SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A-1
(Mark One)
<checked-box> ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
or
<square> TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 865 KM. 0.4
BO. CANDELARIA ARENAS
TOA BAJA, PUERTO RICO 00949
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (787) 251-2000
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
Class B Common Stock, Par Value $.01 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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. <checked-box> Yes <square> No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. <square>
Based upon the closing price of the Class B Common Stock on December 19,
1996, as reported on the New York Stock Exchange Composite Tape (as reported by
THE WALL STREET JOURNAL), the aggregate market value of the Registrant's Class
B Common Stock held by non-affiliates of the Registrant as of such date was
approximately
$70,125,000.
As of December 19, 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.
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the 1996 Proxy Statement of Pepsi-Cola Puerto
Rico Bottling Company are incorporated by reference into Part I of this Form
10-K/A-1 to the extent provided herein.
PAGE
<PAGE>
Pursuant to Rule 12b-15 under the Securities Exchange Act of
1934, as amended, Pepsi-Cola Puerto Rico Bottling Company (the "Company") hereby
amends the Company's annual report on Form 10-K as filed with the
Securities and Exchange Commission on December 23, 1996 (the "Annual Report").
This Form 10-K/A-1 restates Item 1 of the Annual Report to clarify certain
information regarding certain agreements among the Company's shareholders,
and restates Item 14(a)(3) to file Exhibit 10.13 as an additional exhibit to
the Annual Report.
PAGE
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Pepsi-Cola Puerto Rico Bottling Company (the "Company") is a holding
company which, through its manufacturing and distribution subsidiaries,
produces, sells and distributes a variety of soft drink and fruit juice
products, iced teas, isotonics and bottled water in the Commonwealth of Puerto
Rico ("Puerto Rico"), pursuant to exclusive franchise arrangements with
PepsiCo, Inc. ("PepsiCo") and other franchise arrangements. The Company also
has rights to sell PepsiCo products to distributors in the U.S. Virgin Islands.
The Company produces, sells and distributes soft drink products under the
Pepsi-Cola, Diet Pepsi, Pepsi Free, Slice, Wonder Kola, On-Tap and Mountain Dew
trademarks pursuant to exclusive franchise arrangements with PepsiCo. The
Company produces (through an arrangement with a co-packer), sells and
distributes isotonics under the All Sport trademark pursuant to an exclusive
franchise arrangement with PepsiCo. In addition, the Company produces, sells
and distributes tonic water, club soda and ginger ale under the Seagram
trademark under an exclusive arrangement with Joseph E. Seagram & Sons, Inc.
("Seagram") and sells and distributes fruit juice products under the Welch's
trademark, iced teas under the Lipton trademark and bottled water under the
Naya trademark. The Company also produces, sells and distributes bottled water
under its own Cristalia trademark.
In addition to conducting its own bottling operations, the Company
indirectly owns 12,345,347 shares, or approximately 17% of the outstanding
capital stock of Buenos Aires Embotelladora S.A. ("BAESA"). BAESA is a Pepsi-
Cola franchised bottler, with the exclusive rights to produce, sell and
distribute PepsiCo soft drink products directly and through its subsidiaries in
Argentina, Brazil, Costa Rica and Uruguay and through a joint venture in Chile.
A subsidiary of the Company manufactures and sells plastic bottles and
"preforms" (small molded plastic units which are expanded with air to produce
plastic bottles).
For its fiscal year ended September 30, 1996, the Company had a loss from
operations of $(26.8) million compared to income from operations of $9.7
million during fiscal 1995. This severe impact on the profitability of the
Company's operations resulted primarily from intense competitive pressures in
Puerto Rico which produced lower sales prices, increased discounts offered to
customers and a significant increase in selling and marketing expenditures. In
addition, during the course of fiscal 1996, the Company discovered accounting
irregularities that required it to restate its financial statements for the
first and second quarters ended December 31, 1995 and March 31, 1996.
Responding to the circumstances surrounding the discovery of these
irregularities has required extensive management attention. In connection with
the accounting irregularities, the Company has been named as a defendant in a
number of class action shareholder lawsuits alleging violations of federal
securities laws, and the Securities and Exchange Commission is investigating
the circumstances surrounding the accounting irregularities. Responding to
these lawsuits and this investigation has also required extensive management
attention and the expenditure of substantial amounts for legal defense. In
addition, BAESA encountered financial difficulties during the course of fiscal
1996. The Company's net loss of $(74.3) million for fiscal 1996 reflects loss
before equity in earnings (loss) of BAESA of $(22.9) million and equity in net
loss of BAESA, net of income tax of $(51.5) million. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
In response to the difficulties faced by the Company during the past
fiscal year, the Company has taken a number of steps intended to restore
the profitability of its Puerto Rican bottling operations including the
reorganization of its senior management and Board of Directors, the
implementation of new pricing initiatives, the consolidation of most of its
existing operations in its new Toa Baja bottling facility and other cost
reduction measures. There can be no assurance, however, that the Company will
be successful in reaching its goal of restoring the profitability of its Puerto
Rican bottling operations.
This Report contains forward looking statements of expected future
developments. The Company wishes to insure that such statements are
<PAGE>
accompanied by meaningful cautionary statements pursuant to the safe harbor
established in the Private Securities Litigation Reform Act of 1995. The
forward looking statements in this Report refer to the ability of the Company
to implement pricing initiatives in a manner that improves the pricing
environment in the marketplace, its ability to generate cost savings through
the consolidation of existing operations, its expected future capital
expenditures and the ability to achieve its goal of restoring the profitability
of its Puerto Rico bottling operations as a result of these pricing initiatives
and cost savings. These forward looking statements reflect management's
expectations and are based upon currently available data; however, actual
results are subject to future events and uncertainties which could materially
impact actual performance. The Company's future performance also involves a
number of risks and uncertainties. Among the factors that can cause actual
performance to differ materially are: continued competitive pressures with
respect to pricing in the Puerto Rican market notwithstanding the
implementation of the pricing initiatives, the inability to achieve cost
savings due to unexpected developments at the Company's new plant and other
factors, changed plans regarding capital expenditures, adverse developments
with respect to litigation, economic, climatic and political conditions in
Puerto Rico, and the impact of such conditions on consumer spending.
The Company was incorporated and acquired the franchise rights to
produce, sell and distribute PepsiCo soft drink products in Puerto Rico in
1987. In 1989, the Company became one of the founding shareholders of BAESA,
which was incorporated and commenced operations in the Buenos Aires
metropolitan area in that year.
PRINCIPAL MARKET
The principal market for the Company's products is Puerto Rico, a
commonwealth of the United States with a population of approximately 3.7
million.
Currently, approximately 35% of the population of Puerto Rico is under
the age of 18 and 45% of the population is under the age of 25 which the
Company believes is significant because young people are major consumers of
soft drinks.
THE BEVERAGE INDUSTRY IN PUERTO RICO
CONSUMPTION AND MARKET TRENDS
The Puerto Rican soft drink market is characterized by relatively low per
capita consumption. In addition, the imposition of the Carbonated Beverage Tax
had a material adverse effect on per capita consumption of soft drinks in the
years in which it was in effect. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - General Overview -
Carbonated Beverage Tax." Consumption levels have generally increased since
the replacement of the Carbonated Beverage Tax in January 1994 but remain low
compared to consumption levels in the United States. In 1995, the annual per
capita consumption of soft drink products in Puerto Rico was approximately 410
eight-ounce servings, as compared with approximately 816 eight-ounce servings
in the United States.
MARKET SHARE AND SALES DATA
This subsection contains information regarding the Puerto Rican soft
drink industry and the Company's market share thereof. Certain information
regarding the Puerto Rican soft drink take-home market segment (retail sales to
customers) has been obtained or derived from data published by Asesores, Inc.
("Asesores"), an independent research company. Asesores publishes bimonthly
estimates of beverage consumption in the soft drink take-home market segment
based on information obtained through weekly surveys of the consumption
patterns of panels of individual consumers throughout Puerto Rico. The data
for the surveys are collected in two ways: product presence is verified through
an inventory "pantry check"; and information on purchases during the prior week
is collected utilizing personal interviews. For each product category, the
recorded information includes in-home presence, brand and type, size, quantity
purchased, price and establishment where purchased. The universe of the study
is defined as "all family households in Puerto Rico." The sample is stratified
and proportional by geographic area, urban and rural zone, socio-economic
levels and age group. The consumption and sales information relating to the
take-home market segment may not be representative of sales of the Company's
products as a whole.
<PAGE>
As used throughout this Form 10-K, the term "soft drink" refers generally
to carbonated, nonalcoholic beverages. Soft drink products can be classified
as colas or other flavored soft drinks. References to the term "case"
throughout this Form refer to 192 ounces of finished beverage product (24
eight-ounce servings).
SOFT DRINK PRODUCTS
The following table shows the estimated total sales volume of the soft
drink industry in Puerto Rico as well as the Company's total soft drink sales
volume for the periods indicated:
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED INDUSTRY
VOLUME COMPANY VOLUME
CALENDAR YEAR (IN MILLIONS OF CASES)(1) (IN MILLIONS OF CASES)
_____________ _________________________ ______________________
<S> <C> <C> <C>
1990 61.3 23.2
1991 54.6 24.1(2)
1992 52.7 23.2(2)
1993 54.1 24.5(2)
1994 60.9 26.6
1995 63.3 27.2(3)
1996 60.1 29.1(4)
(1) SOURCE: Company estimates.
(2) Actual Company soft drink volume during 1991, 1992 and 1993 were 24.1, 23.2 and 24.5 million cases respectively,
of which 1.4, 1.4 and 2.3 million cases, respectively, were exported to Argentina.
(3) Represents fiscal year 1995 sales volume.
(4) Represents fiscal year 1996 sales volumes.
</TABLE>
Soft drink products can be classified as colas or other flavored soft
drinks. The cola and flavored soft drinks segments represented approximately
64% and 36%, respectively, of the soft drink market in Puerto Rico in 1996.
The following chart shows the Company's case sales volume of cola soft drinks
for the periods indicated:
<TABLE>
<CAPTION>
COMPANY COLA
VOLUME
CALENDAR YEAR (IN MILLIONS OF CASES)
_____________ ______________________
<S> <C> <C>
1990 21.4
1991 22.5
1992 21.6
1993 21.9
1994 24.8
1995 (fiscal year cola sales volume) 24.9
1996 (fiscal year cola sales volume) 25.9
</TABLE>
Sales of cola soft drinks represented approximately 90% of the Company's
total soft drink sales volume in the fiscal year 1996.
<PAGE>
The following chart reflects the Company's share of the soft drink and
cola take-home market segments in Puerto Rico for the periods indicated:
<TABLE>
<CAPTION>
COMPANY SHARE OF COMPANY SHARE OF
SOFT DRINK TAKE-HOME COLA TAKE-HOME
CALENDAR YEAR MARKET SEGMENT(1) MARKET SEGMENT(1)
_____________ _____________________ _________________
<S> <C> <C> <C>
1990 47.3% 58.7%
1991 47.8 60.7
1992 53.1 61.4
1993 49.1 59.5
1994 49.3 56.7
1995 (for the twelve-month period
ended August 31, 1995) 49.4 56.5
1996 (for the twelve-month period
ended August 31, 1996) 47.3 54.2
(1) SOURCE: Asesores
</TABLE>
OTHER PRODUCTS
The Company's total sales volume of non-carbonated beverages, including
water, fruit juices, iced teas and isotonics, was 3.9 and 3.7 million cases,
representing 12.9% and 11.4% of total sales volume, in calendar year 1995 and
fiscal year 1996, respectively. The Company estimates that the industry sales
volume of such beverages in Puerto Rico was 36.8 million cases in fiscal year
1996. The Company believes that its sales of non-carbonated beverages will
represent an increasingly higher percentage of its total sales. The Company
expects that the Toa Baja plant which was completed in early calendar year 1996
will enable the Company to begin or expand production of such products to meet
anticipated growth in demand for such products.
BUSINESS STRATEGY
The Company's current business strategy is to restore the profitability
of its Puerto Rican bottling operations. The Company intends to pursue this
strategy through the implementation of new pricing initiatives designed to
address the current intense price competition in the soft drink market in
Puerto Rico, the realization of efficiencies and cost savings through the
consolidation of its existing operations in its new Toa Baja manufacturing
facility, and the implementation of further cost cutting measures. There can
be no assurance, however, that the Company will be successful in achieving its
goal of restoring the profitability of its Puerto Rican bottling operations.
The Company completed, during the fiscal year 1996, the construction of
the Toa Baja plant and the consolidation of its operations in the Toa Baja
plant. The Toa Baja plant has 3 bottling lines and increased the Company's
annual production capacity by 60% (at comparable utilization rates) to
approximately 44 million cases per year. The Company commenced operations at
the Toa Baja plant in the third fiscal quarter and plans to close and sell the
R<i'>o Piedras plant as soon as possible. The plastics production facility has
moved to Toa Baja in the first fiscal quarter of fiscal year 1997. Several
facilities leased by the Company in the San Juan area and elsewhere in Puerto
Rico were closed as a result of the completion and consolidation of operations
in the Toa Baja plant. The Company anticipates that the opening of the new
plant and the closing of leased facilities will lead to cost savings in the
manufacturing and distribution of the Company's products, eliminate existing
capacity constraints and the need for co-packing arrangements and improve
production efficiency.
The Company is pursuing opportunities to expand its presence in the
flavored soft drink markets through the introduction of new products under both
PepsiCo and other trademarks in 1996 and 1997.
<PAGE>
FRANCHISE ARRANGEMENTS
PEPSICO PRODUCTS
The Company has entered into a master franchise commitment letter (the
"Franchise Commitment Letter") with PepsiCo with respect to the sale of PepsiCo
soft drink products in Puerto Rico. The Company has also entered into
exclusive bottling appointment agreements (each an "Exclusive Bottling
Appointment" and collectively, with the Franchise Commitment Letter, the
Concentrate Price Agreement and the Cooperative Advertising and Marketing
Agreement between PepsiCo (or its affiliates) and the Company, the "Franchise
Arrangements") for the relevant trademarks Pepsi-Cola, Diet Pepsi, Pepsi Free,
Diet Pepsi Free, Lemon-Lime Slice, Diet Lemon-Lime Slice, Mandarin Orange
Slice, Diet Mandarin Orange Slice, Teem, Diet Teem, Mirinda, On-Tap, Wonder
Kola, Mountain Dew and All Sport. The Franchise Arrangements grant the Company
exclusive rights to produce, bottle, sell and distribute PepsiCo soft drink
products in Puerto Rico. The Franchise Arrangements also authorize the Company
to supply canned beverages to the U.S. Virgin Islands, provided that it remains
competitive in price, quality and quantity. The Company has the right of first
refusal to purchase distribution rights for PepsiCo products in the U.S. Virgin
Islands when such rights become available. If the Company wishes to bottle,
sell or distribute any flavored soft drink or other carbonated beverage other
than the products covered by the Exclusive Bottling Appointments, PepsiCo has
the right of first refusal to provide the Company with concentrate for any such
soft drink or to supply the Company with such other carbonated beverage at
prevailing market prices. The Franchise Commitment Letters run concurrently
with the Exclusive Bottling Appointments and terminate in the event of the
termination or expiration of the Exclusive Bottling Appointments. All of the
Franchise Arrangements have the provisions described below.
The Franchise Arrangements require the Company to purchase its entire
requirements of concentrates and syrups for all of the PepsiCo soft drink
products from certain affiliates of PepsiCo. Pursuant to the Concentrate Price
Agreement between the Company and PepsiCo, PepsiCo charges the Company the
actual price of a unit of concentrate that is paid by bottlers for the same or
similar concentrate in the continental United States on an equivalent yield
basis based upon the then current domestic list price for each of the
respective PepsiCo products.
The Franchise Commitment Letter requires the Company to attain minimum
volume and market share levels of the cola market and flavored soft drink
market, minimum levels of nominal and effective distribution and minimum levels
of capital expenditures. The Company believes it has so far exceeded such
minimum levels. The Exclusive Bottling Appointments require the Company to
maintain the share, distribution and expenditure targets for the PepsiCo soft
drink products set forth in the Franchise Commitment Letter. In a number of
minor respects, the Company may not have during the past fiscal year met
certain market share requirements contained in the Exclusive Bottling
Appointments with respect to certain soft drink flavors. The Company has not
received any notice from PepsiCo regarding any violations and does not believe
that there is any risk to the Company of the Company being adversely affected
by them. In the event the Company materially fails to achieve such aggregate
market share distribution or capital expenditure and such failure continues for
a period of 12 months following notice thereof from PepsiCo, then PepsiCo has
the right to require the Company to dispose of the bottling business, plant and
operating assets to a purchaser satisfactory to PepsiCo, or, if such purchaser
is not found, to terminate the agreement. As required by the Exclusive
Bottling Appointments, the Company has also developed a postmix department with
the necessary infrastructure to provide effective service to the food service
channel of distribution.
The Company is obligated under the Franchise Arrangements to use, handle
and process the concentrates purchased from PepsiCo and to bottle, label,
package and distribute the PepsiCo soft drink products in accordance with
PepsiCo's instructions. The Company must maintain and operate its plants and
all sales and distribution equipment in clean and sanitary conditions in
accordance with PepsiCo's standards and specifications, and otherwise must
satisfy PepsiCo's quality control standards. The Company must comply with all
standards and specifications with respect to the treatment and purification of
water used in manufacturing PepsiCo soft drink products and the maintenance and
operation of water treatment and purifying equipment. The Company must also
conduct tests of the PepsiCo soft drink products and the water used in their
manufacture, maintain records of such testing and permit PepsiCo access to its
facilities for inspection purposes.
<PAGE>
The Company is required to test market and introduce new packages, sizes
and products as PepsiCo may direct and promote and advertise the PepsiCo soft
drink products. The Company is also required to make capital expenditures to
maintain a sufficient inventory of bottles, cartons, containers and cases.
The Franchise Arrangements also require the Company to display all
advertising and promotional materials furnished by PepsiCo or its affiliates
and to incur mutually agreed upon marketing, advertising and sales promotion
expenditures. See "- Marketing."
The Franchise Arrangements require the Company to not exceed a ratio of
senior debt to subordinated debt to equity of 65 to 25 to 10.
The Exclusive Bottling Appointments have ten-year terms expiring on
November 5, 2003. Each of the Exclusive Bottling Appointments will
automatically be extended for an additional five-year term expiring on November
5, 2008, provided the Company is not in breach of any provisions of the
Franchise Arrangements. Thereafter, each agreement is automatically renewed
for additional five-year terms unless either party gives written notice of its
intention not to renew the agreement at least 18 months prior to the date of
expiration of the term. PepsiCo may terminate the Franchise Arrangements if
the Company fails to comply in any material respect with the terms and
conditions of the Franchise Arrangements, subject to a right to cure in certain
instances. In addition, PepsiCo may terminate the Franchise Arrangements if
there is a change of effective control of the Company without PepsiCo's prior
written consent. For purposes of the Franchise Arrangements, a change of
effective control of the Company shall be deemed to have occurred if the
Essential Shareholders (as defined below), directly or indirectly, cease to own
or have the power to vote in the aggregate at least a majority of the voting
stock of the Company. The "Essential Shareholders" are the members of the
Charles H. Beach Voting Trust and the Michael J. Gerrits Voting Trust
(together, the "Essential Shareholders") controlled by Charles H. Beach and
Michael J. Gerrits, respectively. The Essential Shareholders are thus required
under the terms of the Franchise Arrangements to retain voting control of the
Company. (See "Security Ownership" in the Company's Proxy Statement for 1996
incorporated herein by reference).
In September 1996 in connection with his continued service as President
and Chief Executive Officer, Mr. Rafael Nin requested, and was granted by the
Essential Shareholders and certain other shareholders, a ten-year voting trust
(the "Voting Trust") which entitles him to vote, but not own, 5,000,000 Class A
Shares representing a controlling interest in the Company. In connection with
the execution of the Voting Trust agreement, PepsiCo consented to the change of
effective control of the Company from the Essential Shareholders to Mr. Nin,
acting as voting trustee (the "Trustee"). The initial term of the Voting Trust
is five years and is automatically renewed for an additional five-year period
unless either PepsiCo or the Trustee notifies the other party of non-renewal at
least six months prior to the end of the initial five-year term, provided that
PepsiCo may not unreasonably withhold its consent to the additional five-year
period. Under the terms of the Voting Trust, Mr. Nin is entitled to resign as
Trustee at any time, which results in a termination of the Voting Trust. If
the Voting Trust is terminated because of the resignation or death of the
Trustee, PepsiCo has the right for a period of ninety days after such
resignation or death to appoint a new Trustee to replace Mr. Nin for the
remaining term of the Voting Trust, subject to the approval of the beneficial
owners of a majority of the Class A Shares. Upon the termination of the Nin
Voting Trust at the expiration of its term, the Class A Shares held in the Nin
Voting Trust will be returned to the Essential Shareholders and the other
beneficial owners of the Class A Shares and the terms of the Franchise
Arrangements applicable to the Essential Shareholders will again become
effective. Additionally, in connection with the Nin Voting Trust, Rafael Nin,
the Company and the shareholders of the Company's Class A Shares entered into a
stock option agreement (the "Stock Option Agreement"), pursuant to which those
shareholders granted Rafael Nin a two year option to purchase all or a portion
of the Company's 5,000,000 Class A Shares, par value $0.01 per share of the
Company, at a price of $1.00 per share, subject to adjustment from time to
time. Mr. Nin may not exercise the option, but is only permitted to transfer
the option in whole or with respect to some shares to third parties (including
the Company) for the benefit of the Company.
In addition to the products covered by the Franchise Arrangements, the
Company has the rights to sell and distribute Lipton Ice Tea Original Formula
pursuant to a joint venture arrangement between PCI and Lipton.
<PAGE>
OTHER PRODUCTS
The Company has reached agreement on the terms of a soft drink trademark
license and bottling agreement with Seagram for the exclusive rights to
produce, sell and distribute tonic water, club soda and ginger ale under the
Seagram trademark in Puerto Rico. The Company must purchase concentrate from
Seagram at a price per unit mutually agreed upon by Seagram and the Company.
The Company is obligated to meet specified production levels. The Company may
not produce, sell or distribute any other tonic water, club soda or ginger ale
other than the Seagram trademark. The Company has further agreed to maintain
certain production and quality control standards, and to use its best efforts
to advertise and promote the sale, distribution and consumption of the Seagram
products in the franchise territory. The license and bottling agreement with
Seagram is effective through January 31, 2000 and is renewable for successive
ten-year terms thereafter at the option of Seagram. The agreement with Seagram
may be terminated in the event that the Company does not comply with its terms
and, in the case of the Company's bankruptcy, appointment of a receiver or
assignment for the benefit of creditors.
The Company has entered into a sales and distribution agreement effective
through March 31, 1997 with Welch Foods Inc. ("Welch's") for the rights to sell
and distribute non-carbonated fruit juice beverages under the Welch's trademark
in Puerto Rico. The Company must purchase the product from certain authorized
sellers and may not manufacture, sell or distribute certain specified brand
names which compete with Welch's products. The Company is actively negotiating
the renewal of this distribution agreement.
The Company has entered into an exclusive distributorship agreement
effective through 2013 with Nora Beverages Inc. to distribute natural spring
water under the Naya trademark in Puerto Rico and St. Maarten.
FRANCHISE PROTECTION
The Company's Franchise Arrangements with PepsiCo are subject to Act No.
75 of June 24, 1964 of Puerto Rico, as amended, ("Act 75"), which provides that
a company that grants distribution rights to a distributor in Puerto Rico may
not unilaterally terminate, perform any act detrimental to or refuse to renew
its agreement with the distributor without just cause, and would be required to
pay damages to the distributor as specified in Act 75 in the event of a
termination, impairment or non-renewal without just cause, which are specific
acts set forth in Act 75 which are attributable to the distribution. Act 75
does not protect a distributor in the event of a breach by such distributor.
PROPRIETARY TRADEMARKS
The Company produces, sells and distributes bottled water under its own
Cristalia trademark in one-gallon and five-gallon containers. The Company's
sales of Cristalia bottled water totalled $4.5 million in 1996 and accounted
for 4.4% of the Company's net sales and 9.4% of sales volume for the fiscal
year 1996.
PRODUCTION
Soft drinks are produced by mixing water, concentrate and sweetener and
injecting carbon dioxide gas into the mixture to produce carbonation
immediately prior to bottling. Prior to mixing, the water is processed to
eliminate mineral salts, chlorinated and then passed through purification tanks
containing sand filters to eliminate remaining impurities and carbon filters to
eliminate chlorine taste, copper and odors. The purified water is then
combined with processed sugar and concentrate. Following carbonation the
mixture is bottled in prewashed bottles or aluminum cans. The Company
maintains a laboratory area at its production facility where raw materials are
tested and samples of soft drink products are analyzed to ensure quality
control.
The raw materials used by the Company in the production of soft drinks
include concentrate, syrup, water, sugar, carbon dioxide gas, glass and plastic
bottles, aluminum cans and other packaging material. The Company is obligated
under the terms of the Franchise Arrangements to obtain concentrate for the
production of soft drink products from PepsiCo or its affiliates. The Company
<PAGE>
obtains water from publicly available supplies (such as municipal water
systems) and from its own drilled wells. The Company obtains all of its sugar
requirements from a number of independent suppliers and distributors located in
the United States and Puerto Rico. The Company does not directly purchase low
calorie sweetener for use in diet soft drinks because these sweeteners are
already contained in the diet soft drink concentrates purchased by the Company.
The Company purchases its supplies of carbon dioxide gas from a number of
independent suppliers in Puerto Rico and elsewhere. The Company purchases
plastic bottles used in the bottling process principally from its plastics
operation and from other independent suppliers as needed. The Company also
manufactures preforms which are utilized in bottle manufacture. Plastics were
also sold to BAESA during the first quarter of 1996. All bottles used in the
bottling process of Cristalia are purchased by the Company from a number of
independent suppliers. The Company purchases its aluminum can requirements
from Crown Cork & Seal.
None of the raw materials or supplies used by the Company is currently in
short supply, although the available supply of certain materials could be
adversely affected in the future due to reasons outside the Company's control.
The following table sets forth the principal raw materials utilized in
the soft drink production process and the approximate percentage of the
Company's total cost in the fiscal year 1996 represented by each of them.
<TABLE>
<CAPTION>
PERCENTAGE OF
FISCAL YEAR
RAW MATERIAL 1996 COST
____________ __________
<S> <C>
Packaging 45.8%
Concentrate 29.9
Sugar/fructose 16.9
Carbon dioxide gas 1.1
Other 6.3
_____
Total 100.0%
_____
</TABLE>
The Company produces bottled water under its Cristalia trademark at a
facility located in Ponce. The water obtained from a spring and several wells
is passed through purification tanks containing sand filters and carbon filters
and subjected to reverse osmosis treatment to filter out impurities and certain
minerals. After the water is passed through an ozonator for further treatment,
it is bottled in one- and five-gallon containers.
The Company currently produces soft drinks at its plant in Toa Baja and
bottled water at a leased facility in Ponce. The Company moved its
manufacturing operations from R<i'>o Piedras to Toa Baja during the third
quarter of fiscal year 1996. The following chart shows the approximate
effective production capacity, number of shifts and bottling lines, and average
fiscal year 1996 capacity utilization for the Toa Baja plant:
<TABLE>
<CAPTION>
APPROXIMATE EFFECTIVE NUMBER OF AVERAGE 1996
PLANT PRODUCTION CAPACITY(1) BOTTLING LINES CAPACITY UTILIZATION(2)
_____ ______________________ ______________ _______________________
<S> <C> <C> <C> <C>
Toa Baja 44,347(2 shifts) 3 65%
(1) Approximate effective production capacity is expressed in thousands of cases per year, assuming the number of
shifts indicated. Effective production capacity is a plant's theoretical installed capacity, adjusted for seasonal
variations in demand as well as regular maintenance and repair.
(2) Actual production in fiscal year 1996 expressed as a percentage of approximate effective production capacity.
</TABLE>
The Company expects to produce substantially all of its products during
fiscal year 1997 in its soft drink plant in Toa Baja or in its water plant in
Ponce (the "Water Plant"). The remaining volume is purchased from outside
sources. The Toa Baja plant is located approximately 15 miles west of San Juan
and the Water Plant is located on the southern portion of the island of Puerto
Rico. The R<i'>o Piedras plant has been cleared of all producing equipment and
is currently on the market for sale.
<PAGE>
DISTRIBUTION
Once the bottling process is complete, the Company packages its soft
drink products in cases, tanks and boxes for distribution throughout its
franchise territory. The Company uses two primary methods of distribution for
its soft drink products: conventional routes and bulk presell delivery. In the
conventional route form of distribution, a truck owned or leased by the Company
is loaded with the Company's beverage products and visits each of the Company's
customers along an assigned distribution route. The customer places orders and
accepts delivery of the amount of the Company's products needed at that time.
The drivers and sales persons which deliver the Company's products along the
conventional route system are employees of the Company in Puerto Rico. The
conventional route form of distribution is the main form of distribution
currently used by the Company in Puerto Rico.
Under the bulk presell method of distribution, the Company's account
representatives and key account salespersons visit customers assigned to their
route and fill out order forms for the Company's products. These orders are
processed at the Company's plant and the products are delivered the next day in
trailer loads by independent truck drivers or in bulk (less than trailer loads)
by the Company's employees in Company-owned or leased trucks. The bulk presell
method is mostly used for wholesalers and large retailers.
The Company intends to emphasize the "route presell" method of
distribution for its conventional routes where feasible to capitalize on its
planned introduction of new products and packaging formats. Under the route
presell method, employees of the Company visit customers assigned to their
route and take orders which are processed at the end of the day. The ordered
products are then delivered the next day by the Company's employees in Company-
owned or leased trucks. The Company has conducted pilot tests for the route
presell method in the San Juan metropolitan area and these tests indicate that
the route presell method of distribution is preferred by the Company's
customers. In addition, this method provides better route coverage in densely
populated areas and facilitates the distribution of the Company's existing
products as well as the introduction of new products.
As of September 30, 1996, the Company had approximately 112 distribution
routes (conventional, bulk and presell) and its transportation fleet consisted
of approximately 125 trucks. The Company's products are also distributed to
restaurants and soda fountains in post-mix form.
In addition, the Company has approximately 1,250 "single service" and
1,500 "full service" vending machines throughout Puerto Rico. In the "single
service" format, the proprietor of the location of the machine purchases a
minimum amount of the Company's products while in the "full service" format,
the Company pays a commission to the proprietor and supplies and retains the
profit from sales from the machines. The Company is responsible for
refurbishing and maintaining the vending machines and there is no charge for
installation and maintenance or rental fees for the vending machines. The
Company's bottled water is distributed to customers in private homes,
businesses and government agencies some of which have coolers installed by the
Company. The Company receives a rental payment for each cooler installed by
the Company.
In the fiscal year 1996, approximately 52% of the Company's net sales was
to supermarkets and grocery stores, 29% was to "cash and carries" (small, high-
volume wholesalers) and similar businesses, 12% was to restaurants and soda
fountains and 7% was through other distribution channels. The Company also
distributes its products through vending machines and is in the process of
rapidly expanding its placement of vending machines throughout Puerto Rico.
The Company's Cristalia brand bottled water is distributed to private
homeowners, businesses and government agencies. Most sales to the Company's
customers are on a credit basis, with payment due approximately 30 days after
delivery. Credit sales and cash sales accounted for approximately 81% and 19%,
respectively, of the Company's total sales in the fiscal year 1996.
MARKETING
The Company has entered into a cooperative advertising and marketing
agreement with affiliates of PepsiCo in Puerto Rico. This arrangement provides
for advertising of Pepsi-Cola and other PepsiCo soft drink products on
<PAGE>
television and radio stations, billboards, newspapers and other media. The
total amount spent by the Company on advertising pursuant to this cooperative
arrangement in any year is determined by the amount set forth in that year's
cooperative marketing agreement.
A primary basis of competition among soft drink bottling companies is
sales promotion activities, including television, radio and billboard
advertising and "point of purchase" promotional devices, such as display racks
and cases, clocks, neon signs and other merchandise and equipment bearing the
Pepsi logo and placed in retail outlets where the Company's products are sold.
The Company also uses point-of-purchase promotional devices approved by
PepsiCo in marketing its products. These products consist primarily of
prominent in-store displays such as racks and cases. These products are
delivered to the Company's customers by distribution trucks along with soft
drink deliveries. The Company shares the cost of these point-of-purchase
promotional devices, excluding design costs, with PepsiCo. PepsiCo reimburses
the Company for PepsiCo's share of its marketing expenditures. PepsiCo may
from time to time during the year pay for marketing expenditures directly,
subject to agreement with the Company, and will be credited for such payments
toward PepsiCo's share of marketing expenditures.
The Company has entered into long-term arrangements to offer discounts to
selected customers, such as the major supermarket chains in Puerto Rico. The
Company has also entered into cooperative marketing agreements with its
customers relating to special displays and promotional campaigns for the
Company's products.
The Company frequently uses promotional campaigns such as concerts and
sports events, merchandise giveaways, contests and similar programs to increase
sales of its products. These programs are typically heavily advertised and
frequently result in increased sales and higher per capita consumption of the
Company's products during the time the program is being conducted.
The Company sells its soft drink and water products in a variety of non-
returnable bottles, both glass and plastic, and in cans, in a variety of sizes.
The Company currently sells its products in 15 different packaging formats.
The Company continually examines sales data and customer preferences in order
to develop a mix of packaging formats which consumers will consider most
desirable in order to increase sales and per capita consumption of the
Company's products. All the packaging formats utilized by the Company for soft
drink products are subject to the approval of PepsiCo.
A primary basis of competition in the soft drink industry in Puerto Rico
is the "image" that a particular soft drink has among consumers. The Company
intends to continue to promote the image of PepsiCo products among consumers in
Puerto Rico by means of advertising which depicts PepsiCo products as the
preferred soft drink products among consumers.
The Company uses its management information systems in order to evaluate
sales data for purposes of forecasting future sales and establishing sales
quotas and forecasts. Based on the information compiled in the Company's
historical sales records, the Company may initiate one or more of the marketing
programs described above in order to increase sales volume or per capita
consumption of its soft drink products.
COMPETITION
The soft drink industry in Puerto Rico is highly competitive. In
addition, during fiscal 1996, the Company faced intense price competition
resulting in substantially lower net prices. The Company's principal
competitors in Puerto Rico are the local bottlers and distributors of Coca-Cola
in the cola market and Seven-Up in the flavored soft drink market. The
Company's other competitors include bottlers and distributors of nationally and
regionally advertised and marketed products, as well as bottlers of smaller
private label soft drinks, which the Company believes have historically
represented less than 4% of total soft drink sales in Puerto Rico. During
fiscal year 1996 the Coca-Cola franchise was sold to an investor group headed
by a Florida-based businessman and the Seven-Up Company was sold in part to its
management group in a leveraged buy-out transaction. These two transactions
have resulted in a significant increase in competition in the Puerto Rican soft
drink market, increasing the Company's marketing and discount expenditures
during fiscal year 1996.
<PAGE>
Carbonated soft drink products compete with other major commercial
beverages, such as coffee, milk and beer, as well as non-carbonated soft
drinks, citrus and non-citrus fruit drinks and other beverages.
The principal methods of competition in the soft drink industry in Puerto
Rico are pricing, advertising and product image. In addition, the Company
provides discounts to certain of its large customers such as supermarket
chains, fast food chains and other retail outlets which carry PepsiCo soft
drink products.
The following charts compare the market share of PepsiCo soft drink
products and Coca-Cola soft drink products in the Puerto Rican soft drink take-
home market at the end of the periods indicated.
<TABLE>
<CAPTION>
SOFT DRINKS TAKE-HOME MARKET SHARE(1)
_____________________________________
CALENDAR YEAR PEPSICO PRODUCTS COCA-COLA PRODUCTS
_____________ ________________ __________________
<S> <C> <C>
1990 47.3% 29.7%
1991 47.8 24.5
1992 53.1 28.7
1993 49.1 33.0
1994 49.3 33.0
1995 (for the twelve-month period ended August 49.4 32.3
31, 1995)
1996 (for the twelve-month period ended August 47.3 32.6
31, 1996)
(1) SOURCE: Asesores
</TABLE>
PLASTIC PRODUCTS
Beverage Plastics Company, a subsidiary of the Company, manufactures and
sells non-returnable plastic bottles and preforms. In 1996, the plastic
bottles manufactured by that subsidiary were used entirely in the Company's
soft drink production and distribution business, and the preforms were all used
in the manufacture of plastic bottles or sold to the Argentine and Brazilian
operations of BAESA. Sales to BAESA were discontinued in early 1996.
GOVERNMENT REGULATION
The Company's operations are subject to the regulatory oversight of the
U.S. Department of Agriculture and Department of Labor, the Food and Drug
Administration, the Occupational Safety and Health Administration, the
Environmental Protection Agency and the Puerto Rico Environmental Quality
Board.
The Company is required to obtain municipal licenses for its bottling
plants. The Company is currently in compliance with such requirements.
Additionally, the Company routinely obtains the necessary approvals to operate
certain machinery and equipment, such as boilers, steamers, compressors and
precision instruments, from municipal authorities.
<PAGE>
ENVIRONMENTAL REGULATION
The Company has entered into a stipulation, dated September 11, 1990 (the
"Stipulation") with the Puerto Rico Aqueduct and Sewer Authority ("PRASA") with
respect to the discharge of waste water in excess of pretreatment permit
limitations. Pursuant to the terms of the Stipulation, PRASA and the Company
agreed on a compliance plan by which the Company would invest approximately
$1.0 million for the construction of a waste water treatment plant in its
bottling facilities and would pay an administrative penalty to PRASA. The
Company also entered into a settlement with PRASA covering surcharges to be
paid by the Company for the discharge of waste water in excess of surcharge
limits. Under the terms of the settlement, the Company agreed to pay PRASA the
amount of $60,000 in accord and satisfaction for any surcharges which might
have been computed and notified on or before June 1, 1991. The settlement
<PAGE>
provides for prospective surcharges as follows: (a) $48,000 for the period from
June 1, 1991 to December 31, 1991; (b) $10,000 per month for the period from
January 1, 1992 through and until June 30, 1993; and (c) $12,500 per month for
the period from July 1, 1993 through and until the waste treatment facility at
the Toa Baja plant is completely built and operational. The settlement also
provides for additional surcharges if certain limits are exceeded. The Company
received a permit from PRASA to operate its Toa Baja plant until June 28, 1997
while a PH Equalization Facility is being placed in service and the discharge
of waste water is characterized. This process will provide the information
needed to obtain the permanent permit. The Company hopes that the results of
the characterization of the discharge of waste water will permit it to make use
of a municipal waste treatment facility, for which it would pay a monthly fee,
and thereby avoid the need to construct a separate waste water treatment plant
adjacent to its Toa Baja manufacturing facility. The Company places a high
priority on quality control and industrial safety and believes that it is in
material compliance with all other applicable regulations. The Company
received the Quality Award from PepsiCo in 1993 and 1994. The International
Bottled Water Association's Quality Award has been received by the Company's
Water Plant for 1994, 1995 and 1996.
TAXATION
The Puerto Rican government currently imposes an excise tax on carbonated
beverages of 5% of the "taxable price in Puerto Rico." The "taxable price in
Puerto Rico" for a product manufactured in Puerto Rico is effectively defined
under the Puerto Rico Excise Act as 72% of the manufacturer's sales price. The
Company is thus subject to an excise tax at an effective rate of 3.6% (or 5% of
72%) of the sales price of its soft drink products.
EMPLOYEES
At September 30, 1996, the Company had 477 full-time employees,
approximately 65% of which were represented by a labor union. The Company
believes that its relationship with its employees and their unions is
excellent. The Company has not experienced any strike or work stoppage since
the Company was acquired in 1987. Labor relations are generally governed by
union agreements entered into from time to time between the Company and its
employees. The Company has entered into three such agreements, with its union
employees in its manufacturing and distributing subsidiaries, its plastics
subsidiary and its bottled water division, respectively. The Company's
agreements relating to its manufacturing and distributing subsidiaries expires
on December 31, 1997. The agreement relating to its plastics subsidiary
expired on October 1, 1996. The Company currently is in the process of
renegotiating this agreement. Each of the agreements relating to the
manufacturing and distributing subsidiaries and the agreement relating to the
plastics subsidiary are subject to automatic renewal for additional one-year
terms unless terminated by either party in writing. The Company's agreement
relating to the bottled water division became effective January 1995 and
expires on December 31, 1998. The Company and the labor union are in the
process of renegotiating the agreement relating to its manufacturing and
distribution subsidiaries with the intention of increasing efficiencies and
lowering the operating costs in both subsidiaries.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are elected by the Board of
Directors and serve at its discretion. There is no family relationship among
any of the officers or directors.
The following table sets forth certain information regarding the
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION OFFICER SINCE
____ ___ ________ _____________
<S> <C> <C> <C>
Rafael Nin 52 President and Chief Executive Officer 1996
C. Leon Timothy 61 Senior Vice President-Investor Relations 1990
David Cuthbertson 55 Vice President - Operations 1990
Manuel Bonilla 46 Vice President - Sales and Marketing 1996
Reinaldo Rodriguez 51 Vice President - Human Resources 1996
David Lee Virginia 46 Vice President - Finance Officer 1996
Jose Gonzalez 39 Vice President - Internal Audit 1996
</TABLE>
<PAGE>
On June 11, 1996, Rafael Nin, one of the Company's founding shareholders
and a member of the Board of Directors of the Company replaced Charles H. Beach
as the Company's President and Chief Executive Officer. Effective August 8,
1996, Charles Beach, the Chairman of the Board of Directors, and Michael
Gerrits, who together were then the controlling shareholders of the Company,
resigned as Board members. The Company further restructured its Board of
Directors under the leadership of a new Chairman, John W. Beck. Beck is the
retired chairman and chief executive officer of First National Bank,
Orlando/Winter Park, Florida and has been a Director of the Company since 1987.
The Board also appointed Richard Reiss, a certified public accountant and well
known business consultant in Puerto Rico, to chair the Audit Committee.
In connection with his continued service as President and Chief Executive
Officer, Mr. Nin requested, and was granted by the Company's controlling
stockholders, a ten-year voting trust agreement which entitles him to vote, but
not own, 5 million Class A shares, a controlling interest in the Company. Mr.
Nin was granted a two-year option at $1 per share on these controlling shares,
to be exercised for the exclusive benefit of the Company. At his request, this
option may not be exercised for his own benefit. See "Business-Franchise
Arrangements". A prior option to purchase a substantial interest in the
Company, previously reported as granted to Nin upon his appointment as chief
executive officer, was never formalized, and has been withdrawn by mutual
agreement.
The Essential Shareholders, and the Company's other existing shareholders
prior to the Company's public offering on September 20, 1995 (the "Non-
Essential Shareholders" and together with the Essential Shareholders, the
"Initial Shareholders") have entered into a Shareholders Agreement governing
the transfer of the shares of the Company by such shareholders. (See
"Shareholders Agreement" in the Company's Proxy Statement for 1996,
incorporated herein by reference.) Under the Shareholders Agreement, following
September 28, 1998 all of the Class B Shares owned by the Initial Shareholders
become fully tradeable in the public market, and the Company will undertake and
pay for any filings required by the Securities and Exchange Commission under
applicable securities laws.
The following is a brief description of the business background of each
of the executive officers of the Company.
Rafael Nin has been a Director of the Company since May 1987. He was
elected President and Chief Executive Officer in June 1996. He has been a
Director of Bestov Foods S.A., a Pizza Hut franchise in Argentina since 1992,
and has acted as President and Chief Executive Officer of Kana Development,
Inc., a land development company, since 1983.
C. Leon Timothy has been a Senior Vice President of the Company since
February 1990 and a Director of the Company since December 1992. He was a
Director of BAESA from April 1990 until July 1996 and a Senior Vice President
of BAESA responsible for shareholder relations until July 1996.
David Cuthbertson has been a Vice President of the Company in charge of
operations since July 1990. He was a regional Sales Manager for Crown Cork and
Seal Company from 1979 to June 1990.
<PAGE>
Manuel Bonilla has been a Vice President of the Company in charge of
Sales and Marketing since September 1996. He was Vice President of Sales for
Philip Morris Latin America from 1987 to August 1996.
Reinaldo Rodriguez has been Vice President of the Company in charge of
Human Resources since September 1996. He was Vice President in charge of Human
Resources for BAESA from 1990 to July 1996, and he was Personnel Director for
Pepsi Cola Puerto Rico Bottling Company from 1982 to 1990.
David Lee Virginia has been Vice President of the Company in charge of
Finance since September 1996. He was Planning Director for Pepsi Cola
Engarrafadora Ltda from 1994 to 1996. He was with BAESA in a number of
positions including Vice President - Treasurer from 1992 to September 1994 and
he was Vice President in charge of Finance for Pepsi Cola Puerto Rico Bottling
Co. from 1987 to 1992.
<PAGE>
Jose Gonzalez has been a Vice President of the Company in charge of
Internal Audit since October 1996. He was previously Audit Manager, since
December 1995. He was Controller and Operations Manager for The West Company
from 1993 to 1995 and Assistant Controller for Nypro Puerto Rico Inc. from 1992
to 1993. Previous positions include Senior Accountant for Motorola of Puerto
Rico and Senior Auditor for Coopers & Lybrand, from 1988 to 1992.
INVESTMENT IN BAESA
On July 1, 1996, voting control of BAESA was transferred to PepsiCo with
the result that the Company no longer exercises any significant influence or
control over BAESA. As a result of this change, the Company's investment in
BAESA may cause the Company to be an investment company under the Investment
Company Act of 1940, as amended (the "Investment Company Act"). In order to
avoid being required to register as an investment company, which the Company
believes would impose burdensome restrictions on its future operations, the
Company's Board of Directors has expressed its intention to take steps as soon
as reasonably possible which are intended to result in the Company not being
required to register as an investment company. The Company expects to file
with the Securities and Exchange Commission an application for an exemptive
order from registration under the Investment Company Act. There can be no
assurances, however, that the Company will be successful in obtaining such an
exemptive order or will otherwise find a way to avoid registration, or that if
the Company is ultimately required to register, it will not adversely affect
the Company's future business operations.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) Documents filed as part of this amendment:
(3) The following exhibits are filed as part of this amendment:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995).
3.2 Amended and Restated By-Laws of the Company (incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on Form 10-
K for the fiscal year ended September 30, 1995).
4.1 Form of Specimen Stock Certificate representing Class B Shares
(incorporated by reference to Exhibit 4.1 to Amendment No. 3 to the
Company's Registration Statement on Form S-1 (Registration No. 33-
94620) (the "S-1 Registration Statement").
9.1 Form of Charles H. Beach Voting Trust Agreement (incorporated by
reference to Exhibit 9.1 to Amendment No. 1 to the S-1 Registration
Statement).
9.2 Michael Gerrits Voting Trust Agreement (incorporated by reference
to Exhibit 9.2 to Amendment No. 1 to the S-1 Registration
Statement).
9.3 Form of Amendment No. 1 to Michael Gerrits Voting Trust Agreement
(incorporated by reference to Exhibit 9.3 to Amendment No. 1 to the
S-1 Registration Statement).
9.4 Charles Krauser Voting Trust Agreement (incorporated by reference
to Exhibit 9.4 to Amendment No. 1 to the S-1 Registration
Statement).
9.5 Form of Amendment No. 1 to Charles Krauser Voting Trust Agreement
(incorporated by reference to Exhibit 9.5 to Amendment No. 1 to the
S-1 Registration Statement).
10.1 Franchise Commitment Letter (incorporated by reference to Exhibit
10.1 to the S-1 Registration Statement).
10.2 Letter Agreement between the Company and PepsiCo extending term of
Exclusive Bottling Appointments (incorporated by reference to
Exhibit 10.2 to the S-1 Registration Statement).
10.3 Form of Exclusive Bottling Appointment (incorporated by reference
to Exhibit 10.3 to the S-1 Registration Statement).
10.4 Material Differences in Exclusive Bottling Appointments
(incorporated by reference to Exhibit 10.4 to the S-1 Registration
Statement).
10.5 Concentrate Price Agreement (incorporated by reference to Exhibit
10.5 to the S-1 Registration Statement).
10.6 Amended and Restated General Partnership Agreement for BSA
(incorporated by reference to Exhibit 10.6 to Amendment No. 1 to
the S-1 Registration Statement).
<PAGE>
10.7 Shareholders Agreement (incorporated by reference to Exhibit 10.7
to Amendment No. 1 to the S-1 Registration Statement).
10.8 Amendment No. 1 to Shareholders Agreement (incorporated by
reference to Exhibit 10.8 to Amendment No. 1 to the S-1
Registration Statement).
10.9 Amendment No. 2 to Shareholders Agreement (incorporated by
reference to Exhibit 10.9 to Amendment No. 1 to the S-1
Registration Statement).
10.10 Amendment No. 3 to Shareholders Agreement (incorporated by
reference to Exhibit 10.10 to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1995).
<PAGE>
10.11 Stock Option Agreement dated as of September 28, 1996 among Rafael
Nin, Pepsi-Cola Puerto Rico Bottling Company and the Shareholders
(incorporated by reference to Exhibit 1 to the Schedule 13D of
Rafael Nin dated October 9, 1996).
10.12 Voting Trust Agreement dated September 28, 1996 among Rafael Nin,
Pepsi-Cola Puerto Bottling Company and the Grantors (incorporated
by reference to Exhibit 2 to the Schedule 13D of Rafael Nin dated
October 9, 1996).
10.13 Amendment No. 4 to the Shareholders Agreement.*
21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 to
the S-1 Registration Statement).
* Filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized.
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
By: /S/ RAFAEL NIN
______________________________
Name: Rafael Nin
Title: Chief Executive Officer
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 Director and Chief Executive Officer April 11, 1997
_____________________________
Rafael Nin
/s/ JOHN WILLIAM BECK Director April 11, 1997
_____________________________
John William Beck
/s/ CHARLES R. KRAUSER Director April 11, 1997
_____________________________
Charles R. Krauser
/s/ ANTON SCHEDLBAUER Director April 11, 1997
_____________________________
Anton Schedlbauer
/s/ C. LEON TIMOTHY Director April 11, 1997
_____________________________
C. Leon Timothy
/s/ RICHARD REISS HUYKE Director April 11, 1997
_____________________________
Richard Reiss Huyke
/s/ DAVID L. VIRGINIA Vice President and April 11, 1997
_____________________________
David L. Virginia Chief Financial Officer
</TABLE>
<PAGE>
EXHIBIT 10.13
AMENDMENT NO. 4 TO CLASS A SHAREHOLDERS AGREEMENT
This Amendment No. 4 to the Class A Shareholders Agreement is made as
of this 29th day of January, 1997, but is effective as of September 28,
1996, by and between PEPSI-COLA PUERTO RICO BOTTLING COMPANY, a Delaware
corporation (the "Corporation"), and the individual and corporate
shareholders (the "Shareholders") of the Corporation whose signatures
appear in the signature pages hereto.
WHEREAS, the undersigned are all parties to that certain Class A
Shareholders Agreement dated as of April 27, 1987, as amended under
Amendment No. 1 to Class A Shareholders Agreement dated as of July, 1990,
Amendment No. 2 to Class A Shareholders Agreement dated as of November 5,
1993 and Amendment No. 3 to Class A Shareholders Agreement dated as of
August 28, 1995 (hereinafter the "Agreement"); and
WHEREAS, on September 28, 1996, the parties hereto executed a Stock
Option Agreement (the "Option Agreement") whereby all of the current Class
A shareholders of the Corporation granted to Mr. Rafael Nin an option to
purchase all 5,000,000 Class A shares of the Corporation for a purchase
price of $1 per share, which option is exercisable within a period of two
(2) years from the date thereof; and
WHEREAS, also on September 28, 1996, the parties hereto executed a
Voting Trust Agreement (the "Voting Trust Agreement") whereby all Class A
shareholders of the Corporation delivered and deposited with Mr. Nin the
5,000,000 Class A shares of the Corporation in a voting trust, granting
thereby to Mr. Nin the right to vote said shares in all shareholder
meetings; and
WHEREAS, the Shareholders and the Corporation have determined that it
would be in the best interests of the Corporation and in the best long-term
interests of the Shareholders that the Shareholders maintain their existing
ownership interests in the Corporation during the aforementioned two year
period of time; and
WHEREAS, in consideration of their agreement to maintain their
existing ownership interests for such aforementioned two year period of
time, and in consideration of the agreements set forth in the Option
Agreement and the Voting Trust Agreement, the Corporation and the
Shareholders have agreed to release each other from the restrictions on
transfer contained in the Shareholders Agreement after the expiration of
such aforementioned two year period of time, except for those restrictions
set forth herein, in the Option Agreement (to the extent such Agreement is
still in effect), the Voting Trust Agreement or the Exclusive Bottling
Appointments dated April 27, 1987 (the "EBAs"), between Pepsico, Inc., the
Corporation and the shareholders specified in the EBAs; and
<PAGE>
WHEREAS, the parties hereto had reached an agreement in principle as
to the matters set forth herein on or about September 28, 1996, but had
failed to reduce such agreement to writing, and they now wish to do so;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to such terms in the Agreement, as amended.
SECTION 2. The Shareholders and the Corporation agree that,
notwithstanding anything to the contrary in the Shareholders Agreement
(including without limitation Sections 5 through 8 thereof), for a period
beginning on September 28, 1996, and ending on and including September 28,
1998, they will not sell, pledge or otherwise transfer any of their Shares
(which term includes both Class A and Class B shares of the Corporation),
except with the prior written consent of the Corporation. On and after
September 29, 1998, the restrictions on transfer set forth in Sections 3,
4, 5, 6, 7, 8 or 11 of the Shareholders Agreement shall no longer be
applicable; provided, however, that (i) Class A Shares subject to the
Voting Trust Agreement or the Option Agreement (to the extent such
agreement is still in effect) shall continue to be subject to the
restrictions on transfer and other terms of the Voting Trust Agreement and
the Option Agreement, respectively; (ii) all Shares shall be subject to the
restrictions on transfer imposed by applicable law; and (iii) the
Shareholders may not, except at the request of the Corporation, sell or
otherwise transfer any Shares if such sale or transfer would give Pepsico,
Inc. the right to terminate any of the EBAs.
SECTION 3. Promptly after the execution of this Amendment No. 4 the
parties shall negotiate and execute a registration rights agreement in
customary form granting to the Shareholders the right to require the
Corporation to register for resale, at the Corporation's expense, some or
all of the Shares held by one or more Shareholders (provided the number of
Shares to be registered exceeds a specified minimum number of Shares).
SECTION 4. Other than for the amendments herein set forth, the
Agreement, as amended by Amendment No. 1, Amendment No. 2 and Amendment No.
3, shall remain in full force and effect, unaltered and unchanged, with the
provisions of this Amendment No. 4 being fully incorporated to the
Agreement and Amendment No. 1, Amendment No. 2 and Amendment No. 3.
SECTION 5. This Amendment may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument. This Amendment shall be
effective against and bind any given Shareholder upon the execution of this
Amendment by such Shareholder and the Corporation, notwithstanding that any
other Shareholder may not have executed this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 4 to
Class A Shareholders Agreement as of the date first above written.
CORPORATION SHAREHOLDERS
___________ ____________
PEPSI-COLA PUERTO RICO
BOTTLING COMPANY
/s/ Charles H. Beach
By: /S/ RAFAEL NIN /S/ PATRICIA BEACH
______________ _____________________
Charles H. Beach (for himself and on
behalf of his wife, Patricia B. Beach,
and as trustee under Voting Trust
Agreement and attorney-in-fact for the
benefit of Sandra Waugh, Linda McCune
and Charles Beach, Jr.)
/S/ MICHAEL J. GERRITS
________________________________________
Michael J. Gerrits (for himself and as
Trustee under Voting Trust Agreement
dated April 27, 1987, for the benefit of
Michael J. Gerrits Investments Limited,
Anne Gerrits, the Anne Gerrits Trust,
the Patrick T. Gerrits Trust, and the
Christine M. Gerrits Trust, James C. and
Laure L. Keavney, Thomas J. Lawless,
Ronald Robison, William A. Proulx, and
the Estate of James O'Brien)
/S/ ANNE GERRITS
__________________________________________
Anne Gerrits (for herself and as trustee
under Trust Agreement dated , 1993
for the benefit of Alicia Gerrits)
/S/ PATRICK GERRITS
_________________________________________
Patrick Gerrits Investment Ltd.
___________________________________________
William Murphy, as Co-Trustee for the
Patrick Gerrits Irrevocable Trust
Agreement
<PAGE>
/S/ CHRISTINE M. GERRITS
__________________________________________
Christine M. Gerrits, as Trustee for the
Christine M. Gerrits Klines Trust
/S/ DAVID GERRITS
_________________________________________
David Gerrits, as Co-Trustee of the
Patrick Gerrits Irrevocable Trust
Agreement
/S/ JOHN WM. BECK
_________________________________________
John Wm. Beck
/S/ JAMES C. KEAVNEY
_________________________________________
James C. Keavney, as Trustee of the
Laure L. Keavney IGST
/S/ LAURE L. KEAVNEY
_________________________________________
Laure L. Keavney, as Trustee of the
James C. Keavney IGST
/S/ JAMES C. AND LAURE L. KEAVNEY
_________________________________________
James C. and Laure L. Keavney
/S/ CHARLES R. KRAUSER
_________________________________________
Charles R. Krauser (as Trustee under
Voting Trust Agreement dated April 27,
1998 for the benefit of Krauser Family
Investments Limited, the Krauser
Education Trust, Goltra Family
Investments Limited, John R. Goltra
IGST, Janet L. Goltra IGST, and Dorothy
D'Angelo)
<PAGE>
/S/ JOHN R. GOLTRA
_________________________________________
John R. Goltra, on behalf of the Goltra
Family Investments Limited
/S/ JOHN R. GOLTRA
_________________________________________
John R. Goltra, as Trustee of the Janet
L. Goltra IGST
/S/ JANET L. GOLTRA
_________________________________________
Janet L. Goltra, as Trustee of the John
R. Goltra IGST
/S/ ROSE KRAUSER
_________________________________________
Rose Krauser as Trustee of the Krauser
Education Trust Agreement
/S/ DOROTHY D'ANGELO
_________________________________________
Dorothy D'Angelo
/S/ LUMIYA INTERNATIONAL, S.A.
_________________________________________
Lumiya International, S.A.
/S/ INES DE S. SCHEDLBAUER
_________________________________________
Girasol Enterprises, S.A.
/S/ GEORGE HAAS, JR. (CHAIRMAN)
_________________________________________
Haas Financial Corporation
/S/ RAFAEL NIN
_________________________________________
Rafael Nin
<PAGE>
/S/ SUMMER KRAMER
_________________________________________
Summer Kramer
/S/ ANGEL COLLADO SCHWARZ
_________________________________________
Angel Collado Schwarz
/S/ THOMAS J. LAWLESS
__________________________________________
Thomas J. Lawless
/S/ RONALD ROBISON
_________________________________________
Ronald Robison
/S/ WILLIAM A. PROULX
_________________________________________
William A. Proulx
/S/ JAMES O'BRIEN
_________________________________________
James O'Brien as Personal Representative
of the estate of James O'Brien
__________________________________________
Linda McCune
__________________________________________
Sandra Waugh
__________________________________________
Charles Beach, Jr.
__________________________________________
Anita F. Gerrits as Trustee for the
Anita F. Gerrits Trust #1
