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 quarterly period ended March 31, 1998
OR
o 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: SEC #: 0-22675
800-JR Cigar, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 52-2022117
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
301 Route 10 East, Whippany, New Jersey 07981, USA (Address of principal
executive offices) (Zip code)
(973) 884-9555
(Registrant's telephone number including area code)
Not applicable
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by 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 ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value - 12,750,000 shares as of May 13, 1998
<PAGE>
800-J.R. Cigar, Inc. and Subsidiaries
Index to Form 10-Q
Part I - Financial Information
Item 1. Financial Statements Page
Consolidated Statements of Income for the Three-Month Periods
ended March 31, 1998 and 1997.............................................3
Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997......4
Consolidated Statements of Cash Flows for the Three-Month Periods
ended March 31, 1998 and 1997.............................................5
Notes to Consolidated Financial Statements..................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................11
Part II - Other Information
Item 2. Change in Securities and Use of Proceeds.............................13
Item 6. Exhibits and Reports on Form 8-K.....................................14
Signatures...............................................................15
<PAGE>
800-J.R. Cigar, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three-month period
ended March 31
------------------------------------
1998 1997
------------------------------------
(Predecessor)
<S> <C> <C>
Net sales $62,196 $49,683
Cost of goods sold 49,632 40,631
------------------------------------
Gross profit 12,564 9,052
Operating expenses:
Selling 1,350 1,129
General and administrative expenses 4,966 3,681
Depreciation and amortization 367 187
-----------------------------------
Income from operations 5,881 4,055
Other income (expense):
Interest expense (370) (173)
Interest income 399 90
Rental income 42 45
Other, net 13 8
------------------------------------
Income before income taxes 5,965 4,025
Provision for income taxes 2,433 141
------------------------------------
Net income $ 3,532 $ 3,884
====================================
Pro forma:
Historical income before provision for income taxes $ 4,025
Pro forma adjustments other than income taxes (274)
-------------------
Pro forma income before income taxes 3,751
Pro forma provision for income taxes 1,530
-------------------
Pro forma net income $ 2,221
===================
Pro forma earnings per share $ .21
===================
Pro forma common shares outstanding 9,882
===================
Per share data
Earnings per share - basic $ .28
====================================
Earnings per share - diluted $ .27
====================================
Common shares outstanding - basic 12,750
====================================
Common shares outstanding - diluted 12,873
====================================
See accompanying notes.
</TABLE>
Page 3.
<PAGE>
800-J.R. Cigar, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March December
31, 1998 31, 1997
------------------------------------
Assets (Unaudited) (Audited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $13,799 $16,572
Investments in marketable securities 18,760 14,981
Accounts receivable, net of allowance for
doubtful accounts of $78 at December 31,
1997 and March 31, 1998, respectively 4,316 2,313
Merchandise inventory 38,685 34,779
Prepaid expenses and other current assets 1,854 2,155
Loans receivable - affiliates and other
associated entities 420 603
Deferred tax assets - current 995 996
------------------------------------
Total current assets 78,829 72,399
Property, equipment and improvements, at cost,
net of accumulated depreciation and amortization 20,033 18,518
Other assets 398 243
Deferred tax asset, net 92 102
-----------------------------------
$99,352 $91,262
===================================
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 7,933 $ 7,933
Accounts payable 11,528 7,157
Accrued expenses 4,266 2,096
-----------------------------------
Total current liabilities 23,727 17,186
Long-term debt, less current portion 10,917 12,900
------------------------------------
Total liabilities 34,644 30,086
Commitments and contingencies
Stockholders' equity:
Common stock 128 128
Additional paid-in capital 52,716 52,716
Retained earnings 11,864 8,332
------------------------------------
Total stockholders' equity 64,708 61,176
------------------------------------
$99,352 $91,262
====================================
See accompanying notes.
</TABLE>
Page 4.
