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________________________________________________________________________________
FORM 10-Q
_______________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the 13 Weeks ended May 30, 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: (1-12757)
_______________
GENERAL CIGAR HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3922128
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
_______________
387 Park Avenue South 10016-8899
New York, New York (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 448-3800
_______________
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 [ ]
As of June 30, 1998, 12,303,188 shares of Class A common stock, par value $0.01
per share, and 14,901,761 shares of Class B common stock, par value $0.01 per
share, were outstanding.
________________________________________________________________________________
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<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION:
Item 1. FINANCIAL STATEMENTS:
-------------------------------
Consolidated Statement of Operations for the 13 Weeks
ended May 30, 1998 and May 31, 1997 and for the
26 Weeks ended May 30, 1998 and May 31, 1997............ Page 3
Consolidated Balance Sheet as of May 30, 1998
and November 29, 1997................................... Page 4
Consolidated Statement of Cash Flows for the 26 Weeks
ended May 30, 1998 and May 31, 1997..................... Page 5
Consolidated Statement of Changes in Stockholders' Equity
for the 26 Weeks ended May 30, 1998..................... Page 6
Notes to Consolidated Financial Statements................ Page 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
---------------------------------------------------------------------
AND RESULTS OF OPERATIONS.............................. Page 11
-------------------------
PART II. OTHER INFORMATION:
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.... Page 14
-------------------------------------------------------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K....................... Page 14
------------------------------------------
SIGNATURES......................................................... Page 16
INDEX TO EXHIBITS.................................................. Page E-1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
GENERAL CIGAR HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands except per share data)
(Unaudited)
________________ __________________
13 Weeks Ended 26 Weeks Ended
May 30, May 31, May 30, May 31,
---------------- ------------------
1998 1997 1998 1997
------- ------- -------- --------
NET SALES................................ $68,248 $58,908 $135,985 $108,706
Cost of goods sold....................... 36,322 32,435 71,108 59,950
------ ------ ------- -------
GROSS PROFIT............................. 31,926 26,473 64,877 48,756
Selling, general and
administrative expenses............... 20,617 15,873 40,980 30,301
------ ------ ------- -------
OPERATING PROFIT......................... 11,309 10,600 23,897 18,455
Nonoperating income...................... 206 153 370 470
Interest expense......................... 1,026 447 1,859 1,721
------ ------ ------- -------
Income before provision for income taxes. 10,489 10,306 22,408 17,204
Provision for income taxes............... 3,732 3,916 7,955 6,537
------ ------ ------- -------
NET INCOME............................... $ 6,766 $ 6,390 $ 14,453 $ 10,667
====== ====== ======= =======
Basic net income per share............... $ 0.24 $ 0.24 $ 0.52 $ 0.39
===== ===== ===== =====
Weighted average common shares
outstanding (in thousands)............ 27,621 27,102 27,606 27,045
====== ====== ====== ======
Diluted net income per share............. $ 0.24 $ 0.22 $ 0.51 $ 0.37
===== ===== ===== =====
Weighted average common shares and
equivalents outstanding (in thousands) 28,444 28,900 28,558 28,550
====== ====== ====== ======
See Notes to Consolidated Financial Statements.
3
<PAGE>
PART I (Cont.)
GENERAL CIGAR HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands except per share data)
___________ ____________
May 30, November 29,
ASSETS 1998 1997
----------- ------------
CURRENT ASSETS: (Unaudited)
Cash and cash equivalents........................... $ 2,430 $ 8,976
Receivables, less allowance of $1,029 (1997-$1,331). 38,280 50,963
Inventories:
Raw materials and supplies........................ 97,499 83,884
Work-in-process................................... 9,745 9,202
Finished goods.................................... 35,132 14,272
------- -------
142,376 107,358
Other current assets................................ 6,429 8,779
------- -------
TOTAL CURRENT ASSETS......................... 189,515 176,076
------- -------
Property and equipment................................ 122,919 113,041
Less: accumulated depreciation....................... 48,159 45,552
------- -------
Net property and equipment................... 74,760 67,489
Intangible assets, net, principally
trademarks and goodwill............................. 72,455 73,740
Other assets.......................................... 2,771 2,900
------- -------
TOTAL ASSETS................................. $339,501 $320,205
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities............ $ 33,922 $ 40,397
Long-term debt due within one year.................. 1,171 1,224
Income taxes........................................ 1,495 1,326
------- -------
TOTAL CURRENT LIABILITIES.................... 36,588 42,947
Long-term debt........................................ 62,110 47,540
Accrued retirement benefits........................... 16,271 15,923
Deferred income taxes................................. 6,909 5,317
Other noncurrent liabilities.......................... 7,829 10,974
------- -------
TOTAL LIABILITIES............................ 129,707 122,701
------- -------
Commitments and Contingencies (Note 5)
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.01-- authorized:
20,000,000 shares; Issued: none.................... - -
Class B common stock, par value $0.01--authorized:
25,000,000 shares;
Issued: 14,939,684 shares at May 30, 1998;
Issued: 15,707,226 shares at November 29, 1997... 149 157
Class A common stock, par value $0.01--authorized:
50,000,000 shares;
Issued: 12,693,165 shares at May 30, 1998;
Issued: 11,876,729 shares at November 29, 1997... 127 119
Additional paid-in capital.......................... 165,700 165,441
Retained earnings................................... 46,240 31,787
------- -------
212,216 197,504
Less: cost of Class A common stock held
in treasury, 238,100 shares................ (2,422) -
------- -------
Total stockholders' equity................... 209,794 197,504
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $339,501 $320,205
======= =======
See Notes to Consolidated Financial Statements.
4
<PAGE>
PART I (Cont.)
