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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended AprilJuly 4, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to_________________
Commission file number: 1-2207
TRIARC COMPANIES, INC.
------------------------------------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-0471180
------------------------------ ----------------------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
280 Park Avenue, New York, New York 10017
-------------------------------------- ------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(212) 451-3000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes (X) No ( )
There were 19,567,96119,577,438 shares of the registrant's Class A Common Stock and
5,997,622 shares of the registrant's Class B Common Stock outstanding as of AprilJuly
30, 1999.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JANUARY 3, APRILJULY 4,
1999 (A) 1999
-------- ----
(IN THOUSANDS)
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents.............................................................$ 161,248 $ 281,265218,158
Short-term investments................................................................ 99,729 102,563132,989
Receivables........................................................................... 67,724 105,082117,999
Inventories........................................................................... 46,761 61,82670,627
Deferred income tax benefit .......................................................... 28,368 25,62424,403
Prepaid expenses and other current assets ............................................ 5,667 14,6859,395
------------ ------------
Total current assets................................................................ 409,497 591,045573,571
Properties................................................................................ 31,272 31,31031,203 32,776
Unamortized costs in excess of net assets of acquired companies........................... 268,436 279,083268,215 275,911
Trademarks................................................................................ 261,906 259,186256,476
Deferred costs and other assets........................................................... 48,781 65,58265,154
------------ ------------
$ 1,019,8921,019,602 $ 1,226,2061,203,888
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt.....................................................$ 9,978 $ 10,49311,851
Accounts payable...................................................................... 58,257 66,29358,290 83,755
Accrued expenses...................................................................... 132,904 120,548
-----------132,847 145,803
Net current liabilities of discontinued operations.................................... 31,336 30,124
------------ ------------
Total current liabilities........................................................... 201,139 197,334232,451 271,533
Long-term debt............................................................................ 698,981 894,781
Long-term debt due to affiliates.......................................................... -- 20,000668,281 881,791
Deferred income taxes..................................................................... 87,195 87,12187,602
Deferred income and other liabilities..................................................... 21,663 24,13420,403 24,763
Stockholders' equity:equity (deficit):
Common stock.......................................................................... 3,555 3,555
Additional paid-in capital............................................................ 204,539 204,434204,523
Accumulated deficit................................................................... (100,804) (114,149)(109,929)
Treasury stock........................................................................ (94,963) (94,624)(166,043)
Accumulated other comprehensive income (deficit)...................................... (600) 4,1976,300
Unearned compensation................................................................. (813) (577)(455) (207)
------------ ------------
Total stockholders' equity ......................................................... 10,914 2,836(deficit)................................................ 11,272 (61,801)
------------ ------------
$ 1,019,8921,019,602 $ 1,226,2061,203,888
============ ============
(A) Derived from the audited consolidated financial statements as of January 3,
1999
See accompanying notes to condensed consolidated financial statements.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED ---------------------------------
MARCH 29, APRILSIX MONTHS ENDED
----------------------- --------------------------
JUNE 28, JULY 4, JUNE 28 JULY 4,
1998 1999 1998 1999
---- ---- ---- ----
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Revenues:
Net sales..........................................................................sales...................................................$ 153,881213,506 $ 159,888230,379 $ 367,387 $ 390,267
Royalties, franchise fees and other revenues....................................... 18,172 18,303revenues................ 19,385 20,447 37,557 38,750
---------- ---------- ----------- ----------
172,053 178,191232,891 250,826 404,944 429,017
---------- ---------- ----------- ----------
Costs and expenses:
Cost of sales, excluding depreciation and amortization............................. 79,360 83,182amortization
related to sales of $408,000, $501,000, $806,000 and
$951,000.................................................. 114,253 121,040 193,613 204,222
Advertising, selling and distribution.............................................. 48,759 46,714distribution....................... 61,516 66,003 110,275 112,717
General and administrative ........................................................ 24,826 27,199administrative.................................. 25,430 28,157 50,256 55,356
Depreciation and amortization, excluding amortization
of deferred financing costs.. 9,212 8,424
Corporate restructuring related....................................................costs............................... 8,858 8,773 18,070 17,197
Capital structure reorganization related.................... -- 3,6501,217 -- 4,867
---------- ---------- ----------- ----------
162,157 169,169210,057 225,190 372,214 394,359
---------- ---------- ----------- ----------
Operating profit ................................................................ 9,896 9,022......................................... 22,834 25,636 32,730 34,658
Interest expense....................................................................... (16,638) (19,701)expense................................................ (16,996) (22,193) (32,859) (41,328)
Investment income, net................................................................. 7,585 5,333net.......................................... 7,447 7,023 15,032 12,307
Gain on sale of businesses...................................... 3,976 87 4,051 172
Other income, net...................................................................... 2,347 2,062net............................................... 440 1,656 927 2,229
---------- ---------- ----------- ----------
Income (loss) from continuing operations before income
taxes..................... 3,190 (3,284)
(Provision for) benefit fromtaxes.................................................. 17,701 12,209 19,881 8,038
Provision for income taxes.............................................. (1,595) 2,036taxes...................................... (8,219) (7,004) (9,367) (4,582)
---------- ---------- ----------- ----------
Income from continuing operations......................... 9,482 5,205 10,514 3,456
Income (loss) from continuing operations......................................... 1,595 (1,248)
Income from discontinued operations.................................................... 2,600 --operations...................... (1,413) (985) 1,750 (484)
---------- ---------- ----------- ----------
Income (loss) before extraordinary charges....................................... 4,195 (1,248)charges....................... 8,069 4,220 12,264 2,972
Extraordinary charges..................................................................charges........................................... -- -- -- (12,097)
---------- ---------- ----------- ----------
Net income (loss).........................................................................................................$ 4,1958,069 $ (13,345)4,220 $ 12,264 $ (9,125)
========== ========== =========== ==========
Basic and diluted income (loss) per share:
Income from continuing operations.........................$ .31 $ .20 $ .34 $ .12
Income (loss) from continuing operations.........................................$ .05 $discontinued operations................ (.05) (.04) Income from discontinued operations.............................................. .08.06 (.02)
Extraordinary charges..................................... -- Extraordinary charges............................................................ -- (.42)-- (.43)
---------- ---------- ----------- ----------
Net income (loss).........................................................................................................$ .13.26 $ (.46).16 $ .40 $ (.33)
========== ========== =========== ==========
Diluted income (loss) per share:
Income from continuing operations.........................$ .29 $ .19 $ .32 $ .12
Income (loss) from discontinued operations................ (.04) (.04) .05 (.02)
Extraordinary charges..................................... -- -- -- (.43)
---------- ---------- ----------- ----------
Net income (loss).........................................$ .25 $ .15 $ .37 $ (.33)
========== ========== =========== ==========
See accompanying notes to condensed consolidated financial statements.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREESIX MONTHS ENDED
-------------------------------
MARCH 29, APRIL------------------------------
JUNE 28, JULY 4,
1998 1999
---- ----
(IN THOUSANDS)
(UNAUDITED)
Cash flows from operating activities:
Net income (loss)........................................................................$ 4,19512,264 $ (13,345)(9,125)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Amortization of costs in excess of net assets of acquired companies,
trademarks and certain other items ............................................... 6,422 5,91112,523 11,998
Depreciation and amortization of properties......................................... 2,790 2,5135,547 5,199
Amortization of original issue discount and deferred financing costs ............... 2,046 3,0744,823 5,820
Write-off of unamortized deferred financing costs and interest rate cap
agreement costs.............................................................................costs .................................................................. -- 11,446
Corporate restructuringCapital structure reorganization related charge..............................................charge..................................... -- 3,6504,867
Cost of trading securities.......................................................... -- (15,447)(34,930)
Proceeds from trading securities.................................................... -- 26,59739,737
Net recognized gains from transactions in investments and short positions........... (5,169) (815)(9,059) (3,397)
(Income) loss from discontinued operations.......................................... (1,750) 484
Payments for acquisition related costs.............................................. (4,744) (43)(5,376) (62)
Payment resulting from Federal income tax return examination........................ (8,136) --
Income from discontinued operations................................................. (2,600)(8,460) --
Other, net.......................................................................... 12 (1,342)2,493 1,897
Changes in operating assets and liabilities:
Increase in receivables........................................................... (8,012) (35,897)(30,560) (49,752)
Increase in inventories........................................................... (19,008) (22,318)
Decrease (increase) in inventories................................................ 5,923 (13,518)
Increase in prepaid expenses and other current assets............................. (1,540) (9,164)assets.................. 1,408 (3,874)
Increase (decrease) in accounts payable and accrued expenses .................... (13,219) 645............................... 33,826 38,375
--------- ---------
Net cash used in operating activities........................................ (22,032) (35,735)(1,329) (3,635)
--------- ---------
Cash flows from investing activities:
Cost of available-for-sale securities and limited partnerships........................... (24,177) (18,476)partnerships .......................... (96,836) (57,091)
Payments to cover short positions net of proceeds from securities sold short............ -- (12,881)in securities.......................................... (2,012) (40,306)
Proceeds from available-for-sale securities and limited partnerships..................... 33,907 19,07957,898 43,307
Proceeds of securities sold short........................................................ 18,462 29,545
Acquisition of Millrose Distributors, Inc................................................ -- (17,296)(17,376)
Proceeds from sale of investment in Select Beverages, Inc................................ 28,342 --
Capital expenditures..................................................................... (6,168) (1,604)(8,542) (6,338)
Purchase of ownership interests in aircraft.............................................. (3,754) --
Distributions received from propane partnership.......................................... 2,625 --
Other.................................................................................... 52 66368 428
--------- ---------
Net cash provided by (used in)used in investing activities.......................... 2,485 (31,112)activities........................................ (6,074) (47,831)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt............................................................. 100,163 775,000
Repayments of long-term debt............................................................. (2,684) (560,470)
Deferred financing costs................................................................. (3,406) (27,821)(7,426) (563,143)
Repurchase of common stock for treasury ................................................. (27,500) --treasury.................................................. (32,903) (75,958)
Deferred financing costs................................................................. (3,906) (29,600)
Proceeds from stock option exercises .................................................... 1,327 2032,390 4,137
--------- ---------
Net cash provided by financing activities................................... 67,900 186,912activities.................................... 58,318 110,436
--------- ---------
Net cash provided by continuing operations................................................... 48,353 120,06550,915 58,970
Net cash provided by (used in) discontinued operations....................................... 2,452 (48)3,026 (2,060)
--------- ---------
Net increase in cash and cash equivalents.................................................... 50,805 120,01753,941 56,910
Cash and cash equivalents at beginning of period............................................. 129,480 161,248
--------- ---------
Cash and cash equivalents at end of period...................................................$ 180,285183,421 $ 281,265218,158
========= =========
See accompanying notes to condensed consolidated financial statements.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRILJULY 4, 19981999
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Triarc Companies, Inc. ("Triarc" and, together with its subsidiaries, the
"Company") have been prepared in accordance with Rule 10-01 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC") and,
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. In the opinion of the
Company, however, the accompanying condensed consolidated financial statements
contain all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the Company's financial position as of January 3,
1999 and AprilJuly 4, 1999, its results of operations for the three-month and
six-month periods ended June 28, 1998 and July 4, 1999 and its results of operations and cash flows for
the three-monthsix-month periods ended March 29,June 28, 1998 and AprilJuly 4, 1999 (see below). This
information should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended January 3, 1999. Certain statements in these
notes to condensed consolidated financial statements constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve risks, uncertainties and other factors which
may cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. See Part II - "Other
Information".
The Company reports on a fiscal year basis consisting of 52 or 53 weeks
ending on the Sunday closest to December 31. In accordance therewith, the
Company's first quarterhalf of 1998 commenced on December 29, 1997 and ended on June
28, 1998, with its second quarter commencing on March 29,30, 1998 and the Company's
first quarterhalf of 1999 commenced on January 4, 1999 and ended on July 4, 1999, with
its second quarter commencing on April 4,5, 1999. For the purposes of these
consolidated financial statements, suchthe periods (1) from December 29, 1997 to
June 28, 1998 and March 30, 1998 to June 28, 1998 are referred to hereinbelow as the
six-month and three-month periods ended March 29,June 28, 1998, respectively, and (2)
from January 4, 1999 to July 4, 1999 and April 5, 1999 to July 4, 1999 are
referred to below as the six-month and three-month periods ended July 4, 1999,
respectively.
As described in detail in Note 14, on July 19, 1999 the Company sold
substantially all of its remaining 42.7% interest in its former propane business
and, accordingly, the accompanying condensed consolidated financial statements
as of and for the three-month period ended July 4, 1999 reflect the propane
business as discontinued operations and the condensed consolidated financial
statements for the three and six months ended June 28, 1998 and the three months
ended April 4, 1999 respectively.(included in the six months ended July 4, 1999) have been
similarly reclassified.
(2) INVENTORIES
The following is a summary of the components of inventories (in thousands):
JANUARY 3, APRILJULY 4,
1999 1999
---- ----
Raw materials.............materials..............................$ 20,268 $ 25,70830,289
Work in process...........process............................ 98 360454
Finished goods............goods............................. 26,395 35,758
---------- ----------39,884
--------- --------
$ 46,761 $ 61,826
========== ==========70,627
========= ========
(3) LONG-TERM DEBTLong-Term Debt
On January 15, 1999 Triarc Consumer Products Group, LLC ("TCPG"), a
wholly-owned subsidiary of Triarc, was formed. On February 23, 1999 TCPG
acquired all of the stock previously owned directly or indirectly by Triarc of
RC/Arby's Corporation ("RC/Arby's"), Triarc Beverage Holdings Corp. ("Triarc
Beverage Holdings") and Cable Car Beverage Corporation ("Cable Car"). On
February 25, 1999 TCPG issued $300,000,000 principal amount of 10 1/4% senior
subordinated notes due 2009 (the "Notes"), including an aggregate $20,000,000
issued to the Chairman and Chief Executive Officer and President and Chief
Operating Officer (the "Executives") of the Company. The Company has been
informed that, subsequent toas of April 4,23, 1999, the Executives no longer hold any of the
Notes. Concurrently, Snapple Beverage Corp. ("Snapple"), a subsidiary of Triarc
Beverage Holdings, Mistic Brands, Inc. ("Mistic"), a subsidiary of Triarc
Beverage Holdings, Cable Car, RC/Arby's and Royal Crown Company, Inc. ("Royal
Crown"), a subsidiary of RC/Arby's entered into an agreement (the "Credit
Agreement") for a new $535,000,000 senior bank credit facility (the "Credit
Facility") consisting of a $475,000,000 term facility, all of which was borrowed
as term loans (the "Term Loans") on February 25, 1999, and a $60,000,000
revolving credit facility (the "Revolving Credit Facility") which provides for
revolving credit loans (the "Revolving Loans") by Snapple, Mistic, or Cable Car, effective February 25, 1999 and
RC/Arby's or Royal Crown effective upon the redemption of the 9 3/4% Senior Notes (see below).Crown. There were no borrowings of Revolving Loans as of
February 25, 1999 or AprilJuly 4, 1999. The Company utilized a portion of the
aggregate net proceeds of these borrowings to (1) repay on February 25, 1999 the
$284,333,000 outstanding principal amount of the term loans under the former
$380,000,000 credit agreement, as amended (the "Former Beverage Credit
Agreement") entered into by Snapple, Mistic, Triarc Beverage Holdings and Cable
Car and $1,503,000 of related accrued interest, (2) redeem (the "Redemption") on
March 30, 1999 the $275,000,000 of borrowings under the RC/Arby's 9 3/4% senior
secured notes due 2000 (the "9 3/4% Senior Notes") and pay $4,395,000 of related
accrued interest and $7,662,000 of redemption premium, (3) acquire Millrose
Distributors, Inc. and the assets of Mid-State Beverage, Inc. (collectively,
"Millrose"), two New Jersey distributors of the Company's premium beverages, for
$17,296,000$17,376,000, including expenses of $126,000, and (4) payprovide for estimated fees
and expenses of $27,821,000$29,600,000 relating to the issuance of the Notes and the
consummation of the Credit Facility (the "Refinancing Transactions"). The
remaining net proceeds of the Refinancing Transactions are being used for
general corporate purposes, which may includeincluding working capital, investments, future
acquisitions, repayment or refinancing of indebtedness, restructurings or
repurchases of securities, including the Company's common stock (see Note 12)5).
See Note 68 for disclosure of the extraordinary charges related to the
aforementioned debt repayments and recorded during the first quarter of the year
ending January 2, 2000.
