-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N35hfS1ciAA6nmsKEEWvOSlS3TAevHRUcVJJ9H2W2M41V8VCdQSDU0v+m/UQwz78 TJjP9ItwNIKCcSa4hhCldA== 0000893838-96-000091.txt : 19961111 0000893838-96-000091.hdr.sgml : 19961111 ACCESSION NUMBER: 0000893838-96-000091 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961108 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BRANDS INC /DE/ CENTRAL INDEX KEY: 0000789073 STANDARD INDUSTRIAL CLASSIFICATION: CIGARETTES [2111] IRS NUMBER: 133295276 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09076 FILM NUMBER: 96656565 BUSINESS ADDRESS: STREET 1: 1700 E PUTNAM AVE CITY: OLD GREENWICH STATE: CT ZIP: 06870-0811 BUSINESS PHONE: 2036985000 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period Commission file number 1-9076 ended September 30, 1996 AMERICAN BRANDS, INC. - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 13-3295276 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1700 East Putnam Avenue, Old Greenwich, Connecticut 06870-0811 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 698-5000 ------------ Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) The number of shares outstanding of the registrant's Common stock, par value $3.125 per share, at October 31, 1996 was 170,181,658 shares. PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS. - ------ -------------------- AMERICAN BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET --------------------------------------- (In millions) September 30, December 31, 1996 1995 ------------ ------------ (Unaudited) Assets Current assets Cash and cash equivalents $ 159.2 $ 139.9 Accounts receivable, net 1,454.8 984.4 Inventories Leaf tobacco 187.0 148.1 Bulk whiskey 361.4 343.7 Other raw materials, supplies and work in process 302.6 271.6 Finished products 502.5 1,076.8 -------- -------- 1,353.5 1,840.2 Other current assets 241.3 199.5 -------- -------- Total current assets 3,208.8 3,164.0 Property, plant and equipment, net 1,141.1 1,137.3 Intangibles resulting from business acquisitions, net 3,890.8 3,305.2 Other assets 447.3 414.7 -------- -------- Total assets $8,688.0 $8,021.2 ======== ======== See Notes to Condensed Consolidated Financial Statements. -1- AMERICAN BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET --------------------------------------- (In millions, except per share amounts) September 30, December 31, 1996 1995 ------------ ------------ (Unaudited) Liabilities and stockholders' equity Current liabilities Notes payable to banks $ 50.0 $ 297.4 Commercial paper 708.9 - Accounts payable 276.2 301.9 Accrued expenses and other liabilities 586.2 571.8 Accrued excise and other taxes 1,236.2 826.8 Current portion of long-term debt 78.1 413.4 --------- --------- Total current liabilities 2,935.6 2,411.3 Long-term debt 1,590.9 1,154.6 Deferred income taxes 147.5 127.6 Postretirement and other liabilities 419.0 450.5 --------- --------- Total liabilities 5,093.0 4,144.0 --------- --------- Stockholders' equity $2.67 Convertible Preferred stock - redeemable at Company's option 13.3 14.1 Common stock, par value $3.125 per share, 229.6 shares issued 717.4 717.4 Paid-in capital 168.4 171.6 Foreign currency adjustments (240.4) (234.6) Retained earnings 4,996.9 4,887.3 Treasury stock, at cost (2,060.6) (1,678.6) --------- --------- Total stockholders' equity 3,595.0 3,877.2 --------- --------- Total liabilities and stockholders' equity $ 8,688.0 $ 8,021.2 ========= ========= See Notes to Condensed Consolidated Financial Statements. -2- AMERICAN BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF INCOME for the Nine Months Ended September 30, 1996 and 1995 ----------------------------------------------------- (In millions, except per share amounts) (Unaudited) 1996 1995 ---------- ---------- Net sales $8,144.0 $8,282.5 Cost of products sold 2,102.5 2,367.7 Excise taxes on products sold 3,985.1 3,859.5 Advertising, selling, general and administrative expenses 1,216.4 1,269.5 Amortization of intangibles 80.3 71.8 Interest and related expenses 133.4 122.2 Other (income) expenses, net (3.5) (21.4) Gain on disposal of businesses, net - 20.0 -------- -------- Income before income taxes 629.8 633.2 Income taxes 247.0 244.2 -------- -------- Income before extraordinary items 382.8 389.0 Extraordinary items (10.3) (2.7) -------- -------- Net income $ 372.5 $ 386.3 ======== ======== Earnings per Common share Primary Income before extraordinary items $2.19 $2.05 Extraordinary items (.06) (.01) ----- ----- Net income $2.13 $2.04 ===== ===== Fully diluted Income before extraordinary items $2.15 $2.01 Extraordinary items (.06) (.01) ----- ----- Net income $2.09 $2.00 ===== ===== Dividends paid per Common share $1.50 $1.50 ===== ===== Average number of Common shares outstanding Primary 174.3 189.1 ===== ===== Fully diluted 178.8 198.3 ===== ===== See Notes to Condensed Consolidated Financial Statements. -3- AMERICAN BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF INCOME for the Three Months Ended September 30, 1996 and 1995 ----------------------------------------------------- (In millions, except per share amounts) (Unaudited) 1996 1995 ---------- ---------- Net sales $2,920.1 $2,895.3 Cost of products sold 727.3 762.7 Excise taxes on products sold 1,482.8 1,442.5 Advertising, selling, general and administrative expenses 408.8 410.8 Amortization of intangibles 26.9 23.6 Interest and related expenses 43.4 36.1 Other (income) expenses, net (0.2) (5.4) Gain on disposal of businesses, net - 20.0 -------- -------- Income before income taxes 231.1 245.0 Income taxes 94.4 91.7 -------- -------- Net income $ 136.7 $ 153.3 ======== ======== Earnings per Common share Primary $.80 $.82 ==== ==== Fully diluted $.79 $.80 ==== ==== Dividends paid per Common share $.50 $.50 ==== ==== Average number of Common shares outstanding Primary 170.4 184.7 ===== ===== Fully diluted 173.9 191.7 ===== ===== See Notes to Condensed Consolidated Financial Statements. -4- AMERICAN BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS for the Nine Months Ended September 30, 1996 and 1995 ----------------------------------------------------- (In millions) (Unaudited) 1996 1995 --------- --------- Operating activities Net income $ 372.5 $ 386.3 Extraordinary items 10.3 2.7 Depreciation and amortization 204.5 194.4 Gain on disposal of businesses, net - (20.0) Increase in accounts receivable (440.5) (350.0) Decrease in inventories 509.8 640.6 Decrease in accounts payable, accrued expenses and other liabilities (65.3) (214.0) Increase in accrued excise and other taxes 399.9 124.7 Other operating activities, net (35.2) 24.6 ------- -------- Net cash provided from operating activities 956.0 789.3 ------- -------- Investing activities Additions to property, plant and equipment (137.5) (129.7) Proceeds from the disposition of operations, net of cash 4.3 1,305.8 Acquisition, net of cash acquired (702.1) - Other investing activities, net 6.8 (11.4) ------- -------- Net cash (used) provided by investing activities (828.5) 1,164.7 ------- -------- Financing activities Increase (decrease) in short-term debt 865.2 (135.1) Issuance of long-term debt 109.1 3.2 Repayment of long-term debt (404.6) (493.3) Dividends to stockholders (262.9) (286.6) Cash purchases of Common stock for treasury (418.5) (780.7) Other financing activities, net 4.7 15.9 ------- -------- Net cash used by financing activities (107.0) (1,676.6) ------- -------- Effect of foreign exchange rate changes on cash (1.2) 5.2 ------- -------- Net increase in cash and cash equivalents 19.3 282.6 Cash and cash equivalents at beginning of period 139.9 110.1 ------- -------- Cash and cash equivalents at end of period $ 159.2 $ 392.7 ======= ======== See Notes to Condensed Consolidated Financial Statements. -5- AMERICAN BRANDS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Principles of Consolidation The condensed consolidated balance sheet as of September 30, 1996, the related condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 1996 and 1995 and the related condensed consolidated statement of cash flows for the nine-month periods ended September 30, 1996 and 1995 are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. Interim results may not be indicative of results for a full year. The condensed consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the Company's annual consolidated financial statements and notes. The year end condensed consolidated balance sheet was derived from the Company's audited financial statements, but does not include all disclosures required by generally accepted accounting principles. This Form 10-Q should be read in conjunction with the Company's consolidated financial statements and notes incorporated by reference in its 1995 Annual Report on Form 10-K. The Company is presenting its condensed consolidated statement of income in a "single-step" format and, accordingly, certain reclassifications of prior year amounts have been made to conform to this presentation. 2. Acquisition On January 24, 1996, Cobra Golf Incorporated ("Cobra") was acquired for an aggregate cost of approximately $715 million in cash, including fees and expenses. The cost exceeded the fair value of net assets acquired by approximately $650 million. Cobra's operations have been included in consolidated results from the date of acquisition. Had operations been consolidated from January 1, 1995, they would not have materially affected 1995 results. 3. Dispositions The Company completed its previously announced disposition of nonstrategic businesses and product lines in 1995 with the sale of U.K.-based Forbuoys (retail distribution) on July 24, 1995 and Prestige (housewares) on May 2, 1995. As a result, $20 million of the provision that was recorded in 1994 in connection with the disposition was reversed in the third quarter of 1995. -6- AMERICAN BRANDS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Supplementary Profit and Loss Information Federal and foreign excise taxes included in net sales are as follows (in millions): Nine Months Three Months Ended September 30, Ended September 30, -------------------- ------------------- 1996 1995 1996 1995 -------- -------- -------- -------- International tobacco $3,675.4 $3,528.0 $1,375.4 $1,330.4 Distilled spirits 309.7 331.5 107.4 112.1 -------- -------- -------- -------- $3,985.1 $3,859.5 $1,482.8 $1,442.5 ======== ======== ======== ======== The effective income tax rates of 39.2% and 40.8% for the nine-month and three-month periods ended September 30, 1996, respectively, increased from 38.6% and 37.4% for the same periods last year, respectively. The lower rates in 1995 principally reflected the reversal of $20 million provided in 1994 in connection with the disposition of nonstrategic businesses for which no taxes were required. 5. Earnings Per Share Earnings per Common share are based on the weighted average number of Common shares outstanding in each period and after preferred stock dividend requirements. Fully diluted earnings per Common share assume that any convertible debentures and convertible preferred shares outstanding at the beginning of each period, or at their date of issuance, if later, were converted at those dates, with related interest, preferred stock dividend requirements and outstanding Common shares adjusted accordingly. It also assumes that outstanding Common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds exercise price, less shares which could have been purchased by the Company with related proceeds. 6. Extraordinary Items On March 5, 1996, the Company redeemed its $150 million 7-5/8% Eurodollar Convertible Debentures, Due 2001, at a redemption price of 103.8125% of the principal amount plus accrued interest. On March 1, 1996, the Company redeemed its $150 million 9-1/8% Debentures, Due 2016, at a redemption price of 104.4375% of the principal amount plus accrued interest. In connection with the redemptions, the Company recorded a charge of $10.3 million ($15.8 million pretax), or six cents per Common share, and reduced the number of fully diluted shares outstanding by 2.8 million. -7- AMERICAN BRANDS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Extraordinary Items (Concluded) On April 11, 1995, holders of $199.5 million of the $200 million 5-3/4% Eurodollar Convertible Debentures, Due 2005, exercised their right to "put" their Debentures at a price of 114.74% plus accrued interest. This resulted in a total payment by the Company of $240.4 million, including premium and accrued interest. In connection with this exercise, the Company recorded a charge of $2.7 million ($4.1 million pretax), or one cent per Common share, and reduced the number of fully diluted shares outstanding by 5.1 million. On December 12, 1996, the Company will redeem its 7-3/4% Eurodollar Convertible Debentures, Due 2002, its 5-3/8% Eurodollar Convertible Debentures, Due 2003, and its 5-3/4% Eurodollar Convertible Debentures, Due 2005. The aggregate principal amount currently outstanding of these debentures is less than $20 million and total shares issuable upon conversion are less than 600,000. The costs related to the redemption of these debentures will be immaterial. 