10-K405
1
FORM 10-K
1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
COMMISSION FILE NUMBER 33-56292
33-56292-01
DR PEPPER BOTTLING COMPANY OF TEXAS DR PEPPER BOTTLING HOLDINGS, INC.
(Exact name of Registrant as specified in its (Exact name of Registrant as specified in its
charter) charter)
TEXAS 75-2008278 DELAWARE 75-2275754
(State or other (I.R.S. Employer (State or other (I.R.S. Employer
jurisdiction Identification No.) jurisdiction Identification No.)
of incorporation or of incorporation or
organization) organization)
2304 CENTURY CENTER 75062
IRVING, TEXAS (Zip code)
(Address of principal executive offices)
Registrants' telephone number, including area code: (214) 579-1024
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether each 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 such
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
There is no established public trading market for the Class A Common Stock,
$.01 par value, of Dr Pepper Bottling Holdings, Inc. All of the outstanding
shares of common stock, $.01 par value, of Dr Pepper Bottling Company of Texas
are held by Dr Pepper Bottling Holdings, Inc.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
OUTSTANDING
CLASS AT FEBRUARY 28, 1995
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Dr Pepper Bottling Holdings, Inc.
Class A Common Stock, $.01 par value 13,642,168
Dr Pepper Bottling Company of Texas
Common Stock, $.01 par value 100
Documents incorporated by reference. NONE.
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PART I
ITEM 1. BUSINESS
GENERAL
Dr Pepper Bottling Company of Texas (the "Company") is the largest
independent franchise bottler of DR PEPPER brand products, accounting for
approximately 12% of the total volume of such products, and is one of the
largest independent soft drink bottlers (i.e., bottlers that have no
affiliations with either The Coca-Cola Company or PepsiCo, Inc.) in the United
States. Dr Pepper Bottling Holdings, Inc. ("Holdings") owns all of the issued
and outstanding common stock of the Company and conducts its business through
the Company. Unless the context otherwise requires, all references to Holdings
made herein shall mean Holdings and the Company, collectively.
The Company produces, markets and distributes carbonated soft drinks
pursuant to franchise agreements with companies owning the rights to various
soft drink formulae. Principal products are bottled and canned under franchises
from Dr Pepper/Seven-Up Corporation (DR PEPPER and SEVEN-UP brand products),
Cadbury Beverages North America, Inc. (CANADA DRY, SUNKIST brand products, A & W
Root Beer, A & W Cream Soda, SQUIRT, and COUNTRYTIME Lemonade), Royal Crown Cola
Company, Big Red, Inc. (BIG RED) and The Monarch Company, Inc. (NUGRAPE). The
Company also distributes certain other non-carbonated soft drinks, including
leading bottled waters such as Evian and Naya, within defined territories
pursuant to distribution agreements with various companies. The Company's three
major franchise territories are Dallas/Fort Worth, Houston, and Waco, Texas. The
Company's products compete principally in the non-cola segments of the soft
drink market, which represented in the aggregate approximately 43% of the total
soft drink sales volume through supermarkets and grocery stores in the Company's
franchise territories in 1994, and appeal to a wide variety of consumer taste
preferences. The Company believes that its portfolio of highly recognizable
non-cola franchise brands (which, in the Company's territories, generally rank
first or second in their respective beverage flavor categories) enhance the
Company's ability to compete effectively for retail shelf space and further
penetrate the "single drink" market.
The Company was formed in 1985 to acquire Dallas/Fort Worth Dr Pepper
Bottling Company and Dr Pepper Bottling Company of Waco, which companies held
franchises to produce, market, and distribute DR PEPPER brand soft drink
products in the Dallas/Fort Worth and Waco, Texas franchise territories, as well
as franchises to produce, market, and distribute certain other soft drink
products within defined franchise territories. Since that time, the Company has
continued to grow through the acquisition of new franchise territories and
additional brand products within existing franchise territories. The following
table sets forth information regarding certain of the subsequent acquisitions:
ACQUISITION FRANCHISE MAJOR BRAND
ACQUISITION DATE COST TERRITORY PRODUCTS
Certain assets of The October 1985 $ 1.3 million Waco 7UP
Seven-Up Company
Certain assets of Dr December 1986 58.8 million Houston DR PEPPER, 7UP
Pepper Bottling Company
of Houston, Inc.
Certain assets of Full January 1989 24.5 million(a) Dallas/Fort Worth RC, CANADA DRY,
Service Beverage SUNKIST
Company of Texas Fort Worth 7UP
Seven-Up Bottling Company January 1990 4.0 million(b) Dallas 7UP
of Dallas, Inc.
Certain assets of Dr April 1993 9.0 million(c) Galveston DR PEPPER, 7UP
Pepper Bottling Company
of
Galveston, Inc.
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(a) Includes a payment made by the Company with respect to a noncompetition
agreement entered into by the seller and certain of its principals.
(b) In addition to the cash purchase price of $4 million, the Company entered
into a noncompetition agreement with certain stockholders of the seller
providing for cash payments, aggregating $3 million, to be made over a
specified period.
(c) In addition to the cash purchase price of $9 million, the Company entered
into a noncompetition agreement with certain stockholders of the seller
providing for cash payments, aggregating $1 million, to be made over a
specified period.
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Holdings was formed in 1988 to acquire the Company in a leveraged
recapitalization transaction.
RECAPITALIZATION PLAN
In 1993, the Company and Holdings completed a recapitalization plan (the
"Recapitalization Plan") the purpose of which plan was to reduce the aggregate
amount of interest expense and preferred stock dividend requirements. The
principal elements of the Recapitalization Plan are described below. The
following elements of the Recapitalization Plan were completed on February 18,
1993 (the "Closing Date"):
(i) the issuance and sale by the Company of $125,000,000 in aggregate
principal amount of its 10 1/4% Senior Notes due 2000 (the "Senior Notes");
(ii) the issuance and sale by Holdings of $125,000,000 in aggregate
principal amount of its 11 5/8% Senior Discount Notes due 2003 (the
"Discount Notes");
(iii) the issuance and sale by Holdings of senior exchangeable
preferred stock (the "Preferred Stock") and a warrant to purchase 15% of
the common stock of Holdings (the "Warrant") in a private transaction for
$30 million (the "Equity Offering");
(iv) the repurchase of $154,650,000 of the $162 million aggregate
principal amount of outstanding Senior Subordinated Discount Notes due 1998
of the Company (the "Old Discount Notes") pursuant to a cash tender offer
(the "Tender Offer") and a related solicitation of consents from the
holders of the Old Discount Notes (the "Consent Solicitation"); and
(v) the repayment of all amounts outstanding under two then existing
credit agreements of the Company.
The following elements of the Recapitalization Plan were completed on March
22, 1993:
(a) borrowings by the Company of approximately $91.7 million pursuant
to a Credit Agreement, dated February 18, 1993 (the "1993 Bank Credit
Agreement"), among the Company, Texas Commerce Bank National Association
("TCB"), as Agent, and the banks named therein (the "1993 Bank Financing");
and
(b) the redemption of all of the outstanding Senior Exchangeable
Preferred Stock of the Company (the "Old Preferred Stock").
On November 20, 1993 the Company redeemed the remaining $7,350,000
aggregate principal amount of Old Discount Notes not repurchased pursuant to the
Tender Offer.
The following table sets forth the sources of funds used by the Company and
Holdings to effect the Recapitalization Plan and the application of such funds
by the Company and Holdings.
AMOUNT
(IN MILLIONS)
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Sources of Funds:
Cash on hand........................................................... $ 9.6
1993 Bank Financing.................................................... 91.7
Senior Notes........................................................... 125.0
Discount Notes......................................................... 71.1
Equity Offering........................................................ 30.0
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Total.......................................................... $ 327.4
=======
Uses of Funds:
Repurchase of Old Discount Notes pursuant to the Tender Offer and
Consent Solicitation................................................ $ 180.7
Repayment of then existing credit agreements........................... 30.3
Redemption of Old Preferred Stock...................................... 91.7
Redemption of remaining Old Discount Notes............................. 7.8
Estimated transaction fees and expenses................................ 16.9
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Total.......................................................... $ 327.4
=======
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FRANCHISES
The franchise and distribution agreements pursuant to which the Company
operates generally grant to the Company the exclusive right to market and
distribute the licensed product in bottles and cans. Certain of the franchise
agreements also grant to the Company the nonexclusive right to sell and
distribute fountain syrup within a described territory. Substantially all of the
franchise agreements are perpetual. However, the respective franchisors
generally may terminate such agreements in the event of a material breach of the
terms thereof by the Company. The Company's franchise agreements contain
comprehensive provisions regarding the production, distribution, and sale of the
franchisors' products and impose substantial obligations on the Company. Most of
the Company's franchise agreements contain special provisions that require the
Company to obtain the consent of the franchisor in the event of certain changes
in ownership of the Company. The terms of such change in ownership provisions
vary from agreement to agreement. The Company's franchise agreements contain
provisions prohibiting the Company from assigning its rights thereunder to any
other person without the consent of the franchisor. The Company may terminate
such franchise agreements generally upon the expiration of a notice period.
INDUSTRY TRENDS
The soft drink industry has historically been characterized by certain
favorable factors, including a low level of technological risk and the exclusive
marketing and distribution rights granted under franchise agreements. The
challenge to bottlers and franchisors has been to meet changing consumer tastes
with innovative products and packaging and increased product availability. The
Company believes that a growing awareness of health-related issues has caused
many consumers to shift their preferences away from hot drinks, such as tea or
coffee, and alcoholic beverages, and towards products such as bottled water,
diet and caffeine-free soft drinks and juice-added, sodium-free and
nutrient-added beverages. Additional concerns about the content and purity of
tap water have further strengthened the growth of these beverage categories, as
well as contributing to the demand for more traditional naturally sweetened soft
drinks.
In certain regions of the United States, the independent bottling industry
continues to be fragmented, with many small franchise territories and a number
of bottlers with only a few established brands. The Company believes that the
lack of a multi-brand product offering or large case volume renders many of
these bottlers unable to compete effectively for retail shelf space and limits
their ability to consistently match the advertising and promotional support
which larger bottlers can give to their brands. Accordingly, the Company
believes that smaller independent bottlers with contiguous territories may
represent acquisition opportunities for the Company which would allow the
Company to expand the geographic region within which the Company markets leading
non-cola products and to realize operating efficiencies in production and
distribution as a result of increased volume.
PRODUCTS
Franchise Case Sales. Franchise case sales represent primarily sales of the
Company's branded products to retailers only. The Company's principal soft drink
products are produced, marketed and distributed pursuant to franchise agreements
and include DR PEPPER, Diet DR PEPPER, 7UP, Diet 7UP, various CANADA DRY and
SUNKIST products, RC Cola, Diet Rite Cola, A & W Root Beer, Diet A & W Root
Beer, A & W Cream Soda, Diet A & W Cream Soda, SQUIRT, COUNTRYTIME Lemonade, BIG
RED and NUGRAPE.
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Franchise case sales for the Company's principal soft drink products as a
percentage of the Company's total franchise case sales for the three years ended
December 31, 1992, 1993 and 1994 are summarized below:
YEAR ENDED DECEMBER 31,
-------------------------
1992 1993 1994
DR PEPPER................................................... 52.2% 51.5% 52.9%
Cadbury Beverages North America, Inc.(1).................... 12.1 12.5 12.2
7UP and Diet 7UP............................................ 10.6 11.1 11.2
Diet DR PEPPER.............................................. 11.1 10.6 10.5
RC Cola and Diet Rite Cola.................................. 4.8 4.6 4.3
BIG RED..................................................... 4.5 4.3 4.1
Other....................................................... 4.7 5.4 4.8
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100.0% 100.0% 100.0%
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(1) Includes SUNKIST flavors, CANADA DRY products, CRUSH products, A & W
products, SQUIRT, SUNDROP products and COUNTRYTIME Lemonade.
Contract Sales. The Company also bottles and cans soft drink products for
sale to unaffiliated bottling companies that hold soft drink franchises and to
retailers of private label brand soft drink products. Contract sales may
fluctuate significantly from year to year, and are made at relatively low prices
and gross profit margins due to the competition for such sales. As a result,
contract case sales are not a primary focus of management in determining the
Company's business strategy, but are undertaken to utilize available capacity
and to offset fixed overhead expenses. Contract sales represented approximately
8.8%, 7.6% and 7.3% of the Company's net sales revenue in 1992, 1993, and 1994,
respectively, and approximately 5.3%, 5.4% and 6.0% of the Company's gross
profit in 1992, 1993 and 1994, respectively.
OPERATING STRATEGY
The Company's operating strategy is to (i) manufacture and market leading
soft drink products within a comprehensive range of soft drink categories,
principally focusing on sales of national brands in the non-cola segments of the
soft drink market; (ii) increase the market shares of its portfolio of brands by
utilizing a wide range of marketing activities, including price and consumer
promotion, retail space management and advertising; (iii) broaden its
penetration of the higher margin "single drink" segment of the soft drink market
and (iv) acquire contiguous bottling territories and additional franchises for
major brands within existing territories. Management believes that this strategy
will enable the Company to market products meeting a wide variety of consumer
preferences and result in case sales growth within its operating territories.
By utilizing the Company's marketing and distribution strengths, the
Company believes that it can realize growth in the major segments where soft
drink products are sold. These segments are the "home market," consisting of
supermarkets, grocery stores, mass merchandisers, drugstores, liquor stores and
other similar retail outlets, and the "single drink" or on-premise segment,
consisting of convenience stores, vending, and fountain outlets. Single drink
sales generally are less susceptible to price competition and, accordingly,
offer the prospect of higher margins. In addition, the Company believes that
single drink sales afford the Company the opportunity to introduce its products
and packaging innovations to new consumers. The Company, therefore, has
aggressively pursued, and intends to continue to aggressively pursue, sales in
the single drink or on-premise segment.
MARKETING
The principal components of the Company's marketing program are brand
management, customer service, promotional activities and product merchandising.
The Company's marketing programs vary according to geographic location, consumer
preferences and the competitive environment.
Marketing programs for each of the Company's franchised brands are
coordinated with the franchisor. Advertising campaigns are developed by the
franchisors on the national level, and by both the Company and the franchisor on
the local level. A significant portion of the Company's promotional efforts
focuses on price discounting and allowances, newspaper advertising and coupons.
The goal of these activities is to position the
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Company's brands competitively in the marketplace and obtain "feature" retail
advertisements and end-aisle displays in high volume retail outlets. End-aisle
and secondary displays are important marketing tools because they are tied to
special promotions and feature advertisements designed to stimulate sales and
encourage impulse purchases. The Company's merchandisers are responsible for
building displays in conjunction with promotional programs and restocking
products on the beverage aisles of grocery stores.
Marketing expenditures are incurred by the Company, by the franchisors and
by cooperative arrangements between the two. The Company pays retail stores
under annual marketing agreements for the right to be included in the retailer's
advertising programs. Retail promotional programs are the Company's most
significant marketing expenditures and are supported through cooperative
arrangements with the franchisors. National media advertising is funded
primarily by the franchisors, while local media advertising is funded through
cooperative arrangements.
SALES AND DISTRIBUTION
The Company's sales methods vary according to its geographic markets and
specific customer segments. Sales in the larger markets are oriented towards
high-volume customers such as large retail chains, which results in economies of
scale in selling and distribution expenses. Products are generally sold in
advance by a salesperson. Orders are then delivered and merchandised within 24
hours by other Company employees. Some market segments, however, are served by
traditional route sales. This sales method requires that the drivers of the
route trucks perform both a sales and delivery function. Account volume is often
the determining factor in establishing the appropriate sales method.
The Company seeks to maximize market penetration by effectively utilizing
its distribution channels. The Company's principal method of distribution is
direct-store-door ("DSD") delivery, which is also the Company's preferred method
of distribution because the Company has greater control over the sales,
marketing and merchandising of products. Deliveries are made from distribution
facilities by the Company's fleet of trucks. In certain rural territories or
small volume areas where DSD is not cost efficient, an independent distributor
is engaged by the Company to sell its franchise products. In most situations,
the distributor is required to purchase finished product from the Company.
The Company also manufactures products for other independent bottlers or
private label owners that lack sufficient volume to justify the capital
investment of a manufacturing plant. These contract bottling operations generate
profit margins which are typically less than DSD operations.
The "single drink" or on-premise segment consists of convenience stores,
vending, and fountain outlets. The Company's estimated 42,000 vending machines
are typically Company-owned and loaned to retail outlets or distributors. The
Company is primarily responsible for machine maintenance and product restocking.
Both the Company and retail customers effect sales through vending machines.
Fountain equipment, which is primarily owned by the Company, dispenses products
in restaurants, bars, amusement parks, theaters and other similar locations. The
Company sells either premix products (ready-to-serve beverages) or postmix
products (fountain syrups to which carbonated water must be added) to retailers
in stainless steel or disposable containers for use in fountain equipment. The
Company generally loans visi-coolers (brand identified refrigerated cabinets) to
large retail outlets and convenience stores that sell the Company's products.
COMPETITION
The soft drink business is highly competitive. The Company's soft drink
products compete generally with all liquid refreshments and in particular with
numerous nationally-known soft drinks such as Coca-Cola and Pepsi Cola, the
bottlers of which have greater financial resources than the Company. Principal
methods of competition in the soft drink industry are advertising campaigns,
pricing, packaging, management of shelf space in retail outlets, and the
development of new products. In recent years, price competition has been
especially intense with respect to sales of soft drink products to food stores,
with local bottlers granting significant discounts and allowances off wholesale
prices in order to maintain or increase market share in the food store segment.
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SOURCES AND AVAILABILITY OF RAW MATERIALS; INVENTORIES
The Company may purchase concentrates and syrups only from its franchisors
for use in the production of its respective soft drink products. The Company
purchases sweeteners, carbon dioxide, glass and plastic bottles, cans, closures,
premix and postmix containers (including metal tanks and plastic bags and
cardboard boxes) and other packaging materials from multiple suppliers.
The Company does not anticipate any significant difficulties in securing
adequate supplies of raw materials at acceptable prices in the future.
One week's inventory of concentrate is kept on site for the Company's
principal soft drink brands. An inventory of two to three days of high fructose
corn sweetener is usually maintained. As numerous suppliers are available, only
one to two days' inventory for cans, glass, and plastic bottles is maintained.
EMPLOYEES
As of February 28, 1995, the Company employed 1,347 persons. No Company
employees are represented by a union, and the Company considers its employee
relations to be good.
GOVERNMENT REGULATION
The production and marketing of beverages are subject to rules and
regulations of the United States Food and Drug Administration ("FDA") and other
federal, state, and local health agencies. The FDA also regulates the labelling
of containers. The Company believes that it is in material compliance with the
rules and regulations of the FDA.
The Company is subject to the rules and regulations of the United States
Environmental Protection Agency (the "EPA") and state and local environmental
authorities. The Company believes that it is in material compliance with the
rules and regulations of the EPA and such authorities.
ITEM 2. PROPERTIES
The Company currently bottles and cans soft drink products in its
production facilities located in Irving and Houston, Texas. The Houston facility
was completed, and its bottling and canning lines were installed, in 1981. The
Irving facility's lines were installed in 1978. The Irving and Houston, Texas
facilities primarily operate on the equivalent of a one-shift basis, consisting
of 10 hours, four days a week. Management believes that there is substantial
additional capacity available with little or no capital expenditures required to
realize such capacity. The Company also owns warehouse distribution facilities
in Waco, Spring, Beaumont, Fort Worth, Sherman, and Galveston, Texas and a
facility in Dallas, Texas from which it conducts vending operations.
On June 30, 1989, the Company completed the sale and leaseback of its
Irving and Houston production facilities. The net proceeds from such transaction
were used to reduce outstanding indebtedness.
The Company owns the trucks used to service its Houston and Waco franchise
territories. The Company leases the trucks used to service its Dallas/Ft. Worth
franchise territory.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various lawsuits arising in the ordinary course
of business. The Company, however, does not believe that the outcome of any of
these lawsuits will have a material adverse effect on its business or financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders in the fourth
quarter of the fiscal year ended December 31, 1994.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for Holdings' Class A Common
Stock, par value $.01 per share ("Class A Common Stock"). There is no assurance
that an active public market for the Class A Common Stock will develop at any
time or that if such market develops, that it will continue.
