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 quarter ended June 30, 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: 0-22614
ATLANTIC PREMIUM BRANDS, LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3761400
- ---------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
650 Dundee Road, Suite 370
Northbrook, Illinois 60062
- ---------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 480-4000
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
- --------------------------------------------------------------------------------
Title of Class
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
As of June 30, 1997, there were outstanding 6,801,142 shares of Common Stock,
par value $.01 per share, of the Registrant.
================================================================================
<PAGE>
ATLANTIC PREMIUM BRANDS, LTD.
INDEX
FORM 10-Q
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at
December 31, 1996 and June 30, 1997-----------------------------3
Consolidated Statements of Operations for the six months
ended June 30, 1997 and 1996 and the three months ended
June 30, 1997 and 1996------------------------------------------4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996------------------------------------5
Notes to Consolidated Financial Statements
(June 30, 1997 and 1996)----------------------------------------6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations-----------------------------12
PART II - OTHER INFORMATION
Item 1-6. --------------------------------------------------------------17
SIGNATURES--------------------------------------------------------------------18
INDEX TO EXHIBITS-------------------------------------------------------------19
-2-
<PAGE>
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------ -----------
(Unaudited)
<S><C>
ASSETS
CURRENT ASSETS:
Cash $ 1,248,963 $ 2,679,310
Accounts receivable, net of allowance for doubtful accounts
of $118,000 and $132,000, respectively 10,160,891 8,120,374
Inventory 3,629,647 5,631,304
Prepaid expenses and other 404,438 732,061
Deferred tax asset 390,500 390,500
-------------- --------------
Total current assets 15,834,439 17,553,549
PROPERTY, PLANT AND EQUIPMENT, net 4,820,900 4,931,043
GOODWILL, net 13,175,918 13,268,035
OTHER ASSETS, net 821,834 794,724
-------------- --------------
Total Assets $ 34,653,091 $ 36,547,351
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft $ 2,672,630 $ 2,342,699
Line of credit 7,255,984 7,602,107
Current portion of long-term debt 2,324,267 2,269,832
Accounts payable 6,120,435 8,698,621
Accrued expenses 1,083,884 835,623
Net current liabilities of discontinued operations 562,283 392,323
-------------- --------------
Total current liabilities 20,019,483 22,141,205
LONG-TERM DEBT, net of current portion 7,778,934 7,042,167
DEFERRED TAX LIABILITY 250,900 250,900
-------------- --------------
Total liabilities 28,049,317 29,434,272
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
none issued - -
Common stock, $.01 par value; 30,000,000 shares authorized;
6,801,142 shares issued in 1996 and 1997 68,045 68,045
Additional paid-in capital 10,146,148 10,186,148
Accumulated deficit (3,183,349) (2,714,044)
Less: Treasury stock, at cost, 404,532 shares (427,070) (427,070)
-------------- --------------
Total Stockholders' Equity 6,603,774 7,113,079
-------------- --------------
Total Liabilities and Stockholders' Equity $ 34,653,091 $ 36,547,351
============== ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
-3-
<PAGE>
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------------------------------- --------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S><C>
NET SALES $ 84,055,733 $ 71,226,302 $ 42,654,363 $ 37,010,854
COST OF GOODS SOLD, exclusive of
depreciation shown below 74,153,311 62,604,957 37,581,484 32,396,840
-------------- -------------- -------------- --------------
Gross Profit 9,902,422 8,621,345 5,072,879 4,614,014
-------------- -------------- -------------- --------------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:
Salaries and benefits 4,154,423 3,769,552 2,101,465 1,977,647
Other operating expenses 3,971,961 3,924,414 1,996,600 2,054,627
Depreciation and amortization 590,808 489,463 305,207 256,256
-------------- -------------- -------------- --------------
Total selling, general and
administrative expenses 8,717,192 8,183,429 4,403,272 4,288,530
-------------- -------------- -------------- --------------
Income from operations 1,185,230 437,916 669,607 325,484
INTEREST EXPENSE 843,875 496,727 447,554 219,262
OTHER INCOME 127,950 433,665 78,210 45,277
-------------- -------------- -------------- --------------
Income before income tax
provision 469,305 374,854 300,263 151,499
INCOME TAX PROVISION - - - -
-------------- -------------- -------------- -------------
