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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended June 30, 1996
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)
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Delaware 36-3761400
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1587 Sulphur Spring Road
Baltimore, Maryland 21227
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 247-5857
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
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
As of June 30, 1996, there were outstanding 5,740,984 shares of Common Stock,
par value $.01 per share, of the Registrant.
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ATLANTIC BEVERAGE COMPANY, INC.
INDEX
FORM 10-Q
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at
December 31, 1995 and June 30, 1996-----------------------------------------3
Consolidated Statements of Operations for the six months
ended June 30, 1996 and 1995, three months ended June 30,
1996 and 1995---------------------------------------------------------------4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1996 and 1995------------------------------------------------5
Notes to Consolidated Financial Statements
(June 30, 1995 and 1994)----------------------------------------------------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
2
ATLANTIC BEVERAGE COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
1995 1996
ASSETS
CURRENT ASSETS:
Cash ......................................................... $ - $ 973,784
Short-term investments................................................. - 809,357
Accounts receivable, net............................................... 798,385 7,158,386
Inventory.............................................................. 630,968 3,009,218
Prepaid expenses and other............................................. 171,467 400,479
-------------- --------------
Total current assets......................................... 1,600,820 12,351,224
EQUIPMENT, net............................................................. 706,518 2,116,666
NONCOMPETE AGREEMENTS, net................................................. 116,000 96,000
DEFERRED TAX ASSET......................................................... 365,000 365,000
GOODWILL, net.............................................................. 30,666 8,644,987
OTHER ASSETS, net 102,143 411,649
-------------- --------------
Total Assets................................................. $ 2,921,147 $ 23,985,526
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft......................................................... $ 297,458 $ 1,762,284
Line of credit......................................................... 440,000 3,754,309
Accounts payable....................................................... 855,846 6,441,106
Accrued expenses....................................................... 42,528 698,068
Current portion of obligations under capital leases ................... - 54,877
Current portion of notes payable ...................................... 788 812,500
Net current liabilities of discontinued operations..................... 722,173 227,989
-------------- --------------
Total current liabilities.................................... 2,358,793 13,751,133
NOTES PAYABLE, net of current portion...................................... - 5,187,500
OBLIGATIONS UNDER CAPITAL LEASE, net of current portion - 177,026
DEFERRED TAX LIABILITY..................................................... - 167,000
-------------- --------------
Total Liabilities............................................ 2,358,793 19,282,659
-------------- --------------
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;
6,149,022 and 2,727,955 shares issued and outstanding
in 1996 and 1995, respectively...................................... 27,280 61,490
Series A nonvoting convertible preferred stock, $.01
par value; 1 share authorized, issued and outstanding............... - -
Treasury stock, at cost, 408,038 shares................................ (427,070) (427,070)
Additional paid-in capital............................................. 5,041,252 8,834,505
Accumulated deficit.................................................... (4,079,108) (3,766,058)
-------------- --------------
Total Stockholders' Equity................................... 562,354 4,702,867
-------------- --------------
Total Liabilities and Stockholders' Equity................... $ 2,921,147 $ 23,985,526
============== ==============
The accompanying notes are an integral part of these balance sheets.
3
ATLANTIC BEVERAGE COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------ -------------------------------
1996 1995 1996 1995
-------------- ------------- -------------- --------------
NET SALES................................... $ 71,226,302 $ 10,795,185 $ 37,010,854 $ 5,923,535
COST OF GOODS SOLD ......................... 62,604,957 7,755,498 32,396,840 4,271,469
-------------- -------------- -------------- --------------
Gross Profit...................... 8,621,345 3,039,687 4,614,014 1,652,066
-------------- -------------- -------------- --------------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:
Salaries and benefits................ 3,769,552 1,581,132 1,977,647 825,442
Other operating expenses............. 3,924,414 1,145,430 2,054,627 613,454
Depreciation and amortization ....... 489,463 174,381 256,256 98,457
-------------- -------------- -------------- --------------
Total selling, general and
administrative expenses....... 8,183,429 2,900,943 4,288,530 1,537,353
-------------- -------------- -------------- --------------
Income (loss) from operations..... 437,916 138,744 325,484 114,713
INTEREST EXPENSE............................ 496,727 3,764 219,262 1,957
INTEREST INCOME............................. 13,331 8,932 13,331 4,730
OTHER INCOME................................ 420,334 - 31,946 -
-------------- -------------- -------------- -------------
Income (loss) before income tax
provision..................... 374,854 143,912 151,499 117,486
INCOME TAX PROVISION........................ - - - -
-------------- -------------- -------------- -------------
Net income from continuing
operations after accretion of
certain preferred stock....... 374,854 143,912 151,499 117,486
Loss from discontinued operations. - (259,157) - (116,544)
-------------- --------------- -------------- --------------
Net income (loss)................. $ 374,854 $ (115,245) $ 151,499 $ 942
============== ============== ============== ==============
INCOME (LOSS) PER COMMON
SHARE DATA:
Net income (loss) from continuing
operations........................... $ (.09) $ .05 $ .03 $ .04
============= ============== ============= ==============
Loss from discontinued operations....... $ - $ (.09) $ - $ (.04)
============== ============== ============== ==============
Net income (loss)................. $ (.09) $ (.04) $ .03 $ -
============= ============== ============= =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING................... 4,361,737 2,725,455 5,787,800 2,725,455
============== ============== ============== ==============
The accompanying notes are an integral part of these statements.
