<PAGE>
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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 MARCH 31, 1999
/ / 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 May 13, 1999, the issuer had outstanding: (i) 6,251.23 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, $.01 par value.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PART I..................................................................................................... 1
ITEM 1. FINANCIAL STATEMENTS............................................................ 2
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
</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, MARCH 31,
1998 1999
-------------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,818 $ 3,634
Receivables, net of allowance for doubtful
accounts of $597 and $647
Trade 24,201 24,616
Marketing and advertising 7,407 5,362
Other 2,715 2,732
Inventories, at cost 16,149 20,871
Shells, tanks and pallets 6,378 6,378
Prepaid expenses and other 1,783 2,369
Deferred income taxes 4,186 8,391
---------- ---------
Total current assets 66,637 74,353
---------- ---------
PROPERTY AND EQUIPMENT:
Land 4,662 4,662
Buildings and improvements 18,732 19,000
Machinery and equipment 94,621 97,045
---------- ---------
118,015 120,707
Less accumulated depreciation (56,476) (58,758)
---------- ---------
61,539 61,949
---------- ---------
OTHER ASSETS:
Cost of franchises in excess of net assets
acquired, net of accumulated amortization
of $54,300 and $55,212 108,992 108,080
Deferred income taxes 21,071 21,071
Deferred financing costs and other 13,413 14,539
---------- --------
143,476 143,690
---------- --------
$271,652 $279,992
---------- --------
---------- --------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
Unaudited
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
-------------------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt
and other liabilities $ 240 $ 249
Accounts payable 14,038 14,864
Accrued liabilities 16,274 19,562
--------- ----------
Total current liabilities 30,552 34,675
--------- ----------
LONG-TERM DEBT AND OTHER LIABILITIES 180,490 183,041
MINORITY INTEREST 3,600 3,335
STOCKHOLDERS' EQUITY:
Preferred stock:
Series AA, $5,000 stated value, 30,000 shares
authorized, 6,158.84 and 6,251.23 shares
issued and outstanding 30,794 31,256
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 (89,547) (88,078)
Deferred compensation (2) (2)
--------- ----------
57,010 58,941
--------- ----------
$271,652 $ 279,992
--------- ----------
--------- ----------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31
Unaudited
(Dollars in thousands)
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <S> <C>
OPERATIONS:
Net sales $ 75,733 $ 81,255
Cost of sales 53,392 56,302
-------- --------
Gross profit 22,341 24,953
Selling, general and administrative expenses 20,999 21,856
Amortization of franchise costs and other
intangibles 912 912
-------- --------
Operating income 430 2,185
-------- --------
OTHER EXPENSES:
Interest 4,640 4,710
Other, net 54 13
-------- --------
4,694 4,723
-------- --------
LOSS BEFORE INCOME TAXES
AND MINORITY INTEREST (4,264) (2,538)
Income tax benefit 2,694 4,281
Minority interest, net of taxes 291 188
-------- --------
NET INCOME (LOSS) $ (1,279) $ 1,931
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31
Unaudited
(Dollars in thousands)
<TABLE>
<CAPTION>
1998 1999
---------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,279) $ 1,931
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 3,133 3,774
Non-cash interest on long-term debt 1,408 1,468
Change in deferred income taxes (2,172) (4,205)
Minority interest, before taxes (426) (265)
Changes in current assets and liabilities:
Receivables 1,599 1,613
Inventories 469 (4,722)
Shells, tanks and pallets (85) -
Prepaid expenses and other (1,274) (586)
Accounts payable and accrued liabilities 878 2,778
--------- --------
Net cash provided by operating activities 2,251 1,786
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,028) (2,692)
Payments for exclusive beverage pouring rights (779) (1,742)
Other (9) -
--------- --------
Net cash used in investing activities (7,816) (4,434)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving line of credit 6,000 7,000
Payments on revolving line of credit - (4,500)
Principal payments on long-term debt and other
liabilities (61) (36)
--------- --------
Net cash provided by financing activities 5,939 2,464
--------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS 374 (184)
CASH AND CASH EQUIVALENTS, beginning of period 4,680 3,818
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 5,054 $ 3,634
--------- --------
--------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
5
<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. ("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 a fair presentation of financial position, results
of operations and cash flows as of March 31, 1999, 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 Company's audited consolidated financial statements and
related notes thereto for the year ended December 31, 1998. Also, the results of
operations for the interim periods presented may not be indicative of the
results for the entire year.