7. Pending Litigation The Company and its subsidiaries are defendants in various lawsuits associated with their business and operations, including actions based upon allegations that human ailments have resulted from tobacco use. It is not possible to predict the outcome of the pending litigation, but management believes that there are meritorious defenses to the pending actions and that the pending actions will not have a material adverse effect upon the results of operations, cash flow or financial condition of the Company. These actions are being vigorously contested. On December 22, 1994, the Company sold The American Tobacco Company subsidiary to Brown & Williamson Tobacco Corporation, a wholly-owned subsidiary of B.A.T Industries p.l.c. In connection with the sale, Brown & Williamson Tobacco Corporation and The American Tobacco Company agreed to indemnify the Company against claims arising from smoking and health and fire safe cigarette matters relating to the tobacco business of The American Tobacco Company. 8. Environmental The Company is subject to laws and regulations relating to the protection of the environment. While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company's subsidiaries may undertake in the future, in the opinion of management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect upon the results of operations, cash flow or financial condition of the Company. -8- AMERICAN BRANDS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Concluded) 9. Subsequent Event On October 8, 1996, the Company announced plans to spin off its U.K.-based Gallaher tobacco business. Completion of the transaction is contingent upon receipt of favorable tax rulings and relevant stockholder approvals. The transaction is expected to be completed in the second or early in the third quarter of 1997. When the spin off is completed, the name of the Company will be changed to Fortune Brands and the financial statements will be restated to show tobacco operations as discontinued operations. Following the transaction, the Company's shareholders will own shares in two publicly-traded companies - Gallaher and Fortune Brands. -9- REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- To the Board of Directors of American Brands, Inc.: We have reviewed the condensed consolidated balance sheet of American Brands, Inc. and Subsidiaries as of September 30, 1996, the related condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 1996 and 1995 and the related condensed consolidated statement of cash flows for the nine-month periods ended September 30, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1995, and the related consolidated statements of income, cash flows and Common stockholders' equity for the year then ended (not presented herein) and in our report dated February 1, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1995 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. COOPERS & LYBRAND L.L.P. 1301 Avenue of the Americas New York, New York November 7, 1996 -10- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - ------ AND RESULTS OF OPERATIONS ----------------------------------------------------------- AMERICAN BRANDS, INC. AND SUBSIDIARIES -------------------------------------- Results of Operations for the Nine Months Ended September 30, 1996 as Compared to the Nine Months Ended September 30, 1995 ---------------------------------------------------------------------- Net Sales Operating Income* --------------------- ------------------- 1996 1995 1996 1995 -------- -------- ------- -------- (In millions) International tobacco $4,723.1 $4,568.6 $409.7 $400.1 Distilled spirits 892.7 877.8 127.7 126.4 Hardware and home improvement products 1,005.8 962.4 130.4 127.7 Office products 853.3 844.6 49.5 42.3 Golf and leisure products 669.1 478.8 104.7 78.2 -------- -------- ------ ------ 8,144.0 7,732.2 822.0 774.7 Businesses disposed - 550.3 - 4.2 -------- -------- ------ ------ $8,144.0 $8,282.5 $822.0 $778.9 ======== ======== ====== ====== * Operating income represents net sales less all costs and expenses excluding corporate administrative expenses, interest and related expenses and other (income) expenses, net. CONSOLIDATED - ------------ Net sales, excluding businesses disposed in 1995, rose 5% to $8.1 billion on price increases (primarily international tobacco excise tax increases), new products, the inclusion of Cobra and line extensions, partly offset by volume declines and the unfavorable effects of lower average foreign exchange rates. Operating income, excluding businesses disposed, was up 6%, mainly due to the Cobra acquisition as well as the higher sales, partly offset by higher ongoing operating expenses. Excluding the unfavorable effects of lower average foreign exchange rates ($152.9 million and $10.8 million on sales and operating income, respectively) and businesses disposed, both sales and operating income would have been up 7%. Interest and related expenses increased due to higher average borrowings to fund the purchase of Cobra Golf and share repurchases. The unfavorable change in other (income) expenses, net, reflected interest income in 1995 from the investment of proceeds from the disposition of The American Tobacco Company and the Franklin life insurance business. -11- AMERICAN BRANDS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) --------------------------------------------------------- CONSOLIDATED (Concluded) - ------------ The gain on disposal of businesses, net, reflected an unfavorable comparison to last year's reversal of $20 million of the $245 million loss provision recorded in 1994 in connection with the disposition of nonstrategic businesses. The effective income tax rate of 39.2% for the nine months ended September 30, 1996, increased from 38.6% for the same period last year. The lower rate in 1995 principally reflected the reversal of $20 million provided in 1994 in connection with the disposition of nonstrategic businesses for which no taxes were required. Income before extraordinary items of $382.8 million, or $2.19 per Common share, for the nine months ended September 30, 1996, compared with $389 million, or $2.05 per share for the same period last year. The $20 million provision reversal for the disposal of businesses recorded last year impacted primary and fully diluted E.P.S. by ten cents and