FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
[ ] 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 1-12521
SWISHER INTERNATIONAL GROUP INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3857632
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
20 Thorndal Circle, Darien, CT 06820
----------------------------------------
(Address of principal executive offices)
203-656-8000
------------------
(Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 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 [ ]
The number of shares of Class A Common Stock (par value $.01) outstanding at
April 30, 1997 was 6,000,000.
<PAGE>
TABLE OF CONTENTS
Page
Numbers
-------
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets
March 31, 1997 and December 31, 1996........................... 3
Condensed Consolidated Statements of Income
Three Months Ended March 31, 1997 and 1996..................... 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996..................... 5
Notes to Condensed Consolidated Financial Statements............. 6-8
Item 2. Management's Discussion and Analysis of the Results
of Operations and Financial Condition.......................... 9-12
Part II. Other Information
Item 1. Legal Proceedings................................................ 13
Item 6. Exhibits and Reports on Form 8-K................................. 13
Signatures................................................................. 14
<PAGE>
PART I. FINANCIAL INFORMATION
SWISHER INTERNATIONAL GROUP INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
March 31, December 31,
1997 1996
---------- ------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents..................... $ 1,501 $ 1,744
Accounts receivable, less allowance for
doubtful accounts of $1,940 and $1,783,
respectively................................ 29,589 22,365
Inventories................................... 59,151 54,936
Deferred income taxes......................... 1,728 1,512
Prepaid income taxes.......................... - 323
Other current assets.......................... 3,105 2,247
-------- --------
Total current assets.................. 95,074 83,127
-------- --------
Property, plant and equipment:
Land.......................................... 1,319 1,319
Buildings and improvements.................... 10,054 10,054
Machinery and equipment....................... 46,311 46,284
Construction in progress...................... 5,303 2,848
-------- --------
62,987 60,505
Less, accumulated depreciation................ 4,643 3,642
-------- --------
58,344 56,863
-------- --------
Goodwill, net of accumulated amortization
of $2,102 and $1,808, respectively............ 48,183 48,437
Prepaid pension cost............................ 4,660 4,660
Other assets.................................... 5,991 6,152
-------- --------
Total assets.......................... $212,252 $199,239
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............. $ 19,328 $ 17,102
Accounts payable.............................. 6,266 4,927
Accrued expenses.............................. 5,550 8,087
Income taxes payable.......................... 2,964 -
-------- --------
Total current liabilities............. 34,108 30,116
Long-term debt.................................. 100,332 100,583
Deferred income taxes........................... 6,265 4,898
Accrued postretirement and postemployment
benefits...................................... 13,885 13,788
Other liabilities............................... 3,309 3,311
-------- --------
Total liabilities..................... 157,899 152,696
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock.................................. 341 341
Paid-in capital............................... 45,428 45,428
Retained earnings............................. 8,539 774
Translation adjustments....................... 45 -
-------- --------
Total stockholders' equity............ 54,353 46,543
-------- --------
Total liabilities and stockholders'
equity.............................. $212,252 $199,239
======== ========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
3
<PAGE>
SWISHER INTERNATIONAL GROUP INC.
Condensed Consolidated Statements of Income
(Dollars in thousands except per share amounts)
Three Months Ended
March 31,
-------------------------
1997 1996
---- ----
(unaudited)
Net sales........................................ $63,799 $48,628
Cost of sales.................................... 33,320 24,951
------- -------
Gross profit................................... 30,479 23,677
Selling, general and administrative expenses..... 15,532 13,982
------- -------
Operating profit............................... 14,947 9,695
Interest expense, net............................ 2,130 2,314
Other (income) expense, net...................... (16) 64
------- -------
Income before income taxes....................... 12,833 7,317
Provision for income taxes....................... 5,068 2,870
------- -------
Net income....................................... $ 7,765 $ 4,447
======= =======
Earnings per share............................... $ .23 $ .13
======= =======
Weighted average shares outstanding.............. 34,100 34,100
======= =======
The accompanying notes are an integral part of the
condensed consolidated financial statements.
