<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8K/A
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13, 04 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
CULBRO CORPORATION
(Exact name of registrant as specified in charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends Culbro Corporation's Form 8-K
dated May 10, 1994 to include the following financial information required by
Items 7(a) and 7(b) of the Form 8-K, in connection with the acquisition of the
Southern Divisions of NCC L.P. by The Eli Witt Company, a subsidiary of Culbro
Corporation.
(1) FINANCIAL STATEMENTS REQUIRED BY ITEM 7(A)
- Audited financial statements of NCC L.P. as of and for the fiscal year
ended November 27, 1993 (including supplemental information on the
Southern Divisions of NCC L.P.)
- Unaudited financial statements of the Southern Divisions of NCC L.P.
as of and for the quarter ended February 26, 1994.
(2) FINANCIAL STATEMENTS REQUIRED BY ITEM 7(B)
- Unaudited pro forma income statements of Culbro Corporation for the
fiscal year ended November 27, 1993 and the quarter ended February 26,
1994 assuming that the Southern Divisions of NCC L.P. had been
acquired by Culbro Corporation's subsidiary, The Eli Witt Company, as
of the beginning of the respective periods;
- Unaudited pro forma balance sheet of Culbro Corporation as of February
26, 1994 assuming that the Southern Divisions of NCC L.P. had been
acquired by Culbro Corporation's subsidiary, The Eli Witt Company, as
of the balance sheet date.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Culbro Corporation
----------------------------------------
(Registrant)
By: /s/ Jay M. Green
----------------------------------------
(Signature)
Executive Vice President
Date: July 11, 1994
<PAGE>
CULBRO CORPORATION
FORM 8K/A
AMENDMENT NO. 1
INDEX
Audited annual financial statements of NCC L.P. for the
fiscal year ended November 27, 1993
- Report of independent auditors . . . . . . . . . . . . . . . . . . . 3
- Balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5
- Statement of operations. . . . . . . . . . . . . . . . . . . . . . . 6
- Statement of cash flows. . . . . . . . . . . . . . . . . . . . . . . 7
- Notes to financial statements. . . . . . . . . . . . . . . . . . 8-13
Unaudited supplemental financial information of the Southern
Divisions of NCC L.P. for the fiscal year ended November 27, 1993
- Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
- Statement of operations. . . . . . . . . . . . . . . . . . . . . . 15
- Notes to supplemental information. . . . . . . . . . . . . . . . . 16
Unaudited interim financial statements of the Southern Divisions
of NCC L.P. for the quarter ended February 26, 1994
- Balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
- Statement of operations. . . . . . . . . . . . . . . . . . . . . . 18
- Statement of cash flows. . . . . . . . . . . . . . . . . . . . . . 19
- Notes to financial statement . . . . . . . . . . . . . . . . . . . 20
Unaudited pro forma combined financial information of
Culbro Corporation
- Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
- Statement of operations for the year ended November 27, 1993 . . . 22
- Statement of operations for the quarter ended February 26, 1994. . 23
- Balance sheet as of February 26, 1994. . . . . . . . . . . . . . . 24
- Notes to unaudited pro forma combined financial information. . . . 25
-2-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
NCC L.P.
We have audited the accompanying balance sheet of NCC L.P. (the "Partnership")
as of November 27, 1993 and the related statements of operations, and cash flows
for the year then ended. The financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NCC L.P. at November 27, 1993,
and the results of its operations and its cash flow for the year then ended in
conformity with generally accepted accounting principles.
February 2, 1994 except for Notes 7 and 8(b),
as to which the date is April 22, 1994
/s/ Ernst & Young
-3-
<PAGE>
NCC L.P.
BALANCE SHEET
NOVEMBER 27, 1993
<TABLE>
<CAPTION>
Pro Forma
November 27, February 28,
1993 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 7,006,474 $ 923,000
Receivables:
Trade, net of allowance of $4,068,844 39,930,463 20,471,000
Other 7,443,390 2,047,000
Current portion of trade notes, net of
allowance of $164,166 46,698 31,000
---------- ----------
47,420,551 22,549,000
Merchandise inventories 38,927,321 11,019,000
Prepaid expenses 2,213,207 3,292,000
---------- ----------
Total current assets 95,567,553 37,783,000
Property and equipment, net
Land 1,988,000 1,060,000
Building 2,165,160 1,356,000
Warehouse equipment 7,064,560 862,000
Computer software and equipment 3,850,002 58,000
Automobiles and trucks 1,533,731 74,000
Furniture, fixtures and office equipment 1,251,599 74,000
Leasehold improvements 785,786 343,000
Construction in progress 242,600 33,000
-------- -------
18,881,438 3,860,000
Less accumulated depreciation and
amortization 8,006,175 245,000
---------- ---------
10,875,263 3,615,000
Other assets:
Deferred financing costs, net 4,108,606 1,595,000
Trade notes receivable, net of allowance
of $100,000 826,088 --
Deferred charges, net 948,126 --
Investments 250,000 --
Other 625,967 723,000
----------- ----------
6,758,787 2,318,000
----------- ----------
$113,201,603 $43,716,000
----------- ----------
----------- ----------
</TABLE>
-4-
<PAGE>
NCC L.P.
