-----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, LR29sQNWFjVbqqU/V1zfR+GmkrCJbZhQJZO3QPquwsnzc77HEowjxT2ULjjY/hax 0cIdIoEB9O7DHQSYWCMxUA== 0000912057-96-006396.txt : 19960416 0000912057-96-006396.hdr.sgml : 19960416 ACCESSION NUMBER: 0000912057-96-006396 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960302 FILED AS OF DATE: 19960412 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CULBRO CORP CENTRAL INDEX KEY: 0000026093 STANDARD INDUSTRIAL CLASSIFICATION: TOBACCO PRODUCTS [2100] IRS NUMBER: 130762310 STATE OF INCORPORATION: NY FISCAL YEAR END: 1128 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01210 FILM NUMBER: 96546750 BUSINESS ADDRESS: STREET 1: 387 PARK AVE S CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2125618700 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL CIGAR CO INC DATE OF NAME CHANGE: 19760726 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the 13 weeks ended March 2, 1996 Commission File No. 1-1210 CULBRO CORPORATION (Exact name of registrant as specified in its charter) NEW YORK 13-0762310 (State or other jurisdiction of incorporation or (IRS Employer organization) Identification Number) 387 Park Avenue South, New York, New York 10016-8899 (Address of principal executive offices) (Zip code) Registrant's Telephone Number including Area Code (212) 561-8700 Former name, former address and former fiscal year, Not applicable if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 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 ------- ------ Number of shares of Common Stock outstanding at March 31, 1996-4,475,104 1 of 12 CULBRO CORPORATION FORM 10Q INDEX PART I - FINANCIAL INFORMATION Consolidated Statement of Operations and Retained Earnings - thirteen weeks ended March 2, 1996 and March 4, 1995................................................3 Consolidated Balance Sheet March 2, 1996 and December 2, 1995.............................................4 Consolidated Statement of Cash Flows - thirteen weeks ended March 2, 1996 and March 4, 1995..................................................................5 Notes to Consolidated Financial Statements...................................6-7 Management's Discussion and Analysis of Financial Condition and Results of Operations................................8-9 PART II OTHER INFORMATION..................................................10-11 SIGNATURES....................................................................12 2 of 12 CULBRO CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (dollars in thousands except per share data) (unaudited)
13 Weeks Ended ------------------------------ March 2, March 4, 1996 1995 ---------- ---------- Net Sales and other revenue $ 45,884 $ 41,991 Costs and expenses Cost of goods sold 27,983 25,892 Selling, general and administrative expenses 14,535 13,569 ---------- ---------- Operating profit 3,366 2,530 (Loss) income from equity investments (18) 112 Other nonoperating income, net 337 587 Interest expense, net 2,171 2,314 ---------- ---------- Income before tax provision 1,514 915 Income tax provision 590 365 ---------- ---------- Net income 924 550 Retained earnings - beginning of period 110,686 99,497 ---------- ---------- Retained earnings - end of period $ 111,610 $ 100,047 ---------- ---------- ---------- ---------- Net income per common share $ 0.20 $ 0.13 ---------- ---------- ---------- ---------- Weighted average common shares and equivalents outstanding 4,622,000 4,308,000 ---------- ---------- ---------- ----------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 3 of 12 CULBRO CORPORATION CONSOLIDATED BALANCE SHEET (dollars in thousands except per share data)
March 2, December 2, 1996 1995 ----------- ----------- (UNAUDITED) ASSETS Current Assets Cash and cash equivalents $ 3,273 $ 5,876 Receivables, less allowance of $1,246 (1995-$1,159) 28,570 35,863 Inventories 77,564 70,269 Other current assets 4,946 5,389 -------- -------- Total current assets 114,353 117,397 Property and equipment, net 76,154 75,206 Real estate held for sale or lease, net 29,637 29,959 Investment in Series B preferred stock of The Eli Witt Company 15,709 15,122 Investment in real estate joint ventures 7,806 7,964 Other, including investment in Centaur Communications Limited of $14,374 (1995-$14,392) 18,887 19,191 Intangible assets, net 18,047 18,271 ------ ------ Total assets $280,593 $283,110 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 23,169 $ 32,272 Long-term debt due within one year 9,076 9,020 Income taxes 1,404 2,610 -------- -------- Total current liabilities 33,649 43,902 Long-term debt 89,594 84,365 Accrued retirement benefits 16,370 16,148 Deferred income taxes 6,025 5,622 Other noncurrent liabilities and deferred 8,332 8,098 credits -------- -------- Total liabilities 153,970 158,135 -------- -------- Shareholders' Equity Common stock, par value $1 Authorized - 10,000,000 shares Issued - 4,549,190 shares 4,549 4,549 Capital in excess of par value 13,092 13,276 Retained earnings 111,610 110,686 -------- -------- 129,251 128,511 Less-Common stock in Treasury, at cost, 118,185 shares (1995-159,045) (2,628) (3,536) -------- -------- Total shareholders' equity 126,623 124,975 -------- -------- Total liabilities and shareholders' equity $280,593 $283,110 -------- -------- -------- --------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 of 12 CULBRO CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (dollars in thousands) (unaudited)