Net income $ 469,305 $ 374,854 $ 300,263 $ 151,499
============== ============== ============== ==============
INCOME PER COMMON SHARE DATA:
Net income $ .07 $ .09 $ .05 $ .03
============== ============= ============== =============
Weighted average common shares
outstanding 6,664,031 4,361,737 6,670,803 5,787,800
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
June 30,
--------------------------------
1997 1996
<S><C> -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 469,305 $ 374,854
Adjustments to reconcile net income to cash flows provided
by operating activities, net of non-cash items:
Depreciation and amortization 590,808 489,463
Amortization of debt discount and deferred financing costs 101,689 19,743
Decrease (increase) in accounts receivable, net 2,040,517 (837,529)
Increase in inventory (2,001,657) (183,378)
Increase in prepaid expenses and other (327,623) (141,131)
(Increase) decrease in other assets (62,526) 7,841
Increase in accounts payable 2,578,186 430,675
(Decrease) increase in accrued expenses (248,261) 76,771
-------------- --------------
Net cash flows from-
Continuing operations 3,140,438 237,309
Discontinued operations (129,960) (494,184)
-------------- --------------
Net cash flows from operating activities 3,010,478 (256,875)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (515,184) (183,385)
Increase in short-term investments - (809,357)
Purchase of distribution rights (267,885) -
Cash paid for acquisition of Prefco and Carlton, including
acquisition fees, net of cash acquired - (3,902,691)
-------------- --------------
Net cash flows from investing activities (783,069) (4,895,433)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term liabilities (813,254) (2,456,875)
Cash paid for financing fees - (394,853)
Borrowings under line of credit 346,123 3,314,309
Borrowings under term loan - 4,500,000
Decrease in bank overdraft, net (329,931) (1,618,873)
Proceeds from private placement of common stock, net - 2,782,384
-------------- --------------
Net cash flows from financing activities (797,062) 6,126,092
-------------- --------------
NET INCREASE IN CASH 1,430,347 973,784
CASH, beginning of period 1,248,963 -
-------------- -------------
CASH, end of period $ 2,679,310 $ 973,784
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
ATLANTIC PREMIUM BRANDS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying consolidated financial statements present the accounts of
Atlantic Premium Brands, Ltd. (the "Company") and its wholly-owned subsidiaries.
The Company, together with its subsidiaries, is engaged in the distribution of
specialty beverages in the Baltimore and Washington, D.C. metropolitan areas
and, effective January 1, 1996, engaged in the manufacturing, marketing and
distribution of meat products in Texas, Louisiana, Kentucky and surrounding
states.
The consolidated financial statements included herein for Atlantic Premium
Brands, Ltd. have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. In management's
opinion, the interim financial data presented includes all adjustments (which
include only normal recurring adjustments) necessary for a fair presentation.
Certain information and footnote disclosures normally included in the
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are adequate to
understand the information presented. The results of operations for the three
months and six months ending June 30, 1997, are not necessarily indicative of
the operating results expected for the entire year. It is suggested that these
consolidated financial statements be read in conjunction with the Company's
December 31, 1996, consolidated financial statements and notes thereto included
in the Company's annual report on Form 10-K dated March 31, 1997.
Revenue Recognition
The Company records sales when product is delivered to the customers. Discounts
provided, principally volume, are accrued at the time of the sale.
Cash
Cash consists of cash held in various deposit accounts with financial
institutions. As of June 30, 1997, $175,000 was restricted to meet minimum
balance funding requirements.
Inventory
Inventory is stated at the lower of cost or market. It is comprised of raw
materials, finished goods and inventory supplies. Cost is determined using the
first-in, first-out method (FIFO). Inventory consisted of the following as of:
December 31, June 30,
1996 1997
-------------- --------------
Raw materials $ 100,619 $ 279,893
Finished goods 3,077,431 4,786,337
Packaging supplies 451,597 565,074
-------------- --------------
Total inventory $ 3,629,647 $ 5,631,304
============== ==============
-6-
<PAGE>
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of applicable
depreciation. Depreciation is provided using the straight-line method over
following useful lives.
