<PAGE>
UNITED STATES
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 June 30, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period to
Commission file number: 1-10064
DR PEPPER/SEVEN-UP COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2233365
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8144 WALNUT HILL LANE DALLAS, TEXAS 75231-4372
(Address of principal executive offices) (Zip Code)
(214) 360-7000
(Registrant's telephone number, including area code)
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. [X] Yes [ ] No
The number of shares of each class of Registrant's common stock outstanding
as of June 30, 1994 was as follows: 61,507,541 shares of Common Stock.
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DR PEPPER/SEVEN-UP COMPANIES, INC.
INDEX
Page
Part I - Financial Statements
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
June 30, 1994 and December 31, 1993 3
Consolidated Condensed Statements of Operations
Three and six months ended June 30, 1994 and 1993 4
Consolidated Condensed Statement of Stockholders' Deficit
Six months ended June 30, 1994 5
Consolidated Condensed Statements of Cash Flows
Six months ended June 30, 1994 and 1993 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Part II - Other Information
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
2
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<TABLE>
DR PEPPER/SEVEN-UP COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
<CAPTION>
June 30, December 31,
1994 1993
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Accounts receivable, less allowance for doubtful
accounts of $2,042 in 1994 and $1,737 in 1993 $ 92,830 70,255 Inventories17,00014,550
Prepaid advertising and other current assets 12,247 18,480
Deferred income taxes 24,399 24,175
Total current assets 146,476 127,460
Property, plant and equipment, net 18,632 19,012
Intangible assets 538,317 602,860
Less accumulated amortization 117,986 111,434
Total intangible assets, net 420,331 491,426
Other assets, principally deferred debt issuance costs, net 41,333 42,125
Total assets $ 626,772 680,023
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 16,588 25,060
Accrued expenses 74,868 84,292
Current portion of long-term debt 90,067 85,274
Total current liabilities 181,523 194,626
Long-term debt, less current portion 762,954 790,540
Deferred credits and other 28,889 28,805
Deferred income taxes 32,002 86,156
Stockholders' deficit:
Common Stock, $.01 par value, 61,509,992
shares in 1994 and 60,796,377 shares in 1993 issued 615 608
Additional paid-in capital 414,844 406,728
Accumulated deficit (794,274) (827,672)
Foreign currency translation adjustment 219 232
Treasury stock, 2,451 shares in 1994 and 148,152
shares in 1993, at cost - -
Total stockholders' deficit (378,596) (420,104)
Total liabilities and stockholders' deficit $ 626,772 680,023
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
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<TABLE>
DR PEPPER/SEVEN-UP COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 1994 and 1993
Unaudited
(In thousands, except per share amounts)
<CAPTION>
Three Months Six Months
1994 1993 1994 1993
<S> <C> <C> <C> <C> <C>
Net sales $ 197,389 182,523 383,130 353,305
Cost of sales 32,876 31,468 64,633 57,684
Gross profit 164,513 151,055 318,497 295,621
Operating expenses:
Marketing 98,533 88,375 192,670 178,588
General and administrative 7,933 7,037 16,316 14,356
Amortization of intangible assets 2,782 3,789 6,551 7,578
Total operating expenses 109,248 99,201 215,537 200,522
Operating profit 55,265 51,854 102,960 95,099
Other income (expense):
Interest expense (18,283) (21,058) (36,610) (45,404)
Other, net (406) 330 (807) 50
Income before income taxes and
extraordinary item 36,576 31,126 65,543 49,745
Income tax expense 12,762 855 24,033 1,462
Income before extraordinary item 23,814 30,271 41,510 48,283
Extraordinary item -
extinguishments of debt, less
applicable income taxes - - 8,112 14,901
<PAGE>
Net income 23,814 30,271 33,398 33,382
Income per common share and share
equivalents:
Income before extraordinary item $ 0.36 0.46 0.62 0.78
Extraordinary item - - (0.12) (0.24)
Net income $ 0.36 0.46 0.50 0.54
Weighted average shares and share
equivalents outstanding 66,937 66,267 66,958 62,188
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
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<PAGE>
<TABLE>
DR PEPPER/SEVEN-UP COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT
For the Six Months Ended June 30, 1994
Unaudited
(In thousands)
<CAPTION>
Foreign
Currency
Trans- Total
Additional lation Stock-
Number of Common Paid-in Accumulated Adjust- Treasury holders'
Shares Stock Capital Deficit ment Stock Deficit
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993 60,648 $ 608 $406,728 $(827,672) $232 $ - $(420,104)
Exercise of
employee
stock options,
including tax
benefits 714 7 7,889 - - - 7,896
Net income - - - 33,398 - - 33,398
