<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
--------------------------
QUARTERLY REPORT
UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED COMMISSION FILE NUMBER
JUNE 30, 1996 33-47718
SEVEN-UP/RC BOTTLING COMPANY
OF
SOUTHERN CALIFORNIA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4284699
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3220 EAST 26TH STREET
VERNON, CALIFORNIA 90023
(Address of principal executive offices) (Zip code)
(213) 268-7779
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s)), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO .
--- ---
At August 9, 1996 there were 1,000 shares of Common Stock outstanding. As of
such date, none of the outstanding shares of Common Stock was held by persons
other than affiliates and employees of the registrant, and there was no public
market for the Common Stock.
================================================================================
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited consolidated balance sheets as of
June 30, 1996 and December 31, 1995 2
Unaudited consolidated statements of
operations for the six months ended
June 30, 1996 and 1995 3
Unaudited consolidated statements of cash
flows for the six months ended
June 30, 1996 and 1995 4
Unaudited consolidated statements of
stockholder's equity (deficit) as of
December 31, 1995 and June 30, 1996 5
Notes to consolidated financial statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 3. Defaults Upon Senior Securities 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
1
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
Unaudited Consolidated Balance Sheets
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Current assets:
Cash $ 4,493 $ 5,949
Accounts receivable:
Trade, net 42,144 42,261
Other 8,952 9,450
Inventories:
Finished goods 21,476 18,749
Raw materials 8,027 6,198
Prepaids 2,360 2,908
--------- ----------
Total current assets 87,452 85,515
--------- ----------
Investment in joint venture 1,420 1,422
Property, plant and equipment, net 73,842 79,945
Other assets:
Intangible and other assets 18,546 21,422
Debt issuance costs 2,823 3,829
--------- ----------
Total assets $ 184,083 $ 192,133
========= ==========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable:
Pre-petition $ 25,909 $ -
Post-petition 22,380 29,141
Accrued expenses 50,769 34,371
Current portion of long-term debt and capital
lease obligations 160,465 189,954
--------- ----------
Total current liabilities 259,523 253,466
--------- ----------
Long-term debt - -
Stockholder's equity (deficit):
Capital stock $0.01 par value; 1,000 shares
authorized, issued and outstanding - -
Additional paid-in capital 42,557 42,557
Retained deficit (117,997) (103,890)
--------- ----------
Total stockholder's equity (deficit) (75,440) (61,333)
--------- ----------
Total liabilities and stockholder's equity
(deficit) $ 184,083 $ 192,133
========= ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
2
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
Unaudited Consolidated Statements of Operations
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $90,027 $111,379 $164,056 $200,438
Cost of goods sold 72,972 96,131 132,914 168,344
------- -------- -------- --------
Gross profit 17,055 15,248 31,142 32,094
Administrative, marketing and
general expenses 12,173 13,607 23,443 25,101
Depreciation and amortization 4,561 4,493 8,787 8,988
Reorganization expense 1,606 -- 3,157 --
Restructuring charges 547 -- 547 --
------- -------- -------- --------
Operating income (loss) (1,832) (2,852) (4,792) (1,995)
Interest expense 5,247 5,758 10,655 11,507
Other (income) expense, net 26 (72) (1,895) (136)
------- -------- -------- --------
Loss before income taxes (7,105) (8,538) (13,552) (13,366)
Provision for income taxes 45 -- 45 --
------- -------- -------- --------
Loss before extraordinary item (7,150) (8,538) (13,597) (13,366)
Extraordinary items (510) -- (510) --
------- -------- -------- --------
Net loss $(7,660) $ (8,538) $(14,107) $(13,366)
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
Unaudited Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss before extraordinary item $ (13,597) $ (13,366)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 9,338 9,875
Equity in earnings of joint venture (5) (47)
Gain on sales of fixed assets (3) 15
Provision for doubtful accounts 709 345
Changes in assets and liabilities:
Accounts receivable (1,629) 3,616
Inventories (4,556) 11,989
Prepaids and other 1,290 (1,382)
Accounts payable 30,043 (14,660)
Accrued expenses 6,903 (1,838)
--------- ---------
Net cash provided by (used in) operating activities 28,493 (5,453)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment 130 4
Restructuring charges 547 -
Additions to property, plant and equipment (4,570) (2,383)
--------- ---------
Net cash used in investing activities (3,893) (2,379)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayment of) proceeds from old revolving loans (30,447) 7,510