nine cents, respectively. Lower average Common shares outstanding in 1996 benefited primary and fully diluted E.P.S. by 17 cents and 21 cents, respectively. The extraordinary items resulted from a charge this year of $10.3 million ($15.8 million pretax) in connection with the redemption of the Company's $150 million 7-5/8% Eurodollar Convertible Debentures, Due 2001, and its $150 million 9-1/8% Debentures, Due 2016. Last year's extraordinary item resulted from a charge of $2.7 million ($4.1 million pretax) for the extinguishment of debt resulting from holders of the Company's 5-3/4% Eurodollar Convertible Debentures, Due 2005, exercising their right to "put" the debentures. (See note 6 in the Notes to Condensed Consolidated Financial Statements.) Net income of $372.5 million, or $2.13 per Common share, for the nine months ended September 30, 1996, compared with $386.3 million, or $2.04 per share, for the same period last year. Earnings per Common share in 1996 will continue to benefit from the Company's repurchase of shares of its Common stock. The ten million share purchase authorization adopted by the Board of Directors was substantially completed during the nine-month period. A significant proportion of the Company's income is derived from foreign sources, primarily the United Kingdom. As a result, changes in the value of foreign currencies, principally sterling, can have a significant effect on dollar results. See notes 7 and 8 in the Notes to Condensed Consolidated Financial Statements for discussion of pending litigation and environmental matters. -12- AMERICAN BRANDS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) --------------------------------------------------------- International Tobacco - --------------------- Net sales in sterling were up 6% on price increases (primarily higher U.K. tobacco taxes) and the inclusion of one additional month's results for Gallaher Dublin (change to a calendar year end), partly offset by a slight decline in U.K. cigarette unit sales. Gallaher's worldwide cigarette unit sales were up slightly. Operating income in sterling increased 5% on higher sales, partly offset by higher operating expenses (principally Sovereign introductory costs). In dollars, net sales and operating income increased 3% and 2%, respectively, reflecting translation at lower average foreign exchange rates. Gallaher's share of cigarette sales to consumers was estimated at 39.1%, as compared with 39.3% for last year's comparable nine month period. Consumer demand is estimated to have declined in the range of 2% for both nine month periods. The U.K. cigarette industry unit sales to the trade are estimated to have increased 3.5%. Changes in the trade buying patterns related to the U.K. budget announcements at the end of 1994 and 1995 caused distortions in the comparison between the first nine months of 1995 and 1996, which benefited the first nine months of 1996. Distilled Spirits - ----------------- Net sales increased 2% on the inclusion of one additional month's results for Whyte & Mackay (change to a calendar year end), price increases and new products, partly offset by lower volumes (principally lower U.S. shipments) and lower average foreign exchange rates. Operating income increased 1% on higher sales and improved gross margin, partly offset by higher operating expenses (principally marketing expenditures). Hardware and Home Improvement Products - -------------------------------------- Net sales increased 5% on price increases, line extensions and new products, partly offset by volume declines. Operating income was up 2% on the sales increase and a gain on the sale of Moen's joint venture in Taiwan, partly offset by increased operating expenses (including an unfavorable comparison to the prior year's reversal of reserves related to a joint venture and increased marketing) and higher manufacturing costs (including higher raw material costs). Master Lock's operating income declined as competitive activities resulted in increased spending on selling and pricing programs. -13- AMERICAN BRANDS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) --------------------------------------------------------- Office Products - --------------- Net sales, excluding the office furniture operations sold in 1995, increased 5% on new products and price increases, partly offset by volume declines and lower average foreign exchange rates. Operating income increased 17% reflecting the sales increase and improved gross margin, partly offset by slightly increased operating expenses. Golf and Leisure Products - ------------------------- Net sales were up 40% on inclusion of Cobra, acquired January 24, 1996, and increased volume in all product lines, reflecting benefits from line extensions and new products. Operating income increased 34% on the inclusion of Cobra and sales gains, partly offset by higher operating expenses, principally increased marketing expenses to support new products and meet competitive activity. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Net cash provided from operating activities of $956 million for the nine months ended September 30, 1996, exceeded the funds required for capital expenditures and dividends by $555.6 million. Compared to the nine-month period last year, net cash provided from operating activities increased $166.7 million. The increase was largely attributable to changes in accrued taxes, accounts payable and last year's payment of $29.4 million related to the "put" exercise premium on the 5-3/4% Eurodollar Convertible Debentures, partly offset by fluctuations in inventories and accounts receivable. Net cash used by investing activities for the nine months ended September 30, 1996 was $828.5 million, as compared with net cash provided of $1,164.7 million in the nine-month period last year, reflecting this year's acquisition of Cobra and last year's proceeds from the sale of the Franklin life insurance business. Net cash used by financing activities for the nine months ended September 30, 1996 was $107 million, as compared with net cash used of $1,676.6 million in 1995, reflecting this year's borrowings and lower repurchases of Common stock for treasury. The Company's repurchases amounted to $418.5 million during the first nine months of 1996 as compared with $780.7 million in the first nine months of 1995. -14- AMERICAN BRANDS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) --------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES (Concluded) - ------------------------------- The