Balance Sheet
November 27, 1993
<TABLE>
<CAPTION>
Pro Forma
November 27, February 28,
1993 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable 21,476,243 $ 13,127,000
Outstanding checks in excess of bank balances 5,535,365 --
Accrued expenses 3,912,289 3,294,000
Current portion of long-term debt 525,813 142,000
----------- -----------
Total current liabilities 31,449,710 16,563,000
Long-term liabilities:
Borrowings under line of credit 58,628,790 19,371,000
Subordinated secured related party note -- 2,000,000
Other long-term debt 3,234,849 1,106,000
Partners' equity 19,888,254 4,676,000
------------ ------------
$113,201,603 $ 43,716,000
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES.
-5-
<PAGE>
NCC L.P.
Statement of Operations
Year ended November 27, 1993
Net sales $1,038,524,927
Cost of sales 969,356,406
-------------
Gross profit 69,168,521
Selling, general and administrative expenses 75,885,892
-------------
Loss from operations (6,717,371)
Interest income 49,327
Interest expense 5,030,872
-------------
4,981,545
-------------
Net loss $ (11,698,916)
-------------
-------------
SEE ACCOMPANYING NOTES.
-6-
<PAGE>
NCC L.P.
Statement of Cash Flows
Year ended November 27, 1993
OPERATING ACTIVITIES
Net loss $(11,698,916)
Adjustments:
Depreciation and amortization 3,444,509
Changes in assets and liabilities:
Receivables 7,022,662
Merchandise inventories 15,632,208
Prepaid expenses 855,136
Accounts payable (6,814,857)
Bank overdraft (521,165)
Accrued expenses (98,435)
-----------
Total adjustments 19,520,058
-----------
Net cash provided by operating activities 7,821,142
INVESTING ACTIVITIES
Purchases of property and equipment (2,021,018)
Change in deferred charges and other assets 145,203
-----------
Net cash used in investing activities (1,875,815)
FINANCING ACTIVITIES
Net borrowing (repayments) under lines of credit (8,922,973)
Principal payments on long-term debt (1,251,678)
Financing costs (2,038,624)
------------
Net cash used in financing activities (12,213,275)
------------
Net decrease in cash and equivalents (6,267,948)
Cash and equivalents at beginning of year 13,274,422
-----------
Cash and equivalents at end of year $ 7,006,474
------------
------------
Supplemental Cash Flow Information:
Interest paid $ 5,094,889
SEE ACCOMPANYING NOTES.
-7-
<PAGE>
NCC L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS AND PARTNERSHIP AGREEMENT
NCC L.P. (the Partnership) is a Georgia limited partnership which was formed on
July 28, 1989 by Nicotiana Enterprises, Inc. (Nicotiana, the General Partner)
and LOR, Inc. (LOR, Limited Partner A) (together, the Original Partners) to
engage in the business of wholesale distribution of tobacco products, candy,
sundries, health and beauty care products, groceries and automotive supplies.
On November 16, 1992 the Original Partners amended and restated their existing
partnership agreement in order to admit MS Distribution, Inc. as a limited
partner (Limited Partner B). In connection with joining the Partnership,
Limited Partner B made a capital contribution of $30,000,000. The amended and
restated Partnership Agreement (the Amended Agreement) provides for the
ownership by the General Partner of a 13.9% Partnership interest and ownership
by Limited Partners A and B of Partnership interests of 14.5% and 71.6%,
respectively.
The Amended Agreement provides certain restrictive covenants which must be met
by each partner and restricts the transfer by a partner of its ownership
interest. In general, Partnership profits and losses are allocated to the
respective partners based upon their percentage ownership of the Partnership.
FISCAL YEAR
The Partnership's fiscal year ends on the Saturday nearest November 30.
ACCOUNTS RECEIVABLE
The Partnership sells to a variety of convenience stores and certain large
discount chains in the United States. The Partnership generally does not
require collateral for sales on credit to such customers. Credit losses have
been within management's expectations.
One customer accounted for approximately 10% of the Partnership's net sales in
1993.
Other accounts receivable consists primarily of claims receivable from
manufacturers for returned damaged goods and various incentive programs.
MERCHANDISE INVENTORIES
Merchandise inventories are valued at the lower of cost or market using the
last-in, first-out (LIFO) method of valuing inventories. Had the first-in,
first-out (FIFO) method of valuing inventories been used, inventories would have
been $4,299,248 higher at November 27, 1993.
DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost. Depreciation is provided by using
the straight-line method over the estimated useful lives of the assets,
generally three to thirty years. Leasehold improvements are amortized using the
straight-line method over the lesser of the terms of the respective leases or
the useful lives of the leased property.
