a period of twelve (12) months after your
Termination Date for which the Company will pay the fee. Such assistance
must be started within three (3) months of your Termination Date and ends
twelve (12) months after commencement of service or upon your acceptance
of new employment, whichever comes first. This benefit may not be
converted into a cash award. You are not obligated to use this service,
but the Company urges you to consider this service as one of the avenues
to finding new employment.
10. If on your Termination Date you are an active participant in the Tuition
Refund Plan and all of the requirements of the Plan are fulfilled, you
will continue to be eligible for tuition aid reimbursement during Benefit
Continuation for courses completed during Benefit Continuation. Promissory
Notes existing on your Termination Date shall be deemed paid.
If otherwise eligible, you may continue to participate or newly enroll in
the MedSave Retiree Savings Plan and Scholastic Savings Plan during
Benefit Continuation. Upon your Separation Date, no further contributions
will be permitted; however, your account(s) including any applicable
Company match will be maintained with continued interest growth.
Distribution of your account(s) will be processed in accordance with
program rules for severed employees.
In addition, you may apply for any of the education loans available in the
RJR Nabisco Scholastic Loan Program during Benefit Continuation. You will
continue to be eligible for the interest credit reimbursement feature of
the RJRN Plus loan if you are still on Benefit Continuation at the end of
the School Year. You are not eligible for credit reimbursement after your
Separation Date.
11. a) The Company shall hold you harmless from any golden parachute tax
imposed by any federal, state or local taxing authority as a result of any
of the payments made pursuant to this Agreement. Payment of such golden
parachute tax plus any additional taxes imposed as a result of the payment
by the Company of such golden parachute tax, shall be made at the time you
are
7
<PAGE>
required to pay such golden parachute tax. You agree to cooperate fully
with the Company in any protest or appeal by the Company in the event of
the imposition of such golden parachute tax.
b) You shall be covered by the same liability and indemnification programs
afforded to other officers for acts that occurred while you were an
officer of the Company and/or its affiliates.
You shall maintain the terms and conditions of this Agreement in
confidence. In addition, you will not disclose to any other employer or
person any trade secrets or other proprietary, non-public, or confidential
information pertaining to the Company. You will return all Company
information or documents in whatever form, except information relating to
your personal employee benefits or executive compensation. In accordance
with normal ethical and professional standards, you will refrain from
taking actions or making statements, written or oral, which defame the
goodwill or reputation of the Company, its directors, officers, executives
and employees or which constitute willful misconduct under circumstances
where it is reasonable for you to anticipate or to expect that the natural
consequences of such conduct by you will be to affect adversely the
business or reputation of the Company or its affiliates, or the morale of
other employees.
12. (a) You agree that you will personally provide reasonable assistance and
cooperation to the Company, RIR Nabisco, Inc., their predecessors,
successors and assigns in activities related to the prosecution or defense
of any pending or future lawsuits or claims involving the Company, RJR
Nabisco, Inc. or R. J. Reynolds Tobacco Company. (b) You will promptly
notify the Company if you receive any requests from anyone other than an
employee or agent of the Company for information regarding the Company or
if you become aware of any potential claim or proposed litigation against
the Company, RJR Nabisco, Inc. or R. J. Reynolds Tobacco Company. (c) You
will refrain from providing any information related to any claim or
potential litigation against the Company, RJR Nabisco, Inc. or R. J.
Reynolds Tobacco Company to any non-Company representatives without either
the Company's written permission or being required to provide information
pursuant to legal process. (d) If required by law to provide sworn
testimony regarding any Company-related matter, you will consult with and
have Company-designated legal counsel present for such testimony. (e) The
Company will be responsible for the costs of such designated counsel and
you will bear no cost for same. (f) You will confine your testimony to
items about which you have knowledge rather than speculation, unless
otherwise directed by legal process. (g) You will cooperate with the
Company's attorneys to assist their
8
<PAGE>
efforts, especially on matters you have been privy to, holding all
privileged attorney-client matters in strictest confidence.
Nothing in sentences (c)-(g) of the above paragraph is intended to apply
to governmental or judicial investigations, including, but not limited to,
an investigation by any agency or department of the Federal or state
government, any hearing before a committee of the Congress of the United
States or of a state legislature, any investigation or proceeding by or of
a special prosecutor, or any proceeding by or before a grand jury;
provided, however, the Company will reimburse you for legal expenses
including, but not limited to, the cost of any attorney reasonably
acceptable to the Company and other out-of-pocket expenses if you are
compelled to appear in a governmental or judicial investigation and such
appearance arises out of your previous employment by the Company or RJR
Nabisco, Inc.
13. Except as otherwise stated herein, no benefits (other than those provided
by a tax-qualified plan or trust) or promise hereunder shall be secured by
any specific assets of the Company. The payments under this Agreement
shall not be assigned by you or anticipated in any way and any such
attempted assignment will be void.
14. IN CONSIDERATION OF THE COMPENSATION AND BENEFITS SET FORTH IN THIS
AGREEMENT, YOU VOLUNTARILY, KNOWINGLY AND WILLINGLY RELEASE AND FOREVER
DISCHARGE THE COMPANY, ITS PARENTS, SUBSIDIARIES AND AFFILIATES, TOGETHER
WITH THEIR RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND
AGENTS, AND EACH OF THEIR PREDECESSORS, SUCCESSORS AND ASSIGNS, FROM ANY
AND ALL CHARGES, COMPLAINTS, CLAIMS, PROMISES, AGREEMENTS, CONTROVERSIES,
CAUSES OF ACTION AND DEMANDS OF ANY NATURE WHATSOEVER WHICH AGAINST THEM
YOU OR YOUR EXECUTORS, ADMINISTRATORS, SUCCESSORS OR ASSIGNS EVER HAD, NOW
HAVE OR HEREAFTER CAN, SHALL OR MAY HAVE BY REASON OF ANY MATTER, CAUSE OR
THING WHATSOEVER ARISING TO THE TIME YOU SIGN THIS AGREEMENT. YOU FURTHER
AGREE THAT YOU WILL NOT SEEK OR BE ENTITLED TO ANY AWARD OF EQUITABLE OR
MONETARY RELIEF IN ANY PROCEEDING OF ANY NATURE BROUGHT ON YOUR BEHALF
ARISING OUT OF ANY OF THE MATTERS RELEASED BY THIS PARAGRAPH. THIS RELEASE
INCLUDES, BUT IS NOT LIMITED TO, ANY RIGHTS OR CLANS RELATING IN ANY WAY
TO YOUR
9
<PAGE>
EMPLOYMENT RELATIONSHIP WITH THE COMPANY, OR THE TERMINATION THEREOF, OR
UNDER ANY STATUTE, INCLUDING THE AGE DISCRIMINATION IN EMPLOYMENT ACT,
TITLE VII OF THE CIVIL RIGHTS ACT, THE AMERICANS WITH DISABILITIES ACT,
THE NEW YORK STATE AND CITY HUMAN RIGHTS LAWS OR ANY OTHER FEDERAL, STATE
OR LOCAL LAW.
15. By signing this Agreement, you represent that you have not commenced any
proceeding against the Company in any forum (administrative or judicial)
concerning your employment or the termination thereof. You further
acknowledge that you were given sufficient notice under the Worker
Adjustment and Retraining Notification Act (the "WARN Act") and that the
termination of your employment does not give rise to any claim or right to
notice, or pay or benefits in lieu of notice under the WARN Act. In the
event any WARN Act issue does exist or arises in the future, you agree and
acknowledge that the payments and benefits set forth in this Agreement
shall be applied to any pay or benefits in lieu of notice required by the
WARN Act, provided that any such offset shall not impair or affect the
validity of any provision of this Agreement, including the release set
forth in paragraph 14.
