<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the 13 weeks ended March 2, 1996 Commission File No. 1-1210
CULBRO CORPORATION
(Exact name of registrant as specified in its charter)
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 March 31, 1996-4,475,104
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CULBRO CORPORATION
FORM 10Q
INDEX
PART I - FINANCIAL INFORMATION
Consolidated Statement of Operations and
Retained Earnings - thirteen weeks ended
March 2, 1996 and March 4, 1995................................................3
Consolidated Balance Sheet
March 2, 1996 and December 2, 1995.............................................4
Consolidated Statement of Cash Flows -
thirteen weeks ended March 2, 1996 and
March 4, 1995..................................................................5
Notes to Consolidated Financial Statements...................................6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations................................8-9
PART II OTHER INFORMATION..................................................10-11
SIGNATURES....................................................................12
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CULBRO CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
(dollars in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
------------------------------
March 2, March 4,
1996 1995
---------- ----------
<S> <C> <C>
Net Sales and other revenue $ 45,884 $ 41,991
Costs and expenses
Cost of goods sold 27,983 25,892
Selling, general and administrative expenses 14,535 13,569
---------- ----------
Operating profit 3,366 2,530
(Loss) income from equity investments (18) 112
Other nonoperating income, net 337 587
Interest expense, net 2,171 2,314
---------- ----------
Income before tax provision 1,514 915
Income tax provision 590 365
---------- ----------
Net income 924 550
Retained earnings - beginning of period 110,686 99,497
---------- ----------
Retained earnings - end of period $ 111,610 $ 100,047
---------- ----------
---------- ----------
Net income per common share $ 0.20 $ 0.13
---------- ----------
---------- ----------
Weighted average common shares
and equivalents outstanding 4,622,000 4,308,000
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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CULBRO CORPORATION
CONSOLIDATED BALANCE SHEET
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
March 2, December 2,
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,273 $ 5,876
Receivables, less allowance of $1,246
(1995-$1,159) 28,570 35,863
Inventories 77,564 70,269
Other current assets 4,946 5,389
-------- --------
Total current assets 114,353 117,397
Property and equipment, net 76,154 75,206
Real estate held for sale or lease, net 29,637 29,959
Investment in Series B preferred stock
of The Eli Witt Company 15,709 15,122
Investment in real estate joint ventures 7,806 7,964
Other, including investment in Centaur
Communications Limited of $14,374
(1995-$14,392) 18,887 19,191
Intangible assets, net 18,047 18,271
------ ------
Total assets $280,593 $283,110
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 23,169 $ 32,272
Long-term debt due within one year 9,076 9,020
Income taxes 1,404 2,610
-------- --------
Total current liabilities 33,649 43,902
Long-term debt 89,594 84,365
Accrued retirement benefits 16,370 16,148
Deferred income taxes 6,025 5,622
Other noncurrent liabilities and deferred 8,332 8,098
credits -------- --------
Total liabilities 153,970 158,135
-------- --------
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 13,092 13,276
Retained earnings 111,610 110,686
-------- --------
129,251 128,511
Less-Common stock in Treasury, at cost,
118,185 shares (1995-159,045) (2,628) (3,536)
-------- --------
Total shareholders' equity 126,623 124,975
-------- --------
Total liabilities and shareholders' equity $280,593 $283,110
-------- --------
-------- --------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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CULBRO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
-------------------------
March 2, March 4,
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 924 $ 550
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 1,997 1,889
Loss (income) from equity investments 18 (112)
Discount and interest on subordinated note 587 587
Accretion and accrued dividends on Series B
preferred stock of Eli Witt (587) (587)
Provision for bad debts 188 127
Changes in assets and liabilities:
Decrease in real estate held for sale or
lease, net 322 260
Increase in inventories (7,295) (3,356)
Decrease in accounts receivable 7,105 2,682
Decrease in accounts payable and accrued
liabilities (9,103) (4,451)
Other, net 104 (314)
-------- --------
Net cash used in operating activities (5,740) (2,725)
-------- --------
INVESTING ACTIVITIES:
Additions to property and equipment (2,658) (845)
-------- --------
FINANCING ACTIVITIES:
Increase in debt 5,073 -
Payments of debt - (2,872)
Proceeds from exercise of stock options 722 -
-------- --------
Net cash provided by (used in) financing activities 5,795 (2,872)
-------- --------
Net decrease in cash and cash equivalents (2,603) (6,442)
Cash and cash equivalents at beginning of period 5,876 6,682
-------- --------
Cash and cash equivalents at end of period $ 3,273 $ 240
-------- --------
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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CULBRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except per share data)
(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 1995 Annual Report to Shareholders
included in Form 10K, 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 period have been reflected.
