<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 April 4, 1998
-------------------------------------------------
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
----------------------------------------------------------
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 May 15, 1998 the Registrant had 10,975,101 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 April 4, 1998
(unaudited) and December 31, 1997.......................................... 3
Condensed Consolidated Statements of Income
for the Thirteen Weeks Ended April 4, 1998 (unaudited)
and March 29, 1997 (unaudited)............................................. 5
Condensed Consolidated Statements of Stockholders' Equity
for the Thirteen Weeks Ended April 4, 1998 (unaudited)
and March 29, 1997 (unaudited).............................................. 6
Condensed Consolidated Statements of Cash Flows
for the Thirteen Weeks Ended April 4, 1998 (unaudited)
and March 29, 1997 (unaudited).............................................. 7
Notes to Unaudited Condensed Consolidated Financial Statements.............. 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................................ 11
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................. 14
2
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, APRIL 4,
1997 1998
(UNAUDITED)
------------------ -----------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 3,231 $ 2,676
ACCOUNTS RECEIVABLE, LESS ALLOWANCES
OF $6,008 AND $6,092, RESPECTIVELY 24,969 26,284
INVENTORIES 88,945 108,955
DEFERRED TAXES 4,187 4,236
PREPAID AND OTHER 13,220 15,059
---------- ---------
TOTAL CURRENT ASSETS 134,552 157,210
PROPERTY, PLANT AND EQUIPMENT, NET 39,511 39,838
TRADEMARKS, LESS ACCUMULATED AMORTIZATION
OF $4,190 AND $4,410, RESPECTIVELY 30,876 30,656
GOODWILL, LESS ACCUMULATED AMORTIZATION
OF $8,295 AND $8,775, RESPECTIVELY 70,590 70,110
OTHER INTANGIBLES AND ASSETS, LESS ACCUMULATED
AMORTIZATION OF $4,359 AND $34, RESPECTIVELY 3,904 2,384
---------- ---------
TOTAL ASSETS $ 279,433 $ 300,198
========== =========
</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, APRIL 4,
1997 1998
(UNAUDITED)
------------------ -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
CURRENT PORTION OF PROMISSORY NOTE DUE TO AFFILIATE $ 10,000 $ 10,000
CURRENT PORTION OF LONG-TERM DEBT 657 1,114
ACCOUNTS PAYABLE 13,704 14,222
ACCRUED EXPENSES AND OTHER 18,440 14,710
---------- ---------
TOTAL CURRENT LIABILITIES 42,801 40,046
LONG-TERM DEBT DUE TO THIRD PARTIES 112,900 134,200
PROMISSORY NOTE DUE TO AFFILIATE 50,000 47,500
DEFERRED TAXES 13,810 14,469
OTHER LIABILITIES 4,785 5,596
---------- ---------
TOTAL LIABILITIES 224,296 241,811
---------- ---------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, PAR VALUE $0.01 PER SHARE;
20,000,000 SHARES AUTHORIZED - -
CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE;
300,000,000 SHARES AUTHORIZED 111 111
CLASS B COMMON STOCK, PAR VALUE $0.01 PER SHARE;
250,000,000 SHARES AUTHORIZED 196 196
CAPITAL DEFICIENCY (13,123) (13,123)
RETAINED EARNINGS 67,953 73,208
---------- ---------
55,137 60,392
LESS TREASURY STOCK, AT COST - (2,005)
--------- ----------
TOTAL STOCKHOLDERS' EQUITY 55,137 58,387
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 279,433 $ 300,198
========== =========
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN
WEEKS ENDED WEEKS ENDED
MARCH 29, APRIL 4,
1997 1998
------------------ -----------------
<S> <C> <C>
NET SALES $ 55,888 $ 63,191
COST OF SALES 31,258 36,450
---------- ----------
GROSS PROFIT 24,630 26,741
SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES 9,220 10,428
---------- ----------
OPERATING INCOME 15,410 16,313
---------- ----------
OTHER EXPENSES:
INTEREST EXPENSE, NET 2,493 2,727
MINORITY INTEREST 219 549
MISCELLANEOUS, NET 351 265
---------- ----------
3,063 3,541
---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 12,347 12,772
PROVISION FOR INCOME TAXES 3,952 4,343
----------- ----------
INCOME BEFORE EXTRAORDINARY ITEM 8,395 8,429
EXTRAORDINARY ITEM-
EARLY EXTINGUISHMENT OF DEBT, NET OF TAX - 3,174
---------- ----------
NET INCOME $ 8,395 $ 5,255
=========== ==========
BASIC AND DILUTED NET INCOME PER COMMON SHARE:
INCOME BEFORE EXTRAORDINARY ITEM $ 0.27 $ 0.27
EXTRAORDINARY ITEM -- (0.10)
---------- ----------