Proceeds from new debtor-in-possession facility 8,576 -
(Repayment of) proceeds from term loan (3,620) 315
Repayment of capital leases (565) (209)
--------- ---------
Net cash provided by (used in) financing activities (26,056) 7,614
--------- ---------
NET DECREASE IN CASH (1,456) (218)
CASH, beginning of period 5,949 6,982
--------- ---------
CASH, end of period $ 4,493 $ 6,764
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash interest paid $ 1,918 $ 10,580
========= =========
Purchase of property, plant and equipment through issuance of
capital lease obligation $ 0 $ 555
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
Unaudited Consolidated Statements of Stockholder's Equity (Deficit)
(Amounts in thousands, except share amounts)
<TABLE>
<CAPTION>
Capital Stock Additional Total
--------------- Paid-in Retained Stockholder's
Shares Amount Capital Deficit Equity (Deficit)
------ ------ ---------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 1,000 $ $42,557 $(103,890) $(61,333)
Net loss - - - (14,107) $(14,107)
----- ----- ------- --------- --------
Balance, June 30, 1996 1,000 $ - $42,557 $(117,997) $(75,440)
===== ===== ======= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
Notes to Consolidated Financial Statements
(Unaudited)
(1) Presentation of Financial Information
-------------------------------------
The accompanying consolidated financial statements include the accounts of
Seven-Up/RC Bottling Company of Southern California, Inc. ("Southern
California") and Southern California's wholly-owned subsidiary, Seven-Up/RC
Bottling Company of Puerto Rico, Inc. ("Puerto Rico"). Except as otherwise
indicated, Southern California and Puerto Rico are referred to collectively
as the "Company".
During interim periods, the Company follows the accounting policies set
forth in its Annual Report on Form 10-K filed with the Securities and
Exchange Commission. Users of financial information produced for interim
periods are encouraged to refer to the footnotes contained in the Annual
Report on Form 10-K when reviewing interim financial results.
In the opinion of management, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial condition, the
results of operations, cash flows, and stockholder's equity of the Company
for interim periods.
Certain reclassifications have been made to the 1995 financial statements
to conform in the 1996 presentation.
As discussed below, Southern California filed for relief under Chapter 11
of the Bankruptcy Code on May 13, 1996.
(2) Bankruptcy Filings
------------------
As a result of severe liquidity problems, on July 31, 1995, Southern
California suspended payments of interest on its $140,000,000 11.5% Senior
Secured Notes due 1999 (the "Senior Secured Notes"). At the end of the
second quarter of 1995 through the first quarter of 1996, Southern
California was in violation of certain of its revolving credit facility
covenants, including tangible net-worth, interest coverage and fixed charge
coverage. At the request of Southern California, the revolving credit
lender executed forbearance agreements extending through May 15, 1996.
On November 9, 1995, Southern California announced that it had reached an
agreement in principle on the terms of a restructuring of the Senior
Secured Notes with an unofficial committee (the "Committee") of holders of
such notes. The agreement contemplated, among other things, (i) the
exchange of the Senior Secured Notes for approximately 98% of the equity of
Southern California, and (ii) the sale of Puerto Rico and the payment to
the holders of the Senior Secured Notes of the net proceeds from such sale.
On May 13, 1996, Southern California and its immediate holding company
parent, Beverage Group Acquisition Company ("BGAC"), filed voluntary
petitions for reorganization relief under Chapter 11 of the Bankruptcy Code
to implement the terms of the restructuring agreement with the Committee.
The Chapter 11 cases are pending before the U.S. Bankruptcy Court for the
District of Delaware. As of June 30, 1996 Southern California and BGAC
continued to operate the businesses as debtors-in-possession (See
Subsequent Events).
6
<PAGE>
On May 13, 1996, the bankruptcy court entered an order (the "Trade Order")
authorizing Southern California to, among other things, make payments to
its trade suppliers on account of pre-bankruptcy claims provided that such
suppliers continue to provide goods to Southern California on the same
credit terms as were in effect on the day before Southern California
announced the suspension of interest payments on the Senior Secured Notes.
The accompanying financial statements have not been adjusted to reflect the
impact of the Company's proposed plan of reorganization (See Subsequent
Events). However, because the indenture trustee and, subject to the
satisfaction of certain conditions, the holders of the Senior Secured Notes
had the right prior to the filing of the bankruptcy petitions to accelerate
the Notes, the Notes are reflected as a current liability.
