<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
( )TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM ____TO ___
COMMISSION FILE NUMBER 33-62038NY
SARATOGA BEVERAGE GROUP, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 14-1749554
(STATE OR OTHER JURISDICTION (IRS EMPLOYER ID NUMBER)
OF INCORPORATION OR ORGANIZATION)
1000 AMERICAN SUPERIOR BLVD, WINTER HAVEN, FLORIDA 33844
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS)
(863) 299-6915
(ISSUER'S TELEPHONE NUMBER)
CHECK WHETHER ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR
15(d) FOR THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH 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
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON
EQUITY, AS OF THE LATEST PRACTICABLE DATE:
COMMON STOCK - 5,521,561 SHARES OF CLASS A COMMON STOCK, $.01 PAR VALUE,
AND 522,955 SHARES OF CLASS B COMMON STOCK, $.01 PAR VALUE,
WERE OUTSTANDING AS OF APRIL 11, 2000
TRADITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES NO X
THIS DOCUMENT CONTAINS 17 PAGES
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FORM 10-QSB
INDEX
PART I - FINANCIAL
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Page Number
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Item 1 Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1999 (Unaudited) and as of December 31, 1998 1
Consolidated Statements of Operations and Accumulated Deficit for the three and nine months 2
ended September 30, 1999 and 1998 (Unaudited)
Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 3
(Unaudited)
Notes to Consolidated Financial Statements (Unaudited) 4-6
Item 2 Management's Discussions and Analysis of Financial Condition and Results of Operations 7-12
</TABLE>
PART II - OTHER INFORMATION
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Page Number
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Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Defaults upon Senior Securities 13
Item 4 Submission of Matter to a Vote of Security Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 14-16
Signatures 17
</TABLE>
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SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED)
-------------------- --------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $428,660 $473,796
Accounts receivable, net of allowance for doubtful
accounts of $438,243 in 2000 and $281,163 in 1999 6,820,850 6,188,016
Inventories 9,827,440 6,182,611
Income taxes receivable 644,427
Prepaid expenses and other current assets 492,750 252,274
Current portion of notes receivable 392,887 143,750
-------------------- --------------------
Total current assets 17,962,587 13,884,874
Property, plant and equipment, net 7,865,744 7,800,076
Note receivable 127,404
Deferred financing costs, net 695,924 741,525
Goodwill, net of accumulated amortization 18,255,343 18,413,626
Other intangibles, net of accumulated amortization 236,647 247,272
Other assets, net 113,131 132,561
-------------------- --------------------
TOTAL ASSETS $45,129,376 $41,347,338
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $7,010,857 $5,209,181
Short-term debt and current portion of obligation under capital lease 120,426 172,952
Other current liabilities 20,268 18,309
-------------------- --------------------
Total current liabilities 7,155,551 5,400,442
Long-term debt, net of current installments 23,609,510 21,941,773
Other liabilities 511,447 514,962
5% subordinated convertible note 1,500,000
-------------------- --------------------
TOTAL LIABILITIES 31,272,508 29,357,177
Commitments and contingencies
Stockholders' Equity
Preferred stock, $.01 par value; 5,000,000 shares authorized,
no shares issued and outstanding
Class A common stock, $.01 par value; 50,000,000 shares authorized; 5,535,431
and 4,809,692 shares issued and outstanding in 2000 and 1999, respectively 55,355 50,047
Class B common stock, $.01 par value; 2,000,000 shares
authorized; 522,955 shares issued and outstanding in 2000 and 1999,
respectively 5,230 5,230
Paid-in capital 17,513,564 15,769,115
Accumulated deficit (3,717,281) (3,834,231)
-------------------- --------------------
TOTAL STOCKHOLDERS' EQUITY 13,856,868 11,990,161
-------------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $45,129,376 $41,347,338
==================== ====================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
1
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SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2000 1999
------------------- -------------------
<S> <C> <C>
REVENUE $13,875,139 $9,639,794
COST OF GOODS SOLD, EXCLUSIVE OF DEPRECIATION, AMORTIZATION AND EQUIPMENT
LEASE EXPENSE SHOWN SEPARATELY BELOW 10,123,932 7,133,567
------------------- -------------------
GROSS PROFIT 3,751,207 2,506,227
------------------- -------------------
OPERATING EXPENSES:
SELLING, GENERAL AND ADMINISTRATIVE 571,317 1,864,191
DEPRECIATION, AMORIZATION, AND EQUIPMENT LEASE EXPENSE 437,766 337,559
------------------- -------------------
1,009,083 304,477
------------------- -------------------
------------------- -------------------
OPERATING INCOME 742,124 304,477
OTHER INCOME (EXPENSE):
INTEREST INCOME 11,472 30,809
INTEREST (EXPENSE) (573,456) (334,844)
NET GAIN ON DISPOSAL OF EQUIPMENT 8,964 3,429
OTHER INCOME 12,846 12,132
------------------- -------------------
(540,174) (288,474)
------------------- -------------------
INCOME BEFORE INCOME TAXES 201,950 16,003
PROVISION FOR INCOME TAXES (85,000) (30,000)
------------------- -------------------
NET INCOME 116,950 (13,997)
ACCUMULATED DEFICIT:
BEGINNING OF PERIOD (3,834,231) (5,595,443)
------------------- -------------------
END OF PERIOD $(3,717,281) $(5,609,440)
------------------- -------------------
PER SHARE INFORMATION:
BASIC EPS $0.02 $0.00
DILUTED EPS $0.02 $0.00
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
2
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SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
March 31, March 31,
2000 1999
-------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $116,950 $(13,997)
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization 450,015 333,999
Provision for doubtful accounts 157,080
Gain on disposal of equipment (8,964) (3,429)
Changes in operating assets and liabilities:
Accounts receivable (789,913) (490,304)
Inventories (3,644,829) (328,711)
Prepaid expenses and other current assets 403,951 (24,696)
Accounts payable and accrued liabilities 1,794,949 (1,578,361)
-------------------- --------------------
Net cash used in operating activities (1,520,761) (2,105,499)
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Company (13,689,278)
Sale of equipment 17,222
Proceeds from note receivable 112,237 200,280
Purchase of property, plant and equipment (292,196) (250,922)
Decrease in intangibles and other assets 23,702
-------------------- --------------------
Net cash used in investing activities (139,035) (13,739,920)
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 1,665,000 18,269,053
Principal payments of debt and capital lease obligation (66,125) (4,093,596)
Proceeds from issuance of Class A common stock 15,785
Net cash provided by financing activities 1,614,660 14,175,457
-------------------- --------------------
Decrease in cash and cash equivalents (45,136) (1,669,962)
Cash and cash equivalents at beginning of period 473,796 2,576,873
-------------------- --------------------
Cash and cash equivalents at end of period $428,660 $906,911
==================== ====================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Conversion of 5% subordinated note into 428,571 shares of common stock $1,500,000
Acquisition of equipment under capital lease 13,599
Proceeds from the conversion of Class A common stock options 233,970
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
3
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SARATOGA BEVERAGE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the
three-month period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000.
The accompanying 2000 financial statements include the Company and its
wholly owned subsidiary, The Fresh Juice Company, Inc. ("Fresh Juice") that was
acquired on January 29, 1999. The 1999 financial statements include three months
of financial information for Saratoga and two months of financial information
for Fresh Juice. All significant inter-company accounts have been eliminated in
consolidation.
PER SHARE DATA
Earnings per share is computed using the weighted average number of shares of
Class A and Class B common stock outstanding during each year. Diluted net
income per share includes the effect of all potentially dilutive securities.
RECLASSIFICATION
Certain 1999 amounts have been reclassified to conform to the 2000 presentation.
4
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2. EARNINGS PER SHARE
The calculation of earnings per share is as follows:
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
---- ----
NUMERATOR:
Net income $116,950 Basic $(13,997) Basic
Impact of potential common
shares:
Interest expense on 5%
subordinated convertible
note 12,750
--------- ----------
$201,949 Diluted $(1,247) Diluted
========= ==========
DENOMINATOR:
Weighted-average
outstanding shares 6,000,520 Basic 5,332,647 Basic
Impact of potential
common shares:
Warrants
Stock options (1) 524,264 ---
Convertible debt --- 428,571
--------- ----------
6,524,784 Diluted 5,761,218 Diluted
========= ===========
(1) Outstanding warrants and options for 1,000 and 1,255,220 shares of stock
for the three months ended March 31, 2000 and March 31, 1999 were not
included in the calculation of earnings per share because they were
considered to be anti-dilutive.