BASIC AND DILUTED NET INCOME PER COMMON SHARE $ 0.27 $ 0.17
=========== ==========
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 30,675,000 30,677,600
=========== ==========
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 30,757,316 30,677,600
=========== ==========
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON COMMON CAPITAL RETAINED TREASURY
STOCK STOCK DEFICIENCY EARNINGS STOCK TOTAL
----------- ----------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 $ 61 $ 246 $ (13,314) $ 14,362 $ -- $ 1,355
NET INCOME FOR THE THIRTEEN WEEKS -- -- -- 8,395 -- 8,395
SECONDARY PUBLIC OFFERING AND RETIREMENT
OF CLASS B COMMON STOCK SOLD 50 (50) -- -- -- --
------ ------ --------- --------- ---- -------
BALANCE AT MARCH 29, 1997 $ 111 $ 196 $ (13,314) $ 22,757 $ -- $ 9,750
====== ====== ========== ========= ======= =======
BALANCE AT DECEMBER 31, 1997 $ 111 $ 196 $ (13,123) $ 67,953 $ -- $ 55,137
NET INCOME FOR THE THIRTEEN WEEKS -- -- -- 5,255 -- 5,255
PURCHASE OF TREASURY STOCK -- -- -- -- (2,005) (2,005)
----- ----- --------- -------- -------- ---------
BALANCE AT APRIL 4, 1998 $ 111 $ 196 $ (13,123) $ 73,208 $(2,005) $ 58,387
====== ====== ========== ========= ======== ========
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN
WEEKS ENDED WEEKS ENDED
MARCH 29, APRIL 4,
1997 1998
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 8,395 $ 5,255
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 1,869 2,120
LOSS ON EARLY EXTINGUISHMENT OF DEBT, NET OF TAX - 3,174
DEFERRED INCOME (53) (70)
CHANGES IN ASSETS AND LIABILITIES:
INCREASE IN:
ACCOUNTS RECEIVABLE (5,397) (1,315)
INVENTORIES (8,594) (20,010)
PREPAID EXPENSES AND OTHER (1,856) (2,216)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 530 518
ACCRUED EXPENSES AND
OTHER LIABILITIES (2,188) (911)
------- --------
NET CASH USED FOR OPERATING ACTIVITIES (7,294) (13,455)
------- --------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (949) (1,586)
INCREASE IN OTHER ASSETS - (61)
------- --------
NET CASH USED FOR INVESTING ACTIVITIES (949) (1,647)
------- --------
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN
WEEKS ENDED WEEKS ENDED
MARCH 29, APRIL 4,
1997 1998
------------------ ------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
BORROWINGS OF REVOLVING LOAN, NET $ 6,600 $ 140,100
EARLY EXTINGUISHMENT OF DEBT - (118,800)
DEBT ISSUANCE AND REFINANCING COSTS - (3,095)
PURCHASE OF TREASURY STOCK - (2,005)
DUE TO AFFILIATES AND OTHER BORROWINGS 1,065 (1,653)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,665 14,547
-------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (578) (555)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,906 3,231
-------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,328 $ 2,676
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
INTEREST PAID DURING THE PERIOD $ 4,892 $ 5,734
INCOME TAXES PAID DURING THE PERIOD 2,340 1,218
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
- ------------------------------
Consolidated Cigar 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. Unless the context otherwise
requires, all references in these notes to the consolidated financial
statements of the Company shall mean Consolidated Cigar Holdings Inc. and its
subsidiaries.
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.
Since July 9, 1997, Mafco Consolidated Group has been a wholly-owned
subsidiary of Mafco Holdings Inc. ("Mafco Holdings"), which is owned by Ronald
O. Perelman. Prior to that date, Mafco Holdings held an 85% ownership interest
in Mafco Consolidated Group.
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, 1997, as filed with Form 10-K. The results of operations for the thirteen
week periods ended April 4, 1998 and March 29, 1997 are not necessarily
indicative of the results for the entire year.
-9-
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION (CONTINUED)
- ------------------------------
During the first quarter of 1998, the Company adopted the Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes new rules for the reporting and display of
comprehensive income and its components. The adoption of SFAS 130 had no impact
on the Company's net income or shareholders' equity. During the first quarter
of 1998 and 1997, there was no difference between the Company's net income and
comprehensive income.