(3) Reorganization Expense
----------------------
During the second quarter of 1996, the Company recorded reorganization
expense of approximately $1,606,000 related to negotiations of the
potential restructuring of Southern California's obligations under the
Senior Secured Notes. Since the second quarter of 1995, reorganization
expenses of approximately $5,643,000 have been recorded.
(4) Restructuring Charges
---------------------
During the second quarter of 1996, the Company recorded approximately
$547,000 of restructuring charges related to the termination of a capital
lease. Since the second quarter of 1995, the Company has recorded
approximately $3,113,000 related to employee termination expenses and
facility exit costs.
(5) Long-Term Debt
--------------
Components of the current portion of long-term debt at June 30, 1996, and
December 31, 1995, were (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Pre-petition revolving loans $ 7,400 $ 37,847
Post-petition revolving loans 8,576 -
Senior Secured Notes 140,000 140,000
Term loans 578 4,197
Capital lease obligations 3911 7,910
--------- ------------
Total $ 160,465 $ 189,954
========= ============
</TABLE>
(6) Recent Accounting Pronouncement
-------------------------------
In the first quarter of 1996, the Company adopted Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of" (SFAS 121). The impact of
the adoption of SFAS 121 was not material to the Company's financial
position or results of operations. The projected use of the Company's
long-lived assets is subject to change in the future, depending upon the
outcome of the Company's restructuring. The effect of any change to the
projected use of the Company's long-lived assets could impact the Company's
financial position or results of operations in the future.
7
<PAGE>
(7) First Amended Joint Plan of Reorganization
------------------------------------------
On June 19, 1996, Southern California's Disclosure Statement with respect
to the First Amended Joint Plan of Reorganization (the "Plan") was
approved by the bankruptcy court.
(8) Extraordinary Loss
------------------
As a result of the bankruptcy filing and the resulting debtor-in-possession
working capital facility, Southern California wrote off $510,000 of debt
issuance costs related to its old working capital facility.
(9) Bankruptcy Impact on Cash Flows From Operating Activities
---------------------------------------------------------
Cash flow provided by operating activities for the six months ending June
30, 1996, of approximately $29,040,000 was impacted by approximately
$24,909,000 of pre-petition accounts payable, that are anticipated to be
paid in full upon consummation of the Plan (See Subsequent Events).
Additionally, accrued expenses were impacted by $6,708,000 of unpaid
interest related to the Senior Secured Notes, which payment was suspended
by Southern California on July 31, 1995.
(10) Subsequent Events
-----------------
Puerto Rico Sale
----------------
On July 1, 1996, the sale of the stock of Puerto Rico, in accordance with
the definitive agreement entered into by Southern California on May 3,
1996, was consummated for approximately $74 million. The net proceeds from
the sale that are expected to be distributed pursuant to the Plan to
holders of the Senior Secured Notes is $55 million.
Puerto Rico balance sheet components (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Current assets $ 29,159 $ 27,582
Long-term assets 22,549 23,620
-------- ---------
Total assets 51,708 51,202
======== =========
Current liabilities 38,810 37,688
Long-term debt - -
Stockholders equity 12,898 13,514
-------- ---------
Total liabilities and stockholders' equity $ 51,708 $ 51,202
======== =========
</TABLE>
8
<PAGE>
Puerto Rico profit and loss comparison for the six months ending June 30,
1996 and 1995, (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
-------- --------
<S> <C> <C>
Net sales $ 37,935 $ 38,059
Cost of goods 30,375 30,488
-------- --------
Gross profit 7,560 7,571
Administrative, marketing and general expense 3,170 3,060
Depreciation and amortization 2,603 2,202
Reorganization expense 79 -
Restructuring charges - -
-------- --------
Operating income 1,708 2,309
Interest expense 1,529 1,519
Other expense, net 750 750
-------- --------
Gain (loss) before income taxes (571) 40
Provision for income taxes 45 -
-------- --------
Gain (loss) before extraordinary items (616) 40
Extraordinary items - -
-------- --------
Net gain (loss) $ (616) $ 40
======== ========
</TABLE>
Plan Confirmation and Consummation
- ----------------------------------
On August 2, 1996, the Bankruptcy Court confirmed the Plan. It
is anticipated the Plan will be consummated and that Southern California
will emerge from Chapter 11, on or before August 15, 1996. Distributions
to creditors on account of pre-petition claims should commence soon
thereafter.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
On May 13, 1996, Southern California and its immediate holding Company
parent, BGAC, filed voluntary petitions for reorganization relief under Chapter
11 of the Bankruptcy Code as a result of the events described below. See
"Bankruptcy Petitions." As of June 30, 1996 Southern California continued to
operate its business as a debtor-in-possession (See Subsequent Events).
