<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 2000
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
SNAPPLE BEVERAGE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2086 65-0748978
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------
709 WESTCHESTER AVENUE
WHITE PLAINS, NEW YORK 10604
(914) 397-9200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------
GARY G. LYONS, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
SNAPPLE BEVERAGE GROUP, INC.
709 WESTCHESTER AVENUE
WHITE PLAINS, NEW YORK 10604
(914) 397-9295
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
-------------------
COPIES TO:
<TABLE>
<S> <C>
NEALE M. ALBERT, ESQ. RICHARD SANDLER, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON DAVIS POLK & WARDWELL
1285 AVENUE OF THE AMERICAS 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10019-6064 NEW YORK, NEW YORK 10017
(212) 373-3000 (212) 450-4224
</TABLE>
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plan, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.10 per share. $115,000,000 $30,360
==================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED JUNE 27, 2000
SHARES
SNAPPLE BEVERAGE GROUP, INC.
COMMON STOCK
------------------
SNAPPLE BEVERAGE GROUP, INC. IS OFFERING SHARES OF ITS COMMON STOCK. THIS
IS OUR INITIAL PUBLIC OFFERING OF COMMON STOCK AND NO PUBLIC MARKET CURRENTLY
EXISTS FOR OUR SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL
BE BETWEEN $ AND $ PER SHARE.
-------------------
WE INTEND TO APPLY TO LIST OUR COMMON STOCK ON THE NEW YORK STOCK EXCHANGE UNDER
THE SYMBOL 'SNP.'
-------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE 'RISK FACTORS' BEGINNING ON
PAGE 10.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
PROCEEDS TO
SNAPPLE
UNDERWRITING BEVERAGE
PRICE TO DISCOUNTS AND GROUP,
PUBLIC COMMISSIONS INC.
------ ----------- ----
<S> <C> <C> <C>
Per Share................................................... $ $ $
Total....................................................... $ $ $
</TABLE>
Snapple Beverage Group, Inc. has granted the underwriters the right to purchase
up to an additional shares to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on
, 2000.
-------------------
MORGAN STANLEY DEAN WITTER
DONALDSON, LUFKIN & JENRETTE
ING BARINGS
LEHMAN BROTHERS
, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 10
Special Note Regarding Forward-Looking
Statements........................... 18
Separation from Triarc................. 19
The Restructuring...................... 21
Use of Proceeds........................ 23
Dividend Policy........................ 23
Capitalization......................... 24
Unaudited Pro Forma Condensed
Consolidated Financial Statements.... 25
Selected Consolidated Financial Data... 37
Management's Discussion and Analysis of
Financial Condition and Results of
Operation............................ 43
Quantitative and Qualitative
Disclosures About Market Risk........ 72
Business............................... 74
Management............................. 84
Relationship with Triarc and Related
Party Transactions................... 96
Principal Stockholders................. 103
Description of Capital Stock........... 104
Description of Indebtedness............ 107
United States Federal Income Tax
Consequences to Non-United States
Holders of Common Stock.............. 111
Shares Available for Future Sale....... 114
Underwriters........................... 116
Legal Matters.......................... 118
Experts................................ 118
Where You Can Find More Information.... 118
Index to Financial Statements.......... F-1
</TABLE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock.
-------------------
References to 'we', 'us', and 'our' refer to Triarc Consumer Products Group,
LLC, which, as a result of a series of transactions to occur in connection with
the offering, will effectively be merged with and into Snapple Beverage Group,
Inc., together with its consolidated subsidiaries. References to 'Triarc' refer
to Triarc Companies, Inc., our parent company.
In connection with the offering and the related transactions, our restaurant
franchising business will be effectively distributed to our parent company. See
'The Restructuring.' The historical financial information presented in this
prospectus is prepared for Triarc Consumer Products Group, LLC. The pro forma
financial information is, except as otherwise noted, prepared for Snapple
Beverage Group, Inc. as if the offering and related transactions had already
occurred. The related transactions have not been reflected in the historical
financial statements included elsewhere in this prospectus because the related
transactions will not have occurred prior to the registration statement of which
this prospectus is a part being declared effective by the Securities and
Exchange Commission. Because the offering is conditioned upon the related
transactions, the description of our business contained under 'Prospectus
Summary' and 'Business' does not present information about our restaurant
franchising business. In addition, we have not presented information about
officers of our restaurant franchising business in the section entitled
'Management' or disclosure about relationships between our restaurant
franchising business and related parties in the section entitled 'Relationship
with Triarc and Related Party Transactions.'
-------------------
Trademarks, copyrights and other intellectual property owned or licensed by
us or our subsidiaries appear in italics the first time that they are referred
to in this prospectus. All other trademarks appearing in this prospectus are the
property of their respective owners.
-------------------
Snapple Beverage Group, Inc. is a Delaware corporation. Snapple Beverage
Group, Inc.'s principal executive offices are located at 709 Westchester Avenue,
White Plains, New York 10604, and its telephone number at that address is (914)
397-9200.
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Because it is a summary, it does not contain all of the information that you
should consider before investing. In connection with the offering and the
related transactions, we will no longer own the restaurant franchising business
which is included as part of our historical financial statements included
elsewhere in this prospectus. As a result, the discussion below does not present
information about the restaurant franchising business. You should read this
entire prospectus carefully, including the section entitled 'Risk Factors' and
our financial statements and the notes thereto appearing elsewhere in this
prospectus.
SNAPPLE BEVERAGE GROUP
We are a leading premium beverage company and a leading supplier of
concentrates for private label carbonated soft drinks in North America. We own
the Snapple, Mistic and Stewart's premium beverage brands. According to A.C.
Nielsen data, in 1999 our premium brands had the leading share (33%) of U.S.
premium beverage sales volume in convenience stores, grocery stores and mass
merchandisers. We continue to increase consumer awareness for our premium
beverage brands with innovative marketing and new product introductions. We also
own the Royal Crown carbonated soft drink brand, the largest national brand cola
available to the independent bottling system.
For the three months ended April 2, 2000, we had pro forma revenues of
$170.6 million and pro forma EBITDA of $19.2 million, an increase of
approximately 5.5% and 35.2%, respectively, compared with the three months ended
April 4, 1999. For the twelve months ended January 2, 2000, we had pro forma
revenues of $773.9 million and pro forma EBITDA of $100.7 million, an increase
of approximately 5.1% and 6.2%, respectively, compared with the twelve months
ended January 3, 1999. Pro forma revenues and EBITDA exclude the Arby's
restaurant franchising business, which we will no longer own after the offering
and the related transactions described under 'The Restructuring.' Our operating
strategy has allowed us to maintain an efficient cost structure requiring
minimal capital expenditures. We have also developed an efficient route to
market by controlling distribution in a number of our key markets and developing
a nationwide network of third-party distributors. We believe that our focus on
the premium beverage market creates significant opportunities for continued
growth in our core products as well as through new product development and
geographic expansion.
Our management team has substantial experience in the premium beverage and
carbonated soft drink business and a proven operating record relating to
manufacturing, operations, sales, distribution and financial management. Michael
Weinstein, our Chief Executive Officer, was named Beverage Industry's 1999
Executive of the Year, and Mr. Weinstein and Kenneth Gilbert, our Senior Vice
President, Marketing, were named Brand Week's 1999 Marketers of the Year.
PREMIUM BEVERAGES (SNAPPLE, MISTIC AND STEWART'S)
We are a leader in the U.S. wholesale premium beverage market, which we
estimate is approximately a $3.0 billion market. Through the first quarter of
2000, our premium beverages have achieved ten consecutive quarters of case
volume growth compared to the prior year's quarter. Premium beverages contain
high quality ingredients, use innovative packaging and are often sold in single
serving packages primarily through convenience stores and other small retail
outlets. Premium beverage products typically command higher prices and margins
than non-premium beverages such as carbonated soft drinks and bottled water.
Snapple: Snapple Beverage Corp. markets and distributes a wide variety of
premium beverages, including all-natural ready-to-drink teas, fruit drinks
and juices under the Snapple, Snapple Elements, WhipperSnapple and Snapple
Farms brand names. According to A.C. Nielsen data, in 1999 Snapple had the
leading share (28%) of U.S. premium beverage sales volume in convenience
stores, grocery stores and mass merchandisers, compared to 10% for the next
highest brand. Snapple's case sales increased approximately 10% in the
first quarter 2000 compared to the first quarter 1999, 7.3% in 1999
compared to 1998 and 8.4% in 1998 compared to 1997. Since acquiring Snapple
in May 1997, we have strengthened our distributor relationships, improved
promotional initiatives and significantly increased new product
introductions and packaging innovations.
3
<PAGE>
Mistic: Mistic Brands, Inc. markets and distributes a wide variety of
premium beverages, including fruit drinks, ready-to-drink teas, juices and
flavored seltzers under the Mistic, Mistic Fruit Blast and Mistic Zotics
brand names. In general, Mistic complements Snapple by appealing to
consumers who prefer a sweeter product with stronger fruit flavors. Since
Triarc acquired Mistic in August 1995, Mistic has introduced more than 35
new flavors, a line of fruit juices, various new bottle sizes and shapes
and numerous new package designs.
Stewart's: Stewart's Beverages, Inc., the exclusive soft drink licensee of
Stewart's brand beverages, markets and distributes Stewart's brand premium
soft drinks, including Root Beer, Orange N'Cream, Diet Root Beer and the
new 'S' line of diet premium soft drinks. Through the first quarter of
2000, Stewart's has experienced 30 consecutive quarters of double-digit
percentage case sales increases compared to the prior year's comparable
quarter.
Our premium beverage growth strategy is to continue to:
increase consumer awareness and strengthen brand imagery of both core and
new products through innovative marketing and advertising and unique
packaging,
expand and improve distribution,
control production and logistics costs through favorable supply and freight
arrangements and other cost savings initiatives,
minimize capital expenditures through the use of third-party co-packers and
the continued use of independent distributors, and
pursue acquisitions of additional beverage brands and selective
acquisitions of additional distributors.
SOFT DRINK CONCENTRATES (ROYAL CROWN)
Through Royal Crown Company, Inc., we participate in the approximately $58
billion domestic retail carbonated soft drink market. Royal Crown produces and
sells concentrates used in the production of carbonated soft drinks. Royal Crown
is the exclusive supplier of cola concentrate and a primary supplier of other
flavor concentrates to Cott Corporation for retailer branded products. Based on
public disclosures, Cott is a leading worldwide supplier of premium quality
retailer brand carbonated soft drinks. We also sell these concentrates to
independent, licensed bottlers who manufacture and distribute finished beverage
products domestically and internationally. Our branded products include:
RC Cola, Diet RC Cola, Cherry RC Cola, RC Edge, Diet Rite Cola, Diet Rite
flavors, Nehi, Upper 10 and Kick. RC Cola is the largest national brand cola
available to bottlers who do not bottle either Coca-Cola or Pepsi Cola branded
soft drinks.
Our soft drink concentrate growth strategy is to continue to:
enhance Royal Crown's strategic relationship with Cott by assisting in the
development of new products,
focus marketing resources in markets where Royal Crown's market share is
strongest and on targeted promotional relationships, including those
involving Little League Baseball, the World Wrestling Federation and the
Sears Craftsman Truck Series of NASCAR, and
expand Royal Crown's international business.
SEPARATION FROM TRIARC
Snapple Beverage Group, Inc. is currently 99.9% indirectly owned by Triarc.
After the completion of the offering, Triarc will indirectly own approximately
% of the outstanding shares of our common stock, or % if the underwriters
fully exercise their option to purchase additional shares. In addition, we have
issued options to purchase an additional shares of our common stock. On
a fully diluted basis, Triarc will indirectly own approximately % of the
shares of our common stock after the offering, or % if the underwriters fully
exercise their option to purchase additional shares.
It is Triarc's current intention, following the completion of the offering,
to effect a tax-free separation of its remaining interest in our company.
Triarc's board of directors has authorized Triarc's officers to pursue a
4
<PAGE>
separation following the completion of the offering conditioned on, among other
things, market conditions, the consent of the holders of Triarc's outstanding
debentures or the redemption of the debentures, to be financed on terms
satisfactory to Triarc, and receipt of a favorable ruling from the Internal
Revenue Service or other assurance acceptable to Triarc that a separation will
be tax-free to Triarc and its stockholders. We cannot assure you that Triarc
will be able to satisfy all those conditions. In addition, Triarc will not be
obligated to complete a separation and will, in its sole discretion, determine
if and when a separation will occur, its structure and all of its terms. Please
refer to the section of this prospectus entitled 'Separation from Triarc.'
If Triarc does not complete a separation, it will continue to control us.
Please refer to the sections of this prospectus entitled 'Risk Factors -- Risks
Relating to Our Relationship with Triarc -- Triarc's ownership of our common
stock may have adverse consequences to you,' ' -- We may face potential
conflicts of interest with Triarc that may be adverse to our business' and
'Relationship With Triarc and Related Party Transactions.'
After the offering is completed, Triarc will continue to provide some
administrative services to us in a manner generally consistent with past
practices. We have entered into intercompany agreements with Triarc relating to
these services and other matters, including a tax sharing agreement and a
management services agreement, and plan to enter into an initial public offering
and separation agreement, a release and indemnification agreement and a
registration rights agreement before the offering is completed. Please refer to
the sections of this prospectus entitled 'Risk Factors -- Risks Relating to Our
Relationship with Triarc -- Agreements and arrangements that we have or will
have with Triarc are not subject to arm's-length negotiations,' ' -- Triarc's
control of our tax matters could result in additional liabilities to us' and
'Relationship With Triarc and Related Party Transactions.'
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered......................... shares
Common stock to be outstanding after the
offering................................... shares
Over-allotment option........................ shares
Use of Proceeds.............................. We expect to use the net proceeds of the offering,
together with the cash received from a financing of the
restaurant franchising business, our cash on hand and
borrowings under a new credit facility, to repay
indebtedness under our existing credit facility and to pay
fees and expenses related to the offering and the related
transactions. The closing of those other transactions is a
condition to the closing of the offering. Please refer to
the section of this prospectus entitled 'Use of Proceeds.'
Dividend Policy.............................. We do not plan to pay cash dividends on our common stock
in the foreseeable future. In addition, our debt
instruments restrict the payment of cash dividends. Please
refer to the section in this prospectus entitled 'Dividend
Policy.'
Proposed New York Stock Exchange trading
symbol..................................... 'SNP'
</TABLE>
-------------------
Unless we specifically state otherwise, information in this prospectus about
the number of shares of our outstanding common stock:
reflects a to 1 stock split of our outstanding common stock to occur
prior to the closing of the offering,
does not reflect the sale of up to shares of common stock which the
underwriters have the option to purchase from us to cover over-allotments,
and
does not include shares of common stock that are issuable upon the
exercise of outstanding stock options.
6
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table presents summary financial data, which are derived from
the historical financial statements contained elsewhere in this prospectus. You
should read the information contained below in conjunction with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations,' as
well as the historical financial statements and the notes thereto included
elsewhere in this prospectus.
You should be aware that our results of operations and financial condition
will be significantly affected by the offering and the restructuring and other
related transactions to occur in connection with the offering. You should read
our unaudited pro forma condensed consolidated financial information included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
-------------------------------------- -----------------------
DECEMBER 28, JANUARY 3, JANUARY 2, APRIL 4, APRIL 2,
1997 1999 2000 1999 2000
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Net sales.................................. $ 629,621 $735,436 $ 770,943 $ 159,888 $ 170,345
Royalties, franchise fees and other
revenues................................. 66,531 79,600 83,029 18,303 19,673
--------- -------- --------- --------- ---------
Total revenues................................. 696,152 815,036 853,972 178,191 190,018
Cost of sales, excluding depreciation and
amortization related to sales................ 331,391 387,994 407,708 82,140 89,273
Depreciation and amortization related to
sales........................................ 1,032 1,672 2,102 449 499
--------- -------- --------- --------- ---------
Gross profit................................... 363,729 425,370 444,162 95,602 100,246
Advertising, selling and distribution
expenses..................................... 183,221 197,877 201,451 47,756 46,372
General and administrative expenses............ 83,546 91,165 92,909 22,283 24,724
Depreciation and amortization, excluding
depreciation and amortization related to
sales and amortization of deferred financing
costs........................................ 24,212 31,136 29,958 7,403 7,824
Other operating expenses....................... 40,878 -- 2,338 2,250 204
--------- -------- --------- --------- ---------
Operating profit............................... 31,872 105,192 117,506 15,910 21,122
Interest expense............................... (58,019) (60,235) (76,605) (16,701) (20,733)
Gain (loss) on sale of businesses, net......... (3,513) 5,016 (533) 85 96
Other income, net.............................. 5,532 5,298 6,782 3,156 966
--------- -------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary charges........................ (24,128) 55,271 47,150 2,450 1,451
Benefit from (provision for) income taxes...... 5,142 (25,284) (21,672) (1,213) (709)
--------- -------- --------- --------- ---------
Income (loss) before extraordinary charges..... (18,986) 29,987 25,478 1,237 742
Extraordinary charges.......................... (2,954) -- (11,772) (11,772) --
--------- -------- --------- --------- ---------
Net income (loss)(1)........................... $ (21,940) $ 29,987 $ 13,706 $ (10,535) $ 742
--------- -------- --------- --------- ---------
--------- -------- --------- --------- ---------
Cash dividends................................. $ -- $(23,556) $(204,746) $(204,746) $ --
OTHER DATA:
EBITDA(2)...................................... $ 57,116 $138,000 $ 149,566 $ 23,762 $ 29,445
Net cash provided by (used in) operating
activities................................... 35,440 59,104 57,644 (29,608) (25,540)
Net cash provided by (used in) investing
activities................................... (305,629) 15,771 (43,328) (18,775) (7,556)
Net cash provided by (used in) financing
activities................................... 296,861 (36,325) (26,935) (18,037) (2,915)
Capital expenditures........................... 4,204 11,107 8,525 1,545 7,371
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets................................... $ 853,961 $790,970 $ 828,215 $ 821,303
Long-term debt................................. 564,114 560,977 736,866 735,652
Redeemable preferred stock..................... 79,604 87,587 -- --
Member's deficit............................... (42,860) (44,721) (173,885) (171,549)
</TABLE>
(footnotes on next page)
7
<PAGE>
(footnotes from previous page)
(1) As a result of the proposed restructuring transactions, the historical
consolidated financial statements of Triarc Consumer Products Group are not
indicative of the financial position and results of operations of the
ongoing entity, Snapple Beverage Group, as restructured. As such, the
historical income (loss) per share of Triarc Consumer Products Group is not
presented since that data is not considered relevant.
(2) EBITDA is presented in order to allow for greater comparability between
periods as well as an indication of results on an ongoing basis. We
calculate EBITDA as operating profit (loss) plus depreciation and
amortization (excluding amortization of deferred financing costs). Because
all companies do not calculate EBITDA or similarly titled financial measures
in the same manner, those disclosures may not be comparable with EBITDA as
calculated by us. You should not think of EBITDA as an alternative to net
income or loss (as an indicator of operating performance) or as an
alternative to cash flow (as a measure of liquidity or ability to service
debt obligations) and EBITDA is not a measure of performance or financial
condition under generally accepted accounting principles. However, EBITDA
provides additional information for evaluating our ability to meet our
obligations. Cash flows in accordance with generally accepted accounting
principles consist of cash flows from (1) operating, (2) investing and
(3) financing activities. Cash flows from operating activities reflect net
income or loss (including charges for interest and income taxes not
reflected in EBITDA) adjusted for (1) all non-cash charges or credits
(including, but not limited to, depreciation and amortization) and
(2) changes in operating assets and liabilities (not reflected in EBITDA).
Further, cash flows from investing and financing activities are not included
in EBITDA. The historical cash flows of Triarc Consumer Products Group are
presented in the table above.
8
<PAGE>
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table presents unaudited summary pro forma financial data,
which are derived from the historical financial statements appearing elsewhere
in this prospectus and gives effect to the effective distribution of our
restaurant franchising business to Triarc. The pro forma data for the year ended
January 2, 2000 and the three months ended April 2, 2000 also give effect to the
other transactions described in 'Unaudited Pro Forma Condensed Consolidated
Financial Statements' contained elsewhere in this prospectus, including the
offering and the related use of proceeds. In addition, the pro forma data for
the year ended January 2, 2000 reflect refinancing transactions that occurred in
February and March 1999. You should read the information contained below in
conjunction with 'The Restructuring,' 'Unaudited Pro Forma Condensed
Consolidated Financial Statements,' and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations,' as well as the historical
financial statements and the notes thereto included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------- THREE MONTHS
DECEMBER 28, JANUARY 3, JANUARY 2, ENDED
1997 1999 2000 APRIL 2, 2000
---- ---- ---- -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Net sales..................................... $555,426 $735,436 $772,617 $170,345
Royalties, franchise fees and other
revenues.................................... 297 977 1,243 280
-------- -------- -------- --------
Total revenues.................................... 555,723 736,413 773,860 170,625
Cost of sales, excluding depreciation and
amortization related to sales................... 272,169 387,994 408,342 89,273
Depreciation and amortization related to
sales(1)........................................ 1,032 1,672 2,102 499
-------- -------- -------- --------
Gross profit...................................... 282,522 346,747 363,416 80,853
Advertising, selling and distribution expenses.... 174,172 196,653 201,822 46,284
General and administrative expenses............... 48,185 56,946 60,386 15,626
Depreciation and amortization, excluding
depreciation and amortization related to sales
and amortization of deferred financing costs.... 21,544 28,633 28,143 7,285
Other operating expenses.......................... 35,281 -- 2,641 204
-------- -------- -------- --------
Operating profit.................................. 3,340 64,515 70,424 11,454
Interest expense.................................. (53,696) (60,064) (51,259) (12,536)
Gain (loss) on sale of businesses, net............ 576 5,016 (533) 96
Other income, net................................. 3,868 3,566 2,846 435
-------- -------- -------- --------
Income (loss) from continuing operations before
income taxes.................................... (45,912) 13,033 21,478 (551)
Benefit from (provision for) income taxes......... 14,201 (8,247) (15,039) 322
-------- -------- -------- --------
Income (loss) from continuing operations.......... $(31,711) $ 4,786 $ 6,439 $ (229)
-------- -------- -------- --------
-------- -------- -------- --------
Income (loss) from continuing operations per
share...........................................
Weighted average shares outstanding...............
OTHER DATA:
EBITDA(2)......................................... $ 25,916 $ 94,820 $100,669 $ 19,238
Capital expenditures.............................. 3,241 10,697 8,249 7,337
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets...................................... $756,019
Long-term debt.................................... 474,988
Stockholders' equity.............................. 75,550
</TABLE>
---------
(1) Pro forma depreciation and amortization related to sales was taken from the
historical consolidated statements of operations appearing elsewhere in this
prospectus since there are no pro forma adjustments which affected
historical depreciation and amortization related to sales.
(2) You should refer to Note 2 to 'Summary Historical Consolidated Financial
Data' for a discussion of EBITDA.
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RISK FACTORS
In addition to the other information in this prospectus, you should
carefully consider the risks described below before making an investment
decision.
Our business, financial condition or results of operations could be
materially adversely affected by these risks. The trading price of our common
stock could decline due to any of these risks, and you may lose all or part of
your investment.
RISKS RELATING TO OUR BUSINESS
WE HAVE SUBSTANTIAL DEBT WHICH MAY ADVERSELY AFFECT US BY LIMITING FUTURE
SOURCES OF FINANCING AND SUBJECTING US TO ADDITIONAL RISKS
We currently have, and after the restructuring and offering, will continue
to have, a significant amount of debt. Assuming that the offering, the
restructuring and the related transactions had been completed at April 2, 2000,
our total indebtedness would have been $494.7 million and our stockholders'
equity would have been $75.6 million on that date.
We may also incur additional debt, except as prohibited by limitations
contained in our credit facility, the indenture governing our senior
subordinated notes and instruments governing our other debt. If new debt is
added to our current debt levels, the related risks that we face could increase.
The consequences of our significant amount of debt include:
we may be unable to obtain additional financing for working capital,
capital expenditures, acquisitions and general corporate purposes,
a significant portion of our cash flow from operations must be
dedicated to the repayment of indebtedness, which reduces the amount of
cash we have available for other purposes,
we may be disadvantaged as compared to our competitors because of the
significant amount of debt we owe,
our ability to adjust to changing market conditions and our ability to
withstand competition may be hampered by the amount of debt we owe; we
may also be more vulnerable in a volatile market, and
we will be exposed to interest rate fluctuations because most of our
borrowings under our credit facility are at variable rates of interest.
RESTRICTIONS IMPOSED BY OUR NEW CREDIT FACILITY AND INDENTURE MAY LIMIT OUR
ABILITY TO EXECUTE OUR BUSINESS STRATEGY
Our new credit facility will contain financial covenants that require us to
maintain specified financial ratios and our new credit facility and the
indenture governing our senior subordinated notes will restrict our ability to:
incur debt,
pay dividends,
make investments,
sell assets,
enter into some fundamental transactions, including mergers and
consolidations, and
create or permit liens.
If we are unable to generate sufficient cash flow or otherwise obtain the
funds necessary to make required payments of principal and interest under, or
are unable to comply with covenants of, our new credit facility or the
indenture, we would be in default under the terms of our new credit facility and
the indenture. This would permit the lenders under our new credit facility and
the holders of our senior subordinated notes to accelerate the maturity of the
indebtedness owed to them. Please refer to the section of this prospectus
entitled 'Description of Indebtedness.'
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RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS FROM OUR SUBSIDIARIES COULD
AFFECT OUR ABILITY TO PAY DIVIDENDS AND OTHER DISTRIBUTIONS
Because we are a holding company with no direct operations and no
significant assets other than the stock of our subsidiaries, we will be
dependent on the cash flows of our subsidiaries to meet our debt obligations and
pay dividends and other distributions. Restrictions on dividends and other
distributions from our subsidiaries could limit amounts payable to us to pay our
stockholders and to meet our obligations under our indebtedness. You should be
aware of the following:
our new credit facility will prohibit the payment of dividends to us by
our subsidiaries except to pay interest on our senior subordinated
notes, pay operating expenses and, to a limited extent, to permit us to
repurchase our capital stock,
additional indebtedness incurred by our subsidiaries may restrict the
ability of our subsidiaries to pay dividends or make other similar
payments to us, and
under applicable state law, our subsidiaries may be limited in amounts
that they are permitted to pay as dividends on their capital stock.
WE MAY NOT BE ABLE TO CONTINUE TO IMPROVE SNAPPLE'S OPERATIONS WHICH, BECAUSE OF
THE IMPORTANCE OF SNAPPLE TO OUR SUCCESS, MAY ADVERSELY AFFECT OUR FINANCIAL
CONDITION
A significant part of our success depends on Snapple's financial
performance, which has improved since we acquired Snapple from The Quaker Oats
Company in May 1997. Snapple's performance deteriorated significantly after
Quaker Oats acquired it in December 1994 for approximately $1.7 billion. Case
sales declined from 72.0 million cases in 1994 to 49.6 million cases for the
twelve months ended March 31, 1997, and revenues declined from $675.8 million in
1994 to $550.8 million in 1996. Snapple's case sales increased by approximately
8.4% in 1998 compared to 1997, 7.3% in 1999 compared to 1998 and 10% in the
first quarter 2000 compared to the first quarter 1999. We cannot assure you that
our efforts to continue to improve Snapple's operations will be successful.
WE MAY NOT BE ABLE TO DEVELOP SUCCESSFUL NEW BEVERAGE PRODUCTS WHICH ARE
IMPORTANT TO OUR GROWTH
An important part of our strategy is to increase our sales through the
development of new beverage products. We cannot assure you that we will be able
to continue to develop, market and distribute future beverage products that will
enjoy market acceptance. The failure to continue to develop new beverage
products that gain market acceptance could have an adverse impact on our growth
and materially adversely affect our financial condition. We may have higher
obsolescent product expense if new products fail to perform as expected due to
the need to write off excess inventory of the new products.
Our results of operations may be impacted in various ways by the
introduction of new products, even if they are successful, including the
following:
sales of new products could cannibalize sales of existing products,
we may incur higher cost of goods sold and selling, general and
administrative expenses in the periods when we introduce new products
due to increased costs associated with the introduction and marketing
of new products, most of which are expensed as incurred, and
when we introduce new platforms and bottle sizes, we may experience
increased freight and logistics costs as our co-packers adjust their
facilities for the new products.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY BECAUSE OF THE
SEASONALITY OF OUR BUSINESS
Because our highest revenues occur during the spring and summer, the second
and third quarters of each fiscal year reflect the highest revenues. Our EBITDA
and operating profit are also highest during the second and third fiscal
quarters and lowest in the first fiscal quarter. These seasonality issues may
cause our financial performance to fluctuate. In addition, beverage sales can be
adversely affected by
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<PAGE>
sustained periods of bad weather. Please refer to the section of this prospectus
entitled 'Business -- Seasonality.'
OUR RELIANCE ON CO-PACKERS MAY ADVERSELY AFFECT OUR REVENUES
All of our premium beverages are currently produced for us by co-packers
throughout the United States. While this arrangement permits us to avoid
significant capital expenditures, it exposes us to various risks, including:
our three largest co-packers accounted for approximately 54% of our
total case production in 1999; if any of those co-packers were to
terminate or fail to renew our contracts, which expire in December
2005, April 2001 and December 2001, or have difficulties in producing
beverages for us, our ability to produce premium beverages would be
adversely affected until we were able to make alternative arrangements,
and
our business reputation would be adversely affected if any of the
co-packers were to produce inferior quality products.
Please refer to the section of this prospectus entitled 'Business -- Business
Segments -- Premium Beverages -- Co-packing Arrangements.'
ROYAL CROWN'S RELIANCE ON COTT CORPORATION AND OTHER CUSTOMERS AND BOTTLERS MAY
ADVERSELY AFFECT ROYAL CROWN'S REVENUES
Private label sales
Royal Crown relies to a significant extent upon sales of beverage
concentrates to Cott Corporation under a concentrate supply agreement, which
continues until 2015, subject to additional six-year extensions. Royal Crown's
revenues from sales to Cott were approximately 15.8% of Royal Crown's total
revenues in 1997, 17.2% in 1998 and 22.3% in 1999. If Cott's business declines,
or if Royal Crown's supply agreement with Cott is terminated, Royal Crown would
have difficulty replacing these sales. As a result, Royal Crown's sales could be
adversely affected. Please refer to the section of this prospectus entitled
'Business -- Business Segments -- Soft Drink Concentrates -- Private Label.'
Bottlers
Royal Crown relies upon its relationships with key bottlers. For example:
Dr Pepper/Seven Up Bottling Group accounted for approximately 24.5% of
Royal Crown's domestic volume of concentrate for branded products
during 1999; RC Chicago Bottling Group accounted for approximately
22.3% of such volume during 1999, and
Royal Crown's ten largest bottler groups accounted in the aggregate for
approximately 80.5% of Royal Crown's domestic volume of concentrate for
branded products during 1999.
Royal Crown's sales would decline from their present levels if any of these
major bottlers stopped selling RC Cola brand products unless and until Royal
Crown established a comparable relationship with one or more new bottlers. We
cannot assure you that new bottlers would provide Royal Crown with the level of
sales that these bottlers have. Please refer to the section of this prospectus
entitled 'Business -- Business Segments -- Soft Drink Concentrates -- Royal
Crown Domestic Bottler Network.'
OUR BUSINESS DEPENDS ON A LIMITED NUMBER OF KEY PERSONNEL, THE LOSS OF WHOM
COULD ADVERSELY AFFECT US
Some of our senior executives are important to our success because they have
been instrumental in identifying business acquisitions and operating our
business. Although we feel that there is a significant pool of talented
personnel in the consumer products and beverage industries, if these members of
our senior management team become unable or unwilling to continue in their
present positions, our business and financial results could be materially
adversely affected. Please refer to the section of this prospectus entitled
'Management -- Executive Officers and Directors.'
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<PAGE>
PRICE FLUCTUATIONS IN, AND UNAVAILABILITY OF, RAW MATERIALS THAT WE USE COULD
ADVERSELY AFFECT US
We do not enter into hedging arrangements for raw materials. Although the
prices of raw materials that we use have not increased significantly in recent
years, our results of operations would be adversely affected if the price of
these raw materials were to rise and we were unable to pass these costs on to
our customers.
In addition, one of our glass suppliers has the right to supply up to 75% of
our requirements for some types of packaging, and another supplier has the right
to supply up to 95% of some of Stewart's packaging requirements. As a result of
consolidation in the glass industry, it is uncertain whether all of the glass
production of our largest supplier could be replaced by alternate sources.
Please refer to the sections of this prospectus entitled 'Business -- Business
Segments -- Premium Beverages -- Raw Materials' and 'Business -- Business
Segments -- Soft Drink Concentrates -- Raw Materials.'
WE MAY INCUR LOSSES AS A RESULT OF PRODUCT LIABILITY CLAIMS THAT MAY BE BROUGHT
AGAINST US OR AS A RESULT OF ANY PRODUCT RECALLS WE HAVE TO MAKE
We may be liable if the consumption of any of our products causes injury,
illness or death. We also may be required to withdraw or recall some of our
products if they become contaminated or are damaged or mislabeled. Although we
have insurance to cover some of these events, a significant product liability
judgment against us or a widespread product withdrawal or recall could have a
material adverse effect on our business and financial condition.
COMPETITION FROM OTHER BEVERAGE COMPANIES THAT HAVE GREATER RESOURCES THAN WE DO
COULD ADVERSELY AFFECT US
The premium beverage and carbonated soft drink industries are highly
competitive. Many of our competitors have substantially greater financial,
marketing, personnel and other resources than we do. Please refer to the section
of this prospectus entitled 'Business -- Competition.'
WE HAVE NEVER OPERATED AS A STAND-ALONE COMPANY AND MAY NOT BE ABLE TO IMPLEMENT
OUR STRATEGY SUCCESSFULLY WITHOUT THE SUPPORT OF TRIARC
For most of our existence, we have been a wholly owned subsidiary of Triarc
and its subsidiaries and we have never operated as a stand-alone company.
Following the offering, we will not be able to rely upon Triarc for financial
support to the extent we have in the past, which includes working capital
advances that Triarc has provided to Royal Crown to finance its operations and
growth. We may not be able to implement our strategy successfully without the
support of Triarc.
THE FINANCIAL INFORMATION IN THIS PROSPECTUS MAY HAVE LIMITED RELEVANCE TO YOU
The financial information that is included in this prospectus does not
reflect what our actual results of operations, financial position and cash flows
would have been had we existed in our proposed restructured form during the
periods presented, nor is it necessarily indicative of our results of
operations, financial position and cash flows in the future. In particular, our
historical financial statements include our restaurant franchising business, in
which we will no longer have any ownership interest after the offering. The
restaurant franchising business was responsible for 39.9% of our operating
profit and 32.8% of our EBITDA in the year ended January 2, 2000. Please refer
to the sections of this prospectus entitled 'Unaudited Pro Forma Condensed
Consolidated Financial Statements' and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Presentation of Financial
Information.'
RISKS RELATING TO OUR RELATIONSHIP WITH TRIARC
TRIARC'S OWNERSHIP OF OUR COMMON STOCK MAY HAVE ADVERSE CONSEQUENCES TO YOU
After the offering is completed, Triarc will indirectly own approximately
% of our outstanding common stock, or approximately % if the underwriters
fully exercise their option to purchase
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<PAGE>
additional shares. As of May 31, 2000, Messrs. Peltz and May, our Chairman and
Vice Chairman, and directors of our company and the Chief Executive Officer and
the Chief Operating Officer and directors of Triarc, beneficially owned an
aggregate of approximately 37.4% of Triarc's voting common stock. In connection
with this offering and the restructuring, we will grant Triarc the right to
purchase additional shares of our common stock that will allow Triarc to
maintain its then current percentage ownership interest in our common stock.
Triarc may also require us to repurchase shares in the open market in the event
we issue stock pursuant to the exercise of stock options or in connection with
acquisitions where we issue our stock as consideration in order for Triarc
to maintain its then current ownership percentage, subject to any restrictions
contained in our debt agreements. See 'Relationship with Triarc and Related
Party Transactions -- Initial Public Offering and Separation Agreement.' You
should consider the following risks of this ownership:
Triarc can exert control over us and as a result our other stockholders will
have little or no influence over stockholder decisions
Triarc will have the ability to elect all of the members of our board of
directors and control our management and affairs, including decisions about
acquisitions and dispositions, changes to our capital structure, such as
borrowings and issuances of common stock or other securities, and the
declaration and payment of any dividends on our common stock. In addition,
Triarc will be able to decide any matter submitted to a vote of our stockholders
for approval and to cause or prevent a change in control of our company. Triarc
may have interests that differ from yours.
Currently, Messrs. Peltz and May have significant influence over the
election of directors to the board of directors of Triarc. As a result, they may
be able to significantly influence the actions of Triarc and therefore the
outcome of corporate actions requiring our stockholders' approval.
Triarc may prevent us from taking actions that benefit you in order to preserve
its ability to consolidate our company for tax purposes and complete a tax-free
separation
Triarc must beneficially own at least 80% of the total voting power and
value of our outstanding capital stock to continue to include us in its
consolidated group for federal income tax purposes. In addition, under current
law Triarc must beneficially own at least 80% of our total voting power and 80%
of each class of our nonvoting capital stock in order to be able to effect a
separation of Snapple Beverage Group from Triarc in a manner that is tax-free
for Triarc and Triarc's stockholders under the Internal Revenue Code. After the
offering is completed and assuming the exercise of all currently outstanding
options to purchase our stock, Triarc will indirectly own approximately % of
our outstanding common stock, or approximately % if the underwriters fully
exercise their option to purchase additional shares. Because Triarc may seek to
maintain its beneficial ownership percentage of our stock for tax planning
purposes, and because Triarc can, in its sole discretion, determine if and when
a separation will occur, its structure and all of its terms, Triarc may prevent
us from raising equity capital in the future or from issuing common stock or
other equity securities in connection with acquisitions that might otherwise be
beneficial to us and may restrict us from issuing additional options to
incentivize employees. Under the initial public offering and separation
agreement, subject to compliance with our debt agreements, Triarc will be able
to require us to repurchase our stock in the event we issue stock pursuant to
the exercise of stock options or in connection with acquisitions where we issue
our stock as consideration in order for Triarc to maintain its then current
ownership percentage. This would require us to use cash that we could otherwise
use in our business. Please refer to the section of this prospectus entitled
'Relationship with Triarc and Related Party Transactions.'
In addition, our ability to issue equity securities or make acquisitions for
a period of two years after any tax-free separation will be limited by the terms
of the initial public offering and separation agreement and applicable tax laws.
See 'Relationship with Triarc and Related Party Transactions -- Initial Public
Offering and Separation Agreement.'
Transfers of common stock by Triarc could adversely affect your rights as
minority stockholders and the prevailing price of our common stock
Because Triarc can dispose of all or a portion of its ownership of our
common stock at some future date, it may transfer a controlling interest in us
without allowing you to participate or realize a premium
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<PAGE>
for your shares of common stock. A sale of a controlling interest to a third
party may adversely affect the market price of our common stock and our business
and results of operations because the change in control may result in a change
in management decisions and business policy. In addition, sales or distributions
by Triarc of substantial amounts of common stock in the public market or to its
stockholders could adversely affect prevailing market prices for our common
stock. Please refer to the section of this prospectus entitled 'Relationship
with Triarc and Related Party Transactions.'
OUR ABILITY TO RAISE CAPITAL MAY BE ADVERSELY AFFECTED IF TRIARC DOES NOT
COMPLETE A SEPARATION OF OUR COMPANY
If Triarc fails to complete a separation of our company, we would likely not
realize the capital planning flexibility and other benefits we could expect to
achieve in connection with a separation. Triarc is under no obligation to
complete a separation of its ownership interest in our company and can, in its
sole discretion, determine if and when a separation will occur, its structure
and all of its terms. We therefore cannot assure you as to whether or when a
separation will occur. In addition, Triarc will, prior to February 2003, need
the consent from its debenture holders to effect the separation and will require
the receipt of a favorable ruling from the Internal Revenue Service or other
assurances acceptable to Triarc that the separation will be tax-free to Triarc
and Triarc's stockholders. There can be no assurance that Triarc's debenture
holders will grant such consent, that the Internal Revenue Service will grant
such ruling or that such other assurances will be obtained. For information
about Triarc's possible separation from us, please refer to the section of this
prospectus entitled 'Separation from Triarc.'
In addition, unless a separation occurs, the risks discussed in this section
relating to Triarc's control of our company, the potential business conflicts of
interest between our company and Triarc and the potential conflicts of interest
of our directors who are also directors and/or officers of Triarc will continue
to be relevant to our stockholders.
WE MAY FACE POTENTIAL CONFLICTS OF INTEREST WITH TRIARC THAT MAY BE ADVERSE TO
OUR BUSINESS
Potential conflicts of interest may arise because our Chairman and Vice Chairman
are directors and officers of Triarc
Conflicts of interest may arise between us and Triarc, including potential
conflicts relating to:
the nature and quality of services rendered by Triarc to us,
issuances of common stock,
tax consolidation,
employee benefit matters,
indemnity agreements,
sales or distributions by Triarc of its ownership interest in us, and
Triarc's ability to control our management and affairs.
Currently, our Chairman and Vice Chairman also serve as directors and
officers of Triarc. These directors will consider not only our interests, but
also Triarc's interests. In some instances, these decisions could be adverse for
us while favorable for Triarc. Our certificate of incorporation and agreements
that we will enter into with Triarc will include provisions that:
allow Triarc to pursue corporate opportunities that may belong to us,
other than those relating to the beverage business, and to compete with
us outside the beverage business, and
limit the liability of our directors and officers.
Our certificate of incorporation will also provide that stockholders will be
deemed to have consented to the provision that allows Triarc to enter into
agreements with us and the provision that limits the liability of our directors
and officers, which may therefore restrict a stockholder's ability to challenge
transactions carried out in compliance with these provisions. Triarc's
certificate of incorporation does not include comparable provisions, and our
directors who are also directors and/or officers of Triarc may choose to act in
a way favorable to Triarc but adverse to us. Please refer to the section of this
prospectus entitled 'Description of Capital Stock -- Selected Certificate of
Incorporation
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<PAGE>
and Bylaw Provisions -- Provisions Relating to Conflicts of Interest with
Triarc.' These provisions may eliminate rights that might otherwise have been
available to stockholders under Delaware law.
In addition, some of our directors and officers own Triarc common stock.
Ownership interests of our directors or officers in Triarc's common stock could
also create or appear to create potential conflicts of interest when directors
and officers are faced with decisions that could have different implications for
us and Triarc.
Provisions of our charter limit the liability of our directors
Our certificate of incorporation eliminates the personal monetary liability
of our directors for breaching their fiduciary duty of care, including actions
involving gross negligence, to the fullest extent permitted under Delaware law.
This could protect our directors who take actions that are favorable to Triarc
but adverse to us.
TRIARC'S CONTROL OF OUR TAX MATTERS COULD RESULT IN ADDITIONAL LIABILITIES TO US
Immediately following the offering, Triarc plans to continue to include us
in its consolidated group for federal income tax purposes. This may result in
the following risks:
Triarc controls our tax matters
We have entered into a tax sharing agreement with Triarc that effectively
allows Triarc to control all of our tax decisions. Triarc has the sole authority
to respond to and conduct all tax proceedings, including tax audits relating to
us, file our federal, state and local returns and calculate the amount of our
liability to Triarc under the tax sharing agreement. As a result, Triarc may
choose to contest, compromise or settle any adjustment or deficiency proposed by
the relevant taxing authority in a manner that may be beneficial to Triarc and
detrimental to us. Please refer to the section of this prospectus entitled
'Relationship with Triarc and Related Party Transactions -- Existing Tax Sharing
Agreement.'
We are subject to additional tax and employee retirement liabilities
During the period that we are included in Triarc's consolidated or
controlled group for tax purposes, we will be liable for the federal and
possibly certain state income tax liabilities of Triarc and other members of
Triarc's consolidated or controlled group. Each member of a consolidated group
for federal income tax purposes is jointly and severally liable for the federal
income tax liability of each other member of the consolidated group. The income
tax laws of various states contain similar rules. Consequently, we and Triarc
will both be jointly and severally liable for any tax liability resulting from a
separation. In addition, under the Employee Retirement Income Security Act of
1974 and federal income tax law, each member of the controlled group is jointly
and severally liable for liabilities of specified benefit plans as well as other
specified taxes. Although we will be entitled to be indemnified for certain of
these liabilities, we may be unable to collect on these indemnities. Please
refer to the section of this prospectus entitled 'Relationship with Triarc and
Related Party Transactions -- Initial Public Offering and Separation Agreement.'
AGREEMENTS AND ARRANGEMENTS THAT WE HAVE OR WILL HAVE WITH TRIARC ARE NOT
SUBJECT TO ARM'S-LENGTH NEGOTIATIONS
We have entered into a management services agreement and a tax sharing
agreement with Triarc, relating to corporate services that may be material to
the conduct of our business, and plan to enter into an initial public offering
and separation agreement, a release and indemnification agreement and a
registration rights agreement before the offering is completed. The services
that we will obtain from Triarc include financial, insurance, accounting,
employee benefits, payroll, tax and legal services. Because we have entered into
or will enter into these agreements while being a subsidiary of Triarc, none of
these agreements were or will be the result of arm's-length negotiations. These
agreements may include specific terms and conditions that are different from
terms and conditions that would be
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<PAGE>
contained in similar agreements negotiated with third parties. Please refer to
the section of this prospectus entitled 'Relationship with Triarc and Related
Party Transactions.'
RISKS RELATING TO THE OFFERING
THE PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY AFTER THE OFFERING AND
YOU MAY FIND IT DIFFICULT TO SELL YOUR SHARES AT OR ABOVE THE INITIAL PUBLIC
OFFERING PRICE
We do not know the extent to which investor interest will lead to the
development of a trading market in our common stock or how liquid that market
might be. Before the offering, there has been no public market for the shares.
For these reasons, you may not be able to resell your shares at or above the
initial public offering price. Actions of or announcements by our competitors,
regulatory developments and economic conditions, as well as period-to-period
fluctuations in our financial results, may have significant effects on the price
of our common stock. Please refer to the section of this prospectus entitled
'Underwriters -- Pricing of the Offering.'
ANTI-TAKEOVER PROVISIONS AFFECTING US MAY DISCOURAGE A CHANGE IN CONTROL OF OUR
COMPANY THAT MIGHT OTHERWISE BE BENEFICIAL TO YOU
Provisions of our certificate of incorporation and by-laws, debt instruments
and other agreements and provisions of applicable Delaware law may discourage or
delay a hostile takeover or change of control of us even if it would otherwise
benefit you. These provisions are summarized in detail in the sections of this
prospectus entitled 'Description of Capital Stock -- Selected Certificate of
Incorporation and Bylaw Provisions -- Provisions with Anti-Takeover Effects,'
'Description of Capital Stock -- Preferred Stock' and 'Description of
Indebtedness.'
In addition, we will not be permitted to engage in certain change of control
transactions for a period of two years after a tax-free separation. See
'Relationship with Triarc and Related Party Transactions -- Initial Public
Offering and Separation Agreement.'
WE DO NOT ANTICIPATE PAYING ANY DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE
FUTURE
Our ability to pay dividends on our common stock is limited under the terms
of our indenture and will be limited under our new credit facility. We do not
currently intend to pay any cash dividends on our common stock in the
foreseeable future. Please refer to the sections of this prospectus entitled
'Dividend Policy' and 'Description of Indebtedness.'
SHARES ELIGIBLE FOR PUBLIC SALE IN THE FUTURE COULD ADVERSELY AFFECT THE PRICE
OF COMMON SHARES
Sales of substantial amounts of our common stock in the public market could
adversely affect the prevailing market prices of our common stock. Although many
shares will not be available for sale shortly after the offering because of
contractual and legal restrictions on resale, sales of substantial amounts of
our common stock in the public market after these restrictions end could
adversely affect the prevailing market price and our ability to raise equity
capital in the future.
Immediately after the offering is completed, shares of common stock
will be outstanding, shares if the underwriters fully exercise their
option to purchase additional shares. Of these shares, all of the shares sold in
the offering will be freely transferable without restriction or further
registration under the Securities Act, except for any shares purchased by
persons who are considered our affiliates under Rule 144 under the Securities
Act. The remaining shares of common stock outstanding, including the shares of
common stock held by Triarc and its subsidiaries, will be considered restricted
securities under Rule 144. These shares may be sold in the future without
registration under the Securities Act only as permitted by Rule 144 or another
exemption under the Securities Act. Under a registration rights agreement that
we will enter into, Triarc and RC/Arby's Corporation will have the right to
require us to register any shares of our equity securities owned by them for
sale in accordance with their intended method of disposition. In addition, we
have adopted a stock option plan and initially reserved 150,000 shares of common
stock for issuance under this plan. We also plan to adopt a new stock option
plan and reserve shares of common stock for issuance under this new
stock
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option plan. As of May 31, 2000, options to acquire 146,950 shares of our common
stock were outstanding under our 1997 Stock Option Plan, and options to purchase
500 shares had been exercised. After the offering, we plan to file a
registration statement under the Securities Act covering the shares available
under these stock option plans.
We cannot predict the effect, if any, that future sale of restricted shares,
the availability of these restricted shares for sale, the issuance of shares of
common stock upon the exercise of options, or the perceptions that these sales
or exercises could occur, will have on the market price prevailing from time to
time. Please refer to the section of this prospectus entitled 'Shares Available
for Future Sale.'