16. The Company advises you that you may wish to consult with an attorney of
your choosing prior to signing this Agreement You understand and agree
that you have the right and have been given the opportunity to review this
Agreement and, specifically, the release in paragraph 14, with an attorney
of your choice should you so desire. You have entered into this Agreement
freely, knowingly and voluntarily and specifically in consideration of the
additional benefits provided to you under the Agreement.
17. You will be reimbursed for travel, food, lodging or similar out-of-pocket
expense incurred at the Company's request in discharging any of your
obligations under this Agreement. If the Company reasonably determines
that you have violated any of your obligations under this Agreement, then
the Company may, at its option, terminate the Benefit Continuation and any
other benefits hereunder; and the Company may demand the return of all
payments already made and you hereby agree to return such payments upon
such demand. If after such demand you fail to return said payments, the
Company has the right to commence judicial proceedings against you to
recover any and all of its attorney's fees and costs. The Company, or its
designated representative thereof shall have exclusive authority to
interpret this Agreement and the Headquarters Protection Program. The
decision of the Company, or its designated representative, with respect to
any question
10
<PAGE>
arising as to the employees selected to participate in the Protection
Program, the amount, term, form and time of payment of benefits under this
Agreement or any other matter concerning this Agreement shall be final,
conclusive and binding on both you and the Company.
18. This Agreement may not be amended except in writing signed by you and the
Company and no amendments or modifications are contemplated at this time.
This Agreement shall not be construed to provide any rights to anyone
other than you and the Company.
19. If you have any questions about this Agreement, contact Leon Lichter.
20. You have at least twenty-one days to consider the terms of this Agreement,
although you may sign and return it sooner if you wish. This Agreement may
be revoked by you for a period of seven (7) consecutive calendar days
after you have signed and dated it, and after such seven (7) days, it
becomes final.
Please indicate your acceptance of the terms of this Agreement by signing this
letter and returning it to me.
Sincerely,
NABISCO GROUP HOLDINGS CORP.
/s/ Gerald I. Angowitz
----------------------------------------
Gerald I. Angowitz
Senior Vice President, Human Resources
and Administration
Understood and Agreed:
/s/ David B. Rickard
- -----------------------------------
Date: 9/30/99
11
<PAGE>
Exhibit 10.54
[LETTERHEAD OF NABISCO GROUP HOLDINGS]
September 24, 1999
William Rosoff
465 West End Avenue
Apartment SA
New York, NY 10024
Dear Bill:
This letter constitutes the entire agreement between NABISCO GROUP
HOLDINGS CORP. (the "Company"), its predecessors, successors, affiliates,
former affiliates and/or assigns, and you regarding the termination of
your employment relationship with the Company, and implements the
provisions of the Headquarters Protection Program. The severance-related
compensation and/or benefits as described in this letter represent the
Company's entire severance obligation to you and are in lieu of any such
compensation and/or benefits to which you would otherwise have been
entitled under the RJR Nabisco, Inc. Salary and Benefit Continuation
Program (the "SBC"), your non-qualified pension benefits under the
Company's Additional Benefits Plan and Supplemental Benefits Plan and/or
your Employment Agreement dated January 18, 1998 (copy attached) with the
Company.
Please read the rest of this letter carefully; if you agree to be bound by
its terms, please sign the copy of this letter agreement where indicated
on the last page and return it to me by October 15, 1999.
1. a) You specifically acknowledge that you have received your Completion
Bonus of $510,000.00, less withholding taxes and other applicable
deductions, and, therefore, the Company's obligation to pay you a
Completion Bonus has been satisfied. The Completion Bonus is not
includable in any benefit plan calculations.
b) Your Termination Date is October 15, 1999 or such other date as
determined by the Chief Executive Officer of the Company. You will
continue as a regular full-time employee through your Termination Date and
are expected prior to your Termination Date to provide a transition of
your
<PAGE>
job duties and responsibilities, if you voluntarily quit or are terminated
by the Company for violation of Company rules, policies, guides or
standards of conduct before your Termination Date or if you fail to
provide reasonable job transition assistance, as determined by the Senior
Vice President, Human Resources, you will not receive the benefits
described below.
c) Your Benefit Continuation, as summarized below, commences the day after
your Termination Date and continues through October 15, 2002, which will
be your official "Separation Date" for Company records.
As soon as practicable following your Termination Date and unless
otherwise deferred by you under a deferral plan provided by the Company
and/or its affiliates, you shall receive a lump sum Severance Payment of
$2,040,000.00, less withholding taxes and other applicable deductions.
This lump sum Severance Payment shall contain a lump sum settlement of
your Cost of Living Adjustment, if any, for the period of Benefit
Continuation. You specifically acknowledge that upon receipt of your
Severance Payment, any Company obligation to make a cash severance payment
to you shall have been satisfied.
d) As soon as practicable following your Termination Date and unless
otherwise deferred by you under a deferral plan provided by the Company
and/or its affiliates, you shall receive your Cash Retention Grant from
the Retention Incentive Program in two payments for a total of
$2,550,000.00, less withholding taxes and other applicable deductions. The
Cash Retention Grant shall not be included in any benefit plan
calculations. You specifically acknowledge that upon receipt of your Cash
Retention Grant, the Company's and the Retention Trust's obligation to pay
you such a grant shall have been satisfied.
(e) As soon as practicable following your Termination Date and unless
otherwise deferred by you under a deferral plan provided by the Company
and/or its affiliates, you shall receive your Departure Bonus in the
amount of $1,000,000.00, less withholding taxes and other applicable
deductions.
f) Benefit Continuation through your Separation Date is provided in order
to preserve the Company's access to you although you will have been
relieved of all your normal duties and responsibilities. You agree that
you will personally provide reasonable assistance and cooperation in
locating or obtaining information concerning the Company (past or present)
about which you are knowledgeable, and specifically, you will assist your
successor, if any, on an as needed basis.
2
<PAGE>
g) You acknowledge that as of your Termination Date, your active
employment with the Company and/or its affiliates or former affiliates
will end irrevocably and will not resume again at any time in the future.
h) Except as otherwise noted, Benefit Continuation as described herein
continues through your Separation Date regardless of whether or not you
become employed by an employer not affiliated with the Company.
2. If you die during Benefit Continuation, any survivor benefits shall be
governed by the terms of applicable individual benefit plan provisions. If
you die after the Completion Date, but before your Termination Date, all
cash payments shall be made to your beneficiary designated under the
Company's Core Life Insurance Program, unless you have specifically
elected otherwise in writing.
3. As of your Termination Date, you will cease to accrue any further
vacation. Unused 1999 vacation plus vacation for 2000 accrued in 1999 up
to your Termination Date will be paid in a lump sum as soon as practicable
following your Termination Date and is not includable for any benefit plan
calculations. Vacation accrues up to your Termination Date at 1/12 of your
vacation entitlement for each full or partial month of active employment.
Your vacation entitlement is determined as of the beginning of the
calendar year. Vacation taken prior to your Termination Date will reduce
this amount.
