SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the 13 weeks ended May 28, 1994 Commission File No. 1-1210
CULBRO CORPORATION
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
This amendment to Culbro Corporation's Form 10Q for the thirteen weeks
ended May 28, 1994 filed on July 18, 1994 revises the accounting for the
acquisition of the Southern Divisions of NCC L.P. by The Eli Witt Company, a
subsidiary of Culbro Corporation, and related transactions. The revised
results reflect the elimination of an accounting change income item after tax
and inclusion of a previously deferred gain on the sale of a portion of Culbro
Corporation's common shares of Eli Witt.
NEW YORK 13-0762310
(state or other jurisdiction of incorporation or (IRS Employer
organization) Identification Number)
387 Park Avenue South, New York, New York 10016-8899
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number including Area Code (212) 561-8700
Former name, former address and former fiscal year, Not Applicable
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Number of shares of Common Stock outstanding at July 1, 1994 - 4,308,288
</PAGE>
CULBRO CORPORATION
INDEX
PART I - FINANCIAL INFORMATION PAGE
Consolidated Statement of Operations and
Retained Earnings - thirteen weeks ended
May 28, 1994 and May 29, 1993 . . . . . . . . . . . . . . 3
Consolidated Statement of Operations and
Retained Earnings - twenty-six weeks ended
May 28, 1994 and May 29, 1993 . . . . . . . . . . . . . . 4
Consolidated Balance Sheet
May 28, 1994 and November 27, 1993. . . . . . . . . . . . . 5
Consolidated Statement of Cash Flows -
twenty-six weeks ended May 28, 1994
and May 29, 1993. . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . .7-11
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . 12-13
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . 14-15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
<PAGE>
CULBRO CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
(dollars in thousands except per share data)
(unaudited)
<TABLE>
13 Weeks Ended
---------------------
May 28, May 29,
1994 1993
----------- ---------
<S> <C> <C>
Net sales and other revenue $ 54,499 $389,602
Costs and expenses
Cost of goods sold 35,728 350,353
Selling, general and administrative expenses 13,654 32,368
------- --------
Operating profit 5,117 6,881
Gain on sale of Eli Witt common stock 2,691 -
Loss from equity investments, net 1,307 25
Other nonoperating income 226 -
Interest expense, net 2,105 3,829
------ -------
Income before taxes 4,622 3,027
Income tax provision 2,386 1,211
------- --------
Income before minority interest 2,236 1,816
Minority interest - (44)
-------- --------
Net income 2,236 1,772
Accretion of Series A preferred
stock of Eli Witt - (221)
-------- ---------
Net income applicable to common shareholders 2,236 1,551
Retained earnings - beginning of period 97,296 95,670
--------- ---------
Retained earnings - end of period $ 99,532 $ 97,221
========= =========
Net income per common share $ 0.52 $ 0.36
========= =========
</TABLE>
The 1994 financial statements reflect the deconsolidation of Eli Witt
effective at the beginning of the current year. Prior periods reflect
Eli Witt as a fully consolidated subsidiary. See Note B.
See Notes to Consolidated Financial Statements.<PAGE>
CULBRO CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
(dollars in thousands except per share data)
(unaudited)
<TABLE>
26 Weeks Ended
---------------------------
May 28, May 29,
1994 1993
-------- --------
<S> <C> <C>
Net sales and other revenue $ 87,859 $676,257
Costs and expense
Cost of goods sold 56,078 608,916
Selling, general and administrative expenses 26,107 59,006
-------- ---------
Operating profit 5,674 8,335
Gain on sale of Eli Witt common stock 2,691 -
Loss from equity investments, net 1,953 125
Other nonoperating income 226 -
Interest expense, net 3,989 7,466
Fees on sales of accounts receivable - 476
-------- --------
Income before taxes 2,649 268
Income tax provision 1,462 107
------- --------
Income before minority interest 1,187 161
Minority interest - (44)
-------- --------
Income before cumulative effect of
accounting change 1,187 117
Cumulative effect of accounting change for
postretirement benefits, net of tax - (9,177)
-------- ---------
Net income (loss) 1,187 (9,060)
Accretion of Series A preferred stock
of Eli Witt - (221)
------- ---------
Net income (loss) applicable to
common shareholders 1,187 (9,281)
Retained earnings - beginning of period 98,345 106,502
--------- ---------
Retained earnings - end of period $ 99,532 $ 97,221
========== ==========
Income (loss) per common share before cumulative
effect of accounting change $ 0.28 $ (0.02)
Cumulative effect of accounting change
per common share - (2.13)
-------- ----------
Net income (loss) per common share $ 0.28 $ (2.15)
======== ===========
</TABLE>
The 1994 financial statements reflect the deconsolidation of Eli Witt
effective at the beginning of the current year. Prior periods reflect
Eli Witt as a fully consolidated subsidiary. See Note B.