The results of operations for the thirteen weeks ended March 2, 1996
are not necessarily indicative of the results to be expected for the full
year.
B. The Corporation's Credit Agreement was extended through March 31,
1997, and the Corporation and its banks are in the process of negotiating a
new agreement, which is expected to be in place before the end of the
current fiscal year.
C. In the 1996 first quarter, options to purchase 40,800 shares under the
1991 and 1992 Employees Incentive Stock Option Plans were exercised at
prices ranging from $12.25 to $27.00 per share, generating proceeds of
$722. The changes in Capital in Excess of Par Value and Common Stock in
Treasury reflect the exercise of these stock options.
D. Supplemental Financial Statement Information
INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
March 2, December 2,
1996 1995
--------- -----------
<S> <C> <C>
Raw material and supplies $ 37,702 $ 32,839
Work-in-process 18,346 16,485
Finished goods 21,516 20,945
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$ 77,564 $ 70,269
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PROPERTY AND EQUIPMENT
Property and equipment consist of:
<CAPTION>
March 2, December 2,
1996 1995
--------- -----------
Land $ 11,147 $ 11,200
Buildings 64,937 64,167
Machinery and equipment 62,665 60,884
Accumulated depreciation (62,595) (61,045)
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$ 76,154 $ 75,206
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</TABLE>
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CASH FLOW
Cash paid during the period for:
<TABLE>
<CAPTION>
13 Weeks Ended
-------------------------
March 2, March 4,
1996 1995
-------- --------
<S> <C> <C>
Interest, net of amounts capitalized $ 1,651 $ 1,846
-------- --------
-------- --------
Income taxes, net $ 1,373 $ 284
-------- --------
-------- --------
</TABLE>
OTHER NONOPERATING INCOME, NET
Other nonoperating income, net, in the current and prior year's quarters
reflects accrued dividends and accretion income of approximately $0.6 million on
the Series B preferred stock of The Eli Witt Company ("Eli Witt") held by the
Corporation, partially offset in the 1996 first quarter by consulting expenses
of approximately $0.3 million related to the Corporation's investment in
Eli Witt.
The accrued dividends and accretion income on the Eli Witt preferred stock
equal the accrued interest on the Corporation's subordinated note payable that
is included in interest expense. The Corporation has the unilateral right to
exchange the Eli Witt Series B preferred stock for the subordinated note payable
and all accrued interest upon the note's maturity in August 1998.
RESULTS FROM EQUITY INVESTMENTS, NET
The Corporation's results from equity investments in the 1996 and 1995
first quarters reflect the results of Centaur Communications Limited, the
publishing business in the United Kingdom, in which the Corporation owns an
equity interest of approximately 25%. In 1995 and in the 1996 first quarter,
the Corporation did not recognize the results of Eli Witt because of the
Corporation's negative basis in its common equity investment in Eli Witt. The
Corporation will not recognize the results of Eli Witt until the negative basis
in its common equity investment in Eli Witt is eliminated.
Summarized operating results of Eli Witt are as follows:
<TABLE>
<CAPTION>
13 Weeks Ended
-------------------------
March 2, March 4,
1996 1995
-------- --------
<S> <C> <C>
Net sales and other revenue $328,852 $398,367
Operating loss (2,175) (1,674)
Net loss (4,533) (3,704)
Net loss applicable to common stockholders (5,524) (4,596)
</TABLE>
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MANAGEMENTS'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
In the 1996 first quarter, cash used in operating activities was higher
than the 1995 first quarter. This reflected a greater increase in inventories
than last year, due principally to the purchase of tobacco by the Corporation's
cigar business, General Cigar Co. Inc. ("General Cigar"). Also, reductions in
accounts payable and accrued liabilities were greater in the 1996 first quarter
because of higher accounts payable and accruals at year end 1995 than the
previous year end. Partially offsetting these items was a greater reduction of
accounts receivable during the 1996 first quarter, principally reflecting
collections relating to sales at General Cigar in the 1995 fourth
quarter.
Investment in property and equipment was higher in 1996 than 1995
reflecting the expansion of production capacity at General Cigar to meet the
growing demand for cigars, and expenditures related to the Corporation's opening
of an upscale cigar bar, "Club Macanudo", in New York City, scheduled for the
second quarter.
