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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[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
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-69274
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THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC.
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(Exact name of registrant as specified in its charter)
Nevada 75-1494591
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1999 Bryan Street, Suite 3300, Dallas, Texas 75201
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (214) 969-1910
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 (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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The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of April 1, 1997 was $0.00.
As of April 1, 1997, 100,000 shares of the Company's Common Stock, par
value $.10 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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PART I
FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--MARCH 31, 1997 AND DECEMBER 31, 1996
(Amounts in Thousands, Except Share Data)
March 31, December 31,
1997 1996
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CURRENT ASSETS:
Cash and cash equivalents $ 2,414 $ 3,182
Receivables-
Trade accounts, net of allowance
for doubtful accounts of $508 as of
March 31, 1997 and $540 as of
December 31, 1996 16,138 17,782
Other 10,777 6,818
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26,915 24,600
Inventories 11,140 9,843
Prepaid expenses and other 1,784 2,400
Deferred tax asset 5,905 5,848
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Total current assets 48,158 45,873
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PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 5,796 5,796
Buildings and improvements 30,280 28,257
Vending machines, machinery and equipment 72,652 69,444
Furniture and fixtures 3,587 3,859
Transportation equipment 18,018 17,745
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130,333 125,101
Less-Accumulated depreciation and
amortization (80,846) (79,424)
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Property, plant and equipment, net 49,487 45,677
OTHER ASSETS:
Franchise rights, net of accumulated
amortization of $38,630 as of March 31,
1997 and $37,744 as of December 31, 1996 104,726 105,910
Goodwill, net of accumulated amortization
of $1,977 as of March 31, 1997 and $1,874
as of December 31, 1996 13,742 13,558
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Franchise rights and goodwill 118,468 119,468
Deferred financing costs, and other assets,
net of accumulated amortization of $14,033
as of March 31, 1997 and $13,834 as of
December 31, 1996 16,673 16,301
Deferred tax asset 3,300 3,725
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Total other assets 138,441 139,494
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Total assets $ 236,086 $ 231,044
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The accompanying notes are an integral part
of these consolidated balance sheets.
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THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--MARCH 31, 1997 AND DECEMBER 31, 1996
(Amounts in Thousands, Except Share Data)
CURRENT LIABILITIES:
Accounts payable $19,049 $21,289
Accrued payroll 2,112 2,692
Accrued interest 4,785 1,629
Other accrued liabilities 2,934 1,392
Current maturities of long-term debt 13,008 12,816
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Total current liabilities 41,888 39,818
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LONG-TERM DEBT, net of current maturities 239,924 238,027
OTHER LIABILITIES 13,510 13,326
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, $.10 par value; 250,000 shares
authorized: 100,000 shares issued and outstanding 10 10
Additional paid-in capital 26,223 26,223
Retained deficit (85,469) (86,360)
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Total stockholder's equity (59,236) (60,127)
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Total liabilities and stockholder's equity $236,086 $231,044
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The accompanying notes are an integral part of these consolidated
balance sheets.
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THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED MARCH 31, 1997 AND 1996
(Amounts in Thousands)
1997 1996
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NET REVENUES $58,669 $56,795
COSTS AND EXPENSES:
Cost of goods sold (exclusive of
depreciation shown below) 28,881 29,268
Selling, general and administrative 20,005 17,873
Depreciation and amortization 3,480 3,275
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52,366 50,416
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Operating income 6,303 6,379
INTEREST:
Interest on debt (5,028) (5,235)
Deferred financing cost (146) (155)
Interest income 51 50
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(5,123) (5,340)
Equity in earnings of unconsolidated subsidiary 379 966
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Income before income taxes 1,559 2,005
Provision for income taxes (668) (280)
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Net income 891 1,725
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The accompanying notes are an integral part of these consolidated
statements.