See Notes to Consolidated Financial Statements.
<PAGE>
CULBRO CORPORATION
CONSOLIDATED BALANCE SHEET
(dollars in thousands except per share data)
<TABLE>
May 28, Nov. 27,
ASSETS 1994 1993
-------- ---------
<S> <C> <C>
Current Assets (unaudited)
Cash and cash equivalents $ 2,437 $ 8,715
Receivables, less allowance of $1,208
(1993 - $2,364) 31,273 75,917
Inventories 69,943 128,216
Other current assets 11,715 5,931
--------- -------
Total current assets 115,368 218,779
Property and equipment, net 78,110 114,898
Real estate held for sale or lease, net 34,902 35,338
Investment in Series B preferred stock of
The Eli Witt Company 11,554 -
Investment in real estate joint ventures 7,969 8,275
Other, including investment in Centaur
Communications of $14,320 (1993 - $14,195) 19,723 24,923
Intangible assets 19,322 21,446
------- --------
Total assets $286,948 $423,659
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 17,252 $ 72,870
Long-term debt due within one year 9,104 14,519
Income taxes 143 264
-------- ---------
Total current liabilities 26,499 87,653
Long-term debt 113,579 175,405
Deferred income taxes 8,032 5,479
Accrued retirement benefits 14,982 19,477
Other noncurrent liabilities and
deferred credits 11,784 14,758
-------- ---------
Total liabilities 174,876 302,772
-------- ---------
Minority interest in subsidiary - 10,005
--------- ---------
Shareholders' Equity
Common stock, par value $1
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 99,532 98,345
-------- --------
117,377 116,190
Less - Common stock in Treasury,
at cost, 240,902 shares (1993 - 241,128) (5,305) (5,308)
--------- ---------
Total shareholders' equity 112,072 110,882
---------- ---------
Total liabilities, minority interest
and shareholders' equity $286,948 $423,659
========= ========
</TABLE>
The 1994 financial statements reflect the deconsolidation of Eli Witt
effective at the beginning of the current year. Prior periods reflect Eli
Witt as a fully consolidated subsidiary. See Note B.
See Notes to Consolidated Financial Statements.<PAGE>
CULBRO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
26 Weeks Ended
-----------------------------
May 28, May 29,
1994 1993
---------- --------
<S> <C> <C>
Operating activities:
- ---------------------
Net income (loss) $ 1,187 $ (9,060)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Cumulative effect of accounting change,
net of tax - 9,177
Depreciation and amortization 3,632 6,071
Gain on sale of Eli Witt common stock (2,691) -
Loss from equity investments, net 1,953 125
Discount and interest on subordinated note 226 -
Other nonoperating income (226) -
Provision for bad debts 178 689
Changes in assets and liabilities net
of effects from the deconsolidation
of Eli Witt in 1994 and the acquisition
of Certified Grocers in 1993:
Decrease in real estate held for
sale or lease, net 436 701
Decrease in inventories 344 46,953
Increase in accounts receivable (6,366) (11,353)
Decrease in sales of accounts
receivable - (26,000)
Decrease in accounts payable and
accrued liabilities (5,329) (239)
Increase (decrease) in deferred
income taxes 553 (886)
Other, net 1,514 581
-------- ---------
Net cash (used in) provided
by operating activities (4,589) 16,759
-------- ---------
Investing activities:
- ---------------------
Additions to property and equipment (2,543) (3,786)
Proceeds from the sale of Eli
Witt common stock 672 -
Proceeds from Take-out Agreement
with Moll PlastiCrafters - 4,953
Acquisition of Certified Grocers,
net cash acquired - (2,004)
-------- ----------
Net cash used in investing activities (1,871) (837)
-------- ----------
Financing activities:
- ----------------------
Increase in debt (1993 principally
reflects debt assumed in acquisition
of Certified Grocers) 16,343 29,453
Payments of debt (1993 principally
reflects refinancing of debt
assumed from acquisition of
Certified Grocers) (8,321) (39,467)
--------- ---------
Net cash provided by (used in)
financing activities 8,022 (10,014)
-------- ---------
Net increase in cash and cash equivalents 1,562 5,908
Cash and cash equivalents at beginning
of period (excluding Eli Witt cash
of $7,840 at the beginning of 1994
not available to the Corporation) 875 1,898
-------- -------
Cash and cash equivalents at end of period $ 2,437 $ 7,806
======== =======
</TABLE>
The 1994 financial statements reflect the deconsolidation of Eli Witt
effective at the beginning of the current year. Prior periods reflect
Eli Witt as a fully consolidated subsidiary. See Note B.
