- --------------------------------------------------------------------------------
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 BEVERAGE HOLDINGS CORP.
------------------------------
(Exact name of registrant as specified in its charter)
Delaware 65-0748978
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
709 Westchester Avenue,
White Plains, New York 10604
---------------------- -----
(Address of principal executive offices) (Zip Code)
(914) 397-9200
--------------
(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 ( )
There were 850,500 shares of the registrant's common stock outstanding as
of April 28, 2000.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
TRIARC BEVERAGE HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
January 2, April 2,
2000 (A) 2000
-------- --------
(In thousands)
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................................$ 22,108 $ 10,643
Receivables................................................................. 50,579 66,643
Inventories................................................................. 55,848 60,643
Deferred income tax benefit................................................. 11,276 11,276
Prepaid expenses and other current assets................................... 2,816 2,396
Total current assets................................................... 142,627 151,601
Properties..................................................................... 17,839 23,232
Unamortized costs in excess of net assets of acquired companies................ 119,356 118,019
Trademarks..................................................................... 244,181 241,641
Other intangible assets........................................................ 31,122 31,971
Deferred costs and other assets................................................ 15,780 15,540
---------- ----------
$ 570,905 $ 582,004
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt...........................................$ 32,301 $ 31,075
Accounts payable ........................................................... 28,063 37,999
Accrued expenses ........................................................... 54,978 38,978
Due to Triarc Companies, Inc. and affiliates ............................... 30,064 40,703
---------- ----------
Total current liabilities.............................................. 145,406 148,755
Long-term debt................................................................. 646,009 645,068
Deferred income taxes.......................................................... 61,337 61,337
Other liabilities.............................................................. 5,615 5,704
Redeemable preferred stock..................................................... 96,320 98,589
Stockholders' deficit:
Common stock................................................................ 850 850
Additional paid-in capital.................................................. -- 1,600
Accumulated deficit......................................................... (72,197) (75,701)
Receivable from parent...................................................... (312,417) (304,166)
Accumulated other comprehensive deficit..................................... (18) (32)
---------- ----------
Total stockholders' deficit........................................... (383,782) (377,449)
---------- ----------
$ 570,905 $ 582,004
========== ==========
(A) Derived from the audited consolidated financial statements as of January 2, 2000.
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRIARC BEVERAGE HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
------------------------
April 4, April 2,
1999 2000
---- ----
(In thousands)
(Unaudited)
<S> <C> <C>
Net revenues................................................................$ 129,163 $ 140,631
--------- ---------
Costs and expenses:
Cost of sales, excluding depreciation and amortization related to sales of
$367,000 and $405,000................................................. 74,758 82,466
Advertising, selling and distribution.................................... 33,563 32,589
General and administrative............................................... 9,687 11,521
Depreciation and amortization, excluding amortization of deferred
financing costs....................................................... 5,384 6,284
Capital structure reorganization related charges......................... 2,250 204
--------- ---------
125,642 133,064
--------- ---------
Operating profit................................................... 3,521 7,567
Interest expense ........................................................... (7,757) (9,960)
Other income, net........................................................... 398 148
--------- ---------
Loss before income taxes and extraordinary charge.................. (3,838) (2,245)
Benefit from income taxes................................................... 1,405 1,010
--------- ---------
Loss before extraordinary charge................................... (2,433) (1,235)
Extraordinary charge........................................................ (4,876) --
--------- ---------
Net loss...........................................................$ (7,309) $ (1,235)
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRIARC BEVERAGE HOLDINGS CORP. 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 loss ...............................................................$ (7,309) $ (1,235)
Adjustments to reconcile net loss to net cash used in operating
activities:
Amortization of costs in excess of net assets of acquired companies,
trademarks and certain other items............................... 3,899 4,768
Depreciation and amortization of properties........................ 1,485 1,516
