- --------------------------------------------------------------------------------
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 April 2, 2000
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: 333-78625-11
------------
TRIARC CONSUMER PRODUCTS GROUP, LLC
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-0471180
-------- ----------
(State or other jurisdiction (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
--------------
(Registrant's telephone number, including area code)
-----------------------------------------------------
(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 ( )
All of the membership interests in the registrant are held by the
registrant's parent, Triarc Companies, Inc.
- --------------------------------------------------------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
January 2, April 2,
2000 (A) 2000
-------- ----
(In thousands)
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents..............................................$ 60,173 $ 24,162
Receivables............................................................ 77,476 100,633
Inventories............................................................ 61,736 66,815
Deferred income tax benefit ........................................... 16,422 16,422
Prepaid expenses and other current assets ............................. 6,362 7,598
---------- ---------
Total current assets................................................. 222,169 215,630
Properties................................................................ 25,261 30,697
Unamortized costs in excess of net assets of acquired companies........... 261,666 258,890
Trademarks................................................................ 251,117 248,484
Other intangible assets................................................... 31,511 32,325
Deferred costs and other assets........................................... 36,491 35,277
---------- ---------
$ 828,215 $ 821,303
========== =========
LIABILITIES AND MEMBER'S DEFICIT
Current liabilities:
Current portion of long-term debt......................................$ 41,894 $ 40,194
Accounts payable....................................................... 35,397 45,294
Accrued expenses....................................................... 90,573 70,934
Due to Triarc Companies, Inc........................................... 22,591 25,498
---------- ---------
Total current liabilities............................................ 190,455 181,920
Long-term debt............................................................ 736,866 735,652
Deferred income taxes..................................................... 56,680 56,680
Deferred income and other liabilities..................................... 18,099 18,600
Member's deficit:
Contributed capital.................................................... -- 1,600
Accumulated deficit.................................................... (173,533) (172,791)
Accumulated other comprehensive deficit................................ (352) (358)
---------- ---------
Total member's deficit .............................................. (173,885) (171,549)
---------- ---------
$ 828,215 $ 821,303
========== =========
(A) Derived from the audited consolidated financial statements as of January 2, 2000
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
-------------------------
April 4, April 2,
1999 2000
---- ----
(In thousands)
(Unaudited)
<S> <C> <C>
Revenues:
Net sales............................................................$ 159,888 $170,345
Royalties, franchise fees and other revenues......................... 18,303 19,673
--------- --------
178,191 190,018
--------- --------
Costs and expenses:
Cost of sales, excluding depreciation and amortization related to
sales of $449,000 and $499,000..................................... 82,140 89,273
Advertising, selling and distribution................................ 47,756 46,372
General and administrative .......................................... 22,283 24,724
Depreciation and amortization, excluding amortization of deferred
financing costs................................................... 7,852 8,323
Capital structure reorganization related charges..................... 2,250 204
--------- --------
162,281 168,896
--------- --------
Operating profit .................................................. 15,910 21,122
Interest expense........................................................ (16,701) (20,733)
Other income, net....................................................... 3,241 1,062
--------- --------
Income before income taxes and extraordinary charges............... 2,450 1,451
Provision for income taxes.............................................. (1,213) (709)
--------- --------
Income before extraordinary charges................................ 1,237 742
Extraordinary charges................................................... (11,772) --
--------- --------
Net income (loss)..................................................$ (10,535) $ 742
========= ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
-----------------------
April 4, April 2,
1999 2000
---- ----
(In thousands)
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................$(10,535) $ 742
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 ................................ 5,604 6,439
Depreciation and amortization of properties.......................... 2,248 1,884
Amortization of deferred financing costs ............................ 1,228 944
Provision for doubtful accounts...................................... 761 626
Capital structure reorganization related charges..................... 2,250 204
Write-off of unamortized deferred financing costs and interest
rate cap agreement costs........................................... 10,938 --
Other, net........................................................... 1,721 466
Changes in operating assets and liabilities:
Increase in receivables............................................ (24,021) (23,783)
Increase in inventories............................................ (13,518) (5,079)
Increase in prepaid expenses and other current assets.............. (3,286) (1,236)
Increase (decrease) in accounts payable and accrued expenses....... 1,100 (9,646)
Increase (decrease) in due to Triarc Companies, Inc................ (4,098) 2,895
-------- -------
Net cash used in operating activities............................ (29,608) (25,544)
-------- -------
Cash flows from investing activities:
Capital expenditures..................................................... (1,545) (7,371)
Business acquisitions.................................................... (17,296) (43)
Other.................................................................... 66 (138)
-------- -------
Net cash used in investing activities............................ (18,775) (7,552)
-------- -------
Cash flows from financing activities:
Repayments of long-term debt.............................................(560,470) (2,915)
Proceeds from long-term debt............................................. 775,000 --
Dividends................................................................(204,746) --
Deferred financing costs................................................. (27,821) --
-------- -------
Net cash used in financing activities............................ (18,037) (2,915)
-------- -------
Net decrease in cash and cash equivalents................................... (66,420) (36,011)
Cash and cash equivalents at beginning of period............................ 72,792 60,173
-------- -------
Cash and cash equivalents at end of period..................................$ 6,372 $24,162
======== =======
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
April 2, 2000
(Unaudited)
(1) Basis of Presentation
Triarc Consumer Products Group, LLC ("Triarc Consumer Products Group," and
together with its subsidiaries, the "Company"), a wholly-owned subsidiary of
Triarc Companies, Inc. ("Triarc"), was formed on January 15, 1999 and commenced
operations on February 23, 1999 with the acquisition through a capital
contribution of all of the capital stock previously owned directly or indirectly
by Triarc of RC/Arby's Corporation ("RC/Arby's"), Triarc Beverage Holdings Corp.
("Triarc Beverage Holdings") and Stewart's Beverages Inc. ("Stewart's") and
their subsidiaries. Effective May 17, 1999 Triarc Consumer Products Group
contributed the stock of Stewart's to Triarc Beverage Holdings. Triarc Beverage
Holdings, 99.9% owned, has as its principally wholly-owned subsidiaries Snapple
Beverage Corp. ("Snapple"), Mistic Brands, Inc. ("Mistic") and, effective May
17, 1999, Stewart's. RC/Arby's has as its principal wholly-owned subsidiaries
Royal Crown Company, Inc. ("Royal Crown") and Arby's Inc. ("Arby's"). The
accompanying condensed consolidated statements of operations and cash flows for
the three-month period ended April 4, 1999 present the consolidated results of
operations and cash flows of Triarc Consumer Products Group as if it had been
formed prior to January 4, 1999. The consolidated results of operations and cash
flows of each of RC/Arby's, Triarc Beverage Holdings and Stewart's and their
subsidiaries have been consolidated with Triarc Consumer Products Group since
such entities were under the common control of Triarc and, accordingly, are
presented on an "as-if pooling" basis prior to the contribution of their capital
stock to Triarc Consumer Products Group.
The accompanying unaudited condensed consolidated financial statements of
Triarc Consumer Products Group have been prepared in accordance with Rule 10-01
of Regulation S-X promulgated by the Securities and Exchange Commission 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 2,
2000 and April 2, 2000 and its results of operations and cash flows for the
three-month periods ended April 4, 1999 and April 2, 2000 (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 2, 2000 (the "Form 10-K"). 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 quarter of 1999 commenced on January 4, 1999 and ended on April
4, 1999 and the Company's first quarter of 2000 commenced on January 3, 2000 and
ended on April 2, 2000. For purposes of these condensed consolidated financial
statements, such periods are referred to herein as the three-month periods ended
April 4, 1999 and April 2, 2000, respectively.