For income tax purposes, the Partnership uses accelerated depreciation methods.
-8-
<PAGE>
NCC L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED FINANCING COSTS
Deferred financing costs consist of amounts incurred in connection with the
Credit Agreement as discussed in Note 2 and are being amortized over the life of
the agreement (3 years). Amortization expense was approximately $1,700,000 in
1993 (which included amortization and the related write off of costs deferred in
connection with a previous credit agreement).
DEFERRED CHARGES
Deferred charges consists of deferred organization and facility start-up costs
and customer incentive programs and are being amortized over periods ranging
from sixty to seventy months.
INCOME TAXES
No provision has been made for income taxes since the income or loss of the
Partnership is to be included in the income tax returns of the individual
partners. The partners are provided with their specific amounts of taxable
income or loss to be included in the computation of their taxable income.
CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid investments with
maturities of three months or less when purchased.
2. LINE OF CREDIT
The Partnership maintains a $75 million revolving credit facility (credit
facility) with a consortium of financial institutions. The credit facility
expires on December 31, 1995 and is secured by substantially all assets of the
Partnership. Borrowings under the facility can be made up to specified
percentages of eligible accounts receivable and inventory, as defined, subject
to increase at certain times. Outstanding borrowings bear interest at the
Eurodollar rate plus 3.5% (increased to 3.75% during certain times) or the prime
rate plus 1.5% (increased to 1.75% during certain times). The Partnership is
required to pay a fee of .5% per year on the unused credit commitment and
outstanding letters of credit are subject to fees of 2% or 3%, depending upon
the type of letter of credit.
The facility contains various financial covenants requiring the maintenance of a
specified current ratio, interest coverage ratios and minimum partner's equity.
Additionally the facility contains various restrictions including limitations on
capital expenditures, additional indebtedness, distributions to the partners,
and restricts certain other actions of the Partnership.
-9-
<PAGE>
NCC L.P.
NOTES TO FINANCIAL STATEMENTS
2. LINE OF CREDIT (CONTINUED)
At November 27, 1993 the Partnership was in violation of certain financial
covenants. As described in Note 7, subsequent to year-end the Partnership
significantly restructured its operations, reduced the borrowings outstanding
under the credit facility and amended the credit facility such that the
Partnership became in compliance with the financial covenants. Management
believes the Partnership will be able to comply with all financial and
restrictive covenants contained in the credit facility through 1994.
3. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
November 27,
1993
------------
<S> <C>
Mortgages payable to banks, bearing interest at rates
varying from 4.2% to 12%; secured by certain land and
buildings; due in varying installments through 1999 $2,084,428
9% note payable to former owners of Samelson; secured by
certain land; annual principal and interest payments of
$200,000; due in 1999 1,036,326
9% note payable to an individual, interest payable annually;
principal due September 1996; secured by certain shares of
common stock of the General Partner 407,500
Other 232,408
----------
3,760,662
Less current portion 525,813
----------
$3,234,849
----------
----------
</TABLE>
Aggregate maturities of long-term debt by fiscal year are as follows:
<TABLE>
<S> <C>
1994 $ 525,813
1995 480,897
1996 794,012
1997 400,084
1998 414,684
Thereafter 1,145,172
-----------
$ 3,760,662
-----------
-----------
</TABLE>
-10-
<PAGE>
NCC L.P.
NOTES TO FINANCIAL STATEMENTS
4. COMMITMENTS
The Partnership leases warehouse and office space and automobiles, computer
equipment and warehouse equipment under noncancellable operating leases which
expire at various dates through 2007. Rental expense aggregated approximately
$6,676,000 in fiscal 1993.
Future minimum lease payments by fiscal year are as follows:
<TABLE>
<S> <C>
1994 $ 6,927,000
1995 6,092,000
1996 4,809,000
1997 3,412,000
1998 2,858,000
Thereafter 7,512,000
-----------
$31,610,000
-----------
-----------
</TABLE>
5. RELATED PARTY TRANSACTION
The Partnership leases some of its warehouse and office space from a subsidiary
of the General Partner. These leases provide for monthly rentals of $52,500
through 1999 and are included in the future minimum lease payments in Note 4
above.
6. EMPLOYEE BENEFIT PLAN
The Partnership sponsors a 401(k) plan covering substantially all full-time
employees with more than one year of service. Participants may contribute up to
15% of their salaries subject to a specified maximum. The Partnership matches
50% of the participants' contributions up to a maximum of 4% of their salaries.
The Partnership contributed approximately $254,000 related to this plan in
fiscal 1993. Effective January 1, 1994 the Partnership discontinued matching
contributions.
7. SUBSEQUENT EVENTS
Subsequent to November 27, 1993, the Partnership has made significant changes to
its operating structure through an acquisition and a series of dispositions
which resulted in the sale of six of its nine operating divisions. The
specifics of the various transactions are as follows:
a) In December 1993 the Partnership purchased certain assets owned by The S&S
Tobacco and Candy Partnership (S&S), a Connecticut based wholesale
distributor, for a cash payment of approximately $1.5 million. In addition
to the cash payment, the Partnership will pay S&S a commission of .5% of
sales related to the acquired business for a period of five years.
