==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 1997
or
Transition Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number 33-69832
ALL-AMERICAN BOTTLING CORPORATION
BROWNE BOTTLING COMPANY
(Exact name of registrant as specified in its charter)
Delaware 73-1317652
(State or other jurisdiction 73-1311569
of incorporation or organization) (IRS Employer Identification No.)
Colcord Building
15 North Robinson, Suite 1201
Oklahoma City, Oklahoma 73102
(Address of Principal Executive Office)
(405) 232-1158
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for each shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
As of May 1, 1997 Browne Bottling Company had 192,244 shares of common
stock outstanding for which there is no public market; and All-American
Bottling Corporation had 100,000 shares of common stock outstanding, all of
which are held by Browne Bottling Company.
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<PAGE>
All-American Bottling Corporation
Browne Bottling Company
INDEX
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
as of March 31, 1997 and December 31, 1996
(unaudited)
Consolidated Statements of Operations
for the three months ended March 31, 1997
and 1996 (unaudited)
Consolidated Statements of Changes in Stockholders'
Equity for the three months ended March 31, 1997
and for the year ended December 31, 1996 (unaudited)
Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements
(unaudited)
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Part II Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART I
ITEM 1. Financial Statements
BROWNE BOTTLING COMPANY
Consolidated Balance Sheets (in thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Trade accounts receivable $ 10,208 $ 10,212
Franchise companies receivable 1,564 1,485
Other receivables 1,494 1,681
Allowance for doubtful accounts (462) (445)
Inventories - ingredients and packaging 2,783 3,371
Inventories - finished goods 4,165 4,298
Inventories - other 243 230
Inventories - pallets at deposit value 261 247
Prepaid expenses 399 488
Deferred tax asset 492 492
----------- -----------
Total current assets 21,147 22,059
----------- -----------
Plant and equipment, at cost:
Land 828 828
Buildings and improvements 6,347 6,494
Machinery and equipment 10,903 10,954
Vehicles 7,328 7,325
Vending equipment 5,970 6,020
Furniture and fixtures 354 376
Computer equipment 1,812 1,831
Returnable containers 2,338 2,338
----------- -----------
35,880 36,166
Less - Accumulated depreciation (23,826) (24,359)
----------- -----------
Net plant and equipment 12,054 11,807
----------- -----------
Intangible assets:
Franchises 37,443 37,443
Goodwill 15,007 15,007
Other intangibles 2,657 2,700
----------- -----------
55,107 55,150
Less - Accumulated amortization (13,285) (13,674)
----------- -----------
Net intangible assets 41,822 41,476
----------- -----------
Other assets 1,211 842
----------- -----------
Total assets $ 76,234 $ 76,184
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BROWNE BOTTLING COMPANY
Consolidated Balance Sheets (in thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
----------- -----------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ 1,554 $ 657
Current portion of long-term debt 12,189 14,911
Current portion of obligations under
capital lease 167 159
Current portion of deferred compensation
and non-compete agreements 106 90
Trade accounts payable 8,832 9,899
Accrued compensation and payroll taxes 1,865 1,720
Accrued interest payable 2,020 765
Accrued insurance reserves 1,059 999
Accrued pension liability 130 146
Other liabilities 2,486 2,515
----------- -----------
Total current liabilities 30,408 31,861
----------- -----------
Long-term debt, net of current maturities 38,668 38,491
----------- -----------
Obligations under capital leases, net 885 847
----------- -----------
Deferred compensation and non-compete
agreements, net 984 1,032
----------- -----------
Other non-current liabilities 839 797
----------- -----------
Deferred tax liability 11,287 10,802
----------- -----------
Stock warrants 815 815
----------- -----------
Stockholders' equity (deficit):
Preferred stock - Series B, $.01 par
value, 1,000 shares authorized, issued
and outstanding; (liquidation preference
of $1,000 per share) - -
Common stock, $.01 par value, 220,295 shares
authorized, 192,244 shares issued and
outstanding 2 2
Common stock, non-voting, $.01 par value,
5,263 shares authorized, none outstanding - -
Additional paid-in capital 26,542 26,542
Deficit (34,196) (35,005)
----------- -----------
Total stockholders' deficit (7,652) (8,461)
----------- -----------