(2) Inventories
The following is a summary of the components of inventories (in thousands):
January 2, April 2,
2000 2000
---- ----
Raw materials..................................$ 20,952 $ 24,127
Work in process................................ 397 545
Finished goods................................. 40,387 42,143
-------- --------
$ 61,736 $ 66,815
======== ========
(3) Capital Structure Reorganization Related Charges
The capital structure reorganization related charges of $2,250,000 and
$204,000 recognized during the three months ended April 4, 1999 and April 2,
2000, respectively, resulted from equitable adjustments made in 1999 to the
terms of outstanding options under the stock option plan (the "Triarc Beverage
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 Stewart's to Triarc Beverage Holdings
effective May 17, 1999.
The Triarc Beverage Plan provides for an equitable adjustment of options in
the event of a recapitalization or similar event. As a result of these net
distributions and the terms of the Triarc Beverage Plan, the exercise prices of
the Triarc Beverage Holdings options granted in 1997 and 1998 were equitably
adjusted in 1999 from $147.30 and $191.00 per share, respectively, to $107.05
and $138.83 per share, respectively, and a cash payment of $51.34 and $39.40 per
share, respectively, is due from the Company to the option holder following the
exercise of the stock options and either (1) the sale by the option holder to
the Company of shares of Triarc Beverage Holdings common stock received upon the
exercise of the stock options or (2) the consummation of an initial public
offering of Triarc Beverage Holdings common stock. The Company has accounted for
the equitable adjustment in accordance with the intrinsic value method.
Compensation expense is being recognized for the cash to be paid in connection
with the exercise of the stock options ratably over the vesting period of the
stock options. No compensation expense has been or will be recognized for the
changes in the exercise prices of the outstanding options because such
modifications to the options did not create a new measurement date under the
intrinsic value method.
(4) Income Taxes
The Internal Revenue Service (the "IRS") has tentatively completed its
examination of the Federal income tax returns of Triarc and its subsidiaries,
including RC/Arby's, for the year ended April 30, 1993 and transition period
ended December 31, 1993. In connection therewith, subject to final processing
and approval by the IRS and pursuant to the Company's tax-sharing agreement with
Triarc, RC/Arby's would owe Triarc additional taxes and accrued interest
aggregating $434,000. Such additional taxes and accrued interest have been
provided for prior to the year ended January 3, 1999.
(5) Comprehensive Income (Loss)
The following is a summary of the components of comprehensive income (loss)
(in thousands):
Three months ended
---------------------
April 4, April 2,
1999 2000
---- ----
Net income (loss) ..................................$(10,535) $ 742
Net change in currency translation adjustment....... (78) (6)
------- --------
Comprehensive income (loss).......................$(10,613) $ 736
======== ========
(6) Transactions with Related Parties
On March 31, 2000 Triarc acquired certain assets, principally distribution
rights, of California Beverage Company ("California Beverage"), a distributor of
the Company's premium beverage products in the City and County of San Francisco,
California, for cash of $1,600,000, subject to post-closing adjustment. Triarc
in turn contributed those assets of California Beverage as a capital
contribution to the Company.
The Company continues to have certain related party transactions with
Triarc of the same nature and general magnitude as those described in Note 18 to
the consolidated financial statements in the Form 10-K. In addition, see Notes 3
and 4 above for discussion of certain other related party transactions for the
three-month period ended April 2, 2000.
(7) Legal and Environmental Matters
The Company is involved in litigation, claims and environmental matters
incidental to its businesses. The Company has reserves for legal and
environmental matters aggregating $1,714,000 as of April 2, 2000. Although the
outcome of such matters cannot be predicted with certainty and some of these
matters may be disposed of unfavorably to the Company, based on currently
available information and given the Company's aforementioned reserves, the
Company does not believe that such legal and environmental matters will have a
material adverse effect on its consolidated financial position or results of
operations.
(8) Business Segments
<TABLE>
<CAPTION>
The following is a summary of the Company's segment information (in
thousands):
Three months ended
-----------------------
April 4, April 2,
1999 2000
---- ----
<S> <C> <C>
Revenues:
Premium beverages.............................................$ 129,162 $ 140,631
Soft drink concentrates....................................... 30,940 29,994
Restaurant franchising........................................ 18,089 19,393
--------- ---------
Consolidated revenues.......................................$ 178,191 $ 190,018
========= =========
Earnings before interest, taxes, depreciation and amortization:
Premium beverages.............................................$ 8,906 (a) $ 13,851 (a)
Soft drink concentrates....................................... 5,215 5,401
Restaurant franchising........................................ 9,662 10,210
General corporate............................................. (21) (17)
--------- ---------
Consolidated earnings before interest, taxes, depreciation
and amortization........................................ 23,762 29,445
--------- ---------
Less depreciation and amortization:
Premium beverages............................................. 5,385 6,284
Soft drink concentrates....................................... 1,918 1,500
Restaurant franchising........................................ 549 539
--------- ---------
Consolidated depreciation and amortization.................. 7,852 8,323
--------- ---------
Operating profit:
Premium beverages............................................. 3,521 (a) 7,567 (a)
Soft drink concentrates....................................... 3,297 3,901
Restaurant franchising........................................ 9,113 9,671
General corporate............................................. (21) (17)
--------- ---------
Consolidated operating profit............................... 15,910 21,122
Interest expense.................................................. (16,701) (20,733)
Other income, net................................................. 3,241 1,062
--------- ---------
Consolidated income before income taxes and
extraordinary charges...................................$ 2,450 $ 1,451
========= =========
- ------------
(a) Reflects the capital structure reorganization related charge of $2,250,000
and $204,000 recognized during the three months ended April 4, 1999 and
April 2, 2000, respectively, discussed in Note 3.
</TABLE>
(9) Condensed Consolidating Financial Information
The following condensed consolidating financial statements of the Company
depict, in separate columns, the parent companies of each of the issuers of the
$300.0 million aggregate principal amount of 10 1/4% senior subordinated notes
due 2009 (Triarc Consumer Products Group and Triarc Beverage Holdings -
collectively, the "Parent Companies") on a consolidated basis, those
subsidiaries which are guarantors, those subsidiaries which are non-guarantors,
elimination adjustments and the consolidated total. The condensed consolidating
balance sheet as of January 2, 2000 was included in Note 21 to the consolidated
financial statements in the Form 10-K.