GENERAL CIGAR HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
(Unaudited)
__________________
26 Weeks Ended
May 30, May 31,
------------------
1998 1997
------ ------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income............................................. $14,453 $10,667
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization......................... 4,253 3,100
Changes in assets and liabilities, net of Villazon
Acquisition and Liability Assumption in 1997:
Decrease in accounts receivable....................... 12,683 5,138
Increase in inventories............................... (35,018) (16,087)
Decrease in accounts payable and accrued liabilities.. (6,475) (2,447)
Increase in income taxes payable...................... 169 3,660
Increase in deferred income taxes..................... 1,592 1,517
Other, net............................................ (379) 1,500
------ ------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES.. (8,722) 7,048
------ ------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of Villazon, net of cash acquired.......... - (70,068)
Additions to property and equipment.................... (10,178) (4,872)
------ ------
NET CASH USED IN INVESTING ACTIVITIES................ (10,178) (74,940)
------ ------
CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from Offering............................. - 112,600
Increase in debt....................................... 15,000 -
Purchase of treasury stock............................. (2,422) -
Payments of debt....................................... (483) (38,137)
Proceeds from exercise of stock options................ 129 -
Tax benefit from exercise of stock options............. 130 -
Net transactions with Culbro, excluding
Liability Assumption................................. - (2,640)
Other, net............................................. - (1,000)
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES............ 12,354 70,823
------ ------
Net (decrease) increase in cash and cash equivalents...... (6,546) 2,931
Cash and cash equivalents at beginning of period.......... 8,976 409
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ 2,430 $ 3,340
====== ======
See Notes to Consolidated Financial Statements.
5
<PAGE>
<TABLE>
PART I (Cont.)
GENERAL CIGAR HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)
(Unaudited)
<CAPTION>
_______ _______ __________ ________ ________ _____________
Class B Class A Additional Total
Common Common Paid-in Retained Treasury Stockholders'
Stock Stock Capital Earnings Stock Equity
------- ------- ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT NOVEMBER 29, 1997... $ 157 $ 119 $165,441 $ 31,787 $ - $197,504
Exercise of stock options...... - - 129 - - 129
Exchange of shares............. (8) 8 - - - -
Tax benefit arising from
exercise of employee
stock options................ - - 130 - - 130
Purchase of treasury stock..... - - - - (2,422) (2,422)
Net income..................... - - - 14,453 - 14,453
----- ----- ------- ------- ------- -------
BALANCE AT MAY 30, 1998........ $ 149 $ 127 $165,700 $ 46,240 $ (2,422) $209,794
===== ===== ======= ======= ======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
6
<PAGE>
PART I (CONT.)
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except per share data)
(Unaudited)
(1) INTERIM FINANCIAL PRESENTATION
The interim Consolidated Financial Statements are unaudited; however, they
have been prepared in accordance with Rule 10-01 of Regulation S-X adopted
by the Securities and Exchange Commission ("Commission") and in the opinion
of management reflect all adjustments (all of which are of a normal,
recurring nature) which are necessary for a fair statement of the financial
condition, results of operations, cash flows and changes in stockholders'
equity for the periods presented. Results of operations for the 26 weeks
ended May 30, 1998 are not necessarily indicative of the results that may
be expected for the entire year ending November 28, 1998.
As used in these Notes, references to the "Company" mean General Cigar
Holdings, Inc. and its direct and indirect subsidiaries General Cigar Co.,
Inc. ("General Cigar"), Villazon & Company, Inc. ("Villazon"), Club
Macanudo, Inc. and Club Macanudo (Chicago), Inc. (collectively "Club
Macanudo"), and 387 PAS Corp. ("387 PAS"). The accompanying financial
statements reflect the results of operations of these businesses and assets
for all of the periods presented. Club Macanudo, which operates cigar bars
in New York City and Chicago, and 387 PAS which owns and operates the
Company's headquarters building, were not material to the Company's results
of operations in any of the periods presented.
The accompanying Consolidated Financial Statements should be read in
conjunction with the Company's audited 1997 financial statements included
in Form 10-K, as filed with the Commission on February 27, 1998, and should
be read in conjunction with the Notes to Consolidated Financial Statements
appearing in that report.
(2) VILLAZON ACQUISITION
On January 21, 1997, the Company completed the acquisitions of two
affiliated companies, Villazon & Company, Inc., a U.S. corporation, and
Honduras American Tabaco, S.A. de C. V., a Honduran corporation
(collectively "Villazon"), for approximately $81.2 million consisting of
$91.1 million of purchase price and direct acquisition costs, less $9.9
million of cash acquired at closing. At closing, $64.3 million of cash was
paid and $24.4 million aggregate principal amount of seller notes were
issued (the "Villazon Acquisition"). Both companies are engaged in the
cigar business. The Villazon Acquisition was accounted for using the
purchase method of accounting. Acquisition cost in excess of the fair value
of net tangible assets was approximately $69 million, representing
principally trademarks and goodwill (see unaudited pro forma condensed
financial information in Note 4). The Company entered into a Credit
Agreement to finance the acquisition. Proceeds from the Company's initial
public offering (the "Offering") were used to reduce amounts outstanding
under the Credit Agreement.
7
<PAGE>
(3) EARNINGS PER SHARE
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 replaced the
calculation of primary and fully diluted earnings per share ("EPS") with
basic and diluted EPS. EPS amounts for all prior periods presented have
been restated to conform with SFAS 128. For the periods presented, the only
difference between the basic and diluted EPS calculation is the dilutive
impact of stock options which are included in the diluted EPS calculations.
(4) CONSOLIDATED CONDENSED PRO FORMA FINANCIAL INFORMATION
The following consolidated condensed unaudited pro forma financial
statement of operations reflects the Villazon Acquisition, including the
effect of the associated borrowings to finance the acquisition, the
Liability Assumption and the Offering as if these transactions were
completed at the beginning of the period. The Villazon Acquisition and the
Liability Assumption are already reflected in the Company's balance sheet
at May 31, 1997. The unaudited pro forma consolidated condensed financial
information presented herein may not necessarily reflect the results of
operations and financial position that actually would have been achieved
had the transactions discussed above actually taken place at the assumed
date.
Consolidated Condensed Pro Forma Statement of Operations
(Unaudited)
26 Weeks Ended
May 31, 1997
------------
Net sales........................................... $114,298
-------
Operating profit.................................... 19,574
Nonoperating income................................. 470
Interest expense.................................... 953
-------
Income before provision for income taxes............ 19,091
Provision for income taxes.......................... 7,273
-------
Net income.......................................... $ 11,818
=======
Basic net income per share.......................... $ 0.44
=====
Diluted net income per share........................ $ 0.41
=====
8
<PAGE>
(5) COMMITMENTS AND CONTINGENCIES
As of May 31, 1998, the Company had commitments for capital expenditures of
approximately $10.3 million for the improvement of manufacturing and
distribution facilities, the addition of machinery and equipment, and the
implementation of a new computer system.
The Company believes that the outcome of currently pending legal
proceedings will not, in the aggregate, have a material adverse effect on
the Company's financial position.