4. a) During Benefit Continuation, you may continue to participate in the
employee welfare benefit programs in which you participated as of your
Termination Date except as otherwise provided in this Agreement or by the
terms of the individual program. You may participate as though you were an
active employee, subject to applicable contributions by you. The term
"employee welfare benefit programs" does not include the SELECT Long Term
Disability Plan, the Annual Incentive Award Plan ("AIAP"), the Long Term
Incentive Plan ("LTIP"), the Retirement Plan for Employees of RJR Nabisco,
Inc. ("PEP") or the Capital Investment Plan ("CIP"), the dispositions of
which are detailed in other provisions of this Agreement.
Unless otherwise specified by the Company in its sole discretion, changes
in the employee welfare benefit programs after the date of this letter
will not apply to you, unless otherwise required by law. New benefit
programs which replace or supersede current programs will apply to you if
the Company chooses not to continue to make the current programs available
to employees; provided however, such employee welfare benefit programs
shall be no less
3
<PAGE>
favorable, in the aggregate, than provided to you on the date of this
Agreement.
b) The following is a summary of benefit continuation:
Your participation in the Company's Executive Medical Plan and in the
SELECT Flexible Benefits Program will continue until your Separation Date,
provided you make any required Plan contributions in the manner specified
by the Company. You will not be eligible for Short or Long Term Disability
benefits during your Benefits Continuation Period. If your Benefits
Continuation period continues into a new SELECT Plan Year, you will be
required to re-enroll in the same manner as active employees. Should you
become employed by an employer not affiliated with the Company, health
care coverage provided by your new employer will be coordinated with
health care benefits provided by the Company. If you elect COBRA
(Consolidated Omnibus Budget Reconciliation Act of 1985) continuation
coverage under SELECT after your Separation Date, the monthly premium is
equal to the full 102% of the actual plan cost. Specific costs and details
will be provided on request. You may elect COBRA coverage for 18 months.
If at the end of your Benefit Continuation, you are at least age 50 with
five (5) years of service and the Company provides retiree medical, dental
and life insurance for its retirees, you shall be eligible for such
insurance at the Company and retiree contribution rate for a retiree (i)
of your actual age and (ii) with service equal to the greater of ten (10)
years or actual years of service.
Should you have any questions about Benefit Continuation after
Headquarters is closed, you should contact Nabisco Employee Benefit
Administration at (973) 503-4676.
You are vested in the PEP. After your Termination Date, you will have an
irrevocable choice of receiving your PEP benefit as a lump sum or an
immediate annuity, or electing a deferred annuity which can commence no
earlier than age 65. Appropriate election forms will be provided to you
within two (2) months after your Termination Date.
You shall be paid a lump sum benefit of $2,463,110.00 (subject to final
adjustment) as soon as practicable following your Termination Date in
satisfaction of all benefits payable under all of the non-tax qualified
defined benefit plans of the Company. This payment is in lieu of any
benefit entitlement you may have under the Company's Additional Benefits
Plan or
4
<PAGE>
Supplemental Benefits Plan. The calculation of this benefit includes your
lump sum Severance Payment and credit for the period between your
Termination Date and Separation Date. You specifically acknowledge that
upon receipt of payment for your lump sure benefit the Company's
obligation to pay a non-tax qualified defined benefit payment shall have
been satisfied.
Your lump sum Severance Payment is compensation subject to elective
contributions to CIP. If your compensation for 1999 exceeds $160,000, a
non-qualified Company matching payment will be made to you in accordance
with your elected deferral percentage and will be distributed to you as
soon as possible following your Termination Date, less withholding taxes
and other applicable deductions, unless otherwise deferred by you under a
deferral plan provided by the Company and/or its affiliates. Following
your Termination Date, you may elect to receive a distribution of your CIP
account balance in accordance with the terms of CIP. If you elect to leave
your account balance in CIP, you will retain all rights under the Plan as
a terminated employee, including the right to transfer investments between
funds and to request a distribution from CIP. You are fully vested in your
CIP account.
5. a) You will be paid the full value of your Flexible Perquisite Program for
a period of three years in a lump sum as soon as practicable following
your Termination Date. The amount of your lump sum Flexible Perquisite
payment is $142,500.00, less taxes and applicable deductions, payable as
soon as practicable following your Termination Date, unless otherwise
deferred by you under a deferral plan provided by the Company and/or its
affiliates. This lump sum payment shall not be included in any benefit
plan calculations.
b) No new car or lease will be provided during Benefit Continuation;
provided, however, the car currently leased for you by the Company shall
be transferred to you as soon as practicable following your Termination
Date, and the value of the car, as determined by the Company, shall be
grossed up for all applicable taxes. Car related expenses after the
foregoing transfer shall be your responsibility. Company car insurance
under the Flexible Perquisite Program shall be available to you during the
Benefit Continuation provided applicable premiums are paid by you.
c) Your Paragon and Group Universal Life Insurance policies may be
retained by you after your Termination Date by payment of applicable
premiums. Details regarding direct billing to you will be made available
prior to your Termination Date.
5
<PAGE>
d) If applicable, you may remain a member of the Equitable Athletic & Swim
Club until the last day of the month in which you are terminated, You may
continue as a member after your Termination Date at your own expense
without an initiation fee.
e) If you were relocated at the Company's request during or after 1989,
you may be eligible for relocation benefits to a new job location pursuant
to the Company's relocation program. Your application for relocation
benefits must be made within twelve (12) months following your Termination
Date and will be offset by any relocation benefits provided by a new
employer. Contact Nabisco Relocation with any questions at (973) 503-3097.
6. You will be paid as soon as practicable following your Termination Date an
award under the AIAP for your months of active employment during the 1999
plan year at 150% of target in the amount of $525,000.00, less taxes and
applicable deductions, unless otherwise deferred by you under a deferral
plan provided by the Company and/or its affiliates, This payment is
includable for benefit calculation purposes. Your lump sum Severance
Payment described above includes a full payment for AIAP awards for the
full period of severance, so no further payment for AIAP will be made
after your Termination Date.
7. Prior to your Termination Date, you are expected to submit Expense Reports
for all outstanding travel, entertainment and other business expenses. If
any expense report(s) reflect any amounts owing to the Company, such
expense will be deducted from payments under this Agreement, as necessary.
In addition, prior to your Termination Date you must return all Company
equipment requested from you by the Company or the value of such
equipment, as determined by the Company, shall be deducted from the
calculation of your lump sum Severance Payment.
8. a) Under LTIP, your vested Non-Qualified Stock Option Agreements may be
exercised anytime up to the exercise expiration date. Your unvested
options, if any, will be fully vested on your Termination Date. The
exercise of your stock options is governed by the terms of your
Non-Qualified Stock Option agreements. No further LTIP Awards will be
made to you.
b) Your PARS and Performance Notes will be fully vested on your
Termination Date and shall be calculated and paid as soon as practicable
following your Termination Date in accordance with your applicable PAR and
Performance Note Agreements, unless otherwise deferred by you under a
6
<PAGE>
deferral plan provided by the Company and/or its affiliates. Your
Performance Notes are includable for benefit calculation
purposes.
c) Your Restricted Stock shall vest on your Termination Date and shall be
handled in accordance with the terms of your Restricted Stock Agreement.
9. You are entitled to the use of the outplacement counseling services
designated by the Company for a period of twelve (12) months after your
Termination Date for which the Company will pay the fee. Such assistance
must be started within three (3) months of your Termination Date and ends
twelve (12) months after commencement of service or upon your acceptance
of new employment, whichever comes first. This benefit may not be
converted into a cash award. You are not obligated to use this service,
but the Company urges you to consider this service as one of the avenues
to finding new employment.