changes in accounts receivable and inventories from December 31, 1995 to September 30, 1996, were primarily attributable to international tobacco. Generally, these balances are significantly affected at December 31 as a result of buying patterns associated with the annual U.K. budget. On March 5, 1996, the Company redeemed its $150 million 7-5/8% Eurodollar Convertible Debentures, Due 2001, at a redemption price of 103.8125% of the principal amount plus accrued interest. On March 1, 1996, the Company redeemed its $150 million 9-1/8% Debentures, Due 2016, at a redemption price of 104.4375% of the principal amount plus accrued interest. Total debt at September 30, 1996 was $2.4 billion, an increase of $562.5 million from December 31, 1995, primarily reflecting the increase in commercial paper borrowings, principally due to the acquisition of Cobra. The ratio of total debt to total capital increased from 32.5% at December 31, 1995 to 40.3% at September 30, 1996. Management believes that the Company's internally generated funds, together with its access to global credit markets, are more than adequate to meet the Company's capital needs. On October 8, 1996, the Company announced plans to spin off its U.K.-based Gallaher tobacco business. Completion of the transaction is contingent upon receipt of favorable tax rulings and relevant stockholder approvals. The transaction is expected to be completed in the second or early in the third quarter of 1997. To allocate the overall debt burden of the Company at the time of the spin off, Gallaher will borrow and pay to Fortune Brands approximately $1.4 billion. Fortune Brands will use the proceeds (approximately $1.25 billion after taxes) initially to pay down short-term debt. The Gallaher debt will be in addition to its seasonal working capital requirements. -15- AMERICAN BRANDS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) ------------------------------------------------------------- Results of Operations for the Three Months Ended September 30, 1996 as Compared to the Three Months Ended September 30, 1995 ------------------------------------------------------------------------ Net Sales Operating Income ---------------------- ------------------ 1996 1995 1996 1995 -------- -------- ------- ------- (In millions) International tobacco $1,762.0 $1,711.5 $159.1 $152.0 Distilled spirits 309.2 307.3 52.9 51.4 Hardware and home improvement products 349.1 327.9 44.2 39.7 Office products 304.3 300.1 19.3 16.4 Golf and leisure products 195.5 136.5 17.6 18.0 -------- -------- ------ ------ 2,920.1 2,783.3 293.1 277.5 Businesses disposed - 112.0 - 0.9 -------- -------- ------ ------ $2,920.1 $2,895.3 $293.1 $278.4 ======== ======== ====== ====== CONSOLIDATED - ------------ Net sales, excluding businesses disposed in 1995, rose 5% to $2.9 billion on price increases (primarily international tobacco excise tax increases), new products, line extensions and the inclusion of Cobra, partly offset by volume declines and the unfavorable effects of lower average foreign exchange rates. Operating income, excluding businesses disposed, was up 6%, principally due to the higher sales, partly offset by higher ongoing operating expenses. Interest and related expenses increased due to higher average borrowings to fund share repurchases and the purchase of Cobra Golf. The unfavorable change in other (income) expenses, net, reflected interest income in the third quarter of 1995 from investment of proceeds from the disposition of The American Tobacco Company and the Franklin life insurance business. The gain on disposal of businesses, net, reflected an unfavorable comparison to last year's reversal of $20 million of the $245 million loss provision recorded in 1994 in connection with the disposition of nonstrategic businesses. -16- AMERICAN BRANDS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) --------------------------------------------------------- CONSOLIDATED (Concluded) - ------------ The effective income tax rate of 40.8% for the three months ended September 30, 1996, increased from 37.4% for the same period last year. The lower rate in 1995 principally reflected the reversal of $20 million provided in 1994 in connection with the disposition of nonstrategic businesses for which no taxes were required. Net income of $136.7 million, or 80 cents per Common share, for the three months ended September 30, 1996, compared with $153.3 million, or 82 cents per share, for the same period last year. The $20 million provision reversal for disposal of businesses recorded last year impacted primary and fully diluted E.P.S. by ten cents and nine cents, respectively. Lower average Common shares outstanding in 1996 benefited primary and fully diluted E.P.S. by six cents and eight cents, respectively. International Tobacco - --------------------- Net sales in sterling were up 4%, principally on price increases resulting from higher U.K. tobacco taxes and the inclusion of one additional month's results for Gallaher Dublin (change to a calendar year end). The increase was partly offset by a 3.7% decrease in U.K. cigarette unit sales. Export cigarette unit sales were up 2.3%. Gallaher's worldwide cigarette unit sales were down 0.5%; excluding the additional month for Gallaher Dublin, worldwide cigarette unit sales were down 2.3%. Operating income in sterling increased 6% principally on higher sales. In dollars, net sales and operating income increased 3% and 5%, respectively, reflecting translation at lower average foreign exchange rates. Distilled Spirits - ----------------- Net sales increased slightly on price increases and new products, partly offset by lower volumes (principally lower U.S. shipments). Operating income increased 3% on higher sales and improved gross margin, partly offset by increased marketing expenses. Hardware and Home Improvement Products - -------------------------------------- Net sales increased 6% on line extensions, volume gains, price increases and new products. Operating income was up 11% on increased sales, favorable product mix and a gain on the sale of Moen's joint venture in Taiwan, partly offset by increased operating expenses which included volume-related selling expenses and spending to meet competitive activities. Master Lock's operating income declined as intensely competitive activities resulted in increased spending on selling and pricing programs. -17- AMERICAN BRANDS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Concluded) --------------------------------------------------------- Office