Buildings and building improvements 5-30 years
Machinery and equipment 5-10 years
Furniture and fixtures 5 years
Leasehold improvements 2-5 years
Vehicles 5-10 years
Other Assets
Other assets consist of costs associated with the acquisitions described and
includes distribution and license agreements and deferred financing costs.
Distribution and license agreements are being amortized over 2-3 years using the
straight-line method, while the deferred financing costs are being amortized
over 5 years using the effective interest method.
Goodwill
Goodwill was recorded with the acquisitions of the Predecessor, Prefco, Inc.,
Carlton Foods, Inc., Grogan Farm, Inc., Grogan's Sausage, Inc., Partin's Country
Sausage, Inc. and Richard's Cajun Country Food Processors and is being amortized
using the straight-line method over 5 to 40 years.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Accounting Pronouncements
In February 1997, the FASB issued Statement No. 128 (SFAS 128), "Earnings Per
Share," which establishes new standards for computing and presenting earnings
per share. SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods. This statement
requires presentation of basic earnings per share and diluted earnings per
share. The Company's earnings per share for the three months ended June 30, 1996
and 1997, according to SFAS 128 would be as follows:
<TABLE>
<CAPTION>
1996 1997
---------------------------------------- ---------------------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
------------ --------- ----------- ----------- --------- -----------
<S><C>
Basic EPS:
Income available to
common stockholders $ 151,499 5,740,984 $ 0.03 $ 300,263 6,396,610 $ 0.05
=========== ===========
Effect of Dilutive Securities:
Options $ - 46,816 $ - 274,193
----------- ---------- ----------- ----------
Diluted EPS:
Income available to
common stockholders,
plus assumed
conversions $ 151,499 5,787,800 $ 0.03 $ 300,263 6,670,803 $ 0.05
=========== ========= =========== =========== ========= ===========
</TABLE>
-7-
<PAGE>
Options to purchase 25,000 shares of common stock at $4 per share were
outstanding during the second quarter of 1997 but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares during the quarter.
The Company's earnings per share for the six months ended June 30, 1996 and
1997, according to SFAS 128 would be as follows:
<TABLE>
<CAPTION>
1996 1997
---------------------------------------- ---------------------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
------------ --------- ----------- ----------- --------- -----------
<S><C>
Basic EPS:
Income available to
common stockholders $ 374,854 4,331,204 $ 0.09 $ 469,305 6,396,610 $ 0.07
=========== ===========
Effect of Dilutive Securities:
Options $ - 30,533 $ - 267,421
----------- ---------- ----------- ----------
Diluted EPS:
Income available to
common stockholders,
plus assumed
conversions $ 374,854 4,361,737 $ 0.09 $ 469,305 6,664,031 $ 0.07
=========== ========= =========== =========== ========= ===========
</TABLE>
Options to purchase 25,000 shares of common stock at $4 per share were
outstanding during the six months ended June 30, 1997, but were not included in
the computation of diluted EPS because the options' exercise price was greater
than the average market price of the common shares during those six months.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year amounts in order to
conform with the current year presentation.
2. DISCONTINUATION OF THE FLYING FRUIT FANTASY DIVISION:
In December 1995, the Company adopted a plan to dispose of its Flying Fruit
Fantasy division. As a result, the Company recognized a one-time charge in the
fourth quarter of 1995. The net liabilities of the Flying Fruit Fantasy division
have been presented separately in the accompanying consolidated balance sheets.
3. TERMINATION SETTLEMENT:
During the first quarter of 1996, the Company and one of its former suppliers
agreed to terminate their distribution agreement. As part of the settlement, the
former supplier agreed to pay the Company $250,000 in consideration. The
consideration received is included in other income on the consolidated
statements of operations. During 1995, approximately 4% of the total cases sold
represented cases supplied by this former supplier.
4. CONTINGENCIES:
Lawsuits and claims are filed against the Company from time to time in the
ordinary course of business. These actions are in various preliminary stages and
no judgments or decisions have been rendered by hearing boards or courts.
Management, after reviewing developments to date with legal counsel, is of the
opinion that the outcome of such matters will not have a material adverse effect
on the Company's financial position or results of operations.