3. INCOME TAX
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard No. 109 (SFAS 109). SFAS 109 requires the use of
the asset and liability method of accounting for income taxes. Under this
method, deferred taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
for the differences between the financial statement and tax basis of existing
assets and liabilities.
In the three months ended March 31, 2000 the Company offset substantially
all income taxes through the use of net operating loss carry forwards. A full
valuation allowance has been established against the Company's net deferred tax
assets.
5
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4. ACQUISITION
On January 29, 1999, the Company consummated the acquisition of The Fresh
Juice Company, Inc. ("Fresh Juice"). Fresh Juice produces, markets and sells
fresh squeezed and frozen fresh squeezed orange juice, grapefruit juice, fresh
fruit smoothies and other non-carbonated beverages. The transaction was
accounted for as a purchase. The purchase price of $21.4 million was comprised
of cash of approximately $16.4 million and 2,133,553 shares of Class A common
stock. The cash payment was financed through a credit agreement consummated with
NationsBank, N.A., which included an $8 million term loan and a $14 million
revolving credit facility. The excess purchase price over fair values assigned
to assets acquired (goodwill) of $18.9 million is being amortized on a
straight-line basis over 30 years.
5. NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has also issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The standard establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that a company recognize derivatives as assets or liabilities measured at fair
value. This standard is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. Adoption of this standard is not expected to have
material impact on the financial statements of the Company.
6. PROPOSED MERGER
On January 5, 2000, the Company entered into a Stock Purchase Agreement and
Agreement and Plan of Merger by and among Saratoga, NCP-SBG, L.P., a Delaware
limited partnership (the "Purchaser"), and NCP-SBG Recapitalization Corp., a
Delaware corporation ("Merger Co"). The terms of this agreement are detailed in
a proxy statement and Schedule 13E-3 pursuant to which proxies were solicited by
and on behalf of the board of directors of Saratoga for use at the special
meeting of stockholders. The proxy statement and Schedule 13-E-3 may be viewed
on the SEC's internet site on the World Wide Web at http://www.sec.gov. On May
15, 2000 the stockholders of Saratoga approved and adopted the merger agreement.
On May 17, 2000, North Castle Partners L.L.C., ("North Castle") sent a
letter to Saratoga claiming Saratoga has not satisfied all of its conditions to
closing of the merger and, based on the information available to North Castle
stating North Castle's belief that it is unlikely that Saratoga will be able to
satisfy such conditions. North Castle's letter follows certain questions raised
by North Castle concerning Saratoga's financial statements. Saratoga has
answered these questions promptly and directly. Saratoga believes that it is in
compliance with all of its conditions to closing of the merger and that North
Castle is therefore obligated to close on or before May 31, 2000 in accordance
with the merger agreement. However, there can be no assurance that the merger
will be completed on the terms previously described, or at all.
6
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SARATOGA BEVERAGE GROUP, INC.
FORM 10-QSB
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
PROPOSED MERGER
On January 5, 2000, the Company entered into a Stock Purchase Agreement
and Agreement and Plan of Merger by and among Saratoga, NCP-SBG, L.P., a
Delaware limited partnership (the "Purchaser"), and NCP-SBG Recapitalization
Corp., a Delaware corporation ("MergerCo"). The merger agreement provides,
subject to the approval of the stockholders of Saratoga at a special meeting and
subject to the satisfaction or waiver of certain other conditions, that:
o MergerCo will be merged with and into Saratoga, with Saratoga
continuing as the surviving corporation of the merger;
o each share of Class A common stock and Class B common stock that is
outstanding at the effective time of the merger, excluding:
o a minimum of 550,000 and a maximum of 700,000 shares of Class
A common stock held by certain other stockholders, including
the Chief Executive Officer, certain directors of Saratoga and
Anthony Malatino, who will convert a minimum of 550,000 and a
maximum of 700,000 of their shares of Class A common stock
into shares of common stock of the surviving corporation and
will continue to be stockholders of Saratoga (such continuing
stockholders, the "Continuing Stockholders" and the shares of
such Continuing Stockholders that will not be converted into
the right to receive $6.00 per share in cash, without
interest, the "Rollover Stock"),
o shares held by Saratoga as treasury stock, and
o shares as to which dissenters' rights are perfected in
accordance with Delaware law,
will be converted into the right to receive $6.00 per share in cash,
without interest, subject to applicable back up withholding taxes;
o each share of Rollover Stock will be converted into the right to
receive one share of common stock of Saratoga as the corporation
surviving the merger; and
o each existing option and warrant, whether vested or unvested, to
purchase shares of Class A common stock shall be canceled or
repurchased for an amount equal to the excess, if any, of $6.00 per
share of Class A common stock purchasable under each option and warrant
over the exercise price with respect to each share.
