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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
_______________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported)
APRIL 19, 1999
GENERAL CIGAR HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
_______________
Commission file number: (1-12757)
_______________
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
________________________________________________________________________________
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<PAGE>
GENERAL CIGAR HOLDINGS, INC.
ITEM 5. OTHER EVENTS
- --------------------
As used herein, references to the "Registrant" mean General Cigar Holdings,
Inc., references to "General Cigar" mean General Cigar Co., Inc., a wholly-owned
subsidiary of the Registrant, and references to "MM" in the pro forma financial
information mean General Cigar's mass-market cigar business.
On March 26, 1999, General Cigar and Swedish Match North America Inc., a
Delaware corporation (the "Purchaser"), entered into an Asset Purchase Agreement
(the "Asset Purchase Agreement"), pursuant to which the Purchaser agreed to
purchase General Cigar's mass-market cigar business for $200 million in cash.
The accompanying pro forma financial information is being filed with the
Securities and Exchange Commission (the "Commission") prior to the discussion of
the sale of the mass-market business and the presentation of pro forma financial
information at the Annual Meeting of Shareholders of the Registrant on April 20,
1999. The Registrant announced on April 13, 1999, in connection with its
quarterly earnings release, that it will file such pro forma financial
statements with the Commission on Form 8-K prior to the Annual Shareholders'
meeting. See the Earnings Release filed herewith as Exhibit No. 99.
The proposed sale of the mass-market business has received early termination of
antitrust review by the Federal Trade Commission. The transaction is subject to
customary closing conditions and is expected to close within approximately two
weeks.
FORWARD-LOOKING STATEMENTS
The pro forma financial statements presented herein on Form 8-K 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 Registrant's
beliefs about trends in the cigar industry and its views about the long-term
future of the industry and the Registrant. The following factors, among others,
could cause the Registrant'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 to
reduce SG&A expenses as expected, (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, (vii) failure to remediate Year 2000 issues and (viii)
other risks and uncertainties set forth in the Registrant's other filings with
the Commission.
2
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- -----------------------------------------
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED -- Not applicable
(b) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements are filed as part of this report.
DESCRIPTION OF PRO FORMA FINANCIAL INFORMATION PAGE
-------------------------------------------------------------------------
Pro Forma Condensed Consolidated Balance Sheet
as of February 27, 1999 .......................................... F-1
Pro Forma Condensed Consolidated Statement of Operations:
For the Year Ended November 28, 1998............................ F-2
For the 13 Weeks Ended February 27, 1999........................ F-3
The Pro Forma Condensed Consolidated Balance Sheet of the Registrant as of
February 27, 1999 reflects the financial position of the Registrant after
giving effect to the sale of the mass-market net assets assuming that the
sale occurred on February 27, 1999. The Pro Forma Condensed Consolidated
Statements of Operations for the year ended November 28, 1998 and the 13
weeks ended February 27, 1999, the end of the Registrant's first quarter,
assume that the sale occurred on November 30, 1997 and November 29, 1998,
respectively, and are based on the operations of the Registrant for the
year ended November 28, 1998 and the 13 weeks ended February 27, 1999. Such
pro forma financial statements also reflect the repayments of $54,000,000
of bank debt and $3,410,000 of a certain equipment loan.
The unaudited pro forma condensed consolidated financial statements have
been prepared by the Registrant based upon assumptions deemed reasonable by
management. Such consolidated financial statements presented herein are
shown for illustrative purposes only and are not necessarily indicative of
the future financial position or future results of operations of the
Registrant, or of the actual financial position or actual results of
operations of the Registrant had the transaction been in effect as of the
date or for the periods presented.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the Registrant's audited 1998 financial
statements included in Form 10-K, as filed with the Commission on February
26, 1999, and the Registrant's unaudited financial statements for the 13
weeks ended February 27, 1999, as filed with the Commission on April 13,
1999, and should be read in conjunction with the Notes to Consolidated
Financial Statements appearing in those reports.