Amortization of deferred financing costs........................... 520 445
Provision for doubtful accounts.................................... 407 268
Capital structure reorganization related charges................... 2,250 204
Write-off of unamortized deferred financing costs and interest
rate cap agreement costs......................................... 7,990 --
Other, net......................................................... (45) (338)
Changes in operating assets and liabilities:
Increase in receivables.......................................... (18,880) (16,332)
Increase in inventories.......................................... (13,228) (4,795)
Decrease (increase) in prepaid expenses and other current assets. (2,149) 420
Increase in accounts payable and accrued expenses................ 10,029 2,187
Increase (decrease) in due to Triarc Companies, Inc. and
affiliates.................................................... (368) 834
-------- --------
Net cash used in operating activities........................ (15,399) (12,058)
-------- --------
Cash flows from investing activities:
Capital expenditures.................................................... (1,350) (6,882)
Business acquisitions................................................... (17,296) (43)
Other .................................................................. 71 (114)
-------- --------
Net cash used in investing activities........................ (18,575) (7,039)
-------- --------
Cash flows from financing activities:
Advances from affiliate................................................. -- 12,500
Repayment of advances from affiliate.................................... -- (2,700)
Repayments of long-term debt............................................(285,203) (2,168)
Proceeds from long-term debt............................................ 378,700 --
Dividends .............................................................. (82,837) --
Deferred financing costs................................................ (16,245) --
Reimbursement of estimated deferred financing costs from affiliate...... 3,293 --
-------- --------
Net cash provided by (used in) financing activities.......... (2,292) 7,632
-------- --------
Net decrease in cash and cash equivalents.................................. (36,266) (11,465)
Cash and cash equivalents at beginning of period........................... 39,578 22,108
-------- --------
Cash and cash equivalents at end of period.................................$ 3,312 $ 10,643
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
TRIARC BEVERAGE HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 2, 2000
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Triarc Beverage Holdings Corp. ("Triarc Beverage Holdings" and, together with
its subsidiaries, the "Company"), a 99.9% owned subsidiary of Triarc Consumer
Products Group, LLC ("Triarc Consumer Products Group") and an indirect 99.9%
owned subsidiary of Triarc Companies, Inc. ("Triarc"), 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."
Effective May 17, 1999 Triarc Consumer Products Group contributed the stock
of Stewart's Beverages, Inc. ("Stewart's") to Triarc Beverage Holdings. The
consolidated results of operations and cash flows of Stewart's and its
subsidiaries have been consolidated with Triarc Beverage Holdings since
Stewart's was under the common control of Triarc, and, accordingly, are
presented on an "as if pooling" basis prior to the capital contribution of
Stewart's capital stock to Triarc Beverage Holdings.
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..............................$ 17,540 $ 20,517
Finished goods............................. 38,308 40,126
-------- --------
$ 55,848 $ 60,643
======== ========
(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 Company's stock option plan (the "Triarc
Beverage Plan") 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 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 (the "Cash Payment") of $51.34 and $39.40 per
share, respectively, is due from the Company to the option holder following the
exercise of the stock options and either (1) the sale by the option holder to
the Company of shares of the Company's common stock received upon the exercise
of the stock options or (2) the consummation of an initial public offering of
the Company's common stock. The Company is responsible for the Cash Payment to
its employees who are option holders and Triarc is responsible for the Cash
Payment to its employees who are option holders either directly or through
reimbursement to the Company. The Company has accounted for the equitable
adjustment in accordance with the intrinsic value method. Compensation expense
is being recognized for the cash to be paid by the Company to its option holders
in connection with the exercise of the stock options ratably over the vesting
period of the stock options. No compensation expense has been or will be
recognized for the changes in the exercise prices of the outstanding options
because such modifications to the options did not create a new measurement date
under the intrinsic value method.
(4) Comprehensive Loss
The following is a summary of the components of comprehensive loss (in
thousands):
Three months ended
------------------------
April 4, April 2,
1999 2000
---- ----
Net loss ..........................................$ (7,309) $ (1,235)
Net change in currency translation adjustment...... (68) (14)
-------- --------
Comprehensive loss..............................$ (7,377) $ (1,249)
======== ========
(5) 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 Triarc Consumer Products Group, which in turn contributed them
to the Company.