Saratoga has filed a proxy statement and Schedule 13E-3 pursuant to
which proxies were solicited by and on behalf of the board of directors of
Saratoga for use at the special meeting of stockholders. On May 15, 2000 the
stockholders of Saratoga approved and adopted the merger agreement.
On May 17, 2000, North Castle Partners, L.L.C. ("North Castle") sent a
letter to Saratoga claiming Saratoga has not yet satisfied all of its conditions
to closing of the merger and, based on the information available to North
Castle, stating North Castle's belief that it is unlikely that Saratoga will be
able to satisfy such conditions. North Castle's letter follows certain questions
recently raised by North Castle concerning Saratoga's financial statements.
Saratoga has answered these questions promptly and directly. Saratoga believes
that it is in compliance with all of its conditions to closing of the merger and
that North Castle is therefore obligated to close on or before May 31, 2000 in
accordance with the merger agreement. However, there can be no assurance that
the merger will be completed on the terms previously described or at all.
The proxy statement and Schedule 13E-3 may be viewed on the SEC's
Internet site on the World Wide Web at "http://www.sec.gov". WE URGE YOU TO
REVIEW THE PROXY STATEMENT AND SCHEDULE 13E-3 CAREFULLY TO OBTAIN ADDITIONAL
INFORMATION REGARDING THE MERGER.
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results for the three month periods ended March 31, 2000 and 1999.
7
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REVENUE
Revenues for the three-month period ended March 31, 2000 were $13.9 million, an
increase of $4.3 million over revenues of $9.6 million for the period ended
March 31, 1999. Revenues from the period ending March 31, 1999 includes two
months of revenue related to the acquisition of Fresh Juice completed January
29, 1999, while revenue for the period ending March 31, 2000 included three
months of operating results.
GROSS PROFIT MARGINS
Gross profit was $3.75 million for the three-month period ended March 31, 2000,
an increase of $1.25 million from gross profit of $2.5 million for the period
ended March 31, 1999. Gross profit margin in 1999 includes two months of Fresh
Juice results subsequent to the acquisition. Gross profit margin was 27.0% and
26.0% in 2000 and 1999, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses of $2.6 million for the period
ending March 31, 2000 increased $700 thousand over selling, general, and
administrative expenses of $1.9 million for the period ended March 31, 1999. The
period ending March 31, 1999 includes two months of operating results for Fresh
Juice. Selling, general and administrative expenses, as a percentage of sales,
decreased from 19% in 1999 to 20% in 2000.
OTHER INCOME (EXPENSE)
For the three month period ended March 31, 2000 other expense, net of other
income, increased to $540 thousand, an increase of $252 thousand from other
expense, net of other income of $288 thousand for the period ended March 31,
1999. Other expense for the period ending March 31, 1999 includes only two
months of activity related to Fresh Juice. The increase in other expense is
primarily due to an increase in interest expense related to increased debt
financing associated with the Fresh Juice acquisition.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, working capital was $10.9 million, an increase of 2.4
million as compared to working capital of $8.5 million as of March 31, 1999. The
current ratio as of March 31, 2000 was 2.5 to 1, compared to 2.6 to 1 as of
December 31, 1999.
Subordinated Convertible Note
On June 12, 1997 the Company entered into a Securities Purchase
Agreement with Parley International, as nominee for Maerki Baumann & Co., A.G.
(Zurich) ("Purchaser"), pursuant to which Purchaser acquired $1,500,000
principal amount of the Company's 5% Subordinated Convertible Notes due 2000
(the "Note") for an aggregate purchase price of $1,500,000 in a private
placement effected under Section 4(2) of the Securities Act of 1933. Interest on
the unpaid principal amount accrued from the date of issuance at a rate of 5%
per annum. Interest was due and payable on each of the first, second and third
anniversaries.