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING BALANCE SHEET
April 2, 2000
------------------------------------------------------------
Parent Non-
Companies Guarantors Guarantors Eliminations Consolidated
--------- ---------- ---------- ------------ ------------
(In thousands)
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............ $ 231 $ 22,670 $ 1,261 $ -- $ 24,162
Receivables.......................... -- 98,219 2,414 -- 100,633
Inventories.......................... -- 65,333 1,482 -- 66,815
Deferred income tax benefit.......... -- 16,422 -- -- 16,422
Prepaid expenses and other
current assets..................... -- 7,587 11 -- 7,598
--------- --------- --------- --------- ---------
Total current assets............ 231 210,231 5,168 -- 215,630
Investment in subsidiaries.............. -- 11,004 -- (11,004) --
Intercompany receivables................ 7,549 12,889 7,255 (27,693) --
Properties.............................. -- 26,948 3,749 -- 30,697
Note receivable from RC/Arby's.......... 300,000 (300,000) -- -- --
Unamortized costs in excess of net
assets of acquired companies......... -- 258,890 -- -- 258,890
Trademarks.............................. -- 248,484 -- -- 248,484
Other intangible assets................. -- 32,325 -- -- 32,325
Deferred costs and other assets......... 12,021 23,246 10 -- 35,277
--------- --------- --------- --------- ---------
$ 319,801 $ 524,017 $ 16,182 $ (38,697) $ 821,303
========= ========= ========= ========= =========
LIABILITIES AND MEMBER'S/STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt.... $ -- $ 40,194 $ -- $ -- $ 40,194
Accounts payable..................... -- 43,793 1,501 -- 45,294
Accrued expenses..................... 3,830 64,228 2,876 -- 70,934
Due to Triarc Companies, Inc......... 137 25,361 -- -- 25,498
--------- --------- --------- --------- ---------
Total current liabilities....... 3,967 173,576 4,377 -- 181,920
Long-term debt.......................... 300,000 435,652 -- -- 735,652
Intercompany payables................... 12,125 14,804 764 (27,693) --
Accumulated reductions in stockholders'
equity of subsidiaries in excess of
investments.......................... 175,204 -- -- (175,204) --
Deferred income taxes................... -- 56,643 37 -- 56,680
Deferred income and other liabilities... 54 18,546 -- -- 18,600
Member's/stockholders' equity (deficit):
Common stock......................... -- 4 526 (530) --
Contributed/additional paid-in capital 1,600 45,344 9,533 (54,877) 1,600
Retained earnings (accumulated deficit) (172,791) (220,194) 1,303 218,891 (172,791)
Accumulated other comprehensive
deficit............................ (358) (358) (358) 716 (358)
--------- --------- --------- --------- ---------
Total member's/stockholders'
equity (deficit)........... (171,549) (175,204) 11,004 164,200 (171,549)
--------- --------- --------- --------- ---------
$ 319,801 $ 524,017 $ 16,182 $ (38,697) $ 821,303
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended April 4, 1999
------------------------------------------------------------
Parent Non-
Companies Guarantors Guarantors Eliminations Consolidated
--------- ---------- ---------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales............................ $ -- $ 158,098 $ 1,790 $ -- $ 159,888
Royalties, franchise fees and
other revenues..................... -- 18,303 -- -- 18,303
--------- --------- --------- --------- ---------
-- 176,401 1,790 -- 178,191
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of sales, excluding depreciation
and amortization................... -- 80,947 1,193 -- 82,140
Advertising, selling and distribution -- 47,472 284 -- 47,756
General and administrative........... -- 21,981 302 -- 22,283
Depreciation and amortization, excluding
amortization of deferred financing
costs.............................. -- 7,842 10 -- 7,852
Capital structure reorganization related
charge............................. -- 2,250 -- -- 2,250
--------- --------- --------- --------- ---------
-- 160,492 1,789 -- 162,281
--------- --------- --------- --------- ---------
Operating profit................... -- 15,909 1 -- 15,910
Interest expense........................ (3,334) (13,367) -- -- (16,701)
Interest income from RC/Arby's.......... 430 (430) -- -- --
Other income, net....................... 1,116 2,031 94 -- 3,241
Equity in net income of subsidiaries before
extraordinary charges................ 2,335 95 -- (2,430) --
--------- --------- --------- --------- ---------
Income before income taxes and
extraordinary charges........... 547 4,238 95 (2,430) 2,450
(Provision for) benefit from income taxes 690 (1,903) -- -- (1,213)
--------- --------- --------- --------- ---------
Income before extraordinary
charges......................... 1,237 2,335 95 (2,430) 1,237
Extraordinary charges................... (11,772) (11,772) -- 11,772 (11,772)
--------- --------- --------- --------- ---------
Net income (loss).................. $ (10,535) $ (9,437) $ 95 $ 9,342 $ (10,535)
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended April 2, 2000
----------------------------------------------------------
Parent Non-
Companies Guarantors Guarantors Eliminations Consolidated
--------- ---------- ---------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales............................ $ -- $ 167,264 $ 3,081 $ -- $ 170,345
Royalties, franchise fees and
other revenues..................... -- 19,673 -- -- 19,673
--------- --------- --------- --------- ---------
-- 186,937 3,081 -- 190,018
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of sales, excluding depreciation
and amortization................... -- 86,925 2,348 -- 89,273
Advertising, selling and distribution -- 45,987 385 -- 46,372
General and administrative........... 15 24,397 312 -- 24,724
Depreciation and amortization, excluding
amortization of deferred financing
costs.............................. -- 8,323 -- -- 8,323
Capital structure reorganization related
charge............................. -- 204 -- -- 204
--------- --------- --------- --------- ---------
15 165,836 3,045 -- 168,896
--------- --------- --------- --------- ---------
Operating profit (loss)............ (15) 21,101 36 -- 21,122
Interest expense........................ (8,118) (12,615) -- -- (20,733)
Interest income from RC/Arby's.......... 7,726 (7,726) -- -- --
Other income, net....................... 4 1,099 (41) -- 1,062
Equity in net income of subsidiaries.... 857 (5) -- (852) --
--------- --------- --------- --------- ---------
Income (loss) before income taxes.. 454 1,854 (5) (852) 1,451
(Provision for) benefit from income taxes 288 (997) -- -- (709)
--------- --------- --------- --------- ---------
Net income (loss).................. $ 742 $ 857 $ (5) $ (852) $ 742
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended April 4, 1999
------------------------------------------------------------
Parent Non-
Companies Guarantors Guarantors Eliminations Consolidated
--------- ---------- ---------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net cash used in operating activities... $ (1,960) $ (27,066) $ (582) $ -- $(29,608)
--------- --------- --------- --------- --------
Cash flows from investing activities:
Business acquisition................. -- (17,296) -- -- (17,296)
Capital expenditures................. -- (1,545) -- -- (1,545)
Loan to RC/Arby's.................... (300,000) -- -- 300,000 --
Dividends from subsidiaries.......... 218,283 -- -- (218,283) --
Other................................ -- 66 -- -- 66
--------- --------- --------- --------- --------
Net cash used in investing activities... (81,717) (18,775) -- 81,717 (18,775)
--------- --------- --------- --------- --------
Cash flows from financing activities:
Proceeds from long-term debt......... 300,000 475,000 -- -- 775,000
Repayments of long-term debt......... -- (560,470) -- -- (560,470)
Dividends............................ (204,746) (218,283) -- 218,283 (204,746)
Deferred financing costs............. (11,576) (16,245) -- -- (27,821)
Loan from Triarc Consumer Products
Group.............................. -- 300,000 -- (300,000) --
--------- --------- --------- --------- -------
Net cash provided by (used in) financing
activities........................... 83,678 (19,998) -- (81,717) (18,037)
--------- --------- --------- --------- --------
Net increase (decrease) in cash and cash
equivalents.......................... 1 (65,839) (582) -- (66,420)
Cash and cash equivalents at beginning
of period............................ 1 71,335 1,456 -- 72,792
--------- --------- --------- --------- --------
Cash and cash equivalents at end of
period............................... $ 2 $ 5,496 $ 874 $ -- $ 6,372
========= ========= ========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended April 2, 2000
------------------------------------------------------------
Parent Non-
Companies Guarantors Guarantors Eliminations Consolidated
--------- ---------- ---------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities........................... $ 127 $ (25,025) $ (1) $ (645) $(25,544)
--------- --------- --------- --------- --------
Cash flows from investing activities:
Capital expenditures................. -- (7,343) (28) -- (7,371)
Business acquisition................. -- (43) -- -- (43)
Other................................ -- (138) -- -- (138)
--------- --------- --------- --------- --------
Net cash used in investing activities... -- (7,524) (28) -- (7,552)
--------- --------- --------- --------- --------
Cash flows from financing activities:
Repayments of long-term debt......... -- (2,915) -- -- (2,915)
Intercompany dividends............... -- (645) -- 645 --
--------- --------- --------- --------- --------
Net cash used in financing activities... -- (3,560) -- 645 (2,915)
--------- --------- --------- --------- --------
Net increase (decrease) in cash and
cash equivalents..................... 127 (36,109) (29) -- (36,011)
Cash and cash equivalents at beginning
of period............................ 104 58,779 1,290 -- 60,173
--------- --------- --------- --------- --------
Cash and cash equivalents at end of
period............................... $ 231 $ 22,670 $ 1,261 $ -- $ 24,162
========= ========= ========= ========= ========
</TABLE>
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
Item 2. 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 the accompanying
condensed consolidated financial statements and "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 2, 2000 of Triarc Consumer
Products Group, LLC, a wholly-owned subsidiary of Triarc Companies, Inc. When we
refer to "Triarc," we mean Triarc Companies, Inc. Triarc Consumer Products Group
was formed on January 15, 1999 and commenced operations on February 23, 1999
with the acquisition through a capital contribution of all of the capital stock
of RC/Arby's Corporation, Triarc Beverage Holdings Corp. and Stewart's Beverages
Inc. and their subsidiaries. These companies previously had been held directly
or indirectly by Triarc. Effective May 17, 1999 Triarc Consumer Products Group
contributed the stock of Stewart's to Triarc Beverage Holdings. Triarc Beverage
Holdings, 99.9% owned, is the parent of Snapple Beverage Corp., Mistic Brands,
Inc. and, effective May 17, 1999, Stewart's. RC/Arby's is the parent of Royal
Crown Company, Inc. and Arby's Inc. This "Management's Discussion and Analysis
of Financial Condition and Results of Operations" reflects the consolidated
results of operations for the three months ended April 4, 1999 of Triarc
Consumer Products Group as if it had been formed prior to January 4, 1999. The
consolidated results of operations of each of RC/Arby's, Triarc Beverage
Holdings and Stewart's and their subsidiaries have been consolidated with Triarc
Consumer Products Group since these entities were under the common control of
Triarc and, accordingly, are presented on an "as-if pooling" basis prior to the
contribution of their capital stock to Triarc Consumer Products Group.
