-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AYURJRw5OFOBF7oO29uOhCDH1cbm2q9x8dr5saeYkkkA14cI+GaVH0LhXxZPLhr7 v3vm902uOfLga0kLfFRwIQ== 0000909334-97-000121.txt : 19970515 0000909334-97-000121.hdr.sgml : 19970515 ACCESSION NUMBER: 0000909334-97-000121 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALL AMERICAN BOTTLING CORP CENTRAL INDEX KEY: 0000825811 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 731317652 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-69832 FILM NUMBER: 97605123 BUSINESS ADDRESS: STREET 1: 15 N ROBINSON STE 100 STREET 2: COLCORD BUILDING CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 BUSINESS PHONE: 4052321158 MAIL ADDRESS: STREET 2: 15 N ROBINSON CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROWNE BOTTLING CO CENTRAL INDEX KEY: 0000825813 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 171311569 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-69832-01 FILM NUMBER: 97605124 BUSINESS ADDRESS: STREET 1: 15 N ROBINSON STE 700 CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 BUSINESS PHONE: 4052321158 10-Q 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 QUARTERLY PERIOD ENDED MARCH 31, 1997 or Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 33-69832 ALL-AMERICAN BOTTLING CORPORATION BROWNE BOTTLING COMPANY (Exact name of registrant as specified in its charter) Delaware 73-1317652 (State or other jurisdiction 73-1311569 of incorporation or organization) (IRS Employer Identification No.) Colcord Building 15 North Robinson, Suite 1201 Oklahoma City, Oklahoma 73102 (Address of Principal Executive Office) (405) 232-1158 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for each 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 . As of May 1, 1997 Browne Bottling Company had 192,244 shares of common stock outstanding for which there is no public market; and All-American Bottling Corporation had 100,000 shares of common stock outstanding, all of which are held by Browne Bottling Company. ============================================================================== All-American Bottling Corporation Browne Bottling Company INDEX Part I Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996 (unaudited) Consolidated Statements of Operations for the three months ended March 31, 1997 and 1996 (unaudited) Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 1997 and for the year ended December 31, 1996 (unaudited) Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996 (unaudited) Notes to Consolidated Financial Statements (unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II Other Information Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K PART I ITEM 1. Financial Statements BROWNE BOTTLING COMPANY Consolidated Balance Sheets (in thousands) - -------------------------------------------------------------------------------
December 31, March 31, 1996 1997 ----------- ----------- (unaudited) ASSETS Current assets: Trade accounts receivable $ 10,208 $ 10,212 Franchise companies receivable 1,564 1,485 Other receivables 1,494 1,681 Allowance for doubtful accounts (462) (445) Inventories - ingredients and packaging 2,783 3,371 Inventories - finished goods 4,165 4,298 Inventories - other 243 230 Inventories - pallets at deposit value 261 247 Prepaid expenses 399 488 Deferred tax asset 492 492 ----------- ----------- Total current assets 21,147 22,059 ----------- ----------- Plant and equipment, at cost: Land 828 828 Buildings and improvements 6,347 6,494 Machinery and equipment 10,903 10,954 Vehicles 7,328 7,325 Vending equipment 5,970 6,020 Furniture and fixtures 354 376 Computer equipment 1,812 1,831 Returnable containers 2,338 2,338 ----------- ----------- 35,880 36,166 Less - Accumulated depreciation (23,826) (24,359) ----------- ----------- Net plant and equipment 12,054 11,807 ----------- ----------- Intangible assets: Franchises 37,443 37,443 Goodwill 15,007 15,007 Other intangibles 2,657 2,700 ----------- ----------- 55,107 55,150 Less - Accumulated amortization (13,285) (13,674) ----------- ----------- Net intangible assets 41,822 41,476 ----------- ----------- Other assets 1,211 842 ----------- ----------- Total assets $ 76,234 $ 76,184 =========== ===========
The accompanying notes are an integral part of these financial statements. BROWNE BOTTLING COMPANY Consolidated Balance Sheets (in thousands) - -------------------------------------------------------------------------------
