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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER _________
DELTA BEVERAGE GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 75-2048317
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
2221 DEMOCRAT ROAD, MEMPHIS, TENNESSEE 38132
(Address of Principal Executive Offices, including Zip Code)
(901) 344-7100
(Registrant's Telephone Number, including Area Code)
As of November 10, 1997, the issuer had outstanding: (i) 5,717.01 shares
of Series AA Preferred Stock, $5,000 stated value, (ii) 20,301.87 shares of
voting Common Stock, $.01 par value, and (iii) 32,949.93 shares of nonvoting
Common Stock.
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TABLE OF CONTENTS
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Page
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PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 1. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . 7
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 11
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PART I
ITEM 1. FINANCIAL STATEMENTS
DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
Unaudited
(Dollars in thousands)
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,171 $ 10,099
Receivables, net of allowance for
doubtful accounts of $500 and $627
Trade 16,657 20,086
Marketing and advertising 5,853 6,569
Other 1,842 1,810
Inventories, at cost 14,372 17,765
Pallets, tanks and shells, at deposit value 5,669 5,998
Prepaid expenses and other 827 2,219
Deferred income taxes 4,131 4,080
---------- ---------
Total current assets 61,522 68,626
---------- ---------
PROPERTY AND EQUIPMENT:
Land 4,639 4,639
Buildings and improvements 15,706 16,058
Machinery and equipment 80,527 89,998
---------- ---------
100,872 110,695
Less accumulated depreciation and
amortization (52,648) (56,627)
---------- ---------
48,224 54,068
---------- ---------
OTHER ASSETS:
Cost of franchises in excess of net assets
acquired, net of accumulated
amortization of $47,007 and $49,741 116,336 113,540
Deferred income taxes 22,767 19,548
Deferred financing costs and other 6,478 6,031
---------- ---------
145,581 139,119
---------- ---------
$ 255,327 $ 261,813
---------- ---------
---------- ---------
The accompany notes are an integral part of these balance sheets.
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DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
Unaudited
(Dollars in thousands)
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DECEMBER 31, SEPTEMBER 30,
1996 1997
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and
other liabilities $ 529 $ 1,135
Accounts payable 9,038 11,596
Accrued liabilities 16,261 18,972
-------- -------
Total current liabilities 25,828 31,703
-------- -------
LONG-TERM DEBT AND OTHER LIABILITIES 163,747 165,198
MINORITY INTEREST 5,303 5,184
STOCKHOLDERS' EQUITY:
Preferred stock:
Series AA, $5,000 stated value, 30,000 shares
authorized, 5,467.27 and 5,717.01 shares
issued and outstanding 27,336 28,585
Common stock:
Voting, $.01 par value, 60,000 shares authorized,
20,301.87 shares issued and outstanding -- --
Nonvoting, $.01 par value, 35,000 shares authorized,
32,949.93 shares issued and outstanding -- --
Additional paid-in capital 115,765 115,765
Accumulated deficit (82,639) (84,614)
Deferred compensation (13) (8)
-------- -------
60,449 59,728
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$ 255,327 $ 261,813
-------- -------
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</TABLE>
The accompanying notes are an integral part of these balance sheets.
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DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(Dollars in thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------- -------------------
1996 1997 1996 1997
-------- --------- -------- ----------
OPERATIONS:
Net sales $ 84,424 $ 89,370 $ 239,887 $ 246,517
Cost of sales 57,832 60,040 164,415 165,755
-------- --------- -------- ----------
Gross profit 26,592 29,330 75,472 80,762
Selling, general and administrative
expenses 19,984 21,054 58,101 61,672
Amortization of franchise costs
and other intangibles 937 910 2,743 2,734
-------- --------- -------- ----------
Operating income 5,671 7,366 14,628 16,356
-------- --------- -------- ----------
OTHER (INCOME) EXPENSES:
Interest 4,368 4,510 11,286 13,416
Other, net (22) (97) (46) 20
-------- --------- -------- ----------
4,346 4,413 11,240 13,436
-------- --------- -------- ----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,325 2,953 3,388 2,920
Income tax provision (745) (4,037) (2,262) (3,473)
Minority interest, net of taxes (91) (154) (200) (173)
-------- --------- -------- ----------
NET INCOME (LOSS) $ 489 $ (1,238) $ 926 $ (726)
-------- --------- -------- ----------
-------- --------- -------- ----------
INCOME (LOSS) PER COMMON SHARE $ 1.71 $ (31.19) $ (4.69) $ (37.09)
-------- --------- -------- ----------
-------- --------- -------- ----------
The accompanying notes are an integral part of these statements.