(6) SUPPLEMENTAL CASH FLOW INFORMATION
Prior to the Offering, General Cigar had been included in Culbro
Corporation ("Culbro") consolidated federal income tax returns.
Accordingly, tax payments made by Culbro in the period prior to the
Offering are reflected in net transactions with Culbro in the consolidated
statement of cash flows. Income taxes paid by the company during the six
months ended May 30, 1998 was $6.1 million.
Interest paid in the six months period of 1998 and 1997 was $1.8 million
and $1.7 million, respectively.
At May 31, 1997, the estimated cash and noncash activities related to the
Villazon Acquisition were summarized as follows:
Estimated fair value of net assets acquired......... $ 89,975
Notes issued to sellers............................. (24,370)
Payment of short-term seller notes.................. 14,370
------
Payments in connection with the acquisition......... 79,975
Cash acquired....................................... (9,907)
------
Payments in connection with acquisition, net
of cash acquired............................... $ 70,068
======
(7) AMENDMENTS TO CREDIT FACILITIES
On April 29, 1998, the Company amended its Credit Agreement to increase the
commitment of the revolving credit facility to $92.5 million from $50
million. Borrowings under the revolving credit facility bear interest, at
the Company's option, of either (1) the ABR (2) the Eurodollar rate plus
0.75% or (3) a combination thereof. The Company pays a commitment fee of
1/4 of 1% on the unused portion of the revolving credit facility.
9
<PAGE>
(8) STOCK REPURCHASE PROGRAM
On May 21, 1998, the Company announced a program to repurchase up to 5% of
the Company's common stock from time to time in open market transactions.
The maximum amount authorized of 5% represents approximately 8% of the
outstanding common stock after excluding the common stock owned by the
Cullman and Ernst group, the Company's principal shareholders. Through May
30, 1998, the Company repurchased 238,100 shares of Class A common stock
for $2.4 million under this program.
(9) NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
130, "Reporting Comprehensive Income", and SFAS 131, "Disclosures About
Segments of an Enterprise and Related Information". In February 1998, the
FASB issued SFAS 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits". All of these statements are effective for fiscal
years beginning after December 15, 1997. These statements address
presentation and disclosure matters that currently have no material impact
on the Company's financial position or results of operations.
10
<PAGE>
PART I (Cont.)
GENERAL CIGAR HOLDINGS, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ---------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS
INCLUDE, WITHOUT LIMITATIONS, THE COMPANY'S BELIEFS ABOUT TRENDS IN THE CIGAR
INDUSTRY AND ITS VIEWS ABOUT THE LONG-TERM FUTURE OF THE INDUSTRY AND THE
COMPANY. THE FOLLOWING FACTORS, AMONG OTHERS, COULD CAUSE THE COMPANY'S
FINANCIAL PERFORMANCE TO DIFFER MATERIALLY FROM THAT EXPRESSED IN SUCH
STATEMENTS (I) CHANGES IN CONSUMER PREFERENCES RESULTING IN A DECLINE IN THE
DEMAND FOR AND CONSUMPTION OF CIGARS; (II) AN INABILITY ON THE PART OF THE
COMPANY TO INCREASE PRODUCTION OF CIGARS, PARTICULARLY PREMIUM CIGARS, TO MEET
DEMAND AS A RESULT OF, AMONG OTHER THINGS, A SHORTAGE OF RAW MATERIALS, TRAINED
LABOR OR PRODUCTION CAPACITY, (III) AN INCREASE IN THE PRICE OF RAW MATERIALS,
(IV) ADDITIONAL GOVERNMENTAL REGULATION OF TOBACCO OR FURTHER TOBACCO
LITIGATION, (V) ENACTMENT OF NEW OR SIGNIFICANT INCREASES IN EXISTING EXCISE
TAXES, (VI) POLITICAL AND/OR ECONOMIC INSTABILITY IN FOREIGN COUNTRIES WHERE THE
COMPANY HAS OPERATIONS AND (VII) OTHER RISKS AND UNCERTAINTIES SET FORTH IN THE
COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
AS USED HEREIN, REFERENCES TO THE "COMPANY" MEAN GENERAL CIGAR HOLDINGS, INC.
AND ITS DIRECT AND INDIRECT SUBSIDIARIES GENERAL CIGAR CO., INC. ("GENERAL
CIGAR"), VILLAZON & COMPANY, INC. ("VILLAZON"), CLUB MACANUDO, INC. AND CLUB
MACANUDO (CHICAGO), INC. (COLLECTIVELY, "CLUB MACANUDO"), AND 387 PAS CORP.
("387 PAS").
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $8.7 million in the six months ended
May 30, 1998 (the "1998 Period") compared to net cash of $7.0 million provided
by operations in the six months ended May 31, 1997 (the "1997 Period). The use
of cash in the 1998 Period compared to cash flow generated in the 1997 Period
reflected substantially higher level of inventories. The substantial increase in
cigar demand created shortages of tobacco in 1997 and its effect continued into
1998. Accordingly, the Company has increased substantially its inventory of
filler and binder tobacco needed for making high quality premium cigars.
However, due to the lower rate of growth in cigar sales currently being
experienced, the Company has begun to curtail its tobacco purchases, but will
continue to secure supplies of its primary tobacco requirements under existing
arrangements with suppliers. The increase in inventories of finished goods
reflected principally the availability of certain premium cigars previously in
short supply. The Company has downsized its manufacturing workforce and reduced
production of cigars to bring inventory levels in line with current demand.
Accounts receivable decreased $12.7 million during the 1998 Period as a result
of seasonal sales in the fourth quarter of 1997.
Cash used in investing activities was $10.2 million in the 1998 Period compared
to $74.9 million in the 1997 Period. In the 1998 Period, investing activities
consisted of purchases of property and equipment to complete the manufacturing
capacity expansion projects. In the 1997 Period, investing activities reflected
principally the acquisition of Villazon ($70.0 million) and purchases of
property and equipment ($4.9 million).
11
<PAGE>
Cash provided by financing activities was $12.4 million in the 1998 Period
compared to $70.8 million in the 1997 Period. The financing activities in the
1997 Period reflected the net proceeds from the Offering and the repayments of
bank borrowings used to finance the Villazon Acquisition and the assumed Culbro
general corporate debt. In the 1998 Period, the Company increased its long-term
borrowings by $15.0 million to finance the manufacturing capacity expansion
projects and higher working capital requirements. In April 1998, the Company
increased its commitment under the revolving line of credit from $50.0 million
to $92.5 million principally to provide more working capital financing, and
extended the term to April 29, 2001. As of May 30, 1998, $45.5 million was
available under the facility.