As of February 28, 1995, there were approximately 35 stockholders of record
of Class A Common Stock.
Neither Holdings nor the Company has ever paid any cash dividends on its
shares of common stock. Holdings is restricted from receiving any dividend or
any other distribution from the Company by certain restrictive covenants
contained in the 1993 Bank Credit Agreement and the indenture governing the
Senior Notes. In addition, certain covenants contained in the Discount Notes
indenture and Holdings' guaranty of the 1993 Bank Credit Agreement restrict
Holdings from making any dividend payments or other distributions on its shares
of common stock. Accordingly, Holdings does not anticipate paying cash dividends
on its shares of common stock in the foreseeable future. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
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ITEM 6. SELECTED FINANCIAL DATA
COMPANY SELECTED FINANCIAL DATA
The following table presents selected operating, balance sheet and other
data of the Company as of and for the years ended December 31, 1990, 1991, 1992,
1993 and 1994 derived from the consolidated financial statements of the Company,
which have been audited by KPMG Peat Marwick LLP. The financial data set forth
below should be read in conjunction with Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements of the Company and the related notes thereto contained elsewhere
herein.
COMPANY
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YEAR ENDED DECEMBER 31,
----------------------------------------------------
1990(A) 1991 1992 1993(B) 1994
(IN THOUSANDS)
OPERATING DATA:
Net sales................................. $247,029 $267,225 $288,271 $310,881 $332,204
Gross profit.............................. 89,332 97,063 102,488 114,924 117,828
Operating profit.......................... 19,753 24,949 30,001 33,606 35,995
Other expense (income):
Interest............................... 31,888 31,793 30,830 23,957 22,392
Other.................................. 1,094 1,586 908 (1,280) 983
Extraordinary item -- loss on
recapitalization....................... -- -- -- (31,559) --
Net earnings (loss)....................... (13,229) (8,430) (1,737) (20,630) 12,480
Dividends on preferred stock.............. 9,442 11,152 13,171 5,806 --
OTHER DATA:
Depreciation.............................. 10,282 10,127 8,658 9,593 9,273
Amortization of excess cost over net
assets of business acquired............ 5,956 5,439 5,505 5,751 5,519
Amortization of debt issuance costs....... 974 1,433 1,107 1,337 1,384
Accretion of bond discount................ 19,881 19,000 -- -- --
Additions to property, plant and
equipment, net(c)...................... 5,236 5,580 6,346 8,367 10,644
Deficiency of earnings available to cover
fixed charges(d)....................... 13,229 8,430 1,737 -- --
Ratio of earnings to fixed
charges(d)(e).......................... -- -- -- 1.43x 1.53x
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital........................... 13,933 4,622 3,258 657 (9,818)
Total assets.............................. 245,536 229,618 227,625 243,175 237,816
Long-term debt, less current maturities... 233,260 221,069 212,562 227,696 199,261
Stockholders' deficit..................... (14,723) (23,157) (24,896) (37,593) (25,113)
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(a) The operating data for the year ended December 31, 1990 reflect the impact
of the acquisition of all of the outstanding capital stock of Seven-Up
Bottling Company of Dallas, Inc. for the period from January 12, 1990
through December 31, 1990. See Item 1, "Business -- General."
(b) The operating data for the year ended December 31, 1993 reflect the impact
of the acquisition of substantially all the assets of Dr Pepper Bottling
Company of Galveston, Inc. for the period from April 13, 1993 to December
31, 1993. See Item 1, "Business -- General".
(c) Additions to property, plant and equipment are presented net of proceeds
received upon the disposition of such assets. Additions to property, plant
and equipment for the year ended December 31, 1992 reflect the receipt of
$1,487 by the Company upon the sale/leaseback of a portion of its trucking
fleet.
(d) "Fixed charges" consist of interest (including amortization of discount and
debt issuance costs) and the interest component of lease expense.
(e) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" represents income before taxes and extraordinary items plus
fixed charges.
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HOLDINGS SELECTED FINANCIAL DATA
The following table presents selected operating, balance sheet and other
data of Holdings as of and for the years ended December 31, 1990, 1991, 1992,
1993 and 1994 derived from the consolidated financial statements of Holdings,
which have been audited by KPMG Peat Marwick LLP. The financial data set forth
below should be read in conjunction with Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements of Holdings and the related notes thereto contained elsewhere herein.
HOLDINGS
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YEAR ENDED DECEMBER 31,
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1990(A) 1991 1992 1993(B) 1994
(IN THOUSANDS)
OPERATING DATA:
Net sales.............................. $247,029 $267,225 $ 288,271 $ 310,881 $ 332,204
Gross profit........................... 89,332 97,063 102,488 114,924 117,828
Operating profit....................... 19,753 24,949 30,001 33,606 35,995
Other expense (income):
Interest............................ 31,888 31,793 30,830 31,304 31,777
Other............................... 1,094 1,586 908 (1,014) 1,287
Dividends on Company preferred stock... 9,442 11,152 13,171 5,806 --
Extraordinary item -- loss on
recapitalization.................... -- -- -- (31,559) --
Net earnings (loss).................... (22,671) (19,582) (14,908) (34,049) 2,791
Net loss per common share.............. (1.70) (1.46) (1.12) (2.67) (.08)
OTHER DATA:
Depreciation........................... 10,282 10,127 8,658 9,593 9,273
Amortization of excess cost over net
assets of business acquired......... 5,956 5,439 5,505 5,751 5,519
Amortization of debt issuance costs.... 974 1,433 1,107 1,610 1,711
Accretion of bond discount............. 19,881 19,000 -- 7,340 9,385
Additions to property, plant and
equipment, net(c)................... 5,236 5,580 6,346 8,367 10,644
Deficiency of earnings available to
cover:
Fixed charges(d).................... 22,671 19,582 14,908 2,490 --
Fixed charges and preferred stock
dividend requirements on the
Preferred Stock(d)................ -- -- -- 4,569 --
Ratio of earnings to fixed
charges(d)(e)..................... -- -- -- -- 1.09x
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital........................ 13,933 4,622 3,258 374 (10,078)
Total assets........................... 245,536 229,618 227,625 245,863 240,199
Long-term debt, less current
maturities.......................... 233,260 221,069 212,562 306,149 287,099
Preferred Stock(f)..................... -- -- -- 29,635 33,502
Stockholders' deficit.................. (74,904) (94,486) (109,394) (142,994) (144,070)
---------------
(a) The operating data for the year ended December 31, 1990 reflect the impact
of the acquisition of all of the outstanding capital stock of Seven-Up
Bottling Company of Dallas, Inc. for the period from January 12, 1990
through December 31, 1990. See Item 1, "Business -- General."
(b) The operating data for the year ended December 31, 1993 reflect the impact
of the acquisition of substantially all the assets of Dr Pepper Bottling
Company of Galveston, Inc. for the period from April 13, 1993 to December
31, 1993. See Item 1, "Business -- General."
(c) Additions to property, plant and equipment are presented net of proceeds
received upon the disposition of such assets. Additions to property, plant
and equipment for the year ended December 31, 1992 reflect the receipt of
$1,487 by the Company upon the sale/leaseback of a portion of its trucking
fleet.
(d) "Fixed charges" consist of interest (including amortization of discount and
debt issuance costs), the interest component of lease expense, and dividend
requirements for the Old Preferred Stock.
(e) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" represents income before taxes and extraordinary items plus
fixed charges.
(f) The Preferred Stock is subject to mandatory redemption under certain
circumstances.
10
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
General
The Company's primary measurement of unit volume is case sales. Case sales
refers to physical cases of beverages sold, including both premix products
(ready-to-serve beverages which are sold in tanks and converted to case sales on
the basis of four cases per tank) and postmix products (fountain syrups to which
carbonated water must be added and which are converted to case sales on the
basis of one case per gallon).
Franchise case sales represent primarily sales of the Company's branded
products to retailers only. Contract case sales are comprised of sales,
primarily of products in cans, to unaffiliated bottling companies that hold soft
drink franchises and to a wholesaler of private label brand soft drink products.
Contract sales may fluctuate significantly from year to year, and are made at
relatively low prices and gross profit margins (historically representing
approximately 16% of contract sales revenues) due to the competition for such
sales, and are not a primary focus of management in determining the Company's
business strategy. As a result, management believes that changes in franchise
net sales more accurately measure growth than changes in total net sales.
The primary asset of Holdings is the common stock of the Company. Holdings
conducts no business other than holding the common stock of the Company. As a
result, the operating data items for both Holdings and the Company are the same
for the years ended December 31, 1990, 1991 and 1992, with the exception that
dividends on the Company's Old Preferred Stock are shown as a minority interest
in Holdings' statements of operations. With respect to 1993 and 1994, as a
result of the consummation of the transactions contemplated by the
Recapitalization Plan, only net sales, cost of sales, gross profit, operating
expenses and operating profit are the same for the Company and Holdings.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Net sales, excluding contract net sales, for the year ended December 31,
1994 increased to $308.0 million compared to $287.3 million for 1993. The
increase was due to a 7.8% increase in franchise case sales, with growth
attributable to the acquisition of the franchise territory of Dr Pepper Bottling
Company of Galveston, Inc. ("Dr Pepper Galveston") on April 13, 1993 (the
"Galveston Acquisition") and to strong results from Dr Pepper and 7UP brands.
Contract net sales for the year ended December 31, 1994 increased 2.6% from 1993
due to an increase in lower-margin private label contract sales volume partially
offset by a small reduction in regular contract sales. As a result of the
foregoing, net sales for the year ended December 31, 1994 increased 6.9% to
$332.2 million compared to $310.9 million for 1993.
Cost of sales for the year ended December 31, 1994 increased to $214.4
million compared to $196.0 million for 1993. The increase was due primarily to
an increase in franchise case sales as well as increases in the prices paid by
the Company for certain raw materials, primarily concentrate, sweetener, and
plastic bottles. These increases in costs were partially offset by reduced costs
for aluminum cans. As a percentage of net sales, cost of sales for the year
ended December 31, 1994 increased to 64.5% from 63.0% for 1993.
Marketing expenses for the year ended December 31, 1994 decreased to $7.6
million compared to $9.4 million for 1993 due to a higher level of sports media
advertising and sponsorship agreements in 1993. Marketing expenses represented
approximately 2.3% of net sales in 1994 compared to 3.0% in 1993.
Administrative and general expenses for the year ended December 31, 1994
increased to $62.9 million compared to $60.6 million for 1993. The increase was
due primarily to an increase of $2.0 million in labor and employee benefit
expenses, an increase of $.1 million in fleet expenses under a full service
lease arrangement, an increase of $.6 million in full service commissions, and
an increase of $.2 million in other expenses, partially offset by an increase of
$.6 million in incentive credits from The Dr Pepper Company for placement of
vending machines. Depreciation expense for the year ended December 31, 1994
increased to $5.8 million from
11
12
$5.6 million for 1993. Amortization of intangible assets for the year ended
December 31, 1994 decreased to $5.5 million from $5.8 million for 1993.
As a result of the above factors, operating profit for the year ended
December 31, 1994 increased to $36.0 million, or 10.8% of net sales, compared to
$33.6 million, or 10.8% of net sales, for 1993.
Interest expense for the Company for the year ended December 31, 1994
decreased to $22.4 million from $24.0 million for 1993 due to reduction of
outstanding indebtedness under the 1993 Bank Credit Agreement.
Amortization of the Company's deferred debt issuance costs for the year
ended December 31, 1994 was $1.4 million compared to $1.3 million for 1993.
Other income for the Company for the year ended December 31, 1994 was $.4
million compared to $2.6 million for 1993. The 1993 amount included $2.5 million
paid to the Company in settlement of its 1988 lawsuit against Del Monte
Corporation for its refusal to consent to the acquisition of the Company by
Holdings and the subsequent termination of the Company's license to produce and
distribute Hawaiian Punch products.
As a result of the above factors, the Company's income before income taxes
for the year ended December 31, 1994 was $12.6 million compared to income before
income taxes of $10.9 million for 1993. Income taxes for the year ended December
31, 1994 were $.1 million. Income before extraordinary item for the year ended
December 31, 1994 was $12.5 million compared to income before extraordinary item
of $10.9 million for 1993.
Holdings' amortization of deferred debt issuance costs for the year ended
December 31, 1994 increased to $1.7 million compared to $1.6 million for 1993.
Interest expense (including bond accretion on the Discount Notes) for
Holdings for the year ended December 31, 1994 increased to $31.8 million from
$31.3 million for 1993. The increase was due to additional bond accretion on the
Discount Notes, partially offset by reduced cash interest due to a paydown of
indebtedness under the 1993 Bank Credit Agreement.
As a result of the above factors, Holdings generated income before
extraordinary item of $2.8 million for the year ended December 31, 1994,
compared to a loss before extraordinary item of $2.5 million for 1993. The net
loss before extraordinary item for Holdings of $2.5 million for the year ended
December 31, 1993 reflects charges of $5.8 million relating to dividends on the
Company's Old Preferred Stock. The Old Preferred Stock was classified as a
minority interest for purposes of the financial statements of Holdings.
Extraordinary loss for the year ended December 31, 1993 amounted to $31.6
million, due to transactions contemplated by the Recapitalization Plan. There
was no extraordinary item for the year ended December 31, 1994. As a result,
Holdings generated net income of $2.8 million for the year ended December 31,
1994, compared to a net loss of $34.0 million for 1993.
Year Ended December 31, 1993 Compared to Year Ended December 31, 1992
Net sales, excluding contract net sales, for the year ended December 31,
1993 increased to $287.3 million compared to $262.8 million for 1992. The
increase was due to a 10.2% increase in franchise case sales, with growth
attributable to the acquisition of the franchise territory of Dr Pepper
Galveston in the Galveston Acquisition and to strong results from DR PEPPER as
well as from allied brands. Contract net sales for the year ended December 31,
1993 decreased 7.5% from 1992 due to the elimination of contract sales to Dr
Pepper Galveston as a result of the consummation of the Galveston Acquisition.
As a result of the foregoing, net sales for the year ended December 31, 1993
increased 7.8% to $310.9 million compared to $288.3 million in 1992.
Cost of sales for the year ended December 31, 1993 increased to $196.0
million compared to $185.8 million in 1992. The increase was due primarily to an
increase in franchise case sales as well as increases in the prices paid by the
Company for certain raw materials, primarily concentrate. Increases in
concentrate costs were partially offset by cost decreases in other ingredients
and materials including sweetener, P.E.T. bottles, and aluminum cans. As a
percentage of net sales, cost of sales for the year ended December 31, 1993
decreased to 63.0% from 64.4% in 1992.
12
13
Marketing expense for the year ended December 31, 1993 increased to $9.4
million compared to $6.0 million in 1992. This increase was due primarily to
higher expenditures for sports media advertising and sponsorship agreements with
various sports organizations, including the new Dallas NHL hockey team, the new
baseball stadium in Arlington for the Texas Rangers, and the Southwest
Conference basketball tournament. Marketing expenses represented approximately
3.0% of net sales for the year ended December 31, 1993 compared to 2.1% of net
sales in 1992.
Administrative and general expenses for the year ended December 31, 1993
increased to $60.6 million compared to $55.6 million in 1992. This increase was
primarily due to an increase of $3.3 million in labor and employee benefit
expenses, an increase of $1.5 million in fleet expenses due to an upgrade in
fleet vehicles under a full service lease arrangement, an increase of $0.7
million in full service commissions, and an increase of $0.3 million in other
expenses, offset by a reduction in bad debts expense of $0.8 million due to
recoveries in 1993. Depreciation expense for the year ended December 31, 1993
increased to $5.6 million from $5.4 million in 1992. Amortization of intangible
assets for the year ended December 31, 1993 increased to $5.8 million compared
to $5.5 million in 1992.
As a result of the above factors, operating profit for the year ended
December 31, 1993 increased to $33.6 million, or 10.8% of net sales, compared to
$30.0 million, or 10.4% of net sales, in 1992.
Interest expense for the Company for the year ended December 31, 1993
decreased to $24.0 million from $30.8 million in 1992. The decrease was due
primarily to lower interest rates on outstanding indebtedness as a result of the
transactions contemplated by the Recapitalization Plan.
Amortization of the Company's deferred debt issuance costs for the year
ended December 31, 1993 was $1.3 million compared to $1.1 million in 1992.
Loss from disposition of assets for the year ended December 31, 1993 was
$32,000 compared to a gain of $.2 million in 1992.
Other income for the Company for the year ended December 31, 1993 was $2.6
million compared to other expenses of $28,000 in 1992, due to the $2.5 million
settlement of the Company's 1988 lawsuit against Del Monte Corporation for its
refusal to consent to the acquisition of the Company by Holdings and the
subsequent termination of the Company's license to produce and distribute
Hawaiian Punch products.
As a result of the above factors, the Company's income before extraordinary
item for the year ended December 31, 1993 was $10.9 million compared to a loss
of $1.7 million in 1992.
Holdings' amortization of deferred debt issuance costs for the year ended
December 31, 1993 increased to $1.6 million compared to $1.1 million in 1992.
Interest expense for Holdings for the year ended December 31, 1993
increased to $31.3 million from $30.8 million in 1992. The increase was due to
increased indebtedness as a result of the Recapitalization Plan, partially
offset by lower interest rates on such indebtedness. Interest expense for
Holdings for the year ended December 31, 1993 includes $7.3 million of bond
accretion on the Discount Notes.
As a result of the above factors, Holdings generated income before
dividends on subsidiary's preferred stock and extraordinary item of $3.3 million
for the year ended December 31, 1993 compared to a loss of $1.7 million in 1992.
The net loss before extraordinary item for Holdings of $2.5 million for the year
ended December 31, 1993 reflects charges of $5.8 million related to dividends on
the Company's Old Preferred Stock. The net loss before extraordinary item for
Holdings for the year ended December 31, 1992 reflects charges of $13.2 million
relating to dividends on the Company's Old Preferred Stock. The Old Preferred
Stock was classified as a minority interest for purposes of the financial
statements of Holdings. As a result of the above factors, a net loss before
extraordinary item of $2.5 million was reported for Holdings for the year ended
December 31, 1993 compared to a net loss before extraordinary item of $14.9
million in 1992.
Extraordinary loss for the year ended December 31, 1993 amounted to $31.6
million, due to the transactions contemplated by the Recapitalization Plan.
After the extraordinary item, Holdings generated a net loss of $34.0 million for
the year ended December 31, 1993 compared to a net loss of $14.9 million in
1992.
13
14
LIQUIDITY AND CAPITAL RESOURCES
Holdings conducts business through the Company and has no material
operations of its own. The primary asset of Holdings is the common stock of the
Company. Accordingly, Holdings is dependent on the cash flow of the Company to
meet its obligations. Holdings has no material obligations other than those
under the Discount Notes, the Preferred Stock and any exchange debentures of
Holdings into which such stock becomes exchangeable, and certain contingent
obligations under Holdings' guarantee of the Company's obligations under the
1993 Bank Credit Agreement. Holdings, though, is not expected to have any
material need for cash until interest on the Discount Notes becomes payable in
cash beginning August 15, 1998. The Discount Notes will mature in 2003. The 1993
Bank Credit Agreement and the Senior Notes indenture impose significant
restrictions on the payment of dividends and the making of loans by the Company
to Holdings. However, the Senior Notes indenture allows the Company to pay
dividends to Holdings in accordance with a specified formula if, after giving
effect thereto, no event of default, or an event that with the passage of time
or the giving of notice, or both, would constitute an event of default under the
Senior Notes indenture shall have occurred and be continuing. In addition, the
1993 Bank Credit Agreement allows the Company to pay dividends to Holdings in an
amount necessary to make cash interest payments on the Discount Notes, provided
that no event of default exists or would be created under the 1993 Bank Credit
Agreement.