Total liabilities and stockholders' deficit $ 76,234 $ 76,184
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BROWNE BOTTLING COMPANY
Unaudited Consolidated Statements of Operations (in thousands except share and
per share amount)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1997
----------- -----------
<S> <C> <C>
Revenues, net of discounts and allowances
($14,488 and $11,990 in 1996 and 1997,
respectively) $ 33,533 $ 27,953
Cost of sales 22,286 17,639
---------- ----------
Gross Profit 11,247 10,314
Operating expenses:
Plant and occupancy 1,543 1,263
Loading and shipping 1,029 778
Transport 227 129
Fleet service 185 158
Selling and delivery 6,173 5,040
Vending and Fountain 577 508
Advertising 517 410
General and administrative 1,709 1,510
Amortization of intangibles 555 403
----------- ----------
Total operating expenses 12,515 10,199
----------- ----------
Income (loss) from operations (1,268) 115
Gain (loss) on disposals (1,926) 12
Interest expense (1,892) (1,669)
Other income 14 277
----------- ----------
Loss before income tax benefit (5,072) (1,265)
Income tax benefit 1,194 456
----------- ----------
Net loss $ (3,878) $ (809)
=========== ===========
Loss per common share and common share
equivalent:
Primary and fully diluted:
Net loss $ (20.17) $ (4.21)
=========== ===========
Weighted average common shares 192,244 192,244
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BROWNE BOTTLING COMPANY
Consolidated Statements of Changes in Stockholders' Equity (Deficit) (dollars
in thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred Additional Retained
Shares, Common Stock Paid-in Earnings
Series B Shares Amount Capital (Deficit) Total
--------- ------- ------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 1,000 192,244 $ 2 $26,542 $(28,948) $(2,404)
Net loss (5,248) (5,248)
--------- ------- ------ --------- --------- ---------
Balance, December 31, 1996 1,000 192,244 2 26,542 (34,196) (7,652)
--------- ------- ------ --------- --------- ---------
Net loss (unaudited) (809) (809)
--------- ------- ------ --------- --------- ---------
Balance, March 31, 1997
(unaudited) 1,000 192,244 $ 2 $26,542 $(35,005) $(8,461)
======== ======= ====== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BROWNE BOTTLING COMPANY
Unaudited Consolidated Statements of Cash Flows (in thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,878) $ (809)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 1,285 1,094
(Gain) loss on disposal of assets
and franchises 1,926 (12)
Deferred taxes (1,305) (485)
Deferred compensation 215 64
Changes in assets and liabilities, net of
effect of acquisitions and dispositions:
Decrease (increase) in accounts receivable 524 159
Decrease (increase) in inventories (1,597) (695)
Increase (decrease) in accounts payable 1,170 1,027
Increase (decrease) in accrued interest (1,512) (1,255)
Other 192 (286)
----------- -----------
Net cash provided (used) by operating
activities (2,980) (1,198)
----------- -----------
Cash flows from investing activities:
Capital expenditures (806) (364)
Proceeds from sale of fixed assets and
franchises 7,185 12
Payment for purchase of territories and
related fixed assets, net of cash
acquired (670) -
----------- -----------
Net cash provided (used) by investing
activities 5,709 (352)
----------- -----------
Cash flows from financing activities:
Increase (decrease) in overdraft 807 (897)
Proceeds from issuance of debt 2,976 358
Principal payments on debt (867) (1,003)
Borrowings on revolver note 39,969 34,476
Payments on revolver note (45,514) (31,334)
Financing costs paid (100) (50)
----------- -----------
Net cash provided (used) by financing
activities (2,729) 1,550
----------- -----------
Net increase in cash - -
Cash at beginning of period - -
----------- -----------
Cash at end of period $ - $ -
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BROWNE BOTTLING COMPANY
Unaudited Consolidated Statements of Cash Flows (in thousands)
- -------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1997
----------- -----------
<S> <C> <C>
Cash paid during the period for interest $ 3,401 $ 2,683
=========== ===========
Cash paid during the period for income
taxes $ 123 $ -
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BROWNE BOTTLING COMPANY
Notes to Unaudited Consolidated Financial Statements
- -------------------------------------------------------------------------------
1. NATURE OF BUSINESS
All-American Bottling Corporation (the "Company") is a wholly-owned
subsidiary of Browne Bottling Company ("BBC"). BBC has no independent
operations and its only material asset is its investment in the Company.
