RJR Slashes Its Loss in the Third Quarter

RJR Nabisco Holdings Corp. on Tuesday reported a sharply lower third-quarter loss, aided by improved profit in the tobacco business, lower interest expenses and special items.

The New York-based company said its loss in the quarter fell to $86 million from $447 million in the 1989 period. Sales rose 17.7% to $3.53 billion from $3 billion.

RJR, the second-largest U.S. tobacco company and a major food producer, owns a host of well-known brands, including Winston and Salem cigarettes, Oreo, Fig Newton and Ritz cookies and crackers, Planters peanuts and Lifesaver candies.

RJR took on a huge debt load when it went private in a record $25-billion leveraged buyout last year.

It said quarterly operating income before interest charges on its debt, taxes and other items rose 56.2% to $706 million from $452 million a year ago.

“By focusing on efficiency and productivity gains, we’ve improved the operating performance of both our tobacco businesses and our food businesses,” Chairman Louis Gerstner Jr. said.

Interest payments related mainly to RJR’s 1989 buyout were $507 million in the quarter, which included additional costs of $303 million for depreciation and other items.

Total interest expense fell to $845 million in the quarter from $983 million a year ago.

The results included a net gain of $108 million from a debt restructuring last summer. The recapitalization was designed to bring the company’s total debt load under $20 billion, from $28.7 billion after the buyout was completed in February, 1989.

Worldwide tobacco sales jumped 36% to $2.11 billion in the quarter from $1.55 billion a year ago. Higher prices and cost reductions improved profitability, the company said.

Operating income in tobacco, before amortization and other items, rose 51.4% to $683 million from $451 million. But last year’s results were depressed by about $230 million, reflecting lower volumes and a decision to eliminate excess inventory.