Under the indenture (the "Indenture") pursuant to which the Notes were
issued, the Notes are redeemable at the option of the Company at amounts
commencing at 105.125% of principal beginning February 2004 decreasing annually
to 100% in February 2007 through February 2009. In addition, should the Company
consummate a permitted initial public equity offering of its consumer products
subsidiaries, the Company may at any time prior to February 2002 redeem up to
$105,000,000 of the Notes at 110.25% of principal amount with the net proceeds
of such public offering. TheOn August 3, 1999, the Company filed amendment No. 1 to
a registration statement (the "Registration Statement") covering resales by
holders of the Notes on May 17,
1999 with the SEC. If the Registration Statement is not declared
effective by the SEC on or before August 24, 1999, the annual interest rate on
the Notes will increase by 1/2% to 10 3/4% until the Registration Statement is
declared effective. The Company currently believes that the Registration
Statement will not be declared effective by the SEC by such date.
Borrowings under the Credit Facility bear interest, at the Company's
option, at rates based on either the 30, 60, 90 or 180-day London Interbank
Offered Rate ("LIBOR") (ranging from 4.94%5.18% to 5.06%5.59% at AprilJuly 4, 1999) or an
alternate base rate (the "ABR"). The ABR (8% at July 4, 1999) represents the
higher of the prime rate or 1/2% over the Federal funds rate. The interest rates
on LIBOR-based loans are reset at the end of the period corresponding with the
duration of the LIBOR selected. The interest rates on ABR-based loans are reset
at the time of any change in the ABR. The ABR (7 3/4% at April 4, 1999) represents the higher of
the prime rate or 1/2% over the Federal funds rate. Revolving Loans and one class of the Term
Loans with $45,000,000$44,437,000 outstanding as of AprilJuly 4, 1999 bear interest at 3% over
LIBOR or 2% over ABR until such time as such margins may be subject to downward
adjustment by up to 3/4% based on the borrowers' leverage ratio, as defined. The
other two classes of Term Loans with $125,000,000$124,688,000 and $305,000,000$304,238,000 outstanding
as of AprilJuly 4, 1999 (the "Term B Loans" and "Term C Loans," respectively) bear
interest at 3 1/2% and 3 3/4% over LIBOR, respectively, and 2 1/2% and 2 3/4%,
respectively, over ABR. The borrowing base for Revolving Loans is the sum of 80%
of eligible accounts receivable and 50% of eligible inventories. At AprilJuly 4, 1999
there would have beenwas $59,951,000 of borrowing availability under the Revolving Credit
Facility in accordance with limitations due to such borrowing base. The Term
Loans are due $4,912,000$3,275,000 during the remainder of 1999, $8,238,000 in 2000,
$10,488,000 in 2001, $12,738,000 in 2002, $14,987,000 in 2003, $15,550,000 in
2004, $94,299,000 in 2005, $242,875,000 in 2006 and $70,913,000 in 2007 and any
Revolving Loans would be due in full in March 2005. The borrowers must also make
mandatory annual prepayments in an amount, if any, initially equal to 75% of
excess cash flow, as defined in the Credit Agreement. If the Company makes
voluntary prepayments of the Term B and Term C Loans on or prior tothrough February 25, 2001,2000,
it will incur prepayment penalties of 2.0% and 3.0% of the amounts prepaid,
respectively, and from February 26, 2000 through February 25, 2000 and2001 it will incur
prepayment penalties of 1.0% and 1.5% of the amounts prepaid, respectively, through February 25, 2001.respectively.
Under the Credit Agreement substantially all of the assets, other than cash
and cash equivalents, of Snapple, Mistic, Cable Car, RC/Arby's, Royal Crown and
Arby's, Inc. ("Arby's"), a subsidiary of RC/Arby's, and their subsidiaries, are
pledged as security. The Company's obligations with respect to the Notes are
guaranteed by Snapple, Mistic, Cable Car and RC/Arby's and all of their domestic
subsidiaries. Such guarantees are full and unconditional, are on a joint and
several basis and are unsecured. The Company's obligations with respect to the
Credit Facility are guaranteed (the "Guaranty") by TCPG, Triarc Beverage
Holdings and substantially all of the domestic subsidiaries of Snapple, Mistic,
Cable Car, RC/Arby's and Royal Crown. As collateral for such guarantees under
the Credit Facility, all of the stock of Snapple, Mistic, Cable Car, RC/Arby's
and Royal Crown and substantially all of their domestic subsidiaries and 65% of the stock of
each of their directly-owned foreign subsidiaries is pledged.
The Indenture, and the Credit Agreement and the Guaranty contain various
covenants which (1) require meeting certain financial amount and ratio tests,
(2) limit, among other matters, (a) the incurrence of indebtedness, (b) the
retirement of certain debt prior to maturity, (c) investments, (d) asset
dispositions and (e) affiliate transactions other than in the normal course of
business, and (3) restrict the payment of dividends to Triarc. Under the most
restrictive of such covenants, the borrowers would not be able to pay any
dividends to Triarc other than (1) permitted one-time distributions, including
dividends, paid to Triarc in connection with the Refinancing Transactions and
(2) certain defined amounts in the event of consummation of a securitization of
certain assets of Arby's. Such one-time permitted distributions consisted of
$91,420,000 paid on February 25, 1999 and $124,108,000 paid on March 30, 1999
following the Redemption.
The following pro forma data of the Company for the threesix months ended AprilJuly
4, 1999 have been prepared by adjusting the historical data reflected in the
accompanying condensed consolidated statement of operations for such period to
reflect the effects of the Refinancing Transactions (without any incremental
interest income or any other benefit of the excess proceeds of the Refinancing
Transactions) as if such transactions had been consummated on January 4, 1999.
Such pro forma data is presented for information purposes only and does not
purport to be indicative of the Company's actual results of operations had such
transactions actually been consummated on January 4, 1999 or of the Company's
future results of operations and are as follows (in thousands except per share
amounts):
AS PRO
REPORTED FORMA
-------- ------
Revenues........................................................................$ 178,191 $ 179,865
Operating profit................................................................ 9,022 8,933
Interest expense................................................................ (19,701) (19,963)
Loss from continuing operations................................................. (1,248) (2,240)
Basic and diluted loss from continuing operations per share..................... (.04) (.08)
AS PRO
REPORTED FORMA
-------- -----
Revenues...........................................$ 429,017 $ 430,691
Operating profit................................... 34,658 34,568
Interest expense................................... (41,328) (44,222)
Income from continuing operations.................. 3,456 789
Basic and diluted income from continuing
operations per share............................. .12 .03
(4) CORPORATE RESTRUCTURINGACQUISITION
The acquisition of Millrose described in Note 3 has been accounted for in
accordance with the purchase method of accounting. In accordance therewith, the
following table sets forth the preliminary allocation of the aggregate purchase
price (in thousands):
Current assets....................................$ 3,770
Properties........................................ 1,000
Unamortized costs in excess of net assets
of acquired companies........................... 13,464
Current liabilities............................... (858)
--------
$ 17,376
========
(5) TREASURY STOCK REPURCHASE
On April 27, 1999 the Company repurchased 3,805,015 shares of its Class A
common stock for $18.25 per share in connection with a tender offer for an
aggregate cost of $69,442,000, plus fees and expenses of $550,000. Assuming this
share repurchase had occurred on January 4, 1999, the Company's diluted
per-share income from continuing operations, loss from discontinued operations,
extraordinary charges and net loss for the six-month period ended July 4, 1999
would have been $.13, $(.02), $(.47) and $(.36), respectively.
(6) CAPITAL STRUCTURE REORGANIZATION RELATED CHARGE
The restructuringcapital structure reorganization related charge of $3,650,000$4,867,000
recognized during the six months ended July 4, 1999 (including $1,217,000
recognized during the three months ended AprilJuly 4, 19991999) resulted from equitable
adjustments to the terms of outstanding options under the stock option plan of
Triarc Beverage Holdings, to adjust for the effects of net distributions of
$91,342,000, principally consisting of transfers of cash and deferred tax
assets, from Triarc Beverage Holdings to Triarc, partially offset by the effect
of the contribution of Cable Car to Triarc Beverage Holdings.
(5)Holdings effective May 17,
1999.
(7) INCOME TAXES
The Federal income tax returns of the Company have been examined by the
Internal Revenue Service (the "IRS") for the tax years from 1989 through 1992.1992
(the "1989 through 1992 Examinations"). The Company has reached a tentative settlementresolved all issues with
the IRS regarding all
remaining issues in connection with such audit. TheIn connection therewith, the Company paid
$5,298,000, including interest, during 1997, paid an additional $8,136,000,$8,460,000,
including interest, during the first quarterhalf of 1998 and paid an additional $324,000,has agreed to make net
payments of approximately $1,200,000, including interest, during the secondthird
quarter of 1998 in partial settlement of
such audit. In addition, the Company has agreed to pay approximately $5,000,000,
including interest, to resolve all remaining issues. The tentative settlement is
subject to review by the Congressional Joint Committee on Taxation. If the
settlement is so approved, the Company anticipates it would make payment later
in 1999. The IRS is examining the Company's Federal income tax returns
for the tax year ended April 30, 1993 and transition period ended December 31,
1993.1993 (the "1993 Examination"). In connection therewith, the Company has not
received any notices of proposed adjustments. Management of the Company believes
that adequate aggregate provisions have been made principally in years prior to
1998 for the $1,200,000 of tax liabilities, including interest, in connection
with the 1989 through 1992 Examinations and any tax liabilities, including
interest, that may result from the resolution of these
IRS examinations.
(6)the 1993 Examination.
(8) EXTRAORDINARY CHARGES
The extraordinary charges in the threesix months ended AprilJuly 4, 1999 resulted
from the early extinguishment of borrowings under the Former Beverage Credit
Agreement and the 9 3/4% Senior Notes (see Note 3). Such extraordinary charges
consisted of (1) the write-off of previously unamortized (a) deferred financing
costs of $11,300,000 and (b) interest rate cap agreement costs of $146,000 and
(2) the payment of the $7,662,000 redemption premium (see Note 3), less income
tax benefit of $7,011,000.
(7)(9) COMPREHENSIVE INCOME (LOSS)
The following is a summary of the components of comprehensive income
(loss) (in thousands):
THREE MONTHS ENDED MARCH 29, APRILSIX MONTHS ENDED
-------------------------- ----------------------------
JUNE 28, JULY 4, JUNE 28, JULY 4
1998 1999 1998 1999
---- ---- ---- ----
Net income (loss) ..............................................................................................$ 4,1958,069 $ (13,345)4,220 $ 12,264 $ (9,125)
Unrealized gains (losses) on "available-for-sale"
investments............................ 1,715 1,205investments................................... (2,419) (380) (704) 825
Equity in the unrealized gains of investment
limited partnerships...............partnerships.......................... -- 3,6702,532 -- 6,202
Net change in currency translation adjustment................................... 5 (78)
---------adjustment..... (17) (49) (12) (127)
---------- ----------- ---------- ----------
Comprehensive income (loss)....................................................................$ 5,9155,633 $ (8,548)6,323 $ 11,548 $ (2,225)
========== =========== ========== ==========
(8)(10) INCOME (LOSS) PER SHARE
The weighted average number of common shares outstanding used in the
calculations of basic income (loss) per share for the three-monththree and six-month
periods ended March 29,(1) June 28, 1998 were 30,596,000 and April30,841,000, respectively,
and (2) July 4, 1999 were 31,086,00026,434,000 and 29,316,000,27,875,000, respectively. The shares
used in the calculations of diluted income (loss) per share for the three-monththree and
six-month periods ended March 29,(1) June 28, 1998 were 32,374,000 and April32,655,000,
respectively, and (2) July 4, 1999 were 32,919,00027,339,000 and 29,316,000,28,328,000, respectively.
The shares used for diluted earnings per share for the 1998
period include 1,833,000 shares forreflect the effect of dilutive
stock options of 1,778,000, 1,814,000, 905,0000 and 453,000 for the three and
six-month periods ended June 28, 1998 and the three and six-month periods ended
July 4, 1999, respectively, but exclude the effect of the other potentially
dilutive security, the Company's zero coupon convertible debentures due 2018, since the
effect thereof would have been antidilutive.
The shares used in the calculations of basic and diluted loss per
share are the same in the 1999 period since both potentially dilutive securities
would have had an antidilutive effect.
(9)(11) TRANSACTIONS WITH RELATED PARTIES
The Company continues to lease aircraft owned by Triangle Aircraft
Services Corporation ("TASCO"), a company owned by the Executives, for annual
rent of $3,360,000 as of January 1, 1999. In connection with such lease and the
amortization over a five-year period of a $2,500,000 payment made in 1997 by the
Company to TASCO for (1) an option to continue the lease for an additional five
years effective September 30, 1997 and (2) the agreement by TASCO to replace one
of the aircraft covered under the lease, the Company had rent expense of
$935,000$1,898,000 for the three-monthsix-month period ended AprilJuly 4, 1999. Pursuant to this
arrangement, the Company also pays the operating expenses of the aircraft
directly to third parties.
On October 12, 1998 the Company announced that its Board of Directors had
formed a Special Committee to evaluate a proposal (the "Proposal") it had
received from the Executives for the acquisition by an entity to be formed by
them of all (a) of the outstanding shares of Triarc's common stock (other than
approximately 6,000,000 shares owned by an affiliate of the Executives) for
$18.00 per share payable in cash and securities. On March 10, 1999 the Company
announced that it had been advised by the Executives that they had withdrawn the
Proposal.
(10)(12) LEGAL AND ENVIRONMENTAL MATTERS
The Company is involved in litigation, claims and environmental matters
incidental to its businesses. The Company has reserves for such legal and
environmental matters aggregating approximately $1,800,000$1,708,000 as of AprilJuly 4, 1999.
Although the outcome of such matters cannot be predicted with certainty and some
of these matters may be disposed of unfavorably to the Company, based on
currently available information and given the Company's aforementioned reserves,
the Company does not believe that such legal and environmental matters will have
a material adverse effect on its consolidated financial position or results of
operations.
(11)(13) BUSINESS SEGMENTS
The following is a summary of the Company's segment information (in
thousands):
THREE MONTHS ENDED -------------------------------
MARCH 29, APRILSIX MONTHS ENDED
------------------------- -------------------------
JUNE 28, JULY 4, JUNE 28, JULY 4,
1998 1999 1998 1999
---- ---- ---- ----
Revenues:
Premium beverages...........................................................beverages...................................$ 121,769177,691 $ 129,162196,370 $ 299,460 $ 325,532
Soft drink concentrates..................................................... 32,195 30,940
Restaurants................................................................. 18,089 18,089concentrates............................. 35,958 34,344 68,153 65,284
Restaurants......................................... 19,242 20,112 37,331 38,201
----------- ----------- ----------- -----------
Consolidated revenues...................................................revenues...........................$ 172,053232,891 $ 178,191250,826 $ 404,944 $ 429,017
=========== =========== =========== ===========
Earnings before interest, taxes, depreciation and
amortization:
Premium beverages...........................................................beverages...................................$ 8,55419,554 $ 8,90622,724 (a) $ 28,108 $ 31,630 (a)
Soft drink concentrates..................................................... 5,141 5,215
Restaurants................................................................. 9,715 9,662concentrates............................. 5,002 5,293 10,143 10,508
Restaurants......................................... 10,685 12,012 20,400 21,674
General corporate........................................................... (4,302) (6,337)corporate................................... (3,549) (5,620) (a) (7,851) (11,957) (a)
----------- ----------- ----------- -----------
Consolidated earnings before interest, taxes,
depreciation and amortization........................................................ 19,108 17,446amortization............... 31,692 34,409 50,800 51,855
----------- ----------- ----------- -----------
Less depreciation and amortization:
Premium beverages........................................................... 5,567 5,385beverages................................... 5,482 5,662 11,049 11,047
Soft drink concentrates..................................................... 2,281 1,918
Restaurants................................................................. 670 549concentrates............................. 2,271 1,791 4,552 3,709
Restaurants......................................... 535 533 1,205 1,082
General corporate........................................................... 694 572corporate................................... 570 787 1,264 1,359
----------- ----------- ----------- -----------
Consolidated depreciation and amortization.............................. 9,212 8,424amortization...... 8,858 8,773 18,070 17,197
----------- ----------- ----------- -----------
Operating profit (loss):profit:
Premium beverages........................................................... 2,987 3,521beverages................................... 14,072 17,062 (a) 17,059 20,583 (a)
Soft drink concentrates..................................................... 2,860 3,297
Restaurants................................................................. 9,045 9,113concentrates............................. 2,731 3,502 5,591 6,799
Restaurants......................................... 10,150 11,479 19,195 20,592
General corporate........................................................... (4,996) (6,909)corporate................................... (4,119) (6,407) (a) (9,115) (13,316) (a)
----------- ----------- ----------- -----------
Consolidated operating profit........................................... 9,896 9,022
Equity in the income of the propane segment..................................... 1,785 1,453profit................... 22,834 25,636 32,730 34,658
Interest expense................................................................ (16,638) (19,701)expense........................................ (16,996) (22,193) (32,859) (41,328)
Investment income, net.......................................................... 7,585 5,333net.................................. 7,447 7,023 15,032 12,307
Gain on sale of businesses.............................. 3,976 87 4,051 172
Other income, net............................................................... 562 609net....................................... 440 1,656 927 2,229
----------- ----------- ----------- -----------
Consolidated income (loss) from continuing
operations before income taxes.........................................................taxes...............$ 3,19017,701 $ (3,284)12,209 $ 19,881 $ 8,038
=========== =========== =========== ===========
- - - - - - - - - - - - - -
- ------------
(a) Reflects the $3,650,000 corporate restructuringcapital structure reorganization related charge discussed in
Note 6 as follows (in thousands):
THREE MONTHS SIX MONTHS
ENDED ENDED
JULY 4, with $2,250,000 charged to the premium beverage segment and
$1,400,000 charged to general corporate.