The Company's primary measurement of unit volume is DSD cases. Case sales
are defined as physical cases of beverages sold, including both ready-to-serve
premix and postmix fountain products that are sold in bulk (tanks or boxes).
Avalon and Liquitrend are not combined in the Company's physical case sales, but
are included in net sales, cost of goods sold, and operating income.
Liquitrend's net sales fluctuate from year to year and generate gross margins
that are less than gross margins for DSD sales.
RESULTS OF OPERATIONS (UNAUDITED)
COMPARISON OF THE COMPANY'S THREE MONTHS ENDED JUNE 30, 1996, WITH THE THREE
MONTHS ENDED JUNE 30, 1995.
Consolidated net sales decreased to $90,027,000 for the three months ending
June 30, 1996, from $111,379,000 for the three months ending June 30, 1995, or
19.2%. This net sales decrease was primarily due to a reduction in Southern
California's operations, the result of reduced DSD case sales volume, reduced
hot-fill contract packing revenue and the elimination of the value-priced
product division, Avalon, which represented $7,797,000, or 36.5%, of the sales
decrease for the three months ending June 30, 1996.
Net sales of Southern California's DSD product line decreased to
$58,878,000 for the three months ending June 30, 1996, from $61,289,000 for the
comparable 1995 period, or 3.9%. This net sales decrease is the direct result
of the November 1995 termination of a temporary distribution agreement under
which Southern California distributed Snapple products in a portion of its
territory. Excluding the impact of this termination, comparable net sales for
the three months ending June 30, 1996, increased 3.9% on DSD case volume that
decreased 6.0%. Net sales for Puerto Rico decreased to $21,076,000 for the
three months ending June 30, 1996, from $21,514,000 for the comparable 1995
period, or 2.0%.
Liquitrend net sales decreased to $10,073,000 for the three months ending
June 30, 1996 from $20,779,000 for the three months ending June 30, 1995, or
51.5%. This decrease is attributable to Southern California's previously
announced strategic decision to downsize this division.
Costs of goods sold decreased to $72,972,000 for the three months ending
June 30, 1996 from $96,131,000 for the comparable 1995 period, or 24.1%. As a
percent of sales, gross margin improved to 18.9% from 13.7% for the comparable
period. This improvement is primarily the result of increased selling price per
DSD case in Southern California and reduced fixed costs in Southern California,
such as warehouse expense and labor costs that were eliminated during the third
quarter of 1995 restructuring.
Administrative, marketing and general expenses decreased to $12,173,000 for
the three months ending June 30, 1996 from $13,607,000 for the comparable 1995
period, or 10.5%. This decrease is attributable to expense savings resulting
from Southern California's work force reduction in September 1995.
Interest expense decreased to $5,247.000 during the three months ending
June 30, 1996 from $5,758,000 for the comparable 1995 period, or 8.9%, primarily
the result of lower short-term interest rates in 1996.
For the reasons set forth above, the Company's net loss before
extraordinary items decreased to $7,105,000 for the three months ending June 30,
1996 from $8,538,000 for the comparable 1995 period, or 16.8%.
10
<PAGE>
COMPARISON OF THE COMPANY'S SIX MONTHS ENDED JUNE 30, 1996, WITH THE SIX MONTHS
ENDED JUNE 30, 1995.
Consolidated net sales decreased to $164,056,000 for the six months ended
June 30, 1996, from $200,438,000 for the comparable 1995 period, or 18.2%. This
decrease was principally due to a reduction in Southern California's operations,
the result of reduced DSD case sales volume, reduced hot-fill contract packing
revenue and the elimination of the value-priced product division, Avalon, which
represented $12,820,000, or 35.2%, of the consolidated net sales decrease for
the six months ending June 30, 1996.