The recent trends affecting our premium beverage, soft drink concentrate
and restaurant franchising segments are described in Item 7 of our Form 10-K.
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.
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 first quarter of fiscal 1999 commenced on January 4, 1999 and
ended on April 4, 1999 and our first quarter of fiscal 2000 commenced on January
3, 2000 and ended on April 2, 2000. When we refer to the "three months ended
April 4, 1999" or the "1999 first quarter," we mean the period from January 4,
1999 to April 4, 1999; and when we refer to the "three months ended April 2,
2000" or the "2000 first quarter," we mean the period from January 3, 2000 to
April 2, 2000.
Results of Operations
Revenues
Our revenues increased $11.8 million to $190.0 million in the three months
ended April 2, 2000 compared with the three months ended April 4, 1999. A
discussion of the changes in revenues by segment is as follows:
Premium Beverages -- Premium beverage revenues increased $11.5 million
(8.9%) in the three months ended April 2, 2000 compared with the three
months ended April 4, 1999. The increase, which relates entirely to sales
of finished product, reflects higher volume and, to a lesser extent,
higher average selling prices in the first quarter of 2000. The increase
in volume principally reflects (1) sales in the 2000 first quarter of
Snapple Elements(TM), a new product platform of herbally enhanced drinks
introduced in April 1999, (2) higher sales of diet teas and other diet
beverages and juice drinks, (3) higher sales of Stewart's products as a
result of increased distribution in existing and new markets and (4)
increased cases sold to retailers through Millrose Distributors, Inc. and
Snapple Distributors of Long Island, Inc. principally reflecting the
effect of an increased focus on our products as a result of our ownership
of these distributors since their acquisitions on February 25, 1999
and January 2, 2000, respectively. The effect with respect to Millrose
was for the full first quarter in 2000 compared with only the period from
February 26 to April 4 in the 1999 first quarter. Such increases were
partially offset by lower sales of WhipperSnapple(TM) in the 2000 first
quarter. The higher average selling prices principally reflect (1) the
effect of the Millrose and Long Island Snapple acquisitions whereby we
sell product at higher prices directly to retailers subsequent to
these acquisitions compared with sales at lower prices to distributors
such as Millrose and Long Island Snapple and (2) selective price
increases.
Soft Drink Concentrates -- Soft drink concentrate revenues decreased $1.0
million (3.1%) in the three months ended April 2, 2000 compared with the
three months ended April 4, 1999. This decrease is attributable to lower
Royal Crown sales of concentrate entirely reflecting a decline in branded
sales, primarily due to lower domestic volume reflecting continued
competitive pricing pressures experienced by our bottlers. Such pressures
began to lessen commencing in late 1999 and have continued that trend into
the second quarter of 2000.
Restaurant Franchising -- Restaurant franchising revenues increased $1.3
million (7.2%) in the three months ended April 2, 2000 compared with the
three months ended April 4, 1999. This increase reflects higher royalty
revenues and slightly higher franchise fee revenues. The increase in
royalty revenues resulted from an average net increase of 90, or 2.9%,
franchised restaurants and a 3.6% increase in same-store sales of
franchised restaurants.
Gross Profit
We calculate gross profit as total revenues less (1) costs of sales,
excluding depreciation and amortization and (2) that portion of depreciation and
amortization related to sales. Our gross profit increased $4.6 million to $100.2
million in the three months ended April 2, 2000 compared with the three months
ended April 4, 1999. This increase was due to the effect of the higher sales
volumes discussed above, partially offset by a slight decrease in our aggregate
gross margins, which we compute as gross profit divided by total revenues, to
53% from 54%. The decrease in gross margins reflects the higher concentration of
revenues in the premium beverage segment, which had a 1% decrease in gross
margins, despite a 1% increase in the soft drink concentrate segment. A
discussion of the changes in gross margins by segment is as follows:
Premium Beverages -- Gross margins decreased slightly to 41% during the
2000 first quarter from 42% during the 1999 first quarter. The decrease in
gross margins was principally due to the effects of (1) a shift in product
mix to lower-margin products in the 2000 first quarter, (2) $0.7 million
of increased provisions for obsolete inventory resulting from higher
levels of raw materials and finished goods inventories that passed their
shelf lives during the 2000 first quarter and that were not timely used
and (3) increased production costs in the 2000 first quarter resulting
from higher fees charged to us by our co-packers. Such decreases were
substantially offset by the positive effect on gross margins from (1) the
selective price increases and (2) the effect of the higher selling prices
resulting from the Millrose acquisition for the full 2000 first quarter
compared with only a portion of the 1999 first quarter and the Long Island
Snapple acquisition, both as referred to above.
Soft Drink Concentrates -- Gross margins increased 1% to 77% during the
2000 first quarter from 76% during the 1999 first quarter. This increase
was due to the conversion, commencing in December 1999, from our use of
the raw material aspartame to the less costly Ace-K sucralose blend in our
diet products.
Restaurant Franchising -- 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
Our advertising, selling and distribution expenses decreased $1.4 million
to $46.4 million in the three months ended April 2, 2000. A discussion of the
changes in advertising, selling and distribution expenses by segment is as
follows:
Premium Beverages -- Advertising, selling and distribution expenses
decreased $1.0 million (2.9%) to $32.6 million in the 2000 first quarter
compared with the 1999 first quarter. This decrease was principally due to
an overall decrease in promotional spending principally reflecting a
decrease in discounts offered to distributors participating in our cold
drink equipment purchasing program and a shift to shorter, less costly
radio advertising, partially offset by higher employee compensation and
related benefit costs reflecting an increase in the number of sales and
distribution employees.