-11-
<PAGE>
NCC L.P.
NOTES TO FINANCIAL STATEMENTS
7. SUBSEQUENT EVENTS (CONTINUED)
b) In February 1994 the Partnership sold certain assets of its division located
in Birmingham, Alabama to an unaffiliated company for cash payment of
approximately $4 million. In connection with the sale of these assets, the
Partnership recognized a gain of approximately $400,000.
c) In March 1994 the Partnership sold certain assets of its vending business
located in Memphis, Tennessee to a group consisting of an unaffiliated
company and several employees of the Memphis division. As consideration
for the sale, the Partnership cancelled a $333,000 note receivable due from
a member of the buying group, cancelled notes totaling approximately $1.2
million due from the Partnership and the Partnership issued a non-interest
bearing note (present value of approximately $500,000) to a member of the
buying group, due in 1998 and 1999. In connection with the sales of these
assets, the Partnership recognized a loss of approximately $200,000.
d) In April 1994 the Partnership sold the assets of five of its divisions,
located in the southern United States, to The Eli Witt Company (Witt) for a
cash payment of approximately $25 million (which was used to immediately pay
down the portion of the line of credit allocated to the purchased
divisions), issuance of 595,700 shares of Witt common stock and the
assumption of certain operating liabilities of those divisions totaling
approximately $15.5 million. The consideration described was determined
based on the February 28, 1994 balance sheet and is to be adjusted based on
a final balance sheet as of the closing date. The shares of Witt common
stock were used to redeem Limited Partner B's partnership interest. In
connection with the sale to Witt, the Partnership recognized a loss of
approximately $13 million.
Simultaneous with the sale to Witt and the redemption of Limited Partner B's
partnership interest, the following occurred:
1) In connection with an amendment and restatement of the partnership
agreement, Limited Partner A contributed an additional $2 million as
equity (which was used to reduce borrowings under the line of credit) to
the Partnership. Under the terms of the amended and restated partnership
agreement, the General Partner has a 25% general partnership interest and
Limited Partner A has a 75% limited partnership interest.
Additionally, the Partnership issued a $2 million subordinated secured
note to the General Partner and Limited Partner A, the proceeds of which
were used to reduce borrowings under the line of credit. The note bears
interest at the Eurodollar rate plus 3.5% and is due December 31, 1995.
and
2) The Partnership amended its credit facility by reducing the maximum
available borrowings to $25 million and establishing new financial
covenants and restrictions. Calculation of the borrowing base and
interest rate remain unchanged. The amended credit facility expires
December 31, 1995. Management of the Partnership believes the Partnership
will be able to comply with all financial and restrictive covenants
contained in the credit facility through 1994.
-12-
<PAGE>
NCC L.P.
NOTES TO FINANCIAL STATEMENTS
8. CONTINGENCIES
a) A competitor of the Partnership has filed suit against the Partnership
seeking to enjoin the Partnership from engaging in certain sales and
marketing efforts and claiming unspecified monetary damages. The
Partnership has filed a counterclaim seeking unspecified monetary damages.
The Partnership believes it has meritorious defenses, and therefore, no
provision has been made in the accompanying financial statements related to
this matter.
b) In connection with the purchase of S&S Tobacco and Candy Partnership (See
Note 7a), a cigarette manufacturer has filed suit against the Partnership
and S&S claiming actual damages of approximately $500,000 and punitive
damages of approximately $500,000. The Partnership believes the claims have
no merit and intends to defend itself vigorously. No provision has been
made in the accompanying financial statements related to this matter.
The Partnership is involved in various other litigation arising in the normal
course of business. In the opinion of management, the ultimate recovery or
liability, if any, resulting from such litigation will not materially affect the
financial position or results of operations of the Partnership.
9. PRO FORMA INFORMATION (UNAUDITED)
Pro forma balance sheet information reflects the pro forma effect of the
subsequent events described in Note 7c) and d) above as if they had occurred as
of February 28, 1994. This pro forma presentation is not materially different
than had it been prepared as of November 27, 1993. The pro forma balance sheet
reflects the assets and liabilities specifically related to the Partnership's
three remaining divisions which operate along the northeastern seaboard of the
United States (Northern divisions) and certain corporate assets and liabilities
which have remained with the Northern divisions.
Additionally a $2 million contribution and a $2 million subordinated secured
note from the partners as outlined in Note 7d), a decrease to the LIFO reserve
of approximately $2.5 million (which relates to inventory sold in the
transactions described in Note 7) and the write-off of approximately $2.1
million of deferred financing costs related to the portion of the line of credit
retired in conjunction with the Witt transaction were reflected in the pro forma
balance sheet.
