1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 2, 1999
----------------
Atlantic Premium Brands, Ltd.
(Exact Name of Registrant as Specified in Charter)
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Delaware 1-13747 36-3761400
- ---------------------------- ----------- -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
650 Dundee Road, Suite 370, Northbrook, Illinois 60062
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (847) 480-4000
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2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Atlantic Premium Brands, Ltd. (the "Company") has completed the sale of
substantially all the assets of its Beverage Division. The operations of the
Beverage Division consisted of the wholesale purchasing, marketing and
distribution of nonalcoholic beverages to retail trade accounts in the greater
Baltimore and Washington D.C. metropolitan areas.
The disposition of the Beverage Division's distribution rights and
inventories for the Mistic(R), Stewart's(R) and AriZona(TM) brands, along with
certain other related assets, occurred in two stages on December 1, 1998 and
January 11, 1999. The purchaser of these assets was Canada Dry Potomac
Corporation. The remaining accounts receivable and inventory, as well as
substantially all the furniture and equipment, of the Beverage Division were
sold to Master Distributors, Inc. on February 2, 1999.
The consideration received by the Company from these transactions totaled
approximately $3,500,000 and consisted of approximately $3,100,000 in cash, a
promissory note payable to the Company for $260,000 and the assumption by the
purchasers of approximately $140,000 in liabilities and obligations of the
Beverage Division.
The Company has been advised that a former manager of the Beverage Division
is a shareholder of Master Distributors, Inc.
3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not Applicable.
(b) The pro forma financial information required by Item 7(b) relating to the
disposition of the Company's Beverage Division described in Item 2 is
included in pages F-1 through F-6.
(c) Exhibits.
2.1 Asset Purchase Agreement dated as of November 24, 1998 between the
Company and Canada Dry Potomac Corporation*
2.2 Asset Purchase Agreement dated February 2, 1999 between the Company
and Master Distributors, Inc.*
- --------------
* Filed herewith.
4
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated balance sheet as of September 30,
1998 and the unaudited pro forma consolidated statements of operations for the
nine months ended September 30, 1998 and for the year ended December 31, 1997
give effect to the sale of the Beverage Division described in this Form 8-K. In
March 1998, the Company acquired J.C. Potter Sausage Company, Inc. The unaudited
pro forma consolidated statments of operations have been adjusted to give effect
to (i) the consummation of the acquisition of the J.C. Potter Sausage Company,
Inc., (ii) the acquisition of new debt to complete the transaction described in
(i) and (iii) the retirement of existing debt in conjunction with the
transaction. The unaudited pro forma consolidated balance sheet is presented as
if the sale of the Beverage Division had occurred on September 30, 1998. The
unaudited pro forma consolidated statements of operations are presented as if
the sale of the Beverage Division and the acquisition of J.C. Potter Sausage
Company, Inc. had occurred at the beginning of the periods presented. The
unaudited pro forma information is presented for illustrative purposes only and
may not be indicative of the results that would have been obtained had the sale
of the Beverage Division and acquisition of J.C. Potter Sausage Company, Inc.
actually occurred on the dates assumed, nor is it necessarily indicative of the
future consolidated results of operations.
F-1
5
ATLANTIC PREMIUM BRANDS, LTD.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
Reclassify
Beverage
Division to
Discontinued
Historical Operations
----------------- -----------------
ASSETS
CURRENT ASSETS:
Cash 2,453,265
Account receivable, net of allowance for doubtful 9,156,255 (2,160,815)
accounts of $217,000
Notes receivable - -
Inventory 6,545,753 (1,372,643)
Prepaid expenses and other 827,841 (166,059)
Net current assets of division held for
disposition 2,019,921
----------------- -----------------
Total current assets 18,983,114 (1,679,596)
PROPERTY, PLANT AND EQUIPMENT, net 13,507,726 (1,094,879)
GOODWILL, net 13,168,338
OTHER ASSETS, net 1,745,107 (231,066)
Net non-current assets of division held for
disposition 1,286,896
----------------- -----------------
Total Assets 47,404,285 (1,718,645)
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft 3,109,277 (521,080)
Line of credit 4,035,620
Current portion of long-term debt 1,284,110
Accounts payable 7,199,847 (906,872)
Accrued expenses 2,546,728 (251,644)
----------------- -----------------
Total current liabilities 18,175,582 (1,679,596)
LONG-TERM DEBT, net of current portion 17,311,121
CAPITAL LEASE (39,049)