In February and March 2000 the Company was advanced an aggregate
$12,500,000 on a non-interest bearing basis by RC/Arby's Corporation
("RC/Arby's"), a wholly-owned subsidiary of Triarc Consumer Products Group. Such
amount is included in "Due to Triarc Companies, Inc. and affiliates" at April 2,
2000. Subsequent to April 2, 2000, RC/Arby's made additional non-interest
bearing advances to the Company of $7,500,000.
During the three months ended April 2, 2000, the Company repaid $2,700,000
of advances it had received prior to January 3, 2000 from Royal Crown Company,
Inc., a subsidiary of RC/Arby's.
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.
(6) Legal Matters
The Company is involved in litigation and claims incidental to its
business. The Company has reserves for legal matters aggregating $388,000 as of
April 2, 2000. Although the outcome of such matters cannot be predicted with
certainty and some of these 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 matters will have a
material adverse effect on its consolidated financial position or results of
operations.
(7) Condensed Consolidating Financial Information
The following condensed consolidating financial statements of the Company
depict, in separate columns, Triarc Beverage Holdings as the parent company and
a co-issuer of the 10 1/4% senior subordinated notes due 2009, 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 19 to the consolidated
financial statements in the Form 10-K.
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING BALANCE SHEET
April 2, 2000
--------------------------------------------------------------
Parent Non-
Company Guarantors Guarantors Eliminations Consolidated
------- ---------- ---------- ------------ ------------
(In thousands)
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............ $ 92 $ 9,975 $ 576 $ -- $ 10,643
Receivables.......................... -- 64,276 2,367 -- 66,643
Inventories.......................... -- 59,177 1,466 -- 60,643
Deferred income tax benefit.......... -- 11,276 -- -- 11,276
Prepaid expenses and other
current assets..................... -- 2,394 2 -- 2,396
--------- --------- --------- --------- ---------
Total current assets............ 92 147,098 4,411 -- 151,601
Investment in subsidiaries.............. 25,251 11,174 -- (36,425) --
Intercompany receivables................ 7,549 4,339 7,255 (19,143) --
Properties.............................. -- 19,493 3,739 -- 23,232
Unamortized costs in excess of net
assets of acquired companies......... -- 118,019 -- -- 118,019
Trademarks.............................. -- 241,641 -- -- 241,641
Other intangible assets................. -- 31,971 -- -- 31,971
Deferred costs and other assets......... -- 15,540 -- -- 15,540
--------- --------- --------- --------- ---------
$ 32,892 $ 589,275 $ 15,405 $ (55,568) $ 582,004
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt.... $ -- $ 31,075 $ -- $ -- $ 31,075
Accounts payable..................... -- 36,554 1,445 -- 37,999
Accrued expenses..................... 4,165 32,152 2,661 -- 38,978
Due to Triarc Companies, Inc. and
affiliates......................... 3,373 37,330 -- -- 40,703
--------- --------- --------- --------- ---------
Total current liabilities....... 7,538 137,111 4,106 -- 148,755
Long-term debt.......................... 300,000 345,068 -- -- 645,068
Intercompany payables................... 4,214 14,804 125 (19,143) --
Deferred income taxes................... -- 61,337 -- -- 61,337
Other liabilities....................... -- 5,704 -- -- 5,704
Redeemable preferred stock.............. 98,589 -- -- -- 98,589
Stockholders' equity (deficit):
Common stock......................... 850 3 -- (3) 850
Additional paid-in capital........... 1,600 45,344 7,911 (53,255) 1,600
Retained earnings (accumulated
deficit)........................... (75,701) (20,064) 3,295 16,769 (75,701)
Receivable from Triarc Consumer
Products Group..................... (304,166) -- -- -- (304,166)
Accumulated other comprehensive
deficit............................ (32) (32) (32) 64 (32)
--------- --------- --------- --------- ---------
Total stockholders' equity
(deficit)..................... (377,449) 25,251 11,174 (36,425) (377,449)
--------- --------- --------- --------- ---------
$ 32,892 $ 589,275 $ 15,405 $ (55,568) $ 582,004
========= ========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended April 4, 1999
-----------------------------------------------------------
Parent Non-
Company Guarantors Guarantors Eliminations Consolidated
------- ---------- ---------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net revenues............................ $ -- $ 127,411 $ 1,752 $ -- $ 129,163
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of sales, excluding depreciation
and amortization related to sales.. -- 73,592 1,166 -- 74,758
