SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
<checked-box> QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995
or
<square> TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 1-13914
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
(Exact name of Registrant as specified in its Charter)
DELAWARE ###-##-####
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
CARRETERA #2, KM 19.4
BARRIO CANDELARIA
TOA BAJA, PUERTO RICO 00949
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (787) 251-2000
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. <square> Yes <checked-box> No
As of February 13, 1996, there were 21,500,000 shares of Common Stock
issued and outstanding. This amount includes 5,000,000 shares of Class A
Common Stock and 16,500,000 shares of Class B Common Stock.
PAGE
<PAGE>
This Report on Form 10-Q/A is being filed to amend and restate in
its entirety (except for the information contained (i) in Footnote 7 to the
Condensed Consolidated Financial Statements, (ii) under the caption,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - BAESA" and (iii) any other information relating to BAESA which is
not being amended by this Report on Form 10-Q/A) the quarterly report on Form
10-Q for the quarterly period ended December 31, 1995 which was filed by the
Company on February 14, 1996.
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<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PAGE
NUMBER
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets (unaudited) at
December 31, 1995 and September 30, 1995 4
Condensed Consolidated Statements of Income / (Loss)
(unaudited) for the Three Months Ended December 31, 1995 and 1994 6
Condensed Consolidated Statements of Cash Flows (Unaudited) for
the Three Months Ended December 31, 1995 and 1994 7
Notes to Condensed Consolidated Financial Statements (Unaudited) 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II OTHER INFORMATION
None of the items are applicable.
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
(unaudited) (audited)
------------- -------------
<S> <C> <C>
Cash and cash equivalents $ 46,703 $ 46,091
Accounts receivable:
Trade, less allowance for doubtful accounts of $1,027 on
December 31, 1995 and $1,458 on September 30, 1995 17,403 16,086
Due from PepsiCo, Inc. and affiliated companies 2,839 2,913
Other 633 341
Inventories 4,137 4,542
Prepaid expenses and other assets 2,426 2,516
---------- ----------
Total current assets 74,141 72,489
Investment in BAESA 67,157 74,128
Property, plant and equipment, net 40,032 36,445
Intangible assets 2,141 2,163
Other assets 314 441
---------- ----------
Total assets $ 183,785 $ 185,666
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
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<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN THOUSANDS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
(unaudited) (audited)
------------- --------------
<S> <C> <C>
Current installments of long-term debt $ 1,550 $ 1,550
Current installments of capital lease obligations 737 1,204
Short-term borrowings 14,836 4,600
Accounts payable:
Trade 12,879 12,536
Affiliate 664 1,181
Income taxes payable 891 123
Deferred income taxes 55 530
Other accrued expenses 5,088 6,477
---------- ----------
Total current liabilities 36,700 28,201
Long-term debt, excluding current installments 5,977 6,365
Capital lease obligations, excluding current installments 788 848
Accrued pension cost, long-term 2,871 2,871
Deferred income taxes 17,454 18,732
---------- ----------
Total liabilities 63,790 57,017
Shareholders' equity:
Class A common shares of $0.01 par value; authorized,
issued and outstanding 5,000,000 shares 50 50
Class B common shares, $0.01 par value; authorized
35,000,000 shares; issued and outstanding 16,500,000 shares 165 165
Additional paid-in capital 90,738 90,738
Retained earnings 31,049 39,472
Cumulative translation adjustment (463) (232)
Pension liability adjustment (1,544) (1,544)
---------- ----------
Total shareholders' equity 119,995 128,649
---------- ----------
Total liabilities and shareholders' equity $ 183,785 $ 185,666
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
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<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1995 1994
(unaudited) (unaudited)
------------ -----------
<S> <C> <C>
Net Sales $ 29,417 $ 28,057
Cost of Sales 18,924 16,811
---------- ----------
Gross profit 10,493 11,246
Selling and marketing expenses 9,872 7,546
Administrative expenses 1,598 1,502
---------- ----------
Income/(loss) from operations (977) 2,198
---------- ----------
Other income (expenses):
Interest expense (154) (354)
Interest income 685 32
Other, net 129 26
---------- ----------
Total other income (expenses) 660 (296)
Income/(loss) before income tax expense and
equity in net earnings/(loss) of BAESA (317) 1,902
Income tax expense 266 322
---------- ----------
Income/(Loss) before equity in net earnings/(loss) of
BAESA (583) 1,580
Equity in net earnings/(loss) of BAESA, net of income tax
benefit/(expense) of $1,278 and $(486) in 1995
and 1994, respectively (2,623) 2,552
---------- ----------
Net income/(loss) $ (3,206) 4,132
========== ==========
