<PAGE>
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 June 30, 1994_
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: 33-56292-01 and 33-56292
DR PEPPER BOTTLING HOLDINGS, INC.
DR PEPPER BOTTLING COMPANY OF TEXAS
- - - ---------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 75-2275754
Texas 75-2008278
- - - -------------------------------- --------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
2304 Century Center Blvd.
Irving, Texas 75062
(214) 579-1024
- - - ---------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code
of Registrant's Principal Executive Offices)
- - - ---------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
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 [_]
The number of shares outstanding of each of the issuers' classes of common
stock as of June 30, 1994 was as follows: 13,642,168 shares of Class A
Common Stock, par value $.01 per share, of Dr Pepper Bottling Holdings,
Inc., and 100 shares of Common Stock, par value $.01 per share, of Dr
Pepper Bottling Company of Texas.
<PAGE>
<PAGE>
PART I
FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of 23
Financial Condition and Results of Operations
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Condensed Balance Sheets
June 30, 1994 and December 31, 1993
(In thousands)
ASSETS
<TABLE>
<CAPTION>
June 30
1994 December 31,
(Unaudited) 1993
------------- ------------
<S> <C> <C>
Current assets:
Cash & cash equivalents $ 18,712 $ 16,955
Accounts receivable
Trade, less allowance for doubtful
accounts of $461 in June 1994 and $305 in
December 1993 25,121 20,156
Other 4,587 3,109
Inventories 13,718 9,806
Prepaid expenses 5,092 3,421
-------- --------
Total current assets 67,230 53,447
Property, plant and equipment, net 66,456 64,523
Other assets at amortized cost:
Goodwill and other intangible assets 114,011 116,668
Debt issuance costs 10,370 11,225
-------- --------
Total assets $258,067 $245,863
======== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Condensed Balance Sheets
June 30, 1994 and December 31, 1993
(In thousands, except per share amounts)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
June 30
1994 December 31,
(Unaudited) 1993
------------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 36,111 $ 26,311
Accrued expenses 19,639 13,877
Current maturities of long-term debt and
obligations under capital leases (note 7)
12,830 12,885
-------- --------
Total current liabilities 68,580 53,073
Long-term debt and obligations under capital
leases, less current maturities (note 7) 299,840 306,149
Cumulative redeemable senior exchangeable
preferred stock, $.01 par value. Authorized
2,150 shares; issued and outstanding 1,355
shares in 1994 and 1,283 shares in 1993;
aggregate liquidation preference $33,868
(note 10) 31,519 29,635
Stockholders' deficit (notes 3 and 11):
Class A common stock, $.01 par value.
Authorized 20,000 shares; issued and
outstanding 13,642 in 1994 and 1993 136 136
Additional paid-in capital 14,383 14,383
Consideration to continuing predecessor
shareholders in excess of book value (33,948) (33,948)
Deficit (122,443) (123,565)
--------- ---------
Total stockholders' deficit (141,872) (142,994)
--------- ---------
Total liabilities and stockholders'
deficit $ 258,067 $ 245,863
========= =========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Three Months and Six Months Ended June 30, 1994 and 1993
(In thousands, except per share amounts)
UNAUDITED
Three Months
--------------
Ended Six Months Ended
----------------- ----------------
<TABLE>
<CAPTION>
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $86,776 $81,137 $160,769 $151,013
Cost of sales (note 12) 55,546 50,493 101,191 93,013
-------- -------- -------- --------
Gross profit 31,230 30,644 59,578 58,000
Operating expenses:
Marketing expenses 1,993 1,860 3,474 3,423
Administrative and general
expenses 16,153 15,129 31,147 29,058
Depreciation (note 12) 1,440 1,254 2,808 2,443
Amortization of intangible
assets 1,288 1,437 2,657 2,816
-------- -------- -------- --------
Total operating
expenses 20,874 19,680 40,086 37,740
------- ------- ------- -------
Operating profit 10,356 10,964 19,492 20,260
Other expense (income):
Interest expense 5,587 5,946 11,161 12,194
Amortization of deferred
debt issuance costs 428 431 856 752
Loss (gain) from
disposition of assets 41 (1) 51
Bond accretion 2,312 2,067 4,560 3,030
Other (99) (13) (160) (2,559)
-------- -------- -------- --------
Total other expense 8,228 8,472 16,416 13,468
-------- -------- -------- --------
Income before provision of
income taxes 2,128 2,492 3,076 6,792
Provision for income taxes 35 70
------- -------- ------- --------
Net income before dividends
on subsidiary's preferred
stock and extraordinary
item 2,093 2,492 3,006 6,792
Dividends on subsidiary's
preferred stock 5,806
-------- -------- -------- --------
Net income (loss) before
extraordinary item 2,093 2,492 3,006 986
Extraordinary item - loss on
recapitalization (183) (32,320)
-------- -------- -----------------
Net income (loss) $ 2,093 $ 2,309 $ 3,006 ($31,334)
======== ======== ======== ========
Profit (loss) per common
share before extraordinary 0.08 0.15 0.08 0.04
item
Extraordinary item per share (0.01) (2.37)
------- ------- ------- -------
Profit (loss) per common
share (note 14) $0.08 $0.14 $0.08 ($2.33)
======= ======= ======= =======
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Deficit
(In thousands)
UNAUDITED
<TABLE>
<CAPTION>
Consideration
to continuing
Common Stock Predecessor
---------------------- Additional stockholders
paid-in in excess of
Shares Amount capital Deficit book value Totals
--------- --------- ---------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 13,642 $136 $14,383 ($123,565) ($33,948) ($142,994)
Accretion of preferred stock
(note 10) (47) (47)
Preferred stock dividend (882) (882)
Net profit 912 912
-------- -------- -------- -------- -------- --------
Balance at March 31, 1994 13,642 136 14,383 (123,582) (33,948) (143,011)
Accretion of preferred stock
(note 10) (47) (47)
Preferred stock dividend (907) (907)
Net profit 2,093 2,093
-------- -------- -------- -------- -------- --------
Balance at June 30, 1994 13,642 $136 $14,383 ($122,443) ($33,948) ($141,872)
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Six Months Ending June 30, 1994 and 1993
(In thousands)
UNAUDITED
<TABLE>
<CAPTION>
June 30, June 30,
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net profit (loss) $3,006 ($31,334)
Adjustments to reconcile net income (loss) to net
cash
provided by operating activities:
Loss on recapitalization 32,320
Depreciation of property, plant and equipment 4,503 4,171
Amortization of other assets 3,512 3,568
Subsidiary's preferred stock dividends 5,806
Accretion of discount on discount notes 4,560 3,030
Loss (gain) on sale of assets (1) 51
Changes in assets and liabilities:
Accounts receivable (6,443) (1,059)
Inventories (3,912) (4,216)
Prepaid assets (1,672) (2,201)
Accounts payable 9,800 2,733
Accrued expenses 5,763 4,480
-------- --------
Total adjustments 16,110 48,683
-------- --------
Net cash provided by operating
activities 19,116 17,349
Cash flows from investing activities:
Additions to property, plant and equipment (6,920) (4,514)
Proceeds from sale of property, plant and equipment 485 212
Cash paid for acquisition, net of cash acquired (9,000)
-------- --------
Net cash used in investing activities (6,435) (13,302)
Cash flows from financing activities:
Debt issued 287,798
Deferred debt costs (11,977)
Payment of long-term debt (10,924) (183,712)
Payment of costs related to recapitalization (27,667)
Preferred stock issued 27,555
Preferred stock retired (88,148)
Payment of dividends on subsidiary's preferred