The principal amount of the Note was due and payable on the third
anniversary of the Note and is convertible at the option of the holder into
shares of the Company's Class A common stock at a conversion price of $3.50
principal amount per share. The Note was mandatorily convertible into shares of
Class A common stock in the event that the closing price of Class A common stock
exceeds $5.25 for three consecutive trading days. As of January 10, 2000, the
Note was converted into 428,571 shares of Class A common stock under the
mandatory conversion provision of the Note as the Class A common stock price
equaled or exceeded $5.25 for three consecutive trading days.
Debt
In connection with the acquisition of Fresh Juice, the Company consummated a
financing transaction with NationsBank, N.A., which included an $8 million term
loan and a $14 million revolving credit facility. The financing constituted the
principal source of the funds for the acquisition. Availability under the
Revolver shall be reduced in $750,000 amounts, the first such reduction
occurring on the last business day of the 27th month after January 29, 1999 and
each quarterly anniversary thereafter until the revolver maturity date. The
revolver will terminate and all remaining amounts outstanding there under will
be due and payable five years following closing. The term loan facility reduces
with eight equal quarterly payments of $1,000,000 the first such payment being
due on the last business day of the 63rd month following January 29, 1999 and
subsequent payments due on each succeeding quarterly anniversary. The term loan
will terminate seven years following closing. The interest rate on the revolving
credit facility may be elected from two interest rate bases: floating rate
(Federal Funds rate plus 50 basis points or prime rate) or reserve-adjusted
Eurodollar rate. The Eurodollar rate will be determined by adding a margin of
100 basis points to the floating rate or 250 basis points to the Eurodollar
rate, in both instances using a 360 day basis. At all times the interest rate on
the term loan will be calculated as the Eurodollar rate plus 350 basis points,
using a 360 day basis. Within one year from January 29, 1999 the Company is
required to enter into interest rate hedging agreements to fix or limit its
interest rate risk exposure on not less than forty % of the drawn amount of the
facilities and for a term of not less than 3 years. The debt agreement Includes
administrative and financial covenants, including a consolidated leverage ratio,
consolidated fixed charge ratio and consolidated interest charge ratio, all as
defined.
8
<PAGE>
Effective January 19, 2000, the revolving credit commitment was increased to $16
million for the period beginning January 19, 2000 ending April 30, 2000 and, for
the period beginning May 1, 2000 and ending September 30, 2000 the revolving
credit commitment was increased to $18 million. The total revolving credit
commitment will be reduced to $16 million on or before September 30, 2000 and is
then required to be reduced to a principal amount on or before October 30, 2000.
The Company has also entered into three interest rate swaps that fix a total of
$7.4 million of debt at interest rates ranging from 5.31% to 6.1925% and have
expiration dates ranging from March 1, 2001 through October 19, 2001. The
Company entered into these transactions pursuant to the credit agreement in
order to protect the Company from variable interest rate exposure. The fair
value of these swaps is estimated to be approximately $84,000.
At March 31, 2000, debt consists primarily of $11 million borrowed under the
revolving credit line using the 90-day reserve-adjusted Eurodollar rate plus 250
basis points, ranging from 7.73% to 8.10%, $2.6 million borrowed under the
revolving credit line based on prime plus 100 basis points at a rate of 9.25%
and $8,000,000 term loan at a Eurodollar rate plus 350 basis points at a rate of
8.98%.
PRO FORMA INFORMATION
On January 29, 1999, the Company consummated the acquisition of The Fresh Juice
Company, Inc. ("Fresh Juice"). Fresh Juice produces, markets and sells fresh
squeezed and frozen fresh squeezed orange juice, grapefruit juice, fresh fruit
smoothies and other non-carbonated beverages. The transaction was accounted for
as a purchase. The purchase price of $21.4 million was comprised of cash of
approximately $16.4 million and 2,133,553 shares of Class A common stock. The
cash payment was financed through a credit agreement consummated with
NationsBank, N.A., which included an $8 million term loan and a $14 million
revolving credit facility. The excess purchase price over fair values assigned
to assets acquired (goodwill) of $18.9 million, is being amortized on a
straight-line basis over 30 years.
OPERATING SEGMENTS AND GEOGRAPHIC AREAS
Effective for the year ending December 31, 1999, the Company adopted SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 supersedes previously issued segment reporting disclosure rules and
requires reporting of segment information that is consistent with the way in
which management operates the Company.
