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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-69275
TEXAS BOTTLING GROUP, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 75-2158578
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1999 BRYAN STREET, SUITE 3300, DALLAS, TEXAS 75201
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (214) 969-1910
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of April 1, 1997 was $0.00.
As of April 1, 1997, 541,917 shares of the Company's Common Stock Class A,
par value $2.00 per share, and 228,357 shares of the Company's Common Stock
Class B, par value $2.00 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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PART 1
FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS-MARCH 31, 1997 AND DECEMBER 31, 1996
(Amounts in Thousands Except Share Data)
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March 31, 1997 December 31, 1996
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,516 $ 636
Receivables-
Trade accounts, net of allowance for doubtful
accounts of $527 and $544 in 1997 and 1996 19,710 21,349
Other 2,989 3,280
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22,699 24,629
Inventories 10,200 9,327
Prepaid expenses and other 1,919 1,498
Deferred tax asset 10,625 9,645
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Total current assets 49,959 45,735
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PROPERTY, PLANT, & EQUIPMENT
Land 4,866 4,866
Buildings and improvements 20,819 20,819
Machinery and equipment 17,767 16,393
Vehicles 16,640 16,662
Vending equipment 30,534 27,215
Furniture and fixtures 5,500 5,500
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96,126 91,455
Less-accumulated depreciation and amortization (52,193) (50,312)
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Property, plant, and equipment, net 43,933 41,143
OTHER ASSETS:
Franchise rights, net of accumulated
amortization of $37,051 and $36,140
in 1997 and 1996 108,451 109,362
Goodwill, net of accumulated amortization of
$17,887 And $17,455 in 1997 and 1996 51,244 51,676
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Franchise rights and goodwill 159,695 161,038
Deferred financing costs and other assets,
net of accumulated amortization of $2,666
and $2,335 in 1997 and 1996 8,111 7,852
Deferred tax asset - 355
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Total other assets 167,806 169,245
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Total assets $ 261,698 $ 256,123
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The accompanying notes are an integral part
of these consolidated balance sheets
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TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS-MARCH 31, 1997 AND DECEMBER 31, 1996
(Amounts in Thousands Except Share Data)
March 31, 1997 December 31, 1996
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CURRENT LIABILITIES:
Accounts payable $ 14,415 $ 15,276
Accrued payroll 170 573
Accrued insurance 3,393 3,342
Accrued interest 4,121 1,364
Contribution to employees'
benefit plans 2,277 2,158
Taxes payable 95 220
Current maturities of long-term debt 16,500 16,500
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Total current liabilities 40,971 39,433
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LONG-TERM DEBT, net of current
maturities 204,750 203,000
OTHER LIABILITIES 5,308 3,864
POST RETIREMENT BENEFIT OBLIGATION 6,144 6,157
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock Class A, $2 par value;
1,100,249 shares authorized; 541,917
issued and outstanding as of
March 31, 1997 and 1996 1,084 1,084
Common stock Class B, $2 par value;
228,357 shares authorized, issued
and outstanding as of March 31, 1997
and 1996 (convertible to 558,332
shares of Class A) 457 457
Additional paid-in-capital 43,459 43,459
Retained deficit (40,475) (41,331)
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Total stockholders' equity 4,525 3,669
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Total liabilities and
stockholders' equity $261,698 $256,123
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The accompanying notes are an integral part
of these consolidated balance sheets.
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TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIODS ENDED MARCH 31, 1997 AND 1996
(Amounts in Thousands)
THREE MONTHS ENDED
1997 1996
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NET REVENUES $48,847 $49,107
COSTS AND EXPENSES:
Cost of goods sold (exclusive of depreciation
shown below) 25,327 26,150
Selling, general, and administrative 14,178 13,021
Depreciation and amortization 3,446 3,010
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42,951 42,181
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Operating income 5,896 6,926
INTEREST:
Interest on debt (4,385) (4,467)
Deferred financing cost (143) (143)
Interest income 23 66
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(4,505) (4,544)
Other income, net 2 9
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Income before income taxes 1,393 2,391
Provision for income taxes (537) (430)
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Net income $ 856 $ 1,961
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The accompanying notes are an integral part
of these consolidated statements
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TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED MARCH 31, 1997 AND 1996
(Amounts in Thousands)
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 856 $ 1,961
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization 3,446 3,010
Deferred tax provision 486 430
Amortization of deferred financing costs 143 143
Deferred compensation 333 238
Change in assets and liabilities
Receivables 1,930 3,412
Inventories (873) (2,383)
Prepaid expenses (421) (580)
Accounts payable (861) (2,314)
Accrued expenses 2,404 2,490
Contribution to employees' benefit plans 119 130
Taxes payable (125) -
Other liabilities - 135
Postretirement benefit obligation (13) 48
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Net cash provided by operating
activities 7,424 6,720
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment (4,704) (1,975)
Other noncurrent assets acquired (590) (3)
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Net cash used by investing activities (5,294) (1,978)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility 5,500 -
Payments on long-term debt (3,750) (2,500)
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Net cash provided (used) by financing
activities 1,750 (2,500)
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NET INCREASE IN CASH AND CASH
EQUIVALENTS 3,880 2,242
CASH AND CASH EQUIVALENTS, beginning of period 636 5,864
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CASH AND CASH EQUIVALENTS, end of period $ 4,516 $ 8,106
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The accompanying notes are an integral part
of these consolidated statements.