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DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
Unaudited
(Dollars in thousands)
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1996 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 926 $ (726)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 7,594 8,390
Noncash interest on long-term debt 3,325 4,054
Change in deferred income taxes 2,040 3,270
Minority interest, before taxes 412 375
Net expense (payments) under deferred
compensation plans (61) 408
Changes in current assets and liabilities:
Receivables 4,329 (4,113)
Inventories (2,200) (3,393)
Pallets, tanks and shells, at deposit value (913) (329)
Prepaid expenses and other (487) (1,392)
Accounts payable and accrued
liabilities (1,792) 3,824
-------- ---------
Net cash provided by operating
activities 13,173 10,368
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,922) (11,583)
Acquisitions of businesses (1,028) -
Purchase of franchise rights (997) -
Collections on notes receivable 110 -
Proceeds from sales of property and equipment - 144
-------- ---------
Net cash used in investing activities (8,837) (11,439)
-------- ---------
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving line of credit - 12,000
Payments on revolving line of credit - (12,000)
Principal payments on long-term debt and other
liabilities (7,514) (507)
Payments of deferred financing costs (1,005) -
Cash distribution to minority interest holder - (494)
-------- ---------
Net cash used in financing activities (8,519) (1,001)
-------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,183) (2,072)
CASH AND CASH EQUIVALENTS, beginning of period 7,933 12,171
-------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 3,750 $ 10,099
-------- ---------
-------- ---------
</TABLE>
The accompany notes are an integral part of these statements.
4
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DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Delta
Beverage Group, Inc. ("Delta," a Delaware corporation) and subsidiary
(collectively, the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and, in the
opinion of management, include all adjustments (consisting of normal and
recurring adjustments) which are considered necessary for the fair
presentation of results for the interim periods presented. These condensed
interim financial statements do not include all of the financial information
and disclosures required by generally accepted accounting principles for
complete financial statements, and should be read in conjunction with the
Company's audited consolidated financial statements and related notes thereto
for the year ended December 31, 1996. Also, the results of operations for
the interim periods presented may not be indicative of the results for the
entire year.
2. RECLASSIFICATIONS
Certain 1996 amounts have been reclassified to conform to the 1997
presentation.
3. INCOME (LOSS) PER COMMON SHARE
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share," was issued. This statement establishes new standards
for computing and presenting earnings per common share for periods ending
after December 15, 1997, including interim periods. The Company will adopt
this statement effective at the 1997 year-end. Statement No. 128 will
eliminate the Company's requirement to present earnings per share data.
Earnings per common share was computed by dividing net income (loss), less
dividends on preferred stock, by the weighted average number of shares of
common stock. Dividends on preferred stock were $1,249,000 and $1,176,000
for the nine months ended September 30, 1997 and 1996, respectively, and
$423,000 and $398,000 for the three months ended September 30, 1997 and 1996,
respectively. The weighted average number of shares used in computing
earnings per common share was 53,251.80 as of September 30, 1997 and 1996,
respectively.
4. ACQUISITIONS
In April 1996, the Company's subsidiary acquired substantially all of the
assets of Delta Distributing Company, a wholesale distributor of Miller
Brewing Company alcoholic beverages in Raceland, Louisiana. The aggregate
purchase price, consisting primarily of inventories and distribution rights,
included approximately $1,000,000 in cash and an obligation, pursuant to a
marketing support agreement with Miller Brewing Company's advertising agency,
for the general promotion of Miller products in the greater New Orleans area.
In May 1996, the Company's subsidiary acquired for approximately $2,000,000
the franchise rights from Heineken USA to distribute Heineken beer products
in the greater New Orleans area. The marketing support obligation described
above has been capitalized and is being amortized. As of September 30, 1996,
the Company's subsidiary had paid approximately $2,025,000 of the aggregate
purchase price for the above described acquisitions.