-8-
<PAGE>
5. DISTRIBUTION AGREEMENTS:
During the first quarter of 1997, the Company signed two exclusive distribution
agreements with suppliers to the specialty beverage distribution division.
During the second quarter of 1997, the Company acquired the rights to distribute
an existing product line of the specialty beverage distribution division to two
new territories within Maryland.
6. SUBSEQUENT EVENT:
During July 1997, the Company raised approximately $2.5 million in cash through
the private sale of approximately one million shares of its common stock. These
shares are subject to certain restrictions regarding their resale.
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
In 1996 the Company implemented a new corporate strategy that resulted
in the acquisition of five food businesses. Each of these businesses represents
a dominant local or regional branded processed meat company. Collectively they
added approximately $138 million in net sales for 1996 while increasing the
Company's assets from $3 million to $35 million. In addition to increasing the
size of the Company, the newly acquired businesses have created a broader
platform for future growth.
In order to acquire and operate its food businesses, the Company formed
four new subsidiaries during 1996: Prefco Corp., Carlton Foods Corp., Richards
Cajun Foods Corp., and Grogan's Farm, Inc. In connection with its food company
acquisitions, the Company issued approximately four million new shares of its
common stock and borrowed approximately $13 million from LaSalle National Bank.
The Company continues to operate as a distributor of non-alcoholic
beverages in the Baltimore and Washington D.C. metropolitan areas. This business
represents the Company's Beverage Division, while the four newly-formed
subsidiaries collectively represent the Company's Food Division.
THE ACQUISITIONS
In the first quarter of 1996, a newly formed, wholly-owned subsidiary
of the Company acquired the outstanding common stock of Prefco, Inc. ("Prefco").
Prefco, based in Houston, Texas, markets and distributes its own branded meat
products as well as unbranded meat products to the retail grocery trade in
Texas. Also in the first quarter of 1996, Carlton Foods, Inc. ("Carlton") was
merged into another newly formed, wholly-owned subsidiary of the Company.
Carlton, based in New Braunfels, Texas, is a manufacturer of branded and private
label meat products. The combined purchase price for these entities was
approximately $11 million, which included approximately $3.0 million in Carlton
refinanced and assumed debt. In connection with these transactions and the
financing thereof, the Company incurred transaction costs of approximately $0.9
million, which were recorded as additional goodwill on the Company's balance
sheet.
In connection with such transactions, the Company (i) issued
approximately 650,000 shares of common stock to the former stockholders of
Prefco and Carlton, (ii) issued, at a price of $1.05 per share, approximately
2.7 million shares of common stock in a private placement to a limited number of
purchasers, (iii) entered into a loan agreement with LaSalle National Bank (the
"LaSalle Facility") which provided a $4.5 million term loan at a variable annual
interest rate of LIBOR + 3.5%, which term loan is due March 15, 2001, and a $6.5
million revolving line of credit at a variable annual interest rate which
reflects a combination of LIBOR + 3% and Prime +1%, and (iv) issued a
subordinated promissory note to the former shareholders of Prefco in the amount
of $1.4 million (the "Prefco Note"). The Prefco Note bears interest at 9% per
annum and is payable in quarterly installments of interest only, with a single
principal payment due March 15, 2001. The Company incurred transaction costs of
approximately $0.1 million in connection with the private placement. These costs
were reflected as a reduction in the equity proceeds of the private placement.
In August of 1996, a newly formed, wholly-owned subsidiary of the
Company acquired certain of the assets of Richard's Cajun Country Food
Processors ("Richard's"). Richard's, based in Church Point, Louisiana, is
engaged in the manufacturing, marketing and distribution of Cajun-style
processed meat and specialty food products. The consideration for these assets
was $2.5 million cash and a subordinated promissory note in the amount of $0.875
million (the "Richard's Note.) The Richard's Note is subject to quarterly
payments of interest only at the annual rate of 6.35%, with a single principal
payment due on July 31, 2001. In funding the cash portion of the Richard's
transaction, the Company used approximately $0.8 million of existing cash
balances and
-12-
<PAGE>
approximately $0.3 million of additional line of credit borrowings under the
LaSalle Facility (the line of credit portion of which was increased by $0.5
million) and obtained additional term debt from LaSalle National Bank in the
amount of $1.4 million, which bears interest at a variable rate of Prime + 1.5%
and is subject to monthly payments of interest and quarterly payments of
principal with a final payment of interest and principal due March 15, 2001. In
connection with these transactions and the financing thereof, the Company
incurred transaction costs of approximately $0.3 million, which were recorded as
additional goodwill on the Company's balance sheet.