Products - --------------- Net sales, excluding the office furniture operations sold in 1995, increased 5% on new products and price increases, partly offset by volume declines and lower average foreign exchange rates. Operating income increased 18% reflecting the sales increase and improved gross margin, partly offset by a slight increase in operating expenses. Golf and Leisure Products - ------------------------- Net sales were up 43% on inclusion of Cobra and increased volume in all product lines reflecting benefits from line extensions and new products. Operating income decreased 2% reflecting an operating loss at Cobra caused primarily by goodwill amortization, increased marketing efforts (principally to promote the King Cobra Ti metal wood products and the expansion into the Japanese market), as well as higher manufacturing costs associated with the titanium finishing process and the development and production of certain newer shaft designs. This decrease was mostly offset by an increase at Titleist on higher sales, partly offset by higher operating expenses to support new products and meet competitive activity. CAUTIONARY STATEMENT - -------------------- This Quarterly Report on Form 10-Q contains statements relating to future results which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to changes in general economic conditions, foreign exchange rate fluctuations, competitive product and pricing pressures, the impact of excise tax increases with respect to international tobacco and distilled spirits, regulatory developments, the uncertainties of litigation, as well as other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings. -18- PART I - EXHIBIT A ------------------ AMERICAN BRANDS, INC. AND SUBSIDIARIES Computation of Net Income Per Common Share - Primary and Fully Diluted (Unaudited) -------------------------------------------- (In millions) Nine Months Ended September 30, ---------------------- 1996 1995 ------- ------- Income before extraordinary items $382.8 $389.0 Preferred stock dividend requirements (0.9) (1.0) ------ ------ Income available for computing earnings per Common share - primary 381.9 388.0 Extraordinary items (10.3) (2.7) ------ ------ Net income for computing earnings per Common share - primary $371.6 $385.3 ====== ====== Income available for computing earnings per Common share - primary $381.9 $388.0 Convertible preferred stock dividend requirements 0.9 1.0 Interest and related expenses on convertible debentures 2.3 10.5 ------ ------ Income available for computing earnings per Common share - fully diluted 385.1 399.5 Extraordinary items (10.3) (2.7) ------ ------ Net income for computing earnings per Common share - fully diluted $374.8 $396.8 ====== ====== -19- PART I - EXHIBIT A (Continued) ------------------------------ Computation of Weighted Average Number of Common Shares Outstanding on a Fully Diluted Basis (Unaudited) -------------------------------------------------------------- (In millions, except per share amounts) Nine Months Ended September 30, ---------------------- 1996 1995 ------- ------- Weighted average number of Common shares outstanding during each period - primary 174.3 189.1 Addition from assumed conversion as of the beginning of each period of the convertible preferred stock outstanding at the end of each period 1.8 1.9 Addition from assumed conversion of convertible debentures 0.6 3.8 Other additions 2.1 3.5 ----- ----- Weighted average number of Common shares outstanding during each period on a fully diluted basis 178.8 198.3 ===== ===== Earnings per Common share Primary Income before extraordinary items $2.19 $2.05 Extraordinary items (.06) (.01) ----- ----- Net income $2.13 $2.04 ===== ===== Fully diluted Income before extraordinary items $2.15 $2.01 Extraordinary items (.06) (.01) ----- ----- Net income $2.09 $2.00 ===== ===== -20- PART I - EXHIBIT A (Concluded) ------------------------------ AMERICAN BRANDS, INC. AND SUBSIDIARIES Computation of Net Income Per Common Share - Primary and Fully Diluted (Unaudited) -------------------------------------------- (In millions) Three Months Ended September 30, ---------------------- 1996 1995 ------- ------- Net income $136.7 $153.3 Preferred stock dividend requirements (0.3) (0.3) ------ ------ Net income for computing earnings per Common share - primary 136.4 153.0 Convertible preferred stock dividend requirements 0.3 0.3 Interest and related expenses on convertible debentures 0.3 2.4 ------ ------ Net income for computing earnings per Common share - fully diluted $137.0 $155.7 ====== ====== Computation of Weighted Average Number of Common Shares Outstanding on a Fully Diluted Basis (Unaudited) -------------------------------------------------------------- (In millions, except per share amounts) Weighted average number of Common shares outstanding during each period - primary 170.4 184.7 Addition from assumed conversion as of the beginning of each period of the convertible preferred stock outstanding at the end of each period 1.7 2.0 Addition from assumed conversion of convertible debentures 0.6 3.8 Other additions 1.2 1.2 ----- ----- Weighted average number of Common shares outstanding during each period on a fully diluted basis 173.9 191.7 ===== ===== Earnings per Common share Primary $.80 $.82 ==== ==== Fully diluted $.79 $.80 ==== ==== -21- PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. - ------ ----------------- (a) Reference is made to paragraph (a) of Part I, Item 3, "Legal Proceedings", of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, paragraph (a) of Part II, Item 1, "Legal Proceedings", of Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 1996 and to paragraph (a) of Part II, Item 1, "Legal Proceedings", of Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1996. In addition, Registrant has been named as a defendant, together with leading tobacco manufacturers, in Arch v. The American Tobacco Company, et al., United States District Court for the Eastern District of Pennsylvania, August 8, 1996; Chamberlain v. The American Tobacco Company, United States District Court for the Northern District of Ohio, August 14, 1996; Harris v. The American Tobacco Company, Inc., et al., United States District Court for the Eastern District of New York, October 14, 1996; and Masepohl v. The American Tobacco Company, et al., United States District Court for the District of Minnesota, September 3, 1996. Arch, Chamberlain and Masepohl are