-13-
<PAGE>
NCC L.P.
NOVEMBER 27, 1993
SUPPLEMENTAL BALANCE SHEET INFORMATION
OF THE SOUTHERN DIVISIONS
(unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Receivables:
Trade, net of allowance of $1,556,000 $24,105,000
Total other receivables 4,840,000
Current portion of trade notes 182,000
----------
29,127,000
Merchandise inventories (at FIFO) 30,192,000
Prepaid expenses 987,000
----------
Total current assets 60,306,000
Property and equipment 15,237,000
Less accumulated depreciation and amortization (7,821,000)
----------
7,416,000
Other assets 1,696,000
----------
Total assets $69,418,000
----------
----------
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable $12,013,000
Accrued expenses 1,536,000
Current portion of long-term debt 388,000
----------
Total current liabilities 13,937,000
Long-term debt:
Borrowings under line of credit 33,418,000
Other long-term debt 2,588,000
----------
Total liabilities 49,943,000
Partners' equity 19,475,000
----------
Total liabilities & partners' equity $69,418,000
----------
----------
</TABLE>
SEE NOTES TO SUPPLEMENTAL FINANCIAL INFORMATION.
-14-
<PAGE>
NCC L.P.
YEAR ENDED NOVEMBER 27, 1993
SUPPLEMENTAL INFORMATION ON OPERATIONS
OF THE SOUTHERN DIVISIONS
(unaudited)
<TABLE>
<CAPTION>
<S> <C>
Net sales $ 635,514,000
Cost of sales 594,001,000
-----------
Gross profit 41,513,000
Selling, general and administrative expenses 46,851,000
----------
Loss from operations (5,338,000)
Interest expense, net 3,256,000
----------
Net loss $ (8,594,000)
----------
----------
</TABLE>
SEE NOTES TO SUPPLEMENTAL FINANCIAL INFORMATION.
-15-
<PAGE>
NCC L.P.
NOVEMBER 27, 1993
NOTES TO SUPPLEMENTAL FINANCIAL INFORMATION
OF THE SOUTHERN DIVISIONS
(unaudited)
1. BASIS OF PRESENTATION
The Eli Witt Company purchased substantially all of the net assets
(approximately 80%) of NCC L.P. as reflected in the audited financial
statements of the year ended November 27, 1993 filed herein. The accompanying
unaudited supplemental information is presented as additional information. The
NCC L.P. financial statements of earlier years are not included because the
Southern Divisions of NCC L.P. did not exist in its current form prior to the
fiscal year ended November 27, 1993.
The accompanying unaudited supplemental information includes the balance
sheet and statement of operations of the Southern Divisions of NCC L.P. ("NCC
South") which were sold to The Eli Witt Company on April 25, 1994 (See Note 7 to
the audited financial statements of NCC L.P.). This information is presented to
reflect the financial position and results of operations of these divisions as
of and for the year ended November 27, 1993 as if the divisions had operated as
a separate business and used the first-in, first-out (FIFO) method of valuing
inventories.
The accompanying supplemental financial information should be read in
conjunction with the financial statements of NCC L.P.
2. ALLOCATION OF CERTAIN EXPENSES AND DEBT
The Corporate office of NCC L.P. provided certain services to NCC South
such as sales, marketing, legal, accounting, and information systems support.
Included in selling, general and administrative expenses of NCC South is
$5,459,000 representing the amount of such corporate expenses allocated to NCC
South. This allocation was based on the ratio of NCC South's sales to the total
sales of NCC L.P.
As stated in Note 2 to the financial statements of NCC L.P., the
Partnership maintained a $75 million revolving credit facility, borrowings under
which were limited to specified percentages of eligible accounts receivable and
inventory, as defined (the "borrowing base"). Borrowings under this facility of
$33,418,000 included in long-term debt of NCC South reflect the amount
of such borrowings allocated to NCC South based on the ratio of its borrowing
base to the total borrowing base of the Partnership.
Interest expense of $3,303,000 represents interest on the average monthly
allocated borrowings under the revolving credit facility and interest on other
debt related specifically to NCC South.
The above allocations may not necessarily reflect the amount of such
expenses and debt that NCC South would have incurred if it had operated as a
separate entity.
-16-
<PAGE>
SOUTHERN DIVISIONS OF NCC L.P.
UNAUDITED BALANCE SHEET
FEBRUARY 26, 1994
(amounts in thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Receivables, net of allowance of $1,604 $28,122
Merchandise inventories (at FIFO) 17,518
Prepaid expenses 531
------
Total current assets 46,171
Property and equipment, net 6,927
Other assets 1,642
------
Total assets $54,740
------
------
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $13,040
Current portion of long-term debt 392
------
Total current liabilities 13,432
Long-term liabilities:
Borrowings under line of credit 26,888
Other long-term debt 2,020
------
Total liabilities 42,340
Partners' equity 12,400
------
Total liabilities and partners equity $54,740
-------
-------
</TABLE>
SEE ACCOMPANYING NOTES.
