DELTA BEVERAGE GROUP INC
10-Q, 2000-05-10
BOTTLED & CANNED SOFT DRINKS & CARBONATED WATERS
Previous: HAWAIIAN ELECTRIC INDUSTRIES CAPITAL TRUST I, 10-Q, 2000-05-10
Next: OTOOLE TERENCE M, 3/A, 2000-05-10



<PAGE>


================================================================================


                       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 MARCH 31, 2000


/ /      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 8, 2000, the issuer had outstanding: (i) 6,440.17 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.


================================================================================
<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.......................................................      7

PART II...................................................................................................       11

     ITEM 1.      LEGAL PROCEEDINGS.......................................................................       11
     ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K........................................................       11
</TABLE>

                                       i
<PAGE>


                                     PART I

ITEM 1.   FINANCIAL STATEMENTS

                    DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

                                    Unaudited

                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                      MARCH 31,               DECEMBER 31,
                                                                         2000                     1999
                                                                   ---------------           -------------
<S>                                                                <C>                       <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                         $    4,245                 $   4,560
   Receivables
           Trade, net of allowance for doubtful
              accounts of $589 and $1,298                                26,031                    27,267
           Marketing and advertising                                      5,167                     6,284
           Other                                                          2,753                     3,982
   Inventories, at cost                                                  21,703                    21,410
   Shells, tanks and pallets                                              6,995                     6,820
   Prepaid expenses and other                                             6,058                     5,167
   Deferred income taxes                                                  5,441                     5,349
                                                                     ----------                 ---------
             Total current assets                                        78,393                    80,839
                                                                     ----------                 ---------

PROPERTY AND EQUIPMENT:
   Land                                                                   5,202                     5,202
   Buildings and improvements                                            19,960                    19,807
   Machinery and equipment                                              110,562                   104,292
                                                                     ----------                 ---------
                                                                        135,724                   129,301
   Less accumulated depreciation                                        (66,966)                  (64,680)
                                                                     ----------                 ---------
              Total property and equipment                               68,758                    64,621
                                                                     ----------                 ---------

OTHER ASSETS:
   Franchise rights, net of accumulated
       amortization of $58,858 and $57,946                              104,434                   105,346
   Deferred income taxes                                                 19,717                    19,717
   Deferred financing costs, beverage pouring
       rights and other                                                  24,541                    24,447
                                                                     ----------                 ---------
            Total other assets                                          148,692                   149,510
                                                                     ----------                 ---------
                                                                     $  295,843                 $ 294,970
                                                                     ==========                 =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      1
<PAGE>


                    DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                    Unaudited

                    (Dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                      MARCH 31,                DECEMBER 31,
                                                                       2000                       1999
                                                               --------------------            ------------
<S>                                                            <C>                             <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current maturities of long-term debt                              $      186                $      186
   Accounts payable                                                      18,999                    21,195
   Accrued liabilities                                                   20,489                    21,270
                                                                      ---------                ----------
           Total current liabilities                                     39,674                    42,651

LONG-TERM DEBT AND OTHER LIABILITIES                                    147,124                   140,685
NOTES PAYABLE TO PEPSIAMERICAS, INC.                                     54,392                    54,392
MINORITY INTEREST                                                         3,204                     3,284
                                                                     ----------                ----------
           Total liabilities                                            244,394                   241,012
                                                                     ----------                ----------

STOCKHOLDERS' EQUITY:
   Preferred stock:
       Series AA, $5,000 stated value, 30,000 shares
       authorized, 6,440.17 shares issued and outstanding                32,201                    32,201
   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                                           118,537                   118,054
   Accumulated deficit                                                  (99,289)                  (96,297)
                                                                     ----------                ----------
           Total stockholders' equity                                    51,449                    53,958
                                                                     ----------                ----------
                                                                     $  295,843                $  294,970
                                                                     ==========                ==========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       2
<PAGE>


                    DELTA BEVERAGE GROUP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       FOR THE THREE MONTHS ENDED MARCH 31

                                    Unaudited

                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                           2000              1999
                                                         --------           ------
<S>                                                      <C>                <C>
OPERATIONS:
   Net sales                                             $ 82,440           81,255
   Cost of sales                                           55,622           56,302
                                                         --------           ------
       Gross profit                                        26,818           24,953

