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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 JUNE 30, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER
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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 August 8, 1997, the issuer had outstanding: (i) 5,632.52 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
Page
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . 12
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
Unaudited
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
----------------- ----------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 12,171 $ 7,541
Receivables, net of allowance for doubtful
accounts of $500 and $570
Trade 16,657 21,284
Marketing and advertising 5,853 4,036
Other 1,842 2,191
Inventories, at cost 14,372 18,728
Pallets, tanks and shells, at deposit value 5,669 5,521
Prepaid expenses and other 827 2,136
Deferred income taxes 4,131 3,652
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Total current assets 61,522 65,089
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PROPERTY AND EQUIPMENT:
Land 4,639 4,639
Buildings and improvements 15,706 15,906
Machinery and equipment 80,527 88,693
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100,872 109,238
Less accumulated depreciation and amortization (52,648) (54,846)
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48,224 54,392
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OTHER ASSETS:
Cost of franchises in excess of net assets
acquired, net of accumulated amortization
of $47,007 and $48,832 116,336 114,450
Deferred income taxes 22,767 23,916
Deferred financing costs and other 6,478 6,170
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145,581 144,536
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$ 255,327 $ 264,017
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--------- --------
</TABLE>
The accompany notes are an integral part of these balance sheets.
1
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DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
Unaudited
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
----------------- ----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and
other liabilities $ 529 $ 1,163
Accounts payable 9,038 11,319
Accrued liabilities 16,261 15,771
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Total current liabilities 25,828 28,253
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LONG-TERM DEBT AND OTHER LIABILITIES 163,747 169,637
MINORITY INTEREST 5,303 5,163
STOCKHOLDERS' EQUITY:
Preferred stock:
Series AA, $5,000 stated value, 30,000 shares
authorized, 5,467.27 and 5,632.52 shares
issues and outstanding 27,336 28,162
Common stock:
Voting, $.01 par value, 60,000 shares authorized,
20,301.87 shares issued and outstanding - -
Nonvoting, $.01 par value, 35,000 shares authorized,
32,949.93 shares issued and outstanding - -
Additional paid-in capital 115,765 115,765
Accumulated deficit (82,639) (82,953)
Deferred compensation (13) (10)
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60,449 60,964
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$ 255,327 $ 264,017
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--------- --------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
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DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- ---------------------------
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net sales $ 86,258 $ 85,867 $ 155,463 $ 157,147
Cost of sales 58,689 57,437 106,583 105,715
------------ ------------ ------------ ------------
Gross profit 27,569 28,430 48,880 51,432
Selling, general and administrative
expenses 19,376 20,291 38,117 40,617
Amortization of franchise costs
and other intangibles 901 911 1,806 1,825
------------ ------------ ------------ ------------
Operating income 7,292 7,228 8,957 8,990
------------ ------------ ------------ ------------
OTHER (INCOME) EXPENSES:
Interest 3,486 4,515 6,918 8,906
Other, net (33) 6 (24) 117
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3,453 4,521 6,894 9,023
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INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST 3,839 2,707 2,063 (33)
Income tax (provision) benefit (1,825) (360) (1,517) 564
Minority interest, net of taxes (269) (197) (109) (19)
------------ ------------ ------------ ------------
NET INCOME $ 1,745 $ 2,150 $ 437 $ 512
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
INCOME (LOSS) PER COMMON SHARE $ 25.41 $ 32.56 $ (6.40) $ (5.90)
------------ ------------ ------------ ------------
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</TABLE>
The accompanying notes are an integral part of these statements.