The Company is an independent bottler and distributor of soft drinks and
other beverage products, including flavored and premium waters, brewed
teas, natural sodas and sparkling juices. The Company's largest markets
in terms of franchise case sales volume are the metropolitan areas of
Milwaukee, Louisville, Nashville and Oklahoma City. The Company has
franchise agreements covering various territories for brands such as RC
Cola, Diet Rite Cola, Seven-Up, Dr Pepper, Sunkist, Canada Dry, Dad's
Root Beer, Crush, A&W Root Beer, Big Red, Sundrop, Snapple, Mistic, Evian
and Yoo-Hoo.
2. BASIS OF PRESENTATION
The interim financial statements included herein have been prepared by
BBC without audit, pursuant to the rules and regulations promulgated by
the Securities and Exchange Commission (the "Commission"). Certain
information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been omitted pursuant to Commission rules and
regulations; nevertheless, BBC believes that the disclosures are adequate
to make the information presented not misleading. These condensed
financial statements should be read in conjunction with BBC's audited
financial statements and the notes thereto included in BBC's Annual
Report on Form 10-K for the year ended December 31, 1996 filed with the
Commission. In the opinion of management, the accompanying interim
financial statements contain all material adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position, the results of operations, cash flows and stockholders' equity
of BBC for the three month periods ended March 31, 1996 and 1997. The
results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full fiscal year.
The accompanying financial statements include the accounts of BBC and its
wholly-owned subsidiary, the Company. All significant intercompany
balances and transactions have been eliminated.
In August 1993, the Company issued $45 million principal amount of 13%
Senior Secured Notes (the "Senior Notes"), which indebtedness has been
fully and unconditionally guaranteed by BBC. The separate financial
statements of the Company have not been included because the assets,
liabilities, earnings and equity of the Company are substantially
equivalent to the assets, liabilities, earnings and equity of BBC on a
consolidated basis and therefore are not considered material.
3. ASSET SALES AND PURCHASES
In January, 1997, the Company purchased franchise rights and vending
equipment in Cookesville, Tennessee for $50,000.
In January, 1997, the Company purchased the assets of Beverage Service
Corporation, a vending company doing business in Wisconsin owned by
Randall Wissink, the Group President of the Mid-West Division, and Carl
Heiss, the controller of the Mid-West Division, for $182,000. The
assets included receivables, inventory and fixed assets purchased at fair
market value.
4. DEBT COVENANTS
At March 31, 1997, the Company was not in compliance with the
consolidated interest coverage ratio covenant contained in its Senior
Credit Facility. The ratio (as defined) required by the Senior Credit
Facility is 1.25 to 1, and the Company's ratio at March 31, 1997, was
1.06 to 1. The Company has made all scheduled principal and interest
payments required by the Senior Credit Facility to date. BT Commercial,
agent, and the participating banks, have agreed to waive the Company's
non-compliance with such covenant, subject to receipt from the Company of
a $50,000 fee for such waiver. The Company has elected not to pay the
requested fee, and has again requested BT Commercial, as agent, and the
participating banks for a waiver, but no such waiver has yet been
received by the Company. BT Commercial, as agent, and the participating
banks have not declared a default with respect to the Senior Credit
Facility, nor have they accelerated the maturity of the indebtedness
under the Senior Credit Facility, nor has BT Commercial, as agent, and
the participating banks indicated any intention of declaring an event of
default or an acceleration of maturity of the indebtedness under the
Senior Credit Facility. The Company has executed a letter of intent with
another lending institution for a $20 million credit facility with terms
similar to the Senior Credit Facility. The new facility is expected to
be in place by June, 1997.
5. ADJUSTED HISTORICAL RESULTS
During 1996 the Company sold certain assets constituting its St. Paul,
Minnesota, Duluth, Minnesota, Roanoke, Virginia and Parkersburg, West
Virginia operations. The following table sets forth a summary of un-
audited selected financial information for the three months ended March
31, 1996 and 1997. For each of these periods, the selected financial
information presented includes actual operating results for the Com-
pany, while "adjusted" information has also been provided for the three
months ended March 31, 1996 which eliminates all case sales data and
all revenues and expenses relating to the St. Paul, Duluth, Roanoke
and Parkersburg operations.