(c) EXHIBITS
The exhibit listed in the following table has been filed as part of this
Current Report on Form 8-K.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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99 Earnings Release, dated April 13, 1999
3
<PAGE>
PRO FORMA FINANCIAL INFORMATION
GENERAL CIGAR HOLDINGS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT FEBRUARY 27, 1999
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------
ASSETS Historical MM (A) Other Pro Forma
---------- ------- ----------- ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................... $ 3,923 $ - $68,198 (B) $ 72,121
Receivables, net............................ 28,171 - - 28,171
Inventories................................. 160,154 9,830 - 150,324
Other current assets........................ 7,694 325 - 7,369
------- ------ ------ -------
TOTAL CURRENT ASSETS...................... 199,942 10,155 68,198 257,985
Property and equipment, net................... 77,119 13,042 - 64,077
Intangible assets, net, principally
trademarks and goodwill...................... 70,511 - - 70,511
Other assets.................................. 1,864 - - 1,864
------- ------ ------ -------
TOTAL ASSETS.............................. $349,436 $23,197 $68,198 $394,437
======= ====== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities.... $ 26,915 $ 914 $ - $ 26,001
Long-term debt due within one year.......... 1,341 710 - 631 (C)
Income taxes................................ 1,936 - - 1,936
------- ------ ------ -------
TOTAL CURRENT LIABILITIES.................. 30,192 1,624 - 28,568
Long-term debt................................ 68,931 1,026 (57,410) (B) 10,495 (C)
Accrued retirement benefits................... 12,625 - - 12,625
Deferred income taxes......................... 10,060 - - 10,060
Other noncurrent liabilities.................. 10,895 - - 10,895
------- ------ ------ -------
TOTAL LIABILITIES.......................... 132,703 2,650 (57,410) (B) 72,643
------- ------ ------ -------
TOTAL STOCKHOLDERS' EQUITY................. 216,733 20,547 125,608 321,794
------- ------ ------ -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY..................... $349,436 $23,197 $ 68,198 $394,437
======= ====== ====== =======
- ---------------------------------------------
(A) To eliminate the assets sold and liabilities assumed, included in the
balance sheet of MM as of February 27, 1999.
(B) To reflect the $200 million proceeds from the sale of MM, the $54.0 million
repayment of bank debt, the $3.4 million repayment of a certain equipment
loan, and the related $64.4 million of income tax liability and the
estimated $10.0 million of transaction expenses and other costs related to
the sale, which were assumed paid at February 27, 1999.
(C) The remaining outstanding debt represents $10.0 million of Villazon seller
notes, due January 2002, which by their terms cannot be prepaid and capital
lease obligations.
F-1
</TABLE>
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PRO FORMA FINANCIAL INFORMATION
GENERAL CIGAR HOLDINGS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 28, 1998
(thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments (E)
------------------------
Historical MM (A) Other Pro Forma
---------- ------- ----------- ---------
<S> <C> <C> <C> <C>
NET SALES.................................... $271,185 $84,940 $ - $186,245
Cost of goods sold........................... 136,943 50,170 - 86,773
------- ------ ------ -------
GROSS PROFIT................................. 134,242 34,770 - 99,472
Selling, general and
administrative expenses..................... 85,876 23,243 6,004 (B) 68,637
Special charges.............................. 8,227 - (752) (D) 7,475
------- ------ ------ -------
OPERATING PROFIT............................. 40,139 11,527 (5,252) 23,360
Gain on insurance settlement................. 3,753 - - 3,753
Non operating income......................... 522 - - 522
Interest expense............................. 4,390 - (2,983) (C) 1,407
------- ------ ------ -------
Income before provision for income taxes..... 40,024 11,527 (2,269) 26,228
Provision for income taxes................... 14,209 4,303 (805) 9,101
------- ------ ------ -------
NET INCOME................................... $25,815 $ 7,224 $ (1,464) $ 17,127
======= ====== ====== =======
Basic net income per share................... $ 0.95 $ 0.63
====== ======
Weighted average common shares outstanding... 27,286 27,286
====== ======
Diluted net income per share................. $ 0.92 $ 0.61
====== ======
Weighted average common shares
and equivalents outstanding............... 28,102 28,102
====== ======
- ---------------------------------------------
(A) To eliminate the results of MM for the entire period.