Net sales for Southern California DSD product line decreased to
$107,656,000 from $113,859,000, or 5.4% for the six months ending June 30, 1996
and 1995, respectively. This net sales decrease is the direct result of the
termination of a temporary Snapple product distribution agreement for portions
of Southern California. Excluding the impact on 1995 net sales for this
distribution agreement termination, comparable net sales for Southern California
would have increased 2.8% on a DSD case volume decrease of 3.0%. Puerto Rico's
net sales for the six months ended June 30, 1996, decreased to $37,935,000 from
$38,059,000 for the comparable 1995 period, or 0.3%.
Liquitrend contract packing net sales decreased to $16,920,000 for the six
months ending June 30, 1996, from $34,176,000 for the six months ending June 30,
1995, or 50.5%. This net sales reduction is the direct result of Southern
California's previously announced strategic decision to downsize this division.
Costs of goods sold decreased to $132,914,000 for the six months ending
June 30, 1996 from $168,344,000 for the comparable 1995 period, or 21.0%. This
decrease is primarily the result of lower direct material and reduced variable
costs related to Southern California net sales decrease and reduced fixed costs,
such as warehouse expense and labor costs that were eliminated from Southern
California as a result of the third quarter 1995 restructuring.
Administrative, marketing and general expenses decreased to $23,443,000 for
the six month period ending June 30, 1996 from $25,101,000 for the comparable
1995 time frame, or 6.6%. This decrease is principally the result of work force
reductions during the third quarter of 1995 in Southern California.
Interest expense decreased to $10,655,000 during the first six months of
1996 from $11,508,000 during the comparable 1995 period, or 7.4%. This decrease
was primarily the result of lower period to period short term interest rates.
For the reasons set for the above, the Company's net loss before
extraordinary items increased to $13,597,000 for the first six months of 1996 as
compared to a net loss of $13,366,000 for the first six months of 1995, or 1.7%.
BANKRUPTCY PETITIONS
As a result of severe liquidity problems, on July 31, 1995, Southern
California suspended payment of interest on its $140,000,000 11.5% Senior
Secured Notes due 1999 (the "Senior Secured Notes"). Southern California
entered into negotiations with financial and legal advisors of an unofficial
committee of holders of the Senior Secured Notes (the "Bondholders' Committee"),
and announced on November 9, 1995 that it reached an agreement in principle with
the Bondholders' Committee.
At the end of the second quarter of 1995 through the first quarter of 1996,
Southern California was also in violation of certain of its revolving credit
facility covenants, including tangible net-worth, interest coverage and fixed
charge coverage. At the request of Southern California, the revolving credit
lender executed forbearance agreements extending through May 15, 1996.
11
<PAGE>
On May 13, 1996, Southern California and BGAC filed voluntary petitions for
reorganization relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy
Court for the District of Delaware. Following commencement of the Chapter 11
cases, all actions and proceedings against Southern California and BGAC and all
acts to obtain any property of the bankruptcy estate were automatically stayed
under section 362 of the Bankruptcy Code. As of June 30, 1996 Southern
California and BGAC continued to operate the business as a debtors-in-possession
(See Subsequent Events).
Under the terms of the Company's Plan, consistent with the agreement in
principle reached with the Bondholders' Committee, the stock of Puerto Rico was
sold (See Subsequent Events) and the holders of the Senior Secured Notes will
receive, in exchange for their Notes, 98% of the equity of Southern California
(subject to dilution to the extent certain warrants and options to be granted by
Southern California as part of the restructuring are exercised) and $55 million
of proceeds from the sale of the stock of Puerto Rico.
In the first quarter of 1996, in accordance with the agreement in principle
with the Bondholders' Committee, Southern California initiated efforts to sell
the stock of Puerto Rico. On May 3, 1996, Southern California entered into a
definitive agreement to sell the stock of Puerto Rico for approximately $74
million to an investor group led by Center Street Capital Partners, L.P
. and certain members of the current Puerto Rico management. The transaction
with the investor group was consummated on July 1, 1996 (See Subsequent Events).
In 1995, Puerto Rico's operating profit was approximately $4,992,000 and its
depreciation and amortization charges were approximately $5,027,000. During the
first six months of 1996, Puerto Rico's operating profit was approximately
$1,708,000 and its depreciation and amortization charges were approximately
$2,603,000.
SUBSEQUENT EVENTS
On July 1, 1996, subsequent to the period covered by this Report, Southern
California consummated the sale of the stock of Puerto Rico described above for
approximately $74 million in accordance with the definitive agreement entered
into by Southern California on May 3, 1996.