See Notes to Consolidated Financial Statements.<PAGE>
CULBRO CORPORATION
Notes to Consolidated Financial Statements
(dollars in thousands)
(unaudited)
A. The unaudited financial statements included in this report 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 the Corporation's 1993 Annual Report to Shareholders included in
Form 10K, except for a change in the basis of consolidation (as discussed
in Note B below) and should be read in conjunction with the Notes to
Consolidated Financial Statements appearing in that report. All adjustments
which are, in the opinion of management, necessary for a fair presentation of
results for the interim periods have been reflected.
The results of operations for the thirteen and twenty-six weeks ended
May 28, 1994 are not necessarily indicative of the results to be expected for
the full year.
B. On April 25, 1994, Eli Witt acquired the net assets of the six
Southern distribution facilities of NCC L.P. (see Note C) in exchange for
595,000 newly issued common shares of Eli Witt. The Corporation accounted for
this transaction as a like kind exchange and therefore did not recognize any
gain or loss on this transaction. As a result of the additional shares of
common stock issued by Eli Witt and the concurrent sale by the Corporation of
400,000 shares of its Eli Witt common stock holdings (see Note C), the
Corporation's ownership of Eli Witt's outstanding common stock was reduced
from 85% to 50.1%. In connection with these transactions the Corporation
entered into a Shareholders Agreement with MS Distribution, Inc. ("MSD"), a
former limited partner in the NCC L.P. partnership. MSD now owns
approximately 38% of the outstanding common stock of Eli Witt. This
Agreement contains certain governance provisions which require the prior
approval of MSD for all major transactions by Eli Witt, including (but not
limited to), incurrence of debt, acquisitions, material contracts, the sale of
assets, issuance and repurchase of stock, changes in Eli Witt's charter and
by-laws, and capital expenditures. Due to the shareholder rights granted to
MSD, the Corporation no longer has unilateral control over Eli Witt.
Therefore, the Corporation deconsolidated Eli Witt as of April 25, 1994 and
is accounting for its remaining investment in Eli Witt under the equity
method. The 1994 financial statements reflect the application of the equity
method of accounting retroactive to the beginning of the year. The financial
statements of the prior year continue to reflect Eli Witt as a fully
consolidated subsidiary.
The following unaudited condensed balance sheet, statements of
operations and statement of cash flows of the Corporation, presented for
comparative purposes, reflect Eli Witt under the equity method on a pro forma
basis in 1993.
Condensed Balance Sheet of Culbro Corporation
<TABLE>
Nov. 27,
May 28, 1993
1994 (pro forma)
--------- -----------
<S> <C> <C>
Total current assets $ 115,368 $ 100,293
Property and equipment, net 78,110 78,770
All other noncurrent assets 93,470 102,833
Total assets $ 286,948 $ 281,896
Total current liabilities 26,499 32,592
Long term debt 113,579 104,914
All other noncurrent liabilities 34,798 33,508
Total liabilities 174,876 171,014
Shareholders' equity 112,072 110,882
Total liabilities and
shareholders' equity $ 286,948 $ 281,896
</TABLE>
Condensed Statements of Operations of Culbro Corporation
<TABLE>
13 Weeks Ended
----------------------------
May 29,
May 28, 1993
1994 (pro forma)
-------- ----------
<S> <C> <C>
Net sales and other revenue $ 54,499 $ 48,822
Operating profit 5,117 4,326
Gain on sale of Eli Witt common stock 2,691 -
(Loss) income from equity investments (1,307) 195
Net income 2,236 1,551
26 Weeks Ended
---------------------------
May 29,
May 28, 1993
1994 (pro forma)
---------- ------------
<S> <C> <C>
Net sales and other revenue $ 87,859 $ 78,525
Operating profit 5,674 2,014
Gain on sale of Eli Witt common stock 2,691 -
(Loss) income from equity investments (1,953) 1,427
Income (loss) before cumulative effect
of accounting change 1,187 (104)
</TABLE>
Condensed Statement of Cash Flows of Culbro Corporation
<TABLE>
26 Weeks Ended
-------------------
May 29,
