<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ----------------------
Commission file number 1-11995
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CONSOLIDATED CIGAR HOLDINGS INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3694743
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5900 NORTH ANDREWS AVENUE, FORT LAUDERDALE, FLORIDA 33309-2369
--------------------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(954) 772-9000
--------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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 [ ]
As of November 4, 1997 the Registrant had 11,093,332 shares of Class A
Common Stock and 19,600,000 shares of Class B Common Stock outstanding. All of
the shares of Class B Common Stock were held by Mafco Consolidated Group Inc.
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
INDEX
-----
Page
Number
------
Part I. FINANCIAL INFORMATION
Item 1. Interim Financial Statements
Condensed Consolidated Balance Sheets at September 27, 1997
(unaudited) and December 31, 1996 .................................... 3
Condensed Consolidated Statements of Operations
for the Thirteen Weeks Ended September 27, 1997 (unaudited)
and September 28, 1996 (unaudited) ................................... 5
Condensed Consolidated Statements of Operations for
the Thirty-Nine Weeks Ended September 27, 1997 (unaudited)
and September 28, 1996 (unaudited) ................................... 6
Condensed Consolidated Statements of Stockholders' Equity
for the Thirty-Nine Weeks Ended September 27, 1997 (unaudited)
and September 28, 1996 (unaudited).................................... 7
Condensed Consolidated Statements of Cash Flows
for the Thirty-Nine Weeks Ended September 27, 1997 (unaudited)
and September 28, 1996 (unaudited).................................... 8
Notes to Unaudited Condensed Consolidated Financial Statements........ 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................................... 12
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................. 15
2
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, September 27,
1996 1997
(Unaudited)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,906 $ 3,018
Accounts receivable, less allowances
of $5,604 and $6,310, respectively 19,498 32,592
Inventories 45,957 74,208
Prepaid expenses and other 5,591 10,079
-------- --------
Total current assets 72,952 119,897
Property, plant and equipment, net of accumulated depreciation 37,224 39,231
Trademarks, less accumulated amortization
of $3,319 and $3,969, respectively 31,155 31,096
Goodwill, less accumulated amortization
of $6,593 and $7,830, respectively 59,723 69,893
Other intangibles and assets, less accumulated
amortization of $3,406 and $4,134, respectively 4,457 4,170
-------- --------
Total assets $205,511 $264,287
======== ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, September 27,
1996 1997
(Unaudited)
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of promissory note due to affiliate $ 10,000 $ 10,000
Current portion of long-term debt - 1,090
Accounts payable 7,197 11,077
Accrued expenses and other 21,812 22,998
--------- ---------
Total current liabilities 39,009 45,165
Promissory note due to affiliate 60,000 55,000
Long-term debt 97,500 113,400
Deferred taxes 5,851 6,479
Other liabilities 1,796 4,076
--------- ---------
Total liabilities 204,156 224,120
--------- ---------
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, par value $0.01 per share, 20,000,000 shares
authorized, no shares issued and outstanding - -
Class A Common Stock, par value $0.01 per share; 300,000,000
shares authorized, 6,075,000 and 11,093,332 shares issued and
outstanding, respectively 61 111
Class B Common Stock, par value $0.01 per share; 250,000,000
shares authorized, 24,600,000 and 19,600,000 shares issued and
outstanding, respectively 246 196
Capital deficiency (13,314) (12,893)
Retained earnings 14,362 52,753
--------- ---------
Total stockholders' equity 1,355 40,167
--------- ---------
Total liabilities and stockholders' equity $ 205,511 $ 264,287
========= =========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Thirteen
Weeks Ended Weeks Ended
September 28, September 27,
1996 1997
------------- -------------
<S> <C> <C>
Net sales $ 60,620 $ 82,642
Cost of sales 34,975 45,736
----------- -----------
Gross profit 25,645 36,906
Selling, general
and administrative expenses 9,018 9,065
----------- -----------
Operating income 16,627 27,841
----------- -----------