December 31, March 31, 1996 1997 ----------- ----------- (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank overdraft $ 1,554 $ 657 Current portion of long-term debt 12,189 14,911 Current portion of obligations under capital lease 167 159 Current portion of deferred compensation and non-compete agreements 106 90 Trade accounts payable 8,832 9,899 Accrued compensation and payroll taxes 1,865 1,720 Accrued interest payable 2,020 765 Accrued insurance reserves 1,059 999 Accrued pension liability 130 146 Other liabilities 2,486 2,515 ----------- ----------- Total current liabilities 30,408 31,861 ----------- ----------- Long-term debt, net of current maturities 38,668 38,491 ----------- ----------- Obligations under capital leases, net 885 847 ----------- ----------- Deferred compensation and non-compete agreements, net 984 1,032 ----------- ----------- Other non-current liabilities 839 797 ----------- ----------- Deferred tax liability 11,287 10,802 ----------- ----------- Stock warrants 815 815 ----------- ----------- Stockholders' equity (deficit): Preferred stock - Series B, $.01 par value, 1,000 shares authorized, issued and outstanding; (liquidation preference of $1,000 per share) - - Common stock, $.01 par value, 220,295 shares authorized, 192,244 shares issued and outstanding 2 2 Common stock, non-voting, $.01 par value, 5,263 shares authorized, none outstanding - - Additional paid-in capital 26,542 26,542 Deficit (34,196) (35,005) ----------- ----------- Total stockholders' deficit (7,652) (8,461) ----------- ----------- Total liabilities and stockholders' deficit $ 76,234 $ 76,184 =========== ===========
The accompanying notes are an integral part of these financial statements. BROWNE BOTTLING COMPANY Unaudited Consolidated Statements of Operations (in thousands except share and per share amount) - -------------------------------------------------------------------------------
Three Months Ended March 31, 1996 1997 ----------- ----------- Revenues, net of discounts and allowances ($14,488 and $11,990 in 1996 and 1997, respectively) $ 33,533 $ 27,953 Cost of sales 22,286 17,639 ---------- ---------- Gross Profit 11,247 10,314 Operating expenses: Plant and occupancy 1,543 1,263 Loading and shipping 1,029 778 Transport 227 129 Fleet service 185 158 Selling and delivery 6,173 5,040 Vending and Fountain 577 508 Advertising 517 410 General and administrative 1,709 1,510 Amortization of intangibles 555 403 ----------- ---------- Total operating expenses 12,515 10,199 ----------- ---------- Income (loss) from operations (1,268) 115 Gain (loss) on disposals (1,926) 12 Interest expense (1,892) (1,669) Other income 14 277 ----------- ---------- Loss before income tax benefit (5,072) (1,265) Income tax benefit 1,194 456 ----------- ---------- Net loss $ (3,878) $ (809) =========== =========== Loss per common share and common share equivalent: Primary and fully diluted: Net loss $ (20.17) $ (4.21) =========== =========== Weighted average common shares 192,244 192,244 =========== ===========
The accompanying notes are an integral part of these financial statements. BROWNE BOTTLING COMPANY Consolidated Statements of Changes in Stockholders' Equity (Deficit) (dollars in thousands) - -------------------------------------------------------------------------------
Preferred Additional Retained Shares, Common Stock Paid-in Earnings Series B Shares Amount Capital (Deficit) Total --------- ------- ------ --------- --------- --------- Balance, December 31, 1995 1,000 192,244 $ 2 $26,542 $(28,948) $(2,404) Net loss (5,248) (5,248) --------- ------- ------ --------- --------- --------- Balance, December 31, 1996 1,000 192,244 2 26,542 (34,196) (7,652) --------- ------- ------ --------- --------- --------- Net loss (unaudited) (809) (809) --------- ------- ------ --------- --------- --------- Balance, March 31, 1997 (unaudited) 1,000 192,244 $ 2 $26,542 $(35,005) $(8,461) ======== ======= ====== ========= ========= =========
The accompanying notes are an integral part of these financial statements. BROWNE BOTTLING COMPANY Unaudited Consolidated Statements of Cash Flows (in thousands) - -------------------------------------------------------------------------------
Three Months Ended March 31, 1996 1997 ----------- ----------- Cash flows from operating activities: Net loss $ (3,878) $ (809) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 1,285 1,094 (Gain) loss on disposal of assets and franchises 1,926 (12) Deferred taxes (1,305) (485) Deferred compensation 215 64 Changes in assets and liabilities, net of effect of acquisitions and dispositions: Decrease (increase) in accounts receivable 524 159 Decrease (increase) in inventories (1,597) (695) Increase (decrease) in accounts payable 1,170 1,027 Increase (decrease) in accrued interest (1,512) (1,255) Other 192 (286) ----------- ----------- Net cash provided (used) by operating activities (2,980) (1,198) ----------- ----------- Cash flows from investing activities: Capital expenditures (806) (364) Proceeds from sale of fixed assets and franchises 7,185 12 Payment for purchase of territories and related fixed assets, net of cash acquired (670) - ----------- ----------- Net cash provided (used) by investing activities 5,709 (352) ----------- ----------- Cash flows from financing activities: Increase (decrease) in overdraft 807 (897) Proceeds from issuance of debt 2,976 358 Principal payments on debt (867) (1,003) Borrowings on revolver note 39,969 34,476 Payments on revolver note (45,514) (31,334) Financing costs paid (100) (50) ----------- ----------- Net cash provided (used) by financing activities (2,729) 1,550 ----------- ----------- Net increase in cash - - Cash at beginning of period - - ----------- ----------- Cash at end of period $ - $ - =========== ===========