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THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(Amounts in Thousands)
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 891 $ 1,725
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 3,480 3,275
Deferred tax provision 368 155
Amortization of deferred financing costs 146 155
Deferred compensation 398 394
Earnings of unconsolidated subsidiary (379) (966)
Change in assets and liabilities:
Receivables (2,315) (394)
Inventories (1,359) (3,262)
Prepaid expenses and other 616 (1,103)
Payables (2,240) 2,895
Accrued expenses 4,118 2,244
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Net cash provided by operating activities 3,724 5,118
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment, net (6,058) (3,971)
Other noncurrent assets aquired (309) (65)
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Net cash used by investing activities (6,367) (4,036)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving
credit facility 5,300 950
Payments on long-term debt (3,425) (2,384)
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Net cash provided (used) by financing activities 1,875 (1,434)
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NET DECREASE IN CASH AND CASH
EQUIVALENTS (768) (352)
CASH AND CASH EQUIVALENTS, beginning of period 3,182 3,053
CASH AND CASH EQUIVALENTS, end of period $2,414 $2,701
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The accompanying notes are an integral part of these consolidated
statements.
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THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
(1) BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements
of The Coca-Cola Bottling Group (Southwest) Inc., a Nevada
corporation (the "Company") and its wholly owned subsidiaries have
been prepared in accordance with generally accepted accounting
principles for interim financial information and reflect, in the
opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of financial
position, results of operations, and changes in cash flows at March
31, 1997 and for all periods presented. These interim financial
statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the
consolidated financial statements of the Company included in Form
10-K for the fiscal year ended December 31, 1996. The results of
operations for the period ended March 31, 1997 are not necessarily
indicative of results to be expected for the entire year ending
December 31, 1997.
(2) INVENTORIES:
Inventories consist of the following (in thousands):
Mar. 31, Dec. 31,
1997 1996
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Raw materials $ 2,752 $1,991
Repair parts and supplies 125 513
Finished goods 8,263 7,339
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$11,140 $9,843
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(3) INVESTMENT IN UNCONSOLIDATED SUBSIDIARY:
Summarized financial information for Texas Bottling Group, Inc.
("TBG") as of March 31, 1997 and December 31, 1996, is as follows
(in thousands):
Mar. 31 Dec. 31
1997 1996
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Current assets $ 49,959 $ 45,735
Noncurrent assets 211,739 210,388
Current liabilities 40,971 39,433
Long-term debt 204,750 203,000
Other liabilities 5,308 3,864
Postretirement benefit obligation 6,144 6,157
Stockholders' equity 4,525 3,669
FOR THE THREE MONTH PERIODS
ENDED MARCH 31, 1997 AND 1996:
1997 1996
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Net sales $ 48,847 $ 49,107
Cost of goods sold 25,327 26,150
Net income before income taxes 1,393 2,391
Net income 856 1,961
The Company's equity in 1997 net income resulted in the Company
recording income from TBG of $379,000.
(4) INCOME TAXES:
The Company's provision for income taxes for the periods ended
March 31, 1997 and 1996, is as follows (in thousands):
1997 1996
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Current $300 $125
Deferred 368 155
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$668 $280
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(5) COMMITMENTS, CONTINGENCIES, AND RELATED PARTIES:
The Company is a member of a soft drink canning
cooperative and owns approximately 4% (qualifying shares) at March
31, 1997. The Company had purchases of $1,231,000 and $394,000 for
the periods ended March 31, 1997 and 1996 from this cooperative.
The Company's transactions with TBG included purchases of
approximately $3,003,000 and $3,844,000 and sales of approximately
$2,166,000 and $1,639,000 for the periods ended March 31, 1997 and
1996.
The Company had purchases from Western Container
Corporation, a plastic bottle manufacturer of which the Company's
subsidiaries are shareholders, of $1,352,000 and $2,278,000 for the
periods ended March 31, 1997 and 1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Unit growth of soft drink sales is measured in equivalent case sales
which convert all wholesale bottle, can and pre-mix unit sales into a value
of equivalent cases of 192 ounces each. Unit sales of post-mix and contract
bottling are not generally included in discussions concerning unit sales
volume as post-mix sales are essentially sales of syrup and not of packaged
products, and contract bottling is done as capacity permits and does not
represent licensed products for the franchised territory. However, all
references to net revenues and gross profit include volumes for post-mix and
contract sales.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
NET REVENUES. Net Revenues for the Company increased by 3.3% or
approximately $1.9 million to $58.7 million in 1997. Soft drink net revenues
increased 1.9% primarily as a result of a 2.3% increase in equivalent case
sales in 1997 versus 1996. Net revenues for post-mix as a percentage of
total net revenues increased to 11.9% in 1997, as compared to 11.4% in 1996.