The Company's Board of Directors has authorized the purchase of up to 5% of the
Company's common stock from time to time on open market transactions. As of May
30, 1998, 238,100 shares with a cumulative cost of $2.4 million had been
repurchased under this program.
The Company's working capital increased to $152.9 million at May 31, 1998, from
$133.1 million at November 29, 1997. Total debt increased by $14.5 million
during the same period.
Based on its current projection of cash flows, management believes that cash
from operations combined with its revolving credit facility will be sufficient
to fund its operations. The Company expects that it will make capital
expenditures in fiscal 1998 of approximately $21 million, principally to improve
manufacturing efficiencies, and install a new computer system.
RESULTS OF OPERATIONS
THREE MONTH AND SIX MONTH PERIODS ENDED MAY 30, 1998 AS COMPARED TO THREE MONTH
AND SIX MONTH PERIODS ENDED MAY 31, 1997
Net sales increased 15.9%, or $9.3 million, to $68.2 million in the second
quarter of 1998 ("1998 Second Quarter") from $58.9 million in the second quarter
of 1997 ("1997 Second Quarter"). The increase in net sales reflected higher unit
sales of mass market cigars and higher prices in certain mass market cigar
categories.
Net sales in the 1998 Period were $136.0 million, an increase of 25.1% over net
sales of 108.7 million in the 1997 Period. The increase in net sales reflected
principally higher unit sales of cigars and higher prices in all cigar
categories.
Gross profit increased 20.6%, or $5.4 million to $31.9 million in the 1998
Second Quarter from $26.5 million in the 1997 Second Quarter. Gross margin
increased to 46.8% in the 1998 Second Quarter from 44.9% in the 1997 Second
Quarter. The increase in gross margin reflected higher unit sales and the
benefit of relatively higher prices of certain cigar categories. In the 1998
Period, gross profit increased 33.1%, or $16.1 million to $64.9 million from
$48.8 million in the 1997 Period. Gross margin also increased to 47.7% in the
1998 Period from 44.9% in the 1997 Period.
12
<PAGE>
Selling, general and administrative expenses ("S,G&A") increased to $20.6
million in the 1998 Second Quarter from $15.9 million in the 1997 Second
Quarter. For the 1998 Period, S,G&A expenses increased to $41.0 million from
$30.3 million in the 1997 Period. As a percentage of net sales, S,G&A expenses
were 30.2% and 30.1%, in the 1998 Second Quarter and 1998 Period, respectively,
compared to 26.9% and 27.9%, in the 1997 Second Quarter and 1997 Period,
respectively. The increases in S,G&A expenses as a percentage of net sales
reflect higher marketing expenses and higher general and administrative
expenses, including certain non-recurring charges, associated with business
development activities.
Operating profit increased 6.7%, or $0.7 million, to $11.3 million in the 1998
Second Quarter from $10.6 million in the 1997 Second Quarter as a result of the
higher S,G&A expenses. Operating margin decreased to 16.6% from 18.0% in the
1998 Second Quarter. In the 1998 Period, operating profit was $23.9 million, or
17.6% of net sales, as compared to $18.5 million, or 17.0% of net sales, in the
1997 Period.
Interest expense increased to $1.0 million in the 1998 Second Quarter from $0.5
million in the 1997 Second Quarter. This increase was due to higher average
borrowings during the 1998 Second Quarter. For the 1998 Period, interest expense
increased to $1.9 million from $1.7 million in the 1997 Period. The interest
expense in the 1997 Period reflected principally the cost of financing the
Villazon Acquisition. The bank financing for the acquisition and certain of the
seller notes were repaid with the net proceeds from the Offering.
The provision for income taxes was $3.7 million in the 1998 Second Quarter as
compared to $3.9 million in the 1997 Second Quarter. For the 1998 Period income
tax provision was $8.0 million as compared to $6.5 million in the 1997 Period.
The lower effective tax rate of 35.5% in 1998 compared to 38.0% in 1997 reflects
a change in the geographical composition of earnings.
As a result of the changes described above, principally higher gross profits
substantially offset by higher expenses, net income increased 5.9% to $6.8
million compared to $6.4 million in the 1997 Second Quarter. Net income for the
1998 Period was $14.5 million, an increase of 35.5% from net income of $10.7
million in the 1997 Period.
13
<PAGE>
PART II. OTHER INFORMATION
GENERAL CIGAR HOLDINGS, INC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
On April 16, 1998, the Company held its annual meeting of stockholders in New
York, N.Y. The stockholders elected the following directors with corresponding
votes for and against. These votes reflect shares of the Company's Class A
common stock which entitles each stockholder to one vote for each share held and
shares of Class B common stock which entitles each stockholder to ten votes for
each share held.
Number of Number of
Name of Director Votes For Votes Against
-------------------------------------------------------------------------
Edgar M. Cullman.......................... 154,469,468 424,897
Bruce A. Barnet........................... 154,627,572 266,793
John L. Bernbach.......................... 154,309,497 584,864
Edgar M. Cullman, Jr...................... 154,514,992 379,373
Susan R. Cullman.......................... 154,435,436 458,929
John L. Ernst............................. 154,516,172 378,193
Thomas C. Israel.......................... 154,627,572 266,793
Dan W. Lufkin............................. 154,582,872 311,493
Graham V. Sherren......................... 154,310,097 584,268
Peter J. Solomon.......................... 154,516,772 377,593
Francis T. Vincent, Jr.................... 154,516,772 377,593
The stockholders approved the selection the Company's independent accountants
for 1998:
Number of Number of Number of
Votes For Votes Against Votes Abstained
----------- ------------- ---------------
Price Waterhouse LLP..... 154,689,418 20,875 184,072
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) EXHIBITS
The exhibits listed in the following table have been filed as part of this
Quarterly Report on Form 10-Q.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
--------------------------------------------------------------------------
10.17(a) Amended and Restated Credit Agreement, dated as of April 29,
1998, Among General Cigar Co., Inc. as Borrower; General Cigar
Holdings, Inc., 387 PAS
14
<PAGE>
Corp., Club Macanudo, Inc., Club Macanudo (Chicago), Inc. and
Villazon & Company, Inc., as Guarantors, and The Lenders From
Time to Time Parties Hereto, and The Chase Manhattan Bank as
Administrative Agent. (Exhibits and schedules are omitted; the
Registrant hereby undertakes to furnish a copy of such exhibits
and schedules to the Commission upon request).