Other expenses:
Interest expense, net 2,660 2,455
Miscellaneous 256 676
----------- -----------
2,916 3,131
----------- -----------
Income before provision for
income taxes 13,711 24,710
Provision for income taxes 4,134 7,918
----------- -----------
Net income $ 9,577 $ 16,792
=========== ===========
Net income per common share $ 0.35 $ 0.55
=========== ===========
Weighted average common shares outstanding 27,537,363 30,683,644
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
5
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
September 28, September 27,
1996 1997
------------- -------------
<S> <C> <C>
Net sales $ 152,820 $ 214,907
Cost of sales 88,391 119,929
----------- -----------
Gross profit 64,429 94,978
Selling, general
and administrative expenses 26,596 29,050
----------- -----------
Operating income 37,833 65,928
----------- -----------
Other expenses:
Interest expense, net 7,961 7,618
Miscellaneous 841 1,837
----------- -----------
8,802 9,455
----------- -----------
Income before provision for
income taxes 29,031 56,473
Provision for income taxes 8,277 18,082
----------- -----------
Net income $ 20,754 $ 38,391
=========== ===========
Net income per common share $ 0.81 $ 1.25
=========== ===========
Weighted average common shares outstanding 25,582,721 30,677,913
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
6
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Paid-in
Class A Class B Capital
Common Common Common (Capital Retained
Stock Stock Stock Deficiency) Earnings Total
-------- --------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 1 $ - $ - $ 34,834 $ 19,493 $ 54,328
Net income for the thirty-nine weeks - - - - 20,754 20,754
Promissory note dividend - - - (47,842) (22,158) (70,000)
Net proceeds from initial public offering (1) 61 246 127,503 - 127,809
Dividends paid - - - (127,809) (12,768) (140,577)
------ --------- --------- --------- --------- ---------
Balance at September 28, 1996 $ - $ 61 $ 246 $ (13,314) $ 5,321 $ (7,686)
====== ========= ========= ========= ========= =========
Balance at December 31, 1996 $ - $ 61 $ 246 $ (13,314) $ 14,362 $ 1,355
Net income for the thirty-nine weeks - - - - 38,391 38,391
Exercise of stock options - - - 421 - 421
Secondary public offering and retirement
of Class B Common Stock sold - 50 (50) - - -
------ --------- --------- --------- --------- ---------
Balance at September 27, 1997 $ - $ 111 $ 196 $ (12,893) $ 52,753 $ 40,167
====== ========= ========= ========= ========= =========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
7
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
September 28, September 27,
1996 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 20,754 $ 38,391
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,499 5,834
Deferred income (153) (115)
Changes in assets and liabilities, net of
assets and liabilities acquired:
Increase in:
Accounts receivable (4,351) (12,220)
Inventories (8,043) (24,862)
Prepaid expenses and other (751) (4,628)
Increase in:
Accounts payable 6,484 3,214
Accrued expenses and other 744 3,962
-------- --------
Net cash provided by operating activities 20,183 9,576
-------- --------
Cash flows used for investing activities:
Capital expenditures (4,376) (4,578)
Acquisition, net of cash acquired - (14,420)
Investment in joint venture (482) -
(Increase) decrease in other assets (16) 9
-------- --------
Net cash used for investing activities (4,874) (18,989)
-------- --------
</TABLE>
See notes to unaudited condensed consolidated financial statements.
8
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
September 28, September 27,
1996 1997
------------- -------------
<S> <C> <C>
Cash flows provided by (used for) financing activities:
Net proceeds from initial public offering $ 127,809 $ -
Exercise of stock options - 421
(Repayment) borrowings of revolving loan, net (600) 19,398
Due to affiliates (459) (6,394)
Other debt - (2,900)
Dividends paid (140,577) -
--------- ---------
Net cash provided by (used for) financing activities (13,827) 10,525
--------- ---------
Increase in cash and cash equivalents 1,482 1,112
Cash and cash equivalents, beginning of period 1,145 1,906
--------- ---------
Cash and cash equivalents, end of period $ 2,627 $ 3,018
========= =========
Supplemental disclosures of cash flow information:
Interest paid during the period $ 10,548 $ 10,246
Income taxes paid during the period 8,362 16,709
</TABLE>
See notes to unaudited condensed consolidated financial statements.