Advertising, selling and distribution -- 33,279 284 -- 33,563
General and administrative........... -- 9,619 68 -- 9,687
Depreciation and amortization,
excluding amortization of deferred
financing costs................... -- 5,375 9 -- 5,384
Capital structure reorganization
related charges.................... -- 2,250 -- -- 2,250
--------- --------- --------- --------- ---------
-- 124,115 1,527 -- 125,642
--------- --------- --------- --------- ---------
Operating profit ............... -- 3,296 225 -- 3,521
Interest expense........................ -- (7,757) -- -- (7,757)
Other income, net....................... -- 398 -- -- 398
Equity in net earnings (losses) of
subsidiaries......................... (2,433) 225 -- 2,208 --
-------- --------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary charge...... (2,433) (3,838) 225 2,208 (3,838)
Benefit from income taxes............... -- 1,405 -- -- 1,405
-------- --------- --------- --------- ---------
Income (loss) before
extraordinary charge.......... (2,433) (2,433) 225 2,208 (2,433)
Extraordinary charge.................... (4,876) (4,876) -- 4,876 (4,876)
--------- --------- --------- --------- ---------
Net income (loss)............... $ (7,309) $ (7,309) $ 225 $ 7,084 $ (7,309)
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended April 2, 2000
-----------------------------------------------------------
Parent Non-
Company Guarantors Guarantors Eliminations Consolidated
------- ---------- ---------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net revenues............................ $ -- $ 137,565 $ 3,066 $ -- $ 140,631
--------- --------- --------- -------- ---------
Costs and expenses:
Cost of sales, excluding depreciation
and amortization related to sales.. -- 80,127 2,339 -- 82,466
Advertising, selling and distribution -- 32,204 385 -- 32,589
General and administrative........... -- 11,446 75 -- 11,521
Depreciation and amortization,
excluding amortization of deferred
financing costs................... -- 6,283 1 -- 6,284
Capital structure reorganization
related charges.................... -- 204 -- -- 204
--------- -------- -------- --------- ---------
-- 130,264 2,800 -- 133,064
--------- -------- -------- --------- ---------
Operating profit ............... -- 7,301 266 -- 7,567
Interest expense........................ -- (9,960) -- -- (9,960)
Other income (expense), net............. -- 199 (51) -- 148
Equity in net earnings (losses) of
subsidiaries......................... (1,235) 215 -- 1,020 --
--------- -------- --------- --------- ---------
Income (loss) before income taxes (1,235) (2,245) 215 1,020 (2,245)
Benefit from income taxes............... -- 1,010 -- -- 1,010
--------- -------- --------- --------- ---------
Net income (loss)............... $ (1,235) $ (1,235) $ 215 $ 1,020 $ (1,235)
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended April 4, 1999
------------------------------------------------------------
Parent Non-
Company Guarantors Guarantors Eliminations Consolidated
------- ---------- ---------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net cash used in operating
activities............................ $ -- $ (15,112) $ (287) $ -- $ (15,399)
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Business acquisition................. -- (17,296) -- -- (17,296)
Capital expenditures................. -- (1,350) -- -- (1,350)
Other................................ -- 71 -- -- 71
--------- --------- --------- --------- ---------
Net cash used in investing activities... -- (18,575) -- -- (18,575)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt......... -- 378,700 -- -- 378,700
Repayments of long-term debt......... -- (285,203) -- -- (285,203)
Dividends............................ -- (82,837) -- -- (82,837)
Deferred financing costs............. -- (16,245) -- -- (16,245)
Reimbursement of estimated deferred
financing costs from affiliate..... -- 3,293 -- -- 3,293
--------- --------- --------- --------- ---------
Net cash used in financing activities... -- (2,292) -- -- (2,292)
--------- --------- --------- --------- ---------
Net decrease in cash and cash
equivalents.......................... -- (35,979) (287) -- (36,266)
Cash and cash equivalents at beginning
of period............................ 1 39,046 531 -- 39,578
--------- --------- --------- --------- ---------
Cash and cash equivalents at end
of period........................... $ 1 $ 3,067 $ 244 $ -- $ 3,312
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended April 2, 2000
---------------------------------------------------------
Parent Non-
Company Guarantors Guarantors Eliminations Consolidated
------- ---------- ---------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities............................ $ -- $ (12,243) $ 185 $ -- $(12,058)
--------- --------- ------- --------- --------
Cash flows from investing activities:
Capital expenditures................. -- (6,854) (28) -- (6,882)
Business acquisition................. -- (43) -- -- (43)
Other................................ -- (114) -- -- (114)
--------- --------- ------- --------- --------
Net cash used in investing activities... -- (7,011) (28) -- (7,039)
--------- --------- ------- --------- --------
Cash flows from financing activities:
Advances from affiliate.............. -- 12,500 -- -- 12,500
Repayment of advances from affiliate. -- (2,700) -- -- (2,700)
Repayments of long-term debt......... -- (2,168) -- -- (2,168)
--------- --------- -------- --------- --------
Net cash provided by financing activities -- 7,632 -- -- 7,632
--------- --------- -------- --------- --------
Net increase (decrease) in cash and cash
equivalents.......................... -- (11,622) 157 -- (11,465)
Cash and cash equivalents at beginning
of period............................ 92 21,597 419 -- 22,108
--------- --------- --------- --------- --------
Cash and cash equivalents at end of
period............................... $ 92 $ 9,975 $ 576 $ -- $ 10,643
========= ========= ========= ========= ========
</TABLE>
TRIARC BEVERAGE HOLDINGS CORP. 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 Beverage
Holdings Corp., a 99.9% owned subsidiary of Triarc Consumer Products Group and
an indirect 99.9% owned subsidiary of Triarc Companies, Inc. When we refer to
"Triarc," we mean Triarc Companies, Inc. Effective May 17, 1999 Triarc Consumer
Products Group contributed the stock of Stewart's Beverages, Inc. to Triarc
Beverage Holdings. Triarc Beverage Holdings is also the parent of Snapple
Beverage Corp. and Mistic Brands, Inc. This "Management's Discussion and
Analysis of Financial Condition and Results of Operations" reflects the
consolidated results of operations of Stewart's and its subsidiaries
consolidated with Triarc Beverage Holdings since these companies were under the
common control of Triarc and, accordingly, are presented on an "as-if pooling"
basis prior to the contribution of Stewart's stock to Triarc Beverage Holdings.
The recent trends affecting our business 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 $11.5 million (8.9%) to $140.6 million 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.
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 $3.7 million to $57.8
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 gross
margins, which we compute as gross profit divided by total revenues, 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.
Advertising, Selling and Distribution Expenses
Our 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.
General and Administrative Expenses
Our 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 administrative employees.
Depreciation and Amortization, Excluding Amortization of Deferred Financing
Costs
Our 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.
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
our stock option plan. The stock option plan provides for an equitable
adjustment of options in the event of a recapitalization or similar event. The
exercise prices of outstanding options under our stock option 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 us to Triarc partially offset by the effect of the contribution of
Stewart's to us effective May 17, 1999. The exercise prices of the 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 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 our common stock received upon the
exercise of the stock options or (2) the consummation of an initial public
offering of our common stock. We are responsible for the cash payment to our
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 us. 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 by us 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 stock options held by our 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 by us to the extent of the vesting of the options
held by our employees through April 4, 1999. The $0.2 million charge in the 2000
first quarter represents the portion of the cash to be paid by us in connection
with the exercise of the stock options to the extent of the vesting of the
options held by our employees during that quarter. We expect to recognize
additional pre-tax charges relating to this equitable adjustment of $0.4
million during the remainder of 2000 and $0.2 million in 2001 as the affected
stock options held by our employees 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 $2.2 million to $10.0 million in the 2000 first
quarter compared with the 1999 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 $378.7
million, net of $96.3 million transferred to Royal Crown Company, Inc., an
affiliate of ours, borrowed under a senior bank credit facility and the
repayment of $284.3 million under our former credit facility.