stock (2,156)
Common stock issued 278
Warrant issued 2,250
-------- --------
Net cash provided (used) in financing activities (10,924) 4,221
Net increase in cash and cash equivalents 1,757 8,268
Cash and cash equivalents at beginning of year 16,955 8,008
-------- --------
Cash and cash equivalents at end of period $18,712 $16,276
======== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING COMPANY OF TEXAS
Consolidated Condensed Balance Sheets
June 30, 1994 and December 31, 1993
(In thousands)
ASSETS
<TABLE>
<CAPTION>
June 30
1994 December 31,
(Unaudited) 1993
------------- ------------
<S> <C> <C>
Current assets:
Cash & cash equivalents $ 18,687 $ 16,930
Accounts receivable
Trade, less allowance for doubtful
accounts of $461 in June 1994 and $305 in
December 1993 25,121 20,156
Other 4,885 3,417
Inventories 13,718 9,806
Prepaid expenses 5,092 3,420
-------- --------
Total current assets 67,503 53,729
Property, plant and equipment, net 66,456 64,523
Other assets at amortized cost:
Goodwill and other intangible assets 114,011 116,668
Debt issuance costs 7,563 8,255
-------- --------
Total assets $255,533 $243,175
======== ========
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING COMPANY OF TEXAS
Consolidated Condensed Balance Sheets
June 30, 1994 and December 31, 1993
(In thousands, except per share amounts)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
June 30
1994 December 31,
(Unaudited) 1993
------------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 36,111 $ 26,311
Accrued expenses 19,639 13,876
Current maturities of long-term debt and
obligations under capital leases 12,830 12,885
-------- --------
Total current liabilities 68,580 53,072
Long-term debt and obligations under capital
leases, less current maturities 216,827 227,696
Stockholders' deficit:
Common stock, $.01 par value. Authorized
11,000 shares; issued and outstanding .1
shares 1 1
Additional paid-in capital (note 2) 110,227 110,227
Consideration to continuing predecessor
shareholders in excess of book value (33,948) (33,948)
Deficit (106,154) (113,873)
--------- ---------
Total stockholders' deficit (29,874) (37,593)
--------- ---------
Total liabilities and stockholders'
deficit $ 255,533 $ 243,175
========= =========
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING COMPANY OF TEXAS
Statements of Operations
For the Three Months and Six Months Ended June 30, 1994 and 1993
(In thousands, except per share amounts)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------- ---------------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $86,776 $81,137 $160,769 $151,013
Cost of sales 55,546 50,493 101,191 93,013
-------- -------- -------- --------
Gross profit 31,230 30,644 59,578 58,000
Operating expenses:
Marketing expenses 1,993 1,860 3,474 3,423
Administrative and general
expenses 16,153 15,129 31,147 29,058
Depreciation 1,440 1,254 2,808 2,443
Amortization of intangible
assets 1,288 1,437 2,657 2,816
-------- -------- -------- --------
Total operating expenses 20,874 19,680 40,086 37,740
-------- -------- -------- --------
Operating profit 10,356 10,964 19,492 20,260
Other expense (income):
Interest expense 5,587 5,946 11,161 12,187
Amortization of deferred
debt issuance costs 346 349 692 643
Loss (gain) from disposition
of assets 41 (1) 51
Other (92) (12) (149) (2,558)
-------- -------- -------- --------
Total other expense 5,841 6,324 11,703 10,323
-------- -------- -------- --------
Income before provision of
income taxes 4,515 4,640 7,789 9,937
Provision for income taxes 35 (70)
------- -------- ------ --------
Net Income before extraordinary
item 4,480 4,640 7,719 9,937
Extraordinary item - loss on
recapitalization (183) (32,320)
-------- -------- -------- --------
Net Income (loss) $4,480 $4,457 $7,719 ($22,383)
======== ======== ======== =========
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING COMPANY OF TEXAS
Statement of Stockholders' Deficit
(In thousands)
UNAUDITED
<TABLE>
<CAPTION>
Consideration
to continuing
Common Stock Predecessor
------------------ Additional stockholders
paid-in in excess of
Shares Amount capital Deficit book value Totals
------- ------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 0.1 $1 $110,227 ($113,873) ($33,948) ($37,593)
Net income 3,239 3,239
------ ------ -------- -------- -------- --------
Balance at March 31, 1994 0.1 1 110,227 (110,634) (33,948) (34,354)
Net income 4,480 4,480
------ ------ -------- -------- -------- --------
Balance at June 30, 1994 0.1 $1 $110,227 ($106,154) ($33,948) ($29,874)
====== ====== ======== ======== ======== =======
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING COMPANY OF TEXAS
Statements of Cash Flows
For the Six Months Ending June 30, 1994 and 1993
(In thousands)
UNAUDITED
<TABLE>
<CAPTION>
June 30, June 30,
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $7,719 ($22,383)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on recapitalization 32,320
Depreciation of property, plant and equipment 4,503 4,171
Amortization of other assets 3,349 3,459
Loss (gain) on sale of assets (1) 51
Changes in assets and liabilities:
Accounts receivable (6,443) (1,059)
Inventories (3,912) (4,216)
Prepaid assets (1,672) (2,516)
Accounts payable 9,800 2,733
Accrued expenses 5,763 4,480
-------- --------
Total adjustments 11,397 39,423
-------- --------
Net cash provided by operating
activities 19,116 17,040
Cash flows from investing activities:
Additions to property, plant and equipment (6,920) (4,514)
Proceeds from sale of property, plant and equipment 485 212
Cash paid for acquisition, net of cash acquired (9,000)
-------- --------
Net cash used in investing activities (6,435) (13,302)
Cash flows from financing activities:
Debt issued 216,685
Deferred debt costs (8,733)
Payment of long-term debt (10,924) (183,712)
Payment of costs related to recapitalization (27,667)
Preferred stock retired (88,148)
Additions to paid-in-capital related to
recapitalization 98,236
Payment of preferred stock divident (2,156)
-------- --------
Net cash provided (used) in financing activities (10,924) 4,505
Net increase in cash and cash equivalents 1,757 8,243
Cash and cash equivalents at beginning of year 16,930 8,008
-------- --------
Cash and cash equivalents at end of period $18,687 $16,251
======== ========
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED
JUNE 30, 1994
1. GENERAL
-------
The accompanying consolidated balance sheets of Dr Pepper Bottling
Holdings, Inc. ("Holdings") and its wholly owned subsidiary, Dr
Pepper Bottling Company of Texas (the "Company" or "Subsidiary"),
as of June 30, 1994, the related consolidated condensed statements
of operations for the three months and six months ended June 30,
1994 and 1993, the related consolidated condensed statements of
stockholders' deficit for the six months ended June 30, 1994, and
the related consolidated condensed statements of cash flows for the
six months ended June 30, 1994 and 1993 are unaudited but, in the
opinion of the Company and Holdings, reflect all adjustments, which
are of a normal recurring nature, necessary for a fair
presentation. Such financial statements are for interim periods
and do not include all detail normally provided in annual financial
statements and should be read in conjunction with the financial
statements of the Company and Holdings, and notes thereto, included
in the Prospectus of the Company and Holdings, dated April 18,
1994, relating to the Company's 10 1/4% Senior Notes due 2000
(the "Senior Notes") and Holdings' 11 5/8% Senior Discount Notes
due 2003 (the "Discount Notes"), filed with the Securities and
Exchange Commission (File Nos. 33-56292 and 33-56292-01,
respectively) (the "Prospectus").