proposed state-wide class actions, and Harris is a proposed nationwide class action, on behalf of individuals allegedly addicted to cigarettes through the manipulation of nicotine levels or individuals who have allegedly suffered personal injury from the use of cigarettes. Registrant has been named as a defendant, together with leading tobacco manufacturers, in Dymits v. American Brands, et al., United States District Court for the Northern District of California, May 22, 1996; Evans v. The American Tobacco Company, et al., Supreme Court of the City of New York, Kings County, August 23, 1996; Hellen v. The American Tobacco Company, et al., Supreme Court of the City of New York, Kings County, August 23, 1996; Inzerilla v. The American Tobacco Company, et al., Supreme Court of Queens County, New York, May 29, 1996; Nociforo v. The American Tobacco Company, et al., Supreme Court of the State of New York, Suffolk County, July 16, 1996; Portnoy v. The American Tobacco Company, et al., Supreme Court for the State of New York, Suffolk County, July 15, 1996; Reitano v. The American Tobacco Company, et al., Supreme Court of the State of New York, Kings County, August 22, 1996; Sola v. The American Tobacco Company, et al., Supreme Court for the State of New York, Bronx County, July 12, 1996. Registrant is also aware that it has been named as a defendant, together with leading tobacco manufacturers, although Registrant has not been served, in Cresser v. The American Tobacco Company, et al., Supreme Court of the City of New York, Kings County, October 10, 1996; Daniels v. Brown & Williamson Tobacco Corp., et al., United States District Court for the Eastern District of New York, October 24, 1996; Knutsen v. The American Tobacco Company, et al., Supreme Court of the City of New York, Kings County, October 11, 1996; Pollan v. Brown & Williamson Tobacco Corp., et al., United States District Court for the Eastern District of New York, October 24, 1996; Siegel v. The American Tobacco Company, et al., Supreme Court of the City of New York, Kings County, October 11, 1996. These are individual cases where the plaintiffs allege personal injury from the use of cigarettes. -22- Item 1. LEGAL PROCEEDINGS. (Continued) - ------ ----------------- In addition, Registrant has been named as a defendant, together with leading tobacco manufacturers, in Coyne v. American Brands, et al., United States District Court for the Northern District of Ohio, September 17, 1996; Crozier v. The American Tobacco Company, et al., United States District Court for the Middle District of Alabama, August 8, 1996; Kelley (State of Michigan) v. The American Tobacco Company, et al., Circuit Court for the 30th Judicial Circuit, Michigan, August 21, 1996; Oklahoma (State of Oklahoma) v. The American Tobacco Company, et al., District Court for Cleveland County, Oklahoma, August 22, 1996. These cases have been brought by the attorneys general (or on behalf of the attorney general) of Ohio, Alabama, Michigan and Oklahoma, respectively, seeking unspecified compensatory and punitive damages and various forms of equitable relief, including restitution of the expenditures by the state for the cost of medical care provided by the state to its citizens for numerous diseases allegedly caused by cigarettes and other tobacco products. Reference is made to the description of State of Florida v. The American Tobacco Company, et al., Circuit Court of Palm Beach County, State of Florida, in paragraph (a) of Part I, Item 3, "Legal Proceedings", of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. On November 1, 1996, the plaintiffs in this case filed an amended complaint that no longer names the Registrant as a defendant in such case. Reference also is made to the discussion of the recovery of damages to date in cases against leading tobacco manufacturers brought by parties seeking damages for cancer and other ailments claimed to have resulted from tobacco use in paragraph (a)(i) of Part I, Item 3, "Legal Proceedings", of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. On August 9, 1996, the jury in Carter v. The American Tobacco Company, et al., District Court of Duval County, State of Florida, a smoking and health case, awarded plaintiffs $750,000 in actual damages. The Registrant is not a party to such litigation. The defendant in that action has announced that it intends to appeal the verdict. In connection with the sale of Registrant's former subsidiary, The American Tobacco Company ("ATCO"), to Brown & Williamson Tobacco Corporation ("Brown & Williamson") on December 22, 1994, Brown & Williamson and ATCO agreed to indemnify Registrant against claims arising from smoking and health and fire safe cigarette matters relating to the tobacco business of ATCO. Registrant's counsel have advised that, in their opinion, on the basis of their investigations generally with respect to suits and claims of this character, Registrant has meritorious defenses to these actions and threatened actions. The actions will be vigorously contested. Reference is made to the description of Dean v. Gallaher Limited, pending in the High Court of Justice in Northern Ireland, in paragraph (a)(ii)(A) of Part I, Item 3, "Legal Proceedings", of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. Trial of preliminary issue opened on October 14, 1996. After three days of testimony on plaintiff's behalf, the trial was adjourned at plaintiff's request. On October 21, 1996, the case was dismissed and judgment was entered in defendant's favor. -23- Item 1. LEGAL PROCEEDINGS. (Concluded) - ------ ----------------- Leigh, Day & Co., a law firm in London, England, has announced the intent to file suit against Gallaher and another UK tobacco manufacturer on behalf of 40 claimants for alleged injuries claimed to have resulted from the use of tobacco products. (b) It is not possible to predict the outcome of the pending litigation referenced in paragraph (a) above, but management believes that there are meritorious defenses to the pending actions against Registrant and that the pending actions against Registrant will not have a material adverse effect upon the results of operations, cash flow or financial condition of the Registrant. Reference is made to note 7, "Pending Litigation", in the Notes to Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. - ------ -------------------------------- (a) Exhibits. -------- 12. Statement re computation of ratio of earnings to fixed charges. 