10. If on your Termination Date you are an active participant in the Tuition
Refund Plan and all of the requirements of the Plan are fulfilled, you
will continue to be eligible for tuition aid reimbursement during Benefit
Continuation for courses completed during Benefit Continuation. Promissory
Notes existing on your Termination Date shall be deemed paid.
If otherwise eligible, you may continue to participate or newly enroll in
the MedSave Retiree Savings Plan and Scholastic Savings Plan during
Benefit Continuation. Upon your Separation Date, no further contributions
will be permitted; however, your account(s) including any applicable
Company match will be maintained with continued interest growth.
Distribution of your account(s) will be processed in accordance with
program rules for severed employees.
In addition, you may apply for any of the education loans available in the
RJR Nabisco Scholastic Loan Program during Benefit Continuation. You will
continue to be eligible for the interest credit reimbursement feature of
the RJRN Plus loan if you are still on Benefit Continuation at the end of
the School Year. You are not eligible for credit reimbursement after your
Separation Date.
11. a) The Company shall hold you harmless from any golden parachute tax
imposed by any federal, state or local taxing authority as a result of any
of the payments made pursuant to this Agreement. Payment of such golden
parachute tax plus any additional taxes imposed as a result of the payment
by the Company of such golden parachute tax, shall be made at the time you
are
7
<PAGE>
required to pay such golden parachute tax. You agree to cooperate fully
with the Company in any protest or appeal by the Company in the event of
the imposition of such golden parachute tax.
b) You shall be covered by the same liability and indemnification programs
afforded to other officers for acts that occurred while you were an
officer of the Company and/or its affiliates.
You shall maintain the terms and conditions of this Agreement in
confidence. In addition, you will not disclose to any other employer or
person any trade secrets or other proprietary, non-public, or confidential
information pertaining to the Company. You will return all Company
information or documents in whatever form, except information relating to
your personal employee benefits or executive compensation. In accordance
with normal ethical and professional standards, you will refrain from
taking actions or making statements, written or oral, which defame the
goodwill or reputation of the Company, its directors, officers, executives
and employees or which constitute willful misconduct under circumstances
where it is reasonable for you to anticipate or to expect that the natural
consequences of such conduct by you will be to affect adversely the
business or reputation of the Company or its affiliates, or the morale of
other employees.
12. (a) You agree that you will personally provide reasonable assistance and
cooperation to the Company, RJR Nabisco, Inc., their predecessors,
successors and assigns in activities related to the prosecution or defense
of any pending or future lawsuits or claims involving the Company, RJR
Nabisco, Inc. or R. J. Reynolds Tobacco Company, (b) You will promptly
notify the Company if you receive any requests from anyone other than an
employee or agent of the Company for information regarding the Company or
if you become aware of any potential claim or proposed litigation against
the Company, RJR Nabisco, Inc. or R. J. Reynolds Tobacco Company. (c) You
will refrain from providing any information related to any claim or
potential litigation against the Company, RJR Nabisco, Inc. or R. J
Reynolds Tobacco Company to any non-Company representatives without either
the Company's written permission or being required to provide information
pursuant to legal process. (d) If required by law to provide sworn
testimony regarding any Company-related matter, you will consult with and
have Company-designated legal counsel present for such testimony. (e) The
Company will be responsible for the costs of such designated counsel and
you will bear no cost for same. (f) You will confine your testimony to
items about which you have knowledge rather than speculation, unless
otherwise directed by legal process. (g) You will cooperate with the
Company's attorneys to assist their
8
<PAGE>
efforts, especially on matters you have been privy to, holding all
privileged attorney-client matters in strictest confidence.
Nothing in sentences (c)-(g) of the above paragraph is intended to apply
to governmental or judicial investigations, including, but not limited to,
an investigation by any agency or department of the Federal or state
government, any hearing before a committee of the Congress of the United
States or of a state legislature, any investigation or proceeding by or of
a special prosecutor, or any proceeding by or before a grand jury;
provided, however, the Company will reimburse you for legal expenses
including, but not limited to, the cost of any attorney reasonably
acceptable to the Company and other out-of pocket expenses if you are
compelled to appear in a governmental or judicial investigation and such
appearance arises out of your previous employment by the Company or RJR
Nabisco, Inc.
13. Except as otherwise stated herein, no benefits (other than those provided
by a tax-qualified plan or trust) or promise hereunder shall be secured by
any specific assets of the Company. The payments under this Agreement
shall not be assigned by you or anticipated in any way and any such
attempted assignment will be void.
14. IN CONSIDERATION OF THE COMPENSATION AND BENEFITS SET FORTH IN THIS
AGREEMENT, YOU VOLUNTARILY, KNOWINGLY AND WILLINGLY RELEASE AND FOREVER
DISCHARGE THE COMPANY, ITS PARENTS, SUBSIDIARIES AND AFFILIATES, TOGETHER
WITH THEIR RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND
AGENTS, AND EACH OF THEIR PREDECESSORS, SUCCESSORS AND ASSIGNS, FROM ANY
AND ALL CHARGES, COMPLAINTS, CLAIMS, PROMISES, AGREEMENTS, CONTROVERSIES,
CAUSES OF ACTION AND DEMANDS OF ANY NATURE WHATSOEVER WHICH AGAINST THEM
YOU OR YOUR EXECUTORS, ADMINISTRATORS, SUCCESSORS OR ASSIGNS EVER HAD, NOW
HAVE OR HEREAFTER CAN, SHALL OR MAY HAVE BY REASON OF ANY MATTER, CAUSE OR
THING WHATSOEVER ARISING TO THE TIME YOU SIGN THIS AGREEMENT. YOU FURTHER
AGREE THAT YOU WILL NOT SEEK OR BE ENTITLED TO ANY AWARD OF EQUITABLE OR
MONETARY RELIEF IN ANY PROCEEDING OF ANY NATURE BROUGHT ON YOUR BEHALF
ARISING OUT OF ANY OF THE MATTERS RELEASED BY THIS PARAGRAPH. THIS RELEASE
INCLUDES, BUT IS NOT LIMITED TO, ANY RIGHTS OR CLAIMS RELATING IN ANY WAY
TO YOUR
9
<PAGE>
EMPLOYMENT RELATIONSHIP WITH THE COMPANY, OR THE TERMINATION THEREOF, OR
UNDER ANY STATUTE, INCLUDING THE AGE DISCRIMINATION IN EMPLOYMENT ACT,
TITLE VII OF THE CIVIL RIGHTS ACT, THE AMERICANS WITH DISABILITIES ACT,
THE NEW YORK STATE AND CITY HUMAN RIGHTS LAWS OR ANY OTHER FEDERAL, STATE
OR LOCAL LAW.
15. By signing this Agreement, you represent that you have not commenced any
proceeding against the Company in any forum (administrative or judicial)
concerning your employment or the termination thereof. You further
acknowledge that you were given sufficient notice under the Worker
Adjustment and Retraining Notification Act (the "WARN Act") and that the
termination of your employment does not give rise to any claim or right to
notice, or pay or benefits in lieu of notice under the WARN Act. In the
event any WARN Act issue does exist or arises in the future, you agree and
acknowledge that the payments and benefits set forth in this Agreement
shall be applied to any pay or benefits in lieu of notice required by the
WARN Act, provided that any such offset shall not impair or affect the
validity of any provision of this Agreement, including the release set
forth in paragraph 14.