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements we have made in this prospectus under the sections
entitled 'Prospectus Summary,' 'Risk Factors,' 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and 'Business'
constitute 'forward-looking statements' within the meaning of the Private
Securities Litigation Reform Act of 1995. The words 'believe', 'anticipate',
'expect', 'intend', 'estimate', 'plan', 'may', 'will', 'should' and other
similar expressions that are predictions of or indicate future events and future
trends identify forward-looking statements. These forward-looking statements are
based on our current expectations and are susceptible to a number of risks,
uncertainties and other factors, and our actual results, performance and
achievements may differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include the factors discussed in the section of the prospectus entitled
'Risk Factors' as well as the following:
success of operating initiatives, including our construction and
operation of a new packing line in one of our facilities,
development and operating costs,
changing trends in customer tastes and demographic patterns,
changes in business strategy or development plans,
ability to successfully integrate any acquired businesses, including
acquired distributors,
general economic, business and political conditions in the countries
and territories in which we operate, 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,
costs and other effects of legal and administrative proceedings,
impact of general economic conditions on consumer spending, and
other risks and uncertainties referred to in this prospectus and in our
other current and periodic filings 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 result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events. In
addition, it is 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.
18
<PAGE>
SEPARATION FROM TRIARC
Snapple Beverage Group, Inc. is currently 99.9% indirectly owned by Triarc.
After the completion of the offering, Triarc will indirectly own approximately
% of the outstanding shares of our common stock, or % if the underwriters
fully exercise their option to purchase additional shares. In addition, we have
issued options to purchase an additional shares of our common stock. On a
fully diluted basis, Triarc will indirectly own approximately % of the shares
of our common stock after the offering, or % if the underwriters fully
exercise their option to purchase additional shares.
It is Triarc's current intention, following the completion of the offering,
to effect a tax-free separation of its remaining interest in our company.
Triarc's board of directors has authorized Triarc's officers to pursue a
separation following the completion of the offering, conditioned on, among other
things, market conditions, the consent of the holders of Triarc's outstanding
debentures or the redemption of the debentures, to be financed on terms
satisfactory to Triarc, and receipt of a favorable ruling from the Internal
Revenue Service or other assurance acceptable to Triarc that a separation will
be tax-free to Triarc and its stockholders. We will enter into an initial public
offering and separation agreement with Triarc in connection with this offering
to address various matters in connection with a possible separation. See
'Relationship with Triarc and Related Party Transactions.' You should be aware
of the following facts and circumstances that could materially limit Triarc's
ability to accomplish a tax-free separation:
Under current tax laws, Triarc will only be permitted to effectuate a
tax-free separation if it owns at least 80% of the voting power of our
capital stock and 80% of each class of nonvoting stock. While Triarc
currently satisfies that test, it might not meet that test after
existing options are exercised or if we issue additional shares in the
future. Under the initial public offering and separation agreement, we
will grant to Triarc a continuing option to purchase additional shares
of our common stock whenever we issue additional shares in the future.
We will also agree that Triarc may require us to repurchase shares of
our stock in the event we issue stock pursuant to the exercise of stock
options or in connection with acquisitions where we issue our stock as
consideration, subject to our continued compliance with our debt
agreements. Triarc may exercise these rights only to the extent
necessary to maintain its then-existing percentage of equity value or
voting power. See 'Relationship with Triarc and Related Party
Transactions -- Initial Public Offering and Separation Agreement.'
Triarc cannot complete a separation without the consent of holders of
Triarc's outstanding debentures prior to February 9, 2003, when the
debentures first become redeemable by Triarc. Triarc has not initiated
any discussions with the debenture holders and has not determined
whether or when it will do so and cannot provide any assurances as to
whether it will seek to or be able to obtain their consent to a
separation on terms acceptable to Triarc. Commencing February 9, 2003,
Triarc has the right to redeem the debentures, but any decision to
redeem the debentures will be made by Triarc in its sole discretion,
and Triarc cannot provide any assurances as to whether it will be able
at such time to finance the redemption on terms satisfactory to Triarc.
Triarc currently intends to complete a separation only if it receives a
favorable ruling from the Internal Revenue Service or other assurances
acceptable to Triarc that the separation will be tax-free to Triarc and
its stockholders. Triarc has not yet prepared a request for a tax
ruling and it cannot provide any assurance as to whether it will be
able to satisfy the requirements necessary to obtain a favorable ruling
or obtain such other assurances.
We cannot assure you that Triarc will be able to satisfy the various
requirements to complete a tax-free separation or that other issues will not
arise which will jeopardize Triarc's ability to accomplish a tax-free
separation. Even if Triarc is able to do so, it will not be obligated to
complete a separation and will, in its sole discretion, determine if and when a
separation will occur, its structure and all of its terms. Triarc has indicated
that completion of a separation will be subject to market conditions, the
completion of the offering, the receipt of a favorable tax ruling from the
Internal Revenue Service or other assurance acceptable to Triarc that the
separation will be tax-free to Triarc and its stockholders, and the absence of
other circumstances that cause Triarc to conclude that a separation is not in
the best interests of its stockholders. Thus, we cannot assure you that Triarc
will effect a separation.
19
<PAGE>
If Triarc does not complete a separation, Triarc may choose to retain all or
part of its ownership of our company. As long as it beneficially owns a majority
of our outstanding common stock, Triarc will have the ability to elect all of
the members of our board of directors and be able to control our management and
affairs. Please refer to the section of this prospectus entitled 'Risk
Factors -- Risks Relating to Our Relationship With Triarc.'
We have agreed to cooperate with Triarc in all respects to complete a
separation if it desires to complete one because we believe that a complete
separation from Triarc will enhance our ability to pursue our business strategy.
For a discussion of the risks associated with completing or not completing a
separation from Triarc, please refer to the section of this prospectus entitled
'Risk Factors -- Risks Relating to Our Relationship with Triarc -- Triarc's
ownership of our common stock may have adverse consequences to you,' and
' -- Our ability to raise capital may be adversely affected if Triarc does not
complete a separation of our company.'
20
<PAGE>
THE RESTRUCTURING
Prior to the closing of the offering,
Snapple Beverage Group is a 99.9% owned subsidiary of Triarc Consumer
Products Group, which in turn is a wholly-owned subsidiary of Triarc;
the remaining outstanding shares of common stock of Snapple Beverage
Group were issued to former employees in connection with the exercise
of stock options,
Triarc Consumer Products Group owns all of the outstanding shares of
preferred stock of Snapple Beverage Group,
Snapple Beverage Group owns all of the outstanding capital stock of
Snapple, Mistic and Stewart's,
Triarc Consumer Products Group owns all of the capital stock of
RC/Arby's, and
RC/Arby's owns all of the capital stock of Royal Crown and Arby's, a
restaurant franchisor.
The following chart summarizes our organizational structure, excluding
immaterial subsidiaries, immediately prior to the offering and the related
restructuring:
[FLOW CHART]
In conjunction with the offering, the following restructuring will occur:
Triarc Consumer Products Group will make a capital contribution to
Snapple Beverage Group of all of the preferred stock of Snapple
Beverage Group, including dividend arrearages, for no consideration,
Arby's will borrow $185 million and distribute approximately $178
million, the expected net amount of the borrowing after fees and
expenses, and all of its available cash to RC/Arby's,
RC/Arby's will form a limited liability company with RC/Arby's as the
sole member, and will transfer certain assets to the limited liability
company as a capital contribution, including: (1) the cash received
from Arby's and (2) the capital stock of Royal Crown,
Triarc Consumer Products Group will merge into the limited liability
company with the limited liability company as the survivor, Triarc will
receive stock in RC/Arby's as the merger consideration and will not
receive a membership interest in the limited liability company and
21
<PAGE>
the stock in RC/Arby's that was owned by Triarc Consumer Products
Group will be canceled, and
the limited liability company will merge into Snapple Beverage Group
with Snapple Beverage Group as the survivor, and RC/Arby's will receive
all of the common stock in our company, as consideration for its
interest in the limited liability company.
After the restructuring occurs:
Triarc will own all the outstanding capital stock of RC/Arby's, which
will own (1) the companies engaged in Triarc's restaurant franchising
business and (2) all of our outstanding capital stock, except for
shares issued in the offering and shares issued or to be issued upon
exercise of outstanding employee stock options,
we will own all of the outstanding capital stock of Snapple, Mistic,
Stewart's and Royal Crown, and
we will repay all amounts due under, and terminate, our existing credit
facility with proceeds from the offering, the cash received from
RC/Arby's, our available cash, and borrowings under a new credit
facility that will not include RC/Arby's or Arby's as borrowers or
guarantors.
The following chart summarizes our organizational structure, excluding
immaterial subsidiaries, immediately after the closing of the offering and the
related restructuring:
[FLOW CHART]
Our historical financial statements included in this prospectus include the
financial condition and results of operations of the restaurant business for all
periods. As a result of the restructuring, we will no longer have any ownership
interest or be involved in the restaurant business. We have included pro forma
financial information in this prospectus that reflects our historical financial
information excluding the restaurant business for all periods. Following the
completion of the restructuring transactions, the restaurant business will be
reported as a discontinued operation in our historical consolidated financial
statements.
22
<PAGE>
USE OF PROCEEDS
The net proceeds we will receive from the sale of our common stock in the
offering, after deducting underwriting discounts and estimated offering expenses
of $ million, will be approximately $ million, at an assumed initial
public offering price of $ per share, the mid-point of the range presented
on the cover page of this prospectus. If the underwriters exercise their
over-allotment option in full, we estimate that the net proceeds we will receive
in the offering will be $ million.
We will use the net proceeds of the offering, together with the cash
received from a financing of the restaurant franchising business, our cash on
hand and the borrowings under a new credit facility, to repay indebtedness under
our existing credit facility and to pay fees and expenses related to the
offering and related transactions.
The sources and uses of funds to consummate the offering and related
transactions as of April 2, 2000 are as follows:
<TABLE>
<S> <C>
SOURCES:
Minimum proceeds from the offering, net of underwriting
discounts................................................. $ 93,000,000
Borrowings under new credit facility........................ 192,032,000
Capital contribution from RC/Arby's......................... 188,700,000
Available cash.............................................. 11,462,000
------------
Total Sources........................................... $485,194,000
------------
------------
USES:
Repayment of borrowings under existing credit facility...... $468,450,000
Payment of interest on existing credit facility
borrowings................................................ 5,881,000
Prepayment penalties under existing credit facility......... 5,767,000
Estimated fees and expenses (not paid prior to April 2,
2000)..................................................... 5,096,000
------------
Total Uses.............................................. $485,194,000
------------
------------
</TABLE>
Outstanding borrowings under our existing credit facility amortize over time
until 2007. At April 2, 2000, the weighted average interest rate on outstanding
borrowings under our existing credit facility was 9.6%.
DIVIDEND POLICY
For the foreseeable future, we do not intend to pay any dividends on our
common stock. Rather, we currently intend to reinvest all of our earnings for
use in our business and to finance future growth. Any future determination to
pay dividends will be at the discretion of our board of directors and will
depend upon our financial condition, results of operations, contractual
restrictions, business prospects and other factors that our board of directors
may consider relevant. Our debt instruments restrict our ability to pay cash
dividends. Please refer to the section of this prospectus entitled 'Description
of Indebtedness.'
23
<PAGE>
CAPITALIZATION
The following table presents the consolidated cash and cash equivalents and
capitalization at April 2, 2000 (1) on a historical basis and (2) as adjusted
for the restructuring (you should refer to 'The Restructuring' elsewhere in this
prospectus for a discussion of these transactions), the offering and related
transactions, assuming $100.0 million gross cash proceeds of the offering. The
actual capitalization includes the restaurant franchising business and
RC/Arby's. In contrast, the as adjusted capitalization excludes the restaurant
franchising business and RC/Arby's since it reflects the effective distribution
of the stock of RC/Arby's, including its interest in the restaurant franchising
business, to Triarc. You should read this capitalization table together with the
historical consolidated financial statements and related notes and the unaudited
pro forma condensed consolidated balance sheet and related notes included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED
------ --------
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents................................... $ 24.2 $ 2.0
------- -------
------- -------
Current portion of long-term debt........................... $ 40.2 $ 19.7
------- -------
Long-term debt:
Term loans under the existing credit facility........... 432.7 --
10 1/4% senior subordinated notes due 2009.............. 300.0 300.0
Term loans under the new credit facility................ -- 174.9
Other................................................... 3.0 0.1
------- -------
Total long-term debt................................ 735.7 475.0
------- -------
Member's (deficit)/stockholders' equity:
Contributed capital/common stock and additional paid-in
capital............................................... 1.6 260.8
Accumulated deficit..................................... (172.8) (184.9)(1)
Accumulated other comprehensive deficit................. (0.3) (0.3)
------- -------
Total member's (deficit)/stockholders' equity....... (171.5) 75.6
------- -------
Total capitalization................................ $ 604.4 $ 570.3
------- -------
------- -------
</TABLE>
---------
(1) Reflects the $12.1 million effect, net of tax, of an extraordinary charge
related to the assumed early extinguishment of debt in connection with the
offering and related transactions and resulting from the write-off of
unamortized deferred financing costs and the payment of prepayment
penalties.
24
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma (i) condensed consolidated balance sheet
as of April 2, 2000 and (ii) condensed consolidated statements of operations for
the years ended December 28, 1997, January 3, 1999 and January 2, 2000 and the
three months ended April 2, 2000 have been prepared by adjusting these financial
statements, as derived and condensed, as applicable, from the consolidated
financial statements on pages F-3 and F-4 in this prospectus. For further
information about the preparation of these consolidated financial statements,
please refer to Note 1 to the financial statements on page F-8.
BALANCE SHEET ADJUSTMENTS
The unaudited pro forma condensed consolidated balance sheet has been
adjusted to give effect to:
the proposed restructuring transactions described elsewhere in this
prospectus, see 'The Restructuring,' whereby Snapple Beverage Group
will be transferred to RC/Arby's, the restaurant franchising business
will be reclassified as discontinued operations, RC/Arby's (parent
company) and the restaurant franchising business are then effectively
distributed from Triarc Consumer Products Group to Triarc and, as a
result of a series of transactions, Triarc Consumer Products Group then
effectively merges into Snapple Beverage Group;
our receipt of the minimum gross proceeds from the offering, borrowings
under a new credit facility and a capital contribution from RC/Arby's
funded with borrowings by Arby's under a new bridge facility and all of
RC/Arby's and Arby's existing cash and cash equivalents; and
our application of those proceeds, together with our available cash in
excess of $2,000,000, to repay all amounts outstanding under our
existing credit facility, together with prepayment penalties and
accrued interest, and to pay fees and expenses related to the offering
and the new credit facility
as if those transactions occurred as of April 2, 2000. For more information
about these transactions, including the sources and uses of funds, you should
read the sections of this prospectus titled 'The Restructuring' and 'Use of
Proceeds.' We call the restructuring transactions the 'restructuring' and we
call the other transactions the 'offering and related transactions.'
STATEMENT OF OPERATIONS ADJUSTMENTS
Fiscal years ended December 28, 1997 and January 3, 1999. The unaudited pro
forma condensed consolidated statements of operations for the years ended
December 28, 1997 and January 3, 1999 have been adjusted to give effect to the
reclassification of the restaurant business as a discontinued operation, but
have not otherwise been adjusted to give effect to the restructuring and the
offering and related transactions. The adjustments related to the restaurant
business include restaurant franchising and the operation of company-owned
restaurants for the period prior to their sale on May 5, 1997 and only
restaurant franchising thereafter.
Fiscal year ended January 2, 2000. The unaudited pro forma condensed
consolidated statement of operations for the year ended January 2, 2000 has been
adjusted to give effect to refinancing transactions consummated in February and
March 1999, when we:
issued $300,000,000 of our 10 1/4% senior subordinated notes and
borrowed $475,000,000 of term loans under our existing credit facility;
and
used the proceeds, together with available cash, to repay $284,333,000
of term loans under a previously existing credit facility and
$275,000,000 of RC/Arby's 9 3/4% senior notes, acquire Millrose
Distributors, Inc. for $17,491,000 including related expenses of
$241,000, pay a one-time distribution to Triarc of $215,528,000 and pay
related fees and expenses of $30,500,000,
and has been further adjusted to give effect to the restructuring and the
offering and related transactions, as if each had occurred on January 4, 1999.
25
<PAGE>
Three months ended April 2, 2000. The unaudited pro forma condensed
consolidated statement of operations for the three months ended April 2, 2000
has been adjusted to give effect to the restructuring and the offering and
related transactions, as if each had occurred on January 4, 1999.
We will recognize an extraordinary charge resulting from the write-off of
unamortized deferred financing costs and the payment of prepayment penalties in
connection with the repayment of borrowings under our existing credit facility
in connection with the offering and related transactions in the fiscal quarter
during which the offering is completed. As of April 2, 2000 this charge would be
$12,145,000, net of income taxes. Because that charge is non-recurring, it is
not reflected in the pro forma statements of operations.
The pro forma adjustments are described in more detail in the accompanying
notes to the pro forma condensed consolidated balance sheet and statements of
operations which you should read together with these unaudited pro forma
financial statements. The unaudited pro forma financial statements may not be
indicative of our actual financial position or results of operations had these
transactions occurred as of the dates assumed in preparing these pro forma
financial statements or of our future financial position or results of
operations. You should read the unaudited pro forma financial statements
together with the 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' and the other financial information included
elsewhere in this prospectus.
26
<PAGE>
SNAPPLE BEVERAGE GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
APRIL 2, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE
INITIAL
ADJUSTMENTS PRO FORMA PUBLIC
AS FOR THE FOR THE OFFERING
REPORTED RESTRUCTURING RESTRUCTURING TRANSACTIONS PRO FORMA
-------- ------------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 24,162 $ (4,095)(a) $ 13,462 $ 188,700 (d) $ 2,000
(6,605)(b) 93,000 (e)
192,032 (f)
(5,096)(g)
(474,331)(h)
(5,767)(i)
Receivables..................................... 100,633 (8,351)(a) 92,282 -- 92,282
Inventories..................................... 66,815 -- 66,815 -- 66,815
Deferred income tax benefit..................... 16,422 (4,042)(a) 12,703 -- 12,703
323 (b)
Prepaid expenses and other current assets....... 7,598 (185)(a) 7,398 7,603 (i) 15,001
(15)(b)
Due from RC/Arby's Corporation.................. -- -- -- 2,274 (j) 2,274
--------- --------- ---------- --------- ---------
Total current assets......................... 215,630 (22,970) 192,660 (1,585) 191,075
Note receivable from RC/Arby's Corporation......... -- 300,000 (b) 300,000 (300,000)(j) --
Properties......................................... 30,697 (2,310)(a) 28,387 28,387
Unamortized costs in excess of net assets of
acquired companies................................ 258,890 (19,395)(a) 239,495 -- 239,495
Trademarks......................................... 248,484 (6,233)(a) 242,251 -- 242,251
Other intangible assets............................ 32,325 (187)(a) 32,138 -- 32,138
Net non-current assets of discontinued -- 18,739 (a) -- -- --
operations........................................ (18,739)(b)
Deferred costs and other assets.................... 35,277 (1,218)(a) 34,058 2,596 (g) 22,673
(1)(b) (13,981)(i)
--------- --------- ---------- --------- ---------
$ 821,303 $ 247,686 $1,068,989 $(312,970) $ 756,019
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
LIABILITIES AND MEMBER'S
(DEFICIT)/STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............... $ 40,194 $ (1,875)(a) $ 38,319 $ (35,730)(h) $ 19,709
17,120 (f)
Accounts payable................................ 45,294 (1,126)(a) 44,168 21,639 (k) 65,807
Accrued expenses................................ 70,934 (16,254)(a) 51,404 (5,881)(h) 45,523
(3,276)(b)
Due to Triarc Companies, Inc. and other
affiliates..................................... 25,498 2,231 (a) 32,542 (7,029)(j) 3,874
4,813 (b) (21,639)(k)
Net current liabilities of discontinued
operation...................................... -- (351)(a) -- -- --
351 (b)
--------- --------- ---------- --------- ---------
Total current liabilities.................... 181,920 (15,487) 166,433 (31,520) 134,913
Long-term debt..................................... 735,652 (2,856)(a) 732,796 (432,720)(h) 474,988
174,912 (f)
Deferred income taxes.............................. 56,680 1,937 (a) 61,670 -- 61,670
3,053 (b)
Deferred income and other liabilities.............. 18,600 (9,702)(a) 8,898 -- 8,898
Note payable to RC/Arby's Corporation.............. -- 76,000 (b) 76,000 (76,000)(j) --
Member's (deficit)/stockholders' equity:
Common stock and additional paid-in-capital..... -- 196,325 (c) 196,325 188,700 (d) 260,828
93,000 (e)
(2,500)(g)
(214,697)(j)
Contributed capital............................. 1,600 194,725 (b) -- -- --
(196,325)(c)
Accumulated deficit............................. (172,791) -- (172,791) (12,145)(i) (184,936)
Accumulated other comprehensive deficit......... (358) 16 (a) (342) -- (342)
--------- --------- ---------- --------- ---------
Total member's (deficit)/stockholders' (171,549) 194,741 23,192 52,358 75,550
equity.....................................
--------- --------- ---------- --------- ---------
$ 821,303 $ 247,686 $1,068,989 $(312,970) $ 756,019
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
</TABLE>
(footnotes on next page)
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(footnotes from previous page)
(a) To reclassify the net current and noncurrent assets of the restaurant
franchising business as discontinued operations and to reflect intercompany
balances owed to the restaurant franchising business by RC/Arby's parent
company and Royal Crown and no longer eliminated in consolidation. The net
assets of the restaurant franchising business are presented as discontinued
operations in these pro forma financial statements and not the historical
financial statements of Triarc Consumer Products Group included elsewhere
in this prospectus because the restaurant franchising business will be
effectively distributed to Triarc only upon the successful completion of
the initial public offering and related transactions and, as such, did not
meet the requirements to be reported as discontinued operations in the
historical consolidated financial statements.
(b) To reflect the effective distribution of the stock of RC/Arby's, including
its interest in the restaurant franchising business, from Triarc Consumer
Products Group to Triarc and to reflect intercompany balances and notes no
longer eliminated in consolidation.
(c) To reflect the merger of Triarc Consumer Products Group, a limited
liability company, into Snapple Beverage Group, a corporation.
(d) To reflect a $188,700,000 cash capital contribution to Snapple Beverage
Group by RC/Arby's representing the (1) net proceeds of its financing of
the restaurant franchising business and (2) substantially all existing cash
and cash equivalents of the restaurant franchising business and RC/Arby's
parent company. The restaurant franchising business has received a
commitment letter from a lender for this financing.
(e) To reflect $100,000,000 minimum gross proceeds of the offering, less
$7,000,000 of underwriter's discount. The per-share price of the common
shares offered in the offering, the number of total shares to be offered in
the offering and the ratio of a planned stock split have not yet been
determined. Accordingly, common stock and additional paid-in capital have
not been separately reflected in the pro forma condensed consolidated
balance sheet.
(f) To reflect the proceeds of borrowings of two classes of term loans
aggregating $192,032,000 under the new credit facility, including
$17,120,000 classified as current portion of long-term debt. Snapple
Beverage Group has received a commitment letter for a new credit facility
which provides for these term loan borrowings.
(g) To reflect the payment of estimated fees and expenses, exclusive of
underwriter's discount, relating to (1) the new credit facility of
$3,000,000, consisting of $2,400,000 of commitment fees paid to the
lenders, $300,000 of legal expenses and $300,000 of other expenses, and
(2) the offering of $2,500,000, consisting of $920,000 of auditing and
accounting fees, $900,000 of legal fees, $400,000 of printing fees and
$280,000 of other expenses. Of the fees and expenses relating to the
offering, $404,000 was paid through April 2, 2000 and is classified in
'Deferred costs and other assets' in the 'As reported' consolidated balance
sheet as of April 2, 2000.
(h) To reflect the repayment of $468,450,000 principal amount of the term loans
under the credit facility, including the current portion of $35,730,000,
and $5,881,000 of related accrued interest.
(i) To reflect (1) the write-off of $13,981,000 of previously unamortized
deferred financing costs relating to the repaid term loans and (2) the
payment of $5,767,000 of prepayment penalties relating to the repaid term
loans, both less the related income tax benefit of $7,603,000 determined
using the weighted average incremental Federal and state income tax rate of
38.5% based on the entities to which these charges related.
(j) To reflect (1) the assumed effective dividend of a $300,000,000 note
receivable from RC/Arby's and related accrued interest of $4,288,000,
(2) the effective capital contribution of a $76,000,000 note payable to
RC/Arby's, related accrued interest of $1,091,000 and intercompany advances
payable to RC/Arby's of $12,500,000 and (3) the reclassification of the
remaining resulting $2,274,000 receivable from RC/Arby's to an asset. These
adjustments have been reflected because they are components of the
transactions related to the offering and are required under Triarc Consumer
Products Group's existing debt agreements to complete the offering.
(k) To reclassify liabilities related to raw materials purchased from third
party vendors by Triarc on behalf of Snapple, Mistic, Royal Crown and
Stewart's as accounts payable to third parties from intercompany payables
to Triarc as a result of the agreement among Triarc Consumer Products Group
and Triarc to terminate this purchasing arrangement and assign the relevant
contracts to us upon the successful completion of the offering.
28
<PAGE>
SNAPPLE BEVERAGE GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
RECLASSIFICATION
OF RESTAURANT
BUSINESS AS
AS DISCONTINUED PRO
REPORTED OPERATIONS FORMA
-------- ---------- -----
<S> <C> <C> <C>
Revenues:
Net sales............................................... $629,621 $ (74,195)(a) $555,426
Royalties, franchise fees and other revenues............ 66,531 (66,234)(a) 297
-------- --------- --------
696,152 (140,429) 555,723
-------- --------- --------
Costs and expenses:
Cost of sales, excluding depreciation and amortization
related to sales...................................... 331,391 (59,222)(a) 272,169
Advertising, selling and distribution................... 183,221 (9,049)(a) 174,172
General and administrative.............................. 83,546 (35,361)(a) 48,185
Depreciation and amortization, excluding amortization of
deferred financing costs.............................. 25,244 (2,668)(a) 22,576
Charges related to post-acquisition transition,
integration and changes to business strategies........ 33,815 -- 33,815
Facilities relocation and corporate restructuring....... 7,063 (5,597)(a) 1,466
-------- --------- --------
664,280 (111,897) 552,383
-------- --------- --------
Operating profit.................................... 31,872 (28,532) 3,340
Interest expense............................................ (58,019) 4,323 (a) (53,696)
Interest income from affiliates, net........................ -- 277 (a) 277
Gain (loss) on sale of business, net........................ (3,513) 4,089 (a) 576
Other income, net........................................... 5,532 (1,941)(a) 3,591
-------- --------- --------
Loss from continuing operations before income
taxes............................................. (24,128) (21,784) (45,912)
Benefit from income taxes................................... 5,142 9,059 (a) 14,201
-------- --------- --------
Loss from continuing operations..................... $(18,986) $ (12,725) $(31,711)
-------- --------- --------
-------- --------- --------
</TABLE>
29
<PAGE>
SNAPPLE BEVERAGE GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 3, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
RECLASSIFICATION
OF RESTAURANT
BUSINESS AS
AS DISCONTINUED PRO
REPORTED OPERATIONS FORMA
-------- ---------- -----
<S> <C> <C> <C>
Revenues:
Net sales............................................... $735,436 $ -- $735,436
Royalties, franchise fees and other revenues............ 79,600 (78,623)(a) 977
-------- -------- --------
815,036 (78,623) 736,413
-------- -------- --------
Costs and expenses:
Cost of sales, excluding depreciation and amortization
related to sales...................................... 387,994 -- 387,994
Advertising, selling and distribution................... 197,877 (1,224)(a) 196,653
General and administrative.............................. 91,165 (34,219)(a) 56,946
Depreciation and amortization, excluding amortization of
deferred financing costs.............................. 32,808 (2,503)(a) 30,305
-------- -------- --------
709,844 (37,946) 671,898
-------- -------- --------
Operating profit.................................... 105,192 (40,677) 64,515
Interest expense............................................ (60,235) 1,124 (a) (59,111)
Interest expense to affiliates, net......................... -- (953)(a) (953)
Gain on sale of businesses, net............................. 5,016 -- 5,016
Other income net............................................ 5,298 (1,732)(a) 3,566
-------- -------- --------
Income from continuing operations before income
taxes............................................. 55,271 (42,238) 13,033
Provision for income taxes.................................. (25,284) 17,037 (a) (8,247)
-------- -------- --------
Income from continuing operations................... $ 29,987 $(25,201) $ 4,786
-------- -------- --------
-------- -------- --------
</TABLE>
30
<PAGE>
SNAPPLE BEVERAGE GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 2, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE
INITIAL
ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA PUBLIC
AS FOR THE 1999 FOR 1999 FOR THE FOR THE OFFERING
REPORTED TRANSACTIONS TRANSACTIONS RESTRUCTURING RESTRUCTURING TRANSACTIONS PRO FORMA
-------- ------------ ------------ ------------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales.................. $770,943 $ 4,597 (b) $772,617 $ -- $772,617 $ -- $772,617
(2,923)(c)
Royalties, franchise fees
and other revenues........ 83,029 -- 83,029 (81,786)(a) 1,243 -- 1,243
-------- ------- -------- -------- -------- -------- --------
853,972 1,674 855,646 (81,786) 773,860 -- 773,860
-------- ------- -------- -------- -------- -------- --------
Costs and expenses:
Cost of sales, excluding
depreciation and
amortization related to
sales..................... 407,708 3,619 (b) 408,342 -- 408,342 -- 408,342
(2,985)(c)
Advertising, selling and
distribution.............. 201,451 832 (b) 202,283 (461)(a) 201,822 -- 201,822
General and
administrative............ 92,909 239 (b) 92,991 (32,630)(a) 60,386 -- 60,386
(157)(d) 25 (i)
Depreciation and
amortization, excluding
amortization of deferred
financing costs........... 32,060 66 (b) 32,413 (2,168)(a) 30,245 -- 30,245
287 (e)
Capital structure
reorganization related
charge.................... 3,348 -- 3,348 -- 3,348 -- 3,348
Credit related to
post-acquisition
transition, integration
and changes to business
strategies................ (549) -- (549) -- (549) -- (549)
Facilities relocation and
corporate restructuring
credits................... (461) -- (461) 303 (a) (158) -- (158)
-------- ------- -------- -------- -------- -------- --------
736,466 1,901 738,367 (34,931) 703,436 -- 703,436
-------- ------- -------- -------- -------- -------- --------
Operating profit........ 117,506 (227) 117,279 (46,855) 70,424 -- 70,424
Interest expense.............. (76,605) (645)(f) (77,250) 700 (a) (79,758) 28,521 (j) (51,237)
(3,208)(i)
Interest income from (expense
to) affiliates, net.......... -- -- -- (385)(a) 23,041 (23,063)(k) (22)
23,426 (i)
Loss on sale of businesses,
net.......................... (533) (533) -- (533) -- (533)
Other income, net............. 6,782 (1,116)(g) 5,666 (1,974)(a) 2,846 -- 2,846
(846)(i)
-------- ------- -------- -------- -------- -------- --------
Income from continuing
operations before
income taxes.......... 47,150 (1,988) 45,162 (29,142) 16,020 5,458 21,478
Provision for income taxes.... (21,672) 707 (h) (20,965) 16,824(a) (12,399) (2,640)(l) (15,039)
(8,258)(i)
-------- ------- -------- -------- -------- -------- --------
Income from continuing
operations............ $ 25,478 $(1,281) $ 24,197 $(20,576) $ 3,621 $ 2,818 $ 6,439
-------- ------- -------- -------- -------- -------- --------
-------- ------- -------- -------- -------- -------- --------
Income from continuing
operations per
share.................
Basic................ $
--------
--------
Diluted.............. $
--------
--------
</TABLE>
31
<PAGE>
SNAPPLE BEVERAGE GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 2, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE
INITIAL
ADJUSTMENTS PRO FORMA PUBLIC
AS FOR THE FOR THE OFFERING
REPORTED RESTRUCTURING RESTRUCTURING TRANSACTIONS PRO FORMA
-------- ------------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales............................................. $170,345 $ -- $170,345 $-- $170,345
Royalties, franchise fees and other revenues.......... 19,673 (19,393)(a) 280 -- 280
-------- -------- -------- ------- --------
190,018 (19,393) 170,625 -- 170,625
-------- -------- -------- ------- --------
Costs and expenses:
Cost of sales, excluding depreciation and amortization
related to sales..................................... 89,273 -- 89,273 -- 89,273
Advertising, selling and distribution................. 46,372 (88)(a) 46,284 -- 46,284
General and administrative............................ 24,724 (9,095)(a) 15,626 -- 15,626
(3)(i)
Depreciation and amortization, excluding amortization
of deferred financing costs.......................... 8,323 (539)(a) 7,784 -- 7,784
Capital structure reorganization related charge....... 204 -- 204 -- 204
-------- -------- -------- ------- --------
168,896 (9,725) 159,171 -- 159,171
-------- -------- -------- ------- --------
Operating profit................................... 21,122 (9,668) 11,454 -- 11,454
Interest expense......................................... (20,733) 132 (a) (20,601) 8,065 (j) (12,536)
Interest income from affiliates, net..................... -- 5,769 (i) 5,769 (5,769)(k) --
Gain on sale of business, net............................ 96 -- 96 -- 96
Other income, net........................................ 966 (343)(a) 435 -- 435
(188)(i)
-------- -------- -------- ------- --------
Income (loss) from continuing operations before
income taxes..................................... 1,451 (4,298) (2,847) 2,296 (551)
Benefit from (provision for) income taxes................ (709) 4,005 (a) 1,342 (1,020)(l) 322
(1,954)(i)
-------- -------- -------- ------- --------
Income (loss) from continuing operations........... $ 742 $ (2,247) $ (1,505) $ 1,276 $ (229)
-------- -------- -------- ------- --------
-------- -------- -------- ------- --------
Loss from continuing operations per share..........
Basic........................................... $
--------
--------
Diluted......................................... $
--------
--------
</TABLE>
32
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(a) To reclassify the results of operations of the restaurant business as
discontinued operations and to reflect intercompany interest expense owed
to the restaurant business and no longer eliminated in consolidation. The
results of operations of the restaurant franchising business reclassified
as discontinued operations for the year ended January 2, 2000 reflect the
reversal of the allocation from RC/Arby's of interest expense on the 9 3/4%
senior notes since all the interest on the 9 3/4% senior notes was reversed
in (f) below to reflect the 1999 transactions as follows (in thousands):
<TABLE>
<S> <C>
Income from continuing operations of the restaurant franchising business... $30,565
Reversal of allocation of interest expense on the 9 3/4% senior notes
from RC/Arby's, net of income tax benefit............................. 1,100
-------
$31,665
-------
-------
</TABLE>
The results of operations of the restaurant business are presented as
discontinued operations in these pro forma financial statements and not the
historical financial statements of Triarc Consumer Products Group included
elsewhere in this prospectus because the restaurant business will be
effectively distributed to Triarc only upon the successful completion of
the offering and related transactions and, as such, did not meet the
requirements to be reported as discontinued operations in the historical
consolidated financial statements.
(b) To reflect the results of operations of Millrose.
(c) To reflect the elimination of sales and cost of sales between Triarc
Consumer Products Group and Millrose.
(d) Represents a reduction of 'General and administrative' expenses to reflect
the estimated effect of (1) the terminations of two employees and (2) the
reductions in salaries of three employees of Millrose (assuming these
employees chose to remain with Triarc Consumer Products Group after the
acquisition of Millrose). These terminations and reductions are in
accordance with a signed agreement between such employees and Triarc
Consumer Products Group.
(e) Represents an adjustment to 'Depreciation and amortization, excluding
amortization of deferred financing costs' as follows (in thousands):
<TABLE>
<S> <C>
To record amortization of 'Unamortized costs in excess of
net assets of acquired companies,' which we refer to as
goodwill, of $5,843 resulting from the acquisition of
Millrose over an estimated useful life of 15 years(1)..... $ 65
To record amortization of 'Other intangible assets'
(including distribution rights) of $14,303 resulting from
the acquisition of Millrose over estimated useful lives
ranging from 2 to 15 years................................ 222
----
$287
----
----
</TABLE>
---------
(1) The goodwill of $5,843 represents the excess of the purchase price for
Millrose over the net assets we acquired, calculated as follows (in
thousands):
<TABLE>
<S> <C> <C>
Purchase price, including estimated expenses................ 17,491
Less net assets acquired:
Receivables............................................. $ 1,781
Inventories............................................. 1,533
Properties.............................................. 366
Other intangible assets................................. 14,303
Accounts payable........................................ (492)
Deferred income tax liabilities......................... (5,843) 11,648
------- -------
$ 5,843
-------
-------
</TABLE>
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS -- CONTINUED
(f) Represents adjustments to 'Interest expense' as follows (in thousands):
<TABLE>
<S> <C>
To record interest expense on the 10 1/4% notes
through the February 25, 1999 date of
issuance........................................ $(4,527)
To record interest expense at a weighted average
assumed interest rate of 8.64% on the assumed
term loan borrowings initially at $475,000 under
the existing credit facility through the
February 25, 1999 date of actual
borrowings(1)................................... (6,045)
To record amortization under the interest rate
method on the $30,500 of deferred financing
costs associated with the 10 1/4% notes and the
credit facility(2).............................. (584)
To reverse reported interest expense on the
RC/Arby's 9 3/4% senior notes and the term loans
under the previously existing credit
agreement(3).................................... 9,681
To reverse reported amortization of deferred
financing costs associated with the RC/Arby's
9 3/4% senior notes and the previously existing
credit agreement................................ 830
-------
$ (645)
-------
-------
</TABLE>
---------
(1) The weighted average assumed interest rate results from applying the
actual London Interbank Offered Rated-based interest rates initially
charged by our lenders on each of the term loans under our existing
credit facility to the respective average outstanding balances of each
of the term loans assuming the initial borrowings occurred at the
beginning of 1999.
(2) The $30,500,000 of estimated deferred financing costs associated with
the 10 1/4% notes and the credit facility consist of approximately
(a) $15,200,000 of fees and expenses, including commitment fees, paid to
the lenders under the credit facility, (b) $9,700,000 of fees paid to
the underwriters of the 10 1/4% notes, (c) $4,200,000 of legal, auditing
and accounting fees, (d) $800,000 of printing fees, and (e) $600,000 of
other fees.
(3) The principal amounts repaid were $275,000,000 under the RC/Arby's
9 3/4% senior notes and $284,333,000 under the term loans of the
previously existing credit agreement. The weighted average interest rate
associated with the term loans repaid was 7.93% at the February 25, 1999
actual repayment date.
(g) To reverse the actual interest income recorded by Triarc Consumer Products
Group resulting from the investment of the proceeds of the 10 1/4% notes
issued on February 25, 1999 prior to such proceeds being used to redeem the
RC/Arby's 9 3/4% senior notes on March 30, 1999.
(h) Represents adjustments to 'Provision for income taxes' as follows (in
thousands):
<TABLE>
<S> <C>
To reflect the income tax benefit related to the
interest expense adjustment in (f) above,
including amortization of deferred financing
costs, on the 10 1/4% notes and the term loans
at the weighted average incremental Federal and
state income tax rate of 37.3% based on the
allocation of this debt by entity............... $ 4,158
To reverse the income tax benefit related to the
reported interest expense reversed in (f) above,
including amortization of deferred financing
costs, at the weighted average incremental
Federal and state income tax rate of 37.3% based
on the entities to which this interest
related......................................... (3,920)
To reflect an income tax benefit on Millrose's
pretax loss at Millrose's incremental Federal
and state income tax rate of 40.9%. The benefit
is not reflected in Millrose's reported results
of operations due to its Subchapter S status
prior to its acquisition........................ 65
To reflect the income tax benefit on the effect of
the pro forma adjustments (c), (d) and (e) above
to Millrose's reported results of operations,
other than the amortization of goodwill which is
not tax deductible, at Millrose's incremental
Federal and state income tax rate of 40.9%...... 2
To reflect the income tax benefit related to the
interest income from the investment of the
proceeds of the 10 1/4% notes prior to such
proceeds being used to redeem the RC/Arby's
9 3/4% senior notes, reversed in (g) above, at
the incremental Federal and state income tax
rate of 36%..................................... 402
-------
$ 707
-------
-------
</TABLE>
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS -- CONTINUED
(i) To reflect the effective distribution of the stock of RC/Arby's, including
its interest in the restaurant franchising business, from Triarc Consumer
Products Group to Triarc and to reflect intercompany interest income no
longer eliminated in consolidation. The adjustment to intercompany interest
income (expense) includes actual interest income on a $300,000,000 note
receivable by Triarc Consumer Products Group from RC/Arby's, bearing
interest at 10.33%, less actual interest expense on a $76,000,000 note
payable by Royal Crown to RC/Arby's, bearing interest at 10.33%, plus
related pro forma interest income and interest expense as if such notes,
which were actually issued on March 30, 1999 in connection with the 1999
transactions, were issued on January 3, 1999.
(j) Represents adjustments to 'Interest expense' as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
JANUARY 2, APRIL 2,
2000 2000
---- ----
<S> <C> <C>
To record interest expense at an initial weighted
average assumed interest rate of 8.73% on the
assumed term loan borrowings initially at
$192,032 under the new credit facility(1)....... $(16,224) $(3,829)
To record amortization under the interest rate
method on the $3,000 of estimated deferred
financing costs associated with the new credit
facility(2)..................................... (724) (168)
To reverse reported interest expense and the pro
forma adjustment to interest expense included in
(f) above, associated with the term loans under
the 1999 credit facility........................ 42,661 11,472
To reverse reported amortization of deferred
financing costs and the pro forma adjustment to
interest expense included in (f) associated with
the term loans under the 1999 credit facility... 2,808 590
-------- -------
$ 28,521 $ 8,065
-------- -------
-------- -------
</TABLE>
---------
(1) The weighted average assumed interest rate results from adding the
margins stated in a commitment letter to the London Interbank Offered
Rate available at April 2, 2000 on each of the classes of term loans
under the new credit facility and applying the resulting interest rate
to the respective average outstanding balances of each of the classes of
term loans. The average outstanding balances reflect scheduled
repayments under the term loans assuming the initial borrowings occurred
at the beginning of 1999 and were $185,612,000 and $174,912,000 for the
year ended January 2, 2000 and the three months ended April 2, 2000,
respectively.
If the assumed weighted average interest rate on the term loan
borrowings under the new credit facility changed by .125%, the pro forma
interest expense would change by $232,000 and $55,000 for the year ended
January 2, 2000 and the three months ended April 2, 2000, respectively.
(2) The $3,000,000 of estimated deferred financing costs associated with the
new credit facility consist of approximately (a) $2,400,000 of
commitment fees to be paid to the lenders (b) $300,000 of legal expenses
and (c) $300,000 of other fees.
(k) To reflect a net reduction to intercompany interest income resulting from
the assumed effective dividend of the $300,000,000 note receivable from
RC/Arby's and the effective capital contribution of the $76,000,000 note
payable to RC/Arby's. These adjustments have been reflected since the
assumed dividend and capital contribution are components of the
transactions related to the offering and are required under Triarc Consumer
Product Group's existing debt agreements to complete the offering.
35
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS -- CONTINUED
(l) Represents adjustments to 'Benefit from (provision for) income taxes' as
follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
JANUARY 2, APRIL 2,
2000 2000
---- ----
<S> <C> <C>
To reflect the income tax benefit related to the
interest expense adjustment in (j) above,
including amortization of deferred financing
costs, on the assumed term loan borrowings at
the incremental Federal and state income tax
rate of 39.0% based on the entity to which this
debt is expected to relate...................... $ 6,610 $ 1,559
To reverse the income tax benefit related to the
interest expense, including amortization of
deferred financing costs, reversed in (j) above
at the weighted average incremental Federal and
state income tax rate of 38.5%, based on the
entities to which this interest expense
related......................................... (17,506) (4,644)
To reverse the income tax provision related to the
net intercompany interest income reversed in (k)
above, at the incremental Federal and state
income tax rate of 35.8% based on the entities
to which this net interest income related....... 8,256 2,065
-------- -------
$ (2,640) $(1,020)
-------- -------
-------- -------
</TABLE>
36
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations and other data for the years ended
December 28, 1997, January 3, 1999 and January 2, 2000 and the balance sheet
data as of January 3, 1999 and January 2, 2000 are derived from the consolidated
financial statements of Triarc Consumer Products Group audited by Deloitte &
Touche LLP, independent auditors, beginning on page F-2 in this prospectus and
should be read with those financial statements and the related notes. The
statement of operations and other data for the three-month periods ended
April 4, 1999 and April 2, 2000 and the balance sheet data as of April 2, 2000
are derived from the unaudited financial information for such periods included
within the consolidated financial statements referred to above. The historical
consolidated balance sheet data as of December 31, 1995 are derived from
combining the audited consolidated balance sheet of RC/Arby's contained in its
annual report on Form 10-K for the year ended December 31, 1995 not included in
this prospectus and the audited balance sheet of Mistic not included in this
prospectus. The consolidated statement of operations and other data for the
years ended December 31, 1995 and 1996 and consolidated balance sheet data as of
December 31, 1996 are derived from audited consolidated financial statements of
Triarc Consumer Products Group not included in this prospectus.
In our opinion, the unaudited condensed consolidated financial statements as
of April 2, 2000 and for the three-month periods ended April 4, 1999 and
April 2, 2000 contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly, in all material respects, Triarc
Consumer Products Group's financial position as of April 2, 2000 and its results
of operations for the three-month periods ended April 4, 1999 and April 2, 2000.
You should be aware that our results of operations and financial condition
will be significantly affected by the offering and the restructuring and other
related transactions to occur in connection with the offering. You should read
our unaudited pro forma condensed consolidated financial information included
elsewhere in this prospectus.
37
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED
YEARS ENDED DECEMBER 31, ------------------------------------------
----------------------------- DECEMBER 28, JANUARY 3, JANUARY 2,
1995 1996 1997 1999 2000
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Net sales.................. $ 431,514 $540,106 $ 629,621 $735,436 $ 770,943
Royalties, franchise fees
and other revenues....... 55,812 57,329 66,531 79,600 83,029
--------- -------- --------- -------- ---------
Total revenues................ 487,326 597,435 696,152 815,036 853,972
Cost of sales, excluding
depreciation and amortization
related to sales............. 248,765 313,966 331,391 387,994 407,708
Depreciation and amortization
related to sales............. 12,609 13,545 1,032 1,672 2,102
--------- -------- --------- -------- ---------
Gross profit.................. 225,952 269,924 363,729 425,370 444,162
Advertising, selling and
distribution expenses........ 116,896 133,885 183,221 197,877 201,451
General and administrative
expenses..................... 82,180 78,355 83,546 91,165 92,909
Depreciation and amortization,
excluding depreciation and
amortization related to sales
and amortization of deferred
financing costs.............. 13,375 16,419 24,212 31,136 29,958
Other operating expenses...... 14,647 66,700 40,878 -- 2,338
--------- -------- --------- -------- ---------
Operating profit (loss)....... (1,146)(3) (25,435)(4) 31,872 (5) 105,192 117,506 (7)
Interest expense.............. (42,386) (50,031) (58,019) (60,235) (76,605)
Gain (loss) on sale of
business, net................ (1,000) -- (3,513) 5,016 (533)
Other income (expense), net... (1,074) 470 5,532 5,298 6,782
--------- -------- --------- -------- ---------
Income (loss) before income
taxes and extraordinary
charges...................... (45,606)(3) (74,996)(4) (24,128)(5) 55,271 (6) 47,150 (7)
Benefit from (provision for)
income taxes................. 12,257 23,628 5,142 (25,284) (21,672)
--------- -------- --------- -------- ---------
Income (loss) before
extraordinary charges........ (33,349)(3) (51,368)(4) (18,986)(5) 29,987 (6) 25,478 (7)
Extraordinary charges......... -- -- (2,954) -- (11,772)
--------- -------- --------- -------- ---------
Net income (loss)(1).......... $ (33,349)(3) $(51,368)(4) $ (21,940)(5) $ 29,987 (6) $ 13,706 (7)
--------- -------- --------- -------- ---------
--------- -------- --------- -------- ---------
Cash dividends................ $ -- $ -- $ -- $(23,556) $(204,746)
OTHER DATA:
EBITDA(2)..................... $ 39,485 $ 63,429 $ 57,116 $138,000 $ 149,566
Net cash provided by (used in)
operating activities......... 5,567 11,325 35,440 59,104 57,644
Net cash provided by (used in)
investing activities......... (154,333) (18,028) (305,629) 15,771 (43,328)
Net cash provided by (used in)
financing activities......... 156,766 4,388 296,861 (36,325) (26,935)
Capital expenditures.......... 48,738 17,113 4,204 11,107 8,525
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets.................. $ 515,375 $480,592 $ 853,961 $790,970 $ 828,215
Long-term debt................ 416,688 347,810 564,114 560,977 736,866
Redeemable preferred stock.... -- -- 79,604 87,587 -- (10)
Member's deficit.............. (37,110) (86,978) (42,860)(9) (44,721) (173,885)(10)
<CAPTION>
THREE MONTHS ENDED
-----------------------
APRIL 4, APRIL 2,
1999 2000
---- ----
(IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Net sales.................. $ 159,888 $ 170,345
Royalties, franchise fees
and other revenues....... 18,303 19,673
--------- ---------
Total revenues................ 178,191 190,018
Cost of sales, excluding
depreciation and amortization
related to sales............. 82,140 89,273
Depreciation and amortization
related to sales............. 449 499
--------- ---------
Gross profit.................. 95,602 100,246
Advertising, selling and
distribution expenses........ 47,756 46,372
General and administrative
expenses..................... 22,283 24,724
Depreciation and amortization,
excluding depreciation and
amortization related to sales
and amortization of deferred
financing costs.............. 7,403 7,824
Other operating expenses...... 2,250 204
--------- ---------
Operating profit (loss)....... 15,910 (8) 21,122
Interest expense.............. (16,701) (20,733)
Gain (loss) on sale of
business, net................ 85 96
Other income (expense), net... 3,156 966
--------- ---------
Income (loss) before income
taxes and extraordinary
charges...................... 2,450 (8) 1,451
Benefit from (provision for)
income taxes................. (1,213) (709)
--------- ---------
Income (loss) before
extraordinary charges........ 1,237 (8) 742
Extraordinary charges......... (11,772) --
--------- ---------
Net income (loss)(1).......... $ (10,535)(8) $ 742
--------- ---------
--------- ---------
Cash dividends................ $(204,746) $ --
OTHER DATA:
EBITDA(2)..................... $ 23,762 $ 29,445
Net cash provided by (used in)
operating activities......... (29,608) (25,540)
Net cash provided by (used in)
investing activities......... (18,775) (7,556)
Net cash provided by (used in)
financing activities......... (18,037) (2,915)
Capital expenditures.......... 1,545 7,371
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets.................. $ 821,303
Long-term debt................ 735,652
Redeemable preferred stock.... --
Member's deficit.............. (171,549)
</TABLE>
---------
(1) As a result of the proposed restructuring transactions, the historical
consolidated financial statements of Triarc Consumer Products Group are not
indicative of the financial position and results of operations of the
ongoing entity, Snapple Beverage Group, as restructured. You should refer
to 'The Restructuring' elsewhere in this prospectus for further discussion
of these transactions. As such, the historical income (loss) per share of
Triarc Consumer Products Group is not presented since that data is not
considered relevant.