15. Letter from Coopers & Lybrand L.L.P. dated November 7, 1996 re unaudited financial information. 23. Consent of Counsel, Chadbourne & Parke LLP. 27. Financial Data Schedule (Article 5). In lieu of filing certain instruments with respect to long-term debt of the kind described in Item 601(b)(4) of Regulation S-K, Registrant agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request. (b) Reports on Form 8-K. ------------------- Registrant filed a Current Report on Form 8-K, dated July 25, 1996, in respect of Registrant's press release dated July 23, 1996 announcing Registrant's financial results for the three-month and six-month periods ended June 30, 1996 (Items 5 and 7(c)). Registrant filed a Current Report on Form 8-K, dated October 8, 1996, in respect of Registrant's press release dated October 8, 1996 announcing Registrant's plan to spin off the U.K.-based tobacco business of its Gallaher Limited subsidiary (Items 5 and 7(c)). -24- Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (Concluded) - ------ -------------------------------- Registrant filed a Current Report on Form 8-K, dated October 16, 1996, in respect of Registrant's press release dated October 15, 1996 announcing that Registrant will redeem certain of its outstanding debentures (Items 5 and 7(c)). Registrant filed a Current Report on Form 8-K, dated October 22, 1996, in respect of Registrant's press release dated October 22, 1996 announcing Registrant's financial results for the three-month and nine-month periods ended September 30, 1996 (Items 5 and 7(c)). -25- SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN BRANDS, INC. --------------------- (Registrant) Date: November 7, 1996 By /s/ R. L. Plancher ---------------- ------------------------- R. L. Plancher Senior Vice President and Chief Accounting Officer EXHIBIT INDEX ------------- Sequentially Exhibit Numbered Page - ------- ------------- 12. Statement re computation of ratio of earnings to fixed charges. 15. Letter from Coopers & Lybrand L.L.P. dated November 7, 1996 re unaudited financial information. 23. Consent of Counsel, Chadbourne & Parke LLP. 27. Financial Data Schedule (Article 5). EX-12 2 EXHIBIT 12 PART II - EXHIBIT 12 -------------------- AMERICAN BRANDS, INC. AND SUBSIDIARIES STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollar amounts in millions)
Nine Months Ended Years Ended December 31, September 30, -------------------------------------------------------------- ------------- 1991 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- ---- Earnings Available: Income from continuing operations before income taxes, minority interest and extraordinary items......... $1,107.0 $1,255.1 $ 878.9 $1,354.0 $ 895.3 $630.3 Less: Excess of earnings over dividends of less than fifty percent owned companies...................... 0.1 0.3 0.8 0.4 0.2 0.1 Capitalized interest............... 1.0 1.0 2.5 1.4 0.2 0.3 -------- -------- -------- -------- -------- ------ 1,105.9 1,253.8 875.6 1,352.2 894.9 629.9 ======== ======== ======== ======== ======== ====== Fixed Charges: Interest expense (including capitalized interest) and amortization of debt discount and expenses............................. 276.6 283.4 258.7 224.9 170.4 138.9 Portion of rentals representative of an interest factor.................... 30.4 32.3 29.8 27.1 20.6 13.4 -------- -------- -------- -------- -------- ------ Total Fixed Charges................ 307.0 315.7 288.5 252.0 191.0 152.3 -------- -------- -------- -------- -------- ------ Total Earnings Available........... $1,412.9 $1,569.5 $1,164.1 $1,604.2 $1,085.9 $782.2 ======== ======== ======== ======== ======== ====== Ratio of Earnings to Fixed Charges............ 4.60 4.97 4.04 6.37 5.69 5.14 ==== ==== ==== ==== ==== ====
EX-15 3 EXHIBIT 15 PART II - EXHIBIT 15 November 7, 1996 Securities and Exchange Commission 450 5th Street, N.W. Attention: Filing Desk, Stop 1-4 Washington, D.C. 20549-1004 Re: American Brands, Inc. We are aware that our report dated November 7, 1996, on our review of interim financial information of American Brands, Inc. and Subsidiaries for the three-month and nine-month periods ended September 30, 1996 and 1995 included in this Form 10-Q, has been incorporated by reference into (a) the Registration Statement on Form S-8 (Registration No. 33-64071) relating to the Defined Contribution Plan of American Brands, Inc. and Participating Operating Companies, the Registration Statement on Form S-8 (Registration No. 33-64075) relating to the MasterBrand Industries, Inc. Hourly Employee Savings Plan, the Registration Statement on Form S-8 (Registration No. 33-58865) relating to the 1990 Long-Term Incentive Plan of American Brands, Inc., and the prospectuses related thereto, and (b) the prospectuses related to the Registration Statements on Form S-3 (Registration Nos. 33-50832, 33-42397, 33-23039 and 33-3985) of American Brands, Inc. Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered a part of such registration statements or prospectuses or certification by us within the meaning of Sections 7 and 11 of that Act. Very truly yours, COOPERS & LYBRAND L.L.P. 1301 Avenue of the Americas New York, New York 10019 EX-23 4 EXHIBIT 23 PART II - EXHIBIT 23 -------------------- CONSENT OF COUNSEL We consent to the incorporation by reference of our opinions contained in Part II, Item 1, "Legal Proceedings", of this Quarterly Report on Form 10-Q of American Brands, Inc. into (a) the Registration Statement on Form S-8 (Registration No. 33-64071) relating to the Defined Contribution Plan of American Brands, Inc. and Participating Operating Companies, the Registration Statement on Form S-8 (Registration No. 33-64075) relating to the MasterBrand Industries, Inc. Hourly Employee Savings Plan, the Registration Statement on Form S-8 (Registration No. 33-58865) relating to the 1990 Long-Term Incentive Plan of American Brands, Inc., and the prospectuses related thereto, and (b) the prospectuses related to the Registration Statements on Form S-3 (Registration Nos. 33-50832, 33-42397, 33-23039 and 33-3985) of American Brands, Inc. CHADBOURNE & PARKE LLP 30 Rockefeller Plaza New York, New York 10112 November 7, 1996 EX-27 5 EXHIBIT 27
5 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND RELATED STATEMENT OF INCOME AS OF SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 $ 159 0 1,515 60 1,353 3,209 2,229 1,088 8,688 $2,936 1,591 717 0 13 2,864 8,688 $8,144 8,144 2,103 2,103 3,985 5 133 630 247 383 0 (10) 0 $ 373 $2.13 $2.09
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