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MOODTS INDUSTRIAL MANUAL 473 Products opernuons are conducted by Abex Beer and 3ubbie Up m Chicago and in most of including scheduhrg of energy usage to avoid Corporation ( Abex ') and Hussmann Corpo- its other ma-keung areas peak periods, cycling ot refrigerator compres -at-on ( `Hussmann ) Rauroad Activities are During 1984 diet soft drinks accounted for sors and recapture ot heat. The dollar amount conducted by he Illinois Central Gulf Rail approximately 16% of Pepsi Gene-al's sales. of fi-m backlog increased 47% from year-end road Company < ICG )- The businesses of Substantially all diet soft drinks including 1983 to 894 million at Decemoer 31 1984 Sub Coisu-ner Products and Commercial Prod those oi Pepsi General, contain aspartame stantially all such backlog is expected to be ucts are operated by IC Products Company, a and/or saccharin. In 1983. the United States filled within one year wholly owned subsidiary of Industries. Food and Drug Administration (the Products of Hussmann axe marketed inter CONSUMER PRODUCTS "USFDA") approved the use of aspartame .n nationally by both company-employed sales Consumer P"ducts consists of the food diet soft drinks Since February, 1978 the personnel and independent distnoutors. Dur business conducted by Pet, the soft dnnk busi USFDA has required precautionary 'abehng ing 1984, Hussmann acquired several compa ness earned on through Pepsi General Dad's and Bubble Up. and die automotive services on soft dnnk products containing saccharin. The USFDA in 1977, also proposed regula nies tn the United Kingdom which will provide Hussmann with the same kind of integrated business conducted by Midas. Pot Pet's specialty food products are comprised of three operating groups. Grocery, Specialty and I-'teroauonai The Grocery Group markets Old El Paso Mexican products the largest: selling line of shelf-stable Mexican foods in the United States Orleans canned shnmp clams and oystero, Gulf Belie frozen shnmp, Underwood canned meat spreads, BficM baked beans and Ac'cent lavor ennancer. The Grocery Group also markets evaporated milk Pet's original product, as well as diet products under the Sego brand. Specialty foods include Pet-Ritx pie crusts, the largest selkrg frozen pie shells in the Unit ed Suites Downyflake waffles. Old El Paso frozen Mexican entrees and other frozen foods Whitman s chocolates and confections, and Pet and Aunt Fanny's bakery items. This group also markets fresh dairy products in cluding milk ice cream and specialty dairy products m the Southeastern states. The International Group manufactures and markets canned meats and other products m the United Kingdom. Venezuela. Australia, Mexico and Canada and .3 responsible for ex porting all Pet products. Pet markets its products principally to su permarkets and grocery stores throughout the United States through brokers and company tions to prohibit the use of saccharin in soft dnnks which Congress has suspended indefi nitely Industries coes not believe that such a ban, if made effecuve. will have a materially adverse effect on the business of Industries and its subsidiaries Midas Midas provides automotive exhaust system, suspension system and brake service through approximately l 800 franchised and company- owned Midas shops in the United States Can ada, England, France, Australia. Belgium, Germany, Austria, Panama and Mexico Mi das manufactures over 900 different types of mufflers and exhaust tail pipes to service ap proximately 1,800 makes and models of auto mobiles. Midaa' principal market is its of fran chised Midas shops. An initial franchise fee is charged and dealers par a royalty fee baaed upon gross revenues. Franchise agreements, which generally are for a 20-year term and provide for renewals, can be canceled by Mi das only for failure of the dealer to comply with the provisions of the agreement. An im portant part of the Midas marketing program is its warranty of mufflers, brakes and shocks. Midas manufactures the majority of mufflers and tubing sold by its franchised dealers. Mi das also distributes its exhaust system parts under other brand names to automotive parts distributors jobbers and automobile accesso ry stores and its tube bending equipment to engineering maauiactunng and marxeting organization in Europe as it has established in theU-S RAILROAD ACTIVITIES The ICG is a major rail freight carrer oper ating in the central United States. As of De cember 31. 