Other Income, Net
Other income, net decreased $0.3 million to $0.1 million in the 2000 first
quarter compared with the 1999 first quarter. This decrease was principally due
to a $0.2 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.
Income Taxes
The provision for income taxes represented rates of 45% in the 2000 first
quarter and 37% in the 1999 first quarter. The 2000 first quarter rate
represents an effective rate that is higher than the statutory rate principally
due to the effect of the amortization of non-deductible Goodwill. The rate for
the 1999 first quarter is based on the total of the separate tax provisions for
Snapple, Mistic and Stewart's since Stewart's was not acquired until May 17,
1999 but was accounted for on an as if pooling basis prior to its acquisition,
as discussed previously. The lower than anticipated effective rate from
combining the tax provisions of these companies results from the differing
impact of the mix of pre-tax income or loss among these companies which had
differing effective rates principally due to the effect of the amortization of
non-deductible Goodwill.
Extraordinary Charge
The 1999 first quarter extraordinary charge of $4.9 million resulted from
the early extinguishment of borrowings under our former credit facility and
consisted of the write-off of previously unamortized (1) deferred financing
costs of $7.9 million and (2) interest rate cap agreement costs of $0.1 million,
less income tax benefit of $3.1 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 $12.1 million during the three
months ended April 2, 2000 reflecting (1) a net loss of $1.2 million, (2) cash
used by changes in operating assets and liabilities of $17.7 million and (3)
other of $0.4 million, all partially offset by net non-cash charges, principally
depreciation and amortization, of $7.2 million.
The cash used by changes in operating assets and liabilities of $17.7
million principally reflects increases in receivables of $16.3 million and
inventories of $4.8 million, both partially offset by (1) a $2.2 million
increase in accounts payable and accrued expenses, (2) a $0.8 million increase
in due to Triarc and affiliates and (3) a $0.4 million decrease in prepaid
expenses and other current assets. 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 our peak spring and summer selling season. The
related increase in accounts payable reflecting the increased inventory
purchases was partially offset by a decrease in accrued expenses principally due
to the payment of previously accrued incentive compensation.
Despite the $12.1 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 our 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
$2.8 million at April 2, 2000, reflecting a current ratio, which equals current
assets divided by current liabilities, of 1.0:1. Our working capital increased
$5.6 million from a deficit at January 2, 2000 principally due to (1) an $8.2
million decrease in accrued interest on the $300.0 million of 10 1/4% notes of
which we are a co-issuer as discussed in the paragraph below due to the February
2000 semi-annual interest payment of $16.0 million made by Triarc Consumer
Products Group and not us and (2) working capital provided by operations, both
partially offset by capital expenditures and reclassifications of long-term debt
to current liabilities.
Both we and Triarc Consumer Products Group have recorded our obligations
under the 10 1/4% notes consisting of $300.0 million principal amount as
long-term debt and $12.4 million and $4.2 million of related accrued but unpaid
interest as of January 2, 2000 and April 2, 2000, respectively, in "Accrued
expenses." Since it is intended that Triarc Consumer Products Group will make
all principal and interest payments under the 10 1/4% notes, we have reported a
corresponding charge of $312.4 million and $304.2 million as of January 2, 2000
and April 2, 2000, respectively, in "Receivable from parent" included as a
component of stockholders' deficit. These amounts are increased for interest
accrued and reduced to the extent that Triarc Consumer Products Group makes
interest and principal payments on the 10 1/4% notes.
