<PAGE> 1
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, 2000
( ) 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: 1-13747
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) 412-6200
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 May 8, 2000, there were outstanding 6,751,758 shares of Common Stock, par
value $.01 per share, of the Registrant.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and par value)
<TABLE>
<CAPTION>
(Unaudited)
December 31, March 31,
1999 2000
------------ ---------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,841 $ 1,612
Accounts receivable, net of allowance for doubtful accounts
of $348 and $191, respectively 9,623 8,868
Inventory 5,610 6,279
Prepaid expenses and other current assets 475 489
Deferred income taxes 587 587
Net assets of discontinued operations 276 276
-------- --------
Total current assets 18,412 18,111
Property, plant and equipment, net 12,549 12,567
Intangible assets, net 13,153 13,062
Other assets, net 437 404
-------- --------
Total assets $ 44,551 $ 44,144
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ 2,963 $ 3,560
Notes payable under line of credit 751 4,995
Current maturities of long-term debt 1,964 3,479
Accounts payable 10,572 6,232
Accrued expenses 1,222 679
-------- --------
Total current liabilities 17,472 18,945
Long-term debt, net of current maturities 15,986 14,156
Deferred income taxes 5 5
Put warrants 1,435 1,435
-------- --------
Total liabilities 34,898 34,541
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
none issued or outstanding -- --
Common stock, $.01 par value; 30,000,000 shares authorized;
6,845,069 and 6,751,758 shares issued and outstanding, respectively 68 68
Additional paid-in capital 10,898 10,665
Accumulated deficit (1,313) (1,130)
-------- --------
Total stockholders' equity 9,653 9,603
-------- --------
Total liabilities and stockholders' equity $ 44,551 $ 44,144
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 3
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1999 2000
---------- ----------
<S> <C> <C>
Net sales $ 45,907 $ 51,408
Cost of goods sold 39,331 44,928
---------- ----------
Gross profit 6,576 6,480
---------- ----------
Selling, general and administrative expenses:
Salaries and benefits 2,347 2,716
Other operating expenses 2,329 2,384
Depreciation and amortization 488 536
---------- ----------
Total selling, general and administrative expenses 5,164 5,636
---------- ----------
Income from operations 1,412 844
Interest expense 584 626
Other income, net 77 112
---------- ----------
Income before income taxes 905 330
Income tax expense 371 147
---------- ----------
Net income $ 534 $ 183
========== ==========
Income per common share-
Basic and diluted $ 0.07 $ 0.03
========== ==========
Weighted average common shares:
Basic 7,412,583 6,812,197
========== ==========
Diluted 7,598,844 7,012,546
========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE> 4
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1999 2000
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 534 $ 183
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 549 598
Decrease in accounts receivable, net 224 755
Increase in inventory (777) (669)
Increase in prepaid expenses and other current assets
(23) (14)
(Decrease) increase in accounts payable 975 (4,340)
Decrease in accrued expenses and
other current liabilities (945) (553)
------- -------
Net cash provided by (used in) operating activities 537 (4,040)
------- -------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (243) (430)
Purchase of common stock -- (233)
------- -------
Net cash used in investing activities (243) (663)
------- -------
Cash Flows from Financing Activities:
Increase (decrease) in bank overdraft (2,191) 597
Net borrowings under line of credit 1,115 4,244
Payments of term debt and notes payable (311) (367)
------- -------
Net cash flows provided by (used in) financing
activities (1,387) 4,474
------- -------
Net cash provided by discontinued operations 357 --
------- -------
Net decrease in cash (736) (229)
Cash, beginning of period 1,774 1,841
------- -------
Cash, end of period $ 1,038 $ 1,612
======= =======
</TABLE>
These accompanying notes are an integral part of
these consolidated financial statements.
<PAGE> 5
ATLANTIC PREMIUM BRANDS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying consolidated financial statements present the accounts of
Atlantic Premium Brands, Ltd. and subsidiaries (the "Company"). All significant
intercompany transactions have been eliminated in consolidation.