11 Statement re: computation of per share earnings
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No Report on Form 8-K was filed during the quarter for which this
Quarterly Report on Form 10-Q is filed.
15
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
SIGNATURES
Pursuant to the requirement 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.
GENERAL CIGAR HOLDINGS, INC.
Date: July 13, 1998 By: /s/ Jay M. Green
----------------
Jay M. Green
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
Date: July 13, 1998 By: /s/ Joseph C. Aird
------------------
Joseph C. Aird
Senior Vice President,
Controller
16
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE
- --------------------------------------------------------------------------------
10.17(a) Amended and Restated Credit Agreement, dated as of April 29,
1998, Among General Cigar Co., Inc. as Borrower; General
Cigar Holdings, Inc., 387 PAS Corp., Club Macanudo, Inc.,
Club Macanudo (Chicago), Inc. and Villazon & Company, Inc.,
as Guarantors, and The Lenders From Time to Time Parties
Hereto, and The Chase Manhattan Bank as Administrative Agent.
(Exhibits and schedules are omitted; the Registrant hereby
undertakes to furnish a copy of such exhibits and schedules
to the Commission upon request)............................... E-2
11 Statement re: computation of per share earnings............... E-3
27 Financial Data Schedule....................................... E-4
E-1
Exhibit 10.17(a)
________________________________________________________________________________
________________________________________________________________________________
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of April 29, 1998
(Amending and Restating the Credit Agreement, dated as of January 21, 1997,
as amended by the First Amendment, dated as of February 27, 1997,
the Second Amendment, dated as of April 14, 1997 and
the Third Amendment, dated as of April 23, 1997)
Among
GENERAL CIGAR CO., INC.,
as Borrower
GENERAL CIGAR HOLDINGS, INC.,
387 PAS CORP.,
CLUB MACANUDO, INC.,
CLUB MACANUDO (CHICAGO), INC., and
VILLAZON & COMPANY, INC.
as Guarantors
and
THE LENDERS FROM TIME TO TIME PARTIES HERETO
------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 29, 1998
(amending and restating the Credit Agreement, dated as of January 21, 1997 (the
"OLD CREDIT AGREEMENT"), as amended February 27, 1997, April 14, 1997 and April
23, 1997), by and among General Cigar Co., Inc., a Delaware corporation (the
"BORROWER"), General Cigar Holdings, Inc., a Delaware corporation ("HOLDINGS"),
387 PAS Corp., a New York corporation ("387"), Club Macanudo, Inc., a New York
corporation ("CLUB"), Club Macanudo (Chicago), Inc., an Illinois corporation
("CLUB CHICAGO"), Villazon & Company, Inc., a Delaware corporation ("NEW
VILLAZON"), the several banks and other financial institutions from time to time
parties to this Amended and Restated Agreement (collectively, the "LENDERS"),
and The Chase Manhattan Bank, a New York banking corporation, as agent for the
Lenders hereunder (in such capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H :
---------------------
WHEREAS, pursuant to the Old Credit Agreement, the Lenders
parties thereto and the Administrative Agent have agreed to extend credit to the
Borrower;
WHEREAS, the Borrower has requested that the Old Credit Agreement
be amended and restated as hereinafter provided; and
WHEREAS, the parties hereto are willing to agree to such
amendment and restatement;
NOW, THEREFORE, the parties hereto hereby agree that on the
Amendment and Restatement Effective Date (as hereinafter defined), the Old
Credit Agreement will be amended and restated in its entirety as follows:
SUBSECTIONS 1.1 THROUGH 10.7
----------------------------
Subsections 1.1 through 10.7 of the Old Credit Agreement, in each
case with their respective existing subsection and Section designations, are
hereby incorporated herein by reference as if set forth in full herein, except
that for purposes of such incorporation by reference:
1. Section 1 of the Old Credit Agreement shall be deemed amended
by deleting therefrom the definition of "Revolving Credit Termination Date" and
substituting in lieu thereof the following definition:
"REVOLVING CREDIT TERMINATION DATE": the date which is the
third anniversary of the Amendment and Restatement Effective
Date.
2. Section 1 of the Old Credit Agreement shall be deemed amended
by inserting the following new definitions in correct alphabetical order:
1
<PAGE>
"AMENDED AND RESTATED AGREEMENT": this Amended and Restated
Credit Agreement, as amended, supplemented or modified from time
to time.
"AMENDMENT AND RESTATEMENT EFFECTIVE DATE": the date on
which each of the conditions precedent specified in subsection
4.3 shall have been satisfied.
"OLD CREDIT AGREEMENT": as defined in the recitals to this
Amended and Restated Agreement.
3. Sections 2.3 and 2.11 of the Old Credit Agreement shall be
deemed amended to read in their entirety as follows:
"2.3 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Borrower
may borrow under the Revolving Credit Commitments during the
Revolving Credit Commitment Period on any Working Day, if all or
any part of the requested Revolving Credit Loans are to be
initially Eurodollar Loans, or on any Business Day, otherwise,
PROVIDED that the Borrower shall give the Administrative Agent
and the Lenders irrevocable notice (which notice must be received
by the Administrative Agent prior to 11:00 A.M., New York City
time, (a) three Working Days prior to the requested Borrowing
Date, if all or any part of the requested Revolving Credit Loans
are to be initially Eurodollar Loans, or (b) one Business Day
prior to the requested Borrowing Date, otherwise), specifying (i)
the amount to be borrowed, (ii) the requested Borrowing Date,
(iii) whether the borrowing is to be of Eurodollar Loans,
Alternate Base Rate Loans or a combination thereof and (iv) if
the borrowing is to be entirely or partly of Eurodollar Loans,
the respective amounts of each such Type of Loan and the
respective lengths of the initial Interest Periods therefor. Each
borrowing under the Revolving Credit Commitments shall be in an
amount equal to (x) in the case of Alternate Base Rate Loans,
$500,000 or a whole multiple of $500,000 in excess thereof (or,
if the then Available Revolving Credit Commitments are less than
$500,000, such lesser amount) and (y) in the case of Eurodollar
Loans, $500,000 or a whole multiple of $500,000 in excess
thereof. Each Lender will make the amount of its pro rata share
of each borrowing available to the Administrative Agent for the
account of the Borrower at the office of the Administrative Agent
specified in subsection 10.2 prior to 1:00 P.M., New York City
time, on the Borrowing Date requested by the Borrower in funds
immediately available to the Administrative Agent. Subject to the
satisfaction of the conditions precedent set forth in Section 4,
such borrowing will then be made available to the Borrower by the
Administrative Agent crediting the account of the Borrower on
2
<PAGE>
the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Lenders and in like
funds as received by the Administrative Agent."