Effective October 28, 1988, Holdings acquired all of the
outstanding common stock of the Company (the "Acquisition") in a
business combination accounted for as a purchase. As Holdings is
essentially a holding company whose principal asset is its
investment in the Company, all purchase adjustments have been
recorded on the books of the Company. To the extent that the
Acquisition included new investors, the Company adjusted property,
plant and equipment to their estimated fair values as of the
Acquisition date and retired related accumulated depreciation.
Holdings, through its subsidiary, is principally engaged in
producing, marketing and distributing carbonated soft drinks
in Dallas/Fort Worth, Houston, Waco, and Galveston. Soft drink
operations are conducted pursuant to franchise
agreements with companies owning the rights to soft drink formulae.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(a) Cash Equivalents
Cash equivalents consist of highly liquid debt instruments with
original maturities of three months or less.
(b) Inventories
Inventories are stated at the lower of first-in, first-out (FIFO)
cost or market.
(c) Property, Plant and Equipment
Property, plant and equipment are stated at cost. For financial
reporting purposes, depreciation is provided on the
straight-line method over the estimated useful lives of the
assets.
Maintenance and repairs are charged to operations as incurred;
renewals and betterments are capitalized and depreciated. The
cost and accumulated depreciation of assets sold or disposed of
are removed from the accounts. Resultant profit or loss on such
transactions is credited or charged to earnings.
(d) Intangible Assets
Excess of cost over fair market value of net assets of acquired
business and costs of franchises are being amortized on a
straight-line basis over 10 to 40 years.
(e) Other Assets
Debt issuance costs incurred in connection with acquisitions and
the recapitalization plan described below are deferred and will
be amortized by the interest method over the terms of the related
debt agreements (7 to 25 years). Covenants not to compete are
amortized over the terms of the agreements (5 to 10 years).
(f) Marketing Expense
Marketing costs include costs of advertising, marketing and
promotional programs. Prepaid advertising consists of
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<PAGE>
various marketing, media and advertising prepayments; these
assets are expensed in the year used. Marketing costs, other
than prepayments, are expensed in the year incurred.
3. RECAPITALIZATION PLAN
---------------------
During the first quarter of 1993, the Company and Holdings
completed a recapitalization plan (the "Recapitalization Plan") the
purpose of which plan was to reduce the aggregate amount of
interest expense and preferred stock dividend requirements. The
Company recorded an extraordinary loss of approximately $32 million
in connection with the early retirement of a total of $192.2
million principal payment amount of notes and debentures. The
aggregate purchase price (including costs to extinguish the debt)
of such indebtedness was $223.8 million, financed principally
through newly issued debt and preferred stock. The
Recapitalization Plan is described in more detail in notes 5, 6, 8,
9, and 10.
4. BUSINESS ACQUIRED
-----------------
On April 13, 1993, pursuing its operating strategy of acquiring
contiguous bottling territories, the Company acquired all of the
operating assets of Dr Pepper Bottling Company of Galveston, Inc.
for $9 million in cash and $1 million payable over five years under
a non-competition agreement.
5. 1993 BANK CREDIT AGREEMENT
--------------------------
Pursuant to the Recapitalization Plan, on February 18, 1993, the
Company entered into a credit agreement (the "1993 Bank Credit
Agreement") with certain banks providing for (i) a term loan
facility in the aggregate amount of $100 million and (ii) a
revolving line of credit facility in the aggregate amount of $25
million.
On March 22, 1993, as contemplated by the Recapitalization Plan,
the Company borrowed $91.7 million under the term loan facility of
the 1993 Bank Credit Agreement to redeem all of the then
outstanding Senior Exchangeable Preferred Stock of the Company. As
of June 30, 1994, the Company had no balance outstanding on the
revolving line of credit facility of the 1993 Bank Credit
Agreement. The facilities mature June 30, 1999.
The 1993 Bank Credit Agreement contains customary restrictive
covenants and requires the Company, among other things, to
<PAGE>
<PAGE>
satisfy certain financial ratios and restrict investments, capital
expenditures, additional debt and payments of dividends. Amounts
owed under the 1993 Bank Credit Agreement are the direct
obligations of the Company and are unconditionally guaranteed by
Holdings.
6. SALE/LEASEBACK
--------------
As part of the Recapitalization Plan, on February 18, 1993, the
Company entered into an amendment to the lease agreement entered
into by the Company on June 30, 1989, in connection with the
sale/leaseback of its Irving and Houston, Texas production
facilities. The amendment to the lease agreement modified certain
covenants contained therein, increased rent by $500,000 per annum,
and eliminated the consumer price index adjustment to the rent
scheduled to be effected on July 1, 1994. In connection with the
amendment, Donaldson Lufkin & Jenrette Securities Corporation
("DLJ") obtained the right to sell the note (the "Landlord Note")
held by the lender to the landlord under the lease agreement.
The Landlord Note was sold on October 19, 1993 at a price of
$17,698,500 (the "Sales Price") plus accrued interest of $95,985.
DLJ received a commission of $176,985 in connection with such sale
(1% of the Sales Price) and reimbursement of $94,472 for expenses
incurred in connection with such sale, both of which were paid out
of the proceeds from such sale. The remaining proceeds from such
sale in excess of the principal amount of the Landlord Note plus
accrued interest ($1,227,043) were paid to the Company and
reflected as a reduction of the loss on recapitalization of debt.
The present value of the increased rent payments was added to long
term debt on the Company's and Holdings' balance sheets.
7. LONG-TERM DEBT
--------------
Long-term debt at June 30, 1994 and December 31, 1993 is summarized
as follows:
<TABLE>
<CAPTION>
(In thousands)
June 30, Dec. 31,
1994 1993
-------- --------
<S> <C> <C>
Facility borrowing under 1993 Bank
Credit Agreement $ 75,685 $ 86,111
Sale/leaseback borrowings, due in
monthly installments of $333,167
through June 2014 27,179 27,475
Capital lease obligations 7 51
Senior notes,
due February 15, 2000 125,000 125,000
Discount notes,
due February 15, 2003 83,013 78,453
Covenant not to compete; liability at
present value of payments 1,786 1,944
-------- --------
$312,670 $319,034
Less current portion 12,830 12,885
-------- --------
$299,840 $306,149
</TABLE>
8. SENIOR NOTES
------------
As contemplated by the Recapitalization Plan, on February 18, 1993,
the Company issued and sold $125,000,000 aggregate principal amount
of Senior Notes. The Senior Notes bear interest at a rate of
10 1/4% per annum, payable semi-annually on February 15 and August
15 of each year, commencing August 15, 1993. The Senior Notes are
redeemable at the option of the Company, in whole or in part, at
any time on or after February 16, 1998, at 101.708% of the
principal amount thereof, plus accrued interest, if any, if
redeemed during the twelve-month period beginning February 16,
1998, and thereafter at 100% of the principal amount thereof, plus
accrued interest, if any, until maturity. In the event of a change
in control of the Company or Holdings, the Company will be
obligated to make an offer to purchase all outstanding Senior Notes
at a redemption price of 101% of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase.
Under the terms of the indenture governing the Senior Notes,
dividend payments on capital stock are restricted to the sum of (i)
50% of net income (or in the case of a net loss, 100% of the net
loss) plus (ii) the proceeds from the issuance of capital stock,
warrants or options plus (iii) $7.5 million.