   Selling, general and administrative expenses            23,488           21,856
   Amortization of franchise rights                           912              912
                                                         --------         --------
       Operating income                                     2,418            2,185
                                                         --------         --------

OTHER EXPENSES:
   Interest, net                                            4,992            4,710
   Other, net                                                   5               13
                                                         --------         --------
                                                            4,997            4,723
                                                         --------         --------

LOSS BEFORE INCOME TAXES
   AND MINORITY INTEREST                                   (2,579)          (2,538)

   Minority interest, net of taxes                             73              188
   Income tax benefit (expense)                                (3)           4,281
                                                         ---------        --------

NET INCOME (LOSS)                                        $ (2,509)        $  1,931
                                                         ========         ========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      3
<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>
                                                                         2000                      1999
                                                                       --------                  ------
<S>                                                                   <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                  $  (2,509)                 $  1,931
   Adjustments to reconcile net income (loss) to net cash
       provided by operating activities:
           Depreciation and amortization                                  3,972                     3,774
           Non-cash interest on long-term debt                              189                     1,468
           Change in deferred income taxes                                  (92)                   (4,205)
           Minority interest (income) expense, before taxes                 (80)                     (265)
           Net expense under deferred
             compensation plans                                               8                         -
           Changes in current assets and liabilities:
             Receivables                                                  3,896                     1,613
             Inventories                                                   (293)                   (4,722)
             Shells, tanks and pallets                                     (175)                        -
             Prepaid expenses and other current assets                   (1,640)                     (586)
             Accounts payable and accrued liabilities                    (2,449)                    2,778
                                                                      ---------                  --------
               Net cash provided by operating activities                    827                     1,786
                                                                      ---------                  --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                  (6,668)                   (2,692)
   Payments for exclusive beverage pouring rights                          (635)                   (1,742)
   Other                                                                    (39)                        -
                                                                      ----------                 --------
               Net cash used in investing activities                     (7,342)                   (4,434)
                                                                      ----------                 --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowings under revolving line of credit                             10,400                     7,000
   Payments on revolving line of credit                                  (4,200)                   (4,500)
   Principal payments on long-term debt and other
       liabilities                                                            -                       (36)
   Additional contributed capital from PepsiAmericas, Inc.                  483                         -
   Preferred stock dividends                                               (483)                        -
                                                                      -----------                --------
               Net cash provided by financing activities                  6,200                     2,464
                                                                      ---------                  --------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                    (315)                     (184)
CASH AND CASH EQUIVALENTS, beginning of period                            4,560                     3,818
                                                                      ---------                  --------
CASH AND CASH EQUIVALENTS, end of period                              $   4,245                  $  3,634
                                                                      =========                  ========
</TABLE>

   The accompanying notes are an integral part of these financial 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. ("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,
2000, 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, 1999. Also, the results of operations for the interim
periods presented may not be indicative of the results for the entire year.

2.       COMBINATION OF INTERESTS:

On June 28, 1999, the shareholders of Delta and Dakota Beverage Company, Inc.
("Dakota") entered into share exchange agreements with a related party
entity, Pepsi-Cola Puerto Rico Bottling Company ("PPR"). On October 1, 1999,
PPR's shareholders approved the issuance of shares as outlined in the
exchange agreements, as well as an amendment to PPR's certificate of
incorporation changing PPR's name to PepsiAmericas, Inc. ("PAS"). On October
15, 1999, PAS issued shares of its Class B Common Stock in connection with
the acquisitions of Delta and Dakota pursuant to the exchange agreements,
including 18,310,006 shares to the common shareholders of Delta. Prior to the
issuance of PAS stock to the Delta and Dakota shareholders, PAS, Delta and
Dakota shared common ownership and were under the common control of Pohlad
Companies. Pohlad Companies continues to be a controlling shareholder of PAS.
The combination was accounted for as a merger of entities under common
control.

