<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 June 28, 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 August 8, 1997 the Registrant had 11,075,000 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 June 28, 1997 (unaudited)
and December 31, 1996 ................................................ 3
Condensed Consolidated Statements of Operations for the Thirteen
Weeks Ended June 28, 1997 (unaudited) and June 29, 1996 (unaudited) .. 5
Condensed Consolidated Statements of Operations for the Twenty-Six
Weeks Ended June 28, 1997 (unaudited) and June 29, 1996 (unaudited) .. 6
Condensed Consolidated Statements of Stockholders' Equity for the
Twenty-Six Weeks Ended June 28, 1997 (unaudited) and June 29, 1996
(unaudited)........................................................... 7
Condensed Consolidated Statements of Cash Flows for the Twenty-Six
Weeks Ended June 28, 1997 (unaudited) and June 29, 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, June 28,
1996 1997
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,906 $ 3,113
Accounts receivable, less allowances
of $5,604 and $6,279, respectively 19,498 27,516
Inventories 45,957 59,882
Prepaid expenses and other 5,591 10,375
-------- --------
Total current assets 72,952 100,886
Property, plant and equipment, net of accumulated depreciation 37,224 38,014
Trademarks, less accumulated amortization
of $3,319 and $3,752, respectively 31,155 30,722
Goodwill, less accumulated amortization
of $6,593 and $7,396, respectively 59,723 58,920
Other intangibles and assets, less accumulated
amortization of $3,406 and $3,899, respectively 4,457 4,248
-------- --------
Total assets $205,511 $232,790
======== ========
</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, June 28,
1996 1997
(Unaudited)
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of promissory note due to affiliate $ 10,000 $ 10,000
Accounts payable 7,197 6,714
Accrued expenses 21,812 22,982
--------- ---------
Total current liabilities 39,009 39,696
Long-term debt due to third parties 97,500 103,800
Promissory note due to affiliate 60,000 57,500
Deferred taxes 7,647 8,840
--------- ---------
Total liabilities 204,156 209,836
--------- ---------
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 11,075,000 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) (13,314)
Retained earnings 14,362 35,961
--------- ---------
Total stockholders' equity 1,355 22,954
--------- ---------
Total liabilities and stockholders' equity $ 205,511 $ 232,790
========= =========
</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
June 29, June 28,
1996 1997
----------- -----------
<S> <C> <C>
Net sales $ 51,975 $ 76,377
Cost of sales 30,103 42,935
----------- -----------
Gross profit 21,872 33,442
Selling, general
and administrative expenses 9,415 10,765
----------- -----------
Operating income 12,457 22,677
----------- -----------
Other expenses:
Interest expense, net 2,675 2,670
Miscellaneous 288 591
----------- -----------
2,963 3,261
----------- -----------
Income before provision for
income taxes 9,494 19,416
Provision for income taxes 2,651 6,212
----------- -----------
Net income $ 6,843 $ 13,204
=========== ===========
Net income per common share $ 0.28 $ 0.43
=========== ===========
Weighted average common shares outstanding 24,600,000 30,675,000
=========== ===========
</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>
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
June 29, June 28,
1996 1997
----------- -----------
<S> <C> <C>
Net sales $ 92,200 $ 132,265
Cost of sales 53,416 74,193
----------- -----------
Gross profit 38,784 58,072
Selling, general
and administrative expenses 17,578 19,985
----------- -----------
Operating income 21,206 38,087
----------- -----------
Other expenses:
Interest expense, net 5,301 5,163
Miscellaneous 585 1,161
----------- -----------
5,886 6,324
----------- -----------
Income before provision for
income taxes 15,320 31,763
Provision for income taxes 4,143 10,164
----------- -----------
Net income $ 11,177 $ 21,599
=========== ===========
Net income per common share $ 0.45 $ 0.70
=========== ===========
Weighted average common shares outstanding 24,600,000 30,675,000
=========== ===========
</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 twenty-six weeks -- -- -- -- 11,177 11,177
Dividends paid -- -- -- -- (7,180) (7,180)
-------- -------- -------- -------- -------- --------
Balance at June 29, 1996 $ 1 $ -- $ -- $ 34,834 $ 23,490 $ 58,325
======== ======== ======== ======== ======== ========
Balance at December 31, 1996 $ -- $ 61 $ 246 $(13,314) $ 14,362 $ 1,355
Net income for the twenty-six weeks -- -- -- -- 21,599 21,599
Secondary public offering and retirement
of Class B Common Stock sold -- 50 (50) -- -- --
-------- -------- -------- -------- -------- --------
Balance at June 28, 1997 $ -- $ 111 $ 196 $(13,314) $ 35,961 $ 22,954
======== ======== ======== ======== ======== ========
</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>
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
June 29, June 28,
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,177 $ 21,599
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,647 3,754
Deferred income (102) (61)
Changes in assets and liabilities:
Increase in:
Accounts receivable (3,358) (8,018)