-17-
<PAGE>
SOUTHERN DIVISIONS OF NCC L.P.
UNAUDITED STATEMENT OF OPERATIONS
QUARTER ENDED FEBRUARY 26, 1994
(Amounts in thousands)
<TABLE>
<CAPTION>
<S> <C>
Net sales $ 132,559
Cost of sales 123,971
-------
Gross profit 8,588
Selling, general and administrative expenses 10,914
------
Loss from operations (2,326)
Interest expense, net 695
------
Net loss $ (3,021)
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES.
-18-
<PAGE>
SOUTHERN DIVISIONS OF NCC L.P.
UNAUDITED STATEMENT OF CASH FLOWS
QUARTER ENDED FEBRUARY 26, 1994
(amounts in thousands)
<TABLE>
<CAPTION>
OPERATING ACTIVITIES
<S> <C>
Net loss $ (3,021)
Adjustments:
Depreciation and amortization 290
Gain in sale of Birmingham assets (400)
Changes in assets and liabilities
net of effect of the sale of Birmingham assets:
Receivables (404)
Merchandise inventories 10,609
Accounts payable and accrued expenses 37
Other (135)
------------
Net cash provided by operating activities 6,976
------------
INVESTING ACTIVITIES
Proceeds from the sale of Birmingham assets 4,000
Purchases of property and equipment (98)
------------
Net cash provided by investing activities 3,902
------------
FINANCING ACTIVITIES
Net repayments under line of credit (6,530)
Effect of allocation of partnership debt
in connection with sale to Eli Witt (3,784)
Principal payments on other long-term debt (564)
------------
Net cash used in financing activities (10,878)
------------
Net decrease in cash and equivalents --
Cash at beginning of period --
------------
Cash at end of period $ --
------------
------------
Supplemental Cash Flow Information:
Interest paid $ 695
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES.
-19-
<PAGE>
SOUTHERN DIVISIONS OF NCC L.P.
FEBRUARY 26, 1994
NOTES TO FINANCIAL STATEMENTS
(amounts in thousands)
1. The accompanying unaudited financial statements reflect the Southern
Divisions of NCC L.P. ("NCC South") which were sold to The Eli Witt Company
on April 25, 1994. These statements have been prepared in conformity with
the standards of accounting measurement set forth in Accounting Principles
Board Opinion No. 28 and any amendments thereto adopted by the Financial
Accounting Standards Board. Also, the financial statements have been
prepared in accordance with the accounting policies stated in NCC L.P.'s
1993 audited financial statements included herein, except for merchandise
inventories which have been valued using the first-in, first-out method,
and should be read in conjunction with those Notes to Financial Statements.
All adjustments which are, in the opinion of management, necessary for a
fair presentation of results for the interim period have been reflected.
The results of operations for the quarter ended February 26, 1994 are not
necessarily indicative of the results to be expected for the full year.
2. The Corporate office of NCC L.P. provided certain services to NCC South
such as sales, marketing, legal, accounting and information systems
support. Included in selling, general and administrative expenses of NCC
South is $1,253 representing the amount of such corporate expenses
allocated to NCC South.
NCC L.P. maintained a $75 million revolving credit facility, borrowings
under which were limited to specified percentages of eligible accounts
receivable and inventory, as defined (the "borrowing base"). Borrowings
under this facility of $26,880 are included in long term debt of NCC South
and reflect the amount of such borrowings allocated to NCC South based on
the ratio of its borrowing base to the total borrowing base of the
Partnership.
Interest expense of $695 represents interest on the average monthly
allocated borrowings under the revolving credit facility and interest on
other debt related specifically to NCC South.
The above allocations may not necessarily reflect the amount of such
expenses and debt that NCC South would have incurred if it had operated as
a separate entity.
3. In February 1994 the assets of the NCC South Division located in
Birmingham, Alabama were sold to an unaffiliated company for cash payment
of approximately $4 million. In connection with the sale of these assets,
a gain of approximately $400,000 was recognized by NCC L.P.