The accompanying notes are an integral part of these financial statements. BROWNE BOTTLING COMPANY Unaudited Consolidated Statements of Cash Flows (in thousands) - ------------------------------------------------------------------------------- Supplemental Disclosures of Cash Flow Information
Three Months Ended March 31, 1996 1997 ----------- ----------- Cash paid during the period for interest $ 3,401 $ 2,683 =========== =========== Cash paid during the period for income taxes $ 123 $ - =========== ===========
The accompanying notes are an integral part of these financial statements. BROWNE BOTTLING COMPANY Notes to Unaudited Consolidated Financial Statements - ------------------------------------------------------------------------------- 1. NATURE OF BUSINESS All-American Bottling Corporation (the "Company") is a wholly-owned subsidiary of Browne Bottling Company ("BBC"). BBC has no independent operations and its only material asset is its investment in the Company. The Company is an independent bottler and distributor of soft drinks and other beverage products, including flavored and premium waters, brewed teas, natural sodas and sparkling juices. The Company's largest markets in terms of franchise case sales volume are the metropolitan areas of Milwaukee, Louisville, Nashville and Oklahoma City. The Company has franchise agreements covering various territories for brands such as RC Cola, Diet Rite Cola, Seven-Up, Dr Pepper, Sunkist, Canada Dry, Dad's Root Beer, Crush, A&W Root Beer, Big Red, Sundrop, Snapple, Mistic, Evian and Yoo-Hoo. 2. BASIS OF PRESENTATION The interim financial statements included herein have been prepared by BBC without audit, pursuant to the rules and regulations promulgated by the Securities and Exchange Commission (the "Commission"). Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been omitted pursuant to Commission rules and regulations; nevertheless, BBC believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with BBC's audited financial statements and the notes thereto included in BBC's Annual Report on Form 10-K for the year ended December 31, 1996 filed with the Commission. In the opinion of management, the accompanying interim financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position, the results of operations, cash flows and stockholders' equity of BBC for the three month periods ended March 31, 1996 and 1997. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year. The accompanying financial statements include the accounts of BBC and its wholly-owned subsidiary, the Company. All significant intercompany balances and transactions have been eliminated. In August 1993, the Company issued $45 million principal amount of 13% Senior Secured Notes (the "Senior Notes"), which indebtedness has been fully and unconditionally guaranteed by BBC. The separate financial statements of the Company have not been included because the assets, liabilities, earnings and equity of the Company are substantially equivalent to the assets, liabilities, earnings and equity of BBC on a consolidated basis and therefore are not considered material. 3. ASSET SALES AND PURCHASES In January, 1997, the Company purchased franchise rights and vending equipment in Cookesville, Tennessee for $50,000. In January, 1997, the Company purchased the assets of Beverage Service Corporation, a vending company doing business in Wisconsin owned by Randall Wissink, the Group President of the Mid-West Division, and Carl Heiss, the controller of the Mid-West Division, for $182,000. The assets included receivables, inventory and fixed assets purchased at fair market value. 