(12)1999 JULY 4, 1999
------------ ------------
Charged to:
Premium beverages..................$ 750 $ 3,000
General corporate.................. 467 1,867
--------- --------
$ 1,217 $ 4,867
========= ========
(14) SUBSEQUENT EVENTS
SALE OF THE PROPANE PARTNERSHIP
On April 5,July 19, 1999 the Company sold (the "Propane Partnership Sale")
substantially all of its interests in National Propane Partners, L.P. (the
"Propane Partnership") and Columbiaa subpartnership National Propane, Corporation ("Columbia Propane"), a
subsidiary of Columbia Energy Group, signed a definitive purchase agreementL.P. (the
"Purchase Agreement""Operating Partnership") pursuant to which Columbia Propane, L.P. ("Columbia"),. Prior to the
Propane Partnership Sale, the Company owned a subsidiary of Columbia42.7% combined interest in the
Propane commenced a tender offer on April 9, 1999 to
acquire all ofPartnership and the Operating Partnership; the remaining 57.3% interest
the Company did not own was represented by publicly traded common units (the
"Common Units") of the Propane Partnership representingPartnership. The consideration paid to Triarc
consisted of (1) the 57.3% interest the Company does not own for
$12.00 in cash per Common Unit. The tender offer was the first stepforgiveness of $15,816,000 of a two-step transactionnote payable to the
Operating Partnership by Triarc (the "Partnership Sale"Note"). The Company owns with a 42.7% combined
interest in the Propane Partnershipremaining
principal balance of $30,700,000 as of July 4, 1999 and a subpartnership, National Propane, L.P.
(the "Operating Partnership"). Columbia has advised the Propane Partnership that
pursuant to the tender offer, which expired on May 6, 1999, Columbia acquired
5,922,654 Common Units representing approximately 88.4%(2) cash of the outstanding
Common Units. In the second step$2,866,000,
consisting of this two-step transaction, subject to the
terms and conditions$2,101,000 of the Purchase Agreement, Columbia would acquireconsideration for the Company's interests in the
Propane Partnership and the Operating Partnership exceptand $1,033,000 representing
the reimbursement of interest expense incurred and paid by the Company on the
Partnership Note, both partially offset by $268,000 of amounts equivalent to
interest on advances made by the purchaser in a tender offer for a 1% limited partnership interest in the Operating Partnership, in
consideration of cash of $2,100,000 and the forgiveness of $15,816,000 of a note
payable toCommon
Units. The Company expects that the Propane Partnership by Triarc (the "Partnership Note") with
remaining principal of $30,700,000 as of April 4, 1999, and the Propane
Partnership would merge into Columbia. The Operating Partnership will continue
to exist as a subsidiary partnership of Columbia. As part of the second step,
any remaining Common Unit holders of the Propane Partnership would receive
$12.00 in cash per Common Unit and the Company would repay the remaining
$14,884,000 of the Partnership Note. Also as part of the second step, the
Propane Partnership filed an information statement with the SEC on May 19, 1999.
Following clearance of the information statement by the SEC and its mailing to
holders of the Propane Partnership's Common Units and upon satisfaction or
waiver of the terms and conditions set forth in the Purchase Agreement, the
second step of the transaction would be consummated. The second step of the
Partnership Sale is currently expected to be completed in the second half of
1999. However, there can be no assurance that the second step of the Partnership
Sale will be consummated.
Assuming the Partnership Sale is consummated in accordance with its present
terms, such sale would result in a
gain to be recorded in the Company. Underthird quarter of 1999, the amount of which has not
yet been determined. In connection with the closing of the Propane Partnership
Sale, Triarc repaid the remaining principal balance of the Partnership Note of
$14,884,000 and the Propane Partnership merged into Columbia.
As a result of the Propane Partnership Sale, the Company would maintain financial interestssold
substantially all of its remaining 42.7% interest in the propane business,
through retention ofretaining a 1% limited partnershippartner interest. The equity in the losses (the "Equity
in Losses") of the Propane Partnership and the recognition of deferred gain (the
"Deferred Gain") from the 1996 sale of the 57.3% interest in the Propane
Partnership for the second quarter of 1999 are reported as discontinued
operations and the Equity in Losses and Deferred Gain for the three and six
months ended June 28, 1998 and the three months ended April 4, 1999 (included in
the six months ended July 4, 1999) have been reclassified in the accompanying
condensed consolidated financial statements to reflect the Propane Partnership
as discontinued operations.
Income (loss) from discontinued operations consisted of the following (in
thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
JUNE 28, JULY 4, JUNE 28, JULY 4,
1998 1999 1998 1999
---- ---- ---- ----
Loss from discontinued operations
net of income taxes of $1,180, $1,193,
$733 and $807.................................$ (1,925) $ (1,914) $ (1,362) $ (1,413)
Gain on disposal of discontinued operations
net of income taxes of $288, $523,
$1,688 and $523............................... 512 929 3,112 (a) 929
---------- ----------- ---------- ----------
$ (1,413) $ (985) $ 1,750 $ (484)
========== =========== ========== ==========
----------------------------
(a) Includes $2,600,000 recorded in the first quarter of 1998 representing
an after-tax adjustment to amounts provided in prior years as a result
of the collection of a note receivable not previously recognized for
the estimated loss on disposal of certain discontinued operations of
SEPSCO, LLC, a subsidiary of the Company.
In connection with the Propane Partnership Sale, National Propane
Corporation ("National Propane"), the former managing general partner of the
Propane Partnership and a subsidiary of the Company, retained a 1% special
limited partner interest in the Operating Partnership and agreed that while it
remains a special limited partner, National Propane would indemnify ("the
guarantee (the "Propane Guarantee"Indemnification") of substantially allthe purchaser for any payments the purchaser makes, only after
recourse to the assets of the Operating Partnership's debt by National Propane Corporation ("National
Propane"), a subsidiaryPartnership, related to the purchaser's
obligations under certain of the Company. Accordingly, the resultsdebt of operations
of the propane segment and any resulting gain from the Partnership Sale will not
be accounted for as a discontinued operation.
At December 31, 1998 and March 31, 1999 the Operating Partnership, was not
in compliance with a covenant under its bank credit facility (the "Propane Bank
Facility"). The Operating Partnership received an unconditional waiver of such
non-compliance from the lenders under the Propane Bank Credit Facility (the
"Lenders") with respect to the covenant non-complianceaggregating
approximately $138,000,000 as of December 31, 1998
and a conditional waiver with respect to any future non-compliance with such
covenant through August 31, 1999. In accordance with the waiver the Lenders have
unconditionally waived non-compliance with the covenant of March 31, 1999. A
number of the conditions to such conditional waiver are directly related to the
Partnership Sale. Should the conditions not be met, or the waiver expire andJuly 19, 1999, if the Operating Partnership be in default ofis
unable to repay or refinance such debt. Under the purchase agreement, both the
purchaser and National Propane Bank Facility,may require the Operating Partnership would also be in defaultto
repurchase the 1% special limited partner interest. The purchase price for the
equity of $125,000,000 of its first mortgage notes
by virtue of cross-default provisions. If the Partnership Sale is not
consummated and the Lenders are unwilling to extend the waiver, (1) the Propane
Partnership could seek to otherwise refinance its indebtedness, (2) Triarc might
consider buying the banks' loans to the Operating Partnership ($15,997,000
principal amount outstanding as of April 4, 1999), (3) the Propane Partnership
could pursue other potential purchasers of the Propane Partnership or (4) the
Propane Partnership could be forced to seek protection under the Federal
bankruptcy laws. In such latter event, National Propane may be required to honor
the Propane Guarantee. As a result, Triarc may be required to pay a $30,000,000
demand note payable to National Propane, and National Propane would be required
to surrender the note (if the Company has not yet paid it) or the proceeds from
such note, as well as the Company's interests in the Propane Partnership and the Operating Partnership, including the
57.3% not owned by National Propane, aggregated approximately $99,100,000. The
Company believes that it is unlikely that it will be called upon to make any
payments under the Lenders.
TREASURY STOCK REPURCHASE
On April 27, 1999 the Company repurchased 3,805,015 shares of its Class A
common stock for $18.25 per share in connection with a tender offer that had
commenced on March 12, 1999 and expired on April 22, 1999. As a result, in the
second quarter of 1999 the Company will record an addition to treasury stock
with a resulting reduction in stockholders' equity for the aggregate costs to
repurchase the shares of $69,442,000, plus related estimated fees and expenses
of $1,000,000. Assuming this share repurchase had occured on January 4, 1999,
the Company's per share loss from continuing operations, extraordinary charges
and net loss would have increased to $.05, $.47 and $.52, respectively.
Indemnification.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
ITEMItem 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.Management's Discussion and Analysis of Financial Condition and Results
of Operations.
INTRODUCTION
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" should be read in conjunction with "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report on Form 10-K for the fiscal year ended January 3, 1999 of Triarc
Companies, Inc. ("Triarc" or, collectively with its subsidiaries, the
"Company"). The recent trends affecting our premium beverage, soft drink
concentrate and restaurant segments are described therein. Certain statements
under this caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations" constitute "forward-looking statements" under the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve risks, uncertainties and other factors which
may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. For these statements, we claim the
protection of the safe harbor for forward-looking statements contained in the
Reform Act. See "Part II - Other Information".
Our fiscal year consists of 52 or 53 weeks ending on the Sunday closest to
December 31. Our 1998 first quarterhalf commenced on December 29, 1997 and ended on
June 28, 1998, with our second quarter commencing on March 29,30, 1998 and our 1999
first quarterhalf commenced on January 4, 1999 and ended on July 4, 1999, with our
second quarter commencing on April 4,5, 1999. WhenTherefore, when we refer to the
"six-month period ended June 28, 1998" and the "three-month period ended March 29,June
28, 1998," or "1998 first quarter," we mean the periodperiods from December 29, 1997 to June 28, 1998 and March
29,30, 1998 to June 28, 1998; and when we refer to the "six-month period ended July
4, 1999", or the "1999 first half," and the "three-month period ended AprilJuly 4,
1999"1999," or the "1999 firstsecond quarter," we mean the periodperiods from January 4, 1999 to
July 4, 1999 and April 5, 1999 to July 4, 1999.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JULY 4, 1999 COMPARED WITH SIX MONTHS ENDED JUNE 28, 1998
Revenues
Our revenues increased $6.1$24.1 million to $178.2$429.0 million in the threesix months
ended AprilJuly 4, 1999 compared towith the threesix months ended March 29,June 28, 1998. A
discussion of the changes in revenues by segment is as follows:
Premium Beverages -- Our premium beverage revenues increased $7.4$26.1 million
(6.1%(8.7%) in the threesix months ended AprilJuly 4, 1999 compared with the threesix months
ended March 29,June 28, 1998. The increase was principally due to netreflects higher volume reflectingand, to a lesser
extent, higher average selling prices in the 1999 first half. The increase
in volume principally reflects (1) 1999 sales of WhippleSnapple(TM)Snapple Elements(TM), a
new product platform of herbally enhanced drinks introduced in April 1999,
(2) increased cases sold to retailers through Millrose Distributors, Inc.
principally reflecting an increased focus on our products as a result of
our ownership of this New Jersey distributor, which was not
introduced until April 1998,we refer to as
well as increases inMillrose, since February 25, 1999 (see further discussion of the Millrose
acquisition below under "Liquidity and Capital Resources"), (3) net higher
sales of diet teas and other diet beverages and juice drinks, and non-diet teas.(4)
higher sales of Whipper Snapple(TM), which was introduced in April 1998.
The higher average selling prices principally reflect (1) the effect of the
Millrose acquisition since February 25, 1999 whereby we sell product at
higher prices directly to retailers compared with sales at lower prices to
distributors such as Millrose and (2) selective price increases.
Soft Drink Concentrates -- Our soft drink concentrate revenues decreased
$1.3$2.9 million (3.9%(4.2%) in the threesix months ended AprilJuly 4, 1999 compared with the
threesix months ended March 29,June 28, 1998. This decrease is attributable to lower
Royal Crown sales of (1) concentrate of $1.5 million, or 2.2%, and (2)
finished goods of $0.8$1.4 million, or 100%, which the soft drink concentrate
segment no longer sells, and (2)
concentrate of $0.5 million, or 1.7%.sells. The decrease in Royal Crown sales of concentrate
reflects a $2.6$5.4 million decline in branded sales, primarily due to lower
domestic volume reflecting continued competitive pricing pressures
experienced by our bottlers, partially offset by a $2.1$3.9 million volume
increase in private label sales reflecting a general business recovery
being experienced by our private label customer as well as an increase in
its inventory levels to better serve its customers.levels.
Restaurants -- Revenues remained unchanged at $18.1Our restaurant revenues increased $0.9 million (2.3%) in the
threesix months ended AprilJuly 4, 1999. An1999 compared with the six months ended June 28,
1998 as higher royalty revenue was offset by lower franchise fee revenue.
The increase in royalty revenue resulted from an average net increase of
49,56, or 1.6%1.8%, franchised restaurants and a 1.2%1.8% increase in same-store sales
of franchised restaurants were offset by arestaurants. The decrease in franchise fee revenue, despite
the increase in franchised restaurants, was due to (1) a decrease in
dual-branded T.J. Cinnamons openings and (2) an increase in remodeling
credits applied against franchise fees.
Gross Profit
We calculate gross profit as total revenues less (1) cost of sales,
lessexcluding depreciation and amortization and (2) that portion of depreciation and
amortization related to sales. Depreciation and amortization
included in cost of sales was $0.4 million in each of the three months ended
April 4, 1999 and March 29, 1998. Our gross profit increased $2.3$13.3 million to
$94.6$223.8 million in the threesix months ended AprilJuly 4, 1999 compared with the threesix months
ended March 29,June 28, 1998 due to the effect of higher sales volumes discussed above
partially offset byand a slight decreaseincrease in our aggregate gross margins, which we compute as gross
profit divided by total revenues, to 53.1%52.2% from 53.6%52.0%. A discussion of the
changes in gross margins by segment is as follows:
Premium Beverages -- Our gross margins decreased slightlyincreased to 41.0%41.7% during the 1999
first quarterhalf from 41.2%40.7% during the 1998 first quarter.half. The decreaseincrease in gross
margins was principally due to (1) the effectsselective price increases noted
above, (2) the effect of changes in
product mix to lower-margin products in the 1999 quarter and higher provisions for obsolete inventory, both substantially offset byselling prices resulting from the
effectsMillrose acquisition, (3) the effect of lower freight costs and (4) to a
lesser extent, the effect of the reduced costs of certain raw materials,
principally glass bottles and flavors, in the 1999 quarter.half.
Soft Drink Concentrates -- Our gross margins increased to 75.9%76.3% during the
1999 first quarterhalf from 74.9%75.3% during the 1998 first quarter.half. This increase was
due to (1) lower costs of the raw material aspartame and (2) the effects of
changes in product mix whereby the positive effect of our no longer selling
the lowest-margin finished goods in the 1999 quarter was partially offset by a shift in
sales to private label concentrate in the 1999 quarter which have a somewhat lower
margin than branded concentrate.
Restaurants -- Our gross margins during each period are 100% because
royalties and franchise fees with no associated cost of sales, constitute the total revenues of the segment.segment
and these are with no associated cost of sales.
Advertising, Selling and Distribution Expenses
Advertising, selling and distribution expenses decreased $2.0increased $2.4 million to
$46.7$112.7 million in the 1999 quarterfirst half. This increase was principally due to an
increase in promotional spending by the premium beverage segment principally
reflecting new product introductions and overall higher volume, partially offset
by a decrease in the expenses of the soft drink concentrate segment reflecting
lower bottler promotional reimbursements and other promotional spending
resulting from the decline in branded concentrate sales volume.
General and Administrative Expenses
General and administrative expenses increased $2.4$5.1 million to $27.2$55.4 million
in the 1999 quarter.first half. This increase principally reflects generally overall
modest cost increases in all of our business segments, the most significant of
which are higher incentive compensation expenses and maintenance and repairs.