13 Weeks Ended ------------------------- March 2, March 4, 1996 1995 -------- -------- OPERATING ACTIVITIES: Net income $ 924 $ 550 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 1,997 1,889 Loss (income) from equity investments 18 (112) Discount and interest on subordinated note 587 587 Accretion and accrued dividends on Series B preferred stock of Eli Witt (587) (587) Provision for bad debts 188 127 Changes in assets and liabilities: Decrease in real estate held for sale or lease, net 322 260 Increase in inventories (7,295) (3,356) Decrease in accounts receivable 7,105 2,682 Decrease in accounts payable and accrued liabilities (9,103) (4,451) Other, net 104 (314) -------- -------- Net cash used in operating activities (5,740) (2,725) -------- -------- INVESTING ACTIVITIES: Additions to property and equipment (2,658) (845) -------- -------- FINANCING ACTIVITIES: Increase in debt 5,073 - Payments of debt - (2,872) Proceeds from exercise of stock options 722 - -------- -------- Net cash provided by (used in) financing activities 5,795 (2,872) -------- -------- Net decrease in cash and cash equivalents (2,603) (6,442) Cash and cash equivalents at beginning of period 5,876 6,682 -------- -------- Cash and cash equivalents at end of period $ 3,273 $ 240 -------- -------- -------- --------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 5 of 12 CULBRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands except per share data) (unaudited) A. The unaudited financial statements included in this report have been prepared in conformity with the standards of accounting measurement set forth in Accounting Principles Board Opinion No. 28 and any amendments thereto adopted by the Financial Accounting Standards Board. Also, the financial statements have been prepared in accordance with the accounting policies stated in the Corporation's 1995 Annual Report to Shareholders included in Form 10K, and should be read in conjunction with the Notes to Consolidated Financial Statements appearing in that report. All adjustments which are, in the opinion of management, necessary for a fair presentation of results for the interim period have been reflected. The results of operations for the thirteen weeks ended March 2, 1996 are not necessarily indicative of the results to be expected for the full year. B. The Corporation's Credit Agreement was extended through March 31, 1997, and the Corporation and its banks are in the process of negotiating a new agreement, which is expected to be in place before the end of the current fiscal year. C. In the 1996 first quarter, options to purchase 40,800 shares under the 1991 and 1992 Employees Incentive Stock Option Plans were exercised at prices ranging from $12.25 to $27.00 per share, generating proceeds of $722. The changes in Capital in Excess of Par Value and Common Stock in Treasury reflect the exercise of these stock options. D. Supplemental Financial Statement Information INVENTORIES Inventories consist of:
March 2, December 2, 1996 1995 --------- ----------- Raw material and supplies $ 37,702 $ 32,839 Work-in-process 18,346 16,485 Finished goods 21,516 20,945 --------- --------- $ 77,564 $ 70,269 --------- --------- --------- --------- PROPERTY AND EQUIPMENT Property and equipment consist of: March 2, December 2, 1996 1995 --------- ----------- Land $ 11,147 $ 11,200 Buildings 64,937 64,167 Machinery and equipment 62,665 60,884 Accumulated depreciation (62,595) (61,045) --------- ----------- $ 76,154 $ 75,206 --------- ----------- --------- -----------
6 of 12 CASH FLOW Cash paid during the period for:
13 Weeks Ended ------------------------- March 2, March 4, 1996 1995 -------- -------- Interest, net of amounts capitalized $ 1,651 $ 1,846 -------- -------- -------- -------- Income taxes, net $ 1,373 $ 284 -------- -------- -------- --------
OTHER NONOPERATING INCOME, NET Other nonoperating income, net, in the current and prior year's quarters reflects accrued dividends and accretion income of approximately $0.6 million on the Series B preferred stock of The Eli Witt Company ("Eli Witt") held by the Corporation, partially offset in the 1996 first quarter by consulting expenses of approximately $0.3 million related to the Corporation's investment in Eli Witt. The accrued dividends and accretion income on the Eli Witt preferred stock equal the accrued interest on the Corporation's subordinated note payable that is included in interest expense. The Corporation has the unilateral right to exchange the Eli Witt Series B preferred stock for the subordinated note payable and all accrued interest upon the note's maturity in August 1998. RESULTS FROM EQUITY INVESTMENTS, NET The Corporation's results from equity investments in the 1996 and 1995 first quarters reflect the results of Centaur Communications Limited, the publishing business in the United Kingdom, in which the Corporation owns an equity interest of approximately 25%. In 1995 and in the 1996 first quarter, the Corporation did not recognize the results of Eli Witt because of the Corporation's negative basis in its common equity investment in Eli Witt. The Corporation will not recognize the results of Eli Witt until the negative basis in its common equity investment in Eli Witt is eliminated. Summarized operating results of Eli Witt are as follows:
13 Weeks Ended ------------------------- March 2, March 4, 1996 1995 -------- -------- Net sales and other revenue $328,852 $398,367 Operating loss (2,175) (1,674) Net loss (4,533) (3,704) Net loss applicable to common stockholders (5,524) (4,596)