On August 2, 1996, the Bankruptcy Court confirmed the Plan. Southern
California anticipates that the Plan will be consummated and that Southern
California will emerge from Chapter 11 on or before August 15, 1996.
Distributions to creditors on account of pre-petition claims are expected to
commence soon thereafter.
REORGANIZATION EXPENSE
During the second quarter of 1996, the Company recorded reorganization
expense of approximately $1,606,000 related to negotiations of the potential
restructuring of Southern California's obligations under the Senior Secured
Notes. Since the second quarter of 1995, reorganization expenses of
approximately $5,643,000 have been recorded.
RESTRUCTURING CHARGES
During the second quarter of 1996, the Company recorded approximately
$547,000 of restructuring charges related to the termination of a capital lease.
Since the second quarter of 1995, the Company has recorded approximately
$3,113,000 related to employee termination expenses and facility exit costs.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1996, the Company's operating activities
provided $28,493,000 in cash as compared to the six months ended June 30, 1995,
when operating activities used $5,453,000 of cash. This change is primarily the
result of pre-petition accounts payable and the suspension of interest payments
on the Senior Secured Notes.
12
<PAGE>
During the first six months of 1996, the Company used $4,570,000 for
investing activities related to the purchase of property, plant and equipment as
compared to $2,383,000 for the comparable 1995 period. This increase was
primarily the result of a required water reclamation project at the Vernon,
California production facility and costs incurred during the first six months of
1996 for installation of a major management information system in Southern
California.
Upon filing the bankruptcy petitions, GE Capital agreed to make revolving
credit advances and guarantee letter of credit obligations in the amount of
$54,000,000 pursuant to a Debtor-In-Possession Credit Agreement dated as of May
13, 1996 (the "DIP Facility"). All obligations under the DIP Facility are due
and payable on the earliest to occur of, among other things, (i) 24 months from
the closing date of the DIP Facility, (ii) the date of termination of the
revolving credit commitments of Southern California under the DIP Facility,
(iii) the termination of Southern California's right to borrow under the DIP
Facility upon the occurrence of an event of default thereunder (subject to a
cure period), and (iv) the effective date of a plan of reorganization. As a
result of this DIP Facility, Southern California was required to pay off its
existing revolving credit facilities and term loan. At June 30, 1996, the
Company's unused revolving credit facilities were $30,329,000.
Upon consummation of the Plan, which is expected to occur on or before
August 15, 1996, Southern California will enter into a credit facility with GE
Capital to provide working capital (the "Post-Reorganization Facility"). The
Post-Reorganization Facility will provide Southern California with $35 million
in a revolving financing facility for general corporate purposes, including
working capital and capital expenditures. Borrowings under this facility will,
as they are under the current working capital facility, be secured by
substantially all of Southern California's assets.
Southern California believes that cash available under the Post-
Reorganization Facility, and cash provided by future operations should enable it
to continue to pay its creditors in the ordinary course of business.
RECENT ACCOUNTING PRONOUNCEMENT
In the first quarter of 1996, the Company adopted Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed of" (SFAS 121). The impact of the adoption
of SFAS 121 was not material to the Company's financial position or results of
operations. The projected use of the Company's long-lived assets is subject to
change in the future, depending upon the outcome of the Company's restructuring.
The effect of any change to the projected use of the Company's long-lived assets
could impact the Company's financial position or results of operations in the
future.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of the voluntary bankruptcy petitions filed by
Southern California and BGAC with the Bankruptcy Court for the
District of Delaware, see Part I, Item 1, Note 2 ("Bankruptcy
Filings"), Note 10 ("Subsequent Events") and "Management's Discussion
and Analysis of Financial Conditions and Results of Operations --
Bankruptcy Petitions" and "-- Subsequent Events" in Item 2 of Part I
of this Form 10Q.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
For a description of defaults under Southern California's Senior
Secured Notes and revolving credit facilities, see Part I, Item 1,
Note 2 ("Bankruptcy Filings") and "Management's Discussion and
Analysis of Financial Conditions and Results of Operations --
Bankruptcy Petitions" and "-- Subsequent Events" in Item 2 of Part I
of this Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated May 13,
1996.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 10, 1996
Seven-Up/RC Bottling Company of
Southern California, Inc.
/s/ David I. Brown
--------------------------------
David I. Brown
Chief Accounting Officer
Treasurer
(Duly authorized officer and
Principal Financial Officer)
15
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