Other 146 - 227 - (13) - 214
------ ------ ------- -------- ------ ------ -------
Balance at
June 30, 1994 61,508 $ 615 $414,844 $(794,274) $219 $ - $(378,596)
====== ====== ======= ======= ====== ====== =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
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<TABLE>
DR PEPPER/SEVEN-UP COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1994 and 1993
Unaudited
(In thousands)
<CAPTION>
1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 33,398 33,382
Adjustments to reconcile net income to net cash provided
by operating activities: Depreciation and amortization of intangibles, debt
discounts and deferred debt issuance costs 27,433 30,922
Deferred income taxes 11,665 -
Debt restructuring charge 1,305 6,815
Changes in assets and liabilities:
Accounts receivable (22,575) (29,018)
Inventories (2,450) (3,682)
Prepaid advertising and other assets 3,142 9,124
Accounts payable and accrued expenses (18,140) (20,128)
Other 5,733 362
Net cash provided by operating activities 39,511 27,777
Cash flows from investing activities:
Capital expenditures (1,094) (593)
Other (697) -
Net cash used in investing activities (1,791) (593)
Cash flows from financing activities:
Proceeds from sale of common stock - 305,873
Proceeds from long-term debt 162,000 139,000
Payments on long-term debt (151,735) (375,750)
Redemption of preferred stock - (98,383)
Retirement of subordinated debt (48,445) -
Increase (decrease) in cash overdraft (1,256) 2,063
Other 1,716 13
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Net cash used in financing activities (37,720) (27,184)
Net decrease in cash and cash equivalents - -
Cash and cash equivalents at beginning of period - -
Cash and cash equivalents at end of period $ - -
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
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DR PEPPER/SEVEN-UP COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED
JUNE 30, 1994
1. General
The accompanying consolidated condensed balance sheet as of June 30,
1994, the consolidated condensed statements of operations for the
three months and six months ended June 30, 1994 and 1993, the
consolidated condensed statement of stockholders' deficit for the six
months ended June 30, 1994 and the consolidated condensed statements
of cash flows for the six months ended June 30, 1994 and 1993 are
unaudited but include, in the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation. The results of operations for the three months and six
months ended June 30, 1994 are not necessarily indicative of the
operating results that may be expected for the full fiscal year.
These financial statements are for interim periods and do not include
all detail normally provided in annual financial statements.
They should be read in conjunction with the consolidated
financial statements of Dr Pepper/Seven-Up Companies, Inc. and
subsidiaries for the year ended December 31, 1993 included in the
Company's Annual Report on Form 10-K.
As hereinafter used, unless the context requires otherwise, the
"Company" means Dr Pepper/Seven-Up Companies, Inc. together with its
direct and indirect subsidiaries, and the "Holding Company" means
Dr Pepper/Seven-Up Companies, Inc. Dr Pepper/Seven-Up Corporation
("DP/7UP") is a direct operating subsidiary of the Holding Company.
Income per common share and share equivalents is based on the income
applicable to the fully diluted weighted average number of shares of
the Company's common stock, par value $.01 per share ("Common Stock"),
outstanding of approximately 66,937,000 and 66,267,000 shares for the
three months ended June 30, 1994 and 1993, respectively, and
66,958,000 and 62,188,000 shares for the six months ended June 30,
1994 and 1993, respectively. The weighted average number of shares of
Common Stock outstanding assumes the exercise of dilutive warrants and
stock options. Income per common share and share equivalents is the
same for primary and fully diluted per share amounts.
<PAGE>
7
<PAGE>
2. Inventories
Inventories consisted of the following at June 30, 1994 and
December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C> <C>
Finished products $ 5,746 5,362
Raw materials and supplies 11,254 9,188
------ ------
Total inventories $ 17,000 14,550
====== ======
</TABLE>
3. Subordinated Debt Retirement
In the first quarter of 1994, the Company completed an open market
purchase of a portion of its 11 1/2% Senior Subordinated Discount
Notes due 2002 (the "Discount Notes"). The Company borrowed $59.6
million under its credit agreement (the "Credit Agreement") to retire
$48.4 million accreted value of the Discount Notes. In connection
with this transaction, the Company recorded an extraordinary charge of
$8.1 million. The charge reflected a write-off of a portion of the
unamortized balance of deferred debt issuance costs as well as the
premium paid in excess of accreted value, net of tax.