The acquisitions described above were accounted for as purchases, and the
Company's consolidated results of operations include the results of the
acquisitions since their respective purchase dates. Costs of the franchises
in excess of net assets acquired of approximately $2,980,000 are being
amortized evenly over 40 years.
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5. LONG-TERM DEBT AND OTHER LIABILITIES
In December 1996, the Company placed $120 million of new senior notes and
executed a new $30 million bank revolving line of credit. The net proceeds
of the debt offering were used primarily to retire the prior senior notes and
the amounts outstanding under the prior revolving line of credit. The
Company incurred financing fees of approximately $4,831,000 in connection
with the debt placement. These fees have been capitalized and are being
amortized over the terms of the related debt agreements. Deferred financing
costs relating to debt retired in December 1996 of approximately $2,472,000
were written off.
Pursuant to a registration statement filed with the Securities and Exchange
Commission under the Securities Act of 1933, which was declared effective on
February 12, 1997, the Company exchanged the $120 million of senior notes for
$120 million of new senior notes. The new senior notes retain the same
interest rate, maturity date and ranking as the original senior notes. The
Company did not receive any cash proceeds from this transaction.
6
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS DESCRIBES CERTAIN FACTORS
AFFECTING THE RESULTS OF OPERATIONS OF DELTA BEVERAGE GROUP, INC. ("THE
COMPANY") FOR THE FISCAL QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
ITS FINANCIAL CONDITION AS OF SEPTEMBER 30, 1997. THIS DISCUSSION AND
ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S SPECIAL FINANCIAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
CERTAIN OF THE STATEMENTS IN THE FOLLOWING DISCUSSION CONSTITUTE
FORWARD-LOOKING STATEMENTS WHICH ARE MADE PURSUANT TO THE SAFE HARBOR
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FACTORS
OUTSIDE THE COMPANY'S CONTROL MAY CAUSE ACTUAL RESULTS OF OPERATIONS AND
FINANCIAL CONDITION TO VARY SIGNIFICANTLY FROM THOSE EXPRESSED IN ANY
FORWARD-LOOKING STATEMENT MADE HEREIN OR IN OTHER REPRESENTATIONS MADE BY THE
COMPANY'S MANAGEMENT OR BY OTHERS ON BEHALF OF THE COMPANY. PLEASE REFER TO
THE COMPANY'S SPECIAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 1996 FOR A DESCRIPTION OF THE FACTORS KNOWN TO THE COMPANY THAT MAY CAUSE
ACTUAL RESULTS TO VARY.
RESULTS OF OPERATIONS
GENERAL
The Company's primary measurement of unit volume is franchise case
sales which are case-sized quantities of the various packages in which
products are produced. Franchise case sales refers to physical cases of
beverages sold. The Company also sells premix or draft products
(ready-to-serve beverages which are sold in tanks or kegs) and postmix
products (fountain syrups to which carbonated water must be added). Premix
and postmix products, while effectively containing the identical beverages as
packaged product, are not included in case sales measurements as they are not
the primary focus of the Company's selling efforts.
The Company's primary source of revenue is sales of the Company's
franchised products directly to retailers whether of package, premix or
postmix configuration. Another source of revenue is contract sales which are
sales, primarily of products in cans, to unaffiliated companies that hold
soft drink franchises. Contract sales, which historically represent less
than 10.0% of total net sales, may fluctuate from year to year, and are made
at relatively low prices and gross profit margins due to the competition for
such sales, and are not a primary focus of management in determining the
Company's business strategy.
QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1996
Net sales, excluding contract sales, for the three months ended
September 30, 1997 increased by 5.2% to $82.0 million compared to $78.0
million for the same period in 1996. The increase was primarily due to a
5.6% increase in franchise case sales of the Company's soft drink products.
There was strong consumer demand for the Company's soft drink products in
single-serve packages as the result of expanded placement of marketing
equipment. This demand for single-serve packages was accompanied by a 2.9%
increase in franchise case sales of the Company's take-home soft drink
packages. The soft drink volume gains were achieved at pricing levels
consistent with the same period in 1996. Net sales from the Company's beer
products were essentially unchanged in the third quarter of 1997 compared to
the same period in 1996 as the effect of unit volume gains in below premium
priced brands was offset by lower pricing. Contract net sales for the three
months ended September 30, 1997 increased 14.3% compared to the same period
in 1996. As a result of the foregoing, total net sales for the three months
ended September 30, 1997 increased 5.9% to $89.4 million compared to $84.4
million for the same period in 1996.