The Company's products include spring and mineral water products, fresh juice
and fresh frozen juice products, and smoothies, a blend of juices, berries, and
fruit purees. The Company's manages its nationwide beverage business as one
segment engaged in the bottling, marketing, and distribution of its products.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has also issued Statement of Financial
Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging
Activities. The standard establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that a company
recognize derivatives as assets or liabilities measured at fair value. This
standard is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. Management believes that the adoption of this pronouncement will
not have a significant effect on the financial statements.
SAFE HARBOR STATEMENT
The Company has made, and may continue to make, various forward-looking
statements with respect to its financial position, business strategy, and plans
and objectives of management. Such forward-looking statements are identified by
the use of forward-looking words or phrases such as "anticipates," intends,"
"expects," "plans," "believe," "estimates," or words or phrases of similar
import. These forward-looking statements are subject to numerous assumptions,
risks, and uncertainties, and the statements looking forward beyond 2000 are
subject to greater uncertainty because of the increased likelihood of changes in
underlying factors and assumptions. Actual results could differ materially from
those anticipated by the forward-looking statements.
The Company's forward-looking statements represent its judgment only on the
dates such statements are made. By making any forward-looking statements, the
Company assumes no duty to update them to reflect new, changed, or unanticipated
events or circumstances.
9
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On December 22, 1999, lawsuits were filed in the Court of Chancery of
the State of Delaware by each of Moses Semel, Marian Lustig and Melvin Tepler on
their own behalf and as purported class actions on behalf of all security
holders of Saratoga, against Saratoga and its directors. The complaints in the
three lawsuits are materially identical, and each alleges, among other things,
that (1) the $6.00 per share price to be paid in the merger is "unfair and
inadequate consideration" because, among other things, (a) "the intrinsic value
of the stock of Saratoga is materially in excess of $6.00 per share, giving due
consideration to the prospects for growth and profitability of Saratoga in light
of its business, earnings and earnings power, present and future," and (b) "the
$6.00 per share price was fixed by [members of Saratoga management and an
undisclosed financial sponsor (the "Buyout Group")] to 'cap' artificially the
market price of Saratoga's stock, as part of the plan by the Buyout Group to
obtain complete ownership of Saratoga's assets and business at the lowest
possible price"; (2) the members of Saratoga's board of directors "suffer from
material conflicts of interest" because they are "significant participants in
the Buyout Group"; and (3) the members of the Buyout Group are using "superior
knowledge" of Saratoga's finances and value "to effectuate the [purchase of all
of Saratoga's shares not already owned by the Buyout Group for $6.00 per share]
at the expense of the Company's public shareholders." Saratoga and the members
of its board of directors who have been named as defendants believe that the
lawsuits are without merit and intend to defend the lawsuits vigorously. Counsel
for the plaintiffs in the three actions have indicated that they intend to seek
an Order consolidating the three lawsuits and have agreed to indefinitely extend
the time for the defendants to respond to the complaints.
ITEM 2 - CHANGES IN SECURITIES
NONE.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
NONE.
ITEM 4 - SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
ITEM 5 - OTHER INFORMATION
NONE.
10
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits and Index
Exhibit No.
2.1(1)(P) Agreement and Plan of Merger
2.2(12) Stock Purchase Agreement and Agreement and Plan of Merger,
dated as of January 5, 2000, by and among Saratoga, NCP-SBG,
L.P. and NCP-SBG Recapitalization Corp.
3.1(1)(P) Restated Certificate of Incorporation of Saratoga
3.2(1)(P) By-Laws of Saratoga
3.3(8) Amendment to By-Laws of Saratoga
4.1(1)(P) Specimen of Class A Stock Certificate
9.1(9)+ Restated Voting, Standstill and Proxy Agreement dated as of
October 13, 1998
9.2(9)+ Stockholder Agreement dated October 13, 1998 by and among
Saratoga, Robin Prever, Anthony Malatino and Steven Bogen
10.1(1)+(P) Form of the Saratoga Spring Water Company 1993 Stock Option
Plan
10.2(1)(P) Letter Agreement between Saratoga and Owens-Brockway Glass
Containers
10.3(2)+(P) Consulting Agreement entered into by Saratoga and Leonard
Toboroff
10.4(2)(P) Distribution Agreement, dated March 25, 1993, by and between
Joseph Victori Wines, Inc. and JNJ Distributors, Inc.