4
ATLANTIC BEVERAGE COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................................................... $ 374,854 $ (115,245)
Adjustments to reconcile net income to cash flows provided
by operating activities, net of non-cash items:
Depreciation and amortization...................................... 509,206 174,381
Increase in accounts receivable, net............................... (837,529) (182,241)
Increase in inventory.............................................. (183,378) (145,913)
(Increase) decrease in prepaid expenses and other.................. (141,131) 44,621
Decrease in other assets........................................... 7,841 -
Increase in accounts payable....................................... 430,675 826,336
Increase in accrued expenses....................................... 76,771 54,943
-------------- --------------
Net cash flows from-
Continuing operations.................................... 237,309 656,882
-------------- --------------
Discontinued operations.................................. (494,184) (173,743)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment........................................... (183,385) (299,647)
Increase in short-term investments................................. (809,357) -
Cash paid for acquisition of Prefco and Carlton,
net of cash acquired............................................ (3,532,001) -
Cash paid for acquisition fees..................................... (370,690) -
-------------- -------------
Net cash flows from investing activities.................... (4,895,433) (299,647)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of equipment notes payable.................................. - (59,353)
Repayment of other long-term liabilities.............................. - (19,669)
Cash paid for financing fees.......................................... (394,853) -
Borrowings under line of credit....................................... 3,314,309 -
Borrowings under term loan............................................ 4,500,000 -
Repayment of capital lease obligation................................. (10,267) -
Decrease in bank overdraft, net....................................... (1,618,873) -
Repayment of notes payable............................................ (2,446,608)
Proceeds from private placement of common stock, net.................. 2,782,384 -
-------------- -------------
Net cash flows from financing activities.................... 6,126,092 (79,022)
-------------- --------------
NET INCREASE IN CASH...................................................... 973,784 104,470
CASH, beginning of period................................................. - 142,395
-------------- --------------
CASH, end of period....................................................... $ 973,784 $ 246,865
============== ==============
The accompanying notes are an integral part of these statements.
5
ATLANTIC BEVERAGE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
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 several Texas markets including
Houston, Dallas, Austin and San Antonio (see Note 3).
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 and six months ending June 30, 1996, 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, 1995 consolidated financial statements and notes
thereto included in the Company's annual report on Form 10-K dated March 31,
1996.
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.
Inventory
Inventory is stated at the lower of cost or market. It is comprised of
raw materials, finished goods and inventory supplies. Cost is determined using
the first-in, first-out method (FIFO). Inventory consisted of the following as
of:
December 31, June 30,
1995 1996
Raw materials..................... $ - $ 114,833
Finished goods.................... 630,968 2,732,152
Packaging supplies................ - 162,233
-------------- --------------
Total purchase price....... $ 630,968 $ 3,009,218
============== ==============
6
Equipment
Equipment consists of machinery and equipment, furniture and fixtures,
leasehold improvements and delivery vehicles and are stated at cost.
Depreciation is provided using the straight-line method over following useful
lives.
Machinery and equipment 5-10 years
Furniture and fixtures 5 years
Leasehold improvements 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. and Carlton Foods, Inc. (see Note 3) and is being amortized using the
straight-line method over 5 to 40 years.
2. LINE OF CREDIT:
In March 1996, the Company entered into a new line of credit agreement
with a bank through March 2001. Under the terms of the agreement, the Company is
permitted to borrow up to $6,500,000, subject to advance formulas based on
accounts receivable and inventory. Amounts borrowed are due on demand and bear
interest at the bank's prime rate plus an additional rate of 1%. Amounts
borrowed are payable monthly and are secured by all assets of the Company.
