SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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 March 31, 1998
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)
<TABLE>
<CAPTION>
DELAWARE ###-##-####
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
<S> <C>
CARRETERA #865, KM 0.4
BARRIO CANDELARIA ARENAS
TOA BAJA, PUERTO RICO 00949
(Address of principal executive office) (Zip code)
</TABLE>
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. <checked-box> Yes <square> No
As of May 15, 1998, 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>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PAGE
NUMBER
PART I FINANCIAL INFORMATION.................................................3
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets (unaudited) at March 31, 1998
and September 30, 1997...........................................3
Condensed Consolidated Statements of Income/(Loss) (unaudited) for the
Six Months Ended March 31, 1998 and 1997.........................5
Condensed Consolidated Statements of Income/(Loss) (unaudited) for the
Three Months Ended March 31, 1998 and 1997.......................5
Condensed Consolidated Statements of Cash Flows (unaudited) for the
Six Months Ended March 31, 1998 and 1997.........................7
Notes to Condensed Consolidated Financial Statements (unaudited)......8
Item 2. Management's Discussions and Analysis of Financial Condition
and Results of Operations.....................................13
PART II OTHER INFORMATION...................................................20
Item 1. Legal Proceedings...................................................20
Item 6. Exhibits and Reports on Form 8-K....................................20
(a) Exhibits.......................................................20
(b) Reports on Form 8-K during the quarter ended March 31, 1998....20
2
<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)
ASSETS
<TABLE>
<CAPTION>
March 31, September
30,
1998 1997
(UNAUDITED) (AUDITED)
___________
____________
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $12,954 $19,447
Accounts receivable:
Trade, less allowance for doubtful accounts of 12,433 11,681
$1,396 at
March 31, 1998 and $1,389 at September 30,
1997
Due from PepsiCo, Inc. 865
943
Other 5,066 4,273
Inventories 3,949 3,635
Deferred income taxes 97
97
Prepaid expenses and other current assets 1,208 1,414
________ _______
Total current assets 36,572 41,490
Deferred income tax, long-term 1,645 1,619
Long-lived assets for sale, principally land and building 3,752 3,752
Property, plant and equipment, net 45,656 47,347
Intangible assets, net of accumulated amortization 1,598 1,644
Other assets 9
58
________ _______
Total assets $89,232 $95,910
======== =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN THOUSANDS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31,
September 30,
1998 1997
(UNAUDITED)
(AUDITED)
___________
____________
<S> <C> <C> <C>
Liabilities:
Current installments of long-term debt $1,007
$1,007
Current installments of capital lease obligations 700
908
Short-term borrowings 5,329
5,430
Accounts payable:
Trade 10,181
13,750
Affiliate --
32
Income tax payable 76
199
Other accrued expenses 5,940
4,830
__________
_________
Total current liabilities 23,233
26,156
Long-term debt, excluding current installments 23,119
23,636
Capital lease obligations, excluding current installments 123
513
Accrued pension cost, long-term 1,507
2,213
__________
_________
Total liabilities 47,982
52,518
Shareholders' equity:
Class A common shares of $0.01 par value; authorized, 50
50
issued and outstanding 5,000,000 shares
Class B common shares, $0.01 par value; authorized 165
165
35,000,000 shares; issued and outstanding
16,500,000 shares
Additional paid-in capital 103,910
103,910
Retained earnings/(deficit) (61,877)
(59,735)
Pension liability adjustment (998)
(998)
__________
_________
41,250
43,392
__________
_________
$89,232
$95,910
==========
=========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<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>
Six Months Ended March 31,
<S> <C> <C>
<C>
1998
1997
(UNAUDITED)
(UNAUDITED)
______________
______________
Net Sales 48,460
$46,584
Cost of Sales 33,530
32,663
Gross profit 14,930
13,921
Selling and marketing expenses 14,283
15,377
Administrative expenses 3,147
6,168
Restructuring charges -
535
_________
________
Income/(loss) from operations (2,500)
(8,159)
_________
________
Other income (expenses):
Interest expense (1,292)
(1,245)
Interest income 392
699
Other, net 322
95
_________
________
Total other income (expenses) (578)
(451)
_________
________
Loss before income tax benefit (expense) (3,078)
(8,610)
_________
________
Income tax benefit (expense) 936
(129)
Net income/(loss) $(2,142)
$(8,739)
=========
========
Basic loss per common share $(0.10)
$(0.41)
=========
========
Weighted average number of shares outstanding (in thousands) 21,500
21,500
=========
========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended March 31,
<S> <C> <C> <C>
1998 1997
(UNAUDITED)
(UNAUDITED)
_______________
____________
Net Sales $ 22,943 $
20,786
Cost of Sales 16,331
14,754
___________
___________
Gross profit 6,612
6,032
Selling and marketing expenses 6,870
7,159
Administrative expenses 1,763
3,348
Restructuring charges -
535
___________
__________
Income/(loss) from operations (2,021)
(5,010)
___________
__________
Other income (expenses):
Interest expense (629)
(613)
Interest income 156
291
Other, net 282
69
___________
__________
Total other income (expenses) (191)
(253)
___________
__________
Income/(loss) before income tax benefit (2,212)
(5,263)
(expense )
Income tax benefit ( expense) 1,061
(21)
___________
__________
Net income/(loss) $ (1,151) $
(5,284)
===========
===========
Basic loss per common share $ (0.05) $
(0.25)
===========
===========
Weighted average number of shares outstanding (in thousands) 21,500
21,500
===========
==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended March 31,
<S> <C> <C> <C>
1998
1997
(UNAUDITED)
(UNAUDITED)
_____________
____________
Net loss $(2,142)
$(8,739)
Adjustments to reconcile net earnings to net cash provided by/
(used in) operating activities:
(Gain)/loss on sale of property, plant and equipment (228)
30
Depreciation and amortization 2,721
3,278
Changes in assets and liabilities:
Accounts receivable (1,467)
791
Inventories (314)
836
Prepaid expenses and other current assets 206
616
Accounts payable (3,601)
(1,832)
Other accrued expenses 1,110
(2,010)
Income taxes payable (123)
(56)
Other, net (749)
24
_________
________
Net cash provided by/(used in) operating activities (4,587)
(7,062)
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 518
152
Proceeds from matured short-term investment -
12,904
Purchases of property, plant and equipment (1,208)
(2,968)
_________
________
Net cash provided by/(used in) investing activities (690)
10,088
Cash flows from financing activities:
Proceeds from (repayment of) short-term borrowings (101)
309
Repayment of long-term debt (517)
(746)
Repayment of capital lease obligations (598)
(471)
_________
________
Net cash provided by/(used in) financing activities (1,216)
(908)
Net increase/(decrease) in cash and cash equivalents (6,493)
2,118
Cash and cash equivalents at beginning of period 19,447
18,614
_________
________
Cash and cash equivalents at end of period $12,954
$20,732
=========
========
Supplemental disclosures:
Cash paid for:
Interest $1,322
$1,217
Income taxes 285
185
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
7
<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, 1997. In
the opinion of the Company's management, the unaudited condensed consolidated
interim financial statements reflect all adjustments necessary for a fair
presentation. Operating results for the six months ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the fiscal
year ended September 30, 1998.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
__________ _____________
<S> <C> <C> <C>
Raw materials $1,565 $1,070
Finished goods 1,179 1,428
Other 1,205 1,137
___________ __________
$3,949 $3,635
=========== ==========
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
____________ _____________
<S> <C> <C> <C>
Land and improvements $6,892 $7,057
Buildings and improvements 14,695 14,682
Machinery, equipment and vehicles 48,473 48,081
Bottles, cases and shells 1,345 1,515
Furniture and fixtures 1,617 1,580
Construction in process 750 86
____________ ___________
73,772 73,001
Less accumulated depreciation and amortization (28,116) (25,654)
____________ ___________
Property, plant and equipment, net $ 45,656 $ 47,347
============ ===========
</TABLE>
(4) ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
The Company has adopted the provisions of FASB 128 for fiscal year 1998.
Under the provisions of FASB 128 the Company is required to report
earnings/(losses) per share under the following two concepts: (i) basic
earnings/(losses) per share and (ii) diluted earnings/(losses) per share.
Under the diluted earnings/(losses) per share method, the Company must consider
in the computation of earnings/(losses) per share the effect of all dilutive
common shares that were outstanding for the period, including the number of
common shares that would have been issued and outstanding, if the stock options
granted by the Company for the period under the plans (as defined, in footnote
no. 9) had been exercised. Nevertheless, if the effect of considering the
potential common shares results in the computation being antidilutive then the
FASB requires that the Company present basic earnings/(losses) per share only.
The Company has reported losses for both the 1997 and 1998 interim periods,
therefore it does not include the potential common shares in the computation of
8
<PAGE>
loss per share since this would result in an antidilutive computation of such
loss per common share. Therefore the Company's reported basic and diluted
earnings/(losses) per share is the same. Potential common shares outstanding
at March 31, 1998 which could, in the future, enter into the computation of
diluted earnings/(losses) per share amount to 1,761,667.
Prior to October 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB")
opinion no. 25, "Accounting for Stock issued to Employees", and related
interpretations. As such, compensation expense would be recorded on the date
of the grant only if the current market price of the underlying stock exceeded
the exercise price. On October 1, 1996, the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation", which permits entities to recognize
as expense, over the vesting period, the fair value of all stock-based awards
on the date of the grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB No. 25 and provide pro forma net income
and pro forma earnings per share disclosures for employee stock option grants
made in 1995 and future years as if the fair value based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to apply the
provisions of APB No. 25 and provide the pro forma disclosure required by SFAS
No. 123.
(5) INCOME TAX
The Company recorded a current income tax expense of $118 and $129 for
the six month periods ended March 31, 1998 and 1997, respectively.
(6) NOTES PAYABLE TO BANK AND LONG-TERM DEBT
The Company has, among its credit facilities, a $5 million revolving
credit facility which was fully drawn as of March 31, 1998.
(7) RELATED PARTY TRANSACTIONS
The following are transactions between the Company and subsidiaries, and
other related parties, for the six months ended March 31, 1998 and 1997,
respectively:
(i) The Company paid approximately $724 and $1,140 during the six
months ended March 31, 1998 and 1997, respectively, in advertising
fees to a firm controlled by a shareholder of the Company.
(ii) The Company paid approximately $100 and $110 during the six
month periods ended March 31, 1998 and 1997, respectively for legal
fees to a firm, one of whose partners is a relative of the
Company's President.
(8) INVESTMENT IN BAESA
The Company owns 12,345,347 shares, or approximately 17% as of September
30, 1997 and 1996, respectively, of the outstanding capital stock of BAESA.
Through June 30, 1996, the Company exercised significant influence over the
management of BAESA, subject to the right of PepsiCo, Inc. ("PepsiCo") and
certain of its affiliates to approve certain management decisions. As of July
1, 1996, PepsiCo assumed operating control of BAESA and the Company does not
control, or have significant influence over, the management or operations of
BAESA. On May 9, 1997, The Buenos Aires Stock Exchange suspended trading of
BAESA's Class B shares after its fiscal second quarter results for the period
ended March 31, 1997 showed a negative net worth under Argentine Accounting
Principles. The New York Stock Exchange also halted trading in BAESA's
American Depository Shares. On December 5, 1997, BAESA announced a financial
restructuring plan which would result in the issuance of additional equity by
BAESA in exchange for a portion of its outstanding debt, and would (if the
Company does not elect to exercise its preemptive rights to purchase its pro
rata share of the additional equity) result in the Company's 17% interest in
the outstanding capital stock of BAESA being diluted to a .34% interest. On
January 29, 1998, BAESA announced that its shareholders had approved the
restructuring plan. The plan provides for the recapitalization of BAESA and
9
<PAGE>
involves lenders holding 89% of the approximately $700 million of debt being
restructured. This $700 million includes $60 million of 8.5% negotiable
obligations originally issued in the Eurobond market (the "Eurobonds"). The
implementation of the plan is contingent upon the satisfaction of several
conditions including: (i) the tender of at least 92% of the face value of the
Eurobonds in connection with the restructuring; (ii) the settlement of class
action litigation commenced against BAESA in the United States; and (iii)
approvals by Argentine and United States regulatory authorities for the
issuance of new BAESA equity, and by Argentine authorities for the issuance of
new debt, as part of the restructuring. BAESA also announced that, if the
requisite amount of Eurobonds is not tendered, or the class action litigation
is not settled on terms acceptable to BAESA, the parties to the restructuring
plan agreement have agreed to support a prepackaged plan of reorganization of
BAESA under Chapter XI of the United States Bankruptcy Code.
The Company withdrew its interest in BAESA Shareholder Associates
("BSA"), and liquidated Argentine Bottling Associates, two partnerships, which
previously held the Company's interest in BAESA, during fiscal year 1997.
These actions have resulted in the Company holding its BAESA shares directly,
and eliminates for future periods, the accounting requirement that the Company
report on an equity basis the results of operations of BAESA.
The Company's Board of Directors have declared a dividend consisting of
the 12,345,347 shares of capital stock of BAESA owned by the Company. The
dividend will be distributed on June 17, 1998 to the Company's shareholders of
record on May 28, 1998. The distribution will be made in the form of 6,172,674
BAESA American Depository Shares (each representing two underlying BAESA
shares) on a pro rata basis to the holders of the Company's 21,500,000
outstanding Class shares A and Class B shares, and for the benefit of Rafael Nin
who, pursuant to a Stock Option Agreement between the Company and Mr. Nin, holds
an option to acquire 1,516,667 Class B shares, with fractional American
Depository Shares being rounded to the nearest whole number of American
Depository Shares. Under the Stock Option Agreement with Mr. Nin, the Company
is obligated to retain the BAESA shares allocable to the 1,516,667 unissued
Class B shares (as if they were outstanding on the record date) represented by
Mr. Nin's option, so that such BAESA shares also will be subject to acquisition
by Mr. Nin upon exercise of the option.
The following condensed audited financial information relating to BAESA
as of September 30, 1996 (in thousands of U.S. dollars), and for the year then
ended has been provided to the Company by BAESA; its inclusion in this report
is for disclosure purposes only and the Company makes no representation as to
the accuracy or completeness of such information. At the present time, the
Company does not control, or have significant influence over, the management or
operations of BAESA. For further information regarding BAESA, investors should
consult information made publicly available by BAESA to its shareholders.
<TABLE>
<CAPTION>
SEPTEMBER
30,
1996
___________
<S> <C>
ASSETS
Cash and cash equivalents...................................................... $27,361
Accounts receivable, net....................................................... 64,069
Inventories.................................................................... 31,077
Deferred income tax, net....................................................... 6,681
Other current assets........................................................... 8,469
________
Total current assets................................................... 137,657
Property, plant and equipment, net............................................. 586,908
Intangible assets, net......................................................... 79,092
Investment in joint venture.................................................... 106,918
Other assets................................................................... 16,805
Total assets ________
$927,380
LIABILITIES
Current installments of long-term debt and capital lease obligations........... $290,299
Bank loans and overdrafts...................................................... 375,788
Accounts payable, income tax payable and accrued expenses...................... 190,981
________
Total current liabilities.............................................. $857,068
Long-term debt................................................................. 87,461
Deferred income taxes.......................................................... 7,740
Other long-term liabilities.................................................... 8,385
________
Total liabilities...................................................... 960,654
Total shareholders' equity/(deficit)........................................... (33,274)
________
Total liabilities and shareholders' equity/(deficit)................... $927,380
========
</TABLE>
10
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER
30,
1996
____________
<S> <C>
Net Sales...................................................................... $680,236
_________
Cost and Expenses:
Cost of sales.................................................................. (472,692)
Selling and marketing expenses................................................. (354,880)
Administrative expenses........................................................ (192,210)
Restructuring costs............................................................ (34,782)
_________
(1,054,564)
_________
Income/(loss) from operations.................................................. (374,328)
Other income (expenses), net................................................... (75,459)
_________
Income/(loss) before income tax (expense) benefit and equity
in net earnings of affiliate..................................... (449,787)
Income/(loss) tax (expense) benefit............................................. (8,191)
________
Income/(loss) before equity in net earnings of affiliate............ (457,978)
Equity in net earnings of affiliate............................................. 5,597
________
Net income/(loss)................................................... $(452,381)
========
</TABLE>
(9) STOCK OPTION PLANS
In 1997 the Company adopted two stock option plans (the "plans") pursuant
to which the Company's Board of Directors may grant stock options to certain
employees and directors of the Company and its affiliates who have served in
such capacities for at least one year prior to the date the options are
granted. The plans authorize grants of options to purchase up to one million
shares of authorized but unissued Class B Common Stock. One of the option
plans is designed so as to be qualified for income tax purposes, whereas the
other is not a qualified plan. Stock options under the qualified plan are
granted with an exercise price equal to the stock's fair market value at the
date of the grant. Each of the stock options granted under the plans has a
ten-year term and vests and becomes fully exercisable in accordance with the
terms of its grant.
At September 30, 1997, there were 810,000 additional shares available for
grant under the plans. Prior to September 30, 1997, Rafael Nin was granted an
option to purchase 190,000 Class B shares under the plans. The per share
weighted-average estimated fair value of stock options granted during 1997 was
$3.52 on the date of the grant, using the Black Scholes option-pricing model
with the following weighted average assumptions: expected dividend yield 0%,
risk-free interest rate of 6.125%, expected volatility of 51.42% and an
expected life of 10 years.
On March 3, 1998, the Company issued 110,000 stock options to acquire
Class B shares, to certain officers and key management employees, pursuant to
the qualified stock option plan. The exercise price of these options is $6.25
per share. The per share weighted-average estimated fair value of stock options
granted during the twelve month period ended March 3, 1998 was $4.73 on the
date of the grant, using the Black Scholes option-pricing model with the
following weighted average assumptions: expected dividend yield 0%, risk-free
interest rate of 6%, expected volatility of 41.17% and an expected life of 10
years. After this transaction there were 700,000 Class B shares available for
grant under the plans. On March 3, 1998, 50% of these stock options vested and
are considered granted. The balance will become vested and considered granted
on the earlier of (i) the date there is a change in control of the Company or
(ii) December 31, 1998.
Additionally, the Company has entered into a Stock Option Agreement with
Rafael Nin,(the "Nin Option") the Chief Executive Officer of the Company, which
grants him the right to acquire 1,516,667 Class B shares of the Company, at an
exercise price of $5.00 per share. This stock option will be exercisable in
whole or in part until exercised in full. The per share weighted-average
estimated fair value of stock options granted during 1997 was $3.52 on the date
of the grant, using the Black Scholes option-pricing model with the following
weighted average assumptions: expected dividend yield 0%, risk-free interest
rate of 6.125%, expected volatility of 51.42% and an expected life of 10 years.
The Company applies APB opinion No. 25 in accounting for all the stock
option granted under the plans and the Nin Option and, accordingly, no
compensation cost has been recognized for its stock options in the financial
statements. Had the Company determined compensation costs based on the fair
value at the grant date for its stock options, under SFAS 123, the Company's
net loss would have increased to the pro forma amounts indicated below:
11
<PAGE>
<TABLE>
<CAPTION>
1998
______
<S> <C> <C>
Net Loss As Reported $2,142
______
Pro Forma $2,402
______
Net Loss Per Share $.11
______
</TABLE>
At March 31, 1998 the number of options exercisable was 1,761,667 and the
exercise price of such options was as follows:
1,706,667 class B shares Exercise price of $5.00 per share
55,000 class B shares Exercise price of $6.25 per share
(10) CONTINGENCIES
LEGAL PROCEEDINGS
The Company has resolved the U.S. Securities and Exchange Commission's
(the "Commission") administrative proceeding relating to certain fiscal year
1996 accounting irregularities that were first uncovered during 1996. Without
admitting or denying any of the Commission's allegations and findings, the
Company has agreed to cease and desist from committing any violation of the
reporting, record-keeping and internal control provisions of the federal
securities laws. No fines or penalties were imposed on the Company.
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable, bank loans and overdrafts, accrued payroll, taxes and other
current liabilities approximate fair value because of the short maturity of
these instruments.
The fair value of each of the Company's long-term debt instruments is
based on the amount of future cash flows associated with each instrument
discounted using the Company's current borrowing rate for similar debt
instruments of comparable maturity. The carrying amounts approximate the
estimated fair value at March 31, 1998.
The Company currently does not hold any derivatives.
Under the equity method of accounting, the Company's investment in BAESA
was reduced to zero.
(12) YEAR 2000 COMPLIANCE
The Company recognizes potential software failures arising from
processing the Year 2000 date as a known risk. The Company is addressing this
risk by developing and implementing procedures that identify systems and
equipment that are not Year 2000 compliant and executing appropriate solutions
to modify or replace them in order to become compliant. The Company believes
that the cost associated with becoming Year 2000 compliant will not have a
material adverse effect on its results. There can be no assurance, however,
that the Company will be able to identify and correct all aspects of the Year
2000 problems that affect the Company's business or that becoming Year 2000
compliant will not have a material adverse effect on its financial results.
12
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL OVERVIEW
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with this overview and
the Condensed Consolidated Financial Statements of the Company, and the Notes
thereto, as of March 31, 1998 (unaudited) and September 30, 1997, and for the
six month periods ended March 31, 1998 and March 31, 1997 (the "1998 six month
interim period" and the "1997 six month interim period," respectively) and for
the three month interim periods ended March 31, 1998 and March 31, 1997 (the
"1998 three month interim period" and the "1997 three month interim period",
respectively).
All of the 5,000,000 shares of Class A Common Stock, (six votes per
share) are being held in a voting trust for which Rafael Nin, the Company's
Chief Executive Officer, acts as a voting trustee. These shares which
represent a controlling interest in the Company, are subject to a purchase
option exercisable at $1 per share which may be transferred exclusively for the
benefit of the Company. Any transfer of the option which results in a transfer
of voting control of the Company, will require the prior written consent of
PepsiCo Inc. ("PepsiCo"), approval of the Company's principal lender and
compliance with applicable regulatory requirements. The option expires on
September 28, 1998. The Company has retained the services of a financial
adviser to assist it in connection with the possible sale of the option.
There can be no assurance that the Company will be successful in
consummating any transaction.
This Report contains forward looking statements of expected future
developments. The Company wishes to insure that such statements are
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 expectations regarding the
payment of dividends, seasonality and estimated capital expenditures for future
years. These forward looking statements reflect Management's expectations and
are based upon currently available data; however, actual payments and
expenditures are subject to future events and uncertainties which could
materially impact the Company's ability to pay dividends and its ability and
need to make capital expenditures.
Presentation of Financial Information
In addition to conducting its own bottling operations, the Company owns
12,345,347 shares, or approximately 17% of the outstanding capital stock (prior
to the restructuring described in the following paragraph), and, through June
30, 1996, exercised 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. As of July 1, 1996, PepsiCo assumed operating control of
BAESA and the Company does not control, or have significant influence over, the
management or operations of BAESA.
On May 9, 1997, The Buenos Aires Stock Exchange suspended trading of
BAESA's Class B Shares after its fiscal second quarter results for the period
ended March 31, 1997 showed a negative net worth under Argentine accounting
principles of $18.7 million. The New York Stock Exchange also halted trading
in BAESA's American Depository Shares. On December 5, 1997, BAESA announced a
financial restructuring plan which would result in the issuance of additional
equity by BAESA in exchange for a portion of its outstanding debt, and would
(if the Company does not elect to exercise its preemptive rights to purchase
its pro rata share of the additional equity) result in the Company's 17%
interest in the outstanding capital stock of BAESA being diluted to a .34%
interest. On January 29, 1998, BAESA announced that its shareholders had
approved the restructuring plan. The plan provides for the recapitalization of
BAESA and involves lenders holding 89% of the approximately $700 million of
debt being restructured. This $700 million includes $60 million of 8.5%
negotiable obligations originally issued in the Eurobond market (the
13
<PAGE>
"Eurobonds"). The implementation of the plan is contingent upon the
satisfaction of several conditions including: (i) the tender of at least 92%
of the face value of the Eurobonds in connection with the restructuring; (ii)
the settlement of class action litigation commenced against BAESA in the United
States; and (iii) approvals by Argentine and United States regulatory
authorities for the issuance of new BAESA equity, and by Argentine authorities
for the issuance of new debt, as part of the restructuring. BAESA also
announced that, if the requisite amount of Eurobonds is not tendered, or the
class action litigation is not settled on terms acceptable to BAESA, the
parties to the restructuring plan agreement have agreed to support a
prepackaged plan of reorganization of BAESA under Chapter XI of the United
States Bankruptcy Code.
The Company withdrew its interest in BAESA Shareholder Associates, and
liquidated Argentine Bottling Associates, two partnerships, which previously
held the Company's interest in BAESA, during fiscal year 1997. These actions
have resulted in the Company holding its BAESA shares directly, and eliminates
for future periods, the accounting requirement that the Company report on an
equity basis the results of operations of BAESA.
The Company's Board of Directors has declared a dividend consisting of
the 12,345,347 shares of capital stock of BAESA owned by the Company. The
dividend will be distributed on June 17, 1998 to the Company shareholders of
record on May 28, 1998. The distribution will be made in the form of 6,172,674
BAESA American Depository Shares (each representing two underlying BAESA
shares) on a pro rata basis to the holders of the Company's 21,500,000
outstanding Class A shares and Class B shares, and for the benefit of Rafael Nin
who, pursuant to a Stock Option Agreement between the Company and Mr. Nin, holds
an option to acquire 1,516,667 Class B shares, with fractional American
Depository Shares being rounded to the nearest whole number of American
Depository Shares. Under the Stock Option Agreement with Mr. Nin, the Company
is obligated to retain the BAESA shares allocable to the 1,515,667 unissued
Class B Shares (as if they were outstanding on the record date) represented by
Mr. Nin upon exercise of the option.
Seasonality
The historical results of operations of the Company have not been
significantly seasonal. However, the Company anticipates that its results of
operations in the future may be somewhat seasonal in the summer and holiday
seasons.
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>
Six Months Three
Months
FISCAL YEAR INTERIM
INTERIM
_______________________________ __________________
__________________
<S> <C> <C> <C> <C> <C> <C>
<C>
1995 1996 1997 1997 1998 1997
1998
_______ _______ _______ _______ _______ _______
_______
Net Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
100.0%
Cost of Sales 59.4 72.8 68.8 70.1 69.2 71.0
71.2
Gross Profit 40.6 27.2 31.2 29.9 30.8 29.0
28.8
Selling and Marketing Expenses 26.6 41.3 30.5 33.0 29.5 34.4
29.9
Administrative Expenses 5.5 9.3 8.5 13.2 6.5 16.1
7.7
Restructuring Charges - 2.6 .5 1.1 - 2.6
-
Settlement expenses 13.3
Income (Loss) from Operations 8.5 (26.1) (21.6) (17.4) (5.2) (24.1)
(8.8)
===== ====== ====== ====== ====== ======
======
</TABLE>
14
<PAGE>
1998 SIX MONTH INTERIM PERIOD COMPARED TO 1997 SIX MONTH INTERIM PERIOD
NET SALES. Net Sales for the Company increased $1.9 million, or 4.0%,
for the 1998 six month interim period from the 1997 six month interim period to
$48.5 million. This increase was primarily the result of an increase in sales
volume of 14.9% offset partially by increased discounts provided to customers
in the 1998 six month interim period as compared to the 1997 six month interim
period. The average net sales price on an eight ounce equivalent basis
decreased during the 1998 six month interim period by approximately 9.4% as
compared to the 1997 six month interim period.
COST OF SALES. Cost of sales for the Company increased $.9 million, or
2.7% for the 1998 six month interim period as compared to the 1997 six month
interim period to $33.5 million. This increase was primarily the result of the
14.9% increase in sales volume offset in part by lower raw material costs
during the 1998 six month interim period as compared to the 1997 six month
interim period.
GROSS PROFIT. Gross profit for the Company increased by $1.0 million to
$14.9 million in the 1998 six month interim period from $13.9 million in the
1997 six month interim period. As a percentage of net sales, gross profit
increased to 30.8% in the 1998 six month interim period from 29.9% in the 1997
six month interim period. The increase was primarily due to the increase in
sales volume of 14.9% offset in part by higher discounts provided to customers
(which resulted in a lower average net sales price), and the lower raw material
costs.
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 decreased $1.1 million, or
7.1%, to $14.3 million for the 1998 six month interim period as compared to the
1997 six month interim period. This decrease was primarily due to reduced
selling expenses of $.8 million and reduced marketing spending of $.3 million
in the 1998 six month interim period as compared to the 1997 six month interim
period. As a percentage of net sales, selling and marketing expenses decreased
to 29.5% during the 1998 six month interim period from 33.0% in the 1997 six
month interim period.
ADMINISTRATIVE EXPENSES. Administrative expenses for the Company
decreased $3.0 million or 49.0% for the 1998 six month interim period from the
1997 six month interim period to $3.1 million. This decrease was primarily the
result of reductions of $2.0 million in the cost of legal services associated
with certain civil litigation and the investigation of the accounting
irregularities and reductions of $1.0 million in salaries and wages and other
expenses. As a percentage of net sales, administrative expenses decreased to
6.5% during the 1998 six month interim period from 13.2% in the 1997 six month
interim period.
RESTRUCTURING CHARGES. The Company's results of operations for the six
months ended March 31, 1997 were affected by the incurrence of a non-recurring
restructuring charge totaling $.5 million. This charge was for the costs
associated with employee terminations which resulted in a reduction of the
Company's work force by approximately 5%. There were no such charges during
the 1998 six month interim period.
INCOME (LOSS) FROM OPERATIONS. Income (loss) from operations for the
Company increased to $(2.5) million in the 1998 six month interim period, from
$(8.2) million in the 1997 six month interim period. This increase is the
result of an increase in Gross Profit of $1.0 million (due to increased volume
of 14.9% partially offset by increased discounts provided to customers), and
decreased selling and marketing costs of $1.1 million and decreased general and
administrative costs of $3.0 million and the reduction in restructuring costs
of $.5 million for the 1998 six month interim period as compared to the 1997
six month interim period.
OTHER INCOME/(EXPENSES). Other income/(expenses) decreased to $(.6)
million in the 1998 six month interim period, from $(.5) million in the 1997
six month interim period. This decrease is primarily due to lower interest
15
<PAGE>
earnings during the 1998 six month interim period as a result of lower cash
balances available for investment as compared to the 1997 six month interim
period.
INCOME TAX BENEFIT (EXPENSE). Income tax benefit (expense) was $.9
million for the 1998 six month interim period as compared to $(.1) million
expense for the 1997 six month interim period. The increase was primarily due
to income tax benefit realized from carrying back certain tax credits to
previous years.
NET INCOME/(LOSS). Net income/(loss) during the 1998 six month interim
period was $(2.1) million, compared to $(8.7) million during the 1997 six month
interim period.
16
<PAGE>
1998 THREE MONTH INTERIM PERIOD COMPARED TO 1997 THREE MONTH INTERIM PERIOD
NET SALES. Net Sales for the Company increased $2.2 million, or 10.4%,
for the 1998 three month interim period from the 1997 three month interim
period to $22.9 million. This increase was primarily the result of the 22.8%
increase in sales volume partially offset by an increase in discounts provided
to customers, in the 1998 three month interim period as compared to the 1997
three month interim period. The average net sales price on an eight ounce
equivalent basis decreased during the 1998 three month interim period by
approximately 10.0% as compared to the 1997 three month interim period.
COST OF SALES. Cost of sales for the Company increased $1.6 million, or
10.7% for the 1998 three month interim period as compared to the 1997 three
month interim period to $16.3 million. This increase was primarily the result
of the 22.8% increase in sales volume, offset partially by lower raw material
and fixed manufacturing costs in the 1998 three month interim period as
compared to the 1997 three month interim period.
GROSS PROFIT. Gross profit for the Company increased by $.6 million to
$6.6 million in the 1998 three month interim period from $6.0 million in the
1997 three month interim period. As a percentage of net sales, gross profit
decreased slightly to 28.8% in the 1998 three month interim period from 29.0%
in the 1997 three month interim period. The increase in gross profit was
primarily due to the increase in sales volume offset partially by higher
discounts provided to customers, and the resulting lower average net sales
price, and reductions in raw material and other fixed manufacturing costs for
the 1998 three month interim period as compared to the 1997 three month interim
period.
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 decreased $.3 million, or
4.0%, to $6.9 million for the 1998 three month interim period as compared to
the 1997 three month interim period. This decrease was primarily due to
reduced selling expenses in the 1998 three month interim period as compared to
the 1997 three month interim period. As a percentage of net sales, selling and
marketing expenses decreased to 29.9% during the 1998 three month interim
period from 34.4% in the 1997 three month interim period.
ADMINISTRATIVE EXPENSES. Administrative expenses for the Company
decreased $1.6 million or 47.3% for the 1998 three month interim period from
the 1997 three month interim period to $1.8 million. This decrease is
primarily the result of the reduced cost of legal services of $1.0 million and
lower salaries and wages and other costs of $.6 million. As a percentage of
net sales, administrative expenses decreased to 7.7% during the 1998 three
month interim period from 16.1% in the 1997 three month interim period.
RESTRUCTURING CHARGES. The Company's results of operations for the 1997
three month interim period were affected by the incurrence of a non-recurring
restructuring charge totaling $0.5 million. This charge was for the costs
associated with employee terminations which resulted in a reduction of the
Company's work force by approximately 5%. There were no such charges during
the 1998 three month interim period.
INCOME (LOSS) FROM OPERATIONS. Income (loss) from operations for the
Company increased to $(2.0) million in the 1998 three month interim period,
from $(5.0) million in the 1997 three month interim period. This increase is
the result of greater gross profit of $.6 million, reflecting increased sales
volume, offset partially by increased discounts offered to customers, lower
operating expenses of $1.9 million and lower restructuring charges of $.5
million, for the 1998 three month interim period as compared to the 1997 three
month interim period.
OTHER INCOME/(EXPENSES). Other income/(expenses) increased to $(.2)
million in the 1998 three month interim period, from $(0.3) million in the 1997
three month interim period. This increase was primarily due to a gain realized
on the sale of a portion of land of $.3 million which was partially offset by
lower interest earnings realized as a result of lower cash balances available
for investment in the 1998 interim period as compared to the 1997 three month
interim period.
17
<PAGE>
INCOME TAX BENEFIT (EXPENSE). Income tax benefit (expense) was $1.1
million for the 1998 three month interim period as compared to $(.2) thousand
expense for the 1997 three month interim period. The increase was primarily
due to income tax benefit realized from carrying back certain tax credits to
previous years.
NET INCOME/(LOSS). Net income/(loss) during the 1998 three month interim
period was $(1.2) million, compared to $(5.3) million during the 1997 three
month interim period.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had $13.0 million of cash and cash
equivalents and indebtedness for borrowed money, including short-term and long-
term borrowings and capital lease obligations, of $30.3 million, which in turn
included $7.0 million of current and short-term obligations.
The Company's current priority is to restore profitability with respect
to its Puerto Rican operations. As of March 31, 1998, the Company has used
approximately $28.6 million, net of interest earnings, of the cash set aside
from its September 1995 initial public offering to support these efforts, for
the repayment of indebtedness, and for additions to the Company's working
capital which has been and continues to be affected as a result of the
Company's net operating losses, and to cover a portion of the cost of the
offering. In addition, on April 8, 1997, the Company completed the refinancing
of its remaining debt to include a payment schedule which more closely matches
the life of its production assets.
Net cash provided by/(used in) operating activities for the Company for
the 1998 six month interim period was $(4.6) million compared to $(7.1) million
during the 1997 six month interim period. This change was mainly the result of
the net cash income after depreciation and amortization and (gain) loss on sale
of property, plant and equipment of $.3 million and changes in assets and
liabilities of $(4.9) million during the 1998 six month interim period, as
compared to $(5.4) million and $(1.7) million, respectively, for the 1997 six
month interim period. As of March 31, 1998, the Company had $72.3 million
in net operating loss carryforwards available to offset future Puerto Rican
income taxes and $41.1 million in net operating loss carryforwards available
to offset future U.S. taxable income.
Net cash provided by/(used in) investing activities for the Company was
$(.7) million for the 1998 six month interim period, as compared with $10.1
million during the 1997 interim period. Purchases of property, plant and
equipment, net of disposals, amounted to $(.7) million during the 1998 interim
period as compared to $(2.8) million during the 1997 interim period. Proceeds
from short-term investment were zero during the 1998 interim period as compared
to $12.9 million for the 1997 interim period.
Cash flows provided by/(used in) financing activities for the Company
during the 1998 six month interim period were $(1.2) million compared to $(0.9)
million during the 1997 six month interim period. The significant financing
activities for the Company during the 1998 interim period were the net repayment
of debt. The significant financing activities during the 1997 six month interim
period were also the net repayment of debt. The Company did not pay any
dividends for either the 1998 or 1997 six month interim periods. In the future,
the payment of cash dividends will be in part dependent on the receipt of
dividends from BAESA, and in part dependent on the achievement of adequate
levels of profitability in the Company's Puerto Rican operations, and, under
certain conditions, the consent by Banco Popular. The Company does not expect
to pay any cash dividends for the foreseeable future.
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 could borrow under revolving loans.
As of March 31, 1996, 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 $5.3 million and non-revolving loans in an
aggregate principal amount of $15.0 million. On April 8, 1997, the Company
entered into a Second Restated Credit Agreement with Banco Popular, the holder
of this debt. The effect of this new agreement was to restructure the existing
debt into two portions, a long-term loan of $25.0 million and a short-term
revolving credit facility of $5.0 million. Both portions bear interest at 2.5%
over LIBOR.
The weighted average interest rate on such borrowings was 8.3% for the
1998 interim period. Beginning on May 1, 1997, the Company is required to make
monthly payments of principal in the amount of $.083 million with respect to
the new term loan for the first two years of the loan with annual escalating
monthly payments thereafter until the end of the tenth year of the loan (April
1, 2007) when an $11.8 million balloon payment is due. The Company may prepay
certain of the loans subject to the terms and conditions of the Second Restated
Credit Agreement.
19
<PAGE>
Under the terms of the Second Restated Credit Agreement, the Company is
subject to the following financial restrictions: (i) the Company must maintain
a minimum ratio of Total Liabilities to Tangible Net Worth (as defined in the
Second Restated Credit Agreement) of not more than 1.60 to 1 for fiscal year
1997 and 1.50 to 1 for each fiscal year thereafter during the term of the
Second Restated Credit Agreement; (ii) a ratio of Operating Cash Flow to Total
Debt Service (as defined in the Second Restated Credit Agreement) of 1 to 1
through June 30, 1998, 1.30 to 1 from September 30, 1998 through June 30, 1999,
and 1.5 to 1 thereafter; (iii) a minimum Tangible Net Worth of $37 million on
September 30, 1997 and of $39.5 million, $42 million, $44.5 million and $47
million, respectively, by September 30, 1998, 1999, 2000, 2001, and thereafter.
The Company is also required to maintain with Banco Popular a minimum cash
balance of $10 million less certain prepayments of indebtedness under the term
loan, and under certain conditions this amount may be reduced to zero. In
addition, under certain circumstances, the Company may be required to prepay a
portion of the debt. Specifically, net proceeds of capital asset dispositions
over $.25 million per year, insurance recoveries other than for business
interruption not promptly applied toward repair or replacement, a portion of
excess cash flow (as defined in the Second Restated Credit Agreement), and a
portion of net proceeds associated with any sale of Class A shares, require
early repayment of the amounts outstanding under this agreement. Certain of
the repayment amounts offset the minimum cash balance requirement. The entire
principal amount of loans outstanding under the Second Restated Credit
Agreement becomes immediately due and payable, 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 under the Second Restated Credit Agreement.
The Company believes that it is currently in full compliance with the
terms of the Second Restated Credit Agreement.
Pursuant to the Second Restated 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 arrangements 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 $1.2 million in the 1998
six month interim period as compared to $3.0 million in the 1997 six month
interim period. The Company's capital expenditures have been financed by
a combination of borrowings from third parties and internally generated
funds. The Company estimates that its capital expenditures for the fiscal years
1998 and 1999 may be approximately $3 million in each year.
20
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information contained in Note 10 to Notes to Condensed Consolidated
Financial Statements contained in Part I of this Report is incorporated herein
by reference. Except as described in that Note, there were no material
developments regarding legal proceedings involving the Company during the six
month period ended March 31, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS. The following exhibits are filed herewith or incorporated
herein:
<TABLE>
<CAPTION>
Exhibit
NUMBER DESCRIPTION OF EXHIBIT
_______ ______________________
<S> <C>
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 Certificate of Amendment of the Company's Amended and Restated Certificate of
Incorporation.
3.3 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")).
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).
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).
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 Rico Bottling
Company and the Grantors (incorporated by reference to Exhibit 2 to the Schedule
13D of Rafael Nin
dated October 9, 1996).
10.13 Consent of PepsiCo, Inc. to the terms of the Voting Trust Agreement referred to
under Exhibit No.
10.12 above.
10.14 Stock Option Agreement dated as of October 15, 1996 between Rafael Nin and
Pepsi-Cola Puerto Rico
Bottling Company (incorporated by reference to Exhibit 1 to the Amendment No. 1
to the Schedule 13D
of Rafael Nin dated January 7, 1997).
10.15 Pepsi-Cola Puerto Rico Bottling Company Qualified Stock Option Plan dated as of
December 30, 1996
(incorporated by reference to Exhibit 2 to the Amendment No. 1 to the Schedule
13D of Rafael Nin
dated January 7, 1997).
10.16 Pepsi-Cola Puerto Rico Bottling Company Non-Qualified Stock Option Plan dated
as of December 30,
1996 (incorporated by reference to the Company's Proxy Statement dated January 31,
1997).
10.17 Amendment No. 4 to the Shareholders Agreement (incorporated by reference to the
Exhibit 10.13 to the
Company's Annual Report on Form 10K/A-1 for the fiscal year ended September 30,
1996).
21
<PAGE>
10.18 Second Restated Credit Agreement dated April 8, 1997 among Pepsi-Cola Puerto Rico
Bottling Company,
Pepsi-Cola Puerto Rico Manufacturing Company, Pepsi-Cola Puerto Rico Distributing
Company, Beverage
Plastics Company and Banco Popular de Puerto Rico (incorporated by reference to the
Exhibit 10.18 to
the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1997).
10.19 Master Lease Agreement dated April 18, 1997 between General Electric Capital
Corporation of Puerto
Rico and Pepsi-Cola Puerto Rico Bottling Company (incorporated by reference to the
Exhibit 10.19 to
the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1997).
10.20 Amendment No. 5 to Class A Shareholders Agreement (incorporated by reference to the
Exhibit 10.20 to
the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1997).
10.21 Trust Agreement dated as of May 14, 1997 among certain shareholders of the Company
and Rafael Nin,
as Trustee (incorporated by reference to Exhibit 1 to Amendment No. 3 to the
Schedule 13D of Rafael
Nin dated August 13, 1997).
10.22 Stock Option Agreement dated as of May 14, 1997 among certain grantors, a special
committee of the
Company's Board of Directors, the Company and Rafael Nin (incorporated by reference
to Exhibit No. 2
to Amendment No. 3 to the Schedule 13D of Rafael Nin dated August 13, 1997).
21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the S-1
Registration Statement).
</TABLE>
(b) There were no reports on Form 8-K filed during the quarter ended
March 31, 1998.
22
<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>
Rafael Nin Chief Executive Officer May __, 1998
David L. Virginia Chief Financial Officer and Chief May __, 1998
Accounting Officer
Wanda Rivera Ortiz Chief Accounting Officer May __, 1998
</TABLE>
23
NF104630.2 <<Date>> <<Time>>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000948086
<NAME> PEPSI COLA PUERTO RICO BOTTLING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,954
<SECURITIES> 0
<RECEIVABLES> 19,760
<ALLOWANCES> 1,396
<INVENTORY> 3,949
<CURRENT-ASSETS> 36,572
<PP&E> 73,772
<DEPRECIATION> (28,116)
<TOTAL-ASSETS> 89,232
<CURRENT-LIABILITIES> 23,233
<BONDS> 23,242
0
0
<COMMON> 215
<OTHER-SE> 42,033
<TOTAL-LIABILITY-AND-EQUITY> 89,232
<SALES> 22,943
<TOTAL-REVENUES> 22,943
<CGS> (16,331)
<TOTAL-COSTS> (25,101)
<OTHER-EXPENSES> 438
<LOSS-PROVISION> 137
<INTEREST-EXPENSE> (629)
<INCOME-PRETAX> (2,212)
<INCOME-TAX> (1,061)
<INCOME-CONTINUING> (1,151)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,151)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