The Company remains highly leveraged following the consummation of the
transactions contemplated by the Recapitalization Plan. The Company's principal
use of funds in the future will be the payment of principal and interest under
the 1993 Bank Credit Agreement and the Senior Notes. As of December 31, 1994,
approximately $68.1 million was outstanding under the term loan facility of the
1993 Bank Credit Agreement (the "Term Loan Facility"). The Company will be
required to repay the principal under the Term Loan Facility as follows: $13.8
million in 1995, $15.5 million in 1996, $17.2 million in each of 1997 and 1998
and $4.4 million in 1999, subject to reduction for mandatory and optional
prepayments. In addition, the Company will be required to further retire the
principal amount outstanding under the 1993 Bank Credit Agreement with Excess
Cash Flow (as defined in the 1993 Bank Credit Agreement). It is expected that
the Company's primary sources of financing for its future business activities
will be funds from operations, together with additional borrowings under the
1993 Bank Credit Agreement's revolving line of credit facility (the "Revolving
Line of Credit Facility"). The Revolving Line of Credit Facility provides for
revolving loans in an aggregate amount of up to $25 million with a $5 million
sublimit for the issuance of letters of credit. The Revolving Line of Credit
Facility will mature in 1999. During 1994, the Company purchased $8.0 million
aggregate principal amount of its outstanding Senior Notes at an aggregate
purchase price of $8.2 million. The purchase price was funded from cash on hand.
In January 1995 the Company used the Revolving Line of Credit Facility to
purchase an additional $5.0 million of its Senior Notes for $5.1 million.
Because the obligations under the 1993 Bank Credit Agreement bear interest
at floating rates, the Company will be sensitive to changes in prevailing
interest rates. As required by the 1993 Bank Credit Agreement, the Company
entered into interest rate protection arrangements, expiring June 30, 1996, in
an aggregate notional amount equal to $45 million, subject to reduction by $2
million at the end of each quarter starting with the quarter ending June 30,
1994.
The Company had negative working capital of $9.8 million at December 31,
1994 compared to working capital of $0.7 million at December 31, 1993.
Based on the Company's anticipated operating results, management believes
that the Company's future operating activities will generate sufficient cash
flows to repay borrowings under the Term Loan Facility as they become due and
payable. However, based on such anticipated operating results, management does
not expect that the Company's future operating activities will generate
sufficient cash flows to repay the Senior Notes and the Discount Notes at their
respective maturities. Accordingly, the Company and Holdings expect that they
will be required to refinance all or substantially all of the Senior Notes and
the Discount Notes at their respective maturities or sell equity or assets to
fund the repayment of all or substantially all of the Senior Notes and the
Discount Notes at their respective maturities, or effect a combination of the
foregoing. While the Company and Holdings believe that they will be able to
refinance the Senior Notes and the Discount Notes at or prior to their
respective maturities, or raise sufficient funds through equity or asset sales
to repay
14
15
such indebtedness, or effect a combination of the foregoing, there can be no
assurance that such will be the case.
The 1993 Bank Credit Agreement contains numerous financial and operating
covenants and prohibitions that impose limitations on the liquidity of the
Company, including requirements that the Company satisfy certain financial
ratios and maintain certain specified levels of net worth, and limitations on
the incurrence of additional indebtedness. The indentures governing the Senior
Notes and the Discount Notes also contain covenants that impose limitations on
the liquidity of the Company and Holdings, including a limitation on the
incurrence of additional indebtedness. The ability of the Company and Holdings
to meet their debt service requirements and to comply with such covenants will
be dependent upon future operating performance and financial results of the
Company, which will be subject to financial, economic, competitive and other
factors affecting the Company, many of which are beyond its control.
Management anticipates expansion related capital expenditures in 1995 and
1996 to service volume growth at several locations. During 1994 capital
expenditures totaled $10.8 million. The Company anticipates that capital
expenditures will total approximately $8.0 million to $8.5 million for each of
the years 1995 through 1997.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("Statement 109"). Statement 109 requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and liability method
of accounting for income taxes. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that include the enactment date. The Company
and Holdings have adopted the provisions of Statement 109 effective January 1,
1993 and the cumulative effect of the change in accounting for income taxes was
immaterial.
In December 1990, the Financial Accounting Standards Board issued Statement
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
("Statement 106") which is effective for fiscal years beginning after December
15, 1992. The Company and Holdings do not provide postretirement benefits and,
therefore, the provisions of Statement 106 are not applicable.
In November 1992, the Financial Accounting Standards Board issued Statement
112, "Employers' Accounting for Postemployment Benefits" ("Statement 112") which
is effective for fiscal years beginning after December 15, 1993. The Company and
Holdings do not provide postretirement benefits and, therefore, the provisions
of Statement 112 are not applicable.
15
16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
PAGE
--------
DR PEPPER BOTTLING COMPANY OF TEXAS
Independent Auditors' Report....................................................
Balance Sheets, December 31, 1993 and 1994......................................
Statements of Operations for the years ended December 31, 1992, 1993 and 1994...
Statements of Stockholders' Deficit for the years ended December 31, 1992, 1993
and 1994.....................................................................
Statements of Cash Flows for the years ended December 31, 1992, 1993 and 1994...
Notes to Financial Statements...................................................
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Independent Auditors' Report....................................................
Consolidated Balance Sheets, December 31, 1993 and 1994.........................
Consolidated Statements of Operations for the years ended December 31, 1992,
1993 and 1994................................................................
Consolidated Statements of Stockholders' Deficit for the years ended
December 31, 1992, 1993 and 1994.............................................
Consolidated Statements of Cash Flows for the years ended December 31, 1992,
1993 and 1994................................................................
Notes to Consolidated Financial Statements......................................
16
17
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Dr Pepper Bottling Company of Texas:
We have audited the accompanying balance sheets of Dr Pepper Bottling Company
of Texas (a wholly-owned subsidiary of Dr Pepper Bottling Holdings, Inc.) as of
December 31, 1993 and 1994, and the related statements of operations,
stockholders' deficit and cash flows for each of the years in the three-year
period ended December 31, 1994. In connection with our audits of the financial
statements, we also have audited the financial statement schedules as listed on
the accompanying index. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dr Pepper Bottling Company of
Texas as of December 31, 1993 and 1994, and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1994, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Dallas, Texas
March 8, 1995
18
DR PEPPER BOTTLING COMPANY OF TEXAS
Balance Sheets
December 31, 1993 and 1994
(in thousands, except share and per share amounts)
Assets (note 9) 1993 1994
--------------- ---- ----
Current assets:
Cash and cash equivalents $ 16,930 7,769
Accounts receivable:
Trade, less allowance for doubtful accounts of $305
in 1993 and $371 in 1994 20,156 24,479
Other 3,417 3,748
Inventories (note 4) 9,806 12,183
Prepaid expenses 3,420 5,671
----------- ---------
Total current assets 53,729 53,850
----------- ---------
Property, plant and equipment, net (notes 5 and 9) 64,523 65,946
Other assets, at amortized cost:
Goodwill and other intangible assets (note 6) 116,668 111,149
Debt issuance costs 8,255 6,871
----------- ---------
$ 243,175 237,816
=========== =========
Liabilities and Stockholder's Deficit
-------------------------------------
Current liabilities:
Accounts payable $ 26,311 34,285
Accrued expenses 13,876 14,935
Current maturities of long-term debt and obligations under
capital leases (note 9) 12,885 14,448
----------- ---------
Total current liabilities 53,072 63,668
----------- ---------
Long-term debt and obligations under capital leases, less current
maturities (note 9) 227,696 199,261
Stockholder's deficit:
Common stock, $.01 par value. Authorized 11,000,000 shares;
issued and outstanding 100 shares 1 1
Additional paid-in capital 110,227 110,227
Consideration to continuing predecessor shareholders in
excess of book value (33,948) (33,948)
Deficit (113,873) (101,393)
----------- ---------
Total stockholders' deficit (37,593) (25,113)
Commitments and contingencies (notes 7, 11 and 12)
----------- ---------
$ 243,175 237,816
=========== =========
See accompanying notes to financial statements.
19
DR PEPPER BOTTLING COMPANY OF TEXAS
Statements of Operations
Years ended December 31, 1992, 1993 and 1994
(in thousands)
1992 1993 1994
---- ---- ----
Net sales $ 288,271 310,881 332,204
Cost of sales (note 5) 185,783 195,957 214,376
--------- ------- -------
Gross profit 102,488 114,924 117,828
Marketing expense 6,036 9,418 7,618
Depreciation 5,371 5,577 5,765
Amortization of intangible assets 5,505 5,751 5,519
Administrative and general expenses 55,575 60,572 62,931
--------- ------- -------
Operating profit 30,001 33,606 35,995
--------- ------- -------
Other expense (income):
Interest 30,830 23,957 22,392
Amortization of deferred debt issuance costs 1,107 1,337 1,384
Other, net (199) (2,617) (401)
--------- ------- -------
31,738 22,677 23,375
--------- ------- -------
Earnings (loss) before income taxes and
extraordinary item (1,737) 10,929 12,620
Income taxes - - 140
--------- ------- -------
Earnings (loss) before extraordinary item (1,737) 10,929 12,480
Extraordinary item - loss on recapitalization (note 2) - (31,559) -
--------- ------- -------
Net earnings (loss) $ (1,737) (20,630) 12,480
========= ======= =======
See accompanying notes to financial statements.
20
DR PEPPER BOTTLING COMPANY OF TEXAS
Statements of Stockholder's Deficit
Years ended December 31, 1992, 1993 and 1994
(in thousands, except per share amounts)
Consideration
to continuing
predecessor
Preferred stock Common stock Additional stockholders
--------------- ------------ paid-in in excess of
Shares Amount Shares Amount capital book value Deficit Totals
------ ------ ------ ------ ------- ---------- ------- ------
Balance at December 31, 1991 2,908 $ 71,329 100 $ 1 11,990 (33,948) (72,529) (23,157)
Stock dividends on senior
exchangeable preferred stock 527 13,169 - - - - (13,169) -
Cash dividends on senior
exchangeable preferred stock - - - - - - (2) (2)
Net loss - - - - - - (1,737) (1,737)
------ -------- --- --- ------- ------- --------- -------
Balance at December 31, 1992 3,435 84,498 100 1 11,990 (33,948) (87,437) (24,896)
Stock dividends on senior
exchangeable preferred stock 146 3,649 - - - - (3,649) -
Cash dividends on senior
exchangeable preferred stock - - - - - - (2,157) (2,157)
Preferred shares retired (3,581) (88,147) - - - - - (88,147)
Additional paid-in capital related
to recapitalization - - - - 98,237 - - 98,237
Net loss - - - - - - (20,630) (20,630)
------ -------- --- --- ------- ------- --------- -------
Balance at December 31, 1993 - - 100 1 110,227 (33,948) (113,873) (37,593)
Net earnings - - - - - - 12,480 12,480
------ -------- --- --- ------- ------- --------- -------
Balance at December 31, 1994 - $ - 100 $ 1 110,227 (33,948) (101,393) (25,113)
====== ======== === === ======= ======= ========= =======
See accompanying notes to financial statements.
21
DR PEPPER BOTTLING COMPANY OF TEXAS
Statements of Cash Flows
Years ended December 31, 1992, 1993 and 1994
(in thousands)
1992 1993 1994
---- ---- ----
Cash flows from operating activities:
Net earnings (loss) $ (1,737) (20,630) 12,480
--------- -------- -------
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Loss on recapitalization - 31,559 -
Depreciation of property, plant and equipment 8,658 9,593 9,273
Amortization of other assets 6,612 7,088 6,903
Loss (gain) on sale of assets (224) 32 (52)
Changes in assets and liabilities,
net of effects from acquisitions:
Accounts receivable (1,228) (1,926) (4,654)
Inventories (1,444) (346) (2,377)
Prepaid expenses (1,159) 1,491 (2,251)
Accounts payable 6,878 2,079 7,974
Accrued expenses (792) 4,949 1,059
--------- -------- -------
Total adjustments 17,301 54,519 15,875
--------- -------- -------
Net cash provided by
operating activities 15,564 33,889 28,355
--------- -------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (7,833) (8,971) (10,838)
Proceeds from the sale of property, plant and equipment 1,673 604 194
Cash paid for acquisitions, net of cash acquired - (8,965) -
--------- -------- -------
Net cash used in investing activities (6,160) (17,332) (10,644)
--------- -------- -------
Cash flows from financing activities:
Payment of long-term debt (6,345) (198,713) (26,872)
Debt issued - 218,819 -
Deferred debt costs - (8,768) -
Payment of costs related to recapitalization - (26,906) -
Preferred stock retired - (88,147) -
Additions to paid-in capital related to recapitalization - 98,237 -
Payment of preferred stock dividends (2) (2,157) -
--------- -------- -------
Net cash used in financing activities (6,347) (7,635) (26,872)
--------- -------- -------
Net increase (decrease) in cash and cash equivalents 3,057 8,922 (9,161)
Cash and cash equivalents at beginning of year 4,951 8,008 16,930
--------- -------- -------
Cash and cash equivalents at end of year $ 8,008 16,930 7,769
========= ======== =======
See accompanying notes to financial statements.
22
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
December 31, 1992, 1993 and 1994
(in thousands, except share and per share amounts)
(1) Organization and Business
(a) Organization
Dr Pepper Bottling Company of Texas ("Company") is a
wholly-owned subsidiary of Dr Pepper Bottling Holdings, Inc.
("Holdings"). Holdings was formed expressly for the purpose
of acquiring all of the common stock of the Company.
Effective October 28, 1988, Holdings entered into an agreement
with the Company providing for the acquisition of all issued
and outstanding common stock of the Company. Stockholders'
equity reflects such continuing Predecessor stockholders'
proportionate interests in the adjusted historical book value
of the Company, reduced by the net consideration paid by
Holdings for common stock representing such interest.
(b) Business
The Company is principally engaged in producing, marketing and
distributing carbonated soft drinks in Dallas/Fort Worth,
Houston and Waco, Texas. Soft drink operations are conducted
pursuant to franchise agreements with companies owning the
rights to soft drink formulae.
(2) Recapitalization
During 1993, the Company completed a recapitalization plan (the
"Recapitalization Plan"), the purpose of which was to reduce the
aggregate amount of interest expense and preferred stock dividend
requirements. The Recapitalization Plan is described in more detail
in note 9.
23
2
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
(in thousands, except share and per share amounts)
(a) 1993 Bank Credit Agreement
Pursuant to the Recapitalization Plan, on February 18, 1993,
the Company entered into a credit agreement (the "1993 Bank
Credit Agreement") with certain banks providing for (i) a term
loan facility in the aggregate amount of $100,000 and (ii) a
revolving line of credit facility in the aggregate amount of
$25,000.
On March 22, 1993, as contemplated by the Recapitalization
Plan, the Company borrowed $91,700 under the term loan
facility of the 1993 Bank Credit Agreement to redeem all of
the then outstanding Senior Exchangeable Preferred Stock of
the Company.
(b) Sale/Leaseback
As part of the Recapitalization Plan, the Company entered into
an amendment to the lease agreement in connection with the
sale/leaseback of its Irving and Houston, Texas production
facilities. The amendment to the lease agreement modified
certain covenants and eliminated the consumer price index
adjustment to the rent scheduled to be effected on July 1,
1994. In connection with the amendment, Donaldson Lufkin &
Jenrette Securities Corporation ("DLJ") obtained the right to
sell the note held by the lender under the lease agreement,
and DLJ subsequently sold the note. The proceeds from such
sale in excess of the principal amount of the note plus
accrued interest, commissions and expenses ($1,227) were paid
to the Company and are reflected as a reduction of the loss on
recapitalization.
(c) Senior Preferred Stock
The Company redeemed all of the outstanding Senior
Exchangeable Preferred Stock of the Company, in accordance
with the Recapitalization Plan.
(d) Loss on Recapitalization
In 1993, the Company recorded an extraordinary loss of $31,600
in connection with the early retirement of a total of $192,200
principal amount of notes and debentures. The aggregate
purchase price (including certain costs to extinguish the
debt) of such indebtedness was $223,800, financed principally
through newly issued debt and preferred stock.
(Continued)
24
3
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
(in thousands, except share and per share amounts)
(3) Summary of Significant Accounting Policies
(a) Basis of Presentation
The financial statements include the accounts of the Company's
three operating branches: Dallas/Ft. Worth, Houston and
Waco. All balances and transactions between branches have
been eliminated. Certain amounts in the 1992 and 1993
financial statements have been reclassified to conform with
1994 presentation.
(b) Cash Equivalents
Cash equivalents consist of highly liquid debt instruments
with original maturities of three months or less. The Company
did not have any cash equivalents at December 31, 1993 or
1994.
(c) Inventories
Inventories are stated at the lower of first-in, first-out
("FIFO") cost or market.
(d) Property, Plant and Equipment
Property, plant and equipment are stated at cost. For
financial reporting purposes, depreciation is provided on the
straight-line method over the estimated useful lives of the
assets. Accelerated depreciation methods are generally used
for income tax purposes.
Maintenance and repairs are charged to operations as incurred;
renewals and betterments are capitalized and depreciated. The
cost and accumulated depreciation of assets sold or disposed
of are removed from the accounts. Resultant profit or loss on
such transactions is credited or charged to earnings.
(Continued)
25
4
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
(in thousands, except share and per share amounts)
(e) Goodwill and Other Intangible Assets
Excess of cost over estimated fair market value of tangible
net assets of acquired businesses and costs of franchises are
being amortized on a straight-line basis over 10 to 40 years.
Debt issuance costs are being amortized over the terms of the
related debt agreements (10 to 25 years). Covenants not to
compete are amortized over the terms of the agreements (5 to
10 years).
The Company continually evaluates the propriety of the
carrying amount of goodwill and other intangibles as well as
the amortization period to determine whether current events or
circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists
of the projection of undiscounted operating income before
depreciation, amortization, nonrecurring charges and interest
for the Company over the remaining amortization periods of the
related intangible assets. The projections are based on a
historical trend line of actual results since the acquisitions
of the respective assets and adjusted for expected changes in
operating results. To the extent such projections indicate
that the undiscounted operating income is not expected to be
adequate to recover the carrying amounts of the related
intangible assets, such carrying amounts are written down by
charges to expense. At this time, the Company believes that
no significant impairment of goodwill and other intangible
assets has occurred and that no reduction of the estimated
useful lives is warranted.
(f) Self-insurance
The Company is self-insured in these areas: (a) employer's
excess indemnity with a $250 per occurrence limit on coverage,
(b) automobile liability with a $250 per occurrence limit on
coverage, (c) general liability with a $250 per occurrence
limit on coverage, and (d) medical insurance with a $125 per
person per year limit on coverage. The Company accrues for
costs associated with its self-insured programs as incurred.
Coverage in excess of the limits defined above is provided by
third-party insurance companies. All other claims are covered
through third-party insurance policies.
(g) Financial Instruments and Credit Risk Concentrations
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash
equivalents and trade receivables. The Company places its
cash equivalents with high credit quality financial
institutions; however, such amounts are generally in excess of
federally insured limits. Although the Company
(Continued)
26
5
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
(in thousands, except share and per share amounts)
does not require collateral for trade receivables, the credit
risk is limited due to the large number of customers. For the
years ended December 31, 1992, 1993 and 1994, no customer
accounted for more than 10% of net sales. At December 31,
1993 and 1994, no receivable from any customer exceeded 5% of
stockholder's deficit.
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments"
("Statement 107"), requires that the Company disclose
estimated fair values for its financial instruments. Fair
value estimates are set forth below for the Company's
financial instruments:
. Cash, Accounts Receivable, Accounts Payable and
Accrued Expenses - The carrying amounts approximate
fair value because of the short maturity of these
instruments.
. Long-term Debt - The carrying amounts of the term
loan and credit facility loan approximate market
because of the variable interest rate which is based
on the bank's alternative base rate.
The fair value estimates are made at a specific point in time,
based on relevant market information and information about the
financial instruments. These estimates are subjective in
nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the
estimates.
(h) Income Taxes
In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Statement 109 requires a
change from the deferred method of accounting for income taxes
of APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability
method of Statement 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on
(Continued)
27
6
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
(in thousands, except share and per share amounts)
deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
Pursuant to the deferred method under APB Opinion 11, which
was applied in 1992 and prior years, deferred income taxes are
recognized for income and expense items that are reported in
different years for financial reporting purposes and income
tax purposes using the tax rate applicable for the year of the
calculation. Under the deferred method, deferred taxes are
not adjusted for subsequent changes in tax rates.
Effective January 1, 1993, the Company adopted Statement 109
and the cumulative effect of the change in accounting for
income taxes was immaterial.