Earnings per common share:
Income/(loss) before equity in net earnings of BAESA $ (0.03) $ 0.09
========== ==========
Net income/(loss) $ (0.15) $ 0.23
========== ==========
Weighted average number of shares outstanding 21,500 18,000
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
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<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(U.S. DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ (3,206) $ 4,132
Adjustments to reconcile net earnings to net cash
provided by (used
in) operating activities:
Gain on disposal of property, plant, and equipment (279) -
Depreciation and amortization 1,251 1,120
Equity in net earnings/(loss) of BAESA 2,623 (2,552)
Changes in assets and liabilities:
Accounts receivable (1,535) (2,383)
Inventories 405 (311)
Prepaid expenses and other current assets 90 (927)
------ ------
Accounts payable (174) 3,714
Other liabilities and accrued expenses (1,864) 3,841
Income taxes payable 768 276
Other, net 127 282
------ ------
Net cash provided by (used in) operating activities (1,794) 7,192
------ ------
Cash flows from investing activities:
Proceeds from the sale of property, plant and equipment 538 -
Purchases of property, plant and equipment (5,075) (2,617)
Dividends received from affiliates 2,839 2,839
------ ------
Net cash provided by (used in) investing activities (1,698) 222
------ ------
Cash flows from financing activities:
Proceeds from short-term borrowings 10,236 500
Repayment of long-term debt (388) (387)
Repayment of capital lease obligations (527) (630)
Dividends paid (5,217) (4,610)
------ ------
Net cash provided by (used in) financing activities 4,104 (5,127)
------ ------
Net increase in cash and cash equivalents 612 2,287
Cash and cash equivalent at beginnings of period 46,091 1,347
------ ------
Cash and cash equivalent at the end of period $46,703 $3,634
====== ======
Supplemental disclosures:
Cash paid for:
Interest $ 409 $ 354
Income taxes -- --
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
7
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<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
(1) ACCOUNTING PRINCIPLES AND BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements, footnotes,
and discussions should be read in conjunction with the consolidated financial
statements, related footnotes, and discussions contained in the Company's
annual report on form 10-K for the fiscal year ended September 30, 1995. In
the opinion of the Company's management, the unaudited consolidated interim
financial statements reflect all adjustments, including those related to the
restatement of the results of operations for the first quarter, necessary for a
fair presentation. For additional information, please refer to page 10 of this
Form 10-Q/A. Operating results for the three months ended December 31, 1995
are not necessarily indicative of the results that may be expected for the
fiscal year ended September 30, 1996.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1995 September 30, 1995
<S> <C> <C>
Raw materials $ 969 $ 1,247
Finished goods 1,931 2,048
Other 1,237 1,247
------- -------
$ 4,137 $ 4,542
======= =======
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
------------ -------------
<S> <C> <C>
Land and improvements $ 1,159 $ 1,159
Buildings and improvements 5,592 5,592
Machinery, equipment and vehicles 35,979 36,173
Bottles, cases and shells 1,606 1,585
Furniture and fixtures 2,166 1,833
Construction in process 16,681 12,224
------- -------
63,184 58,566
Less accumulated depreciation and amortization (23,152) (22,121)
------- -------
Property, plant and equipment, net $40,032 $36,445
======= =======
</TABLE>
The Company capitalizes interest cost as a component of the cost of
certain building and improvements, and machinery. The following is a summary
of interest cost incurred:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Interest cost capitalized $ 255 $ --
Interest cost charged to income 154 354
------- -------
$ 409 $ 354
======= =======
</TABLE>
8
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<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(4) SHAREHOLDERS' EQUITY
The Company declared and paid cash dividends of $5,217 during the three
months ended December 31, 1995 and $4,610 during the three months ended
December 31, 1994.
In connection with the Company's September 19, 1995 public offering (the
"Offering") of 7,000,000 Class B common shares, the Company changed its capital
structure to 5,000,000 authorized shares of $0.01 par value Class A common
shares and 35,000,000 authorized shares of $0.01 par value Class B common
shares.
On August 14, 1995, the Company's Board of Directors declared a 24,000 to
1 stock split effective concurrently with the effective date of the Offering.
The par value of each share is $0.01. A total of $179 was reclassified from
the Company's additional paid-in capital account the Company's Class A and B
common share accounts. All share and per share amounts have been restated to
retroactively reflect the stock split.
Earnings per common share are determined by dividing net income by the
weighted average number of common shares outstanding during each year.