In October of 1996, Grogan's Farm, Inc. ("GFC"), a newly formed,
wholly-owned subsidiary of the Company, acquired and merged with the
distribution and manufacturing business of Grogan's Sausage, Inc. and Grogan's
Farm, Inc. respectively (collectively "Grogan's"), based in Arlington, Kentucky
for total consideration of approximately $3.8 million, consisting of $1.9
million cash, $0.2 million in a note (the "Grogan's Note") and 573,810 shares
(approximately $1.7 million) of common stock of the Company. GFC completed three
transactions: (i) GFC acquired certain assets of Grogan's Sausage, Inc. for
$509,000 cash; (ii) GFC acquired certain real estate from Mr. and Mrs. Grogan
for $1,000,000 cash; and (iii) Grogan's Farm, Inc. was merged with and into GFC
in consideration for $391,000 cash, the Grogan's Note, and 573,810 shares of
common stock of the Company. The Grogan's Note will bear no interest through
September 30, 1998, and, commencing October 1, 1998, will be subject to
quarterly payments of interest only at the annual rate of 8%, with a single
principal payment due on September 30, 2001. In funding the $1.9 million cash
portion of the Grogan's transactions, the Company used $0.35 million in
additional line of credit borrowings under the LaSalle Facility (the line of
credit portion of which was increased by $0.5 million) and obtained additional
term debt from LaSalle National Bank in the amount of $1.55 million, which bears
interest at a variable rate of Prime + 1.5% and is subject to monthly payments
of interest and quarterly payments of principal with a final payment of interest
and principal due March 15, 2001. In connection with these transactions and the
financing thereof, the Company incurred transaction costs of approximately $0.3
million, which were recorded as additional goodwill on the Company's balance
sheet.
In November of 1996, GFC acquired the assets of Partin's Sausage
("Partin's") in consideration for $0.4 million cash, $0.225 million in a note
(the "Partin's Note"), and 78,310 shares of common stock of the Company.
Partin's, based in Cunningham, Kentucky, is engaged in the manufacturing,
marketing and distribution of pork sausage products. The Partin's Note is
subject to quarterly payments of interest only at the annual rate of 8% with a
single principal payment due on December 31, 2003. In funding the cash portion
of the purchase price, the Company used additional line of credit borrowings
under the LaSalle Facility. Following the acquisition, the operations of
Partin's were consolidated with those of Grogan's at its facility in Arlington,
Kentucky.
In 1994, the Company entered into and consummated an agreement to
acquire certain assets and marketing rights from Flying Fruit Fantasy, USA, Inc.
for total consideration of approximately $1.2 million. In December 1995, the
Company adopted a plan to discontinue this division. As a result, in the fourth
quarter of 1995, the Company recognized a one-time charge of approximately $2.4
million which reflected the write-off of $1.1 million in equipment and $0.9
million in intangible assets, and costs of approximately $0.4 million associated
with discontinuing the operation.
RESULTS OF OPERATIONS
All of the acquisitions completed during 1996 were recorded utilizing
the purchase method of accounting. Therefore results of the acquired businesses
prior to the effective date of such acquisitions are not included in the
Company's Results of Operations.
During the six months ended June 30, 1996 and June 30, 1997, the
Company's Carlton subsidiary and the Company's Grogan's subsidiary both sold
product to the Company's Prefco subsidiary. The Company's financial statements
do not reflect this activity in net sales, as it is eliminated on a consolidated
basis.