(4) Inventories
Inventories consist of the following at December 31, 1993 and 1994:
1993 1994
---- ----
Finished products $ 8,396 8,154
Raw materials and supplies 1,410 4,029
------- ------
$ 9,806 12,183
======= ======
(5) Property, Plant and Equipment
Property, plant and equipment and accumulated depreciation at December
31, 1993 and 1994 are summarized as follows:
1993 1994
---- ----
Land and improvements $ 17,540 17,589
Buildings 26,930 27,120
Machinery and other equipment 46,708 51,309
Vending equipment 29,105 32,084
--------- --------
120,283 128,102
Accumulated depreciation (55,760) (62,156)
--------- --------
Net property, plant and equipment $ 64,523 65,946
========= ========
Depreciation expense on production facilities is included in cost of
sales and totaled $3,287, $4,016 and $3,508 for the years ended
December 31, 1992, 1993 and 1994, respectively.
(Continued)
28
7
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
(in thousands, except share and per share amounts)
(6) Goodwill and Other Intangible Assets
Goodwill and other intangible assets at December 31, 1993 and 1994 are
summarized as follows:
1993 1994
---- ----
Goodwill, net of accumulated amortization
of $12,790 and $15,363 $ 86,543 83,970
Franchise costs, net of accumulated
amortization of $10,357 and $12,872 28,112 25,597
Other, net of accumulated amortization of
$5,591 and $6,022 2,013 1,582
--------- --------
$ 116,668 111,149
========= ========
(7) Lease Obligations
The Company has operating leases principally for office, trucking
fleet and vending equipment. Rent expense on operating leases was
$3,197, $4,533 and $4,997 in 1992, 1993 and 1994, respectively.
At December 31, 1994, future minimum rental payments under
noncancellable operating leases are $2,183, $1,858, $1,521, $1,141,
$713 and $238 for the years 1995 through 1999 and thereafter,
respectively.
(8) Acquisition
On April 13, 1993, pursuing its operating strategy of acquiring
contiguous bottling territories, the Company acquired all of the
operating assets of Dr Pepper Bottling Company of Galveston, Inc. for
$9,000 in cash and $1,000 payable in installments over five years
under a noncompetition agreement.
(Continued)
29
8
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
(in thousands, except share and per share amounts)
(9) Long-term Debt and Obligations Under Capital Leases
Long-term debt and obligations under capital leases at December 31,
1993 and 1994 is summarized as follows:
1993 1994
---- ----
Senior notes due in 2000, interest at 10-1/4% (a) $ 125,000 117,000
Facility A Note, interest at LIBOR (6% at
December 31, 1994) + 2%; due in varying
installments through June 1999 (b) 86,111 68,069
Sale/leaseback borrowings, interest at 12.6%, due in
monthly installments of $333 through
June 2014 (c) 27,475 27,019
Covenant not to compete liabilities at present value
of payments 1,944 1,617
Obligations under capital leases 51 4
--------- ---------
240,581 213,709
Less current portion 12,885 14,448
--------- ---------
$ 227,696 199,261
========= =========
(a) Senior Notes
As contemplated by the Recapitalization Plan, on February 18,
1993, the Company issued and sold $125,000 aggregate principal
amount of Senior Notes. The Senior Notes are redeemable at
the option of the Company, in whole or in part, at any time on
or after February 16, 1998, at 101.708% of the principal
amount, plus accrued interest, if any, if redeemed during the
twelve-month period beginning February 16, 1998, and
thereafter at 100% of the principal amount, plus accrued
interest, if any, until maturity. In the event of a change in
control of the Company or Holdings, the Company will be
obligated to make an offer to purchase all outstanding Senior
Notes at a redemption price of 101% of the principal amount
plus accrued interest to the date of repurchase.
Under the terms of the indenture governing the Senior Notes,
aggregate dividend payments on capital stock subsequent to
issuance of the Senior Notes are restricted to the sum of (i)
50% of aggregate net income subsequent to issuance of the
Senior Notes (or in the case of a net loss, 100% of the
aggregate net loss) plus (ii) the proceeds from the issuance
of capital stock, warrants or options plus (iii) $7.5 million.
(Continued)
30
9
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
(in thousands, except share and per share amounts)
(b) Facility A Note
The Facility A Note contains certain restrictive covenants and
requires the Company, among other things, to satisfy certain
financial ratios and restrict investments, capital
expenditures, additional debts and payment of dividends. This
loan is secured by substantially all assets of the Company.
(c) Sale/Leaseback Borrowings
Under the sale/leaseback agreement, the Company has the option
to repurchase the property on the tenth anniversary date of
the agreement at the greater of the fair value of the property
at the option date or the original sales price. On the tenth
anniversary of the amended agreement, and at the end of each
successive five-year period for which the agreement remains in
effect, the monthly payments are to be adjusted, using a
formula based upon increases in the Consumer Price Index. In
addition, the agreement provides for, at the option of the
Company, an extension of the lease termination date for
successive five-year terms to 2034.
(d) Bank Credit Agreement
As of December 31, 1994, the Company had no balance
outstanding on the $25,000 revolving line of credit facility
of the 1993 Bank Credit Agreement. The balance available for
borrowing has been reduced by the outstanding letters of
credit discussed below. The facility matures June 30, 1999.
Interest on outstanding balances is payable at LIBOR (6% at
December 31, 1994) plus 2%.
The 1993 Bank Credit Agreement contains customary restrictive
covenants and requires the Company, among other things, to
satisfy certain financial ratios and restrict investments,
capital expenditures, additional debt and payments of
dividends. Amounts owed under the 1993 Bank Credit Agreement
are the direct obligations of the Company and are
unconditionally guaranteed by Holdings. This loan is secured
by substantially all assets of the Company.
(Continued)
31
10
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
(in thousands, except share and per share amounts)
The maturities of long-term debt and obligations under capital leases
at December 31, 1994 are as follows: 1995 - $14,448; 1996 - $16,244;
1997 - $18,058; 1998 - $18,014; 1999 - $5,177 and thereafter -
$141,768.
Interest paid for the years ended December 31, 1992, 1993 and 1994
totaled $30,830, $23,344 and $22,633, respectively.
At December 31, 1994, the Company had outstanding letters of credit of
$1,830 related to certain insurance policies.
(10) Savings Plan
The Company maintains a tax-qualified defined contribution 401(k)
profit sharing plan (Savings Plan). All employees over age 21 with
one year of service are eligible to participate in the Savings Plan.
Participants may elect to defer up to fifteen percent of their
compensation and have it contributed to the Savings Plan on a pre-tax
basis. In addition, as long as it has sufficient net profits, the
Company automatically matches fifty percent of each participant's
salary deferral contributions up to three percent of each
participant's salary. In accordance with the Internal Revenue Code of
1986, as amended, the amount which may be contributed annually to the
Savings Plan by or on behalf of any participant is subject to the
limitations imposed on defined contribution plan contributions.
Amounts expensed under the Savings Plan were not significant in 1992,
1993 or 1994.
(11) Income Taxes
Income tax expense attributable to income from continuing operations
was $140 for the year ended December 31, 1994 ($-0- in 1992 and 1993),
and differed from the amount computed by applying the U.S. federal
income tax rate of 34 percent to pretax income from continuing
operations as a result of the following:
1992 1993 1994
---- ---- ----
Computed "expected" tax expense $(591) (3,716) 4,291
Changes in income taxes resulting from:
Addition to (utilization of) net operating loss
carryforward 591 3,716 (4,634)
Amortization of goodwill - - 165
Alternative minimum tax - - 140
Other - - 178
----- ------ ------
Total income tax expense $ - - 140
===== ====== ======
(Continued)
32
11
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
(in thousands, except share and per share amounts)
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of
December 31, 1994 are presented below:
1993 1994
---- ----
Deferred tax assets:
Net operating loss carryforwards $ 34,431 22,991
Obligations under capital leases 8,974 8,605
Other 1,961 2,254
-------- -------
Total gross deferred tax assets 45,366 33,850
Less valuation allowance (37,904) (26,116)
-------- -------
Net deferred tax assets 7,462 7,734
-------- -------
1993 1994
---- ----
Deferred tax liabilities:
Plant and equipment, principally due to differences
in depreciation $ (3,879) (3,586)
Intangible assets due to differences in amortization (3,583) (4,148)
-------- -------
Total gross deferred liabilities (7,462) (7,734)
-------- -------
Net deferred tax assets (liabilities) $ - -
======== =======
For federal income tax purposes, the predecessor tax basis of assets
and liabilities was retained following the Acquisition.
At December 31, 1994, the Company has net operating loss carryforwards
of approximately $67,619 which are available to offset future federal
taxable income, if any, through 2008. At December 31, 1994, there
were approximately $48,903 of net operating loss carryforwards
available to offset future alternative minimum taxable income for
federal income tax purposes. Net operating losses may not offset more
than 90% of the Company's alternative minimum tax income.
The valuation allowance for deferred tax assets as of January 1, 1993
was $19,744. The net change in the total valuation allowance for the
years ended December 31, 1993 and 1994 was an increase (decrease) of
$18,160 and ($11,788), respectively. The changes are primarily
related to changes in net operating loss carryforwards during 1993 and
1994.
(Continued)
33
12
DR PEPPER BOTTLING COMPANY OF TEXAS
Notes to Financial Statements
(in thousands, except share and per share amounts)
Income taxes paid for the year ended December 31, 1994 totaled
$105,000 (none in 1992 and 1993).
If the Company undergoes a more-than-50% ownership change within the
meaning of section 382(g) of the Internal Revenue Code, then the
Company will be limited in the use of its pre-ownership change net
operating losses to offset future taxable income. A similar
limitation would apply to any pre-ownership change tax credits. Also,
to the extent that the taxable income of the Company for any future
year exceeds the sum of any net operating losses arising after the
date of the ownership change plus the amount of the annual limitation
on the pre- ownership change net operating losses, the Company would
be required to pay federal income tax on such excess.
Although a more-than-50% ownership change within the meaning of
section 382(g) of the Internal Revenue Code occurred with respect to
the Company in October of 1988, the Company has determined that the
annual limitation under section 382 of the Code on its pre-October
1988 net operating losses should be adequate to permit the full use of
those net operating losses against future taxable income of the
Company. Furthermore, although there can be no assurance that the
Internal Revenue Service would not take a different position, the
Company believes that a more-than-50% ownership change within the
meaning of section 382(g) of the Internal Revenue Code has not
occurred with respect to the Company after October 1988.
(12) Other Contingencies
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 financial position.
34
[KPMG Peat Marwick LLP LOGO]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Dr Pepper Bottling Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Dr Pepper
Bottling Holdings, Inc. and subsidiary as of December 31, 1993 and 1994, and
the related statements of operations, stockholders' deficit and cash flows for
each of the years in the three-year period ended December 31, 1994. In
connection with our audits of the financial statements, we also have audited the
financial statement schedules as listed on the accompanying index. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Dr Pepper Bottling
Holdings, Inc. and subsidiary as of December 31, 1993 and 1994, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick LLP
Dallas, Texas
March 8, 1995
35
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1993 and 1994
(in thousands, except per share amounts)
Assets (note 9) 1993 1994
---- ----
Current assets:
Cash $ 16,955 7,794
Accounts receivable:
Trade, less allowance for doubtful accounts of $305
in 1993 and $371 in 1994 20,156 24,479
Other 3,109 3,463
Inventories (note 4) 9,806 12,183
Prepaid expenses 3,421 5,671
--------- ---------
Total current assets 53,447 53,590
--------- ---------
Property, plant and equipment, net (notes 5 and 9) 64,523 65,946
Other assets, at amortized cost:
Goodwill and other intangible assets (note 6) 116,668 111,149
Debt issuance costs 11,225 9,514
--------- ---------
$ 245,863 240,199
========= =========
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 26,311 34,285
Accrued expenses 13,877 14,935
Current maturities of long-term debt and obligations
under capital leases (note 9) 12,885 14,448
--------- ---------
Total current liabilities 53,073 63,668
--------- ---------
Long-term debt and obligations under capital leases, less current
maturities (note 9) 306,149 287,099
Cumulative, redeemable senior exchangeable preferred stock at $.01 par
value. Authorized 2,150 shares; issued and outstanding 1,283 shares
in 1993 and 1,430 in 1994; aggregate liquidation preference $35,750
(note 10) 29,635 33,502
Stockholders' deficit (note 11):
Class A common stock, $.01 par value. Authorized 22,000 shares;
issued and outstanding 13,642 shares in 1993 and 1994 136 136
Additional paid-in capital 14,383 14,383
Consideration to continuing predecessor shareholders in
excess of book value (33,948) (33,948)
Deficit (123,565) (124,641)
--------- ---------
Total stockholders' deficit (142,994) (144,070)
Commitments and contingencies (notes 7, 13 and 14)
--------- ---------
$ 245,863 240,199
========= =========
See accompanying notes to consolidated financial statements.
36
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Years ended December 31, 1992, 1993 and 1994
(in thousands, except per share amounts)
1992 1993 1994
---- ---- ----
Net sales $ 288,271 310,881 332,204
Cost of sales (note 5) 185,783 195,957 214,376
------------- ---------- ----------
Gross profit 102,488 114,924 117,828
Marketing expense 6,036 9,418 7,618
Depreciation 5,371 5,577 5,765
Amortization of intangible assets 5,505 5,751 5,519
Administrative and general expenses 55,575 60,572 62,931
------------- ---------- ----------
Operating profit 30,001 33,606 35,995
------------- ---------- ----------
Other expense (income):
Interest, including accretion of discount on
discount notes of $7,340 and $9,385 in 1993
and 1994, respectively 30,830 31,304 31,777
Amortization of deferred debt issuance costs 1,107 1,610 1,711
Other, net (199) (2,624) (424)
------------- ---------- ----------
31,738 30,290 33,064
------------- ---------- ----------
Earnings (loss) before income taxes,
extraordinary item and dividends on
subsidiary's preferred stock (1,737) 3,316 2,931
Income taxes - - 140
------------- ---------- ----------
Earnings (loss) before extraordinary
item and dividends on subsidiary's
preferred stock (1,737) 3,316 2,791
Dividends on subsidiary's preferred stock (13,171) (5,806) -
------------- ---------- ----------
Earnings (loss) before extraordinary
item (14,908) (2,490) 2,791
Extraordinary item - loss on recapitalization (note 2) - (31,559) -
------------- ---------- ----------
Net earnings (loss) $ (14,908) (34,049) 2,791
============= ========== ==========
Net loss applicable to common stock (note 3(i)) $ (14,908) (36,128) (1,076)
============= ========== ==========
Weighted average shares outstanding 13,333,000 13,543,000 13,642,000
============= ========== ==========
Loss per common share before extraordinary item $(1.12) (.34) (.08)
Extraordinary item - (2.33) -
------------- ---------- ----------
Loss per common share $(1.12) (2.67) (.08)
============= ========== ==========
See accompanying notes to consolidated financial statements.
37
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Deficit
Years ended December 31, 1992, 1993 and 1994
(in thousands)
Consideration
Common stock to continuing
--------------------------------- Predecessor
Class A Class B Additional stockholders
--------------- --------------- paid-in in excess of
Shares Amount Shares Amount capital book value Deficit Totals
------ ------ ------ ------ ------- ---------- ------- ------
Balance at December 31, 1991 11,333 $ 113 2,000 $ 20 11,858 (33,948) (72,529) (94,486)
Net loss - - - - - - (14,908) (14,908)
------ ------ ------ ------ ------ ------ ------- -------
Balance at December 31, 1992 11,333 113 2,000 20 11,858 (33,948) (87,437) (109,394)
Warrant issued (note 11) - - - - 2,250 - - 2,250
Common shares issued 309 3 275 - - 278
Class B shares converted to Class A 2,000 20 (2,000) (20) - - - -
Stock dividends on redeemable
senior exchangeable preferred
stock - - - - - - (2,079) (2,079)
Net loss - - - - - - (34,049) (34,049)
------ ------ ------ ------ ------ ------ ------- -------
Balance at December 31, 1993 13,642 136 - - 14,383 (33,948) (123,565) (142,994)
Stock dividends on redeemable
senior exchangeable preferred
stock - - - - - - (3,677) (3,677)
Net earnings - - - - - - 2,791 2,791
Accretion of preferred stock - - - - - - (190) (190)
------ ------ ------ ------ ------ ------ ------- -------
Balance at December 31, 1994 13,642 136 - $ - 14,383 (33,948) (124,641) (144,070)
====== ====== ====== ====== ====== ====== ======= =======
See accompanying notes to consolidated financial statements.
38
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1992, 1993 and 1994
(in thousands)
1992 1993 1994
---- ---- ----
Cash flows from operating activities:
Net earnings (loss) $ (14,908) (34,049) 2,791
---------- --------- --------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on recapitalization - 31,559 -
Depreciation of property, plant and equipment 8,658 9,593 9,273
Amortization of other assets 6,612 7,361 7,230
Subsidiary's preferred stock dividends 13,171 5,806 -
Accretion of discount on discount notes - 7,340 9,385
Loss (gain) on sale of assets (224) 32 (52)
Changes in assets and liabilities, net of
effects from acquisitions:
Accounts receivable (1,228) (1,618) (4,677)
Inventories (1,444) (346) (2,377)
Prepaid expenses (1,159) 1,491 (2,250)
Accounts payable 6,878 2,079 7,974
Accrued expenses (792) 4,949 1,058
---------- --------- --------
Total adjustments 30,472 68,246 25,564
---------- --------- --------
Net cash provided by
operating activities 15,564 34,197 28,355
---------- --------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (7,833) (8,971) (10,838)
Proceeds from sale of property, plant and equipment 1,673 604 194
Cash paid for acquisitions, net of cash acquired - (8,965) -
---------- --------- --------
Net cash used in investing activities (6,160) (17,332) (10,644)
---------- --------- --------
Cash flows from financing activities:
Payment of long-term debt (6,345) (198,713) (26,872)
Debt issued - 289,932 -
Deferred debt costs - (12,011) -
Payment of costs related to recapitalization - (26,906) -
Preferred stock issued - 27,556 -
Preferred stock retired - (88,147) -
Payment of dividends on subsidiary's preferred stock (2) (2,157) -
Common stock issued - 278 -
Warrant issued - 2,250 -
---------- --------- --------
Net cash used in financing activities (6,347) (7,918) (26,872)
---------- --------- --------
Net increase (decrease) in cash and cash equivalents 3,057 8,947 (9,161)
Cash and cash equivalents at beginning of year 4,951 8,008 16,955
---------- --------- --------
Cash and cash equivalents at end of year $ 8,008 16,955 7,794
========== ========= ========
See accompanying notes to consolidated financial statements.
39
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1992, 1993 and 1994
(in thousands, except share and per share amounts)
(1) Organization and Business
(a) Organization
Dr Pepper Bottling Holdings, Inc. ("Holdings") is a
corporation owned 41.5% (including 39% related to beneficial
ownership pursuant to the terms of a voting trust agreement)
by DLJ Capital Corporation ("DLJ Capital"), 21.2% by other new
investors and 37.3% by certain continuing predecessor
stockholders of Dr Pepper Bottling Company of Texas
("Company"). Holdings was formed expressly for the purpose of
acquiring all of the common stock of the Company. Effective
October 28, 1988, Holdings entered into an agreement with the
Company providing for the acquisition of all issued and
outstanding common stock of the Company. Stockholders' equity
reflects such continuing Predecessor stockholders'
proportionate interests in the adjusted historical book value
of the Company, reduced by the net consideration paid by
Holdings for common stock representing such interest.
(b) Business
The Company is principally engaged in producing, marketing and
distributing carbonated soft drinks in Dallas/Fort Worth,
Houston and Waco, Texas. Soft drink operations are conducted
pursuant to franchise agreements with companies owning the
rights to soft drink formulae.
(2) Recapitalization
In 1993, the Company and Holdings completed a recapitalization plan
(the "Recapitalization Plan"), the purpose of which was to reduce the
aggregate amount of interest expense and preferred stock dividend
requirements. The Recapitalization Plan is described in more detail
in notes 9, 10 and 11.
(a) 1993 Bank Credit Agreement
Pursuant to the Recapitalization Plan, on February 18, 1993,
the Company entered into a credit agreement (the "1993 Bank
Credit Agreement") with certain banks providing for (i) a term
loan facility in the aggregate amount of $100,000 and (ii) a
revolving line of credit facility in the aggregate amount of
$25,000.