3. ACQUISITION OF PREFCO AND MERGER OF CARLTON FOODS:
As of January 1, 1996, a newly formed wholly-owned subsidiary of the
Company acquired the outstanding common stock of Prefco, Inc. (Prefco). Also as
of January 1, 1996, Carlton Foods, Inc. (Carlton) was merged into another newly
formed, wholly-owned subsidiary of the Company. The acquisitions were accounted
for using the purchase method of accounting, whereby the purchase price is
allocated to the assets acquired and liabilities assumed based upon fair value.
The resulting goodwill was determined as follows:
Prefco Carlton
Cash consideration provided at closing................................... $ 6,000,000 $ -
Consideration paid through the issuance of note to the Seller............ 1,400,000 -
Consideration paid through the issuance of the Company's
common stock......................................................... 75,000 600,002
Debt assumed by the Company.............................................. - 3,046,231
Acquisition costs........................................................ 230,852 227,852
-------------- --------------
Total purchase price.............................................. $ 7,705,852 $ 3,874,085
============== ==============
7
Prefco Carlton
Cash..................................................................... $ 2,445,210 $ 22,959
Accounts receivable...................................................... 5,037,027 464,445
Inventory................................................................ 1,776,325 418,547
Prepaid expenses and other assets........................................ 152,059 84,569
Property, plant and equipment............................................ 222,450 1,301,062
-------------- --------------
Total assets acquired.......................................... 9,633,071 2,291,582
-------------- --------------
Bank overdrafts.......................................................... 2,821,156 262,543
Accounts payable......................................................... 4,908,042 246,712
Accrued expenses......................................................... 261,873 405,212
Deferred tax liability................................................... - 167,000
Obligations under capital lease.......................................... - 151,085
-------------- --------------
Total liabilities assumed...................................... 7,991,071 1,232,552
-------------- --------------
Net assets acquired............................................ 1,642,000 1,059,030
-------------- --------------
Goodwill....................................................... $ 6,063,852 $ 2,815,055
============== ==============
In connection with these transactions, the Company issued approximately
650,000 shares of common stock to the former stockholders of Carlton and Prefco
and 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. In
connection with the private placement, the Company incurred costs of
approximately $121,000. The Company also entered into a loan agreement with a
commercial bank which provided a $4.5 million term loan and a $6.5 million
revolving line of credit (see Note 2). The Company also issued a subordinated
promissory note to the former shareholders of Prefco in the amount of $1.4
million. The note bears interest at 9% per annum and is payable in quarterly
installments of interest, with a final payment of all outstanding interest and
principal on March 15, 2001.
4. 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 of
$2,410,200, in the fourth quarter of 1995. The net liabilities of the Flying
Fruit Fantasy division have been presented separately in the accompanying
December 31, 1995 and June 30, 1996, consolidated balance sheets. The result of
operations for the three months and six months ended June 30, 1995, are
presented separately in the statement of operations as a loss from discontinued
operations.
5. 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 1995, approximately 4% of the
total cases sold represented cases supplied by this former supplier.
6. CONTINGENCIES:
Lawsuits and claims are filed against the Company from time to time in
the ordinary course of business. These actions are in various preliminary stages
and no judgments or decisions have been rendered by hearing boards or courts.
Management, after reviewing developments to date with legal counsel, is of the
opinion that the outcome of such matters will not have a material adverse effect
on the Company's financial position or results of operations.
8
Management's Discussion and Analysis of Financial Condition and Results of
Operations
General
The Company completed its initial public offering of common stock (the
"Offering") in 1993. Following the Offering, the Company repaid approximately
$4.2 million in debt and recorded a net non-cash charge of approximately $1.3
million in connection with the repayment of debt and the write-off of certain
intangible assets.
On April 27, 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. Under
the terms of this agreement, the Company obtained worldwide marketing and
distribution rights to a frozen beverage served through automated dispensing
machines. 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.
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 an asset on the Company's balance sheet.
In connection with such transactions, the Company issued approximately
650,000 shares of common stock to the former stockholders of Prefco and Carlton
and 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. The
Company incurred transaction costs of approximately $0.1 million in connection
with the private placement. The Company also entered into a loan agreement with
LaSalle National Bank (the "LaSalle Facility") which provided a $4.5 million
term loan and a $6.5 million revolving line of credit. The Company also issued a
subordinated promissory note to the former shareholders of Prefco in the amount
of $1.4 million. The note bears interest at 9% per annum and is payable in sixty
monthly installments of interest, with a final payment of all outstanding
interest and principal on March 15, 2001.