9
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
- ------------------------------
Consolidated Cigar Holdings Inc. (formerly Consolidated Cigar (Parent)
Holdings Inc.) (the "Company") is a holding company with no business operations
of its own and was formed as a Delaware corporation on January 6, 1993 to hold
all of the outstanding capital stock of Consolidated Cigar Corporation
("Consolidated Cigar"), through which the Company conducts its business
operations. The results of operations and financial position of the Company
therefore reflect the consolidated results of operations and financial position
of Consolidated Cigar.
On August 21, 1996, the Company, then a direct wholly-owned subsidiary
of Mafco Consolidated Group Inc. ("Mafco Consolidated Group"), completed an
initial public offering (the "IPO") in which it issued and sold 6,075,000
shares of its Class A Common Stock for $23.00 per share. The proceeds, net of
underwriters' discount and related fees and expenses, of $127.8 million, were
paid as a dividend to Mafco Consolidated Group. On March 20, 1997 the Company
completed a secondary offering (the "Offering"), of 5,000,000 shares of Class A
Common Stock sold by Mafco Consolidated Group, reducing its ownership in the
Company to approximately 63.9%. The Company did not receive any of the proceeds
from the Offering. As a result of Mafco Consolidated Group's ownership
decreasing below 80.0%, the Company is no longer subject to the Tax Sharing
Agreement with Mafco Consolidated Group and as such, has begun paying taxes
directly to the federal government and will be filing tax returns on a separate
company basis.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and
accordingly include all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary for a fair
statement of the operations for the periods presented. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The fiscal year of the
Company is comprised of four quarters with each quarter consisting of thirteen
weeks ending on a Saturday except the last quarter which ends on December 31st.
The statements should be read in conjunction with the consolidated financial
statements of the Company and notes thereto for the fiscal year ended December
31, 1996, as filed with Form 10-K. The results of operations for the
thirty-nine week periods ended September 27, 1997 and September 28, 1996 are
not necessarily indicative of the results for the entire year.
-10-
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE B - INVENTORIES
- --------------------
The components of inventory are as follows:
(In thousands)
December 31, 1996 September 27, 1997
----------------- ------------------
Raw materials and supplies $34,469 $50,784
Work in process 1,974 4,282
Finished goods 9,514 19,142
------- -------
$45,957 $74,208
======= =======
NOTE C - NET INCOME PER COMMON SHARE
- ------------------------------------
Net income per common share has been computed assuming the conversion of
the Company's common stock into Class B Common Shares as of the beginning of
all periods presented and is therefore based upon the weighted average of
24,600,000 shares of common stock outstanding prior to the IPO and 30,675,000
shares of common stock outstanding after the IPO. The number of shares used in
the calculation of net income per common share for the thirteen and thirty-nine
weeks ended September 27, 1997, also reflect the weighted average of additional
shares issued as a result of the exercise of stock options. The dilutive effect
of stock options has not been included as it is less than 3%.
NOTE D - ACQUISITION
- --------------------
On August 26, 1997, Consolidated Cigar entered into a stock purchase
agreement with certain shareholders of Fabrica de Tabacos La Flor de Copan,
S.A. de C.V. ("La Flor"), a Honduran corporation, to acquire 75% of La Flor's
outstanding capital stock for $14.4 million, net of cash acquired. La Flor is a
manufacturer of handmade premium cigars located in Santa Rosa, Honduras. The
acquisition was accounted for as a purchase with the purchase price allocated
to tangible and intangible assets acquired and liabilities assumed based upon
initial fair value estimates. The La Flor acquisition was funded through
borrowings under the credit agreement, as amended, with The Chase Manhattan
Bank, as the agent (the "Credit Agreement.")