Our results of operations for periods subsequent to the 1999 first half will be
unfavorably impacted by increased general and administrative expenses related to
a new salary and executive bonus plan we have entered into, subject to
stockholder approval, to be effective May 3, 1999. We intend to submit the
executive bonus plan for approval by our stockholders at our 1999 annual meeting
of stockholders scheduled for September 23, 1999. Although the precise amount of
the expense is not presently determinable, based on current projections of our
operating results and assuming stockholder approval of the executive bonus plan,
we estimate we will recognize compensation expense related to these salaries and
executive bonuses of $4.4 million in our 1999 third quarter, including bonuses
relating to May and June, and $2.8 million in our 1999 fourth quarter.
Depreciation and Amortization, Excluding Amortization of Deferred Financing
Costs
Depreciation and amortization, excluding amortization of deferred financing
costs, decreased $0.8$0.9 million to $8.4$17.2 million in the 1999 quarter principally reflecting
the effects of (1) vending machines of the soft drink concentrate segment, with
an aggregate cost of $4.6 million, becoming fully depreciated subsequent to thein November 1998 first quarter
and (2) the cost of a three-year non-compete agreement, with the seller of the
Mistic business to us, becoming fully amortized in August 1998.
Corporate Restructuring1998, both partially
offset by an increase in amortization of costs in excess of net assets of
businesses acquired, which we refer to as goodwill, as a result of the Millrose
acquisition.
Capital Structure Reorganization Related Charge
The corporate restructuringcapital structure reorganization related charge of $3.7$4.9 million in the
1999 first quarter resulted fromhalf reflects equitable adjustments that were made to the terms of
outstanding options under a stock option plan of Triarc Beverage Holdings Corp.,
the parent company of Snapple Beverage Corp. and, Mistic Brands, Inc., and, effective
May 17, 1999, Cable Car Beverage Corporation to adjust for the effects of net
distributions of $91.3 million made by Triarc Beverage Holdings to Triarc. These
distributions principally consistingconsisted of transfers of cash and deferred tax
assets, from Triarc Beverage Holdings to Triarc, partially offset by the effect
of the contribution of Cable Car to Triarc Beverage Holdings. We expect to
recognize additional pre-tax charges relating to this adjustment of $1.9 million
during the remainder ofthrough fiscal 19992001 as the affected stock options continue to vest.vest, of which
$0.7 million relates to the remainder of fiscal 1999. There was no similar
charge in the 1998 first quarter.half.
Interest Expense
Interest expense increased $3.1$8.5 million to $19.7$41.3 million in the 1999 quarterfirst
half reflecting higher average levels of debt during the 1999 first half due to
increases from a first quarter 1999 debt refinancing. Such refinancing consisted
of (1) the excessissuance of $475.0$300.0 million of debt10 1/4% senior subordinated notes due
2000 and (2) $475.0 million borrowed under a new senior bank credit facility on February 25, 1999 overand
the repayment of (1) $284.3 million of refinanced borrowings
under thea former credit facility of Triarc Beverage Holdings,and (2) the full
period effect of the February 9, 1998 issuance by Triarc of zero coupon
convertible subordinated debentures due 2018 ($107.8 million net of unamortized
original issue discount outstanding as of April 4, 1999) and (3) the effect of
the 33-day escrow period, prior to the redemption of RC/Arby's Corporation's
$275.0 million of 9 3/4% senior secured notes due 2000, during which both the
RC/Arby's 9 3/4% notes and the $300.0 million 10 1/4% senior subordinated notes
due 2009 were outstanding.2000.
Investment Income, Net
Investment income, net decreased $2.3$2.7 million to $5.3$12.3 million in the 1999
quarterfirst half principally reflecting $5.0$5.9 million of lower realizedrecognized gains in the
1999 first half from (1) the sales of short-term investments, (2) unrealized
gains on the sale
of investments in the 1998 first quartermarketable securities classified as trading and (3) securities sold but
not yet purchased. Such decrease was partially offset by (1) a $1.9$2.4 million
increase in the 1999 first half in interest income on cash equivalents and
short-term investments resulting from the investment of excess proceeds from the
first quarter 1999 debt refinancing and related transactions and (2) a $0.8$0.7
million increase in the 1999 first quarter in equity in earnings of investment limited partnerships
accounted for under the equity method.
The
increased interest income resultedGain on Sale of Businesses
Gain on sale of businesses decreased $3.9 million to $0.2 million in the
1999 first half due to a $3.9 million non-recurring gain in the 1998 first half
from the investmentMay 1998 sale of (1) excess proceeds
from the first quarter 1999 borrowings under the new senior bank credit facility
and (2) the escrowed funds for 33 days for the redemption of the RC/Arby's 9
3/4% notes.our former 20% interest in Select Beverages, Inc.
Other Income, Net
Other income, net decreased $0.3increased $1.3 million to $2.1$2.2 million in the 1999 quarterhalf.
This increase was due to a $1.6 million net improvement in the Company's equity
in the income or loss of affiliates to income in the 1999 first half, entirely
reflecting the effecteffects of a(1) the $1.1 million non-recurring $0.3 million gainequity in the loss
of Select Beverages, Inc. for the 1998 first quarter resulting fromhalf and (2) our $1.0 million
equity in a collection ongain recognized by one of our limited partnership investees; a note receivablegain
which had been
fully reserved.may not recur in future periods. We owned 20% of Select Beverages until
May 1998 when we sold our 20% interest.
Provision for Income Taxes
The (provision for) and benefit fromprovision for income taxes represented effective rates of 62%57% in the
1999 quarterfirst half and 50%47% in the 1998 quarter.half. The effective rate is higher in the
1999 quarterfirst half principally due to the greater impact of the amortization of
non-deductible costs in excess of net assets of acquired companies in the 1999 first quarter.1999. Such
effect is greater in the 1999 quarterfirst half due to lower projected 1999 full-year
pre-tax income, entirely due to higher projected net non-operating expenses,
compared with the then projected 1998 full-year pre-tax income as of the end of
the 1998 first quarter.half.
Discontinued Operations
Income (loss) from discontinued operations was a loss of $2.6$0.5 million in
the 1999 first half compared with income of $1.7 million in the 1998 quarter
representsfirst half.
This change of $2.2 million reflects a $2.6 million non-recurring gain in the
1998 first half representing an after tax adjustment to amounts provided in
prior years as a result of collection of a note receivable not previously
recognized for the estimated loss on disposal of certain discontinued operations
of our subsidiary, SEPSCO, LLC.LLC, partially offset by a $0.4 million decrease in
the loss from discontinued operations related to National Propane Partners, a
partnership in which Triarc sold its remaining 42.7% interests in July 1999,
reflecting, on an after-tax basis, a $0.4 million increase in the recognition of
previously deferred gains from the 1996 sale of 57.3% of National Propane
Partners.
Extraordinary Charges
The first quarterhalf 1999 extraordinary charges aggregating $12.1 million
resulted from the early extinguishment of borrowings under the former credit
facility of Triarc Beverage Holdings and the RC/Arby's 9 3/4% notes and
consisted of (1) the write-off of previously unamortized (a) deferred financing
costs of $11.3 million and (b) interest rate cap agreement costs of $0.1 million
and (2) the payment of a $7.7 million redemption premium on the RC/Arby's 9 3/4%
notes, both net of income tax benefit of $7.0 million.
THREE MONTHS ENDED JULY 4, 1999 COMPARED WITH THREE MONTHS ENDED JUNE 28, 1998
Revenues
Our revenues increased $17.9 million to $250.8 million in the three months
ended July 4, 1999 compared with the three months ended June 28, 1998. A
discussion of the changes in revenues by segment is as follows:
Premium Beverages -- Our premium beverage revenues increased $18.6 million
(10.5%) in the three months ended July 4, 1999 compared with the three
months ended June 28, 1998. The increase reflects both higher volume and
higher average selling prices in the 1999 second quarter. The increase in
volume principally reflects (1) 1999 sales of Snapple Elements(TM) which
was introduced in April 1999, (2) increased cases sold to retailers through
Millrose principally reflecting an increased focus on our products as a
result of our ownership of the distributor since February 25, 1999 and (3)
net higher sales of diet teas and other diet beverages and juice drinks.
The higher average selling prices reflect (1) the effect of the higher
selling prices in connection with the Millrose acquisition whereby we now
sell directly to retailers rather than to Millrose as a distributor and (2)
selective price increases.
Soft Drink Concentrates -- Our soft drink concentrate revenues decreased
$1.6 million (4.5%) in the three months ended July 4, 1999 compared with
the three months ended June 28, 1998. This decrease is attributable to
lower Royal Crown sales of (1) concentrate of $0.9 million, or 2.6%, and
(2) finished goods of $0.7 million, or 100%, which the soft drink
concentrate segment no longer sells. The decrease in Royal Crown sales of
concentrate reflects a $2.8 million decline in branded sales, primarily due
to lower domestic volume reflecting continued competitive pricing pressures
experienced by our bottlers and lower international volume as a result of
the economic crisis experienced in 1999 in the former Soviet Union and the
Baltics, partially offset by a $1.9 million volume increase in private
label sales reflecting the general business recovery being experienced by
our private label customer as well as an increase in its inventory levels.
Restaurants -- Our restaurant revenues increased $0.9 million (4.5%) in the
three months ended July 4, 1999 compared with the three months ended June
28, 1998 entirely due to an increase in royalty revenue resulting from an
average net increase of 63, or 2.0%, franchised restaurants and a 2.1%
increase in same-store sales of franchised restaurants.
Gross Profit
We calculate gross profit as total revenues less (1) cost of sales,
excluding depreciation and amortization and (2) that portion of depreciation and
amortization related to sales. Our gross profit increased $11.1 million to
$129.3 million in the three months ended July 4, 1999 compared with the three
months ended June 28, 1998 due to the effect of higher sales volumes discussed
above and an increase in our aggregate gross margins, which we compute as gross
profit divided by total revenues, to 51.5% from 50.8%. A discussion of the
changes in gross margins by segment is as follows:
Premium Beverages -- Our gross margins increased to 42.2% during the 1999
second quarter from 40.4% during the 1998 quarter. The increase in gross
margins was principally due to (1) the selective price increases noted
above, (2) the effect of the higher selling prices resulting from the
Millrose acquisition, and (3) the effects of lower freight costs in the
1999 quarter.
Soft Drink Concentrates -- Our gross margins increased to 76.8% during the
1999 second quarter from 75.6% during the 1998 quarter. This increase was
due to (1) lower costs of the raw material aspartame and (2) the effects of
changes in product mix whereby the positive effect of our no longer selling
the lowest-margin finished goods in 1999 was partially offset by a shift in
sales to private label concentrate in 1999 which have a somewhat lower
margin than branded concentrate.
Restaurants -- Our gross margins during each period are 100% because
royalties and franchise fees constitute the total revenues of the segment
with no associated cost of sales.
Advertising, Selling and Distribution Expenses
Advertising, selling and distribution expenses increased $4.5 million to
$66.0 million in the 1999 second quarter. This increase was principally due to
an increase in the expenses of the premium beverage segment as a result of
increased promotional spending primarily reflecting new product introductions
and overall higher volume partially offset by a decrease in the expenses of the
soft drink concentrate segment reflecting lower bottler promotional
reimbursements and other promotional spending resulting from the decline in
branded concentrate sales volume.
General and Administrative Expenses
General and administrative expenses increased $2.7 million to $28.2 million
in the 1999 second quarter. This increase principally reflects generally overall
modest cost increases in all of our business segments, the most significant of
which is higher incentive compensation expenses and maintenance and repairs. As
discussed above in the comparison of the six-month periods, our future general
and administrative expenses will be unfavorably impacted by a new salary and
executive bonus plan.
Depreciation and Amortization, Excluding Amortization of Deferred Financing
Costs
Depreciation and amortization, excluding amortization of deferred financing
costs, decreased $0.1 million to $8.8 million in the 1999 second quarter
principally reflecting the effects of (1) vending machines of the soft drink
concentrate segment becoming fully depreciated in November 1998 and (2) the cost
of a three-year non-compete agreement, with the seller of the Mistic business to
us, becoming fully amortized in August 1998, both partially offset by increased
amortization of goodwill as a result of the Millrose acquisition.
Capital Structure Reorganization Related Charge
The capital structure reorganization related charge of $1.2 million in the
1999 second quarter reflects the effect of equitable adjustments that were made
to the terms of outstanding options under a stock option plan of Triarc Beverage
Holdings, as discussed above in the comparison of the six-month periods, as the
affected stock options continue to vest. We will continue to incur additional
charges through 2001 as discussed above. There was no similar charge in the 1998
second quarter.
Interest Expense
Interest expense increased $5.2 million to $22.2 million in the 1999 second
quarter reflecting higher average levels of debt during the 1999 second quarter
due to increases from the first quarter 1999 debt refinancing as discussed above
in the comparison of the six-month periods.
Investment Income, Net
Investment income, net decreased $0.4 million to $7.0 million in the 1999
second quarter principally reflecting $0.9 million of lower recognized gains in
the 1999 second quarter from (1) the sales of short-term investments, (2)
unrealized gains on marketable securities classified as trading and (3)
securities sold but not yet purchased. Such decrease was partially offset by a
$0.6 million increase in the 1999 second quarter in interest income on cash
equivalents and short-term investments resulting from the investment of excess
proceeds from the first quarter 1999 debt refinancing and related transactions.
Gain on Sale of Businesses
Gain on sale of businesses decreased $3.9 million to $0.1 million in the
1999 quarter due to a $3.9 million non-recurring gain in the 1998 second quarter
from the May 1998 sale of Select Beverages.
Other Income, Net
Other income, net increased $1.2 million to $1.7 million in the 1999 second
quarter. This increase was principally due to (1) the effect of our $1.0 million
equity in a gain recognized by one of our limited partnership investees, a gain
which may not recur in future periods, and (2) a non-recurring $0.3 million loss
in the 1998 second quarter representing our equity in the loss of Select
Beverages prior to its May 1998 sale.
Provision for Income Taxes
The provision for income taxes represented effective rates of 57% in the
1999 quarter and 46% in the 1998 quarter. The effective rate is higher in the
1999 second quarter principally due to the greater impact of the amortization of
non-deductible costs in excess of net assets of acquired companies in 1999. Such
effect is greater in the 1999 second quarter due to lower projected 1999
full-year pre-tax income, entirely due to higher projected net non-operating
expenses, compared with the then projected 1998 full-year pre-tax income as of
the end of the 1998 second quarter.
Discontinued Operations
Loss from discontinued operations decreased $0.4 million to a loss of $1.0
million in the 1999 second quarter reflecting a $0.4 million increase, on an
after-tax basis, in the recognition of previously deferred gains from the 1996
sale of 57.3% of National Propane Partners.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows From Operations
Our consolidated operating activities used cash and cash equivalents, which
we refer to in this discussion as cash, of $35.7$3.6 million during the threesix months
ended AprilJuly 4, 1999 principally reflecting (1) cash used by changes in operating
assets and liabilities of $57.9$37.5 million (2)and a net loss of $13.3 million
and (3) other of $2.2$9.1 million. These
uses were partially offset by (1) net non-cash charges of $26.6$39.3 million,
principally depreciation and amortization of $11.5$23.0 million and the write-off of
unamortized deferred financing costs and interest rate cap agreement costs of
$11.4 million relating to the refinancing transactions described below, and (2)
net salesother of marketable securities
classified as trading of $11.1$3.7 million.
The cash used by changes in operating assets and liabilities of $57.9$37.5
million reflects increases in receivables of $35.9$49.8 million, inventories of $13.5$22.3
million and prepaid expenses and other current assets of $9.2$3.8 million. These
effects were partially offset by a $38.4 million increase in accounts payable
and accrued expenses. The increase in receivables principally results from
$21.8 million of seasonally higher sales in February and MarchJune 1999 compared with November and December 1998 and $11.5 million of proceeds due from
sales of marketable securities.1998. The increase
in inventories was due to seasonal buildups in anticipation of the peak selling
season in our beverage businesses. The related increase in accounts payable forand accrued
expenses was principally due to the increased inventory purchases was offset by a decrease in accrued expenses principally relating to (1) an $8.8
million reduction in accrued interest due to the payment of accrued interest on
refinanced debt and (2) an $8.3 million reduction in accrued compensationseasonally
higher accrual for bottler and related benefits principally due to the payment of incentive compensation
previously accrued. The increase in prepaid expenses and other current assets
results from recording a tax benefit on first quarter 1999 pre-tax losses,
principally the extraordinary charges, since we are projecting income for the
full year.distributor promotional allowances.