9. DISCOUNT NOTES
--------------
As contemplated by the Recapitalization Plan, on February 18, 1993,
Holdings issued and sold $125,000,000 aggregate principal amount of
Discount Notes. The Discount Notes were issued at a substantial
discount from their principal amount. Commencing February 16,
1998, interest will accrue until
<PAGE>
<PAGE>
maturity on the Discount Notes at a rate of 11 5/8% per annum.
Interest on the Discount Notes is payable semi-annually on February
15 and August 15 of each year, commencing August 15, 1998. The
Discount Notes are redeemable, in whole or in part, at the option
of Holdings, on or after February 16, 1998, at amounts decreasing
from 104.359% of the principal amount thereof, plus accrued
interest, at February 16, 1998 to 100% of the principal amount
thereof, plus accrued interest, at February 16, 2001, until
maturity. In the event of a change in control of Holdings,
Holdings will be obligated to make an offer to purchase all
outstanding Discount Notes at a redemption price of 101% of the
accreted value thereof on any repurchase date prior to February 16,
1998, or 101% of the principal amount thereof plus accrued and
unpaid interest to any repurchase date on or after February 16,
1998.
Under the terms of the indenture governing the Discount Notes,
dividend payments on capital stock are restricted to the sum of (i)
50% of net income (or in the case of a net loss, 100% of the net
loss) plus (ii) the proceeds from the issuance of capital stock,
warrants or options plus (iii) $7.5 million.
10. HOLDINGS PREFERRED STOCK AND WARRANT
------------------------------------
As part of the Recapitalization Plan, Holdings sold, for an
aggregate purchase price of $30 million, 1,200,000 shares of
redeemable senior cumulative exchangeable preferred stock, par
value $.01 per share, of Holdings (the "Preferred Stock") and a
warrant to purchase up to 15% of the common stock of Holdings on a
fully diluted basis. The Company redeemed all of the outstanding
Senior Exchangeable Preferred Stock of the Company, in accordance
with the Recapitalization Plan.
Each share of Preferred Stock has a liquidation preference of
$25.00 per share, plus accrued and unpaid dividends. Dividends are
payable quarterly at the rate of $2.75 per annum per share.
Dividends on the Preferred Stock are cumulative and, at the option
of Holdings, may be paid through the issuance of additional shares
of Preferred Stock on each dividend payment date through April 1,
1998. The Preferred Stock is optionally redeemable, in whole or in
part, at $25.00 per share, plus accrued and unpaid dividends
thereon on or after April 1, 1998, provided that Holdings is also
entitled to optionally redeem Preferred Stock with all or a portion
of the proceeds from an initial offering of Holdings common stock
consummated on or before the third anniversary of the issuance of
the Preferred Stock.
<PAGE>
<PAGE>
On each of April 1, 2005 and 2006, Holdings is required to redeem
25% of the number of shares of Preferred Stock that is outstanding
as of March 31, 2005, at $25.00 per share. On April 1, 2007,
Holdings must redeem the remaining shares of Preferred Stock then
outstanding at $25.00 per share. Shares redeemed by Holdings prior
to the mandatory redemption dates are credited toward the mandatory
redemption requirements on a pro rata basis.
The Preferred Stock is exchangeable, in whole or in part, at the
option of Holdings on any dividend payment date for 11% Junior
Subordinated Exchange Debentures due 2006 of Holdings (the
"Holdings Exchange Debentures"). Each share of Preferred Stock
will be exchanged for $25.00 in principal amount of Holdings
Exchange Debentures in denominations of $1,000 or integral
multiples thereof.
Differences between the carrying value of the Preferred Stock and
redemption price ($25.00 per share) will be recognized through
adjustments in the carrying value prior to the mandatory redemption
dates.
Upon the occurrence of a change in control, at the election of the
holders of the Preferred Stock, Holdings will be required to
purchase for cash all shares of Preferred Stock at $25.25 per
share, plus accrued and unpaid dividends to the date of repurchase.
11. HOLDINGS COMMON STOCK
---------------------
On November 1, 1993, pursuant to Holdings' Certificate of
Incorporation, each share of Class B common stock outstanding was
automatically converted to Class A common stock.
12. DEPRECIATION EXPENSES
---------------------
Depreciation expenses included in cost of goods sold and in
administrative and general expenses are as follows:
<TABLE>
<CAPTION>
(In thousands) (In thousands)
Three Mos. Ended Six Mos. Ended
------------------ --------------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Cost of goods sold $ 845 $ 888 $1,695 $1,728
Administrative and general
expenses 1,440 1,254 2,808 2,443
------ ------ ------ ------
Total depreciation $2,285 $2,142 $4,503 $4,171
</TABLE>
<PAGE>
<PAGE>
13. CHANGE IN ACCOUNTING PRINCIPLES - ACCOUNTING FOR INCOME TAXES
-------------------------------------------------------------
(DOLLAR AMOUNTS IN THOUSANDS)
-----------------------------
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Statement 109 requires a change from the
deferred method of accounting for income taxes of APB Opinion 11 to
the asset and liability method of accounting for income taxes.
Under the asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date.
Pursuant to the deferred method under APB Opinion 11, which was
applied in 1992 and prior years, deferred income taxes are
recognized for income and expense items that are reported in
different years for financial reporting purposes and income tax
purposes using the tax rate applicable for the year of the
calculation. Under the deferred method, deferred taxes are not
adjusted for subsequent changes in tax rates.
Effective January 1, 1993, Holdings adopted Statement 109 and the
cumulative effect of the change in accounting for income taxes was
immaterial.
The tax effect of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities as of December 31, 1993 are presented below:
Deferred tax assets:
Net operating loss carryforwards $ 34,431
Obligations under capital leases 8,974
Other 1,961
--------
Total gross deferred tax assets $ 45,366
Less valuation allowance ( 37,904)
--------
Net deferred tax assets 7,462
--------
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation ( 3,879)
Intangible assets due to differences in
amortization ( 3,583)
--------
Total gross deferred liabilities ( 7,462)
--------
Net deferred tax assets (liabilities) $ -
========
For federal income tax purposes, the predecessor tax basis of
assets and liabilities was retained following the Acquisition.
At December 31, 1993, the Company has net operating loss
carryforwards of approximately $98,000 which are available to
offset future federal taxable income, if any, through 2008. At
December 31, 1993, there were approximately $82,000 of net
operating loss carryforwards available to offset future alternative
minimum taxable income for federal income tax purposes. Net
operating losses may not offset more than 90% of the Company's
alternative minimum taxable income.
The valuation allowance increased $18,160 at December 31, 1993 as
compared to January 1, 1993 when FAS 109 was adopted by Holdings.
The increase is primarily related to an increase in net operating
loss carryforwards during 1993.
If the Company undergoes a more-than-50% ownership change within
the meaning of section 382(g) of the Internal Revenue Code, then
the Company will be limited in the use of its pre-ownership change
net operating losses to offset future taxable income. A similar
limitation would apply to any pre-ownership change tax credits.
Also, to the extent that the taxable income of the company for any
future year exceeds the sum of any net operating losses arising
after the date of the ownership change plus the amount of the
annual limitation on the pre-ownership change net operating losses,
the Company would be required to pay federal income tax on such
excess.
Although a more-than-50% ownership change within the meaning of
section 382(g) of the Internal Revenue Code occurred with respect
to the Company in October of 1988, the Company has determined that
the annual limitation under section 382 of the Code on its pre-
October 1988 net operating losses should be adequate to permit the
full use of those net operating losses against future taxable
income of the Company. Furthermore, although there can be no
assurance that the Internal Revenue Service would not take a
different position, the Company believes that a more-than-50%
ownership change within the meaning of section 382(g) of the
Internal Revenue Code has not occurred with respect to the Company
after October 1988.