(5) INCOME TAX
Income tax expense for the three months ended December 31, 1995 and 1994
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current $266 $322
Deferred -- --
-------- --------
Income tax expense $266 $322
======== ========
</TABLE>
Deferred income tax (benefit) / expense of $(1,278) and $486 for the three
month period ended December 31, 1995 and 1994, respectively, have been provided
in connection with the Company's equity in net earnings / (loss) of BAESA.
(6) RELATED PARTY TRANSACTIONS
The Company paid approximately $637 and $422 during the three months ended
December 31, 1995 and 1994, respectively, for advertising fees to a firm
controlled by a shareholder of the Company.
The Company paid approximately $232 and $73 during the three months ended
December 31, 1995 and 1994, respectively, for consulting fees to a shareholder
and director of BAESA.
The Company paid approximately $150 during the three months ended December
31, 1995 for construction management services to a shareholder and director of
the Company.
9
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PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL OVERVIEW
This report on Form 10-Q/A is being filed to restate the Condensed
Consolidated Financial Statements of the Company which were included in the
Company's report on Form 10-Q for the three-month period ended December 31,
1995 which was filed on February 14, 1996. Subsequent to the filing of that
report, the Company discovered accounting irregularities which resulted in a
substantial understatement of certain expenses, primarily discounting and
marketing expenses, and a corresponding overstatement of income from operations
for both the three-month period ended December 31, 1995, and the three-month
period ended March 31, 1996. A separate report on Form 10-Q/A amending the
Company's report on Form 10-Q for the three-month period ended March 31, 1996
is being filed simultaneously with this report. As a result of the restatement
contained in this report, the Company is reporting a loss from operations for
the three months ended December 31, 1995 of $(1.0) million, rather than income
from operations of $2.4 million which was reported in its originally filed
report on Form 10-Q for its first fiscal quarter.
After discovering the accounting irregularities, the Company's Board of
Directors retained Rogers & Wells as independent counsel to conduct an
investigation of the circumstances which resulted in the irregularities.
Rogers & Wells, working with the independent accounting firm of Price
Waterhouse, which was retained to assist with the investigation, conducted a
thorough investigation of these circumstances and has made its report to the
Company's Board of Directors. Taking into consideration the findings of the
investigation and in consultation with the Company's independent accountants
regarding their materiality, the Company concluded that the irregularities did
not have a material effect on any Company financial statements prior to the
first and second quarters of fiscal 1996, and thus that no restatements for any
prior periods are required.
The following discussion of the financial condition and results of
operations of the Company and of BAESA should be read in conjunction with this
overview and the Condensed Consolidated Financial Statements of the Company and
of BAESA, and the Notes thereto, as of and for the three-month period ended
December 31, 1994 and 1995 (the "1995 interim period" and the "1996 interim
period," respectively).
PRESENTATION OF FINANCIAL INFORMATION
In addition to conducting its own bottling operations, the Company
indirectly owns 12,345,347 shares, or approximately 17% of the outstanding
capital stock, and exercises significant influence over the management of
BAESA, subject to the right of PepsiCo, Inc. ("PepsiCo") and certain of its
affiliates (collectively, "Pepsi Cola International" or "PCI") to approve
certain management decisions. The financial information relating to the
Company set forth below reflects the operations of the Company and its equity
interest in the net earnings of BAESA.
SEASONALITY
The historical results of operations of the Company have not been
significantly seasonal. The Company believes that this is partly attributable
to existing capacity constraints in recent years which prevented the Company
from meeting increased demand during peak periods. However, the Company
anticipates that its results of operations in the future may be increasingly
seasonal in the summer and holiday seasons.
10
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<PAGE>
THE COMPANY
GENERAL
The following table sets forth certain financial information as a
percentage of net sales for the Company for the periods indicated.
<TABLE>
<CAPTION>
Fiscal Year Interim
------------------------------------------ ------------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Sales 59.8 58.2 59.4 59.9 64.3
Gross Profit 40.2 41.8 40.6 40.1 35.7
Selling and Marketing Expenses 28.0 29.3 26.6 26.9 33.5
Administrative Expenses 11.5 10.1 5.5 5.4 5.4
Intangibles and Fixed Asset Writeoffs -- 2.8 -- -- --
Income (Loss) from Operations 0.8 (0.4) 8.5 7.8 (3.2)
</TABLE>
1996 INTERIM PERIOD COMPARED TO 1995 INTERIM PERIOD
NET SALES. Net Sales for the Company increased $ 1.4 million, or 4.9%,
for the 1996 interim period from the 1995 interim period to $29.4 million.
This increase was primarily the result of a 9% increase in beverage sales
volume partially offset by an increase in discounts provided to customers in
the 1996 interim period as compared to the 1995 interim period. This increase
in discounts resulted from increased competitive activity. The average net
sales price on an eight ounce equivalent basis decreased during the 1996
interim period by approximately 3.6% as compared to the 1995 interim period.