In August of 1996, a newly formed, wholly-owned subsidiary of the
Company acquired certain of the assets of Richards Cajun Country Food Processors
("Richards"). Richards, based in Church Point, Louisiana, is engaged in the
manufacturing, marketing and distribution of Cajun-style processed meat and
specialty food products. The purchase price for these assets was approximately
$3.4 million, which included cash paid at closing in the amount of $2.5 million
and a subordinated promissory note in the amount of $0.85 million. In connection
with these transactions and the financing thereof, the Company incurred
transaction costs of approximately $0.3 million, which will be reflected as an
asset on the Company's balance sheet.
In funding the $2.5 million cash portion of the Richards transaction,
the Company used approximately $0.8 million of existing cash balances and
approximately $0.3 million of additional borrowings under the LaSalle Facility
and obtained additional term debt from LaSalle National Bank in the amount of
$1.4 million.
9
Results of Operations
Quarter Ended June 30, 1996 Compared to Quarter Ended June 30, 1995
Net Sales. Net sales increased by approximately $31.1 million or
525% from approximately $5.9 million for the quarter ended June 30, 1995 to
approximately $37.0 million for the quarter ended June 30, 1996. This
increase reflects the acquisition of Carlton and Prefco.
Gross Profit. Gross profit increased by approximately $3.0 million or
179% from approximately $1.6 million for the quarter ended June 30, 1995 to
approximately $4.6 million for the quarter ended June 30, 1996. This increase
reflects the acquisition of Carlton and Prefco. Gross profit as a percentage of
net sales decreased from 27.9% to 12.5% reflecting the lower gross profit margin
associated with the Company's food operations. Gross profit from beverage sales
did increase, however, from 27.9% of sales to 29.8% of sales reflecting lower
product costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $2.8 million or 179% from
approximately $1.5 million for the quarter ended June 30, 1995 to approximately
$4.3 million for the quarter ended June 30, 1996. This increase reflects the
acquisition of Carlton and Prefco. As a percentage of net sales, selling,
general and administrative expenses decreased from 25.9% to 11.6%. This decrease
reflects the fact that expenses as a percentage of sales are significantly lower
in the Company's food operations than in its beverage operations.
Income from Operations. Income from operations increased approximately
$0.2 million or 178% from approximately $0.1 million for the quarter ended June
30, 1995 to approximately $0.3 million for the quarter ended June 30, 1996. This
increase is attributable to income from the Company's newly acquired food
businesses as well as the improvement in gross margin in the Company's beverage
business.
Interest Expense. Interest expense increased approximately $0.2 million
from approximately $4,500 for the quarter ended June 30, 1995 to approximately
$0.2 million for the quarter ended June 30, 1996. This increase was attributable
to debt that the Company incurred in connection with the acquisitions of Carlton
and Prefco, including $4.5 million in bank term debt and $1.7 million owed to
former owners of Carlton and Prefco, in addition to amounts outstanding under
the Company's line of credit.
Net Income from Continuing Operations. Net income from continuing
operations increased approximately $34,000 from approximately $117,000 for the
quarter ended June 30, 1995 to approximately $151,000 for the quarter ended June
30, 1996. This increase reflects factors discussed above in income from
operations and interest expense.
Loss from Discontinued Operations. Loss from discontinued operations
decreased approximately $0.1 million from approximately $0.1 million for the
quarter ended June 30, 1995 to zero for the quarter ended June 30, 1996. The
loss in 1995 represents the results of the Company's discontinued frozen
beverage division.
Net Income. Net income increased approximately $150,000 from
approximately $1,000 for the quarter ended June 30, 1995 to income of
approximately $151,000 for the quarter ended June 30, 1996.
Six months Ended June 30, 1996 Compared to Six months Ended June 30, 1995
Net Sales. Net sales increased by approximately $60.4 million or 560%
from approximately $10.8 million for the six months ended June 30, 1995 to
approximately $71.2 million for the six months ended June 30, 1996. This
increase reflects the acquisition of Carlton and Prefco.