-11-
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
COMPARISON OF THE THIRTEEN WEEKS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 28,
1996 AND THE THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
Net sales were $82.6 million and $60.6 million for the thirteen weeks
ended September 27, 1997 (the "1997 Quarter") and September 28, 1996 (the "1996
Quarter"), respectively, an increase of $22.0 million or 36.3%. Net sales were
$214.9 million and $152.8 million for the thirty-nine weeks ended September 27,
1997 (the "1997 Period") and September 28, 1996 (the "1996 Period"),
respectively, an increase of $62.1 million or 40.6%. The increases in net sales
were primarily due to higher sales of cigars. Cigar sales increased as a result
of both a shift in the sales mix to higher priced cigars and price increases on
certain cigar brands and, to a lesser extent, an increase in cigar unit volume,
particularly in the premium market.
Gross profit was $36.9 million and $25.6 million for the 1997 Quarter
and the 1996 Quarter, respectively, an increase of $11.3 million or 43.9%.
Gross profit was $95.0 million and $64.4 million for the 1997 Period and the
1996 Period, respectively, an increase of $30.6 million or 47.4%. The increases
in gross profit for the 1997 Quarter and 1997 Period were due to the increases
in sales, especially of higher margin premium cigars, partially offset by
increases in the costs of raw materials. As a percentage of net sales, gross
profit increased to 44.7% for the 1997 Quarter and 44.2% for the 1997 Period
from 42.3% and 42.2% for the 1996 Quarter and 1996 Period, respectively,
primarily due to the impact of price increases and fixed manufacturing costs
spread over increased production volume.
Selling, general and administrative ("SG&A") expenses were $9.1 million
and $9.0 million for the 1997 Quarter and 1996 Quarter, respectively. SG&A
expenses were $29.1 million and $26.6 million for the 1997 Period and the 1996
Period, respectively, an increase of $2.5 million or 9.2%. The increases were
primarily due to increases in selling expenses and professional fees. As a
percentage of net sales, SG&A expenses decreased to 11.0% for the 1997 Quarter
from 14.9% for the 1996 Quarter and to 13.5% for the 1997 Period from 17.4% for
the 1996 Period. The decreases were primarily due to SG&A expenses increasing
at a lower rate relative to the increase in net sales.
Operating income was $27.8 million and $16.6 million for the 1997
Quarter and 1996 Quarter, respectively, an increase of $11.2 million or 67.4%.
Operating income was $65.9 million and $37.8 million for the 1997 Period and
the 1996 Period, respectively, an increase of $28.1 million or 74.3%. As a
percentage of net sales, operating income increased to 33.7% for the 1997
Quarter from 27.4% for the 1996 Quarter and 30.7% for the 1997 Period from
24.8% for the 1996 Period, primarily due to higher gross profit margins and a
decrease in SG&A expenses as a percentage of net sales.
Interest expense, net was $2.5 million and $2.7 million for the 1997
Quarter and 1996 Quarter, respectively. Interest expense, net was $7.6 million
and $8.0 million for the 1997 Period and the 1996 Period, respectively. The
decreases were primarily due to a lower amount of debt due to third parties
outstanding during 1997.
-12-
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
The provision for income taxes as a percentage of income before income
taxes was 32.0% and 30.2% for the 1997 Quarter and 1996 Quarter, respectively,
and 32.0% and 28.5% for the 1997 Period and 1996 Period, respectively. The
increase in the effective rate is primarily due to an increase in income
subject to United States taxation during the 1997 Quarter and 1997 Period
partially offset by tax benefits associated with the Company's operations in
Puerto Rico. Income tax expense for all periods reflects provisions for federal
income taxes, Puerto Rico tollgate taxes, and taxes on Puerto Rico source
income, together with state and franchise taxes.
As a result of the foregoing, net income was $16.8 million and $9.6 million for
the 1997 Quarter and 1996 Quarter, respectively, an increase of $7.2 million or
75.3%. Net income was $38.4 million and $20.8 million for the 1997 Period and
the 1996 Period, respectively, an increase of $17.6 million or 85.0%.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by operating activities were $9.6 million for
the 1997 Period and $20.2 million for the 1996 Period. The decrease in cash
flows of $10.6 million between the two periods was due primarily to a
significant increase in working capital requirements, partially offset by an
increase in net income.