4. Preferred Stock Redemption
On July 8, 1994, DP/7UP called for redemption all of its outstanding
shares of DP/7UP Preferred Stock (as hereinafter defined). All
1,268,174 outstanding shares will be redeemed on August 31, 1994 at a
redemption price of $10.9625 per share. DP/7UP will use approximately
$13.9 million of Credit Agreement borrowings to effect the redemption.
5. Contingencies
(a) Internal Revenue Service Matter
The Internal Revenue Service has completed its examination of
Federal income tax returns of Dr Pepper Company ("Dr Pepper") and
The Seven-Up Company ("Seven-Up"), predecessors in interest to
DP/7UP, for the periods ended December 31, 1986, December 31,
1987
<PAGE>
8
<PAGE>
and May 19, 1988, and of the Company for the period ended
December 31, 1988. The Company was notified of proposed IRS
adjustments disallowing certain deductions, including
substantially all amortization of intangible assets related to
the 1986 acquisitions of Dr Pepper and Seven-Up. During the
second quarter of 1994, the Company accepted a global tax
settlement from the IRS with respect to certain proposed
adjustments relating to the deductibility of a portion of
intangible assets. As a result of the settlement, the Company
reduced its recorded deferred tax liabilities by approximately
$65.0 million. The corresponding effect of this adjustment to
deferred tax liabilities was applied as a reduction of intangible
assets for financial reporting purposes. If the remaining
proposed IRS adjustments are sustained, in whole or in part,
the Company's net operating loss carryforwards for federal income
tax purposes would be significantly reduced. The Company is
vigorously contesting the remaining proposed adjustments.
Management of the Company believes the ultimate resolution of the
remaining proposed adjustments will not have a material adverse
effect on the Company's operating results or financial condition.
(b) Steiner Litigation
Sidney J. Steiner, the landlord under the Company's former lease
covering its former headquarters facilities, and Harbord Midtown,
a Texas partnership, filed suit against the Company in the 95th
Judicial District Court, Dallas County, Texas, on May 25, 1988 in
connection with the Company's move of its corporate headquarters.
The landlord has alleged that the Company breached an oral
agreement to lease space in a new office building the landlord
planned to construct on such premises. The landlord seeks to
recover $470,000 in architectural fees and other costs claimed
to have been incurred as a result of such agreement and the
landlord claims to have suffered $24.0 million in other damages
as a result of the Company's alleged breach. Additionally, on
October 12, 1989, the landlord amended its complaint in this
cause of action to include allegations that the Company
fraudulently misrepresented the existence of asbestos in the
Company's former headquarters facilities, which were purchased by
the landlord and leased back to the Company in 1985. The
landlord claims damages in excess of $4.0 million related to the
additional allegations.
The lawsuit was dismissed without prejudice pursuant to an Agreed
Order Granting Joint Motion for Non-Suit on May 18, 1992.
