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SECURITIES AND EXCHANGE COMMISSION,WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended November 27, 1993
Commission file number 1-1210
CULBRO CORPORATION
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
New York
(I.R.S. Employer Identification No.) 13-0762310
387 Park Avenue South, New York, New York 10016-8899
(Address of principal executive offices)
(Registrant's Telephone Number, Including Area Code) (212) 561-8700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which registered - New York Stock Exchange, Inc.
Title of each class - Common Stock, $1 par value
Securities registered pursuant to Section 12(g) of the Act: None
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 .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing:
$33,000,000 approximately, based on the closing sales price on the New York
Stock Exchange on February 28, 1994.
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Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: Common Stock: 4,308,288
shares as of February 28, 1994.
The following documents, or portions thereof as indicated in the following
report, are incorporated by reference in the Parts of Form 10-K indicated:
Part Document
I Annual Report to Shareholders for the fiscal year ended November 27, 1993
II Annual Report to Shareholders for the fiscal year ended November 27, 1993
III Proxy Statement in connection with the 1994 Annual Meeting of
Shareholders
IV Annual Report to Shareholders for the fiscal year ended November 27, 1993
(such Annual Report is referred to hereinafter as the "Annual Report")
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PART I
ITEM 1 - BUSINESS
Culbro Corporation and its subsidiaries (the "Corporation") comprise a
diversified consumer and industrial products company. The Corporation engages
in four principal lines of business: (1) Consumer Products, comprised of (a)
the manufacturing and marketing of cigars and the growing, processing and
selling of cigar wrapper tobacco; and (b) wholesale distribution, which engages
in the wholesaling of cigarettes, cigars and other tobacco products, foodservice
products, groceries, confectionery, health and beauty aids, sundries and general
merchandise; (2) Nursery Products, growing for sale container and field grown
nursery products principally to nursery mass merchandisers, and owning and
operating wholesale sales and service centers; (3) Industrial Products, which
consists of the manufacturing and marketing of packaging and labeling systems
which include plastic shrink film labels and tamper-evident seals and the
production of packaging and labeling machinery to apply them; and (4) Real
Estate, owning, building and managing commercial and industrial properties and
developing residential subdivisions on real estate owned by the Corporation in
Connecticut and Massachusetts, and owning and managing its headquarters building
at 387 Park Avenue South in New York City.
IN DECEMBER 1990 THE CORPORATION CHANGED ITS FISCAL YEAR FROM THE
SATURDAY NEAREST DECEMBER 31 TO THE SATURDAY NEAREST NOVEMBER 30.
The approximate net sales and other revenue, operating profit and
identifiable assets attributable to each reportable segment of the Corporation
in each of the last three fiscal periods are set forth in Note 11 to the
Consolidated Financial Statements on page 18 of the Annual Report.
In July 1991 the Corporation sold the assets of its Moll Tool &
Plastics Corp. subsidiary, part of the Industrial Products group and a
manufacturer of injection molded plastic components, to a limited partnership
formed by a combination with a smaller injection molded plastics business. In
December 1992, the Corporation relinquished its 25% equity interest in the
purchaser and exchanged its Notes for $5,000,000 in cash and a note for
$750,000. See Note 2 to the Consolidated Financial Statements on page 12 of the
Annual Report.
The Corporation owns approximately 25% of the stock of Centaur
Communications Limited, a privately-held publisher of business magazines in the
United Kingdom.
In late 1992 The Eli Witt Company ("Eli Witt"), the Corporation's
wholesale distribution subsidiary, executed a Merger Agreement with Certified
Grocers of Florida, Inc. (the "Merger"). The Merger became effective February
19, 1993 and the Corporation currently owns approximately 85% of the Common
Stock of Eli Witt, which is the surviving company after the Merger. On November
24, 1993 Eli Witt signed a letter of intent for the acquisition of the six
southern divisions of NCC, L.P. See "Wholesale Distribution Business" herein
and Note 1 to the Consolidated Financial Statements on page 11 of the Annual
Report.
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CONSUMER PRODUCTS
The Consumer Products segment is comprised of the Cigar Business and
the Wholesale Distribution Business.
CIGAR BUSINESS
The cigar business is comprised principally of (a) the manufacture and
sale, by General Cigar Co., Inc. ("General Cigar"), of domestic and imported
cigars in all major price categories under numerous trademarks, including the
premium cigar brands of Macanudo, Partagas, Temple Hall, Ramon Allones, Cohiba
and Canaria D'Oro and the domestic cigar brands of Garcia y Vega, White Owl,
Tiparillo, Robt. Burns, Wm. Penn and Tijuana Smalls and (b) the growing,
processing and sale of cigar wrapper tobacco by the Culbro Tobacco Division of
General Cigar.
Cigars are produced with three tobacco components: filler, binder and
wrapper. Filler tobacco is purchased from a large number of growers and
suppliers in many areas of the world. The binder is principally natural binder
leaf or HTL, a homogenized tobacco binder developed by General Cigar. General
Cigar's premium brands and its Garcia y Vega brand are wrapped with natural
cigar wrapper tobacco. Its other domestic cigars are primarily wrapped with
homogenized tobacco wrappers. Some of the natural leaf wrapper tobacco used for
General Cigar's cigars is grown by General Cigar on farms it leases from the
Corporation in the Connecticut River Valley. The remainder of General Cigar's
requirements for natural leaf wrapper tobacco is purchased from a number of
foreign growers and suppliers. A major portion of the wrapper tobacco grown by
General Cigar is sold to others, including export sales principally in Europe.
General Cigar annually adjusts acreage grown to reflect changing market demands
from export customers.
In November 1990 the Corporation sold the homogenized wrapper and
binder manufacturing facility used by General Cigar in Lancaster, Pennsylvania
to Brown & Williamson Tobacco Corporation. As part of the transaction, Brown &
Williamson will manufacture at the facility General Cigar's requirements for
these products for a term of ten years.
In 1992 General Cigar completed the consolidation of its Dothan,
Alabama domestic cigar manufacturing operations into one building. Also in late
1992 General Cigar moved its corporate headquarters from the Corporation's New
York City headquarters building to the Griffin Center corporate park of Culbro
Land Resources in Bloomfield, Connecticut. The move integrated General Cigar's
headquarters operations with its Culbro Tobacco operations in Connecticut. 1993
was General Cigar's first full year of benefitting from the cost savings of
being at that location.
General Cigar maintains inventories of wrapper and filler tobacco for
cigars sufficient to meet its estimated requirements for more than one year.
Most of its inventories are stored in warehouses in the United States. General
Cigar believes that its inventories are adequately insured.
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The markets for General Cigar's cigars are highly competitive. The
industry has experienced a long continuing decline in cigar consumption and
substantial consolidation. In order to maintain its position in its markets,
General Cigar advertises and employs a variety of promotional activities.
General Cigar believes that it is among the industry leaders in the manufacture
and sale of cigars in the United States, with particular strength in the higher
priced, premium and super premium segments which have evidenced growing consumer
acceptance in recent years.
General Cigar's products are distributed in the United States through
approximately 1,300 wholesale distributors, including the distribution operation
of the Corporation, and direct retail and chain store accounts.
The cigar business carried on by General Cigar in Jamaica and the
Dominican Republic, where the Corporation produces its highest priced, handmade
cigars, and warehouses certain of its inventories, and some of the sources of
tobacco purchased by General Cigar, are subject to the risks associated with
foreign operations.
General Cigar's handmade cigars include Macanudo, Macanudo Vintage
Cabinet, Partagas, Partagas Limited Reserve, Temple Hall, Cohiba, Ramon Allones
and Canaria D'Oro. General Cigar cannot predict the effect on its cigar
business of a reopening of trade with Cuba, if that should occur, except that
such trade could adversely affect its handmade cigar manufacturing business.
In 1993 General Cigar reappointed its independent sales agent in
Europe to take advantage of increased opportunities resulting from the
eradication of trade barriers among Common Market countries. Cigar export
sales, revenues from royalties and other revenues from foreign operations are
not material. General Cigar imports for sale in the United States on an
exclusive basis the Djeep lighter - a disposable butane gas lighter made in
France. One customer comprises approximately 60% of General Cigar's Djeep
lighter sales.
* * *
While the substantial adverse publicity resulting from the 1964 Report
of the Surgeon General and subsequent reports with respect to studies linking
the use of tobacco with human disease have not been principally directed at
cigars, General Cigar believes such publicity and the health concerns it has
provoked have contributed to the long decline of sales in the cigar industry.
The reported health effects upon non-smokers of so-called "passive" or
"environmental tobacco smoke" have caused the U.S. Surgeon General and others to
support restrictive legislation. Federal and state regulations designating
certain areas as non-smoking areas and the prohibition of smoking cigars in
certain areas have adversely affected the sales of cigar products. Various
legislative initiatives affecting tobacco, including warnings of carcinogenic
chemical contents, advertising bans and nondeductibility of advertising expenses
have recently been implemented or proposed. Tobacco products, including cigars,
also face increased federal excise taxes to fund various health care legislative
initiatives that have been proposed.
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WHOLESALE DISTRIBUTION BUSINESS
The wholesale distribution business of the Corporation is managed by
The Eli Witt Company ("Eli Witt"). Giving effect to the merger of Certified
Grocers, Inc., the acquisition of Trinity Distributors, Inc. of Ft. Worth, Texas
and the consolidation of six branch operations, Eli Witt ended 1993 with 12
distribution centers. The products distributed included cigarettes, foodservice
products, health and beauty aids, candy, cigars, paper, other tobacco products
and other confectionery and general merchandise.
In late 1992 Eli Witt executed a Merger Agreement with Certified
Grocers of Florida, Inc. (the "Merger"). The Merger became effective February
19, 1993 and the Corporation currently owns approximately 85% of the Common
Stock of Eli Witt. The businesses of Eli Witt and Certified Grocers of Florida,
Inc. are described at pages 66-72 and 72-75, respectively, and the Merger is
described at pages 36-53, of the Proxy Statement and Prospectus filed with the
Securities and Exchange Commission by The Eli Witt Company as Part of a
Registration Statement on Form S-4 (Registration No. 33-54934, Amendment No. 2)
on January 8, 1993. Such descriptions are incorporated by reference herein
pursuant to Rule 12b-23 and General Instruction G to Form 10-K.
Eli Witt's 1993 Form 10-K is incorporated herein by reference pursuant
to Rule 12b-23 and General Instruction G to Form 10-K.
Eli Witt signed a letter of intent on November 24, 1993 for the
acquisition of the six southern divisions of NCC, L.P. ("NCC South"). This
acquisition would combine the operations of two leading wholesale distributors
which together serve the southeast, mid-atlantic, and southwest markets. The
combined company would be the second largest wholesale distributor of tobacco,
candy, beverages, and grocery products in the United States with annual sales of
approximately $2 billion. The acquisition of NCC South by Eli Witt is pending
and subject to several conditions.
NURSERY PRODUCTS BUSINESS
Imperial Nurseries, Inc., which previously operated as a division of
the Corporation, became in February 1993 a wholly owned subsidiary of the
Corporation. Imperial Nurseries, Inc. ("Imperial") is a grower, distributor and
broker of wholesale nursery stock. The nursery industry is extremely
fragmented, with the industry leader having less than 1% of total market share.
Imperial believes that its volume places it among the ten largest nursery
companies in the country.
Imperial's growing operations are located on property owned by the
Corporation and leased to Imperial in Connecticut (1000 acres) and in northern
Florida (350 acres). Such operations mainly serve landscapers, retail chain
store garden departments, retail nurseries and garden centers, and wholesale
nurseries and distributors. Imperial-grown products are also distributed
through the company's own wholesale horticultural sales and service centers.
Most of Imperial's customers are located east of the Mississippi River and over
70% of sales are in Connecticut, New York, Michigan, New Jersey and
Massachusetts. Nursery sales are seasonal, peaking in spring, and are affected
by commercial and residential building activity as well as weather conditions.
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Imperial operates seven wholesale sales and service centers which sell
a wide range of plant material and horticultural tools and products to the
trade. These centers, owned by the Corporation and leased to Imperial, are
located in Windsor, Connecticut; Aston, Pennsylvania; Pittsburgh, Pennsylvania;
Columbus, Ohio; Cincinnati, Ohio; White Marsh, Maryland; and Manassas, Virginia.
In 1992 Imperial's customer base grew by 60%, allowing for less
dependence on a few large customers, with much of this growth occurring in
independent retail garden centers and mass merchandise chain stores where "do-
it-yourself" consumer demand has been strong. The brokerage operation is
located in Connecticut. Approximately 35% of the nursery stock sold by Imperial
is purchased from other growers through its brokerage business.
Growing and shipping capacity has been increased to meet the potential
volume and quality needs of Imperial's customers and to capitalize on any growth
in this market during the predicted economic upturn in the Northeast.
As the result of studies undertaken in 1993, Imperial is reorganizing
its operations by changing to a regional organizational structure. The new
structure is anticipated to remove conflicting objectives between the nursery
and distribution operations and improve overall customer satisfaction. 1993 was
the first full year for Imperial's Vice President of Total Quality Management.
Current initiatives are aimed at reducing costs and improving customer service
levels.
INDUSTRIAL PRODUCTS BUSINESS
Industrial Products consists of CMS Gilbreth Packaging Systems, Inc.
("CMS Gilbreth") which manufactures high quality plastic labels and a variety of
application equipment. This market is both highly specialized and fragmented.
CMS Gilbreth believes it is a leader in the several markets in which it
participates.
CMS Gilbreth has manufacturing plants in Bensalem and Bristol,
Pennsylvania (labeling materials), Kingston, Pennsylvania and Turlock,
California (application machinery), and its headquarters is located in Trevose,
Pennsylvania. It also has regional sales offices located in Chicago, Illinois
and Brussels, Belgium.
In 1991, CMS Gilbreth restructured its business and positioned itself
to offer a complete system featuring a full range of shrink film, labeling and
tamper-evident seal products as well as application machinery.
In 1992 CMS Gilbreth continued its market development process and
initiated Total Quality Management focusing on total customer satisfaction. In
addition, there were increased new product development activities in both
materials and machine operations.
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CMS Gilbreth operating results in 1993 reflected a significant
improvement over 1992. This favorable trend was the consequence of earlier
adopted Total Quality Management processes and continuous improvement savings in
both the materials and roll-fed machinery applications segments and increased
volume in the roll-fed market. In 1993 one customer accounted for approximately
22% of CMS Gilbreth's aggregate sales.
Certain of CMS Gilbreth's shrink label printing business is dependent
upon its ability to source raw material of print quality film. Such film is
available only from a limited number of suppliers, but CMS Gilbreth believes its
sources to be adequate.
