<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 March 31, 1995
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 numbers: 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 March 31, 1995 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
Financial Condition and Results of Operations 23
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Condensed Balance Sheets
March 31, 1995 and December 31, 1994
(In thousands)
ASSETS
<TABLE>
<CAPTION>
March 31,
1995 December 31,
(Unaudited) 1994
------------- ------------
<S> <C> <C>
Current assets:
Cash & cash equivalents $ 8,502 $ 7,794
Accounts receivable:
Trade, less allowance for doubtful
accounts of $437 in March 1995 and $371
in December 1994 23,843 24,479
Other 3,376 3,463
Inventories 12,947 12,183
Prepaid expenses 5,461 5,671
-------- --------
Total current assets 54,129 53,590
Property, plant and equipment, net 65,112 65,946
Other assets at amortized cost:
Goodwill and other intangible assets 109,827 111,149
Debt issuance costs 9,086 9,514
-------- --------
Total assets $238,154 $240,199
======== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Condensed Balance Sheets
March 31, 1995 and December 31, 1994
(In thousands, except per share amounts)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
March 31,
1995 December 31,
(Unaudited) 1994
------------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 25,131 $ 34,285
Accrued expenses 19,465 14,935
Current maturities of long-term debt and
obligations under capital leases (note 7) 14,462 14,448
-------- --------
Total current liabilities 59,058 63,668
Long-term debt and obligations under capital
leases, less current maturities (note 7) 287,299 287,099
Cumulative redeemable senior exchangeable
preferred stock, $.01 par value. Authorized
2,150 shares; issued and outstanding 1,470
shares in 1995 and 1,430 shares in 1994;
aggregate liquidation preference $36,750
(note 10) 34,533 33,502
Stockholders' deficit (notes 3 and 11):
Class A common stock, $.01 par value.
Authorized 20,000 shares; issued and
outstanding 13,642 in 1995 and 1994 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 (123,307) (124,641)
--------- ---------
Total stockholders' deficit (142,736) (144,070)
--------- ---------
Total liabilities and stockholders'
deficit $ 238,154 $ 240,199
========= =========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Condensed Statements of Operations
For the Three Months
Ended March 31, 1995 and 1994
(In thousands, except per share amounts)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
March 31, March 31,
1995 1994
---------- ----------
<S> <C> <C>
Net sales $81,290 $73,993
Cost of sales (note 12) 50,114 45,645
------- -------
Gross profit 31,176 28,348
Operating expenses:
Marketing expenses 1,830 1,481
Administrative and general expenses 16,006 14,994
Depreciation (note 12) 1,422 1,368
Amortization of intangible assets 1,322 1,369
------- -------
Total operating expenses 20,580 19,212
------- -------
Operating profit 10,596 9,136
Other expense (income):
Interest expense 5,363 5,584
Amortization of deferred debt issuance costs 428 428
Gain from disposition of assets (2) (2)
Bond accretion 2,517 2,248
Other (75) (69)
------- -------
Total other expense 8,231 8,189
------- -------
Income before provision of income taxes 2,365 947
Provision for income taxes - 35
------- -------
Net income 2,365 912
====== =======
Net income per common share (note 14) $0.10 $0.00
====== =======
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Stockholders' Deficit
(In thousands)
UNAUDITED
<TABLE>
<CAPTION>
Consideration
to continuing
Predecessor
Additional stockholders
Common Stock paid-in in excess of
------------------
Shares Amount capital Deficit book value Totals
------- ------- ---------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 13,642 $136 $14,383 ($124,641) ($33,948) ($144,070)
Accretion of preferred stock (note 10) (48) (48)
Preferred stock dividend (983) (983)
Net income 2,365 2,365
------- ------- -------- --------- -------- ---------
Balance at March 31, 1995 13,642 136 $14,383 ($123,307) ($33,948) ($142,736)
======= ======= ======== ========= ======== =========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
For the Three Months Ended March 31, 1995 and 1994
(In thousands)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
March 31, March 31,
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $2,365 $ 912
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property, plant and equipment 2,314 2,219
Amortization of other assets 1,750 1,797
Accretion of discount on discount notes 2,517 2,248
Gain on sale of assets (2) (2)
Changes in assets and liabilities:
Accounts receivable 723 (1,549)
Inventories (764) (3,418)
Prepaid assets 211 (1,992)
Accounts payable (9,154) 2,645
Accrued expenses 4,530 83
------- -------
Total adjustments 2,125 2,031
------- -------
Net cash provided by operating
activities 4,490 2,943
Cash flows from investing activities:
Additions to property, plant and equipment (1,551) (1,973)
Proceeds from sale of property, plant and
equipment 72 86
------- -------
Net cash used in investing activities
(1,479) (1,887)
Cash flows from financing activities:
Payment of long-term debt (2,303) (254)
Proceeds from borrowings under credit agreement 5,000
Purchase of senior notes (5,000)
------- -------
Net cash used in financing activities (2,303) (254)
Net increase in cash and cash equivalents 708 802
Cash and cash equivalents at beginning of year 7,794 16,955
------- -------
Cash and cash equivalents at end of period $ 8,502 $17,757
======= =======
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING COMPANY OF TEXAS
Consolidated Condensed Balance Sheets
March 31, 1995 and December 31, 1994