Subsequent to filing the lawsuit, Steiner sold the property and
the claim in litigation to a third party, who in turn later sold
the property and the claim to another party, who became a debtor
in a bankruptcy proceeding. The trustee in bankruptcy sold the
claim in the lawsuit to Canco Properties ("Canco"), San Antonio,
<PAGE>
Texas, who
9
<PAGE>
refiled the lawsuit on January 29, 1993. By letter dated
September 21, 1993, Canco claimed that additional discovery and
investigation resulted in an increase in estimated damages, and
now estimates their damages to be over $31.5 million, with
punitive damages in excess of $50.0 million in the aggregate. On
May 4, 1994, Canco amended its petition to add claims for
negligent misrepresentation and fraud based upon the Company's
alleged failure to disclose the existence of water leaks in the
building at the time the building was sold to Steiner in August
1985. The court has set a trial date of September 19, 1994.
On December 4, 1990, Steiner filed a claim with the American
Arbitration Association seeking compensation for damage allegedly
caused by the Company to its former corporate headquarters
building during the Company's occupancy of such building as
tenant under a lease agreement with Steiner. This claim was
subsequently sold in the same manner as described in the
immediately preceding paragraph with respect to the litigation
and is now owned by Canco. Canco presently seeks damages in
connection with this claim in the amount of approximately $11.5
million as well as an unspecified amount of punitive damages and
attorneys' fees. An arbitration hearing with respect to this
claim began on November 8, 1993 in Dallas, Texas; however, due to
the death of the arbitrator, a new arbitrator was appointed. The
parties conducted the arbitration hearing from June 28 through
July 7, 1994. The parties will be submitting post-hearing briefs
on August 3, 1994 and a decision by the arbitrator is expected
within thirty days of such date. The decision of the arbitrator
will be binding on the parties.
The Company believes that the claims alleged in the lawsuit and
arbitration proceeding are without merit and intends to
vigorously contest these allegations. The Company further
believes that the resolution of these matters will not have a
material adverse effect on its operating results or financial
condition.
(c) Other Litigation
DP/7UP is a defendant in various other lawsuits arising out of
the ordinary conduct of its business. Management of the Company
believes the resolution of these matters will not have a material
adverse effect on the Company's operating results or financial
condition.
<PAGE>
10
<PAGE>
DR PEPPER/SEVEN-UP COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
June 30, 1994
Results of Operations - Six Months Ended June 30, 1994 Compared to Six
Months
Ended June 30, 1993 and Three Months Ended June 30, 1994 Compared to
Three Months Ended June 30, 1993
Net sales for the six months ended June 30, 1994 increased 8.4% to
$383.1 million compared to $353.3 million for the six months ended June
30, 1993. Net sales for the three months ended June 30, 1994 increased 8.1%
to $197.4 million compared to $182.5 million in the second quarter of 1993.
The increases were primarily the result of increased sales volume for
DR PEPPER brands over the comparable periods in 1993, as well as selected
price increases.
Cost of sales for the six months ended June 30, 1994 increased 12.0%
to $64.6 million compared to $57.7 million in the first six months of 1993.
Cost of sales for the three months ended June 30, 1994 increased 4.5% to
$32.9 million compared to $31.5 million in the second quarter of 1993.
These increases resulted from the increase in concentrate and syrup sales
volume. Gross profit as a percentage of net sales for the six months ended
June 30 decreased from 83.7% in 1993 to 83.1% in 1994, primarily reflecting
increased sales of IBC's lower-margin finished goods and product mix.
Total operating expenses, which include marketing expense, general and
administrative expense and amortization of intangible assets, increased
7.5% to $215.5 million in the first six months of 1994 compared to $200.5
million in the same period of the prior year. Total operating expenses for
the three months ended June 30, 1994 increased 10.1% to $109.2 million from
$99.2 million in the second quarter of the prior year. These increases
were primarily due to increased marketing expenses in response to improved
sales volume.
As a result of the above factors, operating profit for the six months
ended June 30, 1994 increased 8.3% to $103.0 million compared to $95.1
million in the first six months of 1993. Operating profit for the three
months ended June 30, 1994 of $55.3 million was 6.6% higher than the $51.9
million operating profit earned in the second quarter of 1993.
Interest expense for the six months ended June 30, 1994 decreased
19.4% to $36.6 million compared to $45.4 million in the first six months of
1993. Interest expense for the three months ended June 30, 1994 decreased
13.2% to $18.3 million compared to $21.1 million in the second quarter of
<PAGE>
1993. These decreases were principally due to the impact of the Company's
deleveraging efforts.
11
<PAGE>
The increase in income tax expense in the six and three months of 1994
as compared to the same periods in 1993 is principally due to the
utilization of net operating loss carryforwards during 1993. Income tax
expense for the first six months and second quarter of 1993 consisted
principally of current state tax expense.
In connection with the retirement of a portion of the Discount Notes,
an extraordinary charge of $8.1 million was recorded in the first six
months of 1994, net of a $4.4 million tax effect. The extraordinary charge
reflects a write-off of a portion of the unamortized balance of deferred
debt issuance costs as well as the premium paid in excess of the accreted
value.
In connection with the Company's public offering of its Common Stock
during the first quarter of 1993, a $14.9 million extraordinary charge was
recorded in the first six months of 1993 which included a write-off of a
portion of the unamortized balance of deferred debt issuance costs and the
payment of premiums on the redemption of a portion of the Discount Notes.