Despite the $35.7$3.6 million of cash used in operating activities in the 1999 first
quarter,half of 1999, we expect positive cash flows from operations during the remainder
of 1999 due to (1) the expectation of profitable operations for the remainder of
the year due to the seasonality of the beverage business with the summer months
as the peak season and (2) the significant seasonal or
non-recurring factors impacting the cash
used in the 1999 first quarterhalf for operating assets and liabilities which should
not recur during the remainder of 1999 and should substantially reverse.
Working Capital and Capitalization
Working capital, which equals current assets less current liabilities, was
$393.7$302.0 million at AprilJuly 4, 1999, reflecting a current ratio, which equals current
assets divided by current liabilities, of 3.0:2.1:1. Our capitalization at AprilJuly 4,
1999 aggregated $928.1$831.8 million consisting of $925.3$893.6 million of long-term debt,
including current portion, and $2.8 millionpartially offset by a stockholders' deficit of stockholders'
equity.$61.8
million. Our working capital and total capitalization increased $185.3$124.3 million
and $208.2$142.3 million, respectively, from January 3, 1999 principally due to the
refinancing transactions partially offset by the repurchase of treasury stock
both as described immediatelyin detail below.
The Propane Partnership Sale
On July 19, 1999, we sold our 42.7% interests in National Propane Partners,
L.P. and a subpartnership, National Propane, L.P., except for a 1% limited
partnership interest which we retained in National Propane, L.P., to Columbia
Propane, L.P. for cash of $2.9 million and the forgiveness of $15.8 million of
the $30.7 million outstanding principal balance under a 13 1/2% note payable to
National Propane, L.P. The $2.9 million of cash consists of $2.1 million of
consideration for our sold interests in the propane business and $1.0 million
representing the reimbursement of interest expense incurred and paid by the
Company on the 13 1/2% note payable to National Propane, L.P., both partially
offset by $0.2 million of amounts equivalent to interest on advances made by the
purchaser in a tender offer for the 57.3% interest in the propane business we
did not own. In connection with the closing of the sale of the propane business
on July 19, 1999, we repaid the remaining $14.9 million of the 13 1/2% note
payable to National Propane, L.P. We expect the sale of the propane business
will result in a gain, the amount of which has not yet been determined.
Under the sale, we maintained financial interests in the propane business
through retention of a 1% limited partnership interest in National Propane,
L.P., which continues to exist as a subsidiary partnership of Columbia Propane,
L.P., and the indemnification of approximately $138.0 million of obligations of
National Propane, L.P. discussed below.
Refinancing Transactions
On January 15, 1999 we formed Triarc Consumer Products Group, LLC and on
February 23, 1999 Triarc Consumer Products Group acquired all of the stock
previously owned directly or indirectly by Triarc of Triarc Beverage Holdings,
Cable Car and RC/Arby's Corporation, the parent of Royal Crown Company, Inc. and
Arby's.Arby's, Inc. On February 25, 1999 Triarc Consumer Products Group issued $300.0
million principal amount of the 10 1/4% senior subordinated notes due 2009 and
concurrently entered into a new $535.0 million senior bank credit facility. An
aggregate $20 million principal amount of the 10 1/4% notes were initially
purchased by our affiliates. We have been advised by these affiliates that, subsequent toas
of April 4,23, 1999, they no longer hold any of the 10 1/4% notes.
The new credit facility consists of a $475.0 million term facility, all of
which was borrowed as three classes of term loans on February 25, 1999, and a
$60.0 million revolving credit facility which provides for revolving credit
loans by Snapple, Mistic, Cable Car, RC/Arby's or Royal Crown Company, Inc., a subsidiary of
RC/Arby's.Crown. They may make
revolving loan borrowings of up to 80% of eligible accounts receivable plus 50%
of eligible inventories. There were no borrowings of revolving loans as of
February 25, 1999 or July 4, 1999. At AprilJuly 4, 1999 there was $59.9 million of
borrowing availability under the revolving credit facility.
There were no borrowings of revolving loans as of February 25, 1999 or April 4,
1999.
We utilized a portion of the proceeds of the borrowings under the 10 1/4%
notes and the new credit facility to (1) repay on February 25, 1999 the $284.3
million outstanding principal amount of term loans under a former beverage
credit facility and $1.5 million of related accrued interest, (2) redeem on
March 30, 1999 the $275.0 million of borrowings under the RC/Arby's 9 3/4%
senior secured notes due 2000 and pay $4.4 million of related accrued interest
and $7.7 million of redemption premium, (3) acquire Millrose Distributors, Inc.
and the assets of Mid-State Beverage, Inc., two New Jersey distributors of our
premium beverages, for $17.3$17.4 million, including expenses of $0.1 million, and
(4) payprovide for estimated fees and expenses of $27.8$29.6 million relating to the
issuance of the 10 1/4% notes and the consummation of the new credit facility.
The remaining net proceeds of this refinancing are being used for general
corporate purposes, which may includeincluding working capital, investments, future acquisitions,
repayment or refinancing of indebtedness, restructurings or repurchases of
securities, including repurchases of our common stock as described below under
"Triarc"Treasury Stock Purchases".
The 10 1/4% notes mature in 2009 and do not require any amortization of
principal prior to 2009. WeOn August 3, 1999 we filed amendment No.1 to a
registration statement covering resales by holders of the 10 1/4% notes on May 17, 1999 with the
Securities and Exchange Commission. If the registration statement is not
declared effective by the Securities and Exchange Commission on or before August
24, 1999, the annual interest rate on the 10 1/4% notes will increase by 1/2% to
10 3/4% until the registration statement is declared effective. We currently
believe that the registration statement will not be declared effective by that
date.
Scheduled maturities of the new term loans under the credit facility are
$4.9$3.3 million during the remainder of 1999, representing threetwo quarterly
installments, commencing June 1999, increasing annually afterwards through 2006 with a final payment
in 2007. Any revolving loans will be due in full in 2005. Triarc Consumer Products Group isThe borrowers are also
required, with some exceptions, to make mandatory annual prepayments in an annual
amount, if any, initially equal to 75% of excess cash flow as defined in the new
credit agreement. If we make voluntary prepayments of two classes of the term
loans which have $124.7 million and $304.2 million outstanding as of July 4,
1999, we will incur prepayment penalties of 2.0% and 3.0% of the amounts prepaid
through February 25, 2000, respectively, and from February 26, 2000 through
February 25, 2001 we will incur prepayment penalties of 1.0% and 1.5% of the
amounts prepaid, respectively.
Other Debt ObligationsAgreements
We have $360.0 million principal amount, at maturity, of zero coupon
convertible subordinated debentures outstanding which mature in 2018 and do not
require any amortization of principal prior to 2018.
We have a 13 1/2% note payable to National Propane Partners, L.P. with
a remaining principal balance of $30.7 million which does not require any
scheduled amortization of principal prior to 2004. We own a 42.7% combined
interest in National Propane Partnership and a subpartnership, National Propane,
L.P. However, if an anticipated sale of National Propane Partners is
consummated, $15.8 million of this note would be forgiven and we would pay the
remaining $14.9 million later in 1999. See below under "The Propane Partnership"
for a detailed discussion of the anticipated sale of National Propane Partners.
We have a note payable to a beverage co-packer in an outstanding principal
amount of $5.9$5.1 million as of AprilJuly 4, 1999, of which $2.5$1.7 million is due during
the remainder of 1999.
The aggregate scheduled maturities of ourOur long-term debt principal repayments during the remainder of 1999 are $8.2of
$20.5 million consist of $5.6 million of scheduled maturities, including $4.9$3.3
million under the new term loans and $2.5$1.7 million under the note payable to a
beverage co-packer discussed above. Such $8.2above, and the $14.9 million excludes the potential $14.9 prepayment of the 13
1/2% note payable to National Propane, Partners.L.P. made on July 19, 1999 in connection
with the sale of National Propane Partners described above.
Debt Agreement Guarantees and Restrictions
Under our debt agreements substantially all of the assets, other than cash
and cash equivalents, of Snapple, Mistic, Cable Car, RC/Arby's, Royal Crown and
Arby's Inc., a subsidiary of RC/Arby's, and their subsidiaries, are pledged as security. Obligations of Triarc Consumer Products GroupOur obligations relating
to the 10 1/4% notes are guaranteed by Snapple, Mistic, Cable Car and RC/Arby's
and all of their domestic subsidiaries. These guarantees are full and
unconditional, are on a joint and several basis and are unsecured. Obligations of Triarc Consumer
Products GroupOur
obligations relating to the new credit facility are guaranteed by Triarc
Consumer Products Group, Triarc Beverage Holdings and substantially all of the
domestic subsidiaries of Snapple, Mistic, Cable Car, RC/Arby's and Royal Crown.
As collateral for the guarantees under the new credit facility, all of the stock
of Snapple, Mistic, Cable Car, RC/Arby's and Royal Crown and substantially all of their
domestic subsidiaries and 65% of the stock of each of their directly-owned
foreign subsidiaries is pledged.
In connection with the Propane Partnership Sale discussed above, National
Propane Corporation, the former managing general partner of National Propane
Partners and a subsidiary of ours, has guaranteed obligationsretained a 1% special limited partner
interest in National Propane, L.P. and agreed that while it remains a special
limited partner, National Propane Corporation would indemnify the purchaser of
substantially all of our 42.7% interest in the propane business for any payments
the purchaser makes, only after recourse to the assets of National Propane,
L.P., related to the purchaser's obligations under (1) $125.0 million of 8.54% first mortgage notes
due June 30, 2010 and (2) $13.0 million of outstanding borrowings under a bank
credit facility. As collateral for the propane guarantee, allcertain of the stockdebt of
National Propane, SGP, Inc.L.P., a subsidiaryaggregating approximately $138.0 million as of July 19,
1999, if National Propane, L.P. is unable to repay or refinance such debt. Under
the purchase agreement, both the purchaser and National Propane Corporation may
require National Propane L.P. to repurchase the 1% special limited partner
interest. The purchase price for the equity of National Propane CorporationPartners and the
holder of a 2% unsubordinated general partnership interest in
National Propane Partners, is pledged as well as National Propane Corporation's 2% unsubordinated
general partnership interest in National Propane Partners. AlthoughL.P., including the stock of57.3% not owned by National Propane
Corporation, aggregated $99.1 million. The Company believes that it is not pledged in connection withunlikely
that it will be called upon to make any guarantee of
debt obligations, the 75.7% of stock owned by Triarc Parent directly is pledged
as security for obligationspayments under the 13 1/2% note payable to National Propane
Partners.this indemnity. In
addition, Arby's remains responsible for $117.0 million of
operating and capitalized lease
payments assumed by the purchaser in connection with the restaurants sale of
approximately $95.7$117.0 million
outstanding as of AprilMay 1997 when the Arby's restaurants were
sold and $93.6 million as of July 4, 1999 assuming the purchaser of the
previously owned Arby's restaurants which were sold in May 1997 has made all scheduled repayments through
such date, which were assumed by the purchaser in connection with the
restaurants sale.date. Further, Triarc parent company, referred to below as Triarc, Parent, has
guaranteed $54.7 million of mortgage notes and equipment notes payable to FFCA Mortgage
Corporation $50.5assumed by the purchaser in connection with the restaurants sale of
$54.7 million outstanding as of AprilMay 1997 and $50.0 million as of July 4, 1999 assuming the
purchaser of the Arby's restaurants has made all scheduled repayments through
such date, assumed by the purchaser in connection with the
restaurants sale.date.
Our debt agreements contain various covenants which (1) require meeting
financial amount and ratio tests, (2) limit, among other matters, (a) the
incurrence of indebtedness, (b) the retirement of debt prior to maturity, with
exceptions, (c) investments, (d) asset dispositions and (e) affiliate
transactions other than in the normal course of business, and (3) restrict the
payment of dividends to Triarc Parent.Triarc. Under the most restrictive of these covenants,
the borrowers would not be able to pay any dividends to Triarc other than (1)
the one-time distributions, including dividends, paid to Triarc Parent in connection
with the 1999 refinancing transactions and (2) defined amounts in the event of
completing a securitization of some of the assets of Arby's. The one-time
permitted distributions, which were paid to Triarc Parent from the net proceeds of the
refinancing transactions as well as from the borrowers' existing cash and cash
equivalents, consisted of $91.4 million paid on February 25, 1999 and $124.1
million paid on March 30, 1999 following the redemption of the RC/Arby's 9 3/4%
senior notes.
Capital Expenditures
Consolidated capitalCapital expenditures amounted to $1.6$6.3 million during the threesix months ended
AprilJuly 4, 1999. We expect that capital expenditures will approximate $10.0$7.5 million
during the remainder of 1999 for which there were $0.9$0.2 million of outstanding
commitments as of AprilJuly 4, 1999. Our planned capital expenditures are principally
for production equipment and computer hardware in our beverage segments.
Acquisitions
In February 1999 we acquired Millrose and Mid-State for $17.3$17.4 million as
discloseddiscussed above. To further our growth strategy, we will consider additional
selective business acquisitions, as appropriate, to grow strategically and
explore other alternatives to the extent we have available resources to do so.
Income Taxes
Our Federal income tax returns have been examined by the Internal Revenue
Service for the tax years from 1989 through 1992. We have reached a
tentative settlementresolved all issues
with the Internal Revenue Service regarding all remaining
issues in connection with such audit. WeIn connection therewith,
we paid $5.3 million during 1997 and $8.5 million during 1998 each including interest, in partial settlement of such
audit. In addition, weand have agreed to
paymake net payments of approximately $5.0$1.2 million during the third quarter of
1999, each including interest, to resolve all remaining issues. The tentative settlement is subject
to review by the Congressional Joint Committee on Taxation. If the settlement is
so approved, we anticipate we will make payment later in 1999.interest. The Internal Revenue Service is examining our
Federal income tax returns for the tax year ended April 30, 1993 and transition
period ended December 31, 1993. In connection therewith,with this more recent examination,
we have not received any notices of proposed adjustments and do not expect to
make any related payments during the remainder of 1999.
Triarc Stock PurchasesWithdrawal of Going-Private Proposal
On October 12, 1998, we announced that our Board of Directors had formed a
Special Committee to evaluate a proposal we had received from our Chairman and
Chief Executive Officer and President and Chief Operating Officer for the
acquisition by an entity to be formed by them of all (a) of the outstanding shares
of our common stock, other than approximately 6,000,000 shares owned by an
affiliate of theirs, for $18.00 per share payable in cash and securities. On
March 10, 1999, we announced that we had been advised by our Chairman and Chief
Executive Officer and President and Chief Operating Officer that they had
withdrawn the proposal.
Treasury Stock Purchases
On April 27, 1999, we repurchased 3,805,015 shares of our Class A common
stock for $18.25 per share in connection with a tender offer that had begun on
March 12, 1999 and ended on April 22, 1999. Asfor a result, in the second quarter
of 1999 we will record an addition to treasury stock with a resulting reduction
in stockholders' equity for the total costs to repurchase the sharescost of
$69.4 million, plus estimated fees and expenses of $1.0$0.6 million.
On April 29, 1999, we announced that our management has been authorized,
when and if market conditions warrant and to the extent legally permissible, to
repurchase up to $30.0 million of our Class A common stock. This authorization
will terminate in May 2000. Through July 4, 1999, we have repurchased 285,000
shares under this program at a cost of $6.0 million. We cannot assure you that
we will make any or all of the remaining $24.0 million of repurchases authorized
under this program.
The Propane Partnership
National Propane Partners distributesOn August 19, 1999, we entered into a contract to its partners, including us, onrepurchase the 5,997,622
shares of our Class B common stock held by affiliates of Victor Posner for
$127.0 million. On August 19, 1999, we completed the purchase of 1,999,207 Class
B shares for $40.9 million at a quarterly basis allprice of its available cash, if any, as defined in its
partnership agreement. The main source$20.44 per share, which was the current
trading price of available cash would be cash flows
from its operations, as supplemented by any prepayments on our 13 1/2% note
payable to National Propane Partners. As a result ofClass A common stock at the financial difficulties
of National Propane Partners including (1) insufficient cash flows to make
distributions, (2) non-compliance with covenants under its bank credit facility
and (3) $8.8 million of arrearages on the publicly traded common units of
National Propane Partners, representing the 57.3% interest we do not own, we did
not receive any distributions in the 1999 first quarter and we do not expect to
receive any distributions from National Propane Partners in the foreseeable
future.