Soft Drink Concentrates -- Advertising, selling and distribution expenses
decreased $0.3 million (2.4%) to $13.7 million in the 2000 first quarter
compared with the 1999 first quarter reflecting continued lower bottler
promotional reimbursements and other promotional spending resulting from
the decline in branded concentrate sales volume.
Restaurant Franchising -- Advertising, selling and distribution expenses
decreased $0.1 million (46.7%) to $0.1 million in the 2000 first quarter
compared with the 1999 first quarter reflecting a decrease in the
provision for doubtful accounts.
General and Administrative Expenses
Our general and administrative expenses increased $2.4 million to $24.7
million in the three months ended April 2, 2000. A discussion of the changes in
general and administrative expenses by segment is as follows:
Premium Beverages -- General and administrative expenses increased $1.8
million (18.9%) to $11.5 million in the 2000 first quarter compared with
the 1999 first quarter reflecting (1) increased expenses as a result of
the full effect in the 2000 first quarter of the Millrose acquisition and
the effect of the Long Island Snapple acquisition and (2) increases in
compensation and related benefit costs primarily due to an increased
number of employees.
Soft Drink Concentrates -- General and administrative expenses decreased
$0.2 million (5.2%) to $4.1 million in the 2000 first quarter compared
with the 1999 first quarter primarily reflecting a decrease in travel
expenses in the 2000 first quarter.
Restaurant Franchising -- General and administrative expenses increased
$0.8 million (10.1%) to $9.1 million in the 2000 first quarter compared
with the 1999 first quarter. This increase principally reflects (1)
provisions in the 2000 first quarter for costs to support a change in
distributors for a majority of franchisees for food and other products
and, to a lesser extent, (2) an increase in compensation and related
benefit costs due to an increased number of employees.
Depreciation and Amortization, Excluding Amortization of Deferred Financing
Costs
Our depreciation and amortization, excluding amortization of deferred
financing costs, increased $0.5 million to $8.3 million in the 2000 first
quarter. A discussion of the changes in depreciation and amortization, excluding
amortization of deferred financing costs, by segment is as follows:
Premium Beverages -- Depreciation and amortization, excluding amortization
of deferred financing costs, increased $0.9 million (16.7%) to $6.3
million in the 2000 first quarter compared with the 1999 first quarter
principally reflecting an increase in amortization of costs in excess of
net assets acquired, which we refer to as Goodwill, trademarks and other
intangibles, as a result of the full effect in the 2000 quarter of the
Millrose acquisition and the effect of the Long Island Snapple
acquisition.
Soft Drink Concentrates -- Depreciation and amortization, excluding
amortization of deferred financing costs, decreased $0.4 million (21.8%)
to $1.5 million in the 2000 first quarter primarily due to the effect of
nonrecurring 1999 depreciation on $3.7 million of soft drink vending
machines purchased in January 1998 becoming fully depreciated over periods
throughout 1999.
Restaurant Franchising -- Depreciation and amortization, excluding
amortization of deferred financing costs, was unchanged at $0.5 million in
both the 2000 and 1999 first quarters.
Capital Structure Reorganization Related Charges
The capital structure reorganization related charges of $0.2 million and
$2.3 million in the 2000 and 1999 first quarters, respectively, reflect
equitable adjustments that were made to the terms of outstanding options under
the stock option plan of Triarc Beverage Holdings. The Triarc Beverage Holdings
plan provides for an equitable adjustment of options in the event of a
recapitalization or similar event. The exercise prices of outstanding options
under the Triarc Beverage Holdings plan were equitably adjusted in 1999 to
adjust for the effects of net distributions of $91.3 million, 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
Stewart's to Triarc Beverage Holdings effective May 17, 1999. The exercise
prices of the Triarc Beverage Holdings options granted in 1997 and 1998 were
equitably adjusted in 1999 from $147.30 and $191.00 per share, respectively, to
$107.05 and $138.83 per share, respectively, and a cash payment of $51.34 and
$39.40 per share, respectively, is due from us to the option holder following
the exercise of the stock options and either (1) the sale by the option holder
to us of shares of Triarc Beverage Holdings common stock received upon the
exercise of the stock options or (2) the consummation of an initial public
offering of Triarc Beverage Holdings common stock. Triarc Beverage Holdings is
responsible for the cash payment to its employees who are option holders and
Triarc is responsible for the cash payment to its employees who are option
holders either directly or through reimbursement to Triarc Beverage Holdings. We
have accounted for the equitable adjustment in accordance with the intrinsic
value method. Commencing with the first quarter of 1999 we are recognizing
compensation expense for the aggregate maximum $4.1 million of cash to be paid
in connection with the exercise of the stock options, net of credits for
forfeitures of non-vested stock options of terminated employees, assuming all
remaining Triarc Beverage Holdings stock options held by Triarc Beverage
Holdings employees either have vested or will become vested, ratably over the
vesting period. The initial charge relating to these equitable adjustments was
recorded in the 1999 first quarter and, therefore, the 1999 first quarter charge
of $2.3 million includes the portion of the aggregate cash to be paid to the
extent of the vesting of the options held by employees of Triarc Beverage
Holdings through April 4, 1999. The $0.2 million charge in the 2000 first
quarter represents the portion of the cash to be paid in connection with the
exercise of the stock options to the extent of the vesting of the options held
by employees of Triarc Beverage Holdings during that quarter. We expect to
recognize additional pre-tax charges relating to this equitable adjustment of
$0.4 million in the remainder of 2000 and $0.2 million in 2001 as the affected
stock options held by employees of Triarc Beverage Holdings continue to vest. No
compensation expense has been or will be recognized for the changes in the
exercise prices of the outstanding options because those modifications to the
options did not create a new measurement date under the intrinsic value method.
Interest Expense
Interest expense increased $4.0 million to $20.7 million in the 2000 first
quarter reflecting higher average levels of debt during the 2000 first quarter
due to the full quarter effect of increases from a February 25, 1999 debt
refinancing and, to a lesser extent, higher average interest rates in the 2000
period. Such refinancing consisted of (1) the issuance of $300.0 million of 10
1/4% senior subordinated notes due 2000 and (2) $475.0 million borrowed under a
senior bank credit facility and the repayment of (1) $284.3 million under a
former credit facility of Triarc Beverage Holdings and (2) $275.0 million of 9
3/4% senior secured notes due 2000 of RC/Arby's.
Other Income, Net
Other income, net decreased $2.2 million to $1.1 million in the 2000 first
quarter. This decrease was principally due to (1) a $1.6 million decrease in
interest income on cash equivalents in the 2000 first quarter as a result of
lower average amounts of cash equivalents in the 2000 first quarter compared
with the 1999 first quarter and (2) a $0.3 million decrease in our gains on
lease terminations recognized by the restaurant franchising segment in the 2000
first quarter which result from the settlement of lease obligations related to
the restaurants that were sold in 1997 which were not assumed by the purchaser.
Income Taxes
The provision for income taxes represented effective rates of 49% in the
2000 first quarter and 50% in the 1999 first quarter. The effective tax rate is
lower in the 2000 quarter principally due to the impact of the amortization of
non- deductible Goodwill, the effect of which is lower in the 2000 first quarter
due to higher projected 2000 full-year pre-tax income compared with the then
projected 1999 full-year pre-tax income as of the end of the 1999 first quarter.
Extraordinary Charges
The 1999 first quarter extraordinary charges aggregating $11.8 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 $10.8 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, less income tax benefit of $6.8 million.
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 $25.5 million during the three
months ended April 2, 2000 reflecting cash used by changes in operating assets
and liabilities of $36.8 million partially offset by (1) net income of $0.7
million, (2) net non-cash charges, principally depreciation and amortization, of
$10.1 million and (3) other of $0.5 million.