Cost of sales for the three months ended September 30, 1997
increased to $60.0 million compared to $57.8 million for the same period in
1996. This increase was primarily due to the increases in franchise case
sales, partially offset by a decrease in the unit prices paid by the Company
for certain soft drink raw materials, principally packaging materials and
sweetener. As a percentage of net sales, cost of sales for the three months
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ended September 30, 1997 decreased to 67.2% compared to 68.5% for the same
period in 1996. The improved margin associated with the single-serve
packages of soft drinks, and the 5.6% increase in soft drink franchise case
sales, resulted in gross profit for the three months ended September 30, 1997
of $29.3 million or 10.2% greater than the gross profit of $26.6 million for
the same period in 1996.
Selling, general and administrative expenses for the three months
ended September 30, 1997 increased to $21.1 million compared to $20.0 million
for the same period in 1996. Selling, general and administrative expenses
are comprised of selling, distribution and warehousing expenses ("S&D"),
advertising and marketing expenses ("A&M"), and general and administrative
expenses ("G&A"). All categories grew at a rate consistent with sales growth,
reflecting the effect of leveraging fixed costs against higher unit volumes,
partially offset by increases in S&D due to expenses related to, and
placement of equipment dedicated to, single-serve packages of soft drinks.
In addition, this rate of growth also reflected increases in G&A due to
provisions for incentive compensation plans which anticipate the attainment
of a targeted level of annual performance. The level of expenditure for such
incentives in 1997 is expected to exceed comparable expenditures during 1996
(on a full year basis) by approximately $1.7 million.
As a result of the above factors, income from operations for the
three months ended September 30, 1997 increased to $7.4 million, or 8.2% of
net sales, compared to $5.7 million, or 6.7% of net sales, for the same
period in 1996. The Company's operating results are affected by seasonal
demand for its products which generally results in higher sales and operating
income in the second and third quarter of each fiscal year.
Interest expense for the three months ended September 30, 1997
increased to $4.5 million from $4.4 million for the same period in 1996. The
increase was due primarily to the higher interest rates associated with the
December 1996 refinancing of the Company's senior debt. However, the total
debt service requirements of the Company have been reduced through
elimination of current principal payments on senior indebtedness.
As a result of the above factors, the Company had income before
income taxes and minority interest of $3.0 million for the three months ended
September 30, 1997 compared to $1.3 million for the same period in 1996.
The Company's effective income tax rate differs from statutory
rates primarily due to the non-tax-deductibility of franchise cost
amortization and, in interim periods of a fiscal year, due to the application
of a projected annual effective income tax rate.
As a result of the foregoing factors, the Company had a net loss of
$1.2 million for the three months ended September 30, 1997 compared to net
income of $489 thousand for the same period in 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Net sales, excluding contract sales, for the nine months ended
September 30, 1997, increased by 2.8% to $226.2 million compared to $219.9
million for the same period in 1996. The increase was primarily due to a
2.6% increase in aggregate franchise case sales. The majority of the
increase in franchise case sales came in single-serve soft drink packages,
but unit volume of take home soft drink and beer packages also increased.
Pricing for all soft drink packages was relatively consistent with the same
period of the prior year and beer pricing increased 2.1% reflecting industry
trends and an increase in the proportion of premium beer sales to total beer
sales. Contract net sales for the nine months ended September 30, 1997
increased 1.9% compared to the same period in 1996. As a result of the
foregoing, total net sales for the nine months ended September 30, 1997
increased 2.7% to $246.5 million compared to $239.9 million for the same
period in 1996.
Cost of sales for the nine months ended September 30, 1997
increased to $165.8 million compared to $164.4 million for the same period in
1996. The increase was primarily due to the increases in franchise case
sales, partially offset by a decrease in the unit prices paid by the Company
for certain soft drink raw
8
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materials, principally packaging materials and sweetener. As a percentage of
net sales, cost of sales for the nine months ended September 30, 1997
decreased to 67.2% compared to 68.5% for the same period in 1996. The
improved margin associated with single-serve packages of soft drinks, and the
increase in franchise case sales, resulted in gross profit for the nine
months ended September 30, 1997 of $80.8 million or 7.0% greater than the
gross profit of $75.5 million for the same period in 1996.