On April 5, 1999, National Propane Partners and Columbia Propane
Corporation, a subsidiary of Columbia Energy Group, signed a definitive purchase
agreement under which Columbia Propane Corporation began a tender offer on April
9, 1999 to acquire all of the publicly traded common units of National Propane
Partners representing the 57.3% interest we do not own for $12.00 in cash per
common unit. National Propane Partners has been advised that pursuanttime this transaction was
negotiated. Pursuant to the tender offer, which expired on May 6, 1999, Columbia Propane, L.P. acquired
5,922,654 common units representing approximately 88.4% of the publicly traded
common units. The tender offer was the first step of a two-step transaction. Incontract, the second step, subject to the terms and conditionsthird purchases of the purchase agreement,
Columbia Propane, L.P. would acquire our 42.7% interests in the propane
business, except for a 1% limited partnership interest in National Propane,
L.P., for cash of $2.1$42.3
million and the forgiveness$43.8 million, respectively, for 1,999,207 shares each at negotiated
prices of $15.8 million of the 13
1/2% note payable to National Propane Partners$21.18 and National Propane Partners
would merge into Columbia Propane, L.P. National Propane, L.P. will continue to
exist as a subsidiary partnership of Columbia Propane, L.P. As part of the
second step of this two-step transaction, any remaining common unit holders of
National Propane Partners would receive $12.00 in cash$21.93 per common unit and we
would repay the remaining $14.9 million of the 13 1/2% note payable to National
Propane Partners. Also as part of the second step, National Propane Partners
filed an information statement with the Securities and Exchange Commission on
May 19, 1999. Following clearance of the information statement by the Securities
and Exchange Commission and its mailing to holders of National Propane Partner's
common units and upon satisfaction or waiver of the terms and conditions under
the purchase agreement, the second step of the transaction would be completed.
The second step of the sale of National Propane Partners is currentlyshare, are expected to be completed in the second half of 1999. However, we cannot assure you that
the second step of the sale of National Propane Partners will be completed.
Assuming the sale of National Propane Partners is completed under its
present terms, the sale would result in a gain to us. Under the sale, we would
maintain financial interests in the propane business through retention of a 1%
limited partnership interest in National Propane, L.P.occur on or before August
19, 2000 and the guarantee of
obligations of National Propane, L.P. under (1) the $125.0 million of 8.54%
first mortgage notes and (2) $13.0 million of outstanding obligations under a
bank credit facility. Accordingly, the results of operations of our propane
segment and any resulting gain or loss from the sale of National Propane
Partners will not be accounted for as a discontinued operation.
At December 31, 1998 and March 31, 1999 National Propane, L.P. was not
in compliance with a covenant under its bank facility. National Propane, L.P.
has received an unconditional waiver of the non-compliance from the lenders
under the bank facility relating to the covenant non-compliance as of December
31, 1998 and a conditional waiver relating to any future non-compliance with
that covenant through August 31, 1999. In accordance with the waiver, the
lenders have unconditionally waived the non-compliance with the covenant at
March 31, 1999. A number of the conditions to the conditional waiver are
directly related to the sale of National Propane Partners discussed above.
Should the conditions not be met, or the waiver expire and National Propane,
L.P. be in default of its bank facility, National Propane, L.P. would also be in
default of its $125.0 million of 8.54% first mortgage notes by virtue of
cross-default provisions. If the sale of National Propane Partners is not
consummated and the lenders are unwilling to extend the waiver, (1) National
Propane Partners could seek to otherwise refinance its indebtedness, (2) we
might consider buying the banks' loans to National Propane, L.P. ($16.0 million
principal amount outstanding as of April 4, 1999), (3) National Propane Partners
could pursue other potential purchasers or (4) National Propane Partners could
be forced to seek protection under the Federal bankruptcy laws. In the latter
event, National Propane Corporation may be required to honor the guarantee of
the debt obligations of National Propane, L.P. discussed above. As a result,
Triarc Parent may be required to pay a $30.0 million demand note payable to
National Propane Corporation, and National Propane Corporation would be required
to surrender the note, if we have not yet paid it, or the proceeds from the
note, as well as our partnership interests, to the lenders.2001, respectively.
Cash Requirements
As of AprilJuly 4, 1999, our consolidated cash requirements for the remainder of
1999, exclusive of operating cash flow requirements, consist principally of (1)
$69.4 million for treasury stock repurchases, plus an
estimated $1.0 millionthe repurchase of related fees and expenses, as a resultone-third of the April
27,outstanding shares of our Class B common
stock for $40.9 million made on August 19, 1999, repurchase, (2) additional treasury
repurchases of our Class A common stock, if any, of up to $30.0$24.0 million of additional treasury stock
repurchases, if any, under
athe repurchase program announced April 29, 1999, (3) capital expenditures of approximately $10.0 million, (4) scheduled debt principal repayments
aggregating $8.2$20.5 million (5)including scheduled maturities and a $14.9 million prepayment ofon the
13 1/2% note payable to National Propane, Partners if the saleL.P. made on July 19, 1999, (4)
capital expenditures of National
Propane Partners is completed, (6)approximately $7.5 million, (5) a net Federal income tax
payment, including interest, of approximately $5.0$1.2 million assumingin connection with
finalizing the tentative settlement of the remaining income tax audit
issues for the tax years 1989 through 1992 is approved by the Congressional
Joint Committee on Taxation and (7)(6) the
cost of additional business acquisitions, if any. We anticipate meeting all of
these requirements through (1) existing cash and cash equivalents and short-term
investments, aggregating $366.7$328.8 million, net of $17.1$22.3 million of obligations for
short-term investments sold but not yet purchased included in "Accrued expenses"
in the accompanying condensed consolidated balance sheet as of AprilJuly 4, 1999, (2)
cash flows from operations and/or (3) the $59.9 million of availability as of
July 4, 1999 under Triarc Consumer Products' $60.0 million revolving credit
facility.
TRIARC
PARENT
Triarc Parent is a holding company whose ability to meet its cash requirements is
primarily dependent upon its (1) cash and cash equivalents and short-term
investments, (aggregating $348.3aggregating $277.4 million, net of $17.1$22.3 million of obligations for
short-term investments sold but not yet purchased, as of AprilJuly 4, 1999),1999, (2)
investment income on its cash equivalents and short-term investments and (3)
cash flows from its subsidiaries including (a) loans, distributions and
dividends (see limitations below) and (a), (b) reimbursement by certain subsidiaries to
Triarc in connection with the providing of certain management services and (b)(c)
payments under tax-sharing agreements with certain subsidiaries.
As of AprilJuly 4, 1999 Triarc Parent'sTriarc's principal subsidiaries are unable to pay any
dividends or make any loans or advances to Triarc under the terms of their
indentures and credit arrangements, except as follows. While there are no
restrictions applicable to National Propane Corporation, National Propane
Corporation is dependent upon cash flows from National Propane Partners,
principally quarterly distributions. As discussed above, National Propane
Corporation does not anticipate receiving any distributions for the foreseeable
future.that Triarc Consumer Products distributed, on a one-time basis, $215.5
million to Triarc Parent during the first quarter of 1999, in connection with
the refinancing transactions described above, but is not
permitted to pay any
other dividends to Triarc except for specified amounts in the event of a securitization of some of
the assets of Arby's.
Triarc Parent had indebtedness to consolidated subsidiaries of $30.0 million as of
AprilJuly 4, 1999 under a demand note payable to National Propane Corporation bearing
interest at 13 1/2% payable in cash. While this note requires the payment of
interest in cash, Triarc currently expects to receive dividends from National
Propane Corporation equal to the cash interest. The note requires no principal
payments during the remainder of 1999, assuming no demand is made thereunder,
and none is anticipated unless National Propane Corporation
is required to honor the guarantee of the debt obligations of National Propane,
L.P. under the bank facility and the 8.54% first mortgage notes and surrender
the proceeds from the note to the propane bank facility lenders as discussed
above.anticipated. Triarc Parent also has other indebtedness principally under
the zero coupon convertible debentures and the 13 1/2% note payable to National Propane
Partners described above which requirerequires no
amortization of principal during the remainder of 1999. However, asAs previously indicateddiscussed,
Triarc Parent may prepayprepaid $14.9 million of the 13 1/2% note payable to National Propane,
Partners ifL.P. and the remaining balance was forgiven in connection with the sale of
National Propane Partners is completed.
Triarc Parent'son July 19, 1999.
Triarc's principal cash requirements for the remainder of 1999 are (1) $69.4 million for treasury stock repurchases, plus an estimated $1.0
millionthe
repurchase of related fees and expenses, as a resultone-third of the April 27,outstanding shares of our Class B common stock
for $40.9 million made on August 19, 1999, repurchase, (2) additional treasury repurchases
of our Class A common stock, if any, of up to $30.0$24.0 million of additional treasury stock repurchases, if
any, under athe repurchase
program announced April 29, 1999, (3) payments of general corporate expenses,
(4) interest due on the 13 1/2% note payable to
National Propane Partners, (5) a $14.9 million prepayment of the 13 1/2% note payable to National Propane,
Partners if the sale of National Propane Partners is
completed (6)L.P. made on July 19, 1999, (5) a net Federal income tax payment, including
interest, of approximately $5.0$1.2 million assumingin connection with finalizing the tentative settlement of the remaining income
tax audit issues for the tax years 1989 through 1992 is approved by the Congressional Joint Committee
on Taxation and (7)(6) the cost of additional business
acquisitions, if any. Triarc expects to be able to meet all of these cash
requirements through (1) existing cash and cash equivalents and short-term
investments, (2) investment income and (3) receipts from its subsidiaries under
management services and tax sharing agreements.
LEGAL AND ENVIRONMENTAL MATTERS
We are involved in litigation, claims and environmental matters incidental
to our businesses. We have reserves for legal and environmental matters of
approximately $1.8$1.7 million as of AprilJuly 4, 1999. Although the outcome of these
matters cannot be predicted with certainty and some of these matters may be
disposed of unfavorably to us, based on currently available information and
given our reserves, we do not believe that these legal and environmental matters
will have a material adverse effect on our consolidated financial position or
results of operations.
YEAR 2000
We have undertaken a study of our functional application systems to
determine their compliance with year 2000 issues and, to the extent of
noncompliance, the required remediation. Our study consisted of an eight-step
methodology to:
(1) obtain an awareness of the issues;
(2) perform an inventory of our software and hardware systems;
(3) identify our systems and computer programs with year 2000 exposure;
(4) assess the impact on our operations by each mission critical
application;
(5) consider solution alternatives;
(6) initiate remediation;
(7) perform validation and confirmation testing and
(8) implement.
Through the first quarterhalf of 1999, we had completed steps one through six and
expect to complete step seven and the final implementation before January 1,
2000. Step seven requires that we develop testing and review methodology on a
risk prioritization basis and implement such protocols to test year 2000
compliance of both internal software and hardware systems. Step eight requires
that we implement needed corrections to existing and/or new hardware and
software applications to cause systems to become and remain year 2000 compliant.
This study addressed both information technology and non-information
technology systems, including imbedded technology such as micro controllers in
our telephone systems, production processes and delivery systems. Some
significant systems in our soft drink concentrate segment, principally Royal
Crown's order processing, inventory control and production scheduling system,
required remediation which was completed in the first quarter of 1999.
As a result of this study and subsequent remediation, we have no reason to
believe that any of our mission critical systems are not year 2000 compliant.
Accordingly, we do not currently anticipate that internal systems failures will
result in any material adverse effect to our operations. However, should the
final testing and implementation steps reveal any year 2000 compliance problems
which cannot be corrected before January 1, 2000, the most reasonably likely
worst-case scenario is that we might experience a delay in production and/or
fulfilling and processing orders resulting in either lost sales or delayed cash
receipts, although we do not believe that this delay would be material. In this
case, our contingency plan would be to revert to a manual system in order to
perform the required functions. Due to the limited number of orders received by
Royal Crown on a daily basis, this contingency plan would not cause any
significant disruption of business. As of AprilJuly 4, 1999, we had incurred $1.0$1.2
million of costs in order to become year 2000 compliant, including computer
software and hardware costs, and the current estimated cost to complete this
remediation during the remainder of 1999 is $1.0$0.8 million. These costs incurred
through January 3, 1999 were expensed as incurred, except for the direct
purchase costs of software and hardware, which were capitalized. The
software-related costs incurred on or after January 4, 1999 are being
capitalized in accordance with the provisions of Statement of Position 98-1, of
the
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", of the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants, which we adopted in the first quarter
of 1999.
An assessment of the readiness of year 2000 compliance of third party
entities with which we have relationships, such as our suppliers, banking
institutions, customers, payroll processors and others is ongoing. We have
inquired, or are in the process of inquiring, of the significant aforementioned
third parties about their readiness relating to year 2000 compliance and to date
have received indications that many of them are in the process of remediation
and/or will be year 2000 compliant. We are, however, subject to certain risks relating
to these third parties' potential year 2000 non-compliance. We believe that
these risks are primarily associated with our banks and major suppliers,
including our beverage co-packers and bottlers and the food suppliers and
distributors to our restaurant franchisees. At present, we cannot determine the
impact on our results of operations in the event of year 2000 non-compliance by
these third parties. In the most reasonably likely worst-case scenario, the year
2000 non-compliance might result in a disruption of business and loss of
revenues, including the effects of any lost customers, in any or all of our
business segments. The most reasonably likely worst-case scenario from failure
of systems of our suppliers is an inability to order and receive delivery of
needed raw materials, packaging and/or other production supplies which would
result in an inability to meet orders causing lost sales. The most likely
worst-case scenario from failure of systems of our banks would be an inability
to transact normal banking business such as deposits of collections, clearing
cash disbursements and borrowing needed revolving loan funds or investing excess
funds.
We determined that the possible failure of these third party systems
represents the most significant risk to our ability to operate our businesses in
the normal course as we could not manufacture our products without the ability
to order and receive materials when and where we need them and as we could not
manage our monetary responsibilities without the ability to interact with the
banking system.
We will continue to monitor these third parties to determine the impact on
our businessbusinesses and the actions we must take, if any, in the event of
non-compliance by any of these third parties. We are in the process of
collecting additional information from those third parties which disclosed that
remediation is required and have begun detailed evaluations of those third
parties, as well as those that could not satisfactorily respond, in order to
develop our contingency plans. These contingency plans might include the
build-up of our beverage inventories just before the year 2000 in order to
mitigate the effects of temporary supply disruptions. We believe there are
multiple vendors of the goods and services we receive from our suppliers and
thus the risk of non-compliance with year 2000 by any of our suppliers is
mitigated by this factor. Also, no single customer accounts for more than 3%4% of
our consolidated revenues, thus mitigating the adverse risk to our business if
some customers are not year 2000 compliant.
We have engaged consultants to advise us regarding the compliance efforts
of each of our operating businesses. The consultants are assisting us in
completing inventories of critical applications and in completing formal
documentation of year 2000 compliance of hardware and software as well as
mission critical customers, vendors and service providers. The costs of the
project and the date on which we believe we will complete the year 2000
modifications are based on management's best estimates, which were derived using
numerous assumptions of future events. However, we cannot assure you that these
estimates will be achieved and actual results could differ materially from those
anticipated.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities". Statement of Financial Accounting Standards 133
provides a comprehensive standard for the recognition and measurement of
derivatives and hedging activities. The standard requires all derivatives be
recorded on the balance sheet at fair value and establishes special accounting
for three types of hedges. The accounting treatment for each of these three
types of hedges is unique but results in including the offsetting changes in
fair values or cash flows of both the hedge and hedged item in results of
operations in the same period. Changes in fair value of derivatives that do not
meet the criteria of one of the aforementioned categories of hedges are included
in results of operations. Statement of Financial Accounting Standards 133 is
effective for our fiscal year beginning January 3, 2000.1, 2001, as amended by Statement
of Financial Accounting Standards No. 137 which defers the effective date. We
believe our more significant derivatives are the conversion component of our
short-term investments in convertible bonds, securities sold and not yet
purchased, put and call options on stocks and bonds, and an interest rate cap
agreement on certain of our long-term debt. We historically have not had
transactions to which hedge accounting applied and, accordingly, the more
restrictive criteria for hedge accounting in Statement of Financial Accounting
Standards 133 should have no effect on our consolidated financial position or
results of operations. However, the provisions of Statement of Financial
Accounting Standards 133 are complex and we are just beginning our evaluation of
the implementation requirements of Statement of Financial Accounting Standards
133 and, accordingly, are unable to determine at this time the impact it will
have on our consolidated financial position and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company isWe are exposed to the impact of interest rate changes, changes in the
market value of itsour investments and foreign currency fluctuations.
Policies and procedures -- In the normal course of business, the Company
employswe employ
established policies and procedures to manage itsour exposure to changes in
interest rates, changes in the market value of itsour investments and fluctuations
in the value of foreign currencies using a variety of financial instruments it
deems appropriate.we deem
applicable.