14. LOSS PER COMMON SHARE
---------------------
The net income (loss) per share is computed by dividing net income
(loss), adjusted for dividends on Holdings' preferred stock and
accretion of preferred stock for the difference between the
carrying value and liquidation preference, by the weighted average
number of common shares outstanding during each period.
<TABLE>
<CAPTION>
(In thousands) (In thousands)
Three Mos. Ended Six Mos. Ended
------------------ --------------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) $ 2,093 $ 2,309 $ 3,006 $(31,334)
Preferred stock dividends (907) (385) (1,789) (385)
Accretion of preferred
stock (47) -- (94) --
------- ------- ------- -------
$ 1,139 $ 1,924 $ 1,123 $(31,719)
Common shares outstanding 13,642 13,642 13,642 13,642
Profit (loss) per common
shares $ .08 $ .14 $ .08 $ (2.33)
======= ======= ======= ========
</TABLE>
15. NEW ACCOUNTING STANDARDS
------------------------
In December 1990, the Financial Accounting Standards Board issued
Statement 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" ("Statement 106") which is effective for
fiscal years beginning after
December 15, 1992. The Company and Holdings do not provide
postretirement benefits and, therefore, the provisions of Statement
106 are not applicable.
In November 1992, the Financial Accounting Standards Board issued
Statement 112, "Employers' Accounting for Postemployment Benefits"
("Statement 112") which is effective for fiscal years beginning
after December 15, 1993. The Company and Holdings do not provide
postemployment benefits and, therefore, the provisions of Statement
112 are not applicable.
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1994
GENERAL
-------
Case sales, the Company's primary measure of unit volume, refers to
physical cases of beverages sold, including both premix
(ready-to-serve products which are sold in tanks and converted to case
sales on the basis of four cases per tank) and post-mix products
(fountain syrups to which water and carbonation must be added and
which are converted to case sales on the basis of one case per
gallon.)
Franchise case sales represent sales to retailers only. Contract case
sales comprise sales, primarily of product in cans, to unaffiliated
bottling companies that hold soft drink franchises and to a wholesaler
of private label branded soft drink products. Contract sales may
fluctuate significantly from year to year, and are made at relatively
low prices and gross profit margins (historically representing
approximately 16% of contract sales revenues) due to the competition
for such sales, and are not a primary focus of management in
determining the Company's business strategy. As a result, management
believes that changes in franchise sales more accurately measure
growth than changes in total net sales.
The primary asset of Holdings is the common stock of the Company.
Holdings conducts no business other than holding the common stock of
the Company. As a result, net sales, cost of sales, operating
expenses and operating profit are the same for the Company and
Holdings.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED JUNE 30, 1994
--------------------- --------------------------------
COMPARED TO THREE MONTHS ENDED JUNE 30,1993
-------------------------------------------
Net sales, excluding contract sales, for the three months ended June
30, 1994 increased to $79.3 million compared to $74.9 million for the
same period in 1993. The increase was due to a 7.4% increase in
franchise case sales, with growth attributable to strong results from
Dr Pepper and 7Up brands. Contract sales revenue for the three months
ended June 30, 1994 increased 20.0% from the same period in 1993 due
to increased private label contract sales volume that more than offset
a reduction in regular contract sales. As a result of the foregoing,
net sales
<PAGE>
<PAGE>
for the three months ended June 30, 1994 increased 7.0% to $86.8
million compared to $81.1 million for the same period in 1993.
Cost of sales for the three months ended June 30, 1994 increased to
$55.5 million compared to $50.5 million for the same period in 1993.
The increase was due primarily to an increase in franchise case sales
as well as increases in the prices paid by the Company for certain raw
materials, primarily concentrate, sweetener, and plastic bottles.
These increases costs were partially offset by reduced cost of
aluminum cans. As a percentage of net sales, cost of sales for the
three months ended June 30, 1994 increased to 64.0% from 62.2% for the
same period in 1993.
Marketing expenses for the three months ended June 30, 1994 increased
to $2.0 million compared to $1.9 million for the same period in 1993.
Marketing expenses represented approximately 2.0% of net sales in each
period.
Administrative and general expenses for the three months ended
June 30, 1994 increased to $16.2 million compared to $15.1 million for
the same period in 1993. The increase was due primarily to an
increase of $.6 million in labor and employee benefit expenses, an
increase of $.1 million in fleet expenses under a full service lease
arrangement, an increase of $.1 million in full service commissions,
and an increase of $.3 million in other expenses. Depreciation
expense for the three months ended June 30, 1994 was $1.4 million
compared to $1.3 million for the same period in 1993. Amortization of
intangible assets decreased to $1.3 million from $1.4 million for the
same period in 1993.
As a result of the above factors, operating profit for the three
months ended June 30, 1994 decreased to $10.4 million, or 11.9% of net
sales, compared to $11.0 million, or 13.5% of net sales, for the same
period in 1993.
Interest expense for the Company for the three months ended June 30,
1994 decreased to $5.6 million from $5.9 million for the same period
in 1993 due to reduction of debt and lower interest rates.
Amortization of the Company's deferred debt issuance costs for the
three months ended June 30, 1994 was $.3 million, unchanged from the
same period in 1993.
As a result of the above factors, the Company's income before
extraordinary item for the three months ended June 30, 1994 was $4.5
million compared to $4.6 million for the same period in 1993.
<PAGE>
<PAGE>
Holdings' amortization of deferred debt issuance costs for the three
months ended June 30, 1994 was $.4 million, unchanged from the same
period in 1993.
Interest expense (including bond accretion on the Discount Notes) for
Holdings for the three months ended June 30, 1994 decreased to $7.9
million from $8.0 million for the same period in 1993. The decrease
was due to lower indebtedness.
As a result of the above factors, Holdings generated income before
extraordinary item of $2.1 million for the three months ended June 30,
1994 compared to $2.5 million for the same period in 1993.
Extraordinary loss for the three months ended June 30, 1993 amounted
to $.2 million, due to transactions contemplated by the
Recapitalization Plan. There was no extraordinary item for the three
months ended June 30, 1994. Holdings generated net income of $2.1
million for the three months ended June 30, 1994, compared to a net
income of $2.3 million for the same period in 1993.
RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 1994
--------------------- ------------------------------
COMPARED TO SIX MONTHS ENDED JUNE 30, 1993
------------------------------------------
Net sales, excluding contract sales, for the six months ended June 30,
1994 increased to $148.3 million compared to $138.9 million for the
same period in 1993. The increase was due to an 8.9% increase in
franchise case sales, with growth attributable to the acquisition of
the franchise territory of Dr Pepper Bottling Company of Galveston,
Inc. ("Dr Pepper-Galveston") on April 13, 1993 (the "Galveston
Acquisition") and to strong results from Dr Pepper and 7Up brands.
Contract sales revenue for the six months ended June 30, 1994
increased 3.0% from the same period in 1993 due to increased private
label contract sales volume that more than offset a reduction in
regular contract sales. As a result of the foregoing, net sales for
the six months ended June 30, 1994 increased 6.5% to $160.8 million
compared to $151.0 million for the same period in 1993.
Cost of sales for the six months ended June 30, 1994 increased to
$101.2 million compared to $93.0 million for the same period in 1993.