4
<PAGE>
SWISHER INTERNATIONAL GROUP INC.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
Three Months Ended
March 31,
--------------------
1997 1996
---- ----
(unaudited)
Cash flows from operating activities:
Net income.......................................... $ 7,765 $ 4,447
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization..................... 1,591 1,401
Deferred income taxes............................. 1,151 1,007
Changes in assets and liabilities:
Accounts receivable............................. (7,225) 799
Inventories..................................... (4,215) (7,335)
Other current assets............................ (858) (433)
Other assets.................................... (172) (183)
Accounts payable and accrued expenses........... (1,103) (565)
Income taxes.................................... 3,285 (1,032)
Other, net...................................... 45 (4)
------- -------
Net cash provided by (used in) operating
activities.................................. 264 (1,898)
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment.......... (2,482) (1,145)
------- -------
Net cash used in investing activities......... (2,482) (1,145)
------- -------
Cash flows from financing activities:
Long-term borrowings................................ 26,900 16,300
Payments of long-term debt.......................... (24,925) (15,633)
Dividend paid to Hay Island......................... - (212)
------- -------
Net cash provided by financing activities..... 1,975 455
------- -------
Net decrease in cash and cash equivalents............. (243) (2,588)
Cash and cash equivalents, beginning of period........ 1,744 3,250
------- -------
Cash and cash equivalents, end of period.............. $ 1,501 $ 662
======= =======
The accompanying notes are an integral part of the
condensed consolidated financial statements.
5
<PAGE>
SWISHER INTERNATIONAL GROUP INC.
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except share data)
1. ACCOUNTING POLICIES
The accompanying Condensed Consolidated Financial Statements should be
read in conjunction with the Consolidated Financial Statements and the Notes
thereto contained in Swisher International Group Inc.'s (the "Company's") 1996
Annual Report to Stockholders. The interim statements are unaudited but include
all adjustments, which consist of only normal recurring accruals, that
management considers necessary to fairly present the results for the interim
periods. Results for interim periods are not necessarily indicative of results
for a full year. The year end balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.
2. SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION
"Net cash provided by (used in) operating activities" includes the
following cash payments for interest and income taxes:
Three Months Ended
March 31,
---------------------
1997 1996
---- ----
Interest, net of amount capitalized...... $2,214 $2,394
Income taxes............................. 617 2,866
3. EARNINGS PER SHARE
Earnings per share for the three months ended March 31, 1997 has been
computed based on the weighted average number of shares of common stock
outstanding during such period. Earnings per share for the three months ended
March 31, 1996 has been computed based on the number of shares of common stock
outstanding subsequent to the completion of the Initial Public Offering.
4. INVENTORIES
Inventories consist of the following:
March 31, December 31,
1997 1996
--------- ------------
Finished goods....................... $13,148 $12,489
Work-in-process...................... 2,839 2,809
Raw materials........................ 34,636 31,023
Stores and supplies.................. 8,528 8,615
------- -------
$59,151 $54,936
======= =======
5. DIVIDENDS
During the three month period ended March 31, 1996, a cash dividend of
$212 was declared and paid to Hay Island Holding Corporation ("Hay Island").
6
<PAGE>
SWISHER INTERNATIONAL GROUP INC.
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except share data)
6. PRO FORMA RESULTS OF OPERATIONS
The following summarizes the unaudited pro forma results of operations,
for the three months ended March 31, 1996, as if a management services agreement
between the Company and Hay Island, dated January 1, 1997, had been in effect on
January 1, 1996. In addition, certain one-time special bonuses to management in
connection with the Initial Public Offering have been excluded from the pro
forma results of operations.
Net sales......................... $48,628
Net income........................ 5,615
Earnings per share................ .16
7. CONTINGENCIES
The tobacco industry has experienced and is experiencing significant
health-related litigation. Plaintiffs in such litigation typically seek
compensation and, in some cases, punitive damages, for various injuries
allegedly resulting from the use of tobacco products or the exposure to tobacco
smoke, including health care costs. In 1996, a Florida jury rendered a damages
verdict in favor of a cigarette smoker. More recently, however, a Florida jury
rendered a verdict in favor of a cigarette manufacturer defending an action
brought by a different plaintiff claiming similar damages. Neither of these
cases involved the Company. Recent press reports that a chemical found in
cigarette smoke causes genetic damage in lung cells identical to damage observed
in many malignant lung tumors could affect pending and future tobacco
litigation.