May 28, 1993
1994 (pro forma)
---------- -----------
<S> <C> <C>
Operating activities:
---------------------
Net cash used in operating activities (4,589) (11,254)
--------- ---------
Investing activities:
---------------------
Additions to property and equipment (2,543) (1,947)
Proceeds from sale of Eli Witt common stock 672 -
Cash dividend from Eli Witt - 41,529
Net repayment of Eli Witt intercompany debt - 46,129
Issuance of a mortgage on an Eli Witt facility - (10,000)
Proceeds from Take-Out Agreement - 4,953
------- -------
Net cash (used in) provided by investing activities (1,871) 80,664
-------- --------
Financing activities:
---------------------
Payments of long-term debt (8,321) (70,029)
Increases in long-term debt 16,343 -
-------- --------
Net cash provided by (used in)
financing activities 8,022 (70,029)
-------- --------
Net increase (decrease) in cash
and cash equivalents $ 1,562 $ (619)
======== ========
</TABLE>
C. At the time of the deconsolidation and at May 28, 1994, Eli Witt was
in a common deficit position, and as such, the Corporation has a negative
basis in its common equity investment in Eli Witt. The negative basis of
approximately $6.5 million at May 28, 1994 is reflected as a deferred
credit on the Corporation's balance sheet. Accordingly, the Corporation
recognized the results of Eli Witt through the April 25, 1994
deconsolidation date and will not recognize any future profit or loss of
Eli Witt until its common deficit is recouped. At May 28, 1994, the $15
million face value mandatorily redeemable Series B preferred stock of Eli
Witt held by the Corporation is included on the consolidated balance sheet
at approximately $11.5 million. This amount reflects the fair value of
the related subordinated note for which it is exchangeable in August 1998.<PAGE>
The carrying value of the Series B preferred stock is being accreted
to its $15 million face value, plus 10% cumulative dividends. The total
amount of accretion and dividends is equal to the amortization of the
original issue discount plus accrued interest on the subordinated note.
Other nonoperating income for the thirteen and twenty-six weeks ended May
28, 1994 in the consolidated statements of operations includes accretion
and accrued dividends totaling $226 which equal the amount of discount
amortization and interest on the subordinated note included in the
Corporation's consolidated interest expense.
Eli Witt's unaudited summarized financial information is as follows:
Summarized Statement of Operations of Eli Witt
<TABLE>
26 Weeks Ended
------------------------------
May 28, May 29,
1994 1993
---------- ---------
<S> <C> <C>
Net sales and other revenues $641,447 $ 597,732
Operating (loss) profit (1,833) 6,321
Net (loss) income (2,733) 1,522
Dividends/accretion related
to preferred stock (1,250) (625)
Net (loss) income available to
common shareholders (3,983) 897
</TABLE>
<TABLE>
Summarized Balance Sheet of Eli Witt
May 28, Nov. 27,
1994 1993
---------- ---------
<S> <C> <C>
Trade receivables, net $ 76,130 $ 50,832
Inventories 57,159 57,929
Property and equipment, net 42,711 36,128
All other assets 19,776 20,036
-------- --------
Total assets $195,776 $164,925
========= ========
Accounts payable and accrued expenses $ 62,748 $ 49,666
Total debt 104,610 85,263
All other liabilities 12,057 12,067
-------- ---------
Total liabilities 179,415 146,996
-------- --------
Mandatorily redeemable Series B
preferred stock 16,900 16,150
-------- ---------
Shareholders' (deficit) equity:
Series A preferred stock 9,184 10,005
Series C preferred stock 1,321 -
Common stock and accumulated deficit (11,044) (8,226)
---------- ---------
Total shareholders' (deficit) equity (539) 1,779
---------- --------
Total liabilities, preferred stock and
shareholders' (deficit) equity $195,776 $164,925
========= ========
</TABLE>
On April 25th, 1994, Eli Witt acquired the net assets of the six
Southern distribution facilities of NCC L.P., ("NCC"), a limited partnership
engaged in the wholesale distribution business. The six facilities,
designated as NCC South, comprised a portion of the overall distribution
business conducted by NCC through nine warehouses in total.