The Company is engaged in the manufacturing, marketing and distribution of
packaged meat and other food products in Texas, Louisiana, Kentucky, Oklahoma
and surrounding states. The operating results of the Company are impacted by
changes in food commodity markets.
The consolidated financial statements included herein 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 reclassifications have
been made in the 1999 financial statements to conform to the 2000 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 interim
periods are not necessarily indicative of the operating results expected for an
entire year. It is suggested that these consolidated financial statements be
read in conjunction with the Company's December 31, 1999 consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-K and Form 10K/A dated March 26, 2000 and April 28, 2000, respectively.
Inventory
Inventory is stated at the lower of cost or market and is comprised of raw
materials, finished goods and packaging supplies. Cost is determined using the
first-in, first-out method (FIFO). Inventory consisted of the following as of:
December 31, March 31,
(in thousands) 1999 2000
------------ ---------
Raw materials $ 423 $ 466
Finished goods 3,821 4,338
Packaging supplies 1,366 1,475
------ ------
Total inventory $5,610 $6,279
====== ======
<PAGE> 6
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of applicable
depreciation. Depreciation is computed using the straight-line method at annual
rates of 3% to 20% for buildings and building improvements, and 10% to 20% for
equipment, furniture and vehicles. Leasehold improvements are amortized over the
lesser of the lease term or asset life. Additions and improvements that
substantially extend the useful life of a particular asset are capitalized.
Repair and maintenance costs are charged to expense. Upon sale, the cost and
related accumulated depreciation are removed from the accounts.
Other Assets
Other assets consist of deferred acquisition costs, cash surrender value of life
insurance, and deferred financing costs. Deferred financing costs are being
amortized over 5 to 7 years, representing the term of the related debt, using
the effective interest method.
Goodwill
Goodwill recorded in connection with business combinations 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.
Income Per Common Share
The weighted average shares used to calculate basic and diluted income per
common share for the three-month periods ended March 31, 1999 and 2000, are as
follows:
Three Months Ended
March 31,
----------------------
1999 2000
--------- ----------
Weighted average shares outstanding for basic 7,412,583 6,812,197
income per common share
Dilutive effect of common stock options 186,261 200,349
--------- ---------
Weighted average shares outstanding for dilutive
income per common share
7,598,844 7,012,546
========= =========
Options to purchase 1,281,192 and 1,165,209 shares of common stock at prices
ranging from $2.50 to $6.50 per share were outstanding during the first quarter
of 1999 and 2000, respectively, but were not included in the computation of
diluted income per common share because the options' exercise price was greater
than the average market price of the common shares during the quarter.
<PAGE> 7
Warrants with a put option to purchase up to a maximum of 1,095,700 shares of
common stock, as of March 31, 1999 and 2000 at $3.38 per share were outstanding
during the first quarter of 1999 and 2000 but were not included in the
computation of diluted income per common share because the warrants' exercise
price was greater than the average market price of the common shares during the
quarter.
Reclassifications
Certain prior year amounts have been reclassified from amounts previously
reported to conform with the 2000 presentation.
2. 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.
3. DISCONTINUED OPERATIONS:
During the fourth quarter of 1998, the Company decided to sell substantially all
the assets of its beverage division. The sale was recorded in three separate
transactions. Effective December 1, 1998, certain assets were sold for cash of
approximately $2.2 million. Effective January 11, 1999, additional assets were
sold for cash of approximately $900,000. Effective February 2, 1999 the Company
completed its disposition of the Beverage Division when it sold the remaining
assets for approximately $400,000 in cash and notes. The remaining net assets of
discontinued operations at March 31, 2000 are comprised of trade receivables and
rent deposits.