4. DEBT COVENANTS At March 31, 1997, the Company was not in compliance with the consolidated interest coverage ratio covenant contained in its Senior Credit Facility. The ratio (as defined) required by the Senior Credit Facility is 1.25 to 1, and the Company's ratio at March 31, 1997, was 1.06 to 1. The Company has made all scheduled principal and interest payments required by the Senior Credit Facility to date. BT Commercial, agent, and the participating banks, have agreed to waive the Company's non-compliance with such covenant, subject to receipt from the Company of a $50,000 fee for such waiver. The Company has elected not to pay the requested fee, and has again requested BT Commercial, as agent, and the participating banks for a waiver, but no such waiver has yet been received by the Company. BT Commercial, as agent, and the participating banks have not declared a default with respect to the Senior Credit Facility, nor have they accelerated the maturity of the indebtedness under the Senior Credit Facility, nor has BT Commercial, as agent, and the participating banks indicated any intention of declaring an event of default or an acceleration of maturity of the indebtedness under the Senior Credit Facility. The Company has executed a letter of intent with another lending institution for a $20 million credit facility with terms similar to the Senior Credit Facility. The new facility is expected to be in place by June, 1997. 5. ADJUSTED HISTORICAL RESULTS During 1996 the Company sold certain assets constituting its St. Paul, Minnesota, Duluth, Minnesota, Roanoke, Virginia and Parkersburg, West Virginia operations. The following table sets forth a summary of un- audited selected financial information for the three months ended March 31, 1996 and 1997. For each of these periods, the selected financial information presented includes actual operating results for the Com- pany, while "adjusted" information has also been provided for the three months ended March 31, 1996 which eliminates all case sales data and all revenues and expenses relating to the St. Paul, Duluth, Roanoke and Parkersburg operations.
Three Months Ended March 31, Historical Adjusted 1996 1996 1997 --------------- -------------- -------------- Cases Percent Cases Percent Cases Percent ------ -------- ------ ------- ------ ------- (In thousands, except percent data) DSD sales 4,164 3,497 3,480 Distributor Sales 466 311 245 -------- -------- ------- Total Franchise 4,630 88% 3,808 86% 3,725 86% Contract Sales 608 12% 608 14% 620 14% -------- --------- -------- -------- ------- -------- Total case sales 5,238 100% 4,416 100% 4,345 100% Produced 4,887 93% 4,246 96% 3,802 87% Purchased 475 9% 390 9% 592 14% Inventory - (inc.)/dec (124) -2% (220) -5% (49) -1% -------- --------- -------- -------- ------- -------- Total case sales 5,238 100% 4,416 100% 4,345 100%
Per Per Per Aggregate Case Aggregate Case Aggregate Case --------- ----- --------- ----- --------- ----- (In thousands, except per case and per share data) Franchise sales $ 30,615 $ 6.61 $ 25,740 $ 6.76 $ 25,074 $ 6.73 Contract sales 2,918 4.80 2,918 4.80 2,879 4.64 -------- -------- -------- Net sales 33,533 6.40 28,658 6.49 27,953 6.43 Cost of goods sold 22,286 4.25 18,597 4.21 17,639 4.06 -------- ----- -------- ------ -------- ------ Gross profit 11,247 $ 2.15 10,061 $ 2.28 10,314 $ 2.37 Operating expenses 12,515 10,330 10,199 -------- -------- -------- Operating income (loss) (1,268) (269) 115 Gain (loss) on disposals (1,926) 435 12 Interest expense (1,892) (1,575) (1,669) Other income 14 49 277 -------- -------- -------- Net income (loss) before income tax benefit (5,072) (1,360) (1,265) Income tax benefit 1,194 453 456 -------- -------- -------- Net loss $ (3,878) $ (907) $ (809) ======== ======== ======== EPS $ (20.17) $ (4.72) $ (4.21) EBITDA $ 27 $ 803 $ 1,457 EBITDA consists of net income (loss) before (a) income taxes, (b) interest expense, (c) depreciation, (d) amortization, (e) gain (loss) on asset sales, and (f) other non-cash charges. EBITDA should not be considered as an alternative to, or more meaningful than, operating income or cash flow as an indicator of the Company's operating performance.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL All-American Bottling Corporation (the "Company") is an independent bottler and distributor of soft drinks and other beverage products operating in six states, and is a wholly-owned subsidiary of Browne Bottling Company ("BBC"). The Company's soft drink product portfolio includes such well-known national brands such as RC Cola, Diet Rite Cola, Seven-Up, Dr Pepper, Sunkist, Canada Dry, Dad's Root Beer, Crush and A&W Root Beer, as well as leading regional brands such as Big Red and Sundrop. Other beverages distributed by the Company include Snapple, Mistic, Evian and other waters and are commonly referred to as "alternative beverages". The Company's largest markets in terms of franchise case sales volume are the metropolitan areas of Milwaukee, Louisville, Nashville and Oklahoma City. In August 1993 the Company issued $45.0 million principal amount of 13% Senior Secured notes due 2001 (the "Senior Notes"), guaranteed by BBC, and entered into a new senior secured credit facility (the "Senior Credit Facility") providing for borrowing availability of up to $20.0 million, subject to borrowing base limitations. The Company's primary measurement of unit volume is franchise