On March 22, 1993, as contemplated by the Recapitalization
Plan, the Company borrowed $91,700 under the term loan
facility of the 1993 Bank Credit Agreement to redeem all of
the then outstanding Senior Exchangeable Preferred Stock of
the Company.
(Continued)
40
2
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(b) Sale/Leaseback
As part of the Recapitalization Plan, the Company entered into
an amendment to the lease agreement in connection with the
sale/leaseback of its Irving and Houston, Texas production
facilities. The amendment to the lease agreement modified
certain covenants and eliminated the consumer price index
adjustment to the rent scheduled to be effected on July 1,
1994. In connection with the amendment, Donaldson Lufkin &
Jenrette Securities Corporation ("DLJ") obtained the right to
sell the note held by the lender under the lease agreement,
and DLJ subsequently sold the note. The proceeds from such
sale in excess of the principal amount of the note plus
accrued interest, commissions and expenses ($1,227) were paid
to the Company and are reflected as a reduction of the loss on
recapitalization.
(c) Loss on Recapitalization
In 1993, Company recorded an extraordinary loss of $31,600 in
connection with the early retirement of a total of $192,200
principal amount of notes and debentures. The aggregate
purchase price (including certain costs to extinguish the
debt) of such indebtedness was $223,800, financed principally
through newly issued debt and preferred stock.
(3) Summary of Significant Accounting Policies
(a) Basis of Presentation
The consolidated financial statements include the accounts of
Holdings and its wholly-owned subsidiary, Dr Pepper Bottling
Company of Texas. Certain amounts in the 1992 and 1993
financial statements have been reclassified to conform with
1994 presentation.
(b) Cash Equivalents
Cash equivalents consist of highly liquid debt instruments
with original maturities of three months or less. The Company
did not have any cash equivalents at December 31, 1993 or
1994.
(c) Inventories
Inventories are stated at the lower of first-in, first-out
("FIFO") cost or market.
(d) Property, Plant and Equipment
Property, plant and equipment are stated at cost. For
financial reporting purposes, depreciation is provided on the
straight-line method over the estimated useful lives of the
assets. Accelerated depreciation methods are generally used
for income tax purposes.
Maintenance and repairs are charged to operations as incurred;
renewals and betterments are capitalized and depreciated. The
cost and accumulated depreciation of
(Continued)
41
3
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
assets sold or disposed of are removed from the accounts.
Resultant profit or loss on such transactions is credited or
charged to earnings.
(e) Goodwill and Other Intangible Assets
Excess of cost over estimated fair market value of tangible
net assets of acquired businesses and costs of franchises are
being amortized on a straight-line basis over 10 to 40 years.
Debt issuance costs are being amortized over the terms of the
related debt agreements (10 to 25 years). Covenants not to
compete are amortized over the terms of the agreements (5 to
10 years).
The Company continually evaluates the propriety of the
carrying amount of goodwill and other intangibles as well as
the amortization period to determine whether current events or
circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists
of the projection of undiscounted operating income before
depreciation, amortization, nonrecurring charges and interest
for the Company over the remaining amortization periods of the
related intangible assets. The projections are based on a
historical trend line of actual results since the acquisitions
of the respective assets and adjusted for expected changes in
operating results. To the extent such projections indicate
that the undiscounted operating income is not expected to be
adequate to recover the carrying amounts of the related
intangible assets, such carrying amounts are written down by
charges to expense. At this time, the Company believes that
no significant impairment of goodwill and other intangible
assets has occurred and that no reduction of the estimated
useful lives is warranted.
(f) Self-insurance
The Company is self-insured in these areas: (a) employer's
excess indemnity with a $250 per occurrence limit on coverage,
(b) automobile liability with a $250 per occurrence limit on
coverage, (c) general liability with a $250 per occurrence
limit on coverage, and (d) medical insurance with a $125 per
person per year limit on coverage. The Company accrues for
costs associated with its self-insured programs as incurred.
Coverage in excess of the limits defined above is provided by
third-party insurance companies. All other claims are covered
through third-party insurance policies.
(g) Financial Instruments and Credit Risk Concentrations
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash
equivalents and trade receivables. The Company places its
cash equivalents with high credit quality financial
institutions; however, such amounts are generally in excess of
federally insured limits. Although the Company does not
require collateral for trade receivables, the credit risk is
limited due to the large number of customers. For the years
ended December 31, 1992, 1993 and 1994, no customer accounted
for more than 10% of net sales. At December 31, 1993 and
1994, no receivable from any customer exceeded 5% of
stockholders' deficit.
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments"
("Statement 107"), requires that the Company disclose
(Continued)
42
4
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
estimated fair values for its financial instruments. Fair
value estimates are set forth below for the Company's
financial instruments:
-- Cash, Accounts Receivable, Accounts Payable and
Accrued Expenses - The carrying amounts approximate
fair value because of the short maturity of these
instruments.
-- Long-term Debt - The carrying amounts of the term
loan and credit facility loan approximate market
because of the variable interest rate which is based
on the bank's alternative base rate.
-- Senior Discount Notes - The fair value is based on
the amount of discounted future cash flows associated
with the notes using the Company's current borrowing
rate for similar debt instruments of comparable
maturity. The estimated fair value of the Company's
senior discount notes at December 31, 1994 was
$98,125.
The fair value estimates are made at a specific point in time,
based on relevant market information and information about the
financial instruments. These estimates are subjective in
nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the
estimates.
(h) Income Taxes
In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Statement 109 requires a
change from the deferred method of accounting for income taxes
of APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability
method of Statement 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
Pursuant to the deferred method under APB Opinion 11, which
was applied in 1992 and prior years, deferred income taxes are
recognized for income and expense items that are reported in
different years for financial reporting purposes and income
tax purposes using the tax rate applicable for the year of the
calculation. Under the deferred method, deferred taxes are
not adjusted for subsequent changes in tax rates.
Effective January 1, 1993, Holdings adopted Statement 109 and
the cumulative effect of the change in accounting for income
taxes was immaterial.
(Continued)
43
5
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(i) Loss Per Common Share
Net loss per common share is based on the weighted average
number of Class A and Class B common shares outstanding and is
adjusted for dividends on Holdings' preferred stock and
accretion of preferred stock for the difference between the
carrying value and liquidation preference. Shares assumable
upon exercise of stock options and warrants are antidilutive
and are excluded from the calculation.
(4) Inventories
Inventories consist of the following at December 31, 1993 and 1994:
1993 1994
---- ----
Finished products $ 8,396 8,154
Raw materials and supplies 1,410 4,029
------- -------
$ 9,806 12,183
======= =======
(5) Property, Plant and Equipment
Property, plant and equipment and accumulated depreciation at December
31, 1993 and 1994 are summarized as follows:
1993 1994
---- ----
Land and improvements $ 17,540 17,589
Buildings 26,930 27,120
Machinery and other equipment 46,708 51,309
Vending equipment 29,105 32,084
---------- ----------
120,283 128,102
Accumulated depreciation (55,760) (62,156)
---------- ----------
Net property, plant and equipment $ 64,523 65,946
========== ==========
Depreciation expense on production facilities is included in cost of
sales and totaled $3,287, $4,016 and $3,508 for the years ended
December 31, 1992, 1993 and 1994, respectively.
(6) Goodwill and Other Intangible Assets
Goodwill and other intangible assets at December 31, 1993 and 1994 are
summarized as follows:
1993 1994
--------- ---------
Goodwill, net of accumulated amortization
of $12,790 and $15,363 $ 86,543 83,970
Franchise costs, net of accumulated
amortization of $10,357 and $12,872 28,112 25,597
Other net of accumulated amortization of
$5,591 and $6,022 2,013 1,582
--------- ---------
$ 116,668 111,149
========= =========
(Continued)
44
6
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(7) Lease Obligations
The Company has operating leases principally for office, trucking
fleet and vending equipment. Rent expense on operating leases was
$3,197, $4,533 and $4,997 in 1992, 1993 and 1994, respectively.
At December 31, 1994, future minimum rental payments under
noncancellable operating leases are $2,183, $1,858, $1,521, $1,141,
$713 and $238 for the years 1995 through 1999 and thereafter,
respectively.
(8) Acquisition
On April 13, 1993, pursuing its operating strategy of acquiring
contiguous bottling territories, the Company acquired all of the
operating assets of Dr Pepper Bottling Company of Galveston, Inc. for
$9,000 in cash and $1,000 payable in installments over five years
under a noncompetition agreement.
(9) Long-term Debt and Obligations Under Capital Leases
Long-term debt and obligations under capital leases at December 31,
1993 and 1994 is summarized as follows:
1993 1994
---- ----
Senior notes due in 2000, interest at 10-1/4% (a) $ 125,000 117,000
Facility A Note, interest at LIBOR (6% at
December 31, 1994) + 2%; due in varying
installments through June 1999 (b) 86,111 68,069
Senior discount notes due in 2003 (c) 78,453 87,838
Sale/leaseback borrowings, interest at 12.6%, due in
monthly installments of $333 through June 2014 (d) 27,475 27,019
Covenant not to compete liabilities at present value
of payments 1,944 1,617
Obligations under capital leases 51 4
--------- ---------
319,034 301,547
Less current portion 12,885 14,448
--------- ---------
$ 306,149 287,099
========= =========
(a) Senior Notes
As contemplated by the Recapitalization Plan, on February 18,
1993, the Company issued and sold $125,000 aggregate principal
amount of Senior Notes. The Senior Notes are redeemable at
the option of the Company, in whole or in part, at any time on
or after February 16, 1998, at 101.708% of the principal
amount, plus accrued interest, if any, if redeemed during the
twelve-month period beginning February 16, 1998, and
thereafter at 100% of the principal amount, plus accrued
interest, if any, until maturity. In the event of a change in
control of the Company or Holdings, the
(Continued)
45
7
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
Company will be obligated to make an offer to purchase all
outstanding Senior Notes at a redemption price of 101% of the
principal amount plus accrued interest to the date of
repurchase.
Under the terms of the indenture governing the Senior Notes,
aggregate dividend payments on capital stock subsequent to
issuance of the Senior Notes are restricted to the sum of (i)
50% of aggregate net income subsequent to issuance of the
Senior Notes (or in the case of a net loss, 100% of the
aggregate net loss) plus (ii) the proceeds from the issuance
of capital stock, warrants or options plus (iii) $7,500.
(b) Facility A Note
The Facility A Note contains certain restrictive covenants and
requires the Company, among other things, to satisfy certain
financial ratios and restrict investments, capital
expenditures, additional debts and payment of dividends. This
loan is secured by substantially all assets of the Company.
(c) Senior Discount Notes
As contemplated by the Recapitalization Plan, on February 18,
1993, Holdings issued and sold $125,000 aggregate principal
amount of Discount Notes. The notes will mature on February
15, 2003. The Discount Notes were issued at a substantial
discount from their principal amount. Commencing February 16,
1998, interest will accrue until maturity on the Discount
Notes at a rate of 11-5/8% per annum. Interest on the
Discount Notes is payable semiannually on February 15 and
August 15 of each year, commencing August 15, 1998. The
Discount Notes are redeemable, in whole or in part, at the
option of Holdings, on or after February 16, 1998, at amounts
decreasing from 104.359% of the principal amount, plus accrued
interest, at February 16, 1998 to 100% of the principal
amount, plus accrued interest, at February 16, 2001, until
maturity. In the event of a change in control of Holdings,
Holdings will be obligated to make an offer to purchase all
outstanding Discount Notes at a redemption price of 101% of
the accreted value on any repurchase date prior to February
16, 1998, or 101% of the principal amount thereof plus accrued
interest to any repurchase date on or after February 16, 1998.
Under the terms of the indenture governing the Senior Discount
Notes, aggregate dividend payments on capital stock subsequent
to issuance of the Senior Discount Notes are restricted to the
sum of (i) 50% of aggregate net income subsequent to issuance
of the Senior Discount Notes (or in the case of a net loss,
100% of the aggregate net loss) plus (ii) the proceeds from
the issuance of capital stock, warrants or options plus (iii)
$7,500.
(d) Sale/Leaseback Borrowings
Under the sale/leaseback agreement, the Company has the option
to repurchase the property on the tenth anniversary date of
the agreement at the greater of the fair value of the property
at the option date or the original sales price. On the tenth
anniversary of the agreement, and at the end of each
successive five-year period for which the agreement remains in
effect, the monthly payments are to be adjusted, using a
formula
(Continued)
46
8
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
based upon increases in the Consumer Price Index. In
addition, the agreement provides for, at the option of the
Company, an extension of the lease termination date for
successive five-year terms to 2034.
(e) Bank Credit Agreement
As of December 31, 1994, the Company had no balance
outstanding on the $25,000 revolving line of credit facility
of the 1993 Bank Credit Agreement. The balance available for
borrowing has been reduced by the outstanding letters of
credit discussed below. The facility matures June 30, 1999.
Interest on outstanding balances is payable at discussed below
LIBOR (6% at December 31, 1994) plus 2%.
The 1993 Bank Credit Agreement contains customary restrictive
covenants and requires the Company, among other things, to
satisfy certain financial ratios and restrict investments,
capital expenditures, additional debt and payments of
dividends. Amounts owed under the 1993 Bank Credit Agreement
are the direct obligations of the Company and are
unconditionally guaranteed by Holdings. This loan is secured
by substantially all assets of the Company.
The maturities of long-term debt and obligations under capital leases
at December 31, 1994 are as follows: 1995 - $14,448; 1996 - $16,244;
1997 - $18,058; 1998 - $18,014; 1999 - $5,177 and thereafter -
$229,606.
Interest paid for the years ended December 31, 1992, 1993 and 1994
totaled $30,830, $23,344 and $26,633, respectively.
At December 31, 1994, the Company had outstanding letters of credit of
$1,830 related to certain insurance policies.
(10) Redeemable Preferred Stock
As part of the Recapitalization Plan, Holdings sold, for an aggregate
purchase price of $30,000, 1,200,000 shares of redeemable senior
cumulative exchangeable preferred stock, par value $.01 per share, of
Holdings (the "Preferred Stock") and a warrant to purchase up to 15%
of the common stock of Holdings on a fully diluted basis. The Company
redeemed all of the outstanding Senior Exchangeable Preferred Stock of
the Company, in accordance with the Recapitalization Plan.
Each share of Preferred Stock has a liquidation preference of $25.00
per share, plus accrued and unpaid dividends. Dividends are payable
quarterly at the rate of $2.75 per annum per share. Dividends on the
Preferred Stock are cumulative and, at the option of Holdings, may be
paid through the issuance of additional shares of Preferred Stock on
each dividend payment date through April 1, 1998. During 1993 and
1994, dividends on the redeemable preferred stock were paid through
the issuance of additional shares of preferred stock. The Preferred
Stock is optionally redeemable, in whole or in part, at $25.00 per
share, plus accrued and unpaid dividends thereon on or after April 1,
1998, provided that Holdings is also entitled to optionally redeem
Preferred Stock with all or a portion of the proceeds from an initial
offering of Holdings common stock consummated on or before the third
anniversary of the issuance of the Preferred Stock.
(Continued)
47
9
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
On each of April 1, 2005 and 2006, Holdings is required to redeem 25%
of the number of shares of Preferred Stock that is outstanding as of
March 31, 2005, at $25.00 per share. On April 1, 2007, Holdings must
redeem the remaining shares of Preferred Stock then outstanding at
$25.00 per share. Shares redeemed by Holdings prior to the mandatory
redemption dates are credited toward the mandatory redemption
requirements on a pro rata basis.
The Preferred Stock is exchangeable, in whole or in part, at the
option of Holdings on any dividend payment date for 11% Junior
Subordinated Exchange Debentures due 2006 of Holdings (the "Holdings
Exchange Debentures"). Each share of Preferred Stock will be
exchanged for $25.00 in principal amount of Holdings Exchange
Debentures in denominations of $1,000 or integral multiples thereof.
Differences between the carrying value of the Preferred Stock and
redemption price ($25.00 per share) will be recognized through
adjustments in the carrying value by charges to accumulated deficit
prior to the mandatory redemption dates.
Upon the occurrence of a change in control, at the election of the
holders of the Preferred Stock, Holdings will be required to purchase
for cash all shares of Preferred Stock at $25.25 per share, plus
accrued and unpaid dividends to the date of repurchase.
(11) Stockholders' Deficit
(a) Common Stock
On November 1, 1993, each share of Class B common stock
outstanding was converted to Class A common stock.
(b) Stock Purchase Warrant
In connection with the issuance of Senior Preferred Stock, the
Company entered into an agreement providing for issuance of
warrants to purchase 2,525,000 shares of common stock at $.01
per share. In consideration for granting the warrant, the
Company received $2,250 which was recorded as additional
paid-in capital.
(c) Stock Option Plan
In 1989, Holdings adopted the Dr Pepper Bottling Holdings,
Inc. 1989 Stock Option Plan (the Stock Option Plan). Options
granted under the Stock Option Plan will be exercisable for
the Class A common stock, $0.01 par value per share, of
Holdings. The maximum number of shares of the Class A common
stock to be issued pursuant to the exercise of options granted
under the Stock Option Plan is 666,665. Options granted under
the Stock Option Plan may be either qualified (incentive
options) or nonqualified (nonstatutory options) under Section
422A of the Internal Revenue Code. Options may be granted to
consultants, employees, officers and directors of the Company.
Options granted under the Stock Option Plan will be
exercisable at such times, in such amounts, and at such
exercise prices as shall be determined; provided, however,
that the exercise price for incentive options granted under
the Stock Option
(Continued)
48
10
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
Plan will be not less than the fair market value of the Class
A common stock on the date of grant and the exercise price for
nonstatutory options granted under the Stock Option Plan will
be not less than 50% of the fair market value of the common
stock on the date of grant. At December 31, 1993 and 1994,
666,165 options remained unexercised.
(12) Savings Plan
The Company maintains a tax-qualified defined contribution 401(k)
profit sharing plan ("Savings Plan"). All employees over age 21 with
one year of service are eligible to participate in the Savings Plan.
Participants may elect to defer up to fifteen percent of their
compensation and have it contributed to the Savings Plan on a pre-tax
basis. In addition, as long as it has sufficient net profits, the
Company automatically matches fifty percent of each participant's
salary deferral contributions up to three percent of each
participant's salary. In accordance with the Internal Revenue Code of
1986, as amended, the amount which may be contributed annually to the
Savings Plan by or on behalf of any participant is subject to the
limitations imposed on defined contribution plan contributions.
Amounts expensed under the Savings Plan were not significant in 1992,
1993 or 1994.
(13) Income Taxes
Income tax expense attributable to income from continuing operations
was $140 for the year ended December 31, 1994 ($-0- in 1992 and 1993),
and differed from the amount computed by applying the U.S. federal
income tax rate of 34 percent to pretax income from continuing
operations as a result of the following:
1992 1993 1994
---- ---- ----
Computed "expected" tax expense $(591) (1,127) 997
Changes in income taxes resulting from:
Addition to (utilization) of net operating loss
carryforward 591 1,127 (1,340)
Amortization of goodwill - - 165
Alternative minimum tax - - 140
Other - - 178
----- ------ ------
Total income tax expense $ - - 140
===== ====== ======
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of
December 31, 1994 are presented below:
1993 1994
---- ----
Deferred tax assets:
Net operating loss carryforwards $ 34,431 28,784
Obligations under capital leases 8,974 8,605
Other 1,961 2,457
-------- --------
Total gross deferred tax assets 45,366 39,846
Less valuation allowance (37,904) (32,112)
-------- --------
Net deferred tax assets $ 7,462 7,734
-------- --------
(Continued)
49
11
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
1993 1994
---- ----
Deferred tax liabilities:
Plant and equipment, principally due to differences
in depreciation $ (3,879) (3,586)
Intangible assets due to differences in amortization (3,583) (4,148)
--------- ---------
Total gross deferred liabilities (7,462) (7,734)
--------- ---------
Net deferred tax assets (liabilities) $ - -
========= =========
For federal income tax purposes, the predecessor tax basis of assets
and liabilities was retained following the Acquisition.