4. DEBT REFINANCING:
On March 20, 1998, the Company refinanced its senior revolver and term debt. The
debt consists of an $11 million term note, a $15 million line of credit and $6.5
million senior subordinated note with detachable warrants with a put option.
The term debt bears interest at either the bank's prime rate plus 1% or Adjusted
LIBOR plus 2.5%, at the Company's option. This loan is due in varying amounts
monthly through March 2003 and is secured by all assets of the Company.
Under the terms of the line of credit agreement, the Company is permitted to
borrow up to $15 million subject to advance formulas based on accounts
receivable, inventory and letter of credit obligations outstanding through March
2003. Amounts borrowed are due on demand and bear interest at an annual rate
equal to either the bank's prime rate plus 1% or adjusted LIBOR plus 2.5%.
Interest is payable monthly and amounts are secured by all assets of the
Company.
The $6.5 million senior subordinated note, maturing on March 31, 2005, bears
interest at 10% per annum. Principal is payable in quarterly installments
beginning June 30, 2003. The subordinated debt was issued with detachable
warrants with a put option to purchase 666,947 shares of nonvoting common stock
at $3.38 and a contingent warrant to purchase up to a maximum of 428,753 shares
of nonvoting common stock at $3.38 per share based upon the equity value of the
Company on certain dates. The warrants have been recorded at an estimated fair
value of $1,435,000, resulting in a discount on the senior subordinated note of
the same amount. This discount is being amortized over the seven-year term of
the note as additional interest expense.
<PAGE> 8
5. SEGMENTS
The Company's operations have been classified into two business segments: food
processing and food distribution. The food processing segment includes the
processing and sales of sausages and related food products to distributors and
retailers in Louisiana, Texas, Kentucky and other surrounding states. The food
distribution segment includes the purchasing, marketing, and distribution of
packaged meat products to retailers and restaurants, located primarily in Texas.
Summarized financial information, by business segment, for the three months
ended are as follows:
(in thousands)
Three Months
--------------------------------
March 31, 1999 March 31, 2000
-------------- --------------
Net sales to external customers:
Food Processing $ 11,447 $ 14,500
Food Distribution 34,460 36,908
-------- --------
45,907 51,408
======== ========
Interest expense:
Food Processing 35 37
Food Distribution 32 34
Corporate 517 555
-------- --------
584 626
======== ========
Depreciation and amortization:
Food Processing
Food Distribution 396 434
Corporate 63 69
29 33
-------- --------
488 536
======== ========
Income before income taxes:
Food Processing 1,144 774
Food Distribution 718 660
Corporate (957) (1,104)
-------- --------
$ 905 $ 330
======== ========
<PAGE> 9
ITEM 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 preeminent local or regional branded processed meat company. In addition to
significantly increasing the Company's size, the newly acquired businesses
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.,
Richard's Cajun Foods Corp., and Grogan's Farm, Inc. In March of 1998, the
Company formed a fifth new subsidiary to acquire the business of J.C. Potter
Sausage Company and affiliates.
In conjunction with the new corporate strategy, during 1998 the Company
completed the sale of substantially all the assets of its beverage division,
which operated as a distributor of non-alcoholic beverages in the Baltimore and
Washington D.C. metropolitan areas. The disposition occurred in three
transactions on December 1, 1998, January 11, 1999 and February 2, 1999.
RESULTS OF OPERATIONS
All of the acquisitions in 1996 and 1998 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.
QUARTER ENDED MARCH 31, 2000 COMPARED TO QUARTER ENDED MARCH 31, 1999
Net Sales. Net sales increased by $5.5 million or 12.0% from
$45.9 million for the quarter ended March 31, 1999 to $51.4 million for the
quarter ended March 31, 2000. The increase in net sales was primarily due to
increases in both the volume and the average selling price of the Company's
products. The increase in the average selling price primarily reflected the
increase in the cost of certain of the Company's raw materials. Sales also
increased as a result of the continuing rollout of new branded product lines in
new markets.