As a result of the above factors, the Company earned $33.4 million of
net income in the first six months of both 1994 and 1993. For the three
months ended June 30, 1994 the Company earned $23.8 million of net income
compared to $30.3 million of net income earned in the second quarter of
1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that cash provided by operations, together with
borrowings under DP/7UP's $150.0 million revolving facility (the "Revolving
Facility"), will be sufficient to fund its working capital requirements,
capital expenditures and principal, interest and dividend requirements
described below.
The Holding Company conducts its business through DP/7UP and the
primary asset of the Holding Company is the common stock of DP/7UP. The
Holding Company has no material operations of its own. Accordingly, the
Holding Company is dependent on the cash flow of DP/7UP to meet its
obligations. The Holding Company has no material obligations other than
those under the Discount Notes and certain contingent obligations under the
Holding Company's guarantee of DP/7UP's obligations under the Credit
Agreement. Accordingly, the Holding Company is not expected to have any
material need for cash until interest on the Discount Notes becomes payable
in cash on May 1, 1998. The Holding Company will be required to make
<PAGE>
sinking fund payments equal to 25% of the then outstanding principal amount
of the Discount Notes in each of 2000 and 2001. The Discount Notes will
mature in 2002. The Credit Agreement imposes significant restrictions on
the payment of dividends and the making of loans by DP/7UP to the Holding
Company. The Credit Agreement does, however, allow DP/7UP to pay
dividends to the Holding Company in an amount
12
<PAGE>
necessary to make cash interest payments on the Discount Notes, provided
that such interest payments are permitted to be made at such time in
accordance with the subordination provisions relating to the Discount Notes
and so long as no payment default or bankruptcy default then exists under
the Credit Agreement with respect to the Holding Company or DP/7UP. The
Holding Company's access to the cash flow of DP/7UP is further restricted
because DP/7UP may not make any dividend payments to the Holding Company
unless all accumulated and unpaid dividends on the outstanding shares of
the $1.375 Senior Exchangeable Preferred Stock of DP/7UP (the "DP/7UP
Preferred Stock") (and any DP/7UP preferred stock that may be issued in the
future) are paid in full. In addition, the indenture governing the
exchange debentures into which the DP/7UP Preferred Stock is exchangeable
limits the payment of dividends and the making of loans by DP/7UP to the
Holding Company. On July 8, 1994, DP/7UP called for redemption all of its
outstanding shares of DP/7UP Preferred Stock. The shares will be redeemed
on August 31, 1994 at a redemption price of $10.9625 per share. The
indenture governing the Discount Notes also imposes limits on the payment
of dividends by the Holding Company.
The operations of DP/7UP do not require significant outlays for
capital expenditures, and its working capital requirements have
historically been funded with internally generated funds. Marketing
expenditures have historically been, and are expected to remain, the
principal recurring use of funds for the foreseeable future. Such
expenditures are, to an extent, controllable by management and are
generally based on a percentage of unit sales volume. DP/7UP's other
principal use of funds in the future will be the payment of principal and
interest under the Credit Agreement, the payment of dividends on, or the
repurchase or redemption of, the outstanding shares of DP/7UP Preferred
Stock and the payment of dividends to the Holding Company for purposes of
making principal and interest payments on the Discount Notes. As of June
30, 1994, DP/7UP is required to repay the remaining principal of $482.5
million under its term loan facility (the "Term Loan Facility") as follows:
$42.5 million in 1994, $100.0 million in 1995, $110.0 million in 1996, and
$115.0 million in each of 1997 and 1998. The Revolving Facility includes an
amount for letters of credit in an aggregate face amount of up to
$15.0 million. At June 30, 1994, the outstanding balance of revolving
loans and the aggregate face amount of letters of credit issued under the
Revolving Facility were $102.0 million and $0.4 million, respectively. A
total of $15.6 million of the available credit under the Revolving Facility
<PAGE>
is reserved for use to repurchase or redeem shares of DP/7UP Preferred
Stock and, if not so used by September 1, 1994, is required to be used to
repay borrowings under the Term Loan Facility. The Revolving Facility will
mature on the earlier to occur of (i) December 31, 1998 or (ii) the date on
which there are no amounts outstanding under the Term Loan Facility.
