AMERICAN BRANDS REPORTS RECORD FOURTH QUARTER AND YEAR
AMERICAN BRANDS REPORTS RECORD FOURTH QUARTER AND YEAR OLD GREENWICH, Conn., Jan. 24 /PRNewswire/ -- American Brands, Inc.
(NYSE: AMB), today announced that net income for the quarter ended Dec. 31, 1991, rose to a record $217 million, or $1.04 per common share, from $7 million, or 2 cents per share, for the fourth quarter of 1990. Revenues rose 1 percent to $3.8 billion.
For the year, net income increased 37 percent to a record $806 million, or $3.91 per share, from $589 million, or $2.95 per share, in 1990. Revenues increased 2 percent to a record $14.1 billion. In the 1991 fourth quarter, the company changed its method of accounting for income taxes, retroactively adopting FAS Statement No. 96. Previously reported results have been restated. (See table below for restated 1990 and 1991 quarterly amounts). The company also announced that in the fourth quarter of 1991 it recognized a tax benefit of approximately $28 million as a result of the disposition of the McGregor Acquisition Corp. increasing rate preferred stock that it completely wrote down in 1990. The write-down amounted to $198 million, or 99 cents per share, for the 1990 fourth quarter and $180 million, or 93 cents (83 cents fully diluted), for the year. A further tax benefit of approximately $22 million is not being recognized at this time, since it is contingent on realizing future capital gains. The effect of the fourth quarter tax benefit was offset by an increase in nontobacco legal reserves, which resulted in a substantial increase in corporate administrative expenses. Reflecting conversions of convertible securities, the average number of shares outstanding was up for the quarter and the year, although the company purchased approximately 2.5 million shares in the open market during the fourth quarter. Interest expense declined 36 percent for the quarter on lower average rates. Fluctuations in exchange rates for foreign currencies, principally the British pound, adversely affected net income and E.P.S. by $12 million and 6 cents, respectively, in the quarter and by $3 million and 2 cents, respectively, for the year. Chairman and Chief Executive Officer William J. Alley said: "Our record results for the quarter and the year were achieved despite a nearly worldwide recession and the impact of substantial 1991 tax increases affecting our tobacco and distilled spirits businesses. Nevertheless, both these businesses reported solid profit increases in the quarter, as did our hardware and home improvement and specialty business groups. "Our largest core business, tobacco, had another excellent quarter. Revenues rose 22 percent to a record $2.2 billion, and operating income was up 15 percent to a record $281 million. Results were favorably affected by the timing of a cigarette price increase by our United Kingdom-based Gallaher Tobacco, which had the effect of shifting volume in the U.K. from the third to the fourth quarter, as well as by a strong performance by The American Tobacco Company. "For the year, total tobacco revenues rose 1 percent to a record $8.2 billion, and operating income declined 2 percent to $1.08 billion. However, tobacco revenues and operating income both would have been up 5 percent on a comparable basis, excluding the 1990 operations of and gain on the sale of a Netherlands-based subsidiary. "The American Tobacco Company achieved a significant milestone in 1991, with its first unit volume increase in over a quarter century. Its nearly 1 percent increase in U.S. unit sales compared with a 2.4 percent decline for the industry, resulting in a market share increase to over 7 percent for the year compared with 6.8 percent in 1990. This performance reflects continuing strong consumer acceptance of American Tobacco's recently introduced price-value brands -- Montclair, Misty and Bull Durham -- and contributed to American's record results for the quarter and the year. Revenues and operating income rose 8 percent and 7 percent, respectively, for both the quarter and the year. "Gallaher Tobacco had an outstanding fourth quarter, benefiting, as noted, from the timing of a cigarette price increase. Revenues and operating income rose 26 percent and 25 percent, respectively, and U.K. cigarette unit sales were up 28 percent for the quarter. In sterling, revenues and operating income increased 39 percent and 40 percent, respectively. "For the year, Gallaher and the U.K. tobacco industry were adversely affected by an 18 percent increase in cigarette taxes imposed in March. Cigarette unit sales declined 6.3 percent in 1991 for Gallaher, compared with a 3 percent decline for the U.K. industry as some consumers traded down to cheaper, mostly imported brands. As a result, Gallaher's cigarette market share declined from nearly 45 percent to about 43.5 percent, though it gained share of the premium sector. On a comparable basis (excluding the Netherlands operation and the gain on its sale in 1990), revenues for the year