At December 31, 1994, the Company has net operating loss carryforwards
of approximately $84,658 which are available to offset future federal
taxable income, if any, through 2008. At December 31, 1994, there
were approximately $64,973 of net operating loss carryforwards
available to offset future alternative minimum taxable income for
federal income tax purposes. Net operating losses may not offset more
than 90% of the Company's alternative minimum tax income.
The valuation allowance for deferred tax assets as of January 1, 1993
was $19,744. The net change in the total valuation allowance for the
years ended December 31, 1993 and 1994 was an increase (decrease) of
$18,160 and ($5,792), respectively. The changes are primarily related
to changes in net operating loss carryforwards during 1993 and 1994.
Income taxes paid for the year ended December 31, 1994 totaled
$105,000 (none in 1992 and 1993).
If the Company undergoes a more-than-50% ownership change within the
meaning of section 382(g) of the Internal Revenue Code, then the
Company will be limited in the use of its pre-ownership change net
operating losses to offset future taxable income. A similar
limitation would apply to any pre-ownership change tax credits. Also,
to the extent that the taxable income of the Company for any future
year exceeds the sum of any net operating losses arising after the
date of the ownership change plus the amount of the annual limitation
on the pre-ownership change net operating losses, the Company would be
required to pay federal income tax on such excess.
Although a more-than-50% ownership change within the meaning of
section 382(g) of the Internal Revenue Code occurred with respect to
the Company in October of 1988, the Company has determined that the
annual limitation under section 382 of the Code on its pre-October
1988 net operating losses should be adequate to permit the full use of
those net operating losses against future taxable income of the
Company. Furthermore, although there can be no assurance that the
Internal Revenue Service would not take a different position, the
Company believes that a more-than-50% ownership change within the
meaning of section 382(g) of the Internal Revenue Code has not
occurred with respect to the Company after October 1988.
(Continued)
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12
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(14) Other Contingencies
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 financial position.
51
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Set forth below are the names, ages, and positions of the executive
officers and directors of the Company and the executive officers and directors
of Holdings. All directors hold office until the next annual meeting of
stockholders and until their successors are duly elected and qualified and all
executive officers hold office at the pleasure of the Board of Directors. The
New Stockholders Agreement (as defined herein) contains certain provisions
regarding the composition of the Board of Directors of Holdings. William O.
Hunt, trustee (the "Voting Trustee"), who is a director of Holdings, is a party
to a Voting Trust Agreement (the "Voting Trust Agreement") between DLJ Capital
Corporation ("DLJ Capital") and himself. See Item 13, "Certain Relationships and
Related Transactions -- Stockholders Agreement" and " -- Voting Trust
Agreement."
NAME AND AGE OFFICE AND PRINCIPAL OCCUPATION
Jim L. Turner, 49..................... Chairman of the Board of Holdings;
Chairman, President, and Chief
Executive Officer of the Company
since 1985; Director of The
Morningstar Group Inc.; Director of
All American Bottling Corporation;
Director of G. Heileman Brewing
Company, Inc.
Thomas O. Hicks, 49................... Director of Holdings; Director of the
Company; Director of Sybron
Corporation; Director of Neodata
Corporation; Director of Life
Partners Group, Inc.; Director of
Berg Electronics, Inc.; Chairman of
the Board of G. Heileman Brewing
Company, Inc.; Chairman of the
Board of Chancellor Communications
Corporation; Director of HMW
Communications, Inc.; Director of
Semi-Tech, Inc.; Co-Founder,
Chairman of the Board, President,
Chief Executive Officer and Chief
Operating Officer of Hicks, Muse,
Tate & Furst, Incorporated, a
Dallas-based private investment
firm organized in 1989; Co-Chairman
of the Board and Co-Chief Executive
Officer of Hicks & Haas
Incorporated.
William O. Hunt, 61................... Director of Holdings; Director of
Michael's Stores, Inc.; Chairman of
the Board of Hogan Systems, Inc.;
Director of Allen Group, Inc.;
Chairman of the Board, Chief
Executive Officer and President of
Intellical Inc. from 1992 to
present; Chairman of the Board,
Chief Executive Officer and
President of Alliance
Telecommunications Corporation from
1989 to 1992; private investor from
1988 to 1989; Chairman of the Board
and Chief Executive Officer of
Alliance Telecommunications
Corporation from 1986 to 1988;
private investor from 1985 to 1986;
Chairman of the Board and Chief
Executive Officer of NetAmerica,
Inc. from 1983 to 1985.
J. Kent Sweezey, 42................... Director of Holdings; Managing
Director of Donaldson, Lufkin &
Jenrette Securities Corporation
("DLJ Securities"), which is
engaged in the investment banking
business, since 1990; Senior Vice
President of DLJ Securities from
1989 to 1990; Vice President of DLJ
Securities from 1984 to 1989.
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53
NAME AND AGE OFFICE AND PRINCIPAL OCCUPATION
Harold Wisnoski, 61................... Senior Vice President -- Operations
since 1988; Vice
President -- Operations from 1984
to 1988.
C. Marvin Montgomery, 54.............. Vice President -- Finance and Chief
Financial Officer of the Company
and Holdings since 1989; Vice
President -- Finance of Coca-Cola
Bottlers of Detroit, Inc. from 1987
to 1989.
Thomas J. Taszarek, 48................ Senior Vice
President -- Administration since
1993; Vice President -- Personnel
since 1986.
Charles D. Burkhart, 46............... Senior Vice President -- Marketing,
D/FW Division since 1993; General
Manager of Quality Beverage
Company, Inc., a distributor of
alcoholic and non-alcoholic
beverages, from 1992 to 1993;
President of Shenley Affiliated
Brands, a division of Guinness,
PLC, a producer and importer of
alcoholic and non-alcoholic
beverages, from 1988 to 1992.
L. Glenn Glasco, 61................... Vice President -- Southwest Fountain
Supply/ Vending Services since
1983.
Eugene W. Honermann, 47............... Senior Vice President -- Sales, D/FW
Division since 1988; Vice
President -- Sales from 1985 to
1988.
Richard E. Edgell, 39................. Regional Vice President -- Sales and
Marketing, Houston Region since
1990; Regional Vice President of
Sales of Kemmerer Bottling,
Indianapolis, Indiana from 1988 to
1990.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company to its
Chief Executive Officer and the four remaining most highly compensated executive
officers for the three fiscal years ended December 31, 1992, 1993 and 1994.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
ANNUAL AWARDS
COMPENSATION ------------
------------------ OPTIONS/ ALL OTHER
SALARY BONUS SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)
----------------------------------------- ---- ------- ------- ------------ ------------
Jim L. Turner 1994 410,000 299,000 -- 3,946
Chairman, President and 1993 404,153 318,750 6,449
Chief Executive Officer 1992 396,461 226,000 241,865 6,262
Charles D. Burkhart(2) 1994 140,000 17,050 -- --
Senior Vice President -- Marketing, 1993 29,615 15,000 -- --
Dallas/Ft. Worth division 1992 -- -- -- --
Harold Wisnoski 1994 110,933 24,050 -- 2,025
Senior Vice President -- 1993 107,500 31,000 2,264
Operations 1992 111,634 30,000 2,545
Eugene W. Honermann 1994 118,029 23,050 -- 2,116
Senior Vice President -- Sales, 1993 115,000 31,000 2,389
Dallas/Ft. Worth division 1992 111,347 30,000 2,540
C. Marvin Montgomery 1994 99,469 15,050 -- 1,718
Vice President -- Finance and Chief 1993 94,942 22,000 1,923
Financial Officer 1992 91,384 17,000 1,851
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---------------
(1) The 1994 amounts include:
(a) As to Mr. Turner, (i) the Company's matching contributions of $2,250
under the Savings Plan (as defined herein), (ii) payment by the
Company of a premium of $989 for the term portion of a life insurance
policy on behalf of Mr. Turner, and (iii) $707, which represents the
dollar value of the benefit to Mr. Turner of the remainder of the
premiums paid by the Company during 1993 under such insurance policy.
(B) As to Messrs. Wisnoski, Honermann, Montgomery and Edgell, the
Company's matching contributions of the respective amounts under
the Savings Plan.
(2) Mr. Burkhart was hired by the Company on October 11, 1993.
EMPLOYMENT AGREEMENT
Mr. Turner has entered into an eight-year employment agreement, dated as of
February 18, 1993, with the Company to serve as its Chairman, President and
Chief Executive Officer. Such employment agreement provides that Mr. Turner
receive an annual salary of $425,000 during the first year of the agreement, and
that such salary be increased during each succeeding year of the agreement by 7%
of the base salary paid in the preceding year of the agreement. Mr. Turner also
will be provided the use of a car during the term of the agreement and other
benefits customary in employment agreements. The employment agreement also
contains provisions governing Mr. Turner's participation in employee benefit
plans and the payment of an annual incentive bonus to Mr. Turner based on the
Company's attainment of specified operating goals. The employment agreement
provides that the Company will purchase an annuity contract for the benefit of
Mr. Turner to provide an annuity income at age 55 of approximately $150,000 per
year.
The employment agreement provides that if Mr. Turner's employment is
terminated due to death or disability, Mr. Turner or his personal representative
will receive on the dates when due payments equal to 100% of his salary and
bonus for the first three years following death or disability and 75% of his
salary and bonus for each remaining year of the agreement plus any amounts due
under a policy of life insurance to be provided by the Company for the benefit
of his designated beneficiaries. In the event that Mr. Turner's employment is
terminated for reasons other than death or disability, the agreement provides
that he may elect to receive from the Company a lump-sum payment equal to the
present value of the base salary and bonus due to him for the remaining term of
the agreement, provided that he may not make such an election at any time when
there is a default under the 1993 Credit Agreement, or if the exercise of such
election or the payment by the Company of the amount required as a result of
such election would result in such a default. Further, the agreement provides
that regardless of his decision to make the above-described election, Mr. Turner
shall be entitled to receive in full any bonus not previously received by him
with respect to the fiscal year prior to the termination of his employment and a
pro-rated portion of the bonus payable with respect to the fiscal year in which
his employment is terminated.
DIRECTOR COMPENSATION
Directors of the Company or Holdings generally do not receive compensation
for their services as directors, although directors are reimbursed for their
reasonable expenses in attending meetings of the respective boards of directors.
William O. Hunt, trustee under the Voting Trust Agreement, will receive $25,000
per annum from DLJ Capital, which will be reimbursed by the Company, for serving
as voting trustee and a director of Holdings. See Item 13, "Certain
Relationships and Related Transactions -- Voting Trust Agreement."
COMPANY PROFIT SHARING BENEFITS
The Company maintains a tax-qualified defined contribution 401(k) profit
sharing plan known as the Dr Pepper Retirement & Savings Plan (the "Savings
Plan"). All employees over age 21 with one year of service are eligible to
participate in the Savings Plan. Participants may elect to defer up to fifteen
percent of their compensation and have it contributed to the Savings Plan on a
pre-tax basis. In addition, as long as it has sufficient net profits, as
determined by the Company's board of directors, the Company automatically
matches
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55
fifty percent of the first three percent of each participant's salary deferral
contributions. In accordance with the Internal Revenue Code of 1986, as amended,
the amount which may be contributed annually to the Savings Plan by or on behalf
of any participant is subject to the limitations imposed on defined contribution
plan contributions. Currently, these limitations prohibit participant salary
deferrals in excess of $9,240 annually (as adjusted for inflation) and limit
total participant and company contributions to the lesser of $30,000 annually
per participant or 25% of the participant's annual compensation. Additional
limitations on salary deferral and employer matching contributions apply to
highly compensated employees if certain nondiscrimination tests are not
satisfied.
HOLDINGS STOCK OPTION PLAN
Holdings adopted the Dr Pepper Bottling Holdings, Inc. 1989 Stock Option
Plan on January 17, 1989 (the "Stock Option Plan"). Options granted under the
Stock Option Plan will be exercisable for the Class A Common Stock of Holdings.
The maximum number of shares of the Class A Common Stock of Holdings to be
issued pursuant to the exercise of options granted under the Stock Option Plan
is 666,665 (which number is subject to adjustment in the case of certain
corporate reorganizations). Options granted under the Stock Option Plan may be
either qualified ("incentive options") under section 422 of the Internal Revenue
Code of 1986, as amended, or nonqualified ("non-statutory options"). Options may
be granted to consultants, employees, officers, and directors of Holdings and of
the Company. The Stock Option Plan provides that the board of directors, a
committee thereof, the President, or the Chief Executive Officer of Holdings
have the authority to grant options. Options granted under the Stock Option Plan
will be exercisable at such times, in such amounts, and at such exercise prices
as shall be determined by such of the board of directors, a committee thereof,
the President, or the Chief Executive Officer that actually grants the options;
provided, however, that the exercise price for incentive options granted under
the Stock Option Plan will be not less than the fair market value of the Class A
Common Stock of Holdings on the date of grant and the exercise price for
non-statutory options granted under the Stock Option Plan will be not less than
50% of the fair market value of the Class A Common Stock of Holdings on the date
of grant. The Stock Option Plan also contains provisions concerning the
treatment of an optionee's options in the event of the death or disability of
such optionee, a change in the optionee's relationship with Holdings or the
Company as an employee or director thereof or as a consultant thereto, or the
occurrence of certain fundamental corporate changes involving Holdings. The
Stock Option Plan also provides that optionees may be granted cash awards in
connection with the exercise of options.
As of February 28, 1995, 424,800 non-statutory options, exercisable at an
exercise price of $1.00 per share, had been granted pursuant to the Stock Option
Plan. In addition, 241,865 options, exercisable at an exercise price of $.90 per
share, had been granted under the Stock Option Plan. As of February 28, 1995,
666,165 options remained unexercised.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither the Company nor Holdings has a compensation committee. Functions
equivalent to those of a compensation committee are performed by the Company's
entire board of directors, of which Mr. Turner is the Chairman. Accordingly, Mr.
Turner participated in the deliberations of the Board of Directors concerning
compensation of executive officers (other than himself).
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56
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
All the issued and outstanding shares of common stock of the Company are
held by Holdings. Holdings has guaranteed the obligations of the Company under
the 1993 Bank Credit Agreement and such guarantee is secured by a first
priority, perfected security interest in the common stock of the Company. The
following table sets forth the beneficial ownership of the outstanding shares of
Class A Common Stock, par value $.01 per share, of Holdings ("Class A Common
Stock") by each person who is a director of the Company or Holdings, each
executive officer listed in the Summary Compensation Table contained in Item
11., all persons that are directors and executive officers of the Company and
Holdings as a group, and each person known by Holdings to be the beneficial
owner of more than 5% of the outstanding shares of such Class A Common Stock
(i) as of February 28, 1995 and (ii) as of February 28, 1995 on a fully-diluted
basis. Except as otherwise discussed below, each of the directors, executive
officers, and 5% stockholders has sole voting and investment power with respect
to all shares indicated as being owned by such person. For information
regarding the New Stockholders Agreement (as defined herein), see Item 13,
"Certain Relationships and Related Transactions -- Stockholders Agreement". For
information regarding the Voting Trust Agreement between DLJ Capital and
William O. Hunt, see Item 13 "Certain Relationships and Related Transactions --
Voting Trust Agreement."
PERCENT OF PERCENT OF
CLASS A OUTSTANDING FULLY-DILUTED
NAME AND ADDRESS COMMON STOCK COMMON STOCK(1) COMMON STOCK(1)(2)
DLJ Capital Corporation(3)(4)............................ 333,666 2.45% 1.98%
140 Broadway
New York, New York
Thomas O. Hicks(5)....................................... 925,322 6.78% 5.50%
200 Crescent Court
Suite 1600
Dallas, Texas
Jim L. Turner(3)(6)...................................... 3,550,200 25.57% 21.09%
2304 Century Center
Irving, Texas
William O. Hunt, Trustee(3)(7)........................... 5,333,334 39.09% 31.68%
6901 McKamy
Dallas, Texas
J. Kent Sweezey(8)....................................... -- -- --
2200 Ross Avenue
Suite 2900
Dallas, Texas
Charles D. Burkhart...................................... -- -- --
2304 Century Center
Irving, Texas
Harold Wisnoski(9)....................................... 8,500 * *
2304 Century Center
Irving, Texas
Eugene W. Honermann(9)................................... 10,000 * *
2304 Century Center
Irving, Texas
C. Marvin Montgomery(9).................................. 7,500 * *
2304 Century Center
Irving, Texas
Crown Cork & Seal Company, Inc.
Master Retirement Trust(3)(10)......................... 2,525,000 15.62% 15.00%
9300 Ashton Road
Philadelphia, Pennsylvania
Directors and officers
as a group (11 persons)(11)............................ 9,849,356 70.73% 58.51%
---------------
* Less than one percent.
(1) Pursuant to Holdings' Certificate of Incorporation, each holder of Class A
Common Stock is entitled to one vote for each share thereof held.
(2) For purposes of calculating the percentage of outstanding shares of common
stock on a fully-diluted basis, the shares of Class A Common Stock issuable
upon the exercise of the Warrant issued as part of the Equity Offering and
all the shares issuable upon the exercise of options outstanding under the
Stock Option Plan (including the options held by Mr. Turner) are assumed to
be outstanding.
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57
(3) The shares of Class A Common Stock of such person are subject to the New
Stockholders Agreement. See Item 13, "Certain Relationships and Related
Transactions -- Stockholders Agreement."
(4) Does not include the 5,333,334 shares of Class A Common Stock held for the
benefit of such person by William O. Hunt, Trustee, pursuant to the terms
of a Voting Trust Agreement. See Item 13, "Certain Relationships and
Related Transactions -- Voting Trust Agreement." DLJ Capital may be deemed
to beneficially own such shares.
(5) As of February 28, 1995, Mr. Hicks held 465,744 shares of Class A Common
Stock and four trusts for the benefit of Mr. Hicks' children for which Mr.
Hicks serves as trustee owned an aggregate of 459,578 shares of Class A
Common Stock (representing in the aggregate 925,322 shares of Class A
Common Stock).
(6) Includes 241,865 shares of Class A Common Stock issuable to Mr. Turner upon
the exercise of outstanding stock options.
(7) DLJ Capital may be deemed to beneficially own such shares. See note (4)
above.
(8) Mr. Sweezey, a Managing Director of DLJ Securities, has been designated to
the Board of Directors of Holdings by DLJ Capital pursuant to the New
Stockholders Agreement.
(9) All such shares of Class A Common Stock are issuable upon the exercise of
outstanding stock options.
(10) The 2,525,000 shares set forth in the table are the shares issuable upon
exercise of the Warrant issued as part of the Equity Offering. The Warrant
entitles the holder thereof to purchase up to 15% of the fully-diluted
common stock of Holdings.
(11) The shares of Class A Common Stock set forth in the table include the
shares held by Mr. Turner (including the shares referenced in note (6)
above), the shares held by Mr. Hicks (including the shares held by the
trusts referenced in note (5) above), and the shares held by Mr. Hunt
pursuant to the voting trust referenced in note (4) above, over which Mr.
Hunt has sole voting power except with respect to the election of
directors.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
In connection with the Recapitalization Plan and on the Closing Date,
Holdings, DLJ Capital, the Voting Trustee, Jim L. Turner and Crown Cork & Seal
Company, Inc. Master Retirement Trust ("Crown") entered into a stockholders
agreement (the "New Stockholders Agreement"). Pursuant to the New Stockholders
Agreement, DLJ Capital, the Voting Trustee, Jim L. Turner and Crown agreed to
vote their capital stock to insure that the Board of Directors of Holdings will
at all times consist of five persons, one person designated by DLJ Capital, one
person designated by the Voting Trustee, and three persons designated by Jim L.