1984. the ICG had approximately 6 500 route miles in ten states, including a ma jor north-south height line with trackage ex tending from Chicago to the Gulf of Mexico, together with east-west routes crossing Illi nois Iowa and Missouri. The pnncpal metro politan markets served by the ICG wmch also constitute important interchange points with other railroads. Include Chicago, Illinois New Orleans and Shreveport. Louisiana: Kansas City and St. Louis, Missouri: Indianapolis, In diana; Louisville. Kentucky; Birmingham. Montgomery and Mobile Alabama; Memphis. Tennessee; Jackson. Mississippi, and Omaha, Neoraska. In addition to its transportation ac tavines the ICG owns substantial real estate which is not used m railroad operations. The sale or lease of such real estate contributes significant income to the ICG The pnncpal commodities transported by the ICG include gram gram mill products, coaL chemicals, paper and other bulk prod ucts. Intermodal (piggyback) operations also contribute an important portion of the ICG's revenues. The ICG operates commuter services in the sales personnel. These product tines are also jobbers and retail installers. Chicago area under contract with the six- marketed to restaurants and other institutions The raw materials and supplies used in Mi county Regional Transportation Authority in the food service industry and directly to consumers through specialty retailing outlets. In the case of chocolate and confection items, das products are purchased from many sup pliers and the company la not dependent on any single source for any of its raw material The ICG also operates several passenger trams under contract with the National Rail road Passenger Corporation (* AMTRAK") the products also are marketed through drug or supplies. These operations are not considered material stores and mass merchandise stores. Pet s milk and dairy products and its other food and grocery items compete with nation ally recognized brand names, as well as with local and private label products, on the basis _ COMMERCIAL PRODUCTS The products within Commercial Products are manufactured and sold through Abcx and Hussmann and their respective subsidiaries. to the results of the ICG. ICG finances its own capital requirements. Management believes that the physical condi tion ot its main line railway ana yards is main tained at standards that permit efficient per of price quality and product innovations. Abex formance and is confident that the company is Agricultural commodities, raw milk, raw The products of Abex are divided mto four meeting the current service requirements ot its materials and packaging are purchased from principal product line categories; Automotive customers. farmers, fisherman, importers dairy coopera Products, Cast Products. Fluid Power Prod Industries is unable to predict what effect tives otner food processors and vanous pack ucts and Railroad Products. Automotive the present trend toward consolidation of rail aging manufacturers. Except for normal fluc products Include braking materials and light roads mto large regional systems may have on tuations in crop sizes Pet has experienced lit ing equipment for the automotive original its revenues or operating results. While no for tle difficulty in obtaining raw materials for its equipment and replacement markets. Abex is mal plan for disposition of the ICG currently products. a major source of brake linings and disc brake exists, the merger or sale for the ICG la an Soft Orfnk* pads fdr cars, trucks and buses. It is also a important goal of Industries. During 1984, In Pepsi General packages and distributes, un manufacturer of metallic brake discs for com dustries retained the services of an investment der exclusive franchises. Pepai-Cola products mercial and military aircraft, signal lights, banking firm to review Industries' own work and other brand name soft drinks, including lamps, reflectors, mirrors and other safety de on assessing the options of the 2CG These op Dad's Root Beer, Bubble Up, Sunkist Orange Soda. 7-Up Mountain Dew, Dr. Pepper Or ange Crush Canada Dry and Hawaiian Punch In mid-1984 Pepsi General introduced vices for trucks, automobiles and recreational vehicles. Abex also produces a wide variety of cast ings in iron steel, copper and aluminum al tions include merger with another railroad, sale to a nonrailroad investor, spm-off to shareholders, sale to employees, sale of stock to the public and retaining the ICG in whole its own brand of aseptic juice dnnk, "Orchard Sun." It is a naturally flavored 10% juice loys for use in mining, earthmovmg, steel making, petrochemical, nuclear, rock crush or in part. No accurate prediction can be made as to whether the ICG will be involved dnnk in four flavors orange grape, fruit ' punch and apple. Pepsi General presently sells ing, dredging, food processing and other ap plications. It is an important supplier of man in a consolidation or other transaction m the foreseeable future, or the amount which Pepsi-Cola products in five areas in the Mid west with a total population of over 16 million people and sells its other drink products m certain of these areas. Pepsi General's franchises grant it the ex ganese steel castings having high impact-re sistant properties as well as of both centnfugally and statically