3
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DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30
Unaudited
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 437 $ 512
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,053 5,639
Noncash interest on long-term debt 1,859 2,091
Change in deferred income taxes 1,358 (670)
Gain on dispositions of property and equipment (30) (58)
Minority interest, before taxes 267 126
Net payments under deferred compensation plans (33) (219)
Changes in current assets and liabilities:
Receivables (586) (3,159)
Inventories (6,231) (4,356)
Pallets, tanks and shells, at deposit value (694) 148
Prepaid expenses and other (757) (1,309)
Accounts payable and accrued liabilities 5,081 2,141
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Net cash provided by operating activities 5,724 886
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,225) (9,953)
Acquisitions of businesses (1,077) --
Collections on notes receivable and other 175 (133)
Proceeds from sales of property and equipment 30 89
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Net cash used in investing activities (6,097) (9,997)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving line of credit -- 12,000
Payments on revolving line of credit -- (7,000)
Principal payments on long-term debt and other
liabilities (678) (253)
Cash distribution to minority interest holder -- (266)
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Net cash provided by (used in) financing
activities (678) 4,481
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NET DECREASE IN CASH AND CASH EQUIVALENTS (1,051) (4,630)
CASH AND CASH EQUIVALENTS, beginning of period 7,933 12,171
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CASH AND CASH EQUIVALENTS, end of period $ 6,882 $ 7,541
------ ------
------ ------
</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. 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 and is effective 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 $826,000 and $778,000 for
the six months ended June 30, 1997 and 1996, respectively, and $416,000 and
$392,000 for the three months ended June 30, 1997 and 1996, respectively.
The weighted average number of shares used in computing earnings per common
share was 53,251.80 as of June 30, 1997 and 1996.
3. 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 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 June 30, 1996, the
Company's subsidiary had paid approximately $1,077,000 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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4. 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.
In 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 SIX MONTHS ENDED JUNE 30, 1997 AND ITS FINANCIAL CONDITION AS
OF JUNE 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 JUNE 30, 1997 COMPARED TO QUARTER ENDED JUNE 30, 1996
Net sales, excluding contract sales, for the three months ended June 30,
1997 decreased by 0.3% to $78.2 million compared to $78.4 million for the
same period in 1996. The decrease was due in part to a 0.4% decrease in
franchise case sales, of which (i) 1.0% was attributable to decreased sales
of the Company's beer products (although premium brands were a greater
proportion of the sales mix), and (ii) 0.6% was attributable to increased
sales of the Company's soft drink products. The increase in proportion of
premium beer sales to total beer sales combined with general price increases
resulted in an increase in average unit selling prices of approximately 12.1%
for beer. There was strong consumer demand for the Company's soft drink
products in single-serve packages which was in part the result of expanded
placement of marketing equipment. The effect of the demand for single-serve
packages was, however, offset by the effect of competition on net pricing in
the Company's take-home soft drink packages. Contract net sales for the three
months ended June
7
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30, 1997 decreased 2.5% compared to the same period in 1996. As a result of the
foregoing, total net sales for the three months ended June 30, 1997 decreased
0.5% to $85.9 million compared to $86.3 million for the same period in 1996.
Cost of sales for the three months ended June 30, 1997 decreased to
$57.4 million compared to $58.7 million for the same period in 1996. The
decrease was due primarily to a decrease in the unit prices paid by the
Company for certain soft drink raw materials, principally packaging materials
and sweetener, partially offset by the higher unit cost of purchasing beers
from the breweries (including the effect of the shift to premium brands) and
by the 0.4% decrease in franchise case sales. As a percentage of net sales,
cost of sales for the three months ended June 30, 1997 decreased to 66.9%
compared to 68.0% for the same period in 1996. The improved margin
associated with the premium brands of beer and single-serve packages of soft
drinks and the modest increase in soft drink franchise case sales resulted in
gross profit for the three months ended June 30, 1997 of $28.4 million or
3.1% greater than the gross profit of $27.6 million for the same period in
1996.
Selling, general and administrative expenses for the three months ended
June 30, 1997 increased to $20.3 million compared to $19.4 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 faster rate than sales. The
apparent accelerated growth rate in these expenses is generally related to
expenditures made in anticipation of higher level sales in the period of
seasonal peak which did not develop in the three months ended June 30, 1997
due to increased supermarket competition. S&D grew due to expenses related to
increased emphasis on bulk delivery of product and placement of equipment
dedicated to single-serve packages of soft drinks. The level of these
expenditures is expected to normalize when sales do reach seasonal peaks.