Interest Rate Risk
The Company'sOur objective in managing itsour exposure to interest rate changes is to limit
the impact of interest rate changes on earnings and cash flows. To achieve itsour
objectives, the Company assesseswe assess the relative proportions of itsour debt under fixed versus
variable rates. The CompanyWe generally usesuse purchased interest rate caps on a portion of
its variable- rateour variable-rate debt to limit itsour exposure to increases in short-term interest
rates. These cap agreements usually are usually at significantly higher than market
interest rates prevailing at the time the cap agreements are entered into and
are intended to protect against very significant increases in short-term
interest rates. As such, the onlyof July 4, 1999 we had one interest rate cap agreement
outstanding as of April 4, 1999 isrelating to interest on our variable-rate debt under our current $535.0 million
senior bank credit facility which provides for a cap which was approximately 3%
higher than the current interest rate on the related debt.rate. In addition to itsour variable and
fixed-rate debt, the Company'sour investment portfolio includes debt securities that are
subject to medium termmedium-term and long-term interest rate risk reflecting the
portfolio's maturities between one and sevennineteen years. The fair market value of
such investments will decline in value if interest rates increase.
Equity Market Risk
The Company'sOur objective in managing itsour exposure to changes in the market value of
itsour investments is also to balance the risk of the impact of such changes on
earnings and cash flows with the Company'sour expectations for long-term investment returns.
The Company'sOur primary exposure to equity price risk relates to itsour investments in equity
securities, equity derivatives, securities sold but not yet purchased and
investment limited partnerships. The Company hasWe have established policies and procedures
governing the type and relative magnitude of investments which itwe can make. The
Company has a management investment committee whose duty is to oversee the
Company's continuing compliance with the restrictions embodied in its policies.
Foreign Currency Risk
The Company'sOur objective in managing its exposure to foreign currency fluctuations is also
to limit the impact of such fluctuations on earnings and cash flows. The Company'sOur primary
exposure to foreign currency risk relates to itsour investments in certain
investment limited partnerships that hold foreign securities, including those of
entities based in emerging market countries and other countries which experience
volatility in their capital and lending markets. To a more limited extent, the Company haswe
have foreign currency exposure when itsour investment managers buy or sell foreign
currencies or financial instruments denominated in foreign currencies for the Company'sour
account. The
Company monitorsWe monitor these exposures and periodically determines itsdetermine our need for use
of strategies intended to lessen or limit itsour exposure to these fluctuations. The
CompanyWe
also hashave a relatively smalllimited amount of exposure to (1) export sales revenues
and related receivables denominated in foreign currencies and also has a
relatively small(2) investment in
foreign subsidiaries which are subject to foreign currency fluctuations. Our
primary export sales exposures relates to sales in Canada, Latin America,
Europe, Asia and the Caribbean. However, foreign export sales and foreign
operations for our most recent full fiscal year ended January 3, 1999
represented only 5.7% of our revenues and an immediate 10% change in foreign
currency exchange rates versus the U.S. dollar from their levels at January 3,
1999 would not have a material effect on our financial condition or results of
operations.
Overall Market Risk
With regard to overall market risk, the Company attemptswe attempt to mitigate itsour exposure to
such risks by assessing the relative proportion of itsour investments in cash and
cash equivalents and the relatively stable and risk minimizedrisk-minimized returns available
on such investments. The CompanyWe periodically interviewsinterview asset managers to ascertain the
investment objectives of such managers and investsinvest amounts with selected managers
in order to avail itselfourselves of higher but more risk
inherentrisk-inherent returns from the
selected investment strategies of these managers. The
Company seeksWe seek to identify
alternative investment strategies also seeking higher returns with attendant
increased risk profiles for a small portion of itsour investment portfolio. The CompanyWe
periodically reviewsreview the returns from each of itsour investments and may maintain,
liquidate or increase selected investments based on this review of past returns
and prospects for future returns.
The Company maintainsWe maintain investment portfolio holdings of various issuers, types and
maturities. As of AprilJuly 4, 1999, such investments consist of the following (in
thousands):
Cash equivalents included in "Cash""Cash and cash equivalents" on the accompanying
condensed consolidated balance sheet..................................................................................sheet...........................................................$ 280,662216,705
Short-term investments............................................................................. 102,563132,989
Non-current investments included in "Deferred costs and other assets" on the
accompanying condensed consolidated balance sheet.............................................. 10,92010,912
------------
$ 394,145360,606
============
Such investments are classified in the following general types or
categories:
INVESTMENT AT
INVESTMENT FAIR VALUE OR CARRYING
TYPE AT COST EQUITY VALUE PERCENTAGE
---- ------ ------ ----- ----------
(IN THOUSANDS)
Cash equivalents ..........................................$ 280,662216,705 $ 280,662216,705 $ 280,662 71.2%216,705 60.1%
Company-owned securities accounted for as:
Trading securities................................. 18,106 21,014 21,014 5.3%25,936 30,023 30,023 8.3%
Available-for-sale securities...................... 40,610 42,287 42,287 10.7%57,946 59,033 59,033 16.4%
Investments in investment limited partnerships accounted
for at:
Cost............................................... 19,522 17,087 19,522 5.0%20,070 19,707 20,070 5.6%
Equity............................................. 16,841 23,005 23,005 5.8%17,557 27,680 27,680 7.7%
Other non-current investments accounted for at:
Cost................................................ 2,650 2,650 2,650 0.7%
Equity.............................................. 4,951 5,005 5,005 1.3%4,226 4,445 4,445 1.2%
----------- ----------- ----------- ----------------
Total cash equivalents and long investment positions ......$ 383,342345,090 $ 391,710360,243 $ 394,145360,606 100.0%
=========== =========== =========== ================
Securities sold with an obligation for the Company
to purchase accounted for as trading securities.......$ (13,879)(18,507) $ (17,119)(22,307) $ (17,119)(22,307) N/A
=========== =========== =========== =============
The Company'sOur marketable securities are classified and accounted for either as
"available-for-sale" or "trading" and are reported at fair market value with the
related net unrealized gains or losses reported as a component of stockholders'
equity (net of income taxes) or included as a component of net income,
respectively. Investment limited partnerships and other non-current investments
in which the Company doeswe do not have significant influence over the investee are accounted
for at cost. Realized gains and losses on investment limited partnerships and
other non-current investments recorded at cost are reported as investment income
or loss in the period in which the securities are sold. The Company reviewsWe review such
investments carried at cost and in which the
Company haswe have unrealized losses for any
unrealized losses deemed to be other than temporary. The Company recognizesWe recognize an investment
loss currently for any such other than temporary losses. Investment limited
partnership and other non-current investments in which the Company haswe have significant
influence over the investee are accounted for in accordance with the equity
method of accounting under which theour results of operations include the Company'sour share of
the income or loss of such investees and, with respect to investment limited
partnerships, the Company'sour share of unrealized gains or losses on "available-for-sale"
investments.
SENSITIVITY ANALYSIS
For purposes of this disclosure, market risk sensitive instruments are
divided into two categories: instruments entered into for trading purposes and
instruments entered into for purposes other than trading. The Company'sOur measure of market
risk exposure represents an estimate of the potential change in fair market value of
itsour financial instruments. Market risk exposure is presented for each class of
financial instruments held by the Companyus at AprilJuly 4, 1999 for which an immediate adverse
market movement represents a potential material impact on theour financial position
or results of operations of the Company. The
Company believesoperations. We believe that the various rates of adverse market movements
described below represent the hypothetical loss to future earnings and do not
represent the maximum possible loss nor any expected actual loss, even under
adverse conditions, because actual adverse fluctuations would likely differ. In
addition, since the Company'sour investment portfolio is subject to change based on itsour
portfolio management strategy as well as in response to changes in market
conditions, these estimates are not necessarily indicative of the actual results
which may occur.
The following tables reflect the estimated effects on the market value of
the Company'sour financial instruments as of AprilJuly 4, 1999 based upon assumed immediate
adverse effects as noted below.
TRADING PORTFOLIO:
CARRYING INTEREST EQUITY FOREIGN
VALUE RATE RISK PRICE RISK CURRENCY RISK
(IN THOUSANDS)
Equity securities ..................................$ 17,012 $ -- $ (1,701) $ --
Debt securities..................................... 4,002 -- (a) (400) --
Securities sold but not yet purchased............... (17,119) -- 1,712 --
(a) TheseCARRYING EQUITY
VALUE PRICE RISK
----- ----------
(IN THOUSANDS)
Equity securities .........................$ 27,016 $ (2,702)
Debt securities............................ 3,007 (301)
Securities sold but not yet purchased...... (22,307) 2,231
The debt securities included in the trading portfolio are predominately
investments in convertible bonds which primarily trade on the conversion feature
of the securities rather than the stated interest rate, and as such, there is no
material interest rate risk since a change in interest rates of one percentage
point would not have a material impact on the Company'sour financial position or earnings.results of
operations. The securities included in the trading portfolio do not include any
investments denominated in foreign currency and, accordingly, there is no
foreign currency risk.
The sensitivity analysis of financial instruments held for trading purposes
assumes an instantaneous 10% decrease in the equity markets in which the Company is investedwe invest
from their levels at AprilJuly 4, 1999, with all other variables held constant. For
purposes of this analysis, the Company'sour debt securities, primarily convertible bonds,
were assumed to primarily trade based upon the conversion feature of the
securities and be perfectly correlated with the assumed equity index.
The Company has no foreign investments within its
trading portfolio.
OTHER THAN TRADING PORTFOLIO:
CARRYING INTEREST EQUITY FOREIGN
VALUE RATE RISK PRICE RISK CURRENCY RISK
----- --------- ---------- -------------
(IN THOUSANDS)
Cash equivalents ...................................$ 280,622216,705 $ -- (a) $ -- $ --
Available-for-sale equity securities ............... 9,39325,697 -- (939)(2,570) --
Available-for-sale debt securities.................. 32,894 (3,289)33,336 (3,334) -- --
Other investments................................... 50,18254,845 (854) (3,302) (1,230)(3,765) (1,271)
Long-term debt...................................... 925,274 (4,750)924,342 (4,734) -- --
(a) Due to the short-term nature of the cash equivalents, a change in
interest rates of one percentage point would not have a material
impact on the Company'sour financial position or earnings.results of operations.
The sensitivity analysis of financial instruments held for purposes other
than trading assumes an instantaneous increase in market interest rates of one
percentage point from their levels at AprilJuly 4, 1999 and an instantaneous 10%
decrease in the equity markets in which the Company iswe are invested from their levels at
AprilJuly 4, 1999, both with all other variables held constant. The increase of one
percentage point with respect to the Company'sour available-for-sale debt securities
represents an assumed average 10% decline as the weighted average interest rate
of such debt securities at AprilJuly 4, 1999 approximated 10%. The change of one
percentage point with respect to the
Company'sour long-term debt represents an assumed
average 11% decline as the weighted average interest rate of the Company'sour variable-rate
debt at AprilJuly 4, 1999 approximated 9% and relates to only the Company'sour variable-rate debt
since a change in interest rates on fixed-rate debt would not affect the Company's
earnings.our results
of operations. The interest rate risk presented with respect to long-term debt
represents the potential impact the indicated change in interest rates would
have on the Company's earningsour results of operations and not itsour financial position. The analysis
also assumes an instantaneous 10% change in the foreign currency exchange rates
versus the U.S. dollar from their levels at AprilJuly 4, 1999, with all other
variables held constant. For purposes of this analysis, with respect to
investments in investment limited partnerships accounted for at cost, (1) the
investment mix for each such investment between equity versus debt securities
and domestic versus foreign securities was assumed to be unchanged since January
3, 1999 since more current information was not available and (2) the decrease in
the equity markets and the change in foreign currency were assumed to be other
than temporary. Further, this analysis assumed no market risk for investments,
other than investment limited partnerships.
Part II. Other Information
This Quarterly Report on Form 10-Q contains or incorporates by reference
certain statements that are not historical facts, including, most importantly,
information concerning possible or assumed future results of operations of
Triarc Companies, Inc. and its subsidiaries (collectively, "Triarc" or "the
Company") and statements preceded by, followed by or that include the words
"may," "believes," "expects," "anticipates," or the negation thereof, or similar
expressions, which constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). All
statements which address operating performance, events or developments that are
expected or anticipated to occur in the future, including statements relating to
volume and revenue growth, earnings per share growth or statements expressing
general optimism about future operating results, are forward-looking statements
within the meaning of the Reform Act. Such forward-looking statements involve
risks, uncertainties and other factors which may cause the actual performance or
achievements of the Company and its subsidiaries to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. For those statements, the Company claims the
protection of the safe harbor for forward- looking statements contained in the
Reform Act. Many important factors could affect the future results of the
Company and could cause those results to differ materially from those expressed
in the forward-looking statements contained herein. Such factors include, but
are not limited to, the following: competition, including product and pricing
pressures; success of operating initiatives; the ability to attract and retain
customers; development and operating costs; advertising and promotional efforts;
brand awareness; the existence or absence of adverse publicity; market
acceptance of new product offerings; new product and concept development by
competitors; changing trends in consumer tastes; the success of multi-branding;
availability, location and terms of sites for restaurant development by
franchisees; the ability of franchisees to open new restaurants in accordance
with their development commitments; the performance by material customers of
their obligations under their purchase agreements; changes in business strategy
or development plans; quality of management; availability, terms and deployment
of capital; business abilities and judgment of personnel; availability of
qualified personnel; labor and employee benefit costs; availability and cost of
raw materials, ingredients and supplies; unexpected costs associated with Year
2000 compliance or the business risk associated with Year 2000 non-compliance by
customers and/or suppliers; general economic, business and political conditions
in the countries and territories where the Company operates, including the
ability to form successful strategic business alliances with local participants;
changes in, or failure to comply with, government regulations, including
accounting standards, environmental laws and taxation requirements; changes in
wholesale propane prices; regional weather conditions; competition from
alternative energy sources and within the propane industry; the costs,
uncertainties and other effects of legal and administrative proceedings; the
impact of general economic conditions on consumer spending; and other risks and
uncertainties affecting the Company and its subsidiaries detailed in other
current and periodic filings by Triarc and National Propane Partners, L.P. with the Securities and Exchange
Commission, (the "SEC"), all of which are difficult or impossible to predict accurately and
many of which are beyond the control of the Company. The Company will not
undertake and specifically declines any obligation to publicly release the
result of any revisions which may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events. In addition, it is
Triarc's policy generally not to make any specific projections as to future
earnings, and Triarc does not endorse any projections regarding future
performance that may be made by third parties.
ITEM 1. LEGAL PROCEEDINGS
As disclosed in Triarc's Annual Report on Form 10-K for the year ended
January 3, 1999 (the "Form 10-K"), the Company is a party to two consolidated
actions in the United States District Court for the Southern District of New
York involving three former court appointed directors of the Company's Board. In
November 1995, the Company commenced the first of the consolidated actions, in
New York State court. The case was subsequently removed to federal court. On
June 27, 1996, the former court appointed directors commenced the second of the
consolidated actions in the United States District Court for the Northern
District of Ohio, asserting claims against Nelson Peltz and others. Thereafter,
the case was transferred to federal court in New York. In an amended complaint,
the former court appointed directors alleged, among other things, that the
defendants conspired to mislead a federal court in connection with the change of
control of Triarc in April 1993 and in connection with the payment of the former
court appointed directors' fees. The former court appointed directors also
alleged that Mr. Peltz and Steven Posner conspired to frustrate collection of
amounts owed by Steven Posner to the United States. By order dated February 10,
1999, the court granted Mr. Peltz's motion for summary judgment with respect to
all the claims against him in the consolidated actions. The court subsequently
denied a motion by the former directors for reconsideration. No trial date has
been set for the remaining claims.
As reported in the Form 10-K, on February 19, 1996, Arby's Restaurants
S.A. de C.V., the master franchisee of Arby's, Inc. ("Arby's") in Mexico,
commenced an action in the civil court of Mexico against Arby's. The plaintiff
alleged that a non-binding letter of intent dated November 9, 1994 between the
plaintiff and Arby's constituted a binding contract pursuant to which Arby's had
obligated itself to repurchase the master franchise rights from the plaintiff
for $2.85 million and that Arby's had breached a master development agreement
between the plaintiff and Arby's. Arby's commenced an arbitration proceeding
pursuant to the terms of the franchise and development agreements. In September
1997, the arbitrator ruled that the November 9, 1994 letter of intent was not a
binding contract and the master development agreement was properly terminated.
The plaintiff challenged the arbitrator's decision and in March 1998, the civil
court of Mexico ruled that the November 9, 1994 letter of intent was a binding
contract and ordered Arby's to pay the plaintiff $2.85 million, plus interest
and value added tax. In May 1997, the plaintiff commenced an action against
Arby's in the United States District Court for the Southern District of Florida
alleging that Arby's had engaged in fraudulent negotiations with the plaintiff
in 1994-1995, in order to force the plaintiff to sell the master franchise
rights for Mexico to Arby's cheaply and Arby's had tortiously interfered with an
alleged business opportunity that the plaintiff had with a third party. Arby's
has moved to dismiss that action. The parties have agreed to settle all the
litigation including the Mexican court case and on December 4, 1998 entered into
an escrow agreement pursuant to which Arby's deposited $1.65 million in escrow.