"2.11 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF TRANCHES. A11
Minimum Amounts and Maximum Number of Tranches. All borrowings,
conversions and continuations of Eurodollar Loans hereunder and
all selections of Interest Periods hereunder shall be in such
amounts and be made pursuant to such elections so that, after
giving effect thereto, the aggregate principal amount of the
Eurodollar Loans comprising each Tranche shall be equal to
$500,000 or a whole multiple of $500,000 in excess thereof. No
more than ten Tranches may be outstanding at any time."
4. Section 2 of the Old Credit Agreement shall be deemed amended
by adding thereto the following new subsection 2.20:
"2.20 EXPANSION FACILITY. (a) At any time and from time to
time after the Amendment and Restatement Effective Date the
Borrower may (unless it shall previously have reduced the
Revolving Credit Commitments pursuant to subsection 2.5) cause
the Revolving Credit Commitments to be increased up to a maximum
aggregate total of one hundred million dollars ($100,000,000)
through the increase in the Revolving Credit Commitments of one
or more of the Lenders and/or the addition of one additional bank
or other financial institution as a Lender.
(b) Any additional bank or other financial institution that
elects to become a party to this Agreement shall execute a New
Lender Supplement with the Borrower and the Administrative Agent,
substantially in the form of Exhibit G (a "NEW LENDER
SUPPLEMENT"), whereupon such bank or other financial institution
shall become a Lender for all purposes and to the same extent as
if it had executed this Agreement as a party hereto and shall be
bound by and entitled to the benefits of this Agreement.
(c) Any Lender that agrees to increase its Revolving Credit
Commitment in accordance with this subsection shall execute a
Commitment Increase Supplement with the Borrower and the
Administrative Agent, substantially in the form of Exhibit H (a
"COMMITMENT INCREASE SUPPLEMENT"), whereupon such Lender shall be
bound by and entitled to the benefits of this Agreement with
respect to the full amount of its Revolving Credit Commitment as
so increased.
(d) On each date upon which the Revolving Credit Commitments
shall be increased pursuant to this subsection, Schedule I shall
be deemed amended to include the amount of
3
<PAGE>
such increase, and each Loan, if any, outstanding on such date
shall be repaid on such date to the Administrative Agent for the
account of the Lender to which such Loan is owed, in each case in
accordance with this Amended and Restated Agreement; each such
repayment shall be accompanied by payment in full to each Lender
by the Borrower of (i) all accrued interest owed to such Lender
by the Borrower under this Amended and Restated Agreement and
(ii) all unpaid amounts, if any, required to be paid to such
Lender by the Borrower pursuant to this Amended and Restated
Agreement (which, for purposes hereof, shall include payment of
all fees accrued for the account of such Lender pursuant to
subsection 2.4 of this Amended and Restated Agreement); and loans
in the aggregate amount requested by the Borrower in accordance
with this Amended and Restated Agreement, if any, shall be made
by the Lenders on the date of such increase in accordance with
this Amended and Restated Agreement.
5. Sections 3.1(a) and 3.2 of the Old Credit Agreement shall be
deemed amended to read in their entirety as follows:
"3.1 FINANCIAL CONDITION. Each of (i) the audited combined
balance sheets of Holdings as at November 29, 1997 and November
30, 1996 and the related audited combined statements of
operations and of cash flows for the fiscal years ended on
November 29, 1997 and November 30, 1996 (said financial
statements having been audited by Price Waterhouse LLP), copies
of which have heretofore been furnished to each Lender, are
complete and correct and present fairly the combined financial
condition of Holdings as at such dates, and the combined results
of its operations and its combined cash flows for the fiscal
periods then ended. All such financial statements, including the
related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants, and as
disclosed therein). Neither Holdings nor any of its Subsidiaries
had, at the date of the balance sheets referred to above, any
material Guarantee Obligation, contingent liability or liability
for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements or in the notes thereto.
During the period from November 29, 1997 to and including the
date hereof there has been no sale, transfer or other disposition
by Holdings or any of its Subsidiaries of any material part of
its business or property, and no purchase or other acquisition of
any business or property (including any Capital Stock of any
other Person) material in relation to the combined
4
<PAGE>
financial condition of Holdings and its Subsidiaries, taken as a
whole, at November 29, 1997."
"3.2 NO CHANGE. Since November 29, 1997 there has been no
change, and no development or event involving a prospective
change, which has had or could reasonably be expected to have a
Material Adverse Effect, and Holdings and its Subsidiaries have
made no Restricted Payments."
6. Section 3 of the Old Credit Agreement shall be deemed amended
by adding thereto the following new subsections 3.23 and 3.24:
"3.23 YEAR 2000 MATTERS. Any reprogramming required to
permit the proper functioning (but only to the extent that such
proper functioning would otherwise be impaired by the occurrence
of the year 2000) in and following the year 2000 of computer
systems and other equipment containing embedded microchips, in
either case owned or operated by Holdings, the Borrower or any of
its Subsidiaries or used or relied upon in the conduct of their
business (including any such systems and other equipment supplied
by others or with which the computer systems of Holdings, the
Borrower or any of its Subsidiaries interface), and the testing
of all such systems and other equipment as so reprogrammed, will
be completed by June 30, 1999. The costs to Holdings, the
Borrower and its Subsidiaries that have not been incurred as of
the date hereof for such reprogramming and testing and for the
other reasonably foreseeable consequences to them of any improper
functioning of other computer systems and equipment containing
embedded microchips due to the occurrence of the year 2000 could
not reasonably be expected to result in a Default or Event of
Default or to have a Material Adverse Effect. Except for any
reprogramming referred to above, the computer systems of
Holdings, the Borrower and its Subsidiaries are and, with
ordinary course upgrading and maintenance, will continue for the
term of this Amended and Restated Agreement to be, sufficient for
the conduct of their business as currently conducted."