PUT WARRANTS 1,435,000
----------------- -----------------
Total Liabilities 36,921,703 (1,718,645)
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
PREFERRED STOCK
COMMON STOCK 74,355
ADDITIONAL PAID IN CAPITAL 12,200,124
ACCUMULATED DEFICIT (1,791,897)
----------------- -----------------
Total Stockholders' Equity 10,482,582 -
Total Liabilities and Stockholders' Equity 47,404,285 (1,718,645)
================= =================
Pro Forma
Adjustments Pro Forma
------------------ ------------------
ASSETS
CURRENT ASSETS:
Cash 2,453,265
Account receivable, net of allowance for doubtful 6,995,440
accounts of $217,000
Notes receivable 260,000 (g) 260,000
Inventory 5,173,110
Prepaid expenses and other 661,782
Net current assets of division held for
disposition (2,019,921)(h) -
------------------ ------------------
Total current assets (1,759,921) 15,543,597
PROPERTY, PLANT AND EQUIPMENT, net 12,412,847
GOODWILL, net 13,168,338
OTHER ASSETS, net 1,514,041
Net non-current assets of division held for
disposition (1,286,896)(h) -
------------------ ------------------
Total Assets (3,046,817) 42,638,823
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft 2,588,197
Line of credit 4,035,620
Current portion of long-term debt 1,284,110
Accounts payable 6,292,975
Accrued expenses 264,093(i) 2,559,177
------------------ ------------------
Total current liabilities - 16,760,079
LONG-TERM DEBT, net of current portion (3,110,910)(j) 14,200,211
CAPITAL LEASE (39,049)
PUT WARRANTS 1,435,000
------------------ ------------------
Total Liabilities (2,846,817) 32,356,241
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
PREFERRED STOCK
COMMON STOCK 74,355
ADDITIONAL PAID IN CAPITAL 12,200,124
ACCUMULATED DEFICIT (200,000)(k) (1,991,897)
------------------ ------------------
Total Stockholders' Equity (200,000) 10,282,582
Total Liabilities and Stockholders' Equity (3,046,817) 42,638,823
================== ==================
See accompanying notes to pro forma financial information.
F-2
6
ATLANTIC PREMIUM BRANDS, LTD.
PRO FORMA CONSOLIDATED STATEMENT
OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
J.C. Potter Pro Forma Pro Forma
The Company Sausage Adjustments Combined
------------------ ---------------- ---------------- --------------
Net Sales 172,198,494 37,028,436 (1,143,576)(a) 208,083,354
Cost Sales 152,608,121 29,920,230 (1,143,576)(a) 181,384,775
----------------- ---------------- ---------------- --------------
Gross Profit 19,590,373 7,108,206 - 26,698,579
----------------- ---------------- ---------------- --------------
Selling, general and
administrative expenses:
Salaries and benefits 7,997,062 1,402,721 - 9,399,783
Other operating expenses 8,493,832 2,719,638 - 11,213,470
Depreciation and amortization 1,381,221 821,043 (17,948)(b) 2,184,316
----------------- ---------------- ---------------- --------------
Total operating expense 17,872,115 4,943,402 (17,948) 22,797,569
----------------- ---------------- ---------------- --------------
Income from operations 1,718,258 2,164,804 17,948 3,901,010
Interest income (expense) (1,692,610) 63,705 (822,503)(c) (2,451,408)
Other income 381,209 568,180 - 949,389
----------------- ---------------- ---------------- --------------
Total nonoperating income (expense) (1,311,401) 631,885 (822,503) (1,502,019)
----------------- ---------------- ---------------- --------------
Income before income tax provision 406,857 2,796,689 (804,555) 2,398,991
Income tax provision 50,000 513,725 565,797 (d) 1,129,522
----------------- ---------------- ---------------- --------------
Income from continuing operations 356,857 2,282,964 (1,370,352) 1,269,469
----------------- ---------------- ---------------- --------------
Reclassify
Beverage
Division to
Discontinued Pro Forma
Operations Adjustments Pro Forma
------------------ ---------------- ------------------
Net Sales (21,149,844) 186,933,510
Cost Sales (14,990,879) 166,393,896
------------------ ---------------- ------------------
Gross Profit (6,158,965) 20,539,614
------------------ ---------------- ------------------
Selling, general and
administrative expenses:
Salaries and benefits (3,392,401) 6,007,382
Other operating expenses (2,162,723) 9,050,747
Depreciation and amortization (444,125) 1,740,191
------------------ ---------------- ------------------
Total operating expense (5,999,249) 16,798,320
------------------ ---------------- ------------------
Income from operations (159,716) 3,741,294
Interest income (expense) 265,732 278,737(e) (1,906,939)
Other income 12,457 961,846
------------------ ---------------- ------------------
Total nonoperating income (expense) 253,275 278,737 (970,007)
------------------ ---------------- ------------------
Income before income tax provision 93,559 2,492,550
Income tax provision (15,000) 105,920(f) 1,220,442
------------------ ---------------- ------------------
Income from continuing operations 108,559 384,657 1,762,685
------------------ ---------------- ------------------
See accompanying notes to pro forma financial information.