10.5(2)(P) Partnership Agreement, dated July 21, 1993, by and between JNJ
Distributors, Inc. and Saratoga Springs Distribution Corp., as
amended by Amendment of Partnership Agreement hereto dated
November 9, 1993
10.6(2)(P) Stock Agreement, dated July 21, 1993, by and between JNJ
Distributors, Inc. and Saratoga Spring Water Company
10.7(3)(P) Cott Co-pack Agreement dated as of June 8, 1995
10.8(4) Manufacturing and Distribution Agreement, dated as of July 23,
1996, by and between Saratoga and Mistic Brands, Inc.
10.9(5) Bottling Agreement, dated April 16, 1997, by and among
Saratoga, Hype Corporation, Hype Beverage Corporation, World
Wide Beverage Inc., Hype Water Company, Inc., Hyperholics
Inc., R.J. Barry Cox and Nigel Spiro
10.10(6) Saratoga Splash Agreement, dated as of June 30, 1997, by and
between Saratoga and Mistic Brands, Inc.
10.11(6) Master Distribution Agreement dated as of June 16, 1997 by and
among Saratoga Beverage Group, Inc., Hype Corporation, World
Wide Beverage Inc., Global Brands AG, Hype Water Company, Inc.
and Hyperholics Inc.
10.12(7)+ Securities Purchase Agreement dated February 12, 1998 between
Saratoga and Carl T. Wolf
10.13(7)+ Stock Option Agreement dated February 25, 1998 between
Saratoga and Steel Partners II, L.P.
10.14(7)+ Securities Purchase Agreement dated February 25, 1998 between
Saratoga and Carl T. Wolf
10.15(7) Option Agreement dated March 16, 1998 between Saratoga and
Steven Smith
10.16(7) Letter agreement dated March 29, 1998 between Saratoga and The
Fresh Juice Company, Inc.
10.17(7)+ Amended and Restated Stock Option Agreement dated April 17,
1998 between Saratoga and Carl T. Wolf
10.18(7) Letter agreement dated April 24, 1998 between Saratoga and The
Fresh Juice Company, Inc.
10.19(9)+ Form of the Saratoga Beverage Group, Inc. 1998 Stock Option
Plan
10.20(9) Restated Agreement and Plan of Merger dated as of October 13,
1998 by and among Saratoga, Rowale Corp. and The Fresh Juice
Company, Inc.
10.21(9)+ Employment Agreement dated October 13, 1998 between Saratoga
and Jeffrey Heavirland
10.22(9) Letter agreement dated October 13, 1998 among Saratoga, Fresh
Juice and Steven Smith (amending the agreement set forth in
Exhibit 10.26 hereof)
10.23(10)+ Letter agreements dated December 2, 1998 among Saratoga, Fresh
Juice and Steven Bogen (amending the agreement set forth in
Exhibit 10.27 hereof)
10.24(10)+ Letter agreement dated December 2, 1998 among Saratoga, Fresh
Juice and Jeffrey Heavirland
10.25(10) Industrial Real Estate Lease dated June 17, 1992 between
Hansen's Juices, Inc. and Pruco Life Insurance Company
10.26(10) Employment Agreement effective April 1, 1996 between The Fresh
Juice Company, Inc. and Steven Smith
10.27(10) Employment Agreement effective April 1, 1996 between The Fresh
Juice Company, Inc. and Steven M. Bogen
10.28(10) Supply Agreement dated March 31, 1996 between The Fresh Juice
Company, Inc. and Natural Juice Company, Inc.
10.29(10) Agreement of Lease dated November 24, 1997 between The Fresh
Juice Company of New York, Inc. and 280 Wilson Avenue
Associates, L.L.C. and guaranteed by The Fresh Juice Company,
Inc.
10.30(11) Robin Prever Employment Agreement dated January 28, 1999
10.31(11) Credit Agreement by and among Saratoga Beverage Group, Inc.,
as Borrower, NationsBank, National Association, as Agent and
Lender and the Lenders party thereto from time to time, dated
January 29, 1999
10.32(11) Assignment and Agreement, dated September 22, 1999 by The
Fresh Juice Company, Inc. and Hansen Beverage Company
10.33(12)+ Form of Voting Agreements, dated as of January 5, 2000, by and
between NCP- SBG, L.P. and each of the other parties thereto
10.34(12)+ Employment Agreement, dated as of January 5, 2000, by and
between Saratoga Beverage Group, Inc. and Robin Prever
11
<PAGE>
10.35(12)+ Non-Competition Agreement, dated as of January 5, 2000, by and
between Saratoga Beverage Group, Inc. and Robin Prever.