A&M grew due to expenses related to in-store promotions and product identity
programs and the level of expenditure is expected to normalize when sales do
reach seasonal peaks. G&A grew faster than the rate of sales due to
provisions for incentive compensation plans which anticipates the attainment
of a targeted level of annual performance.
As a result of the above factors, income from operations for the three
months ended June 30, 1997 decreased to $7.2 million or 8.4% of net sales,
compared to $7.3 million, or 8.5% 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 June 30, 1997 increased to $4.5
million from $3.5 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 on 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 $2.7 million for the three months ended June 30,
1997 compared to $3.8 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 costs amortization.
8
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As a result of the foregoing factors, the Company had net income of $2.2
million for the three months ended June 30, 1997 compared to net income of $1.7
million for the same period in 1996.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Net sales, excluding contract sales, for the six months ended June 30,
1997 increased by 1.6% to $144.2 million compared to $141.9 million for the
same period in 1996. The increase was due in part to a 0.7% increase in
soft-drink franchise case sales. Beer franchise case sales were equal to the
prior six months but premium brands were a greater proportion of the sales
mix. The increase in proportion of premium beer sales to total beer sales
combined with general price increases resulted in an increase in average unit
selling prices of approximately 8.9% for beer. There was strong consumer
demand for the Company's soft drink products in single-serve packages which
was in part the result of expanded placement of marketing equipment. The
effect of the demand for single-serve packages was, however, partially
offset by the effect of competition on net pricing in the Company's take-home
soft drink packages. Contract net sales for the six months ended June 30,
1997 decreased 5.1% compared to the same period in 1996. As a result of the
foregoing, total net sales for the six months ended June 30, 1997 increased
1.1% to $157.1 million compared to $155.5 million for the same period in 1996.
Cost of sales for the six months ended June 30, 1997 decreased to $105.7
million compared to $106.6 million for the same period in 1996. The decrease
was due primarily to a decrease in the unit prices paid by the Company for
certain soft drink raw materials, principally packaging materials and
sweetener, partially offset by the higher unit cost of purchasing beers from
the breweries (including the effect of the shift to premium brands) and by
the 0.7% decrease in franchise case sales. As a percentage of net sales,
cost of sales for the six months ended June 30, 1997 decreased to 67.3%
compared to 68.6% for the same period in 1996. The improved margin
associated with the premium brands of beer and single-serve packages of soft
drinks and the modest increase in soft drink franchise case sales resulted in
gross profit for the six months ended June 30, 1997 of $51.4 million or 5.2%
greater than the gross profit of $48.9 million for the same period in 1996.
Selling, general and administrative expenses for the six months ended
June 30, 1997 increased to $40.6 million compared to $38.1 million for the
same period in 1996. All categories grew at a faster rate than sales. The
apparent accelerated growth rate in these expenses is generally related to
expenditures made in anticipation of higher level sales in the period of
seasonal peak which did not develop in the six months ended June 30, 1997 due
to increased supermarket competition. S&D grew due to expenses related to
increased emphasis on bulk delivery of product and placement of equipment
dedicated to single-serve packages of soft drinks. The level of these
expenditures is expected to normalize when sales do reach seasonal peaks.
A&M grew due to expenses related to in-store promotions and product identity
programs and the level of expenditure is expected to normalize when sales do
reach seasonal peaks. G&A grew faster than the rate of sales due to
provisions for incentive compensation plans which anticipates the attainment
of a targeted level of annual performance.
As a result of the above factors, income from operations for the six
months ended June 30, 1997 remained at $9.0 million or 5.7% of net sales,
compared to 5.8% 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.
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Interest expense for the six months ended June 30, 1997 increased to $8.9
million from $6.9 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 on the Company have been reduced through elimination
of current principal payments.
