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 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: 0-22614
Atlantic Beverage Company, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 36-3761400
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
650 Dundee Road, Suite 370
Northbrook, Illinios 60062
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(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
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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 March 31, 1997, there were outstanding 6,396,610 shares of Common Stock,
par value $.01 per share, of the Registrant.
<PAGE>
ATLANTIC BEVERAGE COMPANY, INC.
INDEX
FORM 10-Q
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at
December 31, 1996 and March 31, 1997---------------------------------------3
Consolidated Statements of Operations for the three months
ended March 31, 1997 and 1996----------------------------------------------4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1997 and 1996----------------------------------------------5
Notes to Consolidated Financial Statements
(March 31, 1997 and 1996)--------------------------------------------------6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations----------------------------------------9
PART II - OTHER INFORMATION
Item 1-6. ------------------------------------------------------------------13
SIGNATURES---------------------------------------------------------------------------------------14
INDEX TO EXHIBITS--------------------------------------------------------------------------------15
</TABLE>
<PAGE>
ATLANTIC BEVERAGE COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ -----------
(Unaudited)
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,248,963 $ 1,306,178
Accounts receivable, net of allowance for doubtful accounts
of $118,000 and $144,000, respectively 10,160,891 7,418,578
Inventory 3,629,647 4,552,056
Prepaid expenses and other 404,438 899,514
Deferred tax asset 390,500 390,500
-------------- --------------
Total current assets 15,834,439 14,566,826
PROPERTY, PLANT AND EQUIPMENT, net 4,820,900 4,748,743
GOODWILL, net 13,175,918 13,087,341
OTHER ASSETS, net 821,834 772,128
-------------- --------------
Total Assets $ 34,653,091 $ 33,175,038
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft $ 2,672,630 $ 2,035,928
Line of credit 7,255,984 5,958,805
Current portion of long-term debt 2,324,267 2,263,944
Accounts payable 6,120,435 7,546,940
Accrued expenses 1,083,884 436,126
Net current liabilities of discontinued operations 562,283 444,014
-------------- --------------
Total current liabilities 20,019,483 18,685,757
LONG-TERM DEBT, net of current portion 7,778,934 7,425,565
DEFERRED TAX LIABILITY 250,900 250,900
-------------- --------------
Total liabilities 28,049,317 26,362,222
-------------- --------------
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) (3,014,307)
Less: Treasury stock, at cost, 404,532 shares (427,070) (427,070)
-------------- --------------
Total Stockholders' Equity 6,603,774 6,812,816
-------------- --------------
Total Liabilities and Stockholders' Equity $ 34,653,091 $ 33,175,038
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
ATLANTIC BEVERAGE COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1996 1997
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NET SALES $ 34,215,448 $ 41,401,370
COST OF GOODS SOLD, exclusive of depreciation shown below 30,208,117 36,571,827
-------------- --------------
Gross Profit 4,007,331 4,829,543
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SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:
Salaries and benefits 1,791,905 2,052,958
Other operating expenses 1,869,787 1,975,361
Depreciation and amortization 233,207 310,601
-------------- --------------
Total selling, general and 3,894,899 4,338,920
-------------- --------------
administrative expenses
Income from operations 112,432 490,623
INTEREST EXPENSE (277,464) (371,321)
OTHER INCOME 388,387 49,740
-------------- --------------
Income before income tax provision 223,355 169,042
INCOME TAX PROVISION - -
-------------- --------------
Net income $ 223,355 $ 169,042
============== ==============
INCOME PER COMMON SHARE DATA:
Net income $ .08 $ .03
============== ==============
Weighted average common shares outstanding 2,950,423 6,655,993
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
ATLANTIC BEVERAGE COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1996 1997
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<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 223,355 $ 169,042
Adjustments to reconcile net income to cash flows provided
by operating activities, net of non-cash items and
acquisitions:
Depreciation and amortization 252,950 310,601
(Increase) decrease in accounts receivable, net (357,310) 2,742,313
Decrease (increase) in inventory 194,674 (922,409)
(Increase) decrease in other assets (41,745) 11,168