Cash flows used for investing activities were $19.0 million for the 1997
Period and $4.9 million for the 1996 Period. The 1997 Period includes $14.4
million invested in the La Flor acquisition. For the 1996 Period, $0.5 million
of cash flows were invested, as part of an equity investment in the Jamaica
joint venture. Capital expenditures in the 1997 and 1996 Periods amount to $4.6
million and $4.4 million respectively, primarily relating to investments in the
Company's manufacturing facilities to meet the increased demand for the
Company's premium cigars. Capital expenditures for the remainder of 1997 are
expected to be approximately $.9 million.
Cash flows provided by financing activities for the 1997 Period were
$10.5 million and consist primarily of net borrowings under the Credit
Agreement reduced by payments due to affiliates. Cash flows used for financing
activities for the 1996 Period were $13.8 million and were primarily used to
pay dividends to Mafco Consolidated Group. The 1996 Period also included
$127.8 million of net proceeds from the IPO which were immediately paid as a
dividend to Mafco Consolidated Group.
In December 1993 and January 1994, the Company entered into two
five-year interest rate swap agreements in an aggregate notional amount of
$85.0 million. Under the terms of the agreements, the Company received a fixed
interest rate averaging 5.8% and paid a variable interest rate equal to the six
month London inter-bank offered rate (LIBOR). In October 1997, the Company paid
$0.5 million to terminate the swap agreements upon completion of their current
coupon periods, which end in December 1997 and January 1998. The termination
payment will be amortized over the remaining original term of the swap
agreements.
-13-
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
The Company's principal sources of working capital for the current year
will be generated from operations and borrowings under the Credit Agreement.
The availability for borrowings under the Credit Agreement was $49.9 million as
of September 27, 1997, of which the Company had borrowed $29.4 million
(including letters of credit issued). The amounts available for borrowing under
the Credit Agreement were increased by $15.0 million, effective with the La
Flor acquisition, and will remain constant for the term of the Credit Agreement
which expires on April 3, 1999.
Simultaneously with the IPO, the Company issued a non-interest bearing
promissory note in an original principal amount of $70.0 million (the
"Promissory Note") to Mafco Consolidated Group. The Promissory Note is payable
in quarterly installments of $2.5 million, which began on March 31, 1997 with
the final installment payable on December 31, 2003. Given the availability of
borrowing under the Credit Agreement and cash flow generated from operations,
the Company does not currently foresee the need to incur additional
indebtedness (other than from the Credit Agreement), to meet the Company's
ongoing operating needs during the next twelve months.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings
Per Share," which established new standards for computing and presenting
earnings per share. SFAS No. 128 will be effective for interim and annual
financial statements ending after December 15, 1997. The Company believes that
the adoption of SFAS No. 128 will not have a material impact on the Company's
reported earnings per share.
-14-
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
---------
*10.1 (m) Amendment No. 13 to the Credit Agreement dated as
of July 29, 1997.
*27.0 Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
Consolidated Cigar Holdings Inc. filed no reports on Form 8-K
during the fiscal quarter ended September 27, 1997.
* Filed herein.
-15-
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
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.
Consolidated Cigar Holdings Inc.
--------------------------------
(Registrant)
DATE: November 4, 1997 /s/ Theo W. Folz
--------------------------------
Theo W. Folz
Chief Executive Officer
DATE: November 4, 1997 /s/ Gary R. Ellis
--------------------------------
Gary R. Ellis
Chief Financial Officer
-16-
<PAGE>
THIRTEENTH AMENDMENT
THIRTEENTH AMENDMENT, dated as of July 29, 1997 (this "Amendment"), to
the Credit Agreement, dated as of February 23, 1993 (as amended from time to
time prior to the date hereof, the "Credit Agreement"), among Consolidated
Cigar Corporation (individually and as successor by merger to Consolidated
Cigar Acquisition Corporation, the "Company"), Congar International Corp.