(In thousands)
ASSETS
<TABLE>
<CAPTION>
March 31,
1995 December 31,
(Unaudited) 1994
------------- ------------
<S> <C> <C>
Current assets:
Cash & cash equivalents $ 8,477 $ 7,769
Accounts receivable:
Trade, less allowance for doubtful
accounts of $437 in March 1995 and $371
in December 1994 23,843 24,479
Other 3,653 3,748
Inventories 12,947 12,183
Prepaid expenses 5,461 5,671
-------- --------
Total current assets 54,381 53,850
Property, plant and equipment, net 65,112 65,946
Other assets at amortized cost:
Goodwill and other intangible assets 109,827 111,149
Debt issuance costs 6,525 6,871
-------- --------
Total assets $235,845 $237,816
======== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
DR PEPPER BOTTLING COMPANY OF TEXAS
Consolidated Condensed Balance Sheets
March 31, 1995 and December 31, 1994
(In thousands, except per share amounts)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
March 31,
1995 December 31,
(Unaudited) 1994
------------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 25,131 $ 34,285
Accrued expenses 19,465 14,935
Current maturities of long-term debt and
obligations under capital leases 14,462 14,448
-------- --------
Total current liabilities 59,058 63,668
Long-term debt and obligations under capital
leases, less current maturities 196,944 199,261
Stockholders' deficit:
Common stock, $.01 par value. Authorized
11,000 shares; issued and outstanding .1
shares in 1995 and 1994 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 (96,437) (101,393)
--------- ---------
Total stockholders' deficit (20,157) (25,113)
--------- ---------
Total liabilities and stockholders'
deficit $ 235,845 $ 237,816
========= =========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING COMPANY OF TEXAS
Consolidated Condensed Statements of Operations
For the Three Months
Ended March 31, 1995 and 1994
(In thousands)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
March 31, March 31,
1995 1994
------------- ------------
<S> <C> <C>
Net sales $81,290 $73,993
Cost of sales 50,114 45,645
-------- --------
Gross profit 31,176 28,348
Operating expenses:
Marketing expenses 1,830 1,481
Administrative and general expenses 16,006 14,994
Depreciation 1,422 1,368
Amortization of intangible assets 1,322 1,369
-------- --------
Total operating expenses 20,580 19,212
-------- --------
Operating profit 10,596 9,136
Other expense (income):
Interest expense 5,364 5,574
Amortization of deferred debt
issuance costs 346 346
Gain from disposition of assets (2) (2)
Other (68) (56)
-------- --------
Total other expense 5,640 5,862
-------- --------
Income before provision of income taxes 4,956 3,274
Provision for income taxes - 35
-------- --------
Net Income $4,956 $3,239
======== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING COMPANY OF TEXAS
Consolidated Condensed Statement of Stockholders' Deficit
(In thousands)
UNAUDITED
<TABLE>
<CAPTION>
Consideration
to continuing
Predecessor
Additional stockholders
Common Stock paid-in in excess of
------------------
Shares Amount capital Deficit book value Totals
------- ------- ------------ ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 0.1 $1 $110,227 ($101,393) ($33,948) ($25,113)
Net income 4,956 4,956
------ ------ -------- --------- -------- --------
Balance at March 31, 1995 0.1 $1 $110,227 ($ 96,437) ($33,948) ($20,157)
====== ====== ======== ========= ======== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
DR PEPPER BOTTLING COMPANY OF TEXAS
Consolidated Condensed Statements of Cash Flows
For the Three Months Ended March 31, 1995 and 1994
(In thousands)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
March 31, March 31,
1995 1994
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $4,956 $ 3,239
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property, plant and equipment 2,314 2,219
Amortization of other assets 1,669 1,715
Gain on sale of assets (2) (2)
Changes in assets and liabilities:
Accounts receivable 730 (1,545)
Inventories (764) (3,418)
Prepaid assets 211 (1,993)
Accounts payable (9,154) 2,645
Accrued expenses 4,530 83
------- --------
Total adjustments (466) (296)
------- --------
Net cash provided by operating
activities 4,490 2,943
Cash flows from investing activities:
Additions to property, plant and equipment (1,551) (1,973)
Proceeds from sale of property, plant and
equipment 72 86
------- --------
Net cash used in investing
activities (1,479) (1,887)
Cash flows from financing activities:
Payment of long-term debt (2,303) (254)
Proceeds from borrowings under credit agreement 5,000
Purchase of senior notes (5,000)
------- --------
Net cash used in financing
activities (2,303) (254)
------- --------
Net increase in cash and cash equivalents 708 802
Cash and cash equivalents at beginning of year 7,769 16,930
------- --------
Cash and cash equivalents at end of period $8,477 $17,732
======= ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Consolidated Condensed Financial Statements
Unaudited
March 31, 1995
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"), and of Dr Pepper Bottling Company of Texas, as of
March 31, 1995 and December 31, 1994, the related consolidated
condensed statements of operations for the three months ended
March 31, 1995 and 1994, the related consolidated condensed
statements of stockholders' deficit for the three months ended
March 31, 1995, and the related consolidated condensed statements
of cash flows for the three months ended March 31, 1995 and 1994
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 May 9, 1995, 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, Texas. Soft
drink operations are conducted pursuant to franchise agreements
with companies owning the rights to soft drink formulae.