(2) EBITDA is presented in order to allow for greater comparability between
periods as well as an indication of results on an ongoing basis. We
calculate EBITDA as operating profit (loss) plus
(footnotes continued on next page)
38
<PAGE>
(footnotes continued from previous page)
depreciation and amortization (excluding amortization of deferred financing
costs) and, for the years ended December 31, 1995 and 1996, impairment
charges related to long-lived assets. Because all companies do not
calculate EBITDA or similarly titled financial measures in the same manner,
those disclosures may not be comparable with EBITDA as calculated by us.
You should not think of EBITDA as an alternative to net income or loss (as
an indicator of operating performance) or as an alternative to cash flow
(as a measure of liquidity or ability to service debt obligations) and
EBITDA is not a measure of performance or financial condition under
generally accepted accounting principles. However, EBITDA provides
additional information for evaluating our ability to meet our obligations.
Cash flows in accordance with generally accepted accounting principles
consist of cash flows from (1) operating, (2) investing and (3) financing
activities. Cash flows from operating activities reflect net income or loss
(including charges for interest and income taxes not reflected in EBITDA)
adjusted for (1) all non-cash charges or credits (including, but not
limited to, depreciation and amortization) and (2) changes in operating
assets and liabilities (not reflected in EBITDA). Further, cash flows from
investing and financing activities are not included in EBITDA. The
historical cash flows of Triarc Consumer Products Group are presented in
the table above.
(3) Reflects certain significant charges recorded during 1995 as follows:
$15,309,000 charged to operating loss representing a $14,647,000 reduction
in the carrying value of long-lived assets impaired or to be disposed and
$662,000 of accelerated vesting of Triarc's restricted stock granted to our
employees; $16,309,000 charged to loss before income taxes and
extraordinary charges representing the aforementioned $15,309,000 charged
to operating loss and $1,000,000 of write-off of an equity investment; and
$11,511,000 charged to loss before extraordinary charges and net loss
representing the aforementioned $16,309,000 charged to loss before income
taxes and extraordinary charges, less $5,898,000 of related income tax
benefit plus a $1,100,000 provision for income tax contingencies.
(4) Reflects certain significant charges recorded during 1996 as follows:
$66,700,000 charged to operating loss and loss before income taxes and
extraordinary charges representing a $58,900,000 charge for impairment of
company-owned restaurants and related exit costs and $7,800,000 of
facilities relocation and corporate restructuring charges; and $40,843,000
charged to loss before extraordinary charges and net loss representing the
aforementioned $66,700,000 charged to operating loss less $25,857,000 of
related income tax benefit.
(5) Reflects certain significant charges recorded during 1997 as follows:
$40,878,000 charged to operating profit representing $33,815,000 of charges
related to post-acquisition transition, integration and changes to business
strategies and $7,063,000 of facilities relocation and corporate
restructuring; $44,391,000 charged to loss before income taxes and
extraordinary charges representing the aforementioned $40,878,000 charged
to operating profit plus $3,513,000 of loss on sale of businesses net;
$27,138,000 charged to loss before extraordinary charges representing the
aforementioned $44,391,000 charged to loss before income taxes and
extraordinary charges less $17,253,000 of related income tax benefit; and
$30,092,000 charged to net loss representing the aforementioned $27,138,000
charged to loss before extraordinary charges and a $2,954,000 extraordinary
charge from the early extinguishment of debt.
(6) Reflects a significant credit recorded during 1998 as follows: $5,016,000
of gain on sale of businesses credited to income before income taxes and
extraordinary charges; and $3,067,000 credited to income before
extraordinary charges and net income representing the aforementioned
$5,016,000 less $1,949,000 of related income tax provision.
(7) Reflects certain significant charges recorded during 1999 as follows:
$3,348,000 charged to operating profit and income before income taxes and
extraordinary charges representing capital structure reorganization related
charges related to equitable adjustments made to the terms of outstanding
stock options, net; $2,042,000 charged to income before extraordinary
charges representing the aforementioned $3,348,000 less $1,306,000 of
related income tax benefit; and $13,814,000 charged to
(footnotes continued on next page)
39
<PAGE>
(footnotes continued from previous page)
net income representing the aforementioned $2,042,000 charged to income
before extraordinary charges and an $11,772,000 extraordinary charge from
the early extinguishment of debt.
(8) Reflects certain significant charges recorded during the three months ended
April 4, 1999 as follows: $2,250,000 charged to operating profit and income
before income taxes and extraordinary charges representing capital
structure reorganization related charges; $1,373,000 charged to income
before extraordinary charges representing the aforementioned $2,250,000
less $877,000 of related income tax benefit; and $13,145,000 charged to net
income representing the aforementioned $1,373,000 charged to income before
extraordinary charges and an $11,772,000 extraordinary charge from the
early extinguishment of debt.
(9) Reflects a decrease in member's deficit principally resulting from (1) a
$29,390,000 capital contribution to Triarc Consumer Products Group by
Triarc and (2) the 'push-down' of Triarc's $40,847,000 (adjusted to
$40,596,000 in 1998) acquisition basis in Stewart's to Triarc Consumer
Products Group.
(10) Reflects an increase in member's deficit principally resulting from
(1) cash dividends of $204,746,000 and (2) a non-cash transfer of deferred
income tax benefits of $32,719,000, both partially offset by a capital
contribution by Triarc of the redeemable preferred stock of Triarc Consumer
Products Group of $88,779,000, including accrued but unpaid dividends.
40
<PAGE>
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table presents unaudited selected pro forma consolidated
financial data for the years ended December 28, 1997, January 3, 1999,
January 2, 2000 and the three-month period ended April 2, 2000. The statement of
operations and other data for all periods presented reflect the reclassification
of the restaurant business as a discontinued operation. The statement of
operations and other data for the year ended January 2, 2000 and the three-month
period ended April 2, 2000 and the balance sheet data as of April 2, 2000
reflect (1) the proposed restructuring transactions (you should refer to 'The
Restructuring' elsewhere in this prospectus for further discussion of these
transactions), and (2) the offering, related transactions and the related use of
proceeds. The statement of operations and other data for the year ended
January 2, 2000 also reflect adjustments for refinancing transactions
consummated in February and March 1999. The pro forma consolidated financial
data are derived from the 'Unaudited Pro Forma Condensed Financial Statements'
contained elsewhere in this prospectus and should be read with those financial
statements and the related notes.
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------------- THREE MONTHS
DECEMBER 28, JANUARY 3, JANUARY 2, ENDED
1997 1999 2000 APRIL 2, 2000
---- ---- ---- -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Net sales............................... $555,426 $735,436 $772,617 $170,345
Royalties, franchise fees and other
revenues.............................. 297 977 1,243 280
-------- -------- -------- --------
Total revenues............................. 555,723 736,413 773,860 170,625
Cost of sales, excluding depreciation and
amortization related to sales............. 272,169 387,994 408,342 89,273
Depreciation and amortization related to
sales(1).................................. 1,032 1,672 2,102 499
-------- -------- -------- --------
Gross profit............................... 282,522 346,747 363,416 80,853
Advertising, selling and distribution
expenses.................................. 174,172 196,653 201,822 46,284
General and administrative expenses........ 48,185 56,946 60,386 15,626
Depreciation and amortization, excluding
depreciation and amortization related to
sales and amortization of deferred
financing costs........................... 21,544 28,633 28,143 7,285
Other operating expenses................... 35,281 -- 2,641 204
-------- -------- -------- --------
Operating profit........................... 3,340 (2) 64,515 (3) 70,424 (4) 11,454
Interest expense........................... (53,696) (60,064) (51,259) (12,536)
Gain (loss) on sale of businesses, net..... 576 5,016 (533) 96
Other income, net.......................... 3,868 3,566 2,846 435
-------- -------- -------- --------
Income (loss) from continuing operations
before income taxes....................... (45,912)(2) 13,033 (3) 21,478 (4) (551)
Benefit from (provision for) income
taxes..................................... 14,201 (8,247) (15,039) 322
-------- -------- -------- --------
Income (loss) from continuing operations... $(31,711)(2) $ 4,786 (3) $ 6,439 (4) $ (229)
-------- -------- -------- --------
-------- -------- -------- --------
Income from continuing operations per
share.....................................
Weighted average shares outstanding........
OTHER DATA:
EBITDA(5).................................. $ 25,916 $ 94,820 $100,669 $ 19,238
Capital expenditures....................... 3,241 10,697 8,249 7,337
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................... $756,019
Long-term debt............................. 474,988
Stockholders' equity....................... 75,550
</TABLE>
---------
(1) Pro forma depreciation and amortization related to sales was taken from the
historical statements of operations appearing elsewhere in this prospectus
since there are no pro forma adjustments which affected historical
depreciation and amortization related to sales.
(2) Reflects certain significant charges recorded during 1997 as follows:
$40,878,000 charged to operating profit representing $33,815,000 of charges
related to post-acquisition transition, integration and changes to business
strategies and $7,063,000 of facilities relocation and corporate
restructuring; $40,302,000 charged to loss from continuing operations before
income taxes representing the
(footnotes continued on next page)
41
<PAGE>
(footnotes continued from previous page)
aforementioned $40,878,000 charged to operating profit less $576,000 of gain
on sale of businesses, net; and $24,638,000 charged to loss from continuing
operations representing the aforementioned $40,302,000 charged to loss from
continuing operations before income taxes less $15,664,000 of related income
tax benefit.
(3) Reflects a significant credit recorded during 1998 as follows: $5,016,000 of
gain on sale of businesses, net credited to income from continuing
operations before income taxes and $3,067,000 credited to income from
continuing operations representing the aforementioned $5,016,000 less
$1,949,000 of related income tax provision.
(4) Reflects certain significant charges recorded during 1999 as follows:
$3,348,000 charged to operating profit and income from continuing operations
before income taxes representing capital structure reorganization related
charges related to equitable adjustments made to the terms of outstanding
stock options; and $2,042,000 charged to income from continuing operations
representing the aforementioned $3,348,000 charged to operating profit and
income from continuing operations before income taxes less $1,306,000 of
related income tax benefit.
(5) You should refer to Note 2 to 'Summary Historical Consolidated Financial
Data' for a discussion of EBITDA.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PRESENTATION OF FINANCIAL INFORMATION
This 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' reflects, on an as-if pooling basis, the consolidated
financial position, results of operations and cash flows of Triarc Consumer
Products Group and its subsidiaries. Triarc Consumer Products Group is the
entity reflected in the consolidated financial statements which begin on
page F-2 of this prospectus. For further discussion of the basis of presentation
of the consolidated financial statements of Triarc Consumer Products Group and
the subsidiaries owned by it, you should refer to Note 1 to those consolidated
financial statements.
In connection with the offering, Triarc Consumer Products Group will enter
into a series of restructuring transactions, as discussed in the section called
'The Restructuring.' The restructuring transactions have not been reflected in
the historical financial statements because the restructuring transactions will
not have occurred prior to a registration statement being declared effective by
the Securities and Exchange Commission to register the common shares of Snapple
Beverage Group to be sold in the offering. Under our existing debt agreements,
the restructuring transactions may be effected only upon the successful
completion of an initial public offering. As a part of the restructuring to
occur in connection with the offering, (a) Snapple Beverage Group will be
transferred to RC/Arby's, (b) Triarc Consumer Products Group will effectively
distribute the restaurant franchising business and RC/Arby's parent company to
Triarc and (c) Triarc Consumer Products Group will then, as a result of a series
of transactions, effectively be merged into Snapple Beverage Group. Following
the restructuring, Snapple Beverage Group will reflect the restaurant
franchising business in its financial statements as a discontinued operation.
You should read the section called 'Unaudited Pro Forma Condensed
Consolidated Financial Statements' for information regarding the pro forma
effect on the historical financial statements of these restructuring
transactions and the use of the proceeds from the offering and other related
transactions.
Terms such as 'we,' 'our' and 'us' as used in this discussion refer to
Triarc Consumer Products Group except within the section of this discussion
under 'Pro Forma Liquidity and Capital Resources,' in which those terms refer to
Snapple Beverage Group.
OVERVIEW
We are a leading premium beverage company, a soft drink concentrates
producer and a restaurant franchisor. Since 1995 we have acquired the Snapple,
Mistic and Stewart's premium beverage brands. After selling all our
company-owned restaurants in 1997, we have focused on building the strength of
our premium beverage, soft drink concentrates and restaurant franchising
businesses.
In our premium beverage business we principally derive our revenues from the
sale of our premium beverage products to distributors. We also derive revenues
from the distribution of products in two of our key markets. One of our
strategies is to increase our control over distribution by making selective
acquisitions of distributors of our branded products in our key markets. By
acting as our own distributor in key markets we are better able to increase
sales, improve focus on current and new products and derive a higher gross
profit margin. During 1999, we purchased two distributors and in each of March
2000 and May 2000 purchased our distribution rights in one other geographic
area. In the aggregate, our company-owned distributors were responsible for
approximately 28% of our premium beverage revenues for the 2000 first quarter.
We expect revenues, gross margins and operating profit to increase as a result
of these acquisitions, as we sell product at higher prices directly to retailers
subsequent to these acquisitions compared with sales at lower prices to the
distributors that we acquired. We also expect to realize additional revenues
from these acquisitions, as we believe that company-owned distributors will be
more focused on increasing sales of our products. The increase in gross profit
that may result from these acquisitions is expected to be partially offset by
associated increases in
43
<PAGE>
advertising, selling and distribution, depreciation and amortization, and
general and administrative expenses.
Currently, all of our premium beverage products are produced by third-party
co-packers that we supply with raw materials and packaging. We are in the
process of constructing a packing line at one of our locations where we have
leased additional space. We expect to realize production and freight savings
from this line in excess of the related increase in depreciation and
amortization.
In our soft drink concentrate business (Royal Crown) we currently derive our
revenues from the sale of our carbonated soft drink concentrates to bottlers and
a private label customer. To a much lesser extent, before 1999 we also derived
revenues from the sale of finished product. Gross margins on concentrate sales
are generally higher than those on finished product sales.
In our restaurant franchising business we currently derive all our revenues
from franchise royalties and franchise fees. While over 75% of our existing
royalty agreements and all of our new domestic royalty agreements provide for
royalties to us equal to 4% of franchise revenues, our average royalty rate was
3.3% in 1999. We incur selling, general and administrative costs, but no cost of
goods sold in our restaurant franchising business.
Our businesses do not require significant capital expenditures because we do
not own manufacturing facilities, other than a Royal Crown concentrate
manufacturing facility, and we do not own restaurants. The amortization of
(1) costs in excess of net assets of businesses acquired, which we refer to as
goodwill, (2) trademarks and (3) other items results in significant non-cash
charges.
In recent years the premium beverage business has experienced the following
trends:
acquisition/consolidation of distributors;
development of proprietary packaging;
increased pressure by competitors to achieve account exclusivity;
increased use of more costly plastic packaging;
growing consumer demand for all-natural, health-oriented products;
proliferation of new products including premium beverages, bottled
water and beverages enhanced with herbal additives, for example,
ginseng and Echinacea;
increased placement of refrigerated coolers by distributors in customer
locations; and
increased use of more costly multi-packs and variety packs in some
trade channels.
In recent years the soft drink concentrates business has experienced the
following trends:
increased competition in the form of lower prices of finished product
sold at retail, although there has been some improvement commencing in
late 1999;
adverse economic conditions in some international markets, especially
Russia;
increased pressure by competitors to achieve account exclusivity;
acquisition/consolidation of bottlers;
increased placement of refrigerated coolers by bottlers in customer
locations;
increased use of more costly multi-packs in some trade channels;
increased market share of private label beverages; and
increased consumer preference for flavored soft drink beverages.
In recent years the restaurant franchising business has experienced the
following trends:
consistent growth of the restaurant industry as a percentage of total
food-related spending;
increased competitive pressures from the emphasis by competitors on new
unit development to increase market share leading to the frequent use
of price promotions and heavy advertising expenditures within the
industry;
increased price competition in the quick service restaurant industry,
particularly as evidenced by the value menu concept which offers
comparatively lower prices on some menu items, the
44
<PAGE>
combination meals concept which offers a combination meal at an
aggregate price lower than the individual food and beverage items,
couponing and other price discounting;
additional competitive pressures for prepared food purchases from
operations outside the restaurant industry such as deli sections and
in-store cafes of several major grocery store chains; and
the addition of selected higher-priced premium quality items to menus,
which appeal more to adult tastes and recover some of the margins lost
in the discounting of other menu items.
Following the sale of all of the 355 company-owned Arby's restaurants on
May 5, 1997 we experience the effects of these trends only to the extent they
affect our franchise fees and royalties.
FISCAL PERIODS PRESENTED
Effective January 1, 1997 we changed our fiscal year from a calendar year to
a year consisting of 52 or 53 weeks ending on the Sunday closest to
December 31. Our 1997 fiscal year commenced January 1, 1997 and ended on
December 28, 1997, our 1998 fiscal year commenced December 29, 1997 and ended on
January 3, 1999 and our 1999 fiscal year commenced January 4, 1999 and ended on
January 2, 2000. As a result of our fiscal year convention, our 1997 and 1999
fiscal years contained 52 weeks and 1998 contained 53 weeks. However, due to the
seasonality of our beverage businesses, the extra week in fiscal 1998 occurring
in late December and early January had lower than average weekly revenues.
Accordingly, we do not believe the extra week in the 1998 fiscal year has a
material impact on the discussion below of our results of operations. When we
refer to '1999' we mean the period from January 4, 1999 to January 2, 2000; when
we refer to '1998' we mean the period from December 29, 1997 to January 3, 1999;
and when we refer to '1997' we mean the period from January 1, 1997 through
December 28, 1997.
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.
SEGMENT INFORMATION
The following table shows the relative significance of the contribution of
each of our segments to total revenues, gross profit, EBITDA (as defined below)
and operating profit for our most recent fiscal year which ended January 2, 2000
and for our 2000 first quarter. You should note that, because of the seasonality
of our businesses, the relative contributions of our segments in the 2000 first
quarter are not representative of a full year.
45
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
JANUARY 2, 2000 APRIL 2, 2000
---------------------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Premium beverages.............................. $651,076 76.2% $140,631 74.0%
Soft drink concentrates........................ 121,110 14.2 29,994 15.8
Restaurant franchising......................... 81,786 9.6 19,393 10.2
-------- ----- -------- -----
Total...................................... $853,972 100.0% $190,018 100.0%
-------- ----- -------- -----
-------- ----- -------- -----
Gross profit:
Premium beverages.............................. $268,615 60.5% $ 57,760 57.6%
Soft drink concentrates........................ 93,761 21.1 23,093 23.0
Restaurant franchising......................... 81,786 18.4 19,393 19.4
-------- ----- -------- -----
Total.......................................... $444,162 100.0% $100,246 100.0%
-------- ----- -------- -----
-------- ----- -------- -----
EBITDA:
Premium beverages.............................. $ 79,545 53.2% $ 13,851 47.0%
Soft drink concentrates........................ 21,108 14.1 5,401 18.4
Restaurant franchising......................... 48,998 32.8 10,210 34.7
General corporate.............................. (85) (0.1) (17) (0.1)
-------- ----- -------- -----
Total...................................... $149,566 100.0% $ 29,445 100.0%
-------- ----- -------- -----
-------- ----- -------- -----
Operating profit (loss):
Premium beverages.............................. $ 56,638 48.2% $ 7,567 35.8%
Soft drink concentrates........................ 14,123 12.0 3,901 18.5
Restaurant franchising......................... 46,830 39.9 9,671 45.8
General corporate.............................. (85) (0.1) (17) (0.1)
-------- ----- -------- -----
Total...................................... $117,506 100.0% $ 21,122 100.0%
-------- ----- -------- -----
-------- ----- -------- -----
</TABLE>
We calculate gross profit as total revenues less (1) cost of sales,
excluding depreciation and amortization, and (2) depreciation and amortization
related to sales.
We define EBITDA as operating profit plus depreciation and amortization,
excluding amortization of deferred financing costs. Because all companies do not
calculate EBITDA or similarly titled financial measures in the same manner,
these disclosures may not be comparable with EBITDA as we define it. EBITDA
should not be considered as an alternative to net income or loss as an indicator
of our operating performance or as an alternative to cash flow as a measure of
liquidity or ability to repay our debt and is not a measure of performance or
financial condition under generally accepted accounting principles, but provides
additional information for evaluating our ability to meet our obligations.
Cash flows in accordance with generally accepted accounting principles
consist of cash flows from (1) operating, (2) investing and (3) financing
activities. Cash flows from operating activities reflect net income or loss,
including charges for interest and income taxes not reflected in EBITDA,
adjusted for (1) all non-cash charges or credits including, but not limited to,
depreciation and amortization and (2) changes in operating assets and
liabilities, not reflected in EBITDA. Further, cash flows from investing and
financing activities are not included in EBITDA.
For information regarding our historical cash flows, you should refer to our
consolidated statements of cash flows included in the consolidated financial
statements of Triarc Consumer Products Group included elsewhere in this
prospectus. For a reconciliation of consolidated EBITDA to consolidated income
before taxes and extraordinary charges for 1999, you should refer to Note 20 to
those consolidated financial statements.
46
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 2, 2000 COMPARED WITH THREE MONTHS ENDED APRIL 4, 1999
Revenues
Our revenues increased $11.8 million, or 6.6%, to $190.0 million for the
three months ended April 2, 2000 from $178.2 million for 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, or
8.9%, to $140.6 million for the three months ended April 2, 2000 from $129.1
million for 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, 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 26, 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. Those increases were partially offset by lower
sales of WhipperSnapple 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, or 3.1%, to $30.0 million for the three months ended April 2, 2000
from $31.0 million for 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. Those
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, or 7.2%, to $19.4 million for the three months ended April 2, 2000
from $18.1 million for 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%, in the number of 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) cost of sales,
excluding depreciation and amortization, and (2) depreciation and amortization
related to sales. Our gross profit increased $4.6 million, or 4.9%, to $100.2
million for the three months ended April 2, 2000 from $95.6 million for 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%. A discussion of the changes in gross margins by
segment is as follows:
Premium Beverages -- Gross margins decreased slightly to 41% for the 2000
first quarter from 42% for 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) $.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. Those decreases were substantially offset by the
positive effect on gross margins
47
<PAGE>
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% for the 2000
first quarter from 76% for 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 for 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,
or 2.9%, to $46.4 million for the three months ended April 2, 2000 from $47.8
million for the three months ended April 4, 1999. As a percentage of revenues,
our advertising, selling and distribution expenses decreased to 24% for the
three months ended April 2, 2000 from 27% for the three months ended April 4,
1999. 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, or 2.9%, to $32.6 million for the three months ended April 2,
2000 from $33.6 million for the three months ended April 4, 1999. As a
percentage of premium beverage revenues, advertising, selling and
distribution expenses decreased to 23% for the three months ended April 2,
2000 from 26% for the three months ended April 4, 1999. The decrease in
advertising, selling and distribution expenses 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 $.3 million, or 2.4%, to $13.7 million for the three months ended
April 2, 2000 from $14.0 million for the three months ended April 4, 1999. As
a percentage of soft drink concentrate revenues, advertising, selling and
distribution expenses increased to 46% for the three months ended April 2,
2000 from 45% for the three months ended April 4, 1999. The decrease in
advertising, selling and distribution expenses reflects 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 $.1 million, or 46.7%, to $.1 million for the three months ended
April 2, 2000 from $.2 million for the three months ended April 4, 1999,
reflecting a decrease in the provision for doubtful accounts. Advertising,
selling and distribution expenses are less than one percent of restaurant
franchising revenues in both the three months ended April 2, 2000 and the
three months ended April 4, 1999.
General and Administrative Expenses
Our general and administrative expenses increased $2.4 million, or 11.0%, to
$24.7 million for the three months ended April 2, 2000 from $22.3 million for
the three months ended April 4, 1999. As a percentage of revenues, our general
and administrative expenses increased to 13% for the three months ended April 2,
2000 from 12% for the three months ended April 4, 1999. 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, or 18.9%, to $11.5 million for the three months ended April 2, 2000
from $9.7 million for the three months ended April 4, 1999. As a percentage
of premium beverage revenues, general and administrative expenses increased
to 8% for the three months ended April 2, 2000 from 7% for the three months
ended April 4, 1999. The increase in general and administrative expenses
reflects (1) increased expenses as a result of the full effect in the 2000
first quarter of the Millrose acquisition and the
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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 $.2
million, or 5.2%, to $4.1 million for the three months ended April 2, 2000
from $4.3 million for the three months ended April 4, 1999. As a percentage
of soft drink concentrate revenues, general and administrative expenses were
unchanged at 14% for both the three months ended April 2, 2000 and the three
months ended April 4, 1999. The decrease in general and administrative
expenses reflects a decrease in travel expenses in the 2000 first quarter.
Restaurant Franchising -- General and administrative expenses increased $.8
million, or 10.1%, to $9.1 million for the three months ended April 2, 2000
from $8.3 million for the three months ended April 4, 1999. As a percentage
of restaurant franchising revenues, general and administrative expenses
increased to 47% for the three months ended April 2, 2000 from 46% for the
three months ended April 4, 1999. The increase in general and administrative
expenses 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 $.5 million, or 6.0%, to $8.3 million for the three
months ended April 2, 2000 from $7.8 million for the three months ended
April 4, 1999. As a percentage of revenues, our depreciation and amortization
was unchanged at 4% for both the three months ended April 2, 2000 and the three
months ended April 4, 1999. 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 $.9 million, or 16.7%, to $6.3 million
for the three months ended April 2, 2000 from $5.4 million for the three
months ended April 4, 1999. As a percentage of premium beverage revenues,
depreciation and amortization was unchanged at 4% for both the three months
ended April 2, 2000 and the three months ended April 4, 1999. The increase in
depreciation and amortization principally reflects an increase in
amortization of 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 $.4 million, or 21.8%, to
$1.5 million for the three months ended April 2, 2000 from $1.9 million for
the three months ended April 4, 1999. As a percentage of soft drink
concentrate revenues, depreciation and amortization decreased to 5% for the
three months ended April 2, 2000 from 6% for the three months ended April 4,
1999. The decrease in depreciation and amortization was 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 $.5 million in
both the three months ended April 2, 2000 and the three months ended
April 4, 1999, representing 3% of restaurant franchising revenues in both
those periods.
Capital Structure Reorganization Related Charges
The capital structure reorganization related charges of $.2 million for the
three months ended April 2, 2000 and $2.3 million for the three months ended
April 4, 1999, reflect equitable adjustments that were made to the terms of
outstanding options under the stock option plan of Snapple Beverage Group.
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The Snapple Beverage Group 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 Snapple Beverage Group 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 Snapple Beverage Group to Triarc partially offset by the effect of the
contribution of Stewart's to Snapple Beverage Group effective May 17, 1999.
The exercise prices of the Snapple Beverage Group options granted in 1997
were equitably adjusted in 1999 from $147.30 to $107.05 per share and the
exercise prices of the options granted in 1998 were equitably adjusted in 1999
from $191.00 per share to $138.83 per share. A cash payment of $51.34 per share
for the options granted in 1997 and $39.40 per share for the options granted in
1998 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 Snapple Beverage
Group common stock received upon the exercise of the stock options or
(2) the consummation of an initial public offering of Snapple Beverage
Group common stock.
Snapple Beverage Group 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
Snapple Beverage Group.
We have accounted for the equitable adjustment in accordance with the
intrinsic value method. Beginning 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 Snapple Beverage Group stock options held by Snapple Beverage
Group 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 Snapple Beverage Group through
April 4, 1999. The $.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 Snapple
Beverage Group during that quarter.
We expect to recognize additional pre-tax charges relating to this equitable
adjustment of $.4 million in the remainder of 2000 and $.2 million in 2001 as
the affected stock options held by employees of Snapple Beverage Group 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.
Operating Profit
Our operating profit increased $5.2 million, or 32.8%, to $21.1 million for
the three months ended April 2, 2000 from $15.9 million for the three months
ended April 4, 1999 as a result of the changes discussed above. As a percentage
of revenues, our operating profit increased to 11% for the three months ended
April 2, 2000 from 9% for the three months ended April 4, 1999. The changes in
operating profit by segment is as follows:
Premium Beverages -- Operating profit increased $4.0 million, or 114.9%, to
$7.5 million for the three months ended April 2, 2000 from $3.5 million for
the three months ended April 4, 1999. As a percentage of premium beverage
revenues, operating profit increased to 5% for the three months ended April
2, 2000 from 3% for the three months ended April 4, 1999.
Soft Drink Concentrates -- Operating profit increased $.6 million, or 18.3%,
to $3.9 million for the three months ended April 2, 2000 from $3.3 million
for the three months ended April 4, 1999. As a percentage of soft drink
concentrate revenues, operating profit increased to 13% for the three months
ended April 2, 2000 from 11% for the three months ended April 4, 1999.
Restaurant Franchising -- Operating profit increased $.6 million, or 6.1%, to
$9.7 million for the three months ended April 2, 2000 from $9.1 million for
the three months ended April 4, 1999. As a
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percentage of restaurant franchising revenues, operating profit was unchanged
at 50% for both the three months ended April 2, 2000 and the three months
ended April 4, 1999.
Interest Expense
Interest expense increased $4.0 million, or 24.1%, to $20.7 million for the
three months ended April 2, 2000 from $16.7 million for the three months ended
April 4, 1999. This increase reflects 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. The 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 Snapple Beverage
Group and
(2) $275.0 million of RC/Arby's Corporation 9 3/4% senior secured notes
due 2000.
Gain (Loss) on Sale of Businesses, Net
Gain on sale of businesses of $.1 million in both the three months ended
April 2, 2000 and the three months ended April 4, 1999 represents the
recognition of deferred gain on the 1997 sale of our rights to the C&C beverage
line in connection with the receipt of payments on our note receivable from the
purchaser.
Other Income, Net
Other income, net decreased $2.2 million, or 67.2%, to $1.0 million for the
three months ended April 2, 2000 from $3.2 million for the three months ended
April 4, 1999. 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 $.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% for the
three months ended April 2, 2000 and 50% for the three months ended April 4,
1999. 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.
Income Before Extraordinary Charges
Our income before extraordinary charges decreased $.5 million, or 40.0%, to
$.7 million for the three months ended April 2, 2000 from $1.2 million for the
three months ended April 4, 1999.
Extraordinary Charges
The extraordinary charges of $11.8 million for the three months ended April
4, 1999 resulted from the early extinguishment of borrowings under the former
credit facility of Snapple Beverage Group and the RC/Arby's 9 3/4% notes and
consisted of:
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(1) the write-off of previously unamortized
(a) deferred financing costs of $10.8 million and
(b) interest rate cap agreement costs of $.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.
1999 COMPARED WITH 1998
Revenues
Our revenues increased $39.0 million, or 4.8%, to $854.0 million for 1999
from $815.0 million for 1998. A discussion of the changes in revenues by segment
is as follows:
Premium Beverages -- Premium beverage revenues increased $39.6 million, or
6.5%, to $651.1 million for 1999 from $611.5 million for 1998. The increase,
which relates entirely to sales of finished product, reflects higher volume
and, to a lesser extent, higher average selling prices in 1999. The increase
in volume principally reflects (1) 1999 sales of Snapple Elements,
(2) increased cases sold to retailers through Millrose, principally
reflecting an increased focus on our products as a result of our ownership of
this distributor since February 26, 1999, (3) higher sales of diet teas and
other diet beverages and juice drinks and (4) higher sales of Stewart's
products as a result of increased distribution in existing and new markets
and the December 1998 introduction of Stewart's grape soda. The higher
average selling prices principally reflect (1) the effect of the Millrose
acquisition since February 26, 1999 whereby we sell product at higher prices
directly to retailers compared with sales at lower prices to distributors
such as Millrose and (2) selective price increases.
Soft Drink Concentrates -- Soft drink concentrate revenues decreased $3.8
million, or 3.0%, to $121.1 million for 1999 from $124.9 million for 1998.
This decrease is attributable to lower Royal Crown sales of (1) concentrate
of $2.4 million, or 1.9%, and (2) finished goods of $1.4 million, or 100%,
which the soft drink concentrate segment no longer sells. The decrease in
Royal Crown sales of concentrate reflects a $7.8 million decline in branded
sales primarily due to lower domestic volume reflecting continued competitive
pricing pressures experienced by our bottlers and lower international volume
primarily due to the continued depressed economic conditions experienced in
Russia which commenced in August 1998, partially offset by a $5.4 million
volume increase in private label sales reflecting a general business recovery
being experienced by our private label customer. The competitive pricing
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 $3.2
million, or 4.0%, to $81.8 million for 1999 from $78.6 million for 1998. This
increase reflects higher royalty revenues and slightly higher franchise fee
revenues. The increase in royalty revenues resulted from an average net
increase of 70, or 2.3%, in the number of franchised restaurants and a 2.0%
increase in same-store sales of franchised restaurants.
Gross Profit
Our gross profit increased $18.8 million, or 4.4%, to $444.2 million for
1999 from $425.4 million for 1998 principally due to the effect of higher sales
volumes as discussed above. Our gross margins were unchanged at 52%. A
discussion of gross margins by segment is as follows:
Premium Beverages -- Gross margins were unchanged in 1999 compared with 1998
at 41%. The positive effect on gross margins from (1) the selective price
increases noted above, (2) the effect of the higher selling prices resulting
from the Millrose acquisition and (3) the effect of lower freight costs was
fully offset by (1) increased packaging and raw materials costs and
(2) increased warehousing fees and overhead.
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Soft Drink Concentrates -- Gross margins increased 1% to 77% in 1999 from 76%
in 1998. This increase was due to (1) lower costs of the raw materials
aspartame and lemon oils used as a component in the manufacturing of
concentrate and (2) the effects of changes in product mix whereby the
positive effect of our no longer selling the lowest-margin finished goods in
1999 was partially offset by a shift in sales to private label concentrate in
1999 which has a lower margin than branded concentrate.
Restaurant Franchising -- Gross margins for 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 increased $3.6 million,
or 1.8%, to $201.5 million for 1999 from $197.9 million for 1998. As a
percentage of revenues, our advertising, selling and distribution expenses were
unchanged at 24% for both 1999 and 1998. A discussion of the changes in
advertising, selling and distribution expenses by segment is as follows:
Premium Beverages -- Advertising, selling and distribution expenses increased
$8.8 million, or 6.5%, to $145.6 million in 1999 from $136.8 million for
1998. As a percentage of premium beverage revenues, advertising, selling and
distribution expenses were unchanged at 22% for both 1999 and 1998. The
increase in advertising, selling and distribution expenses was principally
due to (1) an overall increase in promotional spending principally reflecting
expenditures resulting from new product introductions and overall higher
sales volume and (2) higher employee compensation and related costs
reflecting an increase in the number of sales and distribution employees.
Soft Drink Concentrates -- Advertising, selling and distribution expenses
decreased $4.4 million, or 7.6%, to $55.4 million for 1999 from $59.8 million
for 1998. As a percentage of soft drink concentrate revenues, advertising,
selling and distribution expenses decreased to 46% for 1999 from 48% for
1998. The decrease in advertising, selling and distribution expenses reflects
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 $.8 million, or 62.3%, to $.5 million for 1999 from $1.3 million
for 1998. As a percentage of restaurant franchising revenues, advertising,
selling and distribution expenses decreased to 1% for 1999 from 2% for 1998.
The decrease in advertising, selling and distribution expenses reflects a
decrease in the provision for doubtful accounts primarily due to nonrecurring
provisions in 1998 because of uncertainties regarding collectibility of some
foreign royalty revenues relating to (1) franchise operations in Mexico as a
result of litigation with Arby's Mexican master franchisee which was settled
in October 1999 and (2) franchise operations in Indonesia as a result of the
political turmoil occurring in that country in 1998 which abated in 1999.
General and Administrative Expenses
Our general and administrative expenses increased $1.7 million, or 1.9%, to
$92.9 million for 1999 from $91.2 million for 1998. As a percentage of revenues,
our general and administrative expenses were unchanged at 11% for both 1999 and
1998. A discussion of the changes in general and administrative expenses by
segment, exclusive of a $.1 million increase in general corporate expenses to
$.1 million for 1999, is as follows:
Premium Beverages -- General and administrative expenses increased $4.5
million, or 11.7%, to $42.3 million for 1999 from $37.8 million for 1998. As
a percentage of premium beverage revenues, general and administrative
expenses were unchanged at 6% for both 1999 and 1998. The increase in general
and administrative expenses reflects increases in compensation and benefit
costs primarily due to an increased number of employees.
Soft Drink Concentrates -- General and administrative expenses decreased $1.3
million, or 6.2%, to $17.9 million for 1999 from $19.2 million for 1998. As a
percentage of soft drink concentrate revenues, general and administrative
expenses were unchanged at 15% for both 1999 and 1998. The
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decrease in general and administrative expenses reflects lower compensation
and benefit costs due to a nonrecurring provision in 1998 of $1.5 million
for a severance arrangement under the last of our 1993 employment agreements.
Restaurant Franchising -- General and administrative expenses decreased $1.6
million, or 4.6%, to $32.6 million for 1999 from $34.2 million for 1998. As a
percentage of restaurant franchising revenues, general and administrative
expenses decreased to 40% for 1999 from 43% for 1998. The decrease in general
and administrative expenses principally reflects a nonrecurring provision in
1998 of (1) $.8 million for the settlement of a lawsuit with ZuZu, Inc., an
entity in which we had an investment and with whom we were developing
dual-branding strategies, and (2) $1.7 million for the then anticipated
settlement of a lawsuit with Arby's Mexican master franchisee which was
ultimately settled in October 1999, partially offset by an increase in
compensation and benefit costs due to higher incentive compensation payments
and salary increases.
Depreciation and Amortization, Excluding Amortization of Deferred Financing
Costs
Our depreciation and amortization, excluding amortization of deferred
financing costs, decreased $.7 million, or 2.3%, to $32.1 million for 1999 from
$32.8 million for 1998. As a percentage of revenues, our depreciation and
amortization was unchanged at 4% for both 1999 and 1998. 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 $1.2 million, or 5.7%, to $22.9 million
for 1999 from $21.7 million for 1998. As a percentage of premium beverage
revenues, depreciation and amortization was unchanged at 4% for both 1999 and
1998. The increase in depreciation and amortization principally reflects an
increase in amortization of goodwill and other intangibles, as a result of
the Millrose acquisition.
Soft Drink Concentrates -- Depreciation and amortization, excluding
amortization of deferred financing costs, decreased $1.6 million, or 19.2%,
to $7.0 million for 1999 from $8.6 million for 1998. As a percentage of soft
drink concentrate revenues, depreciation and amortization decreased to 6% for
1999 from 7% for 1998. The decrease in depreciation and amortization is
primarily due to the effect of $4.6 million of soft drink vending machines
purchased by Royal Crown in January 1998 becoming fully depreciated over
periods beginning in the third quarter of 1998 and continuing throughout
1999.
Restaurant Franchising -- Depreciation and amortization excluding
amortization of deferred financing costs, decreased $.3 million, or 13.4%, to
$2.2 million for 1999 from $2.5 million for 1998. As a percentage of
restaurant franchising revenues, depreciation and amortization was unchanged
at 3% for both 1999 and 1998. The decrease in depreciation and amortization
was due entirely to the nonrecurring 1998 (1) write-off of some franchise
rights and (2) amortization of a non-compete agreement becoming fully
amortized in 1998.
Capital Structure Reorganization Related Charge
The capital structure reorganization related charge of $3.3 million for 1999
reflects equitable adjustments that were made to the terms of outstanding
options under the stock option plan of Snapple Beverage Group, as discussed
above in the comparison of the 2000 first quarter with the 1999 first quarter.
There was no similar charge in 1998.
Charges (Credit) Related to Post-Acquisition Transition, Integration and Changes
to Business Strategies
The 1999 credit related to post-acquisition transition, integration and
changes to business strategies of $.5 million resulted from changes in the
estimated amount of the additional Snapple reserves for doubtful accounts
originally provided for as a component of this caption in 1997 as discussed
below in the comparison of 1998 with 1997.
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Facilities Relocation and Corporate Restructuring Charges (Credits)
The 1999 facilities relocation and corporate restructuring credits of $.5
million principally relate to severance and related termination costs associated
with the relocation of Royal Crown's corporate headquarters which were
centralized with Snapple Beverage Group's offices in White Plains, New York and
the sale of all of our company-owned Arby's restaurants, both of which took
place in 1997. The credits resulted from relatively insignificant changes to the
original estimates used in determining the related provisions for those items in
1996 and 1997 which totaled $14.9 million, including $7.1 million in 1997 which
is discussed below in the comparison of 1998 with 1997.
Operating Profit
Our operating profit increased $12.3 million to $117.5 million for 1999 from
$105.2 million for 1998. As a percentage of revenues, our operating profit
increased to 14% for 1999 from 13% for 1998 as a result of the changes discussed
above. The changes in operating profit by segment is as follows:
Premium Beverages -- Operating profit increased $.5 million, or .9%, to $56.6
million for 1999 from $56.1 million for 1998. As a percentage of premium
beverage revenues, operating profit was unchanged at 9% for both 1999 and
1998.
Soft Drink Concentrates -- Operating profit increased $5.7 million, or 68.8%,
to $14.1 million for 1999 from $8.4 million for 1998. As a percentage of soft
drink concentrate revenues, operating profit increased to 12% for 1999 from
7% for 1998.
Restaurant Franchising -- Operating profit increased $6.1 million, or 15.1%,
to $46.8 million for 1999 from $40.7 million for 1998. As a percentage of
restaurant franchising revenues, operating profit increased to 57% for 1999
from 52% for 1998.
Interest Expense
Interest expense increased $16.4 million, or 27.2%, to $76.6 million for
1999 from $60.2 million for 1998 reflecting higher average levels of debt during
1999 due to increases from the first quarter 1999 debt refinancing discussed in
the comparison of the 2000 first quarter with the 1999 first quarter and, to a
lesser extent, higher average interest rates in the 1999 period.
Gain (Loss) on Sale of Businesses, Net
Gain (loss) on sale of businesses, net consists of a loss of $.5 million for
1999 compared with a gain of $5.0 million for 1998. This change of $5.5 million
is primarily due to:
(1) a $4.7 million nonrecurring gain in 1998 from the May 1998 sale of
our former 20% interest in Select Beverages, Inc. and
(2) a $.9 million reduction to the gain from the Select Beverages sale
recognized during 1999 resulting from a post-closing adjustment to the sales
price higher than the adjustment originally estimated in determining the
$4.7 million gain on the sale recorded in 1998.
The post-closing adjustment was determined as a result of an arbitration hearing
which commenced and concluded in 1999.
Other Income, Net
Other income, net increased $1.5 million, or 28.0%, to $6.8 million in 1999
from $5.3 million for 1998. This increase was principally due to $1.6 million of
higher interest income on cash equivalents as a result of higher invested cash
during the period February 25, 1999 to March 30, 1999 and the $1.2 million
nonrecurring equity in the loss of Select Beverages in 1998.
The higher investment in cash equivalents during the period from February
25, 1999 to March 30, 1999 represented approximately $380.0 million of proceeds
from the February 25, 1999 debt refinancing which were not utilized until March
30, 1999 when these proceeds, together with substantially all of our cash and
cash equivalents then on hand, were used to repay $275.0 million of borrowings
under the
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RC/Arby's 9 3/4% senior notes and $12.1 million of related accrued interest and
redemption premium and pay a $124.1 million distribution to Triarc. Our equity
in the loss of Select Beverages reflected our 20% ownership through the sale of
that ownership in May 1998. These increases were partially offset by:
(1) $.8 million of lower rental income due to the effective termination
of our sublease in early 1999 for an office/warehouse facility and a
decrease in equipment leasing by Snapple and
(2) a $.7 million change in gains or losses on sales of properties which
aggregated a $.2 million loss in 1999 compared with a $.5 million gain in
1998.
We had subleased an office/warehouse facility formerly used by our soft
drink concentrate segment until early 1999 when the sublessee assumed the
underlying lease from us. Snapple, under its prior ownership by The Quaker Oats
Company, financed some equipment purchases by its co-packers, a program which is
being phased-out under our ownership.
Provision for Income Taxes
The provision for income taxes represented an effective rate of 46% for both
1999 and 1998. The 1999 effective tax rate reflected an increase due to the
greater impact of the amortization of non-deductible goodwill resulting from
lower 1999 pre-tax income, entirely due to higher net non-operating expenses.
This was fully offset by the 1999 release of excess income tax reserves as a
result of the settlement of Internal Revenue Service examinations of our tax
returns for the tax years from 1989 to 1993.
Income Before Extraordinary Charges
Our income before extraordinary charges decreased $4.5 million, or 15.0%, to
$25.5 million for 1999 from $30.0 million for 1998.
Extraordinary Charges
The extraordinary charges of $11.8 million for 1999 resulted from the early
extinguishment of borrowings under the former credit facility of Snapple
Beverage Group 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 $.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. There were no extraordinary charges in
1998.
1998 COMPARED WITH 1997
We completed three significant transactions during 1997:
on May 22, 1997 we acquired Snapple,
on November 25, 1997 we acquired Stewart's, and
on May 5, 1997 we sold all of our company-owned Arby's restaurants.
As a result of these transactions, our 1998 results reflect for the entire
period the results of operations of Snapple and Stewart's but no results of
operations attributable to the ownership of the sold restaurants. In contrast,
1997 results reflect the results of operations of Snapple and Stewart's only
from their dates of acquisition and reflect the results of operations
attributable to the ownership of the sold restaurants through the date of sale.
Because of these three significant transactions, 1998 results and 1997
results are not comparable. In order to create a more meaningful comparison of
our results of operations between the two years,
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where applicable we have adjusted for the effects of these transactions in the
segment discussions of revenues and gross profit below.
Revenues
Our revenues increased $118.9 million, or 17.1%, to $815.0 million for 1998
from $696.1 million for 1997. This increase primarily results from the inclusion
of Snapple and Stewart's sales for all of 1998, compared with inclusion for only
a portion of 1997, which resulted in $191.9 million of additional revenues.
These increases were partially offset by the absence during 1998 of sales
attributable to the ownership of the sold restaurants. These sales were $74.2
million from January 1 to May 5, 1997, less the effect of royalties from those
restaurants during the same portion of the 1998 period of $3.2 million. Without
the effects of the acquisitions of Snapple and Stewart's and the sale of the
company-owned restaurants, our revenues declined by $2.0 million, or .3%, to
$619.9 million for 1998 from $621.9 million for 1997. A discussion of the
changes in revenues by segment is as follows:
Premium Beverages -- We have adjusted our 1998 results by including the
results of Snapple and Stewart's only for the same calendar period they were
included during 1997. After giving effect to these adjustments, our premium
beverage revenues increased $10.8 million, or 2.6%, to $419.6 million for
1998 from $408.8 million for 1997. The increase was due to an increase in
sales of finished goods of $12.5 million partially offset by a decrease in
sales of concentrate of $1.7 million, which the premium beverage segment
sells to only one international customer. The increase in sales of finished
goods principally reflects net higher volume of $18.9 million primarily due
to new product introductions as well as increases in sales of teas, diet teas
and other diet beverages. This increase was partially offset by the $6.4
million effect of lower average selling prices. The lower average selling
prices were principally due to a change in Snapple's distribution in Canada
from a company-owned operation with higher selling prices to an independent
distributor with lower selling prices.
Soft Drink Concentrates -- Soft drink concentrate revenues decreased $22.0
million, or 15.0%, to $124.9 million for 1998 from $146.9 million for 1997.
This decrease is attributable to lower sales of concentrate of $15.5 million,
or 11.2%, and finished goods of $6.5 million, or 81.7%. The decrease in Royal
Crown sales of concentrate reflects (1) a $13.7 million decline in branded
sales, primarily due to lower domestic volume reflecting competitive pricing
pressures experienced by our bottlers and (2) a $1.8 million volume decrease
in private label sales due principally to inventory reduction programs of our
private label customer. The domestic volume decline in branded concentrate
sales was partially offset by the fact that as a result of the sale in July
1997 of the C&C beverage line, we now sell concentrate to the purchaser of
the C&C beverage line rather than finished goods. The decrease in sales of
finished goods of the soft drink concentrates segment was principally due to
the sale of the C&C beverage line and therefore the absence in 1998 of sales
of C&C finished product.
Restaurants -- We have adjusted 1997 results to exclude net sales
attributable to the company-owned restaurants which were sold and results for
the same portion of 1998 to exclude royalties from those sold restaurants.