The machine manufacturing operations of Trine Manufacturing Company,
Inc. ("Trine"), a subsidiary of the Corporation and a separate legal entity
whose operations are integrated with CMS Gilbreth, are dependent on the validity
and enforceability of various patents issued to it or others by the United
States Patent and Trademark Office and internationally. Sales of its machines
may be affected by patents issued to others (See Item 3(iii)) and the commercial
exploitation of technological advances in the design and production of labeling
machinery may be limited by such patents. CMS Gilbreth has developed
environmentally-compatible wraparound and sleeved film for labeling in
conjunction with its high-speed application machinery. Management has been
advised that certain aspects of these new developments may be patentable and has
taken appropriate steps to protect its proprietary rights.
Due to the nature of Trine's business, purchases of its machines are
generally on a onetime basis. The only continuing business is for parts and
service. Trine's sales are principally in the food and beverage industry,
including substantial sales to soft drink bottlers. Approximately 35% of its
sales are to foreign customers. Trine sales in the domestic market are
principally to companies in the food and dairy industry, although other outlets
for its machinery are being developed.
REAL ESTATE
The Corporation's Real Estate segment is comprised of Culbro Land
Resources, Inc. and 387 Park Avenue South, the New York City building which the
Corporation owns and operates.
CULBRO LAND RESOURCES
The Corporation is engaged in the real estate development business on
portions of its land in Connecticut through Culbro Land Resources, Inc.
("Resources"), headquartered in Windsor, Connecticut. Resources develops
portions of the Corporation's properties for office, residential and commercial
use.
Resources' most substantial development is Griffin Center in Windsor,
Connecticut and Griffin Center South in Bloomfield, Connecticut. Together these
master planned developments comprise approximately 600 acres, half of which have
been developed with nearly 2,000,000 square feet of office and industrial space.
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Griffin Center currently includes nine Class A corporate office
buildings built by Resources. Prior to 1983, Resources sold 70% interests in
five of the buildings to a bank-managed real estate investment fund. In 1984,
Resources sold one office building and a 70% interest in a second to an
insurance company; and, in 1986, Resources sold a 70% interest in a building to
the same insurance company. Resources manages these properties for its
investor-partners.
At year end approximately 73% of the rentable space in Griffin Center
was rented. After years of growth, the commercial rental market is flat and
excess capacity is prevalent in northern Connecticut. To attract and retain
tenants, Resources continues to provide a variety of amenities to maintain
Griffin Center as a highly competitive, prime office park offering quality
services to tenants.
Griffin Center South, a 130-acre tract, comprises fifteen buildings of
industrial and research/development space. Nine of these buildings have been
retained by Resources for rental and are 88% rented. The other buildings have
been built on land sold by Resources to commercial users who occupy the space.
Resources has a master plan state traffic certificate which allows for the
development of an additional 500,000 square feet of space.
Resources owns a 600-acre tract of land near Bradley International
Airport and Interstate 91 now known as New England Tradeport. To date, 140,000
square feet of warehouse and light manufacturing space have been developed and
are 77% occupied. Resources recently completed a major road extension and
utilities installation in order to service the 18-acre Tradeport site sold in
early 1992 to Allied Bottlers, Inc., a major distributor for Pepsi-Cola. A
state traffic certificate for the future development of 1.3 million square feet
has been obtained for the Tradeport.
Two additional Resources' parcels available for development include 33
acres in the Day Hill Technology Center in Windsor, and 100 acres in the South
Windsor Technology Center. State traffic certificates have been obtained for
500,000 square feet and 750,000 square feet of development, respectively, and in
1993 ground was broken in Day Hill Technology Center to accommodate a 185,000
square foot building.
In 1988, Culbro Homes, Inc. ("Culbro Homes"), a subsidiary of
Resources, began infrastructure work at Walden Woods, a 153-acre site in
Windsor, Connecticut which is planned to contain more than 400 residential
units. Prior to 1992 Culbro Homes had built and sold 45 homes before
discontinuing the home building part of developing Walden Woods.
Since then, Culbro Homes has concluded agreements with two third-party
home builders which would ultimately transfer the building rights to a total of
110 units at Walden Woods. A second section of Walden Woods was opened for
development in 1993. It is also anticipated that the development of Resources'
land in Simsbury, Connecticut will commence in 1994 with the sale of an approved
14 lot residential subdivision to a local builder. Resources has several other
tracts in the Greater Hartford area suitable for residential development but
cannot predict when, or if, development will begin due to the continuing
slowdown in the residential market throughout the region.
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387 PARK AVENUE SOUTH
In 1983 the Corporation acquired all of the outstanding stock of a
corporation whose principal asset was an office building in New York City. The
building is 12 stories and contains approximately 210,000 square feet of rental
space. The purchase price of approximately $15 million was financed principally
by a $12 million mortgage which was prepaid in 1988. The Corporation has
advanced substantial amounts for building improvements. Approximately 11% of
the space in the building has been leased to the Corporation for use as its
offices and the remaining space is being leased or is available for lease as
commercial rental property. Currently approximately 24% of rentable space is
available for lease in this building.
SUBSIDIARIES
In 1987 the Corporation established several wholly-owned subsidiaries
and transferred to them the assets and liabilities of formerly unincorporated
divisions. The Corporation serves as the parent company of separate
subsidiaries operating its cigar, distribution, nursery, machine and labeling
systems and land development operations. Imperial Nurseries, Inc., formerly a
Division of the Corporation, was incorporated as a separate company in February
1993. See Exhibit 22 hereto. In connection with the loan agreements entered
into by the Corporation in February 1993 (see Note 4 to the Consolidated
Financial Statements on page 12 of the Annual Report), the Corporation pledged
the stock of all of its active subsidiaries as collateral for such loans.
EMPLOYEES
The Corporation employs approximately 4,050 persons (excluding
seasonal help employed in wrapper tobacco and nursery operations).
NOTE: The brand names mentioned in this Report are trademarks owned by or
licensed to the Corporation or its subsidiaries. All rights with
respect thereto are reserved.
ITEM 2 - PROPERTIES
LAND HOLDINGS
The Corporation is a major landholder in the State of Connecticut and
owns some land in the State of Massachusetts, with holdings of approximately
5,600 acres, located principally in the Connecticut River Valley. In addition,
the Corporation owns approximately 1,100 acres in Florida, a portion of which is
used for Imperial Nurseries' growing operations, and the sites for Imperial
Nurseries' seven sales and service centers. Each such center typically has a
warehouse/office facility and 10-15 acres of nursery stock.
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The book value of undeveloped land holdings, which includes land
currently needed for tobacco and nursery operations, owned by the Corporation
and Resources in the Connecticut River Valley is approximately $5,000,000. The
Corporation believes the fair market value is very substantially in excess of
such book value. The Corporation is developing certain of these holdings. (See
the description of Culbro Land Resources, Inc. under "Real Estate"). Such
development activities have increased the value of the Corporation's adjoining
properties. Of the Corporation's land not currently needed for tobacco or
nursery operations, only a portion is currently suitable for development.
FACILITIES
The table below sets forth the general character and location of
certain of the principal facilities of the Corporation and its subsidiaries. It
does not include the facilities of Culbro Land Resources, Inc. (See discussion
of Real Estate under Item 1 - Business).
<TABLE>
<CAPTION>
OWNED APPROXIMATE
OR FLOOR SPACE
LOCATION LEASED NATURE OF OPERATION (SQUARE FEET)
-------- ------ ------------------- -------------
<S> <C> <C> <C>
New York, New York Owned Executive Offices
-Corporate Operations 25,000
Kingston, Pennsylvania Leased Production Machinery 58,000
Miami, Florida Leased Distribution Operations 101,000
Tampa, Florida Leased Executive Offices
-Distribution Operations 21,000
Tampa, Florida Leased Distribution Operations 128,000
Ocala, Florida Owned Distribution Operations-Warehousing
& Corporate Offices 875,000
Bensalem, Pennsylvania Owned Labeling Systems Operations 63,000
Bensalem, Pennsylvania Leased Labeling Systems Operations
& Warehousing 40,000
Bristol Township,
Pennsylvania Owned Labeling Systems Operations 101,000
Turlock, California Owned Production Machinery 32,000
Trevose, Pennsylvania Leased Executive Offices
-Labeling Systems Operations 9,000
Kingston, Jamaica, W.I. Owned Cigar Manufacturing 117,000
Dothan, Alabama Leased (1) Cigar Manufacturing & Warehousing 166,000
Hatfield, Massachusetts Owned Tobacco Warehousing & Processing 94,000
Santiago, Dominican
Republic Leased Tobacco Processing & Cigar Mfg. 171,000
Granby, Connecticut Owned Executive Offices
-Nursery Operations 8,000
Windsor, Connecticut Owned Tobacco Processing & Warehousing 52,000
Bloomfield, Connecticut Owned Executive Offices
-Cigar Operations 11,000
<FN>
(1) Industrial Revenue Bond financing lease
</TABLE>
In addition to the above, the Corporation owns approximately 10 other
distribution properties located principally in the Eastern United States having
an aggregate of approximately 463,000 square feet of floor space.
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The Corporation and its General Cigar Co., Inc. subsidiary lease
approximately 80 acres of land for growing tobacco in the Dominican Republic.
In addition, the Corporation leases approximately 15 other facilities for
distribution, storage, sales and related warehousing operations and office
locations which have an aggregate of approximately 355,000 square feet of floor
space.
ITEM 3 - LEGAL PROCEEDINGS
The Corporation is involved in various legal actions including the
following:
(i) TOWN OF WEST SPRINGFIELD V. CULBRO CORPORATION
In 1986 the State of Massachusetts closed certain public and private
wells in the West Springfield, Massachusetts area, where the Corporation had
farmed tobacco, because of alleged contamination by ethylene dibromide (EDB) and
other pesticides. Subsequently the Corporation's farms were identified as a
probable source of the EDB contamination.
In April 1987 the Town of West Springfield, Massachusetts filed suit
in Hampden County Superior Court against the Corporation, another tobacco
farmer, nine chemical manufacturers and an unknown number of unnamed
manufacturers and distributors of pesticides.
The Complaint alleges, among many other things with respect to each
defendant, that the Corporation was negligent in that it should have known that
its use of farm pesticides would contaminate the Town's public wells. The
Complaint demands judgment in the amount of $10,000,000 plus costs and expenses.
The Town has recently calculated that its "direct costs incurred or to be
incurred" as a result of the alleged contamination are $7,532,000 and it
demanded $4,170,000 "in full and complete satisfaction of this matter". The
Corporation believes the five chemical companies which remain defendants in this
action will play the major role in any defense or other resolution of this
litigation. One of the Corporation's general liability insurance carriers is
bearing legal expenses for this action while reserving its rights as to
coverage. The Corporation believes another carrier is also jointly and
severally responsible for coverage. It is impossible to predict the outcome of
the litigation at this preliminary stage, although the Corporation believes it
has meritorious defenses. In a similar action in Connecticut the chemical
manufacturers bore the major part of settlement contributions and the
Corporation's insurance did respond.
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(ii) TOBACCO LIABILITY
While the Corporation now has no pending litigation respecting tobacco
and health, there is currently substantial litigation respecting cigarette
smoking and "environmental tobacco smoke", and other forms of tobacco use may
also be challenged in the courts.
(iii) TRINE MANUFACTURING COMPANY, INC.
Trine Manufacturing Company, Inc., a subsidiary of the Corporation
which manufactures labeling machines ("Trine"), has reached a settlement of its
patent infringement litigation with B&H Manufacturing, Inc. ("B&H) in the
Federal District Court for the Eastern District of California, Fresno Division.
This litigation was described in the Corporation's previous Forms 10-K.
The settlement provides relief for Trine from several, potentially
large, claims for indemnity for patent infringement damages and/or royalties
paid by certain of Trine's customers including Foster Forbes, a division of
American National Can Corporation, to B&H. The settlement also provides a
mechanism under which other Trine customers using Trine machines in an allegedly
infringing manner would be offered a special licensing arrangement from B&H.
The arrangement offers these customers a release of all liability for past
patent infringement if they enter into a license agreement and pay royalties to
B&H on all future production of allegedly infringing articles during the life of
the B&H patents. There is no assurance these customers will accept the license
agreement and thus they may seek indemnity from Trine. Certain other terms and
conditions of the settlement are confidential by agreement of the parties.
Trine did not admit the validity of B&H's patents, will not make any
representations as to whether a customer's use of its Trine machines infringes
these patents and agreed to notify its customers that a patent license may be
available from B&H.
The settlement contains mutual releases by B&H and Trine for all
claims and causes of action which were asserted or could have been asserted in
the litigation. B&H also agreed never to sue the Corporation, Trine, or CMS
Gilbreth Packaging Systems, Inc., an affiliated company, or their successors in
interest for future infringement of the B&H patents involved in the litigation
and foreign counterparts of these patents.
The settlement was also signed on behalf of the seller ("Seller") to
the Corporation of the Trine business. In connection with the Corporation's
acquisition of Trine in 1988 the Seller indemnified the Corporation respecting
the B&H patents and the Corporation has reached a separate agreement with the
Seller whereby the Seller would allow the Corporation to reimburse itself for
85% of the legal fees paid to its patent attorneys in the B&H litigation from
the escrow account established as part of the acquisition. In addition, funds
withheld from payment to the Seller under certain related consulting and non-
competition agreements will be used to reimburse the Seller for 85% of its legal
fees. Approximately $1,500,000 of withheld funds will remain after such
reimbursements and will continue to be held by the Corporation to secure other
potential indemnity obligations of the Seller, including those relating to
litigation against the Seller and it by Anchor Glass Container Corporation.
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(iv) IMPERIAL NURSERIES AZALEA CROP
In early 1991 at its Quincy, Florida farm the Imperial
Nurseries ("Imperial") Division of the Corporation sustained a significant loss
of its azalea crop. The loss appears to have been caused by the use of Benlate
50 DF, a product of E.I. DuPont De Nemours & Co. ("DuPont") which was
contaminated, possibly by the herbicide atrazine. DuPont reportedly had a
similar problem in 1989. The crops involved have been inspected by adjusters
for DuPont and for the Corporation's property insurance carrier, Arkwright-
Factory Mutual ("Arkwright").
In August 1991 Imperial made a claim for approximately $2,200,000 for
lost sales of azaleas and other plants unsaleable because of the damaged
azaleas, less $240,000 previously advanced by DuPont. Despite consistent
expressions of support and approval by its claims adjuster, DuPont refused
payment of the claim. Imperial then filed suit in the United States District
Court for the Northern District of Florida seeking compensation for its full
losses from DuPont and certain distributors of Benlate. The suit is in the
discovery stage and the outcome cannot at this time be predicted. Imperial has
also filed a claim with Arkwright which has been denied. Imperial may also
initiate an insurance coverage action against Arkwright with respect to this
claim.