16. The Company advises you that you may wish to consult with an attorney of
your choosing prior to signing this Agreement. You understand and agree
that you have the right and have been given the opportunity to review this
Agreement and, specifically, the release in paragraph 14, with an attorney
of your choice should you so desire. You have entered into this Agreement
freely, knowingly and voluntarily and specifically in consideration of the
additional benefits provided to you under the Agreement.
17. You will be reimbursed for travel, food, lodging or similar out-of-pocket
expense incurred at the Company's request in discharging any of your
obligations under this Agreement. If the Company reasonably determines
that you have violated any of your obligations under this Agreement, then
the Company may, at its option, terminate the Benefit Continuation and any
other benefits hereunder; and the Company may demand the return of all
payments already made and you hereby agree to return such payments upon
such demand. If after such demand you fail to return said payments, the
Company has the right to commence judicial proceedings against you to
recover any and all of its attorney's fees and costs. The Company, or its
designated representative thereof, shall have exclusive authority to
interpret this Agreement and the Headquarters Protection Program. The
decision of the Company, or its designated representative, with respect to
any question
10
<PAGE>
arising as to the employees selected to participate in the Protection
Program, the amount, term, form and time of payment of benefits under this
Agreement or any other matter concerning this Agreement shall be final,
conclusive and binding on both you and the Company.
18. This Agreement may not be amended except in writing signed by you and the
Company and no amendments or modifications are contemplated at this time.
This Agreement shall not be construed to provide any rights to anyone
other than you and the Company.
19. If you have any questions about this Agreement, contact Leon Lichter.
20. You have at least twenty-one days to consider the terms of this Agreement,
although you may sign and return it sooner if you wish. This Agreement may
be revoked by you for a period of seven (7) consecutive calendar days
after you have signed and dated it, and after such seven (7) days, it
becomes final.
Please indicate your acceptance of the terms of this Agreement by signing this
letter and returning it to me.
Sincerely,
NABISCO GROUP HOLDINGS CORP.
/s/ Gerald I. Angowitz
----------------------------------------
Gerald I. Angowitz Senior Vice President,
Human Resources and Administration
Understood and Agreed:
/s/ William Rosoff
- -----------------------------------
Date:______________________________
11
<PAGE>
EXHIBIT 12.1
NABISCO GROUP HOLDINGS CORP.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS/DEFICIENCY IN THE COVERAGE OF COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS BY EARNINGS BEFORE FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings before fixed charges:
Income (loss) before income taxes....................... $526 $(134) $636 $ 24 $511
Less minority interest in pre-tax income (loss)......... 113 (6) 142 22 105
---- ----- ---- ----- ----
Adjusted income (loss) before income taxes.............. 413 (128) 494 2 406
Interest and debt expense............................... 324 401 421 424 376
Interest portion of rental expense...................... 34 30 28 26 23
---- ----- ---- ----- ----
Earnings before fixed charges............................. $771 $ 303 $943 $ 452 $805
==== ===== ==== ===== ====
Combined fixed charges and preferred stock dividends:
Interest and debt expense............................... $324 $ 401 $421 $ 424 $376
Interest portion of rental expense...................... 34 30 28 26 23
Capitalized interest.................................... 2 3 6 15 10
Preferred stock dividends(1)............................ 8 53 153 307 411
---- ----- ---- ----- ----
Total fixed charges and preferred stock dividends... $368 $ 487 $608 $ 772 $820
==== ===== ==== ===== ====
Deficiency in the coverage of combined fixed charges and
preferred stock dividends by earnings before fixed
charges................................................. $ -- $(184) $ -- $(320) $(15)
==== ===== ==== ===== ====
Ratio of earnings to combined fixed charges and preferred
stock dividends......................................... 2.1 -- 1.6 -- --
==== ===== ==== ===== ====
</TABLE>
- ------------------------
(1) Series B preferred stock dividends have been increased to present their
equivalent pre-tax amounts, as applicable.
<PAGE>
EXHIBIT 12.2
NABISCO GROUP HOLDINGS CORP.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES/DEFICIENCY
IN THE COVERAGE OF FIXED CHARGES BY EARNINGS BEFORE FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings before fixed charges:
Income (loss) before income taxes........................ $526 $(134) $636 $ 24 $511
Less minority interest in pre-tax income (loss).......... 113 (6) 142 22 105
---- ----- ---- ---- ----
Adjusted income (loss) before income taxes............... 413 (128) 494 2 406
Interest and debt expense................................ 324 401 421 424 376
Interest portion of rental expense....................... 34 30 28 26 23
---- ----- ---- ---- ----
Earnings before fixed charges.............................. $771 $ 303 $943 $452 $805
==== ===== ==== ==== ====
Fixed charges:
Interest and debt expense................................ $324 $ 401 $421 $424 $376
Interest portion of rental expense....................... 34 30 28 26 23
Capitalized interest..................................... 2 3 6 15 10
---- ----- ---- ---- ----
Total fixed charges.................................. $360 $ 434 $455 $465 $409
==== ===== ==== ==== ====
Deficiency in the coverage of fixed charges by earnings
before fixed charges..................................... $ -- $(131) $ -- $(13) $ --
==== ===== ==== ==== ====
Ratio of earnings to fixed charges......................... 2.1 -- 2.1 -- 2.0
==== ===== ==== ==== ====
</TABLE>
<PAGE>
NABISCO GROUP HOLDINGS CORP.
SUBSIDIARIES & INVESTMENTS
<TABLE>
<CAPTION>
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nabisco Group Holdings Corp. Oct 25, 1988 Delaware
Airco IHC, Inc. Mar 22, 1989 Delaware
A/O Nabisco ** Aug 16, 1994 Russia
Arrimo Fomento Comercial Ltda. * Oct 27, 1987 Brazil
Beech-Nut Life Savers (Panama) S.A. Jul 12, 1963 Panama
Beijing Nabisco Food Company Ltd. (91.9%) Mar 16, 1995 China
Canale S.A. Jun 21, 1921 Argentina
Carnes y Conservas Espanolas, S.A. [CARCESA] Dec 02, 1975 Spain
Cartera e Inversiones S.A. * Mar 05, 1979 Peru
Comercial Benut, S.A. de C.V. ** Mar 16, 1977 Mexico
Compania Venezolana de Conservas C.A. [COVENCO] Jul 25, 1969 Venezuela
Consiber, S.A. Mar 31, 1979 Spain
Covenco Holding C.A. Nov 26, 1991 Venezuela
Dely, S.A. Dec 18, 1960 Guatemala
Distribuidora Pan Americana, S.A. Oct 22, 1974 Panama
Establecimiento Modelo Terrabusi S.A. (99.2%) Dec 20, 1929 Argentina
Exhold Limited * Oct 03, 1989 Liberia
Fleischmann Corporation, The Nov 02, 1929 Delaware
Fleischmann International, Inc. Nov 20, 1944 Delaware
Fleischmann Peruana Inc. Sep 01, 1939 Delaware
Fleischmann Uruguaya S.A. Mar 09, 1961 Uruguay
Freezer Queen Foods (Canada) Limited Nov 03, 1967 Ontario, Canada
Fulmer Corporation Limited May 15, 1981 Bahamas
Galletas Artiach, S.A. Jul 23, 1932 Spain
Galletas Fontaneda, S.A. Mar 09, 1967 Spain
Gelatinas Ecuatoriana S.A. (66.7%) Nov 21, 1978 Ecuador
Hanover Servicing, Inc. Apr 13, 1992 Delaware
Hervin Company, The May 28, 1965 Oregon
Hervin Holdings, Inc. Mar 29, 1988 Delaware
Industria de Colores y Sabores S.A. * Jun 21, 1967 Colombia
Industria de Laticinios Gloria Ltda. * Jan 18, 1978 Brazil
Industria e Comercio de Produtos Alimenticios Cerqueirense Ltda. May 11, 1971 Brazil
Industrias Alimenticias Maguary Ltda. May 07, 1953 Brazil
Iracema Industrias de Caju Ltda. Aug 08, 1978 Brazil
Jupiter Produtos Alimenticios Ltda. Mar 02, 1962 Brazil
Knox Company, The Dec 30, 1991 New Jersey
</TABLE>
* Inactive Page 1
** In Liquidation SUB-NGH
*** Partnership/Joint Venture/Trust
**** Nameholder At 3/1/2000
<PAGE>
NABISCO GROUP HOLDINGS CORP.
