RJR Nabisco cuts 4,200 jobs
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December 14, 1998: 11:31 a.m. ET
Citing settlement costs, Russian turmoil, tobacco giant also takes $348M charge
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NEW YORK (CNNfn) - Hit by economic upheaval in Russia and the financial fallout from a landmark tobacco settlement, RJR Nabisco Holdings Corp. said Monday it plans to slash 4,200 jobs in its domestic and overseas operations and take an after-tax charge of $348 million, or $1.07 per diluted share, in the fourth quarter.
The company said the overhaul is in response to "lower tobacco unit volume and intensified competitive activity" expected from the $200 billion settlement as well as depressed economic conditions in Russia and the Commonwealth of Independent States.
Despite the measures, RJR Nabisco (RN) stock was up ¼ at 28-9/16 at mid-morning Monday on the New York Stock Exchange.
The cuts coincided with the announcement of a major restructuring by the company's Nabisco food subsidiary.
RJR Nabisco Holdings is the parent of RJR Nabisco Inc., a major consumer products company. RJR Nabisco operating companies include R.J. Reynolds Tobacco Co. and R.J. Reynolds International; the parent company owns 80.6 percent of Nabisco Holdings Corp., the food and consumer-products subsidiary.
On the domestic front, RJR Nabisco said it would take a $335 million pre-tax charge within Reynolds Tobacco to cover facility adjustments and severance costs for about 1,300 workers.
Separately, the company's international business will incur a $55 million pre-tax charge in the fourth quarter to eliminate 2,900 jobs in Russia and the CIS and pay for the consolidation of production facilities.
"We knew when we agreed to resolve the state tobacco litigation that the domestic tobacco company would have to make enormous sacrifices financially and operationally," Steven Goldstone, RJR Nabisco's chairman and chief executive officer, said Monday.
Goldstone stressed that he believes markets in Russia and the CIS have "enormous potential" and that the company was taking steps to boost profit margins with an eye on resuming growth next year.
RJR Nabisco said the fourth-quarter charge includes $124 million, before tax, or 23 cents per diluted share, associated with the second phase of a restructuring at the food company.
In its third quarter, RJR Nabisco Holdings, maker of Winston cigarettes and Oreo cookies, reported a sharp profit decline, mostly due to soft overseas tobacco sales.
The company posted an operating profit of $164 million, or 47 cents a share, during the three months ended Sept. 30, down almost 36 percent from the $255 million, or 75 cents a share, for the year-ago period.
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