As a result of the above factors, the Company had a loss before income
taxes and minority interest of $33 thousand for the six months ended June 30,
1997 compared to income before income taxes and minority interest of $2.1
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 costs amortization.
As a result of the foregoing factors, the Company had net income of $512
thousand for the six months ended June 30, 1997 compared to net income of
$437 thousand for the same period in 1996.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company is highly leveraged, although 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
June 30, 1997, letters of credit of $7.1 million have been issued and $5.0
million had been drawn for seasonal working capital requirements. The credit
facility will mature in 2001.
The Company had cash of $7.5 million and working capital of $30.5 million
at June 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 long-term liabilities).
The $4.6 million decrease in cash from December 31, 1996 to June 30,
1997 resulted from net cash provided by operations of $0.9 million and
augmented by $4.5 million from net financing activities less cash used in
investing activities of $10.0 million during the six months ended June 30,
1997. The cash provided by operations was net of a $7.2 million increase in
working capital. In the same period in 1996, working capital increased by
only $1.8 million as the Company was able to accelerate receipt of certain
reimbursements from franchisors that are classified as receivables and
hold inventory build-up to a minimum. These actions were in response 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 as the Company anticipates the prime
selling season.
Cash used in investing activities of $10.0 million in the six months ended
June 30, 1997 represented a $3.9 million increase over cash used in the same
period of 1996. The increase in cash used was primarily related to capital
expenditures for marketing equipment related to single-serve
10
<PAGE>
packages of soft drinks. Capital expenditures of this type will be less
significant in the balance of fiscal 1997.
Financing activities in the six months ended June 30, 1997 provided $4.5
million in net cash which represented a $5.2 million increase over the $0.7
million in net cash used in the same period of 1996. This increase in net cash
provided resulted primarily from Credit Agreement advances of approximately $5.0
million.
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 six months ended June 30, 1997
and 1996, capital expenditures totaled $10.0 million and $5.2 million
respectively. The Company anticipates that capital expenditures will total
approximately $10.0 million to $12.0 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 June 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.
11
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PART II
ITEM 6. EXHIBITS AND REPORTS OR FORM 8-K
(a) Exhibit 12 - Statement of Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) Not applicable
12
<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 on August 12, 1997.
DELTA BEVERAGE GROUP, INC.
By: /s/ John F. Bierbaum
----------------------------------
John F. Bierbaum
Chief Financial Officer
13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
12 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
14
<PAGE>
EXHIBIT 12
DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
Unaudited
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- -------------------------
1996 1997 1996 1997
------------ ------------ ----------- -----------
<S> <C> <C> <C>
Net income $ 1,745 $ 2,150 $ 437 $ 512
Less preferred stock dividends (392) (416) (778) (826)
------------ ------------ ----------- -----------
Net income (loss) available for
common shareholders $ 1,353 $ 1,734 $ (341) $ (314)
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Weighted average common shares outstanding 53,251.80 53,251.80 53,251.80 53,251.80
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Income (loss) per common share $ 25.41 $ 32.56 $ (6.40) $ (5.90)
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,541
<SECURITIES> 0
<RECEIVABLES> 28,081
<ALLOWANCES> 570
<INVENTORY> 18,728
<CURRENT-ASSETS> 65,089
<PP&E> 109,238
<DEPRECIATION> 54,846
<TOTAL-ASSETS> 264,017
<CURRENT-LIABILITIES> 28,253
<BONDS> 169,637
0
28,162
<COMMON> 0
<OTHER-SE> 32,802
<TOTAL-LIABILITY-AND-EQUITY> 264,017
<SALES> 157,147
<TOTAL-REVENUES> 157,147
<CGS> 105,715
<TOTAL-COSTS> 105,715
<OTHER-EXPENSES> 42,442
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,906
<INCOME-PRETAX> (33)
<INCOME-TAX> (564)
<INCOME-CONTINUING> 512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 512
<EPS-PRIMARY> (5.90)
<EPS-DILUTED> (5.90)
</TABLE>