COST OF SALES. Cost of sales for the Company increased $2.1 million, or
12.6% for the 1996 interim period from the 1995 interim period to $18.9
million. This increase resulted primarily from the increase in sales volume, a
larger percentage of sales volume in two-liter plastic packages and the
increase in the costs of raw materials, principally aluminum cans and resin for
the production of plastic bottles and preforms, and was partially offset by a
decrease in costs attributable to increased efficiency principally due to a
reduction in overtime costs.
GROSS PROFIT. Gross profit for the Company decreased by $0.8 million to
$10.4 million in the 1996 interim period from $11.2 million in the 1995 interim
period. As a percentage of net sales, gross profit decreased to 35.7% in the
1996 interim period from 40.1% in the 1995 interim period due primarily to the
higher raw materials costs and higher discounts offered to customers.
SELLING AND MARKETING EXPENSE. The Company has a number of marketing
arrangements with PepsiCo pursuant to which the Company is required to make
certain investments in marketing, new products, packaging introductions and
certain capital goods. The Company receives reimbursements from PepsiCo for a
portion of such expenditures, which it is able to use to offset traditional
marketing expenses or to acquire fixed assets. The Company's selling and
marketing expenses are shown net of all such reimbursements from PepsiCo.
Selling and marketing expenses for the Company increased $2.3 million, or
30.8%, to $9.9 million for the 1996 interim period from the 1995 interim
period. This increase is the result of higher marketing activities incurred
during the first quarter of fiscal year 1996 in connection with the launch of
Teem, a lemon/lime soft drink, during October 1995, as well as other marketing
activities undertaken to promote the Company's products.
ADMINISTRATIVE EXPENSES. Administrative expenses for the Company
increased $0.1 million or 6.4% for the 1996 interim period from the 1995
interim period to $1.6 million. As a percentage of net sales, administrative
expenses remained at 5.4% during the 1996 interim period and 1995 interim
period.
11
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<PAGE>
INCOME FROM OPERATIONS. Income (loss) from operations for the Company
decreased to ($1.0) million in the 1996 interim period, from $2.2 million in
the 1995 interim period. The decrease is the result of a lower average net
sales price, higher cost of sales and higher selling and marketing expenses
during the 1996 interim period.
INCOME TAX EXPENSE. Income tax expense for the Company decreased by $0.1
million for the 1996 interim period to $0.3 million. In 1995 a larger amount
of the Company's net income was generated by those subsidiaries subject to
income taxes than subsidiaries eligible for income tax exclusions.
EQUITY IN NET EARNINGS (LOSS) OF BAESA, NET OF INCOME TAX. Equity in net
earnings (loss) of BAESA, net of income tax, amounted to $(2.6) million during
the 1996 interim period, compared to $2.6 million during the 1995 interim
period. The decrease is attributable to losses incurred by BAESA for the 1996
interim period resulting from restructuring charges in connection with
continued depressed economic conditions in Argentina, lower sales volume levels
in Argentina resulting from such economic conditions, and lower profitability
achieved in BAESA's Brazilian operations.
NET INCOME. Net income/(loss) for the 1996 interim period for the
Company was ($3.2) million, compared to $4.1 million during the 1995 interim
period. Net loss in the 1996 interim period primarily reflects the loss from
operations of $1.0 million and the equity in net loss of BAESA, net of income
tax of $(2.6) million as compared to equity in net earnings of BAESA of $2.6
million in the 1995 interim period.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company had $46.7 million of cash and cash
equivalents, and indebtedness for borrowed money, including short-term
borrowings and capital lease obligations, of $23.9 million.
Net cash provided by (used in) operations activities for the Company for
the 1996 interim period was $(1.8) million compared to $7.2 million during the
1995 interim period. As of December 31, 1995, the Company has $25.7 million
in net operating loss carryforwards available to offset future Puerto Rican
income taxes. The Company believes that net cash provided by operating
activities for the Company will be sufficient to meet its operating
requirements for the foreseeable future.
Cash flows provided by (used in) investing activities for the Company
amounted to $(1.7) million during the 1996 interim period, as compared to $0.2
million during the 1995 interim period. Purchases of property, plant and
equipment, net amounted to $5.1 million during the 1996 interim period compared
to $2.6 million during the 1995 interim period. Dividends received from BAESA
amounted to $2.8 million for the interim periods 1996 and 1995.