F-3
7
ATLANTIC PREMIUM BRANDS, LTD.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
J.C. Potter Pro Forma Pro Forma
The Company Sausage Adjustments Combined
----------- ----------- ----------- -----------
Net Sales 145,463,948 7,446,259 (285,894) (a) 152,624,313
Cost Sales 123,946,263 5,108,207 (285,894) (a) 128,768,576
----------- ---------- --------- -----------
Gross Profit 21,517,685 2,338,052 23,855,737
----------- ---------- --------- -----------
Selling, general and
administrative expenses:
Salaries and benefits 8,555,208 372,045 8,927,253
Other operating expenses 8,504,189 804,374 9,308,563
Depreciation and amortization 1,505,918 152,793 47,981 (b) 1,706,692
----------- ---------- --------- -----------
Total operating expense 18,565,315 1,329,212 47,981 19,942,508
----------- ---------- --------- -----------
Income from operations 2,952,370 1,008,840 (47,981) 3,913,229
Interest income (expense) (1,902,521) 28,338 (264,951) (c) (2,139,134)
Other income 189,239 189,239
----------- ---------- --------- -----------
Total nonoperating income (expense) (1,713,282) 28,338 (264,951) (1,949,895)
----------- ---------- --------- -----------
Income before income tax provision 1,239,088 1,037,178 (312,932) 1,963,334
Income tax provision 9,500 369,602 30,749 (d) 409,851
----------- ---------- --------- -----------
Income from continuing operations 1,229,588 667,576 (343,681) 1,553,483
----------- ---------- --------- -----------
Reclassify
Beverage
Division to
Discontinued Pro Forma
Operations Adjustments Pro Forma
---------------- --------------- --------------
Net Sales (16,047,607) 136,576,706
Cost Sales (11,378,883) 117,389,693
--------------- --------------- --------------
Gross Profit (4,668,724) 19,187,013
--------------- --------------- --------------
Selling, general and
administrative expenses:
Salaries and benefits (2,622,521) 6,304,732
Other operating expenses (1,745,069) 7,563,494
Depreciation and amortization (447,924) 1,258,768
--------------- --------------- --------------
Total operating expense (4,815,514) 15,126,994
--------------- --------------- --------------
Income from operations (146,790) 3,766,439
Interest income (expense) 86,243 217,452(e) (1,835,439)
Other income 4,151 193,390
---------------- --------------- --------------
Total nonoperating income (expense) 90,394 217,452 (1,642,049)
---------------- --------------- --------------
Income before income tax provision (237,184) 217,452 1,943,602
Income tax provision (315,500) 82,632(f) 176,983
--------------- --------------- --------------
Income from continuing operations 78,316 134,820 1,766,619
--------------- --------------- --------------
F-4
See accompanying notes to pro forma financial information.
8
NOTES TO PRO FORMA
FINANCIAL INFORMATION
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
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(a) Adjustment to eliminate sales between
J.C. Potter Sausage and Atlantic
Premium Brands subsidiaries
(b) To reflect the impact of the different
bases of acquired property, plant and
equipment as calculated below:
Depreciation expense on acquired assets $ 200,774 803,095
Less: Depreciation expense recorded
by acquired company (152,793) (821,043)
--------- ----------
$ 47,981 (17,498)
--------- ----------
(c) To reflect interest expense in connection
with the debt refinancing
Interest on term debt $(255,313) (1,021,250)
Interest on senior subordinated note (162,500) (650,000)
Amortization of discount on senior
subordinated note (51,250) (205,000)
Interest on line of credit (159,716) (638,863)
Interest expense on old debt 363,827 (1,692,610)
--------- ----------
$(264,951) (4,207,723)
--------- ----------
(d) Income tax provision attributable to
adjustments (b) and (c).
(e) To record assumed reduction in interest
expense arising from the repayment of
indebtedness using the funds received
from the sale of the Beverage Division.
It is assumed that the indebtedness
repaid had an average interest rate of
9.32% and 8.96% for the nine months
ended September 30, 1998 and the year
ended December 31, 1997, respectively.
(f) To record income tax expense attributable
to adjustment (e) at a combined Federal,
state, and local tax rate of 38%.
(g) To record the $260,000 note receivable
acquired in conjunction with the
sale of the Beverage Division.
(h) To record the sale of the assets and
liabilities of the Beverage Division.
(i) In connection with the sale of the
Beverage Division, the Company
recorded liabilities primarily
related to severance, legal and
accounting expenses, and lease
obligations which have no future
benefit.
F-5
9
NOTES TO PRO FORMA
FINANCIAL INFORMATION
(j) To record the assumed reduction in long-term debt arising from the
receipt of cash in conjunction with the sale of the Beverage Division.
(k) To record the effects of adjustments (g), (h) and (i) on shareholders'
equity.
F-6
10
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 hereunto duly authorized.
ATLANTIC PREMIUM BRANDS, LTD.
By: /s/ Thomas M. Dalton
---------------------
Name: Thomas M. Dalton
Title: Senior Vice President and
Chief Financial Officer
Dated: February 15, 1999
11
Exhibit Index
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Exhibit # Description
- ------------------- -----------------------------------------------------
2.1 Asset Purchase Agreement dated as of November 24,
1998 between the Company and Canada Dry Potomac
Corporation.*
2.2 Asset Purchase Agreement dated February 2, 1999
between the Company and Master Distributors, Inc.*
- --------------
* Filed herewith.