<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
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, 1998
/ / 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 August 12, 1998, the issuer had outstanding: (i) 5,978.15 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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- -----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I....................................................... 1
ITEM 1. Financial Statements.......................... 1
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 6
PART II...................................................... 11
ITEM 6. Exhibits and Reports on Form 8-K.............. 11
</TABLE>
<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,
1997 1998
------------ --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,680 $ 4,995
Receivables, net of allowance for doubtful
accounts of $562 and $461
Trade 19,644 26,322
Marketing and advertising 7,228 4,796
Other 2,924 2,251
Inventories, at cost 18,153 18,112
Pallets, tanks and shells, at deposit value 6,340 6,390
Prepaid expenses and other 986 3,044
Deferred income taxes 5,747 5,554
-------- --------
Total current assets 65,702 71,464
-------- --------
PROPERTY AND EQUIPMENT:
Land 4,639 4,662
Buildings and improvements 16,286 17,718
Machinery and equipment 90,211 99,623
-------- --------
111,136 122,003
Less accumulated depreciation and amortization (55,880) (59,913)
-------- --------
55,256 62,090
-------- --------
OTHER ASSETS:
Cost of franchises in excess of net assets
acquired, net of accumulated amortization
of $50,652 and $52,471 112,634 110,815
Deferred income taxes 19,481 20,750
Deferred financing costs and other 7,841 9,063
-------- --------
139,956 140,628
-------- --------
$260,914 $274,182
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
1
<PAGE>
DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
Unaudited
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit line and current maturities
of long-term debt $ 215 $ 5,775
Accounts payable 9,530 14,357
Accrued liabilities 16,088 17,582
-------- --------
Total current liabilities 25,833 37,714
-------- --------
LONG-TERM DEBT AND OTHER LIABILITIES 170,189 172,783
MINORITY INTEREST 4,575 3,975
STOCKHOLDERS' EQUITY:
Preferred stock:
Series AA, $5,000 stated value, 30,000 shares
authorized, 5,802.77 and 5,978.15 shares
issued and outstanding 29,014 29,891
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 (84,456) (85,942)
Deferred compensation (6) (4)
-------- --------
60,317 59,710
-------- --------
$260,914 $274,182
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------- -------------------------
1997 1998 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net sales $ 85,867 $ 96,045 $ 157,147 $ 171,778
Cost of sales 57,437 65,867 105,715 119,259
--------- --------- ---------- ----------
Gross profit 28,430 30,178 51,432 52,519
Selling, general and administrative expenses 20,291 22,369 40,617 43,368
Amortization of franchise costs and other
intangibles 911 912 1,825 1,824
--------- --------- ---------- ----------
Operating income 7,228 6,897 8,990 7,327
--------- --------- ---------- ----------
OTHER EXPENSES:
Interest 4,515 4,718 8,906 9,358
Other, net 6 3 117 57
--------- --------- ---------- ----------
4,521 4,721 9,023 9,415
--------- --------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST 2,707 2,176 (33) (2,088)
Income tax (provision) benefit (360) (1,430) 564 1,264
Minority interest, net of taxes (197) (77) (19) 214
--------- --------- ---------- ----------
NET INCOME (LOSS) $ 2,150 $ 669 $ 512 $ (610)
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30
Unaudited
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 512 $ (610)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 5,677 6,558
Non-cash interest on long-term debt 2,682 2,879
Change in deferred income taxes (670) (1,076)
Minority interest, before taxes 126 (258)
Net (payments) expense under deferred compensation plans (149) 529
Changes in current assets and liabilities:
Receivables (3,160) (3,573)
Inventories (4,356) 41
Pallets, tanks, and shells 148 (50)
Prepaid expenses and other (1,309) (2,058)
Accounts payable and accrued liabilities 1,730 5,992
------- -------
Net cash provided by operating activities 1,231 8,374
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,238) (10,928)
Purchase of other assets (942) (2,164)
Proceeds from sales of property and equipment 30 37
Other (98) (21)
------- -------
Net cash used in investing activities (10,248) (13,076)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving line of credit 12,000 10,000
Payments on revolving line of credit (7,000) (4,500)
Principal payments on long-term debt and other
liabilities (347) (141)
Cash distribution to minority interest holder (266) (342)
------- -------
Net cash provided by financing
activities 4,387 5,017
------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS (4,630) 315
CASH AND CASH EQUIVALENTS, beginning of period 12,171 4,680
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 7,541 $ 4,995
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
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. (the "Company", a Delaware corporation) and subsidiary
(collectively, the "Companies") 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 a fair
presentation of financial position, results of operations and cash flows as
of June 30, 1998, and for all 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
Companies' audited consolidated financial statements and related notes
thereto for the year ended December 31, 1997. Also, the results of
operations for the interim periods presented may not be indicative of the
results for the entire year.