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%, which they
received in connection with Eli Witt's acquisition of Certified Grocers in
1993. In connection with its acquisition of NCC South, Eli Witt issued to
NCC 595,000 shares of common stock, representing approximately 23% of its
outstanding common stock after the acquisition. In a transaction executed
simultaneously with Eli Witt's acquisition of NCC South, the Corporation sold
400,000 shares of its Eli Witt common stock to MSD, a former limited partner
of NCC and an affiliate of the Morgan Stanley Leveraged Equity Fund II L.P.,
and issued a $15 million subordinated note to MSD. In return, the
Corporation received proceeds of $12 million and the right to exchange in
1998, at the Corporation's option, the subordinated note for the $15 million
face value Eli Witt Series B preferred stock held by the Corporation. The
$12 million proceeds received from MSD was allocated to the subordinated note
($11,328) and to the Eli Witt common stock sold ($672) based on their fair
values as of April 25, 1994. A pretax gain of $2,691 was recognized on the
400,000 shares sold to MSD comprising the proceeds of $672 and the
Corporation's negative basis of $2,019 in the shares sold.
As a result of the transactions described above, MSD owns shares
totaling approximately 38% of the outstanding common stock of Eli Witt. The
Corporation retained a 50.1% ownership in the outstanding common stock of Eli
Witt, and the former shareholders of Certified Grocers now hold approximately
12% of the outstanding common stock of Eli Witt.
D. As described in Note C, the Corporation issued a $15 million 10%
subordinated note due August 1998 and sold 400,000 of its Eli Witt shares for
proceeds of $12 million in connection with Eli Witt's acquisition of NCC
South. No interest payments are required on the note until maturity, at
which time the principal and all accrued interest may be exchanged, at the
Corporation's option, for the Series B preferred stock of Eli Witt held by
the Corporation. Interest expense in the thirteen and twenty-six weeks ended
May 28, 1994 includes $82 for amortization of the original issue discount on
the subordinated note.
On January 27th, 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 ten years, with a balloon payment
of $1.2 million due at termination.
E. Supplemental Financial Statement Information
<TABLE>
Inventories
-----------
Inventories consist of:
May 28, Nov. 27,
1994 1993
--------- ----------
<S> <C> <C>
Raw materials and supplies $34,381 $ 34,232
Work-in-process 16,841 15,213
Finished goods 18,721 78,771
--------- ---------
$69,943 $128,216
========= =========
Property and equipment
----------------------
Property and equipment consist of:
May 28, Nov. 27,
1994 1993
--------- --------
<S> <C> <C>
Land $ 11,372 $ 13,453
Buildings 62,662 84,340
Machinery and equipment 58,227 81,871
Accumulated Depreciation (54,151) (64,766)
----------- ---------
$ 78,110 $ 114,898
=========== =========
Supplemental Cash Flow Information
----------------------------------
Cash paid during the period for:
26 Weeks Ended
--------------------------
May 28, May 29,
1994 1993
-------- ---------
<S> <C> <C>
Interest, net of
amounts capitalized $ 4,440 $ 6,922
========= ========
Income taxes, net $ 794 $ 1,215
========= =======
</TABLE>
F. The net loss per common share for the thirteen and twenty-six weeks
ended May 28, 1994 is based on the weighted average number of shares of
common stock outstanding during the respective periods. The Corporation's
outstanding stock options were not considered because they are anti-dilutive.
The weighted average number of shares of common stock and common stock
equivalents, was 4,308,288 and 4,308,247 for the thirteen and twenty-six
weeks ended May 28, 1994, respectively. The weighted average common
shares outstanding for the thirteen and twenty-six weeks ended May 29, 1993
was 4,308,062 and 4,308,015, respectively.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- --------------------------------
As discussed in Note B, the Corporation's subsidiary in the wholesale
distribution business, The Eli Witt Company ("Eli Witt"), has been
deconsolidated from the Corporation's financial statements. Last year's
statements have not been restated. The deconsolidation did not have an
effect on the Corporation's cash flow because, as previously reported, the
cash flows of Eli Witt have not been available to the Corporation
because Eli Witt has been financed separately from the Corporation and its
other subsidiaries since February 1993. Comparisons of changes in cash flow
with the prior year are based on the restated 1993 cash flow information
contained in Note B.