(B) To reflect principally an allocation of general and administrative expenses
from General Cigar to MM that would not be eliminated as a direct result of
the sale of MM.
(C) To reflect interest expense on debt that is assumed to have been repaid at
the beginning of the period with the proceeds from the sale.
(D) To reflect special charges related to MM.
(E) The pro forma condensed consolidated statement of operations does not
reflect the net gain on the sale of MM. Such gain will be net of
professional fees, asset write-offs, severance and related benefit
expenses, and other costs related to the transaction.
F-2
</TABLE>
<PAGE>
PRO FORMA FINANCIAL INFORMATION
GENERAL CIGAR HOLDINGS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE 13 WEEKS ENDED FEBRUARY 27, 1999
(thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments (D)
------------------------
Historical MM (A) Other Pro Forma
---------- ------- ----------- ---------
<S> <C> <C> <C> <C>
NET SALES..................................... $52,495 $18,385 $ - $34,110
Cost of goods sold............................ 27,801 11,189 - 16,612
------- ------ ------ ------
GROSS PROFIT.................................. 24,694 7,196 - 17,498
Selling, general and
administrative expenses..................... 17,693 4,961 1,204 (B) 13,936
------- ------ ------ ------
OPERATING PROFIT.............................. 7,001 2,235 (1,204) 3,562
Non operating income.......................... 107 - - 107
Interest expense.............................. 1,099 - (748) (C) 351
------- ------ ------ ------
Income before provision for income taxes...... 6,009 2,235 (456) 3,318
Provision for income taxes.................... 2,043 760 (155) 1,128
------- ------ ------ ------
NET INCOME.................................... $ 3,966 $ 1,475 $ (301) $ 2,190
======= ====== ====== ======
Basic net income per share.................... $ 0.15 $ 0.08
====== ======
Weighted average common shares outstanding.... 26,456 26,456
====== ======
Diluted net income per share.................. $ 0.15 $ 0.08
====== ======
Weighted average common shares
and equivalents outstanding................ 27,164 27,164
====== ======
- ----------------------------------------------
(A) To eliminate the results of MM for the entire period.
(B) To reflect principally an allocation of general and administrative expenses
from General Cigar to MM that would not be eliminated due to the sale of
MM.
(C) To reflect interest expense on debt that is assumed to have been repaid at
the beginning of the period with the proceeds from the sale.
(D) The pro forma condensed consolidated statement of operations does not
reflect the net gain on the sale of MM. Such gain will be net of
professional fees, asset write-offs, severance and related benefit
expenses, and other costs related to the transaction.
F-3
</TABLE>
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
SIGNATURE
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: April 19, 1999 By: /s/ Joseph Aird
---------------
Joseph Aird
Senior Vice President,
Chief Financial Officer,
Treasurer and Acting Controller
7
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GENERAL CIGAR HOLDINGS, INC.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- --------------------------------------------------------------------------------
99 Earnings Release, dated April 13, 1999
EXHIBIT 99
NEWS FROM:
GENERAL CIGAR HOLDINGS, INC.
387 Park avenue South CONTACT:
New York, NY 10016-8899 JOSEPH AIRD
212/448-3800 (860)243-4691
GENERAL CIGAR HOLDINGS REPORTS 1999 FIRST QUARTER NET INCOME
------------------------------------------------------------
NEW YORK--(BUSINESS WIRE)--April 13, 1999--General Cigar Holdings, Inc. (NYSE:
MPP - news) General Cigar Holdings, Inc. today reported first quarter net income
of $3,966,000 or $0.15 a diluted share on sales of $52,495,000 compared to net
income of $7,687,000 or $0.27 a diluted share on sales of $67,737,000 in the
1998 first quarter. Basic earnings per share were $0.15 compared to $0.28 in
1998.