Our capitalization at April 2, 2000 aggregated $397.3 million consisting
of $676.1 million of long-term debt, including current portion, and $98.6
million of redeemable preferred stock less $377.4 million of stockholders'
deficit. Our total capitalization increased $6.4 million from January 2, 2000
principally due to (1) an $8.2 million decrease in the "Receivable from parent"
reflected as a component of stockholders' deficit described above due to the
February 2000 interest payment on the 10 1/4% notes made by Triarc Consumer
Products Group and (2) the $1.6 million capital contribution to us from Triarc
through Triarc Consumer Products Group of certain assets Triarc acquired of
California Beverage Company discussed below under "Acquisitions." These factors
were partially offset by (1) repayments of long-term debt of $2.2 million and
(2) our net loss of $1.2 million.
Debt Agreements
We participate in a $535.0 million senior bank credit facility entered
into by Snapple, Mistic and Stewart's as well as RC/Arby's Corporation, a
wholly-owned subsidiary of Triarc Consumer Products Group, and Royal Crown
Company, Inc., a wholly-owned subsidiary of RC/Arby's. The credit facility
consists of a $475.0 million term facility under which we had $373.5 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, RC/Arby's
or Royal Crown. The participants in the revolving credit facility 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 to the participants in the revolving credit facility which would be
available to us to the extent not already borrowed by Royal Crown or RC/Arby's
and as of April 2, 2000 Royal Crown and RC/Arby's did not have any borrowings
under the revolving credit facility. However, $28.0 million of the revolving
credit facility was subsequently utilized by us 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 our
term loans for the remainder of 2000 are $5.3 million, increasing annually
through 2006 with a final payment in 2007. In addition to scheduled maturities
of the term loans, the participants in the revolving credit facility 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 $22.6 million was applicable to our portion
of the outstanding term loans and $5.7 million was applicable to Royal Crown's
portion of the term loans which we recorded as a receivable from Royal Crown.
The pro rata share applicable to our term B and term C loans was $20.5 million.
Certain lenders of our term B and term C loans elected not to accept an
aggregate $7.0 million of the prepayment and, accordingly, this amount was
applied to our term A loans. The application of the excess cash flow prepayment
had the effect of reducing the scheduled maturities of our term loans during the
last three quarters of 2000 by $0.9 million to $4.4 million. Accordingly, our
payments under our term loans during the last three quarters of 2000 will
aggregate $27.0 million, consisting of the $22.6 million excess cash flow
prepayment and the $4.4 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 our term B and term C loans, which have $98.7
million and $240.7 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 and Triarc Consumer Products Group are co-issuers of $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 $29.6 million, including $27.0 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 along with those
of the other subsidiaries of Triarc Consumer Products Group, 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, among other subsidiaries of Triarc
Consumer Products Group, Snapple, Mistic and Stewart's and all of their domestic
subsidiaries and (2) the credit facility are guaranteed by Triarc Consumer
Products Group and, among other of its subsidiaries, Triarc Beverage Holdings
and substantially all of the domestic subsidiaries of Snapple, Mistic and
Stewart's. As collateral for the guarantees under the credit facility, all of
the stock of Snapple, Mistic and Stewart's, among other subsidiaries of Triarc
Consumer Products Group, 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 by the subsidiaries of Triarc
Beverage Holdings to Triarc Beverage Holdings. Under the most restrictive of
these covenants, Snapple, Mistic and Stewart's are unable to pay any dividends
or make any loans or advances to Triarc Beverage Holdings other than (1)
permitted one-time distributions, including dividends, paid by these
subsidiaries to Triarc Beverage Holdings and, in turn, to Triarc Consumer
Products Group in 1999 and (2) dividends or advances to Triarc Beverage Holdings
to the extent necessary to enable Triarc Consumer Products Group or Triarc
Beverage Holdings to make interest payments under the 10 1/4% notes and to pay
up to $0.2 million of general corporate expenses per year, less any amounts paid
to them by Royal Crown or RC/Arby's for those purposes. While there are no
restrictions applicable to Triarc Beverage Holdings to pay dividends to Triarc
Consumer Products Group, Triarc Beverage Holdings is dependent upon cash flows
from its subsidiaries to pay dividends. We were in compliance with all of these
covenants as of April 2, 2000.