Inventories (3,893) (13,925)
Prepaid expenses and other (654) (4,878)
Increase (decrease) in:
Accounts payable 2,782 (483)
Accrued expenses and
other liabilities 1,069 3,678
-------- --------
Net cash provided by operating activities 10,668 1,666
-------- --------
Cash flows used for investing activities:
Capital expenditures (3,170) (2,815)
Investment in joint venture (482) --
-------- --------
Net cash used for investing activities (3,652) (2,815)
-------- --------
</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>
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
June 29, June 28,
1996 1997
----------- -----------
<S> <C> <C>
Cash flows provided by (used for) financing activities:
Borrowings of revolving loan, net $ 900 $ 9,200
Due to affiliates (934) (3,944)
Other debt -- (2,900)
Dividends paid (7,180) --
-------- --------
Net cash provided by (used for) financing activities (7,214) 2,356
-------- --------
(Decrease) increase in cash and cash equivalents (198) 1,207
Cash and cash equivalents, beginning of period 1,145 1,906
-------- --------
Cash and cash equivalents, end of period $ 947 $ 3,113
======== ========
Supplemental disclosures of cash flow information:
Interest paid during the period $ 5,521 $ 5,407
Income taxes paid during the period 4,830 10,597
</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 twenty-six
week periods ended June 28, 1997 and June 29, 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 June 28, 1997
----------------- -------------
Raw materials and supplies $34,469 $39,848
Work in process 1,974 3,479
Finished goods 9,514 16,555
------- -------
$45,957 $59,882
======= =======
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 dilutive effect of stock
options has not been included as it is less than 3%.
-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 JUNE 28, 1997 AND JUNE 29, 1996 AND THE
TWENTY-SIX WEEKS ENDED JUNE 28, 1997 AND JUNE 29, 1996
Net sales were $76.4 million and $52.0 million for the thirteen weeks
ended June 28, 1997 (the "1997 Quarter") and June 29, 1996 (the "1996
Quarter"), respectively, an increase of $24.4 million or 46.9%. Net sales were
$132.3 million and $92.2 million for the twenty-six weeks ended June 28, 1997
(the "1997 Period") and June 29, 1996 (the "1996 Period"), respectively, an
increase of $40.1 million or 43.5%. The increases in net sales was 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 $33.4 million and $21.9 million for the 1997 Quarter
and the 1996 Quarter, respectively, an increase of $11.5 million or 52.9%.
Gross profit was $58.1 million and $38.8 million for the 1997 Period and the
1996 Period, respectively, an increase of $19.3 million or 49.7%. The increases
in gross profit for the 1997 Quarter and 1997 Period were due to the increases
in sales, partially offset by increases in the costs of raw materials. As a
percentage of net sales, gross profit increased to 43.8% for the 1997 Quarter
and 43.9% for the 1997 Period from 42.1% for both the 1996 Quarter and 1996
Period 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 $10.8
million and $9.4 million for the 1997 Quarter and 1996 Quarter, respectively,
an increase of $1.4 million or 14.3%. SG&A expenses were $20.0 million and
$17.6 million for the 1997 Period and the 1996 Period, respectively, an
increase of $2.4 million or 13.7%. The increases were primarily due to
increases in selling expenses and professional fees. As a percentage of net
sales, SG&A expenses decreased to 14.1% for the 1997 Quarter from 18.1% for the
1996 Quarter and to 15.1% for the 1997 Period from 19.1% 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 $22.7 million and $12.5 million for the 1997
Quarter and 1996 Quarter, respectively, an increase of $10.2 million or 82.0%.
Operating income was $38.1 million and $21.2 million for the 1997 Period and
the 1996 Period, respectively, an increase of $16.9 million or 79.6%. As a
percentage of net sales, operating income increased to 29.7% for the 1997
Quarter from 24.0% for the 1996 Quarter and 28.8% for the 1997 Period from
23.0% 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 $2.7 million for both the 1997 Quarter and
1996 Quarter. Interest expense, net was $5.2 million and $5.3 million for the
1997 Period and the 1996 Period, respectively. The decrease was 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 27.9% for the 1997 Quarter and 1996 Quarter, respectively,
and 32.0% and 27.0% 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 $13.2 million and $6.8 million for
the 1997 Quarter and 1996 Quarter, respectively, an increase of $6.4 million or
93.0%. Net income was $21.6 million and $11.2 million for the 1997 Period and
the 1996 Period, respectively, an increase of $10.4 million or 93.2%.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by operating activities were $1.7 million and
$10.7 million in the 1997 and the 1996 Period, respectively. The decrease in
cash flows of $9.0 million 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 $2.8 million for the
1997 Period and $3.7 million for the 1996 Period which relate to capital
expenditures. The capital expenditures in the 1997 and 1996 Periods primarily
relate to investment 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 $2.7 million.