The increase was due primarily to an increase in franchise case sales
as well as increases in the prices paid by the Company for certain raw
materials, primarily concentrate, sweetener, and plastic bottles.
These increases in costs were partially offset by reduced cost of
aluminum cans. As a percentage of net sales, cost of sales for the
six months ended June 30, 1994 increased to 62.9% from 61.6% for the
same period in 1993.
<PAGE>
<PAGE>
Marketing expenses for the six months ended June 30, 1994 increased to
$3.5 million compared to $3.4 million for the same period in 1993.
Marketing expenses represented approximately 2.0% of net sales in each
period.
Administrative and general expenses for the six months ended
June 30, 1994 increased to $31.1 million compared to $29.1 million for
the same period in 1993. The increase was due primarily to an
increase of $1.2 million in labor and employee benefit expenses, an
increase of $.2 million in fleet expenses under a full service lease
arrangement, an increase of $.4 million in full service commissions,
and an increase of $.2 million in other expenses. Depreciation
expense for the six months ended June 30, 1994 was $2.8 million
compared to $2.4 million for the same period in 1993. Amortization of
intangible assets was $2.7 million compared to $2.8 million for the
same period in 1993.
As a result of the above factors, operating profit for the six months
ended June 30, 1994 decreased to $19.5 million, or 12.1% of net sales,
compared to $20.3 million, or 13.4% of net sales, for the same period
in 1993.
Interest expense for the Company for the six months ended June 30,
1994 decreased to $11.2 million from $12.2 million for the same period
in 1993 due to reduction of debt and lower interest rates.
Amortization of the Company's deferred debt issuance costs for the six
months ended June 30, 1994 was $.7 million compared to $.6 million for
the same period in 1993.
Other income for the Company for the six months ended June 30, 1994
was $.1 million compared to $2.6 million for the same period in 1993.
The 1993 amount included $2.5 million paid to the Company in
settlement of its 1988 lawsuit against Del Monte Corporation for their
refusal to consent to the acquisition of the Company by Holdings and
the subsequent termination of the Company's license to produce and
distribute Hawaiian Punch products.
As a result of the above factors, the Company's income before
extraordinary item for the six months ended June 30, 1994 was $7.8
million compared to an income of $9.9 million for the same period in
1993.
<PAGE>
<PAGE>
Holdings' amortization of deferred debt issuance costs for the six
months ended June 30, 1994 increased to $.9 million compared to $.8
million for the same period in 1993.
Interest expense (including bond accretion on the Discount Notes) for
Holdings for the six months ended June 30, 1994 increased to $15.7
million from $15.2 million for the same period in 1993. The increase
was due to higher indebtedness initially, as a result of the
Recapitalization Plan, partially offset by lower interest rates on
such indebtedness.
As a result of the above factors, Holdings generated income before
dividends on the Company's Senior Exchangeable Preferred Stock (the
"Old Preferred Stock") and extraordinary item of $3.0 million for the
six months ended June 30, 1994, compared to $6.8 million for the same
period in 1993. The net income before extraordinary item for Holdings
of $1.0 million for the six months ended June 30, 1993 reflects
charges of $5.8 million relating to dividends on the Company's Old
Preferred Stock. The Old Preferred Stock was classified as a minority
interest for purposes of the financial statements of Holdings.
Extraordinary loss for the six months ended June 30, 1993 amounted to
$32.3 million, due to transactions contemplated by the
Recapitalization Plan. There was no extraordinary item for the six
months ended June 30, 1994. Holdings generated net income of $3.0
million for the six months ended June 30, 1994, compared to a net loss
of $31.3 million for the same period in 1993.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Holdings conducts business through the Company and has no material
operations of its own. The primary asset of Holdings is the common
stock of the Company. Accordingly, Holdings is dependent on the cash
flow of the Company to meet its obligations. Holdings has no material
obligations other than those under the Discount Notes, the Preferred
Stock and any exchange debentures of Holdings into which such stock
becomes exchangeable, and certain contingent obligations under
Holdings' guarantee of the Company's obligations under the 1993 Bank
Credit Agreement. Holdings, though, is not expected to have any
material need for cash until interest on the Discount Notes becomes
payable in cash beginning August 15, 1998. The Discount Notes will
mature in 2003. The 1993 Bank Credit Agreement and the Senior Notes
indenture impose significant restrictions on the payment of dividends
and the making of loans by the Company to Holdings. However, the
Senior Notes indenture allows the Company to pay dividends to Holdings
in accordance with a specified formula if, after giving effect
thereto, no event of default, or
<PAGE>
<PAGE>
an event that with the passage of time or the giving of notice, or
both, would constitute an event of default under the Senior Notes
indenture shall have occurred and be continuing. In addition, the
1993 Bank Credit Agreement allows the Company to pay dividends to
Holdings in an amount necessary to make cash interest payments on the
Discount Notes, provided that no event of default exists or would be
created under the 1993 Bank Credit Agreement.
The Company remains highly leveraged following the consummation of the
transactions contemplated by the Recapitalization Plan. The Company's
principal use of funds in the future will be the payment of principal
and interest under the 1993 Bank Credit Agreement and the Senior
Notes. As of June 30, 1994, approximately $75.7 million was
outstanding under the term loan facility of the 1993 Bank Credit
Agreement. The Company will be required to repay the principal under
such term loan facility as follows: $6.6 million during the last six
months of 1994, $13.8 million in 1995, $15.5 million in 1996, $17.2
million in each of 1997 and 1998 and $10.3 million in 1999, subject
to reduction for mandatory and optional prepayments. In addition, the
Company will be required to further retire the principal amount
outstanding under the 1993 Bank Credit Agreement with Excess Cash Flow
(as defined in the 1993 Bank Credit Agreement). It is expected that
the Company's primary sources of financing for its future business
activities will be funds from operations, together with additional
borrowings under the revolving line of credit facility of the 1993
Bank Credit Agreement. Such revolving line of credit facility
provides for revolving loans in an aggregate amount of up to $25
million with a $5 million sublimit for the issuance of letters of
credit. The revolving line of credit facility of the 1993 Bank Credit
Agreement will mature in 1999.
Because the obligations under the 1993 Bank Credit Agreement bear
interest at floating rates, the Company will be sensitive to changes
in prevailing interest rates. As required by the 1993 Bank Credit
Agreement, the Company entered into interest rate protection
arrangements, expiring June 28, 1996, in an aggregate notional amount
equal to $45 million, subject to reduction by $2 million at the end of
each quarter starting with the quarter ending June 30, 1994.
The Company had negative working capital of $1.2 million at June 30,
1994 compared to working capital of $0.7 million at December 31, 1993.
<PAGE>
<PAGE>
Based on the Company's anticipated operating results, management
believes that the Company's future operating activities will generate
sufficient cash flows to repay borrowings under the term loan facility
of the 1993 Bank Credit Agreement as they become due and payable.
However, based on such anticipated operating results, management does
not expect that the Company's future operating activities will
generate sufficient cash flows to repay the Senior Notes and the
Discount Notes at their respective maturities. Accordingly, the
Company and Holdings expect that they will be required to refinance
all or substantially all of the Senior Notes and the Discount Notes at
their respective maturities or sell equity or assets to fund the
repayment of all or substantially all of the Senior Notes and the
Discount Notes at their respective maturities, or effect a combination
of the foregoing. While the Company and Holdings believe that they
will be able to refinance the Senior Notes and the Discount Notes at
or prior to their respective maturities, or raise sufficient funds
through equity or asset sales to repay such indebtedness, or effect a
combination of the foregoing, there can be no assurance that such will
be the case.