<TABLE>
<CAPTION>
Three Months Ended March 31,
Historical Adjusted
1996 1996 1997
--------------- -------------- --------------
Cases Percent Cases Percent Cases Percent
------ -------- ------ ------- ------ -------
(In thousands, except percent data)
<S> <C> <C> <C> <C> <C> <C>
DSD sales 4,164 3,497 3,480
Distributor Sales 466 311 245
-------- -------- -------
Total Franchise 4,630 88% 3,808 86% 3,725 86%
Contract Sales 608 12% 608 14% 620 14%
-------- --------- -------- -------- ------- --------
Total case sales 5,238 100% 4,416 100% 4,345 100%
Produced 4,887 93% 4,246 96% 3,802 87%
Purchased 475 9% 390 9% 592 14%
Inventory - (inc.)/dec (124) -2% (220) -5% (49) -1%
-------- --------- -------- -------- ------- --------
Total case sales 5,238 100% 4,416 100% 4,345 100%
</TABLE>
<TABLE>
<CAPTION>
Per Per Per
Aggregate Case Aggregate Case Aggregate Case
--------- ----- --------- ----- --------- -----
(In thousands, except per case and per share data)
<S> <C> <C> <C> <C> <C> <C>
Franchise sales $ 30,615 $ 6.61 $ 25,740 $ 6.76 $ 25,074 $ 6.73
Contract sales 2,918 4.80 2,918 4.80 2,879 4.64
-------- -------- --------
Net sales 33,533 6.40 28,658 6.49 27,953 6.43
Cost of goods sold 22,286 4.25 18,597 4.21 17,639 4.06
-------- ----- -------- ------ -------- ------
Gross profit 11,247 $ 2.15 10,061 $ 2.28 10,314 $ 2.37
Operating expenses 12,515 10,330 10,199
-------- -------- --------
Operating income (loss) (1,268) (269) 115
Gain (loss) on disposals (1,926) 435 12
Interest expense (1,892) (1,575) (1,669)
Other income 14 49 277
-------- -------- --------
Net income (loss) before
income tax benefit (5,072) (1,360) (1,265)
Income tax benefit 1,194 453 456
-------- -------- --------
Net loss $ (3,878) $ (907) $ (809)
======== ======== ========
EPS $ (20.17) $ (4.72) $ (4.21)
EBITDA<F1> $ 27 $ 803 $ 1,457
<FN>
<F1>
EBITDA consists of net income (loss) before (a) income taxes, (b) interest
expense, (c) depreciation, (d) amortization, (e) gain (loss) on asset sales,
and (f) other non-cash charges. EBITDA should not be considered as an
alternative to, or more meaningful than, operating income or cash flow as an
indicator of the Company's operating performance.
</FN>
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
All-American Bottling Corporation (the "Company") is an independent bottler
and distributor of soft drinks and other beverage products operating in six
states, and is a wholly-owned subsidiary of Browne Bottling Company ("BBC").
The Company's soft drink product portfolio includes such well-known national
brands such as RC Cola, Diet Rite Cola, Seven-Up, Dr Pepper, Sunkist, Canada
Dry, Dad's Root Beer, Crush and A&W Root Beer, as well as leading regional
brands such as Big Red and Sundrop. Other beverages distributed by the Company
include Snapple, Mistic, Evian and other waters and are commonly referred to as
"alternative beverages". The Company's largest markets in terms of franchise
case sales volume are the metropolitan areas of Milwaukee, Louisville,
Nashville and Oklahoma City.
In August 1993 the Company issued $45.0 million principal amount of 13%
Senior Secured notes due 2001 (the "Senior Notes"), guaranteed by BBC, and
entered into a new senior secured credit facility (the "Senior Credit
Facility") providing for borrowing availability of up to $20.0 million, subject
to borrowing base limitations.
The Company's primary measurement of unit volume is franchise and contract
case sales. Franchise case sales represent sales of products in the Company's
franchise territories, while contract case sales consist of product sold under
contract manufacturing arrangements to private label or other bottlers.
Produced product consists of product manufactured by the Company in its own
facilities and purchased product is finished product purchased from other
bottlers and suppliers. EBITDA includes net income (loss) before income taxes,
interest expense, depreciation, amortization, gain (loss) on asset sales and
other non-cash charges. EBITDA should not be considered as an alternative to,
or more meaningful than, operating income or cash flow (as determined in
accordance with generally accepted accounting principles) as an indicator of
the Company's operating performance or liquidity.