2. RECLASSIFICATIONS:
Certain prior year balances have been reclassified to conform to the current
year presentation.
3. PREFERRED STOCK:
Authorized preferred stock consists of 30,000 designated Series AA preferred
shares. Series AA preferred stockholders receive cumulative dividends at an
annual rate of 6% based on the $5,000 stated value per share. Dividends are
paid quarterly in cash or in additional shares of Series AA preferred stock.
During the six months ended June 30, 1998, the Company issued additional
preferred shares as payment-in-kind dividends on preferred stock of
approximately $877,000. The additional preferred shares are included in
stockholders' equity as of June 30, 1998.
4. LONG-TERM DEBT AND OTHER LIABILITIES:
The Company maintains a $30.0 million bank revolving line of credit which
matures on December 16, 2001, and bears interest, at the Company's option, at
LIBOR or a defined margin over the higher of (1) the bank's prime rate or (2)
the federal funds rate plus 0.5%. Borrowings are limited to the sum of
approximately 80% of the Company's eligible receivables and approximately 50%
of the Company's eligible inventory. The line of credit includes a $10.0
million limit for the issuance of letters of credit. Borrowings under the
line are secured by the Company's accounts receivable and inventory.
Borrowings outstanding under the line of credit approximated $5.5 million as
of June 30, 1998.
5
<PAGE>
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, 1998, AND ITS
FINANCIAL CONDITION AS OF JUNE 30, 1998. THIS DISCUSSION AND ANALYSIS SHOULD
BE READ IN CONJUNCTION WITH THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1997.
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. VARIOUS
FACTORS 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 ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, FOR A
DESCRIPTION OF THE FACTORS KNOWN TO THE COMPANY THAT MAY CAUSE ACTUAL RESULTS
TO VARY.
GENERAL BUSINESS OVERVIEW
Delta Beverage Group, Inc., a Delaware corporation, was acquired by its
current owners in March 1988. The Company has accomplished a number of
business combinations since 1988, the most significant of which have been (i)
combining in 1992 its PepsiCo based sales operation in southern Louisiana
with a Seven-Up based sales operation in the same territory through a joint
venture in which the Company is majority owner and managing venturer and (ii)
acquiring in April 1995 the distribution rights for Miller products in a
significant portion of the joint venture territory.
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 franchise case sales, which
are sales of the Company's branded 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 approximately 10.0% of total net sales and may
fluctuate from year to year, are made at relatively low prices and gross
profit margins due to the competition for such sales. Contract sales are not
a primary focus of management in determining the Company's business strategy.
As a result, management believes that changes in franchise case sales more
accurately measure growth than changes in total net sales.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1998, COMPARED TO QUARTER ENDED JUNE 30, 1997
Net sales, excluding contract sales, for the three months ended June 30,
1998, increased by 8.4% to $84.8 million compared to $78.2 million for the
same period in 1997. The increase was due primarily to a 7.6% increase in
franchise case sales, of which (i) 7.3% was attributable to increased sales
of the Company's soft drink products, and (ii) 0.3% was attributable to
increased sales of the Company's beer products.
6
<PAGE>
Consumer demand for single-serve soft drink products grew in part due to the
expanded placement of single-serve marketing equipment. Consumers also took
advantage of the increased promotion of take-home soft drink products.
Average unit selling price for soft drink products was 1.5% higher and for
beer products was 0.7% lower. The increase in average unit selling price for
soft drink products represents a 7.9% increase in the price of single-serve
packages offset by the Company's take-home soft drink packages. Contract
sales for the three months ended June 30, 1998, increased 46.9% compared to
the same period in 1997 due to the addition of bottled product sales to an
existing can product customer. Contract sales represented 11.8% of net sales
for the three months ended June 30, 1998, as contrasted to 8.9% of net sales
for the same period in 1997. As a result of the foregoing, aggregate net
sales for the three months ended June 30, 1998, increased 11.9% to $96.0
million compared to $85.9 million for the same period in 1997.