Cash flows provided by (used in) financing activities for the Company
during the 1996 interim period was $4.1 million compared to $(5.1) million
during the 1995 interim period. The significant financing activities for the
Company in the 1996 and 1995 interim periods were the payments of dividends and
the repayment of debt. In the 1996 interim period the Company also received
proceeds from the issuance of notes of $10.2 million. The Company paid $5.2
million and $4.6 million in the 1996 and 1995 interim periods, respectively, in
dividends.
In November 1994, the Company and its subsidiaries entered into a Credit
Agreement with Banco Popular. The Credit Agreement provides for borrowings by
the Company from time to time of $5 million in revolving loans, $8.8 million in
term loans and $15 million in non-revolving loans. In December 1995 Banco
Popular increased the amount the Company may borrow under revolving loans to
$10.0 million. As of December 31, 1995, the Company had outstanding under the
Credit Agreement revolving loans in an aggregate principal amount of $10.0
million, term loans in an aggregate principal amount of $7.2 million and non-
revolving loans in an aggregate principal amount of $4.0 million. These loans
mature on April 30, 1996, December 18, 2000 and September 30, 1996,
respectively, and bear interest at a floating rate of 2% over and above the
cost to Banco Popular of "936 Funds" (as defined below) (the "936 Rate"). At
December 31, 1995, the 936 Rate was 5.7%.
11
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<PAGE>
The weighted average interest rate on such borrowings was 7.7% in the
first three months of the fiscal year 1996. "936 Funds" are defined in the
Credit Agreement as deposits in U.S. dollars in immediately available funds by
Section 936 Corporations on the first day of the relevant funding period for a
period equal to such funding period and in an amount equal or comparable to the
principal amount of the relevant loan. The Company is required to make monthly
payments of principal in the amount of $128,205 with respect to the outstanding
term loans. The Company may prepay certain of the loans subject to the terms
and conditions of the Credit Agreement. Prior to the time that any expansion
opportunities may become available the Company may use a portion of the net
proceeds of an initial public offering completed in September 1995 to repay the
current amount outstanding on the $10.0 million maximum principal amount of
outstanding short-term revolving credit indebtedness under the Credit
Agreement.
Under the terms of the Credit Agreement, the Company is subject to the
following financial restrictions: (i) the Company must maintain a minimum
Operating Cash Flow to total Debt Service ratio (as defined in the Credit
Agreement) of 1.50 to 1 for each fiscal year during the term of the Credit
Agreement, (ii) a minimum ratio of current assets to current liabilities of
0.40, 0.60, 0.75 and 1.00 to 1, respectively, and a maximum ratio of Total
Liabilities to Tangible Net Worth of 4.0, 4.0, 3.0 and 2.0 to 1, respectively,
for the fiscal year 1996 through 1998 and thereafter, and (iii) a minimum
Tangible Net Worth of $15 million through the end of the fiscal year 1996 and
of $18 million, $21.5 million, $25 million and $30 million for each succeeding
fiscal year thereafter. The Company is currently in compliance with these
financing restrictions. The entire principal amount of loans outstanding under
the Credit Agreement becomes immediately due and payable, subject to a cure
period, if the Company violates any of these financial restrictions.
Furthermore, the Company may not pay dividends (other than amounts declared by
and received from BAESA as dividends) without the consent of Banco Popular if
an event of default under the Credit Agreement (including a violation of the
financial restrictions described above) has occurred or would occur because of
the payment of dividends.
Pursuant to the Credit Agreement, the Company has granted Banco Popular a
security interest in all its machinery and equipment, receivables, inventory
and the real property on which the Toa Baja plant and the Rio Piedras plant are
located.
The Company's franchise arraignments with PepsiCo require it not to
exceed a ratio of senior debt to subordinated debt to equity of 65 to 25 to 10.
The Company is currently in compliance with these covenants.
Capital expenditures for the Company totaled $5.1 million in the 1996
interim period and $2.6 million in the 1995 interim period. The Company's
capital expenditures have been financed by a combination of borrowings from
third parties and internally generated funds. The Company expects that it will
make significant capital expenditures in the fiscal year 1996 primarily for the
completion of the construction of the Toa Baja plant, as well as for the
acquisition of trucks, and related bottling company investments within Puerto
Rico, which will be financed with a combination of borrowings from third
parties and internally generated funds.
13
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/S/ RAFAEL NIN Chief Executive Officer October 7, 1996
- ----------------------------
Rafael Nin
/S/ DAVID L. VIRGINIA Chief Financial Officer and Chief October 7, 1996
- ----------------------------
David L. Virginia Accounting Officer
</TABLE>
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000948086
<NAME> PEPSI COLA PUERTO RICO BOTTLING COMPANY
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<S> <C>
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<PERIOD-END> DEC-31-1995
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0
0
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</TABLE>