After giving effect to these adjustments, revenues increased $9.2 million, or
13.8%, to $75.4 million for 1998 from $66.2 million for 1997 due to higher
royalty revenues reflecting (1) a 4.6% increase in average royalty rates due
to the declining significance of older franchise agreements with lower rates,
(2) a 3.0% increase in same-store sales of franchised restaurants and (3) a
net increase of 47, or 1.6%, in the number of franchised restaurants, which
generally experience higher than average restaurant volumes.
Gross Profit
Our gross profit increased $61.6 million, or 16.9% to $425.4 million for
1998 from $363.8 million for 1997. Gross profit increased $80.9 million due to
the inclusion of gross profit relating to Snapple and Stewart's sales for all of
1998, compared with inclusion for only a portion of 1997. This increase was
partially offset by the absence during 1998 of the $15.0 million in 1997 of
gross profit attributable to ownership of the sold restaurants less the
incremental royalties from those sold restaurants during that portion of the
1998 period of $3.2 million. Giving effect to the adjustments described above
relating to
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the acquisitions of Snapple and Stewart's and the sale of the company-owned
restaurants, our gross profit decreased $7.5 million. This decrease occurred,
despite the effect of higher sales volumes discussed above, due to a slight
decrease in our aggregate gross margins to 55% from 56%. This decrease in gross
margins is principally due to an overall shift in revenue mix and lower gross
margins of the premium beverage and soft drink concentrate segments, both as
discussed in more detail below. A discussion of the changes in gross margins by
segment, adjusted for the effects of the adjustments noted above, is as follows:
Premium Beverages -- Giving effect to the adjustments described above
relating to the Snapple and Stewart's acquisitions, gross margins decreased
to 40% for 1998 from 41% for 1997. The decrease in gross margins was
principally due to the effects of (1) changes in product mix, (2) the change
in Snapple's Canadian distribution discussed above and (3) $3.3 million of
increased provisions for obsolete inventory. The increased provisions for
obsolete inventory principally resulted from raw materials and finished goods
inventories that passed their shelf lives and that were not timely used due
to (1) difficulties experienced as we transitioned to our new manufacturing
systems and (2) our overstocking some raw materials and finished products in
our attempt to minimize unfilled orders in order to improve customer
satisfaction. These decreases were substantially offset by the effects of the
reduced costs of some raw materials, principally glass bottles and flavors,
and lower freight costs in 1998.
Soft Drink Concentrates -- Gross margins were unchanged at 77% for 1998 and
1997. The positive effect of the shift during 1998 to higher-margin
concentrate sales from lower-margin finished goods was fully offset by a 1997
nonrecurring $1.1 million reduction to cost of sales resulting from the
guarantee to us of minimum gross profit levels on sales to our private label
customer and lower private label gross margins. We had no similar guarantee
of minimum gross profit levels in 1998.
Restaurants -- After giving effect to the adjustments described above with
respect to the restaurants sold, gross margins for each year are 100% because
royalties and franchise fees, with no associated cost of sales, now
constitute the total revenues of the segment.
Advertising, Selling and Distribution Expenses
Our advertising, selling and distribution expenses increased $14.7 million,
or 8.0%, to $197.9 million for 1998 from $183.2 million for 1997. As a
percentage of revenues, our advertising, selling and distribution expenses
decreased to 24% for 1998 from 26% for 1997. A discussion of the changes in
advertising, selling and distribution expenses by segment is as follows:
Premium Beverages -- Advertising, selling and distribution expenses increased
$35.7 million, or 35.3%, to $136.8 million for 1998 from $101.1 million for
1997. As a percentage of premium beverage revenues, advertising, selling and
distribution expenses decreased to 22% for 1998 from 25% for 1997. The
increase in advertising, selling and distribution expenses principally
reflects the inclusion of Snapple and Stewart's for the full 1998 year
partially offset by a decrease in the expenses of the premium beverage
segment exclusive of the full period effect of Snapple and Stewart's
principally due to less costly promotional programs.
Soft Drink Concentrates -- Advertising, selling and distribution expenses
decreased $13.2 million, or 18.1%, to $59.8 million for 1998 from $73.0
million for 1997. As a percentage of soft drink concentrate revenues,
advertising, selling and distribution expenses decreased to 48% for 1998 from
50% for 1997. The decrease in advertising, selling and distribution expenses
was principally due to lower bottler promotional reimbursements resulting
from the decline in branded concentrate sales volume.
Restaurants -- Advertising, selling and distribution expenses decreased $7.8
million, or 86.5%, to $1.3 million for 1998 from $9.1 million for 1997. As a
percentage of restaurant franchising revenues, advertising, selling and
distribution expenses decreased to 2% for 1998 from 6% for 1997. The decrease
in advertising, selling and distribution expenses was principally due to
local restaurant advertising and marketing expenses no longer needed for the
sold restaurants which commenced in 1997 with the May 1997 sale of the
restaurants and increased to its full effect in 1998, partially
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offset by the nonrecurring provisions in 1998 for doubtful accounts relating
to some foreign royalty revenues as discussed above in the comparison of 1999
with 1998.
General and Administrative Expenses
Our general and administrative expenses increased $7.6 million, or 9.1%, to
$91.2 million for 1998 from $83.6 million for 1997. As a percentage of revenues,
our general and administrative expenses decreased to 11% for 1998 from 12% for
1997. A discussion of the changes in general and administrative expenses by
segment, exclusive of a $.1 million decrease in general corporate expenses, is
as follows:
Premium Beverages -- General and administrative expenses increased $9.6
million, or 34.0%, to $37.8 million for 1998 from $28.2 million for 1997. As
a percentage of premium beverage revenues, general and administrative
expenses decreased to 6% for 1998 from 7% for 1997. The increase in general
and administrative expenses principally reflects the inclusion of Snapple and
Stewart's operations for all of 1998, partially offset by nonrecurring 1997
costs in connection with the integration of the Snapple business following
its acquisition.
Soft Drink Concentrates -- General and administrative expenses decreased $.7
million, or 3.5%, to $19.2 million for 1998 from $19.9 million for 1997. As a
percentage of soft drink concentrate revenues, general and administrative
expenses increased to 15% for 1998 from 13% for 1997. The decrease in general
and administrative expenses principally reflects an overall cost savings
resulting from the centralization of Royal Crown's corporate headquarters
with Snapple Beverage Group's offices, partially offset by a provision in
1998 of $1.5 million for a severance arrangement under the last of our 1993
executive employment agreements.
Restaurants -- General and administrative expenses decreased $1.2 million, or
3.2%, to $34.2 million for 1998 from $35.4 million for 1997. As a percentage
of restaurant franchising revenues, general and administrative expenses
increased to 43% for 1998 from 25% for 1997. The decrease in general and
administrative expenses principally reflects reduced costs for administrative
support, principally payroll, no longer required for the sold restaurants and
other cost reduction measures as discussed above in the comparison of 1999
with 1998, partially offset by provisions in 1998 of (1) $.8 million for the
settlement of a lawsuit with ZuZu and (2) $1.7 million for the then
anticipated settlement of a lawsuit with Arby's Mexican master franchisee.
Depreciation and Amortization, Excluding Amortization of Deferred Financing
Costs
Our depreciation and amortization, excluding amortization of deferred
financing costs, increased $7.5 million, or 30.0%, to $32.8 million for 1998
from $25.3 million for 1997. As a percentage of revenues, our depreciation and
amortization was unchanged at 4% for both 1998 and 1997. 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 $5.4 million, or 33.4%, to $21.7 million
for 1998 from $16.3 million for 1997. As a percentage of premium beverage
revenues, depreciation and amortization was unchanged at 4% for both 1998 and
1997. The increase in depreciation and amortization principally reflects the
inclusion of Snapple and Stewart's for all of 1998.
Soft Drink Concentrates -- Depreciation and amortization, excluding
amortization of deferred financing costs, increased $2.3 million, or 36.3%,
to $8.6 million for 1998 from $6.3 million for 1997. As a percentage of soft
drink concentrate revenues, depreciation and amortization increased to 7% for
1998 from 4% for 1997. The increase in depreciation and amortization was
primarily due to depreciation expense on $4.6 million of vending machines
purchased by Royal Crown in January 1998 which were depreciated over periods
of up to two years.
Restaurants -- Depreciation and amortization, excluding amortization of
deferred financing costs, decreased $.2 million, or 6.2%, to $2.5 million for
1998 from $2.7 million for 1997. As a percentage of restaurant franchising
revenues, depreciation and amortization increased to 3% for 1998 from
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2% for 1997. The decrease in depreciation and amortization is principally due
to nonrecurring 1997 amortization of $.5 million of a non-compete agreement
which became fully amortized in February 1998, partially offset by the 1998
write-off of some franchise rights.
Charges (Credit) Related to Post-Acquisition Transition, Integration and Changes
to Business Strategies
The nonrecurring charges related to post-acquisition transition, integration
and changes to business strategies of $33.8 million for 1997 were associated
with the Snapple acquisition and, to a much lesser extent, the Stewart's
acquisition. Those charges consisted of:
(1) a $12.6 million write-down of glass front vending machines based on
the reduction in our estimate of their value to scrap value based on our
plans for their future use, resulting from our decision to no longer sell
the machines to our distributors but to allow them to use the machines at
locations chosen by them,
(2) a $6.7 million provision for additional reserves for legal matters
based on our change in Quaker Oats' estimate of the amounts required
reflecting our plans and estimates of costs to resolve these matters,
because we had decided to attempt to quickly settle these matters in order
to improve relationships with customers,
(3) a $3.2 million provision for additional reserves for doubtful
accounts of Snapple and the effect of the Snapple acquisition on the
collectibility of a receivable from our affiliate, MetBev, Inc., based on
our change in estimate of the related write-off to be incurred, because we
had decided not to actively seek to collect some balances in order to
improve relationships with customers,
(4) a $2.8 million provision for fees paid to Quaker Oats under a
transition services agreement whereby Quaker Oats provided some operating
and accounting services for Snapple through the end of our 1997 second
quarter while we transitioned the records, operations and management to our
systems,
(5) the $2.5 million portion of the post-acquisition period promotional
expenses we estimated was related to the pre-acquisition period as a result
of our then current operating expectations, because we had decided not to
pursue many questionable claimed promotional credits in order to improve
relationships with customers,
(6) a $4.0 million provision for certain costs in connection with the
successful completion of the acquisition of Snapple and Mistic refinancing
in connection with entering into a credit facility at the time of the
Snapple acquisition, because we had paid a fee to Triarc in order to
compensate Triarc for its recurring indirect costs incurred while providing
assistance in consummating these transactions,
(7) a $1.6 million provision for costs, principally for independent
consultants, incurred in connection with the data processing implementation
of the accounting systems for Snapple, including costs incurred relating to
an alternative system that was not implemented. Under Quaker Oats'
ownership, Snapple did not have its own independent data processing
accounting systems, and
(8) a $.4 million acquisition related sign-on bonus.
You should read Note 11 to the audited consolidated financial statements of
Triarc Consumer Products Group appearing elsewhere in this prospectus where
additional disclosures relating to the charges related to post-acquisition
transition, integration and changes to business strategies are provided.
Facilities Relocation and Corporate Restructuring Charges (Credits)
The nonrecurring facilities relocation and corporate restructuring charges
of $7.1 million for 1997 principally consisted of:
(1) $5.6 million of employee severance and related termination costs and
employee relocation costs associated with restructuring the restaurant
segment in connection with the sale of company-owned restaurants,
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(2) $1.2 million of costs associated with the relocation of Royal
Crown's corporate headquarters and
(3) to a much lesser extent, $.3 million for the write-off of the
remaining unamortized costs of some beverage distribution rights reacquired
in prior years and no longer being utilized by us.
By disposing of the company-owned restaurants and focusing on solely being a
franchisor of restaurants, we anticipated that we would realize operating profit
improvements. We anticipated that the relocation of Royal Crown would result in
(1) improved operating results through cost savings by combining some corporate
functions with those of Snapple Beverage Group and (2) improved operations by
sharing the experienced senior management team of Snapple Beverage Group.
You should read Note 12 to the audited consolidated financial statements of
Triarc Consumer Products Group appearing elsewhere in this prospectus where
additional disclosures relative to the 1997 facilities relocation and corporate
restructuring charges are provided.
Operating Profit
Our operating profit increased $73.3 million, or 230.0% to $105.2 million
for 1998 from $31.9 million for 1997. As a percentage of revenues, our operating
profit increased to 13% for 1998 from 5% for 1997 as a result of the changes
discussed above. A discussion of the changes in operating profit by segment,
exclusive of a $.1 million decrease in general corporate operating loss, is as
follows:
Premium Beverages -- Operating profit increased $64.8 million to $56.1
million for 1998 from an operating loss of $8.7 million for 1997. As a
percentage of premium beverage revenues, operating profit increased to 9% for
1998 from a loss of 2% for 1997.
Soft Drink Concentrates -- Operating profit decreased $3.8 million, or 31.2%,
to $8.4 million for 1998 from $12.2 million for 1997. As a percentage of soft
drink concentrate revenues, operating profit decreased to 7% for 1998 from 8%
for 1997.
Restaurant Franchising -- Operating profit increased $12.2 million, or 42.6%,
to $40.7 million for 1998 from $28.5 million for 1997. As a percentage of
restaurant franchising revenues, operating profit increased to 52% for 1998
from 20% for 1997.
Interest Expense
Interest expense increased $2.2 million, or 3.8%, to $60.2 million for 1998
from $58.0 million for 1997. This increase reflects the effect of higher average
levels of debt due to the inclusion of borrowings by Snapple in connection with
its acquisition, $213.3 million outstanding as of January 3, 1999, for all of
1998, compared with inclusion for only a portion of 1997. This increase was
partially offset by:
(1) the elimination of interest on $69.6 million of mortgage and
equipment notes payable and capitalized lease obligations assumed by the
purchaser of the sold restaurants for all of 1998, compared with the
elimination of such interest for only a portion of 1997 and
(2) to a lesser extent, the reduction of outstanding principal balances
aggregating $29.7 million under notes payable to Triarc for all of 1998,
compared with the reduction for only a portion of 1997, forgiven or repaid
in connection with the sale of the restaurants.
Gain (Loss) on Sale of Businesses, Net
Gain (loss) on sale of businesses, net consists of a gain of $5.0 million
for 1998 compared with a loss of $3.5 million for 1997. This change of $8.5
million is primarily due to:
(1) a $4.7 million gain from the May 1998 sale of our 20% interest in
Select Beverages and
(2) a $4.1 million nonrecurring loss in 1997 from the May 1997 sale of
company-owned restaurants.
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Other Income, Net
Other income, net decreased $.2 million, or 4.2%, to $5.3 million for 1998
from $5.5 million for 1997 principally due to:
(1) a reduction of $2.1 million in our equity in the income or losses of
Select Beverages to a loss of $1.2 million in 1998 compared with income of
$.9 million in 1997 and
(2) a nonrecurring $.9 million gain in 1997 on lease termination.
We terminated a lease for a portion of the space no longer required in the
current headquarters of the restaurant group and former headquarters of Royal
Crown due to staff reductions as a result of the restaurants sale and the
relocation of the Royal Crown headquarters. These effects were partially offset
by:
(1) $1.2 million of higher interest income on cash equivalents due to
higher average amounts of cash equivalents in 1998 reflecting 1998 cash
flows from operations and
(2) $1.0 million of the full period effect of Snapple, other than equity
in the earnings or losses of investees, consisting principally of increased
interest income and rental income.
Income Taxes
The provision for income taxes for 1998 represented an effective rate of 46%
and the benefit from income taxes for 1997 represented an effective rate of 21%.
The effective rate is higher in the 1998 period principally due to:
(1) the differing impact on the respective effective income tax rates of
the amortization of non-deductible goodwill in a period with pre-tax income
(1998) compared with a period with a pre-tax loss (1997) and
(2) the differing impact of the mix of pre-tax loss or income among the
consolidated entities since we file state tax returns on an individual
company basis.
Income (Loss) Before Extraordinary Charges
Our income (loss) before extraordinary charges improved $49.0 million to
income of $30.0 million for 1998 from a loss of $19.0 million for 1997.
Extraordinary Charges
The 1997 nonrecurring extraordinary charges of $3.0 million resulted from
the early assumption or extinguishment of:
(1) mortgage and equipment notes payable assumed by the purchaser in the
sale of our company-owned restaurants and
(2) obligations under Mistic's former credit facility refinanced in
connection with the financing of the Snapple acquisition.
These extraordinary charges were comprised of the write-off of $4.9 million
of previously unamortized deferred financing costs less the related income tax
benefit of $1.9 million.
PRO FORMA LIQUIDITY AND CAPITAL RESOURCES
INITIAL PUBLIC OFFERING, NEW CREDIT FACILITY AND RELATED TRANSACTIONS
Upon the successful completion of the offering and the restructuring
transactions referred to in the section of this discussion called 'Presentation
of Financial Information,' RC/Arby's will make a cash capital contribution to
Snapple Beverage Group of $178.0 million of net proceeds expected from its
financing of the Arby's restaurant franchising business plus substantially all
existing cash and cash equivalents of the Arby's restaurant franchising business
and RC/Arby's, which as of April 2, 2000 was $10.7 million.
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We will also enter into a new credit facility that will not include
RC/Arby's or Arby's as borrowers or guarantors and will repay all outstanding
borrowings under our existing credit facility. In accordance with a commitment
letter for a new credit agreement, there will be two classes of term loans
repayable over five and seven years. Borrowings may be made by certain of our
subsidiaries and would be split equally between the two classes except that the
class repayable in five years is subject to maximum borrowings of $80.0 million.
As of April 2, 2000, we would have had to borrow $192.0 million of term loans
under this new credit facility, together with our other sources of funds, to
enable us to repay the borrowings under our existing credit facility. See below
for detail of the sources and uses of funds. This $192.0 million of assumed term
loan borrowings would be repayable in quarterly installments totaling $17.1
million in each of the first five years and $53.2 million in each of the last
two years. The new credit agreement will also provide a five-year $50.0 million
revolving credit facility in accordance with the commitment letter. Borrowings
under the new credit facility are expected to bear interest, at our option, at
the base rate plus an applicable margin ranging from 1.25% to 1.75% or LIBOR
plus an applicable margin ranging from 2.25% to 2.75%. The applicable margins on
the revolving loans and the term A loans may be reduced beginning six months
after the offering, based on our leverage ratio. In addition the new credit
agreement will contain:
(1) restrictive covenants, including customary limitations on our
ability to incur debt, pay dividends and make capital expenditures and
investments or acquisitions, and
(2) as long as more than $100.0 million of term loans are outstanding, a
mandatory annual prepayment requirement equal to 50% of excess cash flow, as
such term will be defined in the new credit agreement, beginning in 2002
with respect to 2001.
Under the new credit agreement, substantially all of our assets, other than
cash and cash equivalents, will be pledged. In addition, obligations under the
new credit facility will be guaranteed by Snapple Beverage Group and
substantially all of the domestic subsidiaries of Snapple, Mistic, Stewart's and
Royal Crown. As collateral for the guarantees under the new credit facility, all
of the stock of Snapple, Mistic, Stewart's and Royal Crown and all of their
domestic subsidiaries and 65% of the stock of each of their directly-owned
foreign subsidiaries will be pledged. See 'Description of Indebtedness -- New
Credit Facility.'
We expect to use
(1) the net $93.0 million minimum proceeds of the offering,
(2) the cash capital contribution from RC/Arby's, which would total
$188.7 million as of April 2, 2000,
(3) the borrowings of term loans under a new credit facility, which
would total $192.0 million as of April 2, 2000 and
(4) existing cash and cash equivalents in excess of approximately $2.0
million retained for working capital purposes, which would be $11.5 million
as of April 2, 2000,
to repay or pay, based on balances at April 2, 2000,
(1) the $468.4 million principal amount of term loans under our existing
credit facility described below under 'Historical Liquidity and Capital
Resources -- Existing Debt Agreements,'
(2) $5.9 million of related accrued interest,
(3) $5.8 million of related prepayment penalties and
(4) $5.1 million of estimated fees and expenses, exclusive of $0.4
million paid through April 2, 2000 and underwriter's discount, related to
the initial public offering and the new credit agreement.
When we refer to the '2000 Refinancing Transactions,' we mean the completion
of the offering, the entering into of the new credit facility and the related
transactions described above.
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PRO FORMA CAPITALIZATION AND INTEREST EXPENSE
Assuming the 2000 Refinancing Transactions had been completed on April 2,
2000, our capitalization would have been $570.3 million consisting of $494.7
million of long-term debt, including current portion of $19.7 million, and $75.6
million of stockholders' equity.
Assuming the 2000 Refinancing Transactions were completed on April 2, 2000,
scheduled maturities of our long-term debt for the last three quarters of 2000,
exclusive of a $28.3 million required excess cash flow prepayment made in the
2000 second quarter under our existing credit agreement, would increase to $15.4
million, including $12.8 million under the new credit agreement. This increase
reflects higher payments under the new credit agreement less $1.3 million of
debt payments for the restaurant franchising business, which will not be part of
the restructured Snapple Beverage Group.
As a result of the intended prepayment of the term loans we expect to
recognize an extraordinary charge, which as of April 2, 2000 would have been
approximately $12.1 million, consisting of:
(1) the write-off of $13.9 million of previously unamortized deferred
financing costs relating to the repaid term loans and
(2) the payment of $5.8 million of prepayment penalties relating to
certain of the repaid term loans,
both less the related income tax benefit of $7.6 million.
Assuming the 2000 Refinancing Transactions had occurred on January 4, 1999,
reported interest expense of $76.6 million for the year ended January 2, 2000
would have been reduced to $51.2 million and reported interest expense of $20.7
million for the three months ended April 2, 2000 would have been reduced to
$12.5 million.
You should refer to the 'Unaudited Pro Forma Condensed Consolidated
Financial Statements' appearing elsewhere in this prospectus for further
information regarding the assumptions and adjustments made in deriving the pro
forma information discussed above.
PRO FORMA CASH FLOWS FROM OPERATIONS
We expect positive cash flows from operations during the remainder of 2000,
despite the absence of cash flows from the restaurant franchising business, due
to:
(1) the expectation of increasingly profitable operations for the
remainder of the year due to the seasonality of our beverage business, with
the spring and summer months as the peak season,
(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 and
(3) the reduction of interest expense described above.
Our operating cash flow requirements include payments we will be required to
make to Triarc under a management services agreement and a tax-sharing
agreement, as well as interest payments to lenders for our debt service.
Management Services Fees
We receive from Triarc various management services, including legal,
accounting, tax, insurance and financial, under a management services agreement
with our combined beverage business. Under this agreement 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 $6.9 million.
Income Taxes
We are included in the consolidated Federal income tax return and some
combined state income tax returns of Triarc. Under an existing tax-sharing
agreement between Triarc Consumer Products Group and Triarc that will be amended
before the completion of this offering, we are required to pay to Triarc amounts
relating to income taxes based on our consolidated taxable income on a
stand-alone
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basis as long as we are included in the consolidated or combined income tax
returns of Triarc. We expect to make quarterly tax-sharing payments during the
remainder of 2000 under this tax-sharing agreement.
Debt Service
Our principal debt after the offering will be debt under the new credit
facility described above and $300.0 million of senior subordinated notes. The
notes bear interest at a rate of 10 1/4% per year and interest is payable on a
semiannual basis. The 10 1/4% notes are guaranteed by all of our domestic
subsidiaries and contain customary limitations on our ability to incur debt, pay
dividends and make investments.
PRO FORMA CASH REQUIREMENTS
Capital Expenditures
We expect that cash capital expenditures will approximate $8.2 million for
the last three quarters 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
distribution facilities.
Acquisitions
To further our growth strategy, we will consider selective business
acquisitions, as appropriate, to grow strategically and explore other
alternatives to the extent we have available resources to do so.
General
Upon completion of the 2000 Refinancing Transactions, our cash balances will
decrease to approximately $2.0 million.
Assuming the 2000 Refinancing Transactions were completed on April 2, 2000,
we expect our consolidated cash requirements for the remainder of 2000,
exclusive of operating cash flow requirements as discussed above, would consist
principally of:
(1) debt principal repayments of $15.4 million,
(2) capital expenditures of approximately $8.2 million, as described
above, and
(3) business acquisitions, if any.
We would anticipate meeting all of these requirements through:
(1) $2.0 million of remaining cash and cash equivalents,
(2) cash flows from operations and
(3) borrowing availability under the new $50.0 million revolving credit
facility.
We may need to explore additional financing sources if we decide to
consummate any significant acquisitions or if our cash needs are greater than we
anticipate. Potential financing sources include the issuance of debt or equity
securities. You should be aware that our ability to issue additional equity may
be adversely impacted as a result of Triarc's consideration of a possible
tax-free separation of our company, and our ability to issue debt securities is
limited by the restrictive covenants in our debt instruments. See 'Risk
Factors.'
We will no longer have any ownership interest in the restaurant franchising
business after the offering. In 1999, the restaurant franchising business
contributed approximately 40% of the operating profit and 33% of the EBITDA of
Triarc Consumer Products Group. We believe that we will be able to meet our cash
requirements from the sources described above notwithstanding our inability to
use cash generated by the restaurant franchising business to fund our cash needs
in the future.
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HISTORICAL LIQUIDITY AND CAPITAL RESOURCES
Cash Flows From Operations
Our consolidated operating activities provided cash and cash equivalents,
which we refer to in this discussion as cash, of $57.6 million during 1999 and
used cash of $25.5 million during the three months ended April 2, 2000.
The net cash provided by operating activities in 1999 principally reflects:
(1) net income of $13.7 million and
(2) non-cash charges of $70.9 million, principally depreciation and
amortization of $36.5 million, a provision for deferred income taxes of
$17.8 million and the write-off of unamortized deferred financing costs and
interest rate cap agreement costs of $10.9 million relating to the early
extinguishment of debt which was refinanced,
both partially offset by cash used by changes in operating assets and
liabilities of $26.9 million.
The cash used by changes in operating assets and liabilities of $26.9
million in 1999 principally reflects increases in receivables of $12.8 million
and inventories of $12.1 million.
The increase in receivables was principally due to increased premium
beverage sales in December 1999 compared with December 1998.
The increase in inventories was primarily due to the recent introduction of
several new premium beverage product lines and the buildup of our beverage
inventories in late December 1999 to mitigate the effects of temporary supply
disruptions which might have occurred if some of our suppliers' computer systems
were not year 2000 compliant.
Accounts payable which decreased $1.6 million did not increase in proportion
with the late December 1999 inventory buildup primarily due to accelerated
payments to suppliers in December 1999 compared with December 1998.
The net cash used in operating activities in the 2000 first quarter reflects
cash used by changes in operating assets and liabilities of $36.8 million
partially offset by:
(1) net income of $.7 million,
(2) net non-cash charges, principally depreciation and amortization, of
$10.1 million and
(3) other of $.5 million.
The cash used by changes in operating assets and liabilities of $36.8
million in the 2000 first quarter 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 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
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(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 $31.7 million at January 2, 2000 principally due to working
capital provided by operations in excess of both capital expenditures and
reclassifications of long-term debt to current liabilities.
Our capitalization at April 2, 2000 aggregated $604.4 million consisting of
$775.9 million of long-term debt, including current portion, less $171.5 million
of member's deficit. Our total capitalization decreased $0.6 million from $605.0
million at 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.
Existing Debt Agreements
We currently 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. There were no borrowings of revolving loans through
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 on May 4, 2000 in order to
fund a $28.3 million excess cash flow prepayment.
Revolving loans will be due in full in 2005. Maturities of the term loans
are $5.6 million for the last three quarters of 2000 representing three
quarterly installments, after considering the effect of the excess cash flow
prepayment, increasing annually through 2006 with a final payment in 2007.
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 our existing 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 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 Guarantees
Under our existing 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
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(2) the existing credit facility are guaranteed by Triarc Consumer
Products Group, Snapple Beverage Group 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 existing 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.
Arby's remains contingently responsible for operating and capitalized lease
payments, if the purchaser of the Arby's restaurants does not make the 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 $87.0 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 $.5
million as of April 2, 2000.
Capital Expenditures
Cash capital expenditures amounted to $8.5 million during 1999 and $7.4
million during the 2000 first quarter. We expect that cash capital expenditures
will approximate $8.3 million for the last three quarters 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 packaging
line at one of our company-owned distributors.
Acquisitions
In February 1999 we acquired Millrose, a New Jersey distributor of Snapple
and Stewart's products, for $17.5 million, including expenses of $.2 million.
On January 2, 2000 we acquired Snapple Distributors of Long Island, Inc., a
distributor of Snapple and Stewart's products on Long Island, New York, for cash
of $16.9 million, including estimated expenses as of April 2, 2000, subject to
post-closing adjustments. We also entered into a three-year non-compete
agreement with certain of the sellers for $2.0 million payable ratably over a
ten-year period.
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., 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 were reimbursed to
us by Triarc, and $.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.
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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, of which $6.9 million relates to our combined beverage
businesses and $3.9 million relates to Arby's. In addition, as of April 2, 2000
we owed $2.6 million to Triarc with respect to the 1999 fourth quarter.
Income Taxes
We are included in the consolidated Federal income tax return and some
combined state income tax returns of Triarc. Under a tax-sharing agreement with
Triarc, we are required to pay to Triarc amounts relating to income taxes based
on our consolidated taxable income on a stand-alone basis.
While no tax-sharing payments were made during 1999 or the 2000 first
quarter, a tax-sharing payment of $1.4 million with respect to the 2000 first
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 this 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 to Triarc Consumer Products Group to the extent interest on the
10 1/4% notes and up to $.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 our existing 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
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requirements for the last three quarters 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 $.1 million.
LEGAL AND ENVIRONMENTAL MATTERS
We are involved in litigation, claims and environmental matters incidental
to our businesses. We had 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.
INFLATION AND CHANGING PRICES
We believe that inflation did not have a significant effect on our gross
margins during 1997, 1998, 1999 and the 2000 first quarter since inflation rates
generally remained at relatively low levels. Historically, we have been
successful in dealing with the impact of inflation to varying degrees within the
limitations of the competitive environment of each segment of our business. In
the restaurant franchising segment in particular, the impact of any future
inflation should be limited since our restaurant operations are exclusively
franchising following the 1997 sale of all company-owned restaurants.
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 EBITDA 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.
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 Statements of Financial Accounting Standards Nos. 137 and 138, 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 some 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.
In March 2000 the Financial Accounting Standards Board issued FASB
Interpretation No. 44 'Accounting for Certain Transactions Involving Stock
Compensation, an Interpretation of APB Opinion No. 25.' The Company accounts for
stock-based compensation under the intrinsic value
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method set forth in Accounting Principles Board Opinion No. 25. Interpretation
44 clarifies the application of APB Opinion No. 25 for only certain issues.
Among other issues, Interpretation 44 clarifies (1) the definition of an
employee for purposes of applying APB Opinion No. 25, (2) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (3) the
accounting consequences of various modifications to the terms of a previously
fixed stock option or award and (4) the accounting for an exchange of stock
compensation awards in a business combination.
Interpretation 44 is effective July 1, 2000, but some guidance covers on a
prospective basis specific events that occurred after either December 15, 1998
or January 12, 2000. We believe the effect of Interpretation 44 on our financial
position and results of operations will be limited to future transactions, if
any. The effect on our current outstanding stock options we believe would be
limited to any future modifications to the terms of the options which would
result in variable plan accounting and a charge to results of operations for the
excess, if any, of the fair value per share at the time of the modification over
the exercise price. However, we have not completed our evaluation of the
requirements of Interpretation 44.
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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. As of January 3, 1999 we had one interest rate cap agreement
related to interest on $142.2 million of our aggregate $284.3 million of
variable-rate term loans under a then existing credit agreement which provided
for a cap which was approximately 3% higher than the prevailing interest rate at
that time. As of January 2, 2000 and April 2, 2000 we had one interest rate cap
agreement relating to interest on $235.0 million and $234.2 million,
respectively, of our aggregate $470.1 million and $468.4 million, respectively,
of variable-rate term loans under our existing credit agreement. The cap
agreement provides for a cap which was approximately 2% higher than the
prevailing interest rate at each of those dates.
Foreign Currency Risk
Our objective in managing our exposure to foreign currency fluctuations is
also to limit the impact of those 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 years ended January 3, 1999 and January 2, 2000 represented only 6% and
5% of our revenues, respectively, and an immediate 10% change in foreign
currency exchange rates versus the United States dollar from their levels at
January 3, 1999 and 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
those risks by assessing the relative proportion of our investments in cash and
cash equivalents and the relatively stable and risk-minimized returns available
on those investments. At January 3, 1999, January 2, 2000 and 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 January 3, 1999, January 2, 2000 and 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
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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 based upon assumed immediate adverse effects as noted
below (in thousands):
<TABLE>
<CAPTION>
JANUARY 3, 1999 JANUARY 2, 2000 APRIL 2, 2000
-------------------- -------------------- --------------------
CARRYING INTEREST CARRYING INTEREST CARRYING INTEREST
VALUE RATE RISK VALUE RATE RISK VALUE RATE RISK
----- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash equivalents................. $ 66,422 $ -- $ 49,520 $ -- $ 17,560 $ --
Long-term debt................... 570,655 (2,843) 778,760 (3,748) 775,846 (4,684)
</TABLE>
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
January 3, 1999, January 2, 2000 and 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 decline in earnings of 11%, 11% and
10% debt at January 3, 1999, January 2, 2000 and April 2, 2000, respectively, as
the weighted average interest rate of our variable-rate debt at those dates
approximated 9%, 9% and 10%, respectively, 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.
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BUSINESS
OVERVIEW
We are a leading premium beverage company and a leading supplier of
concentrates for private label carbonated soft drinks in North America. We own
the Snapple, Mistic and Stewart's premium beverage brands. According to A.C.
Nielsen data, in 1999, our premium brands had the leading share (33%) of U.S.
premium beverage sales volume in convenience stores, grocery stores and mass
merchandisers. We continue to increase consumer awareness for our premium
beverage brands with innovative marketing and new product introductions. We also
own the Royal Crown carbonated soft drink brand, the largest national brand cola
available to the independent bottling system.
For the three months ended April 2, 2000, we had pro forma revenues of
$170.6 million and pro forma EBITDA of $19.2 million, an increase of
approximately 5.5% and 35.2%, respectively, compared with the three months ended
April 4, 1999. For the twelve months ended January 2, 2000, we had pro forma
revenues of $773.9 million and pro forma EBITDA of $100.7 million, an increase
of approximately 5.1% and 6.2%, respectively, compared with the twelve months
ended January 3, 1999. Pro forma revenues and EBITDA exclude the Arby's
restaurant franchising business, which we will no longer own after the offering
and the related transactions described under 'The Restructuring.' Our operating
strategy has allowed us to maintain an efficient cost structure requiring
minimal capital expenditures. We have also developed an efficient route to
market by controlling distribution in a number of our key markets and developing
a nationwide network of third-party distributors. We believe that our focus on
the premium beverage market creates significant opportunities for continued
growth in our core products as well as through our new product development and
geographic expansion.
Our management team has substantial experience in the premium beverage and
carbonated soft drink businesses and a proven operating record relating to
manufacturing, operations, sales, distribution and financial management. Michael
Weinstein, our Chief Executive Officer, was named Beverage Industry's 1999
Executive of the Year, and Mr. Weinstein and Kenneth Gilbert, our Senior Vice
President, Marketing, were named Brand Week's 1999 Marketers of the Year.
INDUSTRY OVERVIEW
ALTERNATIVE BEVERAGE INDUSTRY
Alternative beverages consist of fruit beverages, a category that includes
both 100% fruit juices and fruit drinks, ready-to-drink teas, sports drinks,
natural soda and water. From 1992 to 1999, the alternative beverage market has
experienced significant growth, with volumes more than doubling to 1.4 billion
cases. Alternative beverages currently remain only a small portion of the $81.8
billion non-alcoholic beverage market, indicating a significant opportunity for
future growth.
We believe that alternative beverage sales should benefit from the following
trends:
increased popularity of beverages that are perceived to be healthy,
additional distribution opportunities,
a wider variety of good tasting alternative beverages, and
international market opportunities.
The alternative beverage category consists of 'premium,' higher quality,
more specialized goods and 'non-premium,' lower-margin, generic products.
Premium beverage products typically command higher prices and higher margins for
the brand owner, the distributor and the retailer than non-premium beverages
because of the following:
Higher Quality Ingredients: Premium beverage ingredients are perceived
to be higher quality and most do not include preservatives.
Distribution: The primary distribution channels for premium beverages
are convenience stores and other small retail outlets. These locations
usually sell premium beverages in single refrigerated servings instead
of larger, multi-pack containers at room temperature.
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Packaging and Marketing: Packaging is a key differentiator in the
single-serve market and is critical to building a premium image.
Marketing premium beverages relies heavily on product innovation,
unique advertising and availability.
CARBONATED SOFT DRINKS INDUSTRY
Carbonated soft drinks accounted for approximately 30% of all drinks,
including alcoholic beverages, consumed in the United States in 1999, up from
approximately 25% in 1989. The carbonated soft drink industry is concentrated,
with the three largest franchise companies -- Coca-Cola Co., PepsiCo Inc., and
Dr Pepper/Seven Up Inc., an affiliate of Cadbury Schweppes Plc -- accounting for
approximately 90% of the dollar volume of U.S. carbonated soft drink sales in
1999. Private label soft drinks accounted for approximately 5.8% of the dollar
volume of all carbonated soft drink sales in 1999, up from approximately 5.7% in
1998.
The following are significant trends in the retail carbonated soft drink
market:
growth of per capita consumption levels of carbonated soft drinks both
domestically and internationally,
increased market share of private-label goods as a result of recent
price increases by Coca-Cola and Pepsi-Cola, and
potential strengthening of the independent bottler network resulting
from increased industry consolidation.
BUSINESS SEGMENTS
PREMIUM BEVERAGES (SNAPPLE, MISTIC AND STEWART'S)
We are a leader in the U.S. wholesale premium beverage market. According to
A.C. Nielsen data, in 1999 our premium beverage brands had the leading share
(33%) of U.S. premium beverage sales volume in convenience stores, grocery
stores and mass merchandisers.
SNAPPLE
Snapple markets and distributes a wide variety of premium beverages,
including all-natural ready-to-drink teas, fruit drinks and juices under the
Snapple, Snapple Elements, WhipperSnapple and Snapple Farms brand names. During
1999, Snapple case sales represented approximately 80% of our total premium
beverage case sales. According to A.C. Nielsen data, in 1999 Snapple had the
leading share (28%) of U.S. premium beverage sales volume in convenience stores,
grocery stores and mass merchandisers, compared to 10% for the next highest
brand. Snapple's case sales increased by approximately 10% in the first quarter
2000 compared to the first quarter 1999, 7.3% in 1999 compared to 1998 and 8.4%
in 1998 compared to 1997. Since acquiring Snapple in May 1997, we have
strengthened our distributor relationships, improved promotional initiatives and
significantly increased new product introductions and packaging innovations.
We have benefitted from the continued growth of our core products as well as
the successful introduction of innovative new beverages. New product
introductions contributed to the growth of our core products by maintaining a
sense of freshness and excitement for the overall product line and enhancing
brand imagery for consumers. Case sales of Snapple's top five products in 1999,
which represented 36% of its domestic case sales in 1999, have grown 8.8% since
December 31, 1997. In April 1999, Snapple introduced Snapple Elements, a line of
juice drinks and teas enhanced with herbal ingredients to capitalize on, in
part, the growing consumer demand for all-natural, health-oriented products.
Snapple Elements is offered in eight flavors. We are in the process of
introducing two new flavors for this summer's selling season. In 1999, Snapple
Elements won Beverage World's Globe Design Gold Award for best overall product
design. In 1998, Snapple introduced a successful new line of products called
WhipperSnapple, which is a smoothie-like beverage. In 1998, WhipperSnapple was
named Convenience Store News' best new non-alcoholic beverage product and won
the American Marketing Association's Edison award for best new beverage product.
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MISTIC
Mistic Brands, Inc. markets and distributes a wide variety of premium
beverages, including fruit drinks, ready-to-drink teas, juices and flavored
seltzers under the Mistic and Mistic Fruit Blast brand names. In general, Mistic
complements Snapple by appealing to consumers who prefer a sweeter product with
stronger fruit flavors. Since Triarc acquired Mistic in August 1995, Mistic has
introduced more than 35 new flavors, a line of fruit juices, various new bottle
sizes and shapes and numerous new package designs. In 1999, Mistic introduced a
line of 50% juice drinks, including Orange Carrot, which has become Mistic's
best selling product, Mango Carrot, Tropical Carrot and Orange Mango. In April
2000, Mistic introduced Mistic Zotics, a line of vitamin-enhanced drinks,
featuring flavors from exotic regions and packaged in a distinctive 20-ounce
bottle.
STEWART'S
Stewart's Beverages, Inc., the exclusive soft drink licensee of Stewart's
brand beverages, markets and distributes Stewart's brand premium soft drinks,
including Root Beer, Orange N' Cream, Diet Root Beer, Cream Ale, Ginger Beer,
Creamy Style Draft Cola, Classic Key Lime, Lemon Meringue, Cherries N' Cream,
Classic Grape and Peach. Stewart's holds the exclusive perpetual worldwide
license to manufacture, distribute and sell Stewart's brand beverages and owns
the Fountain Classics trademark. Through the first quarter of 2000, Stewart's
has experienced 30 consecutive quarters of double-digit percentage case sales
increases compared to the prior year's comparable quarter. Overall, Stewart's
has grown its case sales by approximately 13% in 1999 compared to 1998 and 17%
in 1998 compared to 1997, primarily by increasing penetration in existing
markets, entering new markets and continuing product innovation. In March 2000,
Stewart's introduced 'S', a line of premium carbonated diet soft drinks
available in five flavors and packaged in a proprietary bottle.
PREMIUM BEVERAGE GROWTH STRATEGY
Our growth strategy for our premium beverage business is to continue to:
Increase Consumer Awareness and Strengthen Brand Imaging: A key to
growth of our company is innovative marketing and advertising,
including the introduction of new products and use of unique packaging.
These combine to increase the visibility and range of well-known
brands. Snapple is known for using innovative, quirky and
attention-getting advertising campaigns such as Wendy 'The Snapple
Lady' and the 'Win Nothing Instantly' promotional campaign. To meet
changing consumer tastes, it is important for premium beverage
companies to continue to develop exciting new products. Over the last
two years, we introduced two new successful beverage platforms for
Snapple, Snapple Elements and WhipperSnapple, added a number of new
products to Snapple's existing platforms, including Diet Orange Carrot,
Raspberry Peach, Lemonade Iced Tea and Diet Ruby Red and introduced
Mistic Orange Carrot, which has become Mistic's best selling product.
Because much of our business is done through single servings sold in
convenience stores and other retail outlets, we intend to continue to
develop the type of innovative packaging that catches a consumer's eye
and increases sales, like the new bottle for Elements, the swirl bottle
for WhipperSnapple, the carafe bottle for Mistic juice drinks and teas
and the triangular bottle for Mistic Zotics.
Expand and Improve Distribution: We plan to continue to expand in
existing and new geographic markets and channels of trade, including
selected international markets. We intend to focus our sales force on
continually improving relationships with distributors by assisting our
distributors in developing local marketing promotion campaigns,
training personnel and participating in local customer visits. We also
plan to increase the rate at which we place cold drink equipment, such
as visicoolers, in stores and other outlets. Finally, we intend to
selectively explore the acquisition of additional distributors in key
markets to drive sales and improve focus on existing and new products.
Control Production and Logistics Costs: We expect to continue to
control production costs through favorable supply agreements for raw
materials, flavors, and packaging. We have also
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introduced initiatives to reduce logistics costs and improve freight
management. We are in the process of establishing a packing line at
one of our company-operated distribution centers, which we expect will
result in significant freight and production savings, as well as
enhanced production flexibility.
Minimize Capital Expenditures: We plan to continue to minimize capital
expenditures primarily by using third-party co-packers for production
of our premium beverage products and the continued use of independent
distributors.
Selectively Acquire Beverage Brands: We may broaden our product
offerings through selective premium beverage acquisitions that can
offer us long-term growth potential.
SALES AND MARKETING
Snapple and Mistic have a combined sales and marketing staff, while
Stewart's has its own sales and marketing staff. The sales forces are
responsible for overseeing sales to distributors, monitoring retail account
performance and providing sales direction and trade spending support. Trade
spending includes price promotions, slotting fees and local consumer promotions.
The sales force handles most accounts on a regional basis with the exception of
large national accounts, which are handled by a national accounts group.
After acquiring Snapple in May 1997, we revived Snapple's tradition of
quirky advertising and promotional campaigns. We immediately announced the
return of Wendy 'The Snapple Lady' and introduced a new flavor, Wendy's Tropical
Inspiration, in a commercial featuring Wendy's return from a deserted island to
help 'save Snapple.' In the summer of 1998 Snapple launched its 'Win Nothing
Instantly' sweepstakes where consumers won prizes such as 'No Car Payments,'
awarding $100 per month for one year, and 'No Rent,' awarding $1,000 per month
for one year. This sweepstakes received a 'Brammy' award from Brandweek magazine
for 'Best Promotion' for all categories. Snapple's 'Good Fruit/Bad Fruit'
commercial was recognized by Ad Week as one of the best campaigns of 1999.
Mistic uses targeted advertising. The 1996-1997 'Show Your Colors' campaign,
reflecting the desires of young consumers to express their individuality, was
widely recognized in the advertising trade industry. Mistic won the Promotional
Marketing Association's Silver Reggie award in 1998 for its promotional
sweepstakes that offered consumers one day of Dennis Rodman's salary as a
Chicago Bull if the color under the cap of the Mistic product they had purchased
matched the color of his hair.
We intend to maintain advertising campaigns for our brands as an integral
part of our strategy to stimulate consumer demand and increase brand loyalty. In
1999, we employed a combination of network and cable advertising complemented
with local spot advertising in our larger markets. In most markets, we have used
television as the primary advertising medium and radio as the secondary medium,
although Mistic has used radio as its primary advertising medium. We also employ
outdoor, newspaper and other print media advertising, as well as in-store point
of sale promotions.
DISTRIBUTION
We currently sell our premium beverages through a network of distributors
that include specialty beverage, carbonated soft drink and licensed
beer/wine/spirits distributors. In addition, Snapple uses brokers for
distribution of some Snapple products in Florida and Georgia. We distribute our
products internationally primarily through one distributor in each country. We
typically grant distributors exclusive rights to sell Snapple, Mistic and/or
Stewart's products within a defined territory. We have written agreements with
distributors who represent approximately 84% of our volume. The agreements are
typically either for a fixed term renewable upon mutual consent or are
perpetual, and are terminable by us for cause. The distributor may generally
terminate its agreement upon specified prior notice.
We believe that company-owned distributors place more focus on increasing
sales of our products and successfully launching our new products. At the
beginning of 1999, Snapple owned two of its largest distributors, Mr. Natural
Inc., which distributes in the New York metropolitan area, and Pacific Snapple
Distributors, Inc., which distributes in parts of southern California. In
February 1999, Snapple acquired
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Millrose Distributors, Inc. and the assets of Mid-State Beverage, Inc. Millrose
and Mid-State distributed Snapple and Stewart's products in parts of New Jersey.
Before the acquisition, Millrose was the largest non-company owned Snapple
distributor and Mid-State was the second largest Stewart's distributor.
In January 2000, Snapple acquired Snapple Distributors of Long Island, Inc.,
which distributes in Nassau and Suffolk counties in New York. Before the
acquisition, Long Island Snapple was the largest non-company-owned distributor
of Snapple products and a major distributor of Stewart's products.
On March 31, 2000, Triarc acquired certain assets of California Beverage
Company, including the distribution rights for Snapple, Mistic and Stewart's
products in the City and County of San Francisco, California. On May 16, 2000,
Triarc acquired certain assets of Northern Glacier Ltd., including the
distribution rights for Mistic products in parts of northern and central New
Jersey. Triarc contributed all of these assets to us.
In the aggregate, our company-owned distributors were responsible for
approximately 24% of Snapple's domestic case sales and 9% of Stewart's domestic
case sales in 1999 and for approximately 28% of Snapple's domestic case sales
and 10% of Stewart's domestic case sales in the three months ended April 2,
2000.
No non-company-owned distributor accounted for more than 10% of total case
sales in 1997, 1998 or 1999. We believe that we could find alternative
distributors if our relationships with our largest distributors were terminated.
International sales accounted for less than 10% of our premium beverage
sales in each of 1997, 1998 or 1999. Since we acquired Snapple, Royal Crown's
international group has been responsible for the sales and marketing of our
premium beverages outside North America.
CO-PACKING ARRANGEMENTS
We use more than 20 co-packers, which are strategically located throughout
the United States, to produce our premium beverage products for us under
formulation requirements and quality control procedures that we specify. We
select and monitor the producers to ensure adherence to our production
procedures. We regularly analyze samples from production runs and conduct spot
checks of production facilities. We supply most packaging and raw materials and
arrange for their shipment to our co-packers and bottlers. Please refer to the
section in this prospectus entitled ' -- Raw Materials.' Our three largest
co-packers accounted for approximately 54% of our aggregate case production of
premium beverages in 1999.
Our contractual arrangements with our co-packers are typically for a fixed
term that is automatically renewable for successive one year periods. The
contractual arrangements with our three largest co-packers expire in December
2005, April 2001 and December 2001. During the term of the agreement, the
co-packer generally commits a specified amount of its monthly production
capacity to us. Snapple has committed to order guaranteed minimum volumes under
contracts covering the production of a majority of its case volume. If the
volume actually ordered is less than the guaranteed volume, Snapple is typically
required to pay the co-packer the product of (1) an amount per case specified in
the agreement and (2) the difference between the volume actually ordered and the
guaranteed volume.