Decrease (increase) in prepaid expenses and other 54,719 (495,076)
(Decrease) increase in accounts payable (453,811) 1,426,505
Increase (decrease) in accrued expenses 100,957 (647,758)
Net cash flow (used in) provided by operating activities of-
Continuing operations (26,211) 2,594,386
Discontinued operations (457,527) (78,269)
-------------- --------------
Net cash (used in) provided by operating activities (483,738) 2,516,117
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (1,049) (111,329)
Cash paid for acquisitions, including related costs (6,458,704) -
-------------- --------------
Net cash used in investing activities (6,459,753) (111,329)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in bank overdraft, net (633,040) (636,702)
Repayment of long-term debt (888,560) (413,692)
Cash paid for financing fees (394,853) -
Borrowings (payments) under line of credit 1,993,098 (1,297,179)
Borrowings under term loan 4,500,000 -
Proceeds from private placement of common stock, net 2,782,384 -
-------------- --------------
Net cash flows provided by (used in) financing
activities 7,359,029 (2,347,573)
-------------- --------------
NET INCREASE IN CASH 415,538 57,215
CASH, beginning of period - 1,248,963
-------------- --------------
CASH, end of period $ 415,538 $ 1,306,178
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
ATLANTIC BEVERAGE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying consolidated financial statements present the accounts of
Atlantic Beverage Company, Inc. (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 Beverage
Company, Inc. 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 ending March 31, 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 March 31, 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, March 31,
1996 1997
-------------- --------------
Raw materials $ 100,619 $ 325,022
Finished goods 3,077,431 3,728,877
Packaging supplies 451,597 498,157
-------------- --------------
Total inventory $ 3,629,647 $ 4,552,056
============== ==============
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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 established 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 March 31,
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 $ 223,355 2,921,423 $ .08 $ 169,042 6,396,610 $ .03
=========== ===========
Effect of Dilutive Securities:
Options $ - 29,000 $ - 259,383
----------- ---------- ----------- ----------
Diluted EPS:
Income available to
<PAGE>
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common stockholders,
plus assumed
conversions $ 223,355 2,950,423 $ .08 $ 169,042 6,655,993 $ .03
=========== ========= =========== =========== ========= ===========
</TABLE>
Options to purchase 25,000 shares of common stock at $4 per share were
outstanding during the first 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.
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, Atlantic Beverage and one of its former
suppliers agreed to terminate their distribution agreement. As part of the
settlement, the former supplier agreed to pay Atlantic Beverage $250,000 in
consideration. The consideration received is included in other income on the
consolidated statements of operations. During 1996, 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.
5. DISTRIBUTION AGREEMENTS:
During the first quarter of 1997, the Company signed two exclusive
distribution agreements with suppliers to the specialty beverage distribution
division. Management estimates the new suppliers will supply approximately 5% of
its specialty beverage distribution business.
<PAGE>
ATLANTIC BEVERAGE COMPANY, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the
Three Months
Ended
March 31,
1997
----------------
<S> <C>
NET INCOME $ 169,042
================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,655,993
================
NET INCOME PER COMMON SHARE $ .03
================
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 March 31, 1997 259,383
----------------
6,655,993
================
</TABLE>
<PAGE>
-2-
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
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<PAGE>
-3-
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 quarters ended March 31, 1996 and March 31, 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.
-3-
<PAGE>
-4-
Quarter Ended March 31, 1997 Compared to Quarter Ended March 31, 1996
Net Sales. Net sales increased by approximately $7.2 million or 21% from
approximately $34.2 million for the quarter ended March 31, 1996 to
approximately $41.4 million for the quarter ended March 31, 1997. Both the
Company's Food Division and the Company's Beverage Division increased their
respective net sales by approximately 21%. 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 quarter of 1996. The increase in beverage sales reflected
favorable weather and the addition of several new brands.