Edgar M. Cullman, Jr., President and Chief Executive Officer, stated that the
Company's lower first quarter results were expected because, as previously
reported, the prior year's results reflected unusually heavy ordering from
retailers who were concerned about cigar shortages in the latter half of 1997
and early 1998. Mr. Cullman added that, ``Currently, the premium cigar business
is soft and the shakeout of lower tier brands continues at heavily discounted
prices. The brands we introduced in late 1998, Macanudo Robust, Bolivar and Don
Sebastian are selling well and continue to help General Cigar regain market
share. We have commenced a marketing program, the `Five Star General Plan',
designed to strengthen tobacconists' sales of the Company's products through
increased promotional support and enhanced mutual profitability''.
On March 26, 1999, General Cigar announced that it has entered into a definitive
Asset Purchase Agreement to sell its mass-market cigar business to Swedish Match
North America for $200 million in cash. Sales of the mass-market business are
about one-third of the Company's total sales. Mr. Cullman stated that ``the
Company is progressing satisfactorily towards completing the transaction, and a
closing is expected within approximately three weeks''. Mr. Cullman said the
transaction received federal anti-trust clearance on Friday of last week.
Mr. Cullman further stated that management intends to pursue vigorously
opportunities to reduce expenses in order to increase the profitability of the
Company's premium cigar business. As previously announced, General Cigar expects
to use the net proceeds from the sale to reduce outstanding debt, to make
selective acquisitions of premium cigar brands and to take advantage of
opportunities that may arise in the international cigar marketplace. While in
the interim period the sale of the mass-market cigar business will be dilutive
to earnings, Mr. Cullman stated that, ``it will allow General Cigar to focus on
expanding its powerful portfolio of premium cigar brands, where, in the
long-term we believe we can create the greatest value for our shareholders''.
The Company also announced that it will file pro forma financial statements for
the sale of the mass-market business with the SEC on Form 8-K prior to the
Annual Shareholders' meeting which will be held on April 20, 1999. The pro forma
financial statements will be presented for the first quarter of 1999 and the
fiscal year 1998. The actual results for the quarter and pro forma results, as
well as other matters relating to the sale of the mass-market business, will be
discussed at the Annual Shareholders' meeting. Accordingly, the Company will not
hold its customary earnings conference call for this quarter.
General Cigar Holdings, which traces its roots to 1906, is a leading
manufacturer and marketer of premium cigar brands including Macanudo, Partagas,
Punch (MPP) and Hoyo de Monterrey, as well as mass market cigars including
Garcia y Vega, White Owl and Tiparillo. In addition to being a major grower of
high-quality Connecticut shade wrapper tobacco, General Cigar operates the Club
Macanudo cigar bars in New York City and Chicago.
FORWARD LOOKING STATEMENTS: Certain matters discussed within this press
release may constitute forward-looking statements within the meaning of the
federal securities laws. 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 to reduce SG&A expenses as expected, (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,
(vii) failure to remediate Year 2000 issues and (viii) other risks and
uncertainties set forth in the Company's other filings with the Securities
and Exchange Commission.
GENERAL CIGAR HOLDINGS, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(dollars in thousands except per share data)
(Unaudited)
THIRTEEN WEEKS ENDED
-------------------------------
Feb. 27, 1999 Feb. 28, 1998
------------- -------------
Net sales ...................................... $52,495 $67,737
------ ------
Gross profit ................................... 24,694 32,951
------ ------
Operating profit ............................... 7,001 12,588
------ ------
Income before income tax provision ............. 6,009 11,919
Provision for income taxes ..................... 2,043 4,232
------ ------
Net income ..................................... $ 3,966 $ 7,687
====== ======
Net income per share:
Diluted ..................................... $ 0.15 $ 0.27
====== ======
Basic ....................................... $ 0.15 $ 0.28
====== ======
Weighted average common shares
and equivalents outstanding:
Diluted ..................................... 27,164,215 28,671,587
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Basic ....................................... 26,455,579 27,590,548
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