Advances from Affiliates
In February and March 2000 we received non-interest bearing cash advances
of $12.5 million from RC/Arby's to provide working capital for us. Subsequent to
April 2, 2000, we received additional non-interest bearing cash advances of $7.5
million from RC/Arby's. Some or all of these advances may be repaid during the
remainder of 2000 depending on our cash availability.
During the first quarter of 2000, we repaid $2.7 million of advances we
had received in 1999 from Royal Crown.
Capital Expenditures
Cash capital expenditures amounted to $6.9 million during the 2000 first
quarter. We expect that cash capital expenditures will approximate $7.8 million
for the remainder of 2000 for which there were $2.8 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 through Triarc Consumer Products
Group 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 through
Triarc Consumer Products Group 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. 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 services, under a management services
agreement between Triarc and its combined beverage businesses, which includes
us. Under this agreement we pay Triarc fixed fees on a quarterly basis in
arrears, including annual cost of living adjustments. Our portion of the total
with respect to fiscal year 2000 will be $3.6 million. In addition, as of April
2, 2000 we owe $0.9 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 arrangement with Triarc Consumer Products Group which, in
turn, has a tax-sharing agreement with Triarc, we expect to be required to pay
amounts relating to Federal income taxes to Triarc through Triarc Consumer
Products Group based on our consolidated taxable income on a stand-alone basis.
While no tax-sharing payments were made during the 2000 first quarter, we expect
future tax-sharing payments will be required during the remainder of 2000
pursuant to the informal tax-sharing arrangement.
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 $29.6 million, (2)
capital expenditures of approximately $7.8 million, (3) any repayments of the
cash advances from RC/Arby's and (4) business acquisitions by us, if any. We
anticipate meeting all of these requirements through (1) $10.6 million of
existing cash and cash equivalents, (2) cash flows from operations, (3) the $7.5
million of additional cash advances from RC/Arby's and (4) the $59.9 million of
availability as of April 2, 2000 under the $60.0 million revolving credit
facility to the extent not utilized by Royal Crown or RC/Arby's.
Triarc Beverage Holdings
Triarc Beverage Holdings is a holding company which, other than its
investments in subsidiaries and intercompany receivables, has no significant
assets and whose primary liability consists of the $300.0 million principal
amount of 10 1/4% notes co-issued with Triarc Consumer Products Group, which is
the principal obligor. This liability is offset by an equal amount of receivable
from Triarc Consumer Products Group, which is classified in our stockholders'
deficit.
As discussed above, Triarc Beverage Holdings' subsidiaries are currently
unable to pay any dividends or make any additional loans or advances to Triarc
Beverage Holdings under the terms of the credit facility described above except
to enable Triarc Consumer Products Group or Triarc Beverage Holdings to make
interest payments under the 10 1/4% notes and to pay up to $0.2 million of
general corporate expenses per year. Triarc Beverage Holdings does not
anticipate any significant cash requirements for the last three quarters of
2000.
Legal Matters
We are involved in litigation and claims incidental to our business. We
have reserves for legal matters of $0.4 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 matters
will have a material adverse effect on our consolidated financial position or
results of operations.
Seasonality
Our business is seasonal. Our highest revenues occur during the spring and
summer, between April and September and, accordingly, our second and third
quarters reflect the highest revenues and our first and fourth quarters have
lower revenues. 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 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.
<PAGE>
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 $186.7 million of our aggregate $373.5 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 4% 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..............................$ 5,541 $ --
Long-term debt................................ 676,143 (3,735)
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 Beverage Holdings Corp. and its subsidiaries (collectively, "TBHC" 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
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; 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; 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.
Item 5. Other Information
On May 16, 2000, our indirect 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
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 BEVERAGE HOLDINGS CORP.
(Registrant)
Date: May 22, 2000 By: /S/ JOHN L. BARNES, JR.
-----------------------------
John L. Barnes, Jr.
Executive Vice President
(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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