In 1992 DuPont announced that it was terminating its claims settlement
program. Such termination is not expected to affect this litigation because
DuPont had previously refused to settle Imperial's claim. Discovery continued
in 1993 and trial could occur in late 1994.
(v) ELI WITT - TENNESSEE
In November 1991 and again in May 1992, the State of Tennessee
Department of Revenue (the "Department") notified Eli Witt of "several instances
against your firm for sales of cigarettes below the minimum fair trade price set
by" the Tennessee Unfair Cigarette Sales Law (Tenn. Code Ann. 47-25-Part 3) (the
"Law"). The second notice sought to impose a $5000 fine and a revocation of Eli
Witt's wholesale tobacco license, both of which actions have been stayed by Eli
Witt's timely petition for a formal hearing.
Eli Witt believes the Department is misinterpreting the Law by
attacking "pass through" payments by Eli Witt to its retailer customers of the
discounts and payment programs Eli Witt receives from cigarette manufacturers.
The Administrative Law Judge assigned to this matter left the Department and a
new Judge was assigned. The new Judge granted Eli Witt's Motion for a More
Definitive Statement. Eli Witt has twice tried to have the Tennessee Chancery
Court assume jurisdiction for its case without success. The matter is now again
in proceedings under Tennessee's Administrative Procedure Act. Another
wholesale distributor has been defending a similar charge by the Department
since 1989. Such distributor is defending upon grounds that the Law is either
unconstitutional or violates federal
-12-
<PAGE>
anti-trust laws. Eli Witt concurs in that position and will argue those same
grounds. Eli Witt believes the defenses described above are meritorious but
cannot predict the ultimate outcome of these proceedings. In January 1993 a
third distributor filed suit in the Chancery Court against the Department to
invalidate the Law and/or the Department's interpretation of it. It based its
case on the same grounds as Eli Witt and the second distributor.
* * *
Management does not believe that the above described actions will have
a material adverse effect upon the financial condition of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
On February 18, 1994 the approximate number of record holders of
Common Stock of the Corporation was 1,052 which does not include beneficial
owners whose shares are held of record in the names of brokers or nominees. The
closing market price as quoted on the New York Stock Exchange on such date was
$15.75 per share. The information appearing (i) under Quarterly Data on Common
Shares on page 3 of the Annual Report, (ii) in Note 4 to the Consolidated
Financial Statements on page 12 of the Annual Report and (iii) in Note 11 to the
Consolidated Financial Statements on page 18 of the Annual Report are hereby
incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
The Consolidated Statement of Operations and the Selected Financial
Data appearing on pages 7 and 4, respectively, of the Annual Report are hereby
incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Management's Discussion and Analysis appearing on pages 4, 5 and 6
of the Annual Report is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements appearing on pages 7 through 19
of the Annual Report, together with the Report of Independent Accountants, which
appears on page 21 of the Annual Report, are hereby incorporated by reference.
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
In accordance with General Instruction G-3 to Form 10-K, the
information called for in this Item 10 with respect to directors is not
presented here since such information is included in the definitive proxy
statement which involves the election of directors which will be filed pursuant
to Regulation 14A not later than 120 days after the close of the fiscal year,
and such information is hereby incorporated by reference from such proxy
statement.
-14-
<PAGE>
The following table sets forth the information called for in this Item
10 with respect to executive officers of the Corporation.
<TABLE>
<CAPTION>
NAME OF EXECUTIVE OTHER PRESENT YEAR OTHER POSITIONS
OFFICER AND POSITIONS AND SERVICE OR OTHER BUSINESS
PRESENT PRINCIPAL OFFICES (2) AS EXECUTIVE EXPERIENCE DURING
POSITION (1) (BEGINNING OFFICER PAST FIVE
(BEGINNING YEAR) AGE YEAR) BEGAN YEARS (YEARS)
- ------------------ --- ------------- ------------ -------------------
<S> <C> <C> <C> <C>
EDGAR M. CULLMAN 76 Director 1963 None
Chairman of the Board (1961)
(1975)
EDGAR M. CULLMAN, JR. 48 Director 1983 None
President (1984) (1982)
JOSEPH C. AIRD 48 None 1987 None
Vice President-
Controller (1987)
JAY M. GREEN 46 Treasurer 1988 None
Executive Vice (1988)
President Finance &
Administration (1988)
PEGGY L. KELSTON 43 None 1989 Vice President, Human Resources,
Vice President- Global Markets, Bankers Trust
Human Resources Company (1987-1989)
(1989)
JANET A. KRAJEWSKI 39 None 1993 None
Vice President-Taxes
(1993)
RONALD S. MILSTEIN 37 Assistant 1986 None
Vice President (1990); Secretary (1987)
Assistant General
Counsel (1986)
A. ROSS WOLLEN 50 Senior Vice 1977 None
General Counsel President (1983)
(1980) & Secretary (1987)
<FN>
(1) All of the Corporation's executive officers are subject to annual
reelection. There were and are no understandings or arrangements between
any of the Corporation's executive officers and any other person (except
directors and officers acting solely in their capacities as such) pursuant
to which any executive officer was selected as an officer. Positions not
otherwise identified are with the Corporation.
(2) Some of the Corporation's executive officers also serve as officers
and directors of The Eli Witt Company, of which Mr. Green is the Chairman
of the Board. Eli Witt became a public company on February 19, 1993, and
the Corporation now owns 85% of its common stock.
</TABLE>
-15-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
In accordance with General Instruction G-3 to Form 10-K, the
information called for in this Item 11 is not presented here since such
information is included in the definitive proxy statement which involves the
election of directors which will be filed pursuant to Regulation 14A not later
than 120 days after the close of the fiscal year, and such information is hereby
incorporated by reference from such proxy statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
In accordance with General Instruction G-3 to Form 10-K, the
information called for in this Item 12 is not presented here since such
information is included in the definitive proxy statement which involves the
election of directors which will be filed pursuant to Regulation 14A not later
than 120 days after the close of the fiscal year, and such information is hereby
incorporated by reference from such proxy statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with General Instruction G-3 to Form 10-K, the
information called for in this Item 13 is not presented here since such
information is included in the definitive proxy statement which involves the
election of directors which will be filed pursuant to Regulation 14A not later
than 120 days after the close of the fiscal year, and such information is hereby
incorporated by reference from such proxy statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a)(1) Financial Statements (annexed hereto): There are filed as
part of this Report on Form 10-K: the Consent and Report of Independent
Accountants; and the Consolidated Financial Statements (including Notes) of the
Corporation appearing on pages 7 through 19 of the Annual Report. See Index To
Financial Statements and Additional Financial Data.
(a)(2) Schedules (annexed hereto): Financial Statement Schedules
required by Item 8 of Form 10-K for the fiscal years ended 1993, 1992 and 1991.
See Index To Financial Statements and Additional Financial Data.
(a)(3) Exhibits. (Enumeration corresponds to the Exhibit Table,
Item 601, Regulation S-K. Items not enumerated are not applicable).
-16-
<PAGE>
(3) THE ARTICLES OF INCORPORATION AND BY-LAWS OF THE
CORPORATION.
(A) The Articles of Incorporation, as amended to date
(Incorporated by reference to Exhibits to Form 10-K of the
Corporation filed for the fiscal year 1984 - (Exhibit 3(A)) and
to the definitive proxy statement of Registrant, dated April 11,
1988, for its Annual Meeting of Shareholders held on May 12,
1988).
(B) The By-Laws, as amended to date (Incorporated by
reference to Exhibits to Form 10-K of the Corporation filed for
the fiscal year 1984 - (Exhibit 3(B)) and to the definitive
proxy statement of Registrant, dated April 11, 1988, for its
Annual Meeting of Shareholders held on May 12, 1988).
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES.
(A) Note Purchase Agreement, dated July 15, 1988,
respecting 9.10% Series A Senior Notes due 1991, 9.56% Series B
Senior Notes due 1994, 9.87% Series C Senior Notes due 1998 and
9.93% Series D Senior Notes due 1998 (Incorporated by reference
to Exhibits to Form 10-Q of the Corporation filed for the
thirteen weeks ended July 2, 1988 - (Exhibit (a)(2)).
(B) Credit Agreement, dated May 24, 1990 with several
banks and Manufacturers Hanover Trust Company, as Agent.
(Incorporated by reference to Exhibits to Form 10-Q of the
Corporation filed for the thirteen weeks ended June 30, 1990 -
(Exhibit (a)).
(C) Amended and Restated Note Purchase Agreement among
the Corporation and six institutional investors relating to the
private placement of $35,000,000 of Senior Notes, dated July 15,
1988 amended and restated as of February 19, 1993, including
Exhibits (which have been omitted but will be furnished to the
Commission upon request). (Incorporated by reference to Exhibits
to Form 10-K of the Corporation filed for the fiscal year 1992).
(D) Amended and Restated Credit Agreement, dated February
19, 1993 with several banks and Chemical Bank, as Agent,
including Exhibits (which have been omitted but will be
furnished to the Commission upon request). (Incorporated by
reference to Exhibits to Form 10-K of the Corporation filed for
the fiscal year 1992).
(E) Pages 36-53 and 66-75 of the Proxy Statement and
Prospectus filed with the Securities and Exchange Commission by
The Eli Witt Company as Part of a Registration Statement on Form
S-4 (Registration No. 33-54934, Amendment No. 2). Such Proxy
Statement and Prospectus are incorporated by reference to such
filing.
-17-
<PAGE>
(F) Credit Agreement among The Eli Witt Company, The
Several Lenders from Time to Time Parties Hereto and Chemical
Bank, as Agent, Dated as of February 19, 1993. (Incorporated by
reference to Exhibits to Form 10-K of the Corporation filed for
the fiscal year 1992).
Certain other documents evidencing indebtedness of the
Corporation are not filed herewith in reliance upon the exemption
provided by Item 601(b)(4)(iii)(A); the Registrant hereby undertakes
to furnish a copy of such documents to the Commission upon request.
(10) EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS.
(A) 1992 Stock Plan of Registrant, dated December 10,
1993 (Incorporated by reference to the definitive proxy
statement of Registrant, dated March 3, 1993, for its Annual
Meeting of Shareholders held on April 8, 1993).
(B) Stock Option Plan for Non-employee Directors of
Registrant, dated December 10, 1993 (Incorporated by reference
to the definitive proxy statement of Registrant, dated March 3,
1993, for its Annual Meeting of Shareholders held on April 8,
1993).
(C) 1991 Employees Incentive Stock Option Plan of
Registrant (Incorporated by reference to the definitive proxy
statement of Registrant, dated April 9, 1991, for its 1991
Annual Meeting of Shareholders held on May 9, 1991).
(D) 1983 Employees Incentive Stock Option Plan of
Registrant, as amended (Incorporated by reference to the
definitive proxy statement of Registrant, dated April 6, 1983,
for its Annual Meeting of Shareholders held on May 12, 1983 and
to the Appendix filed pursuant to Rule 424(c) under the
Securities Act of 1933, as amended, dated March 3, 1987).
(13) ANNUAL REPORT TO SECURITY HOLDERS.
The Corporation's Annual Report to Shareholders for
1993 (annexed hereto). Such Annual Report, except for those
portions which are expressly incorporated by reference, is
furnished for the information of the Securities and Exchange
Commission and is not to be deemed "filed" or incorporated by
reference as part of this Form 10-K.
-18-
<PAGE>
(22) SUBSIDIARIES.
List of Subsidiaries.
(28) UNDERTAKING.
For the purposes of complying with the amendments to
the rules governing Form S-8 (effective July 13, 1990) under the
Securities Act of 1933, the undersigned registrant hereby
undertakes as follows, which undertaking shall be incorporated
by reference to registrant's Registration Statement on Form S-8
(Incorporated by reference to Exhibits to Form 10-K of the
Corporation filed for the fiscal year 1984 - (Exhibit 28)) and
subsequent Form S-8's:
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(b) The Corporation filed two reports on Form 8-K in the last
quarter of its 1993 fiscal year:
(1) October 22, 1993, settlement of patent litigation.
(2) November 30, 1993, letter of intent for an acquisition
by the Registrant's majority owned subsidiary, The Eli
Witt Company.
(c) See (a)(3) above.
(d) See Index to Financial Statements and Additional Financial
Data.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CULBRO CORPORATION
By (JAY M. GREEN)
Jay M. Green
Executive Vice President-Finance and Administration
Dated: March 10, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934 this
annual report has been signed by the following persons on behalf of the
Corporation and in the capacities indicated on March 10, 1994.
Signatures & Title
(BRUCE A. BARNET), Director
(Bruce A. Barnet)
(JOHN L. BERNBACH), Director
(John L. Bernbach)
(EDGAR M. CULLMAN), Chairman of the Board, Director and
(Edgar M. Cullman) Principal Executive Officer
(EDGAR M. CULLMAN, JR.), President, Director and
(Edgar M. Cullman, Jr.) Principal Operating Officer
(FREDERICK M. DANZIGER), Director
(Frederick M. Danziger)
(JOHN L. ERNST), Director
(John L. Ernst)
(JAY M. GREEN), Executive Vice President and
(Jay M. Green) Principal Financial Officer
(THOMAS C. ISRAEL), Director
(Thomas C. Israel)
(DAN W. LUFKIN), Director
(Dan W. Lufkin)
(GRAHAM V. SHERREN), Director
(Graham V. Sherren)
(PETER J. SOLOMON), Director
(Peter J. Solomon)
(FRANCIS T. VINCENT, JR.), Director
(Francis T. Vincent, Jr.)
(JOSEPH C. AIRD), Vice President and Controller
(Joseph C. Aird)
<PAGE>
EXHIBIT 22
CULBRO CORPORATION
------------------
State/Jurisdiction
Subsidiaries (1) of Incorporation
- ------------ ----------------
General Cigar Co., Inc. (2) Delaware
Culbro Machine Systems, Inc. Delaware
Culbro Land Resources, Inc. (3) Delaware
387 PAS Corporation New York
The Eli Witt Company * (4) Delaware
CMS Gilbreth Packaging Systems, Inc. (5) Pennsylvania
Trine Manufacturing Company Delaware
Imperial Nurseries, Inc. Delaware
* The Corporation owns approximately 85% of the common stock of this
subsidiary.
(1) The Corporation also has approximately 7 inactive subsidiaries which
considered in the aggregate as a single subsidiary would not constitute
a significant subsidiary. The Consolidated Financial Statements of the
Corporation include the accounts of all subsidiaries of the
Corporation.
(2) Includes approximately 8 subsidiaries and 4 operating divisions within
which it carries on its cigar manufacturing and distribution business,
and approximately 12 assumed names in which it does business.