and contract case sales. Franchise case sales represent sales of products in the Company's franchise territories, while contract case sales consist of product sold under contract manufacturing arrangements to private label or other bottlers. Produced product consists of product manufactured by the Company in its own facilities and purchased product is finished product purchased from other bottlers and suppliers. EBITDA includes net income (loss) before income taxes, interest expense, depreciation, amortization, gain (loss) on asset sales and other non-cash charges. EBITDA should not be considered as an alternative to, or more meaningful than, operating income or cash flow (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's operating performance or liquidity. The operating results for the three month period ended March 31, 1997 is not directly comparable to the operating results for the three month period ended March 31, 1996, as the results for the 1996 period are materially affected by the sale of assets in St. Paul and Duluth, Minnesota, Roanoke, Virginia and Parkersburg, West Virginia. The sales of these operations significantly reduced case sales, net sales, cost of goods sold, gross profit, and administrative, marketing and general expenses. In order to provide comparable information, the selected financial information included in Note 5 of the interim financial statements for the three months ended March 31, 1996 has been "adjusted" to eliminate these operations. Accordingly, the following discussion of the results of operations compares the actual results of operations for the three months ended March 31, 1997 with the actual, as well as "adjusted", results of operations for the corresponding period ended March 31, 1996. During 1996 the Company also sold territories in Madison, Wisconsin and Pulaski, Tennessee and purchased a territory in LaCrosse, Wisconsin. The information presented in Note 5 of the interim financial statements has not been adjusted for these territory sales and acquisitions due to their immaterial impact on the comparability of financial information. RESULTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1997 VS. THREE MONTHS ENDED MARCH 31, 1996 The following discussion addresses the results of operations for the three months ended March 31, 1997 (the "Current Quarter") compared to the corresponding period ended March 31, 1996 (the "Prior Quarter") and the "adjusted" corresponding period ended March 31, 1996 (the "Adjusted Prior Quarter"). Net sales for the Current Quarter were $28.0 million compared to $33.5 million for the Prior Quarter, a $5.6 million or 16.6% decrease due to lower franchise case sales resulting primarily from the sales of the Minnesota, Roanoke, Virginia and Parkersburg, West Virginia territories. Franchise case sales were 3.7 million cases for the Current Quarter compared to 4.6 million cases for the Prior Quarter, a decrease of 905,000 or 19.5%. After the adjustment for sold operations, net sales decreased $705,000 or 2.5% for the Current Quarter compared to the Adjusted Prior Quarter due to a decrease in franchise case sales for the Current Quarter of 83,000 cases or 2.2% from the Adjusted Prior Quarter. This decrease in franchise cases is primarily attributable to volume declines in the Kentucky division. The average net selling price for franchise sales for the Company was $6.73 in the Current Quarter compared to $6.61 for the Prior Quarter and $6.76 for the Adjusted Prior Quarter. The improvement in the average net selling price for the Current Quarter compared to the Prior Quarter is due primarily to the sale of the Minnesota territories which had an average net selling price of $5.38 for the Prior Quarter. Contract case sales increased to 620,000 cases for the Current Quarter from 608,000 cases for the Prior Quarter. The average net selling price for contract cases decreased to $4.64 for the Current Quarter compared to $4.80 for the Prior Quarter. The change in volume is attributable primarily to additional case sales in the Company's Louisville production facility made pursuant to a production agreement with bottlers in Pulaski, Tennessee and Roanoke, Virginia partially offset by a reduction in contract bottling sales in the Oshkosh production facility. On a company-wide basis the average net selling price for all cases was $6.43 for the Current Quarter, $6.40 for the Prior Quarter and $6.49 for the Adjusted Prior Quarter. The decline in the average net selling price in the Current Quarter compared to the Adjusted Prior Quarter is partially attributable to a higher percentage of sales resulting from lower priced contract sales and partially due to a decline in the net selling price to remain competitive as a result of the overall industry-wide reduction in the per case cost of goods as