<PAGE>
<PAGE>
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 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
<PAGE>
<PAGE>
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 December 31, 1994, the Company had no balance outstanding
on the revolving line of credit facility of the 1993 Bank Credit
Agreement. The facilities mature December 31, 1999.
The 1993 Bank Credit Agreement contains customary restrictive
covenants and requires the Company, among other things, to
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 28, 1989, in connection with the
sale/leaseback of its Irving and Houston, Texas
<PAGE>
<PAGE>
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 March 31, 1995 and December 31, 1994 is
summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
Mar. 31, Dec. 31,
1995 1994
---------- ----------
<S> <C> <C>
Facility borrowing under 1993
Bank Credit Agreement $ 70,930 $ 68,069
Sale/leaseback borrowings,
due in monthly installments
of $333,167 through June 2014 26,936 27,019
Capital lease obligations 2 4
Senior notes,
due February 15, 2000 112,000 117,000
Discount notes,
due February 15, 2003 90,355 87,838
Covenant not to compete;
liability at present value
of payments 1,538 1,617
-------- --------
$301,761 $301,547
Less current portion 14,462 14,448
-------- --------
$287,299 $287,099
======== ========
</TABLE>
<PAGE>
<PAGE>
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.
During 1994, the Company purchased $8.0 million aggregate
principal amount of its outstanding Senior Notes at an aggregate
purchase price of $8.2 million. The purchase price was funded
from cash on hand. In January 1995, the Company used its
revolving line of credit facility to purchase an additional $5.0
million of its Senior Notes for $5.1 million.
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 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
<PAGE>
<PAGE>
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.
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
<PAGE>
<PAGE>
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)
Three Months Ended
------------------------
Mar. 31, Mar. 31,
1995 1994
----------- -----------
<S> <C> <C>
Cost of goods sold $ 892 $ 851
Administrative and general expenses 1,422 1,368
------ ------
Total depreciation $2,314 $2,219
====== ======
</TABLE>
13. CHANGE IN ACCOUNTING PRINCIPLES - ACCOUNTING FOR INCOME TAXES
-------------------------------------------------------------
(DOLLAR AMOUNTS IN THOUSANDS)
-----------------------------
Under the asset and liability method of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
("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.
<PAGE>
<PAGE>
Income tax expense attributable to income from continuing
operations was $140 for the year ended December 31, 1994, and
differed from the amount computed by applying the U.S. federal
income tax rate of 34 percent to pretax income from continuing
operations as a result of the following:
<TABLE>
<CAPTION>
1994
----------
<S> <C>
Computed "expected tax expense 997
Changes in income taxes resulting from
utilization of net operating loss
carry-forward (1,340)
Amortization of goodwill 65
Alternative minimum tax 140
Other 178
------
Total income tax expense 140
======
</TABLE>
The tax effect of temporary differences that gave rise to
significant portions of the deferred tax assets and deferred tax
liabilities as of December 31, 1994 are presented below:
<TABLE>
<CAPTION>
Deferred tax assets: 1994
-----------
<S> <C>
Net operating loss carryforwards $ 28,784
Obligations under capital leases 8,605
Other 2,457
--------
Total gross deferred tax assets $ 39,846
Less valuation allowance (32,112)
--------
Net deferred tax assets 7,734
--------
Deferred tax liabilities: 1994
-----------
Plant and equipment, principally due
to differences in depreciation (3,586)
Intangible assets due to differences
in amortization (4,148)
--------
Total gross deferred liabilities (7,734)
--------
Net deferred tax liabilities $ -
========
</TABLE>
For federal income tax purposes, the predecessor tax basis of
assets and liabilities was retained following the Acquisition.