would have been up 5 percent, and operating income would have been up 3 percent. "The Franklin Life Insurance Company had an excellent year, with revenues up 8 percent to $870 million and operating income rising 8 percent to $152 million. Franklin has been benefiting from its strong financial position and sound investment portfolio. In the fourth quarter, revenues rose 12 percent, reflecting solid gains in new insurance sales, principally annuities, but operating income declined 8 percent on higher reserves, benefits and expenses. Both the quarter and the year benefited from higher realized gains on investments. Franklin had an increase in 1991 in both the number of new agents recruited and in the average number of producing agents. "The distilled spirits core business also performed very well. Operating income rose 11 percent for the quarter and 12 percent for the year, both records. Revenues were up 6 percent for the year, but the comparison for the quarter was negatively affected by a fiscal year-end change in 1990 for the U.K.-based Whyte & Mackay, which was acquired in February 1990. "The U.K. distilled spirits market was disrupted in 1991 by a 12 percent increase in taxes on a typical bottle and an industry change in basic bottle size to conform with European Community standards; nevertheless, Whyte & Mackay increased its profits and has invested aggressively in building its brands. During 1991, Whyte & Mackay purchased approximately 41 percent of the outstanding shares of Invergordon Distillers Group PLC, and this interest is presently recorded as an investment in marketable equity securities. "Jim Beam Brands had another record year despite an overall 3 percent decrease in case sales, and we believe that its major brands generally outperformed the industry. The U.S. industry was negatively affected in 1991 by an 8 percent increase in the federal excise tax. Beam's overseas operations continued to show profitable growth, and Jim Beam bourbon had another increase in export units. While the seven brands acquired by Beam in mid-December did not affect 1991 results, they have substantially enhanced Beam's position in the marketplace and should contribute to earnings in 1992. "Despite the worst year for housing starts since World War II, the MasterBrand hardware and home improvement group -- which has focused on the more stable repair and remodeling segment -- had a record year, even including Moen's results for a full year in 1990, and a particularly strong fourth quarter. Fourth quarter results last year were adversely affected by an $11 million restructuring charge in connection with the August 1990 Moen acquisition. Moen had a record year on a comparable basis, and the other companies (Master Lock, Aristokraft and Waterloo) each reported increased revenues and operating income in the fourth quarter. Master Lock had record results for the year and an exceptionally strong quarter, benefiting from a very successful new easy-to-install, high security door lock line as well as lower manufacturing costs. While results on a comparable basis for the MasterBrand group would have been down in the first half of 1991, they rebounded strongly in the second half and would have been up for the year. "Office products results were disappointing. For the year, revenues and operating income declined 4 percent and 57 percent, respectively; for the quarter, the declines were 6 percent and 48 percent, respectively. The economies in all of ACCO's major markets remained in recession during 1991, and the industry was particularly affected by declines in white collar employment following many years of consistent growth, as well as by competitive pricing pressures. "While the economies and our office products results in Europe generally deteriorated over the course of the year, the trend in the U.S., which represented 54 percent of 1991 office products revenues, was significantly better. For the U.S. operations, revenue comparisons improved each quarter as the year progressed and, in the fourth quarter, U.S. revenues were actually ahead of the 1990 quarter. Operating income comparisons in the U.S., while down, have improved in each of the last two quarters. "In the difficult 1991 environment, significant investments were made to improve service levels, penetrate the growing channels of distribution, further reduce manufacturing costs and rationalize facilities. During the year, ACCO reduced its workforce by 10 percent and inventories by 13 percent. With these and other steps completed in 1991, we believe that our office products business is well positioned to realize improved profitability in 1992. "The specialty group had record operating income for the quarter and the year, up 24 percent and 11 percent, respectively, despite lower revenues. Most notably, the Dollond & Aitchison optical group, the largest in Europe, completed an exceptional turnaround year with operating income of $21 million, compared with a loss of $1 million in 1990. The Titleist and Foot-Joy