NOTE B - INVENTORIES
- --------------------
The components of inventory are as follows:
(In thousands)
December 31, 1997 April 4, 1998
----------------- -------------
Raw materials and supplies $61,764 $ 67,455
Work in process 3,977 5,453
Finished goods 23,204 36,047
------- ----------
$88,945 $ 108,955
======= ========
NOTE C - EXTRAORDINARY ITEM
- ---------------------------
On March 2, 1998, the Company redeemed its 10 1/2% Senior Subordinated
Notes due 2003 (the "Senior Subordinated Notes") at a price of 103.00% of the
principal amount, together with accrued interest. As a result, the Company
recognized an extraordinary charge of $3.2 million, net of a $1.6 million
income tax benefit for this early extinguishment of debt.
Coinciding with the redemption of the Senior Subordinated Notes, the
Company entered into a new credit agreement (the "New Credit Agreement") with
Chase Manhattan Bank ("Chase") as administrative agent for the lenders. The New
Credit Agreement initially provided for an unsecured revolving credit facility
in an aggregate principal amount not to exceed $140.0 million. In addition to
financing the redemption of the Senior Subordinated Notes, the New Credit
Agreement was used to satisfy obligations under the previous credit agreement
as of March 2, 1998. On April 27, 1998, the New Credit Agreement was amended to
allow for an additional $50.0 million of borrowings for a total availability of
$190.0 million. The New Credit Agreement will be utilized as the source for
working capital needs and other general corporate purposes
NOTE D- NET INCOME PER COMMON SHARE
- -----------------------------------
For the thirteen week period ended April 4, 1998, there was no
difference between the basic and diluted EPS calculation. For the thirteen week
period ended March 29, 1997, the only difference between the basic and diluted
EPS calculation was the dilutive impact of stock options which are included in
the diluted EPS calculations.
-10-
<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 APRIL 4, 1998 AND MARCH 29,
1997.
Net sales were $63.2 million and $55.9 million for the thirteen weeks
ended April 4, 1998 (the "1998 Quarter") and March 29, 1997 (the "1997
Quarter"), respectively, an increase of $7.3 million or 13.1%. The increase in
net sales was primarily due to an increase in cigar unit volume in the
Company's premium and natural-wrapped mass market brands. Although sales for
the 1998 Quarter increased, they were negatively impacted by
retailer/wholesaler inventory imbalances and an excess of historically unknown
brands. Even though these trends may continue into the second quarter and
beyond, the Company expects that normal ordering, purchasing and production
patterns will resume once retailers/wholesalers re-establish their customary
balance of product.
Gross profit was $26.7 million and $24.6 million for the 1998 Quarter
and the 1997 Quarter, respectively, an increase of $2.1 million or 8.6%. The
increase in gross profit for the 1998 Quarter was due to increases in sales .
As a percentage of net sales, gross profit decreased to 42.3% for the 1998
Quarter, from 44.1% for the 1997 Quarter, primarily due to the impact of cost
increases associated with tobacco processing and procurement.
Selling, general and administrative ("SG&A") expenses were $10.4 million
and $9.2 million for the 1998 and 1997 Quarters, respectively, an increase of
$1.2 million, or 13.1%. The increase was primarily due to increased marketing
and selling expenses. As a percentage of net sales, SG&A expenses were 16.5%
for both the 1998 and 1997 Quarters.
Operating income was $16.3 million and $15.4 million for the 1998
Quarter and 1997 Quarter, respectively, an increase of $0.9 million or 5.9 %.
As a percentage of net sales, operating income decreased to 25.8% for the 1998
Quarter from 27.6% for the 1997 Quarter, primarily due to the decrease in gross
profit margin.
Interest expense, net was $2.7 million and $2.5 million for the 1998
Quarter and 1997 Quarter, respectively. The increase was primarily due to
higher average borrowings during the 1998 Quarter, which was partially offset
by lower interest rates.
The provision for income taxes as a percentage of income before income
taxes was 34.0% and 32.0% for the 1998 Quarter and 1997 Quarter, respectively.
The increase in the effective rate is primarily due to an increase in income
subject to United States taxation during the 1998 Quarter, 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.
An extraordinary charge of $3.2 million, net of a $1.6 million related
income tax benefit was recorded in the 1998 Quarter as a result of the early
extinguishment of debt related to the Senior Subordinated Notes and the
previous credit agreement.
As a result of the foregoing, income before extraordinary item was $8.4
million for both the 1998 Quarter and 1997 Quarter. Net income was $5.3 million
and $8.4 million for the 1998 Quarter and 1997 Quarter, respectively, a
decrease of $3.1 million or 37.4%.
-11-
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows used for operating activities were $13.5 million for the
1998 Quarter and $7.3 million for the 1997 Quarter. The decrease in cash flows
of $6.2 million between the two periods was due primarily to an increase in
inventories and other working capital requirements.