SUBSIDIARIES & INVESTMENTS
<TABLE>
<CAPTION>
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Landers Centro Americana, Fabricantes de Molinos Marca "Corona",
S.A. de C.V. (95%) ** Jan 09, 1979 Honduras
Landers y Cia, S.A. Oct 01, 1951 Colombia
Leite Gloria do Nordeste S.A. May 16, 1968 Brazil
Life Savers Manufacturing, Inc. Apr 21, 1976 Delaware
Lowney Inc. Jan 01, 1983 Federal, Canada
Marbu, S.A. Oct 26, 1967 Spain
Merola Finance B.V. * May 09, 1995 Netherlands
MEX Holdings, Ltd. Nov 27, 1991 Delaware
NABEC, S.A. Nov 17, 1982 Ecuador
Nabisco Arabia Co. Ltd. (75%) *** Jan 29, 1996 Saudi Arabia
Nabisco Argentina S.A. Mar 14, 1994 Argentina
Nabisco Biscuit Manufacturing (Midwest), Inc. Dec 21, 1988 Delaware
Nabisco Biscuit Manufacturing (West), Inc. Dec 21, 1988 Delaware
Nabisco Brands Company Aug 01, 1995 Delaware
Nabisco Brands Holdings Denmark Limited Apr 17, 1989 Liberia
Nabisco Brands Nominees Limited * Aug 22, 1983 England
Nabisco Brazil, Inc. May 10, 1990 Delaware
Nabisco Caribbean Export, Inc. Jun 13, 1984 Delaware
Nabisco (China) Limited Aug 29, 1995 China
Nabisco Chongqing Food Company Ltd. * Mar 01, 1995 China
Nabisco de Nicaragua, S.A. (60%) Dec 10, 1965 Nicaragua
Nabisco Direct, Inc. Aug 23, 1995 Delaware
Nabisco Dominicana, S.A. Dec 11, 1995 Dom. Repub.
Nabisco England IHC, Inc. Mar 29, 1989 Delaware
Nabisco Enterprises IHC, Inc. Mar 22, 1989 Delaware
Nabisco Europe, Middle East and Africa Trading, S.A. Oct 28, 1992 Spain
Nabisco Financing I, Inc. July 13, 1998 Delaware
Nabisco Food (Suzhou) Co. Ltd. Mar 16, 1995 China
Nabisco Group Holdings Capital Trust II (3%) *** Aug 06, 1998 Delaware
Nabisco Group Ltd. Jun 02, 1995 Delaware
Nabisco Holdco, Inc. July 13, 1998 Delaware
Nabisco Holdings Corp. (80.6%) Apr 21, 1981 Delaware
Nabisco Holdings IHC, Inc. Mar 22, 1989 Delaware
Nabisco Holdings I B.V. May 03, 1996 Netherlands
Nabisco Holdings II B.V. May 28, 1996 Netherlands
Nabisco Hong Kong Limited Apr 12, 1994 Hong Kong
Nabisco Iberia Lda. Dec 23, 1916 Portugal
Nabisco Iberia, S.L. Jul 15, 1993 Spain
Nabisco, Inc. Feb 03, 1898 New Jersey
Nabisco, Inc. Foreign Sales Corporation Dec 17, 1991 US Virgin Is.
</TABLE>
* Inactive Page 2
** In Liquidation SUB-NGH
*** Partnership/Joint Venture/Trust
**** Nameholder At 3/1/2000
<PAGE>
NABISCO GROUP HOLDINGS CORP.
SUBSIDIARIES & INVESTMENTS
<TABLE>
<CAPTION>
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nabisco International, Inc. Jul 29, 1947 Delaware
Nabisco International Limited Dec 11, 1987 Nevada
Nabisco International Market Development Group, Inc. Mar 22, 1989 Delaware
Nabisco International M.E./Africa L.L.C. (49%) ? Dubai, U.A.E.
Nabisco International, S.A. Nov 26, 1953 Panama
Nabisco Investments, Inc. Mar 22, 1989 Delaware
Nabisco (Jamaica) Limited Jun 16, 1998 Jamaica
Nabisco Ltd-Nabisco Ltee Jan 01, 1993 Federal, Canada
Nabisco Music Publishers, Inc. Mar 24, 1986 Delaware
Nabisco Music Ventures, Inc. Mar 24, 1986 Delaware
Nabisco (New Zealand) Limited **** Mar 30, 1990 New Zealand
Nabisco Overseas Financing, Inc. July 15, 1998 Delaware
Nabisco Peru S.A. Jan 28, 1972 Peru
Nabisco Philippines, Inc. Oct 14, 1997 Philippines
Nabisco Preferred, Inc. (90%) July 15, 1998 Delaware
Nabisco Royal Argentina LLC Sep 10, 1998 Delaware
Nabisco Royal Chile Limitada Mar 22, 1978 Chile
Nabisco Royal de Honduras, S.A. Jul 22, 1982 Honduras
Nabisco Royal del Ecuador, S.A. Sep 16, 1977 Ecuador
Nabisco Royal, Inc. Sep 21, 1951 New York
Nabisco Royal Panama, S.A. Mar 07, 1979 Panama
Nabisco S.A. de C.V. (99.5%) Jun 15, 1992 Mexico
Nabisco, S.L. * Jan 18, 1989 Spain
Nabisco South Africa (Proprietary) Limited (50%) Jan 02, 1945 South Africa
Nabisco Taiwan Corporation May 27, 1996 Taiwan
Nabisco Technology Company Dec 13, 1996 Delaware
Nabisco (Thailand) Limited Oct 01, 1997 Thailand
Nabisco Trading AG Aug 02, 1960 Switzerland
Nabisco Tunisia S.A. Jul 02, 1976 Tunisia
Nabisco Venezuela, C.A. Nov 26, 1991 Venezuela
National Biscuit Company **** Jan 17, 1971 Delaware
Planters & Biscuits Co. ** Jan 01, 1997 Russia
Posto Apolo Ltda. Dec 05, 1984 Brazil
Productos Confitados Salvavidas de Guatemala, S.A. Jul 03, 1974 Guatemala
Produtos Alimenticios Fleischmann e Royal Ltda. Nov 28, 1964 Brazil
Produtos Alimenticios Pilar Ltda. Jun 23, 1934 Brazil
Produtos Alimenticios Royal S.A. Jan 01, 1966 Costa Rica
PT Nabisco Foods (70%) *** Mar 21, 1995 Indonesia
</TABLE>
* Inactive Page 3
** In Liquidation SUB-NGH
*** Partnership/Joint Venture/Trust
**** Nameholder At 3/1/2000
<PAGE>
NABISCO GROUP HOLDINGS CORP.