<PAGE>
800-J.R. Cigar, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three-month period
ended March 31
---------------------------------
1998 1997
---------------------------------
(Predecessor)
Cash flows from operating activities
<S> <C> <C>
Net income $ 3,532 $3,884
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 367 187
Provision for uncollectible accounts - 55
Deferred income taxes 11 (24)
Changes in operating assets and liabilities:
Accounts receivable (2,003) (87)
Merchandise inventor (3,906) (696)
Prepaid expenses and other current assets 301 (694)
Other assets (155) (342)
Accounts payable and accrued expenses 6,541 587
---------------------------------
Net cash provided by operating activities 4,688 2,870
Cash flows from investing activities
Purchase of marketable securities (3,779) -
Purchase of property and equipment (1,882) (377)
Loans repaid by (extended to) affiliates and other
associated entities 183 (132)
Loans extended to stockholders - (154)
---------------------------------
Net cash used in investing activities (5,478) (663)
Cash flows from financing activities
Payments of long-term debt (522)
Payments on distribution notes (1,983) -
Payments of capital lease obligations (21)
---------------------------------
Net cash used in financing activities (1,983) (543)
---------------------------------
Net (decrease) increase in cash and cash equivalents (2,773) 1,664
Cash and cash equivalents at beginning of period 16,572 6,056
---------------------------------
=================================
Cash and cash equivalents at end of period $ 13,799 $7,720
=================================
Supplemental disclosures of cash flow information
Interest paid $ 347 $ 200
=================================
See accompanying notes.
</TABLE>
Page 5.
<PAGE>
800-JR Cigar, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(In thousands, except per share amounts)
March 31, 1998
1. Unaudited Financial Statements
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnote disclosures
normally included in complete financial statements prepared in accordance with
generally accepted accounting principles. For further information, such as
significant accounting policies followed by the Company, refer to the notes to
the Company's audited consolidated financial statements.
In the opinion of management, the unaudited financial statements include all
necessary adjustments (consisting of normal, recurring accruals) for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods presented. The results of operations for the three-month
periods ended March 31, 1997 and 1998, are not necessarily indicative of the
operating results to be expected for a full year.
2. Basis of Presentation, Pro Forma Adjustments and Summary of Accounting
Policies
Basis of Presentation
800-JR Cigar, Inc. ("800-JR Cigar") was incorporated in Delaware in March 1997.
In connection with 800-JR Cigar's initial public offering of stock (the
"Offering") on June 26, 1997, the former principals of the predecessor group of
companies contributed to 800-JR Cigar all of the outstanding stock in the
entities that comprise the predecessor group of companies, in exchange for
9,300,000 shares of common stock of 800-JR Cigar (the "Reorganization"). The
accompanying financial statements include the results of operations for the
period January 1, 1997 to March 31, 1997 of J. R. Tobacco of America, Inc.,
J.N.R. Grocery Corp., J&R Tobacco (New Jersey) Corp., J. R. Tobacco Company of
Michigan, Inc., Cigars by Santa Clara N.A., Inc., J. R. Tobacco Outlet, Inc., J.
R.-46th Street, Inc., J. R. Tobacco NC, Inc., J. R. Statesville, Inc. and JR
Cigar (DC), Inc. (together, the "Company" or the "Predecessor Entities").
For the period from January 1, 1998 through March 31, 1998, the accompanying
consolidated financial statements include the results of operations of 800-JR
Cigar, as well as all companies that were included in the Predecessor Entities.
Page 6.
<PAGE>
800-JR Cigar, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(In thousands, except per share amounts)
March 31, 1998
2. Basis of Presentation, Pro Forma Adjustments and Summary of Accounting
Policies (continued)
All significant intercompany balances and transactions have been eliminated.
The financial statements of the Predecessor Entities are being presented on a
consolidated basis because of their common ownership. The financial statements
have been prepared as if the Predecessor Entities had operated as a single
consolidated group since their respective dates of organization. All significant
intercompany balances and transactions have been eliminated. After the
Reorganization, the Predecessor Entities became subsidiaries of 800-JR Cigar,
Inc.