Turner. Mr. Sweezey is the initial designee of DLJ Capital, the Voting Trustee
designated himself and Mr. Turner designated Mr. Hicks and himself to the Board
of Directors. Mr. Turner has advised Holdings that he has not yet determined
whether he will exercise his right under the New Stockholders Agreement to name
one other designee and, if so, who such designee will be. The New Stockholders
Agreement also prohibits (with certain exceptions) Holdings or any of its
subsidiaries from engaging in certain fundamental corporate transactions without
the consent of DLJ Capital including, without limitation, amendments to its
charter or by-laws, mergers, acquisitions or the sale or lease of substantially
all of its assets, or issuances or sales of its capital stock, or any rights to
acquire capital stock or any securities or notes convertible into or
exchangeable for its capital stock. The right of Mr. Turner to designate
directors under the New Stockholders Agreement will terminate in the event that
Mr. Turner and/or his Affiliates (as defined) no longer own common stock and
common stock equivalents that collectively represent at least 17.5% of the fully
diluted common stock of Holdings (excluding from such calculation any common
stock and common stock equivalents issued after the date of the New Stockholders
Agreement). The respective rights of designation of DLJ Capital and the Voting
Trustee and the requirement of obtaining DLJ Capital's consent, as described
above, will terminate in the event that DLJ Capital and its Affiliates and/or
the employees of DLJ Capital or its Affiliates no longer own common stock,
common stock equivalents or voting trust certificates that collectively
represent 17.5% of the fully diluted common stock of Holdings (excluding from
such calculation any common stock and common
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58
stock equivalents issued after the date of the New Stockholders Agreement). The
New Stockholders Agreement grants certain rights of first refusal and tag-along
rights with respect to transfers of Class A Common Stock by the parties, other
than certain transfers by parties to the New Stockholders Agreement to their
respective affiliates and certain employees, or except pursuant to certain
public offerings. In addition, Holdings granted certain preemptive rights to the
other parties to the New Stockholders Agreement with respect to the issuance of
common stock and common stock equivalents. Also, under the New Stockholders
Agreement, Holdings granted the parties thereto certain demand and piggy-back
registration rights in respect of Class A Common Stock. The demand registration
rights may be exercised no earlier than two years after the date of the New
Stockholders Agreement. The New Stockholders Agreement will terminate in its
entirety upon a public offering of Holdings' common stock in the amount of $30.0
million or more.
The preceding summary of certain provisions of the New Stockholders
Agreement is qualified in its entirety by reference to the full text of such
agreement, a copy of which has been filed with the Securities and Exchange
Commission (the "Commission") as an exhibit to the Registration Statement on
Form S-1 of the Company and Holdings (File Nos. 33-56292 and 33-56292-01,
respectively) (the "Registration Statement"), which has been incorporated by
reference as an exhibit hereto.
VOTING TRUST AGREEMENT
DLJ Capital and William O. Hunt are parties to a Voting Trust Agreement,
dated as of October 28, 1988, pursuant to which Mr. Hunt, as trustee, has
exclusive power to vote any shares of Class A Common Stock at any time owned by
DLJ Capital or its affiliates that represent in excess of 5% of the total number
of shares of Holdings' voting stock at any time outstanding. Pursuant to the
Voting Trust Agreement, DLJ Capital directed Mr. Hunt to enter into the New
Stockholders Agreement. Mr. Hunt has full power and authority to vote the shares
subject to the Voting Trust Agreement as in his sole judgment he believes to be
in the best interests of the stockholders of Holdings generally. Further,
notwithstanding any other provision of the Voting Trust Agreement, Mr. Hunt will
vote the shares subject to the Voting Trust Agreement (or use his power to
designate a director of Holdings) to prevent the election of more than one
affiliate of DLJ Capital or The Equitable Life Assurance Society of the United
States, the parent company of DLJ Capital, as a director of Holdings at each
election of directors.
The Voting Trust Agreement will terminate on the earlier to occur of (a)
October 28, 1998; (b) under certain circumstances, the written election of DLJ
Capital; or (c) the transfer of all shares subject to the Voting Trust Agreement
such that after giving effect to the transfer, The Equitable Life Assurance
Society of the United States, DLJ Capital, and all other affiliates thereof will
own in the aggregate 5% or less of the total number of shares of the voting
capital stock of Holdings then outstanding. DLJ Capital has notified Mr. Hunt,
as trustee, of its election to terminate the Voting Trust Agreement in
accordance with its terms. Upon such termination, the shares of Class A Common
Stock held by Mr. Hunt pursuant to the terms of the Voting Trust Agreement will
be returned to DLJ Capital. Nothing in the Voting Trust Agreement prohibits Mr.
Hunt from owning shares or options to purchase shares of the capital stock of
Holdings. DLJ Capital entered into a Stock Option Agreement dated as of October
28, 1988, granting Mr. Hunt, in his individual capacity, an option to purchase
from DLJ Capital up to 66,667 shares of Class A Common Stock of Holdings for a
period of ten years at an option exercise price of $.90 per share. In addition,
while Mr. Hunt serves as trustee under the Voting Trust Agreement, DLJ Capital
will pay to him an annual fee of $25,000, which will be reimbursed by the
Company.
The preceding summary of certain provisions of the Voting Trust Agreement
is qualified in its entirety by reference to the full text of such agreement, a
copy of which has been filed with the Commission as an exhibit to the
Registration Statement, which has been incorporated by reference as an exhibit
hereto.
TRANSACTIONS WITH DLJ CAPITAL AND ITS AFFILIATES
In connection with the Recapitalization Plan, DLJ Securities received $6.9
million in underwriting discounts and commissions for serving as underwriter of
the Senior Notes and the Discount Notes. DLJ also served as dealer manager for
the Tender Offer and Consent Solicitation and received customary fees and was
reimbursed for expenses in connection therewith.
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59
DLJ Securities sold the note of the landlord (the "Landlord Note") under
the Company's sale-leaseback arrangement on October 19, 1993 at a price of
$17,698,500 (the "Sales Price") plus accrued interest of $95,985. DLJ Securities
received a commission of $176,985 in connection with such sale (1% of the Sales
Price) and reimbursement of $94,472 for expenses incurred in connection with
such sale, both of which were paid out of the proceeds from such sale. The
remaining proceeds from such sale in excess of the principal amount of the
Landlord Note plus accrued interest ($1,227,043) were paid to the Company.
TRANSACTIONS WITH JIM L. TURNER
Jim L. Turner, President and Chief Executive Officer of the Company and
Holdings, is a party to the New Stockholders Agreement.
As part of the Recapitalization Plan, in April 1993 Holdings issued and
sold 308,335 shares of Class A Common Stock to Mr. Turner at a purchase price of
$.90 per share, or $277,501.50 in the aggregate. The purchase price was paid by
the delivery by Mr. Turner to Holdings of $3,083.35 in cash and a promissory
note in the aggregate principal amount of $274,418.15 which has a term of five
years and bears a rate of interest at TCB's prime rate. Holdings has the right
to require Mr. Turner to reconvey to Holdings 140,000 of such shares in the
event that Holdings does not achieve certain minimum levels of net sales and
earnings before interest, taxes, depreciation and amortization for the year
ending December 31, 1994.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. The following financial statements are
included in Part II, Item 8.
PAGE
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DR PEPPER BOTTLING COMPANY OF TEXAS
Independent Auditors' Report....................................................
Balance Sheets, December 31, 1993 and 1994......................................
Statements of Operations for the years ended December 31, 1992, 1993 and 1994...
Statements of Stockholders' Deficit for the years ended December 31, 1992, 1993
and 1994.....................................................................
Statements of Cash Flows for the years ended December 31, 1992, 1993 and 1994...
Notes to Financial Statements...................................................
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Independent Auditors' Report....................................................
Consolidated Balance Sheets, December 31, 1993 and 1994.........................
Consolidated Statements of Operations for the years ended December 31, 1992,
1993 and 1994................................................................
Consolidated Statements of Stockholders' Deficit for the years ended
December 31, 1992, 1993 and 1994.............................................
Consolidated Statements of Cash Flows for the years ended December 31, 1992,
1993 and 1994................................................................
Notes to Consolidated Financial Statements......................................
2. Schedules for each of the years ended December 31, 1992, 1993 and 1994.
DR PEPPER BOTTLING COMPANY OF TEXAS:
Schedule II -- Valuation and Qualifying Accounts
DR PEPPER BOTTLING HOLDINGS, INC.:
Schedule I -- Condensed Financial Information of the Registrant
Schedule II -- Valuation and Qualifying Accounts
Schedules other than those listed above are not required or are
inapplicable, and therefore are omitted.
3. Exhibits
3.1* -- Articles of Incorporation, as amended, of Dr Pepper Bottling Company
of Texas.
3.2* -- Bylaws of Dr Pepper Bottling Company of Texas.
3.3* -- Certificate of Incorporation of Dr Pepper Bottling Holdings, Inc.
3.4* -- By-laws of Dr Pepper Bottling Holdings, Inc.
4.1 -- #
4.2 -- #
4.3 -- #
4.4 -- #
4.5 -- Indenture, dated February 18, 1993, between Dr Pepper Bottling Company
of Texas and U.S. Trust Company of Texas, N.A. with respect to the
10 1/4% Senior Notes due 2000.(1)
4.6 -- Form of 10 1/4% Senior Notes due 2000 (included in Exhibit 4.5).(1)
60
61
4.7 -- Form of Indenture, dated February 18, 1993, between Dr Pepper Bottling
Holdings, Inc. and United States Trust Company of New York with
respect to the 11 5/8% Senior Discount Notes due 2003.(1)
4.8 -- Form of 11 5/8% Senior Discount Notes due 2003 (included in Exhibit
4.7).(1)
9* -- Voting Trust Agreement dated as of October 28, 1988, between DLJ
Capital Corporation and William O. Hunt, Trustee.
10.1 -- #
10.2 -- #
10.3 -- #
10.4 -- #
10.5 -- #
10.6 -- #
10.7 -- #
10.8 -- #
10.9 -- #
10.10 -- #
10.11 -- #
10.12 -- #
10.13 -- #
10.14 -- #
10.15 -- #
10.16 -- #
10.17 -- #
10.18 -- #
10.19 -- #
10.20 -- #
10.21 -- #
10.22 -- #
10.23 -- #
10.24 -- #
10.25 -- #
10.26 -- #
10.27 -- #
10.28 -- #
10.29 -- #
10.30 -- #
10.31 -- #
10.32 -- #
10.33 -- #
10.34 -- #
10.35 -- #
10.36 -- #
10.37 -- #
10.38 -- #
10.39 -- #
10.40 -- #
61
62
10.41 -- #
10.42 -- #
10.43 -- #
10.44 -- #
10.45 -- #
10.46 -- #
10.47 -- #
10.48 -- #
10.49 -- #
10.50 -- #
10.51 -- #
10.52 -- #
10.53 -- #
10.54 -- #
10.55 -- #
10.56 -- #
10.57 -- #
10.58 -- #
10.59 -- #
10.60 -- #
10.61 -- #
10.62 -- #
10.63 -- #
10.64 -- #
10.65 -- #
10.66 -- #
10.67 -- #
10.68 -- #
10.69 -- #
10.70 -- #
10.71 -- #
10.72 -- #
10.73 -- Franchise Agreements of varying dates between Dr Pepper Company and Dr
Pepper Bottling Company of Texas.(1)
10.74 -- Franchise Agreements of varying dates between The Seven-Up Company and
Dr Pepper Bottling Company of Texas.(1)
10.75 -- Franchise Agreements of varying dates between A & W Brands, Inc. and
Dr Pepper Bottling Company of Texas.(1)
10.76 -- Franchise Agreements of varying dates between Cadbury Beverages North
America, Inc. and Dr Pepper Bottling Company of Texas.(1)
10.78** -- Lease Agreement dated as of June 28, 1989, by and between Corporate
Property Associates 8, L.P., a Delaware Limited Partnership, and
Corporate Property Associates 9, L.P., a Delaware Limited Partnership,
and Dr Pepper Bottling Company of Texas.
10.79** -- Tenant Agreement dated as of June 28, 1989, among Corporate Property
Associates 8, L.P., a Delaware Limited Partnership, Corporate Property
Associates 9, L.P., a Delaware Limited Partnership, and Dr Pepper
Bottling Company of Texas.
62
63
10.80** -- Guaranty and Suretyship Agreement dated as of June 28, 1989, by Dr
Pepper Bottling Holdings, Inc. for the benefit of Corporate Property
Associates 8, L.P., a Delaware Limited Partnership, and Corporate
Property Associates 9, L.P., a Delaware Limited Partnership.
10.81 -- #
10.82 -- #
10.83** -- Amendment to 7UP Franchise Agreement dated as of January 12, 1990,
between The Seven-Up Company and Dr Pepper Bottling Company of Texas.
10.84** -- Fountain Syrup Agreement dated January 22, 1990, between The Seven-Up
Company and Dr Pepper Bottling Company of Texas.
10.85** -- 7UP Franchise Agreement dated as of January 12, 1990, between The
Seven-Up Company and Dr Pepper Bottling Company of Texas.
10.86 -- #
10.87** -- Dr Pepper Bottling Holdings, Inc. 1989 Stock Option Plan.
10.88 -- #
10.89 -- #
10.90 -- #
10.91 -- #
10.92 -- #
10.93 -- Securities Purchase Agreement, dated February 18, 1993, among
Dr Pepper Bottling Holdings, Inc., Dr Pepper Bottling Company of Texas
and Crown Cork & Seal Master Retirement Trust, with exhibits
thereto.(1)
10.94 -- Tax Sharing Agreement, dated as of February 18, 1993, between Dr
Pepper Bottling Holdings, Inc. and Dr Pepper Bottling Company of
Texas.(1)
10.95 -- Amended and Restated Credit Agreement, dated as of February 18, 1993,
between Dr Pepper Bottling Company of Texas and Texas Commerce Bank
National Association, as Agent.(1)
10.96 -- Amended and Restated Guarantee, dated February 18, 1993, by Dr Pepper
Bottling Holdings, Inc. to Texas Commerce Bank National Association
pursuant to that certain Amended and Restated Credit Agreement of even
date.(1)
10.97 -- Amended and Restated General Security Agreement, dated February 18,
1993, between Dr Pepper Bottling Company of Texas and Texas Commerce
Bank National Association, as Agent, pursuant to that certain Amended
and Restated Credit Agreement of even date.(1)
10.98 -- Amended and Restated Collateral Assignment of Deposit Accounts, Pledge
and Security Agreement, dated February 18, 1993, between Dr Pepper
Bottling Company of Texas and Texas Commerce Bank National
Association, as Agent, pursuant to that certain Amended and Restated
Credit Agreement of even date.(1)
10.99 -- Amended and Restated Pledge and Security Agreement, dated February 18,
1993, between Dr Pepper Bottling Holdings, Inc. and Texas Commerce
Bank National Association, as Agent, pursuant to that certain Amended
and Restated Credit Agreement of even date.(1)
10.100 -- First Amendment to Agreement and Landlord's Waiver, dated February 10,
1993, among Dr Pepper Bottling Company of Texas, Dr Pepper Bottling
Holdings, Inc., Corporate Property Associates 8, L.P., Corporate
Property Associates 9, L.P., The New England Mutual Life Insurance
Company and Donaldson Lufkin & Jenrette Securities Corporation.(1)
10.101 -- Second Amendment to Lease Agreement, dated February 18, 1993, among
Corporate Property Associates 8, L.P., Corporate Property Associates
9, L.P. and Dr Pepper Bottling Company of Texas.(1)
63
64
10.102 -- Letter Agreement, dated February 10, 1993, among Dr Pepper Bottling
Company of Texas, Dr Pepper Bottling Holdings, Inc., Corporate
Property Associates 8, L.P., Corporate Property Associates 9, L.P. and
Donaldson, Lufkin & Jenrette Securities Corporation and The New
England Mutual Life Insurance Company, relating to the sale/leaseback
arrangements.(1)
10.103 -- Letter Agreement, effective February 18, 1993, among Corporate
Property Associates 8, L.P., Corporate Property Associates 9, L.P. and
Dr Pepper Bottling Company of Texas, relating to the sale/leaseback
arrangements.(1)
10.104 -- Letter Agreement, effective February 18, 1993, among Corporate
Property Associates 8, L.P., Corporate Property Associates 9, L.P., Dr
Pepper Bottling Company of Texas and Dr Pepper Bottling Holdings,
Inc., relating to the sale/leaseback arrangements.(1)
10.105 -- Letter Agreement, dated February 10, 1993, between Dr Pepper Bottling
Company of Texas and Donaldson Lufkin & Jenrette Securities
Corporation relating to the sale of a mortgage note in connection with
the sale/leaseback arrangements.(1)
10.106 -- Employment Agreement, dated as of February 18, 1993, between Dr Pepper
Bottling Company of Texas and Jim L. Turner.(1)
10.107 -- Underwriting Agreement dated as of February 10, 1993, among Dr Pepper
Bottling Company of Texas, Dr Pepper Bottling Holdings, Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation.(1)
10.108 -- Third Amendment to Lease, dated as of April 15, 1993, among Corporate
Property Associates 8, L.P., Corporate Property Associates 9, L.P. and
Dr Pepper Bottling Company of Texas.(2)
10.109 -- Amended and Restated Second Amendment to Lease Agreement, dated as of
October 15, 1993, among Corporate Property Associates 8, L.P.,
Corporate Property Associates 9, L.P. and Dr Pepper Bottling Company
of Texas.(2)
10.110 -- Agreement and Amendment to Loan Documents, dated as of October 15,
1993, among Corporate Property Associates 8, L.P., Corporate Property
Associates 9, L.P., Dr Pepper Bottling Company of Texas, Dr Pepper
Bottling Holdings, Inc., New York Life Insurance Company and
Donaldson, Lufkin & Jenrette Securities Corporation.(2)
10.111 -- First Amendment to Amended and Restated Credit Agreement, dated as of
July 29, 1994, between Dr Pepper Bottling Company of Texas and Texas
Commerce Bank National Association, as Agent(3)
12.1 -- Computation of Ratio of Earnings to Fixed Charges of Dr Pepper
Bottling Company of Texas.(4)
12.2 -- Computation of Ratio of Earnings to Fixed Charges of Dr Pepper
Bottling Holdings, Inc. and Subsidiary(4)
27.1 -- Financial Data Schedule of Dr Pepper Bottling Company of Texas(4)
27.2 -- Financial Data Schedule of Dr Pepper Bottling Holdings, Inc. and
Subsidiary(4)
64
65
---------------
* Previously filed as an Exhibit to the Registration Statement on Form S-1 of
Dr Pepper Bottling Company of Texas and Dr Pepper Bottling Holdings, Inc.
(File No. 33-28349) and incorporated herein by reference.
** Previously filed as an exhibit to the Form 10-K for the fiscal year ended
December 31, 1989, of Dr Pepper Bottling Holdings, Inc. and Dr Pepper
Bottling Company of Texas, and incorporated by reference herein.
(1) Previously filed as an exhibit to the Registration Statement on Form S-1 of
Dr Pepper Bottling Company of Texas and Dr Pepper Bottling Holdings, Inc.
(File Nos. 33-56292 and 33-56292-01, respectively) and incorporated herein
by reference.
(2) Previously filed as an exhibit to the Form 10-K for the fiscal year ended
December 31, 1993, of Dr Pepper Bottling Holdings, Inc. and Dr Pepper
Bottling Company of Texas, and incorporated by reference herein.
(3) Previously filed as an exhibit to the Form 10-Q for the fiscal quarter
ended June 30, 1994, of Dr Pepper Bottling Holdings, Inc. and Dr Pepper
Bottling Company of Texas, and incorporated by reference herein.
(4) Filed herewith.
# Intentionally left blank.
65
66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DR PEPPER BOTTLING COMPANY OF TEXAS
Date: March 31, 1995 By: /s/ JIM L. TURNER
Jim L. Turner
President
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 and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
----------------------------------------------- ----------------------------- ---------------
By: /s/ JIM L. TURNER Chairman of the Board of March 31, 1995
Jim L. Turner Directors, President and
Chief Executive Officer
(Principal Executive
Officer of the Registrant)
By: /s/ C. MARVIN MONTGOMERY Vice President -- Finance and March 31, 1995
C. Marvin Montgomery Chief Financial Officer
(Principal Financial and
Accounting Officer of the
Registrant)
By: /s/ THOMAS O. HICKS Director March 31, 1995
Thomas O. Hicks
66
67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DR PEPPER BOTTLING HOLDINGS, INC.