3.       PREFERRED STOCK:

Authorized preferred stock consists of 30,000 designated shares of Series AA
preferred stock, of which 6,440.17 shares were outstanding at March 31, 2000.
The Series AA preferred stock do not contain voting rights and is not
convertible into common stock. Series AA preferred stockholders receive
cumulative dividends at an annual rate of 6% based on the $5,000 stated value
per share. The rate will increase 2% annually beginning October 1, 2004, but
is limited to a cumulative increase of 8%. Prior to the combination
transaction described in Note 2, dividends were payable in cash or in
additional shares of Series AA preferred stock. The preferred dividends
through October 15, 1999 were paid with additional shares of preferred stock.
Following the combination, dividends are paid quarterly in cash using
contributed capital from PAS. During the three months ended March 31, 2000,
the Company paid approximately $483,000 of preferred stock dividends using a
capital contribution from PAS.

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. The line of credit also 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. The Company's accounts receivable and
inventory secure borrowings under the line. Borrowings outstanding under the
line of credit approximated $10.9 million as of March 31, 2000, including
$2.5 million under the swing line facility.

                                      5
<PAGE>

The Company also maintains subordinated notes ("Notes"), with interest due
semi-annually on April 1 and October 1, that can be paid in cash or, at the
option of the Company, by the issuance of additional subordinated notes. The
Notes bear interest at 11% or 15% depending upon whether the terms of the
note agreement would have permitted Delta to pay any portion of the interest
in cash. The Notes mature on December 23, 2003. In connection with the
combination transaction described in Note 2, the subordinated noteholders
sold their Notes to PAS. The Notes are classified as Notes Payable to
PepsiAmericas, Inc. in the accompanying consolidated balance sheet.

6.       INVENTORIES:

Inventories included the following (in thousands):

<TABLE>
<CAPTION>
                                                            March 31, 2000           December 31, 1999
                                                            ---------------          -------------------
                    <S>                                     <C>                      <C>
                    Raw materials                           $    6,932               $      7,476
                    Finished goods                              14,771                     13,934
                                                            ---------------          -------------------
                                                            $   21,703               $     21,410
                                                            ===============          ===================
</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, 2000 AND
ITS FINANCIAL CONDITION AS OF MARCH 31, 2000. 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, 1999.

         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, 1999 FOR A DESCRIPTION OF
THE FACTORS KNOWN TO THE COMPANY THAT MAY CAUSE ACTUAL RESULTS TO VARY.

GENERAL BUSINESS OVERVIEW

         The Company has accomplished a number of business combinations over
the last decade, including (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 a majority
owner and managing venturer, (ii) acquiring in 1995 the distribution rights
for Miller and Heineken products in a significant portion of the joint
venture territory and (iii) combining with Dakota and Pepsi-Cola Puerto Rico
Bottling Company to form PAS effective October 15, 1999.

         On June 28, 1999, the Company announced the entry by its
stockholders into the Delta Exchange Agreement, which resulted in the
combination of the Company with two related-party Pepsi-Cola bottlers:
PepsiAmericas, Inc. (PAS) and DAKBEV, LLC (Dakota). The three companies
generated combined revenues in 1999 of approximately $576 million. Such
transactions were consummated during the fourth quarter of 1999, with both
the Company and Dakota becoming wholly owned subsidiaries of PAS. The
combined company is PepsiCo's third largest U.S. based anchor bottler.

         The Company's primary source of revenue is franchise 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% to 12.0% 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 sales more
accurately measure growth than changes in total net sales.

         The Company's primary measurement of unit volume is a franchise
case, which is a case-sized quantity of the various packages in which
products are produced and 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.

                                      7
<PAGE>


RESULTS OF OPERATIONS

QUARTER ENDED MARCH 31, 2000 COMPARED TO QUARTER ENDED MARCH 31, 1999

         Net sales, excluding contract sales, for the three months ended
March 31, 2000 increased by 1.2% to $72.3 million compared to $71.5 million
for the same period in 1999. The increase was due primarily to an increase in
revenue per franchise case of approximately 7.1% due to higher net pricing,
offset by a 5.9% decrease in franchise case volume. The decrease in volume
was in can sales while price increases were spread over all packages. Net
beer prices increased 2.7% as beer volume sales remained flat. Contract net
sales for the three months ended March 31, 2000 remained at approximately
12.0%. As a result of the foregoing, aggregate net sales for the three months
ended March 31, 2000 increased 1.5% to $82.4 million compared to $81.3
million for the same period in 1999.