-13-
<PAGE>
QUARTER ENDED JUNE 30, 1997 COMPARED TO QUARTER ENDED JUNE 30, 1996
Net Sales. Net sales increased by approximately $5.6 million or 15.2%
from approximately $37.0 million for the quarter ended June 30, 1996 to
approximately $42.6 million for the quarter ended June 30, 1997. Sales of the
Company's Food Division increased by approximately 16.3%, while sales of the
Company's Beverage Division increased by approximately 9.3%. The increase in
food sales was attributable to increases in the sales of both Carlton and Prefco
as well as the acquisition of Richards, Grogan's and Partin's, none of which the
Company owned during the second quarter of 1996. The increase in beverage sales
reflected the addition of several new brands.
Gross Profit. Gross profit increased by approximately $0.5 million or
9.9% from approximately $4.6 million for the quarter ended June 30, 1996 to
approximately $5.1 million for the quarter ended June 30, 1997. This increase
reflects the factors discussed above in Net Sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $0.1 million or 2.7% from
approximately $4.3 million for the quarter ended June 30, 1996 to approximately
$4.4 million for the quarter ended June 30, 1997. This increase is attributable
to the acquisition of Richards, Grogan's and Partin's, none of which the Company
owned during the second quarter of 1996.
As a percentage of sales, selling, general and administrative expenses
declined from 11.6% to 10.3%. This decrease was primarily attributable to the
fact that the Company is realizing economies through spreading certain fixed
costs over larger net sales and gross profit amounts.
Income from Operations. Income from operations increased approximately
$0.4 million from approximately $0.3 million for the quarter ended June 30, 1996
to approximately $0.7 million for the quarter ended June 30, 1997. This increase
is attributable to factors discussed above in Net Sales and Selling, General and
Administrative Expenses.
Interest Expense. Interest expense increased approximately $0.2 million
or 104.1% from approximately $0.2 million for the quarter ended June 30, 1996 to
approximately $0.4 million for the quarter ended June 30, 1997. This increase
was primarily attributable to debt that the Company incurred (and the related
amortization of deferred financing costs and note discounts) in connection with
the acquisitions of Richard's, Grogan's and Partin's, including bank term debt,
borrowings under the Company's line of credit, and amounts owed to former owners
of the acquired businesses.
Net Income. Net income increased approximately $0.1 million from
approximately $0.2 million for the quarter ended June 30, 1996 to approximately
$0.3 million for the quarter ended June 30, 1997. This increase is attributable
to the factors discussed in Net Sales and Selling, General and Administrative
Expenses above.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Net Sales. Net sales increased by approximately $12.8 million or 18.0%
from approximately $71.2 million for the six months ended June 30, 1996 to
approximately $84.0 million for the six months ended June 30, 1997. Sales of the
Company's Food Division increased by approximately 18.6%, while sales of the
Company's Beverage Division increased by approximately 14.2%. The increase in
food sales was attributable to increases in the sales of both Carlton and Prefco
as well as the acquisition of Richards, Grogan's and Partin's, none of which the
Company owned during the first six months of 1996. The increase in beverage
sales reflected the addition of several new brands.
Gross Profit. Gross profit increased by approximately $1.3 million or
14.9% from approximately $8.6 million for the six months ended June 30, 1996 to
approximately $9.9 million for the six months ended June 30, 1997. This increase
reflects the factors discussed above in Net Sales.
-14-
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $0.5 million or 6.8% from
approximately $8.2 million for the six months ended June 30, 1996 to
approximately $8.7 million for the six months ended June 30, 1997. This increase
is attributable to the increase in volume at existing businesses as well as the
acquisition of Richards, Grogan's and Partin's, none of which the Company owned
during the first six months of 1996.
As a percentage of sales, selling, general and administrative expenses
declined from 11.5% to 10.4%. This decrease was primarily attributable to the
fact that the Company is realizing economies through spreading certain fixed
costs over larger net sales and gross profit amounts.
Income from Operations. Income from operations increased approximately
$0.7 million from approximately $0.4 million for the six months ended June 30,
1996 to approximately $1.1 million for the six months ended June 30, 1997. This
increase is attributable to factors discussed above in Net Sales and Selling,
General and Administrative Expenses.
