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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): AUGUST 4, 2000
VECTOR GROUP LTD.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
1-5759 65-0949535
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(Commission File Number) (I.R.S. Employer Identification No.)
100 S.E. SECOND STREET, MIAMI, FLORIDA 33131
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(Address of principal executive offices) (Zip Code)
(305) 579-8000
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(Registrant's telephone number, including area code)
BROOKE GROUP LTD.
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 4, 2000, Brooke (Overseas) Ltd., a wholly-owned subsidiary of
Vector Group Ltd., completed the sale to Gallaher Overseas (Holdings) Ltd. of
all of the membership interests of Western Tobacco Investments LLC. Brooke
(Overseas) held its 99.9% equity interest in Liggett-Ducat Ltd., one of Russia's
leading cigarette producers, through Western Tobacco Investments.
The purchase price for the sale consisted of $334.1 million in cash and
$64.4 million in assumed debt and capital commitments. The proceeds generated
from the sale were divided among Brooke (Overseas) and Western Realty
Development LLC, a joint venture of New Valley Corporation and Apollo Real
Estate Investment Fund III, L.P., in accordance with the terms of a
participating loan. Of the cash proceeds from the transaction after expenses,
Brooke (Overseas) received approximately $200 million. New Valley, in which
Vector owns a 55.9% interest, received $57.2 million in cash proceeds from the
sale and Apollo received $68.4 million in cash proceeds from the sale. These
amounts are subject to adjustment based on final closing expenses.
On August 4, 2000, with the proceeds of the sale, BGLS Inc., a
wholly-owned subsidiary of Vector, repurchased $24.9 million principal amount of
its 15.75% Senior Secured Notes, together with accrued interest of $11.5
million, for $36.4 million. On that date, BGLS called the remaining notes for
redemption on September 5, 2000. On the redemption date, all of these notes will
be redeemed for 100% of the principal amount thereof plus accrued interest. BGLS
will use approximately $105 million of the proceeds of the sale to retire the
notes.
The sale of Western Tobacco Investments was effected pursuant to a
Purchase and Sale Agreement dated as of June 14, 2000, as amended, between
Gallaher Overseas and Brooke (Overseas). The sale was negotiated on an arm's
length basis between Gallaher Overseas and Brooke (Overseas). The purchaser is
not affiliated with Brooke (Overseas) or any of its affiliates, or any director
or officer of Brooke (Overseas), or any affiliate or associate of any such
director or officer.
Gallaher Overseas has also agreed to purchase for $1.5 million
additional land adjacent to Liggett-Ducat manufacturing facility outside Moscow,
Russia. The seller is an affiliate of Western Realty Development.
The foregoing summary of the sale of Western Tobacco Investments is
qualified in its entirety by reference to the text of the Purchase and Sale
Agreement, as amended, and related agreements, which are included as exhibits
hereto and are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Pro Forma Financial Information.
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The Unaudited Pro Forma Condensed Consolidated Statements of Operations
for the year ended December 31, 1999 and the six months ended June 30, 2000 have
been prepared giving effect to the following transactions:
o the Philip Morris brand transaction in May 1999 and the application
of the proceeds to retire a portion of the BGLS notes;
o the New Valley recapitalization in June 1999 and the sale of New
Valley's shopping centers and the Thinking Machines assets during
1999; and
o the sale of Western Tobacco Investments in August 2000 and the
application of the proceeds to retire the remaining BGLS notes.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
give effect to these transactions as if they had occurred on January 1, 1999.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June
30, 2000 has been prepared giving effect to the sale of Western Tobacco
Investments and the retirement of the BGLS notes as if they had occurred on June
30, 2000.
The unaudited pro forma financial information should be read in
conjunction with Vector's historical Consolidated Financial Statements and the
related notes thereto contained in Vector's Annual Report on Form 10-K for the
year ended December 31, 1999 and its quarterly reports on Form 10-Q for the
quarters ended March 31, 2000 and June 30, 2000.
The unaudited pro forma financial information does not purport to be
indicative of what Vector's financial position or results of operations would
actually have been had such transactions been completed on the dates indicated
or to project Vector's results of operations for any future date.
