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June
2003

TOBACCO INDUSTRY NEWS (cont.)

CAO Cigars Featured at Russian Events

St. Petersburg, FL - C.A.O. International, Inc. vice president Tim Ozgener was the invited guest of the elite Cigar Smokers' Society "Unforgettable Cigar Evening" featuring CAO cigars. The event was held at the renowned Grand Hotel Europe in St. Petersburg, Russia, the country's first five-star hotel. The Cigar Smokers' Society was founded by Elmar Grief, general manager, Grand Hotel Europe; Dominican Republic cigar maker Jack Melkonian; and Arse Gasparian, founder and publisher of Hecho a Mano magazine.

"We are honored to be a part of this very special cigar dinner,"said Ozgener. "I am equally excited about the opportunity to bring the world of CAO to our friends in Russia." CAO cigars were also featured at a V.I.P. "CAO and Louis Royer Cognac Dinner" held at a Moscow club on April 8.


Study Shows NYC Tobacco Tax Hike Hurts Business
Kills Jobs, Reduces Revenue, but Has Little Impact on Smoking


Washington, DC - One of the nation's leading small business advocacy groups, the Small Business Survival Committee (SBSC), released a 57-page case study on the impact of New York City's tobacco tax increase enacted last year, which raised the cigarette tax from 8 cents per pack to $1.50 per pack.

"Our findings show New York City's tobacco tax increase has been a complete disaster," said SBSC president Darrell McKigney. "Almost 90% of small businesses that sell tobacco have been hurt by the tax increase. In return for the enormous damage inflicted on New York City small businesses, the tax increase has resulted in less than half the revenue projected for New York City, a huge net loss in New York State revenues, and put thousands of people out of work. And in spite of the stated aims of the tax increase proponents, most smokers say they aren't consuming less. They're just finding new sources to avoid the tax."

"There are a number of states right now looking to hike tobacco taxes to solve budget problems. I hope leaders in those states will read this study and see that hiking tobacco taxes does tremendous harm to small businesses and their employees, with little of the benefits promised by proponents," McKigney concluded.

The SBSC is a national nonprofit small business advocacy group with 70,000 members. A copy of the entire study may be downloaded at www.sbsc.org.


PEOPLE MOVES

John Middleton, Inc. has name David Salem as director of international sales. Salem will be responsible for directing all phases of worldwide marketing and sales for John Middleton's cigar and pipe tobacco products outside of the U.S. He will report to Richard E. Smith, vice president of sales and marketing.

Salem served the past five years as president of Agio Cigars, USA. Previously, he was associated with Douwe Egbert van Nelle, North America for 25 years, having left the company as president.

Fernando Dominguez Valdes-Hevia has been appointed the new co-president of Corporacion Habanos S.A, Havana, Cuba. Dominguez will replace Jaime Garcia-Andrade Manso, who held the position since the Cuban company became partly owned by Altadis in 2000.

The Tobacco Merchants Association, Inc. has elected the following nominees for the position of director for for the year 2003 - 2004: Stephen R. Altman, Mountain Service Distributors; Alan Balch, Lane Limited; Bill Fader, Retail Tobacco Dealers of America; Richard D. Harris, Dimon, Inc.; Henry C. Howells, G.D Package Machinery, Inc.; Marlin Jennes, U.S. Smokeless Tobacco Brands, Inc.; Edward Majeski, Standard Commercial Tobacco Co.; Timothy Mann, Swisher International; Walter Niedermann, Astra Tobacco Corporation; Tetsuo Nishihara, JT Proserve, Inc.; Clinton O. Price, Sr., John Middleton, Inc.; Sherwin Seltzer, General Cigar Company, Inc.; Joel Sherman, Nat Sherman, Inc.; James H. Starkey, III, Universal Leaf Tobacco Co.; and Frans Vogels, General Cigar Company, Inc.

Imperial Processing Corp. has named Richard T. "Tracy" Estes as president following the retirement of Merle Adkins. Adkins, who has 42 years of experience in the industry, was with Imperial Processing for 17 years. Estes joined Imperial Processing in 1991 and has held various positions during his tenure.

Bagley Hawthorne has been promoted to executive vice president. Hawthorne, who joined the company in 1993, has been primarily responsible for the financial operations of the company.


CORPORATE BRIEFS

  • Havana Republic, Inc., the former owner and operator of three retail cigar emporiums, has sold all of the operating assets of the company's cigar business to an entity formed by Stephen Schatzman, a director shareholder and c.e.o., in exchange for the assumption of all of the company's liabilities. The transaction closed on November 15, 2002. Havana Republic, a publicly-traded company, currently has no assets or material liabilities.

  • In January 2003, the board of directors of The Havana Group elected to scale back its tobacco operations with the purpose of selling or liquidating them before the end of 2003. The board cited the company's continued losses from its tobacco business operations, combined with a downturn in sales in the tobacco industry and the company's working capital deficiency. In 2002, the company incurred a loss from discontinued operations of $834,833, which declined to $132,299 during the first quarter of 2003.

  • Vector Group Ltd. announced revenues for the first quarter ended March 31, 2003 of $133.1 million, compared to $97.2 million in the first quarter of 2002. An operating loss of $200,000 was recorded in the quarter, compared to an operating loss of $15.1 million during the same 2002 period. Net loss for the quarter was $4.8 million compared to net loss income of $11.9 million in the 2002 first quarter. The company's conventional cigarette business, which includes Liggett Group cigarettes and USA brand cigarettes, had revenues of $124.9 million during the quarter, compared to $94.1 million for the same 2002 period.

  • Star Scientific, Inc. reported net income of $234,270 for the first quarter of 2003, compared with $578,042 for the year-earlier period. Gross profit from the company's discount cigarette business totaled $8.5 million, an 18% increase over the $7.2 million reported for first quarter 2002. Net sales of discount cigarettes during the quarter totaled $26 million, a 19% decrease from $32 million for the same period in 2002. Net sales for smokeless tobacco products during the first quarter decreased to $57,000 from $1.59 million for the same period in 2002, while gross profit for these sales fell from $1.4 million in 2002 to $42,000 for the same period in 2003.

  • Philip Morris International has agreed to buy a 76% stake in Greece's leading cigarette maker, Papastratos, in a cash deal valued at up to $416.6 million. The transaction is expected to be completed in the second half of 2003, after which a tender offer will be made for the remaining, outstanding Papastratos shares, the companies said.


  • SMOKESHOP - June, 2003