described below. Cost of goods sold decreased $4.6 million or 20.9% for the Current Quarter compared to the Prior Quarter due to volume declines resulting from the sold territories. Cost of goods sold decreased $958,000 or 5.2% for the Current Quarter compared to the Adjusted Prior Quarter due primarily to a reduction in sweetener and plastic bottle costs and partially to an overall volume decrease of 1.6%. Gross profit for the Current Quarter was $10.3 million compared to $11.2 million for the Prior Quarter, a decrease of $933,000 or 8.3% due to the volume declines resulting from the territory sales in 1996. Gross profit increased $253,000 or 2.5% for the Current Quarter compared to the Adjusted Prior Quarter due to reduced sweetener and plastic bottle costs. Gross margin (gross profit as a percentage of sales) improved to 36.9% for the Current Quarter compared to 35.1% for the Adjusted Prior Quarter and 33.5% for the Prior Quarter. Operating expenses declined $2.3 million or 18.5% for the Current Quarter compared to the Prior Quarter due to overall decreases in expenses as a result of the decreased volume of case sales. Operating expenses decreased $131,000 or 1.3% in the Current Quarter compared to the Adjusted Prior Quarter due to reduced payroll and utility costs partially offset by an increase in depreciation expense. The loss on sale of assets of $1.9 million for the Prior Quarter resulted primarily from the loss on the sale of the Minnesota territories partially offset by gains on the sales of Roanoke, Virginia, Madison, Wisconsin and Pulaski, Tennessee. In the Current Quarter there was a gain on sale of $12,000. Interest expense was $1.7 million for the Current Quarter compared to $1.9 million for the Prior Quarter. The decrease in interest of $223,00 in the Current Quarter compared to the Prior Quarter is due to lower levels of debt resulting from the application of the sales proceeds from territory sales in 1996. Other income was $277,000 in the Current Quarter compared to $14,000 for the Prior Quarter, an increase of $263,000 due to income recognized under long-term supply arrangements with major suppliers. Pretax net loss for the Current Quarter was $1.3 million compared to a pretax net loss for the Prior Quarter of $5.1 million. The reduction in the loss resulted from improved operations in the Current Quarter and the loss on sale recognized in the Prior Quarter. Compared to the Adjusted Prior Quarter the pretax loss improved by $95,000 primarily due to the lower cost of goods sold. EBITDA was $1.5 million for the Current Quarter compared to $27,000 for the Prior Quarter and $803,000 for the Adjusted Prior Quarter. The increase in EBITDA for the Current Quarter compared to the Adjusted Prior Quarter is attributable to improved gross margins resulting from the lower cost of goods sold, the reduced operating expenses and the increased other income described above. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997 the Company had a working capital deficit of $9.8 million caused by the classification as current of the $14.0 million balance outstanding on the Senior Credit Facility. The Company had working capital (excluding cash overdraft and the current portion of long-term debt and other obligations) of $6.0 million at March 31, 1997 compared to $4.8 million at December 31, 1996. The increase in working capital is due primarily to the decline in accrued interest and an increase in inventory partially offset by an increase in trade payables. The Company's working capital needs have historically been funded from operations and from borrowings under its Senior Credit Facility and from affiliates. The Company's long-term debt (including current maturities and amounts payable under non-compete and deferred compensation agreements) was approximately $55.5 million at March 31, 1997. Scheduled principal payments are estimated to be approximately $1.2 million for the twelve months ending March 31, 1998, of which approximately $580,000 represents unsecured demand notes held by Stephen B. Browne, the Chief Executive Officer of the Company and BBC and BBC's principal stockholder, and entities affiliated with him. Mr. Browne and affiliated entities from time to time make unsecured loans to the Company at the same interest rates charged under the Company's Senior Credit Facility. At March 31, 1997, the Company's borrowing base under its Senior Credit Facility was $15.0 million, and the Company had borrowings of $14.0 million and an additional $138,000 of letters of credit outstanding leaving $839,000 of available credit. At March 31, 1997 the Company was not in compliance with the consolidated interest coverage ratio covenant required in the Senior Credit Facility. The ratio at March 31, 1997 was 1.06 to 1 whereas the Senior Credit Facility requires