At April 2, 2000, Snapple had reserves of approximately $3.3 million for
future payments under its guaranteed volume co-packer agreements known as
take-or-pay agreements. We paid approximately $5.9 million under Snapple's
take-or-pay agreements during the seven months in 1997 that we owned Snapple,
$11.3 million in 1998, primarily related to obligations entered into by the
prior owners of Snapple, and $1.4 million in 1999. Mistic has committed to order
a guaranteed volume in two instances and a percentage of its products sold in a
region in another instance. If the guaranteed volume or percentage is not met,
Mistic must make payments to compensate for the difference. Mistic paid
approximately $180,000 in 1998 under its take-or-pay agreements and made no
payments in 1999. Stewart's has no take-or-pay agreements requiring it to make
minimum purchases.
We have generally been able to avoid significant capital expenditures or
investments for bottling facilities or equipment and our production-related
fixed costs have been minimal because of our
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co-packing arrangements. We are, however, in the process of establishing a
packing line at one of our company-operated distribution centers at a cost of
approximately $5.0 million, because of significant expected freight and
production savings and availability of additional space in one of our
facilities. We anticipate that we will continue to use third-party co-packers
for most of our production.
We believe we have arranged for sufficient production capacity to meet our
requirements for 2000 and that, in general, the co-packing industry has excess
production capacity that we could use. We also expect that in 2000 we will meet
substantially all of our guaranteed volume requirements under our co-packing
agreements. Please refer to the section of this prospectus entitled 'Risk
Factors -- Risks Relating to Our Business -- Our reliance on co-packers may
adversely affect our revenues.'
RAW MATERIALS
We supply certain raw materials used in the preparation and packaging of our
premium beverage products to our co-packers. For quality control and other
purposes, we have chosen to obtain some raw materials, including aspartame, on
an exclusive basis from single suppliers, and other raw materials, such as glass
bottles and flavors, from a relatively small number of suppliers. Since the
acquisition of Snapple, we have been negotiating and continue to negotiate, new
supply and pricing arrangements with our suppliers. We believe that, if
required, alternate sources of raw materials and flavors are available. However,
as a result of consolidation of the glass industry, it is uncertain whether all
of the glass bottles supplied by two suppliers, who supplied approximately 88%
of our premium beverage segment's 1999 purchases of glass bottles, could be
replaced by alternate sources. We do not believe it reasonably possible that
these two glass suppliers will be unable to achieve substantially all of their
anticipated volumes in the near term. Please refer to the section of this
prospectus entitled 'Risk Factors -- Risks Relating to Our Business -- Price
fluctuations in, and unavailability of, raw materials that we use could
adversely affect us.'
SOFT DRINK CONCENTRATES (ROYAL CROWN)
Through Royal Crown Company, Inc., we participate in the approximately $58
billion domestic retail carbonated soft drink market. Royal Crown produces and
sells concentrates used in the production of carbonated soft drinks. Royal Crown
is the exclusive supplier of cola concentrate and a primary supplier of other
flavor concentrates to Cott Corporation for retailer branded products. Based on
public disclosures, Cott is a leading worldwide supplier of premium quality
retailer brand carbonated soft drinks. We also sell these concentrates to
independent, licensed bottlers who manufacture and distribute finished beverage
products domestically and internationally. Our branded products include: RC
Cola, Diet RC Cola, Cherry RC Cola, RC Edge, Diet Rite Cola, Diet Rite flavors,
Nehi, Upper 10, and Kick. RC Cola is the largest national brand cola available
to the independent bottling system, which consists of bottlers who do not bottle
either Coca-Cola or Pepsi-Cola branded soft drinks. During 1999, Royal Crown's
soft drink brands had approximately a 1.4% share of national supermarket volume
according to Beverage Digest/A.C. Nielsen data.
Royal Crown also sells its products internationally. Royal Crown's export
business has grown at an 18% compound annual growth rate over the five years
ended 1997, although growth slowed to 4% in 1998 and was down 2.5% in 1999 due
to adverse economic conditions in some of its markets, especially Russia and
Turkey, and competitive conditions in Mexico.
SOFT DRINK CONCENTRATES GROWTH STRATEGY
Our growth strategy for Royal Crown is to continue to:
Enhance Royal Crown's Strategic Relationship with Cott: We believe that
there is a significant opportunity for sales of private label products
to continue to increase. We plan to expand Royal Crown's relationship
with Cott by assisting in the development of new products and
maintenance of quality control. Royal Crown is Cott's exclusive
worldwide supplier of cola concentrates for retailer-branded beverages
in various containers. Royal Crown also supplies Cott with non-cola
carbonated soft drink concentrates.
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Focus Marketing Resources: We plan to improve profitability by focusing
Royal Crown's marketing resources in markets where its market share is
strongest and on targeted promotional relationships, including those
involving Little League Baseball, the World Wrestling Federation and
the Sears Craftsman Truck Series of NASCAR. We also intend to attract
new customers through marketing focused on direct-to-consumer
campaigns, such as a money-back taste guarantee and on-package
couponing used to call attention to Royal Crown's price advantage over
other branded soft drinks.
Expand Royal Crown's International Business: We believe that there are
a significant number of new markets where Royal Crown and private label
products can be introduced and a number of existing markets where sales
of these products can be increased. We plan to continue to target these
international markets. Royal Crown's sales outside the United States
were approximately 10.4% of its total revenues for 1999.
SALES AND MARKETING
Royal Crown uses radio, print and direct mail advertising. RC Cola's 'Great
Taste/Great Value' strategy has begun to utilize a money-back taste guarantee
and coupons included on its packaging. RC Cola is the official soft drink of
Little League Baseball and is beginning its third year as a title sponsor of the
#86 Dodge Truck in the Sears Craftsman Truck Series of NASCAR.
Royal Crown has enhanced the 'Better For You' marketing of Diet Rite by
focusing on its formulation, which has no sodium, no caffeine, no calories and a
new sweetener blend containing no aspartame. Diet Rite is the only major U.S.
diet soft drink without aspartame.
Royal Crown has entered into a media and promotional sponsorship for RC Edge
to be the exclusive cola marketing partner of the World Wrestling Federation.
The promotion was launched in late March 2000 and features four of the World
Wrestling Federation's most popular stars on RC Edge's packaging.
PRIVATE LABEL
Royal Crown believes that private label sales through Cott represent an
opportunity to benefit from sales of retailer-branded beverages. Royal Crown's
sale of concentrates to Cott began in late 1990. For the five years ended 1999,
Royal Crown's sales to Cott increased by a compound annual growth rate of
approximately 7%. Royal Crown's revenues from sales to Cott were approximately
15.8% of its total revenues in 1997, 17.2% in 1998 and 22.3% in 1999.
Royal Crown sells concentrate to Cott under a 21-year concentrate supply
agreement which expires in 2015, subject to additional six-year extensions.
Under the Cott agreement:
Royal Crown is Cott's exclusive worldwide supplier of cola concentrates
for retailer-branded beverages in bottles, cans and other containers,
although we have agreed to a limited number of exceptions,
Cott must purchase from Royal Crown at least 75% of its total worldwide
requirements for carbonated soft drink concentrates for beverages in
bottles, cans and other containers, and
as long as Cott purchases a specified minimum number of units of
private label concentrate in each year of the agreement, Royal Crown
will not manufacture and sell private label carbonated soft drink
concentrates to parties other than Cott anywhere in the world.
Through its private label program, Royal Crown develops new concentrates
specifically for Cott's private label accounts. The proprietary formulae Royal
Crown uses for this private label program are customer-specific and differ from
those of Royal Crown's branded products. Royal Crown works with Cott to develop
flavors according to each trade customer's specifications. Royal Crown retains
ownership of the formulae for the concentrates developed after the date of the
Cott agreement, except, in most cases, upon termination of the Cott agreement
because of breach or non-renewal by Royal Crown.
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ROYAL CROWN DOMESTIC BOTTLER NETWORK
Royal Crown sells its concentrates to independent licensed bottlers in the
United States. Consistent with industry practice, Royal Crown assigns each
bottler an exclusive territory for bottled and canned products within which no
other bottler may distribute Royal Crown branded soft drinks.
During 1999, Royal Crown's ten largest bottler groups accounted for
approximately 80.5% of Royal Crown's domestic volume of concentrate for branded
products. Dr Pepper/Seven Up Group accounted for approximately 24.5% of this
volume during 1999 and RC Chicago Bottling Group accounted for approximately
22.3% of this volume during 1999. Although we believe that Royal Crown could
find new bottlers for the RC Cola brand, Royal Crown's sales would decline if
these major bottlers stopped selling RC Cola brand products until we found new
bottlers. Please refer to the section of this prospectus entitled 'Risk
Factors -- Risks Relating to Our Business -- Royal Crown's reliance on Cott
Corporation and other customers and bottlers may adversely affect Royal Crown's
revenues -- Bottlers.'
ROYAL CROWN INTERNATIONAL BOTTLER NETWORK
We sell concentrate to bottlers in 72 countries for use in Royal Crown and
other branded products. Royal Crown's sales outside the United States were
approximately 10.9% of its total revenues in 1997, 11.3% in 1998 and 10.4% in
1999. These sales of concentrates outside the United States were approximately
13.9% of Royal Crown's total concentrate sales in 1997, 13.6% in 1998 and 9.7%
in 1999. The decrease in percentages for 1998 and 1999 is mainly attributable to
economic conditions in Russia and Turkey and competitive conditions in Mexico.
As of April 2, 2000, 112 bottlers and 14 distributors sold Royal Crown branded
products outside the United States in 68 countries, with international export
sales in 1999 distributed among Canada (7.2%), Latin America and Mexico (30.6%),
Europe (19.4%), the Middle East/Africa (21.6%) and the Far East/Pacific Rim
(21.3%). While the financial and managerial resources of Royal Crown have been
focused on the United States, we believe significant opportunities exist for
Royal Crown in international markets. In 1999, new bottlers were added to the
following markets: Ireland, Zimbabwe, Algeria, Romania and Tadjikistan.
PRODUCT DEVELOPMENT
Royal Crown believes that it has a history as an industry leader in product
innovation. In 1961, Royal Crown introduced the first national brand diet cola.
The Diet Rite flavors line was introduced in 1988 to complement the cola line
and to target the non-cola segment of the market, which has been growing faster
than the cola segment due to a consumer trend toward flavored beverages. In 1998
Royal Crown introduced two new Diet Rite flavors, Iced Mocha and Lemon Sorbet,
and began to use sucralose in Diet RC Cola. In 1999, Royal Crown reformulated
Diet Rite to eliminate aspartame. In April 1999, Royal Crown introduced RC Edge,
a cola specially formulated with herbal enhancements.
RAW MATERIALS
Flavoring ingredients and sweeteners are generally available on the open
market from several sources. However, we have agreed to purchase some raw
materials on an exclusive or preferred basis from single suppliers. For example,
we have agreed to purchase sucralose exclusively from one supplier for Royal
Crown. Please refer to the section of this prospectus entitled 'Risk
Factors -- Risks Relating to Our Business -- Price fluctuations in, and
unavailability of, raw materials that we use could adversely affect us.'
TRADEMARKS
We own numerous trademarks that are considered material to our business,
including Snapple, Made From The Best Stuff On Earth, Snapple Elements,
WhipperSnapple, Snapple Farms, Mistic, Mistic Italian Ice Smoothies, RC Cola,
Diet RC, Cherry RC Cola, RC Edge, Royal Crown, Diet Rite, Nehi, Upper 10, Kick,
Mistic Zotics, 'S' and Fountain Classics. Mistic licenses the Fruit Blast
trademark under a license agreement that terminates in March 2001 and is
renewable for additional periods. Stewart's licenses the Stewart's trademark on
an exclusive perpetual basis for soft drinks and considers it
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to be material to its business. In addition, we consider our finished product
and concentrate formulae, which are not the subject of any patents, to be trade
secrets.
Many of our material trademarks are registered trademarks in the U.S. Patent
and Trademark Office and in various foreign jurisdictions. Registrations for
trademarks in the United States will last indefinitely as long as the trademark
owners continue to use and police the trademarks and renew filings with the
applicable governmental offices. We have not been challenged in our right to use
any of our material trademarks in the United States.
COMPETITION
Our premium beverage products and soft drink concentrate products compete
generally with all liquid refreshments and in particular with numerous
nationally known soft drinks, including Coca-Cola and Pepsi-Cola. We also
compete with ready-to-drink brewed iced tea competitors, including Nestea Iced
Tea, which is produced under a long-term license granted by Nestle S.A. to The
Coca-Cola Company, and Lipton Original Iced Tea, which is distributed under a
joint venture between PepsiCo, Inc. and Thomas J. Lipton Company, a subsidiary
of Unilever Plc, and nationally branded fruit drink companies, including Ocean
Spray. We compete with other beverage companies not only for consumer acceptance
but also for shelf space in retail outlets and for marketing focus by
distributors, most of which also distribute other beverage brands. The principal
methods of competition in the beverage industry include product quality and
taste, brand advertising, trade and consumer promotions, marketing agreements
including calendar marketing agreements, pricing, packaging and the development
of new products.
Until recently, the soft drink business experienced increased price
competition that resulted in significant price discounting throughout the
industry. Price competition had been especially intense with respect to sales of
soft drink products in supermarkets. This resulted in significant discounts and
allowances off wholesale prices by bottlers to maintain or increase market share
in the supermarket segment. If resumed, these practices could have an adverse
impact on us.
The Coca-Cola Company, PepsiCo and their bottlers are also making increased
use of exclusionary marketing agreements which prevent or limit the marketing
and sale of competitive beverage products at various locations, including
colleges, schools, convenience and grocery store chains and municipal locations,
including city parks and buildings.
GOVERNMENTAL REGULATIONS
The production and marketing of our beverages are governed by the rules and
regulations of various federal, state and local agencies, including the United
States Food and Drug Administration. The Food and Drug Administration also
regulates the labeling of our products. In addition, our dealings with our
bottlers and/or distributors may, in some jurisdictions, be governed by state
laws governing licensor-licensee or distributor relationships.
We are not aware of any pending legislation that is likely to have a
material adverse effect on our operations. To date, the cost of complying with
applicable governmental rules and regulations has not been material.
ENVIRONMENTAL MATTERS
We are governed by federal, state and local environmental laws and
regulations concerning the discharge, storage, handling and disposal of
hazardous or toxic substances. These laws and regulations provide for
significant fines, penalties and liabilities, sometimes without regard to
whether the owner or operator of the property knew of, or was responsible for,
the release or presence of the hazardous or toxic substances. In addition, third
parties may make claims against owners or operators of properties for personal
injuries and property damage associated with releases of hazardous or toxic
substances. We cannot predict what environmental legislation or regulations will
be enacted in the future or how existing or future laws or regulations will be
administered or interpreted. We also cannot predict the amount of future
expenditures which may be required to comply with any environmental laws or
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regulations or to satisfy any claims relating to environmental laws or
regulations. We believe that our operations comply substantially with all
applicable environmental laws and regulations. Please refer to the section of
this prospectus entitled 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Legal and Environmental Matters' and note
19 to our consolidated financial statements included in this prospectus.
EMPLOYEES
As of April 2, 2000, we had approximately 995 employees, consisting of 772
salaried employees and 223 hourly employees. We believe that employee relations
are good. As of April 2, 2000, approximately 50 of our employees were covered by
various collective bargaining agreements expiring from time to time from the
present through August 2002. This number includes approximately 20 of our
employees whose union agreement expired in January 2000 and whose collective
bargaining agreement is expected to be renegotiated following a final
determination of the union that will represent them.
PROPERTIES
We believe that our properties, taken as a whole, are generally well
maintained and are adequate for our current and foreseeable business needs. We
lease a majority of our properties.
The following table describes information about the major plants and
facilities of each of our business segments, as well as our corporate
headquarters, as of April 2, 2000.
<TABLE>
<CAPTION>
LAND APPROXIMATE SQ.
FACILITIES LOCATION TITLE FT. OF FLOOR SPACE
---------- -------- ----- ------------------
<S> <C> <C> <C>
Concentrate Manufacturing (including
office)................................... Columbus, GA 1 owned 216,000
Snapple Beverage Group Headquarters......... White Plains, NY 1 leased 71,970
Stewart's Headquarters...................... Denver, CO 1 leased 4,200
Office/Warehouse Facilities................. Various Locations 8 leased 807,395(1)
Snapple Beverage Group International
Operations................................ Ft. Lauderdale, FL 1 leased 3,500(2)
</TABLE>
---------
(1) Includes 180,000 square feet of warehouse space that is subleased to a third
party.
(2) Royal Crown subleases this space from the RC/Arby's on terms that are no
less favorable than if this space were leased from an unrelated party.
Our Columbus, Georgia facility is used mostly for our soft drink
concentrates business segment, and our Denver, Colorado facility is used only
for our premium beverages business segment. All of our other facilities are used
for both of our business segments.
Substantially all of our properties are pledged as collateral under secured
debt arrangements. You should refer to the section of this prospectus entitled
'Description of Indebtedness -- New Credit Facility.' The lease for our
corporate headquarters expires in March 2004. We believe that our current
properties are suitable for our operations and that suitable additional or
alternative space, including leased space, is available on commercially
reasonable terms.
LEGAL PROCEEDINGS
There are no legal proceedings to which we are a party except matters
arising in the ordinary course of our business. It is our opinion that the
outcome of these matters will not have a material adverse effect on our
financial condition or results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Following the offering, our executive officers and directors will be as
follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE OR POSITION HELD
---- --- -----------------------
<S> <C> <C>
Nelson Peltz................................. 58 Director; Chairman
Peter W. May................................. 57 Director; Vice Chairman
Michael Weinstein............................ 51 Director; Chief Executive Officer
Ernest J. Cavallo............................ 66 President and Chief Operating Officer
Richard Allen................................ 45 Senior Vice President and Chief Financial
Officer
Joseph Bayern................................ 37 Senior Vice President, Strategic Planning and
Operations
John L. Belsito.............................. 39 Senior Vice President; President of Royal Crown
Kenneth W. Gilbert........................... 49 Senior Vice President, Marketing
Gary G. Lyons................................ 49 Senior Vice President and General Counsel and
Assistant Secretary
Joseph G. McDonald........................... 52 Senior Vice President, Sales
Sherry Perley................................ 42 Senior Vice President, Human Resources
Samuel M. Simpson............................ 47 President and Chief Executive Officer of
Stewart's
James A. Smith............................... 55 Senior Vice President, Company Operations
Jerry Smith.................................. 55 Senior Vice President, International
Jeffrey Spencer.............................. 41 Senior Vice President, Royal Crown Marketing
Paul Trudeau................................. 50 Senior Vice President, Royal Crown Sales
Charles Zimmermann........................... 47 Senior Vice President, Operations
</TABLE>
Nelson Peltz. Mr. Peltz has been a director and Chairman since April 1997.
Mr. Peltz has also been a manager and Chairman and Chief Executive Officer of
Triarc Consumer Products Group since January 1999 and a director and Chairman
and Chief Executive Officer of Triarc since April 1993. Since April 1997, he has
also been a director or manager and officer of certain of our subsidiaries. He
is also a general partner of DWG Acquisition Group, L.P., whose principal
business is ownership of securities of Triarc. From its formation in January
1989 to April 1993, Mr. Peltz was Chairman and Chief Executive Officer of Trian
Group, Limited Partnership, which provided investment banking and management
services for entities controlled by Mr. Peltz and Mr. May. From 1983 to December
1988, he was Chairman and Chief Executive Officer and a director of Triangle
Industries, Inc., which, through wholly owned subsidiaries, was a manufacturer
of packaging products, copper electrical wire and cable and steel conduit and
currency and coin handling products. Mr. Peltz has also served as a director of
MCM Capital Group, Inc. since February 1998.
Peter W. May. Mr. May has been a director and Vice Chairman since April
1997. Mr. May has also been a manager and President and Chief Operating Officer
of Triarc Consumer Products Group since January 1999 and a director and
President and Chief Operating Officer of Triarc since April 1993. Since April
1997, he has also been a director or manager and President and Chief Operating
Officer of certain of our subsidiaries. He is also a general partner of DWG
Acquisition. From its formation in January 1989 to April 1993, Mr. May was
President and Chief Operating Officer of Trian Group, Limited Partnership. He
was President and Chief Operating Officer and a director of Triangle Industries
from 1983 until December 1988. Mr. May has also served as a director of Ascent
Entertainment Group, Inc. since February 1998, of MCM Capital Group, Inc. from
June 1999 to April 2000, and of On Command Corporation from February 2000 to
April 2000.
Michael Weinstein. Mr. Weinstein has been a director and Chief Executive
Officer since April 1997 and Chief Executive Officer of Royal Crown since
October 1996. Mr. Weinstein has also served as Chief Executive Officer of
Snapple since it was acquired by Triarc in May 1997 and of Mistic since it was
acquired by Triarc in August 1995. Before August 1995, he was president of
Liquid Logic, a private beverage consulting business he founded in 1994. From
1981 until the end of 1993, he served in various executive capacities at A&W
Brands, Inc., lastly as President/Chief Operating Officer. From 1978 to
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1981, he was a Vice President at Kenyon & Eckhardt Advertising. He began his
career at Pepsi-Cola Company, where he held various sales and marketing
positions from 1972 to 1978.
Ernest J. Cavallo. Mr. Cavallo has been President and Chief Operating
Officer since April 1997, and has been the President and Chief Operating Officer
of Snapple since May 1997. Mr. Cavallo has also served as President of Mistic
since August 1995 and as the Chief Operating Officer of Mistic since November
1996 and was a director of our company from April 1997 to June 2000. From August
1995 to November 1996, Mr. Cavallo served as Chief Financial Officer of Mistic.
From June 1994 until August 1995, Mr. Cavallo was Senior Vice President and
Chief Financial Officer of Joseph Victori Wines, the predecessor company of
Mistic. From 1985 to 1994, Mr. Cavallo served in various positions with A&W
Brands, Inc., including three years as Executive Vice President and Chief
Financial Officer. From 1976 to 1985, Mr. Cavallo was an officer and Assistant
Comptroller with Exxon Corporation and from 1971 to 1976, Mr. Cavallo was a
management consultant with KPMG Peat Marwick.
Richard Allen. Mr Allen has been Senior Vice President and Chief Financial
Officer since August 1997. Previously, Mr. Allen was Vice President and
Assistant Controller, Planning and Analysis of RJR Nabisco from April 1996 until
October 1996. He also was Assistant Controller, Planning and Analysis of RJR
Nabisco from January 1995 until April 1996.
Joseph Bayern. Mr. Bayern has been Senior Vice President, Strategic Planning
and Operations since December 1999. Mr. Bayern was Senior Vice President-Chief
Information Officer of Snapple and Mistic from March 1998 to December 1999. Mr.
Bayern was Chief Information Officer of Snapple and Mistic from December 1997 to
March 1998. Previously, he served as senior manager, management solutions and
services for Deloitte & Touche LLP from April 1995 to December 1997.
John L. Belsito. Mr. Belsito has been Senior Vice President since August
1998, and has been President of Royal Crown since August 1998. Before 1998, Mr.
Belsito served as Vice President -- Corporate Development of Cadbury Beverages
Inc. From 1995 to 1997, he served as Senior Vice President -- Franchising of
Dr Pepper/Seven-Up Inc. From 1994 to 1995, Mr. Belsito served as Vice
President -- Franchising of Cadbury Beverages, North America. From 1993 to 1994,
he served as Vice President -- Field Marketing at Schweppes USA.
Kenneth W. Gilbert. Mr. Gilbert has been Senior Vice President -- Marketing,
since April 1997. He has also been Senior Vice President -- Marketing of Mistic
since September 1995. From 1983 to 1995, Mr. Gilbert was a group account
director at Messner Vetere Berger McNamee Schmetterer Eurocom, an advertising
agency in New York City.
Gary G. Lyons. Mr. Lyons has been Senior Vice President and General Counsel
and Assistant Secretary since July 1997, and was Vice President and General
Counsel of Snapple from May 1997 to July 1997. From 1994 to 1997, Mr. Lyons was
Vice President and General Counsel of Cadbury Beverages, North America and from
1993 to 1997 was Vice President and General Counsel of A&W Brands, Inc. From
1981 to 1992 he held various legal positions with United States subsidiaries of
Nestle, S.A. Mr. Lyons began his legal career as an associate with Shearman &
Sterling from 1975 to 1981.
Joseph G. McDonald. Mr. McDonald has been Senior Vice President -- Sales
since April 1997. Mr. McDonald has also been Senior Vice President -- Sales of
Snapple since May 1997 and of Mistic since September 1995. Mr. McDonald was
Senior Vice President -- Sales, Royal Crown from March 1996 until May 1997. From
October 1993 to September 1995 Mr. McDonald was Vice President -- Sales for
Cadbury Beverages, North America.
Sherry Perley. Ms. Perley has been Senior Vice President -- Human Resources
since December 1999. Ms. Perley has also served as Senior Vice President, Human
Resources of Snapple since November 1999. She was Vice President, Human
Resources of Snapple from July 1997 to November 1999. From January 1997 to July
1997, Ms. Perley was a human resources consultant. From January 1994 to January
1997 she was Vice President, Human Resources at the Nine West Group, Inc.
Samuel M. Simpson. Mr. Simpson has been President and Chief Executive
Officer of Stewart's since 1986.
James A. Smith. Mr. Smith has been Senior Vice President, Company Operations
since December 1999. Mr. Smith was Senior Vice President Franchising, Mr.
Natural and Pacific Snapple from July 1997
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to December 1999. Mr. Smith served as a consultant to our company from June 1995
to 1997. Prior to that, he was President of Canada Dry USA from February 1990 to
June 1995.
Jerry Smith. Mr. Smith has been Senior Vice President, International since
September 1997. From 1991 to August 1997, Mr. Smith was President of Royal Crown
Company, International.
Jeffrey Spencer. Mr. Spencer has been Senior Vice President, Marketing,
Royal Crown since May 1997. Mr. Spencer was Vice-President Marketing, Citibank,
North America from May 1995 to May 1997.
Paul Trudeau. Mr. Trudeau has been Senior Vice President, Royal Crown Sales
since March 1995. From May 1994 to March 1995, Mr. Trudeau was Vice President,
Royal Crown Franchising.
Charles Zimmermann. Mr. Zimmermann has been Senior Vice
President -- Operations since April 1997. Mr. Zimmermann has also served as
Senior Vice President Operations for Snapple since September 1995 and for Mistic
since July 1997. He was also Vice President -- Operations for Mistic from May
1996 to July 1997. Prior thereto, Mr. Zimmermann was Vice
President -- Operations of Snapple from November 1989 to May 1995.
Following the completion of the offering, we expect to add four independent
directors to our board of directors.
The term of office of each director is until his or her successor is elected
and qualified or until his or her prior death, resignation or removal. The term
of office of each executive officer is until the organizational meeting of the
board of directors next succeeding that officer's election and until his or her
successor is elected and qualified or until his or her prior death, resignation
or removal.
COMMITTEES OF THE BOARD OF DIRECTORS
We will have standing audit, nominating, and compensation committees whose
functions are described below.
Audit Committee. Within 90 days after the completion of the offering, we
will form an audit committee. The audit committee will report to the board of
directors in discharging its responsibilities relating to our accounting,
reporting and financial control practices. The audit committee will have general
responsibility for oversight of financial controls, as well as our accounting
and audit activities. The audit committee will conduct an annual review of the
qualifications of the independent auditors. The audit committee will be composed
entirely of outside directors who are not, and have never been, our officers.
Nominating Committee. Within 90 days after the completion of the offering,
we will form a nominating committee. The nominating committee will be charged
with the responsibility of considering and recommending individuals to be
considered by the board of directors for membership on the board of directors.
The nominating committee will consider nominations for directors. It is
expected that the nominating committee will adopt the following rules regarding
considering nominations by stockholders:
the nominating stockholder must have owned, for at least six months
prior to the date the nomination is submitted, shares of (a) common
stock or (b) other classes of capital stock, if any, entitled to vote
for directors;
the nomination must be received by the nominating committee 120 days
before the mailing date for proxy material applicable to the annual
meeting for which the nomination is proposed for submission; and
a detailed statement stating the qualifications, as well as the written
consent, of each party nominated must accompany each nomination
submitted.
Compensation Committee. Within 90 days after the completion of the offering,
we will form a compensation committee. The compensation committee will establish
corporate policy and programs with respect to the compensation and benefits of
our officers and key employees and administer our stock option plans. The
compensation committee will also review the compensation and benefit programs
and policies for employees, such as salary, cash incentives, long-term incentive
compensation,
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stock incentive and other programs and performance standards and target amounts
for grants under these programs. No member of this committee will receive an
award or payment under any employee plan, other than as described below. See
' -- Compensation of Directors.' The compensation committee will be composed
entirely of outside directors who are not, and have never been, our officers.
The compensation committee will also administer our 1997 Stock Option Plan and
our 2000 Equity Participation Plan.
AGREEMENTS REGARDING BOARD OF DIRECTORS POSITIONS
Michael Weinstein's employment agreement provides that Snapple shall take
steps so that Mr. Weinstein will be elected as a member of our board of
directors as long as (1) we, Snapple and Mistic remain separate legal entities
and (2) he remains an employee of Snapple and an officer of ours and Mistic.
EXECUTIVE COMPENSATION
The table below provides compensation information for our Chief Executive
Officer and our four other most highly compensated executive officers for our
fiscal year ended January 2, 2000. These officers are referred to as named
executive officers.
The compensation described includes salary, cash bonus awards and non-cash
awards granted under our 1997 Stock Option Plan, Triarc's 1993 Equity
Participation Plan, Triarc's 1997 Equity Participation Plan and Triarc's 1998
Equity Participation Plan.
Perquisites and other personal benefits did not exceed the lesser of either
$50,000 or 10% of the total annual salary and bonus reported under the headings
'Salary' and 'Bonus.'
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
---------------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
OPTIONS/SARs COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#)(1) ($)(9)
--------------------------- ---- --------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Michael Weinstein ............................ 1999 500,000 225,000 36,000(4) 6,400
Chief Executive Officer 1998 500,000 225,000 10,000 5,600
1997 458,333 2,250,000(2) 21,000(5) 4,000
Ernest J. Cavallo ............................ 1999 400,000 180,000 20,750(4) 6,400
President and Chief Operating Officer 1998 400,000 180,000 7,000 4,000
1997 368,750 2,200,000(2) 12,750(5) 4,000
John L. Belsito .............................. 1999 282,500 127,125 13,875(4) 1,600
Senior Vice President; President of 1998 114,583 100,000 32,875(6) 120,250(10)
Royal Crown 1997 -- -- -- --
Joseph G. McDonald ........................... 1999 268,335 120,751 10,875(4) 6,400
Senior Vice President, Sales 1998 260,835 130,418 4,500 4,000
1997 240,002 115,000 6,375(5) 4,000
Samuel M. Simpson ............................ 1999 284,300 311,903 7,000(7) 4,800
President and Chief Executive Officer of 1998 284,300 220,000 6,500 4,000
Stewart's 1997 183,408 560,000(3) 56,162(8) 0
</TABLE>
---------
(1) Except as noted in footnotes (4) through (8), all stock option grants were
made pursuant to Triarc's 1993 Equity Participation Plan, Triarc's 1997
Equity Participation Plan or Triarc's 1998 Equity Participation Plan. The
option grants under Triarc's 1998 Equity Participation Plan with respect to
fiscal 1998 were made on March 15, 1999.
(2) Includes, as consideration for Messrs. Weinstein's and Cavallo's added
responsibilities in connection with the reorganization of the Snapple
Beverage Group, the acquisition of Snapple and the cancellation of certain
stock appreciation rights with respect to shares of Mistic common stock, a
special payment of $2,000,000 awarded under the terms of each of
Mr. Weinstein's and
(footnotes continued on next page)
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(footnotes continued from previous page)
Mr. Cavallo's 1997 employment agreements that Mr. Weinstein and Mr. Cavallo
received on January 7, 2000. See ' -- Employment Agreements -- Michael
Weinstein'and ' -- Ernest J. Cavallo.'
(3) Includes a stay bonus of $400,000 paid when Triarc acquired Stewart's.
(4) Includes 21,000, 12,750, and 6,375 options granted in 1997 under our 1997
Stock Option Plan to Messrs. Weinstein, Cavallo, and McDonald,
respectively, and 6,375 options granted in 1998 under our 1997 Stock Option
Plan to Mr. Belsito, the exercise prices of which were equitably adjusted
in 1999. In May 1999, in accordance with the terms of the plan, the
Performance Compensation Subcommittee of the Triarc Board of Directors
equitably adjusted the exercise price of all outstanding options under our
stock option plan to reflect the effects of the transfer of cash and
deferred tax assets from us to Triarc and the contribution of Stewart's
Beverages, Inc. to us. As a result, the exercise price of each of our
options granted in 1998 at an exercise price of $191.00 per share was
equitably adjusted to $138.83 per share and the exercise price of each of
our options granted in 1997 at an exercise price of $147.30 per share was
equitably adjusted to $107.05 per share. In addition, holders of options
with an original exercise price of $147.30 per share may be entitled to a
cash payment of $51.34 per share, and holders of options with an original
exercise price of $191.00 per share may be entitled to a cash payment of
$39.40 per share, if they exercise their options or their right to resell
their shares to us.
(5) Represents grants of options made pursuant to our 1997 Stock Option Plan
which were equitably adjusted in 1999. See footnote (4) above.
(6) Includes 6,375 options granted under our 1997 Stock Option Plan which were
equitably adjusted in 1999. See footnote (4) above.
(7) Includes 500 options granted under our 1997 Stock Option Plan.
(8) Includes 36,162 options granted under the Triarc Stock Option Plan for
Cable Car Employees.
(9) Except as noted in footnote (10) below, these amounts represent amounts
contributed to 401(k) plan by Snapple.
(10) Represents a payment made to Mr. Belsito for amounts he was entitled to
receive under an employment agreement with his former employer.
-------------------
During each of the periods presented, our Chairman and Vice Chairman were
also directors and officers of Triarc and their compensation, other than a 1998
grant of 26,000 options under our 1997 Stock Option Plan to our Chairman and
13,000 options to our Vice Chairman, which options were equitably adjusted in
1999 (see footnote (4) to the table above), was paid directly by Triarc. During
each of the periods presented, we paid a management fee ($6.7 million in 1999)
to Triarc, which provides us with various management services, including those
rendered to us by our Chairman and Vice Chairman. Please refer to the section of
the prospectus entitled 'Relationships with Triarc and Related Party
Transactions -- Management Services Agreement.'
EMPLOYMENT AGREEMENTS
The following are summaries of the material terms of employment agreements
with the named executive officers to which we are a party. You should be aware
that these summaries are not a complete description of these agreements and
these summaries are qualified in their entirety by the agreements, copies of
which have been filed with the Securities and Exchange Commission.
Michael Weinstein and Ernest J. Cavallo. Snapple and Mistic entered into
amended and restated employment agreements, effective as of June 1, 1997, with
Michael Weinstein and Ernest Cavallo, providing for the employment of
Mr. Weinstein as the Chief Executive Officer of us, Snapple, Mistic and Royal
Crown and Mr. Cavallo as the President and Chief Operating Officer of us,
Snapple and Mistic. Unless otherwise terminated as provided in the agreement,
the term of employment for Mr. Weinstein will continue until January 2, 2004,
and the term of employment for Mr. Cavallo will
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continue until January 2, 2001. These employment agreements are automatically
renewed for additional one year periods unless either Mr. Weinstein,
Mr. Cavallo or Snapple elect, upon 180 days' notice, not to renew.
Mr. Weinstein receives an annual base salary of $525,000 and is eligible to
receive an annual cash incentive bonus and future grants of options to purchase
shares of Triarc's class A common stock. Mr. Cavallo receives an annual base
salary of $420,000 and is eligible to receive an annual cash incentive bonus and
future grants of options to purchase shares of Triarc's Class A common stock.
Mr. Weinstein and Mr. Cavallo each also received a special payment of $2,000,000
in January 2000.
Mr. Weinstein and Mr. Cavallo are also entitled to participate in any
insurance, including life, disability, medical and dental, vacation, pension and
retirement plans and to receive any other employee benefits and perquisites made
generally available by Snapple to its senior officers. In addition,
Mr. Weinstein and Mr. Cavallo are each entitled to a monthly automobile
allowance in the amount of $900.
In the event Snapple terminates these employments without good cause, these
employment agreements provide that the executive will receive an amount equal to
the sum of: (1) the greater of: (a) his base salary for one year and (b) the
entire amount of base salary that would be payable to the executive under his
employment agreement through the last day of the then current term, plus any
earned but unpaid base salary, vacation or annual bonus in respect of a prior
year owing to the executive accrued before the termination; plus (2) the
executive's annual bonus for the year in which the termination occurs.
These employment agreements provide that in the event of a change in
control, the executive may terminate his employment within 12 months following
the change in control, if he does so because of any substantial diminution of
his title, duties, or responsibilities, or any material reduction in
compensation, and will be entitled to receive the same payments that he would
have been entitled to receive had his employment been terminated without good
cause.
These employment agreements also contain confidentiality provisions that
prohibit the executives from disclosing confidential information relating to
Snapple, its subsidiaries or its affiliated companies during the term of their
employment agreement and for a period of four years afterwards. In addition, the
agreements contain non-competition provisions that prohibit the executives from
competing in the premium or carbonated beverage business for a period of 18
months following the termination of their employment for cause or his voluntary
resignation before the last day of his term of employment.
John L. Belsito. Royal Crown entered into an employment agreement, dated
July 23, 1998, with John Belsito, providing for the employment of Mr. Belsito as
Senior Vice President of us and as President of Royal Crown. The agreement does
not contain a specified term of employment. Mr. Belsito receives an annual base
salary of $282,500 and is eligible to receive an annual cash incentive bonus
equal to 50% of his base salary subject to the achievement of profit objectives
by us and Royal Crown. Under the agreement, in August 1998, Mr. Belsito received
options to purchase 6,375 shares of our common stock and options to purchase
20,000 shares of Triarc's class A common stock.
Mr. Belsito is also entitled to participate in any insurance, including
life, disability, medical and dental, vacation, pension and retirement plans and
to receive any other employee benefits and perquisites made generally available
by us to our senior officers. In addition, Mr. Belsito is entitled to a monthly
automobile allowance in the amount of $900.
If Mr. Belsito is terminated at any time without cause, he will be able to
continue his health and medical coverage.
Mr. Belsito's employment agreement also contains confidentiality provisions
that prohibit him from disclosing confidential information relating to us, our
subsidiaries or our affiliated companies during the term of Mr. Belsito's
employment agreement and for a period of four years afterwards.
Samuel M. Simpson. Stewart's entered into an employment agreement, dated
November 25, 1997, with Samuel M. Simpson, providing for the continued
employment of Mr. Simpson as President and Chief Executive Officer of Stewart's.
The term of employment for Mr. Simpson will continue until November 25, 2001,
unless otherwise terminated as provided in the agreement. The employment
agreement is automatically renewed for additional one year periods unless either
Mr. Simpson or Stewart's elect, upon 180 days' notice, not to renew.
Mr. Simpson receives an annual base salary of
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$284,300, and is eligible to receive an annual cash incentive bonus and future
grants of options to purchase shares of Triarc's class A common stock. Upon the
signing of his employment agreement, Mr. Simpson received a bonus of $400,000.
Mr. Simpson is also entitled to participate in any insurance, including
life, disability, medical and dental, vacation, pension and retirement plans and
to receive any other employee benefits and perquisites made generally available
by Stewart's to its senior officers. In addition, Mr. Simpson is entitled to a
monthly automobile allowance in the amount of $800.
If Mr. Simpson is terminated at any time without cause, he will be able to
continue his health and medical coverage.
Mr. Simpson's employment agreement also contains confidentiality provisions
that prohibit him from disclosing confidential information relating to
Stewart's, its subsidiaries or its affiliated companies during the term of
Mr. Simpson's employment agreement and for a period of four years afterwards. In
addition, the agreement contains non-competition provisions that prohibit
Mr. Simpson from competing in the beverage business for a period of up to 24
months following the termination of his employment for cause or his voluntary
resignation before the last day of his term of employment.
SEVERANCE ARRANGEMENTS
As consideration for entering into confidentiality and non-solicitation
agreements, each of Mr. Belsito, Mr. Simpson and Mr. McDonald will be entitled
to receive an amount equal to their annual base rate of salary for a period of
up to 18 months following their termination without cause (as defined) or their
termination for good reason (as defined) following a change of control of our
company. In addition, they will be entitled to receive a pro rata portion of
their annual bonus for the year of termination, as well as certain health and
medical benefits.
COMPENSATION OF DIRECTORS
Members of our board of directors and the boards of directors of our
subsidiaries who are our officers or officers of Triarc or its other
subsidiaries will not be additionally compensated for their activities in these
capacities. Each other director will receive an annual retainer of $ for
serving on our board of directors. In addition, each other director also
receives a payment of $ for each meeting of our board of directors or of a
committee, or subcommittee, of our board of directors that the director attends.
Under our new stock option plan, each non-management director will be entitled
to elect to have all or a portion of the annual retainer and the meeting
payments paid in shares of our common stock rather than in cash. See
' -- Employment Agreements' above and ' -- Stock Option Plans -- Snapple
Beverage Group, Inc. 2000 Equity Participation Plan' for information relating to
compensation of our management directors.
In addition, each director who is not an employee of ours or of Triarc or
any of its other subsidiaries will receive options to purchase shares of our
common stock on the date of his or her initial election or appointment to our
board of directors. On the date of each annual meeting of stockholders that a
director is reelected, that director will receive options to purchase shares of
our common stock.
CASH INCENTIVE PLANS
We have an annual cash incentive plan for executive officers and key
employees. Our annual incentive plan is designed to provide annual incentive
awards to participants, with amounts payable being linked to our financial
performance and the performance of the participant. Financial performance is
assessed annually against financial and strategic objectives. Under our annual
incentive plan, participants may receive awards of a specified percentage of
their then current base salaries, which percentage varies depending upon the
level of seniority and responsibility of the participant. The percentages are
set by our management in consultation with management of Triarc. Such awards may
be adjusted on a discretionary basis to reflect the relative individual
contribution of the executive or key employee, to evaluate the 'quality' of our
earnings or to take into account external factors that affect performance
results. Our management, in consultation with the management of Triarc, may also
decide
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that multiple performance objectives related to our and/or the individual's
performance may be appropriate in order to determine the amount of the annual
incentive awards. In addition, discretionary bonuses may be awarded to our
executive officers, including our Chairman and Vice Chairman. Our annual
incentive plan will be administered by our board of directors following the
offering and may be amended or terminated at any time.
STOCK OPTION PLANS
Some of our named executive officers, as well as our Chairman and Vice
Chairman, have received options to purchase shares of our common stock as well
as Triarc's class A common stock. The following are summaries of the material
terms of the stock option plans governing these options:
SNAPPLE BEVERAGE GROUP, INC. 1997 STOCK OPTION PLAN
On August 19, 1997, our board of directors adopted the Snapple Beverage
Group, Inc. 1997 Stock Option Plan. Our 1997 Stock Option Plan was adopted for
the purpose of attracting, retaining and motivating key employees, officers,
directors and consultants. Our 1997 Stock Option Plan provides for a maximum of
150,000 shares of our common stock to be issued upon the exercise of stock
options. As of May 31, 2000, options to acquire 146,950 shares of our common
stock were outstanding under our 1997 stock option plan. Our 1997 Stock Option
Plan will be administered by the compensation committee of our board of
directors. The term during which options may be granted under our 1997 Stock
Option Plan expires on August 18, 2007.
During 1997, 76,250 stock options were granted under our 1997 Stock Option
Plan with an exercise price equal to the then fair market value ($147.30) as
determined by an independent appraisal. One third of these options vested on
July 1, 1999, one third of these options will vest on July 1, 2000 and one third
of these options will vest on July 1, 2001.
During 1998, 72,175 stock options were granted under our 1997 Stock Option
Plan with an exercise price equal to the then fair market value ($191.00) as
determined by an independent appraisal. One third of these options vested on
July 1 of 1999, one third of these options will vest on July 1, 2000 and one
third of these options will vest on July 1, 2001.
During 1999, 4,850 stock options were granted under our 1997 Stock Option
Plan and 4,950 stock options were canceled. The options were granted with an
exercise price equal to the then fair market value ($311.99) as determined by an
independent appraisal. For most of these options, one third will vest on
July 1, 2000, one third will vest of July 1, 2001 and one third will vest on
July 1, 2002. For the remainder of these options, one third will vest on
September 1, 2000, one third will vest on September 1, 2001 and one third will
vest on September 1, 2002.
We made equitable adjustments to our outstanding options during the first
quarter of 1999 to reflect the effects of the transfer of cash and deferred tax
assets from us to Triarc and Triarc Consumer Products Group and the contribution
of Stewart's from Triarc Consumer Products Group. Each option granted in 1997 at
an exercise price of $147.30 per share was adjusted to $107.05 per share and the
exercise price of each option granted in 1998 at an exercise price of $191.00
per share was adjusted to $138.83 per share. In addition, holders of options
granted in 1997 may be entitled to a cash payment of $51.34 per share, and
holders of options granted in 1998 may be entitled to a cash payment of $39.40
per share, if they exercise their options or their right to resell their shares
to us.
SNAPPLE BEVERAGE GROUP INC. 2000 EQUITY PARTICIPATION PLAN
Before this offering is completed, we plan to adopt the Snapple Beverage
Group, Inc. 2000 Equity Participation Plan for the purpose of attracting,
retaining and motivating key employees, officers, directors and consultants of
our company and our subsidiaries and affiliates. The 2000 Equity Participation
Plan will provide for the granting of stock options, stock appreciation rights,
and restricted stock to officers, key employees of, and consultants to our
company and our subsidiaries and affiliates. The 2000 Equity Participation Plan
will provide for automatic awards of options to non-employee directors of our
Company and permit non-employee directors to elect to receive all or a portion
of their annual retainer fees and/or board of directors or committee meeting
attendance fees, if any, in shares of
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our common stock. The 2000 Equity Participation Plan will be administered by the
compensation committee of our board of directors.
TRIARC'S 1993 EQUITY PARTICIPATION PLAN
Triarc's 1993 Equity Participation Plan, which expired on April 24, 1998,
provided for the grant of options to purchase Triarc class A common stock, par
value $.10 per share of Triarc, including performance stock options, stock
appreciation rights, restricted shares of Triarc class A common stock and, to
non-employee directors of Triarc, at their option, shares of Triarc class A
common stock instead of annual retainer fees otherwise to be payable in cash.
Directors, selected officers and key employees of, and key consultants to,
Triarc and its subsidiaries were eligible to participate in the 1993 Equity
Participation Plan. A maximum of 10,000,000 shares of Triarc class A common
stock, contingent on adjustments, were authorized to be delivered by Triarc
under options, stock appreciation rights and restricted shares granted under the
1993 Equity Participation Plan.
As of May 31, 2000, options to acquire a total of 7,906,850 shares of Triarc
class A common stock were outstanding under the 1993 Equity Participation Plan.
The plan is administered by the Performance Committee of the Triarc board of
directors.
TRIARC'S 1997 EQUITY PARTICIPATION PLAN
The 1997 Equity Participation Plan was approved by the executive committee
of Triarc's Board of Directors on December 11, 1997 and provides for the
granting of stock options to purchase shares of Triarc's Class A common stock.
Participants in the 1997 Equity Participation Plan are limited to selected key
employees and consultants of Triarc, its subsidiaries and affiliates, including
us and our subsidiaries, who are important to the success and growth of Triarc,
its subsidiaries and affiliates, but who are not 'directors,' 'executive
officers' or 'officers' of Triarc. A total of 500,000 shares of Triarc's
class A common stock are reserved for issuance under the 1997 Equity
Participation Plan. As of May 31, 2000, options to acquire 401,915 shares of
Triarc's class A common stock were outstanding under the 1997 Equity
Participation Plan. The 1997 Equity Participation Plan is administered by the
compensation committee of the Triarc board of directors. The term during which
options may be granted under the 1997 Equity Participation Plan expires on
December 11, 2002.
TRIARC'S 1998 EQUITY PARTICIPATION PLAN
Triarc's 1998 Equity Participation Plan was approved by Triarc's board of
directors on March 10, 1998 and was approved by its stockholders on May 6, 1998.
The 1998 Equity Participation Plan provides for the granting of stock options,
stock appreciation rights, and restricted stock to officers, key employees of,
and consultants to Triarc and its subsidiaries and affiliates. The 1998 Equity
Participation Plan provides for automatic awards of options to non-employee
directors of Triarc and permits non-employee directors to elect to receive all
or a portion of their annual retainer fees and/or board of directors or
committee meeting attendance fees, if any, in shares of Triarc class A common
stock. The 1998 Equity Participation Plan replaced the 1993 Equity Participation
Plan which expired on April 24, 1998.
As of May 31, 2000, options to acquire 1,971,500 shares of Triarc class A
common stock were outstanding under the 1998 Equity Participation Plan.
Contingent on specified antidilution adjustments, a maximum of 5,000,000
aggregate shares of Triarc class A common stock may be granted on the exercise
of options or stock appreciation rights or upon a director's election to receive
their fees in Triarc shares under the 1998 Equity Participation Plan. In
addition, the maximum number of shares of class A common stock that may be
granted to any individual in a calendar year is 1,000,000 shares. The 1998
Equity Participation Plan is administered by the Performance Compensation
Subcommittee of Triarc's board of directors. The term during which awards may be
granted under the 1998 Equity Participation Plan will expire on April 30, 2003.
TRIARC'S STOCK OPTION PLAN FOR CABLE CAR EMPLOYEES
Triarc's Stock Option Plan for Cable Car Employees was approved by the
executive committee of Triarc's board of directors as of January 12, 1998. The
Stock Option Plan for Cable Car Employees
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provides for the grant of options to purchase Triarc class A common stock to
those Stewart's employees who held options to purchase Stewart's, formerly known
as Cable Car Beverage Corporation, common stock at the time Triarc acquired it
in November 1997.