2. 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 three months ended March 31, 1999, the Company issued additional preferred
shares as payment-in-kind dividends on preferred stock of approximately
$462,000. The additional preferred shares are included in stockholders' equity
as of March 31, 1999.
3. LONG-TERM DEBT AND OTHER LIABILITIES:
The Company maintains a $30.0 million bank revolving line of credit which
matures on December 16, 2001. The line of credit includes a swing line facility
of up to $2.5 million. Swing line loans bear interest at either the base rate
(defined below) or at an otherwise mutually agreed upon rate of interest.
Interest on remaining amounts outstanding under the line of credit bear
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% (the "base
rate"). 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 also 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 $8.1 million as of March 31, 1999, including $2.5 million
under the swing line facility.
4. INVENTORIES:
Inventories as of March 31 included the following:
<TABLE>
<CAPTION>
1998 1999
--------------- --------------
<S> <C> <C>
Raw Materials $ 3,116 $ 5,415
Finished Goods 13,033 15,456
--------------- --------------
--------------- --------------
$16,149 $20,871
--------------- --------------
--------------- --------------
</TABLE>
6
<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 THREE MONTHS ENDED MARCH 31, 1999 AND ITS
FINANCIAL CONDITION AS OF MARCH 31, 1999. 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, 1998.
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, 1998 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, may fluctuate from year to year, and 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.
7
<PAGE>
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1999 COMPARED TO QUARTER ENDED MARCH 31, 1998
Net sales, excluding contract sales, for the three months ended March
31, 1999 increased by 6.6% to $71.5 million compared to $67.1 million for the
same period in 1998. The increase was due to a 10.8% increase in franchise case
sales volume, primarily of the Company's take-home packages of soft drinks,
offset by a decrease in average net sales pricing per franchise case of
approximately 4.0%. The decrease in average selling price was due to an increase
in the proportion of take-home packages as compared to total volume and an
increase in support given to retailers featuring those packages. In addition,
the average selling price of single serve packages of soft drinks increased as
the result of continued expanded placement of marketing equipment. Contract net
sales for the three months ended March 31, 1999 increased 12.9%, compared to the
same period in 1998, due to the addition of bottled product requirements of an
existing can product customer. Contract net sales represented 12.0% of net sales
for the three months ended March 31, 1999, compared to 11.4% of net sales for
the same period in 1998. As a result of the foregoing, aggregate net sales for
the three months ended March 31, 1999 increased 7.3% to $81.3 million compared
to $75.7 million for the same period in 1998.
Cost of sales for the three months ended March 31, 1999 increased to
$56.3 million compared to $53.4 million for the same period in 1998. The
increase was due primarily to the increase in contract net sales (although at
thin margins) and the increase in franchise case sales but was offset by lower
unit costs of production, which were primarily due to lower cost of packaging
and the effect of higher volume on manufacturing overhead. As a percentage of
net sales, cost of sales for the three months ended March 31, 1999 decreased to
69.3% compared to 70.5% for the same period in 1998. The improved margin
associated with the single-serve packages of soft drinks and the increase in
soft drink franchise case sales resulted in gross profit for the three months
ended March 31, 1999 of $25.0 million or 12.1% more than the gross profit of
$22.3 million for the same period in 1998.
Selling, general and administrative expenses for the three months ended
March 31, 1999 increased to $21.9 million compared to $21.0 million for the same
period in 1998. Selling, general and administrative expenses are comprised of
selling, distribution and warehousing expenses, advertising and marketing
expenses, and general and administrative expenses ("G&A"). G&A increased by $0.9
million due primarily to increased insurance and legal costs. All expenses grew
at a rate less than volume growth.
As a result of the above factors, income from operations for the three
months ended March 31, 1999 increased to $2.2 million or 2.7% of net sales,
compared to $0.4 million, or 0.6% of net sales, for the same period in 1998.