On June 28, 1994, the Company amended its Credit Agreement to reduce
interest rates by 1/2% by the end of September. The amendment also allows
the Company to purchase portions of the Discount Notes over the next
several years.
13
<PAGE>
The Company has entered into interest rate swap and interest rate cap
agreements in part to satisfy certain terms of the Credit Agreement. At
June 30, 1994, LIBOR-based interest rate agreements expiring annually on
December 1 covered notional amounts of $350.0 million in 1994, $300.0
million in 1995 and $150.0 million in 1996 and 1997, respectively.
Premiums paid for each agreement are charged to interest expense over the
life of each agreement. Any interest rate differentials to be received or
paid are recognized as adjustments to interest expense.
The Company had working capital deficits of $35.0 million at June 30,
1994 and $67.2 million at December 31, 1993. The Company generally operates
with a working capital deficit due to its low inventory investment and
because it has a significant amount of accrued marketing expenses in
current liabilities. The deficit at June 30, 1994 was improved from the
December 31, 1993 deficit by the net increase in working capital components
as a result of the timing of cash receipts and disbursements and the
seasonal nature of the business. The Company does not believe that such
deficits will have a material adverse effect on its liquidity or
operations.
The Credit Agreement contains numerous financial and operating
covenants and prohibitions that impose limitations on the Company's
liquidity, including the satisfaction of certain financial ratios and
limitations on the incurrence of additional indebtedness. Through June 30,
1994, the Company has satisfied all required financial ratios. The
indenture governing the Discount Notes also contains covenants that impose
limitations on the Company's liquidity, including a limitation on the
incurrence of additional indebtedness. The ability of the Company to meet
its debt service requirements and to comply with the financial covenants in
the Credit Agreement and the indenture will be dependent upon future
performance, which is subject to financial, economic, competitive and other
factors affecting the Holding Company and DP/7UP, many of which are beyond
their control.
Item 1. Legal Proceedings
<PAGE>
See Note 5 to Consolidated Condensed Financial Statements which is
hereby incorporated by reference.
14
<PAGE>
Item 4. Submission of Matters To A Vote of Security Holders
The 1994 Annual Shareholders' Meeting of the Holding Company was
held on April 28, 1994, at which time the following matters were
voted upon:
(1) Election of W. W. Clements, Thomas O. Hicks and William E.
Winter to serve as directors of the Holding Company for terms
expiring at the annual shareholders' meeting in 1997.
<TABLE>
<CAPTION>
W. W. Thomas O. William E.
Clements Hicks Winter
<S> <C> <C> <C>
Votes cast for 36,648,595 36,647,755 36,648,595
Votes cast against 2,489,050 2,489,890 2,489,050
Votes withheld - - -
Number of abstentions 1,663,994 1,663,994 1,663,994
Number of broker non-votes 0 0 0
</TABLE>
(2) A proposal to amend the Holding Company's Non-Qualified Stock
Option Plan for Non-Employee Directors.
<TABLE>
<CAPTION>
<S> <C>
Votes cast for 31,800,702
Votes cast against 8,292,224
Votes withheld -
Number of abstentions 707,549
Number of broker non-votes 1,164
</TABLE>
Item 6. Exhibits And Reports On Form 8-K
<PAGE>
(a) Exhibits
10.31.5 - Sixth amendment to the Credit Agreement, dated as
of June 28, 1994, among Dr Pepper/Seven-Up
Corporation, Dr Pepper/Seven-Up Companies, Inc.
and certain banks.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended June 30, 1994.
15
<PAGE>
DR PEPPER/SEVEN-UP COMPANIES, INC.
SIGNATURE
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.
DR PEPPER/SEVEN-UP COMPANIES, INC.
