It is expected that lower consumer cigarette consumption will continue to influence overall industry unit volume and the discount category will be a significant influence in overall sales.
Revenues decreased by $27.8 and $10.8 million, or 15.4% and 6.5%, as compared to 1992 and 1991, respectively. Results from operations before accounting changes decreased by $2.0 and increased by $0.5 million, as compared to 1992 and 1991, respectively. Revenues and results from operations declined due primarily to lower industrial and defense sales volume related to a $19.5 million payment by the U.S. government in 1992 in relation to a favorable settlement of defense contract claims. This benefit was partially offset by a charge of approximately $2.4 million for the write-off of parts inventory and equipment related to these contracts, as well as a continuing decline of defense business. Watch and clock unit sales volume also declined in 1993, partially offset by a gain on sale of an inactive defense manufacturing facility and accrual of environmental costs in 1992. Results from operations increased, as compared to 1991, due to the gain from asset dispositions and lower interest expense, partially offset by lower results from Bulova's consumer products division.
Accounting Changes-Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 113, "Accounting and Reporting for Reinsurance of Short-duration and Long-duration Contracts." This Statement establishes the conditions required for a contract to be accounted for as reinsurance, prescribes accounting and reporting standards for those contracts, and requires that balances pertaining to reinsurance transactions be reported "gross" on the balance sheet rather than reductions of reserves for claims and claims expense, policy benefits of unearned premiums. At December 31, 1993, reinsurance recoverables on insurance claim and policy benefits reserves of $2,500,000,000 and ceded unearned premiums of $167,000,000 are reported as assets. Prior years' amounts have been restated. As a result, assets and liabilities at December 31, 1992 were each increased by $3,100,000,000. The provisions of SFAS No. 113 that pertain to risk transfer and recognition of revenues and costs did not impact the Company's income or shareholders' equity as all material reinsurance arrangements are prospective and provided for the transfer of risk. Effective December 31, 1993, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This Statement requires that investments in debt and equity securities classified as available: for sale be carried at fair value. Previously, fixed income securities classified as available for sale were carried at the lower of aggregate amortized cost or fair value. Unrealized gains and losses are reflected as a separate component of shareholders' equity, net of deferred income taxes, participating policyholders' and minority interests. The effect of adopting this Statement was to increase shareholders' equity by $367,928,000 (net of $293,973,000 in deferred income taxes, participating policyholders' and minority interests). The adoption of this Statement did not impact net income. In accordance with the Statement, prior period financial statements have not been restated. Separate Account assets invested in debt securities have also been classified as available for sale and are now carried at fair value. As a result, Separate Account investments were increased by $189,000,000 with a corresponding increase to Separate Account liabilities. In 1992 the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 109, "Accounting for Income Taxes." CBS Inc. has also adopted SFAS Nos. 106 and 109 as well as SFAS No. 112, "Employers' Accounting for Postemployment Benefits" which requires accrual of benefits to be provided to former or inactive employees after employment, but before retirement. In addition, CNA Financial Corporation ("CNA") changed its method of accounting from reporting ultimate reserves for fixed and determinable claims reserves related to workers' compensation lifetime claims and accident and health disability claims to discounting such reserves consistent with accounting practices on other similar fixed and determinable claims. The cumulative effect as of January 1, 1992 of adopting these accounting changes is as follows:
(a) Amounts of notes and debentures held by the Company are:
(d) Consists of income before minority interest, cumulative effect of changes in accounting principles and allocation for financial reporting purposes of interest expense, corporate expense and income taxes.