7 of 12 MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES In the 1996 first quarter, cash used in operating activities was higher than the 1995 first quarter. This reflected a greater increase in inventories than last year, due principally to the purchase of tobacco by the Corporation's cigar business, General Cigar Co. Inc. ("General Cigar"). Also, reductions in accounts payable and accrued liabilities were greater in the 1996 first quarter because of higher accounts payable and accruals at year end 1995 than the previous year end. Partially offsetting these items was a greater reduction of accounts receivable during the 1996 first quarter, principally reflecting collections relating to sales at General Cigar in the 1995 fourth quarter. Investment in property and equipment was higher in 1996 than 1995 reflecting the expansion of production capacity at General Cigar to meet the growing demand for cigars, and expenditures related to the Corporation's opening of an upscale cigar bar, "Club Macanudo", in New York City, scheduled for the second quarter. Cash generated from financing activities reflects additional borrowings under the Corporation's Credit Agreement and proceeds from the exercise of stock options. These funds along with a portion of the cash on hand at the beginning of the quarter were used in the operating and investing activities described above. The Credit Agreement was extended through March 31, 1997, and the Corporation and its banks are currently negotiating a new agreement which is expected to be in place before the end of the current fiscal year. As previously announced the Corporation has offered for sale CMS Gilbreth Packaging Systems, Inc. ("CMS Gilbreth"), its packaging and labeling systems business. CMS Gilbreth's business in no longer consistent with the Corporation's strategic direction, which is to increase its focus on its cigar business and related affluent market segments. Proceeds from a sale of CMS Gilbreth will most likely be used to reduce debt. Management expects that the Corporation's liquidity and cash flow from operations will be sufficient to meet its planned capital expenditure requirements and its maturing debt obligations. RESULTS OF OPERATIONS The increase in net income in the 1996 first quarter as compared to the 1995 first quarter principally reflected higher operating profit at General Cigar, partially offset by lower operating profit at CMS Gilbreth. The increased operating profit at General Cigar reflected higher prices and increased volume of cigar sales. Demand for General Cigar's cigar products continues to be strong, as backorders increased during the first quarter. Operating profit at CMS Gilbreth was lower due principally to lower margins. 8 of 12 The Corporation's nursery products business, Imperial Nurseries, Inc. ("Imperial") incurred a slightly higher operating loss in the 1996 first quarter as compared to last year's first quarter. Imperial normally incurs a first quarter loss because sales in this highly seasonal business are minimal during the winter months which comprise the Corporation's first fiscal quarter. Results in the Corporation's real estate businesses were substantially unchanged. The Corporation had a small loss from its equity investment in Centaur Communications Limited ("Centaur") in the 1996 first quarter as compared to a profit on its Centaur equity investment in the 1995 first quarter. The lower results of Centaur are attributed to a weak British economy. Interest expense was lower in the 1996 first quarter because of the Corporation's overall lower debt level in the current period. 9 of 12 PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 11: Statement re computation of earnings per share (dollars in thousands except per share data)
PRIMARY 13 WEEKS ENDED - ------- ------------------------- March 2, March 4, 1996 1995 ---------- ---------- Net income $ 924 $ 550 ---------- ---------- ---------- ---------- Weighted average common shares outstanding 4,410,000 4,308,000 Net effect of dilutive stock options based on the treasury stock method using average market price 212,000 - ---------- ---------- Total 4,622,000 4,308,000 ---------- ---------- ---------- ---------- Net income per common share $ 0.20 $ 0.13 ---------- ---------- ---------- ---------- FULLY DILUTED 13 WEEKS ENDED - ------------- ------------------------- March 2, March 4, 1996 1995 ---------- ---------- Net income $ 924 $ 550 ---------- ---------- ---------- ---------- Weighted average common shares outstanding 4,410,000 4,308,000 ---------- ---------- ---------- ---------- Net effect of dilutive stock options based on the treasury stock method using ending market price 236,000 - ---------- ---------- Total 4,646,000 4,308,000 ---------- ---------- ---------- ---------- Net income per common share $ 0.20 $ 0.13 ---------- ---------- ---------- ----------
10 of 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CULBRO CORPORATION (REGISTRANT) Date: April 11, 1996 /s/ Jay M. Green ------------------------------------- Jay M. Green Executive Vice President - Chief Financial Officer and Treasurer Date: April 11, 1996 /s/ Joseph Aird ---------------------------------- Joseph Aird Senior Vice President - Controller 11 of 12 EX-27 2 EXHIBIT 27 - FDS
5 3-MOS NOV-30-1996 MAR-02-1996 3,273 0 29,816 (1,246) 77,564 114,353 138,749 (62,595) 280,593 33,649 89,594 0 0 4,549 122,074 280,593 45,824 45,884 27,983 42,518 0 188 2,171 1,514 590 924 0 0 0 924 0.20 0.20
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