PepsiAmericas, Inc. (NYSE: PAS) today reported results for the second quarter ended June 30, 2000. Income from operations was $12.2 million for the second quarter of 2000, up 40.2 percent from $8.7 million for the same period in 1999. Net sales increased 12.5 percent to $168.8 million for the second quarter of 2000, compared with $150.2 million for the second quarter of 1999. EBITDA increased 22.7 percent for the three months ended June 30, 2000 from the same period a year ago.
“The PepsiAmericas companies have now operated together for eight months, and we’re pleased with the progress we are making,” said Robert C. Pohlad, chairman and chief executive officer of PepsiAmericas. “Pricing in our domestic territories exceeded expectations and drove the significant increase in operating income and EBITDA. Volume, as previously suggested, has improved as the year progressed. Operations in our Caribbean territories were enhanced by acquisition of operations in Jamaica, and Seven-Up and related brands in Puerto Rico, in the second half of 1999. We expect the business to show increasingly better performance as the year progresses.”
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Kenneth Keiser, president and chief operating officer noted, “The Jamaican operation has exceeded expectations by covering its acquisition costs in its first six months of operation. However, while results in Puerto Rico continue to improve, the business has not yet turned profitable due to highly competitive pricing.”
Total company physical case volume was up 6.8 percent for the quarter. Without the new business in Jamaica, physical case volume would have been down slightly for the quarter, reflecting a 2.8 percent decrease in mainland U.S. territories. The volume decrease in the mainland U.S. territories occurred as the company increased its wholesale prices. Physical case volume in the Caribbean territories grew 42.5 percent, including the addition of the Jamaican operation, and grew 7.3 percent in Puerto Rico alone.
Reported total company net sales grew 12.5 percent. Excluding net sales in Jamaica, revenue increased 6.5 percent over the second quarter of 1999, with net sales per case from all revenue sources up 7.2 percent. These revenue increases resulted from improved pricing in the company’s mainland U.S. territories.
Operating expenses, excluding the expense impact of Jamaica, increased only slightly despite absorbing the increased costs associated with continued investments in cold bottle equipment and personnel additions to better serve the company’s markets. The company began its investment in cold bottle equipment in 1997.
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By GlobalDataEBITDA grew 22.7 percent for the second quarter of 2000, including the contribution of the Jamaican business. Excluding Jamaica, EBITDA grew 18.1 percent. The company’s interest expense for the second quarter of 2000 was $7.5 million compared with $5.4 million in the second quarter of 1999. The higher expense in 2000 is due primarily to loans funding the Jamaican acquisition of the soft drink business of Desnoes & Geddes Limited late in 1999, as well as the acquisition of the exclusive rights for the production and distribution of Seven-Up, Sunkist, Welch’s and Schweppes brands in Puerto Rico in July 1999.
PepsiAmericas reported net income of $2.1 million for the second quarter of 2000, or $0.02 per common share, compared to net income of $379,000, or breakeven on a per share basis in the second quarter of 1999. Net income (loss) reflects the tax treatment surrounding the merger of Delta Beverage Group, Dakota Beverage Company and Pepsi-Cola Puerto Rico to form PepsiAmericas, Inc. on October 15, 1999. In 1999, the provision for income taxes reflects the Sub S corporation status of Dakota Beverage before the merger. If income taxes had been provided on Dakota Beverage income, the second quarter 1999 consolidated income tax expense would have been $5.5 million and a net loss of $921,000 would have been realized. The unaudited pro forma effect of this adjustment is depicted as supplemental information in the accompanying consolidated statements of income. The company’s effective tax rate differs from the U.S. statutory rate primarily due to the effect of non-deductible franchise cost and amortization and valuation allowances established for losses incurred by the company’s Puerto Rico operations.
From July 17, 1998, to October 15, 1999, PepsiAmericas (formerly known as Pepsi-Cola Puerto Rico Bottling Company), Delta Beverage Group, Inc. and Dakota Beverage Company, Inc., shared common ownership. Effective October 15, 1999, PepsiAmericas combined with Delta and Dakota in a transaction accounted for as a merger of entities under common control, with the acquisition of certain minority interests in Delta recognized using the “purchase” method of accounting. The results of operations for 1999 in this release have been restated to include the results of operations of PepsiAmericas, Delta and Dakota (recognizing a minority interest in the results of Delta) from the beginning of the 1999 fiscal year.
PepsiAmericas manufactures, distributes and markets PepsiCo soft drinks, Seven-Up and other products in exclusive franchise territories that include Puerto Rico, Jamaica portions of Arkansas, Iowa, Louisiana, Minnesota, Mississippi, North Dakota, South Dakota, Tennessee and Texas. PepsiCo, Inc. (NYSE: PEP – news) holds a 24 percent equity interest in PepsiAmericas.
PepsiAmericas will hold an investor conference call today at 12:00 p.m. (EDT). To access the call, please dial 888-335-3460 — the reservation number is 740173. A replay will be available for seven days after the call by dialing 303-590-3000, reservation number 740173.
This release contains forward-looking statements of expected future developments. We wish to ensure such statements are accompanied by meaningful cautionary statements pursuant to the safe harbor established by the Private Securities Litigation Reform Act of 1995. The forward-looking statements in the release refer to the expectations regarding continuing operating improvement and other matters. These forward-looking statements reflect management’s expectation and are based on currently available data; however, actual results are subject to future events and uncertainties, which could materially affect actual performance. Our future performance also involves a number of risks and uncertainties. Accordingly, any forward-looking statements should be read in conjunction with information about risks and uncertainties set forth in the company’s Securities and Exchange Commission reports, including its annual report and Form 10K for the year ended December 31, 1999.
PEPSIAMERICAS, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Dollars in thousands, except share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
Restated Restated
2000 1999 2000 1999
OPERATIONS:
Net Sales $168,751 $150,187 $307,468 $275,532
Cost of Sales 112,819 100,957 206,792 186,685
Gross Profit 55,932 49,230 100,676 88,847
Selling, general and
administrative expenses 42,405 39,525 82,442 75,444
Amortization of franchise
costs and other
intangibles 1,294 1,021 2,587 2,042
Losses on asset impairments -- -- -- 267
Income from operations 12,233 8,684 15,647 11,094
OTHER INCOME (EXPENSES):
Interest expense, net (7,535) (5,439) (14,722) (10,485)
Other, net (19) (31) 178 (28)
(7,554) (5,470) (14,544) (10,513)
Income (loss) before income
tax, minority interest 4,679 3,214 1,103 581
Minority Interest (555) 1,369 (965) (13)
Income tax (expense) benefit (2,024) (4,204) (3,499) 255
Income (loss) $2,100 $379 $(3,361) $823
NET INCOME (LOSS)
PER COMMON SHARE $0.02 $0.00 $(0.04) $0.01
UNAUDITED PRO FORMA
NET INCOME (LOSS) DATA:
Income (loss) before income
taxes and minority interest 4,679 3,214 1,103 581
Minority interest (555) 1,369 (965) (13)
Pro forma income tax expense (2,024) (5,504) (3,499) (2,345)
Pro forma net income (loss) 2,100 (921) (3,361) (1,777)
PRO FORMA NET INCOME (LOSS)
PER COMMON SHARE $0.02 $(0.01) $(0.04) $(0.02)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING
(IN THOUSANDS) 87,314 86,760 87,314 86,760
EBITDA $19,704 $16,059 $29,954 $23,104