The 1993 Bank Credit Agreement contains numerous financial and
operating covenants and prohibitions that impose limitations on the
liquidity of the Company, including requirements that the Company
satisfy certain financial ratios and maintain certain specified levels
of net worth, and limitations on the incurrence of additional
indebtedness. The indentures governing the Senior Notes and the
Discount Notes also contain covenants that impose limitations on the
liquidity of the Company and Holdings, including a limitation on the
incurrence of additional indebtedness. The ability of the Company and
Holdings to meet their debt service requirements and to comply with
such covenants will be dependent upon future operating performance and
financial results of the Company, which will be subject to financial,
economic, competitive and other factors affecting the Company, many of
which are beyond its control.
Management anticipates expansion related capital expenditures in 1995
to service volume growth at several locations. During 1993 capital
expenditures net of assets acquired in the Galveston Acquisition
totaled $8.3 million. The Company anticipates that capital
expenditures will total approximately $7.5 million to $8.0 million for
each of the years 1994 through 1996.
<PAGE>
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.111 First Amendment to Amended and Restated Credit
Agreement, dated as of July 29, 1994, among Dr Pepper Bottling
company of Texas, Texas Commerce Bank National Association,
and the lenders listed on the signature pages thereof.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended
June 30, 1994.
<PAGE>
<PAGE>
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 BOTTLING HOLDINGS, INC.
Date: 08/15/94 /s/ Jim L. Turner
-------- -----------------
Jim L. Turner
Chairman of the Board/President
Date: 08/15/94 /s/ C. Marvin Montgomery
-------- ------------------------
C. Marvin Montgomery
Vice President/Finance and
Chief Financial Officer
<PAGE>
<PAGE>
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 BOTTLING COMPANY OF TEXAS
Date: 08/15/94 /s/ Jim L. Turner
-------- -----------------
Jim L. Turner
Chairman of the Board/President
Date: 08/15/94 /s/ C. Marvin Montgomery
-------- ------------------------
C. Marvin Montgomery
Vice President/Finance and
Chief Financial Officer
<PAGE>
<PAGE>
EXHIBIT 10.111
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------------------------
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT, dated as of the 29th day of July, 1994 (the "Amendment"),
is among Dr Pepper Bottling Company of Texas, a Texas corporation (the
"Borrower"), Texas Commerce Bank National Association, a national
banking association ("TCB") and each other lender listed on the
signature pages hereof (each individually, including, without
limitation, TCB, a "Lender" and collectively, the "Lenders") and Texas
Commerce Bark National Association as agent for the Lenders (in its
capacity as agent, the "Agent").
WITNESSETH
----------
WHEREAS, on February 18, 1993, the Borrower, TCB as the
Agent and the Lenders entered into an Amended and Restated Credit
Agreement (the "Credit Agreement") pursuant to which the Borrower, the
Agent and the Lenders amended and restated (i) a Credit Agreement
dated as of October 28, 1988, as amended, among the Borrower, TCB as
agent and the other lenders signatory thereto and (ii) a Credit
Agreement dated as of January 18, 1989, as amended, among the
Borrower, TCB as agent and the other lenders signatory thereto;
WHEREAS, pursuant to the Credit Agreement, the Lenders have
made available to the Borrower loans pursuant to an advance term loan
facility of up to $100,000,000 and letters of credit and a revolving
credit facility of up to $25,000,000;
WHEREAS, the Borrower desires to purchase and hold up to an
aggregate original principal amount equal to $20,000,000 of the 10.25%
Senior Notes Due 2000 ("Borrower Senior Notes") issued by the Borrower
pursuant to that certain Indenture (the "Borrower Indenture") by and
between the Borrower and U.S. Trust Company of Texas, N.A., as
Trustee, dated as of February 18, 1993;
WHEREAS, the Borrower, the Agent and the Lenders desire to
reduce the rate of interest and amount of certain fees to be paid by
the Borrower for the loans and other extensions of credit extended to
the Borrower under the Credit Agreement; and
<PAGE>
<PAGE>
WHEREAS, the Borrower, the Agent and the Lenders have
agreed, upon the terms and conditions specified herein, to amend the
Credit Agreement to permit, among other things, the acquisition by the
Borrower of up to an aggregate original principal amount equal to
$20,000,000 of Borrower Senior Notes and to reduce the rate of
interest and amount of certain fees to be paid by the Borrower for
loans and other extensions of credit extended to the Borrower under
the Credit Agreement.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Agent and the Lenders hereby agree as
follows:
1. All capitalized terms which are defined in the Credit
Agreement and not otherwise defined herein shall have the same meaning
herein as in the Credit Agreement.
2. All references to Section and Subsection numbers in
this Amendment shall be references to the corresponding Section or
Subsection of the Credit Agreement.
3. On and after the date hereof, each reference in the
Credit Agreement to "this Agreement," "hereunder," "herein," or words
of like import shall mean and be a reference to the Credit Agreement,
as amended hereby.
4. Section 1.01 of the Credit Agreement is hereby amended
by deleting the table set forth in the definition of "Margin
Percentage" contained in such Section and replacing it with the
following table:
<TABLE>
<CAPTION>
Ratio Margin Percentage
----- -----------------
Greater than or
Equal to but Less than Alternate Base Eurodollar Rate
-------- ------------- -------------- ---------------
Rate
----
<C> <C> <C> <C>
4.75 to 1.0 --- 1.00% 2.25%
4.00 to 1.0 4.75 to 1.0 .75% 2.00%
3.50 to 1.0 4.00 to 1.0 .50% 1.75%
--- 3.50 to 1.0 .25% 1.50%
</TABLE>
<PAGE>
<PAGE>
5. Subsection 2.04(b) of the Credit Agreement is hereby
amended by deleting the table set forth therein and replacing it with
the following table:
<TABLE>
<CAPTION>
Ratio
-----
Greater than Letter of Credit
or Equal to but Less than Fee Percentage
----------- ------------- --------------
<C> <C> <C>
4.75 to 1.0 --- 2.25%
4.00 to 1.0 4.75 to 1.0 2.00%
3.50 to 1.0 4.00 to 1.0 1.75%
--- 3.50 to 1.0 1.50%
</TABLE>
6. Section 7.12 of the Credit Agreement is hereby amended
by deleting the phrase "9.03(f) and (g) and for working capital
purposes" on the seventh line thereof, and by inserting in lieu
thereof the phrase "9.03(f) and (g), for the purpose of purchasing and
holding Borrower Senior Notes in an aggregate original principal
amount not to exceed $20,000,000 (provided that the Borrower shall
have purchased each such Borrower Senior Note at a purchase price not
greater than 105% of the original principal amount of such Borrower
Senior Note) and for working capital purposes".
7. To the extent Subsection 9.11(c) of the Credit
Agreement could be construed to prohibit the purchase by the Borrower
of Borrower Senior Notes as contemplated by this Amendment, said
Subsection 9.11(c) is hereby waived for the limited purpose of
permitting the purchase of the Borrower Senior Notes in an aggregate
original principal amount not to exceed $20,000,000, and for no other
purpose.
8. Article VIII of the Credit Agreement is hereby amended
by adding the following to the end of said Article VIII:
Section 8.14. Borrower Senior Notes. Within
----------------------
seven (7) Business Days after the purchase of each Borrower
Senior Note by the Borrower as permitted under Section 7.12,
the Borrower shall, at its expense, deliver such notes to
the Agent as collateral security under the Security
Agreement, and will
<PAGE>
<PAGE>
execute and deliver to the Agent and the Lenders such
further instruments and documents, and take such further
action, as the Agent or any Lender may from time to time
reasonably request in order to perfect the security interest
therein granted thereby.