Interest Expense. Interest expense increased approximately $0.3 million
or 64.9% from approximately $0.5 million for the six months ended June 30, 1996
to approximately $0.8 million for the six months ended June 30, 1997. This
increase was primarily attributable to debt that the Company incurred (and the
related amortization of deferred financing costs and note discounts) in
connection with the acquisitions of Richard's, Grogan's and Partin's, including
bank term debt, borrowings under the Company's line of credit, and amounts owed
to former owners of the acquired businesses.
Other Income. Other income decreased approximately $0.3 million from
$0.4 million for the six months ended June 30, 1996 to approximately $0.1
million for the six months ended June 30, 1997. This decrease was primarily the
result of a one-time settlement payment of approximately $0.3 million that the
Company received during the 1996 period from a former beverage supplier . Other
amounts include income generated, during both the 1996 and 1997 periods, by the
Prefco subsidiary from product sold at special events.
Net Income. Net income increased approximately $0.1 million from
approximately $0.4 million for the six months ended June 30, 1996 to
approximately $0.5 million for the six months ended June 30, 1997. This increase
is attributable to the factors discussed in Net Sales and Selling, General and
Administrative Expenses above.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities for the six months ended June 30,
1997 was approximately $3.0 million. This amount was principally affected by net
income, the add-back of depreciation, amortization and non-cash interest,
decreases in accounts receivable, and accrued expenses and increases in
inventory, prepaid expenses and accounts payable. Cash used in investing
activities for the six months ended June 30, 1997 was approximately $0.8 million
and reflected the acquisition of equipment and beverage distribution rights.
Cash used in financing activities was approximately $0.8 million and was
principally affected by new equipment debt and an increase in the line of credit
balance, offset by a decrease in bank overdrafts and by repayment of term debt.
Net cash increase during the period was approximately $1.4 million.
As of June 30, 1997, the Company had outstanding under the LaSalle
Facility approximately $7.6 million in line-of-credit borrowings and
approximately $5.8 million in term debt. These amounts are subject to monthly
payments of interest and quarterly payments of term debt principal with a final
payment of interest and principal due March 15, 2001. Interest rates under the
LaSalle Facility are variable, and for the most recent quarter averaged
approximately 8.8% on the line of credit and 9.3% on the term debt.
-15-
<PAGE>
In the fourth quarter of 1996, the Company obtained an additional
$450,000 short-term loan (the "Bridge Debt") from LaSalle National Bank. The
Bridge Debt was subject to monthly interest payments at the annual rate of Prime
+ 1.5% and was repaid on July 1, 1997.
As of June 30, 1997 the Company had outstanding approximately $3.0
million of subordinated debt owed to former owners of Prefco, Carlton,
Richard's, Grogan's and Partin's. Principal of $0.3 million is due during 1997
with the remaining approximately $2.7 million of principal due in 2001. Monthly
interest payments, currently reflecting an average rate of approximately 7.7%,
are being made on the subordinated debt.
The Company believes that cash generated from operations and bank
borrowings will be sufficient to fund its debt service, working capital
requirements and capital expenditures as currently contemplated for the next
year. This is a forward-looking statement and is inherently uncertain. Actual
results may differ materially. The Company's ability to fund its working capital
requirements and capital expenditures will depend in large part on the Company's
compliance with covenants in the LaSalle Facility. No assurance can be given
that the Company will remain in compliance with such covenants throughout the
term of the LaSalle Facility.
The Company's balance sheet as of June 30, 1997 reflected a net
deferred tax asset of approximately $0.1 million. A valuation allowance exists
because, based on the weight of all available evidence, management believes it
is more likely than not that the remaining deferred tax asset will not be fully
realized.
During July 1997, the Company raised approximately $2.5 million cash
through the private sale of approximately one million shares of its common
stock. These shares are subject to certain restrictions regarding their resale.
The Company, from time to time, reviews the possible acquisition of
other products or businesses. The Company's ability to expand successfully
through acquisition depends on many factors, including the successful
identification and acquisition of products or businesses and the Company's
ability to integrate and operate the acquired products or businesses
successfully. There can be no assurance that the Company will be successful in
acquiring or integrating any such products or businesses.
SEASONALITY
Consumer demand for beverage products distributed by the Company tends
to be greater during warmer months. Accordingly, the Company's beverage sales
and profits are generally highest in the second and third calendar quarters.