The cash used by changes in operating assets and liabilities of $36.8
million reflects increases in receivables of $23.8 million, inventories of $5.1
million and prepaid expenses and other current assets of $1.2 million and a
decrease in accounts payable and accrued expenses of $9.6 million, all partially
offset by an increase in due to Triarc of $2.9 million. The increase in
receivables principally results from seasonally higher sales in February and
March 2000 compared with November and December 1999. The increase in inventories
was due to seasonal buildups in anticipation of the peak spring and summer
selling season in our beverage businesses. The related increase in accounts
payable reflecting the increased inventory purchases was more than offset by a
decrease in accrued expenses principally relating to (1) a $10.4 million
reduction in accrued compensation and related benefits principally due to the
payment of previously accrued incentive compensation and (2) an $8.5 million
reduction in accrued interest principally due to the semi-annual interest
payment of $16.0 million made in February 2000 on the $300.0 million of 10 1/4%
senior notes.
Despite the $25.5 million of cash used in operating activities in the 2000
first quarter, we expect positive cash flows from operations during the
remainder of 2000 due to (1) the expectation of increasingly profitable
operations for the remainder of the year due to the seasonality of the beverage
business with the spring and summer months as the peak season and (2) the
significant seasonal factors impacting the cash used in the 2000 first quarter
for operating assets which should not recur during the remainder of 2000 and
should substantially reverse.
Working Capital and Capitalization
Working capital, which equals current assets less current liabilities, was
$33.7 million at April 2, 2000, reflecting a current ratio, which equals current
assets divided by current liabilities, of 1.2:1. Our working capital increased
$2.0 million from January 2, 2000 principally due to working capital provided by
operations in excess of capital expenditures and reclassifications of long-term
debt to current liabilities.
Our capitalization at April 2, 2000 aggregated $604.3 million consisting
of $775.8 million of long-term debt, including current portion, less $171.5
million of member's deficit. Our total capitalization decreased $0.6 million
from January 2, 2000 principally due to repayments of long-term debt of $2.9
million partially offset by (1) the $1.6 million capital contribution to us from
Triarc of certain assets it acquired of California Beverage Company discussed
below under "Acquisitions" and (2) our net income of $0.7 million.
Debt Agreements
We maintain a $535.0 million senior bank credit facility entered into by
Snapple, Mistic, Stewart's, Royal Crown and RC/Arby's which consists of a $475.0
million term facility under which there were $468.4 million of term loans
outstanding as of April 2, 2000 and a $60.0 million revolving credit facility
which provides for borrowings by Snapple, Mistic, Stewart's, Royal Crown or
RC/Arby's. They may make revolving loan borrowings of up to 80% of eligible
accounts receivable plus 50% of eligible inventories. There were no outstanding
revolving credit loans as of April 2, 2000. At April 2, 2000 there was $59.9
million of borrowing availability under the revolving credit facility. However,
$28.0 million of the revolving credit facility was subsequently utilized through
borrowings of revolving credit loans made on May 4, 2000 in order to fund the
excess cash flow prepayment discussed in the following paragraph.
Revolving loans will be due in full in 2005. Scheduled maturities of the
term loans for the remainder of 2000 are $6.6 million, increasing annually
through 2006 with a final payment in 2007. In addition to scheduled maturities
of the term loans, we are also required to make mandatory annual prepayments in
an amount, if any, currently equal to 75% of excess cash flow as defined in the
credit agreement. The mandatory prepayments will be applied on a pro rata basis
to the remaining outstanding balances of each of the three classes of the term
loans except that any lender that has term B or term C loans outstanding may
elect not to have its pro rata share of the loans repaid. Any amount prepaid and
not applied to term B loans or term C loans as a result of the election would be
applied first to the outstanding balance of term A loans and second to any
outstanding balance of revolving loans, with any remaining amount being returned
to us. In that connection, we made a $28.3 million prepayment on May 4, 2000 in
respect of the year ended January 2, 2000, of which $25.7 million was the pro
rata share applicable to the term B and term C loans. Certain lenders of term B
and term C loans elected not to accept an aggregate $8.8 million of the
prepayment and, accordingly, this amount was applied to term A loans. The
application of the excess cash flow prepayment had the effect of reducing the
scheduled maturities of the term loans during the last three quarters of 2000 by
$1.0 million to $5.6 million. Accordingly, our payments under the term loans
during the last three quarters of 2000 will aggregate $33.9 million, consisting
of the $28.3 million excess cash flow prepayment and the $5.6 million of
adjusted scheduled maturities. Under the credit agreement, we can make voluntary
prepayments of the term loans, although as of April 2, 2000, we have not made
any voluntary prepayments. However, if we make voluntary prepayments of term B
and term C loans, which have $123.8 million and $301.9 million outstanding as of
April 2, 2000, we will incur prepayment penalties of 1.0% and 1.5%,
respectively, of any future amounts of those term loans prepaid through February
25, 2001.
We have $300.0 million principal amount of 10 1/4% senior subordinated
notes due 2009 which mature in 2009 and do not require any amortization of
principal prior to 2009.
We have a note payable to a beverage co-packer in an outstanding principal
amount of $2.5 million as of April 2, 2000 which is due during the last three
quarters of 2000.
Our long-term debt repayments during the last three quarters of 2000 are
expected to be $37.8 million, including $33.9 million under the term loans and
$2.5 million under the note payable to a beverage co-packer, both as discussed
above.
Debt Agreement Restrictions and Guarantees
Under the credit facility substantially all of our assets, other than cash
and cash equivalents, are pledged as security. In addition, our obligations
relating to (1) the 10 1/4% notes are guaranteed by Snapple, Mistic, Stewart's,
Arby's, Royal Crown and RC/Arby's and all of their domestic subsidiaries and (2)
the credit facility are guaranteed by Triarc Consumer Products Group, Triarc
Beverage Holdings and substantially all of the domestic subsidiaries of Snapple,
Mistic, Stewart's, Arby's, Royal Crown and RC/Arby's. As collateral for the
guarantees under the credit facility, all of the stock of Snapple, Mistic,
Stewart's, Arby's, Royal Crown and RC/Arby's and all of their domestic
subsidiaries and 65% of the stock of each of their directly-owned foreign
subsidiaries is pledged. The guarantees under the 10 1/4% notes are full and
unconditional, are on a joint and several basis and are unsecured.
Our debt agreements contain various covenants which (1) require periodic
financial reporting, (2) require meeting financial amount and ratio tests, (3)
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 on an arms-length
basis and (4) restrict the payment of dividends, loans or advances to Triarc.
Under the most restrictive of these covenants, we cannot pay any dividends or
make any loans or advances to Triarc other than permitted one-time
distributions, including dividends, paid to Triarc in 1999. We were in
compliance with all of these covenants as of April 2, 2000.
Arby's remains contingently responsible for operating and capitalized lease
payments, if the purchaser does not make such required lease payments, assumed
by the purchaser in connection with the restaurants sale of approximately $117.0
million as of May 1997 when the Arby's restaurants were sold and $89.0 million
as of April 2, 2000, assuming the purchaser of the Arby's restaurants has made
all scheduled payments through that date. Further, Triarc has guaranteed
mortgage notes and equipment notes payable to FFCA Mortgage Corporation assumed
by the purchaser in connection with the restaurants sale of $54.7 million as of
May 1997 and $48.0 million as of April 2, 2000, assuming the purchaser of the
Arby's restaurants has made all scheduled repayments through that date. In
addition, a subsidiary of ours is a co-obligor with the purchaser of the Arby's
restaurants and Triarc is a guarantor under a loan, the repayments of which are
being made by the purchaser, with an aggregate principal amount of $0.5 million
as of April 2, 2000.
Capital Expenditures
Cash capital expenditures amounted to $7.4 million during the 2000 first
quarter. We expect that cash capital expenditures will approximate $8.3 million
for the remainder of 2000 for which there were $2.9 million of outstanding
commitments as of April 2, 2000. Our planned capital expenditures include
amounts for cold drink equipment, co- packing equipment and remaining
expenditures for a premium beverage packing line at one of our company-owned
distributors.
Acquisitions
On March 31, 2000 Triarc acquired, and contributed to us, certain assets,
principally distribution rights, of California Beverage Company, a distributor
of our premium beverage products in the City and County of San Francisco,
California, for cash of $1.6 million, subject to post-closing adjustment. On May
16, 2000 Triarc acquired, and contributed to us, certain assets, principally
distribution rights, of Northern Glacier Ltd. d/b/a Taormina Lighthouse, a
distributor of our Mistic premium beverage products in five counties in New
Jersey and who will continue as our sub-distributor in two of those counties,
for an aggregate purchase price of $2.2 million, subject to post-closing
adjustment. Of the purchase price, $1.9 million was paid through offset of
accounts receivable and a note receivable otherwise owed to us by the seller,
which are to be reimbursed to us by Triarc, and $0.3 million is to be
paid by Triarc to the seller following the conclusion of the seller's
sub-distributorship. 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.
Management Services Fees
We receive from Triarc various management services, including legal,
accounting, tax, insurance and financial, under two management services
agreements with our combined beverage businesses and Arby's. Under these
agreements we pay Triarc fixed fees on a quarterly basis in arrears, including
annual cost of living adjustments. The total with respect to fiscal year 2000
will be $10.8 million. In addition, as of April 2, 2000 we owe $2.6 million to
Triarc with respect to the 1999 fourth quarter.
Income Taxes
We are included in the consolidated Federal income tax return of Triarc.
Under a tax-sharing agreement with Triarc, we are required to pay to Triarc
amounts relating to Federal income taxes based on our consolidated taxable
income on a stand-alone basis. While no tax-sharing payments were made during
the 2000 first quarter, a tax-sharing payment of $1.4 million with respect to
that quarter was made during the second quarter of 2000. We expect to make
additional quarterly tax-sharing payments during the remainder of 2000 pursuant
to the tax-sharing agreement.
The Internal Revenue Service has tentatively completed its examination of
the Federal income tax returns of Triarc and its subsidiaries, including
RC/Arby's, for the year ended April 30, 1993 and transition period ended
December 31, 1993. In connection with these 1993 examination, subject to final
processing and approval by the Internal Revenue Service and pursuant to our
tax-sharing agreement with Triarc, RC/Arby's would owe Triarc additional taxes
and accrued interest totaling $0.4 million.
Cash Requirements
As of April 2, 2000, our consolidated cash requirements for the remainder
of 2000, exclusive of operating cash flow requirements which include tax-sharing
payments and management services fees to Triarc as discussed above, consist
principally of (1) debt principal repayments aggregating $37.8 million, (2)
capital expenditures of approximately $8.3 million and (3) business acquisitions
by us, if any. We anticipate meeting all of these requirements through (1) $24.2
million of existing cash and cash equivalents, (2) cash flows from operations
and (3) the $59.9 million of availability as of April 2, 2000 under our $60.0
million revolving credit facility.
Triarc Consumer Products Group
Triarc Consumer Products Group is a holding company whose primary asset is
a $300.0 million unsecured promissory note receivable from RC/Arby's and whose
primary liability consists of the $300.0 million principal amount of 10 1/4%
notes. The RC/Arby's note has a stated interest rate of 10.33% and is due in
2009. The cash requirements of Triarc Consumer Products Group are semi-annual
interest on the 10 1/4% notes and any general corporate expenses. Triarc
Consumer Products Group's principal source of cash is semi-annual interest on
the RC/Arby's note. Triarc Consumer Products Group's subsidiaries can pay
dividends or advances to Triarc Consumer Products Group to the extent interest
on the 10 1/4% notes and up to $0.2 million of general corporate expenses exceed
the interest income on the RC/Arby's note, but cannot currently pay any other
dividends or advances under the terms of the credit facility described above.
Triarc Consumer Products Group's cash requirements for the remainder of
2000 consist of the August 2000 semi-annual interest payment of $15.4 million
under the 10 1/4% notes and, to a much lesser extent, any general corporate
expenses. Triarc Consumer Products Group expects to meet its cash requirements
for the remainder of 2000 through the $15.5 million of interest to be received
in August 2000 on the RC/Arby's note and existing cash of $0.1 million.
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 $1.7
million as of April 2, 2000. 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.
Seasonality
Our beverage and restaurant franchising businesses are seasonal. In our
beverage businesses, the highest revenues occur during the spring and summer,
between April and September. Accordingly, our second and third quarters reflect
the highest revenues and our first and fourth quarters have lower revenues from
the beverage businesses. The royalty revenues of our restaurant franchising
business are somewhat higher in our fourth quarter and somewhat lower in our
first quarter. Accordingly, consolidated revenues will generally be highest
during the second and third fiscal quarters of each year. Our earnings before
interest, taxes, depreciation and amortization and operating profit are also
highest during the second and third fiscal quarters of each year and lowest in
the first fiscal quarter. This principally results from the higher beverage
revenues in the second and third fiscal quarters while general and
administrative expenses and depreciation and amortization, excluding
amortization of deferred financing costs, are generally recorded ratably in each
quarter either as incurred or allocated to quarters based on time expired. Our
first fiscal quarter earnings before interest, taxes, depreciation and
amortization and operating profit have also been lower due to advertising
production costs which typically are higher in the first quarter in anticipation
of the peak spring and summer beverage selling season and which are recorded the
first time the related advertising takes place.
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 133 provides a comprehensive standard for the
recognition and measurement of derivatives and hedging activities. The standard
requires derivatives be recorded on the balance sheet at fair value and
establishes more restrictive criteria for hedge accounting. Statement 133, as
amended by Statement of Financial Accounting Standards No. 137, is effective for
our fiscal year beginning January 1, 2001. Although we have not yet completed
the process of identifying all of our derivative instruments, the only
derivative which we have currently identified is 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 133 should have no effect on our consolidated
financial position or results of operations. However, the provisions of
Statement 133 are complex and we are just beginning our evaluation of the
implementation requirements of Statement 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
We are exposed to the impact of interest rate changes and, to a much lesser
extent, foreign currency fluctuations.
Policies and Procedures -- In the normal course of business, we employ
established policies and procedures to manage our exposure to changes in
interest rates and fluctuations in the value of foreign currencies using
financial instruments we deem appropriate.
Interest Rate Risk
Our objective in managing our exposure to interest rate changes is to limit
the impact of interest rate changes on earnings and cash flows. To achieve our
objectives, we assess the relative proportions of our debt under fixed versus
variable rates. We generally use purchased interest rate caps on a portion of
our variable-rate debt to limit our exposure to increases in short-term interest
rates. These cap agreements usually are 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. We currently have one interest rate cap agreement relating to
interest on $243.2 million of our aggregate $468.4 million of variable-rate term
loans under our senior bank credit facility which provides for a cap which was
approximately 2% higher than the prevailing interest rate at April 2, 2000.