(f/k/a Congar Newco Inc.) ("Congar Newco"), the financial institutions from
time to time parties thereto (the "Banks") and The Chase Manhattan Bank, as
agent (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Company intends to consummate the Honduras Acquisition
(as defined below);
WHEREAS, each of the Company and Congar Newco wishes to change the
respective Commitments of the Banks in the manner specified herein;
WHEREAS, each of the Company and Congar Newco has requested that the
Banks amend the Credit Agreement as more fully set forth herein; and
WHEREAS, the Banks and the Agent are willing to consent to such
amendments only upon the terms, and subject to the conditions, set forth
herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Company, Congar Newco, the Banks and the Agent
hereby agree as follows:
1. Definitions. All terms defined in the Credit Agreement shall have
such defined meanings when used herein unless otherwise defined herein.
2. Commitments. Effective on the Effective Date (as defined below),
the Commitments of the Banks shall be changed to the respective amounts set
forth on Annex I to this Amendment, and the relevant provisions of the Credit
Agreement shall be deemed to be amended to the extent necessary to reflect such
changes.
3. New Definitions. Section 1.01 of the Credit Agreement is hereby
amended by adding the following definitions in the appropriate alphabetical
order:
"Fabrica" shall mean Fabrica de Tabacos La Flor de Copan, S.A. de
C.V., a Honduras corporation.
"Honduras Acquisition" shall mean the acquisition by the Company of no
less than 50.1% and no more than 75.0% of the equity of Fabrica for a cash
price equal to the product of (x) the aggregate percentage of the equity of
Fabrica to be acquired by the Company, expressed in decimal terms and (y)
$20,000,000.
4. Amendment to Section 9.08--Investments. Section 9.08 of the Credit
Agreement is hereby amended by adding the following new clause (k) to the end
thereof:
<PAGE>
2
"and (k) the consummation of the Honduras Acquisition"
5. Amendment to Section 9.09--Dividend Payments. Section 9.09 of the
Credit Agreement is hereby amended by adding the following sentences to the end
of paragraph (a) thereof:
"In addition, Fabrica will not declare or make any Honduras Dividend
Payment (as defined below) at any time unless such Honduras Dividend
Payment is made on a pro rata basis (or a basis more favorable to the
Company and its other Subsidiaries) to each holder of capital stock of
Fabrica. For the purposes of the preceding sentence, "Honduras Dividend
Payment" refers, with respect to Fabrica, to payments or other transactions
of the type described in the definition of "Dividend Payment", with each
reference in such definition to the Company being deemed for this purpose
to be replaced by a reference to Fabrica. Each reference to Fabrica in the
preceding two sentences shall be deemed to include a reference to any
non-wholly owned Subsidiary of Fabrica."
6. Amendment to Section 12.06--Assignments. Clause (iii) of Section
12.06(b) of the Credit Agreement is hereby amended by adding the following
words to the end thereof:
"unless otherwise agreed by the Company and the Agent"
7. Conditions to Effectiveness. This Amendment shall become effective
on and as of the date (the "Effective Date") on which all of the following
conditions shall have been satisfied (which date shall, in any event, be no
later than September 30, 1997): (a) the Agent shall have received counterparts
of this Amendment, duly executed by the Company, Congar Newco and each of the
Banks, (b) the Agent shall have received executed Notes reflecting the changed
Commitments as described above, duly executed by the Company or Congar Newco,
as the case may be, (c) the Honduras Acquisition shall have been consummated,
(d) the Agent shall have received a satisfactory acknowledgement and consent
with respect to the matters described in this Amendment from each Credit Party
which shall, among other things, provide that the existing Security Documents
shall continue to apply to the obligations under the Basic Documents as
modified pursuant to this Amendment, (e) the Agent shall have received a
satisfactory supplement to the Security Agreement pursuant to which the capital
stock of Fabrica acquired by the Company in connection with the Honduras
Acquisition (not to exceed 65% of the total outstanding capital stock of
Fabrica) (the "New Pledged Stock") shall be pledged as collateral thereunder,
(f) all actions necessary or advisable under the laws of New York to establish
and perfect the Agent's first priority security interest in the New Pledged
Stock shall have been taken and (g) the Agent shall have received a
satisfactory signed opinion from Paul, Weiss, Rifkind, Wharton & Garrison.