Pro Forma Adjustments
The unaudited pro forma net income for the three-month period ended March 31,
1997 reflects the Reorganization, the Offering and the following adjustments as
if they had occurred on January 1: a) a decrease in aggregate compensation from
$126 to $100 for the three-month period ended March 31, 1997 for two of the
Company's executives pursuant to their new employment agreements; b) an increase
in interest expense of $417 for the three-month period ended March 31, 1997
assuming the issuance of the Distribution Notes; c) a reduction in interest
expense of $173 for the three-month period ended March 31, 1997 assuming the
application of proceeds from the Offering to repay all of the Company's
indebtedness other than capital lease obligations; d) a reduction in interest
income of $56 for the three-month period ended March 31, 1997 assuming the
repayment to the Company of loans receivable from stockholders; and e) an
increase of $1,389 for the three-month period ended March 31, 1997 for income
taxes based upon pro forma pre-tax income as if the Company had been subject to
federal and additional state income taxes.
On June 6, 1997, the Company issued Distribution Notes to the former principal
stockholders of the Predecessor Entities in the amount of $23,800, representing
estimated undistributed cumulative S Corporation earnings through the date of
the Offering which were taxable to those stockholders. These notes bear interest
at the rate of 7.0% per annum, and are payable on a quarterly basis over the
three-year period following the Offering.
On June 6, 1997, the Predecessor Entities also issued additional distribution
notes (the "Additional Notes") to the principal stockholders of the Predecessor
Entities, for a nominal amount. At December 31, 1997, the initial principal
amount of the additional notes was
Page 7.
<PAGE>
800-JR Cigar, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(In thousands, except per share amounts)
March 31, 1998
2. Basis of Presentation, Pro Forma Adjustments and Summary of Accounting
Policies (continued)
increased to $1 million, the maximum allowable. Such increase represents the
amount by which the final S Corporation earnings of the Predecessor Entities
exceeded the principal amount of the Distribution Notes. The Additional Notes
mature on June 1, 2000 and bear interest at the rate of 7% per annum.
Earnings Per Share
In 1997, the Financial Accounting Standards Board ("FASB") issued Statement No.
128, Earnings per Share. Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilative effects of options, warrants and convertible securities. Diluted
earnings per share is calculated similar to fully diluted earnings per share.
Pro forma earnings per share amounts conform to the Statement 128 requirements.
Pro Forma Earnings Per Share (Unaudited)
Pro forma earnings per share is based on 9,300,000 shares of common stock
outstanding prior to the Offering, increased by the sale of 581,738 shares of
common stock assuming an initial public offering price of $15.00 per share
($13.58, net of underwriting discounts and commissions and estimated offering
expenses), the proceeds of which would be necessary to pay approximately $7,900,
the current portion of the Distribution Notes. The net income used in the
calculation of pro forma earnings per share represents pro forma net income
decreased by the interest expense on debt of $173 ($102 on an after-tax basis)
for the three-month period ended March 31, 1997.
Supplementary pro forma earnings per share for the three-month period ended
March 31, 1997 are $.21 based on 9,300,000 shares of common stock outstanding
prior to the Offering, increased by (a) the sale of 581,738 shares of common
stock assuming an initial public offering price of $15.00 per share ($13.58, net
of underwriting discounts and commissions and estimated offering expenses), the
proceeds of which would be necessary to pay approximately $7,900, the current
portion of the Distribution Notes, and (b) the sale of 571,208 shares of common
stock assuming an initial public offering price of $15.00 per share ($13.58, net
of underwriting discounts and commissions and estimated offering expenses), the
proceeds of which would be necessary to repay approximately
Page 8.
<PAGE>
800-JR Cigar, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(In thousands, except per share amounts)
March 31, 1998
2. Basis of Presentation, Pro Forma Adjustments and Summary of Accounting
Policies (continued)
$7,800, the amount of outstanding debt at March 31, 1997. The net income used in
the calculation of supplementary pro forma earnings per share is the pro forma
net income of $2,221 for the three-month period ended March 31, 1997.