a ratio of at least 1.25 to 1. As discussed in Note 4 to the interim financial statements, BT Commercial, agent, and the participating banks have agreed to waive the Company's noncompliance subject to receipt of a $50,000 fee which the Company has elected not to pay. BT Commercial, as agent, and the participating banks have not declared a default or accelerated the maturity of the indebtedness under the Senior Credit Facility, nor have they indicated any intention to do so. The Company has executed a letter of intent with another lending institution for a $20 million credit facility with terms similar to the Senior Credit Facility. The new facility is expected to be in place by June 1997. For the Current Quarter, the Company's operating activities used cash of $1.2 million compared to cash used of $3.0 million for the Prior Quarter. The net cash used of $1.2 million by operating activities in the Current Quarter resulted primarily from significant decreases in the accrued interest and increases in inventories partially offset by increases in accounts payable. The net cash used of $3.0 million in the Prior Quarter resulted primarily from cash used from operations of $1.8 million and increases in inventories and decreases in accrued interest partially offset by increases in accounts payable. During the Current Quarter investing activities used cash of $352,000 primarily for capital expenditures compared to cash provided of $5.7 million in the Prior Quarter. The cash provided in the Prior Quarter resulted primarily from sales of the Minnesota, Roanoke, Virginia, Madison, Wisconsin, and Pulaski, Tennessee territories partially offset by cash used for capital expenditures and to purchase a territory in LaCrosse, Wisconsin. Financing activities provided cash of $1.6 million in the Current Quarter primarily due to increased borrowings over payments of $3.1 million on the Senior Credit Facility partially offset by principal payments on debt of $1.0 million and a decrease in the cash overdraft of $897,000. Principal payments on debt of $1.0 million include approximately $125,000 for the repurchase of the Company's Senior Notes and $746,000 paid on unsecured demand notes from Mr. Browne and his affiliates. The Company's earnings before income taxes and fixed charges were insufficient to cover its fixed charges by $1.3 million for the Current Quarter. EBITDA and interest expense for the Current Quarter were $1.5 million and $1.7 million, respectively. If the Company experiences a deterioration in operating results, its ability to generate sufficient cash to cover its interest expense would be reduced, and the Company may be unable to meet its interest obligations. The Company must make certain capital expenditures on an annual basis in order to maintain its business and assets and compete effectively. The Company expects to spend approximately $1.5 million on capital expenditures for the nine months ending December 31, 1997. To the extent that requirements for debt service and capital expenditures exceed cash flow from operations, the Company will need to finance such requirements with additional indebtedness or defer capital expenditures. FORWARD LOOKING STATEMENTS When used in this document, the words "anticipate", "estimate", "believe", "expect" and similar expressions are intended to identify forward looking statements. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. 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 Matters to a Vote of Security Holders None. Item 5. Other Information. None. Item 6. Exhibit and Reports on Form 8-K. (a) The following exhibit is filed with this Form 10-Q and is identified by the number indicated: 27 Financial Data Schedule (b) No reports on Form 8-K were filed during the period covered by this report. 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. ALL-AMERICAN BOTTLING CORPORATION Date: May 13, 1997 By: STEPHEN B. BROWNE Stephen B. Browne President, Chief Executive Officer and Chairman Of the Board Date: May 13, 1997 By: STEPHEN R. KERR Stephen R. Kerr Vice President and Chief Financial Officer BROWNE BOTTLING COMPANY Date: May 13, 1997 By: STEPHEN B. BROWNE Stephen B. Browne President, Chief Executive Officer and Chairman Of the Board Date: May 13, 1997 By: STEPHEN R. KERR Stephen R. Kerr Vice President and Chief Financial Officer EXHIBIT INDEX
Exhibit Number Brief Description Method of Filing - ------- ----------------- ---------------- 27 Financial Data Schedule Filed herewith electronically
EX-27 2
5 0000825811 ALL AMERICAN BOTTLING CORPORATION 1,000 3-MOS DEC-31-1997 MAR-31-1997 (657) 0 10,212 445 8,146 22,059 36,166 24,359 76,184 31,861 40,370 0 0 2 (8,463) 76,184 27,953 27,953 17,639 17,639 10,199 0 1,669 (1,265) (456) (809) 0 0 0 (809) (4.21) (4.21)
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