The Company has been named in three actions brought by plaintiffs against a
number of smokeless tobacco manufacturers and certain other organizations. One
of these was dismissed as to the Company by plaintiff's counsel. The remaining
actions seek damages and other relief in connection with injuries allegedly
sustained as a result of the Company's products. The Company believes that it
has a number of meritorious defenses to such pending litigation. All such cases
are, and will continue to be, vigorously defended.
Though claims have been made against manufacturers of smokeless tobacco
products and against manufacturers of cigars, the Company is not aware of any
adverse decision or judgment having been rendered against smokeless tobacco or
cigar manufacturers. In the opinion of management, the cost, if any, of
resolving all litigation and contingencies should not have a significant impact
on the Company's consolidated financial position. There can be no assurance,
however, that the Company may not be named as a defendant in any future suits,
nor can there be any assurance that such suits, if brought against the Company,
or the Company's existing litigation, will not result in an adverse judgment
against the Company which could have a material adverse effect on the Company's
business, future results of operations or cash flows. The Company does not carry
insurance to protect against health-related product liability because the cost
of obtaining such insurance is commercially prohibitive. Additionally, a
judgment against the Company with respect to a product and any related products,
could preclude the further sale of such products, the result of which could have
a material adverse effect on the Company's business.
7
<PAGE>
SWISHER INTERNATIONAL GROUP INC.
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except share data)
7. CONTINGENCIES (continued)
The Company is also subject to other litigation, claims and contractual
agreements arising in the ordinary course of business. In the opinion of
management, the cost, if any, of resolving all litigation and contingencies
should not have a significant impact on the Company's consolidated financial
position. However, the cost of resolving such litigation and contingencies, if
any, could have a significant effect on future results of operations and cash
flows.
On August 28, 1996, the FDA promulgated new regulations prohibiting the
sale of smokeless tobacco products to persons under the age of 18 years,
restricting certain marketing and manufacturing practices and placing
limitations on access to such products. The portions of the regulation requiring
age identification took effect in February, 1997. On April 25, 1997, a U.S.
District Court in North Carolina invalidated the portions of the regulations
that sought to restrict advertising and promotion and stayed the effectiveness
of the access provisions due to become effective in August, 1997 pending further
order of the court. The remaining provisions of the regulation are due to take
effect in 1998. Any further provisions of these regulations that become
effective could have a materially adverse affect on the Company's business.
Cigars and smokeless tobacco products have long been subject to federal,
state and local excise taxes. Such taxes are frequently subject to proposed
increases, in some cases significantly, to fund various legislative initiatives.
Enactment of new or significant increases in existing federal, state or local
excise taxes would result in decreased unit sales of cigars and smokeless
tobacco products, which could have a material adverse effect on the Company's
business.
The Company is subject to laws and regulations relating to the protection
of the environment. While it is not possible to quantify with certainty the
potential impact of future actions regarding environmental matters, in the
opinion of management, compliance with the present environmental protection
laws, will not have a material adverse impact, if any, upon the Company's
consolidated financial position, results of operations or cash flows.
8. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" ("SFAS 128"), which is effective for
periods ending after December 15, 1997, including interim periods. SFAS 128
establishes standards for computing and presenting earnings per share ("EPS") by
replacing primary EPS with the presentation of basic EPS and requiring dual
presentation of basic and diluted EPS on the face of the income statement. The
Company estimates the calculations will not have a material impact on EPS.
8
<PAGE>
SWISHER INTERNATIONAL GROUP INC.
Management's Discussion and Analysis of the Results
of Operations and Financial Condition
Three Months Ended March 31, 1997 Compared to
Three Months Ended March 31, 1996
Net Sales. Net sales increased $15.2 million or 31.2% to $63.8 million for
the three months ended March 31, 1997 from $48.6 million for the three months
ended March 31, 1996. The increase in net sales was due to higher sales of
cigars and smokeless tobacco products. Cigar sales increased principally due to
unit volume growth and, to a lesser extent, price increases in all cigar
categories. Cigar sales also increased as a result of a shift in sales mix to
higher priced cigars. Smokeless tobacco sales increased as a result of volume
growth and, to a lesser extent, price increases in all smokeless tobacco
categories.