SUBSIDIARIES & INVESTMENTS
<TABLE>
<CAPTION>
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ritz Biscuit Company Limited **** Sep 28, 1989 England
RJR Industries (U.K.) Limited ** Jun 01, 1982 England
RJR Nabisco Securities Ltd.-Titres RJR Nabisco Ltee Sep 28, 1987 Federal, Canada
Royal Beech-Nut (Namibia) (PTY) Ltd. * Aug 08, 1989 South Africa
Royal Holding C.A. Nov 26, 1991 Venezuela
Royal Productos Alimenticios, C.A. Jul 26, 1971 Venezuela
Salvavidas S. de R.L. de C.V. ** Mar 30, 1967 Mexico
Stella D'oro Biscuit Co., Inc. Jan 02, 1948 New York
Tevalca Holding C.A. Nov 26, 1991 Venezuela
Transapolo-Transportes Rodoviarios Apolo Ltda. Oct 24, 1984 Brazil
20th Century Denmark Limited Mar 06, 1990 Liberia
West Indies Yeast Company Limited (72%) Nov 29, 1965 Jamaica
Yili-Nabisco Biscuit & Food Company Limited (51%) *** Jan 29, 1985 China
TOTAL: 127
</TABLE>
* Inactive Page 4
** In Liquidation SUB-NGH
*** Partnership/Joint Venture/Trust
**** Nameholder At 3/1/2000
<PAGE>
EXHIBIT 23
CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statements
Nos. 33-39781, 33-39725, 33-40400, 33-40395, 33-40396, 33-66084, 33-54397,
33-54399, 33-54393 and 33-40702 of Nabisco Group Holdings Corp. on Form S-8, of
our report dated February 2, 2000, appearing in this Annual Report on Form 10-K
of Nabisco Group Holdings Corp. for the year ended December 31, 1999.
Deloitte & Touche LLP
Parsippany, New Jersey
March 21, 2000
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a
director or an officer of NABISCO GROUP HOLDINGS CORP., a Delaware corporation
("Nabisco Group Holdings"), do hereby make, constitute and appoint James A.
Kirkman III and Robert K. DeVries, and each of them, attorneys-in-fact and
agents of the undersigned with full power and authority of substitution and
resubstitution, in any and all capacities, to execute for and on behalf of the
undersigned the ANNUAL REPORT ON FORM 10-K of Nabisco Group Holdings for the
fiscal year ended December 31, 1999, and any and all amendments or supplements
to the foregoing Annual Report and any other documents and instruments
incidental thereto, and to deliver and file the same, with all exhibits thereto,
and all documents and instruments in connection therewith, with the Securities
and Exchange Commission, and with each exchange on which any class of securities
of the Nabisco Group Holdings is registered, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing that said attorneys-in-fact and agents,
and each of them, deem advisable or necessary to enable the Nabisco Group
Holdings to effectuate the intents and purposes hereof, and the undersigned
hereby fully ratify and confirm all that said attorneys-in-fact and agents, or
any of them, or their or his or her substitute or substitutes, shall do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed his or her name
this 17th day of March, 2000.
<TABLE>
<C> <S>
/s/ JAMES M. KILTS
- -------------------------------------------- President and Chief Executive Officer;
James M. Kilts Director
- -------------------------------------------- Senior Vice President and Chief Financial
James E. Healey Officer
- -------------------------------------------- Senior Vice President and Controller
Thomas J. Pesce
/s/ JOHN T. CHAIN, JR.
- -------------------------------------------- Director
John T. Chain, Jr.
/s/ JULIUS L. CHAMBERS
- -------------------------------------------- Director
Julius L. Chambers
/s/ JOHN L. CLENDENIN
- -------------------------------------------- Director
John L. Clendenin
/s/ STEVEN F. GOLDSTONE
- -------------------------------------------- Chairman
Steven F. Goldstone
/s/ RAY J. GROVES
- -------------------------------------------- Director
Ray J. Groves
</TABLE>
<PAGE>
<TABLE>
<C> <S>
/s/ DAVID B. JENKINS
- -------------------------------------------- Director
David B. Jenkins
/s/ FRED H. LANGHAMMER
- -------------------------------------------- Director
Fred H. Langhammer
/s/ H. EUGENE LOCKHART
- -------------------------------------------- Director
H. Eugene Lockhart
/s/ THEODORE E. MARTIN
- -------------------------------------------- Director
Theodore E. Martin
/s/ ROZANNE L. RIDGWAY
- -------------------------------------------- Director
Rozanne L. Ridgway
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM NABISCO GROUP
HOLDINGS' CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000847903
<NAME> NABISCO GROUP HOLDINGS CORP.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 254
<SECURITIES> 0
<RECEIVABLES> 681
<ALLOWANCES> 0
<INVENTORY> 898
<CURRENT-ASSETS> 2,032
<PP&E> 5,074
<DEPRECIATION> (1,985)
<TOTAL-ASSETS> 11,961
<CURRENT-LIABILITIES> 2,002
<BONDS> 3,892
98
0
<COMMON> 3
<OTHER-SE> 3,158
<TOTAL-LIABILITY-AND-EQUITY> 11,961
<SALES> 8,268
<TOTAL-REVENUES> 8,268
<CGS> 4,502
<TOTAL-COSTS> 4,502
<OTHER-EXPENSES> 146
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 324
<INCOME-PRETAX> 526
<INCOME-TAX> 201
<INCOME-CONTINUING> 255
<DISCONTINUED> 2,994
<EXTRAORDINARY> (281)
<CHANGES> 0
<NET-INCOME> 2,968
<EPS-BASIC> 9.11
<EPS-DILUTED> 9.10
</TABLE>
<PAGE>
Exhibit 99
EXHIBIT 99.
EXPANDED TOBACCO LITIGATION DISCLOSURE
As of March 20, 2000, NGH has been served in 40 separate tobacco-related
lawsuits, and has been named but not served in 10 additional lawsuits. The
following is a list of those cases by general category.
CASES IN WHICH NABISCO GROUP
HOLDINGS CORP. HAS BEEN SERVED
CLASS ACTIONS - SMOKING AND HEALTH
BROWN V. PHILIP MORRIS, INC., Civil Action No. 98-CV-5518 (E.D. Pa.).
Complaint served 10/23/98. Case dismissed by Court Order. Appeal pending.
JONES V. THE AMERICAN TOBACCO CO., Case No. 98-CV-30687 (Mo. Cir. Ct.).
Complaint served 5/27/99.
NORTON V. RJR NABISCO HOLDINGS CORP., Cause No. IP 96-0798 C M/S (Ind.
Super. Ct.). Complaint served 5/3/96.
NWANZE V. PHILIP MORRIS, INC., No. 97 Civ. 7344 (S.D.N.Y.). Complaint served
10/14/97.
CLASS ACTIONS - ANTITRUST
AMSTERDAM TOBACCO CORP. V. PHILIP MORRIS COS., INC., No. 1:00CV00460
(D.D.C.). Complaint served 3/9/00.
BARNES V. PHILIP MORRIS COS., INC., No. 00-0000954 (D.C. Super. Ct.). Complaint
served 2/28/00.
BUFFALO TOBACCO PRODUCTS, INC. V. PHILIP MORRIS COS., INC., No. 1:00CV00224 (D.
D.C.). Complaint served 2/14/00.
CUSATIS V. PHILIP MORRIS COS., INC., No. 00CV001359 (Wis. Cir. Ct.). Complaint
served 2/28/00.