The Company had a loss before income taxes and minority interest of
$2.5 million for the three months ended March 31, 1999 compared to a loss of
$4.3 million for the same period in 1998.
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. For interim periods, income tax
expense and benefit are provided at the effective rate projected for a full
fiscal year.
8
<PAGE>
As a result of the foregoing factors, the Company had net income of
$1.9 million for the three months ended March 31, 1999 compared to a net loss of
$1.3 million for the same period in 1998.
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
March 31, 1999, letters of credit of $8.0 million had been issued and $8.1
million had been drawn for seasonal working capital requirements. The credit
facility will mature in 2001.
The Company had cash of $3.6 million and working capital of $36.3
million at March 31, 1999, compared to cash of $3.8 million and working capital
of $32.5 million at December 31, 1998. Working capital represents current assets
(excluding cash and cash equivalents) less current liabilities (excluding
current maturities of long-term debt and other long-term liabilities).
The $0.2 million decrease in cash from December 31, 1998 to March 31,
1999 resulted from net cash provided by operations of $1.8 million, augmented by
$2.5 million provided by net financing activities, less cash used by investing
activities of $4.4 million. The cash provided by operations was net of a $3.8
million increase in working capital. In the same period in 1998, cash increased
by $0.4 million resulted from net cash provided by operations of $2.3 million
and from net financing activities of $5.9 million less cash used by investing
activities of $7.8 million.
Cash used in investing activities of $4.4 million in the three months
ended March 31, 1999 represented a $3.4 million decrease from cash used in the
same period of 1998. The higher amount in 1998 was primarily for marketing
equipment related to single-serve packages of soft drinks.
Financing activities in the three months ended March 31, 1999 provided
$2.5 million in net cash, which represented a $3.4 million decrease over the
$5.9 million in net cash provided in the same period of 1998. This decrease in
net cash provided resulted primarily from credit agreement advances of
approximately $7.0 million less credit agreement payments of approximately $4.5
million. The lower level of capital expenditures required less reliance on the
credit agreement in 1999.
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 three months ended March 31, 1999
and 1998, capital expenditures totaled $2.7 million and $7.0 million,
respectively. The Company anticipates that capital expenditures will total
approximately $12.0 million for fiscal year 1999.
9
<PAGE>
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 March 31, 1999) 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 $48.6
million at March 31, 1999 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 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 at least
until December 1999 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.
YEAR 2000 READINESS DISCLOSURE
The term "Year 2000" is used to describe general problems that may
result from improper processing of dates and date-sensitive calculations by
computers or other machinery as the year 2000 is approached and reached. This
problem stems from the fact that many of the world's computer hardware and
software applications have historically used only the last two digits to refer
to a year. As a result, many of these computer programs do not or will not
properly recognize a year that begins with "20" instead of the familiar "19." If
not corrected, many computer applications could fail or create erroneous
results.
The risks from this date change are both internal and external and can
potentially affect the Company's production, distribution and administrative
systems and the Company's customers, suppliers of raw materials, utilities and
distribution services. Year 2000 related problems could prevent customers from
accepting deliveries from the Company or processing payments for amounts due to
the Company. Suppliers may be prevented from producing and supplying goods or
services essential to the Company's business.
STATE OF READINESS
PepsiCo distributed to its franchisees its Year 2000 compliance plan,
which the Company used as a framework for the development and implementation of
its own Year 2000 compliance. The Company evaluated its information technology
("IT") systems for Year 2000 compliance. The Company also assessed its non-IT
systems (i.e. embedded technology such as microprocessors in manufacturing and
other equipment). The Company completed its assessment of the IT and non-IT
systems, the only outstanding items are HVAC, copiers and fax machines.
10
<PAGE>
Currently, the Company is modifying both IT and non-IT systems to make
them Year 2000 compliant. In instances where modifications have been completed
or were not required, the Company is testing the systems to ensure Year 2000
compliance.