Gross Profit. Gross profit increased $6.8 million or 28.7% to $30.5 million
(47.8% of net sales) for the three months ended March 31, 1997 from $23.7
million (48.7% of net sales) for the three months ended March 31, 1996. The
increase in gross profit for 1997 was due to the increase in net sales in all
cigar and smokeless tobacco product categories. As a percentage of net sales,
gross profit decreased due to a shift in sales mix, and an increase in labor
training costs as a result of adding a third production shift and little cigar
production at the Company's facility in Jacksonville, Florida.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses
increased $1.6 million or 11.1% to $15.5 million (24.4% of net sales ) for the
three months ended March 31, 1997 from $13.9 million (28.8% of net sales) for
the three months ended March 31, 1996. The increase of $1.6 million is
principally due to an increase in marketing expenses, offset in part by a
reduction in administrative expenses, as a result of the management services
agreement between the Company and Hay Island and the one-time special bonuses
paid to management in 1996. The decrease, as a percentage of net sales, was
primarily due to SG&A expenses increasing at a lower rate relative to the
increase in net sales as a consequence of management's effort to monitor and
reduce expenses.
Operating Profit. Operating profit increased $5.3 million or 54.2% to $14.9
million (23.4% of net sales) for the three months ended March 31, 1997 from $9.7
million (19.9% of net sales) for the three months ended March 31, 1996. The
increase, as a percentage of net sales, was primarily due to a decrease in SG&A
expenses as a percentage of net sales offset partially by lower gross profit
margins.
Interest Expense, Net. Interest expense, net decreased $.2 million or 8.0%
to $2.1 million for the three months ended March 31, 1997 from $2.3 million for
the three months ended March 31, 1996. For the three months ended March 31,
1997, the average debt balance was $118.7 million, with an average effective
interest rate of 7.2%. For the three months ended March 31, 1996, the average
debt balance was $128.5 million, with an average effective interest rate of
7.2%.
Income Taxes. The effective income tax rate was 39.5% and 39.2% for the
three month periods ended March 31, 1997 and 1996, respectively.
Net Income. Net income increased $3.3 million or 74.6% to $7.8 million
(12.2% of net sales), for the three months ended March 31, 1997 from $4.4
million (9.1% of net sales), for the three months ended March 31, 1996.
9
<PAGE>
SWISHER INTERNATIONAL GROUP INC.
Management's Discussion and Analysis of the Results
of Operations and Financial Condition
Liquidity and Capital Resources
Net cash flows provided by (used in) operating activities were $.3 million
and $(1.9) million for the three month periods ended March 31, 1997 and 1996,
respectively. The increase of $2.2 million was primarily due to an increase in
net income, offset partially by higher working capital requirements resulting
from increased accounts receivable and inventory levels associated with higher
sales volumes. Historically, the Company's capital requirements have
approximated its depreciation expense. As the Company expands its manufacturing
operations, depreciation expense will increase, but in the near term will be
less than expenditures on capital projects. The Company will fund its projects
using internal cash flow and, if needed, bank borrowings.
Working capital requirements can be expected to grow as the Company's
business grows. The Company's raw material inventory requirements for cigar
production are relatively modest due to its long standing relationships with
major tobacco suppliers who commit to supply tobacco inventory as needed by the
Company. The Company's largest working capital requirements are driven by its
smokeless tobacco operations. The tobacco for dry and moist snuff and loose leaf
chewing tobacco requires aging of two to three years before being processed into
finished products. The Company maintains sufficient smokeless tobacco raw
material inventories to ensure proper aging and an adequate supply. Although the
Company's business is not seasonal, purchases of smokeless tobacco raw material
inventory typically occur from the middle of the fourth quarter through the end
of the first quarter of each year. Therefore, inventories at year end and at the
end of the first quarter are typically higher than during the rest of the year.
The Company will fund its seasonal working capital requirements through
operating cash flows, and, if needed, bank borrowings.
Cash flows used in investing activities were $2.5 million and $1.1 million
for the three month periods ended March 31, 1997 and 1996, respectively. Cash
flows used in both periods related to investments in manufacturing equipment to
expand the Company's manufacturing capacity in mass market large cigars and
little cigars. For all of 1997, the Company currently expects that capital
expenditures will be between $12 million and $17 million and will be used to
expand its off-shore premium cigar production capacity (between $4.0 million and
$5.0 million), expand its domestic production capacity in mass market large
cigars and little cigars and continue its current maintenance capital program.