(3) Includes approximately 5 subsidiaries utilized to carry on certain
aspects of its real estate development business.
(4) Includes approximately 4 subsidiaries utilized to carry on certain
aspects of its wholesale distribution business.
(5) Includes Gilbreth International Corporation, a wholly-owned subsidiary
of the Corporation, which carries on its plastic shrink film and
labeling systems business.
<PAGE>
CONSUMER PRODUCTS
GENERAL CIGAR CO., INC.
Manufacturing and marketing cigars, growing wrapper tobacco and
distributing disposable lighters.
THE ELI WITT COMPANY
Wholesaling tobacco products, candy, groceries, food, health and beauty
aids and general merchandise.
NURSERY PRODUCTS
IMPERIAL NURSERIES, INC.
Growing plants which are sold principally to garden centers and mass
merchandisers and operating horticultural distribution centers which sell
principally to landscapers.
INDUSTRIAL PRODUCTS
CMS GILBRETH PACKAGING SYSTEMS, INC.
Manufacturing and marketing of packaging and labeling systems, including
plastic shrink film labels and tamper-evident seals, and packaging
machinery to apply them.
REAL ESTATE
CULBRO LAND RESOURCES, INC.
Building and managing commercial and industrial properties and developing
residential subdivisions on real estate owned by the Corporation in
Connecticut and Massachusetts.
387 PAS CORP.
Owning and managing a commercial office building in New York City.
<PAGE>
- -------------------------------------------------------------------------------
QUARTERLY DATA ON COMMON SHARES
Following are the high and low prices of the common shares of Culbro
Corporation in 1993 and 1992 as traded on the New York Stock Exchange.
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993 18 1/2 14 3/8 19 1/2 14 7/8 18 14 1/4 17 1/4 13 1/2
1992 19 16 1/8 21 1/4 15 5/8 17 1/2 14 3/8 17 1/2 14 1/2
----------------------------------------------------------------------------
THERE WERE NO CASH DIVIDENDS DECLARED IN 1993. CASH DIVIDENDS OF $.20 PER
SHARE WERE DECLARED FOR EACH OF THE FIRST THREE QUARTERS OF 1992.
- -------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
3
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1990
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 1993 1992 1991 48 Weeks 1989
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales and other revenue $1,364,576 $1,148,722 $1,104,272 $908,395 $945,531
Operating profit 18,779 15,863 24,184 19,826 16,359
Income before cumulative effect of
accounting change 1,725 1,868 3,176 3,109 1,104
Income per common share before cumulative
effect of accounting change 0.24 0.43 0.74 0.72 0.26
Net (loss) income (7,452) 1,868 3,176 3,109 1,104
Net (loss) income per common share (1.89) 0.43 0.74 0.72 0.26
Dividends per common share -- 0.60 0.80 0.80 0.80
Working capital 127,092 108,432 90,100 112,781 51,266
Property and equipment, net 114,898 99,509 99,498 115,812 118,751
Total assets 423,659 403,648 343,023 393,951 394,735
Long-term debt 175,405 145,678 132,885 161,944 98,703
Shareholders' equity 110,882 119,035 119,750 120,013 120,350
Book value per common share at
end of period 25.74 27.63 27.80 27.86 27.94
Weighted average common
shares outstanding 4,308,000 4,308,000 4,307,000 4,307,000 4,301,000
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
The net cash provided by operations principally reflects the liquidation of
excess cigarette inventories at The Eli Witt Company ("Eli Witt"), Culbro
Corporation's (the "Corporation") subsidiary in the wholesale distribution
business. At year end 1992, there was a substantial amount of excess cigarette
inventory on hand that was purchased in connection with cigarette manufacturers'
purchase incentive programs and price increases. That excess cigarette inventory
was liquidated during the first half of 1993 and not replaced because cigarette
manufacturers significantly reduced purchase incentive programs. Cash generated
from the excess cigarette inventory reduction was partially offset by
repurchasing previously sold yet uncollected accounts receivable under the
Corporation's accounts receivable sales agreement. This agreement was terminated
in connection with Eli Witt's separate financing concurrent with its acquisition
of Certified Grocers of Florida, Inc. ("Certified Grocers") on February 19, 1993
(see below).
Investing activities reflect cash used for capital expenditures and the
acquisition of Certified Grocers, partially offset by proceeds received upon
completion of the Take-out Agreement with Moll PlastiCrafters.
The Corporation's financing activities reflect the repayment of debt,
including notes payable, from the cash generated by the sale of the excess
cigarette inventory on hand at the beginning of the year. Also included in the
repayment of debt is the refinancing of the debt assumed from Certified Grocers,
and a $12.5 million prepayment of the Corporation's 9.7% Senior Notes.
On February 19, 1993, Eli Witt acquired Certified Grocers and, concurrent
with the acquisition, entered into a $125 million Credit Agreement ("Eli Witt
Credit Agreement") with a syndicate of banks to separately finance its business.
Consequently, the cash flow of Eli Witt is no longer available to the
Corporation and its other subsidiaries. The Eli Witt Credit Agreement provides
committed financing through February, 1998 and includes a $30 million term loan,
a $45 million revolving facility for working capital and general business
purposes and a $50 million revolving facility for the periodic purchase of
excess cigarette inventories to take advantage of manufacturers' purchase
incentive programs. In connection with the acquisition, Eli Witt paid $87.7
million to the Corporation, which included a special cash dividend and the
repayment of Eli Witt's intercompany debt. The Corporation used these proceeds
to repay its existing debt, including the prepayment on its Senior Notes, and
the repurchase of previously sold and uncollected accounts receivable.
Concurrent with the separate financing of Eli Witt, the Corporation
replaced its $90 million Credit Agreement with an $80 million Credit Agreement
("Culbro Credit Agreement") which provides committed financing through June 1996
to the Corporation and its other subsidiaries. The commitment under the Culbro
Credit Agreement will be reduced to $75 million in June 1994 and to $65 million
in September 1995.
In March 1993, the Corporation and Eli Witt entered into interest rate swap
agreements to convert variable rate debt under the Culbro and Eli Witt Credit
Agreements into fixed rate debt. The swap agreements converted a total of $50
million of variable rate debt under Culbro's Credit Agreement to fixed rate debt
at an average rate of 6.30% for three years. The swap agreements entered into by
Eli Witt range from two to
- -------------------------------------------------------------------------------
4
<PAGE>
three years and converted a total of $60 million of variable rate debt under the
Eli Witt Credit Agreement to fixed rate debt at an average rate of 7.25%.
In November 1993, the Corporation and Eli Witt entered into a letter of
intent with NCC L.P. ("NCC"), a limited partnership engaged in the wholesale
distribution business, whereby Eli Witt would purchase the net assets of NCC's
southern divisions in exchange for Eli Witt common stock. Additionally, a
partner of NCC will purchase, for $12 million, newly issued preferred stock of
the Corporation with a stated value of $15 million, exchangeable into Series B
preferred stock of Eli Witt currently held by the Corporation. The NCC partner
will also purchase $3 million of subordinated notes from Eli Witt at face value.
This proposed transaction is subject to completion of a definitive agreement,
financing arrangements, and the delivery of certain amounts of net assets at
closing by NCC and Eli Witt.
In January 1994, the Corporation obtained a $5 million mortgage on certain
equipment. The proceeds were used to reduce the amount outstanding under the
Culbro Credit Agreement. The mortgage has a term of 10 years, bears interest at
7.25% per annum and has a balloon payment of $1.2 million at termination.
Management believes that the Corporation's cash flow from operations will
need to be supplemented by proceeds generated from other transactions to meet
operating and capital requirements and scheduled debt repayments. Management is
pursuing certain alternatives and expects to conclude agreements that will
generate the necessary funds. Over the long-term, management will seek to
maintain a level of indebtedness which is commensurate with the Corporation's
earnings and cash flow.
RESULTS OF OPERATIONS
1993 COMPARED TO 1992
The 1993 net loss was due to the cumulative effect of the Corporation's
adoption of Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which resulted in a
net charge of $9.2 million. Income before the accounting change in 1993 declined
from the prior year, principally reflecting higher interest expense and lower
operating profit in the consumer products segment (excluding the effect of
certain nonrecurring charges recorded in this segment in 1992), partially offset
by higher operating profit in the industrial products segment. Operating profit
was not materially different in 1993 as compared to 1992 in the nursery products
and real estate segments.
In the consumer products segment, net sales and other revenue increased
primarily due to Eli Witt's acquisition of Certified Grocers near the end of the
first quarter. Excluding the effect of the nonrecurring charges recorded in the
prior year, which included a restructuring charge of $3.5 million at Eli Witt
and a relocation charge of $1.0 million at General Cigar Co., Inc. ("General
Cigar"), operating profit in the consumer products segment declined, due to
lower operating profit at Eli Witt, while operating profit at General Cigar was
substantially unchanged. Eli Witt's operating profit was negatively impacted by
competitive pricing pressures, which reduced gross margins, and lower profit
from inventory price appreciation on excess cigarettes purchased in anticipation
of manufacturers' price increases. Additionally, gross profit was negatively
affected when cigarette manufacturers reduced prices on their premium cigarette
brands by approximately 25% during the year and curtailed purchase incentive
programs. In the fourth quarter, Eli Witt adjusted its pricing to customers to
partially compensate for these effects. At General Cigar, the effect of
increased net sales of cigars was substantially offset by lower sales of
Connecticut shade wrapper tobacco, due to a further reduction in demand by
foreign cigar manufacturers. The increased net sales of cigars in 1993 reflected
price increases and higher volume of premium cigar sales partially offset by
lower volume of nonpremium cigar sales.
In the industrial products segment, operating profit at CMS Gilbreth
Packaging Systems, Inc. ("CMS Gilbreth") increased in 1993 due to higher net
sales and improved gross margins. CMS Gilbreth's higher net sales reflected
sales volume increases for both packaging materials and machinery. The improved
gross margins resulted mainly from continued manufacturing improvements in the
production of packaging materials.
Operating profit in the real estate segment was substantially unchanged as
higher profit in the Connecticut real estate business, Culbro Land Resources,
Inc. ("CLR") was offset by the lower results in the Corporation's New York
office building, due to the full year effect of 1992 lease expirations. The
higher profit at CLR principally reflected higher gains on sales of both
commercial and residential properties.
The Corporation's equity loss from investees was lower in 1993 because the
prior year's results included the loss on the disposition of the Corporation's
25% equity investment in Moll PlastiCrafters, a transaction that generated cash
of approximately $5 million. Results attributed to the Corporation's remaining
equity investment, the 25% ownership in Centaur Communications Limited
("Centaur"), a publishing company in the United Kingdom, were lower after
excluding a 1992 gain related to a sale of shares by Centaur.
The higher interest expense reflected several factors, including the effect
of the additional debt assumed in the acquisition of Certified Grocers and the
termination of the accounts receivable sales agreement. These were partially
offset by lower borrowings in 1993 for the purchase of excess cigarette
inventories because of the reduction of these purchases in anticipation of
manufacturers' price increases and purchase incentive programs, and the effect
of the prepayment of the Corporation's 9.7% Senior Notes.
Fees on sales of accounts receivable declined due to the termination of the
accounts receivable sales agreement near the end of the first quarter. In 1992,
the accounts receivable sales agreement was in effect the entire year.
- -------------------------------------------------------------------------------
5
<PAGE>
The higher effective tax rate reflects the effect of certain tax liability
adjustments on the 1992 income tax provision and the effect of higher state
taxes in the current year as a result of a change in the mix of pretax income.
1992 COMPARED TO 1991
1992 net income decreased as compared to 1991 due principally to the
comparatively lower cost of sales in 1991 in the wholesale distribution
business. The liquidation of LIFO inventories in that year reduced cost of sales
in that business by approximately $17 million. There was no liquidation of LIFO
inventories in 1992. In 1992, the Corporation incurred several nonrecurring
charges, which, in total, were slightly higher than nonrecurring charges in the
previous year. The 1992 results included a $3.5 million pretax restructuring
charge for branch closings and the curtailment of benefits under the Eli Witt
Pension Plan in connection with Eli Witt's acquisition of Certified Grocers.
Other nonrecurring items in 1992 included a loss of approximately $900,000 on
the Take-out Agreement with Moll PlastiCrafters and approximately $1 million of
expenses related to the relocation of General Cigar Company headquarters from
the Corporation's New York office building to its office complex north of
Hartford, Connecticut. These charges were partially offset by other income of
approximately $900,000 reflecting the proceeds from the favorable outcome of a
litigation matter to recover certain expenses from the former owner of Gilbreth
International, one of the Corporation's subsidiaries in the packaging and
labeling systems business. In 1991, nonrecurring items reflected principally a
loss of $3.3 million on the sale of Moll Tool.
Operating profit in the consumer products segment declined due principally
to the effect of the 1991 liquidation of LIFO inventories in the wholesale
distribution business discussed above, and lower operating profit in the cigar
business. In the wholesale distribution business, excluding the effect of the
liquidation of LIFO inventories on prior year's results, operating profit
increased, due principally to increased volume and higher gross margins. The
increased volume reflected new business obtained in 1992 and the full year
effect of new business obtained in 1991. The increase in gross margins
principally reflected lower merchandise costs resulting from manufacturers'
purchase incentive programs on cigarettes. Operating profit in the cigar
business declined due to lower sales volume of Connecticut shade wrapper
tobacco, resulting from increased competition and reduced demand by foreign
cigar manufacturers, the principal market for sales of its wrapper tobacco.
Revenue from sales of cigars increased, as higher prices more than offset a
decline in volume, which has occurred in this industry over the past several
years.
The operating profit in the industrial products segment reflected the
substantially improved results of the packaging and labeling systems business,
which incurred an operating loss in 1991. The improved results were due to
increased volume, higher margins, and lower operating expenses. The increased
volume reflected higher sales of both packaging materials and machinery,
including increased machine sales in international markets. Margins increased
due principally to lower manufacturing costs of packaging materials resulting
from the implementation of a manufacturing cost reduction program in 1992. The
reduction in operating expenses reflected a lower headcount and increased
efficiencies.
The operating profit in the nursery products segment, as compared to an
operating loss in the prior year, was due to increased volume and lower
operating expenses, partially offset by the effect of lower margins. Margins
declined due to pricing pressures caused by the weakened economy and an
oversupply of product in the marketplace.
Operating profit in the real estate segment declined due principally to
lower profit from the Corporation's New York office building, due to the
expiration of certain leases and the renewal of other leases at lower rates.