The Company uses outside vendors to supply its most significant data
processing software. These vendors have indicated their products are Year 2000
compliant or will be Year 2000 compliant in the near future. The Company also
relies on third party suppliers for raw materials. The Company is in the process
of contacting each of its critical suppliers to assess ther readiness of such
suppliers and to determine the extent to which the Company may be vulnerable to
such parties' failure to resolve their own Year 2000 issues. This effort is
expected to be completed by June 30, 1999.
COSTS TO ADDRESS YEAR 2000 ISSUES
The Company does not expect the cost of becoming Year 2000 compliant to
be material to its consolidated financial condition or results of operations.
This is due, in part, to the Company's recent significant upgrades to its data
communication network and key data processing hardware, all of which are Year
2000 compliant.
RISKS OF YEAR 2000 ISSUES
The Company recognizes that Year 2000 issues constitute a material
known uncertainty. The Company also recognizes the importance of ensuring that
Year 2000 issues will not adversely affect its operations. The Company believes
that the processes described above will be effective to manage the risks
associated with the problem. However, there can be no assurance that the
processes can be completed on the timetable described above or that remediation
will be fully effective. The failure to identify and remediate Year 2000 issues,
or the failure of key vendors, suppliers or other critical third parties who do
business with the Company to timely remediate their Year 2000 issues could cause
an interruption in the business operations of the Company. At this time,
however, the Company does not possess information necessary to estimate the
overall potential financial impact of Year 2000 compliance issues.
The Company's worst case scenario would be the temporary inability of
suppliers to provide supplies of raw materials to the Company. The inability of
the Company's suppliers to be Year 2000 ready could result in delays in product
manufacturing and delivery, thereby adversely affecting the business or
operations of the Company. The Company believes, however, that in a worst case
scenario any disruption in supply materials can be minimized by relying on
inventories or shifting production to unaffected plants with some increase in
distribution costs.
CONTINGENCY PLANS
The Company recognizes the need for Year 2000 contingency plans in the
event that remediation is not fully successful or that the remediation efforts
of its vendors and suppliers are not timely completed. The Company plans to
address the contingency planning during the calendar 1999. Such plans will
include building inventories of raw materials and finished goods in advance of
January 1, 2000 to protect against supply and production disruptions. To the
extent that the Company's vendors and suppliers are unable to provide sufficient
evidence of Year 2000 readiness by September 30, 1999, the Company will seek to
arrange for their replacement. Additionally, the Company is developing manual
processes to replace electronic applications in the event of their failure.
Finally, the Company is working with its customers to build customer inventory
levels at year-end as a contingency against company or customer Year 2000
failure.
11
<PAGE>
DISCLOSURES ABOUT MARKET RISK
The Company uses financial instruments, including fixed and variable
rate debt, to finance operations, for capital expenditures and for general
corporate purposes. The Company's exposure to market risk for changes in
interest rates relates primarily to short and long term debt obligations. The
Company does not use derivative financial instruments or engage in trading
activities. There have been no significant changes in the Company's exposure to
market risk for changes in interest rates during the three months ended March
31, 1999.
12
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS OR FORM 8-K
(a) Exhibit 27.1 - Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the
quarter for which this report is filed.
13
<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 May 14, 1999.
DELTA BEVERAGE GROUP, INC.
By: /s/ John F. Bierbaum
----------------------------------
John F. Bierbaum
Chief Financial Officer
14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,634
<SECURITIES> 0
<RECEIVABLES> 25,263
<ALLOWANCES> 647
<INVENTORY> 20,871
<CURRENT-ASSETS> 74,353
<PP&E> 120,707
<DEPRECIATION> 58,758
<TOTAL-ASSETS> 279,992
<CURRENT-LIABILITIES> 34,675
<BONDS> 183,290
0
31,256
<COMMON> 0
<OTHER-SE> 27,685
<TOTAL-LIABILITY-AND-EQUITY> 279,992
<SALES> 81,255
<TOTAL-REVENUES> 81,255
<CGS> 56,302
<TOTAL-COSTS> 79,070
<OTHER-EXPENSES> 4,723
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,710
<INCOME-PRETAX> (2,538)
<INCOME-TAX> (4,281)
<INCOME-CONTINUING> 1,931
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,931
<EPS-PRIMARY> 27.59
<EPS-DILUTED> 27.59
</TABLE>