Gross Profit. Gross profit increased by approximately $0.8 million or 20.5%
from approximately $4.0 million for the quarter ended March 31, 1996 to
approximately $4.8 million for the quarter ended March 31, 1997. This increase
reflects the factors discussed above in Net Sales. Gross profit as a percentage
of net sales was approximately 11.7% for both periods.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $0.4 million or 11.4% from
approximately $3.9 million for the quarter ended March 31, 1996 to approximately
$4.3 million for the quarter ended March 31, 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 quarter of 1996.
As a percentage of sales, selling, general and administrative expenses
declined from 11.4% to 10.5%. 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 $0.1 million for the quarter ended March 31, 1996 to
approximately $0.5 million for the quarter ended March 31, 1997. This increase
is attributable to factors discussed above in Net Sales and Selling, General and
Administrative Expenses
Interest Expense. Interest expense increased approximately $0.1 million or
33.8% from approximately $0.3 million for the quarter ended March 31, 1996 to
approximately $0.4 million for the quarter ended March 31, 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 quarter ended March 31, 1996 to approximately $0.05 million for
the quarter ended March 31, 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 decreased approximately $0.05 million from
approximately $0.22 million for the quarter ended March 31, 1996 to
approximately $0.17 million for the quarter ended March 31, 1997. This decrease
is attributable to the decrease in Other Income discussed above.
Liquidity and Capital Resources
Cash provided by operating activities for the quarter ended March 31, 1997
was approximately $2.5 million. This amount was principally affected by net
income, the add-back of depreciation, amortization and non-cash interest,
decreases in accounts receivable, bank overdrafts and accrued expenses and
increases in inventory, prepaid expenses and accounts payable. Cash used in
investing activities for the quarter ended March 31, 1997 was approximately $0.1
million and reflected the
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<PAGE>
-5-
acquisition of equipment. Cash used in financing activities was approximately
$2.3 million and was principally affected by a reduction in the line of credit
balance, repayment of term debt and new equipment leases. Net cash increase
during the period was approximately $0.1 million.
As of March 31, 1997, the Company had outstanding under the LaSalle
Facility approximately $6.0 million in line-of-credit borrowings and
approximately $6.3 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.
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
is subject to monthly interest payments at the annual rate of Prime + 1.5% and
is due in the second quarter of 1997.
As of March 31, 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. Interest rates
currently average approximately 7.7%.
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 March 31, 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.
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.
-5-
<PAGE>
-6-
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.
None
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 March 31, 1997
27.2 Financial Data Schedule
(b) Reports on Form 8-K:
None
-6-
<PAGE>
-7-
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 BEVERAGE COMPANY, INC.
Date: May __, 1997 By: /s/ Merrick M. Elfman
---------------------------------------
Merrick M. Elfman,
Chairman of the Board (On behalf of
Registrant and as Chief Accounting Officer)
-7-
<PAGE>
-8-
INDEX TO EXHIBITS
Exhibit Number Description Page
11.2 Statement Regarding Computation of Per Share Earnings 13
for the three months ended March 31, 1997
27.2 Financial Data Schedule 15
-8-
Exhibit 11.2
ATLANTIC BEVERAGE COMPANY, INC.
COMPUTATION OF EARNINGS PER SHARE
Three Months
Ended
March 31, 1997
--------------
NET INCOME $ 169,042
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,655,993
---------------
NET INCOME PER COMMON SHARE $ .03
===============
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 March 31, 1997 259,383
---------------
6,655,993
===============
-1-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,306,178
<SECURITIES> 0
<RECEIVABLES> 7,562,578
<ALLOWANCES> 144,000
<INVENTORY> 4,552,056
<CURRENT-ASSETS> 14,566,826
<PP&E> 6,252,103
<DEPRECIATION> 1,503,360
<TOTAL-ASSETS> 33,175,038
<CURRENT-LIABILITIES> 18,685,757
<BONDS> 0
0
0
<COMMON> 68,045
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 33,175,038
<SALES> 41,401,370
<TOTAL-REVENUES> 41,401,370
<CGS> 36,571,827
<TOTAL-COSTS> 4,338,920
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 371,321
<INCOME-PRETAX> 169,042
<INCOME-TAX> 0
<INCOME-CONTINUING> 169,042
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169,042
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
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