3. Initial Public Offering
Effective June 26, 1997, the Company sold 3,450,000 shares of its common stock
at a price of $17 per share in an initial public offering (the "Offering"). Net
proceeds of the Offering, after deducting underwriting discounts and
commissions, and professional fees aggregated $53,270. As of March 31, 1998
proceeds of the Offering were used for the following purposes: (i) to repay
outstanding indebtedness of $7,300, (ii) $4,900 for the relocation and design of
specialty stores, (iii) $4,100 for the purchase of land and building for a new
discount outlet store and warehouse distribution center, (iv) the quarterly
principal payment of distribution notes of $6,000, (v) payment of signing
bonuses to an officer and to MC Management in connection with long-term service
agreements, (vi) $1,800 for the upgrade of the Company's information systems,
(vii) interest payments of $1,100 on the Distribution Notes, and (viii) $14,900
for working capital and general corporate purposes. The remaining proceeds of
$11,670 are expected to be used for the following purposes: (i) $4,370 for a new
discount outlet store and warehouse distribution center, (ii) $5,000 for the
expansion of retail selling space at existing discount outlet stores, (iii)
$1,900 for the payment of distribution notes, and (iv) $400 for the interest
payments on distribution notes.
4. Revolving Credit Facility
The Company, upon consummation of the Offering, entered into a new $15 million
revolving Credit Facility through May 31, 1998. Borrowings under this facility
are unsecured and bear interest at the bank's prime rate minus 1/2% or, at the
option of the Company, 1.5% over the London Interbank Offered Rate (LIBOR). No
amounts were outstanding under this facility at March 31, 1998.
Page 9.
<PAGE>
800-JR Cigar, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(In thousands, except per share amounts)
March 31, 1998
5. Historical and Pro Forma Income Taxes
The historical income tax provision for the three-month period ended March 31,
1997 principally reflects taxes payable by the S Corporations, which were levied
by certain state and local governments. The income tax provision for the period
ended March 31, 1998 represents federal and state income taxes.
The entities in the Predecessor Company were corporations that had elected to be
taxed as S Corporations pursuant to the Internal Revenue Code. In connection
with the Offering, the Company has become subject to federal and additional
state income tax. The pro forma provision for income taxes represents the income
tax provisions that would have been reported had the Company been subject to
federal and additional state income taxes.
Concurrent with becoming subject to federal and additional state income taxes,
the Company recorded a deferred tax asset and a corresponding tax benefit in the
statement of income in accordance with the provisions of SFAS No. 109. The
deferred tax asset recorded on the date of the Offering was $1,209.
Pro forma income tax expense for the three-month periods ended March 31, 1997
includes a provision for federal, state and local taxes of $1,530 at an
effective rate of approximately 41%. This amount is comprised of current expense
of $1,800 and a deferred benefit of $270.
6. Acquisitions
On January 27, 1998, the Board of Directors approved the purchase of the stock
of Nicaraguan America Tobacco Inc. ("NATCO"), the exclusive importer of all
cigars produced by Nicaragua American Tobacco S.A. ("NATSA"), a manufacturer of
hand made cigars in Nicaragua. NATCO is owned 50% by an officer/director and 50%
by another director of the Company, and 49% and 36% of NATSA is owned by these
same individuals. The purchase price is based on a predetermined multiple of
earnings of NATCO for the year ended December 31, 1997.
On January 27, 1998, the Company purchased for a nominal amount Casa
Blanca, Inc. ("Casa Blanca"), the owner/operator of the El Rey del Mundo
Smokers Bar and Lounge within one of the Company's retail outlets. Casa
Blanca was owned by an officer/director of the Company.
Page 10.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This report contains certain "forward-looking statements." Those
statements appear in a number of places in this report and include statements
regarding the intent, belief or current expectations of the company, its
directors and its officers with respect to, among other things: (i) trends
affecting the Company's financial condition or results of operations; (ii) the
Company's financing plans; (iii) the Company's business and growth strategies;
(iv) the use of the proceeds of the Offering by the Company; and (v) the
declaration and payment of dividends. Prospective investors are cautioned that
any such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties and that actual results may differ materially
from those projected in the forward-looking statements as a result of various
factors.
General.
The Company is one of the largest distributors and retailers of tobacco
and tobacco related products in North America. The Company operates in a large
and highly fragmented industry characterized by multiple and relatively
undeveloped channels of distribution. Over its 27-year history in the cigar
industry, the Company has established itself as an important participant in the
movement of products from manufacturers to the customers. Manufacturers benefit
from the Company's ability to perform a number of functions, such as
distribution, credit, customer support and marketing, which would otherwise be
the responsibility of the manufacturer. Customers benefit from the Company's
extensive variety of tobacco products, rapid order fulfillment and advantageous
pricing derived through the Company's volume buying as a direct importer and
distributor.