10.36(12)+ Stockholders Agreement, dated as of January 5, 2000, by and
among Saratoga Beverage Group, Inc. and the other parties
thereto
10.37(12)+ Registration Rights Agreement, dated as of January 5, 2000, by
and among Saratoga Beverage Group, Inc. and the other parties
thereto
10.38(12) Consulting Agreement, dated as of January 5, 2000, by and
between Saratoga Beverage Group, Inc. and North Castle
Partners, L.L.C.
21.1(9) Subsidiaries of Saratoga
27.1(13) Financial Data Schedule
12
<PAGE>
(1) Incorporated herein by reference to Saratoga's Registration Statement
on Form SB-2 filed with the SEC on June 16, 1993 (Registration No.
33-62038NY).
(2) Incorporated herein by reference to Saratoga's Form 10-KSB filed with
the SEC on March 30, 1994.
(3) Incorporated herein by reference to Saratoga's Form 10-KSB filed with
the SEC on March 29, 1996.
(4) Incorporated herein by reference to Saratoga's Form 10-QSB filed with
the SEC on November 12, 1996
(5) Incorporated herein by reference to Saratoga's Form 10-QSB filed with
the SEC on May 13, 1997.
(6) Incorporated herein by reference to Saratoga's Form 10-QSB filed with
the SEC on August 8, 1997.
(7) Incorporated herein by reference to Saratoga's Form 10-QSB filed with
the SEC on May 11, 1998.
(8) Incorporated herein by reference to Saratoga's Form 10-QSB filed with
the SEC on August 5, 1998.
(9) Incorporated herein by reference to Saratoga's Form 10-QSB filed with
the SEC on November 5, 1998.
(10) Incorporated herein by reference to Saratoga's Registration Statement
on Form S-4 filed with the SEC on December 24, 1998 (Registration No.
33-369707).
(11) Incorporated herein by reference to Saratoga's Form 10-KSB filed with
the SEC on March 31, 1999.
(12) Incorporated herein by reference to Saratoga's Schedule 13E-3 filed
with the SEC on January 21, 2000.
(13) Filed herewith.
(+) Management agreement.
(P) Paper filing.
13
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE EXCHANGE ACT, THE REGISTRANT CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREINTO DULY
AUTHORIZED.
SARATOGA BEVERAGE GROUP, INC.
(REGISTRANT)
DATE: MAY 22, 2000 BY: /S/ ROBIN PREVER
------------------------------------
ROBIN PREVER
CHIEF EXECUTIVE OFFICER
DATE: MAY 22, 2000 BY: /S/ KIM JAMES
------------------------------------
KIM JAMES
CHIEF FINANCIAL OFFICER
14
<PAGE>
INDEX TO EXHIBITIS
EXHIBIT NO.
- ------- ----
Financial data schedule 27.1
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schdule contains summary financial information extracted from the March 31,
2000 Financial Statements and is qualifed inits entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 428,660
<SECURITIES> 0
<RECEIVABLES> 7,651,980
<ALLOWANCES> 438,243
<INVENTORY> 9,827,440
<CURRENT-ASSETS> 17,962,587
<PP&E> 7,864,744
<DEPRECIATION> 0
<TOTAL-ASSETS> 45,129,376
<CURRENT-LIABILITIES> 7,155,551
<BONDS> 31,272,508
0
0
<COMMON> 60,585
<OTHER-SE> 13,796,283
<TOTAL-LIABILITY-AND-EQUITY> 45,129,376
<SALES> 13,875,139
<TOTAL-REVENUES> 13,875,139
<CGS> 10,123,932
<TOTAL-COSTS> 10,123,932
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,009,083
<INTEREST-EXPENSE> 573,456
<INCOME-PRETAX> 201,950
<INCOME-TAX> 85,000
<INCOME-CONTINUING> 116,950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 116,950
<EPS-BASIC> .02<F1>
<EPS-DILUTED> .02
<FN>
<F1>The amount is reported as EPS basic, not EPS primary.
</FN>
</TABLE>