"3.24 REPRESENTATIONS AND WARRANTIES ON AMENDMENT AND
RESTATEMENT EFFECTIVE DATE. The representations and warranties
made by the Borrower in subsections 3.1 through 3.23 are true and
correct in all material respects on and as of the Amendment and
Restatement Effective Date, as if made on and as of the Amendment
and Restatement Effective Date, except to the extent such
representations and warranties expressly relate to an earlier
date."
5
<PAGE>
7. Section 4 of the Old Credit Agreement shall be deemed amended
by adding thereto the following new subsection 4.3:
"4.3 CONDITIONS TO AMENDMENT AND RESTATEMENT EFFECTIVE DATE.
The Amendment and Restatement Effective Date shall be the date on
which the following conditions precedent are satisfied:
(a) the Administrative Agent shall have received a copy of
this Amended and Restated Agreement and, for the account of each
Lender, a Note, each duly executed and delivered by the Borrower,
together with a certificate of the Secretary or Assistant
Secretary of the Borrower as to the incumbency and specimen
signatures of the officers of the Borrower who are authorized to
execute this Amended and Restated Agreement, the Notes and each
other document to be executed and delivered by the Borrower
pursuant hereto;
(b) each Loan, if any, outstanding on the Amendment and
Restatement Effective Date shall be repaid on the Amendment and
Restatement Effective Date to the Administrative Agent for the
account of the Lender to which such Loan is owed, in each case in
accordance with the Old Credit Agreement; each such repayment
shall be accompanied by payment in full to each Lender by the
Borrower of (i) all accrued interest owed to such Lender by the
Borrower under the Old Credit Agreement and (ii) all unpaid
amounts, if any, required to be paid to such Lender by the
Borrower pursuant to the Old Credit Agreement (which, for
purposes hereof, shall include payment of all fees accrued for
the account of such Lender pursuant to subsection 2.4 of the Old
Credit Agreement); and loans in the aggregate amount requested by
the Borrower in accordance with this Amended and Restated
Agreement, if any, shall be made by the Lenders on the Amendment
and Restatement Effective Date in accordance with this Amended
and Restated Agreement;
(c) the Administrative Agent shall have received a favorable
opinion of counsel for the Borrower, in form and substance
satisfactory to the Administrative Agent covering such matters as
the Administrative Agent may reasonably request;
(d) the Administrative Agent shall have received, with a
counterpart for each Lender, a copy of the resolutions, in form
and substance reasonably satisfactory to the Administrative
Agent, of the Board of Directors of each Loan Party authorizing
(i) the execution, delivery and performance of this Amended and
Restated Agreement, the Notes and/or the other Loan Documents to
which it is a party and (ii) in the case of the Borrower, the
increase in the amount of the Revolving Credit Commitments
contemplated hereunder, certified by the Secretary or an
Assistant Secretary of such Loan Party as of the Amendment and
6
<PAGE>
Restatement Effective Date, which certificate shall state that
the resolutions thereby certified have not been amended,
modified, revoked or rescinded and are in full force and effect,
and shall be in form and substance satisfactory to the
Administrative Agent; and
(e) all other documents which the Administrative Agent may
reasonably request in connection with the transactions
contemplated by this Amended and Restated Agreement shall be
reasonably satisfactory in form and substance to the
Administrative Agent and its counsel."
8. Sections 6.4, 6.9 and 6.10 of the Old Credit Agreement shall
be deemed amended to read in their entirety as follows:
"6.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur,
assume or suffer to exist any Guarantee Obligation except (a)
Guarantee Obligations existing on the date hereof and listed on
Schedule VI and (b) the Guarantee Obligations created pursuant to
Section 9, or amend, modify or change, or consent or agree to any
amendment, modification or change to, any of the terms of any
Guarantee Obligations described in clauses (a), (b) and (c)."
"6.9 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in,
any Person, except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) investments or advances by Holdings (other than
investments or advances made directly or indirectly for the
purposes of the development of real estate) in or to its
Restricted Subsidiaries and investments or advances by such
Restricted Subsidiaries in or to Holdings and in or to other
Restricted Subsidiaries of Holdings; and
(d) investments or advances by Holdings or any of its
Restricted Subsidiaries in an amount not to exceed $35,000,000 in
the aggregate for the purpose of acquiring assets (other than
assets covered by subsection 6.11) or businesses, PROVIDED, that,
in the case of the acquisition of the Capital Stock of any
Material Subsidiary the provisions of subsection 5.8 shall be
complied with in connection therewith.
7
<PAGE>
"6.10 LIMITATION ON RESTRICTED PAYMENTS. Make any Restricted
Payment or make any optional payment on (including, without
limitation, by means of the exercise of a right of setoff) or
redemption or purchase of any Indebtedness owing to any Person
other than a member of the Holdings Group (other than the Notes
but including, without limitation, the Seller Notes) or amend,
modify or change, or consent or agree to any amendment,
modification or change to, any of the terms of any such
Indebtedness (other than any such amendment, modification or
change which would extend the maturity or reduce the amount of
any payment of principal thereof or which would reduce the rate
or extend the date for payment of interest thereon), except that,
so long as no Default or Event of Default shall have occurred and
be continuing or would result therefrom:
(a) Holdings may at any time pay regular quarterly dividends
on shares of its issued and outstanding common stock in an amount
such that the aggregate of such dividend payments made subsequent
to December 2, 1995 do not exceed $5,000,000 plus 50% of
aggregate Consolidated Net Income of Holdings for the period
commencing December 3, 1995 and ending on the last day of the
then most recently ended fiscal period for which financial
statements shall have been delivered to the Lenders pursuant to
subsection 5.1(a) or (b); PROVIDED, that prior to the payment of
any dividends, Holdings shall have delivered to the
Administrative Agent and the Lenders a certificate of a
Responsible Officer showing in detail the calculation of the
amount of dividends payable;
(b) prepayments of Indebtedness in connection with a
refinancing thereof permitted by subsection 6.2(b); and
(c) purchases by the Borrower of shares of the outstanding
common stock of the Borrower in an amount not to exceed
$20,000,000 in aggregate."
9. Schedules I through VI to the Old Credit Agreement shall each
be deemed amended to read in their entirety as set forth in Schedules I through
VI attached hereto, respectively.
10. The Old Credit Agreement shall be deemed amended to add
thereto new Exhibits G and H in the respective forms thereof attached hereto.
SUBSECTIONS 10.8 THROUGH 10.13
------------------------------
10.8 COUNTERPARTS. This Amended and Restated Agreement may be
executed by one or more of the parties to this Amended and Restated Agreement on
any number of
8
<PAGE>
separate counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Amended and Restated Agreement signed by all the parties shall be lodged with
the Borrower and the Administrative Agent.