Gross Profit. Gross profit decreased by $0.1 million or 1.5%
from $6.6 million for the quarter ended March 31, 1999 to $6.5 million for the
quarter ended March 31, 2000. Gross profit as a percentage of net sales
decreased from 14.3% for the quarter ended March 31, 1999 to 12.6% for the
quarter ended March 31, 2000. This decrease primarily reflects the increase in
the prices of certain of the Company's raw materials over those paid in the
first quarter of 1999 for both the Food Processing segment and the Food
Distribution segment. Pork prices have a significant impact on the Company's
cost of goods sold and higher pork prices in the first quarter of 2000
negatively impacted gross profit as compared to 1999.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses increased $0.4 million from $5.2 million for the
quarter ended March 31, 1999 to $5.6 million for the quarter ended March 31,
2000. Selling, general and administrative expenses as a percentage of net sales
decreased from 11.2% for the quarter ended March 31, 1999 to 11.0% for the
quarter ended March 31, 2000. The dollar increase reflects increased levels of
salaries and benefits, an increase in the size of
<PAGE> 10
the direct store delivery fleet, and increases in the costs of distributing the
Company's products, primarily the cost of fuel.
Income from Operations. Income from operations decreased $0.6
million from $1.4 million for the quarter ended March 31, 1999 to $0.8 million
for the quarter ended March 31, 2000. This decrease is attributable to factors
discussed above.
Interest Expense. Interest expense was $0.6 million for both
the quarter ended March 31, 1999 and for the quarter ended March 31, 2000.
Warrants with a put option were issued by the Company in
conjunction with the debt incurred at the time of the Potter acquisition. The
Company is required to accrete the value of the warrants and mark-to-market the
estimated fair value of the put option. Any increases to such value are charged
to earnings as additional interest expense. To the extent of any charges to
earnings, any subsequent decreases to the value of the warrants are added to
earnings as additional interest income. Furthermore, any such additional
interest expense would not be deductible in the Company's federal or state
income tax returns and, therefore, would increase the effective income tax rate
of the Company. For purposes of these calculations, the fair value of the
warrants is estimated using a Black-Scholes option-pricing model. During the
quarters ended March 31, 1999 and 2000, the Company recorded no additional
interest expense, as the fair value of the warrants did not increase.
Income tax expense. The effective tax rate differs from the
statutory rate primarily because of state income taxes and the non-deductibility
of goodwill.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities for the quarter ended March 31, 2000
was $4.0 million. The cash used by operating activities was primarily the result
of a decrease in accounts payable and accrued expenses and an increase in
inventory, partially offset by net income, depreciation and amortization and a
decrease in accounts receivable. Net cash provided by operating activities for
the quarter ended March 31, 1999 was $0.5 million. This amount was principally
the result of net income, depreciation and amortization, and an increase in
accounts payable, partially offset by a decrease in accrued expenses and an
increase in inventory.
Cash used in investing activities for the quarters ended March 31, 1999
and 2000 were $0.2 million and $0.7 million, respectively, which was primarily
related to capital expenditures.
Cash provided by financing activities in the quarter ended March 31,
2000 was $4.5 million, primarily related to borrowings under the Company's line
of credit offset by a decrease in the Company's bank overdraft and payments
under term debt and notes payable. Cash provided by financing activities in the
quarter ended March 31, 1999 was $1.4 million, principally affected by
borrowings under the Company's line of credit, offset by a decrease in the
Company's bank overdraft and payments under term debt and notes payable.