         Cost of sales for the three months ended March 31, 2000 decreased to
$55.6 million compared to $56.3 million for the same period in 1999. The
decrease was directly related to the decrease in franchise case volume sales.
As a percentage of net sales, cost of sales for the three months ended March
31, 2000 decreased to 67.5% compared to 69.3% for the same period in 1999.
The improved margin associated with the single-serve packages of soft drinks
and the increase in revenue per franchise case resulted in gross profit for
the three months ended March 31, 2000 of $26.8 million or 7.5% more than the
gross profit of $25.0 million for the same period in 1999.

         Selling, general and administrative expenses for the three months
ended March 31, 2000 increased to $23.5 million compared to $21.9 million for
the same period in 1999. Selling, general and administrative expenses are
comprised of selling, distribution and warehousing expenses, advertising and
marketing expenses, and general and administrative expenses ("SG&A"). SG&A
increased by $1.6 million due primarily to increased delivery routes and
depreciation as a result of continued investments in cold drink marketing
equipment placement.

         As a result of the above factors, income from operations for the
three months ended March 31, 2000 increased to $2.4 million or 2.9% of net
sales, compared to $2.2 million, or 2.7% of net sales, for the same period in
1999.

         Interest expense increased to $5.0 million from $4.7 million for the
three months ended March 31, 2000 compared to the same period in 1999. The
increase is a result of additional borrowing for increased capital
expenditures of marketing equipment in the first quarter of 2000.

         The Company had a loss before income taxes and minority interest of
$(2.6) million for the three months ended March 31, 2000 compared to a loss
of $(2.5) million for the same period in 1999.

         Income taxes in interim periods are based on the expected effective
tax rate for a full fiscal year. For the quarter ended March 31, 1999, an
income tax benefit was recorded using a higher effective tax rate than was
actually realized for the full year. Had the full-year rate been known in the
first quarter, an income tax expense of $0.3 million would have been reported
instead of a benefit of $4.3 million. As a result, a net loss of $(2.7)
million would have been reported instead of a net income of $1.9 million. The
company's effective tax rate differs from the U.S. statutory rate primarily
due to the effect of non-deductible franchise cost amortization.

         As a result of the foregoing factors, the Company had net loss of
$(2.5) million for the three months ended March 31, 2000 compared to a net
income of $1.9 million for the same period in 1999.

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, 2000, letters of credit of $8.2

                                      8
<PAGE>

million had been issued and $10.9 million had been drawn for seasonal working
capital requirements. The credit facility will mature in December 2001.

         The Company had cash of $4.2 million and working capital of $34.7
million at March 31, 2000, compared to cash of $4.6 million and working
capital of $33.8 million at December 31, 1999. 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 $0.3 million decrease in cash from December 31, 1999 to March
31, 2000 resulted from net cash provided by operations of $0.8 million,
augmented by $6.2 million provided by net financing activities, less cash
used in investing activities of $7.3 million. The cash provided by operations
decreased $1.0 million to $0.8 million as a result of the reduction of
non-cash interest on long term debt offset by a decrease in working capital.
In 1999 the Company PIK'd interest expense related to the subordinated debt
of $1.3 million. This interest was paid in cash in 2000.

         Cash used in investing activities of $7.3 million in the three
months ended March 31, 2000 represented a $2.8 million increase from cash
used in the same period of 1999. The higher amount in 2000 was primarily for
marketing equipment related to single-serve packages of soft drinks.

         Financing activities in the three months ended March 31, 2000
provided $6.2 million in net cash, which represented a $3.7 million increase
over the $2.5 million in net cash provided in the same period of 1999. This
increase in net cash provided resulted primarily from credit agreement
advances of approximately $10.4 million less credit agreement payments of
approximately $4.2 million. The higher level of capital expenditures required
increased reliance on the credit agreement in 2000.

         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 with respect to
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, 2000 and 1999, capital expenditures totaled $6.7 million and $2.7
million, respectively. The Company anticipates that capital expenditures will
total approximately $12.0 million in 2000.

         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, 2000) 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.