Under the terms of the escrow agreement, as amended, the funds will be released
to the plaintiff if by September 30, 1999 a definitive settlement agreement has
been executed by the parties and, if necessary, approved by a Mexican court
presiding over the plaintiff's suspension of payments proceeding. If the
definitive settlement agreement has not been executed by September 30, 1999, the
escrowed funds will be returned to Arby's. During the pendency of the escrow
arrangement, the parties will stay all proceedings in the United States and, to
the extent possible, not pursue the proceedings in Mexico.
As reported in the Form 10-K, in October 1997, Mistic Brands, Inc.
("Mistic") commenced an action against Universal Beverages Inc. ("Universal"), a
former Mistic co-packer, Leesburg Bottling & Production, Inc. ("Leesburg"), an
affiliate of Universal, and Jonathan O. Moore ("Moore"), an individual
affiliated with Universal and Leesburg, in the Circuit Court for Duval County,
Florida. The action, which was subsequently amended to add additional
defendants, seeks, among other things, damages relating to the unauthorized sale
by the defendants of raw materials, finished product and equipment that was
owned by Mistic but in the possession of the defendants. In their answer,
counterclaim and third party complaint, certain defendants have alleged various
causes of action against Mistic, Snapple Beverage Corp. ("Snapple") and Triarc
Beverage Holdings Corp. ("TBHC"), and seek damages of $6 million relating to a
purported breach by Snapple and Mistic of an alleged oral agreement to have
Universal and/or Leesburg contract manufacture Snapple and Mistic products. They
claim that they were induced to enter into the alleged oral agreement by the
false and negligent misrepresentations of Snapple and Mistic. These defendants
also seek to recover various amounts totaling approximately $500,000 allegedly
owed to Universal for co- packing and other services rendered. Mistic, Snapple
and TBHC vigorously deny and intend to defend against the allegations contained
in defendants' counterclaim. Discovery is proceeding in this action. In July
1999, Mistic received $45,000 in settlement of its claims against some
defendants who did not assert any counterclaims against Mistic. The trial is
currently scheduled to commence in September 1999.
ITEM 5. OTHER INFORMATION
Dutch Auction Self Tender OfferAgreement to Repurchase Class B Common Stock
On March 10,August 19, 1999, Triarcthe Company announced that its Board of Directors
had unanimously approved a tender offer for upstock purchase agreement between the Company and two
entities controlled by Victor Posner, Victor Posner Trust No. 6 and Security
Management Corp. (collectively, the "Posner Entities"), pursuant to 5.5 millionwhich the
Company will acquire from the Posner Entities all of the 5,997,622 issued and
outstanding shares of the Company's common stocknon-voting Class B Common Stock in three
separate transactions. Pursuant to the agreement, on August 19, 1999, the
Company acquired one-third of the shares (1,999,208 shares) at a price of not less than $18.25$20.44
per share pursuant to
a "Dutch Auction". On April 28, 1999, Triarc announced(which was the final results of its
"Dutch Auction" self-tender offer which expired at 5:00 p.m., New York City time
on Thursday, April 22, 1999.
In accordance with the termstrading price of the tender offer, Triarc purchasedCompany's Class A Common Stock at
the 3,805,015time the transaction was negotiated), for an aggregate cost of $40,863,812.
The Company will acquire one-half of the remaining shares that were validly tendered(1,999,207 shares) on
or before the first anniversary of the date of the initial closing (subject to
extension in certain limited circumstances) at a price of $18.25$21.18 per share. Allshare (an
aggregate cost of $42,343,204) and the remaining shares validly tendered(1,999,207 shares) on or
before the second anniversary of the date of the initial closing (subject to
extension in certain limited circumstances) at $18.25 and below were accepted. As a resultprice of this
repurchase, on April 28, 1999 Triarc had 25,524,804$21.93 per share (an
aggregate cost of $43,842,610). The Posner Entities have placed the shares of common stock
outstanding (consisting of 19,527,182 shares of Class A Common Stock and
5,997,622 shares of Class B Common Stock).to be
acquired at the subsequent closings in escrow pending their repurchase.
Stock Repurchase Program
On March 10, 1999 Triarc terminated its previously announced stock
repurchase program in connection with the commencement of the "Dutch Auction"
self-tender offer referred to above.
On April 29, 1999, Triarc announced that its management has been
authorized, when and if market conditions warrant and to the extent legally
permissible, to purchase over the twelve month period commencing on May 7, 1999,
up to $30 million worth of Triarc's Class A Common Stock. To date, Triarc
has not repurchased any285,000 shares, at an average cost of $20.94 per share (including
commissions), pursuant to the newthis stock repurchase program and there(for an aggregate cost
of approximately $6.0 million). There can be no assurance that Triarc will
repurchase any additional shares will be
purchased.pursuant to this stock repurchase program.
Sale of National Propane Partners
As previously announced, on April 5, 1999, National Propane Partners,
L.P. (the "Partnership") and Columbia Energy Group and certain of its affiliates
signed a definitive purchase agreement (the "Purchase Agreement") pursuant to
which Columbia Propane, CorporationL.P. ("Columbia Propane"), a subsidiary of Columbia
Energy Group, commenced a tender offer to acquire (the "Partnership Sale") all
of the outstanding common units of the Partnership for $12.00, in cash per
common unit,
whichunit. The tender offer was the first step of a two-step transaction. In the second
step, subject to the terms and conditions of the purchase agreement, Columbia
Propane would acquire general partner interests and subordinated units of the
Partnership from National Propane Corporation and a subsidiary of National
Propane Corporation in consideration for $2.1 million in cash and the
forgiveness of approximately $15.8 million of a $30.7 million note owed by
Triarc to the Operating Partnership, and the Partnership would merge into
Columbia Propane, L.P. As part of the second step, any remaining common
unitholders of the Partnership would receive, in cash, $12.00 per common unit
and Triarc would repay the remainder of such note (approximately $14.9 million).
On May 6, 1999, Columbia Propane completed its tender offer to acquire
all of the approximately 6.7 million outstanding common units of the Partnership
for $12.00 in cash per common unit. Columbia Propane has advised Triarc that
pursuant to the tender offer, through its direct and indirect subsidiaries, it
has purchased approximately 5.9 million common units (or approximately 88.4% of the
common units then outstanding) for $12.00 in cash per unit.
As part of the second step of this two step transaction, the Partnership
intends to file an information statement with the SEC as soon as practicable.
Following clearance of the information statement by the SEC and its mailing to
holders of the Partnership's units and upon satisfaction or waiver of the
conditions set forth in the purchase agreement,In the second step of the transaction, would be consummated. The transaction is currently expected to be
completed in the second half of 1999.
Termination of Agreement
The agreement dated October 12, 1998 between Triarc and Nelson Peltz and
Peter W. May, pursuant to which Triarc agreed to assign its right of first
refusal to acquireon July 19, 1999 through a merger
with Columbia Propane, all of the outstanding class B common stockunits of the Partnership (other than
those owned by Columbia Propane, L.P. or any of its affiliates) received $12.00
in cash, without interest. Simultaneously with the merger, Columbia Propane
acquired general partner interests and subordinated units of the Partnership
from National Propane Corporation and a subsidiary of National Propane
Corporation. The consideration paid to Messrs. PeltzTriarc consisted of (i) cash in the
amount of $2,866,000 (which included approximately $2.1 million of consideration
for the Company's interests plus approximately $1.0 million (representing
reimbursement of interest paid on the note referred to below) less $268,000
(representing interest on amounts advanced by Columbia Propane in the tender
offer)) and May if(ii) the Company determined notforgiveness of approximately $15.8 million of a $30.7
million note owed by Triarc to exerciseNational Propane, L.P. (the "Operating
Partnership"). Triarc concurrently repaid the remainder of such right, has terminated.note
(approximately $14.9 million).
Pursuant to the Purchase Agreement, National Propane Corporation, a
subsidiary of Triarc, retained a 1% limited partnership interest in the
Operating Partnership, which continues to exist as a subsidiary partnership of
Columbia Propane, and provided an indemnity relating to certain of the Operating
Partnership's debt.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.110.1 - CreditLetter Agreement dated as of February 25,July 28, 1999 among Snapple
Beverage Corp.("Snapple"), Mistic Brands, Inc. ("Mistic"), Cable
Car Beverage Corporation ("Cable Car"), RC/Arby's Corporationbetween Triarc and
Royal Crown Company, Inc., as Borrowers various financial
institutions party thereto, as Lenders, DLJ Capital Funding,
Inc., as syndication agent, Morgan Stanley Senior Funding, Inc.,
as Documentation Agent,and The Bank of New York, as
Administrative Agent, incorporated herein by reference to Exhibit
4.1 to Triarc's Current Report on Form 8-K dated March 11,
1999 (SEC file no. 1-2207).
4.2 - Indenture dated as of February 25, 1999 among Triarc Consumer
Products Group,LLC ("TCPG"), Triarc Beverage Holdings Corp.
("TBHC"), as Issuers, the subsidiary guarantors party thereto and
The Bank of New York, as Trustee,incorporated herein by reference
to Exhibit 4.2 to Triarc's Current Report on Form 8-K dated March
11, 1999 (SEC file no. 1-2207).
4.3 - Registration Rights Agreement dated February 18, 1999 among TCPG,
TBHC, the guarantors party thereto and Morgan Stanley & Co.
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation
and Wasserstein Perrella Securities, Inc.John L. Barnes, Jr., incorporated herein by reference to Exhibit
4.310.37 to Triarc's Current ReportTriarc Consumer Products Group, LLC's and Triarc
Beverage Holdings Corp.'s Amendment No. 1 to Registration
Statement on Form 8-KS-4 dated March 11,August 3, 1999 (SEC fileregistration no.
1-2207)333- 78625).
4.410.2 - Registration Rights Agreement dated as of February 25, 1999 among
TCPG, TBHC, the Guarantors party thereto and Nelson Peltz and
Peter W. May,Amendment No. 1 to Triarc Beverage Holdings Corp. 1997 Stock
Option Plan, incorporated herein by reference to Exhibit 4.110.36 to
Triarc's Current ReportTriarc Consumer Products Group, LLC's and Triarc Beverage Holding
Corp.'s Amendment No. 1 to Registration Statement on Form 8-KS-4
dated April 1,August 3, 1999 (SEC fileregistration no. 1-2207)333-78625).
10.1
10.3 - LetterAmended and Restated Stock Purchase Agreement dated as of February 13, 1997 between Arby'sAugust 19,
1999 by and Roland Smith,among Triarc, Victor Posner Trust No. 6 and Security
Management Corp., incorporated herein by reference to Exhibit
10.1 to Triarc's Current Report on Form 8-K dated April 1,August 19, 1999
(SEC file no. 1-2207).
10.2 - Form of Guaranty Agreement dated as of March 23, 1999 among
National Propane Corporation, Triarc Companies, Inc. and each of
Nelson Peltz and Peter W. May, incorporated herein by reference
to Exhibit 10.33 to Triarc's Annual Report on Form 10-K for the
fiscal year ended January 3, 1999 (SEC file no. 1-2207)
10.3 - Letter Agreement dated as of April 28, 1999 between Triarc and
John L. Barnes, Jr., incorporated herein by reference to Exhibit
10.35 to Triarc Consumer Products Group, LLC's and Triarc
Beverage Holdings Corp.'s Registration Statement on Form S-4
dated May 17, 1999 (SEC registration no. 333-78625).
27.1 - Financial Data Schedule for the three-monthsix-month period ended AprilJuly 4,
1999 (and for the fiscal six-month period ended June 28, 1998 on
a restated basis), submitted to the Securities and Exchange
Commission in electronic format.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K on February 3, 1999 which
included information under Items 5 and 7 of such form.
The Registrant filed a report on Form 8-K on February 4,April 30, 1999 which
included information under Item 7 of such form.
The Registrant filed a report on Form 8-K on February 26, 1999 which
included information under Items 5 and 7 of such form.
The Registrant filed a report on Form 8-K on March 11, 1999 which
included information under Items 5 and 7 of such form.
The Registrant filed a report on Form 8-K on April 1, 1999 which
included information under Item 7 of such form.
Exhibit Index
Exhibit
No. Description Page No.
4.1 - Credit Agreement dated as of February 25, 1999,
among Snapple Beverage Corp. ("Snapple"), Mistic Brands,
Inc.("Mistic"), Cable Car Beverage Corporation ("Cable
Car"), RC/Arby's Corporation and Royal Crown Company,
Inc., as Borrowers, various financial institutions
party thereto, as Lenders, DLJ Capital Funding, Inc.,
as syndication agent, Morgan Stanley Senior Funding,
Inc., as Documentation Agent, and The Bank of
New York, as Administrative Agent, incorporated herein
by reference to Exhibit 4.1 to Triarc's Current Report on
Form 8-K dated March 11, 1999 (SEC file no. 1-2207).
4.2 - Indenture dated as of February 25, 1999 among Triarc
Consumer Products Group, LLC ("TCPG"), Triarc Beverage
Holdings Corp. ("TBHC"), as Issuers, the subsidiary
guarantors party thereto and The Bank of New York,
as Trustee, incorporated herein by reference to Exhibit
4.2 to Triarc's Current Report on Form 8-K
dated March 11, 1999 (SEC file no. 1-2207).
4.3 - Registration Rights Agreement dated February 18, 1999
among TCPG, TBHC, the guarantors party thereto and
Morgan Stanley & Co. Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation and Wasserstein Perrella
Securities, Inc.,incorporated herein by reference to
Exhibit 4.3 to Triarc's Current Report on Form 8-K dated
March 11, 1999 (SEC file no. 1-2207).
4.4 - Registration Rights Agreement dated as of February 25,
1999 among TCPG, TBHC, the Guarantors party thereto and
Nelson Peltz and Peter W. May, incorporated herein by
reference to Exhibit 4.1 to Triarc's Current Report on
Form 8-K dated April 1, 1999 (SEC file no. 1-2207).
10.1 - Letter Agreement dated as of February 13, 1997 between
Arby's and Roland Smith, incorporated herein by referenc
to Exhibit 10.1 to Triarc's Current Report on Form 8-K
dated April 1, 1999 (SEC file no. 1-2207).
10.2 - Form of Guaranty Agreement dated as of March 23, 199
among National Propane Corporation, Triarc Companies, Inc
and each of Nelson Peltz and Peter W. May, incorporated
herein by reference to Exhibit 10.33 to Triarc's Annual
Report on Form 10-K for the fiscal year ended January 3,
1999 (SEC file no. 1-2207)
10.3- Letter Agreement dated as of April 28, 1999 between
Triarc and John L. Barnes, Jr., incorporated herein by
reference to Exhibit 10.35 to Triarc Consumer Products
Group, LLC's and Triarc Beverage Holdings Corp.'s
Registration Statement on Form S-4 dated May 17, 1999
(SEC registration no. 333-78625).
.
27.1- Financial Data Schedule for the three-month period
ended April 4, 1999, submitted to the Securities and
Exchange Commission in electronic format.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements 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.
TRIARC COMPANIES, INC.
(Registrant)
Date: May 19,August 23, 1999 By: /S/ JOHN/s/ John L. BARNES, JR.Barnes, Jr.
---------------------------
John L. Barnes, Jr.
Executive Vice President and
Chief Financial Officer
(On behalf of the Company)
By: /S/ FRED/s/ Fred H. SCHAEFER
-------------------------Schaefer
------------------------
Fred H. Schaefer
Vice President and
Chief Accounting Officer
(Principal accounting officer)
Exhibit Index
Exhibit
No. Description Page No.
10.1 - Letter Agreement dated as of July 28, 1999 between
Triarc and John L. Barnes, Jr., incorporated herein
by reference to Exhibit 10.37 to Triarc Consumer
Products Group, LLC's and Triarc Beverage Holdings
Corp.'s Amendment No. 1 to Registration Statement
on Form S-4 dated August 3, 1999 (SEC registration
no. 333-78625).
10.2 - Amendment No. 1 to Triarc Beverage Holdings Corp. 1997
Stock Option Plan, incorporated herein by reference
to Exhibit 10.36 to Triarc Consumer Products Group,
LLC's and Triarc Beverage Holding Corp.'s Amendment
No. 1 to Registration Statement on Form S-4 dated
August 3, 1999 (SEC registration no. 333-78625).
10.3 - Amended and Restated Stock Purchase Agreement dated
August 19, 1999 by and among Triarc, Victor Posner
Trust No. 6 and Security Management Corp., incorporated
herein by reference to Exhibit 10.1 to Triarc's Current
Report on Form 8-K dated August 19, 1999 (SEC file
no. 1-2207).
27.1 - Financial Data Schedule for the six-month period ended
July 4, 1999 (and for the fiscal six-month period ended
June 28, 1998 on a restated basis), submitted to the
Securities and Exchange Commission in electronic format.