golf group had record results, with operating income up 10 percent. "Overall, our operations are generally performing very well in their markets. Thus, we remain optimistic about the future and, despite continued weak economic conditions, we expect another record year in 1992." American Brands is a global consumer products holding company with five core businesses -- tobacco, distilled spirits, hardware and home improvement products, office products, and life insurance. Each has brand name leaders in its industry. In tobacco, major cigarette brands include American Tobacco's Carlton, Lucky Strike, Pall Mall, Tareyton, Montclair, Misty, Bull Durham and Malibu and, in the U.K., Gallaher Limited's Benson & Hedges, Silk Cut and Berkeley. In distilled spirits, leading brands include Jim Beam and Old Grand-Dad bourbons, DeKuyper and Leroux cordials and liqueurs, Windsor and Lord Calvert Canadian whiskies, Kessler American Blended Whiskey, Gilbey's gin and vodka, Kamchatka, Wolfschmidt and Vladivar vodkas and Ronrico rum along with The Dalmore, The Claymore and Whyte & Mackay Special Reserve scotch whiskies. The MasterBrand Industries hardware and home improvement business includes Master Lock, Moen, Aristokraft and Waterloo. The ACCO World office products group includes Swingline, Wilson Jones, Day-Timers and substantial international operations, including Rexel and Twinlock. Life insurance is sold by The Franklin group of companies. Specialty products include Titleist, Pinnacle and Foot-Joy golf products and, in the U.K., Gallaher's Prestige housewares line, Dollond & Aitchison optics, and Forbuoys retailing. AMERICAN BRANDS, INC. (In millions, except per share amounts) Three months ended Dec. 31 1991 1990(B) Pct. Change Revenues Tobacco Products (C) $2,237.1 $1,839.8 21.6 Life Insurance 223.8 199.2 12.3 Distilled Spirits (D) 334.6 382.9 (12.6) Hardware and Home Improvement Products (E) 240.9 214.6 12.3 Office Products 285.6 302.7 (5.6) Specialty Businesses 474.4 818.7 (42.1) Total 3,796.4 3,757.9 1.0 Operating Income Tobacco Products (C) 280.9 243.5 15.4 Life Insurance 32.1 34.8 (7.8) Distilled Spirits (D) 62.4 56.2 11.0 Hardware and Home Improvement Products (E) 39.7 22.0 80.5 Office Products 18.5 35.6 (48.0) Specialty Businesses 8.7 7.0 24.3 Total 442.3 399.1 10.8 Interest and Related Charges 56.4 88.4 (36.2) Corporate Admin. Expenses 66.4 27.7 139.7 Loss on Investment in Preferred Stock (F) - 214.6 (100.0) Other (Income) Expenses, Net 2.7 (6.7) 140.3 Total 125.5 324.0 (61.3) Income Before Taxes 316.8 75.1 321.8 Income Taxes (F) 100.2 68.0 47.4 Net Income $216.6 $7.1 n.a. Earnings per Common Share Primary $1.04 $0.02 n.a. Fully diluted $1.00 $0.02 n.a. Average Common Shares Outstanding 204.6 199.0 2.8 Twelve months ended Dec. 31 1991(A) 1990(B) Pct. Change Revenues Tobacco Products (C) $8,152.9 $8,037.4 1.4 Life Insurance 870.4 805.5 8.1 Distilled Spirits (D) 1,061.2 1,005.3 5.6 Hardware and Home Improvement Products (E) 902.1 632.5 42.6 Office Products 982.3 1,024.6 (4.1) Specialty Businesses 2,094.9 2,275.6 (7.9) Total 14,063.8 13,780.9 2.1 Operating Income Tobacco Products (C) 1,080.3 1,100.3 (1.8) Life Insurance 151.8 140.5 8.0 Distilled Spirits (D) 151.6 135.5 11.9 Hardware and Home Improvement Products (E) 141.5 78.1 81.2 Office Products 37.7 87.2 (56.8) Specialty Businesses 67.9 61.0 11.3 Total 1,630.8 1,602.6 1.8 Interest and Related Charges 264.0 278.7 (5.3) Corporate Admin. Expenses 134.5 95.8 40.4 Loss on Investment in Preferred Stock (F) - 191.2 (100.0) Other (Income) Expenses, Net (5.7) (6.0) 5.0 Total 392.8 559.7 (29.8) Income Before Taxes 1,238.0 1,042.9 18.7 Income Taxes (F) 431.9 454.3 (4.9) Net Income $806.1 $588.6 37.0 Earnings per Common Share Primary $3.91 $2.95 32.5 Fully diluted $3.74 $2.80 33.6 Average Common Shares Outstanding 202.6 194.5 4.2 AMERICAN BRANDS, INC. Amounts Restated for Change in Method of Accounting for Income Taxes (Unaudited) (In millions, except per share amounts) 1991 QUARTER First Second Third Fourth Year Operating Income Tobacco Products $319.4 $215.6 $264.4 $280.9 $1,080.3 Life Insurance 40.5 37.0 42.2 32.1 151.8 Distilled Spirits 25.0 32.9 31.3 62.4 151.6 Hardware and Home Improvement Products 26.1 35.6 40.1 39.7 141.5 Office Products 9.7 1.5 8.0 18.5 37.7 Specialty Businesses 14.6 38.2 6.4 8.7 67.9 Total 435.3 360.8 392.4 442.3 1,630.8 Income Before Taxes 340.3 280.1 300.8 316.8 1,238.0 Income Taxes 124.3 93.7 113.7 100.2 431.9 Net Income 216.0 186.4 187.1 216.6 806.1 Earnings per Common Share Primary $1.06 $0.90 $0.91 $1.04 $3.91 Fully diluted $1.01 $0.86 $0.87 $1.00 $3.74 1990 QUARTER First Second Third Fourth Year Operating Income Tobacco Products $280.6 $218.3 $357.9 $243.5 $1,100.3 Life Insurance 31.4 37.9 36.4 34.8 140.5 Distilled Spirits 21.2 30.2 27.9 56.2 135.5 Hardware and Home Improvement Products 16.2 17.7 22.2 22.0 78.1 Office Products 18.9 13.6 19.1 35.6 87.2 Specialty Businesses 17.4 30.5 6.1 7.0 61.0 Total 385.7 348.2 469.6 399.1 1,602.6 Income Before Taxes 317.8 262.6 387.4 