Selling, general and administrative expenses for the nine months
ended September 30, 1997 increased to $61.7 million compared to $58.1 million
for the same period in 1996. All categories grew at a rate consistent with
sales growth, reflecting the effect of leveraging fixed costs against higher
unit volumes, partially offset by increases in S&D due to expenses related
to, and placement of equipment dedicated to, single-serve packages of soft
drinks. In addition, this rate of growth also reflected increases in G&A due
to provisions for incentive compensation plans which anticipate the
attainment of a targeted level of annual performance. The level of
expenditure for such incentives in 1997 is expected to exceed comparable
expenditures during 1996 (on full year basis) by approximately $1.7 million.
As a result of the above factors, income from operations for the
nine months ended September 30, 1997 increased to $16.4 million or 6.6% of
net sales, compared to $14.6 million or 6.1% of net sales for the same period
in 1996. The Company's operating results are affected by seasonal demand for
its products which generally results in higher sales and operating income in
the second and third quarter of each fiscal year.
Interest expense for the nine months ended September 30, 1997
increased to $13.4 million from $11.3 million for the same period in 1996.
The increase was due primarily to additional debt related to the acquisition
of additional beer territories and products in 1996 and the higher interest
rates associated with the December 1996 refinancing of the Company's senior
debt. However, the total debt service requirements of the Company have been
reduced through elimination of current principal payments.
As a result of the above factors, the Company had income before
income taxes and minority interest of $2.9 million for the nine months ended
September 30, 1997 compared to income before income taxes and minority
interest of $3.4 million for the same period in 1996.
The Company's effective income tax rate differs from statutory
rates primarily due to the non-tax-deductibility of franchise cost
amortization and, in interim periods of a fiscal year due to the application
of a projected annual effective income tax rate.
As a result of the foregoing factors, the Company had a net loss of
$726 thousand for the nine months ended September 30, 1997 compared to net
income of $926 thousand for the same period in 1996.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company is highly leveraged and there are no significant
reductions in debt scheduled before December 2003. The Company's principal
use of funds until 2003 will be the payment of interest and investment in
capital assets and strategic acquisitions. It is expected that the Company's
primary sources of funds for its future activities will be funds from
operations. While the Company does not currently anticipate utilizing the
funds available under its Credit Agreement for other than seasonal working
capital requirements, such funds may be used to augment operating cash flow.
Pursuant to the Credit Agreement, the Company has a borrowing capacity of up
to $30.0 million, including $10.0 million available for the issuance of
letters of credit. At September 30, 1997, letters of credit of $7.1 million
have been issued and the Credit Agreement has not been drawn upon. The
Credit Facility will mature in 2001.
The Company had cash of $10.1 million and working capital of $28.0
million at September 30, 1997, compared to cash of $12.2 million and working
capital of $24.0 million at December 31, 1996. Working capital represents
current assets (excluding cash and cash equivalents) less current liabilities
(excluding advances under the Credit Agreement and current maturities of
long-term debt and other liabilities).
9
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The $2.1 million decrease in cash from December 31, 1996 to
September 30, 1997 resulted from net cash provided by operations of $10.4
million less cash used in investing activities of $11.4 million and less cash
used in financing activities of $1.0 million during the nine months ended
September 30, 1997. The cash provided by operations was net of a $5.4
million increase in working capital. During the same period in 1996, working
capital remained approximately level as the Company was able to accelerate
receipt of certain reimbursements from franchisors that are classified as
receivables and held inventory build-up to a minimum. Such actions were
taken in 1996 to respond to an inadequate credit line that existed before the
1996 refinancing and to provide for payment of accrued interest that was due
in the period. The increase in working capital in 1997 reflects a resumption
of typical reimbursement and inventory patterns.
Cash used in investing activities of $11.4 million in the nine
months ended September 30, 1997 represented a $2.6 million increase in cash
used during the same period of 1996. The increase in cash used was primarily
related to capital expenditures for marketing equipment related to
single-serve packages of soft drinks. Capital expenditures of this type will
be less significant in the balance of fiscal 1997.