Operating profit in the Corporation's Connecticut real estate business, Culbro
Land Resources, was slightly lower than the prior year. This business continues
to be adversely affected by the weak northeast real estate market which has
depressed both commercial lease rates and residential home sales. Operating
profit in 1992 included a substantial land sale to a bottler of The Pepsi Cola
Company, which was the first major new entrant in the New England Tradeport, the
Corporation's planned 600 acre industrial park located north of Hartford. Total
revenue in the real estate segment declined, reflecting the transition from home
builder to the lot sales program at Culbro Homes in 1992 and lower revenue from
the New York office building, partially offset by the land sale in the New
England Tradeport.
Equity in the net loss of investees in 1992 reflected principally the loss
on the disposition of the Corporation's 25% equity investment in Moll
PlastiCrafters as a result of the Take-out Agreement previously discussed.
Results from the Corporation's equity investment in Centaur improved due
principally to the effect of asset write-offs taken by that Company in the prior
year.
Interest expense, net, decreased due to several factors. The more
significant factors include overall lower rates, the full year effect of the
$19.5 million prepayment of the 9.7% Senior Notes in August 1991, interest
income on a tax refund received in the current year and the accounts receivable
sales program being in effect the entire year compared to six months in 1991.
The lower effective tax rate in 1992 reflects the effect of tax liability
adjustments and foreign subsidiary results.
- -------------------------------------------------------------------------------
6
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES AND OTHER REVENUE $1,364,576 $1,148,722 $1,104,272
COSTS AND EXPENSES
Cost of goods sold 1,219,742 1,020,608 965,208
Selling, general and administrative expenses 126,055 108,629 110,680
Restructuring charge at Eli Witt -- 3,500 --
Loss on sale of business -- -- 3,300
Other expense, net -- 122 900
----------------------------------------
OPERATING PROFIT 18,779 15,863 24,184
Equity in net loss of investees 290 882 1,940
Fees on sales of accounts receivable 476 2,037 1,063
Interest expense, net 14,411 10,405 15,271
----------------------------------------
Income before income taxes 3,602 2,539 5,910
Income tax provision 1,877 671 2,734
----------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,725 1,868 3,176
Cumulative effect of accounting change for
postretirement benefits, net of tax (9,177) -- --
----------------------------------------
NET (LOSS) INCOME (7,452) 1,868 3,176
Accretion of preferred stock of subsidiary 705 -- --
----------------------------------------
NET (LOSS) INCOME APPLICABLE TO COMMON SHAREHOLDERS (8,157) 1,868 3,176
Retained earnings -- beginning of period 106,502 107,219 107,489
Dividends -- (2,585) (3,446)
----------------------------------------
Retained earnings -- end of period $ 98,345 $ 106,502 $ 107,219
----------------------------------------
----------------------------------------
Income per common share before cumulative effect
of accounting change $ 0.24 $ 0.43 $ 0.74
Cumulative effect of accounting change
per common share (2.13) -- --
----------------------------------------
Net (loss) income per common share $ (1.89) $ 0.43 $ 0.74
----------------------------------------
----------------------------------------
Weighted average common shares outstanding 4,308,000 4,308,000 4,307,000
----------------------------------------
----------------------------------------
</TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCK AND CAPITAL IN EXCESS OF PAR
VALUE
<TABLE>
<CAPTION>
CAPITAL IN COMMON
COMMON EXCESS OF STOCK IN
(DOLLARS IN THOUSANDS) STOCK PAR VALUE TREASURY
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance December 1, 1990 $4,549 $13,296 $(5,321)
Issuance of treasury stock (567 shares) -- -- 7
-----------------------------------
Balance November 30, 1991 4,549 13,296 (5,314)
Issuance of treasury stock (166 shares) -- -- 2
-----------------------------------
Balance November 28, 1992 4,549 13,296 (5,312)
Issuance of treasury stock (226 shares) -- -- 4
-----------------------------------
Balance November 27, 1993 $4,549 $13,296 $(5,308)
-----------------------------------
-----------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
- -------------------------------------------------------------------------------
7
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (7,452) $ 1,868 $ 3,176
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Cumulative effect of accounting change, net of tax 9,177 -- --
Depreciation and amortization 12,620 11,368 12,229
Loss on sale of business -- -- 3,300
Equity in undistributed net loss of investees 290 882 1,940
Provision for bad debts 1,332 1,485 1,726
Changes in assets and liabilities net of effects from
acquisition in 1993 and sale of business in 1991:
Reductions in (additions to) real estate held for
sale or lease, net 326 (523) 1,011
Decrease (increase) in inventories 60,828 (67,114) 22,116
Decrease (increase) in accounts receivable 5,815 (4,963) (9,199)
(Decrease) increase in sales of accounts receivable (26,000) (4,000) 30,000
(Decrease) increase in accounts payable and
accrued liabilities (7,046) 5,990 5,432
Decrease in income taxes payable (90) (1,542) (834)
Increase (decrease) in deferred income taxes 1,106 652 (655)
Other, net (1,079) (1,140) (2,679)
----------------------------------------
Net cash provided by (used in) operating activities 49,827 (57,037) 67,563
----------------------------------------
INVESTING ACTIVITIES:
Additions to property and equipment (8,275) (10,666) (8,038)
Proceeds from Take-out Agreement with Moll PlastiCrafters 4,953 -- --
Acquisition of Certified Grocers, net of cash acquired (2,762) -- --
Additional investment in Centaur Communications Ltd. -- -- (4,365)
Proceeds from sale of business -- -- 2,873
Other, net -- 573 (262)
----------------------------------------
Net cash used in investing activities (6,084) (10,093) (9,792)
----------------------------------------
FINANCING ACTIVITIES:
Increases in long-term debt, including debt assumed in the
acquisition of Certified Grocers in 1993 61,612 17,000 --
Payments of long-term debt, including refinancing of
debt assumed in the acquisition of Certified Grocers in 1993 (55,338) (820) (37,916)
Net (decrease) increase in notes payable (43,200) 43,200 (6,700)
Dividends -- (2,585) (3,446)
----------------------------------------
Net cash (used in) provided by financing activities (36,926) 56,795 (48,062)
----------------------------------------
Net increase (decrease) in cash and cash equivalents 6,817 (10,335) 9,709
Cash and cash equivalents at beginning of year 1,898 12,233 2,524
----------------------------------------
Cash and cash equivalents at end of year $ 8,715 $ 1,898 $ 12,233
----------------------------------------
----------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
- -------------------------------------------------------------------------------
8
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS NOV. 27, 1993 Nov. 28, 1992
- ----------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 8,715 $ 1,898
Receivables, less allowance of $2,364 (1992 - $2,650) 75,917 42,844
Inventories 128,216 165,246
Other current assets 5,931 10,642
------------------------------
Total current assets 218,779 220,630
Property and equipment, net 114,898 99,509
Real estate held for sale or lease, net 35,338 35,664
Investments in real estate joint ventures 8,275 8,285
Other, principally investment in Centaur Communications Limited 24,923 19,256
Intangible assets 21,446 20,304
------------------------------
Total assets $423,659 $403,648
------------------------------
------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 76,904 $ 62,416
Notes payable -- 43,200
Long-term debt due within one year 14,519 6,228
Income taxes 264 354
------------------------------
Total current liabilities 91,687 112,198
Long-term debt 175,405 145,678
Deferred income taxes 5,479 12,091
Other noncurrent liabilities 30,201 14,646
------------------------------
Total liabilities 302,772 284,613
------------------------------
Minority interest in subsidiary 10,005 --
------------------------------
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share
Authorized -- 10,000,000 shares
Issued -- 4,549,190 shares 4,549 4,549
Capital in excess of par value 13,296 13,296
Retained earnings 98,345 106,502
------------------------------
116,190 124,347
Less -- Common stock in Treasury, at cost, 241,128 shares (1992 - 241,354) (5,308) (5,312)
------------------------------
Total shareholders' equity 110,882 119,035
------------------------------
Total liabilities, minority interest and shareholders' equity $ 423,659 $403,648
------------------------------
------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
- -------------------------------------------------------------------------------
9
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
BASIS OF CONSOLIDATION
The consolidated financial statements reflect the accounts of all of Culbro
Corporation's (the "Corporation") subsidiaries. The Corporation accounts for its
approximately 25% investment in Centaur Communications Limited ("Centaur") on
the equity method. Approximately $6,550, representing the excess of the cost of
the Corporation's investment over the book value of its equity in Centaur, is
being amortized on a straight-line basis over 40 years. The Corporation accounts
for its investments in real estate joint ventures on the equity method.
FISCAL YEAR
The Corporation's fiscal year ends on the Saturday nearest November 30.
Fiscal 1993, 1992 and 1991 ended on November 27, 1993, November 28, 1992 and
November 30, 1991, respectively, and each year included 52 weeks.
INVENTORIES
Inventories are stated at the lower of cost or market. The first-in, first-
out (FIFO) or average cost method is used to determine the cost of all
inventories, except for The Eli Witt Company ("Eli Witt"), the Corporation's
subsidiary in the wholesale distribution business, which uses the last-in,
first-out (LIFO) method. Eli Witt's inventories consist mainly of cigarettes,
tobacco, confectionery, grocery and paper products. The Corporation believes
that the LIFO method results in a better matching of the costs and revenues of
Eli Witt.
Raw materials include tobacco in the process of aging and landscape nursery
stock, a substantial amount of which will not be used or sold within one year.
It is the practice in these industries to include such inventories in current
assets. Raw materials also include tobacco in bond which is subject to customs
duties payable upon withdrawal from bond. Following industry practice, the
Corporation does not include such duties in inventories until paid.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is determined on a
straight-line basis over the estimated useful asset lives for financial
reporting purposes and principally on accelerated methods for tax purposes. Upon
the sale or retirement of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and the difference
between the book value and any proceeds realized on the sale is charged or
credited to income. Expenditures for maintenance and repairs are charged to
income as incurred; renewals and improvements are capitalized.
INTANGIBLE ASSETS
Intangible assets include principally the excess of the costs of businesses
acquired over the fair value of their net tangible assets and are amortized on a
straight-line basis principally over 40 years.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective at the beginning of the 1993 fiscal year, the Corporation adopted
Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which requires the
Corporation to recognize postretirement benefits on the accrual basis. The
adoption of SFAS No. 106 resulted in a net charge for the cumulative effect of
the accounting change of $9,177, or $2.13 per common share (see Note 8).
MINORITY INTEREST IN SUBSIDIARY
The minority interest in subsidiary included in the Corporation's balance
sheet reflects the Series A preferred stock of Eli Witt issued in connection
with the 1993 acquisition of Certified Grocers of Florida, Inc. (see Note 1).
The Series A preferred stock was recorded at its estimated fair market value at
the time of issuance and is being accreted to its face value under the interest
method over approximately six years.
INCOME TAXES
The Corporation uses the liability method of accounting for income taxes in
accordance with SFAS No. 109 "Accounting for Income Taxes."
EARNINGS PER SHARE
Earnings per share of common stock are based on the weighted average number
of shares of common stock outstanding considering the dilutive effect of
outstanding stock options.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosure About Fair Values of Financial Instruments,"
requires disclosure of the fair value of certain financial instruments. For cash
equivalents, accounts receivable, accounts payable and accrued liabilities, the
amounts included in the financial statements reflect their fair value because of
the short-term maturity of these instruments. The fair value of the
Corporation's debt instruments is discussed in Note 4.
- -------------------------------------------------------------------------------
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 1 -- ACQUISITIONS
CERTIFIED GROCERS ACQUISITION
On February 19, 1993, pursuant to an Agreement and Plan of Merger (the
"Agreement") dated November 3, 1992, Culbro Corporation's (the "Corporation")
subsidiary in the wholesale distribution business, The Eli Witt Company ("Eli
Witt") acquired Certified Grocers of Florida, Inc. ("Certified Grocers"), an
independent full service grocery wholesale distribution company which serviced
retail outlets in Florida and Georgia. Originally a cooperative, Certified
Grocers was a retailer-owned grocery wholesaler that operated from a 700,000
square foot warehouse facility in Ocala, Florida. The acquisition was accounted
for as a purchase and the Corporation's results subsequent to the acquisition
date include the results of Certified Grocers. Approximately $1.8 million of
goodwill from the acquisition was recorded, representing the excess of the fair
value of Eli Witt's Series A preferred stock issued and other costs and expenses
of the acquisition over the fair value of the net assets acquired. The goodwill
is being amortized over twenty-five years.
Under the terms of the Agreement, each share of Certified Grocers' common
stock was converted into one share of newly issued nonvoting Eli Witt Series A
preferred stock. The Series A preferred stock was recorded at its estimated fair
value of $9.3 million when it was issued and is being accreted to its stated
value of $15.8 million using the interest method. Dividends on the Series A
preferred stock are cumulative, and are payable quarterly beginning in May,
1997. The dividend rate is 4% per annum of the stated value for the first year,
8% per annum of the stated value for the second year and thereafter adjusts
quarterly to 2% above the interest rate on seven year U.S. Treasury Notes. The
adjustable dividend rate may not be less than 7% per annum nor more than 12% per
annum. Payment of dividends on the Series A preferred stock may be offset
against certain contingent liabilities if they are actually incurred, or reduced
if default conditions under supply agreements (see below) arise. The Series A
preferred stock is redeemable at the option of Eli Witt, in whole or in part, at
any time at the stated value plus accrued and unpaid dividends. A redemption of
not less than $10 million of the Series A preferred stock will be required if
the Corporation's ownership in Eli Witt falls below 50% or other prohibited
transactions, as defined, occur.
Former Certified Grocers shareholders who entered into supply agreements
with Eli Witt, in which they agreed to purchase minimum quantities of
merchandise from Eli Witt for a three-year period commencing with the
acquisition, received 300,000 shares of Class C common stock, which represented
15% of the issued and outstanding common stock of Eli Witt after the
acquisition. Accordingly, the Corporation's ownership of Eli Witt's common stock
was reduced to 85%. Holders of Class C common stock are entitled, voting as a
separate class, to elect two members of the Board of Directors of Eli Witt.
As a result of this acquisition, Eli Witt is being financed separately
from the Corporation and its other subsidiaries; therefore, Eli Witt's cash flow
is no longer available to the Corporation and its other subsidiaries. Eli Witt
obtained a $125 million Credit Agreement to finance its business (see Note 4).
In connection with the acquisition, Eli Witt repaid its intercompany debt to the
Corporation and also paid the Corporation a cash dividend. These payments
totaled $87.7 million. The dividend amount was equal to Eli Witt's consolidated
book value, as defined, at the acquisition date less $25 million. The
Corporation used the proceeds from these payments to reduce existing debt,
including a $12.5 million prepayment on its 9.7% Senior Notes, and to repurchase
all previously sold yet uncollected receivables under its accounts receivable
sales agreement. Eli Witt used the initial proceeds from its new credit
facility to make these payments and refinance Certified's debt of approximately
$24.3 million that was assumed in the acquisition. The Corporation also holds
a $10 million mortgage on a warehouse previously owned by Certified Grocers.