-20-
<PAGE>
CULBRO CORPORATION
UNAUDITED PRO FORMA FINANCIAL INFORMATION
INTRODUCTION
The following unaudited pro forma financial information gives effect to
the acquisition of the Southern Divisions of NCC L.P. ("NCC South") by The
Eli Witt Company ("Eli Witt"), a subsidiary of Culbro Corporation (the
"Corporation") which occurred on April 25, 1994. Prior to this acquisition,
the Corporation owned 85% of the outstanding common stock of Eli Witt, and the
former shareholders of Certified Grocers of Florida, Inc. ("Certified Grocers")
held 15% of the outstanding common stock of Eli Witt which they received in
connection with Eli Witt's acquisition of Certified Grocers in 1993. In
connection with the acquisition of NCC South, NCC L.P. ("NCC") and one of its
partners, MS Distribution, Inc. ("MSD"), received approximately 38% of the
outstanding common stock of Eli Witt. The Corporation retained a 50.1%
ownership in the common stock of Eli Witt, and the former shareholders of
Certified Grocers now hold the remaining 12% of the outstanding common stock of
Eli Witt. In connection with the issuance of Eli Witt common stock to MSD,
the Corporation entered into a Shareholders Agreement with MSD. This agreement
contains certain provisions ("governance provisions") which state that all
significant transactions by Eli Witt, including incurrence of debt,
acquisitions, material contracts, the sale of assets, stock issuance, changes
in Eli Witt's charter and by-laws, and capital expenditures, require prior
approval by MSD. The Corporation continues to manage the operations of
Eli Witt, however, as a result of the governance provisions, the Corporation
no longer exercises effective control over Eli Witt. Additionally, the
Corporation and its investor partners intend to proceed with a public offering
of the common stock of Eli Witt in due course. Therefore, due to the loss of
control and the likelihood that the Corporation's ownership of 50.1% of Eli
Witt's outstanding common stock is temporary, Eli Witt will be deconsolidated
from the Corporation's financial statements as of the transaction date and will
be accounted for under the equity method.
Concurrent with the acquisition of NCC South by Eli Witt, the Corporation
issued subordinated debt to MSD for proceeds of $12 million. The subordinated
debt has a face value of $15 million, is due in August 1998, and accrues
interest at 10% per annum. No interest payments are required before the
maturity date. At the maturity date, the subordinated debt and all accrued and
unpaid interest is mandatorily exchangeable into mandatorily redeemable
Series B preferred stock in Eli Witt currently held by the Corporation.
The historical statements of operations of NCC South included in the pro
forma presentation are for its fiscal year ended November 27, 1993 and its
fiscal quarter ended February 26, 1994. The historical balance sheet of NCC
South included in the pro forma presentation is as of February 26, 1994. The
following unaudited pro forma combined statements of operations of the
Corporation assume that the transaction was completed at the beginning of the
respective periods presented. The following unaudited pro forma combined
balance sheet of the Corporation assumes the transaction had been completed
as of the balance sheet date. The deconsolidation of Eli Witt is reflected in
the following unaudited pro forma balance sheet and statements of operations.
These unaudited pro forma statements may not necessarily reflect the
Corporation's results of operations which would have been obtained if the
acquisition had been completed at the beginning of the fiscal periods
presented. The pro forma financial statements should be read in conjunction
with the Corporation's financial statements included under Item 7 of the
Corporation's 1993 Form 10K.
-21-
<PAGE>
CULBRO CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 27, 1993
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------------- -----------------------------
Southern
Divisions
Culbro of NCC L.P. Adjustments Combined
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales and other revenue $1,364,576 $635,514 $(1,830,610) (1) 169,480
Cost and expenses:
Cost of goods sold 1,219,742 594,000 (1,706,265) (1) 107,478
Selling, general and
adminstrative expenses 126,055 45,664 (120,711) (1) 51,007
-------- ------- -------- ------
Operating profit (loss) 18,779 (4,150) (3,634) 10,995
Equity in net loss of Centaur
Communications, Ltd. 290 -- -- 290
Equity in income (loss) of Eli Witt -- -- -- (2) --
Fees on sales of accounts receivable 476 -- -- 476
Interest expense, net 14,411 3,256 (10,254) (1) 8,964
1,551 (3)
------ ----- ------- -----
Income (loss) before income taxes 3,602 (7,406) 5,069 1,265
Income tax provision 1,877 -- (777) (4) 1,100
------ ----- ------- -----
Income (loss) before cumulative
effect of accounting change 1,725 (7,406) 5,846 165
Accretion of preferred stock of Eli Witt (705) -- 705 (1) --
----- ----- ------- -----
Income available to common shareholders
before cumulative effect of accounting change $ 1,020 $ (7,406) $ 6,551 $ 165
------- ------- ------- ------
------- ------- ------- ------
Income per common share before effect
of accounting change $ 0.24 $ 0.04
------ -----
------ -----
Average common shares outstanding 4,308,000 4,308,000
--------- ---------
--------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.
-22-
<PAGE>
CULBRO CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
QUARTER ENDED FEBRUARY 26, 1994
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------------- -----------------------------
Southern
Divisions
Culbro of NCC L.P. Adjustments Combined
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales and other revenues $ 317,811 $ 132,559 $ (416,448) (1) $33,922
Cost and expenses:
Cost of goods sold 284,390 123,971 (388,011) (1) 20,350
Selling, general and
adminstrative expenses 32,072 10,914 (30,533) (1) 12,453
------- ------- -------- ------
Operating profit (loss) 1,349 (2,326) 2,096 1,119
Equity in income (loss) of Eli Witt -- -- -- (2) --
Equity in net (income) of Centaur (50) -- -- (50)
Interest expense, net 3,356 695 (2,167) (1) 2,274
390 (3)
------ ------ ------ ------
(Loss) before income tax benefit (1,957) (3,021) 3,873 (1,105)
Income tax (benefit) (1,155) -- 713 (4) (442)
------ ------ ------ ------
Net loss (802) (3,021) 3,160 (663)
Accretion of preferred stock of Eli Witt (247) -- 247 (1) --
------ ------ ------ ------
Net (loss) available to common shareholders $ (1,049) $ (3,021) $ 3,407 $ (663)
------ ------ ------ ------
------ ------ ------ ------
Net (loss) per common share $ (0.24) $ (0.15)
------ ------
------ ------
Average common shares outstanding 4,308,000 4,308,000
--------- ---------
--------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.