As of March 31, 1999 and 2000, the Company had outstanding under the
Fleet Facility approximately $10.1 million and $8.6 million, respectively, in
term debt and approximately $2.7 million and $5.0 million, respectively, in
line-of-credit borrowings. The Company owed $6.5 million to Bank One under the
Senior Subordinated Note, and approximately $2.7 million of subordinated debt to
former owners of Prefco, Richard's, Grogan's and Partin's. The Senior
Subordinated Note bears
<PAGE> 11
interest at 10% per annum. The subordinated debt owed to former owners bears
interest at an average rate of approximately 7.7% per annum. The term debt and
line of credit agreement under the Fleet Facility bear annual interest at either
the bank's prime rate plus 1% (8.75% and 10.00% at March 31, 1999 and 2000,
respectively) or adjusted LIBOR plus 2.5%, at the Company's option.
Warrants issued in conjunction with the Senior Subordinated Note
provide that on the occurrence of a Put Trigger Event (defined below), if the
average trading volume of the Company's stock for four consecutive weeks is less
than 15% of the number of shares issuable to the holder of the put warrants,
such holders would have a thirty day right to require the Company to redeem the
warrants for a cash amount equal to the greater of a cash flow formula (defined
in the Warrant Agreement) or the fair market value of the underlying shares
based upon an appraisal, in each case, net of an exercise price of $3.38 per
share. For these purposes, a "Put Trigger Event" would occur upon the earlier of
certain events, including the fifth anniversary of the warrants, a sale of all
or substantially all of the assets of the Company, or a business combination in
which the Company is not the surviving corporation.
If the holder of the warrants exercises the put option, the Company's
ability to satisfy such obligation will depend on its ability to raise
additional capital. The Company's ability to secure additional capital at such
time will depend upon the Company's overall operating performance, which will be
subject to general business, financial, competitive and other factors affecting
the Company and the processed meat distribution industry, certain of which
factors are beyond the control of the Company. No assurance can be given that
the Company will be able to raise the necessary capital on terms acceptable to
the Company, if at all, to satisfy the put obligation in a timely manner. If the
Company is unable to satisfy such obligation, the Company's business, financial
condition and operations will be materially and adversely effected.
As of March 31, 2000, 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 2000. However, the Company's ability to fund its working capital
requirements and capital expenditures will depend in large part on the Company's
ability to continue to comply with covenants in the Fleet Facility. The
Company's ability to continue to comply with the covenants in the Fleet Facility
will depend on a number of factors, certain of which are beyond the Company's
control, including but not limited to, successful integration of acquired
businesses and implementation of its business strategy, prevailing economic
conditions, uncertainty as to evolving consumer preferences, sensitivity to such
factors as weather and raw material costs, the impact of competition and the
effect of each of these factors on its future operating performance. No
assurance can be given that the Company will remain in compliance with such
covenants throughout the term of the Fleet Facility.
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.
<PAGE> 12
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to certain market risks. These risks relate to
commodity price fluctuations, interest rate changes, fluctuations in the value
of the warrants with the put option and credit risk.
The Company is a purchaser of pork and other meat products. The Company
buys pork and other meat products based upon market prices that are established
with the vendor as part of the purchase process. The operating results of the
Company are significantly impacted by pork prices. The Company does not use
commodity financial instruments to hedge pork and other meat product prices.
The Company's exposure to interest rate risk relates primarily to its
debt obligations and temporary cash investments. The Company does not use, and
has not in the past year used, any derivative financial instruments relating to
the risk associated with changes in interest rates.
The Company is required to accrete the value of the warrants and
mark-to-market the estimated fair value of the put option. Any increases to such
value are charged to earnings as additional interest expense. To the extent of
any charges to earnings, any subsequent decreases to the value of the warrants
are added to earnings as additional interest income. Furthermore, any such
additional interest expense would not be deductible in the Company's federal or
state income tax returns and, therefore, would increase the effective income tax
rate of the Company. For purposes of these calculations, the fair value of the
warrants is estimated using a Black-Scholes option-pricing model. During the
quarters ended March 31, 1999 and 2000, the Company recorded no additional
interest expense, as the estimated fair value of the warrants did not exceed the
carrying value of the warrants.