The mortgage will be repaid upon receipt of a mortgage from a third-party
lender.
In connection with the acquisition, Eli Witt also declared a special
dividend to the Corporation in the form of its Series B preferred stock, with a
stated value of $15 million. Dividends on the Series B preferred stock are
cumulative, and accrue from the acquisition date at the rate of 10% per annum of
the stated value. There were no dividend payments from Eli Witt to the
Corporation in 1993. The Series B preferred stock is subject to mandatory
redemption five years and six months after the acquisition date at a price equal
to the stated value plus accrued dividends. The holders of Series B preferred
stock are entitled to vote, as a class, on all matters on which holders of
common stock (other than holders of Class C common stock) have the right to
vote.
- -------------------------------------------------------------------------------
11
<PAGE>
Unaudited pro forma condensed consolidated results of operations of the
Corporation, assuming the acquisition of Certified Grocers by Eli Witt had
occurred at the beginning of the 1993 and 1992 fiscal years, are as follows:
<TABLE>
<CAPTION>
1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C>
Net sales and
other revenue $1,429,426 $1,458,271
Loss before
cumulative effect
of accounting change $ (262) $ (3,991)
Loss per common share
before cumulative effect
of accounting change $ (0.28) $ (1.14)
</TABLE>
This unaudited pro forma information has been presented for comparative
purposes only and may not necessarily reflect the combined results of operations
had the acquisition actually taken place at the beginning of the respective
years.
PENDING ACQUISITION
On November 24, 1993, the Corporation and Eli Witt entered into a letter of
intent to purchase the net assets of the southern divisions of NCC L.P. ("NCC"),
a limited partnership engaged in the wholesale distribution business. Estimated
annual revenue of NCC's southern divisions is approximately $600 million. As
proposed, Eli Witt would acquire the net assets of NCC's southern divisions in
exchange for 35% of the outstanding common stock of Eli Witt after completion of
this transaction. Concurrent with the acquisition, a partner of NCC will
purchase, for $12 million, newly issued preferred stock of Culbro with a face
value of $15 million, exchangeable into the Series B preferred stock of Eli Witt
currently held by the Corporation. In connection with the foregoing, the NCC
partner will also purchase, at face value, $3 million of newly issued
convertible subordinated notes of Eli Witt. If this transaction is completed as
presently structured, the Corporation's ownership in Eli Witt's common equity
would be reduced to approximately 53%. This proposed transaction is subject to
completion of a definitive agreement, financing arrangements, and the delivery
of certain amounts of net assets by Eli Witt and NCC at closing.
NOTE 2 -- BUSINESS DISPOSITION
In 1991, the Corporation sold its injection molded plastics business, Moll
Tool & Plastics Corporation ("Moll Tool"), to a limited partnership ("Moll
PlastiCrafters") formed by the consolidation of the Moll Tool business and a
smaller injection molded plastics business. A $3.3 million pretax loss on the
sale was reflected in the Corporation's 1991 consolidated statement of
operations. Proceeds from the sale included cash, notes receivable of $6
million, a 25% interest in Moll PlastiCrafters, and assumption of $6.7 million
of capital lease obligations by Moll PlastiCrafters (see Note 13).
On December 17, 1992, the Corporation completed a Take-out Agreement with
Moll PlastiCrafters, whereby the Corporation received cash of approximately $5
million and a note for $750 for the outstanding notes receivable. As part of the
agreement, the Corporation relinquished its 25% equity interest in Moll
PlastiCrafters. A loss of $897 on the relinquishment of the Corporation's equity
investment was included in the Corporation's 1992 consolidated statement of
operations.
NOTE 3 -- SALES OF ACCOUNTS RECEIVABLE
In 1991, the Corporation entered into a three-year agreement with a major
bank to sell, without recourse, up to $35 million of undivided fractional
interests in a designated pool of receivables of the Corporation's consumer
products businesses. As receivables were collected, new receivables were sold to
replace them. The Corporation paid certain fees at the time of each sale. As a
result of the acquisition of Certified Grocers and the separate financing
obtained by Eli Witt, the agreement to sell accounts receivable was terminated
and all previously sold yet uncollected accounts receivable were repurchased by
the Corporation.
NOTE 4 -- LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt includes:
<TABLE>
<CAPTION>
NOV. 27, Nov. 28,
1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C>
Culbro Corporation Credit
Agreement $ 69,000 $ 90,000
The Eli Witt Company Credit
Agreement 70,850 --
Senior Notes, 9.7%, due
serially through 1998 34,491 47,500
Obligations under capital leases 6,305 7,429
Other, principally mortgages 9,278 6,977
-----------------------
189,924 151,906
Less: Due within one year 14,519 6,228
-----------------------
Total long-term debt $175,405 $145,678
-----------------------
-----------------------
</TABLE>
- -------------------------------------------------------------------------------
12
<PAGE>
The annual payment requirements under the terms of all the above loans,
excluding the Culbro Corporation Credit Agreement ("Culbro Credit Agreement"),
the revolving loans under The Eli Witt Company Credit Agreement ("Eli Witt
Credit Agreement") and capital leases, for the years 1994 through 1998 are
$12,852, $11,724, $16,095, $15,796 and $10,730, respectively.
During 1992, prior to the separate financing of Eli Witt, the Corporation
obtained additional temporary short-term credit facilities to enable Eli Witt to
purchase additional cigarette inventories to take advantage of profit
opportunities in connection with manufacturers' quarterly purchase incentive
programs. These additional facilities included a $65 million facility obtained
on June 30, 1992, which was repaid August 27, 1992 and a $40 million facility
obtained on September 30, 1992, which was repaid February 1, 1993. The $40
million was included in notes payable on the Corporation's balance sheet at
November 28, 1992.
On February 19, 1993, in connection with the acquisition of Certified
Grocers (see Note 1), Eli Witt entered into a $125 million Credit Agreement with
a syndicate of banks. The agreement is secured by inventories and accounts
receivable and provides Eli Witt with committed financing through February 1998
at market rates, principally LIBOR plus a margin of 2 3/4%. The Eli Witt Credit
Agreement, which is nonrecourse to the Corporation, includes a $30 million term
loan, a $45 million revolving credit facility for working capital and general
business purposes, and a $50 million revolving credit facility for the purchase
of excess cigarette inventories in connection with manufacturers' purchase
incentive programs and price increases. In lieu of compensating balance
requirements, Eli Witt pays a commitment fee of 1/2 of 1% per annum on the
unused available balance of the revolving credit facilities. The Eli Witt Credit
Agreement prohibits payment of dividends on its common stock, places limitations
on indebtedness, capital expenditures and significant asset sales, as defined,
and requires Eli Witt to maintain a minimum fixed charge coverage, net worth and
working capital. The Eli Witt Credit Agreement requires proceeds from
substantial asset sales not in the ordinary course of business to be used to
reduce the commitments under the agreement. Additionally, Eli Witt's cash flow
is no longer available to the Corporation and its other subsidiaries.
Concurrent with the acquisition of Certified Grocers and the related
financing obtained by Eli Witt, the Corporation's $90 million Credit Agreement
was replaced with an $80 million Credit Agreement. The new Culbro Credit
Agreement terminates in June 1996 (the commitment will be reduced to $75 million
in June 1994 and to $65 million in September 1995) and provides committed
financing at market rates, principally LIBOR plus a margin of 1 1/2 %. In lieu
of compensating balance requirements, the Corporation pays a commitment fee of
1/2 of 1% per annum on the unused available balance. The Culbro Credit Agreement
is collateralized by the stock of the Corporation's operating subsidiaries and
includes limitations on indebtedness, capital expenditures, investments and
other significant transactions, as defined. Proceeds from significant asset
sales not in the ordinary course of business are required to be used to reduce
commitments under the Culbro Credit Agreement and the Corporation's 9.7% Senior
Notes. The Culbro Credit Agreement permits dividends to be paid subsequent to
1994, provided the Corporation's results exceed certain requirements, as
defined.
In March 1993, the Corporation and Eli Witt entered into interest rate swap
agreements with major banks as a hedge against interest rate exposure on
variable rate debt. The Corporation entered into an interest rate swap agreement
which effectively converted $30 million of variable rate debt under the Culbro
Credit Agreement into fixed rate debt at 6.24% for three years. The Corporation
also entered into an interest rate swap agreement to convert an additional $20
million of variable rate debt under the Culbro Credit Agreement to fixed rate
debt at 6.39% for two years. This agree-ment replaced a $20 million interest
rate swap agreement which expired in September 1993. Eli Witt entered into
several interest rate swap agreements which range from two to three years, and
converted a total of $60 million of variable rate debt under the Eli Witt Credit
Agreement to fixed rate debt at an average rate of 7.25%. Management believes
that risk of loss due to the nonperformance by the counter parties of the swap
agreements is minimal.
In January 1994, the Corporation obtained a $5 million mortgage on certain
equipment. The proceeds were used to reduce the amount outstanding under the
Corporation's Credit Agreement. The mortgage bears interest at 7.25% per annum
and has a term of 10 years, with a balloon payment of $1.2 million due at
termination.
Management believes that the overall value of debt as stated on its
November 27, 1993 balance sheet approximates its fair market value. Based on the
estimated fair market value of the interest rate swap agreements in effect at
November 27, 1993, the Corporation and Eli Witt would be required to pay a total
of $1.1 million to terminate such agreements.
NOTE 5 -- SHAREHOLDERS' EQUITY
EMPLOYEES STOCK OPTION PLANS
The 1992 Stock Plan (the "1992 Plan") and the 1991 Employees Incentive
Stock Option Plan (the "1991 Plan") for officers and key employees, made
available 300,000 and 210,000 shares of common stock, respectively, for purchase
at prices equal to the fair market value at date of grant. The options
outstanding under these plans may be exercised as Incentive Stock Options, which
under current tax laws do not provide any tax deduction to the Corporation.
Options may be
- -------------------------------------------------------------------------------
13
<PAGE>
exercised over a period ending not later than eight years from the date of
grant. The exercise period for each grant is determined by the Corporation's
Compensation Committee. The 1983 Employees Incentive Stock Option Plan (the
"1983 Plan") expired in 1993.
At November 27, 1993, a total of 220,100 shares under the 1992 Plan were
available for future grant. There are no shares available for future grant
under the 1991 Plan. Of the options outstanding at November 27, 1993, a total of
146,400 may be exercised as stock appreciation rights. The options granted under
the 1992 and 1991 Plans are not exercisable until three years from the date of
grant. Transactions under the 1992, 1991 and 1983 Plans are summarized as
follows:
<TABLE>
<CAPTION>
NUMBER
OF SHARES
- ------------------------------------------------------------------
<S> <C>
Options outstanding at Dec. 1, 1990 117,972
Granted during 1991 108,900
Expired and canceled (41,298)
-------
Options outstanding at Nov. 30, 1991 185,574
Granted during 1992 80,900
Expired and canceled (36,466)
-------
Options outstanding at Nov. 28, 1992 230,008
Granted during 1993 79,900
Expired and canceled (29,208)
-------
Options outstanding at Nov. 27, 1993 280,700
-------
-------
Option prices range between: $14.00
and
$27.00
Options exercisable:
November 30, 1991 39,574
November 28, 1992 18,708
November 27, 1993 30,700
Expiration date of the 1991 Plan 2001
Expiration date of the 1992 Plan 2002
Number of option holders at Nov. 27, 1993 15
</TABLE>
NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
The 1992 Stock Option Plan for Nonemployee Directors made available 45,000
shares of common stock for purchase at prices equal to the fair market value at
date of grant. Options canceled become available for future grant. In 1993, the
total of 14,000 options granted to nonemployee directors at a price of $16.69
per share are not exercisable until three years from the date of grant.
Accordingly, 31,000 shares remained available for future grant at November 27,
1993. Options may be exercised over a period ending not later than eight years
from the date of grant. The options outstanding will be exercised as Incentive
Stock Options. None of the options outstanding at November 27, 1993 may be
exercised as stock appreciation rights.
PREFERRED STOCK
The Corporation has 1,000,000 authorized but unissued shares of preferred
stock, par value $1.
NOTE 6 -- LEASE COMMITMENTS
The Corporation and its subsidiaries have noncancellable leases relating
principally to manufacturing facilities and distribution equipment.
CAPITAL LEASES
Future minimum lease payments under capital leases and the present value of
such payments as of November 27, 1993 were:
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
1994 $2,200
1995 1,775
1996 1,246
1997 683
1998 475
Later years 984
-----
Total minimum lease payments 7,363
Less: Amounts representing interest 1,058
-----
Present value of minimum lease
payments (a) $6,305
-----
-----
<FN>
(A) INCLUDED ON THE BALANCE SHEET AS CURRENT LIABILITIES ARE $1,667 (1992 -
$1,899) AND AS LONG-TERM DEBT $4,638 (1992 - $5,530) (SEE NOTE 4).
</TABLE>
The present value of future minimum payments under capital leases of Eli
Witt was $1,946 at November 27, 1993.
At November 27, 1993, property and equipment included capital leases
amounting to $7,114 (1992 - $8,070), net of accumulated depreciation of $10,032
(1992 - $9,591). Depreciation expense relating to capital leases was $1,906 in
1993 (1992 - $2,273; 1991 - $2,831).
OPERATING LEASES
Future minimum rental payments under noncancellable leases as of November
27, 1993 were:
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
1994 $ 3,470
1995 2,686
1996 1,898
1997 1,446
1998 1,176
Later years 5,608
------
Total minimum lease payments $16,284
------
------
</TABLE>
Future minimum rental payments under non-cancellable operating leases of
Eli Witt was $15,408 as of November 27, 1993.
Total rental expenses for all operating leases in 1993 was $4,042 (1992 -
$2,893; 1991 - $2,967).
- -------------------------------------------------------------------------------
14
<PAGE>
NOTE 7 -- PENSION PLANS
The Corporation and its Eli Witt subsidiary have noncontributory defined
benefit pension plans covering certain employees. The plans provide benefits
based on employees' years of service and compensation. Contributions to the
plans are made in accordance with the provisions of the Employee Retirement
Income Security Act.
In 1992, in connection with the anticipated acquisition of Certified
Grocers, management curtailed benefits under the Eli Witt Pension Plan.
Accordingly, a charge of $1,415 was included in the restructuring charge related
to Eli Witt in the Corporation's 1992 consolidated statement of operations.