At December 31, 1994, the Company had net operating loss
carryforwards of approximately $84,658 which are available to
offset future federal taxable income, if any, through 2008. At
December 31, 1994, there were approximately $64,973 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.
<PAGE>
<PAGE>
The valuation allowance for deferred tax assets as of
December 31, 1994 was $32,112. The net change in the total
valuation allowance for the year ended December 31, 1994 was a
decrease of $5,792. The change was primarily related to a change
in net operating loss carryforwards during 1994.
Income taxes paid for the year ended December 31, 1994 totaled
$105,000.
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 the 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. NET INCOME PER COMMON SHARE
---------------------------
Net income per common share is computed by dividing net income,
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)
Three Months Ended
------------------------
Mar. 31, Mar. 31,
1995 1994
----------- -----------
<S> <C> <C>
Net income $ 2,365 $ 912
Preferred stock dividends (983) (882)
Accretion of preferred stock (48) (47)
------- -------
$ 1,334 $ (17)
<PAGE>
<PAGE>
Common shares outstanding 13,642 13,642
Net income per common share $ .10 $ .00
======= =======
</TABLE>
<PAGE>
<PAGE>
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
DR PEPPER BOTTLING COMPANY OF TEXAS
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1995
GENERAL
-------
The Company's primary measurement of unit volume is case sales. Case
sales refers to physical cases of beverages sold, including both
premix products (ready-to-serve beverages which are sold in tanks and
converted to case sales on the basis of four cases per tank) and
postmix products (fountain syrups to which carbonated water must be
added and which are converted to case sales on the basis of one case
per gallon.)
Franchise case sales represent primarily sales of the Company's
branded products to retailers only. Contract case sales are comprised
of sales, primarily of products in cans, to unaffiliated bottling
companies that hold soft drink franchises and to a wholesaler of
private label brand 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 net 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 MARCH 31, 1995
--------------------- ---------------------------------
COMPARED TO THREE MONTHS ENDED
------------------------------
MARCH 31, 1994
--------------
Net sales, excluding contract net sales, for the three months ended
March 31, 1995 increased to $76.5 million compared to $69.0 million
for the same period in 1994. The increase was due to a 2.4% increase
in franchise case sales, with the addition of Arizona Tea and with
above average growth in Dr Pepper, Canada Dry, Sunkist and Evian.
Contract sales for the three months ended March 31, 1995 decreased
3.3% from the same period in 1994 due to a decrease in regular
contract sales which was partially offset by increased private label
contract sales. As a result of the foregoing, net sales for the three
months ended March 31,
<PAGE>
<PAGE>
1995 increased 9.9% to $81.3 million compared to $74.0 million for the
same period in 1994.
Cost of sales for the three months ended March 31, 1995 increased to
$50.1 million compared to $45.6 million for the same period in 1994.
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, cans, and plastic bottles. These
increased costs were partially offset by reduced cost of sweetener.
As a percentage of net sales, cost of sales for the three months ended
March 31, 1995 decreased to 61.6% from 61.7% for the same period in
1994.
Marketing expenses for the three months ended March 31, 1995 were $1.8
million, compared to $1.5 million for the same period in 1994.
Marketing expenses represented approximately 2% of net sales in each
period.
Administrative and general expenses for the three months ended March
31, 1995 increased to $16.0 million compared to $15.0 million for the
same period in 1994. The increase was due primarily to an increase of
$.5 million in labor and employee benefit expenses, an increase of $.1
million in fleet expenses under a full service lease arrangement, an
increase of $.2 million in full service commissions, and an increase
of $.2 million in other expenses. Depreciation expense for the three
months ended March 31, 1995 was $1.4 million, unchanged from the same
period in 1994. Amortization of intangible assets decreased to $1.3
million from $1.4 million for the same period in 1994.
As a result of the above factors, operating profit for the three
months ended March 31, 1995 increased to $10.6 million, or 13.0% of
net sales, compared to $9.1 million, or 12.3% of net sales, for the
same period in 1994.
Interest expense for the Company for the three months ended March 31,
1995 decreased to $5.4 million from $5.6 million for the same period
in 1994 due to reduction of debt.