Financing activities in the nine months ended September 30, 1997
required $1.0 million in net cash which represented a $7.5 million decrease
over the $8.5 million in net cash used during the same period of 1996. The
reduction in cash used was the result of relief from principal reductions and
expenses related to senior debt.
Management believes that the Company's production facilities will
be sufficient to meet anticipated unit growth for the next several years.
Accordingly, management anticipates that capital expenditures in respect of
such facilities will consist of expenditures to maintain operating
efficiency. Capital expenditures will be required primarily for the Company's
automobile and truck fleet, vending machines, and routine plant, bottling,
and canning equipment additions or maintenance. During the nine months ended
September 30, 1997 and 1996, capital expenditures totaled $11.6 million and
$6.9 million, respectively. The Company anticipates that capital
expenditures will total approximately $10.0 million to $15.0 million for each
of the years 1997 and 1998.
Based on the Company's anticipated operating results, management
believes that the Company's future operating activities will generate
sufficient cash flows to repay borrowings under the Credit Agreement as they
become due and payable. However, based on such anticipated operating
results, management does not expect that the Company's future operating
activities will generate sufficient cash flows to repay in their entirety its
$120.0 million of Senior Notes payable at their maturity on December 15,
2003. While management believes that the Company will be able to refinance
the Senior Notes at or prior to their maturity, or raise sufficient funds
through equity or asset sales to repay such indebtedness, or effect a
combination of the foregoing, there can be no assurance that it will be able
to do so.
The Company has Subordinated Notes payable with a balance of $41.4
million at September 30, 1997 and which mature on December 23, 2003. However
the maturity of the Subordinated Notes can be extended to December 23, 2004
and then to December 23, 2005 if any debt incurred to refinance the 1993
Senior Notes is then outstanding. The Subordinated Notes have an interest
rate of 11.0% which can be paid under certain conditions with additional
Subordinated Notes ("PIK Notes"). Management expects those conditions will
exist at least until December 1998 and that it will make payments of interest
in PIK Notes to conserve cash. Management does not expect that the Company's
future operating activities will generate sufficient cash flows to repay the
Subordinated Notes at their maturity. While management believes that the
Company will be able to refinance the Subordinated Notes, including any PIK
Notes, at or prior to their maturity, or raise sufficient funds through
equity or asset sales to repay such indebtedness, or effect a combination of
the foregoing, there can be no assurance that it will be able to do so.
10
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PART II
ITEM 6. EXHIBITS AND REPORTS OR FORM 8-K
(a) Exhibit 11 - Statement of Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) Not applicable
11
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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 on November 13, 1997.
DELTA BEVERAGE GROUP, INC.
By: /s/ John F. Bierbaum
-----------------------------------
John F. Bierbaum
Chief Financial Officer
12
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
13
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EXHIBIT 11
DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ --------------------------
1996 1997 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $ 489 $ (1,238) $ 926 $ (726)
Less preferred stock dividends (398) (423) (1,176) (1,249)
---------- ---------- ---------- ----------
Net income (loss) available for
common shareholders $ 91 $ (1,661) $ (250) $ (1,975)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common shares outstanding 53,251.80 53,251.80 53,251.80 53,251.80
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income (loss) per common share $ 1.71 $ (31.19) $ (4.69) $ (37.09)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 10,099
<SECURITIES> 0
<RECEIVABLES> 29,092
<ALLOWANCES> 627
<INVENTORY> 17,765
<CURRENT-ASSETS> 68,626
<PP&E> 110,695
<DEPRECIATION> 56,627
<TOTAL-ASSETS> 261,813
<CURRENT-LIABILITIES> 31,703
<BONDS> 166,333
0
28,585
<COMMON> 0
<OTHER-SE> 31,143
<TOTAL-LIABILITY-AND-EQUITY> 261,813
<SALES> 246,517
<TOTAL-REVENUES> 246,517
<CGS> 165,755
<TOTAL-COSTS> 165,755
<OTHER-EXPENSES> 64,426
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,416
<INCOME-PRETAX> 2,920
<INCOME-TAX> 3,473
<INCOME-CONTINUING> (726)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (726)
<EPS-PRIMARY> (37.09)
<EPS-DILUTED> (37.09)
</TABLE>