Pension expense included in the consolidated results of operations was as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service costs -- benefits
earned during the year $1,182 $1,492 $1,499
Interest on projected
benefit obligations 5,029 5,110 5,552
----------------------------------
Total benefit expense 6,211 6,602 7,051
----------------------------------
Actual return on
pension plans' assets (9,603) (12,911) (10,331)
Difference from expected
long-term return 4,915 8,320 5,303
----------------------------------
Net return (4,688) (4,591) (5,028)
----------------------------------
Amortization of net
pension obligation at
adoption of SFAS No. 87 50 235 245
Other 30 42 53
----------------------------------
Net pension expense $1,603 $2,288 $2,321
----------------------------------
----------------------------------
</TABLE>
At November 27, 1993 and November 28, 1992, the status of the plans was as
follows:
<TABLE>
<CAPTION>
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Present value of benefits earned
by participants, including vested
benefits of $66,836 and $63,676
at Nov. 27, 1993 and Nov. 28,
1992, respectively $67,751 $64,634
---------------------
---------------------
Plan assets at fair value,
primarily equities and insurance
contracts $70,459 $66,055
Present value of projected
benefit obligations 70,069 66,611
---------------------
Plan assets in excess of (less than)
projected benefit obligations 390 (556)
Amount included on balance
sheet 10,656 9,293
---------------------
Unrecognized net asset $11,046 $ 8,737
---------------------
---------------------
Unrecognized net asset includes:
Net gain from experience
differences and assumption
changes $11,385 $ 9,127
Net pension obligation at
adoption of SFAS No. 87 $ (339) $ (390)
---------------------
---------------------
</TABLE>
Discount rates of 7.5% and 8% were used to compute the present value of
pension benefits at November 27, 1993, and November 28, 1992, respectively. A 5%
rate of increase in future compensation levels was used to estimate the
projected pension obligations at both November 27, 1993, and November 28, 1992.
The expected rate of return on pension plan assets in 1993, 1992 and 1991 was
estimated at 9% representing the average long-term rate expected from investment
of the plans' assets.
NOTE 8 -- OTHER POSTRETIREMENT BENEFITS
The Corporation provides health and life insurance benefits to certain
retired employees. Effective at the beginning of the 1993 fiscal year, the
Corporation adopted Statement of Financial Accounting Standards ("SFAS") No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
This statement required the Corporation to record a liability for the present
value of its unfunded accumulated postretirement benefit obligation and
recognize postretirement benefits on the accrual basis. Previously, the
Corporation expensed the cost of these benefits when paid. The Corporation
elected to immediately recognize the cumulative effect of the change in
accounting for postretirement benefits and record its accumulated liability,
measured as of the beginning of the current fiscal year. A net charge of $9.2
million ($2.13 per share) reflecting the accrued postretirement benefit
obligation of $14.8 million, net of a deferred tax benefit of $5.6 million, was
recorded in the Corporation's 1993 statement of operations. The effect of
adopting SFAS No. 106 on 1993 operating profit was not material. The components
of the 1993 expense for such nonpension postretirement benefits were as follows:
<TABLE>
<S> <C>
Service cost -- benefits earned during
the year $ 196
Interest cost on accumulated
postretirement benefit obligation 1,067
------
Total expense $1,263
------
------
</TABLE>
Nonpension postretirement benefits expense, recorded on a cash basis, were
$1,100 and $1,300 in 1992 and 1991, respectively.
At November 27, 1993 the actuarial and recorded liabilities for such
postretirement benefits, none of which have been funded, were as follows:
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:
<TABLE>
<S> <C>
Retirees $10,382
Fully eligible active plan participants 2,836
Other active participants 1,330
-------
Liability for other postretirement
benefits $14,548
-------
-------
</TABLE>
- -------------------------------------------------------------------------------
15
<PAGE>
The accumulated postretirement benefit obligation was determined using a
discount rate of 7.5%. Because the Corporation's obligation for medical benefits
is fixed, any increase in the medical cost trend would have no effect on the
accumulated postretirement benefit obligation, service cost or interest cost.
The adoption of SFAS No. 106 did not have an adverse effect on the
Corporation's cash flow because the Corporation continues funding the cost of
postretirement benefits as paid.
NOTE 9 -- INCOME TAXES
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 54 $(631) $1,540
State and local 715 650 1,445
Deferred,
principally federal 1,108 652 (251)
---------------------------------
$1,877 $ 671 $2,734
---------------------------------
---------------------------------
</TABLE>
Income before income taxes in 1993, 1992 and 1991 was substantially from
domestic U.S. operations.
The reasons for the differences between the United States statutory income
tax rate and the effective rates are shown in the following table:
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense at statutory
rates $1,225 $863 $2,009
State and local income
taxes 670 429 954
Refund of prior years'
income taxes and
liability adjustments (300) (653) (850)
Foreign subsidiaries 184 80 727
Other 98 (48) (106)
---------------------------------
$1,877 $671 $2,734
---------------------------------
---------------------------------
</TABLE>
Net operating loss carryforwards of $5,797 are available to offset future
taxable income through
2007. In addition, preacquisition net operating loss carryforwards totaling
$11,599, which expire substantially in 2006, are available to offset future
taxable income of the related subsidiaries.
The significant components of the net deferred tax liabilities are as
follows:
<TABLE>
<CAPTION>
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Fixed assets $13,770 $11,315
LIFO inventory 7,687 10,360
Postretirement benefit
obligation (5,627) --
Pension (3,984) (3,683)
Net operating loss
carryforwards (6,510) (3,736)
Other 143 (2,165)
--------------------
$ 5,479 $12,091
--------------------
--------------------
</TABLE>
NOTE 10 -- SUPPLEMENTAL FINANCIAL
STATEMENT INFORMATION
NET SALES AND OTHER REVENUE
Excise taxes paid on cigar and cigarette sales in 1993 amounted to $135,028
(1992 - $104,414; 1991 - $106,363) and are included in net sales and other
revenue and cost of goods sold.
OTHER EXPENSE, NET
Other expense, net, in the 1992 consolidated statement of operations
reflected $1,040 to relocate the headquarters of the Corporation's subsidiary,
General Cigar Co., Inc. from New York to a building in the Corporation's office
complex north of Hartford. Also included in 1992 was other income of $918 that
represented the proceeds from the favorable settlement of a litigation matter to
recover certain expenses in connection with the 1988 acquisition of Gilbreth
International.
Other expense in the 1991 consolidated statement of operations reflected
the settlement of certain lease obligations of a former subsidiary in the
wholesale distribution business.
EQUITY IN NET LOSS OF INVESTEES
The Corporation's equity in net loss of investees in the 1993 and 1991
consolidated statement of operations related to the Corporation's investment in
Centaur Communications Limited ("Centaur").
Equity in net loss of investees in the 1992 consolidated statement of
operations reflected an equity loss of $897 on the Corporation's Take-out
Agreement with Moll PlastiCrafters (see Note 2) and equity income from a gain
recognized on the sale of shares by Centaur which more than offset the
Corporation's equity in Centaur's loss.
- -------------------------------------------------------------------------------
16
<PAGE>
INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
NOV. 27, Nov. 28,
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $ 34,232 $ 36,955
Work-in-process 15,213 12,984
Finished goods 78,771 115,307
---------------------
$128,216 $165,246
---------------------
---------------------
</TABLE>
The cost of Eli Witt's inventories at LIFO was $52,674 and $86,029 at
November 27, 1993 and November 28, 1992, respectively. On a FIFO basis, the cost
of the inventories would have been $65,975 and $101,420, respectively. Cost of
sales on a FIFO basis would have been higher by $2,090 in 1993 and lower by
$1,725 in 1992.
At November 28, 1993, the current cost of Eli Witt's cigarette inventory
was lower than the cost at the previous year end and quantities were less than
at the end of the previous year, which resulted in a reduction in costs and the
liquidation of LIFO inventory quantities. The effect in 1993 was to increase
pretax income by $2,090. At November 30, 1991 cigarette inventory quantities
were also lower than the previous year, resulting in the liquidation of LIFO
inventory carried at lower cost. The effect was to increase 1991 pretax income
by $17,045. The aforementioned supplemental information is presented for
comparative purposes.
PROPERTY AND EQUIPMENT
Property and equipment consist of:
<TABLE>
<CAPTION>
NOV. 27, Nov. 28,
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Land $ 13,453 $ 11,783
Buildings 84,340 69,469
Machinery and equipment 82,372 77,025
Accumulated depreciation (65,267) (58,768)
---------------------
$114,898 $ 99,509
---------------------
---------------------
</TABLE>
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities include trade payables of $40,785
(1992 - $28,822) and various accrued liabilities totaling $36,119 (1992 -
$33,594).
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest, net of
amounts capitalized $14,067 $11,184 $14,723
----------------------------------
----------------------------------
Income taxes, net $ 1,647 $ 1,577 $ 2,931
----------------------------------
----------------------------------
</TABLE>
- -------------------------------------------------------------------------------
17
<PAGE>
NOTE 11 -- INDUSTRY SEGMENT INFORMATION
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES AND OTHER REVENUE
Consumer Products $1,271,837 $1,059,796 $ 996,319
Industrial Products 46,896 41,808 60,014
Real Estate 11,669 12,977 17,308
Nursery Products 34,174 34,141 30,631
-------------------------------------
$1,364,576 $1,148,722 $1,104,272
-------------------------------------
-------------------------------------
OPERATING PROFIT (see Note 2 below)
Consumer Products $ 18,555 $ 18,358 $ 35,736
Industrial Products 4,931 3,647 (2,924)
Real Estate 2,092 2,219 2,766
Nursery Products 348 446 (1,530)
-------------------------------------
Industry segment totals 25,926 24,670 34,048
Equity in net loss of investees 290 882 1,940
General corporate expense 7,147 8,807 9,864
Interest expense, net 14,411 10,405 15,271
Fees on sales of accounts receivable 476 2,037 1,063
-------------------------------------
Income before income taxes $ 3,602 $ 2,539 $ 5,910
-------------------------------------
-------------------------------------
IDENTIFIABLE ASSETS
Consumer Products $ 229,400 $ 204,251 $ 129,007
Industrial Products 50,017 52,626 54,248
Real Estate 75,682 76,309 75,976
Nursery Products 41,474 39,749 43,610
-------------------------------------
Industry segment totals 396,573 372,935 302,841
General corporate 27,086 30,713 40,182
-------------------------------------
$ 423,659 $ 403,648 $ 343,023
-------------------------------------
-------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES DEPRECIATION AND AMORTIZATION
----------------------------------------------------------------------------------
1993 1992 1991 1993 1992 1991
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consumer Products $5,698 $ 7,100 $4,211 $ 6,994 $ 5,450 $ 5,605
Industrial Products 1,127 902 1,000 2,745 2,660 3,415
Real Estate 591 2,207 607 1,082 1,129 1,149
Nursery Products 822 437 2,209 949 1,273 1,180
----------------------------------------------------------------------------------
Industry segment totals 8,238 10,646 8,027 11,770 10,512 11,349
General corporate 37 20 11 850 856 880
----------------------------------------------------------------------------------
$8,275 $10,666 $8,038 $12,620 $11,368 $12,229
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
<FN>
NOTES: 1) THE CORPORATE PROFILE ON THE INSIDE FRONT COVER DESCRIBES THE
PRINCIPAL TYPES OF PRODUCTS AND SERVICES OF EACH INDUSTRY SEGMENT.
2) OPERATING PROFIT IN 1992 INCLUDES $3.5 MILLION FOR A RESTRUCTURING
CHARGE IN CONNECTION WITH THE ACQUISITION OF CERTIFIED GROCERS BY
ELI WITT AND OTHER EXPENSE OF APPROXIMATELY $1 MILLION FOR THE
HEADQUARTERS RELOCATION IN THE CONSUMER PRODUCTS SEGMENT. 1992
OPERATING PROFIT IN THE INDUSTRIAL PRODUCTS SEGMENT INCLUDES OTHER
INCOME OF APPROXIMATELY $0.9 MILLION FOR THE FAVORABLE SETTLEMENT
OF A LITIGATION MATTER. OPERATING PROFIT IN 1991 INCLUDES $3.3
MILLION FOR THE LOSS ON SALE OF A BUSINESS IN THE INDUSTRIAL
PRODUCTS SEGMENT.
3) REVENUE, OPERATING PROFIT AND ASSETS OF OPERATIONS OUTSIDE THE U.S.
AND EXPORT SALES ARE NOT MATERIAL.
4) CAPITAL EXPENDITURES AND DEPRECIATION AND AMORTIZATION INCLUDE
AMOUNTS RELATING TO CAPITAL LEASES.
</TABLE>
- -------------------------------------------------------------------------------
18
<PAGE>
NOTE 12 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Summarized quarterly financial data are presented below.
<TABLE>
<CAPTION>
1993 QUARTERS 1ST 2ND 3RD 4TH TOTAL
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales and other revenue $286,655 $389,602 $357,919 $330,400 $1,364,576
Gross profit 28,092 39,249 39,688 37,805 144,834
Income (loss) before cumulative
effect of accounting change (1,655) 1,772 849 759 1,725
Net (loss) income (10,832) 1,772 849 759 (7,452)
Income (loss) per common share before
cumulative effect of accounting change (0.38) 0.36 0.14 0.12 0.24
Net (loss) income per common share (2.51) 0.36 0.14 0.12 (1.89)
--------------------------------------------------------------------
--------------------------------------------------------------------
1992 QUARTERS 1ST 2ND 3RD 4TH TOTAL
- --------------------------------------------------------------------------------------------------------------
Net sales and other revenue $262,113 $299,198 $292,154 $295,257 $1,148,722
Gross profit 29,164 34,412 32,859 31,679 128,114
Net income (loss) (846) 2,321 1,291 (898) 1,868
Net income (loss) per common share (0.20) 0.54 0.30 (0.21) 0.43
--------------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
At November 27, 1993, the effect of manufacturers' price reductions on
cigarettes, valued on LIFO, and lower quantities of cigarette inventories on
hand than at the end of the previous year, resulted in lower cost of sales of
approximately $2.1 million, of which approximately $1.4 million was reflected in
the fourth quarter.
The net loss and net loss per common share in the 1993 first quarter have
been restated to reflect the adoption of SFAS No. 106 "Employees' Accounting for
Postretirement Benefits Other Than Pensions" effective at the beginning of
fiscal 1993.
The 1992 fourth quarter includes the restructuring charge of $3.5 million
related to the acquisition of Certified Grocers (see Note 1) and a charge of
$897 for the relinquishment of the Corporation's 25% equity investment in Moll
PlastiCrafters as a result of the December 17, 1992 Take-out Agreement with Moll
PlastiCrafters (see Note 2).
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
In connection with the sale of Moll Tool in 1991, the Corporation remains
liable on certain capital lease obligations of approximately $5.6 million
assumed by the purchaser of Moll Tool. The leases are collateralized by certain
machinery and a manufacturing facility.