DELOACH V. PHILIP MORRIS COS., INC., No. 1:00CV00294 (D.D.C.). Complaint
served 2/22/00.
DEL SERRONE V. PHILIP MORRIS COS., INC., No. 00-004035 (Mich. Cir. Ct.).
Complaint served 2/18/00.
FAHERTY V. PHILIP MORRIS COS., INC., (Me. Super. Ct.). Complaint served 2/18/00.
<PAGE>
GRAY V. PHILIP MORRIS COS., INC., No. C20000781 (Az. Super. Ct.). Complaint
served 2/25/00.
GREER V. PHILIP MORRIS COS., INC., Case No. 309826 (Cal. Super. Ct.). Complaint
served 3/7/00.
LENNON V. PHILIP MORRIS COS., INC., No. 102396/2000 (N.Y. Sup. Ct.). Complaint
served 3/1/00.
LUDKE V. PHILIP MORRIS COS., INC., (Minn. Dist. Ct.). Complaint served 2/22/00.
PEIRONA V. PHILIP MORRIS COS., INC., Case No. 310283 (Ca. Super. Ct.). Complaint
served 3/3/00.
ROG-GLO V. R.J. REYNOLDS TOBACCO CO., No. 00 Civ. 1255 (S.D.N.Y). Complaint
served 3/7/00.
ROMERO V. PHILIP MORRIS COS., INC., D0117-CV-00-462 (N.M. Dist. Ct.).
Complaint served 2/22/00.
ROWLEN V. PHILIP MORRIS COS., INC., No. 3:00CV119WS (D. Miss). Complaint
served 2/25/00.
SHAFER V. PHILIP MORRIS COS., INC., Civil Action No. 00-C-1107 (N.D. Dist. Ct.).
Complaint served 2/22/00.
VETTER V. PHILIP MORRIS COS., INC., (S.D. Cir. Ct.). Complaint served 2/18/00.
WITHERS V. PHILIP MORRIS COS., INC., No. 17,194-I (Tenn. Cir. Ct.). Complaint
served 2/22/00.
INDIVIDUAL ACTIONS
BENAVIDEZ V. PHILIP MORRIS, INC., Case No. 819377-3 (Cal. Super. Ct.).
Complaint served 1/14/00.
CRAYTON V. PHILIP MORRIS, INC., Case No. 820871-0 (Cal. Super. Ct.). Complaint
served 3/16/00.
KRIGBAUM V. THE AMERICAN TOBACCO CO., Case No. CV 782213 (Cal. Super.
Ct.). Complaint served 1/10/00.
2
<PAGE>
LABOR UNION ACTIONS
CENTRAL LABORER'S WELFARE FUND V. PHILIP MORRIS INC., No. 97-L-516 (Ill. Cir.
Ct.). Complaint served 11/24/97.
DAY CARE COUNCIL -- LOCAL 205 DC 1707 WELFARE FUND V. PHILIP MORRIS INC., No.
97/606240 (Sup. Ct., N.Y. County, N.Y.). Complaint served 12/9/97.
EASTERN STATES HEALTH & WELFARE FUND V. PHILIP MORRIS INC., No. 97/603869 (Sup.
Ct., N.Y. County, N.Y.). Complaint served 9/3/97.
IBEW LOCAL 25 HEALTH & BENEFIT FUND V. PHILIP MORRIS INC., No. 97/122255
(Sup. Ct., N.Y. County, N.Y.). Complaint served 12/1/97.
IBEW LOCAL 363 WELFARE FUND V. PHILIP MORRIS INC., No. 97/122254 (Sup. Ct.,
N.Y. County, N.Y.). Complaint served 12/1/97.
LOCAL 840 INTERNATIONAL BROTHERHOOD OF TEAMSTERS HEALTH & INSURANCE FUND V.
PHILIP MORRIS INC., No. 97/122256 (Sup. Ct., N.Y. County, N.Y.). Complaint
served 12/1/97.
LOCAL 138, 138A, AND 138B INTERNATIONAL UNION OF OPERATING ENGINEERS WELFARE
FUND V. PHILIP MORRIS INC., No. 97/122257 (Sup. Ct., N.Y. County, N.Y.).
Complaint served 12/1/97.
LOCAL 1199 HOME CARE INDUSTRY BENEFIT FUND V. PHILIP MORRIS INC., No.
97/606249 (Sup. Ct., N.Y. County, N.Y.). Complaint served 12/10/97.
LOCAL 1199 NATIONAL BENEFIT FUND FOR HEALTH & HUMAN SERVICES V. PHILIP MORRIS
INC., No. 97/606241 (Sup. Ct., N.Y. County, N.Y.). Complaint served 12/9/97.
LONG ISLAND REGIONAL COUNCIL OF CARPENTERS WELFARE FUND V. PHILIP MORRIS INC.,
No. 97/122258 (Sup. Ct., N.Y. County, N.Y.). Complaint served 12/1/97.
OPERATING ENGINEERS LOCAL 12 HEALTH AND WELFARE TRUST FUND V. PHILIP MORRIS,
INC., Case No. BC 177968 (Cal. Super. Ct.). Complaint served 3/2/00.
PUERTO RICAN ILGWU HEALTH & WELFARE FUND V. PHILIP MORRIS INC., No.
604785/97 (Sup. Ct., N.Y. County, N.Y.). Complaint served 12/1/97.
3
<PAGE>
OTHER INSTITUTIONS/ENTITIES
BOLIVIA, REPUBLIC OF V. PHILIP MORRIS COS., INC., MDL Docket # 1279, CA #
99-586 (PLF) (D.D.C. (Multi-district Litigation; S.D. Tx.)). Complaint served
2/1/99.
PECHANGA BAND OF LUISENO INDIANS V. PHILIP MORRIS, INC., Case No. 725419 (Cal.
Super. Ct.). Complaint served 5/11/99.
RIO DE JANEIRO, STATE OF V. PHILIP MORRIS COS., INC., No. 32198-99-7 (Dist. Ct.,
Angelina County, Tex.). Complaint served 8/2/99.
4
<PAGE>
CLASS ACTION ANTITRUST CASES IN WHICH NABISCO GROUP
HOLDINGS CORP. HAS BEEN NAMED BUT NOT YET BEEN SERVED
BROWNSTEIN V. PHILIP MORRIS COS., INC., Case No. 00002212 (Fla. Cir. Ct.).
MORSE V. R.J. REYNOLDS TOBACCO CO., Case No. 822825-9 (Cal. Super. Ct.).
MUNOZ V. R.J. REYNOLDS TOBACCO CO., Case No. 309834 (Cal. Super. Ct.).
QUICKLE V. PHILIP MORRIS COS., INC., No. 00-C28-RI (W. Va. Cir. Ct.).
SAND V. PHILIP MORRIS COS., INC., Civil Action No. B C225580 (Cal. Super. Ct.).
SULLIVAN V. R.J. REYNOLDS TOBACCO CO., Case No. 823162-8 (Cal. Super. Ct.).
SYLVESTER V. PHILIP MORRIS COS., INC., Index No. 00/601008 (N.Y. Sup. Ct.).
TEITLER V. R.J. REYNOLDS TOBACCO CO., Case No. 823161-9 (Cal. Super. Ct.).
ULAN V. R.J. REYNOLDS TOBACCO CO., Case No. 823160-0 (Cal. Super. Ct.).
WILLIAMSON OIL CO. V. PHILIP MORRIS COS., INC., No. 1 00-CV-0447 (D. Ga.).
5