10.9 SEVERABILITY. Any provision of this Amended and Restated
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
10.10 INTEGRATION. This Amended and Restated Agreement, the Notes
and the other Loan Documents to which the Borrower is a party represent the
entire agreement of the Borrower, the Guarantors which are parties hereto, the
Administrative Agent and the Lenders with respect to the subject matter hereof
and thereof, and there are no promises or representations by the Borrower, any
such Guarantor, the Administrative Agent or any Lender relative to subject
matter hereof or thereof not stated or referred to herein or in the other Loan
Documents.
10.11 GOVERNING LAW. THIS AMENDED AND RESTATED AGREEMENT AND THE
NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDED AND
RESTATED AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 SUBMISSION TO JURISDICTION. Each of the Borrower and each
Guarantor which is a party hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action
or proceeding relating to this Amended and Restated Agreement,
the Notes and the other Loan Documents to which it is a party, or
for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts
of the State of New York for New York County, the courts of the
United States of America for the Southern District of New York,
and appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to the Borrower at its address set
forth in subsection 10.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
and
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction.
9
<PAGE>
10.13 WAIVER OF JURY TRIAL. THE BORROWER, THE GUARANTORS WHICH
ARE PARTIES HERETO, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AMENDED AND RESTATED AGREEMENT OR THE NOTES OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.14 SCHEDULES AND EXHIBITS. Schedules VII through IX and
Exhibits A-1 through F of the Old Credit Agreement are hereby incorporated by
reference as Schedules VII through IX and Exhibits A-1 through F hereto,
respectively.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended
and Restated Agreement to be duly executed and delivered in New York, New York
by their proper and duly authorized officers as of the day and year first above
written.
GENERAL CIGAR CO., INC., as Borrower
By /s/ A. Ross Wollen
--------------------------
Title: Secretary
GENERAL CIGAR HOLDINGS, INC., as a
Guarantor
By /s/ A. Ross Wollen
--------------------------
Title: Secretary
387 PAS CORP., as a Guarantor
By /s/ A. Ross Wollen
--------------------------
Title: Secretary
CLUB MACANUDO, INC., as a Guarantor
By /s/ A. Ross Wollen
--------------------------
Title: Secretary
CLUB MACANUDO (CHICAGO), INC., as a
Guarantor
By /s/ David Danziger
--------------------------
Title: Vice-President
11
<PAGE>
VILLAZON & COMPANY, INC., as a Guarantor
By /s/ A. Ross Wollen
--------------------------
Title: Secretary
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender
By /s/ [ILLEGIBLE]
--------------------------
Title: Vice-President
THE BANK OF NOVA SCOTIA, as a Co-Agent
and as a Lender
By /s/ [ILLEGIBLE]
--------------------------
Title: Vice-President
FLEET NATIONAL BANK, as a Co-Agent and
as a Lender
By /s/ [ILLEGIBLE]
--------------------------
Title: Vice-President
THE BANK OF NEW YORK, as a Lender
By /s/ [ILLEGIBLE]
--------------------------
Title: Vice-President
Exhibit 11
GENERAL CIGAR HOLDINGS, INC.
COMPUTATION OF PER SHARE EARNINGS
(dollars in thousands except per share data)
FOR THE 13 WEEKS ENDED FOR THE 26 WEEKS ENDED
----------------------- ----------------------
MAY 30, MAY 31, MAY 30, MAY 31,
1998 1997 1998 1997
BASIC EPS COMPUTATION ---------- ---------- ---------- ----------
Numerator:
Income available to
common stockholders...... $ 6,766 $ 6,390 $ 14,453 $ 10,667
---------- ---------- ---------- ----------
Denominator:
Common shares outstanding.. 27,620,694 27,101,922 27,605,621 27,044,552
---------- ---------- ---------- ----------
Basic EPS.......... $ 0.24 $ 0.24 $ 0.52 $ 0.39
========== ========== ========== ==========
DILUTED EPS COMPUTATION
Numerator:
Income available to
common stockholders...... $ 6,766 $ 6,390 $ 14,453 $ 10,667
---------- ---------- ---------- ----------
Denominator:
Common shares outstanding.. 27,620,694 27,101,922 27,605,621 27,044,552
Effect of stock options.... 823,732 1,798,078 952,386 1,505,448
---------- ---------- ---------- ----------
Total shares............. 28,444,426 28,900,000 28,558,007 28,550,000
---------- ---------- ---------- ----------
Diluted EPS........ $ 0.24 $ 0.22 $ 0.51 $ 0.37
========== ========== ========== ==========
E-3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED FINANCIAL STATEMENTS OF GENERAL CIGAR HOLDINGS, INC. INCLUDED
IN ITS QUARTERLY REPORT ON FORM 10-Q FOR THE 13 WEEKS ENDED MAY 30, 1998 AND ITS
QUARTERLY REPORT ON FORM 10-Q FOR THE 13 WEEKS ENDED MAY 31, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001029456
<NAME> GENERAL CIGAR HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> NOV-28-1998 NOV-29-1997
<PERIOD-END> MAY-30-1998 MAY-31-1997
<CASH> 2,430 3,340
<SECURITIES> 0 0
<RECEIVABLES> 39,309 32,684
<ALLOWANCES> 1,029 565
<INVENTORY> 142,376 76,253
<CURRENT-ASSETS> 189,515 116,041
<PP&E> 122,919 104,569
<DEPRECIATION> 48,159 44,882
<TOTAL-ASSETS> 339,501 249,194
<CURRENT-LIABILITIES> 36,588 31,015
<BONDS> 62,110 26,007
0 0
0 0
<COMMON> 276 272
<OTHER-SE> 209,518 164,057
<TOTAL-LIABILITY-AND-EQUITY> 339,501 249,194
<SALES> 135,985 108,706
<TOTAL-REVENUES> 135,985 108,706
<CGS> 71,108 59,950
<TOTAL-COSTS> 71,108 59,950
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 983 556
<INTEREST-EXPENSE> 1,859 1,721
<INCOME-PRETAX> 22,408 17,204
<INCOME-TAX> 7,955 6,537
<INCOME-CONTINUING> 14,453 10,667
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 14,453 10,667
<EPS-PRIMARY> 0.52 0.39
<EPS-DILUTED> 0.51 0.37
</TABLE>