Amortization of the Company's deferred debt issuance costs for the
three months ended March 31, 1995 was $.3 million, unchanged from the
same period in 1994.
As a result of the above factors, the Company's income for the three
months ended March 31, 1995 was $5.0 million compared to income of
$3.2 million for the same period in 1994.
Interest expense (including bond accretion on the Discount Notes) for
Holdings for the three months ended March 31, 1995 increased to $7.9
million from $7.8 million for the same period in 1994. The increase
was due to an increase in accretion of discount bonds, partially
offset by reduced cash interest due to reduction of debt.
<PAGE>
<PAGE>
Holdings' amortization of deferred debt issuance costs for the three
months ended March 31, 1995 was $.4 million, unchanged from the same
period in 1994.
As a result of the above factors, Holdings generated a net income of
$2.4 million for the three months ended March 31, 1995 compared to an
income of $.9 million for the same period in 1994.
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 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 March 31, 1995, approximately $65.9 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: $11.7 million during the last
nine months of 1995, $15.5 million in 1996, $17.2 million in each of
1997 and 1998 and $4.4 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
<PAGE>
<PAGE>
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. During 1994, the Company purchased $8.0 million aggregate
principal amount of its outstanding Senior Notes at an aggregate
purchase price of $8.1 million. The purchase price was funded from
cash on hand. In January 1995 the Company used its revolving line of
credit to purchase an additional $5.0 million of its Senior Notes for
$5.1 million.
Because the obligations under the 1993 Bank Credit Agreement bear
interest at floating rates, the Company will be sensitive to changes
in prevailing interest races. As required by the 1993 Bank Credit
Agreement, the Company entered into interest rate protection
arrangements, expiring June 30, 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 $4.7 million at March 31,
1995 compared to negative working capital of $9.8 million at December
31, 1994.
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
<PAGE>
<PAGE>
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
and 1996 to service volume growth at several locations. During 1994
capital expenditures totaled $10.8 million. The Company anticipates
that capital expenditures will total approximately $8.0 million to
$8.5 million for each of the years 1995 through 1997.
<PAGE>
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27.1 - Financial Data Schedule of Dr Pepper Bottling
Holdings, Inc. and Subsidiary
27.2 - Financial Data Schedule of Dr Pepper Bottling
Company of Texas
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months
ended March 31, 1995.
<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: May 15, 1995 /s/ Jim L. Turner
-------------- ------------------------------
Jim L. Turner
Chairman of the Board/President
Date: May 15, 1995 /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: May 15, 1995 /s/ Jim L. Turner
-------------- ------------------------------
Jim L. Turner
Chairman of the Board/President
Date: May 15, 1995 /s/ C. Marvin Montgomery
-------------- ------------------------------
C. Marvin Montgomery
Vice President - Finance and
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-Q and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<CIK> 0000843396
<NAME> DR PEPPER
BOTTLING
HOLDINGS, INC.
AND SUBSIDIARY
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 8,502
<SECURITIES> 0
<RECEIVABLES> 24,280
<ALLOWANCES> 437
<INVENTORY> 12,947
<CURRENT-ASSETS> 54,129
<PP&E> 129,293
<DEPRECIATION> 64,181
<TOTAL-ASSETS> 238,154
<CURRENT-LIABILITIES> 59,058
<BONDS> 287,299
0
34,533
<COMMON> 136
<OTHER-SE> (142,872)
<TOTAL-LIABILITY-AND-EQUITY> 238,154
<SALES> 81,290
<TOTAL-REVENUES> 81,290
<CGS> 50,114
<TOTAL-COSTS> 51,944
<OTHER-EXPENSES> 18,750
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,308
<INCOME-PRETAX> 2,365
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,365
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.08
<PAGE>
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-Q and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<CIK> 0000843397
<NAME> DR PEPPER
BOTTLING COMPANY
OF TEXAS
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 8,477
<SECURITIES> 0
<RECEIVABLES> 24,280
<ALLOWANCES> 437
<INVENTORY> 12,947
<CURRENT-ASSETS> 54,381
<PP&E> 129,293
<DEPRECIATION> 64,181
<TOTAL-ASSETS> 235,845
<CURRENT-LIABILITIES> 59,058
<BONDS> 196,944
0
0
<COMMON> 1
<OTHER-SE> (20,157)
<TOTAL-LIABILITY-AND-EQUITY> 235,845
<SALES> 81,290
<TOTAL-REVENUES> 81,290
<CGS> 50,114
<TOTAL-COSTS> 51,944
<OTHER-EXPENSES> 18,750
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,710
<INCOME-PRETAX> 4,956
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,956
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,956
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
<PAGE>
<PAGE>
</TABLE>