75.1 1,042.9 Income Taxes 123.6 107.1 155.6 68.0 454.3 Net Income 194.2 155.5 231.8 7.1 588.6 Earnings per Common Share Primary $0.99 $0.80 $1.16 $0.02 $2.95 Fully diluted $0.93 $0.75 $1.09 $0.02 $2.80 (A) -- All figures subject to completion of audit. (B) -- In the fourth quarter of 1991, the company changed its method of accounting for income taxes, retroactively adopting FAS Statement No. 96. Under the new liability method, deferred tax assets or liabilities for all temporary differences are established and subsequently adjusted to reflect changes in tax rates expected to be in effect during the periods when the temporary differences reverse. The company does not expect any material effect on the financial statements from the adoption of the principles outlined in the June 1991 Exposure Draft on Accounting for Income Taxes which will supersede FAS Statement No. 96 and will be adopted upon issuance. Previously reported quarterly results for 1991 and 1990 as well as annual results from 1981 through 1990 have been restated to reflect the retroactive application of this change. The effects of adopting FAS Statement No. 96 increased net income by $4.1 million or 2 cents per common share for the nine months ended Sept. 30, 1991, and decreased net income by $3.1 million and $7.4 million or 2 cents and 4 cents per share for the nine months ended Sept. 30 and the year ended Dec. 31, 1990, respectively. (C) -- On July 2, 1990, Gallaher Limited sold Theodorus Niemeyer. Operating income, net income and earnings per common share for the 12 months ended Dec. 31, 1990, include a gain of $54 million, $28.5 million and 15 cents per share, respectively, relating to the sale. Revenues and operating income for 1990 include $295.8 million and $16.3 million, respectively, relating to Niemeyer's operations. (D) -- The three months and 12 months ended Dec. 31, 1991, include the results of Whyte & Mackay and Vladivar vodka, acquired on Feb. 20 and April 6, 1990, respectively. In the fourth quarter of 1990, Whyte & Mackay's fiscal year end was changed to Nov. 30 from Sept. 30 to conform with U.S. tax regulations. Consequently, last year's fourth quarter included two additional months' results of operations. (E) -- The 12 months ended Dec. 31, 1991, include the full year's results of Moen, acquired on Aug. 21, 1990. (F) -- The "Loss on Investment in Preferred Stock" caption reflects 1990's provision to completely write down the carrying value of the company's investment in the cumulative increasing rate preferred stock of McGregor Acquisition Corp. and the related investment income previously recorded as follows: Three Months ended Twelve Months ended Dec. 31, 1990 Dec. 31, 1990 (In millions, except per share amounts) Investment income $ -- $(23.4) Write-down 214.6 214.6 Total $214.6 $191.2 Net loss (a) $197.6 $179.9 Per common share Primary $ 0.99 $ 0.93 Fully diluted $ 0.99 $ 0.83 (a) -- The net loss included a benefit for the reversal of taxes previously provided on the investment income; however, no tax benefit for the capital loss was recorded in 1990 since realization of such a benefit was not assured at that time. The company disposed of the preferred stock in December 1991 and as a result recognized approximately a $28 million tax benefit in the fourth quarter, as a portion of the realized capital loss was utilized to offset capital gains. A future federal tax benefit of approximately $22 million is not being recognized at this time on the remaining capital loss since it is contingent on realization of future capital gains. (G) -- The American Tobacco Company subsidiary and other tobacco manufacturers are defendants in various actions based upon allegations that human ailments have resulted from tobacco use. In addition, the company, two officers and a former officer are defendants in Forstmann Leff Associates, Inc., et al. v. American Brands, Inc., et al., in which plaintiffs, alleged holders of certain debt securities of E-II, seek not less than $400 million in damages for, among other things, alleged violations of the federal securities laws and common law fraud with respect to the tender offer for such debt securities made in connection with the acquisition of E-II and certain disclosures made following the acquisition. While it is not possible to predict the outcome of the pending litigation or the effect of such litigation on the results of operations for any period, management believes that there are meritorious defenses to the pending actions and that the pending actions will not have a material adverse effect upon the financial condition of the company. Such actions are being vigorously defended. -0- 1/24/92 /CONTACT: Roger W. W. Baker, 203-698-5148, or Daniel A. Conforti, 203-698-5132, both of American Brands/ (AMB) CO: American Brands, Inc. ST: Connecticut IN: HOU TOB SU: ERN
GK -- NY018 -- 3171 01/24/92 10:01 EST
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|Date:||Jan 24, 1992|
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