Net revenues for Automated & Custom Food Services, Inc. increased in 1997 by
approximately 4.4% over 1996.
GROSS PROFIT. Gross Profit increased by 8.2% from $27.5 million to
$29.8 million, primarily as a result of the increase in revenues resulting
from the increase in equivalent case sales noted above and reductions in raw
material costs for PET bottles and sweetener. The reduction in raw material
cost accounted for an improvement in gross profit as a percentage of net
revenues to 50.8% in 1997 as compared to 48.5% in 1996.
SELLING, GENERAL & ADMINISTRATIVE. Selling, general and administrative
expenses increased 11.9% or approximately $2.1 million in 1997. Selling,
general and administrative expense as a percentage of net revenues increased
to 34.1% in 1997 from 31.5% in 1996. A significant increase in expenditures
for marketing related items such as display racks, barrels and point-of-sale
materials accounted for the largest portion of the increase. These types of
expenditures have historically been expensed as incurred although they may
benefit sales results in future periods as well as the current period.
Higher labor costs associated with increased hiring for certain key sales
positions also contributed to the increase.
OPERATING INCOME. As a result of the above, together with a $0.2
million increase in depreciation and amortization, operating income for the
period ended March 31, 1997 decreased to $6.3 million, or 10.7% of net
revenue, compared to $6.4 million or 11.2% of net revenue for the same period
in 1996.
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INTEREST EXPENSE. Net interest expense decreased by approximately $0.2
million in 1997 due primarily to lower debt levels as a result of scheduled
principal payments.
EQUITY IN INCOME OF UNCONSOLIDATED SUBSIDIARY. The Company recognized
equity in the income of TBG in 1997 of $0.4 million. TBG recorded net
income of approximately $0.9 million in 1997 compared to net income of
approximately $2.0 million in 1996. TBG's operating income was 26.9% lower in
1997 compared to 1996.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1997, cash provided by operating
activities was $3.7 million, generated primarily by net income plus
depreciation and amortization. Investing activities used $6.4 million
primarily for additions to property, plant and equipment while financing
activities provided $1.9 million primarily from borrowings under the
revolving credit facility to support the increased additions to property,
plant and equipment.
In connection with the 1995 Bank Agreement the Company has entered into
an interest rate cap agreement which caps the three month LIBOR rate at 9% on
a notional principal amount of $60 million for four years. The Company has
no interest rate exposure under the agreement other than the initial purchase
cost of $0.6 million.
The Company will continue to evaluate the realizability of its deferred
tax asset in relation to future taxable income and adjust the valuation
allowance accordingly. At March 31, 1997, the Company recognized provision
for income taxes of $0.7 million of which $0.4 million represents deferred
taxes.
The Company's business is subject to seasonality due to the influence of
weather conditions on consumer demand for soft drinks, which affects working
capital. Sales are stronger in warmer months. The first quarter of
operating performance is usually lower than the other three quarters due to
the winter weather, primarily in the months of January and February.
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
(1) A current report on Form 8-K was filed with the Securities and
Exchange Commission on April 1, 1997 reporting changes in beneficial
ownership of Class A Common Stock of CCBG Corporation, the parent
of the Registrant resulting from transactions dated March 21, 1997.
(2) A current report on Form 8-K was filed with the Securities and
Exchange Commission on April 11, 1997 reporting a change in beneficial
ownership of 3800 shares of the Class A Common Stock of CCBG
Corporation, the parent of the Registrant, resulting from the change
of co-trustees for a trust effective March 21, 1997.
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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.
The Coca-Cola Bottling Group (Southwest), Inc.
(Registrant)
Date April 25, 1997 By: /s/ Charles F. Stephenson
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Charles F. Stephenson
President and Chief Financial
Officer (duly authorized officer and
Principal Financial Officer)
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