Foreign Currency Risk
Our objective in managing our exposure to foreign currency fluctuations is
also to limit the impact of such fluctuations on earnings and cash flows. We
have a relatively limited amount of exposure to (1) export sales revenues and
related receivables denominated in foreign currencies and (2) investments in
foreign subsidiaries which are subject to foreign currency fluctuations. Our
primary export sales exposures relate to sales in Canada, the Caribbean and
Europe. We monitor these exposures and periodically determine our need for use
of strategies intended to lessen or limit our exposure to these fluctuations.
However, foreign export sales and foreign operations for our most recent full
fiscal year ended January 2, 2000 represented only 5% of our revenues and an
immediate 10% change in foreign currency exchange rates versus the United States
dollar from their levels at January 2, 2000 would not have had a material effect
on our consolidated financial position or results of operations. At the present
time, we do not hedge our foreign currency exposures as we do not believe this
exposure to be material.
Overall Market Risk
With regard to overall market risk, we attempt to mitigate our exposure to
such risks by assessing the relative proportion of our investments in cash and
cash equivalents and the relatively stable and risk-minimized returns available
on such investments. At April 2, 2000, our excess cash was primarily invested in
commercial paper with maturities of less than 90 days and money market funds
which, due to their short-term nature, minimizes our overall market risk.
Sensitivity Analysis
All of our market risk sensitive instruments are instruments entered into
for purposes other than trading. Our measure of market risk exposure represents
an estimate of the potential change in fair value of our financial instruments.
Market risk exposure is presented for each class of financial instruments held
by us at April 2, 2000 for which an immediate adverse market movement represents
a potential material impact on our financial position or results of operations.
We believe that the 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.
The following table reflects the estimated effects on the market value of
our financial instruments as of April 2, 2000 based upon assumed immediate
adverse effects as noted below (in thousands):
April 2, 2000
----------------------
Carrying Interest
Value Rate Risk
----- ---------
Cash equivalents...........................$ 17,560 $ --
Long-term debt............................. 775,846 (4,684)
The cash equivalents are short-term in nature with a maturity of three
months or less when acquired and, as such, a change in interest rates of one
percentage point would not have a material impact on our consolidated financial
position or results of operations.
The sensitivity analysis of long-term debt assumes an instantaneous
increase in market interest rates of one percentage point from their levels at
April 2, 2000, with all other variables held constant. The increase of one
percentage point with respect to our long-term debt (1) represents an assumed
average 10% decline in earnings as the weighted average interest rate of our
variable-rate debt at April 2, 2000 approximated 10% and (2) relates only to our
variable-rate debt since a change in interest rates would not affect interest
expense on our fixed-rate debt. The interest rate risk presented with respect to
long-term debt represents the potential impact the indicated change in interest
rates would have on our consolidated results of operations and not our
consolidated financial position.
<PAGE>
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 Consumer Products Group, LLC and its subsidiaries (collectively, "TCPG"
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. These
forward-looking statements are based on our expectations and are susceptible to
a number of risks, uncertainties and other factors and our actual results,
performance or achievements may differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. For those statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Reform Act. Many important factors
could affect our future results 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 positive or adverse publicity; market acceptance of new
product offerings; new product and concept development by competitors; changing
trends in consumer tastes and demographic patterns; 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, including the ability of
franchisees to finance restaurant development; 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; the potential
impact on franchisees' store level sales and resulting royalty revenues that
could arise from interruptions in the distribution of supplies of food and other
products to franchisees; 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 franchising
laws, accounting standards, environmental laws and taxation requirements; 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 our
other current and periodic reports filed with the Securities and Exchange
Commission, all of which are difficult or impossible to predict accurately and
many of which are beyond our control. We will not undertake and specifically
decline any obligation to publicly release the results 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 our policy generally not to make any
specific projections as to future earnings, and we do not endorse any
projections regarding future performance that may be made by third parties.
<PAGE>
Item 5. Other Information
On May 16, 2000, our parent, Triarc Companies, Inc. ("Triarc"), acquired
certain of the assets of Northern Glacier Ltd. d/b/a Taormina Lighthouse,
including the distribution rights for Mistic products in certain counties in New
Jersey, for an aggregate purchase price of $2.2 million, subject to post-closing
adjustment. The assets acquired by Triarc were contributed to our subsidiary
Millrose, L.P.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 - First Amendment dated as of April 1, 2000 to Credit Agreement
dated as of February 25, 1999 among Snapple Beverage Corp.,
Mistic Brands, Inc., Stewart's Beverages, Inc. (f/k/a Cable
Car Beverage Corporation), RC/Arby's Corporation and Royal
Crown Company, Inc., as the Borrowers, various financial
institutions, as the Lenders, DLJ Capital Funding, Inc., as
the Syndication Agent for the Lenders, Morgan Stanley Senior
Funding, Inc., as the Documentation Agent for the Lenders, and
The Bank of New York, as the Administrative Agent for the
Lenders, incorporated herein by reference to Exhibit 4.1 to
Triarc Companies, Inc.'s Quarterly Report on Form 10-Q for the
fiscal quarter ended April 2, 2000 (SEC file no. 1-2201).
27.1 - Financial Data Schedule for the three-month period ended April
2, 2000, submitted to the Securities and Exchange Commission in
electronic format.
27.2 - Financial Data Schedule for the three-month period ended April
4, 1999, on a restated basis, submitted to the Securities and
Exchange Commission in electronic format.
(b) Reports on Form 8-K
None
<PAGE>
Exhibit Index
Exhibit
No. Description Page No.
4.1 - First Amendment dated as of April 1, 2000 to Credit
Agreement dated as of February 25, 1999 among
Snapple Beverage Corp., Mistic Brands, Inc.,
Stewart's Beverages, Inc. (f/k/a Cable Car Beverage
Corporation), RC/Arby's Corporation and Royal Crown
Company, Inc., as the Borrowers, various financial
institutions, as the Lenders, DLJ Capital Funding,
Inc., as the Syndication Agent for the Lenders,
Morgan Stanley Senior Funding, Inc., as the
Documentation Agent for the Lenders, and The Bank of
New York, as the Administrative Agent for the
Lenders incorporated herein by reference to Exhibit
4.1 to Triarc Companies, Inc.'s Quarterly Report on
Form 10-Q for the fiscal quarter ended April 2, 2000
(SEC file no. 1-2201).
27.1 - Financial Data Schedule for the three-month period
ended April 2, 2000, submitted to the Securities and
Exchange Commission in electronic format.
27.2 - Financial Data Schedule for the three-month period
ended April 4, 1999, on a restated basis,
submitted to the Securities and Exchange Commission
in electronic format.
<PAGE>
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 CONSUMER PRODUCTS GROUP, LLC
(Registrant)
Date: May 17, 2000 By: /S/ JOHN L. BARNES, JR.
---------------------------
John L. Barnes, Jr.
Executive Vice President and
Chief Financial Officer
(On behalf of the Company)
By: /S/ FRED H. SCHAEFER
------------------------------
Fred H. Schaefer
Vice President and
Chief Accounting Officer
(Principal accounting officer)
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE ACCOMPANYING FORM
10-Q OF TRIARC CONSUMER PRODUCTS GROUP, LLC FOR THE THREE-MONTH PERIOD ENDED
APRIL 2, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
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<PERIOD-START> JAN-03-2000
<PERIOD-END> APR-02-2000
<EXCHANGE-RATE> 1
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<BONDS> 735,652
0
0
<COMMON> 0
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY INCOME STATEMENT INFORMATION FOR THE
THREE MONTHS ENDED APRIL 4, 1999 EXTRACTED FROM THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS INCLUDED IN THE ACCOMPANYING FORM 10-Q OF TRIARC CONSUMER
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QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
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<RESTATED>
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<NAME> TRIARC CONSUMER PRODUCTS GROUP, LLC
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<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-04-1999
<PERIOD-END> APR-04-1999
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