Cash flows provided by financing activities for the 1997 Period were
$2.4 million and consist primarily of net borrowings under the Credit Agreement
(as defined herein), net of payments due to affiliates. Cash flows used for
financing activities for the 1996 Period were $7.2 million and were primarily
used to make a dividend to Mafco Consolidated Group.
In 1993 and 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 receives a fixed interest rate averaging
5.8% and pays a variable interest rate equal to the six month London interbank
offered rate (LIBOR). The Company entered into such agreements to take
advantage of the differential between long-term and short-term interest rates
and effectively converted the interest rate on $85.0 million of fixed-rate
indebtedness under the 10 1/2% Notes to a variable rate. Had the Company
terminated these agreements, which the Company considers to be held for other
than trading purposes on July 24, 1997, the Company would have realized a
combined loss of approximately $0.7 million. Future positive or negative cash
flows associated with these contracts will depend upon the trend of short-term
interest rates during the remaining life of the agreements. In the event of
non-performance of the counterparties at anytime during the remaining lives of
these agreements which expire at December 1998 and January 1999, the Company
could lose some or all of any future positive cash flows. However, the Company
does not anticipate non-performance by such counterparties.
-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 with The Chase Manhattan Bank, as the agent (the "Credit Agreement").
The availability for borrowings under the Credit Agreement , as amended, was
$34.9 million as of June 28, 1997, of which the Company had borrowed $19.5
million (including letters of credit issued). The amounts available for
borrowing under the Credit Agreement 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 (l) Amendment No. 12 to the Credit Agreement dated as
of May 8, 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 June 28, 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: August 8, 1997 /s/ Theo W. Folz
--------------------------------
Theo W. Folz
Chief Executive Officer
DATE: August 8, 1997 /s/ Gary R. Ellis
--------------------------------
Gary R. Ellis
Chief Financial Officer
-16-
<PAGE>
EXHIBIT 10.1(1)
TWELFTH AMENDMENT
TWELFTH AMENDMENT, dated as of May 8, 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 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, each of the Company and Congar Newco is a party to the Credit
Agreement;
WHEREAS, each of the Company and Congar Newco has requested that the
Banks amend the Credit Agreement as more fully set forth herein;
WHEREAS, the Banks parties hereto 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 parties hereto
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. Amendment to Section 9.07--Guarantees. Paragraph (g) of Section
9.07 of the Credit Agreement is hereby amended by replacing the amount
$2,500,000 contained therein with the amount $10,000,000.
3. Amendment to Section 9.08--Investments. Paragraph (h) of Section
9.08 of the Credit Agreement is hereby amended by replacing the amount
$2,500,000 contained therein with the amount $10,000,000.
4. Amendment to Section 9.11--Capital Expenditures. Section 9.11 of
the Credit Agreement is hereby amended by replacing each reference to the
amount $3,000,000 contained therein with the amount $5,000,000.
5. Conditions to Effectiveness. This Amendment shall become effective
on and as of the date that the Agent shall have received counterparts of this
Amendment, duly executed by the Company, Congar Newco and the Majority Banks.
6. 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,
<PAGE>
reaffirms and restates the representations and warranties made by it in Section
8 of the Credit Agreement and otherwise in the Credit 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.
7. Reference to and Effect on the Credit Documents: Limited Effect. On
and after the date hereof and the satisfaction of the conditions contained in
Section 5 of this Amendment, 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 Credit 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 Credit
Documents, nor constitute a waiver or amendment of any provisions of any of the
Credit Documents. Except as expressly modified herein, all of the provisions
and covenants of the Credit Agreement and the other Credit 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.
8. 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.
9. 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: Gary R. Ellis
Title: Sr. Vice President, CFO,
Secretary & Treasurer
<PAGE>
CONGAR NEWCO INC.
By:
-------------------------------------
Name: Gary R. Ellis
Title: Sr. Vice President, CFO,
Secretary & Treasurer
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:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-28-1997
<EXCHANGE-RATE> 1
<CASH> 3,113
<SECURITIES> 0
<RECEIVABLES> 33,795
<ALLOWANCES> (6,279)
<INVENTORY> 59,882
<CURRENT-ASSETS> 100,886
<PP&E> 53,961
<DEPRECIATION> (15,947)
<TOTAL-ASSETS> 232,790
<CURRENT-LIABILITIES> 39,696
<BONDS> 87,100
0
0
<COMMON> 307
<OTHER-SE> 22,647
<TOTAL-LIABILITY-AND-EQUITY> 232,790
<SALES> 132,265
<TOTAL-REVENUES> 132,265
<CGS> 74,193
<TOTAL-COSTS> 74,193
<OTHER-EXPENSES> 21,071
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 5,163
<INCOME-PRETAX> 31,763
<INCOME-TAX> 10,164
<INCOME-CONTINUING> 21,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,599
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.00
</TABLE>