The operating results for the three month period ended March 31, 1997 is not
directly comparable to the operating results for the three month period ended
March 31, 1996, as the results for the 1996 period are materially affected by
the sale of assets in St. Paul and Duluth, Minnesota, Roanoke, Virginia and
Parkersburg, West Virginia. The sales of these operations significantly
reduced case sales, net sales, cost of goods sold, gross profit, and
administrative, marketing and general expenses. In order to provide comparable
information, the selected financial information included in Note 5 of the
interim financial statements for the three months ended March 31, 1996 has been
"adjusted" to eliminate these operations. Accordingly, the following
discussion of the results of operations compares the actual results of
operations for the three months ended March 31, 1997 with the actual, as well
as "adjusted", results of operations for the corresponding period ended March
31, 1996.
During 1996 the Company also sold territories in Madison, Wisconsin and
Pulaski, Tennessee and purchased a territory in LaCrosse, Wisconsin. The
information presented in Note 5 of the interim financial statements has not
been adjusted for these territory sales and acquisitions due to their
immaterial impact on the comparability of financial information.
RESULTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 VS. THREE MONTHS ENDED MARCH 31, 1996
The following discussion addresses the results of operations for the three
months ended March 31, 1997 (the "Current Quarter") compared to the
corresponding period ended March 31, 1996 (the "Prior Quarter") and the
"adjusted" corresponding period ended March 31, 1996 (the "Adjusted Prior
Quarter").
Net sales for the Current Quarter were $28.0 million compared to $33.5
million for the Prior Quarter, a $5.6 million or 16.6% decrease due to lower
franchise case sales resulting primarily from the sales of the Minnesota,
Roanoke, Virginia and Parkersburg, West Virginia territories. Franchise case
sales were 3.7 million cases for the Current Quarter compared to 4.6 million
cases for the Prior Quarter, a decrease of 905,000 or 19.5%. After the
adjustment for sold operations, net sales decreased $705,000 or 2.5% for the
Current Quarter compared to the Adjusted Prior Quarter due to a decrease in
franchise case sales for the Current Quarter of 83,000 cases or 2.2% from the
Adjusted Prior Quarter. This decrease in franchise cases is primarily
attributable to volume declines in the Kentucky division.
The average net selling price for franchise sales for the Company was $6.73
in the Current Quarter compared to $6.61 for the Prior Quarter and $6.76 for
the Adjusted Prior Quarter. The improvement in the average net selling price
for the Current Quarter compared to the Prior Quarter is due primarily to the
sale of the Minnesota territories which had an average net selling price of
$5.38 for the Prior Quarter.
Contract case sales increased to 620,000 cases for the Current Quarter from
608,000 cases for the Prior Quarter. The average net selling price for
contract cases decreased to $4.64 for the Current Quarter compared to $4.80 for
the Prior Quarter. The change in volume is attributable primarily to
additional case sales in the Company's Louisville production facility made
pursuant to a production agreement with bottlers in Pulaski, Tennessee and
Roanoke, Virginia partially offset by a reduction in contract bottling sales in
the Oshkosh production facility.
On a company-wide basis the average net selling price for all cases was
$6.43 for the Current Quarter, $6.40 for the Prior Quarter and $6.49 for the
Adjusted Prior Quarter. The decline in the average net selling price in the
Current Quarter compared to the Adjusted Prior Quarter is partially
attributable to a higher percentage of sales resulting from lower priced
contract sales and partially due to a decline in the net selling price to
remain competitive as a result of the overall industry-wide reduction in the
per case cost of goods as described below.
Cost of goods sold decreased $4.6 million or 20.9% for the Current Quarter
compared to the Prior Quarter due to volume declines resulting from the sold
territories. Cost of goods sold decreased $958,000 or 5.2% for the Current
Quarter compared to the Adjusted Prior Quarter due primarily to a reduction in
sweetener and plastic bottle costs and partially to an overall volume decrease
of 1.6%. Gross profit for the Current Quarter was $10.3 million compared to
$11.2 million for the Prior Quarter, a decrease of $933,000 or 8.3% due to the
volume declines resulting from the territory sales in 1996. Gross profit
increased $253,000 or 2.5% for the Current Quarter compared to the Adjusted
Prior Quarter due to reduced sweetener and plastic bottle costs. Gross margin
(gross profit as a percentage of sales) improved to 36.9% for the Current
Quarter compared to 35.1% for the Adjusted Prior Quarter and 33.5% for the
Prior Quarter.