Patent litigation involving the Corporation's subsidiary, Trine
Manufacturing Company ("Trine"), in the labeling machinery business, was
favorably settled in 1993. Trine and the previous owner of the Trine business
continue as defendants in an action by a customer of Trine for indemnification
resulting from its own settlement of a related patent action. While it is
impossible to predict the outcome of this indemnification action and any similar
actions which may be filed, management believes that the outcome of this action
and any similar such actions will not have a material adverse effect upon the
financial condition of the Corporation.
- -------------------------------------------------------------------------------
19
<PAGE>
REPORT OF MANAGEMENT
Management is responsible for the accompanying consolidated financial
statements, which are prepared in accordance with generally accepted accounting
principles. In management's opinion, the consolidated financial statements
present fairly the Corporation's financial position, results of operations and
cash flows.
The Corporation maintains a system of internal accounting procedures and
controls intended to provide reasonable assurance, at appropriate cost, that
transactions are executed in accordance with proper authorization, are properly
recorded and reported in the financial statements, and that assets are
adequately safeguarded. The Corporation's internal auditors continually
evaluate the adequacy and effectiveness of this system of controls.
The Audit Committee of the Board of Directors is comprised solely of
outside directors and is responsible for overseeing and monitoring the quality
of the Corporation's accounting and auditing practices. The Audit Committee
meets regularly with management, the internal auditors and the independent
accountants to discuss audit activities, internal controls and financial
reporting matters. The internal auditors and the independent accountants have
full and free access to the Audit Committee.
To foster the conduct of its business in accordance with the highest
ethical standards, the Corporation annually disseminates ethical guidelines, the
compliance with which is monitored by senior management and the Audit Committee.
The appointment of Price Waterhouse as the Corporation's independent
accountants was recommended and approved by the Audit Committee and the Board of
Directors, and was approved by the shareholders. Their Report is based on an
examination conducted in accordance with generally accepted auditing standards,
including a review of internal accounting controls and tests of accounting
procedures and records.
/s/ Edgar M. Cullman
Edgar M. Cullman
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
/s/ Jay M. Green
Jay M. Green
EXECUTIVE VICE PRESIDENT -- CHIEF FINANCIAL OFFICER AND TREASURER
- -------------------------------------------------------------------------------
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE [Logo]
To the Shareholders and Directors of Culbro Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and retained earnings, of cash flows and
of changes in common stock and capital in excess of par value present fairly, in
all material respects, the financial position of Culbro Corporation and its
subsidiaries at November 27, 1993, and November 28, 1992, and the results of
their operations and their cash flows for the fiscal years ended November 27,
1993, November 28, 1992 and November 30, 1991, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the management of Culbro Corporation; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 8 to the consolidated financial statements, the
Corporation adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," in
1993.
/s/ Price Waterhouse
New York, New York
February 21, 1994
- -------------------------------------------------------------------------------
21
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K
________________________
FOR FISCAL YEAR ENDED NOVEMBER 27, 1993
ITEMS 8 and 14 - INDEX TO FINANCIAL STATEMENTS
AND ADDITIONAL FINANCIAL DATA
________________________
CULBRO CORPORATION
________________________________________________
<PAGE>
CULBRO CORPORATION AND SUBSIDIARY COMPANIES
Index to Financial Statements and Additional Financial Data
The financial statements together with the report thereon of Price
Waterhouse dated February 21, 1994, appearing on Pages 7 to 19 of the
accompanying 1993 Annual Report to Shareholders, are incorporated by reference
in this Form 10-K Annual Report. With the exception of the aforementioned
information, and such other information specifically incorporated by reference
herein, the 1993 Annual Report to Shareholders is not to be deemed filed or
incorporated by reference as part of this report.
The following additional financial data should be read in conjunction
with the financial statements in such 1993 Annual Report to Shareholders.
Schedules not included with this additional financial data have been omitted
because they are not applicable or the required information is shown in the
financial statements or notes thereto.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants on Financial
Statement Schedules and Consent of Independent
Accountants C-1
Schedules:
V - Property and Equipment S-1
VI - Accumulated Depreciation and
Amortization of Property and Equipment S-2
VIII - Valuation and Qualifying Accounts
and Reserves S-3
XI - Real Estate and Accumulated Depreciation S-4/S-5
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
TO THE BOARD OF DIRECTORS OF CULBRO CORPORATION
Our audits of the consolidated financial statements referred to in our
report dated February 21, 1994 appearing on page 21 of the 1993 Annual Report to
Shareholders of Culbro Corporation (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules listed in Item 14(a)
of this Form 10-K. In our opinion, these Financial Statement Schedules present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PRICE WATERHOUSE
New York, New York
February 21, 1994
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 2 - 94202) of Culbro Corporation of our report dated
February 21, 1994 appearing on page 21 of the 1993 Annual Report to Shareholders
which is incorporated in this Annual Report on Form 10-K. We also consent to
the incorporation by reference of our report on the Financial Statement
Schedules which appears above.
/s/ PRICE WATERHOUSE
New York, New York
March 10, 1994
C - 1
<PAGE>
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<CAPTION>
CULBRO CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE V - PROPERTY AND EQUIPMENT
-----------------------------------
(DOLLARS IN THOUSANDS)
BALANCE AT ADDITIONS OTHER CHANGES BALANCE AT
DESCRIPTION BEGINNING OF PERIOD AT COST RETIREMENTS ADD (DEDUCT) END OF PERIOD
- ----------- ------------------- ------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
FOR THE FISCAL YEAR ENDED NOVEMBER 27, 1993
Land $ 11,783 $ 109 $ 143 $ 44 (2) $13,453
(63) (1)
1,723 (4)
Buildings 69,469 1,634 1,879 (435) (2) 84,340
15,551 (4)
Machinery & equipment 77,025 6,532 4,861 (10) (1) 82,372
563 (2)
3,123 (4)
----------- -------- -------- -------- -----------
$158,277 $8,275 $6,883 $20,496 $180,165
----------- -------- -------- -------- -----------
----------- -------- -------- -------- -----------
FOR THE FISCAL YEAR ENDED NOVEMBER 28, 1992
Land $11,843 $158 $37 $ 4 (2) $11,783
(185) (1)
Buildings 65,658 4,007 218 22 (2) 69,469
Machinery & equipment 72,840 6,501 2,234 (28) (1) 77,025
(54) (2)
----------- ---------- -------- ------ -----------
$150,341 $10,666 $2,489 $(241) $158,277
----------- ---------- -------- ------ -----------
----------- ---------- -------- ------ -----------
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1991
Land $12,289 $377 $36 $(640) (3) $11,843
(147) (1)
Buildings 72,140 1,363 1,606 108 (2) 65,658
(6,425) (3)
78
Machinery & equipment 81,216 6,298 3,862 164 72,840
(29) (1)
(10,825) (3)
(122) (2)
----------- ---------- -------- --------- -----------
$165,645 $8,038 $5,504 $(17,838) $150,341
----------- ---------- -------- --------- -----------
----------- ---------- -------- --------- -----------
<FN>
NOTES:
(1) AMORTIZATION CREDITED DIRECTLY TO ASSET ACCOUNTS - CHARGED TO COST OF SALES.
(2) RECLASSIFICATION.
(3) SALE OF MOLL TOOL & PLASTICS.
(4) ACQUISITION OF CERTIFIED GROCERS OF FLORIDA, INC.
</TABLE>
S - 1
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<TABLE>
<CAPTION>
CULBRO CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY AND EQUIPMENT
(DOLLARS IN THOUSANDS)
BALANCE AT ADDITIONS OTHER CHANGES BALANCE AT
DESCRIPTION BEGINNING OF PERIOD AT COST RETIREMENTS ADD (DEDUCT) END OF PERIOD
- ----------- ------------------- ------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
FOR THE FISCAL YEAR ENDED NOVEMBER 27, 1993
Buildings $17,016 $ 3,017 $ 538 $(122) (1) $19,373
Machinery & equipment 41,752 7,800 3,955 297 (1) 45,894
------- -------- ------- ----- --------
$58,768 $10,817 $4,493 $ 175 $65,267
------- -------- ------- ----- --------
------- -------- ------- ----- --------
FOR THE FISCAL YEAR ENDED NOVEMBER 28, 1992
Buildings $14,748 $ 2,430 $ 154 $(8) (1) $17,016
Machinery & equipment 36,095 7,771 2,116 2 (1) 41,752
------- -------- ------- ---- --------
$50,843 $10,201 $2,270 $(6) $58,768
------- -------- ------- ---- --------
------- -------- ------- ---- --------
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1991
Buildings $13,937 $2,596 $658 $(1,261) (2) $14,748
105 (1)
29
Machinery & equipment 35,896 8,500 3,621 126 36,095
(121) (1)
(4,685) (2)
------- -------- ------- --------- -------
$49,833 $11,096 $4,279 $(5,807) $50,843
------- -------- ------- --------- -------
------- -------- ------- --------- -------
<FN>
NOTES:
(1) RECLASSIFICATION.
(2) SALE OF MOLL TOOL & PLASTICS.
</TABLE>
S - 2
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<CAPTION>
CULBRO CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(DOLLARS IN THOUSANDS)
BALANCE AT CHARGED TO COSTS CHARGED TO DEDUCTIONS BALANCE AT
DESCRIPTION BEGINNING OF PERIOD AND EXPENSES OTHER ACCOUNTS FROM RESERVES END OF PERIOD
- ----------- ------------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
FOR THE FISCAL YEAR ENDED NOVEMBER 27, 1993
Reserves:
Uncollectible accounts -
trade receivables $2,650 $1,332 $617 $2,235 (1) $2,364
------ ------ ---- ------ ------
------ ------ ---- ------ ------
Inventories $1,247 $534 $ - $949 (2) $832
------ ---- ---- ---- ----
------ ---- ---- ---- ----
FOR THE FISCAL YEAR ENDED NOVEMBER 28, 1992
Reserves:
Uncollectible accounts -
trade receivables $2,416 $1,485 $149 $1,400 (1) $2,650
------ ------ ---- ------ ------
------ ------ ---- ------ ------
Inventories $1,308 $827 $ - $888 (2) $1,247
------ ------ ---- ------ ------
------ ------ ---- ------ ------
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1991
Reserves:
Uncollectible accounts -
trade receivables $2,515 $1,726 $292 $2,117 (1) $2,416
------ ------ ---- ------ ------
------ ------ ---- ------ ------
Inventories $2,108 $1,102 $20 $1,922 (2) $1,308
------ ------ ---- ------ ------
------ ------ ---- ------ ------
Notes:
(1) ACCOUNTS RECEIVABLE WRITTEN-OFF.
(2) INVENTORIES DISPOSED.
S - 3
</TABLE>
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<TABLE>
<CAPTION>
CULBRO CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
COST CAPITALIZED
SUBSEQUENT GROSS AMOUNT
INITIAL COST TO ACQUISITION AT NOVEMBER 27, 1993
------------ -------------- --------------------
ENCUM- BLDG & CARRYING BLDG &
DESCRIPTION BRANCES LAND IMPRV IMPRV COSTS LAND IMPRV TOTAL
- ----------- ------- ---- ----- ----- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land - CT $ - $2,939 $ - $10,074 $ 80 $3,018 $10,075 $13,093
Restaurant
Bloomfield, CT 510 1 - 1,259 - 1 1,259 1,260
Residential Development
Windsor, CT - 103 - 3,019 1,921 103 4,940 5,043
Commercial Off Bldg
Bloomfield, CT 803 47 - 2,020 - 47 2,020 2,067
Commercial Off Bldg
Bloomfield, CT - 3 - 1,815 - 3 1,815 1,818
Commercial Off Bldg
Bloomfield, CT - 1 - 1,513 24 1 1,537 1,538
Commercial Off Bldg
Bloomfield, CT - 1 - 1,452 23 1 1,475 1,476
Commercial Off Bldg
Bloomfield, CT - 1 - 666 - 1 666 667
Commercial Off Bldg
Bloomfield, CT - 5 - 3,277 40 5 3,317 3,322
Commercial Off Bldg
E. Granby, CT 1,191 74 - 2,815 - 74 2,815 2,889
Commercial Off Bldg
E. Granby, CT - 32 1,723 132 - 32 1,855 1,887
Commercial Off Bldg
Windsor, CT 3,895 69 - 4,398 149 69 4,547 4,616
------- ------- ------- ------- ------- -------- ------- -------
$6,399 $3,276 $1,723 $32,440 $2,237 $3,355 $36,321 $39,676
------- ------- ------- ------- ------- -------- ------- -------
------- ------- ------- ------- ------- -------- ------- -------
ACCUM. DATE OF DATE OF DEPR
DEPR. CONSTRUCTION ACQUSITION LIFE
----- ------------ ---------- ----
Land - CT $ -
Restaurant
Bloomfield, CT (354) 1983 40 yrs
Residential Development
Windsor, CT -
Commercial Off Bldg
Bloomfield, CT (845) 1977 40 yrs
Commercial Off Bldg
Bloomfield, CT (402) 1985 40 yrs
Commercial Off Bldg
Bloomfield, CT (178) 1988 40 yrs
Commercial Off Bldg
Bloomfield, CT (199) 1989 40 yrs
Commercial Off Bldg
Bloomfield, CT (98) 1988 40 yrs
Commercial Off Bldg
Bloomfield, CT (204) 1991 40 yrs
Commercial Off Bldg
E. Granby, CT (1,215) 1978 40 yrs
Commercial Off Bldg
E. Granby, CT (288) 1989 40 yrs
Commercial Off Bldg
Windsor, CT (555) 1989 40 yrs
---------
$(4,338)
---------
---------
</TABLE>
S - 4
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<CAPTION>
CULBRO CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
FISCAL YEAR ENDED NOVEMBER 27, 1993
COST RESERVE
---- -------
<S> <C> <C>
Balance at beginning of year $39,328 $(3,664)
Changes during the year:
Improvements 1,352
Additions to reserve charged to costs
and expenses (748)
Cost of sales (1,004) 74
----------- ----------
Balance at end of year $39,676 $(4,338)
----------- ----------
----------- ----------
FISCAL YEAR ENDED NOVEMBER 28, 1992
COST RESERVE
---- -------
Balance at beginning of year $38,087 $(2,946)
Changes during the year:
Improvements 3,083
Additions to reserve charged to costs
and expenses (718)
Cost of sales (1,842)
----------- ----------
Balance at end of year $39,328 $(3,664)
----------- ----------
----------- ----------
FISCAL YEAR ENDED NOVEMBER 30, 1991
COST RESERVE
---- -------
Balance at beginning of year $38,425 $(2,273)
Changes during the year:
Acquisitions 127
Improvements 3,417
Additions to reserve charged to costs
and expenses (673)
Cost of sales (3,882)
----------- ----------
Balance at end of year $38,087 $(2,946)
----------- ----------
----------- ----------
</TABLE>
S-5