As of May 31, 2000, options to acquire 20,664 shares of Triarc class A
common stock were outstanding under this stock option plan.
Contingent on specified antidilution adjustments, a maximum of 154,931
aggregate shares of Triarc class A common stock may be granted on the exercise
of options. This stock option plan is administered by the compensation committee
of Triarc's board of directors.
OPTIONS GRANTED IN FISCAL 1999
The following tables provide information concerning options to purchase
shares of our common stock and Triarc's class A common stock granted during our
fiscal year ended January 2, 2000 to the named executive officers. Other than a
grant of 500 shares to Mr. Simpson, no grants were made under our 1997 stock
option plan to any of the named executive officers during our fiscal year ended
January 2, 2000. No stock appreciation rights were granted to any named
executive officers, and no stock options were exercised by any named executive
officers during fiscal 1999. The grants expiring in March 2009 were made with
respect to fiscal 1998 while the other grants listed were made with respect to
fiscal 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
------------------------------------------------------------- -------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS GRANTED EXERCISE OR GRANT DATE
SARs GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR(2) ($ PER SHARE) DATE ($)(3)
---- ------ -------------- ------------- ---- ------
<S> <C> <C> <C> <C> <C>
Michael Weinstein............ 15,000 0.68% $ 17.75 12/22/09 $122,454
10,000(4) 0.45% $ 16.875 03/15/09 $ 72,847
Ernest J. Cavallo............ 8,000 0.36% $ 17.75 12/22/09 $ 65,309
7,000(4) 0.32% $ 16.875 03/15/09 $ 50,993
John L. Belsito.............. 7,500 0.34% $ 17.75 12/22/09 $ 61,227
6,500(4) 0.29% $ 16.875 03/15/09 $ 47,351
Joseph G. McDonald........... 4,500 0.20% $ 17.75 12/22/09 $ 36,736
4,500(4) 0.20% $ 16.875 03/15/09 $ 32,781
Samuel M. Simpson............ 6,500 0.29% $ 17.75 12/22/09 $ 53,063
6,500(4) 0.29% $ 16.875 03/15/09 $ 47,351
500(5) 10.3%(5) $311.99 05/17/09 $ 46,720(6)
</TABLE>
---------
(1) Except as otherwise noted, all options granted to named executive officers
during 1999 were granted under Triarc's 1998 Equity Participation Plan. One
third of the options granted will vest on each of the first, second and
third anniversaries of the date of grant and they will be exercisable at any
time between the date of vesting and the tenth anniversary of the date of
the grant.
(2) Except as otherwise noted, the percentages are based on the aggregate number
of options granted to employees and directors of Triarc and its subsidiaries
in fiscal 1999 to purchase Triarc's class A common stock.
(3) Except as otherwise noted, these values were calculated using a
Black-Scholes option pricing model. The actual value, if any, that an
executive may realize will depend on the excess, if any, of the stock price
over the exercise price on the date the options are exercised, and no
assurance exists that the value realized by an executive will be at or near
the value estimated by the Black-Scholes model. The following assumptions
were used to calculate the present value of the option grants with respect
to Triarc's common stock:
(footnotes continued on next page)
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(footnotes continued from previous page)
(a) assumed option term of seven years;
(b) stock price volatility factors of .2895 and .2865 for the March 15,
1999 and December 22, 1999 grants, respectively;
(c) annual discount rates of 5.34% and 6.57% for the March 15, 1999 and
December 22, 1999 grants, respectively; and
(d) no dividend payment.
These estimated option values, including the underlying assumptions used in
calculating them, constitute 'forward-looking statements' within the meaning
of the Private Securities Litigation Reform Act of 1995 and involve risks,
uncertainties and other factors which may cause the actual value of the
options to be materially different from those expressed or implied herein.
(4) These options were granted on March 15, 1999 in respect of fiscal 1998.
(5) These options were granted under our 1997 stock option plan. The percentage
is based on the aggregate number of options granted under our 1997 stock
option plan in 1999.
(6) This value was calculated using a Black-Scholes option pricing model. The
actual value, if any, that may be realized will depend on the excess, if
any, of the stock price over the exercise price on the date the options are
exercised, and no assurance exists that the value realized by an executive
will be at or near the value estimated by the Black-Scholes model. The
following assumptions were used to calculate the present value of this
option grant:
(a) assumed option term of seven years from the original date of grant;
(b) stock price volatility factor of 0.0001, reflecting the fact that,
as a privately held subsidiary, our common stock does not have a
public trading market prior to this offering;
(c) an annual discount rate of 5.66%;
(d) no dividend payment; and
(e) 3% discount of Black-Scholes ratio for each year an option remains
unvested.
This estimated option value, including the underlying assumptions used in
calculating it, constitute 'forward-looking statements' within the meaning
of the Private Securities Litigation Reform Act of 1995 and involves risks,
uncertainties and other factors which may cause the actual value of the
options to be materially different from those expressed or implied herein.
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OPTION VALUES AT END OF FISCAL 1999
The following tables provide information concerning the value, as of
January 2, 2000, of unexercised in-the-money options to purchase shares of
Triarc's class A common stock and shares of our common stock granted to the
named executive officers outstanding at the end of fiscal 1999.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR FISCAL YEAR-END
ACQUIRED VALUE END 1999(#) 1999($)(1)
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Michael Weinstein
Triarc Options............ -0- -0- 31,666/38,334 187,246/97,379
Our Options............... -0- -0- 7,000/14,000 1,793,960/3,587,920
Ernest J. Cavallo
Triarc Options............ -0- -0- 23,000/25,000 135,051/170,649
Our Options............... -0- -0- 4,250/8,500 1,089,190/2,178,380
John L. Belsito
Triarc Options............ -0- -0- 0/14,000 0/14,438
Our Options............... -0- -0- 2,125/4,250 451,690/903,380
Joseph G. McDonald
Triarc Options............ -0- -0- 10,666/24,334 52,504/91,444
Our Options............... -0- -0- 2,125/4,250 544,595/1,089,190
Samuel M. Simpson
Triarc Options............ -0- -0- 12,915/13,000 87,370/13,813
Our Options............... -0- -0- 0/500 0/0
</TABLE>
---------
(1) On December 31, 1999 (the last trading day during fiscal 1999), the closing
price of Triarc's class A common stock on the New York Stock Exchange was
$18.375 per share. Prior to the offering, our common stock is not publicly
traded. The per share value as of January 2, 2000 is based on a May 17, 1999
valuation of $311.99 per share provided to us by an independent third party,
the latest valuation prepared.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Joseph Levato was appointed to the Compensation Committee of the Triarc
board of directors in July 1997. Mr. Levato has been a director of Triarc since
July 1996 and retired as Executive Vice President and Chief Financial Officer in
August 1996. Mr. Levato was Executive Vice President and Chief Financial Officer
of Mistic from June 1995 to August 1996. Mr. Levato is not a member of Triarc's
performance compensation subcommittee which administers Triarc's 1993 and 1998
stock option plans, and until completion of the offering, our 1997 Stock Option
Plan.
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RELATIONSHIP WITH TRIARC AND RELATED PARTY TRANSACTIONS
The following descriptions are only summaries of the material terms of
certain agreements and arrangements to which we are or, following the offering,
will be a party. We refer you to the more detailed provisions of these
agreements which are filed with the Securities and Exchange Commission as
exhibits to the registration statement of which this prospectus is a part.
You should be aware that because we are a subsidiary of Triarc, the
agreements described below were not the result of arms'-length negotiation.
However, in accordance with the provisions of our new credit facility and
indenture, any future agreements that we enter into with Triarc, including the
initial public offering and separation agreement, the release and
indemnification agreement and the registration rights agreement described below,
must be on a basis no less favorable to us than we could obtain from a third
party and the transactions may require approval by a majority of our
disinterested directors.
EXISTING TAX SHARING AGREEMENT
We and our principal subsidiaries are included in a consolidated federal
income tax return with Triarc and combined state tax returns in some states. On
February 25, 1999, we entered into a tax sharing agreement with Triarc, Triarc
Consumer Products Group and its subsidiaries. The tax sharing agreement will be
further amended before the completion of this offering. Under this tax sharing
agreement, as amended, for each year for which we or any of our subsidiaries are
included in the Triarc return, we will pay, or cause our subsidiaries to pay, to
Triarc an amount equal to the federal income tax liability that would have been
payable by us for that year, determined generally as if we had filed a separate,
consolidated federal income tax return for that year on behalf of ourselves and
our subsidiaries. The payment to Triarc is based on current income without
regard to any deductions relating to exercise or payment in cancellation of
options to purchase Triarc stock.
Also, under this tax sharing agreement, similar arrangements apply in some
states where we or our subsidiaries file on a combined basis with Triarc or any
of its other subsidiaries. However, our liability will not be less than any
increase in taxes resulting from the inclusion of us or any of our subsidiaries
in the combined return.
In addition, if we cease to be included in a consolidated tax return with
Triarc, we may be required to make tax sharing payments on intercompany
transactions that have not resulted in income to us.
During 1999, we made no tax sharing payments to Triarc primarily as a result
of tax benefits that were fully utilized by us or transferred to Triarc in 1999.
We will continue to have liability to Triarc for any Internal Revenue Service
audit adjustments in years covered by the tax sharing agreement.
OLD TAX SHARING AGREEMENT
Until February 25, 1999, we and our principal subsidiaries were parties to
separate tax sharing agreements with Triarc whereby each of us was required to
pay amounts relating to taxes based on our taxable income and the taxable income
of our eligible subsidiaries on a stand-alone basis. Because of net operating
losses in prior periods, including 1997, in excess of pre-tax income for the
first nine months of 1998 and/or prior period overpayments, no payments were
required for us during 1997. During 1998, we made tax sharing payments to Triarc
of $10.5 million. Stewart's made no payment in 1997, but made a $0.9 million tax
sharing payment during 1998 for the period that it was a party to a separate tax
sharing agreement with Triarc.
These separate tax sharing agreements continue to apply to determine the
payment of amounts relating to taxes for taxable periods ending prior to
February 25, 1999.
SUPPLY ARRANGEMENTS
We purchase some raw materials, flavors and packaging from Triarc at
Triarc's purchase cost from unaffiliated third-party suppliers. We purchased raw
materials, flavors and packaging from Triarc in the amount of $17.2 million in
1997, $123.0 million in 1998 and $153.9 million in 1999. Following the
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offering, this arrangement will end and Triarc will assign to us its rights and
obligations under the agreements between Triarc and its raw material, flavoring
and packaging suppliers.
MANAGEMENT SERVICES AGREEMENT
Under a management services agreement with Triarc, we receive from Triarc
management services, including legal, accounting, tax, insurance, financial and
other management services. The management fee payable to Triarc is an aggregate
of $6.7 million per year beginning in 1999, which may be increased but not
decreased, based on changes in an appropriate consumer price index. Accordingly,
the aggregate fee was increased to approximately $6.9 million for 2000. We are
also required to reimburse Triarc for costs and expenses incurred by Triarc in
connection with supply arrangements that Triarc has entered into relating to
items used in connection with our business, as described above. We also
reimburse Triarc for costs and expenses incurred by Triarc relating to:
insurance maintained by Triarc, including medical, general liability
and directors and officers liability insurance,
the management or operation of employee benefit plans, and
the acquisition from third parties of goods and services and the use of
equipment purchased, arranged for or provided by Triarc, to the extent
that any of the above are for the benefit of, or used by, us or any of
our subsidiaries.
In 1999, we and our subsidiaries recorded approximately $5.7 million in fees
to Triarc under the management services agreement and approximately $1.0 million
in fees to Triarc under a management services agreement that was in effect from
January 1, 1999 to February 25, 1999. We and our subsidiaries recorded
approximately $5.6 million of fees in 1997 and $6.7 million in 1998 under our
previous management services agreement.
INITIAL PUBLIC OFFERING AND SEPARATION AGREEMENT
GENERAL
It is Triarc's current intention, following the completion of the offering,
to effect a tax-free separation of its remaining interest in our company.
Triarc's board of directors has authorized Triarc's officers to pursue a
separation following the completion of the offering, conditioned on, among other
things, market conditions, the consent of the holders of Triarc's outstanding
debentures or the redemption of the debentures, to be financed on terms
satisfactory to Triarc, and receipt of a favorable ruling from the Internal
Revenue Service or other assurance acceptable to Triarc that a separation will
be tax-free to Triarc and its stockholders. As a consequence, prior to the
completion of this offering, we will enter into an initial public offering and
separation agreement with Triarc, which will govern our respective rights and
duties and will set forth certain covenants with respect to some offerings of
our securities, including the offering, and any future separation from Triarc.
However, Triarc is not obligated to complete a separation, and will, in its sole
discretion, determine when and if it will occur, its structure and all of its
terms. Therefore, we cannot assure you as to whether or not or when a separation
will occur or as to the terms of the separation. Please refer to the section of
this prospectus entitled 'Risk Factors -- Risk Factors Relating to Our
Relationship With Triarc -- Our ability to raise capital may be adversely
affected if Triarc does not complete the divestiture of our company' and
'Separation from Triarc.'
OFFERINGS OF OUR SECURITIES
Subject to the limits of applicable laws, regulations and agreements,
including the limits contained in our debt agreements, we will agree to consult
with and cooperate with Triarc in all respects in connection with any primary
offerings of our common stock or other securities and shall at Triarc's
direction, promptly take any and all actions necessary or desirable to
consummate or terminate such transactions. This provision will terminate upon
the earlier to occur of (1) the date when Triarc or its subsidiaries own less
than 50% of the common equity of our company, (2) the date that the separation
is completed, (3) twelve months after Triarc's debentures have been repaid
in full or covenants therein
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have been modified to permit the separation, (4) November 9, 2003, or (5) the
date when Triarc terminates the initial public offering and separation
agreement.
COMPETITION BY TRIARC
Triarc will agree that it will have a duty to refrain from engaging in the
same or similar business activities or lines of business as we are currently
engaged in. This provision will expire on the earliest of the date that the
separation is completed or the date that Triarc ceases to beneficially own
at least 50% of our outstanding common stock and no person who is a director
or officer of ours is also a director or officer of Triarc. We will have
similar obligations with respect to Triarc's current businesses.
CORPORATE OPPORTUNITIES
Triarc will agree that if it acquires knowledge of a corporate opportunity
that is a part of our current business, Triarc, and its officers and directors,
shall be required to offer that corporate opportunity to us before pursuing or
acquiring that opportunity for itself or directing that opportunity to another
person. We will have similar obligations with respect to Triarc's current
businesses. This provision will expire on the earliest of the date that the
separation is completed or the date that Triarc ceases to beneficially own
at least 50% of our outstanding common stock and no person who is a director
or officer of ours is also a director or officer of Triarc.
EXPENSES
In general, we and Triarc will pay our respective costs and expenses
incurred in connection with any primary offering of our securities prior to a
separation or other similar transaction, including the offering.
Expenses Relating to Primary Offerings of Our Securities. We will
generally agree to pay all costs and expenses relating to any primary
offerings of our common stock and our other securities prior to any
future separation or other similar transaction, including the offering.
In particular, we will pay the underwriting discounts and commissions.
Expenses Relating to any Future Separation. Triarc will agree to pay
all costs and expenses relating to the separation or any related
transaction.
ACCESS TO INFORMATION
Upon written request, subject to specified conditions and for a specified
period of time, we and Triarc, will agree to:
refrain from disclosing confidential information concerning each other,
unless legally required to do so;
provide each other with reasonable access to information relating to
the assets, business and operations of the requesting party;
keep our books and records for a specified period of time; and
cooperate with the other party to allow access to each others'
employees, to the extent they are necessary, to discuss and explain all
requested information mentioned above and with respect to any claims
brought against the other relating to the conduct of our business prior
to completion of a separation or similar transaction.
COVENANTS
We will agree that, for so long as Triarc is required to consolidate our
results of operations and financial position, we will:
provide Triarc with financial information regarding our company and our
subsidiaries;
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provide Triarc copies of all quarterly and annual financial information
and other reports and documents we intend to file with the Securities
and Exchange Commission prior to such filings, as well as final copies
upon filing, and to consult actively with Triarc with respect to any
changes made to these reports;
provide Triarc with copies of our budgets and financial projections, as
well as the opportunity to meet with our management to discuss such
budgets and projections and additional financial information and data
Triarc may reasonably request;
provide Triarc with copies of our press releases or any other
statements made to our employees, to our subsidiaries or to the public,
before issuance;
consult with Triarc regarding the timing and content of earnings
releases and cooperate fully and cause our accountants to cooperate
fully with Triarc in connection with any of its public filings;
not change our auditors without Triarc's prior written consent, and use
our reasonable best efforts to enable our auditors to complete their
audit of our financial statements such that they will date their
opinion the same date that they date their opinion on Triarc's
financial statements;
provide to Triarc and its auditors all information required for Triarc
to meet its schedule for the filing and distribution of its financial
statements;
make our books and records available to Triarc and its auditors, so
that they may conduct reasonable audits relating to our financial
statements;
adhere to specified accounting standards;
notify Triarc of changes in our accounting estimates and principles and
keep them consistent with Triarc's; and
maintain the same fiscal year as Triarc.
OTHER COVENANTS
The initial public offering and separation agreement will also provide that
for so long as Triarc beneficially owns 50% or more of our outstanding shares of
common stock, we may not take any action or enter into any commitment or
agreement that may reasonably be anticipated to contravene or result in, with or
without notice and with or without lapse of time, an event of default by Triarc
of:
any provision of applicable law or regulation, including but not
limited to provisions pertaining to the Internal Revenue Code, or the
Employee Retirement Income Security Act of 1974, as amended;
any provision of Triarc's certificate of incorporation or by-laws;
any agreement relating to borrowed money or other material instrument
binding upon Triarc of which we have been advised in writing and
provided a copy; or
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over Triarc or any to its assets of which we have
been advised in writing and provided a copy.
TAX MATTERS
We will agree to take all actions requested by Triarc, including internal
liquidations and mergers, and including any other restructuring that Triarc
reasonably requests and making any representations and covenants requested
by Triarc, in connection with any ruling requests submitted by Triarc to the
Internal Revenue Service, including ruling requests unrelated to any separation
of our company from Triarc.
We will agree that, in the event that our stock is distributed to any, or
all, of Triarc's shareholders or security holders in a transaction intended to
qualify under Section 355 of the Internal Revenue Code, we will not take or fail
to take, or permit any subsidiary or any other member of our consolidated group
to take, or fail to take, any action if such act or failure to act would be
inconsistent with any ruling obtained in connection with any such transaction or
with any representation, covenant or information
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included in any submission to the Internal Revenue Service in connection with
any such ruling. We will agree that, at all times prior to any separation of our
company from Triarc, and during the two years following any such separation, we
will not, and we will not permit any of our subsidiaries, to:
sell, exchange, distribute or otherwise transfer all or a substantial
portion of our, or, if applicable, our subsidiary's, assets, stock or
equity interests,
enter into any merger or liquidation transaction,
discontinue or otherwise fail to maintain the active trade or business
relied upon in connection with any Internal Revenue Service ruling for
any such separation,
purchase any of our outstanding stock, unless pursuant to the exercise
of the right granted to Triarc as described in 'Initial Public
Offering and Separation Agreement -- Options', in a manner contrary to
the requirements of Internal Revenue Service Revenue Procedure 96-30 or
in a manner contrary to the representations made in connection with any
Internal Revenue Service ruling or any submission given in connection
with such ruling,
issue any stock or equity interests, except pursuant to the exercise of
employee stock options,
enter into any agreement for the sale or other disposition of our stock
or equity interests, other than employee stock option agreements,
amend our, or, if applicable, any of our subsidiary's, certificate of
incorporation to create a new class of stock or to change the relative
voting power of any existing class of stock if any new class of stock
has been created, including through the conversion of one class of
stock into another class of stock, or
take any action inconsistent with the information, representations or
covenants included in any Internal Revenue Service ruling, or
submissions given in connection with such ruling, or that would result
in any such separation being taxable in whole or in part to Triarc or
Triarc's shareholders.
However, the initial public offering and separation agreement will provide
that we or any of our subsidiaries may take actions inconsistent with the
agreements set forth in the preceding paragraph if we obtain the consent of
Triarc, with consent to be determined by Triarc in its sole discretion, which
discretion shall be exercised in good faith to preserve the tax-free status of
any separation. If we do not obtain Triarc's consent, we may nonetheless take
any such inconsistent action if Triarc obtains a supplemental ruling from the
Internal Revenue Service or we, in conjunction with Triarc, obtain, from
mutually acceptable counsel, an unqualified opinion that is reasonably
acceptable to Triarc to the effect that such inconsistent actions will not
result in any separation of our company from Triarc being taxable to Triarc or
Triarc's shareholders. We will also agree to indemnify Triarc in the event any
such inconsistent actions result in tax liability to Triarc.
We have also agreed to indemnify Triarc, and each member of Triarc's
consolidated group, for any taxes resulting from any separation of our company
from Triarc, or of any Triarc subsidiary from Triarc, to the extent such taxes
result from:
any event or transaction after such separation that involves our, or
any of our subsidiaries', stock, assets or business, whether or not
such event or transaction is the result of our, or such subsidiary's,
direct actions and whether or not such event or transaction is within
our control or such subsidiary's control,
our company's, or our subsidiaries', act or failure to act after any
such separation,
the breach of any representation, covenant or information regarding our
company or our subsidiaries included in any Internal Revenue Service
ruling obtained in connection with such separation, or included in any
document submitted in connection with such ruling, or
the breach of any covenant of the initial public offering and
separation agreement, regardless of whether Triarc has consented or
obtained a supplemental ruling or opinion as described in the preceding
paragraph.
Triarc has agreed to indemnify us and our subsidiaries for any tax
liabilities that are imposed as a result of our inclusion in Triarc's
consolidated or controlled group for tax purposes to the extent such
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liability is attributable to any event or transaction involving Triarc or any of
its subsidiaries, other than us or our subsidiaries and other than matters for
which we have agreed to indemnify Triarc.
We will agree that Triarc will be entitled to the tax benefits of a tax
deduction in the event (1) stock options to purchase stock of Triarc held by
Triarc employees, or persons whom both we and Triarc employ, are exercised after
any separation of our company from Triarc or (2) stock options to purchase our
stock that were issued as a result of conversion of Triarc options and that
resulted in a charge to the earnings of Triarc at the time of such conversion
for financial reporting purposes are exercised at any time.
We will agree that any payments we make pursuant to the initial public
offering and separation agreement will bear interest at a rate two hundred basis
points above the average interest rate on our senior bank debt if such payments
are not made at the time provided for in the initial public offering and
separation agreement. Further, we will agree that any such payments will be
increased to account for any tax that Triarc has been held liable for as a
result of such payment, increased further to take into account any increase in
Triarc's taxable income caused by any such payment.
We will agree, at our own expense, to retain records, documents, and other
information necessary to prepare all consolidated income tax returns we have
filed with Triarc, to assist and cooperate with Triarc, and take all actions
requested by Triarc, with respect to all such Tax Returns, to give reasonable
access to such records, and to our personnel, to Triarc, and to abide by any
record retention agreement between Triarc and the Internal Revenue Service or
any other taxing authority.
OPTIONS
We will grant to Triarc a continuing option, assignable to any of Triarc's
subsidiaries, to purchase additional shares of our common stock. The purchase
price of our shares of common stock purchased upon any exercise of the option
will be based on the market price of the common stock. We will also agree to
grant Triarc a right to cause us to repurchase our stock in the event we issue
stock pursuant to the exercise of stock options or in connection with
acquisitions where we issue our stock as consideration, subject to any
restrictions contained in our debt agreements. This option and right may be
exercised only to the extent necessary to maintain Triarc's then-existing
percentage of equity value and voting power.
The option and right referred to above will terminate upon the earlier
to occur of (1) the date when Triarc or its subsidiaries own less than 50.1%
of the equity of our company, (2) the date that the separation is completed,
(3) twelve months after Triarc's debentures have been repaid in full or
covenants therein have been modified to permit the separation, (4) November 9,
2003, or (5) the date when Triarc terminates the initial public offering and
separation agreement.
INDEMNIFICATION PROCEDURES
The initial public offering and separation agreement will set forth the
procedures that Triarc and we are to undertake if either of us demanded to be
indemnified by the other under any indemnification right given in any of the
agreements between Triarc and us relating to the offering or the separation,
other than the existing and old tax sharing agreements referred to above.
RELEASE AND INDEMNIFICATION AGREEMENT
We, our subsidiaries, RC/Arby's and its subsidiaries that conduct the Arby's
restaurant franchising business and Triarc will enter into a release and
indemnification agreement under which we and our subsidiaries will agree to
jointly and severally indemnify RC/Arby's, its restaurant franchising
subsidiaries and Triarc and their respective officers, directors, employees,
agents, heirs, executors, successors and assigns from and against all losses
claims, damages and liabilities, including, without limitation, any tax, except
for tax matters covered by the tax sharing agreement, as amended, ERISA or
environmental losses related to the action or operations of our company and our
subsidiaries, including Royal Crown Company, Inc. and each of its subsidiaries.
Triarc, RC/Arby's and its restaurant franchising subsidiaries will jointly
and severally indemnify us and our subsidiaries and the respective officers,
directors, employees, agents, heirs, executors, successors and assigns of our
company and our subsidiaries from and against all losses, claims, damages and
liabilities, including, without limitation, any tax, except for tax matters
covered by the old and existing tax sharing agreements, ERISA or environmental
losses related to the actions or operations of Triarc,
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RC/Arby's and its restaurant franchising subsidiaries, other than any losses
related to the actions or operations of Royal Crown Company, Inc. and each of
its subsidiaries.
We and our subsidiaries will agree to release Triarc, RC/Arby's and its
restaurant franchising subsidiaries from any responsibilities arising out of the
actions or operations of our company, our subsidiaries, Triarc, RC/Arby's and
its restaurant franchising subsidiaries, including any actions resulting from
gross negligence. Reciprocally, Triarc, RC/Arby's and its restaurant
franchising subsidiaries will agree to release us and our subsidiaries from
any responsibilities arising out of the actions or operations of Triarc,
RC/Arby's, its restaurant franchising subsidiaries, our company and our
subsidiaries, including any actions resulting from gross negligence.
REGISTRATION RIGHTS AGREEMENT
We will enter into a registration rights agreement with Triarc and RC/Arby's
which requires us, upon request of Triarc or RC/Arby's, to use our reasonable
best efforts to register under the applicable federal and state securities laws
any of the shares of our equity securities owned by Triarc or RC/Arby's for sale
in accordance with their intended method of disposition, and to take such other
actions as may be necessary to permit the sale of securities in other
jurisdictions, subject to specified limitations. These demand rights will be
exercisable upon Triarc's decision to abandon the separation or its
determination that such exercise will not be prejudicial to the completion of a
future separation. Triarc and RC/Arby's will have the right to make such a
request four times. Triarc and RC/Arby's will also have the right to include the
shares of our equity securities they beneficially own in other registrations of
these equity securities we initiate. The registration rights agreement provides
that we will pay all registration expenses, including all of Triarc's
out-of-pocket costs and expenses relating to each such registration that they
request or in which they participate, other than underwriting discounts and
commissions. Subject to specified limitations, the registration rights will be
assignable by Triarc, RC/Arby's and their assigns. The registration rights
agreement will contain customary indemnification and contribution provisions.
ISSUANCE OF PREFERRED STOCK
On May 22, 1997, we issued 75,000 shares of redeemable cumulative
convertible preferred stock to Triarc for $75,000,000. Following a reverse stock
split, there are currently 750 shares issued and outstanding. The preferred
stock bears a cumulative annual dividend of 10% per annum that, if declared, is
payable in cash or in kind at our option. Each share is convertible into one
share of our common stock. The preferred stock must be redeemed on May 22, 2009
at $100,000 per share plus accrued and unpaid dividends. No cash dividends were
paid in 1997, 1998 or 1999, although we recorded cumulative dividends of $4.6
million in 1997, $8.0 million in 1998 and $1.2 million in 1999. Triarc
contributed the preferred stock to Triarc Consumer Products Group in connection
with the offering of the senior subordinated notes. The preferred stock,
including dividend arrearages, will be contributed for no consideration to
Snapple Beverage Group as part of the restructuring prior to the closing of the
offering. See 'The Restructuring.'
NOTE PURCHASES BY MESSRS. PELTZ AND MAY
On February 25, 1999, Messrs. Peltz and May purchased an aggregate $20.0
million of our senior subordinated notes and entered into a registration rights
agreement with us, that provided for customary demand and piggy-back
registration rights. We have been advised by Messrs. Peltz and May that they no
longer hold any of these senior subordinated notes.
OTHER TRANSACTIONS
We paid $32,000 in 1997 to Triarc for the use of aircraft that Triarc leased
from Triangle Aircraft Services Corporation, an affiliate of Messrs. Peltz and
May. We believe that this payment was on terms no less favorable to us than if
it was between unrelated parties.
ROYAL CROWN SUBLEASE FROM RC/ARBY'S
Royal Crown has subleased office space from RC/Arby's since 1993. Royal
Crown paid RC/Arby's $192,477 in rental expenses in 1997, $54,327 in 1998 and
$65,247 in 1999. We believe that the lease was on terms no less favorable than
would have been obtained from an unrelated party.
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PRINCIPAL STOCKHOLDERS
The following table presents the beneficial ownership of our common stock as
of May 31, 2000, by:
(1) each person known to us to be the beneficial owner of more than 5%
of the outstanding shares of our common stock,
(2) each of our directors,
(3) each of our named executive officers, and
(4) all of our directors and executive officers as a group.
Except as otherwise indicated, each person has sole voting and dispositive power
with respect to his, her or its shares.
<TABLE>
<CAPTION>
PERCENT OF TOTAL
VOTING POWER
--------------------------
BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OFFERING OFFERING
------------------------------------ ------ -------- --------
<S> <C> <C> <C>
Triarc Companies, Inc.
RC/Arby's Corporation
280 Park Avenue
New York, NY 10017................................... 850,000(1) 99.9%
Nelson Peltz........................................... 867,333(1) 99.9%
Peter W. May........................................... 858,666(1) 99.9%
Michael Weinstein...................................... 14,000 1.6%
Ernest J. Cavallo...................................... 8,500 1.0%
John L. Belsito........................................ 4,250 *
Joseph G. McDonald..................................... 4,250 *
Samuel M. Simpson...................................... 167 *
Directors and Executive Officers as group (17
persons)............................................. 921,816 99.9%
</TABLE>
---------
* Less than 1%.
(1) Includes 850,000 shares of our common stock that will be owned by RC/Arby's
after the completion of the restructuring and this offering. As the indirect
beneficial owner of RC/Arby's, Triarc may be deemed to share voting and
investment power of these shares. As the direct beneficial owners of 34.7%
and 33.3%, respectively, of Triarc's class A common stock, Messrs. Peltz and
May may also be deemed to share voting and investment power of these shares.
Triarc and Messrs. Peltz and May disclaim beneficial ownership of these
shares.
-------------------
The above beneficial ownership table includes options to purchase shares of
our common stock which have vested or will vest within 60 days of May 31, 2000
as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER REPRESENTED BY OPTIONS
------------------------ ----------------------
<S> <C>
Nelson Peltz............................................ 17,333 shares
Peter W. May............................................ 8,666 shares
Michael Weinstein....................................... 14,000 shares
Ernest J. Cavallo....................................... 8,500 shares
John L. Belsito......................................... 4,250 shares
Joseph G. McDonald...................................... 4,250 shares
Samuel M. Simpson....................................... 167 shares
Directors and Executive Officers as a group (17
persons).............................................. 71,816 shares
</TABLE>
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DESCRIPTION OF CAPITAL STOCK
The following description is only a summary of the material provisions of
our amended and restated certification of incorporation and bylaws that will be
in effect upon the closing of the offering. We refer you to the more detailed
provisions of (1) the forms of our amended and restated certificate of
incorporation and amended and restated bylaws, copies of which will be filed
with Securities and Exchange Commission as exhibits to the registration
statement of which this prospectus is a part and (2) applicable law.
GENERAL
Our authorized capital stock will consist of shares of capital stock,
of which:
shares of common stock, par value $.10 per share; and
shares of preferred stock, of which no shares of preferred stock
are outstanding as of the date hereof.
Of the shares of common stock, shares are being offered in the
offering, assuming that the underwriters do not exercise their over-allotment
option.
COMMON STOCK
VOTING RIGHTS
Our certificate of incorporation will provide that holders of common stock
are entitled to one vote per share held of record on each matter presented to
our stockholders on which the holders of common stock are entitled to vote. The
holders of common stock will not be entitled to cumulate their votes in the
election of directors. Generally, all matters to be voted on by our stockholders
must be approved by a majority, or, in the case of election of directors, by a
plurality, of the votes entitled to be cast by all shares of common stock
present in person or represented by proxy.
DIVIDENDS
Subject to the right of any preferred stock which may be outstanding, each
holder of common stock on the applicable record date will be entitled to receive
dividends if, as and when declared by our board of directors. Under Delaware
law, a corporation may declare and pay dividends out of surplus, or if there is
no surplus, out of net profits for the fiscal year in which the dividend is
declared and/ or the preceding year. No dividend may be declared, however, if
the capital of the corporation has been diminished by depreciation in the value
of its property, losses or otherwise to an amount less than the aggregate of
capital represented by any issued and outstanding stock having a preference on
the distribution of the assets. Please refer to the section of this prospectus
entitled 'Dividend Policy.'
OTHER RIGHTS
In the event of a liquidation, dissolution or winding-up of our company, all
holders of common stock will be entitled to share ratably in any assets
available for distribution to holders of shares of common stock, subject to any
rights of the holders of preferred stock that may be issued subsequent to the
offering.
The outstanding shares of our common stock are, and the shares of common
stock being offered to you will be, upon your payment, validly issued, fully
paid and nonassessable.
No shares of common stock will be subject to conversion, redemption or
sinking fund, or have any preemptive rights or other rights to purchase
additional shares of common stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock will be American Stock
Transfer & Trust, Inc.
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PREFERRED STOCK
Our certificate of incorporation will authorize the issuance of shares of
'blank check' preferred stock, which will have the designations, rights and
preferences as may be determined from time to time by our board of directors.
Accordingly, our board of directors will be empowered, without stockholder
approval, to issue preferred stock with dividend, whether cumulative or not,
liquidation, conversion, redemption, sinking fund, voting or other rights which
may adversely affect the voting power, preference or other rights of the holders
of common stock.
On May 22, 1997 and August 20, 1997, pursuant to the 'blank check' authority
vested in our board of directors by our certificate of incorporation, our board
of directors adopted resolutions creating the 10% Cumulative Convertible
Preferred Stock, consisting of up to 300,000 shares, which number may be
decreased, but not increased, by our board of directors without a vote of the
stockholders. The 10% Cumulative Convertible Preferred Stock will be canceled as
part of the restructuring prior to the closing of the offering.
If our board of directors authorizes additional preferred stock to be issued
with conversion rights, the number of shares of common stock outstanding could
potentially be increased up to the authorized amount. The issuance of additional
preferred stock could further decrease the amount of earnings and assets
available for distribution to holders of common stock. Any issuance could also
have the effect of delaying, deterring or preventing a change in control of us
and may adversely affect the rights of holders of common stock.
EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Authorized but unissued shares of common stock and preferred stock will be
available for future issuance without stockholder approval, except as may
otherwise be required under the rules of the New York Stock Exchange or Delaware
law. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans.
The existence of authorized but unissued and unreserved common stock and
preferred stock may enable our board of directors to issue shares to persons
friendly to current management, which could render it more difficult or
discourage an attempt to obtain control of us by means of a proxy contest,
tender offer, merger, or otherwise, and thereby protect the continuity of our
management.
DELAWARE ANTI-TAKEOVER LAW PROVISIONS
We are subject to section 203 of the Delaware General Corporate Law. In
general, section 203 prevents an interested stockholder, which generally
includes a person owning 15% or more of a corporation's outstanding voting stock
and its affiliates and associates, from engaging in a business combination,
which includes a merger or sale of more than 10% of a corporation's assets, with
a Delaware corporation for three years following the time that person became an
interested stockholder unless:
the board of directors approved either the business combination or the
transaction which resulted in the interested stockholder becoming an
interested stockholder,
after the transaction that resulted in the interested stockholder
becoming an interested stockholder was completed, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding shares
owned by persons who are officers and directors of the corporation and
shares held by some employee stock ownership plans,
following the transaction in which the person became an interested
stockholder, the business combination is approved by the board of
directors and authorized at a meeting of stockholders by the
affirmative vote of the holders of at least two-thirds of outstanding
voting stock not owned by the interested stockholder.
The restrictions of Section 203 will not apply to Triarc or its affiliates
and associates because Triarc and its affiliates and associates became our
'interested stockholder' at a time when we did not have a
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class of voting stock listed on a national securities exchange, authorized for
quotation on The Nasdaq Stock Market or held of record by more than 2,000
stockholders.
SELECTED CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
PROVISIONS RELATING TO CONFLICTS OF INTEREST WITH TRIARC
Conflicts of interest may arise between us and Triarc. These potential
conflicts include the nature and quality of services rendered by Triarc and its
affiliates to us, issuances of common stock, tax consolidation issues, employee
benefit matters, indemnity arrangements, sales or distributions by Triarc of its
ownership interest in us or Triarc's ability to control our management and
affairs.
Persons serving as directors of both us and Triarc may have conflicting
duties. Two of our directors also serve as directors of Triarc. Ownership
interests of our directors in Triarc's common stock could also create or appear
to create potential conflicts of interest when directors are faced with
decisions that could have different implications for us and Triarc.
Our certificate of incorporation will provide that no contract, agreement,
arrangement or transaction, or any amendment, modification or termination of any
contract, agreement, arrangement or transaction, between us and Triarc or any
related entity, or between us and any director, officer or employee of ours,
Triarc or any related entity, shall be void or voidable solely because the
contract, agreement, arrangement or transaction is between related parties or
solely because those directors or officers were involved in the decision to
approve the contract, agreement, arrangement or transaction. These third parties
will not be presumed liable for breach of fiduciary duty, duty of loyalty or
similar duties. Actions taken by our directors will not constitute an action by
Triarc or other related entities of which that person is an officer or director.
This provision may also have the effect of limiting the liability of Triarc
and its subsidiaries for breaches of their fiduciary duties relating to actions
that may be taken or not taken in good faith under the intercompany agreements.
Please refer to the section of this prospectus entitled 'Relationship with
Triarc and Related Party Transactions.'
PROVISIONS WITH ANTI-TAKEOVER EFFECTS
The provisions to be included in our certificate of incorporation and bylaws
that are summarized in the following paragraphs may be deemed to have an
anti-takeover effect and may delay, defer or prevent an attempt to obtain
control of us by means of a proxy contest, tender offer, merger or other
transaction that a stockholder might consider in its best interest, including
those attempts that might result in a premium over the market price for the
shares held by stockholders.
Special Meeting of Stockholders. Our certificate of incorporation will
provide that special meetings of our stockholders may be called only by our
board of directors, the Chairman or Vice Chairman of our board of directors or
our Chief Executive Officer. This provision will make it more difficult for
stockholders to take actions opposed by our board of directors.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. Our bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual or special meeting of stockholders, must provide
timely notice in writing. To be timely, a stockholder's notice regarding
business to be brought before an annual meeting of shareholders, other than the
nomination of directors, must be delivered to or mailed and received at our
principal executive offices not less than 45 days nor more than 60 days prior to
the meeting. In the event that less than 55 days' notice of the date of the
annual meeting is given to stockholders, notice by the stockholder must be
received not later than the close of business on the tenth day following the day
on which the notice of the date of the meeting was first made. Our bylaws will
also specify requirements for a stockholder's notice to be in proper written
form. These provisions may preclude some stockholders from bringing matters at
an annual or special meeting of stockholders or from making nominations for
directors at an annual or special meeting of stockholders.
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DESCRIPTION OF INDEBTEDNESS
The following are summaries of material provisions of our proposed new
credit facility and our senior subordinated notes. These summaries are not
complete and are qualified in their entity by the credit agreement and the
indenture, copies of which we have previously filed with the Securities and
Exchange Commission. In this section, 'we' and 'us' refer to Snapple Beverage
Group, Inc. and not to any of its subsidiaries.
NEW CREDIT FACILITY
We have entered into a commitment letter with DLJ Capital Funding, Inc.,
pursuant to which Snapple, Mistic, Stewart's and Royal Crown are expected to
enter into a credit facility. The credit facility will allow each of Snapple,
Mistic, Stewart's and Royal Crown to borrow, on a joint and several basis, up to
$245.0 million. Each of Snapple, Mistic, Stewart's and Royal Crown is referred
to as a borrower, and collectively as the borrowers. DLJ Capital Funding, Inc.
is expected to serve as the syndication agent for the lenders.
Structure. The credit facility is expected to consist of:
a revolving credit facility in the amount of $50.0 million, $25.0
million of which is available for letters of credit,
a term A loan in the original principal amount of $80.0 million, and
a term B loan in the original principal amount of $115.0 million.
The amount of the term B loan commitment is subject to reduction based on a
formula relating to the actual amount of net proceeds that we receive
from the offering and the actual amount of loans outstanding under our existing
credit facility two business days prior to the closing date.
Security, Guaranty. We and all of our domestic subsidiaries that are not
borrowers are expected to guarantee the borrowers' obligations under the new
credit facility. In addition, the obligations of the borrowers under the new
credit facility and of the guarantors under the guarantees are expected to be
secured by substantially all of our assets, each borrower's assets and each
guarantor's assets, including:
a pledge of the capital stock of all of the borrowers' present and
future direct and indirect domestic subsidiaries and 65% of the capital
stock of their first tier foreign subsidiaries, other than certain
immaterial subsidiaries,
a security interest in all of the borrowers' property and assets and
all of the property and assets of their present and future direct and
indirect domestic subsidiaries, including accounts receivables,
inventory, equipment, general intangibles and real property, and
a security interest in all intercompany indebtedness in favor of the
borrowers and their direct or indirect domestic subsidiaries.
Availability. The borrowers may not reborrow amounts repaid or prepaid under
the term loans. The borrowers may borrow under the revolving credit facility at
any time before its final maturity. However, the maximum principal amount of
outstanding borrowings under the revolving credit facility may not exceed the
lesser of (1) $50 million and (2) a borrowing base comprised of a percentage of
the value of all eligible inventory and a percentage of the value of all
eligible accounts receivable of the borrowers and their domestic subsidiaries
that are not borrowers.
Amortization. The borrowers will be required to repay the principal amount
that they borrow as follows:
the revolving credit facility will be a five-year facility that must be
repaid in full upon its final maturity,
the term A loan will have to be repaid over a five-year period in equal
quarterly installments aggregating 20% per year, and
the term B loan will have to be repaid over a seven-year period in
quarterly principal payments of 1.0% per year for the first five years,
with the remaining balance payable in equal quarterly installments
during the sixth and seventh years.
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Interest. The outstanding loans are expected to bear interest at an
applicable margin plus, at the Borrowers' option, the administrative agent's
base rate or a London inter-bank offered rate ('LIBOR'). The applicable margins
are expected to be initially as follows:
<TABLE>
<CAPTION>
BASE RATE LOANS LIBOR LOANS
--------------- -----------
<S> <C> <C>
Revolving credit facility....................... 1.25% 2.25%
Term A loan..................................... 1.25% 2.25%
Term B loan..................................... 1.75% 2.75%
</TABLE>
Beginning six months after the closing date of the new credit facility, the
applicable margins for the revolving credit facility and the term A loan may be
reduced if the borrowers meet performance criteria based on a leverage ratio.
If the borrowers do not make required payments of principal or other
monetary obligations when due, they will be required to pay interest on the
outstanding principal amount of the monetary obligation at a default rate equal
to 2.0% above the otherwise applicable base rate.
Optional Prepayments. The borrowers are expected to be able to prepay loans
under the revolving credit facility and reduce the amounts available to them
under the revolving credit facility at any time, and are expected to be able to
prepay term loans at any time, in each case, without premium or penalty. The
optional prepayment of the term loans will be applied pro rata among the
outstanding term loans and ratably in accordance with the remaining amortization
payments.
Mandatory Prepayments. Generally, although with some exceptions, the
borrowers must prepay the term loans and, after the term loans have been repaid,
prepay the revolving credit facility and, with exceptions, reduce the
commitments under the credit facility, in an amount equal to:
100% of the net after-tax cash proceeds of dispositions of assets,
insurance recoveries and condemnation events, subject to reinvestment
baskets, of Snapple Beverage Group, each of the borrowers and their
subsidiaries,
100% of net after-tax cash proceeds received from debt issuances by
Snapple Beverage Group, each of the borrowers and their subsidiaries,
50% of the net after-tax cash proceeds of equity issuances by Snapple
Beverage Group, each of the borrowers and their subsidiaries, plus
50% of the excess cash until the aggregate amount of the term loans
outstanding is equal to or less than $100 million.
However, lenders having term B loans will have the right to decline to have
such loans prepaid, in which case, the amounts that would have been applied to a
prepayment of such Lender's term B loan will be applied to any term A loan.
Fees. The borrowers will be required to pay the following fees under the new
credit facility:
an annual commitment fee of 0.50% of the daily average unused portion
of the unborrowed portion of the revolving credit facility; beginning
six months after the closing of the credit facility, the annual
commitment fee may be reduced if the borrowers meet performance
criteria based on a leverage ratio,
an annual fronting fee of 0.25% of the stated amount of letters of
credit to the lender that issues any letters of credit,
a letter of credit fee on the daily average undrawn amount of
outstanding letters of credit equal to the applicable margin on LIBOR
loans under the revolving credit facility,
annual administration fees, and
arrangement and other similar fees.
Covenants. The new credit facility is expected to contain covenants that
require Snapple Beverage Group and its subsidiaries to comply with financial
ratios and tests, including a minimum interest coverage ratio, a maximum
leverage ratio, a minimum fixed charge coverage ratio and a minimum net worth
test.
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The new credit facility is also expected to contain financial and
operational covenants and other restrictions that, among other things, with
customary exceptions and baskets described in the credit facility, restrict
Snapple Beverage Group's ability and the ability of its subsidiaries to:
dispose of assets,
engage in mergers or make acquisitions,
make capital expenditures,
pay dividends and prepay other indebtedness,
incur additional indebtedness and guarantee obligations,
make investments and loans,
create liens on assets,
engage in transactions with affiliates, and
amend other debt instruments and make material changes to
organizational and other specified material documents.
In addition, the business activities of the borrowers are expected to be
subject to certain limitations.
Events of Default. The new credit facility is expected to contain the
following customary events of default:
payment defaults,
breach of representations and warranties,
breach of performance of covenants,
defaults under other contracts,
specified events of bankruptcy,
ERISA defaults,
the invalidity of any collateral or guarantees, and
change of ownership or control.
SENIOR SUBORDINATED NOTES
On February 25, 1999, we and Triarc Consumer Products Group issued $300
million aggregate principal amount of 10 1/4% senior subordinated notes due
2009. As a result of the merger of Triarc Consumer Products Group into us as
part of the restructuring to occur prior to the completion of this offering, we
will assume all the obligations of Triarc Consumer Products Group under the
senior subordinated notes and the indenture under which the senior subordinated
notes were issued. The senior subordinated notes will remain outstanding
following the offering. The following is a description of the principal terms of
the senior subordinated notes.
Maturity Date. February 15, 2009.
Interest. The senior subordinated notes bear interest at the rate of 10 1/4%
per annum, payable in cash on February 15 and August 15 of each year. Interest
payments began on August 15, 1999.
Sinking Fund. None.
Optional Redemption. We may redeem any of the senior subordinated notes
beginning on February 15, 2004. The initial redemption price is 105.125% of
their principal amount, plus accrued interest. The redemption price will decline
each year after 2004 and will be 100% of their principal amount, plus accrued
interest, beginning on February 15, 2007.
In addition, before February 15, 2002, we may redeem up to 35% of the
aggregate principal amount of the senior subordinated notes issued at a
redemption price equal to 110.25% of the principal amount of the notes redeemed,
plus accrued and unpaid interest, if any, through the date of redemption, if:
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we use the proceeds of any public offerings of common stock by us or
Triarc, to the extent the proceeds are contributed to us, or any
successors of ours, and
at least 65% of the aggregate principal amount of the senior
subordinated notes originally issued remains outstanding immediately
after giving effect to the redemption.
Change of Control. Upon a change of control, holders of senior subordinated
notes have the right to require us to repurchase all of their senior
subordinated notes at a repurchase price equal to 101% of the principal amount
of the senior subordinated notes plus accrued interest, if any, to the date of
the repurchase.
Ranking. The senior subordinated notes rank junior to:
all of our senior indebtedness,
all of our secured indebtedness, and
all liabilities of our subsidiaries that do not guarantee the exchange
notes.
Guarantees. The senior subordinated notes are currently guaranteed on a
senior subordinated basis by all of our existing domestic subsidiaries. After
the restructuring, the senior subordinated notes will be guaranteed on a senior
subordinated basis only by all of our existing domestic subsidiaries at that
time, which will not include our existing restaurant franchising subsidiaries.
The guarantees will rank junior to all senior indebtedness and secured
indebtedness of the guarantors.
Restrictive Covenants. The terms of the senior subordinated notes restrict
our ability and the ability of some of our subsidiaries to:
incur additional indebtedness,
create liens,
engage in sale-leaseback transactions,
pay dividends or make distributions in respect of capital stock,
purchase or redeem capital stock,
make investments or restricted payments,
sell assets,
issue or sell stock of subsidiaries,
enter into transactions with stockholders or affiliates, or
effect a consolidation or merger.