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VECTOR GROUP LTD. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
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PRO FORMA ADJUSTMENTS
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SALE OF
PHILIP MORRIS WESTERN
BRAND TOBACCO BGLS NOTES
HISTORICAL NEW VALLEY TRANSACTION INVESTMENTS RETIREMENT PRO FORMA
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<S> <C> <C> <C> <C> <C> <C>
Revenues:
Tobacco* ................................ $ 522,807 $ $ (21,930)(a) $(100,059)(b) $ $ 400,818
Broker-dealer transactions .............. 40,852 36,323 77,175
Real estate leasing ..................... 3,386 52 3,438
------------ -------- ---------- -------- ------- -----------
Total revenues ...................... 567,045 36,375 (21,930) (100,059) 481,431
Expenses:
Cost of goods sold* ..................... 189,865 (5,453)(a) (78,680)(b) 105,732
Operating, selling, administrative and
general expense ....................... 305,177 41,083 (3,648)(a) (15,805)(b) 326,807
------------ -------- ---------- -------- ------- -----------
Operating income .................... 72,003 (4,708) (12,829) (5,574) 48,892
Other income (expenses):
Interest and dividend income ............ 2,840 (62) 2,778
Interest expense ........................ (54,378) (1,550) 10,546(c) 13,209(b) 24,158(c) (8,015)
Recognition of deferred gain ............ 7,050 7,050
Equity in loss of affiliate ............. (11,315) 7,545 (3,770)
Loss in joint venture ................... (12,082) (1,955) 781(b) (13,256)
Gain on sale of investments, net ........ 741 1,632 2,373
Sale of assets .......................... 12,172 (7,400) 4,772
Gain on brand transaction ............... 294,078 (294,078)(a)
Gain on currency translation ............ 1,179 (1,179)(b)
Other, net .............................. 787 1,927 155 (b) 2,869
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Income (loss) from continuing operations
before provision (benefit) for income
taxes and minority interests .......... 313,075 (4,571) (296,361) 7,392 24,158 43,693
Provision (benefit) for income taxes .... 82,458 42 (73,319) (874) 8,576 16,883
Minority interests ...................... 5,467 7,091 (353) 12,205
------------ -------- ---------- -------- ------- -----------
Income (loss) from continuing
operations .............................. $ 236,084 $ 2,478 $ (223,042) $ 7,913 $15,582 $ 39,015
============ ======== ========== ======== ======= ===========
Earnings per share of Common Stock from
continuing operations:
Basic ................................. $ 10.74 $ 1.77
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Diluted ............................... $ 8.81 $ 1.46
============ ===========
Weighted average number of shares
outstanding:
Basic ................................. 21,989,782 21,989,782
============ ===========
Diluted ............................... 26,811,273 26,811,273
============ ===========
</TABLE>
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* Revenues and cost of goods sold include excise taxes of $66,698 for the
year ended December 31, 1999.
(a) To eliminate sales and expenses associated with the three brands involved
in the Philip Morris brand transaction.
(b) To record sale of Western Tobacco Investments by Brooke (Overseas).
(c) To eliminate interest expense and original issue discount associated with
the BGLS notes.
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VECTOR GROUP LTD. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000
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PRO FORMA ADJUSTMENTS
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SALE OF
WESTERN BGLS
TOBACCO NOTES
HISTORICAL INVESTMENTS RETIREMENT PRO FORMA
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<S> <C> <C> <C> <C>
Revenues:
Tobacco* ................................................... $ 334,792 $ (89,329)(a) $ $ 245,463
Broker-dealer transactions ................................. 48,596 48,596
Real estate leasing ........................................ 1,591 1,591
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Total revenues ......................................... 384,979 (89,329) 295,650
Expenses:
Cost of goods sold* ........................................ 154,142 (77,008)(a) 77,134
Operating, selling, general and administrative expense ..... 210,914 (10,406)(a) 200,508
------------ ------------ ------------
Operating income ....................................... 19,923 (1,915) 18,008
Other income (expenses):
Interest and dividend income ............................... 3,182 3,182
Interest expense ........................................... (23,570) 7,310(a) 10,655(b) (5,605)
Equity in loss of affiliate ................................ (2,913) (2,913)
Foreign currency gain ...................................... 1,535 (1,535)(a)
Gain in joint venture ...................................... 153 941(a) 1,094
Gain on sale of investments, net ........................... 6,191 6,191
Other, net ................................................. 1,261 (193)(a) 1,068
------------ ------------ ------------ ------------
Income from continuing operations before provision
for income taxes and minority interests .................. 5,762 4,608 10,655 21,025
Provision for income taxes ................................. 2,314 1,993 3,783 8,089
Minority interests ......................................... 144 (422) (278)
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Income from continuing operations ............................ $ 3,592 $ 2,194 $ 6,872 $ 12,658
============ ============ ============ ============
Earnings per share of Common Stock from continuing operations:
Basic .................................................... $ 0.16 $ 0.58
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Diluted .................................................. $ 0.14 $ 0.48
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Weighted average number of shares outstanding:
Basic .................................................... 21,989,782 21,989,782
============ ============
Diluted .................................................. 26,281,801 26,281,801
============ ============
</TABLE>
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* Revenues and cost of goods sold include excise taxes of $57,161 for the six
months ended June 30, 2000.
(a) To record sale of Western Tobacco Investments by Brooke (Overseas).
(b) To eliminate interest expense and original issue discount associated with
the BGLS notes.