10
Gross Profit. Gross profit increased by approximately $5.6 million or
184% from approximately $3.0 million for the six months ended June 30, 1995 to
approximately $8.6 million for the six months ended June 30, 1996. This increase
reflects the acquisition of Carlton and Prefco. Gross profit as a percentage of
net sales decreased from 28.2% to 12.1% reflecting the lower gross profit margin
associated with the Company's food operations. Gross profit from beverage sales
did increase, however, from 28.2 % of sales to 30% of sales reflecting lower
product costs and higher selling prices.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $5.3 million or 183% from
approximately $2.9 million for the six months ended June 30, 1995 to
approximately $8.2 million for the six months ended June 30, 1996. This increase
reflects the acquisition of Carlton and Prefco. As a percentage of net sales,
selling, general and administrative expenses decreased from 26.8% to 11.5%. This
decrease reflects the fact that expenses as a percentage of sales are
significantly lower in the Company's food operations than in its beverage
operations.
Income from Operations. Income from operations increased approximately
$0.3 million or 206% from approximately $0.1 for the six months ended June 30,
1995 to approximately $0.4 million for the six months ended June 30, 1996. This
increase is primarily attributable to the Company's newly acquired food
businesses. This increase is attributable to income from the Company's newly
acquired food businesses as well as to the improvement in gross margin in the
Company's beverage business.
Interest Expense. Interest expense increased approximately $0.5 million
from approximately $9,000 for the six months ended June 30, 1995 to
approximately $0.5 million for the six months ended June 30, 1996. This increase
was attributable to debt that the Company incurred in connection with the
acquisitions of Carlton and Prefco, including $4.5 million in bank term debt and
$1.7 million owed to former owners of Carlton and Prefco, in addition to amounts
outstanding under the Company's line of credit.
Other Income. Other income increased approximately $0.4 million from
zero for the six months ended June 30, 1995 to approximately $0.4 million for
the six months ended June 30, 1996. This increase was primarily the result of a
one-time settlement payment of approximately $0.3 million that the Company
received from a former beverage supplier.
Net Income from Continuing Operations. Net income from continuing
operations increased approximately $232,000 from approximately $143,000 for the
six months ended June 30, 1995 to approximately $375,000 for the six months
ended June 30, 1996. This increase reflects factors discussed above in income
from operations, interest expense, and other income.
Loss from Discontinued Operations. Loss from discontinued operations
decreased approximately $0.3 million from approximately $0.3 million for the six
months ended June 30, 1995 to zero for the six months ended June 30, 1996. The
loss in 1995 represents the results of the Company's discontinued frozen
beverage division.
Net Income (Loss). Net income (loss) increased approximately $0.5
million from a loss of approximately $0.1 million for the six months ended June
30, 1995 to income of approximately $0.4 million for the six months ended June
30, 1996.
Liquidity and Capital Resources
Cash used in operating activities for the six months ended June 30,
1996 was approximately $ 0.4 million. This amount was principally affected by
net income, the add-back of depreciation and amortization, a decrease in
short-term investments, reduction in net liabilities of discontinued operations,
an increase in accounts payable and an increase in accounts receivable. Cash
used in investing activities for the six months ended June 30, 1996 was
approximately $6.6 million and
11
primarily reflected the acquisition of Carlton and Prefco. Cash provided by
financing activities was approximately $7.2 million and was principally
affected by debt incurred and equity raised in connection with the acquisition
of Carlton and Prefco. Net cash increase during the period was approximately
$1.0 million.
The Company believes that cash generated from operations and bank
borrowings will be sufficient to fund its 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, 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.
12
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
3.01* Certificate of Incorporation of
the Company, including all
amendments thereto
3.02* By-Laws of the Company
11.2 Statement Regarding Computation of
Per Share Earnings for the three
months ended June 30, 1996
11.3 Statement Regarding Computation of
Per Share Earnings for the six
months ended June 30, 1996
27.2 Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K filed August 12, 1996
Form 8-K/A filed August 13, 1996
* Filed with the Company's Registration Statement No. 33-69438.
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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: August 14, 1996 By: /s/ John F. Izzo
------------------------------
John F. Izzo,
Vice President-Finance Controller and
Treasurer (On behalf of Registrant and
as Chief Accounting Officer)
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INDEX TO EXHIBITS
Exhibit Number Description Page
11.2 Statement Regarding Computation of Per Share Earnings for
the three months ended June 30, 1996 1
11.3 Statement Regarding Computation of Per Share Earnings for the 2
six months ended June 30, 1996
27.2 Financial Data Schedule 3
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