The Company is exposed to credit risk on certain assets, primarily
accounts receivable. The Company provides credit to customers in the ordinary
course of business and performs ongoing credit evaluations. The Company
currently believes its allowance for doubtful accounts is sufficient to cover
customer credit risks.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1999 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133 - an amendment of FASB Statement No. 133". SFAS 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS 133 requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS 133
is effective for fiscal years beginning after June 15, 1999 and now effective
under SFAS 137 beginning after June 15, 2000. The Company is required to comply
with SFAS in fiscal 2001. The Company generally does not use derivative
financial instruments and other than the warrants with a put option (Note 4)
there were no such instruments outstanding as of March 31, 2000.
<PAGE> 13
FORWARD LOOKING STATEMENTS
The Company wants to provide stockholders and investors with more
meaningful and useful information. Therefore, this Quarterly Report on Form 10-Q
contains forward-looking information and describes the Company's belief
concerning future business conditions and the outlook for the Company based on
currently available information. Whenever possible, the Company has identified
these "forward looking" statements by words such as "believes," "will depend,"
"to continue to," "intends" and similar expressions. These forward looking
statements are subject to risks and uncertainties which would cause the
Company's actual results or performance to differ materially from those
expressed in these statements. These risks and uncertainties include the
following: risks associated with acquisitions, including integration of acquired
businesses; new product development and other aspects of the Company's business
strategy; uncertainty as to evolving consumer preferences; customer and supplier
concentration; the impact of competition; the impact of change in the valuation
of the warrants with the put option on the Company's net income and effective
tax rate; the Company's ability to raise additional capital; sensitivity to such
factors as weather and raw material costs. Readers are encouraged to review the
Company's Current Report on Form 8-K dated June 4, 1997 filed with the
Securities and Exchange Commission for a more complete description of these
factors. The Company assumes no obligation to update the information contained
in this Quarterly Report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See the heading "Quantitative and Qualitative Disclosures About Market
Risk" under Item 2, "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<PAGE> 14
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 filed as Exhibits to
this Quarterly Report on Form 10-Q:
Exhibit
Number Description
------- -----------
3(i) Certificate of Incorporation of the
Company, including all amendments
thereto (1)
3(ii) By-Laws of the Company (2)
27 Financial Data Schedule*
------------------
* Filed herewith.
(1) Filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended June
30, 1999 and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Registration
Statement No. 33-69438 or the amendments thereto
and incorporated herein by reference.
(b) Reports on Form 8-K:
None.
<PAGE> 15
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.
Dated as of May 12, 2000 By: /s/ THOMAS M. DALTON
-------------------------------
Thomas M. Dalton, Chief Financial
Officer and Senior Vice President
(On behalf of Registrant and as
Chief Accounting Officer)
<PAGE> 16
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
3(i) Certificate of Incorporation of the Company, including all
amendments thereto (1)
3(ii) By-Laws of the Company (2)
27 Financial Data Schedule*
- ------------------
* Filed herewith.
(1) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999 and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Registration Statement No. 33-69438 or
the amendments thereto and incorporated herein by reference.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,569,000
<SECURITIES> 0
<RECEIVABLES> 9,059,000
<ALLOWANCES> 191,000
<INVENTORY> 6,280,000
<CURRENT-ASSETS> 18,111,000
<PP&E> 16,627,000
<DEPRECIATION> 4,060,000
<TOTAL-ASSETS> 44,144,000
<CURRENT-LIABILITIES> 18,955,000
<BONDS> 15,591,000
0
0
<COMMON> 68,000
<OTHER-SE> 9,535,000
<TOTAL-LIABILITY-AND-EQUITY> 44,144,000
<SALES> 51,408,000
<TOTAL-REVENUES> 51,408,000
<CGS> 44,928,000
<TOTAL-COSTS> 5,636,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 626,000
<INCOME-PRETAX> 330,000
<INCOME-TAX> 147,000
<INCOME-CONTINUING> 183,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183,000
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