Three-month Period Ended March 31, 1998 Compared to Three-Month Period Ended
March 31, 1997
Net sales were $62.2 million and $49.7 million for the first quarters
of 1998 and 1997, respectively, an increase of $12.5 million or 25.2%. Retail
sales increased 12.0% to $32.3 million for the first quarter of 1998 from $28.8
million for the first quarter of 1997. The increase in retail sales was due
primarily to a $3.2 million, or 32.7% increase in direct mail cigar sales.
Wholesale sales increased 43.5% to $29.8 million for the first quarter of 1998
from $20.8 million over the same period in the prior year. The increase in
wholesale sales was due to a $3.9 million, or 41.1% increase in direct mail
cigar sales and to a $5.2 million, or 45.4% increase in cash-and-carry cigarette
sales. The total increase in net sales was primarily attributable to increases
in unit volume, primarily for premium cigars and cigar-related products and to a
lesser extent to price increases.
Gross profit was $12.6 million and $9.1 million for the first quarters
of 1998 and 1997, respectively, an increase of $3.5 million or 38.8%. The
increase in gross profit was due to the increase in sales. As a percentage of
net sales, gross profit increased to 20.2% for the first quarter of 1998 from
18.2% for the first quarter of 1997, primarily due to an increase in unit volume
of higher margin, proprietary cigars and strategic purchases of products based
upon the Companies volume buying opportunities.
Page 11.
<PAGE>
Selling, general and administrative ("S, G & A") expenses were $6.3
million and $4.8 million for the first quarters of 1998 and 1997, respectively,
an increase of $1.5 million or 31.2%. As a percentage of net sales, S, G & A
expenses increased to 10.1% for the first quarter of 1998 from 9.6% for the
first quarter of 1997 primarily due to increased payrolls for new store
openings, higher telephone expense and postage expense related to the mailings
of additional catalogues.
Income from operations was $5.9 million and $4.1 million for the first
quarters of 1998 and 1997, respectively, an increase of $1.8 million or 45.0%.
As a percentage of net sales, income from operations increased to 9.5% for the
first quarter of 1998 from 8.2% for the first quarter of 1997, primarily due to
an increase in sales of higher margin, proprietary cigars.
Interest expense was $0.4 million and $0.2 million for the first
quarters of 1998 and 1997, respectively, an increase of $0.2 million due to the
issuance of the Distribution Notes. Other income, primarily interest and rental
income, was $0.5 million and $0.1 million for the first quarters of 1998 and
1997, respectively.
Income before income taxes was $6.0 million and $4.0 million for
the first quarters of 1998 and 1997, respectively, an increase of $2.0 million
or 50.0%.
The provision for income taxes of $2.4 million for the three-month
period ended March 31, 1998, represents federal and state income taxes provided
at corporate rates since the Company became a "C" corporation effective with the
initial public offering of the Company's common stock on June 26, 1997. The
income tax provision for the three-months ended March 31, 1997 represents taxes
payable by the predecessor companies to state and local governments at "S"
corporation rates.
As a result of the foregoing, the Company had net income of $3.5
million in the first quarter of 1998, compared to pro forma net income of $2.2
million for the first quarter of 1997, an increase of $1.3 million or 59.1%.
Liquidity and Capital Resources
The Company prior to its Initial Public Offering has financed its
business through internally generated funds, bank debt and loans from certain
shareholders. The Company's net cash provided by operating activities was $4.7
million for the three-month period ended March 31, 1998. Net cash used in
investing activities during such period was $5.5 million and net cash used in
financing activities was $2.0 million.
As of March 31, 1998, the Company had working capital of $55.1 million
compared to $55.2 million at December 31, 1997. Working capital as of March 31,
1998 is comprised primarily of cash and cash equivalents of $13.8 million,
short-term investments of $18.8 million, accounts receivable of $4.3 million,
$38.7 million of inventory offset by $15.8 million of accounts payable and
accrued expenses and $7.9 million of the current portion of the distribution
notes.