Capital expenditures are estimated to be between $5 million and $8 million for
each of 1998 and 1999 and are expected to be used to maintain existing equipment
and facilities as well as increase production capacity. The capital expenditures
referred to above are expected to be funded by cash flows from operations.
Cash flows provided by financing activities were $2.0 million and $.5
million for the three month periods ended March 31, 1997 and 1996, respectively.
The 1997 amount is due principally to changes in long-term borrowings. The 1996
amount is due principally to changes in long-term borrowings, offset partially
by a dividend paid to Hay Island.
10
<PAGE>
SWISHER INTERNATIONAL GROUP INC.
Management's Discussion and Analysis of the Results
of Operations and Financial Condition
As of March 31, 1997, borrowings under the A Term Loan were $83.75 million,
borrowings under the B Term Loan were $28.75 million and borrowings under the
Revolver were $7.0 million and the Company had $18.825 million of unused
availability thereunder, after taking into account approximately $1.175 million
utilized to support letters of credit.
To convert floating rate debt into fixed rate debt, the Company has two
interest rate swap agreements. As of March 31, 1997, the total notional amount
covered by existing swap agreements was $55.0 million. The agreements are each
for a period of three years expiring on November 16, 1998 and July 2, 1999. The
notional amount decreases to $50.0 million on November 16, 1997 and $15.0
million on November 16, 1998. Under the terms of these agreements, the Company
receives a variable interest rate equal to three-month LIBOR and pays a fixed
rate of approximately 5.9%, as of March 31, 1997. If the Company terminated
these agreements on March 31, 1997 or 1996, the effect, as of the end of each
period, would be insignificant.
The Company believes that net cash flow generated from future operations and
the availability of borrowings under the Revolver will be sufficient to fund its
working capital requirements, capital expenditures and debt service requirements
for the foreseeable future.
Inflation
The Company has historically been able to pass inflationary increases for
raw materials and other costs onto its customers through price increases and
anticipates that it will be able to do so in the future.
Seasonality
Although the Company's business is generally non-seasonal, consumption of
smokeless tobacco products increases slightly during the summer months.
Additionally, purchases of smokeless tobacco raw materials typically occur from
the middle of the fourth quarter to the end of the first quarter.
Regulation
On August 28, 1996, the FDA promulgated new regulations prohibiting the sale
of smokeless tobacco products to persons under the age of 18 years, restricting
certain marketing and manufacturing practices and placing limitations on access
to such products. The portions of the regulation requiring age identification
took effect in February, 1997. On April 25, 1997, a U.S. District Court in North
Carolina invalidated the portions of the regulations that sought to restrict
advertising and promotion and stayed the effectiveness of the access provisions
due to become effective in August, 1997 pending further order of the court. See
Legal Proceedings. The remaining provisions of the regulation are due to take
effect in 1998. Any further provisions of these regulations that become
effective could have a materially adverse affect on the Company's business.
11
<PAGE>
SWISHER INTERNATIONAL GROUP INC.
Management's Discussion and Analysis of the Results
of Operations and Financial Condition
Excise Taxes
Cigars and smokeless tobacco products have long been subject to federal,
state and local excise taxes. Such taxes are frequently subject to proposed
increases, in some cases significantly, to fund various legislative initiatives.
Enactment of new or significant increases in existing federal, state or local
excise taxes would result in decreased unit sales of cigars and smokeless
tobacco products, which could have a material adverse effect on the Company's
business.
Tobacco Industry Litigation
The tobacco industry has experienced and is experiencing significant
health-related litigation. Plaintiffs in such litigation typically seek
compensation and, in some cases, punitive damages, for various injuries
allegedly resulting from the use of tobacco products or the exposure to tobacco
smoke, including health care costs. In 1996, a Florida jury rendered a damages
verdict in favor of a cigarette smoker. More recently, however, a Florida jury
rendered a verdict in favor of a cigarette manufacturer defending an action
brought by a different plaintiff claiming similar damages. Neither of these
cases involved the Company. Recent press reports that a chemical found in
cigarette smoke causes genetic damage in lung cells identical to damage
observed in many malignant lung tumors could affect pending and future tobacco
litigation.
The Company is currently the subject of material health-related litigation.