Operating expenses declined $2.3 million or 18.5% for the Current Quarter
compared to the Prior Quarter due to overall decreases in expenses as a result
of the decreased volume of case sales. Operating expenses decreased $131,000
or 1.3% in the Current Quarter compared to the Adjusted Prior Quarter due to
reduced payroll and utility costs partially offset by an increase in
depreciation expense.
The loss on sale of assets of $1.9 million for the Prior Quarter resulted
primarily from the loss on the sale of the Minnesota territories partially
offset by gains on the sales of Roanoke, Virginia, Madison, Wisconsin and
Pulaski, Tennessee. In the Current Quarter there was a gain on sale of
$12,000.
Interest expense was $1.7 million for the Current Quarter compared to $1.9
million for the Prior Quarter. The decrease in interest of $223,00 in the
Current Quarter compared to the Prior Quarter is due to lower levels of debt
resulting from the application of the sales proceeds from territory sales in
1996.
Other income was $277,000 in the Current Quarter compared to $14,000 for the
Prior Quarter, an increase of $263,000 due to income recognized under long-term
supply arrangements with major suppliers.
Pretax net loss for the Current Quarter was $1.3 million compared to a
pretax net loss for the Prior Quarter of $5.1 million. The reduction in the
loss resulted from improved operations in the Current Quarter and the loss on
sale recognized in the Prior Quarter. Compared to the Adjusted Prior Quarter
the pretax loss improved by $95,000 primarily due to the lower cost of goods
sold.
EBITDA was $1.5 million for the Current Quarter compared to $27,000 for the
Prior Quarter and $803,000 for the Adjusted Prior Quarter. The increase in
EBITDA for the Current Quarter compared to the Adjusted Prior Quarter is
attributable to improved gross margins resulting from the lower cost of goods
sold, the reduced operating expenses and the increased other income described
above.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997 the Company had a working capital deficit of $9.8 million
caused by the classification as current of the $14.0 million balance
outstanding on the Senior Credit Facility. The Company had working capital
(excluding cash overdraft and the current portion of long-term debt and other
obligations) of $6.0 million at March 31, 1997 compared to $4.8 million at
December 31, 1996. The increase in working capital is due primarily to the
decline in accrued interest and an increase in inventory partially offset by an
increase in trade payables. The Company's working capital needs have
historically been funded from operations and from borrowings under its Senior
Credit Facility and from affiliates.
The Company's long-term debt (including current maturities and amounts
payable under non-compete and deferred compensation agreements) was
approximately $55.5 million at March 31, 1997. Scheduled principal payments are
estimated to be approximately $1.2 million for the twelve months ending March
31, 1998, of which approximately $580,000 represents unsecured demand notes
held by Stephen B. Browne, the Chief Executive Officer of the Company and BBC
and BBC's principal stockholder, and entities affiliated with him. Mr. Browne
and affiliated entities from time to time make unsecured loans to the Company
at the same interest rates charged under the Company's Senior Credit Facility.
At March 31, 1997, the Company's borrowing base under its Senior Credit
Facility was $15.0 million, and the Company had borrowings of $14.0 million and
an additional $138,000 of letters of credit outstanding leaving $839,000 of
available credit.
At March 31, 1997 the Company was not in compliance with the consolidated
interest coverage ratio covenant required in the Senior Credit Facility. The
ratio at March 31, 1997 was 1.06 to 1 whereas the Senior Credit Facility
requires a ratio of at least 1.25 to 1. As discussed in Note 4 to the interim
financial statements, BT Commercial, agent, and the participating banks have
agreed to waive the Company's noncompliance subject to receipt of a $50,000 fee
which the Company has elected not to pay. BT Commercial, as agent, and the
participating banks have not declared a default or accelerated the maturity of
the indebtedness under the Senior Credit Facility, nor have they indicated any
intention to do so. The Company has executed a letter of intent with another
lending institution for a $20 million credit facility with terms similar to the
Senior Credit Facility. The new facility is expected to be in place by June
1997.