Management believes that this effect will be mitigated by the results of its
food operations which are less dependent on seasonal factors.
-16-
<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 Matter to a Vote of Security Holders.
At the Annual Meeting of Stockholders of Atlantic Premium Brands held
on May 15, 1997, the following matters were submitted to a vote of the
stockholders:
1) Election of Directors. Eric D. Becker and G. Cook Jordan, Jr.
were reelected as directors of the Company. The following directors' terms of
office continued after the Annual Meeting of Stockholders: Merrick M. Elfman,
Steven M. Taslitz, Alan F. Sussna, Rick Inatome, and John A. Miller.
2) Approval of changing the Company's name from Atlantic Beverage
Company, Inc. to Atlantic Premium Brands, Ltd.
- --------------------------------------------------------------------------------
Tabulation of Votes
- --------------------------------------------------------------------------------
Matter For Against Withheld
- ----------------------------- ------------------ --------------- ---------------
Director Election:
- ----------------------------- ------------------ --------------- ---------------
Eric D. Becker 5,597,668 0 2,332
- ----------------------------- ------------------ --------------- ---------------
G. Cook Jordan, Jr. 5,597,660 0 2,322
- ----------------------------- ------------------ --------------- ---------------
Approval of Change of
Corporation's Name 5,595,615 4,375 10
- ----------------------------- ------------------ --------------- ---------------
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: The following are annexed as Exhibits:
Exhibit
Number Description
11.2 Statement Regarding Computation of Per Share
Earnings for the three months ended June 30, 1997
11.3 Statement Regarding Computation of Per Share
Earnings for the six months ended June 30, 1997
27.2 Financial Data Schedule
(b) Reports on Form 8-K:
None
-17-
<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.
ATLANTIC PREMIUM BRANDS, LTD.
Date: August 14, 1997 By: /s/ Merrick M. Elfman
-------------------------------------------
Merrick M. Elfman,
Chairman of the Board (On behalf of
Registrant and as Chief Accounting Officer)
-18-
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description Page
11.2 Statement Regarding Computation of Per Share Earnings
for the three months ended June 30, 1997 13
11.3 Statement Regarding Computation of Per Share Earnings
for the six months ended June 30, 1997 14
27.2 Financial Data Schedule 15
-19-
EXHIBIT 11.2
ATLANTIC PREMIUM BRANDS, LTD.
COMPUTATION OF EARNINGS PER SHARE
For the
Three Months
Ended
June 30,
1997
-------------
NET INCOME $ 300,263
=============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,670,803
=============
NET INCOME PER COMMON SHARE $ .05
=============
COMPUTATION OF WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Shares outstanding as of March 31, 1997 6,801,142
Less: Treasury stock (404,532)
Impact of dilutive stock options as of June 30, 1997 274,193
-------------
6,670,803
=============
EXHIBIT 11.3
ATLANTIC PREMIUM BRANDS, LTD.
COMPUTATION OF EARNINGS PER SHARE
For the
Six Months
Ended
June 30,
1997
-------------
NET INCOME $ 469,305
=============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,664,031
=============
NET INCOME PER COMMON SHARE $ .07
=============
COMPUTATION OF WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Shares outstanding as of December 31, 1996: 6,801,142
Less: Treasury stock (404,532)
Impact of dilutive stock options as of June 30, 1997 267,421
-------------
6,664,031
=============
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,679,310
<SECURITIES> 0
<RECEIVABLES> 8,252,374
<ALLOWANCES> 132,000
<INVENTORY> 5,631,304
<CURRENT-ASSETS> 17,553,549
<PP&E> 4,931,043
<DEPRECIATION> 1,737,721
<TOTAL-ASSETS> 36,547,351
<CURRENT-LIABILITIES> 22,141,205
<BONDS> 0
0
0
<COMMON> 68,045
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 36,547,351
<SALES> 42,654,363
<TOTAL-REVENUES> 42,654,363
<CGS> 37,581,484
<TOTAL-COSTS> 4,403,272
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 447,554
<INCOME-PRETAX> 300,263
<INCOME-TAX> 0
<INCOME-CONTINUING> 300,263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 300,263
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
