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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1997
/ / Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission file number 0 - 25836
PORTLAND BREWING COMPANY
(Exact Name of Small Business Issuer as Specified in Its Charter)
OREGON 93-0865997
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2730 N.W. 31st Avenue, Portland, Oregon 97210
(Address of Principal Executive Offices)
(503)226-7623
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 2,074,943 shares of
common stock as of May 8, 1997.
Transitional Small Business Disclosure Format (check one):
Yes X No
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PORTLAND BREWING COMPANY
Balance Sheet
ASSETS
March 31, December 31,
1997 1996
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(Unaudited)
CURRENT ASSETS:
Cash $ 66,365 $ 49,054
Accounts receivable, net 871,723 787,930
Inventories 737,058 675,680
Prepaid assets 308,613 331,296
Income tax receivable 51,914 79,970
Deferred income taxes 89,411 89,411
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Total current assets 2,125,084 2,013,341
Property and equipment, net 9,430,943 9,548,288
Other assets, net 255,353 252,999
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Total assets $ 11,811,380 $ 11,814,628
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The accompanying notes are an integral part of these statements.
2
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PORTLAND BREWING COMPANY
Balance Sheet
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1997 1996
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(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 953,275 $ 1,008,634
Customer deposits held 175,863 210,105
Accrued payroll 120,163 100,864
Other accrued liabilities 24,710 50,027
Line of credit 675,000 300,000
Current portion of long term debt 496,000 400,603
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Total current liabilities 2,445,011 2,070,233
Long-term debt, less current portion 2,755,116 2,904,780
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 100,000
shares authorized, no shares issued. _ _
Common stock, no par value, 5,000,000
shares authorized, 2,074,943 shares
issued and outstanding. 6,715,798 6,715,798
Stock notes receivable (1,975) (2,524)
Retained earnings (deficit) (102,570) 126,341
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Total stockholders' equity 6,611,253 6,839,615
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Total liabilities and stockholders' equity $ 11,811,380 $ 11,814,628
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The accompanying notes are an integral part of these statements.
3
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PORTLAND BREWING COMPANY
Statements of Operations
(Unaudited)
Three months ended
March 31,
--------------------------
1997 1996
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Sales $ 2,782,351 $ 3,154,436
Less-excise tax 118,197 223,390
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Net sales 2,664,154 2,931,046
Cost of sales 1,931,177 1,953,665
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Gross profit 732,977 977,381
General and administrative expenses 351,777 426,608
Sales and marketing expenses 542,762 493,931
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Income (loss) from operations (161,562) 56,842
Interest expense 63,936 14,358
Other expense, net 3,413 3,559
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Total other expense, net 67,349 17,917
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Net income (loss) before income taxes (228,911) 38,925
Provision for income taxes 0 15,800
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Net income (loss) $ (228,911) $ 23,125
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Net income (loss) per share $ (0.11) $ 0.01
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Shares used in per share calculations 2,074,943 2,147,236
The accompanying notes are an integral part of these statements.
4
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PORTLAND BREWING COMPANY
Condensed Statements of Cash Flows
(Unaudited)
Three months ended
March 31,
--------------------------
1997 1996
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Net cash (used in) provided by operating activities $ (126,553) $ 160,565
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Net cash used in investing activities (177,418) (648,531)
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Net cash provided by financing activities 321,282 346,662
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Increase (decrease) in cash 17,311 (141,304)
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Cash, beginning of period 49,054 156,466
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Cash, end of period $ 66,365 $ 15,162
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The accompanying notes are an integral part of these statements.
5
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PORTLAND BREWING COMPANY
Notes to Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying condensed interim financial data is unaudited; however, in
the opinion of management, the interim data includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
statement of the results for the interim periods presented. The financial
statements included herein have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures included
herein are adequate to make the information presented not misleading.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the Company's
financial statements filed as part of the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996. This quarterly report
should be read in conjunction with such Annual Report.
Operating results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the entire
fiscal year ending December 31, 1997, or any portion thereof.
2. Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128") and Statement of Financial Accounting Standards No. 129,
Disclosure of Information About Capital Structure" ("SFAS 129"), which are
effective for fiscal years ending after December 15, 1997. The Company
believes the implementation of these statements will not have a material
effect on its results of operations or financial statement disclosures.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 COMPARISON
Net sales in the first quarter of 1997 decreased 9% to $2,664,154 from
$2,931,046 in the same period 1996. Gross profit decreased to $732,977 (28%
of net sales) in the first quarter of 1997 from $977,381 (33% of net sales)
for the same period in 1996. The decrease in gross profit was a result of
lower fixed overhead cost recovery due to lower production volumes compared
to total capacity. Restaurant sales, as a percentage of total revenues, were
greater in 1997 than in 1996, and cost of sales as a percentage of net
revenues is higher for the Company's restaurant operations than its brewery
operations. Shipments for the three months ended March 31, 1997 were 13,891
barrels, a decrease of 19% from 17,200 barrels for the three months ended
March 31, 1996. The shortfall in shipments is due to continued competitive
pressure caused by product proliferation, particularly in the specialty beer
segment of the market.
General and administrative expenses decreased 18% to $351,777 (13% of
net sales) in the first quarter of 1997 from $426,608 (15% of net sales) for
the same period in 1996. The decrease is due to the effect of downsizing,
attrition and cost containment programs.
Sales and marketing expenses increased 10% to $542,762 (20% of net
sales) in the first quarter of 1997 from $493,931 (17% of net sales) for the
same period in 1996. The increase resulted from further sales organization
development and new product releases.
Interest expense increased to $63,936 in the first quarter of 1997 from
$14,358 for the same quarter in 1996. The increase is a result of increased
debt outstanding for the quarter, compared to 1996.
The net loss for the quarter ended March 31, 1997 was $228,911,
depreciation and amortization totaled $303,866 and capital expenditures
totaled $144,693. This compares to net income of $23,125, depreciation and
amortization of $212,886 and capital expenditures of $586,661 for the quarter
ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital principally to fund its working capital
needs. The Company has met its capital requirements through cash flow from
operations, bank borrowings and the private and public sale of its Common
Stock.
The Company has a $1,000,000 revolving line of credit with a bank which
bears interest at the bank's reference rate (8.5% at March 31, 1997). At
March 31, 1997, $675,000 was outstanding under the revolving line of credit.
The Company has a $2,000,000 non-revolving equipment line of credit with a
bank, which converts to a term loan on June 2, 1997. Amounts outstanding
under the equipment line, $1,999,149, bear interest at LIBOR (7.65% at March
31, 1997). The Company also has a term loan outstanding with a bank. At March
31, 1997, $1,251,967 was outstanding under this term loan. The term loan
bears interest at a fixed rate of 7.55% for $499,537 of the loan with the
remaining $752,430 bearing interest at the bank's reference rate plus 1/2%
(9.00% at March 31, 1997). During April 1997 the credit facility with the
company's bank was renewed through April 1998.
The Company's working capital requirements over the next year are
expected to be met from cash flow from operations, funds available under the
Company's line of credit facilities and, if appropriate, additional equity
offerings.
7
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
Exhibit Number Description
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Exhibit 11 Calculation of net income (loss) per share
Exhibit 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the quarter ended March 31, 1997.
8
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PORTLAND BREWING COMPANY
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(Registrant)
Date 5/8/97 /s/ CHARLES A. ADAMS
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(Signature)
Charles A. Adams, Chairman of the Board
and President (Principal Executive
Officer)
Date 5/8/97 /s/ GLENMORE JAMES
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(Signature)
Glenmore James, Chief Financial Officer
(Principal Financial and Accounting
Officer)
9
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EXHIBIT 11
PORTLAND BREWING COMPANY
CALCULATION OF NET INCOME (LOSS) PER SHARE
QUARTER ENDED MARCH 31,
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1997 1996
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Actual weighted average shares 2,074,943 2,069,397
outstanding
Dilutive common stock options
using the treasury stock method -- 77,839
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Total shares used in per share
calculations 2,074,943 2,147,236
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Net (loss) income $ (228,911) $ 23,125
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Net (loss) income per share (1) $(0.11) $0.01
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(1) Fully diluted earning per share is not materially different from primary
earnings per share in the periods presented.
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the consolidated financial statements found in the Company's Report on
Form 10-QSB for the quarter ended March 31, 1997, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
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<CURRENT-LIABILITIES> 2,445
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<COMMON> 6,716
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