Date: March 31, 1995 By: /s/JIM L. TURNER
Jim L. Turner
President
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 and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
----------------------------------------------- ----------------------------- ---------------
By: /s/ JIM L. TURNER Chairman of the Board of March 31, 1995
Jim L. Turner Directors, President and
Chief Executive Officer
(Principal Executive
Officer of the Registrant)
By: /s/ C. MARVIN MONTGOMERY Vice President -- Finance and March 31, 1995
C. Marvin Montgomery Chief Financial Officer
(Principal Financial and
Accounting Officer of the
Registrant)
By: /s/ THOMAS O. HICKS Director March 31, 1995
Thomas O. Hicks
By: /s/ WILLIAM O. HUNT Director March 31, 1995
William O. Hunt
By: /s/ J. KENT SWEEZEY Director March 31, 1995
J. Kent Sweezey
67
68
Schedule II
DR PEPPER BOTTLING COMPANY OF TEXAS
Valuation and Qualifying Accounts
(in thousands)
Balance at Balance at
beginning Costs and end of
of period expenses Deductions period
--------- -------- ---------- ------
ALLOWANCE FOR DOUBTFUL ACCOUNTS
-------------------------------
Year ended December 31, 1992 $ 179 190 156 (A) 213
===== === === ===
Year ended December 31, 1993 $ 213 561 469 (A) 305
===== === === ===
Year ended December 31, 1994 $ 305 167 101 371
===== === === ===
ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS
---------------------------------------------
Year ended December 31, 1992:
Goodwill and other
intangible assets $ 17,482 5,505 - 22,987
Debt issuance costs 3,642 1,107 - 4,749
-------- ----- ----- ------
$ 21,124 6,612 - 27,736
======== ===== ===== ======
Year ended December 31, 1993:
Goodwill and other
intangible assets 22,987 5,751 - 28,738
Debt issuance costs 4,749 1,609 4,653 (B) 1,705
-------- ----- ----- ------
$ 27,736 7,360 4,653 30,443
======== ===== ===== ======
Year ended December 31, 1994:
Goodwill and other
intangible assets 28,738 5,519 - 34,257
Debt issuance costs 1,705 1,384 - 3,089
-------- ----- ----- ------
$ 30,443 6,903 - 37,346
======== ===== ===== ======
(A) Accounts receivable written off
(B) Deferred debt costs related to retired debt
69
Schedule I
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Condensed Financial Information of the Registrant
Balance Sheets
December 31, 1993 and 1994
(in thousands)
1993 1994
--------- --------
Excess of equity in loss of subsidiary over investment $ (37,593) (25,113)
Other assets 2,687 2,383
--------- --------
(34,906) (22,730)
========= ========
Long-term debt 78,453 87,838
Preferred stock 29,635 33,502
Stockholders' deficit:
Common stock 136 136
Additional paid-in capital 14,383 14,383
Consideration to continuing predecessor stockholders in
excess of book value (33,948) (33,948)
Deficit (123,565) (124,641)
--------- --------
Total stockholders' deficit (142,994) (144,070)
--------- --------
$ (34,906) (22,730)
========= ========
70
Statements of Operations
Years ended December 31, 1992, 1993 and 1994
(in thousands)
1992 1993 1994
--------- -------- -------
Equity in net earnings (loss) of subsidiary $ (1,737) (20,630) 12,480
Accretion of discount on discount notes - 7,340 9,385
Other expense - 273 304
--------- -------- -------
Earnings (loss) before dividends on
subsidiary's preferred stock (1,737) (28,243) 2,791
Dividends on subsidiary's preferred stock (13,171) (5,806) -
--------- -------- -------
Net earnings (loss) $ (14,908) (34,049) 2,791
========= ======== =======
Note: Dr Pepper Holdings, Inc. (Holdings) is essentially a holding company
which was formed solely to acquire the outstanding common stock of Dr
Pepper Bottling Company of Texas (Company). Holdings issued senior
discount notes in the aggregate principal amount of $125,000 and
preferred stock and warrant totaling $30,000. Other than these
transactions and related costs, Holdings does not have any commitments
other than those of the Company.
71
Schedule II
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
Valuation and Qualifying Accounts
(in thousands)
Balance at Balance at
beginning Costs and end of
of period expenses Deductions period
--------- --------- ---------- --------
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 31, 1992 $ 179 190 156 (A) 213
===== === === ===
Year ended December 31, 1993 $ 213 561 469 (A) 305
===== === === ===
Year ended December 31, 1993 $ 305 167 101 371
===== === === ===
ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS
Year ended December 31, 1992:
Goodwill and other
intangible assets 17,482 5,505 - 22,987
Debt issuance costs 3,642 1,107 - 4,749
-------- ----- ----- ------
$ 21,124 6,612 - 27,736
======== ===== ===== ======
Year ended December 31, 1993:
Goodwill and other
intangible assets 22,987 5,751 - 28,738
Debt issuance costs 4,749 1,609 4,653 (B) 1,705
-------- ----- ----- ------
$ 27,736 7,360 4,653 30,443
======== ===== ===== ======
Year ended December 31, 1994:
Goodwill and other
intangible assets 28,738 5,519 - 34,257
Debt issuance costs 1,705 1,711 - 3,416
-------- ----- ----- ------
$ 30,443 7,230 - 37,673
======== ===== ===== ======
72
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
-----------------------------------------------------------------------------------------------
3.1* -- Articles of Incorporation, as amended, of Dr Pepper Bottling Company
of Texas.
3.2* -- Bylaws of Dr Pepper Bottling Company of Texas.
3.3* -- Certificate of Incorporation of Dr Pepper Bottling Holdings, Inc.
3.4* -- By-laws of Dr Pepper Bottling Holdings, Inc.
4.1 -- #
4.2 -- #
4.3 -- #
4.4 -- #
4.5 -- Indenture, dated February 18, 1993, between Dr Pepper Bottling Company
of Texas and U.S. Trust Company of Texas, N.A. with respect to the
10 1/4% Senior Notes due 2000.(1)
4.6 -- Form of 10 1/4% Senior Notes due 2000 (included in Exhibit 4.5).(1)
4.7 -- Form of Indenture, dated February 18, 1993, between Dr Pepper Bottling
Holdings, Inc. and United States Trust Company of New York with
respect to the 11 5/8% Senior Discount Notes due 2003.(1)
4.8 -- Form of 11 5/8% Senior Discount Notes due 2003 (included in Exhibit
4.7).(1)
9* -- Voting Trust Agreement dated as of October 28, 1988, between DLJ
Capital Corporation and William O. Hunt, Trustee.
10.1 -- #
10.2 -- #
10.3 -- #
10.4 -- #
10.5 -- #
10.6 -- #
10.7 -- #
10.8 -- #
10.9 -- #
10.10 -- #
10.11 -- #
10.12 -- #
10.13 -- #
10.14 -- #
10.15 -- #
10.16 -- #
10.17 -- #
10.18 -- #
10.19 -- #
10.20 -- #
10.21 -- #
73
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
-----------------------------------------------------------------------------------------------
10.22 -- #
10.23 -- #
10.24 -- #
10.25 -- #
10.26 -- #
10.27 -- #
10.28 -- #
10.29 -- #
10.30 -- #
10.31 -- #
10.32 -- #
10.33 -- #
10.34 -- #
10.35 -- #
10.36 -- #
10.37 -- #
10.38 -- #
10.39 -- #
10.40 -- #
10.41 -- #
10.42 -- #
10.43 -- #
10.44 -- #
10.45 -- #
10.46 -- #
10.47 -- #
10.48 -- #
10.49 -- #
10.50 -- #
10.51 -- #
10.52 -- #
10.53 -- #
10.54 -- #
10.55 -- #
10.56 -- #
10.57 -- #
10.58 -- #
10.59 -- #
10.60 -- #
10.61 -- #
74
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
-----------------------------------------------------------------------------------------------
10.62 -- #
10.63 -- #
10.64 -- #
10.65 -- #
10.66 -- #
10.67 -- #
10.68 -- #
10.69 -- #
10.70 -- #
10.71 -- #
10.72 -- #
10.73 -- Franchise Agreements of varying dates between Dr Pepper Company and Dr
Pepper Bottling Company of Texas.(1)
10.74 -- Franchise Agreements of varying dates between The Seven-Up Company and
Dr Pepper Bottling Company of Texas.(1)
10.75 -- Franchise Agreements of varying dates between A & W Brands, Inc. and
Dr Pepper Bottling Company of Texas.(1)
10.76 -- Franchise Agreements of varying dates between Cadbury Beverages North
America, Inc. and Dr Pepper Bottling Company of Texas.(1)
10.78** -- Lease Agreement dated as of June 28, 1989, by and between Corporate
Property Associates 8, L.P., a Delaware Limited Partnership, and
Corporate Property Associates 9, L.P., a Delaware Limited Partnership,
and Dr Pepper Bottling Company of Texas.
10.79** -- Tenant Agreement dated as of June 28, 1989, among Corporate Property
Associates 8, L.P., a Delaware Limited Partnership, Corporate Property
Associates 9, L.P., a Delaware Limited Partnership, and Dr Pepper
Bottling Company of Texas.
10.80** -- Guaranty and Suretyship Agreement dated as of June 28, 1989, by Dr
Pepper Bottling Holdings, Inc. for the benefit of Corporate Property
Associates 8, L.P., a Delaware Limited Partnership, and Corporate
Property Associates 9, L.P., a Delaware Limited Partnership.
10.81 -- #
10.82 -- #
10.83** -- Amendment to 7UP Franchise Agreement dated as of January 12, 1990,
between The Seven-Up Company and Dr Pepper Bottling Company of Texas.
10.84** -- Fountain Syrup Agreement dated January 22, 1990, between The Seven-Up
Company and Dr Pepper Bottling Company of Texas.
10.85** -- 7UP Franchise Agreement dated as of January 12, 1990, between The
Seven-Up Company and Dr Pepper Bottling Company of Texas.
10.86 -- #
10.87** -- Dr Pepper Bottling Holdings, Inc. 1989 Stock Option Plan.
10.88 -- #
10.89 -- #
10.90 -- #
75
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
-----------------------------------------------------------------------------------------------
10.91 -- #
10.92 -- #
10.93 -- Securities Purchase Agreement, dated February 18, 1993, among
Dr Pepper Bottling Holdings, Inc., Dr Pepper Bottling Company of Texas
and Crown Cork & Seal Master Retirement Trust, with exhibits
thereto.(1)
10.94 -- Tax Sharing Agreement, dated as of February 18, 1993, between Dr
Pepper Bottling Holdings, Inc. and Dr Pepper Bottling Company of
Texas.(1)
10.95 -- Amended and Restated Credit Agreement, dated as of February 18, 1993,
between Dr Pepper Bottling Company of Texas and Texas Commerce Bank
National Association, as Agent.(1)
10.96 -- Amended and Restated Guarantee, dated February 18, 1993, by Dr Pepper
Bottling Holdings, Inc. to Texas Commerce Bank National Association
pursuant to that certain Amended and Restated Credit Agreement of even
date.(1)
10.97 -- Amended and Restated General Security Agreement, dated February 18,
1993, between Dr Pepper Bottling Company of Texas and Texas Commerce
Bank National Association, as Agent, pursuant to that certain Amended
and Restated Credit Agreement of even date.(1)
10.98 -- Amended and Restated Collateral Assignment of Deposit Accounts, Pledge
and Security Agreement, dated February 18, 1993, between Dr Pepper
Bottling Company of Texas and Texas Commerce Bank National
Association, as Agent, pursuant to that certain Amended and Restated
Credit Agreement of even date.(1)
10.99 -- Amended and Restated Pledge and Security Agreement, dated February 18,
1993, between Dr Pepper Bottling Holdings, Inc. and Texas Commerce
Bank National Association, as Agent, pursuant to that certain Amended
and Restated Credit Agreement of even date.(1)
10.100 -- First Amendment to Agreement and Landlord's Waiver, dated February 10,
1993, among Dr Pepper Bottling Company of Texas, Dr Pepper Bottling
Holdings, Inc., Corporate Property Associates 8, L.P., Corporate
Property Associates 9, L.P., The New England Mutual Life Insurance
Company and Donaldson Lufkin & Jenrette Securities Corporation.(1)
10.101 -- Second Amendment to Lease Agreement, dated February 18, 1993, among
Corporate Property Associates 8, L.P., Corporate Property Associates
9, L.P. and Dr Pepper Bottling Company of Texas.(1)
10.102 -- Letter Agreement, dated February 10, 1993, among Dr Pepper Bottling
Company of Texas, Dr Pepper Bottling Holdings, Inc., Corporate
Property Associates 8, L.P., Corporate Property Associates 9, L.P. and
Donaldson, Lufkin & Jenrette Securities Corporation and The New
England Mutual Life Insurance Company, relating to the sale/leaseback
arrangements.(1)
10.103 -- Letter Agreement, effective February 18, 1993, among Corporate
Property Associates 8, L.P., Corporate Property Associates 9, L.P. and
Dr Pepper Bottling Company of Texas, relating to the sale/leaseback
arrangements.(1)
76
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
-----------------------------------------------------------------------------------------------
10.104 -- Letter Agreement, effective February 18, 1993, among Corporate
Property Associates 8, L.P., Corporate Property Associates 9, L.P., Dr
Pepper Bottling Company of Texas and Dr Pepper Bottling Holdings,
Inc., relating to the sale/leaseback arrangements.(1)
10.105 -- Letter Agreement, dated February 10, 1993, between Dr Pepper Bottling
Company of Texas and Donaldson Lufkin & Jenrette Securities
Corporation relating to the sale of a mortgage note in connection with
the sale/leaseback arrangements.(1)
10.106 -- Employment Agreement, dated as of February 18, 1993, between Dr Pepper
Bottling Company of Texas and Jim L. Turner.(1)
10.107 -- Underwriting Agreement dated as of February 10, 1993, among Dr Pepper
Bottling Company of Texas, Dr Pepper Bottling Holdings, Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation.(1)
10.108 -- Third Amendment to Lease, dated as of April 15, 1993, among Corporate
Property Associates 8, L.P., Corporate Property Associates 9, L.P. and
Dr Pepper Bottling Company of Texas.(2)
10.109 -- Amended and Restated Second Amendment to Lease Agreement, dated as of
October 15, 1993, among Corporate Property Associates 8, L.P.,
Corporate Property Associates 9, L.P. and Dr Pepper Bottling Company
of Texas.(2)
10.110 -- Agreement and Amendment to Loan Documents, dated as of October 15,
1993, among Corporate Property Associates 8, L.P., Corporate Property
Associates 9, L.P., Dr Pepper Bottling Company of Texas, Dr Pepper
Bottling Holdings, Inc., New York Life Insurance Company and
Donaldson, Lufkin & Jenrette Securities Corporation.(2)
10.111 -- First Amendment to Amended and Restated Credit Agreement, dated as of
July 29, 1994, between Dr Pepper Bottling Company of Texas and Texas
Commerce Bank National Association, as Agent(3)
12.1 -- Computation of Ratio of Earnings to Fixed Charges of Dr Pepper
Bottling Company of Texas.(4)
12.2 -- Computation of Ratio of Earnings to Fixed Charges of Dr Pepper
Bottling Holdings, Inc. and Subsidiary(4)
27.1 -- Financial Data Schedule of Dr Pepper Bottling Company of Texas(4)
27.2 -- Financial Data Schedule of Dr Pepper Bottling Holdings, Inc. and
Subsidiary(4)
77
---------------
* Previously filed as an Exhibit to the Registration Statement on Form S-1 of
Dr Pepper Bottling Company of Texas and Dr Pepper Bottling Holdings, Inc.
(File No. 33-28349) and incorporated herein by reference.
** Previously filed as an exhibit to the Form 10-K for the fiscal year ended
December 31, 1989, of Dr Pepper Bottling Holdings, Inc. and Dr Pepper
Bottling Company of Texas, and incorporated by reference herein.
(1) Previously filed as an exhibit to the Registration Statement on Form S-1 of
Dr Pepper Bottling Company of Texas and Dr Pepper Bottling Holdings, Inc.
(File Nos. 33-56292 and 33-56292-01, respectively) and incorporated herein
by reference.
(2) Previously filed as an exhibit to the Form 10-K for the fiscal year ended
December 31, 1993, of Dr Pepper Bottling Holdings, Inc. and Dr Pepper
Bottling Company of Texas, and incorporated by reference herein.
(3) Previously filed as an exhibit to the Form 10-Q for the fiscal quarter
ended June 30, 1994, of Dr Pepper Bottling Holdings, Inc. and Dr Pepper
Bottling Company of Texas, and incorporated by reference herein.
(4) Filed herewith.
# Intentionally left blank.
EX-12.1
2
COMPUTATION OF RATIO OF EARNINGS (BOTTLING)
1
EXHIBIT 12.1
DR PEPPER BOTTLING COMPANY OF TEXAS
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1990 1991 1992 1993 1994
------------ ------------ ------------ ------------ ------------
Earnings:
Earnings (loss) before income
taxes and extraordinary
item....................... $(13,229) $ (8,430) $ (1,737) $ 10,929 $ 12,620
Add -- fixed charges(a)....... 32,862 33,227 31,937 25,294 23,776
-------- -------- -------- -------- --------
$ 19,633 $ 24,797 $ 30,200 $ 36,223 $ 36,396
======== ======== ======== ======== ========
Fixed charges:
Interest on indebtedness...... 11,948 12,758 30,797 23,929 22,389
Interest portion of rental and
lease expense.............. 59 36 33 28 3
Amortization of debt issuance
costs...................... 974 1,433 1,107 1,337 1,384
Accretion of bond discount.... 19,881 19,000 -- -- --
-------- -------- -------- -------- --------
$ 32,862 $ 33,227 $ 31,937 $ 25,294 $ 23,776
======== ======== ======== ======== ========
Deficiency of earnings available
to cover fixed charges........ $ 13,229 $ 8,430 $ 1,737 $ -- $ --
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges....................... -- -- -- 1.43x 1.53x
======== ======== ======== ======== ========
---------------
(a) See note (d) under Item 6, "Selected Financial Data -- Company Selected
Financial Data" in the Form 10-K which defines "fixed charges."
EX-12.2
3
COMPUTATION OF RATIO OF EARNINGS (HOLDINGS)
1
EXHIBIT 12.2
DR PEPPER BOTTLING HOLDINGS, INC. AND SUBSIDIARY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1990 1991 1992 1993 1994
------------ ------------ ------------ ------------ ------------
Earnings:
Earnings (loss) before income
taxes and extraordinary
item....................... $(22,671) $(19,582) $(14,908) $ (2,490) $ 2,791
Add -- fixed charges(a)....... 32,862 33,226 31,937 32,914 33,488
-------- -------- -------- -------- --------
$ 10,191 $ 13,644 $ 17,029 $ 30,424 $ 36,279
======== ======== ======== ======== ========
Fixed charges:
Interest on indebtedness...... 11,948 12,757 30,797 23,936 22,389
Interest portion of rental and
lease expense.............. 59 36 33 28 3
Amortization of debt issuance
costs...................... 974 1,433 1,107 1,610 1,711
Accretion of bond discount.... 19,881 19,000 -- 7,340 9,385
-------- -------- -------- -------- --------
$ 32,862 $ 33,226 $ 31,937 $ 32,914 $ 33,488
======== ======== ======== ======== ========
Deficiency of earnings available
to cover fixed charges........ $ 22,671 $ 19,582 $ 14,908 $ 2,490 $ --
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges....................... -- -- -- -- 1.08x
======== ======== ======== ======== ========
---------------
(a) See note d under Item 6, "Selected Financial Data -- Holdings Selected
Financial Data" in the Form 10-K which defines "fixed charges."
EX-27.1
4
FINANCIAL DATA SCHEDULE FOR DR PEPPER BOTTLING
5
0000843397
DR PEPPER BOTTLING COMPANY OF TEXAS
1,000
YEAR
DEC-31-1994
DEC-31-1994
7,769
0
24,850
371
12,183
53,850
128,102
62,156
237,816
63,668
199,261
1
0
0
(25,113)
237,816
332,204
332,204
214,376
221,994
74,216
0
23,776
12,620
140
12,480
0
0
0
12,480
0.00
0.00
EX-27.2
5
FINANCIAL DATA SCHEDULE FOR DR PEPPER HOLDINGS
5
0000843396
DR PEPPER BOTTLING HOLDINGS, INC.
1,000
YEAR
DEC-31-1994
DEC-31-1994
7,794
0
24,850
371
12,183
53,590
128,102
62,156
240,199
63,668
287,099
136
0
33,502
(144,206)
240,199
332,204
332,204
214,376
221,994
74,216
0
33,488
2,931
140
2,791
0
0
0
2,791
(0.08)
(0.08)