8. Representations and Warranties. Each of the Company and Congar
Newco, as of the date hereof and after giving effect to the amendments
contained herein, hereby confirms, reaffirms and restates the representations
and warranties made by it in Section 8 of the Credit Agreement and otherwise in
the Basic Documents to which it is a party; provided that each reference to the
Credit Agreement therein shall be deemed to be a reference to the Credit
Agreement after giving effect to this Amendment.
<PAGE>
3
9. Reference to and Effect on the Basic Documents; Limited Effect. On
and after the Effective Date, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import referring to the
Credit Agreement, and each reference in the other Basic Documents to "the
Credit Agreement", "thereunder", "thereof" or words of like import referring to
the Credit Agreement, shall mean and be a reference to the Credit Agreement as
modified hereby. The execution, delivery and effectiveness of this Amendment,
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any Bank or the Agent under any of the Basic
Documents, nor constitute a waiver or amendment of any provisions of any of the
Basic Documents. Except as expressly modified herein, all of the provisions and
covenants of the Credit Agreement and the other Basic Documents are and shall
continue to remain in full force and effect in accordance with the terms
thereof and are hereby in all respects ratified and confirmed.
10. Counterparts. This Amendment may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
CONSOLIDATED CIGAR CORPORATION
By:
--------------------------------
Name:
Title:
CONGAR INTERNATIONAL CORP. (f/k/a
Congar Newco Inc.)
By:
--------------------------------
Name:
Title:
<PAGE>
4
THE CHASE MANHATTAN BANK, as Agent
and as a Bank
By:
--------------------------------
Name:
Title:
BANKBOSTON, N.A.
By:
--------------------------------
Name:
Title:
GIROCREDIT BANK
By:
--------------------------------
Name:
Title:
NATIONSBANK, N.A.
By:
--------------------------------
Name:
Title:
BANCO SANTANDER PUERTO RICO
By:
--------------------------------
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
Annex I
to Thirteenth Amendment
-----------------------
=============================================================================================
Bank Cigar WC Cigar RC Congar WC Congar RC
Commitment Commitment Commitment Commitment
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Chase Manhattan Bank $0 $10,562,153.29 $2,339,385.10 $0
- ---------------------------------------------------------------------------------------------
BankBoston, N.A. $4,166,666.66 $11,602,367.40 $0 $0
- ---------------------------------------------------------------------------------------------
Girocredit Bank $4,166,666.67 $3,861,444.97 $0 $0
- ---------------------------------------------------------------------------------------------
NationsBank, N.A. $4,166,666.67 $3,861,444.97 $0 $0
- ---------------------------------------------------------------------------------------------
Banco Santander Puerto Rico $0 $0 $5,160,614.90 $0
=============================================================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Consolidated Cigar
Holdings Inc. Condensed Consolidated Balance Sheet and Statement of Operations
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001017550
<NAME> CONSOLIDATED CIGAR HOLDINGS INC.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-27-1997
<EXCHANGE-RATE> 1
<CASH> 3,018
<SECURITIES> 0
<RECEIVABLES> 38,902
<ALLOWANCES> (6,310)
<INVENTORY> 74,208
<CURRENT-ASSETS> 119,897
<PP&E> 56,328
<DEPRECIATION> (17,097)
<TOTAL-ASSETS> 264,287
<CURRENT-LIABILITIES> 45,165
<BONDS> 87,100
0
0
<COMMON> 307
<OTHER-SE> 39,860
<TOTAL-LIABILITY-AND-EQUITY> 264,287
<SALES> 214,907
<TOTAL-REVENUES> 214,907
<CGS> 119,929
<TOTAL-COSTS> 119,929
<OTHER-EXPENSES> 30,774
<LOSS-PROVISION> 113
<INTEREST-EXPENSE> 7,618
<INCOME-PRETAX> 56,473
<INCOME-TAX> 18,082
<INCOME-CONTINUING> 38,391
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,391
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 0.00
</TABLE>