Cash flows used for investing activities were $1.6 million for the 1998
Quarter and $0.9 million for the 1997 Quarter which relate primarily to capital
expenditures. The capital expenditures in both the 1998 and 1997 Quarter relate
primarily to the expansion of the Company's manufacturing facilities to meet
the increased demand for the Company's premium cigars. Capital expenditures for
the remainder of 1998 are expected to be approximately $5.2 million.
Cash flows provided by financing activities were $14.5 million for the
1998 Quarter and $7.7 million for the 1997 Quarter. Cash flows provided by
financing activities for the 1998 Quarter consist primarily of net borrowings
under a revolving credit agreement to fund the debt redemption, reduced by
payments due to affiliates and the purchase of treasury stock. Cash flows
provided by financing activities for the 1997 Quarter consisted primarily of
borrowings under the credit agreement.
On February 11, 1998 the Company's Board of Directors authorized the
Company to repurchase from time to time up to 4.0 million shares of the
Company's Common Stock at prices deemed by the Company's officers to be
advantageous. The Board specified that any such purchase be subject to
compliance with applicable law and any credit or other agreements by which the
Company may be bound. During the 1998 Quarter, the Company repurchased $2.0
million of Common Stock and has classified them as treasury shares.
The Company's principal sources of working capital for the current year
will be generated from operations and borrowings under the New Credit
Agreement. The availability for borrowings under the New Credit Agreement was
$140.0 million as of April 4, 1998, of which the Company had borrowed $134.7
million (including letters of credit issued). On April 27, 1998 the New Credit
Agreement was amended, increasing the availability of borrowings to $190.0
million. Given the availability of borrowing under the New Credit Agreement as
amended and cash flow generated from operations, the Company does not currently
foresee the need to incur additional indebtedness (other than from the New
Credit Agreement), to meet its ongoing operating needs during the next twelve
months.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-Q filing, the words "believe," "should,"
"would" and similar expressions which are not historical are intended to
identify forward-looking statements that involve risks and uncertainties. Such
statements include, without limitation, expectations with respect to the
results for the full year 1998, the Company's beliefs about trends in the cigar
industry and its views about the long-term future of the industry and the
Company. In addition to factors that may be described in the Company's other
Securities and Exchange Commission filings, the following factors, among
others, could cause the Company's financial performance to differ materially
from that expressed in any forward-looking statements made by, or
-12-
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
FORWARD-LOOKING STATEMENTS (CONTINUED)
on behalf of, the Company: (i) changes in consumer preference resulting in a
decline in the demand for and consumption of cigars; (ii) sustained inventory
imbalances at the retailer/wholesaler level; (iii) an inability on the part of
the Company to increase its production of premium cigars as a result of, among
other things, a shortage of raw materials; (iv) additional governmental
regulation of tobacco products or further tobacco industry litigation; (v)
enactment of new or significant increases in existing excise taxes on cigars
and pipe tobacco; and (vi) the failure to receive a tax credit with respect to
the Company's Puerto Rico taxable earnings or the elimination of an exemption
from Puerto Rican income taxes. The Company does not undertake any
responsibility to update the forward-looking statements contained in this Form
10-Q filing.
-13-
<PAGE>
CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
*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 April 4, 1998.
* Filed herein.
-14-
<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: May 15 , 1998 /s/ Theo W. Folz
----------------
Theo W. Folz
Chief Executive Officer
DATE: May 15, 1998 /s/ Gary R. Ellis
-----------------
Gary R. Ellis
Chief Financial Officer
-15-
<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 INCOME
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> APR-04-1998
<EXCHANGE-RATE> 1
<CASH> 2,676
<SECURITIES> 0
<RECEIVABLES> 32,376
<ALLOWANCES> (6,092)
<INVENTORY> 108,955
<CURRENT-ASSETS> 157,210
<PP&E> 59,305
<DEPRECIATION> (19,467)
<TOTAL-ASSETS> 300,198
<CURRENT-LIABILITIES> 40,046
<BONDS> 0
0
0
<COMMON> 307
<OTHER-SE> 58,080
<TOTAL-LIABILITY-AND-EQUITY> 300,198
<SALES> 63,191
<TOTAL-REVENUES> 63,191
<CGS> 36,450
<TOTAL-COSTS> 36,450
<OTHER-EXPENSES> 11,229
<LOSS-PROVISION> 13
<INTEREST-EXPENSE> 2,727
<INCOME-PRETAX> 12,772
<INCOME-TAX> 4,343
<INCOME-CONTINUING> 8,429
<DISCONTINUED> 0
<EXTRAORDINARY> (3,174)
<CHANGES> 0
<NET-INCOME> 5,255
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