9. By its execution and delivery hereof, the Borrower
represents and warrants the following:
(a) As of the date hereof and after giving effect to the
amendments contemplated herein, (i) the representations and warranties
contained in Article VII of the Credit Agreement, as amended by this
Amendment, and the Loan Documents to which the Borrower is a party,
are true and correct on and as of the date hereof as though made by
the Borrower on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date) and
the Borrower hereby agrees to be bound by such representations and
warranties and (ii) no event has occurred and is continuing which
constitutes a Default or an Event of Default; and
(b) The execution and delivery of this Amendment shall in
no way release, diminish, impair, reduce or otherwise adversely affect
the obligations of the Borrower under the Credit Agreement, as amended
by this Amendment, and under the Notes, as each may be further amended
or otherwise modified from time to time and under the other Loan
Documents to which the Borrower is a party, as each may be further
amended or otherwise modified from time to time. The Borrower
acknowledges and confirms that the indebtedness secured by the Loan
Documents includes, in addition to the indebtedness therein described,
the obligations of the Borrower under the Credit Agreement, as amended
by this Amendment, and the Notes, as each may be further amended or
otherwise modified from time to time.
10. This Amendment shall become effective when and only
when (a) each Lender shall have executed a counterpart of this
Amendment and (b) the Agent shall have received each of the following
(and fifteen original counterparts or copies, as the case may be, to
provide an original counterpart or photocopy to each Lender):
(i) Counterparts of this Agreement executed by the
Borrower;
<PAGE>
<PAGE>
(ii) A duly executed Federal Reserve Form FR U-1 from a
Responsible Officer of Borrower;
(iii) Resolutions of the Board of Directors of the Borrower
approving and authorizing the execution, delivery, and performance by
the Borrower of this Amendment, the purchase of the Borrower Senior
Notes and any and all documents and agreements executed in connection
herewith by the Borrower; and
(iv) Such other documents and agreements as the Agent may
reasonably request.
11. The Credit Agreement, as amended by this Amendment, is
hereby ratified and confirmed and all of the rights and powers created
thereby or thereunder shall be and remain in full force and effect.
12. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy
of the Lenders under the Credit Agreement, as amended by this
Amendment, or under the Notes and the other Loan Documents to which
the Borrower is a party, as each may be amended or modified from time
to time, nor constitute a waiver of any other provision of the Credit
Agreement, as amended by this Amendment, or the Notes and the other
Loan Documents to which the Borrower is a party, as each may be
amended or modified from time to time.
13. The Borrower agrees to do, execute, acknowledge and
deliver all and every such further acts and instruments as the Agent
may request for the better assuring and confirming unto the Agent all
and singular the rights granted or intended to be granted hereby or
hereunder.
14. Pursuant to Section 11.04 of the Credit Agreement, the
Borrower agrees to pay on demand all costs and expenses of the Agent
in connection with the preparation, reproduction, execution and
delivery of this Amendment and the other instruments and documents to
be delivered hereunder (including, without limitation, the reasonable
fees and out of-pocket expenses of counsel for the Agent with respect
thereto and with respect to advising the Agent as to its rights and
responsibilities under the Credit Agreement as hereby amended). In
addition, the Borrower shall pay any and all stamp and other taxes and
fees payable or determined to be payable in connection with the
execution and delivery, filing or recording of this
<PAGE>
<PAGE>
Amendment and the other instruments and documents to be delivered
hereunder, and agrees to save the Agent harmless from and against any
and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes or fees.
15. Prior to, and as a condition precedent of, the
effective date of this Amendment, the Borrower agrees to pay to the
Agent, for and on behalf of the Lenders, in immediately available
funds, an amendment fee of $190,000 (the "Amendment Fee"). Promptly
upon the receipt of the Amendment Fee, the Agent shall pay to each
Lender its pro rata share of the Amendment Fee calculated by
multiplying the Amendment Fee by the Lender's Pro Rata Percentage.
16. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND SHALL BE BINDING
UPON THE BORROWER, THE AGENT AND THE LENDERS AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS.
17. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute but one and
the same instrument.
18. THIS WRITTEN AMENDMENT, THE NOTES, THE CREDIT AGREEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed this Amendment as of the day
and year first above written.
BORROWER:
DR PEPPER BOTTLING COMPANY OF TEXAS
By: /s/ Jim L. Turner
-------------------------------------
Name: Jim L. Turner
-----------------------------------
Title: Chariman of the Board/President/CEO
----------------------------------
AGENT:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, AGENT
By: /s/ Michael J. Costello
-------------------------------------
Name: Michael J. Costello
-----------------------------------
Title: Vice President
----------------------------------
LENDERS:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, for its own account
By: /s/ Michael J. Costello
-------------------------------------
Name: Michael J. Costello
-----------------------------------
Title: Vice President
----------------------------------
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., NEW YORK BRANCH
By: /s/ Shunko Uchida
-------------------------------------
Name: Shunko Uchida
-----------------------------------
Title: Vice President
----------------------------------
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Frederick Haddad
-------------------------------------
Name: Frederick Haddad
-----------------------------------
Title: Senior Vice President
----------------------------------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Susan J. Mulholland
-------------------------------------
Name: Susan J. Mulholland
-----------------------------------
Title: Division Excutive
----------------------------------
FIRST INTERSTATE BANK OF TEXAS, NATIONAL
ASSOCIATION
By: /s/ Susan L. Baker
-------------------------------------
Name: Susan L. Baker
-----------------------------------
Title: Assistant Vice President
----------------------------------
CIBC, INC.
By: /s/ Jack Macmull Jr.
----------------------------------
Name: Jack Mackmull Jr.
----------------------------------
Title: Managing Director
----------------------------------
BANQUE PARIBAS, HOUSTON AGENCY
By: /s/ Christopher S. Goodwin
-------------------------------------
Name: Christopher S. Goodwin
-----------------------------------
Title: Vice President
-----------------------------------
By: /s/ Patrick J. Milon
-------------------------------------
Name: Patrick J. Milon
-----------------------------------
Title: SVP-Deputy General Manager
----------------------------------
BANQUE PARIBAS
By: /s/ Christopher S. Goodwin
-------------------------------------
Name: Christopher S. Goodwin
-----------------------------------
Title: Vice President
----------------------------------
By: /s/ Patrick J. Milon
-------------------------------------
Name: Patrick J. Milon
-----------------------------------
Title: SVP-Deputy General Manager
----------------------------------
HARRIS TRUST AND SAVINGS BANK
By: /s/ R. Michael Newton
-------------------------------------
Name: R. Michael Newton
-----------------------------------
Title: Vice President
----------------------------------
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Salvador W. Antonetti
-------------------------------------
Name: Salvador W. Antonetti
-----------------------------------
Title: Assistant Vice President
----------------------------------
<PAGE>
<PAGE>
CONSENT AND ACKNOWLEDGMENT:
DR PEPPER BOTTLING HOLDERS, INC.
hereby affirms that it has read and does understand this Amendment to
Credit Agreement and does hereby consent to and agree with this
Amendment.
By: /s/ Jim L. Turner
-------------------------
Name: Jim L. Turner
-------------------------
Title: Chairman of the Board/President/C.E.O.
-------------------------
Date: July 29, 1994
-------------------------
<PAGE>