Date: August 3, 1994
/s/ IRA M. ROSENSTEIN
Ira M. Rosenstein
Executive Vice President and
Chief Financial Officer
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EXHIBIT 10.31.5
SIXTH AMENDMENT TO CREDIT AGREEMENT
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SIXTH AMENDMENT (the "Amendment"), dated as of June 28, 1994,
among DR PEPPER/SEVEN-UP CORPORATION (the "Borrower"), DR PEPPER/SEVEN-UP
COMPANIES, INC., a Delaware corporation (the "Guarantor"), the Banks party
to the Credit Agreement described below and BANKERS TRUST COMPANY, as
Managing Agent and Administrative Agent. All capitalized terms used herein
and not otherwise defined shall have the respective meanings provided such
terms in the Credit Agreement referred to below.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower, the Guarantor, the Banks, the Managing
Agent and the Administrative Agent are parties to a Credit Agreement dated
as of October 20, 1992 as amended by the First Amendment, dated as of
October 26, 1992, the Second Amendment, dated as of November 5, 1992, the
Third Amendment, dated as of February 17, 1993, the Fourth Amendment, dated
as of March 4, 1993 and the Fifth Amendment, dated as of December 28, 1993
(as so amended, the "Credit Agreement");
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
1. On and after the Amendment Effective Date (as defined in
Section 9 of this Amendment), Section 3.01(a) of the Credit Agreement shall
be amended by deleting the percentage "1/2 of 1%" appearing therein and
inserting in lieu thereof the percentage "3/8 of 1%".
2. On and after the Amendment Effective Date, Section 3.01(b) of
the Credit Agreement shall be amended by deleting the percentage "1 - 1/4%"
appearing therein and inserting in lieu thereof the percentage "1%".
3. On and after the Amendment Effective Date, Section 4.02(f) of
the Credit Agreement shall be amended by deleting the percentage "50%"
appearing therein and inserting in lieu thereof the percentage "30%".
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4. On and after the Amendment Effective Date, Section 9.03 of
the Credit Agreement shall be amended by (i) deleting clause (ix) contained
therein in its entirety and (ii) inserting in lieu thereof the following
new clause (ix):
"(ix) so long as there shall exist no Default or Event of
Default (both before and after giving effect to the payment
thereof and the use of the proceeds thereof), the Company may pay
cash dividends to the Guarantor so long as all proceeds thereof
are immediately used by the Guarantor to repurchase Guarantor
Senior Subordinated Notes, provided, however, that (a) the
aggregate amount of such cash dividends paid during the one year
period ending on the Excess Cash Payment Date occurring in 1995
shall not exceed $35,000,000, (b) the amount of cash dividends
paid pursuant to this clause (ix) at any time on or after the
Excess Cash Payment Date referenced in preceding clause (a) shall
not, at the time of the payment thereof, exceed the Permitted Use
Amount at such time (whether the Permitted Use Amount is a
negative amount, zero or a positive amount) by more than
$35,000,000, (c) the amount paid by the Guarantor in connection
with the repurchase of any Guarantor Senior Subordinated Note
shall not exceed (x) the product of (i) 125% and (ii) the
accreted amount of such Guarantor Senior Subordinated Note plus
(y) if the repurchase occurs after November 1, 1997, accrued and
unpaid interest thereon through the repurchase date and (d) after
giving effect to any Dividend paid pursuant to this clause (ix)
the remainder of the Total Unutilized Revolving Loan Commitment
less the Blocked Commitment shall not be less than $25,000,000."
5. On and after the Amendment Effective Date, Section 11 of the
Credit Agreement shall be amended by:
(a) deleting the definition of "Applicable Margin" in its
entirety and inserting in lieu thereof a new definition to read as
follows:
"'Applicable Margin' shall mean (A) in the case of Term Loans,
Revolving Loans and Swingline Loans which are Base Rate Loans, (i) at any
time on or prior to the Sixth Amendment Effective Date, 1/4 of 1% and
(ii) at any time after the Sixth Amendment Effective Date, 0%, and (B) in
the case of Term Loans and Revolving Loans which are Eurodollar Loans, (i)
at any time on or prior to the Sixth Amendment Effective Date, 1-1/4% less
the then applicable Leverage Reduction Discount, if any, (ii) at any time
after the Sixth Amendment Effective Date but on or prior to September 29,
1994, 1%, less the then applicable Leverage Reduction Discount, if any, and
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(iii) at any time on or after September 30, 1994, 3/4 of 1%, less the then
applicable Leverage Reduction Discount, if any, provided, however, that for
the purpose of this clause (B), after giving effect to any Leverage
Reduction Discount the Applicable Margin for the purpose of this clause (B)
shall at no time be less than 1/2 of 1%";
(b) in the definition of "Leverage Reduction Discount" (i)
deleting the phrase "(A) 1/4 of 1% if, but only if, as of . . . 1/2 of
1%" and inserting in lieu thereof the phrase "1/4 of 1%" and (ii)
deleting the second sentence of such definition in its entirety;
(c) inserting the following phrase immediately at the end of the
definition of "Permitted Dividends":
"and all amounts paid as Dividends after March 31, 1994 pursuant to
Section 9.03(ix)";
(d) deleting the percentage "50%" appearing in the definition of
the "Retention Percentage" and inserting in lieu thereof the
percentage "70%"; and
(e) inserting the following new definition in appropriate
alphabetical order:
"'Sixth Amendment Effective Date' shall mean the date upon which
the Sixth Amendment to this Agreement, dated as of June 28, 1994,
becomes effective in accordance with its terms."
6. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the Credit Agreement or any other Credit Document.
7. This Amendment may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A complete
set of counterparts shall be lodged with the Credit Parties and the Agent.
8. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF
THE STATE OF NEW YORK.
9. This Amendment shall become effective on the date (the
"Amendment Effective Date") when each of the Borrower, the Guarantor and
each of the Banks shall have signed a copy hereof (whether the same or
different copies) and shall have delivered (including by way of facsimile
transmission) the same to the Administrative Agent at its Notice Office.
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10. In order to induce the Banks to enter into this Amendment (a)
the Borrower agrees to pay (x) a fee to each Bank which has signed a copy
of this Amendment and delivered by facsimile transmission an executed
signature page thereof to Bankers Trust Company, Attention: Mary Kay Coyle
(One Bankers Trust Plaza, New York, New York 10006, Facsimile No.: (212)
250-7218) at or prior to 5:00 p.m. (New York time) on June 28, 1994, equal
to 0.10% of such Bank's aggregate amount of Term Loans and Revolving Loan
Commitments, such fee to be payable on the Amendment Effective Date and (b)
each Credit Party hereby makes each of the representations, warranties and
agreements contained in Section 7 of the Credit Agreement on the Amendment
Effective Date, after giving effect to this Amendment.
11. From and after the Amendment Effective Date, all references
in the Credit Agreement and each of the Credit Documents to the Credit
Agreement shall be deemed to be references to such Credit Agreement as
amended hereby.
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IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the
date first above written.
DR PEPPER/SEVEN-UP CORPORATION
By
Title:
DR PEPPER/SEVEN-UP COMPANIES, INC.
By
Title:
BANKERS TRUST COMPANY,
Individually, as Managing Agent
and as Administrative Agent
By
Title:
ABN-AMRO BANK, N.V.
By
Title:
By
Title:
ALLIED IRISH BANKS
By
Title:
By
Title:
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BANK OF AMERICA NT&SA
By
Title:
THE BANK OF IRELAND, GRAND CAYMAN
BRANCH
By
Title:
BANK OF MONTREAL
By
Title:
THE BANK OF NEW YORK
By
Title:
THE BANK OF NOVA SCOTIA
By
Title:
BANK OF SCOTLAND
By
Title:
THE BANK OF TOKYO TRUST COMPANY
By
Title:
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BANQUE PARIBAS, Houston Agency
By
Title:
By
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE
By
Title:
THE CHASE MANHATTAN BANK, N.A.
By
Title:
CIBC INC.
By
Title:
CORESTATES BANK, N.A.
By
Title:
CREDIT LYONNAIS New York Branch
By
Title:
DRESDNER BANK A.G.
By
Title:
By
Title:
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FIRST INTERSTATE BANK OF TEXAS, N.A.
By
Title:
THE FIRST NATIONAL BANK OF BOSTON
By
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By
Title:
THE FUJI BANK, LTD.
By
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By
Title:
KREDIETBANK N.V.
By
Title:
By
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By
Title:
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MEES PIERSON
By
Title:
MIDLAND BANK PLC
By
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By
Title:
NATIONAL WESTMINSTER BANK USA
By
Title:
NATIONSBANK OF NORTH CAROLINA, N.A.
By
Title:
THE NIPPON CREDIT BANK, LTD.
By
Title:
THE ROYAL BANK OF SCOTLAND plc
By
Title:
SHAWMUT BANK CONNECTICUT, N.A.
By
Title:
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SOCIETE GENERALE
By
Title:
SOCIETY NATIONAL BANK
By
Title:
THE SUMITOMO BANK, LTD.
By
Title:
UNION BANK OF CALIFORNIA
By
Title:
WELLS FARGO BANK, N.A.
By
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK AND
CAYMAN ISLANDS BRANCHES
By
Title:
By
Title:
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