         Prior to consummation of the transaction contemplated by the Delta
Exchange Agreement, the Company maintained subordinated notes with interest
due semi-annually on April 1 and October 1, that could be paid in cash or, at
the option of the Company, by the issuance of additional subordinated notes
("PIK Notes"). The PIK Notes bore interest at 11% or 15% depending upon
whether the terms of the note agreement would have permitted the Company to
pay any portion of the interest in cash. The subordinated notes mature on
December 23, 2003. Prior to the refinancing, certain of the Company's
preferred and non-voting common stockholders were subordinated debt holders.
In connection with the transaction contemplated by the Delta Exchange
Agreement, the subordinated noteholders sold their notes to PAS.

         Series AA preferred stockholders receive cumulative dividends at an
annual rate of 6% based on the $5 thousand stated value per share. Prior to
the combination transaction, dividends were payable in cash or in additional
shares of Series AA preferred stock. The preferred dividends through October
15, 1999 were paid with additional shares of preferred stock. Following the
combination, dividends are paid quarterly in cash using contributed capital

                                      9
<PAGE>

from PAS. During the three months ended March 31, 2000, the Company paid
approximately $0.5 million of preferred stock dividends using a capital
contribution from PAS.

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 relate 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, 2000.

                                     10
<PAGE>


                                     PART II

ITEM 1.  LEGAL PROCEEDINGS

         In August 1993, the Company was named as one of several defendants
in a lawsuit filed in the District Court of Morris County, Texas, by a number
of soft drink bottlers and distributors. The plaintiffs alleged that the
defendants engaged in unfair competition and conspired to monopolize the soft
drink industry in eastern Texas, Louisiana and Arkansas in violation of the
Texas Free Enterprise Act and, alternatively, state antitrust statutes.
Subsequent to March 31, 2000, the litigation was resolved without material
adverse effect to the Company.

         In November and December 1999, the Company was named a defendant in
several class action lawsuits filed in the District Court of the Parish of
St. John the Baptist, Louisiana, by a group of residents near the Company's
facility in Reserve, Louisiana. The residents complained of personal injuries
resulting from noxious fumes emitted from the wastewater pond owned by the
Port of South Louisiana, into which the Company discharges its wastewater.
There are approximately 4,000 potential plaintiffs. No dollar amount has been
demanded as yet. The Company intends to fully defend itself in this action
and does not expect any material consequences to result from this litigation.

         The Company owns 62% of the Pepsi-Cola/Seven-Up Beverage Group of
Louisiana (the "Joint Venture"), which distributes beer in the New Orleans
metropolitan area. The Miller distributor agreement provides that a
publicly-held company cannot own a distributor directly or indirectly.
Because Delta is owned by PAS, a publicly-held company, PAS is working to
resolve this ownership issue. No assurance can be given that PAS will be able
to resolve this issue with Miller.

         From time to time, the Company is involved in various other legal
proceedings arising in the ordinary course of business. The Company believes
ultimate resolution of such litigation will not have a material adverse
effect on the Company's business, financial condition or results of
operations.

ITEM 6.   EXHIBITS AND REPORTS ON 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.

                                      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 May 10, 2000.


                                         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>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-2000
<PERIOD-END>                               MAR-31-2000
<CASH>                                           4,245
<SECURITIES>                                         0
<RECEIVABLES>                                   26,620
<ALLOWANCES>                                       589
<INVENTORY>                                     21,703
<CURRENT-ASSETS>                                78,393
<PP&E>                                         135,724
<DEPRECIATION>                                  66,966
<TOTAL-ASSETS>                                 295,843
<CURRENT-LIABILITIES>                           39,674
<BONDS>                                        201,516
                                0
                                     32,201
<COMMON>                                             0
<OTHER-SE>                                      19,248
<TOTAL-LIABILITY-AND-EQUITY>                   295,843
<SALES>                                         82,440
<TOTAL-REVENUES>                                82,440
<CGS>                                           55,622
<TOTAL-COSTS>                                   80,022
<OTHER-EXPENSES>                                 4,997
<LOSS-PROVISION>                                    92
<INTEREST-EXPENSE>                               4,992
<INCOME-PRETAX>                                (2,579)
<INCOME-TAX>                                       (3)
<INCOME-CONTINUING>                            (2,509)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   (2,509)
<EPS-BASIC>                                          0
<EPS-DILUTED>                                        0


</TABLE>


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission