<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO ______
COMMISSION FILE NUMBER 1-13914
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
(Exact name of Registrant as specified in its Charter)
DELAWARE ###-##-####
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
CARRETERA #865, KM 0.4
BARRIO CANDELARIA ARENAS
TOA BAJA, PUERTO RICO 00949
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (787) 251-2000
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
As of August 14, 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
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I FINANCIAL INFORMATION.................................................................3
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets (unaudited) at June 30, 1998
and September 30, 1997..............................................................3
Condensed Consolidated Statements of Income/(Loss) (unaudited) for the
Nine Months Ended June 30, 1998 and 1997............................................5
Condensed Consolidated Statements of Income/(Loss) (unaudited) for the
Three Months Ended June 30, 1998 and 1997...........................................6
Condensed Consolidated Statements of Cash Flows (unaudited) for the
Nine Months Ended June 30, 1998 and 1997............................................7
Notes to Condensed Consolidated Financial Statements (unaudited)......................8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.........................................................................13
PART II OTHER INFORMATION....................................................................21
Item 1. Legal Proceedings....................................................................21
Item 6. Exhibits and Reports on Form 8-K.....................................................21
(a) Exhibits......................................................................21
(b) Reports on Form 8-K during the quarter ended June 30, 1998....................21
</TABLE>
CAUTIONARY STATEMENT UNDER THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Notes to Condensed Consolidated Financial Statements and the
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in this Report include forward looking statements regarding
possible future events, including estimated capital expenditures, seasonality of
the Company's business and the Company's intentions with respect to dividend
payments. Such forward looking statements may involve factors that could cause
the actual results of the Company to differ materially from historical results
or from any results implied by such forward looking statements. The Company
cautions the public not to place undue reliance on forward looking statements,
which may be based on assumptions and anticipated events that do not
materialize. Factors which could cause the Company's actual results to differ
from forward looking statements include material changes in the relationship
between the Company and PepsiCo, Inc.; inability to achieve additional cost
savings and continued competitive pressures with respect to pricing and volume
in the Puerto Rico market, which could result in continued erosion of market
share; unexpected developments which prevent improved results from the Company's
marketing activities; and other factors, including economic, climatic and
political conditions in Puerto Rico, and the impact of such conditions on
consumer spending.
<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>
JUNE 30, SEPTEMBER 30,
1998 1997
(UNAUDITED) (AUDITED)
------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $10,958 $19,447
Accounts receivable:
Trade, less allowance for doubtful accounts of $1,807 at 14,570 11,681
June 30, 1998 and $1,389 at September 30, 1997
Due from PepsiCo, Inc. 1,423 943
Other 1,622 4,273
Inventories 3,804 3,635
Deferred income taxes 97 97
Prepaid expenses and other current assets 2,915 1,414
------- -------
Total current assets 35,389 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 44,859 47,347
Intangible assets, net of accumulated amortization 1,570 1,644
Other assets 9 58
------- -------
Total assets $87,224 $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>
JUNE 30, SEPTEMBER 30,
1998 1997
(UNAUDITED) (AUDITED)
----------- -------------
<S> <C> <C>
Liabilities:
Current installments of long-term debt $ 1,007 $ 1,007
Current installments of capital lease obligations 491 908
Short-term borrowings 5,164 5,430
Accounts payable:
Trade 12,356 13,750
Affiliate -- 32
Income tax payable 131 199
Other accrued expenses 5,902 4,830
--------- ---------
Total current liabilities 25,051 26,156
Long-term debt, excluding current installments 22,607 23,636
Capital lease obligations, excluding current installments 15 513
Accrued pension cost, long-term 1,359 2,213
--------- ---------
Total liabilities 49,032 52,518
Shareholders' equity:
Class A common shares of $0.01 par value; authorized,
issued and outstanding 5,000,000 shares 50 50
Class B common shares, $0.01 par value; authorized
35,000,000 shares; issued and outstanding
16,500,000 shares 165 165
Additional paid-in capital 103,910 103,910
Retained earnings/(deficit) (64,935) (59,735)
Pension liability adjustment (998) (998)
--------- ---------
38,192 43,392
--------- ---------
$ 87,224 $ 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>
NINE MONTHS ENDED JUNE 30,
1998 1997
(UNAUDITED) (UNAUDITED)
----------- ----------
<S> <C> <C>
Net Sales 74,302 $ 72,778
Cost of Sales 52,230 50,390
-------- --------
Gross profit 22,072 22,388
Selling and marketing expenses 22,455 22,342
Administrative expenses 4,486 6,497
Estimated Liability under shareholders' class action litigation -- 13,172
Restructuring charges -- 535
-------- --------
Income/(loss) from operations (4,869) (20,158)
-------- --------
Other income (expenses):
Interest expense (1,902) (1,961)
Interest income 568 966
Other, net 206 100
-------- --------
Total other income (expenses) (1,128) (895)
-------- --------
Loss before income tax benefit (expense) (5,997) (21,053)
Income tax benefit 797 699
-------- --------
Net income/(loss) $ (5,200) $(20,354)
======== ========
Basic loss per common share $ (0.24) $ (0.95)
======== ========
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 JUNE 30,
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Net Sales $ 25,842 $ 26,194
Cost of Sales 18,700 17,727
-------- --------
Gross profit 7,142 8,467
Selling and marketing expenses 8,172 6,965
Administrative expenses 1,339 329
Estimated Liability under shareholders' class action litigation -- 13,172
-------- --------
Income/(loss) from operations (2,369) (11,999)
-------- --------
Other income (expenses):
Interest expense (610) (716)
Interest income 176 267
Other, net (116) 5
-------- --------
Total other income (expenses) (550) (444)
-------- --------
Income/(loss) before income tax benefit (expense ) (2,919) (12,443)
Income tax benefit (expense) (139) 828
-------- --------
Net income/(loss) $ (3,058) $(11,615)
======== ========
Basic loss per common share $ (0.14) $ (0.54)
======== ========
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>
NINE MONTHS ENDED JUNE 30,
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Net loss $ (5,200) $(20,354)
Adjustments to reconcile net earnings (losses) to net cash provided by/
(used in) operating activities:
Estimated Liability under shareholders' class action litigation -- 13,172
(Gain)/loss on sale of property, plant and equipment (137) 60
Depreciation and amortization 3,981 4,649
Changes in assets and liabilities:
Accounts receivable (718) (4,949)
Inventories (169) 862
Prepaid expenses and other current assets (1,501) 316
Accounts payable (1,426) (2,443)
Other accrued expenses 1,072 119
Income taxes payable (68) (35)
Other, net (897) 26
-------- --------
Net cash provided by/(used in) operating activities (5,063) (8,577)
-------- --------
Cash flows from / (used in) investing activities:
Proceeds from sale of property, plant and equipment 521 313
Proceeds from matured short-term investment -- 12,904
Purchases of property, plant and equipment (1,737) (3,081)
-------- --------
Net cash provided by/(used in) investing activities (1,216) 10,136
-------- --------
Cash flows from / (used in) financing activities:
Proceeds from (repayment of) short-term borrowings (266) 309
Repayment of long-term debt (1,029) (1,751)
Proceeds from Capital Lease -- 1,793
Repayment of capital lease obligations (915) (1,289)
-------- --------
Net cash provided by/(used in) financing activities (2,210) (938)
-------- --------
Net increase/(decrease) in cash and cash equivalents (8,489) 621
Cash and cash equivalents at beginning of period 19,447 18,614
-------- --------
Cash and cash equivalents at end of period $ 10,958 $ 19,235
======== ========
Supplemental disclosures:
Cash paid for:
Interest $ 1,942 $ 1,855
Income taxes 354 217
</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 nine months ended June 30, 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:
June 30, September 30,
1998 1997
---------- -------------
Raw materials $1,453 $1,070
Finished goods 1,403 1,428
Other 948 1,137
------ ------
$3,804 $3,635
====== ======
(3) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
--------- -------------
<S> <C> <C>
Land and improvements $ 6,893 $ 7,057
Buildings and improvements 14,695 14,682
Machinery, equipment and vehicles 48,651 48,081
Bottles, cases and shells 1,332 1,515
Furniture and fixtures 1,774 1,580
Construction in process 676 86
-------- --------
74,021 73,001
Less accumulated depreciation and amortization (29,162) (25,654)
-------- --------
Property, plant and equipment, net 44,859 47,347
======== ========
</TABLE>
8
<PAGE>
(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 compute
earnings/(losses) per share using the number of common shares that would have
been issued and outstanding, if all of the stock options granted by the Company
had been fully exercised. Nevertheless, if the effect of including common shares
subject to stock options 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 common shares subject to stock options in the
computation of 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. There were 1,761,667
common shares subject to stock options at June 30, 1998.
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 benefit of $797 and $699 for the
nine month periods ended June 30, 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 June 30, 1998.
(7) RELATED PARTY TRANSACTIONS
The following are transactions between the Company and subsidiaries, and
other related parties, for the nine months ended June 30, 1998 and 1997,
respectively:
(i) The Company paid approximately $731 and $1,553 during the nine
months ended June 30, 1998 and 1997, respectively, in advertising fees
to a firm controlled by a shareholder of the Company.
(ii) The Company paid approximately $140 and $300 during the nine month
periods ended June 30, 1998 and 1997, respectively for legal fees to a
firm, one of whose partners is a relative of the Company's former
President Rafael Nin, who resigned July 17, 1998.
9
<PAGE>
(8) INVESTMENT IN BAESA
The Company owned 12,345,347 shares, or approximately 17% as of September
30, 1997, 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 ceased to 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 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
resulted in the Company holding its BAESA shares directly, and eliminated 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 declared a dividend consisting of the
12,345,347 shares of capital stock of BAESA owned by the Company. The dividend
was distributed on June 17, 1998 to the Company's shareholders of record on May
28, 1998. The distribution was 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 1,516,667 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 carrying value of the capital stock of BAESA had been written down
to zero at September 30, 1997.
10
<PAGE>
(9) STOCK OPTION PLANS
In 1997 the Company adopted two stock option plans, the Qualified Stock
Option Plan (the "Qualified Plan") and the Non-Qualified Stock Option Plan (the
"Non-Qualified Plan") 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. Each plan authorizes grants of options to purchase
up to 500,000 shares of authorized but unissued Class B Common Stock. 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.
At September 30, 1997, there were 810,000 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 granted options to purchase 110,000 Class B
shares to certain officers and key management employees, pursuant to the
Qualified 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. The balance will become vested on
the earlier (i) of the date there is a change in control of the Company or (ii)
December 31, 1998.
Additionally, the Company entered into a Stock Option Agreement with
Rafael Nin, (the "Nin Option") 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. 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
options 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:
1998
----
Net Loss As Reported $5,200
------
Pro Forma $5,564
------
Net Loss Per Share $.26
------
11
<PAGE>
At June 30, 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
On July 17, 1998, as a result of the change of control of the Company, the
remaining 50% of the options (55,000 shares) that were granted on March 3, 1998
became exercisable pursuant to the provisions of the March 3, 1998 option
agreements.
(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 June 30, 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 June 30, 1998 (unaudited) and September 30, 1997, and for the
nine month periods ended June 30, 1998 and June 30, 1997 (the "1998 nine month
interim period" and the "1997 nine month interim period," respectively) and for
the three month interim periods ended June 30, 1998 and June 30, 1997 (the "1998
three month interim period" and the "1997 three month interim period,"
respectively).
Change In Control
On July 17, 1998, P-PR Transfer, LLP, a Delaware registered limited
liability partnership (the "Partnership") and V. Suarez & Co., Inc., a Puerto
Rico corporation ("Suarez"), purchased an aggregate of 5,000,000 shares of the
Class A common stock, par value $.01 per share (the "Class A Shares"), and
6,210,429 shares of the Class B common stock, par value $.01 per share (the
"Class B Shares"), of the Company. The Partnership is a joint venture between
Pohlad Companies, an independent Pepsi-Cola bottler, and PepsiCo, Inc. The
transactions were previously disclosed by the Company in a current report on
Form 8-K filed with the Securities and Exchange Commission on July 31, 1998.
In connection with the change in control, the Company issued warrants to
the Partnership and Suarez dated July 17, 1998 for the purchase of 1,360,000
Class B Shares and 340,000 Class B Shares, respectively, exercisable at $6.875
per share at any time during a period of seven years and six months after the
date of the warrants. The warrants may be transferred and give the holders one
demand and unlimited piggyback registration rights.
Also in connection with the change in control, six of the Company's seven
directors resigned on July 17, 1998. Effective July 18, 1998, the size of the
Board of Directors was increased to eight members and seven new directors were
appointed, each of whom were designated by the Partnership. Information
concerning the new directors is contained in Appendix A to the Company's Section
14(f) Information Statement dated July 7, 1998 and filed with the Securities and
Exchange Commission. Also effective July 18, 1998, the Company's officers
resigned, except for A. David Velez, Vice President. The following officers were
appointed: Robert C. Pohlad, Chief Executive Officer, Kenneth E. Keiser,
President, John F. Bierbaum, Chief Financial Officer, and Brian D. Wenger,
Secretary.
13
<PAGE>
BAESA Stock Dividend
In addition to conducting its own bottling operations, the Company owned
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 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 "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
resulted in the Company holding its BAESA shares directly, and eliminated 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 declared a dividend consisting of the
12,345,347 shares of capital stock of BAESA owned by the Company. The dividend
was distributed on June 17, 1998 to the Company shareholders of record on May
28, 1998. The distribution was 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 1,516,667 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 carrying value of the capital stock of BAESA had been written down
to zero at September 30, 1997.
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, with higher demand in the
summer and holiday seasons.
14
<PAGE>
THE COMPANY
GENERAL
The following table sets forth certain financial information as a
percentage of net sales for the Company for the periods indicated.
<TABLE>
<CAPTION>
Nine Months Three Months
Fiscal Year Interim Interim
------------------------------------- ----------------------- ------------------------
1995 1996 1997 1997 1998 1997 1998
----------- ----------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
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 69.2 70.3 67.7 72.4
Gross Profit 40.6 27.2 31.2 30.8 29.7 32.3 27.6
Selling and Marketing Expenses 26.6 41.3 30.5 30.7 30.2 26.6 31.6
Administrative Expenses 5.5 9.3 8.5 8.9 6.0 1.2 5.2
Restructuring Charges 2.6 .5 .7 -- -- --
Settlement expenses 13.3 18.1 -- 50.3 --
Income (Loss) from Operations 8.5 (26.1) (21.6) (27.7) (6.6) (45.8) (9.2)
===== ===== ===== ===== ===== ===== =====
</TABLE>
1998 NINE MONTH INTERIM PERIOD COMPARED TO 1997 NINE MONTH INTERIM PERIOD
Net Sales. Net Sales for the Company increased $1.5 million, or 2.1%, for
the 1998 nine month interim period from the 1997 nine month interim period to
$74.3 million. This increase was primarily the result of an increase in sales
volume of 10.6% offset partially by increased discounts provided to customers in
the 1998 nine month interim period as compared to the 1997 nine month interim
period. The average net sales price on an eight ounce equivalent basis decreased
during the 1998 nine month interim period by approximately (7.7)% as compared to
the 1997 nine month interim period.
Cost of Sales. Cost of sales for the Company increased $1.8 million, or
3.7% for the 1998 nine month interim period as compared to the 1997 nine month
interim period to $52.2 million. This increase was primarily the result of the
10.6% increase in sales volume offset in part by lower raw material costs during
the 1998 nine month interim period as compared to the 1997 nine month interim
period.
Gross Profit. Gross profit for the Company decreased by $(.3) million to
$22.1 million in the 1998 nine month interim period from $22.4 million in the
1997 nine month interim period. As a percentage of net sales, gross profit
decreased to 29.7% in the 1998 nine month interim period from 30.8% in the 1997
nine month interim period. The decrease was primarily due to the higher
discounts provided to customers (which resulted in a lower average net sales
price), and offset in part by the 10.6 % increase in sales volume 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 increased $.1 million, or
.5%, to $22.5 million for the 1998 nine month interim period as compared to the
1997 nine month interim period. This increase was primarily due to increased
marketing spending of $.3 million offset in part by lower net selling expenses
of $.2 million in the 1998 nine month interim period as compared to the 1997
nine month interim period. As a percentage of net sales, selling and marketing
expenses decreased to 30.2% during the 1998 nine month interim period from 30.7%
in the 1997 nine month interim period.
15
<PAGE>
Administrative Expenses. Administrative expenses for the Company decreased
$2.0 million or 31.0% for the 1998 nine month interim period from the 1997 nine
month interim period to $4.5 million. This decrease was primarily the result of
reductions of $.9 million in the cost of legal services, reductions of $.8
million in salaries and wages, and $.3 million in other administrative expenses.
As a percentage of net sales, administrative expenses decreased to 6.0% during
the 1998 nine month interim period from 8.9% in the 1997 nine month interim
period.
Settlement of Litigation. The Company's results of operations for the nine
months ended June 30, 1997 were affected by the incurrence of a non-cash expense
of $13.2 million in connection with the Company's settlement of certain civil
litigation, representing the estimated value of 2.5 million Class B shares
transferred as part of the settlement. There was no similar non cash expense
that was incurred during the 1998 nine month interim period.
Restructuring Charges. The Company's results of operations for the nine
months ended June 30, 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 nine month interim period.
Income (Loss) from Operations. Income (loss) from operations for the
Company increased to $(4.9) million in the 1998 nine month interim period, from
$(20.2) million in the 1997 nine month interim period. This increase is the net
result of the decrease in Gross Profit of $.3 million, increased selling and
marketing costs of $.1 million, and decreased general and administrative costs
of $2.0 million and the absence of the Settlement of Litigation Charge of $13.2
million, and restructuring costs of $.5 million for the 1998 nine month interim
period as compared to the 1997 nine month interim period.
Other Income/(Expenses). Other income/(expenses) decreased to $(1.1)
million in the 1998 nine month interim period, from $(.9) million in the 1997
nine month interim period. This decrease is primarily due to lower interest
earnings during the 1998 nine month interim period as a result of lower cash
balances available for investment as compared to the 1997 nine month interim
period.
Income Tax Benefit (Expense). Income tax benefit (expense) was $.8 million
for the 1998 nine month interim period as compared to $.7 million for the 1997
nine month interim period.
Net Income/(Loss). Net income/(loss) during the 1998 nine month interim
period was $(5.2) million, compared to $(20.4) million during the 1997 nine
month interim period.
16
<PAGE>
1998 THREE MONTH INTERIM PERIOD COMPARED TO 1997 THREE MONTH INTERIM PERIOD
Net Sales. Net Sales for the Company decreased $(.4) million, or (1.3)%,
for the 1998 three month interim period from the 1997 three month interim period
to $25.8 million. This decrease was primarily the result of the increase in
discounts provided to customers, partially offset by increased sales volume of
3.5% during 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
(4.5)% as compared to the 1997 three month interim period.
Cost of Sales. Cost of sales for the Company increased $1.0 million, or
5.5% for the 1998 three month interim period as compared to the 1997 three month
interim period to $18.7 million. This increase was primarily the result of the
3.5% sales volume growth which increased cost of sales by $.7 million, and by
higher raw material and packaging costs of $.3 million during the 1998 three
month interim period as compared to the 1997 three month interim period.
Gross Profit. Gross profit for the Company decreased by $(1.4) million to
$7.1 million in the 1998 three month interim period from $8.5 million in the
1997 three month interim period. As a percentage of net sales, gross profit
decreased to 27.6% in the 1998 three month interim period from 32.3% in the 1997
three month interim period. The decrease in gross profit was primarily due to
higher discounts provided to customers, and the resulting lower average net
sales price, and increases in raw material costs offset in part by the increased
sales volume of 3.5% 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 increased $1.2 million, or
17.3%, to $8.2 million for the 1998 three month interim period as compared to
the 1997 three month interim period. This increase was primarily due to
increased marketing expenses of $.6 million and higher selling expenses of $.6
million for 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 increased to 31.6% during the 1998 three month interim period from
26.6% in the 1997 three month interim period.
Administrative Expenses. Administrative expenses for the Company increased
$1.0 million or 295% for the 1998 three month interim period from the 1997 three
month interim period to $1.3 million. This increase is primarily the result of
the recovery of legal expenses realized as part of the insurance settlement
associated with certain civil litigation during the 1997 three month interim
period. The insurance recovery reduced cost of legal services by $1.5 million
for the 1997 three month interim period. There was no such recovery during the
1998 three month interim period. As a percentage of net sales, administrative
expenses increased to 5.2% during the 1998 three month interim period from 1.2%
in the 1997 three month interim period.
Settlement of Litigation. The Company's results of operations for the three
months ended June 30, 1997 were affected by the incurrence of a non-cash expense
of $13.2 million in connection with the Company's settlement of certain civil
litigation, representing the estimated value of 2.5 million Class B shares
transferred as part of the settlement. There was no similar non cash expense
that was incurred during the 1998 three month interim period.
17
<PAGE>
Income (Loss) from Operations. Income (loss) from operations for the
Company increased to $(2.4) million in the 1998 three month interim period, from
$(12.0) million in the 1997 three month interim period. This increase is the
result of lower gross profit of $1.4 million, reflecting increased sales volume,
offset by increased discounts offered to customers, and higher raw material
costs, higher operating expenses of $2.2 million and lower settlement expenses
of $13.2 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 $(.6) million
in the 1998 three month interim period, from $(0.4) million in the 1997 three
month interim period. This decrease was primarily due to loss on disposal of
fixed assets of $.1 million and by lower interest earnings realized as a result
of lower cash balances available for investment of $.1 million in the 1998 three
month interim period as compared to the 1997 three month interim period.
Income Tax Benefit (Expense). Income tax benefit (expense) was $(.1)
million for the 1998 three month interim period as compared to $.8 million for
the 1997 three month interim period. The decrease was primarily due to income
tax benefit realized from carrying back certain tax credits to previous years
during the 1997 three month interim period. There was no such benefit available
during the 1998 three month interim period.
Net Income/(Loss). Net income/(loss) during the 1998 three month interim
period was $(3.1) million, compared to $(11.6) million during the 1997 three
month interim period.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had $11.0 million of cash and cash
equivalents and indebtedness for borrowed money, including short-term and
long-term borrowings and capital lease obligations, of $29.3 million, which in
turn included $6.7 million of current and short-term obligations.
The Company's current priority is to restore profitability. As of June 30,
1998, the Company had used approximately $30.6 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 nine month interim period was $(5.1) million compared to $(8.6) million
during the 1997 nine month interim period. This change was mainly the result of
the net cash loss after depreciation and amortization and (gain) loss on sale of
property, plant and equipment and, in 1997 estimated liability under
shareholders' class action litigation, of $(1.4) million and changes in assets
and liabilities of $(3.7) million during the 1998 nine month interim period, as
compared to $(2.5) million and $(6.1) million, respectively, for the 1997 nine
month interim period. As of June 30, 1998, the Company had $74.9 million in net
operating loss carryforwards available to offset future Puerto Rican income
taxes and $44.2 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
$(1.2) million for the 1998 nine month interim period, as compared with $10.1
million during the 1997 nine month interim period. Purchases of property, plant
and equipment, net of disposals, amounted to $(1.2) million during the 1998 nine
month interim period as compared to $(2.8) million during the 1997 nine month
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 nine month interim period were $(2.2) million compared to $(0.9)
million during the 1997 nine month interim period. The significant financing
activities for the Company during the 1998 nine month interim period were the
net repayment of debt. The significant financing activities during the 1997 nine
month interim period were also the net repayment of debt. The Company did not
pay any cash dividends for either the 1998 or 1997 nine month interim periods.
In the future, the payment of cash dividends will be dependent on the
achievement of adequate levels of profitability, and, under certain conditions,
the consent of 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.
19
<PAGE>
The weighted average interest rate on such borrowings was 8.2% for the 1998
nine month 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.
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, the
Company is required to prepay a portion of the debt if (a) net proceeds of
capital asset dispositions exceed $.25 million per year, (b) insurance
recoveries other than for business interruption are not promptly applied toward
repair or replacement or (c) the Company generates excess cash flow (as defined
in the Second Restated Credit 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 without the consent of Banco
Popular under the Second Restated Credit Agreement.
For the three month interim period ended June 30, 1998 the Company failed
to meet certain of the above covenants, however, the Company obtained a waiver
of the covenants from the bank for this period. The Company believes that, after
taking into consideration the capital infusion made in connection with the
change in control on July 17, 1998, it is 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 $1.7 million in the 1998 nine
month interim period as compared to $3.1 million in the 1997 nine 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 fiscal year 1998 may total
approximately $3 million and the Company intends to consider substantial
increases in capital expenditures for fiscal year 1999. The Company believes
that, as a result of the change in control that became effective on July 17,
1998, the intended disposition of long-lived assets presently classified as
available for sale, may be altered, in as much as those assets could possibly be
utilized in the Company's future operations.
20
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Securities and Exchange Commission (the "Commission") issued an order
that the Company cease and desist from committing any violation and any future
violation of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities
Exchange Act of 1934 and Rules 12b-20 and 13a-13 thereunder (Securities Exchange
Act of 1934 Release No. 39984/May 12, 1998 and Accounting and Auditing
Enforcement Release No. 1034/May 12, 1998). The Company, without admitting or
denying the findings, consented to the entry of the order, in which the
Commission found that the Company reported inaccurate quarterly results during
the first two quarters of fiscal year 1996 by failing to recognize sales
discounts, allowances, and marketing and certain other expenses and by
misstating accounts payable. 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith or incorporated
herein by reference:
Exhibit
Number Description of Exhibit
2.1 Transfer Agreement among Rafael Nin, P-PR Transfer, LLP and the
Company dated June 15, 1998 (incorporated by reference to Exhibit 2.1 to
Amendment No. 3 to the Company's Registration Statement on Form S-3 (Reg.
No. 333-40093)).
3.1 Certificate of Amendment of By-Laws of Pepsi-Cola Puerto Rico Bottling
Company (incorporated by reference to Exhibit 1 to the Company's Current
Report on Form 8-K filed June 11, 1998).
10.1 Guaranty of Obligations Pursuant to Transfer Agreement between Pohlad
Companies, PepsiCo, Inc. and the Company dated June 15, 1998 (incorporated
by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
filed July 31, 1998).
10.2 Warrant dated as of July 17, 1998, to purchase 1,360,000 shares of
Class B common stock issued to P-PR Transfer, LLP (incorporated by
reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed
July 31, 1998).
10.3 Warrant dated as of July 17, 1998, to purchase 340,000 shares of Class
B Common stock issued to V. Suarez & Co., Inc. (incorporated by reference
to Exhibit 10.3 to the Company's Current Report on Form 8-K filed July 31,
1998).
27 Financial Data Schedule
(b) The following reports on Form 8-K were filed during the quarter
ended June 30, 1998.
1. Form 8-K filed June 11, 1998 with respect to amendments to the
Company's By-Laws.
2. Form 8-K filed June 16, 1998 with respect to the change in control
transaction with P-PR Transfer, LLP.
21
<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.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ Robert C. Pohlad
- ----------------------------
Robert C. Pohlad Chief Executive Officer August 14, 1998
/s/ John F. Bierbaum
- ----------------------------
John F. Bierbaum Chief Financial Officer August 14, 1998
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,958
<SECURITIES> 0
<RECEIVABLES> 19,422
<ALLOWANCES> 1,807
<INVENTORY> 3,804
<CURRENT-ASSETS> 35,398
<PP&E> 74,021
<DEPRECIATION> (29,162)
<TOTAL-ASSETS> 87,224
<CURRENT-LIABILITIES> 25,051
<BONDS> 22,622
0
0
<COMMON> 215
<OTHER-SE> 38,975
<TOTAL-LIABILITY-AND-EQUITY> 87,224
<SALES> 25,842
<TOTAL-REVENUES> 25,842
<CGS> (18,700)
<TOTAL-COSTS> (27,824)
<OTHER-EXPENSES> 60
<LOSS-PROVISION> (387)
<INTEREST-EXPENSE> (610)
<INCOME-PRETAX> (2,919)
<INCOME-TAX> (139)
<INCOME-CONTINUING> (3,058)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,058)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