Cash flow used in operations in the 1994 year to date period principally
reflects an increase in accounts receivable, consistent with last year, due
to the seasonal nature of the nursery products business and a reduction in
accounts payable, due to the timing of payments. Cash flow used in
operations was lower than the current period because last year included the
termination of the accounts receivable sales agreement. Excluding the
effect of that one time use of cash, cash flow used in operations was
comparable with the prior year's six month period.
Cash flow used in 1994 investing activities reflects capital
expenditures, primarily in the Corporation's industrial products business,
partially offset by the proceeds from the sale of a portion of the
Corporation's Eli Witt common stock. Capital expenditures were higher
in the current year due to timing. The prior year's investing activities
reflect cash generated and used in several one time transactions. The
Corporation received proceeds from the intercompany dividend and repayment of
intercompany debt from Eli Witt in connection with Eli Witt becoming
separately financed in 1993, and the Corporation entered into a mortgage with
Eli Witt on a distribution facility. The proceeds from the dividend and
repayment of intercompany debt, partially offset by the mortgage loan made
to Eli Witt, were used by the Corporation to repay debt.
Cash flow provided by financing activities in the current period includes
approximately $11.3 million from a subordinated note issued to MS
Distribution, Inc. ("MSD"), a partner of NCC L.P. and $5 million from an
equipment mortgage obtained by the Corporation. The proceeds from these
transactions were used to prepay $3.0 million of the Corporation's 9.7%
Senior Notes with the balance of the proceeds used to reduce amounts
outstanding under the Corporation's Credit Agreement. The subordinated note
does not require interest or principal payments until maturity, at which time
it is exchangeable, at the Corporation's option, with the Series B preferred
stock of Eli Witt. The payment terms and exchangeability feature were
structured primarily to maximize the Corporation's after-tax cash flow from
this transaction. The prior year's cash flow used in financing activities
reflects the reduction of the Corporation's debt in connection with the
separate financing of Eli Witt in 1993.
During the 1994 second quarter, Eli Witt entered into a commitment with a
financial institution to obtain an $8 million mortgage. Upon closing of this
transaction, Eli Witt will use the mortgage proceeds to substantially repay
its mortgage with the Corporation, which will use the proceeds to reduce its
debt. This transaction is expected to be completed during the third quarter.
Management believes that the Corporation's cash flow from operations may
need to be supplemented by proceeds generated from other transactions to meet
operating and capital requirements and scheduled debt repayments. 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
- ---------------------
As a result of the deconsolidation of Eli Witt, and accounting for this
subsidiary under the equity method, the current year's financial statements
have been restated to reflect the deconsolidation as of the beginning of the
fiscal year. Prior year's statements were not restated. The comparisons
reflected in the following discussion pertain to the prior year condensed
pro forma statements of operations contained in Note B, which present Eli Witt
under the equity method.
The Corporation's second quarter and six month results increased from the
comparative periods of last year due principally to the pretax gain of
approximately $2.7 million on the sale of the Eli Witt common stock and
higher operating profit in the cigar business and in the packaging and
labeling systems business, partially offset by an equity loss from Eli Witt
as compared to profit in the respective periods last year. The losses in the
second quarter and six month periods at Eli Witt reflect substantial declines
in profit on cigarette inventory price appreciation that resulted from
manufacturers' purchase incentive programs and price increases on cigarettes
in the previous year. Price changes instituted by cigarette manufacturers in
the third quarter last year also negatively affected gross profit by
effectively reducing margins on cigarettes which comprise a substantial
portion of Eli Witt's sales revenue.
Operating profit at General Cigar Co., Inc. ("General Cigar") increased
in the second quarter and six month period due principally to increased
revenue from cigar sales, reflecting higher volume of premium cigar sales and
price increases on all cigar categories. Also, General Cigar's higher
operating profit reflected improved results from sales of shade grown wrapper
tobacco in 1994 due to an improved crop as compared to last year's crop.
In the industrial products business, CMS Gilbreth Packaging Systems, Inc.
("CMS Gilbreth") had higher operating profit due principally to increased
sales volume on packaging machinery and packaging materials. The increased
sales volume and improved margins from manufacturing efficiencies, including
better absorption of fixed costs due to the higher volume, resulted in the
higher operating profit. However, CMS Gilbreth recently was informed that
its largest customer of packaging materials, comprising approximately 20% of
CMS Gilbreth's total annual revenue, has decided to change the type of label
to be applied to its product and therefore will not continue to purchase
their labels from CMS Gilbreth. The impact of this will not affect the
current year's results because the label change by the customer is not
expected to take place until the 1995 first quarter.