These limitations are subject to a variety of exceptions and qualifications.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK
The following is a general discussion of certain material U.S. federal
income and estate tax consequences of the ownership and disposition of common
stock by a holder that, for U.S. federal income tax purposes, is not a 'United
States person' (a 'non-United States holder'). For the purposes of this
discussion, a 'United States person' is a person or entity that, for U.S.
federal income tax purposes, is:
(1) a citizen or resident of the United States,
(2) a corporation, partnership or other entity created or organized in
or under the laws of the United States or of any political subdivision
thereof,
(3) an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or
(4) a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more
United States persons have authority to control all substantial decisions of
the trust.
This discussion is based on currently existing provisions of the Internal
Revenue Code of 1986, as amended, and administrative interpretations, all of
which may be changed either retroactively or prospectively. This discussion does
not address all aspects of U.S. federal income and estate taxation that may be
relevant to non-United States holders based on their particular circumstances,
and does not address any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction.
DIVIDENDS
Dividends paid to a non-United States holder of common stock generally will
be subject to withholding tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty unless:
(1) the dividend is effectively connected with a non-United States
holder's conduct of a trade or business within the United States, or
(2) an income tax treaty applies and the dividend is attributable to a
United States permanent establishment of the non-United States holder, and
the holder provides the payor with proper documentation.
In order to claim the benefit of an applicable tax treaty rate, a non-United
States holder may have to file with us or our dividend paying agent an exemption
or reduced treaty rate certificate or letter as required by the terms of the
treaty. Under United States Treasury regulations currently in effect, for
purposes of determining whether tax is to be withheld at a 30% rate or at a
reduced rate specified by an income tax treaty, we ordinarily will presume that
dividends paid to an address in a foreign country are paid to a resident of that
country unless we know that such presumption is not warranted. However, under
United States Treasury regulations applicable to dividends paid after
December 31, 2000, a non-United States holder seeking a reduced rate of
withholding under an income tax treaty would generally be required to provide to
us a valid Internal Revenue Service Form W-8 certifying that he, she or it is
entitled to benefits under an income tax treaty. These regulations also provide
special rules for determining whether, for purposes of assessing the
applicability of an income tax treaty, dividends paid to a non-United States
holder that is an entity should be treated as being paid to the entity itself or
to the persons holding an interest in that entity. A non-United States holder
who is eligible for a reduced withholding rate may obtain a refund of any excess
amounts withheld by filing an appropriate claim for a refund with the Internal
Revenue Service.
A non-United States holder will generally be subject to regular U.S. federal
income tax in the same manner as if the non-United States holder were a United
States person for dividends that:
(1) are effectively connected with that holder's conduct of a trade or
business within the United States, or
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(2) if an income tax treaty applies, are attributable to a United States
permanent establishment of that holder.
A non-United States corporation receiving effectively connected dividends also
may be subject to an additional tax, known as the branch profits tax. This tax
will be imposed at a rate of 30%, unless a lower rate is specified by an
applicable treaty, on the non-United States corporation's 'effectively connected
earnings and profits,' as adjusted.
GAIN ON DISPOSITION OF COMMON STOCK
A non-United States holder generally will not be subject to U.S. federal
income tax on gain realized from the sale or other disposition of common stock
unless:
(1) the gain is effectively connected with a trade or business of that
non-United States holder in the United States,
(2) the holder is a non-resident alien individual, held the common stock
as a capital asset, was present in the United States for 183 or more days in
the taxable year of the disposition and either (a) had a 'tax home,' for the
purposes of U.S. federal income tax, in the United States, or (b) the gain
is attributable to an office or other fixed place of business maintained by
that individual in the United States,
(3) the holder is subject to tax under the provisions of U.S. tax law
applicable to certain United States expatriates whose loss of United States
citizenship had as one of its principal purposes the avoidance of U.S.
taxes, or
(4) we are or have been a 'United States real property holding
corporation' for U.S. federal income tax purposes and, assuming that the
common stock is regularly traded on an established securities market for tax
purposes, the non-United States holder held, directly or indirectly, at any
time during the shorter of the five year period ending on the date of
disposition and the period that the holder held our common stock, more than
5% of the total fair market value of the outstanding common stock. We
believe that we are not a United States real property holding corporation
and we do not anticipate becoming a United States real property holding
corporation in the future.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
United States Treasury regulations require us to report annually to the
Internal Revenue Service and to each non-United States holder the amount of
dividends that we pay to that holder and any tax that we withhold relating to
those dividends. These information reporting requirements apply even if
withholding was not required because the dividends were effectively connected
with a trade or business in the United States of the non-United States holder or
withholding was reduced or eliminated by an applicable income tax treaty. Copies
of the information returns reporting those dividends and withholding may also be
made available to the tax authorities in the country that the non-United States
holder is a resident under the provisions of an applicable income tax treaty or
agreement.
United States backup withholding is a withholding tax imposed at the rate of
31% on certain payments to persons that fail to furnish specified information
under the United States information reporting requirements, or otherwise fail to
establish an exemption. Backup withholding generally will not apply to:
(1) dividends paid to non-United States holders that are subject to the
30% withholding tax discussed above or that are not so subject because a tax
treaty applies that reduces or eliminates the 30% withholding, or
(2) under current law, dividends paid to a non-United States holder at
an address outside of the United States.
However, under Treasury regulations applicable to dividends paid after December
31, 2000, a non-United States holder generally will be subject to backup
withholding at a 31% rate, unless specified certification procedures are
complied with, directly or through an intermediary, or, in the case of
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payments made outside the United States with respect to an offshore account,
specified documentary evidence procedures are complied with.
Backup withholding and information reporting generally will apply to
dividends paid on shares of common stock to addresses inside the United States
to beneficial owners that are not exempt recipients and that fail to provide
required information in the proper manner.
Backup withholding and information reporting will also apply to the payment
of the proceeds of the disposition of common stock to or through the United
States office of a broker unless the disposing holder certifies under penalty of
perjury as to its non-United States status, or otherwise establishes an
exemption. Generally, backup withholding and information reporting will not
apply to a payment of disposition proceeds if the payment is made outside the
United States through a non-United States office of a non-United States broker.
However, information reporting requirements (but, prior to January 1, 2001, not
backup withholding) will apply to a payment of disposition proceeds outside the
United States if the payment is made through a non-United States office of a
broker that is
(1) a United States person,
(2) a foreign person which derives 50% or more of its gross income for
specified periods from the conduct of a trade or business in the United
States,
(3) a 'controlled foreign corporation' for U.S. federal income tax
purposes, or
(4) effective January 1, 2001, a foreign partnership (a) one or more of
whose partners are United States persons who, in the aggregate, hold more
than 50% of the income or capital interest in the partnership at any time
during its tax year, or (b) engaged at any time during its tax year in the
conduct of a trade or business in the United States,
unless the broker has documentary evidence in its records that the holder is a
non-United States holder and specified conditions are met, or the holder
otherwise establishes an exemption.
Backup withholding is not an additional tax. Instead, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained if the required information is furnished to the Internal Revenue
Service.
FEDERAL ESTATE TAX
An individual non-United States holder who is treated as the owner of, or
has made certain lifetime transfers of, an interest in the common stock will be
required to include the value thereof in his gross estate for U.S. federal
estate tax purposes, and may be subject to U.S. federal estate tax unless an
applicable estate tax treaty provides otherwise.
THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE UNITED STATES FEDERAL
INCOME TAX AND FEDERAL ESTATE TAX CONSEQUENCES OF OWNING AND DISPOSING OF COMMON
STOCK, INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL,
FOREIGN, OR OTHER TAXING JURISDICTION AND ANY RECENT OR PROSPECTIVE CHANGES IF
APPLICABLE.
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SHARES AVAILABLE FOR FUTURE SALE
Future sales of substantial amounts of our common stock in the public market
could adversely affect the prevailing market prices of our common stock.
Although many shares will not be available for sale shortly after the offering
because of the contractual and legal restrictions on resale described below,
sales of substantial amounts of our common stock in the public market after
these restrictions end could adversely affect the prevailing market price of our
common stock and our ability to raise equity capital in the future.
Immediately after the offering is completed, shares of common stock,
shares if the underwriters exercise their over-allotment option in full,
will be outstanding. Of these shares, all of the shares sold in the offering
will be freely transferable without restriction or further registration under
the Securities Act, except for any shares purchased by persons who are
considered our affiliates under Rule 144 under the Securities Act. The remaining
shares of common stock outstanding, including the shares of common stock
held by RC/Arby's, will be considered restricted securities under Rule 144.
These shares may be sold in the future without registration under the Securities
Act as permitted by Rule 144 or another exemption under the Securities Act,
subject to the lock-up agreements described below.
Lock-Up Agreements
Triarc, RC/Arby's, our executive officers and directors and substantially
all of our stockholders and optionholders have agreed that, with limited
exceptions, they will not sell any shares of our common stock for 180 days after
the date of this prospectus, without the consent of Morgan Stanley & Co.
Incorporated. Please refer to the section of this prospectus entitled
'Underwriters.' We cannot predict how long these parties will continue to hold
their common stock after the offering.
Rule 144
In general, under Rule 144, if one year has elapsed since the date of
acquisition of restricted shares from us or any of our affiliates, the acquiror
or subsequent holder is entitled to sell within any three-month period a number
of shares that does not exceed the greater of:
1% of the number of shares of common stock then outstanding, or
the average weekly trading volume of the common stock during the four
calendar weeks preceding the stockholder's required notice of the sale.
Rule 144 also requires stockholders to comply with manner of sale
provisions, notice requirements and a requirement as to the availability of
current public information about us.
If two years have elapsed since the date of acquisition of restricted shares
from us or any of our affiliates, and the acquiror or subsequent holder of
restricted shares is deemed not to have been an affiliate of ours at any time
during the 90 days preceding a sale, that person would be entitled to sell those
shares in the public market under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements.
Sales by Affiliates
Our affiliates, including Triarc and RC/Arby's, may sell unrestricted shares
by complying with the volume limitations and other requirements that apply under
Rule 144. However, unlike non-affiliates, affiliates:
are not required to wait one year before selling unrestricted shares,
and
must comply with the volume limitations even after they have held their
shares for two years.
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Registration Rights Agreement
Our registration rights agreement with Triarc and RC/Arby's will require us,
upon the request of Triarc or RC/Arby's, to use our reasonable best efforts to
register under the applicable federal and state securities laws any shares of
our equity securities owned by Triarc or RC/Arby's for sale in accordance with
their intended method of disposition. For more information regarding the
registration rights agreement, please refer to the section of this prospectus
entitled 'Relationship with Triarc and Related Party Transactions --
Registration Rights Agreement.'
Stock Options
After the offering, we plan to file a registration statement under the
Securities Act covering 150,000 shares of common stock reserved for issuance
under our 1997 Stock Option Plan and the shares of common stock that will
be reserved for issuance under our new stock option plan. As of May 31, 2000,
options to purchase 146,950 shares of our common stock were outstanding. Unless
prohibited by Rule 144, shares registered under this registration statement
generally will be available for sale in the open market. Please refer to the
section of this prospectus entitled 'Management -- Stock Option Plans -- Snapple
Beverage Group, Inc. 1997 Stock Option Plan and ' -- Snapple Beverage Group,
Inc. 2000 Equity Participation Plan.'
We cannot predict the effect, if any, that future sale of restricted shares,
the availability of these restricted shares for sale, the issuance of shares of
common stock upon the exercise of options, or the perceptions that these sales
or exercises could occur, will have on the market price of our common stock
prevailing from time to time. Please refer to the section of this prospectus
entitled 'Risk Factors -- Risks Relating to the Offering -- Shares eligible for
public sale in the future could adversely affect the price of common shares.'
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UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette Securities
Corporation, ING Barings LLC and Lehman Brothers Inc. are acting as
representatives, have severally agreed to purchase, and we have agreed to sell
to them, severally, the number of shares indicated below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Donaldson, Lufkin & Jenrette Securities Corporation.........
ING Barings LLC.............................................
Lehman Brothers Inc.........................................
-------
Total...................................................
-------
-------
</TABLE>
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The underwriters are obligated to take and pay for all of the
shares of common stock offered by this prospectus if any such shares are taken.
However, the underwriters are not required to take or pay for the shares covered
by the underwriters over-allotment option described below.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price.
Any underwriter may allow, and such dealers may reallow, a concession not in
excess of $ a share to other underwriters or to certain dealers. After
the initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of additional
shares of common stock at the public offering price listed on the cover page of
this prospectus, less underwriting discounts and commissions. The underwriters
may exercise this option solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of common stock offered
by this prospectus. To the extent the option is exercised, each underwriter will
become obligated, subject to certain conditions, to purchase about the same
percentage of the additional shares of common stock as the number listed next to
the underwriter's name in the preceding table bears to the total number of
shares of common stock listed next to the names of all underwriters in the
preceding table. If the underwriters' option is exercised in full, the total
price to the public would be $ , the total underwriters' discounts and
commissions would be $ and total proceeds to us would be $ .
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
We intend to apply for listing of common stock on the New York Stock
Exchange under the symbol 'SNP.'
At our request, the underwriters will reserve for sale, at the initial
public offering price, up to shares offered in this prospectus for
directors, officers, employees, business associates and related persons of ours
and others, generally in the United States. The number of shares available for
sale to the general public will be reduced to the extent these individuals
purchase the reserved shares. Any reserved shares which are not so purchased
will be offered by the underwriters to the general public on the same basis as
the other shares offered in this prospectus.
Each of we, RC/Arby's, our directors, our executive officers and
substantially all of our other stockholders and optionholders have agreed that,
without the prior written consent of Morgan, Stanley & Co. Incorporated on
behalf of the underwriters it will not, during the period ending 180 days after
the date of this prospectus:
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offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, or
enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock.
whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise. In addition, those
directors, executive officers and stockholders have agreed that, without the
prior consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters, they will not, during the period ending 180 days after the date of
this prospectus, make any demand for, or exercise any right with respect to, the
registration of any shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock.
The restrictions described in this paragraph do not apply to:
the issuance of shares to RC/Arby's in connection with the
restructuring to occur in connection with the offering,
the sale of shares to the underwriters,
the issuance by us of shares of common stock upon the exercise of an
option or a warrant or the conversion of a security outstanding on the
date of this prospectus of which the underwriters have been advised in
writing,
transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after
the completion of the offering of the shares;
transfers by any person other than us that occur by way of testate or
intestate succession or by operation of law,
transfers by any person other than us (1) to members of their immediate
family or a trust, partnership, limited liability company or other
entity, all of the beneficial interests of which are held by them
and/or members of their immediate family or (2) to their spouse, former
spouse, child, or other dependent pursuant to a domestic relations
order, as defined in Section 414(p) of the Internal Revenue Code or
Section 206(d)(3) of Title I of the Employee Retirement Income Security
Act,
transfers by any person other than us to charitable organizations, and
(1) the exercise of any options issued to any person that would expire
or otherwise terminate prior to the end of such 180-day period pursuant
to the terms of our 1997 Stock Option Plan as in effect on June 15,
2000 and the related option agreement with us as in effect on such date
(provided that such options were granted in the ordinary course under
such plan) and (2) the sale of shares of common stock in connection
with such exercise, to the extent the proceeds of such sale are used to
pay taxes and expenses (including the exercise option price) incurred
by such person in connection with such exercise and sale,
provided that (x) in the case of any transfer pursuant to the fifth, sixth or
seventh clauses above, the transferee shall have executed a lock-up agreement
and delivered a copy of such agreement to Morgan Stanley & Co. Incorporated and
(y) in the case of any transfer pursuant to the sixth or seventh clauses above,
the transferor is not required to, and does not voluntarily, file a report on
Form 4 under Section 16(a) of the Securities Exchange Act reporting a reduction
in beneficial ownership of shares of common stock during such 180-day period.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for
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distributing the common stock in the offering, if the syndicate repurchases
previously distributed common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.
From time to time, some of the underwriters have provided, and may continue
to provide, investment banking services to us, Triarc and subsidiaries of
Triarc. Affiliates of Morgan Stanley and Donaldson, Lufkin & Jenrette are acting
as agents and lenders under our existing credit facility, and an affiliate of
ING Barings is a lender under our existing credit facility. Some of these
affiliates will act as agents or lenders under our new credit facility and
receive customary fees in connection with these facilities. An affiliate of ING
Barings is expected to provide the $185 million bridge loan to Arby's
concurrently with the closing of this offering and will receive customary fees
from Arby's in connection with that loan.
We and the underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.
PRICING OF THE OFFERING
Prior to the offering, there has been no public market for the common stock.
The initial public offering price will be determined by negotiations between us
and the representatives. Among the factors to be considered in determining the
initial public offering price will be our future prospects and our industry in
general, sales, earnings and certain other financial operating information of
ours in recent periods, and the price-earnings ratios, price-sales ratios,
market prices of securities and certain financial and operating information of
companies engaged in activities similar to ours. The estimated initial public
offering price range set forth on the cover page of this preliminary prospectus
is subject to change as a result of market conditions and other factors.
LEGAL MATTERS
The validity of the common stock being offered will be passed upon for us by
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York. Certain legal
matters for the underwriters will be passed upon by Davis Polk & Wardwell, New
York, New York.
EXPERTS
The consolidated balance sheets of Triarc Consumer Products Group, LLC as of
January 3, 1999 and January 2, 2000, and the related consolidated statements of
operations, member's deficit and cash flows for each of the three years in the
period ended January 2, 2000, included in this prospectus and the related
financial statement schedules included elsewhere in the registration statement
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein and elsewhere in the registration statement, and
have been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The combined statements of certain revenues and operating expenses of the
Snapple Beverage Business of The Quaker Oats Company for the four-month and
twenty-two day period ended May 22, 1997 included in this prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission relating to the registration of the common stock we are
offering, and this prospectus is part of our registration statement. For further
information on us and our common stock, you should refer to our registration
statement and its exhibits. This prospectus summarizes material provisions of
contracts and other documents that we refer you to and is qualified in its
entirety by reference to those documents.
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Because the prospectus may not contain all the information that you may find
important, you should review the full text of these documents. We have included
copies of these documents as exhibits to our registration statement.
We are currently subject to the information requirements of the Securities
Exchange Act and are required to file reports and other information with the
Securities and Exchange Commission. You can inspect and copy at prescribed rates
the reports and other information that we file with the Securities and Exchange
Commission at the public reference facilities maintained by the Securities and
Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and also at the regional offices of the Securities and
Exchange Commission located at 7 World Trade Center, Suite 1300, New York, New
York 10048 and the Citicorp Center at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. You may obtain information on the operation of the
public reference facilities by calling the Securities and Exchange Commission at
1-800-SEC-0330. The Securities and Exchange Commission also maintains an
Internet web site at http://www.sec.gov that contains reports, proxy and
information statements and other information. You can also obtain copies of
these materials from us upon request. Any requests should be directed to Snapple
Beverage Group at 709 Westchester Avenue, White Plains, New York 10604,
Attention: Corporate Communications; Telephone: (914) 397-9200.
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<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGE
----
<S> <C>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets as of January 3, 1999,
January 2, 2000 and April 2, 2000 (unaudited)........... F-3
Consolidated Statements of Operations for the fiscal years
ended December 28, 1997, January 3, 1999 and January 2,
2000 and the fiscal three months ended April 4, 1999
(unaudited) and April 2, 2000 (unaudited)............... F-4
Consolidated Statements of Member's Deficit for the fiscal
years ended December 28, 1997, January 3, 1999 and
January 2, 2000 and the fiscal three months ended
April 2, 2000 (unaudited)............................... F-5
Consolidated Statements of Cash Flows for the fiscal years
ended December 28, 1997, January 3, 1999 and January 2,
2000 and the fiscal three months ended April 4, 1999
(unaudited) and April 2, 2000 (unaudited)............... F-6
Notes to Consolidated Financial Statements................ F-8
SNAPPLE BEVERAGE BUSINESS OF THE QUAKER OATS COMPANY
Report of Independent Public Accountants.................. F-54
Combined Statement of Certain Revenues and Operating
Expenses for the four months and twenty-two days ended
May 22, 1997............................................ F-55
Notes to the Combined Statement of Certain Revenues and
Operating Expenses...................................... F-56
</TABLE>
-------------------
NOTE: The financial statements presented are those of Triarc Consumer Products
Group, LLC. In connection with the offering, certain proposed
restructuring transactions will take place. In accordance with those
transactions, which are described elsewhere in this prospectus under
'The Restructuring,' Snapple Beverage Group will be transferred to
RC/Arby's, the restaurant franchising business will be reclassified as
discontinued operations, RC/Arby's (parent company) and the restaurant
franchising business are then effectively distributed from Triarc Consumer
Products Group to Triarc and, as a result of a series of transactions,
Triarc Consumer Products Group then effectively merges into Snapple
Beverage Group. The restructuring transactions have not been reflected in
the historical financial statements because the restructuring transactions
will not have occurred prior to this registration statement to register
the common shares of Snapple Beverage Group being declared effective by
the Securities and Exchange Commission. As a result, the historical
financial statements reflect RC/Arby's (parent company) and the restaurant
business for all periods presented.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Managers and Member of
TRIARC CONSUMER PRODUCTS GROUP, LLC:
New York, New York
We have audited the accompanying consolidated balance sheets of Triarc
Consumer Products Group, LLC and subsidiaries (the 'Company') as of January 2,
2000 and January 3, 1999, and the related consolidated statements of operations,
member's deficit and cash flows for each of the three fiscal years in the period
ended January 2, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of January 2, 2000 and
January 3, 1999, and the results of their operations and their cash flows for
each of the three fiscal years in the period ended January 2, 2000 in conformity
with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
New York, New York
March 10, 2000
(June 23, 2000 as to Note 22)
F-2
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 2, APRIL 2,
1999 2000 2000
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash (including cash equivalents of $66,422, $49,520
and $17,560)......................................... $ 72,792 $ 60,173 $ 24,162
Receivables (Note 4)................................... 64,872 77,476 100,633
Inventories (Note 4)................................... 46,761 61,736 66,815
Deferred income tax benefit (Note 7)................... 18,934 16,422 16,422
Prepaid expenses and other current assets.............. 7,307 6,362 7,598
--------- --------- ---------
Total current assets............................... 210,666 222,169 215,630
Properties (Note 4)........................................ 25,320 25,261 30,697
Unamortized costs in excess of net assets of acquired
companies (Note 4)....................................... 268,215 261,666 258,890
Trademarks (Note 4)........................................ 261,906 251,117 248,484
Other intangible assets (Note 4)........................... 959 31,511 32,325
Deferred costs and other assets (Note 4)................... 23,904 36,491 35,277
--------- --------- ---------
$ 790,970 $ 828,215 $ 821,303
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND MEMBER'S DEFICIT
Current liabilities:
Current portion of long-term debt (Notes 5 and 6)...... $ 9,678 $ 41,894 $ 40,194
Accounts payable....................................... 36,993 35,397 45,294
Accrued expenses (Note 4).............................. 81,448 90,573 70,934
Due to Triarc Companies, Inc. (Note 18)................ 29,082 22,591 25,498
--------- --------- ---------
Total current liabilities.......................... 157,201 190,455 181,920
Long-term debt (Notes 5 and 6)............................. 560,977 736,866 735,652
Deferred income taxes (Note 7)............................. 9,173 56,680 56,680
Deferred income and other liabilities...................... 20,753 18,099 18,600
Redeemable preferred stock (Note 8)........................ 87,587 -- --
Commitments and contingencies (Notes 3, 7, 16, 17 and 19)
Member's deficit (Note 9):
Contributed capital.................................... 106,269 -- 1,600
Accumulated deficit.................................... (150,732) (173,533) (172,791)
Accumulated other comprehensive deficit................ (258) (352) (358)
--------- --------- ---------
Total member's deficit............................. (44,721) (173,885) (171,549)
--------- --------- ---------
$ 790,970 $ 828,215 $ 821,303
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
--------------------------------------- ---------------------------------------
DECEMBER 28, JANUARY 3, JANUARY 2, APRIL 4, APRIL 2,
1997 1999 2000 1999 2000
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales........................ $629,621 $735,436 $770,943 $159,888 $170,345
Royalties, franchise fees and
other revenues................. 66,531 79,600 83,029 18,303 19,673
-------- -------- -------- -------- --------
696,152 815,036 853,972 178,191 190,018
-------- -------- -------- -------- --------
Costs and expenses:
Cost of sales, excluding
depreciation and amortization
related to sales of $1,032,
$1,672, $2,102, $449 and
$499........................... 331,391 387,994 407,708 82,140 89,273
Advertising, selling and
distribution (Note 1).......... 183,221 197,877 201,451 47,756 46,372
General and administrative....... 83,546 91,165 92,909 22,283 24,724
Depreciation and amortization,
excluding amortization of
deferred financing costs....... 25,244 32,808 32,060 7,852 8,323
Capital structure reorganization
related charges (Note 10)...... -- -- 3,348 2,250 204
Charges (credit) related to post-
acquisition transition,
integration and changes to
business strategies (Note
11)............................ 33,815 -- (549) -- --
Facilities relocation and
corporate restructuring charges
(credits) (Note 12)............ 7,063 -- (461) -- --
-------- -------- -------- -------- --------
664,280 709,844 736,466 162,281 168,896
-------- -------- -------- -------- --------
Operating profit............. 31,872 105,192 117,506 15,910 21,122
Interest expense..................... (58,019) (60,235) (76,605) (16,701) (20,733)
Gain (loss) on sale of businesses,
net (Note 13)...................... (3,513) 5,016 (533) 85 96
Other income, net (Note 14).......... 5,532 5,298 6,782 3,156 966
-------- -------- -------- -------- --------
Income (loss) before income
taxes and extraordinary
charges.................... (24,128) 55,271 47,150 2,450 1,451
Benefit from (provision for) income
taxes (Note 7)..................... 5,142 (25,284) (21,672) (1,213) (709)
-------- -------- -------- -------- --------
Income (loss) before
extraordinary charges...... (18,986) 29,987 25,478 1,237 742
Extraordinary charges (Note 15)...... (2,954) -- (11,772) (11,772) --
-------- -------- -------- -------- --------
Net income (loss)............ $(21,940) $ 29,987 $ 13,706 $(10,535) $ 742
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBER'S DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE OTHER
COMPREHENSIVE INCOME (LOSS)
--------------------------------
UNREALIZED
GAIN (LOSS) ON CURRENCY
CONTRIBUTED ACCUMULATED AVAILABLE-FOR-SALE TRANSLATION
CAPITAL DEFICIT INVESTMENTS ADJUSTMENT TOTAL
------- ------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1996......................... $ 71,801 $(158,779) $ -- $ -- $ (86,978)
---------
Comprehensive loss:
Net loss................... -- (21,940) -- -- (21,940)
Unrealized gain on
available-for-sale
investment............... -- -- 42 -- 42
Net change in currency
translation adjustment... -- -- -- (242) (242)
---------
Comprehensive loss......... -- -- -- -- (22,140)
---------
Pushdown of acquisition basis
of Triarc Companies, Inc. in
Stewart's Beverages, Inc.
(Note 3)..................... 40,847 -- -- -- 40,847
Deferred gain on sale of
subsidiaries' stock to Triarc
Companies, Inc. (Note 18).... 29,390 -- -- -- 29,390
Capital contribution through
forgiveness of a liability to
Triarc Companies, Inc.
(Note 18).................... 625 -- -- -- 625
Issuance of Snapple Beverage
Group, Inc. common stock..... 1 -- -- -- 1
Dividend requirement on
redeemable preferred stock
(Note 8)..................... (4,604) -- -- -- (4,604)
Other......................... (1) -- -- -- (1)
--------- --------- ----- ----- ---------
Balance at December 28,
1997......................... 138,059 (180,719) 42 (242) (42,860)
---------
Comprehensive income:
Net income................. -- 29,987 -- -- 29,987
Reclassification adjustment
for prior year
appreciation on
available-for-sale
investment sold during
the year................. -- -- (42) -- (42)
Net change in currency
translation adjustment... -- -- -- (16) (16)
---------
Comprehensive income....... -- -- -- -- 29,929
---------
Adjustment to pushdown of
acquisition basis of Triarc
Companies, Inc. in Stewart's
Beverages, Inc. (Note 3)..... (251) -- -- -- (251)
Cash dividends................ (23,556) -- -- -- (23,556)
Dividend requirement on
redeemable preferred stock
(Note 8)..................... (7,983) -- -- -- (7,983)
--------- --------- ----- ----- ---------
Balance at January 3, 1999.... 106,269 (150,732) -- (258) (44,721)
---------
Comprehensive income:
Net income................. -- 13,706 -- -- 13,706
Net change in currency
translation adjustment... -- -- -- (94) (94)
---------
Comprehensive income....... -- -- -- -- 13,612
---------
Capital contribution of
redeemable preferred stock
(Note 8)..................... 88,779 -- -- -- 88,779
Other non-cash capital
contributions (Note 18)...... 12,056 -- -- -- 12,056
Dividend requirement on
redeemable preferred stock
(Note 8)..................... (1,192) -- -- -- (1,192)
Dividend of receivable from
Triarc Companies, Inc.
(Note 18).................... (4,954) -- -- -- (4,954)
Cash dividends (Note 5)....... (200,958) (3,788) -- -- (204,746)
Transfer of deferred income
tax benefits as if it were a
distribution (Note 7)........ -- (32,719) -- -- (32,719)
--------- --------- ----- ----- ---------
Balance at January 2, 2000.... -- (173,533) -- (352) (173,885)
---------
Comprehensive income
(unaudited):
Net income................. -- 742 -- -- 742
Net change in currency
translation adjustment... -- -- -- (6) (6)
---------
Comprehensive income....... -- -- -- -- 736
---------
Capital contribution of
certain assets of California
Beverage Company (unaudited)
(Note 3)..................... 1,600 -- -- -- 1,600
--------- --------- ----- ----- ---------
Balance at April 2, 2000
(unaudited).................. $ 1,600 $(172,791) $ -- $(358) $(171,549)
--------- --------- ----- ----- ---------
--------- --------- ----- ----- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
----------------------------------------- ---------------------
DECEMBER 28, JANUARY 3, JANUARY 2, APRIL 4, APRIL 2,
1997 1999 2000 1999 2000
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $(21,940) $ 29,987 $ 13,706 $(10,535) $ 742
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Amortization of costs in excess of net assets of
acquired companies, trademarks and certain other
items............................................. 18,879 23,151 23,732 5,604 6,439
Depreciation and amortization of properties......... 6,365 9,657 8,328 2,248 1,884
Amortization of deferred financing costs............ 3,716 4,075 4,398 1,228 944
Write-off of unamortized deferred financing costs
and, in 1999, interest rate cap agreement costs... 4,839 -- 10,938 10,938 --
Provision for doubtful accounts..................... 3,794 2,387 2,416 761 626
Capital structure reorganization related charges.... -- -- 3,348 2,250 204
Provision for (benefit from) deferred income
taxes............................................. (10,644) 10,467 17,792 -- --
Net provision (reversal or payments) for charges
related to post-acquisition transition,
integration and changes to business strategies.... 22,483 (6,025) (549) (43) --
(Gain) loss on sale of business, net................ 3,513 (5,016) 533 (85) (96)
Other, net.......................................... (4,727) (361) (91) 1,849 566
Changes in operating assets and liabilities:
Decrease (increase) in receivables................ 9,807 7,294 (12,822) (24,021) (23,783)
Decrease (increase) in inventories................ 3,993 10,607 (12,099) (13,518) (5,079)
Decrease (increase) in prepaid expenses and other
current assets.................................. 4,622 (1,051) 718 (3,286) (1,236)
Increase (decrease) in accounts payable and
accrued expenses................................ (21,779) (29,615) 1,064 1,100 (9,646)
Increase (decrease) in due to Triarc Companies,
Inc............................................. 12,519 3,547 (3,768) (4,098) 2,895
-------- -------- -------- -------- --------
Net cash provided by (used in) operating
activities.................................... 35,440 59,104 57,644 (29,608) (25,540)
-------- -------- -------- -------- --------
Cash flows from investing activities:
Capital expenditures.................................... (4,204) (11,107) (8,525) (1,545) (7,371)
Acquisition of Snapple Beverage Corp.................... (307,205) (43) -- -- --
Other business acquisitions (cash acquired in 1997)..... 2,409 (3,000) (34,336) (17,296) (47)
Proceeds from sale of investment in Select Beverages,
Inc. ................................................. -- 28,342 -- -- --
Other................................................... 3,371 1,579 (467) 66 (138)
-------- -------- -------- -------- --------
Net cash provided by (used in) investing
activities.................................... (305,629) 15,771 (43,328) (18,775) (7,556)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from long-term debt............................ 303,400 -- 775,000 775,000 --
Repayments of long-term debt............................ (79,901) (14,158) (568,532) (560,470) (2,915)
Dividends............................................... -- (23,556) (204,746) (204,746) --
Deferred financing costs................................ (11,385) -- (28,657) (27,821) --
Net borrowings from affiliates.......................... 3,535 1,389 -- -- --
Proceeds from issuance of redeemable preferred stock.... 75,000 -- -- -- --
Proceeds from issuance of common stock.................. 1 -- -- -- --
Capital contribution.................................... 6,211 -- -- -- --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities.................................... 296,861 (36,325) (26,935) (18,037) (2,915)
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 26,672 38,550 (12,619) (66,420) (36,011)
Cash and cash equivalents at beginning of period............ 7,570 34,242 72,792 72,792 60,173
-------- -------- -------- -------- --------
Cash and cash equivalents at the end of the period.......... $ 34,242 $ 72,792 $ 60,173 $ 6,372 $ 24,162
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest............................................ $ 55,047 $ 52,437 $ 70,126 $ 24,607 $ 28,203
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Income taxes (refunds), net......................... $ 3,450 $ 4,205 $ 1,666 $ 337 $ (21)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
F-6
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
Due to their non-cash nature, the following transactions are not reflected
in the consolidated statements of cash flows (amounts in whole dollars):
On November 25, 1997 Triarc Companies, Inc. ('Triarc'), the parent of
Triarc Consumer Products Group, LLC ('the Company'), acquired Stewart's
Beverages, Inc. ('Stewart's') for 1,566,858 shares of Triarc common stock
exchanged for all of the then outstanding stock of Stewart's and 154,931
stock options of Triarc exchanged for all of the then outstanding stock
options of Stewart's. The Stewart's acquisition was accounted for by Triarc
in accordance with the purchase method of accounting. Triarc's basis in
Stewart's was 'pushed down' to Stewart's and the excess of the purchase
price over the net assets acquired was allocated to the Stewart's assets and
liabilities as of November 25, 1997. See Note 3 to the consolidated
financial statements for further discussion of this transaction.
On May 22, 1997 Snapple Beverage Group, Inc., a subsidiary of the
Company, acquired Snapple Beverage Corp. The portion of the purchase price
that was not yet paid as of December 28, 1997, representing a portion of the
expenses related to the acquisition, was $2,181,000.
In May 1997 two subsidiaries of the Company issued common shares
representing approximately 49% of each of their common stock after such
issuances to Triarc in consideration for, in addition to cash of $6,211,000,
forgiveness of the then outstanding principal and accrued interest
aggregating $25,788,000 under a note payable by the Company to Triarc. In
February 1999 Triarc contributed its 49% interests in each of these
subsidiaries to the Company at its carrying value of $2,448,000. See
Note 18 to the consolidated financial statements for further discussion of
these transactions.
During 1997 and 1999 Triarc made capital contributions to the Company
through the forgiveness of liabilities of $625,000 and $9,608,000,
respectively. The 1999 contribution included $7,765,000 contributed during
the three months ended April 4, 1999. In addition, during the three months
ended April 4, 1999 the Company made a non-cash dividend of a $4,954,000
receivable from Triarc. See Note 18 to the consolidated financial statements
for further discussion of these transactions.
During 1997, 1998 and the three months ended April 4, 1999 the Company
recorded cumulative dividends not declared or paid on the redeemable
preferred stock of a subsidiary of $4,604,000, $7,983,000 and $1,192,000,
respectively, as increases in 'Redeemable preferred stock' with offsetting
charges to 'Contributed capital' since payment of the dividends was not
solely in the control of the Company. In February 1999 Triarc contributed
the redeemable preferred stock which it held in that subsidiary to the
Company with a carrying value of $88,779,000, including the cumulative
unpaid dividends of $13,779,000. See Note 8 to the consolidated financial
statements for further discussion of these transactions.
During 1999 the Company transferred $32,719,000 of deferred income tax
benefits, including $14,676,000 during the three months ended April 4, 1999,
to Triarc as if such transfer were a distribution from the Company to
Triarc. See Note 7 to the consolidated financial statements for further
discussion of this transaction.
During the three months ended April 2, 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. See Note 3 to the consolidated financial statements for further
discussion of this transaction.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
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'), Snapple Beverage Group, Inc.,
('Snapple Beverage Group'), formerly Triarc Beverage Holdings Corp., and
Stewart's Beverages, Inc. ('Stewart's' -- acquired by Triarc on November 25,
1997), formerly Cable Car Beverage Corporation, and their subsidiaries.
Effective May 17, 1999 Triarc Consumer Products Group contributed the stock of
Stewart's to Snapple Beverage Group. Snapple Beverage Group, 99.9%-owned, has as
its wholly-owned subsidiaries Snapple Beverage Corp. ('Snapple' -- acquired by
the Company on May 22, 1997), Mistic Brands, Inc. ('Mistic') and, effective
May 17, 1999, Stewart's. Prior to the contribution of Mistic to Snapple Beverage
Group on May 22, 1997, Mistic was owned by Triarc from its acquisition prior to
January 1, 1997. RC/Arby's, wholly-owned, has as its principal wholly-owned
subsidiaries Royal Crown Company, Inc. ('Royal Crown') and Arby's, Inc.
('Arby's'). Additionally, RC/Arby's had three subsidiaries which, prior to the
May 1997 sale of all company-owned restaurants, owned and/or operated Arby's
restaurants, consisting of Arby's Restaurant Development Corporation, Arby's
Restaurant Holding Company ('ARHC') and Arby's Restaurant Operations Company
('AROC'), all of which in February 1999 were merged into ARHC, LLC, a
newly-formed wholly-owned subsidiary of RC/Arby's. See Note 3 for a discussion
of the 1997 acquisitions and disposition referred to above.
The accompanying consolidated financial statements present the consolidated
financial position, results of operations and cash flows of Triarc Consumer
Products Group as if it had been formed as of January 1, 1997. The consolidated
financial position, results of operations and cash flows of each of RC/Arby's,
Snapple Beverage Group, Mistic prior to May 22, 1997 and Stewart's prior to
May 17, 1999, and their subsidiaries, have been consolidated with Triarc
Consumer Products Group from their respective dates of formation or acquisition
by Triarc since such entities were under the common control of Triarc during
such period and, accordingly, are presented on an 'as-if pooling' basis. The
aforementioned capital contributions of subsidiaries by Triarc to Triarc
Consumer Products Group and by Triarc Consumer Products Group to Snapple
Beverage Group have been recognized using carryover basis accounting since all
such entities were under common control.
All significant intercompany balances and transactions have been eliminated
in consolidation.
CHANGE IN FISCAL YEAR
Effective January 1, 1997 the Company changed its fiscal year from a
calendar year to a year consisting of 52 or 53 weeks ending on the Sunday
closest to December 31. In accordance therewith, the Company's 1997 fiscal year
contained 52 weeks and commenced January 1, 1997 and ended on December 28, 1997,
its 1998 fiscal year contained 53 weeks and commenced December 29, 1997 and
ended on January 3, 1999 and its 1999 fiscal year contained 52 weeks and
commenced January 4, 1999 and ended on January 2, 2000. Such periods are
referred to herein as (1) 'the year ended December 28, 1997' or '1997,' (2) 'the
year ended January 3, 1999' or '1998' and (3) 'the year ended January 2, 2000'
or '1999,' respectively. January 3, 1999 and January 2, 2000 are referred to
herein as 'Year-End 1998' and 'Year-End 1999,' respectively. Further, the
Company's first quarter of 1999 contained 13 weeks and commenced on January 4,
1999 and ended on April 4, 1999 and the Company's first quarter of 2000
contained 13 weeks and commenced on January 3, 2000 and ended on April 2, 2000.
The fiscal quarter ended April 2, 2000 is referred to herein as 'the three
months ended April 2, 2000' or 'First Quarter 2000.'
F-8
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less when
acquired are considered cash equivalents. The Company typically invests its
excess cash in commercial paper of high credit-quality entities, money market
mutual funds and United States Treasury bills.
INVENTORIES
The Company's inventories are stated at the lower of cost or market with
cost determined in accordance with the first-in, first-out basis.
NON-CURRENT INVESTMENTS
The Company had non-current investments during 1997 and 1998 (see Notes 11
and 14). Such investments in which it had significant influence over the
investee ('Equity Investments') were accounted for in accordance with the equity
method of accounting under which the consolidated results included the Company's
share of income or loss of such investees. The excess, if any, of the carrying
value of the Company's Equity Investments over the underlying equity in net
assets of each investee was being amortized to equity in earnings (losses) of
investees included in 'Other income, net' on a straight-line basis over 35
years.
PROPERTIES AND DEPRECIATION AND AMORTIZATION
Properties are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization of properties is computed
principally on the straight-line basis using the estimated useful lives of the
related major classes of properties: 3 to 15 years for machinery and equipment
and 15 to 40 years for buildings. Leased assets capitalized and leasehold
improvements are amortized over the shorter of their estimated useful lives or
the terms of the respective leases.
AMORTIZATION OF INTANGIBLES
Costs in excess of net assets of acquired companies ('Goodwill') are being
amortized on the straight-line basis over 15 to 40 years. Trademarks are being
amortized on the straight-line basis over 15 to 35 years. Distribution rights
are being amortized on the straight-line basis principally over 15 years. Other
intangible assets are being amortized on the straight-line basis over 2 to 7
years. Deferred financing costs are being amortized as interest expense over the
lives of the respective debt using the interest rate method.
IMPAIRMENTS
Intangible Assets
The amount of impairment, if any, in unamortized Goodwill is measured based
on projected future operating performance. To the extent future operating
performance of those enterprises to which the Goodwill relates through the
period such Goodwill is being amortized are sufficient to absorb the related
amortization, the Company has deemed there to be no impairment of Goodwill.
Long-Lived Assets
The Company reviews its long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If such review
indicates an asset may not be recoverable, the impairment loss is recognized
F-9
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
for the excess of the carrying value over the fair value of an asset to be held
and used or over the net realizable value of an asset to be disposed.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into interest rate cap agreements in order to protect
against significant interest rate increases on certain of its floating-rate
debt. The costs of such agreements are amortized over the lives of the
respective agreements. The only cap agreement outstanding as of January 2, 2000
and April 2, 2000 is approximately two percentage points higher than the
interest rate on the related debt as of such date.
STOCK-BASED COMPENSATION
The Company measures compensation costs for its employee stock-based
compensation under the intrinsic value method. Accordingly, compensation cost
for the Company's stock options is measured as the excess, if any, of the fair
value of the Company's stock at the date of grant over the amount an employee
must pay to acquire the stock.
FOREIGN CURRENCY TRANSLATION
Financial statements of foreign subsidiaries are prepared in their
respective local currencies and translated into United States dollars at the
current exchange rates for assets and liabilities and an average rate for the
year for revenues, costs and expenses. Net gains or losses resulting from the
translation of foreign financial statements are charged or credited directly to
the 'Currency translation adjustment' component of 'Accumulated other
comprehensive deficit' in 'Member's deficit.'
ADVERTISING COSTS AND PROMOTIONAL ALLOWANCES
The Company accounts for advertising production costs by expensing such
production costs the first time the related advertising takes place. Advertising
costs amounted to $40,730,000, $48,389,000, $36,486,000 and $5,080,000 for 1997,
1998, 1999 and the three months ended April 2, 2000, respectively. In addition
the Company supports its beverage bottlers and distributors with promotional
allowances the most significant of which are for (1) indirect advertising by
such bottlers and distributors including in-store displays and point-of-sale
materials, (2) cold drink equipment and (3) promotional merchandise. Promotional
allowances are principally expensed when the related promotion takes place.
Estimates used to expense the costs of certain promotions where the Company
expects reporting delays by the bottlers or distributors are adjusted quarterly
based on actual amounts reported. Promotional allowances amounted to
$107,513,000, $103,750,000, $115,677,000, and $27,238,000 for 1997, 1998, 1999
and the three months ended April 2, 2000, respectively, and are included in
'Advertising, selling and distribution' in the accompanying consolidated
statements of operations.
INCOME TAXES
The Company is included in the consolidated Federal income tax return of
Triarc. Pursuant to tax-sharing agreements with Triarc, the Company provides for
Federal income taxes on the same basis as if it filed a separate consolidated
return. Deferred income taxes are provided to recognize the tax effect of
temporary differences between the bases of assets and liabilities for tax and
financial statement purposes.
REVENUE RECOGNITION
The Company records sales when inventory is shipped or delivered. Sales
terms generally do not allow a right of return. Franchise fees are recognized as
income when a franchised restaurant is opened
F-10
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
since all material services and conditions related to the franchise fee have
been substantially performed by the Company upon the restaurant opening.
Franchise fees for multiple area development agreements represent the aggregate
of the franchise fees for the number of restaurants in the area development and
are recognized as income when each restaurant is opened in the same manner as
franchise fees for individual restaurants. Royalties are based on a percentage
of restaurant sales of the franchised store and are accrued as earned.
RECLASSIFICATIONS
Certain amounts included in the prior periods' consolidated financial
statements have been reclassified to conform with the current periods'
presentation.
(2) SIGNIFICANT RISKS AND UNCERTAINTIES
NATURE OF OPERATIONS
The Company is a holding company which is engaged in three lines of
business: premium beverages, soft drink concentrates and restaurant franchising
(also operated restaurants through May 5, 1997 -- see Note 3). The premium
beverage segment represents approximately 76% of the Company's consolidated
revenues for the year ended January 2, 2000, the soft drink concentrate segment
represents approximately 14% of such revenues and the restaurant franchising
segment represents approximately 10% of such revenues. The Company operates its
businesses principally throughout the United States.
The premium beverage segment markets and distributes, principally to
distributors and, to a lesser extent, directly to retailers, premium beverages
including all-natural ready-to-drink iced teas, fruit drinks, juices and
carbonated sodas under the principal brand names Snapple'r', Snapple
Elements'TM', WhipperSnapple'r', Snapple Farms'r', Snapple Refreshers'TM',
Mistic'r', Mistic Fruit Blast'TM', Mistic Italian Ice Smoothies'TM', Mistic Sun
Valley Squeeze'TM' and Stewart's'r'. The soft drink concentrate segment produces
and sells, to bottlers and a private label supplier, a broad selection of
concentrates and, to a much lesser extent in 1997 (none in 1998 or 1999),
carbonated beverages to distributors. These products are sold principally under
the brand names RC'r' Cola, Diet RC'r' Cola, Cherry RC'r' Cola, RC Edge'TM',
Diet Rite'r' Cola, Diet Rite'r' flavors, Nehi'r', Upper 10'r' and Kick'r'. The
restaurant franchising segment franchises Arby's'r' quick service restaurants
representing the largest restaurant franchising system specializing in
slow-roasted roast beef sandwiches. Some Arby's restaurants are multi-branded
with the segment's T.J. Cinnamons'r' and/or Pasta Connection'TM' product lines.
Information concerning the number of Arby's restaurants is as follows:
<TABLE>
<CAPTION>
FIRST
QUARTER
1997 1998 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Franchised restaurants opened.................. 125 130 159 22
Franchised restaurants closed.................. 63 87 66 14
Restaurants transferred to franchisees......... 355 -- -- --
Franchised restaurants open at end of period... 3,092 3,135 3,228 3,236
</TABLE>
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-11
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
CERTAIN RISK CONCENTRATIONS
The Company believes that its vulnerability to risk concentrations related
to significant customers and vendors, products sold and sources of raw materials
is somewhat mitigated due to the diversification of its businesses. Although
premium beverages accounted for 76% of consolidated revenues in 1999, the
Company believes that the risks from concentrations within the premium beverage
segment are mitigated for several reasons. No customer of the premium beverage
segment accounted for more than 7% of consolidated revenues in 1999. The premium
beverage segment has chosen to purchase certain raw materials (such as
aspartame) on an exclusive basis from single suppliers and other raw materials
(such as glass bottles) from a relatively small number of suppliers. The Company
believes that, if necessary, adequate raw materials, other than glass bottles,
can be obtained from alternate sources. It is uncertain whether all of the glass
bottles supplied by two suppliers, which supplied approximately 88% of the
premium beverage segment's 1999 purchases of glass bottles, could be replaced by
alternate sources. Management, however, does not believe that it is reasonably
possible that the Company's largest glass bottle suppliers will be unable to
supply substantially all of their anticipated volumes in the near term. The
premium beverage segment's three largest co-packer facilities represented an
aggregate of 54% of the segment's total 1999 production. One co-packer held 18%
of the segment's finished goods inventory as of January 2, 2000. Management
believes, however, that sufficient replacement co-packer services could be
obtained if necessary. The premium beverage segments' product offerings are
varied, including fruit flavored beverages, iced teas, lemonades, carbonated
sodas, fruit juices and flavored seltzers. Risk of geographical concentration
for all of the Company's businesses is also minimized since each of such
businesses generally operates throughout the United States with minimal foreign
exposure.
(3) BUSINESS ACQUISITIONS AND DISPOSITIONS
FIRST QUARTER 2000 TRANSACTION
California Beverage Company
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 to the Company (the
'California Beverage Acquisition') as a capital contribution.
The California Beverage Acquisition was accounted for in accordance with the
purchase method of accounting. The preliminary allocation of the purchase price
of California Beverage to the assets acquired is presented below under 'Purchase
Price Allocations of Acquisitions.'
1999 TRANSACTIONS
Millrose and Long Island Snapple Acquisitions
On February 26, 1999 the Company acquired (the 'Millrose Acquisition')
Millrose Distributors, Inc. ('Millrose'), a New Jersey distributor of the
Company's premium beverages which prior to the transaction acquired certain
assets of Mid-State Beverage, Inc., for cash of $17,491,000 (including expenses
of $241,000), subject to certain post-closing adjustments.