Cash generated from financing activities reflects additional borrowings
under the Corporation's Credit Agreement and proceeds from the exercise of stock
options. These funds along with a portion of the cash on hand at the beginning
of the quarter were used in the operating and investing activities described
above. The Credit Agreement was extended through March 31, 1997, and the
Corporation and its banks are currently negotiating a new agreement which is
expected to be in place before the end of the current fiscal year.
As previously announced the Corporation has offered for sale CMS Gilbreth
Packaging Systems, Inc. ("CMS Gilbreth"), its packaging and labeling systems
business. CMS Gilbreth's business in no longer consistent with the
Corporation's strategic direction, which is to increase its focus on its cigar
business and related affluent market segments. Proceeds from a sale of CMS
Gilbreth will most likely be used to reduce debt.
Management expects that the Corporation's liquidity and cash flow from
operations will be sufficient to meet its planned capital expenditure
requirements and its maturing debt obligations.
RESULTS OF OPERATIONS
The increase in net income in the 1996 first quarter as compared to the
1995 first quarter principally reflected higher operating profit at General
Cigar, partially offset by lower operating profit at CMS Gilbreth. The
increased operating profit at General Cigar reflected higher prices and
increased volume of cigar sales. Demand for General Cigar's cigar products
continues to be strong, as backorders increased during the first quarter.
Operating profit at CMS Gilbreth was lower due principally to lower margins.
8 of 12
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The Corporation's nursery products business, Imperial Nurseries, Inc.
("Imperial") incurred a slightly higher operating loss in the 1996 first quarter
as compared to last year's first quarter. Imperial normally incurs a first
quarter loss because sales in this highly seasonal business are minimal during
the winter months which comprise the Corporation's first fiscal quarter.
Results in the Corporation's real estate businesses were substantially
unchanged.
The Corporation had a small loss from its equity investment in Centaur
Communications Limited ("Centaur") in the 1996 first quarter as compared to a
profit on its Centaur equity investment in the 1995 first quarter. The lower
results of Centaur are attributed to a weak British economy. Interest expense
was lower in the 1996 first quarter because of the Corporation's overall lower
debt level in the current period.
9 of 12
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11: Statement re computation of earnings per share
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
PRIMARY 13 WEEKS ENDED
- ------- -------------------------
March 2, March 4,
1996 1995
---------- ----------
<S> <C> <C>
Net income $ 924 $ 550
---------- ----------
---------- ----------
Weighted average common shares outstanding 4,410,000 4,308,000
Net effect of dilutive stock options based on the
treasury stock method using average market price 212,000 -
---------- ----------
Total 4,622,000 4,308,000
---------- ----------
---------- ----------
Net income per common share $ 0.20 $ 0.13
---------- ----------
---------- ----------
<CAPTION>
FULLY DILUTED 13 WEEKS ENDED
- ------------- -------------------------
March 2, March 4,
1996 1995
---------- ----------
<S> <C> <C>
Net income $ 924 $ 550
---------- ----------
---------- ----------
Weighted average common shares outstanding 4,410,000 4,308,000
---------- ----------
---------- ----------
Net effect of dilutive stock options based on the
treasury stock method using ending market price 236,000 -
---------- ----------
Total 4,646,000 4,308,000
---------- ----------
---------- ----------
Net income per common share $ 0.20 $ 0.13
---------- ----------
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</TABLE>
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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: April 11, 1996 /s/ Jay M. Green
-------------------------------------
Jay M. Green
Executive Vice President -
Chief Financial Officer and Treasurer
Date: April 11, 1996 /s/ Joseph Aird
----------------------------------
Joseph Aird
Senior Vice President - Controller
11 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAR-02-1996
<CASH> 3,273
<SECURITIES> 0
<RECEIVABLES> 29,816
<ALLOWANCES> (1,246)
<INVENTORY> 77,564
<CURRENT-ASSETS> 114,353
<PP&E> 138,749
<DEPRECIATION> (62,595)
<TOTAL-ASSETS> 280,593
<CURRENT-LIABILITIES> 33,649
<BONDS> 89,594
0
0
<COMMON> 4,549
<OTHER-SE> 122,074
<TOTAL-LIABILITY-AND-EQUITY> 280,593
<SALES> 45,824
<TOTAL-REVENUES> 45,884
<CGS> 27,983
<TOTAL-COSTS> 42,518
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 188
<INTEREST-EXPENSE> 2,171
<INCOME-PRETAX> 1,514
<INCOME-TAX> 590
<INCOME-CONTINUING> 924
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 924
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