Operating profit in the Corporation's nursery products business, Imperial
Nurseries, Inc. ("Imperial") decreased in the second quarter as compared to
the prior year but was substantially unchanged in the six month period as
compared to last year. Imperial's lower second quarter profit was due
principally to timing of shipments, as some customers accepted delivery
earlier this year than last year. In the six month period, higher sales
volume was substantially offset by increased discounts and higher costs of
sales, reflecting a change in the sales mix.
In the Corporation's Connecticut real estate business, Culbro Land
Resources, Inc. ("CLR'), operating results declined from last year in the
second quarter and six month period due to lower revenue from its joint
venture investments and higher expenses. Subsequent to the end of the second
quarter, CLR completed the sale of undeveloped land which generated
approximately $1 million in proceeds and operating profit of approximately
$900,000. This transaction will be reflected in the Corporation's third
quarter results.
The higher effective tax rate in the second quarter and six month period
of the current year principally reflects the effect of state taxes.<PAGE>
Part II - OTHER INFORMATION
- ----------------------------
Item 4 - Submission of Matters to a Vote of Security Holders
- ---------------------------------------------------------------
(a) Annual Meeting of Shareholders - April 7, 1994
(b) The following were elected as Directors at the Annual Meeting:
Bruce A. Barnet John L. Ernst
John L. Bernbach Thomas C. Israel
Edgar M. Cullman (Chairman) Dan W. Lufkin
Edgar M. Cullman, Jr. Graham V. Sherren
Frederick M. Danziger Peter J. Solomon
Francis T. Vincent, Jr.
(c)(i) 1) Mr. Bruce A. Barnet was elected a Director for 1994 with
4,007,692 votes in favor, 30,445 opposed, and 270,151 not
voting.
2) Mr. John L. Bernbach was elected a Director for 1994 with
4,007,792 votes in favor, 30,345 opposed and 270,151 not
voting.
3) Mr. Edgar M. Cullman was elected a Director for 1994 with
4,008,159 votes in favor, 29,978 opposed and 270,151 not
voting.
4) Mr. Edgar M. Cullman, Jr. was elected a Director for 1994
with 4,007,192 votes in favor, 30,945 opposed and 270,151
not voting.
5) Mr. Frederick M. Danziger was elected a Director for 1994
with 4,008,092 votes in favor, 30,045 opposed and 270,151
not voting.
6) Mr. John L. Ernst was elected a Director for 1994 with
4,008,092 votes in favor, 30,045 opposed and 270,151 not
voting.
7) Mr. Thomas C. Israel was elected a Director for 1994 with
4,007,992 votes in favor, 30,145 opposed and 270,151 not
voting.
8) Mr. Dan W. Lufkin was elected a Director for 1994 with
4,006,059 votes in favor, 32,078 opposed and 270,151 not
voting.
9) Mr. Graham V. Sherren was elected a Director for 1994
with 4,007,732 votes in favor, 30,405 opposed and 270,151
not voting.
10) Mr. Peter J. Solomon was elected a Director for 1994 with
4,007,892 votes in favor, 30,245 opposed and 270,151 not
voting.
11) Mr. Francis T. Vincent, Jr. was elected a Director for
1994 with 4,008,092 votes in favor, 30,045 opposed and
270,151 not voting.
(ii) The selection of Price Waterhouse as independent accountants for
1994 was approved by 3,847,708 votes in favor and 182,527
opposed with 7,902 abstentions and 270,151 not voting.
</PAGE>
Part II - OTHER INFORMATION (Cont.)
- -----------------------------------
Item 4 - Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
(iii) A shareholders' proposal for cumulative voting in the election
of directors received 814,298 votes in favor and 2,961,286
opposed with 9,036 abstentions and 523,668 not voting.
(iv) The grant of stock options pursuant to an employment agreement
with the Corporation's Chief Financial Officer was approved by
3,802,298 in favor and 225,790 against with 10,049 abstentions
and 270,151 not voting.
(d) Not applicable.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CULBRO CORPORATION
(Registrant)
Date: May 11, 1995 (Jay M. Green)
Jay M. Green
Executive Vice President -
Chief Financial Officer and
Treasurer
Date: May 11, 1995 (Joseph Aird)
Joseph Aird
Vice President - Controller
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