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VECTOR GROUP LTD. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, 2000
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PRO FORMA ADJUSTMENTS
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SALE OF WESTERN BGLS NOTES
HISTORICAL NEW VALLEY TOBACCO INVESTMENTS RETIREMENT PRO FORMA
---------- ----------- ------------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents ................. $ 33,046 $ 57,208(a) $194,886(a)(c) $(113,053)(d) $ 172,087
Receivables from clearing broker .......... 13,594 13,594
Investment securities available for sale .. 36,756 36,756
Trading securities owned .................. 13,589 13,589
Accounts receivable - trade ............... 20,773 (11,743)(a) 9,030
Other receivables ......................... 1,993 1,993
Inventories ............................... 55,683 (21,226)(a) 34,457
Restricted assets ......................... 787 787
Deferred income taxes ..................... 59,268 (53,748)(a) 5,520
Other current assets ...................... 5,600 (2,784)(a) 2,816
--------- --------- --------- --------- ---------
Total current assets .................. 241,089 57,208 105,385 (113,053) 290,629
Property, plant and equipment, net .......... 166,765 (121,571)(a) 45,194
Investments in real estate, net ............. 54,665 54,665
Long-term investments, net .................. 7,794 7,794
Investment in joint venture ................. 41,316 (4,983)(a) 36,333
Restricted assets ........................... 4,101 4,101
Deferred income taxes ....................... 9,216 9,216
Other assets ................................ 5,984 (1,653)(a) 4,331
--------- --------- --------- --------- ---------
Total assets .......................... $ 530,930 $ 52,225 $ (17,839) $(113,053) $ 452,263
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT):
Current liabilities:
Current portion of notes payable
and long-term debt ...................... $ 161,347 (48,093)(a) (102,501)(d) 10,753
Margin loan payable ....................... 5,397 5,397
Accounts payable .......................... 49,229 (40,938)(a) 8,291
Securities sold, not yet purchased ........ 976 976
Accrued promotional expenses .............. 24,561 24,561
Accrued taxes payable ..................... 50,172 (2,558)(a) 47,614
Deferred income taxes ..................... 2,364 2,364
Accrued interest .......................... 8,118 (339)(a) (7,775)(d) 4
Prepetition claims and restructuring
accruals ................................ 11,951 11,951
Other accrued liabilities ................. 45,778 (3,174)(a)(c) 42,604
--------- --------- --------- ---------
Total current liabilities ............. 359,893 (95,102) (110,276) 154,515
Notes payable, long-term debt and other
obligations, less current portion ....... 48,060 (10,221)(a)(c) 37,839
Noncurrent employee benefits ................ 14,106 14,106
Deferred income taxes ....................... 117,230 117,230
Other liabilities ........................... 88,937 (42,653)(a) 46,284
Minority interests .......................... 41,745 23,162(a) 64,907
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, par value $0.10 per share,
authorized 100,000,000 shares, issued
27,822,779 shares, outstanding 21,989,782 2,199 2,199
Additional paid-in capital ................ 185,511 185,511
Deficit ................................... (298,793) 29,063(b) 130,137(b) (2,777)(d) (142,370)
Accumulated other comprehensive income .... 3,258 3,258
Other ..................................... (3,743) (3,743)
Less treasury stock ....................... (27,473) (27,473)
--------- --------- --------- --------- ---------
Total stockholders' equity (deficit) .. (139,041) 29,063 130,137 (2,777) 17,382
--------- --------- --------- --------- ---------
Total liabilities and stockholders'
equity (deficit) ................... $ 530,930 $ 52,225 $ (17,839) $(113,053) $ 452,263
========= ========= ========= ========= =========
</TABLE>
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(a) To record sale of Western Tobacco Investments by Brooke (Overseas).
(b) To record gain on sale of Western Tobacco Investments.
(c) To record payment of various liabilities of Brooke (Overseas) Ltd.
(d) To record retirement of BGLS notes, eliminate accrued interest and
original issue discount associated with the notes.
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(c) The following Exhibits are provided in accordance with the
provisions of Item 601 of Regulation S-K and are filed herewith unless otherwise
noted.
EXHIBIT INDEX
10.1 Purchase and Sale Agreement, dated as of June 14, 2000, between
Gallaher Overseas and Brooke (Overseas) (incorporated by reference to
Exhibit 10.1 in Vector's Form 8-K dated June 14, 2000).
10.2 Guaranty, dated as of June 14, 2000, by Vector in favor of Gallaher
Overseas (incorporated by reference to Exhibit 10.2 in Vector's Form
8-K dated June 14, 2000).
10.3 Amendment to Purchase and Sale Agreement, dated as of August 4, 2000,
between Gallaher Overseas and Brooke (Overseas).
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SIGNATURE
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 hereunto duly authorized.
VECTOR GROUP LTD.
By: /s/ JOSELYNN D. VAN SICLEN
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Joselynn D. Van Siclen
Vice President and Chief Financial Officer
Date: August 18, 2000
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