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TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Texas
Bottling Group, Inc., a Nevada corporation, ("TBG" or "the Company") and its
wholly owned subsidiary have been prepared in accordance with generally accepted
accounting principles for interim financial information and reflect, in the
opinion of management, all adjustments, which are normal and recurring in
nature, necessary for fair presentation of financial position, results of
operations, and changes in cash flow at March 31, 1997 and for all periods
presented. These interim financial statements do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements and should be read in conjunction with the
Company's audited financial statements included in Form 10-K for the year ended
December 31, 1996. The results of operations for the period ended March 31,
1997 are not necessarily indicative of results to be expected for the entire
year ending December 31, 1997.
2. INVENTORIES
Inventories consist of the following (in thousands):
Mar. 31, Dec. 31,
1997 1996
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Raw materials $ 3,693 $ 3,351
Finished goods 5,303 4,940
Repair parts and supplies 1,204 1,036
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$ 10,200 $ 9,327
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3. INCOME TAXES
The Company's benefit (provision) for income taxes for the periods ended
March 31, 1997 and 1996, is as follows (in thousands):
1997 1996
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Current $ (51) $ -0-
Deferred (486) (430)
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$ (537) $ (430)
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4. COMMITMENTS AND CONTINGENCIES
The Company paid $175,000 for the periods ended March 31, 1997 and 1996 to
The Coca-Cola Bottling Group (Southwest), Inc. ("CCBG"), holder of the Company's
Class A common stock, under a management agreement. The agreement is for a
period of one year and is renewable annually. The Company also had sales of
approximately $3,003,000 and $3,844,000 to purchases of approximately $2,166,000
and $1,639,000 from, a subsidiary of CCBG for the periods ended March 31, 1997
and 1996.
An officer of the Company serves on the Board of Directors of Western
Container Corporation, a plastic bottle manufacturing cooperative. CCBSW has
purchases of $2,774,000 and $3,825,000 from Western Container for the periods
ended March 31, 1997 and 1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Unit growth of soft drink sales is measured in equivalent case sales which
convert all wholesale bottle, can and pre-mix unit sales into a value of
equivalent cases of 192 ounces each. Unit sales of post-mix and contract
bottling are not generally included in discussions concerning unit sales volume
as post-mix sales are essentially sales of syrup and not of packaged products,
and contract bottling is done for other distributors as capacity permits and
does not include licensed products for the franchised territory. All references
to net revenues and gross profit include volumes for post-mix and contract
sales.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
NET REVENUES. Net revenues for 1997 decreased 0.5% or $ .3 million to
$48.8 million compared to $49.1 million for 1996. This decrease in net
revenues was due primarily to a decrease in contract bottling. Equivalent case
sales increased 2.8% in 1997 compared to 1996. Net revenues from post-mix as a
percentage of total net revenues increased to 8.1% for 1997 compared to 7.6% for
1996. Net revenues from the Company's Snappy Snack Division accounted for 5.6%
of net revenue in 1997.
GROSS PROFIT. Gross profit for 1997 increased 2.4% or $ .6 million to
$23.5 million compared to $23.0 million for the same period in 1996. This
increase in gross profit was due to lower raw material costs, primarily
sweetener and PET bottles partially offset by the decrease in contract
packaging. Gross profit as a percentage of net revenues improved to 48.1% for
1997 compared to 46.7% for 1996 due to the lower raw material cost.
SELLING, GENERAL & ADMINISTRATIVE. Selling, general and administrative
expenses for 1997 increased 8.9% to $14.2 million from $13.0 million for the
same period in 1996, resulting from higher labor costs associated with increased
hiring for certain key sales positions. Higher expenditures for advertising and
marketing related items such as display racks, also contributed to the increase.
OPERATING INCOME. As a result of the above, operating income for 1997
decreased $1.0 million. Operating income was 12.1% of net revenue compared to
14.1% of net revenue for the same period in 1996.
INTEREST EXPENSE. Net interest expense was $4.5 million for both 1997 and
1996.
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LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $7.4 million which was generated
primarily by operating income. Investing activities used $5.3 million primarily
for additions to property, plant, and equipment, while financing activities
provided $1.8 million which reflects the net of borrowings under the revolving
credit facility and the quarterly amortization requirements of the Term Loan.
The 1995 Bank Agreement provides for mandatory annual prepayment based on
excess cash flow as defined for each calendar year. Based on excess cash flow in
1996, the Company will prepay approximately $1.5 million in April, 1997.
In connection with the 1995 Bank Agreement the Company has entered into an
interest rate cap agreement which caps the three month LIBOR rate at 9% on a
notional principal amount of $50 million for four years. The Company has no
interest rate exposure under the agreement other than the initial purchase cost
of $0.5 million.
The Company will continue to evaluate the realizability of its deferred tax
asset in relation to future taxable income and provide a valuation allowance if
necessary. At March 31, 1997, the Company recognized $.02 million net deferred
tax expense.
The Company's business is subject to seasonality due to the influence of
weather conditions on consumer demand for soft drinks, which affects working
capital. Sales are stronger in warm weather. The first quarter operating
performance is usually lower than the other three quarters as a result of winter
weather, primarily in the months of January and February.
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
(1) A current report on Form 8-K was filed with the Securities and
Exchange Commission on April 1, 1997 reporting changes in beneficial
ownership of Class A Common Stock of CCBG Corporation, the parent of
The Coca-Cola Bottling Group (Southwest), Inc., holder of the
outstanding voting stock of the Registrant, which resulted from
transactions dated March 21, 1997.
(2) A current report on Form 8-K was filed with the Securities and
Exchange Commission on April 11, 1997 reporting a change in beneficial
ownership of 3800 shares of the Class A Common Stock of CCBG
Corporation, resulting from the change of co-trustees for a trust
effective March 21, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Texas Bottling Group, Inc.
(Registrant)
Date April 25, 1997 By: /s/ Charles F. Stephenson
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Charles F. Stephenson
Treasurer and Chief Financial
Officer (duly authorized officer
and Principal Financial Officer)
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