cast products in proprie tary heat-resistant ferrous alloys. Fluid power products indude hydraulic would be realised. Depending on many fac tors, including the timing and structure of such a transaction. Industries may realize amounts substantially less than the net book value of the assets of the ICG, which approxi Eclusive nght to produce and sell the products umps. motors, valves and complete hydrau- mated 31,013 4 million at December 31, 1984, and use the related trade names and trade e systems which are used In construction and PNEUMO CORPORATION marks in the franchised terntones. The fran mobile equipment, industrial and marine ma Pneumo Corporation consists of two busi chises require Pepsi General, among other chinery-, materials-handling equipment, off ness groups: the Aerospace/IndustnaL Group things, to purchase its concentrate require shore drilling mad nuclear power plants. Hy and the Food/Drug Group. ments solely from the franchisor, at pncea draulic pumps, motors, servo-valves jet air The Aerospace/Industrial Group designs fixed by the franchisor, and to promote dili craft noise suppressors. electric power invert and manufactures landing gear for military gently the sale and distribution of the fran ers and passenger loading bridges are manu and commeraal aircraft, proprietary flight chised products. Packaging materials (bottles, factured for the aerospace and general avia controls and engine controls for manned and bottle caps cans, cartons, cases) are obtained tion markets. unmanned military aircraft and thrust revert from manufacturers approved by the franchi Abex is a leading supplier of iron and com er actuation systems, engine controls and sor and other items are purchased in the gen position brake shoes, cast steel wheels and flight controls for commercial airlines. This eral market. The franchises are for an indefi nite term and are subject to termination upon custom-made trackworfc. such as frogs, switches crossings and turnouts, for United group also manufactures and distributes insu lated thermocouple wire and related accesso failure to comply with the provisions of the States and Canadian railroads. It also supplies ries which control and measure temperatures franchise agreement. , bearings for freight cars anti remanufactures in hostile environments. Products are distributed by Pepsi General and upgrades electnc traction motors and Pneumo's Food/Drug Group consists of to retail outlets primarily by trucks operated generators for the railroad industry P&C Food Markets C<x. Inc. ("P4C'), a by Pepsi General route salesmen. Pepsi Gen Distribution of Abex products is made prin group of 90 retail food markets operating in eral owns leases or sells the vending machines cipally through Its own salesmen, however, upstate New York and portions of New En which dispense its soft dnnk products m fac Abex does sell certain products, principally gland. and Carls Drug Co.. Inc. ("Carts"), a tories offices, schools, stores, filling stations automobile brake linings and lighting equip of 36 promotional drugstores located and other locations. Pepsi General s business ment, to independent wholesalers and dealers primarily in central and upstate New York is seasonal and weather conditions during the for resale. serving many of the same market areas as peak summer months have a significant effect on sales. Dad's Root Beer Company manufactures and sells root beer concentrate and extract to 125 franchised licensees who package and dis Abex holds a number of patents related to its products. While Abex believes that certain of such patents are valuable tn its ousiness, it does not believe that any major product lines are significantly independent on patent pro PicC r&G also franchises 63 supermarkets and operates a large wholesale food distribu tion system m central and upstate New York and portions of Vermont, New Hampshire and Massachusetts. tribute Dad s Root Beer m marketing areas in duction. The materials used by the Aerospace/In the United States. Bubble Up Company sells Hussmann ,, ,, dustrial Group generally are available from a lemon-lime concentrate and extract to 126 do Huasmann designs, manufactures, installs number of supplier!, while this group is not mestic and 30 foreign franchised licensees. In and maintains refrigeration equipment, dis dependent upon any single supplier of materi addition. Dad a Root Beer and Bubble Up play nit shelving and environmental con als for the operation of die business, there are product is distributed through food brokers in trol systems. In addition. Hussmann has de a limited number of suppliers of forginga. met markets where there are no franchise agree- veloped various energy-saving systems which al parts mad special metals, and any halts or mtntf Pcpii General distributes Dad a Root control the total energy usage in food stores delays in their production, or an unexpected