-23-
<PAGE>
CULBRO CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
FEBRUARY 26, 1994
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------------- -----------------------------
Southern
Divisions
ASSETS Culbro of NCC L.P. Adjustments Combined
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Current Assets
Cash $ 5,244 $ 47 $ (4,606) (1) $ 685
Receivables, net 68,624 23,686 (74,491) (1) 17,819
Inventories 116,185 17,253 (59,766) (1) 73,672
Other current assets 6,077 2,543 (4,321) (1) 4,299
------- ------ ------- ------
Total current assets 196,130 43,529 (143,184) 96,475
Property and equipment, net 113,137 6,467 (41,640) (1) 77,964
Real Estate held for sale or lease, net 35,076 -- -- 35,076
Investment in Preferred Stock of Eli Witt -- -- 15,000 (2) 15,000
Investment in real estate joint ventures 8,099 -- -- 8,099
Other assets 24,526 1,290 (712) (1) 25,104
Intangible assets 21,248 -- (1,779) (1) 19,469
------- ------ ------- -------
Total assets $398,216 $ 51,286 $(172,315) $277,187
------- ------ -------- -------
------- ------ -------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 61,865 $ 15,294 $ (55,601) (1) $ 21,558
Long-term debt due within one year 15,082 359 (5,511) (1) 9,930
Income taxes 75 -- -- 75
------ ------ ------ --------
Total current liabilities 77,022 15,653 (61,112) 31,563
Long-term debt 166,963 26,115 (86,656) (1) 106,422
Deferred income taxes 4,075 -- (2,720) (1) 1,355
Other noncurrent liabilities 30,068 -- (2,057) (1) 28,011
------- ------ ------- -------
Total liabilities 278,128 41,768 (152,545) 167,351
------- -------
Minority interest 10,252 -- (10,252) (1) --
-------
Partners Equity -- 9,518 (9,518) (1) --
Shareholders' Equity
Common stock 4,549 -- -- 4,549
Capital in excess of par value 13,296 -- -- 13,296
Retained earnings 97,296 -- -- 97,296
------- -------
115,141 115,141
Less - Common stock in Treasury (5,305) -- -- (5,305)
------- -------
Total shareholders' equity 109,836 -- -- 109,836
------- ------- ------- -------
Total liabilities, minority interest
and Shareholders'/Partners equity $398,216 $ 51,286 $(172,315) $277,187
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.
-24-
<PAGE>
CULBRO CORPORATION
NOTES TO UNAUDITED COMBINED PRO FORMA INFORMATION
(1) To reflect the deconsolidation of Eli Witt and to account for the
Corporation's 50.1% common stock ownership of Eli Witt on the equity
method.
(2) The investment in Eli Witt reflected on the Corporation's pro forma
balance sheet reflects the Eli Witt Series B preferred stock held by the
Corporation which is mandatorily exchangeable into the $15 million
subordinated debt of Culbro held by MS Distribution, Inc.
Eli Witt is in a common deficit position, and as such, the
Corporation's investment in Eli Witt's common stock is reflected as zero
on the pro forma balance sheet. Accordingly, the Corporation will not
recognize its share of any future profits or losses of Eli Witt until
Eli Witt's common deficit is eliminated.
(3) To reflect the change in the Corporation's interest expense as a result of
the issuance of the subordinated debt to MS Distribution, Inc.. The
Corporation used the proceeds to reduce debt under its 9.7% Senior Notes
and its Credit Agreement.
(4) To reflect a revised income tax provision/(benefit).
(5) In 1993, the Corporation recorded a net charge of $9.2 million for the
cumulative effect of the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Post-retirement
Benefits Other Than Pensions". On a consolidated basis the Corporation
elected to immediately recognize the cumulative effect of this accounting
change. The Eli Witt Company, as a separate company, elected to amortize
its adoption liability over twenty years. As a result of the
deconsolidation of Eli Witt, $3.1 million of the initial net charge ($5.1
million pretax charge offset by a $2.0 million deferred tax benefit)
recorded by the Corporation related to Eli Witt is no longer
required to be included in the Corporation's accounts. The Corporation will
adjust the amount initially recorded for its adoption of SFAS No. 106 in
the current year. This adjustment is not reflected in the accompanying
combined pro forma statements.
-25-