For the Current Quarter, the Company's operating activities used cash of
$1.2 million compared to cash used of $3.0 million for the Prior Quarter. The
net cash used of $1.2 million by operating activities in the Current Quarter
resulted primarily from significant decreases in the accrued interest and
increases in inventories partially offset by increases in accounts payable.
The net cash used of $3.0 million in the Prior Quarter resulted primarily from
cash used from operations of $1.8 million and increases in inventories and
decreases in accrued interest partially offset by increases in accounts
payable.
During the Current Quarter investing activities used cash of $352,000
primarily for capital expenditures compared to cash provided of $5.7 million in
the Prior Quarter. The cash provided in the Prior Quarter resulted primarily
from sales of the Minnesota, Roanoke, Virginia, Madison, Wisconsin, and
Pulaski, Tennessee territories partially offset by cash used for capital
expenditures and to purchase a territory in LaCrosse, Wisconsin.
Financing activities provided cash of $1.6 million in the Current Quarter
primarily due to increased borrowings over payments of $3.1 million on the
Senior Credit Facility partially offset by principal payments on debt of $1.0
million and a decrease in the cash overdraft of $897,000. Principal payments
on debt of $1.0 million include approximately $125,000 for the repurchase of
the Company's Senior Notes and $746,000 paid on unsecured demand notes from Mr.
Browne and his affiliates.
The Company's earnings before income taxes and fixed charges were
insufficient to cover its fixed charges by $1.3 million for the Current
Quarter. EBITDA and interest expense for the Current Quarter were $1.5 million
and $1.7 million, respectively. If the Company experiences a deterioration in
operating results, its ability to generate sufficient cash to cover its
interest expense would be reduced, and the Company may be unable to meet its
interest obligations.
The Company must make certain capital expenditures on an annual basis in
order to maintain its business and assets and compete effectively. The Company
expects to spend approximately $1.5 million on capital expenditures for the
nine months ending December 31, 1997. To the extent that requirements for debt
service and capital expenditures exceed cash flow from operations, the Company
will need to finance such requirements with additional indebtedness or defer
capital expenditures.
FORWARD LOOKING STATEMENTS
When used in this document, the words "anticipate", "estimate", "believe",
"expect" and similar expressions are intended to identify forward looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties occur, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or projected.
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information.
None.
Item 6. Exhibit and Reports on Form 8-K.
(a) The following exhibit is filed with this Form 10-Q and is identified
by the number indicated:
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the period covered by this
report.
<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.
ALL-AMERICAN BOTTLING CORPORATION
Date: May 13, 1997 By: STEPHEN B. BROWNE
Stephen B. Browne
President, Chief Executive
Officer and Chairman
Of the Board
Date: May 13, 1997 By: STEPHEN R. KERR
Stephen R. Kerr
Vice President and Chief
Financial Officer
BROWNE BOTTLING COMPANY
Date: May 13, 1997 By: STEPHEN B. BROWNE
Stephen B. Browne
President, Chief Executive
Officer and Chairman
Of the Board
Date: May 13, 1997 By: STEPHEN R. KERR
Stephen R. Kerr
Vice President and Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Brief Description Method of Filing
- ------- ----------------- ----------------
<S> <C> <C>
27 Financial Data Schedule Filed herewith electronically
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000825811
<NAME> ALL AMERICAN BOTTLING CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> (657)
<SECURITIES> 0
<RECEIVABLES> 10,212
<ALLOWANCES> 445
<INVENTORY> 8,146
<CURRENT-ASSETS> 22,059
<PP&E> 36,166
<DEPRECIATION> 24,359
<TOTAL-ASSETS> 76,184
<CURRENT-LIABILITIES> 31,861
<BONDS> 40,370
0
0
<COMMON> 2
<OTHER-SE> (8,463)
<TOTAL-LIABILITY-AND-EQUITY> 76,184
<SALES> 27,953
<TOTAL-REVENUES> 27,953
<CGS> 17,639
<TOTAL-COSTS> 17,639
<OTHER-EXPENSES> 10,199
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,669
<INCOME-PRETAX> (1,265)
<INCOME-TAX> (456)
<INCOME-CONTINUING> (809)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (809)
<EPS-PRIMARY> (4.21)
<EPS-DILUTED> (4.21)
</TABLE>