Cost of sales for the three months ended June 30, 1998, increased to
$65.9 million compared to $57.4 million for the same period in 1997. The
increase was due primarily to the increase in contract net sales (although at
thin margins) and the 7.6% increase in franchise case sales. In addition,
unit prices for certain soft drink raw materials, principally packaging
materials and concentrate, increased. As a percentage of net sales, cost of
sales for the three months ended June 30, 1998, increased to 68.6% compared
to 66.9% for the same period in 1997, reflecting the increase in low margin
contract production. As a result of the foregoing, gross profit for the
three months ended June 30, 1998, was $30.2 million or 6.1% greater than the
gross profit of $28.4 million for the same period in 1997.
Selling, general, and administrative expenses for the three months ended
June 30, 1998, increased to $22.4 million compared to $20.3 million for the
same period in 1997. Selling, general, and administrative expenses are
comprised of selling, distribution and warehousing expenses ("S&D"),
advertising and marketing expenses, and general and administrative expenses
("G&A"). S&D increased by $1.1 million due to expenses related to the
increased franchise case sales and an emphasis on the placement of equipment
dedicated to single-serve packages of soft drinks, including depreciation of
the equipment. G&A increased by $1.0 million due primarily to increased
personnel costs and provisions of certain expense reserves related to
accounts receivable and self-insurance.
As a result of the above factors, income from operations for the three
months ended June 30, 1998, decreased to $6.9 million, or 7.2% of net sales,
compared to $7.2 million, or 8.4% of net sales, for the same period in 1997.
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 quarters of each fiscal year.
Interest expense for the three months ended June 30, 1998, increased to
$4.7 million from $4.5 million for the same period in 1997. The increase is
due in large part to the additional interest associated with additional "PIK
Notes" issued by the Company to pay the interest on the Subordinated Notes.
The increase is also due to greater usage (based on number of days used) of
the Company's credit facility to fund the expanded placement of marketing
equipment.
As a result of the above factors, the Company had income before income
taxes and minority interest of $2.2 million for the three months ended June
30, 1998, compared to $2.7 million for the same period in 1997.
The Company's effective income tax rate differs from statutory rates due
to several factors. The most significant factors are the
non-tax-deductibility of franchise cost amortization and separate reporting
of the income tax effect of minority interest. The effective income tax rate
provision for the three months ended June 30, 1998, is greater than for the
same period in 1997 because these factors are more significant to the
reported pre-tax results.
7
<PAGE>
As a result of the foregoing factors, the Company had net income of
$700,000 for the three months ended June 30, 1998, compared to net income of
$2.2 million for the same period in 1997.
SIX MONTHS ENDED JUNE 30, 1998, COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net sales, excluding contract sales, for the six months ended June 30,
1998, increased by 5.3% to $151.9 million compared to $144.2 million for the
same period in 1997. The increase was due in part to a 3.5% increase in
soft-drink franchise case sales. 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 single-serve 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, 1998,
increased 53.7% compared to the same period in 1997. As a result of the
foregoing, total net sales for the six months ended June 30, 1998, increased
9.3% to $171.8 million compared to $157.1 million for the same period in 1997.
Cost of sales for the six months ended June 30, 1998, increased to
$119.3 million compared to $105.7 million for the same period in 1997. The
increase was due primarily to a increase in the unit prices paid by the
Company for certain soft drink raw materials, principally packaging materials
and concentrate, as well as by the higher unit cost of purchasing beer from
breweries and by the 3.6% increase in franchise case sales. As a percentage
of net sales, cost of sales for the six months ended June 30, 1998, increased
to 69.4% compared to 67.3% for the same period in 1997. The improved margin
associated with single-serve packages of soft drinks and the increase in soft
drink franchise case sales resulted in gross profit for the six months ended
June 30, 1998, of $52.5 million or 2.1% greater than the gross profit of
$51.4 million for the same period in 1997.
Selling, general, and administrative expenses for the six months ended
June 30, 1998, increased to $43.4 million compared to $40.6 million for the
same period in 1997. S&D increased by $1.7 million due to expenses related
to the increased franchise case sales and the emphasis on the placement of
equipment dedicated to single-serve packages of soft drinks, including
depreciation of the equipment. G&A increased by $1.1 million due to
increased personnel costs and provisions for accounts receivable and
self-insurance.
As a result of the above factors, income from operations for the six
months ended June 30, 1998, decreased to $7.3 million, or 4.3% of net sales,
from $9.0 million, or 5.7% of net sales, for the same period in 1997. 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 quarters of each fiscal year.
Interest expense for the six months ended June 30, 1998, increased to
$9.4 million from $8.9 million for the same period in 1997. The increase is
due in large part to the additional interest associated with additional "PIK
Notes" issued by the Company to pay the interest on the Subordinated Notes.
The increase is also due to greater usage (based on number of days used) of
the Company's credit facility to fund the expanded placement of marketing
equipment.
As a result of the above factors, the Company had a loss before income
taxes and minority interest of $2.1 million for the six months ended June 30,
1998, compared to a loss before income taxes and minority interest of $33,000
for the same period in 1997.
8
<PAGE>
The Company's effective income tax rate differs from statutory rates due
to several factors. The most significant factors are the
non-tax-deductibility of franchise cost amortization and separate reporting
of the income tax effect of minority interest. The effective income tax rate
(benefit) for the six months ended June 30, 1998, is greater than for the
same period in 1997 because these factors are less significant to the
reported pre-tax results.
As a result of the foregoing factors, the Company had net loss of
$610,000 for the six months ended June 30, 1998, compared to net income of
$512,000 for the same period in 1997.
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 source
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, 1998, letters of credit of $9.2 million had been issued and $5.5
million had been drawn for seasonal working capital requirements. The credit
facility will mature in 2001.
The Company had cash of $5.0 million and working capital of $34.5
million at June 30, 1998, compared to cash of $4.7 million and working
capital of $35.4 million at December 31, 1997. Working capital represents
current assets (excluding cash and cash equivalents) less current liabilities
(excluding advances under the credit agreement, current maturities of
long-term debt, and other long-term liabilities).
The $300,000 increase in cash from December 31, 1997, to June 30, 1998,
resulted from net cash provided by operations of $8.4 million, augmented by
$5.0 million provided by financing activities, less the cash used in
investing activities of $13.1 million during the six months ended June 30,
1998. The cash provided by operations included a $900,000 decrease in
working capital. In the same period in 1997, cash decreased by $4.6 million,
decrease represented net cash provided by operations of $1.2 million, plus
$4.4 million of additional cash provided by financing activities, less $10.2
million of cash used in investing activities.
Cash used in investing activities of $13.1 million during the six months
ended June 30, 1998, represented a $2.8 million increase over cash used in
the same period of 1997. The increase in cash used was primarily related to
capital expenditures for marketing equipment related to single-serve packages
of soft drinks and to expenditures for long-term marketing agreements.
Capital expenditures of this type will be less significant in the balance of
fiscal year 1998.
Financing activities during the six months ended June 30, 1998, provided
$5.0 million in net cash which represented a $600,000 increase over the $4.4
million in net cash provided during the same period of 1997. This increase
in net cash provided resulted from credit agreement net advances of $5.5
million, offset by long-term debt repayments and distributions to the
minority interest holder aggregating $500,000.
9
<PAGE>
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. During the six months ended June 30, 1998
and 1997, capital expenditures totaled $10.9 million and $9.2 million,
respectively. The Company anticipates that capital expenditures will total
approximately $15.0 million for fiscal year 1998 and will be reduced
significantly in fiscal year 1999.
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
Senior Notes payable (with a balance of $120.0 million at June 30, 1998) 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 had Subordinated Notes payable with a balance of $46.0
million at June 30, 1998, 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 Company's
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 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
<PAGE>
PART II
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27.1 - Financial Data Schedule
(b) Not applicable
11
<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, 1998.
DELTA BEVERAGE GROUP, INC.
By: /s/ John F. Bierbaum
------------------------------
John F. Bierbaum
Chief Financial Officer
12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,995
<SECURITIES> 0
<RECEIVABLES> 33,830
<ALLOWANCES> 461
<INVENTORY> 18,112
<CURRENT-ASSETS> 71,464
<PP&E> 122,003
<DEPRECIATION> 59,913
<TOTAL-ASSETS> 274,182
<CURRENT-LIABILITIES> 37,714
<BONDS> 178,558
0
29,891
<COMMON> 0
<OTHER-SE> 29,891
<TOTAL-LIABILITY-AND-EQUITY> 274,182
<SALES> 171,778
<TOTAL-REVENUES> 171,778
<CGS> 119,259
<TOTAL-COSTS> 119,259
<OTHER-EXPENSES> 45,249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,358
<INCOME-PRETAX> (2,088)
<INCOME-TAX> (1,264)
<INCOME-CONTINUING> (610)
<DISCONTINUED> 0
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<EPS-PRIMARY> (27.92)
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</TABLE>