Page 12.
<PAGE>
At March 31, 1998, the Company had no funded indebtedness.
The Company has available a short term, unsecured line of credit in the
amount of $15.0 million through May 31, 1998 with interest at either the bank's
base rate minus 50 basis points or an increment over LIBOR, at the Company's
option. The Company intends to renew such line of credit upon its expiration.
On June 6, 1997, the Company issued notes in the aggregate amount of
$23.8 million to shareholders of the predecessor companies, representing the
estimated cumulative undistributed earnings of the predecessor companies which
operated under Subchapter "S" of the Internal Revenue Service code. The notes
have a fixed interest rate of 7.0% and require quarterly payments in aggregate
of $2.0 million plus interest through June 1, 2000. The first payment of
principal and interest was made effective September 1, 1997. In addition, on
June 6, 1997, the Predecessor Companies also issued additional Distribution
Notes to shareholders of the Predecessor Companies for a nominal amount. On
December 31, 1997, the initial principal amount was increased to $1.0 million,
the maximum allowable. The additional Distribution Notes mature on June 1, 2000
and bear interest at the rate of 7.0% per annum. The holders of the notes have
agreed to subordinate payment of principal and interest to senior lenders if
required by credit agreements. The existing credit agreement does not require
subordination in the event of a default under the terms and conditions of the
agreement.
During 1995, the Company purchased versions of its principal
information technology software packages, which have been certified as Year 2000
compliant by the respective software vendors. The Company has developed a plan
to modify non-critical data processing systems to prepare for Year 2000. The
Company expects that by early 1999 it will complete modifications of
non-critical data processing systems and does not expect the total costs
associated with these products will be significant.
Part II. Other Information
Item 2. Change in Securities and Use of Proceeds
Securities Act Rule 229.463 ("Rule 463") required issuers to report on
Form SR their use of proceeds, following an initial public offering, within ten
days of the first three-months following the effective date of the registration
statement, and every six-months thereafter, until the application of all such
proceeds was complete. Effective September 2, 1997, pursuant to Release No.
34-38850, the Securities and Exchange Commission ("SEC") amended Rule 463 to
eliminate Form SR and now requires a first-time registrant to report the
application of proceeds in each of its periodic Exchange Act reports until the
application of such proceeds is complete.
The information provided below represents a reasonable estimate of the
cumulative application, through March 31, 1998, of the net proceeds of $53,270
which were received following the Company's initial public offering on June 26,
1997:
Page 13.
<PAGE>
New warehouse and discount outlet store $4,100
Relocation and design of specialty stores 4,900
Upgrade of information systems and graphics 1,800
Reduction of bank debt and mortgages 7,300
Payment of Distribution Notes and interest 7,100
Payment of employment bonuses` 1,500
Working capital and general corporate use 14,900
Except for payments described in the following sentence, the cumulative
application of the net offering proceeds listed above represent direct payments
to others. Except for the payment of the Distribution Notes to shareholders of
Predecessor Companies referred to in the table above, no payments were made to
directors or officers or to their associates except for payments made in the
ordinary course of business which include, but may not be limited to, the
payment of officer salaries and bonuses, fringe benefits, and expenses
reimbursements or compensation paid to directors for their attendance at board
meetings or for their service provided to the Company under consulting
arrangements, if any.
As of March 31, 1998, the status of proceeds pending final application
are as follows:
Temporary investment of proceeds in marketable securities 11,670
Item 6. Exhibits and Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended March 31, 1998.
Page 14.
<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.
800-JR Cigar, Inc.
(Registrant)
Date: May 13, 1998 By: /s/ Lewis I. Rothman
--------------------
Chairman and President
Date: May 13, 1998 By: /s/ Michael E. Colleton
-----------------------
Chief Financial Officer
<TABLE> <S> <C>
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<NAME> 800-JR CIGAR, INC.
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
<CASH> 13,799
<SECURITIES> 18,760
<RECEIVABLES> 4,313
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0
0
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</TABLE>