See Legal Proceedings. Though claims have been made against manufacturers of
smokeless tobacco products and against manufacturers of cigars, the Company is
not aware of any adverse decision or judgment having been rendered against
smokeless tobacco or cigar manufacturers. In the opinion of management, the
cost, if any, of resolving all litigation and contingencies should not have a
significant impact on the Company's consolidated financial position. There can
be no assurance, however, that the Company may not be named as a defendant in
any future suits, nor can there be any assurance that such suits, if brought
against the Company, or the Company's existing litigation, will not result in an
adverse judgment against the Company which could have a material adverse effect
on the Company's business, future results of operations or cash flows. The
Company does not carry insurance to protect against health-related product
liability because the cost of obtaining such insurance is commercially
prohibitive. Additionally, a judgment against the Company with respect to a
product and any related products, could preclude the further sale of such
products, the result of which could have a material adverse effect on the
Company's business.
Other
This Management's Discussion and Analysis of Financial Condition and Results
of Operations and other sections of this Form 10-Q contain forward-looking
statements that are based on current expectations, estimates and projections
about the industries in which the Company operates, management's beliefs and
assumptions made by management. Words such as "expects", "believes",
"estimates", variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions
which are difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
12
<PAGE>
SWISHER INTERNATIONAL GROUP INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company had been one of the defendants in Rix v. R.J. Reynolds et al.,
a suit commenced on May 31, 1996 by an individual in the Circuit Court, the
Fourth Judicial Circuit for Duval County, Florida, alleging negligence, strict
liability and civil conspiracy. On March 11, 1997, the suit was dismissed as to
the Company by the plaintiff's attorney.
The Company is a plaintiff, along with other smokeless tobacco
manufacturers, in United States Tobacco, et al. v. Harshbarger, et al., a suit
commenced on August 7, 1996 in the United States District Court for the District
of Massachusetts. In 1996, the plaintiffs in the action filed a motion for
summary judgment arguing that Massachusetts was preempted by the federal
Comprehensive Smokeless Tobacco Health Education Act of 1986 ("CSTHEA") from
enforcing a statute requiring manufacturers to disclose the identity and
relative quantities of ingredients added to tobacco in the manufacturing process
on a brand specific basis. The defendant in the action, the Massachusetts
Commissioner of Public Health, filed a cross motion on the same subject. On
February 10, 1997, the Court denied the plaintiffs' motion and granted the
defendant's motion. In March, 1997, plaintiffs filed an appeal from the District
Court's decision in the United States Court of Appeals for the First Circuit.
The Company is also a plaintiff (along with other manufacturers of tobacco
products, and certain organizations representing the advertising industry and
representatives of the retailing community) in United States Tobacco, et al. v.
United States Food and Drug Administration, et al., an action filed in the
United States District Court for the Middle District of North Carolina on
September 19, 1995, pursuant to which plaintiffs are challenging the FDA's
ability to enforce regulations promulgated in 1996, with respect to the
marketing of and public access to certain tobacco products. On October 15, 1996,
plaintiffs filed a motion for summary judgment in the suit arguing that the
FDA's enforcement of certain of the regulations pertaining to advertising and
promotion of plaintiffs' products was preempted by CSTHEA and , further, that
FDA lacked jurisdiction to regulate plaintiffs. On April 25, 1997, the Court
issued an opinion granting plaintiffs' motion with respect to the advertising
and promotion issue and denying the motion with respect to the FDA's
jurisdiction. The Company and the other tobacco manufacturers which were
plaintiffs in the action have filed an interlocutory appeal from the decision in
the United States Court of Appeals for the Fourth Circuit.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
27.1 --Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three months ended
March 31, 1997.
13
<PAGE>
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.
Swisher International Group Inc.
Date: May 13, 1997 By /s/ William Ziegler, III
----------------------- -----------------------------
William Ziegler, III
Chairman of the Board
and Chief Executive Officer
(principal executive officer)
Date: May 13, 1997 By /s/ Robert A. Britton
----------------------- --------------------------
Robert A. Britton
Executive Vice President
and Chief Financial Officer
(principal financial and
accounting officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the balance sheet as of March 31, 1997 and statement of income for the three
months ended March 31, 1997 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0001025834
<NAME> Swisher International Group Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S.
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