On January 2, 2000 the Company acquired (the 'Long Island Snapple
Acquisition') Snapple Distributors of Long Island, Inc. ('Long Island Snapple'),
a distributor of Snapple and Stewart's products on Long Island, New York for
cash of $16,845,000 (including estimated expenses of $45,000 in 1999), subject
to certain post-closing adjustments. During the three months ended April 2, 2000
the Company recognized $43,000 of expenses in addition to the previously
estimated amount, resulting in a revised purchase price of $16,888,000. The
Company also entered into a three-year non-compete
F-12
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
agreement with certain of the sellers for $2,000,000 (discounted value of
$1,246,000) payable ratably over a ten-year period.
The Millrose Acquisition and the Long Island Snapple Acquisition were
accounted for in accordance with the purchase method of accounting. The
allocation of the purchase price of Millrose and the preliminary allocation of
the purchase price of Long Island Snapple to the assets and liabilities assumed
is presented below under 'Purchase Price Allocations of Acquisitions.'
1998 TRANSACTION
Acquisition of T.J. Cinnamons
On August 27, 1998 the Company acquired (the 'T.J. Cinnamons Acquisition')
from Paramark Enterprises, Inc. ('Paramark,' formerly known as T.J. Cinnamons,
Inc.) all of Paramark's franchise agreements for full concept bakeries of T.J.
Cinnamons, an operator and franchisor of retail bakeries specializing in gourmet
cinnamon rolls and related products, and Paramark's wholesale distribution
rights for T.J. Cinnamons products, as well as settling remaining contingent
payments from the 1996 acquisition of the trademarks, service marks, recipes and
proprietary formulae of T.J. Cinnamons. The aggregate consideration in 1998 of
$3,910,000 consisted of cash of $3,000,000 and a $1,000,000 (discounted value of
$910,000) non-interest bearing obligation due in equal monthly installments
through August 2000.
The T.J. Cinnamons Acquisition was accounted for in accordance with the
purchase method of accounting. The allocation of the purchase price of the T.J.
Cinnamons Acquisition to the assets acquired and liabilities assumed is
presented below under 'Purchase Price Allocations of Acquisitions.'
1997 TRANSACTIONS
Acquisition of Snapple
On May 22, 1997 the Company acquired (the 'Snapple Acquisition') Snapple, a
marketer and distributor of premium beverages, from The Quaker Oats Company
('Quaker') for $309,386,000 consisting of cash of $300,126,000 (including
$126,000 of post-closing adjustments) and $9,260,000 of fees and expenses,
including $6,953,000 paid in 1997. The purchase price for the Snapple
Acquisition was funded from (1) $250,000,000 of borrowings by Snapple on May 22,
1997 under a $380,000,000 credit agreement (the 'Former Beverage Credit
Agreement' -- see Note 5), entered into by Snapple, Mistic, Snapple Beverage
Group and, as amended as of August 15, 1998, Stewart's and (2) $75,000,000 from
the issuance of 75,000 shares of redeemable preferred stock (see Note 8) of
Snapple Beverage Group to Triarc.
The Snapple Acquisition was accounted for in accordance with the purchase
method of accounting. The allocation of the purchase price of Snapple to the
assets acquired and liabilities assumed, along with allocations related to the
other 1997 acquisitions, is presented below under 'Purchase Price Allocations of
Acquisitions.'
Stewart's Acquisition
On November 25, 1997 Triarc acquired (the 'Stewart's Acquisition')
Stewart's, a marketer and distributor of premium beverages in the United States
and Canada, primarily under the Stewart's brand name, for an aggregate purchase
price of $40,596,000. Such purchase price consisted of (1) 1,566,858 shares of
Triarc common stock with a value of $37,409,000 as of November 25, 1997 (based
on the closing price of such common stock on such date of $23.875 per share),
issued in exchange for all of the then outstanding stock of Stewart's, (2)
154,931 options to acquire Triarc common stock, with a value of $2,788,000
(based on a calculation using the Black-Scholes option pricing model) as of
November 25,
F-13
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
1997, issued in exchange for all of the then outstanding stock options of
Stewart's and (3) $399,000 of related expenses (originally estimated at
$650,000).
The Stewart's Acquisition was accounted for in accordance with the purchase
method of accounting. The allocation of the purchase price of Stewart's to the
assets acquired and liabilities assumed, along with allocations related to the
other 1997 acquisitions, is presented below under 'Purchase Price Allocations of
Acquisitions.'
Sale of Restaurants
On May 5, 1997 certain subsidiaries of the Company consummated the sale to
affiliates of RTM, Inc. ('RTM'), the largest franchisee in the Arby's system, of
all of the 355 company-owned restaurants (the 'RTM Sale'). The sales price
consisted of cash and promissory notes (discounted value) aggregating $3,471,000
(including $2,092,000 of post-closing adjustments) and the assumption by RTM of
an aggregate $54,682,000 in mortgage notes (the 'Mortgage Notes') and equipment
notes (the 'Equipment Notes') payable to FFCA Mortgage Corporation and
$14,955,000 in capitalized lease obligations. Effective May 5, 1997 RTM operates
the 355 restaurants as a franchisee and pays royalties to the Company at a rate
of 4% of those restaurants' net sales. In 1996 the Company had recorded a
$58,900,000 impairment charge of which $46,000,000 was to reduce the restaurant
segment's long-lived assets to estimated net realizable value based on the
estimated sales price as of December 31, 1996. Such charge was recorded in 1996
since the Company made the decision to sell all of its company-owned restaurants
in the fourth quarter of 1996 and reached an agreement in principle for their
sale to RTM in December 1996. Also included in such charge were estimated exit
costs associated with selling the company-owned restaurants of $10,709,000. The
components of the accrued expenses and other non-current liabilities for such
exit costs and an analysis of related activity are as follows (in thousands):
<TABLE>
<CAPTION>
BALANCE AT 1997 BALANCE AT 1998 BALANCE AT
JANUARY 1, ---------------------- DECEMBER 28, ---------------------- JANUARY 3,
1997(a) PAYMENTS ADJUSTMENTS 1997 PAYMENTS ADJUSTMENTS 1999
------- -------- ----------- ---- -------- ----------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Equipment operating
lease obligations...... $ 9,650 $(2,313) $(364)(b) $6,973 $(2,873) $150(b) $4,250
Vacation and personal or
medical absence
entitlement costs...... 1,059 (1,059) -- -- -- -- --
------- ------- ----- ------ ------- ---- ------
$10,709 $(3,372) $(364) $6,973 $(2,873) $150 $4,250
------- ------- ----- ------ ------- ---- ------
------- ------- ----- ------ ------- ---- ------
<CAPTION>
1999 BALANCE AT
---------------------- RECLASSI- JANUARY 2,
PAYMENTS ADJUSTMENTS FICATIONS 2000
-------- ----------- --------- ----
<S> <C> <C> <C> <C>
Equipment operating
lease obligations...... $(2,780) $94(b) $(1,564)(c) $--(c)
Vacation and personal or
medical absence
entitlement costs...... -- -- -- --
------- --- ------- ------
$(2,780) $94 $(1,564) $--
------- --- ------- ------
------- --- ------- ------
</TABLE>
---------
(a) The accrual for exit costs at January 1, 1997 resulted from a 1996 charge
for exit costs associated with selling the company-owned restaurants. The
$10,709,000 of liabilities for exit costs included $9,650,000 reflecting
the present value of certain equipment operating lease obligations which
would not be assumed by the purchaser and $1,059,000 relating to vacation
and personal or medical absence entitlement costs principally paid to RTM
for approximately 6,500 employees associated with the sold restaurants who
became employees of RTM as a result of the RTM Sale. Although RTM was not
assuming the operating lease obligations, RTM acquired the use of the
leased equipment.
(b) The adjustments represent changes in estimates of the remaining operating
lease obligations.
(c) The balance of equipment operating lease obligations as of December 31,
1999 was converted into a note payable due in December 2000 and,
accordingly, the note payable is classified in 'Current portion of
long-term debt' in the accompanying consolidated balance sheets as of
January 2, 2000 and April 2, 2000.
In 1997 the Company recorded a $4,089,000 loss on the sale included in 'Gain
(loss) on sale of businesses, net' (see Note 13) representing (1) a $1,457,000
provision for the fair value of Triarc's effective guarantee of future lease
commitments and then guarantee of debt repayments assumed by
F-14
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
RTM (see below) and (2) the adjustment of prior year estimates resulting from
reconciling actual amounts to prior estimates for (a) remaining costs of
previously closed restaurants, (b) transaction costs and (c) interpretative
issues between the Company and RTM regarding the measurement of cash flow. Such
1997 loss is exclusive of an extraordinary charge in connection with the early
extinguishment of the Mortgage Notes and the Equipment Notes (see Note 15). The
results of operations of the sold restaurants have been included in the
accompanying consolidated statements of operations until the May 5, 1997 date of
sale. Following the RTM Sale, the Company continues as the franchisor of the
more than 3,000 Arby's restaurants. During 1997 through the date of sale, the
operations of the restaurants to be disposed in the RTM Sale had net sales of
$74,195,000, cost of sales of $59,222,000, no depreciation and amortization
related to sales and pre-tax income of $848,000. Such income reflected
$3,319,000 of allocated general and administrative expenses and $2,756,000 of
interest expense related to the Mortgage Notes and Equipment Notes and
capitalized lease obligations directly related to the operations of the
restaurants sold to RTM.
Arby's remains contingently responsible for approximately $117,000,000 of
operating and capitalized lease payments (approximately $98,000,000, $89,000,000
and $87,000,000 as of January 3, 1999, January 2, 2000 and April 2, 2000,
respectively, assuming RTM had made all scheduled payments through such dates
under such lease obligations) if RTM does not make the required lease payments.
Obligations under an aggregate $54,682,000 of Mortgage Notes and Equipment Notes
which were assumed by RTM in connection with the RTM Sale (approximately
$51,000,000, $49,000,000 and $48,000,000 outstanding as of January 3, 1999,
January 2, 2000 and April 2, 2000, respectively, assuming RTM had made all
scheduled repayments through such dates), have been guaranteed by Triarc. In
addition, a subsidiary of the Company is a co-obligor with RTM under a loan, the
repayments of which are being made by RTM, with an aggregate principal amount of
$626,000 as of May 5, 1997 ($586,000, $556,000 and $548,000 as of January 3,
1999, January 2, 2000 and April 2, 2000, respectively, assuming RTM had made all
scheduled repayments through such dates). The principal amount of the loan is
included in the Company's long-term debt with an equal offsetting amount
recorded as a receivable from RTM. This loan has been guaranteed by Triarc.
C&C Sale
On July 18, 1997 the Company completed the sale (the 'C&C Sale') of its
rights to the C&C beverage line of mixers, colas and flavors, including the C&C
trademark and equipment related to the operation of the C&C beverage line, to
Kelco Sales & Marketing Inc. ('Kelco') for $750,000 in cash and an $8,650,000
note (the 'Kelco Note') with a discounted value of $6,003,000 of which
$3,623,000 was allocated to the C&C Sale resulting in aggregate proceeds
relating to the C&C Sale of $4,373,000. The Kelco Note included compensation
both for the C&C Sale and future sales of concentrate for C&C products to Kelco
subsequent to July 18, 1997 (the 'Minimum Sales Commitments') and technical
services to be performed for Kelco by the Company subsequent to July 18, 1997.
The principal of the Kelco Note was allocated first to the Minimum Sales
Commitments based on the minimum Kelco purchase commitments set forth in the C&C
Sale agreement resulting in a discounted value of $2,096,000, second to
technical services to be performed for Kelco, as requested by Kelco, for seven
years with a discounted value of $284,000 with the remainder allocated to the
C&C Sale. The Minimum Sales Commitments were valued at the contracted sales
price for any Kelco purchases in excess of the minimums since the C&C Sale
contract did not provide any price for the Minimum Sales Commitments. The
technical services to be performed were valued based on the Company's estimated
costs to provide such services based on an estimate of the services to be
requested by Kelco since the C&C Sale contract did not provide any price for
such technical services. The excess of the proceeds of $4,373,000 over the
carrying value of the C&C trademark of $1,575,000 and the related equipment of
$2,000 resulted in a pre-tax gain of $2,796,000 which, commencing in the third
quarter of 1997, is being recognized pro rata between the gain on sale and the
carrying value of the assets sold based on the cash proceeds and
F-15
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
collections under the Kelco Note since realization of the Kelco Note was not at
the date of sale, and is not yet, fully assured. Accordingly, gains of $576,000,
$314,000, $356,000 and $96,000 were recognized in 'Gain (loss) on sale of
businesses, net' (see Note 13) in the accompanying consolidated statements of
operations for 1997, 1998, 1999 and the three months ended April 2, 2000,
respectively.
PURCHASE PRICE ALLOCATIONS OF ACQUISITIONS
The following table sets forth the allocation of the aggregate purchase
prices of the acquisitions discussed above and a reconciliation to business
acquisitions in the accompanying consolidated statements of cash flows (in
thousands):
<TABLE>
<CAPTION>
FIRST
QUARTER
1997 1998 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current assets.................................. $113,767 $ -- $ 4,585 $ 225
Properties...................................... 21,613 -- 566 --
Goodwill........................................ 102,271 160 4,619 47
Trademarks...................................... 221,300 3,389 -- --
Other intangible assets......................... -- 110 31,524 1,375
Other assets.................................... 27,697 -- -- --
Current liabilities............................. (73,898) 43 94 --
Long-term debt assumed including current
portion....................................... (686) -- -- --
Deferred income tax liabilities................. (52,513) -- (5,843) --
Other liabilities............................... (13,908) -- (1,209) --
-------- ------ ------- -------
345,643 3,702 34,336 1,647
Plus (less):
Long-term debt issued to sellers............ -- (910) -- --
Purchase price (including estimated expenses
of $650 adjusted by $251 in 1998) for
Stewart's Acquisition paid by Triarc
through the issuance of its common stock
and stock options and 'pushed down' to
Stewart's................................. (40,847) 251 -- --
Purchase price for California Beverage
acquisition paid by Triarc in cash and
contributed to the Company................ -- -- -- (1,600)
-------- ------ ------- -------
$304,796 $3,043 $34,336 $ 47
-------- ------ ------- -------
-------- ------ ------- -------
</TABLE>
(4) BALANCE SHEET DETAIL
RECEIVABLES
The following is a summary of the components of receivables (in thousands):
<TABLE>
<CAPTION>
YEAR-END
----------------- APRIL 2,
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Receivables:
Trade............................................... $63,283 $72,742 $ 97,021
Other............................................... 7,140 10,375 9,543
------- ------- --------
70,423 83,117 106,564
Less allowance for doubtful accounts.................... 5,551 5,641 5,931
------- ------- --------
$64,872 $77,476 $100,633
------- ------- --------
------- ------- --------
</TABLE>
Substantially all receivables are pledged as collateral for certain debt
(see Note 5).
F-16
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
INVENTORIES
The following is a summary of the components of inventories (in thousands):
<TABLE>
<CAPTION>
YEAR-END
----------------- APRIL 2,
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Raw materials............................................ $20,268 $20,952 $24,127
Work in process.......................................... 98 397 545
Finished goods........................................... 26,395 40,387 42,143
------- ------- -------
$46,761 $61,736 $66,815
------- ------- -------
------- ------- -------
</TABLE>
Substantially all inventories are pledged as collateral for certain debt
(see Note 5).
PROPERTIES
The following is a summary of the components of properties (in thousands):
<TABLE>
<CAPTION>
YEAR-END
----------------- APRIL 2,
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Land..................................................... $ 1,911 $ 1,461 $ 1,461
Buildings and improvements............................... 5,623 2,923 3,098
Leasehold improvements................................... 6,628 10,291 10,741
Machinery and equipment.................................. 35,329 39,521 46,044
Leased assets capitalized................................ 431 384 384
------- ------- -------
49,922 54,580 61,728
Less accumulated depreciation and amortization........... 24,602 29,319 31,031
------- ------- -------
$25,320 $25,261 $30,697
------- ------- -------
------- ------- -------
</TABLE>
Substantially all properties are pledged as collateral for certain debt (see
Note 5).
UNAMORTIZED COSTS IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES
The following is a summary of the components of unamortized costs in excess
of net assets of acquired companies (in thousands):
<TABLE>
<CAPTION>
YEAR-END
------------------- APRIL 2,
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Costs in excess of net assets of acquired companies
(Note 3)............................................ $355,482 $360,101 $360,148
Less accumulated amortization......................... 87,267 98,435 101,258
-------- -------- --------
$268,215 $261,666 $258,890
-------- -------- --------
-------- -------- --------
</TABLE>
TRADEMARKS
The following is a summary of the components of trademarks (in thousands):
<TABLE>
<CAPTION>
YEAR-END
------------------- APRIL 2,
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Trademarks............................................ $286,231 $286,319 $286,411
Less accumulated amortization......................... 24,325 35,202 37,927
-------- -------- --------
$261,906 $251,117 $248,484
-------- -------- --------
-------- -------- --------
</TABLE>
Substantially all trademarks are pledged as collateral for certain debt (see
Note 5).
F-17
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
OTHER INTANGIBLE ASSETS
The following is a summary of the components of other intangible assets (in
thousands):
<TABLE>
<CAPTION>
YEAR-END
---------------- APRIL 2,
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Distribution rights....................................... $ 306 $28,027 $29,302
Non-compete agreements.................................... 5,214 7,661 7,761
Other..................................................... 922 2,901 3,217
------ ------- -------
6,442 38,589 40,280
Less accumulated amortization............................. 5,483 7,078 7,955
------ ------- -------
$ 959 $31,511 $32,325
------ ------- -------
------ ------- -------
</TABLE>
DEFERRED COSTS AND OTHER ASSETS
The following is a summary of the components of deferred costs and other
assets (in thousands):
<TABLE>
<CAPTION>
YEAR-END
----------------- APRIL 2,
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Deferred financing costs................................. $26,948 $30,640 $30,640
Less accumulated amortization of deferred financing
costs.................................................. 15,208 3,588 4,528
------- ------- -------
11,740 27,052 26,112
Other.................................................... 12,164 9,439 9,165
------- ------- -------
$23,904 $36,491 $35,277
------- ------- -------
------- ------- -------
</TABLE>
ACCRUED EXPENSES
The following is a summary of the components of accrued expenses (in
thousands):
<TABLE>
<CAPTION>
YEAR-END
----------------- APRIL 2,
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Accrued promotions....................................... $14,922 $19,560 $16,106
Accrued interest......................................... 19,166 20,965 12,500
Accrued compensation and related benefits................ 13,328 18,896 8,455
Accrued production contract losses (a)................... 4,639 3,251 3,251
Other.................................................... 29,393 27,901 30,622
------- ------- -------
$81,448 $90,573 $70,934
------- ------- -------
------- ------- -------
</TABLE>
---------
(a) Represents obligations related to the portion of those long-term production
contracts with co-packers, assumed in connection with the Snapple
Acquisition, which the Company does not anticipate utilizing based on
projected future volumes. The decrease in this accrual during 1999 was due
to obligations paid during such year.
F-18
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(5) LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR-END
------------------- APRIL 2,
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Credit facility term loans bearing interest at a
weighted average rate of 9.71% and 9.62% at January
2, 2000 and April 2, 2000, respectively............. $ -- $470,088 $468,450
10 1/4% senior subordinated notes due 2009............ -- 300,000 300,000
9 3/4% senior secured notes refinanced in 1999........ 275,000 -- --
Former Beverage Credit Agreement term loans refinanced
in 1999............................................. 284,333 -- --
Other................................................. 11,322 8,672 7,396
-------- -------- --------
Total debt........................................ 570,655 778,760 775,846
Less amounts payable within one year.............. 9,678 41,894 40,194
-------- -------- --------
$560,977 $736,866 $735,652
-------- -------- --------
-------- -------- --------
</TABLE>
Aggregate annual maturities of long-term debt, including capitalized lease
obligations, were as follows as of January 2, 2000 and April 2, 2000 (in
thousands):
<TABLE>
<CAPTION>
AS OF JANUARY 2, 2000
---------------------------------------------
FISCAL YEAR
-----------
<S> <C>
2000............................... $ 41,894
2001............................... 10,063
2002............................... 12,175
2003............................... 14,247
2004............................... 14,756
Thereafter......................... 685,625
--------
$778,760
--------
--------
<CAPTION>
AS OF APRIL 2, 2000
---------------------------------------------
TWELVE MONTHS ENDED
-------------------
<S> <C>
April 1, 2001. $ 40,194
March 31, 2002..................... 9,265
March 30, 2003..................... 10,904
March 28, 2004..................... 12,495
April 3, 2005...................... 12,491
Thereafter......................... 690,497
--------
$775,846
--------
--------
</TABLE>
On February 25, 1999 Triarc Consumer Products Group and Snapple Beverage
Group issued $300,000,000 principal amount of 10 1/4% senior subordinated notes
due 2009 (the 'Notes') and Snapple, Mistic, Stewart's, RC/Arby's and Royal Crown
concurrently entered into an agreement (the 'Credit Agreement') for a
$535,000,000 senior bank credit facility (the 'Credit Facility') consisting of a
$475,000,000 term facility, all of which was borrowed as three classes of term
loans (the 'Term Loans') on February 25, 1999, and a $60,000,000 revolving
credit facility (the 'Revolving Credit Facility') which provides for borrowings
(the 'Revolving Loans') by Snapple, Mistic, Stewart's, RC/Arby's or Royal Crown.
There were no borrowings under the Revolving Credit Facility in 1999 or during
the three months ended April 2, 2000. The Company utilized the aggregate net
proceeds of these borrowings to (1) repay on February 25, 1999 the $284,333,000
outstanding principal amount of the term loans under the Former Beverage Credit
Agreement and $1,503,000 of related accrued interest, (2) redeem (the
'Redemption') on March 30, 1999 the $275,000,000 of borrowings under the
RC/Arby's 9 3/4% senior notes due 2000 (the '9 3/4% Senior Notes') and pay
$4,395,000 of related accrued interest and $7,662,000 of redemption premium,
(3) acquire Millrose (see Note 3) for $17,491,000, (4) pay fees and expenses of
$28,657,000 relating to the issuance of the Notes and the consummation of the
Credit Facility (the 'Refinancing Transactions') and (5) pay one-time
distributions, including dividends, to Triarc of the remaining net proceeds from
the above borrowings and all the Company's cash and cash equivalents then on
hand in excess of approximately $2,000,000, which was retained by the Company
for working capital purposes. An additional $1,843,000 of fees and expenses were
paid by Triarc on behalf of the Company and contributed to the Company (see
Note 18). The aggregate fees and expenses of $30,500,000 relating to the
issuance of the Notes and the consummation of the Credit Facility consist of
F-19
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
$15,211,000 of fees and expenses, including commitment fees, paid to the lenders
under the Credit Facility, $9,720,000 of fees paid to the underwriters of the
Notes, $4,185,000 of legal, auditing and accounting fees, $809,000 of printing
fees and $575,000 of other fees. The one-time distributions paid to Triarc
consisted of $91,420,000 paid on February 25, 1999 and $124,108,000 paid on
March 30, 1999 following the Redemption, and included aggregate dividends of
$204,746,000. As a result of the repayment prior to maturity of the borrowings
under the Former Beverage Credit Agreement and the Redemption, the Company
recognized an extraordinary charge during 1999 of $11,772,000 (see Note 15).
The stated interest rate on the Notes is 10 1/4%. However, on August 25,
1999 a temporary increase in the interest rate by 1/2% to 10 3/4% became
effective because a registration statement (the 'Registration Statement')
covering resales by holders of the Notes had not been declared effective by the
Securities and Exchange Commission (the 'SEC') by August 24, 1999. The
Registration Statement was declared effective on December 23, 1999 and on
January 28, 2000 the Company completed an exchange offer (the 'Exchange Offer')
which, collectively, permitted the Notes to be publicly traded. Upon the
completion of the Exchange Offer, the annual interest rate on the Notes reverted
to the original 10 1/4%. The Notes mature in 2009 and do not require any
amortization of principal prior thereto. However, under the indenture pursuant
to which the Notes were issued, the Notes are redeemable at the option of the
Company at amounts commencing at 105.125% of principal beginning February 2004
decreasing annually to 100% in February 2007 through February 2009. In addition,
should the Company consummate a permitted public equity offering or receive
proceeds from a public equity offering by Triarc, the Company may at any time
prior to February 2002 redeem up to $105,000,000 of the Notes at 110.25% of
principal amount with the net proceeds of such public offering.
Borrowings under the Credit Facility bear interest, at the Company's option,
at rates based on either the 30, 60, 90 or 180-day London Interbank Offered Rate
('LIBOR') (ranging from 5.82% to 6.13% at January 2, 2000 and 6.13% to 6.53% at
April 2, 2000) or an alternate base rate (the 'ABR'). The ABR (8 1/2% and 9% at
January 2, 2000 and April 2, 2000, respectively) represents the higher of the
prime rate or 1/2% over the Federal funds rate. The interest rates on
LIBOR-based loans are reset at the end of the period corresponding with the
duration of the LIBOR selected. The interest rates on ABR-based loans are reset
at the time of any change in the ABR. Revolving Loans and one class of the Term
Loans with $43,312,000 and $42,750,000 outstanding as of January 2, 2000 and
April 2, 2000, respectively (the 'Term A Loans') currently bear interest at 3%
over LIBOR or 2% over ABR. The other two classes of Term Loans with $124,063,000
and $302,713,000 outstanding as of January 2, 2000 and $123,750,000 and
$301,950,000 outstanding as of April 2, 2000 (the 'Term B Loans' and 'Term C
Loans,' respectively) bear interest at 3 1/2% and 3 3/4% over LIBOR,
respectively, and 2 1/2% and 2 3/4%, respectively, over ABR. The borrowing base
for Revolving Loans is the sum of 80% of eligible accounts receivable and 50% of
eligible inventories. At January 2, 2000 and April 2, 2000 there was $51,099,000
and $59,951,000, respectively, of borrowing availability under the Revolving
Credit Facility in accordance with limitations due to such borrowing base.
However, $28,000,000 of the Revolving Credit Facility was subsequently utilized
through borrowings of Revolving Loans made on May 4, 2000 in order to fund the
excess cash flow prepayment discussed in the following paragraph.
The Company must make mandatory annual prepayments in an amount, if any,
currently equal to 75% of excess cash flow as defined in the Credit Agreement.
Such 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 such election would be applied first
to the outstanding balance of the Term A Loans and second to any outstanding
balance of Revolving Loans, with any remaining amount being returned to the
Company. In connection therewith, a $28,302,000 prepayment was made in the
second quarter of 2000 (estimated as $28,349,000 as of January 2, 2000) in
respect of the year ended January 2, 2000 and accordingly, $28,349,000 and
$28,302,000 are included in 'Current portion of long-term debt' in the
accompanying consolidated balance sheets as of January 2, 2000 and April 2,
2000, respectively. The pro
F-20
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
rata share of the actual prepayment applicable to the Term B and Term C Loans
was $25,719,000. Certain lenders of Term B and Term C Loans elected not to
accept an aggregate $8,822,000 of the prepayment and, accordingly, this amount
was applied to Term A loans. After consideration of the effect of the estimated
excess cash flow prepayment as of January 2, 2000 and assuming lenders of Term B
Loans and Term C Loans had elected to accept their pro rata share of such
prepayment, the Term Loans would have been due $36,200,000 in 2000 including the
estimated excess cash flow prepayment, $9,875,000 in 2001, $11,995,000 in 2002,
$14,117,000 in 2003, $14,645,000 in 2004, $88,528,000 in 2005, $228,249,000 in
2006 and $66,479,000 in 2007. The maturities table as of January 2, 2000
includes these Term Loan maturities. After consideration of the effect of the
actual cash flow prepayment and its application to each of the classes of the
Term Loans, as of April 2, 2000 the Term Loans will be due $33,873,000 during
the remaining three quarters of 2000 including the actual cash flow prepayment,
$8,666,000 in 2001, $10,316,000 in 2002, $11,966,000 in 2003, $12,378,000 in
2004, $90,052,000 in 2005, $233,146,000 in 2006 and $68,053,000 in 2007. The
maturities table as of April 2, 2000 reflects the effect of these fiscal year
Term Loan maturities. Such maturities will change if the Company is required to
make any future excess cash flow payments. Pursuant to the Credit Agreement the
Company can make voluntary prepayments of the Term Loans. As of March 10, 2000
and April 2, 2000 no such voluntary prepayments had been made. However, if the
Company makes voluntary prepayments of the Term B and Term C Loans it will incur
prepayment penalties of 1.0% and 1.5%, respectively, of any future amount of
such Term Loans repaid through February 25, 2001. Any Revolving Loans would be
due in full in March 2005.
Under the Credit Agreement, substantially all of the Company's assets, other
than cash and cash equivalents, are pledged as security. In addition, the
Company's obligations with respect to (1) the Notes are guaranteed (the 'Note
Guarantees') 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 (the 'Credit Facility Guaranty') by Triarc Consumer Products Group,
Snapple Beverage Group and substantially all of the domestic subsidiaries of
Snapple, Mistic, Stewart's, Arby's, Royal Crown and RC/Arby's. As collateral for
the Credit Facility Guaranty, all of the stock of Snapple, Mistic, Stewart's,
Arby's, Royal Crown and RC/Arby's and all of their domestic and 65% of the stock
of each of their directly-owned foreign subsidiaries is pledged. The Note
Guarantees are full and unconditional, are on a joint and several basis and are
unsecured. As a result of such guarantees, condensed consolidating financial
statements of the Company are presented in Note 21 which depict, in separate
columns, the parent companies of each of the issuers of the Notes (Triarc
Consumer Products Group, which as previously indicated was formed January 15,
1999, and Snapple Beverage Group), those subsidiaries which are guarantors,
those subsidiaries which are non-guarantors, elimination adjustments and the
consolidated total. Separate financial statements of the guarantor subsidiaries
are not presented because the Company's management has determined that they
would not be material to investors.
The Company's 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 certain debt prior to maturity, (c) investments,
(d) asset dispositions and (e) affiliate transactions other than on an
arms-length basis and (4) restrict the payment of dividends to Triarc. Under the
most restrictive of such covenants, the Company would not be able to pay any
dividends or make any loans or advances to Triarc other than the aforementioned
one-time distributions, including dividends, paid to Triarc in connection with
the Refinancing Transactions. As of January 2, 2000 and April 2, 2000 the
Company was in compliance with all of such covenants.
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has the following financial instruments for which the disclosure
of fair values is required: cash and cash equivalents, accounts receivable and
payable, accrued expenses, due to Triarc and long-term debt. The carrying
amounts of cash and cash equivalents, accounts payable, accrued
F-21
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
expenses and due to Triarc approximated fair value due to the short-term
maturities of such assets and liabilities. The carrying amount of accounts
receivable approximated fair value due to the related allowance for doubtful
accounts. The carrying amounts and fair values of long-term debt (see Note 5)
were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR-END
-----------------------------------------
1998 1999 APRIL 2, 2000
------------------- ------------------- -------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Credit Facility term loans...... $ -- $ -- $470,088 $470,088 $468,450 $468,450
Notes........................... -- -- 300,000 287,250 300,000 285,000
9 3/4% Senior Notes............. 275,000 278,000 -- -- -- --
Former Beverage Credit
Agreement..................... 284,333 284,333 -- -- -- --
Other long-term debt............ 11,322 11,764 8,672 8,754 7,396 7,598
-------- -------- -------- -------- -------- --------
$570,655 $574,097 $778,760 $766,092 $775,846 $761,048
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
The fair values of the term loans under the Credit Agreement and the Former
Beverage Credit Agreement approximated their carrying values due to the
relatively frequent resets of their floating interest rates. The fair values of
the Notes and the 9 3/4% Senior Notes are based on quoted market prices. The
fair values of all other long-term debt were either (1) determined by
discounting the future scheduled payments using an interest rate assuming the
same original issuance spread over a current Treasury bond yield for securities
with similar durations or (2) assumed to reasonably approximate their carrying
amounts since the remaining maturities are relatively short-term or the carrying
amounts of such debt are relatively insignificant.
(7) INCOME TAXES
As discussed in Note 1, the Company is included in the consolidated Federal
income tax return of Triarc. Pursuant to former tax-sharing agreements (the
'Former Tax-Sharing Agreements') between Triarc and each of Snapple Beverage
Group (including Stewart's effective August 15, 1998), RC/Arby's and Stewart's
(through August 15, 1998) through January 3, 1999 and a revised tax-sharing
agreement (the 'Revised Tax-Sharing Agreement') between Triarc and the Company
effective January 4, 1999, the Company provides for Federal income taxes on the
same basis as if separate consolidated returns for Snapple Beverage Group,
RC/Arby's and Stewart's were filed through January 3, 1999 and a separate
consolidated return for the Company was filed commencing January 4, 1999. As of
January 3, 1999 and January 2, 2000, there were no taxes currently payable since
until January 2, 2000 the Company was in a net operating loss carryforward
position. As of April 2, 2000, taxes currently payable are included in 'Accrued
expenses.'
The provision for income taxes for the three months ended April 2, 2000 has
been provided at the estimated effective tax rate for the year ending
December 31, 2000 of 49%.
The income (loss) before income taxes and extraordinary charges consisted of
the following components (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Domestic................................................ $(24,807) $55,050 $46,910
Foreign................................................. 679 221 240
-------- ------- -------
$(24,128) $55,271 $47,150
-------- ------- -------
-------- ------- -------
</TABLE>
F-22
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
The benefit from (provision for) income taxes consisted of the following
components (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Current:
Federal............................................ $(3,646) $(11,695) $ (55)
State.............................................. (1,051) (2,665) (3,416)
Foreign............................................ (805) (457) (409)
------- -------- --------
(5,502) (14,817) (3,880)
------- -------- --------
Deferred:
Federal............................................ 9,722 (8,407) (16,793)
State.............................................. 922 (2,060) (999)
------- -------- --------
10,644 (10,467) (17,792)
------- -------- --------
Total.......................................... $ 5,142 $(25,284) $(21,672)
------- -------- --------
------- -------- --------
</TABLE>
The current deferred income tax benefit and the net non-current deferred
income tax (liability) resulted from the following components (in thousands):
<TABLE>
<CAPTION>
YEAR-END
------------------
1998 1999
---- ----
<S> <C> <C>
Current deferred income tax benefit:
Accrued employee benefit costs.......................... $ 3,363 $ 5,843
Glass front vending machines written off by Quaker...... 2,925 2,925
Allowance for doubtful accounts......................... 2,340 2,374
Inventory obsolescence reserves......................... 1,210 946
Accrued production contract losses...................... 1,320 778
Closed facilities reserves.............................. 1,371 630
Accrued interest relating to income tax matters......... 1,123 --
Accrued lease payments for equipment transferred to
RTM................................................... 1,082 15
Other, net.............................................. 4,200 2,911
------- --------
18,934 16,422
------- --------
Non-current deferred income tax benefit (liability):
Trademarks basis differences............................ (55,038) (55,565)
Reserve for income tax contingencies and other tax
matters, net.......................................... (4,221) (2,573)
Federal net operating loss carryforwards and excess
income tax payments under tax-sharing agreements...... 39,518 --
Depreciation and other properties basis differences..... 3,978 4,590
Other intangible assets basis differences............... (924) (6,812)
Deferred franchise fees................................. 2,108 2,376
Other, net.............................................. 5,406 1,304
------- --------
(9,173) (56,680)
------- --------
$ 9,761 $(40,258)
------- --------
------- --------
</TABLE>
The increase in the net deferred income tax benefit (liability) from a net
benefit of $9,761,000 at January 3, 1999 to a net liability of $40,258,000 at
January 2, 2000, or a change of $50,019,000, differs from the provision for
deferred income taxes of $17,792,000 for 1999. Such difference is principally
due to the transfer of $32,719,000 of deferred income tax benefits to Triarc
(see below).
The Revised Tax-Sharing Agreement provides that the Company would continue
to receive benefit for deferred tax assets aggregating $39,518,000 as of
January 3, 1999 associated with then existing
F-23
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
Federal net operating loss carryforwards and excess Federal income tax payments
made in accordance with the Former Tax-Sharing Agreements. However, Triarc had
the right to cause the effective transfer of any unutilized benefits from the
Company to Triarc, but only to the extent any such transfer would not result in
non-compliance with the minimum net worth covenant of the Credit Agreement.
During 1999, the Company generated an additional $6,339,000 of such benefits as
a result of the extraordinary charges from the early extinguishment of debt (see
Note 15). In accordance with the Revised Tax-Sharing Agreement, during 1999 the
Company utilized $13,138,000 of such benefits to offset income taxes otherwise
payable on its pre-tax income before extraordinary charges and transferred the
remaining $32,719,000 of such deferred tax benefits to Triarc as if such
transfer were a distribution from the Company to Triarc. In accordance
therewith, the Company recorded a charge to 'Accumulated deficit' and a credit
to 'Deferred income taxes' of $32,719,000. As of January 2, 2000, the Company no
longer has any net operating loss carryforward benefits available to it under
the Revised Tax Sharing Agreement.
The difference between the reported benefit from (provision for) income
taxes and the tax benefit (provision) that would result from applying the 35%
Federal statutory rate to the income or loss before income taxes and
extraordinary charges is reconciled as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Income tax benefit (provision) computed at Federal
statutory rate........................................ $ 8,445 $(19,345) $(16,502)
(Increase) decrease in Federal tax provision resulting
from:
Amortization of non-deductible Goodwill............. (2,471) (3,138) (3,217)
State income taxes, net of Federal income tax
effect............................................ (84) (3,071) (2,870)
Foreign tax rate in excess of United States Federal
statutory rate and foreign withholding taxes, net
of Federal income tax benefit..................... (433) (247) (212)
Reversal of provision for income tax
contingencies..................................... -- -- 1,500
Other non-deductible, net........................... (315) 517 (371)
------- -------- --------
$ 5,142 $(25,284) $(21,672)
------- -------- --------
------- -------- --------
</TABLE>
The Federal income tax returns of Triarc and its subsidiaries, including
RC/Arby's, have been examined by the Internal Revenue Service (the 'IRS') for
the tax years from 1989 through 1992 (the '1989 through 1992 Examination').
Prior to 1999 Triarc resolved and settled certain issues with the IRS regarding
such audit and in July 1999 Triarc resolved all remaining issues. In connection
therewith, the Company paid $4,576,000 during 1997, of which $2,426,000 was the
amount of tax due and $2,150,000 was interest thereon, and no further payments
are required. Such amounts were charged to reserves principally provided in
prior years. 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 (the
'1993 Examination'). In connection therewith and subject to final processing and
approval by the IRS, Triarc has received notices of proposed adjustments, of
which $722,000 would increase the taxable income relating to RC/Arby's,
resulting in additional taxes and accrued interest payable of $434,000 under the
Company's tax-sharing agreement with Triarc. Such additional taxes and accrued
interest have been provided for in connection with income tax and related
interest contingency reserves established in prior years. During each of 1997
and 1998 the Company provided $1,000,000 included in 'Interest expense' relating
to such examinations and other tax matters. As a result of the settlement of the
1989 through 1992 Examinations and the tentative completion of the 1993
Examination, the Company determined that it had excess income tax reserves and
interest accruals of $1,500,000 and $2,828,000, respectively, and, accordingly,
released such amounts in 1999. The adjustment to the income tax reserves were
reported as a reduction of the provision for income taxes of $1,500,000 and the
adjustments to interest accruals were reported as a reduction of 'Interest
expense' of $2,828,000.
F-24
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(8) REDEEMABLE PREFERRED STOCK
On May 22, 1997 Snapple Beverage Group issued 75,000 shares of its
redeemable cumulative convertible preferred stock, $1.00 par value (the
'Redeemable Preferred Stock') to Triarc for $75,000,000. On August 21, 1997 each
of the 75,000 outstanding shares of Redeemable Preferred Stock was converted
into 1/100 of a share as a result of a 1:100 reverse stock split, resulting in
750 issued and outstanding shares of Redeemable Preferred Stock. On
February 23, 1999 Triarc contributed the Redeemable Preferred Stock to Triarc
Consumer Products Group. The Redeemable Preferred Stock bore a cumulative annual
dividend of 10% on stated value compounded annually for any undeclared
dividends, payable in cash or additional shares of Redeemable Preferred Stock,
if declared by, and at the option of, the Company. The cumulative dividends not
declared or paid of $4,604,000, $7,983,000 and $1,192,000 for 1997, 1998 and
1999 (through February 23, 1999), respectively, were accounted for as increases
in 'Redeemable preferred stock' with offsetting charges to 'Contributed capital'
since payment of the dividends was not solely in the control of the Company. As
a result of the contribution of the Redeemable Preferred Stock to Triarc
Consumer Products Group the Company credited the $88,779,000 carrying value of
such stock, reflecting the cumulative unpaid dividends of $13,779,000 through
February 23, 1999, to 'Member's deficit.'
(9) MEMBER'S DEFICIT
Snapple Beverage Group adopted the Snapple Beverage Group, Inc. 1997 Stock
Option Plan (the 'Snapple Beverage Plan') in 1997 which provides for the grant
of options to purchase shares of Snapple Beverage Group common stock (the
'Snapple Beverage Common Stock') to key employees, officers, directors and
consultants of Snapple Beverage Group, Triarc and their affiliates. The Snapple
Beverage Plan provides for a maximum of 150,000 shares of Snapple Beverage
Common Stock to be issued upon the exercise of stock options and there remain
2,050 shares available for future grants under the Snapple Beverage Plan as of
January 2, 2000 and April 2, 2000. A summary of changes in outstanding stock
options under the Snapple Beverage Plan is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS OPTION PRICE OPTION PRICE
------- ------------ ------------
<S> <C> <C> <C>
Granted during 1997...................... 76,250 $147.30 $147.30
--------
Outstanding at December 28, 1997......... 76,250 $147.30 $147.30
Granted during 1998...................... 72,175 $191.00 $191.00
Terminated during 1998................... (3,000) $147.30 $147.30
--------
Outstanding at January 3, 1999........... 145,425 $147.30 and $191.00 $168.99
Changes in options relating to equitable
adjustments of option prices during
1999 discussed below:
Cancellation......................... (144,675) $147.30 and $191.00 $169.10
Reissuance........................... 144,675 $107.05 and $138.83 $122.90
Granted during 1999...................... 4,850 $311.99 $311.99
Exercised during 1999.................... (500) $107.05 $107.05
Terminated during 1999................... (2,325) $107.05 - $311.99 $170.72
--------
Outstanding at January 2, 2000 and
April 2, 2000.......................... 147,450 $107.05 - $311.99 $128.55
--------
--------
Exercisable at January 2, 2000 and
April 2, 2000.......................... 47,723 $107.05 and $138.83 $123.07
--------
--------
</TABLE>
Stock options are granted at fair value at the date of grant as determined
by independent appraisals. The weighted average grant date fair value of the
options granted during 1997 and 1998 was
F-25
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
$50.75 and $60.01, respectively. The weighted average grant date fair value of
the options granted during 1999 was $222.69 for the 144,675 reissued options and
$102.75 for the 4,850 granted options. Stock options have maximum terms of ten
years and generally vest ratably over periods approximating three years.
However, the options reissued (see below) in 1999 vest or vested ratably on July
1 of 1999, 2000 and 2001.
The following table sets forth information relating to stock options
outstanding and exercisable at January 2, 2000 and April 2, 2000:
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING
------------------------------------------------------------ STOCK OPTIONS
WEIGHTED AVERAGE EXERCISABLE AND
OUTSTANDING AT YEARS REMAINING AT OUTSTANDING AT
YEAR-END 1999 ---------------------- YEAR-END 1999
OPTION AND APRIL 2, YEAR-END APRIL 2, AND APRIL 2,
PRICE 2000 1999 2000 2000
----- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$107.05 71,000 7.6 7.4 23,667
$138.83 72,175 8.5 8.2 24,056
$311.99 4,275 9.4 9.2 --
------- ------
147,450 8.1 7.8 47,723
------- ------
------- ------
</TABLE>
The Snapple Beverage Plan provides for an equitable adjustment of options in
the event of a recapitalization or similar event. The exercise prices of the
options granted in 1997 and 1998 were equitably adjusted in 1999 to adjust for
the effects of net distributions of $91,342,000, principally consisting of
transfers of cash and deferred tax assets from Snapple Beverage Group to Triarc,
partially offset by the effect of the contribution of Stewart's to Snapple
Beverage Group effective May 17, 1999. The exercise prices of the options
granted in 1997 and 1998 were equitably adjusted 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 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 Snapple Beverage
Common Stock received upon the exercise of the stock options or (2) the
consummation of an initial public offering of Snapple Beverage Common Stock
(collectively, the 'Cash Payment Events'). 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. As disclosed in Note 1, the Company
accounts for stock options in accordance with the intrinsic value method. In
accordance therewith, the equitable adjustment, exclusive of the Cash Payment,
is considered a modification to the terms of existing options. For purposes of
disclosure, including the determination of the pro forma compensation expense
set forth below, the equitable adjustment is reflected in accordance with the
fair value method whereby it results in the deemed cancellation of existing
options and the reissuance of new options. See Note 10 for disclosure of the
compensation expense being recognized ratably over the vesting period of the
stock options for such cash to be paid. No compensation expense 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.
In 1995 the Company granted the syndicated lending bank in connection with a
former bank facility of Mistic and two senior officers of Mistic stock
appreciation rights (the 'Mistic Rights') for the equivalent of 3% and 9.7%,
respectively, of Mistic's outstanding common stock plus the equivalent shares
represented by such stock appreciation rights. The Mistic Rights granted to the
syndicating lending bank were immediately vested and of those granted to the
senior officers, one-third vested over time and two-thirds vested depending on
Mistic's performance. The Mistic Rights provided for appreciation in the
per-share value of Mistic common stock above a base price of $28,637 per share,
which was equal to the price per share paid by Triarc at the time of the Mistic
acquisition in 1995. The value of the Mistic Rights granted to the syndicating
lending bank was recorded as deferred financing
F-26
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
costs. The Company recognized periodically the estimated increase or decrease in
the value of the Mistic Rights; such amounts were not significant to the
Company's consolidated results of operations in 1997. In connection with the
refinancing of the former Mistic bank facility in May 1997, the Mistic Rights
granted to the syndicating lending bank were repurchased by the Company for
$492,000; the $177,000 excess of such cost over the then recorded value of such
rights of $315,000 was recorded as 'Interest expense' during 1997. In addition,
the Mistic Rights granted to the two senior officers were canceled in 1997 in
consideration for, among other things, their participation in the Snapple
Beverage Plan. Since the estimated per-share value of the Mistic common stock at
the time of such cancellation was lower than the base price of the Mistic
Rights, no income or expense was required to be recorded as a result of such
cancellation.
The Company has not recognized any compensation expense for the stock
options granted since it accounts for stock options in accordance with the
intrinsic value method. Had compensation cost for such option grants, including
those options granted to employees of Triarc and affiliates, been determined in
accordance with the fair value method, the Company's pro forma net income (loss)
for 1997, 1998, 1999 and the quarter ended April 2, 2000 would have been
$(22,264,000), $28,277,000, $9,568,000 and $234,000, respectively. Such pro
forma net income (loss) adjusts the net income (loss) as set forth in the
accompanying consolidated statements of operations to reflect (1) compensation
expense for all stock option grants, including those options reissued in 1999 as
a result of equitable adjustments of option prices, based on the fair value
method and (2) the income tax effects thereof. The fair values of stock options
granted on the date of grant were estimated using the Black-Scholes option
pricing model with the following weighted average assumptions: (1) risk-free
interest rate of 6.22%, 5.54% and 5.69% for the 1997, 1998 and 1999 grants,
respectively, (2) expected option life of 7 years, 7 years and 5.7 years,
respectively, and (3) dividends would not be paid. Since the Snapple Beverage
Common Stock is not publicly traded, volatility was not applicable. The weighted
average expected option life of 5.7 years for the 1999 grants has been adjusted
to reflect the remaining expected life of the 144,675 reissued options for which
the original vesting dates were not changed. The above 1999 pro forma amounts
may not be representative of the effects on net income in 2000 because of the
combined effect of there being no option grants prior to 1997 when the plan was
adopted and the approximate three-year vesting period.
(10) CAPITAL STRUCTURE REORGANIZATION RELATED CHARGES
As disclosed in Note 9, the Company must make cash payments of $51.34 and
$39.40 per share for stock options granted in 1997 and 1998, respectively, upon
the Cash Payment Events. The capital structure reorganization related charge of
$3,348,000 in 1999 represents the vested portion as of January 2, 2000 of the
aggregate maximum $4,076,000 Cash Payments to be paid by the Company to its
employees who are option holders and recognized over the full vesting period
assuming all remaining outstanding stock options either have vested or will
become vested, net of credits for forfeitures of non-vested stock options of
terminated employees. The $204,000 charge in the three months ended April 2,
2000 represents the portion of the Cash Payments to be paid by the Company to
the extent of the vesting of options during such quarter.
F-27
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(11) CHARGES (CREDIT) RELATED TO POST-ACQUISITION TRANSITION, INTEGRATION AND
CHANGES TO BUSINESS STRATEGIES
The 1997 charges related to post-acquisition transition, integration and
changes to business strategies are attributed to the Snapple Acquisition and the
Stewart's Acquisition during 1997 and consisted of the following (in thousands):
<TABLE>
<S> <C>
Non-cash charges:
Write down glass front vending machines based on the
Company's change in estimate of their value
considering the Company's plans for their future
use(a)................................................ $12,557
Provide additional reserves for doubtful accounts
related to Snapple ($2,254) and the effect of the
Snapple Acquisition ($975) on collectibility of a
receivable from MetBev, Inc., an affiliate, based on
the Company's change in estimate of the related
write-off to be incurred(b)........................... 3,229
Cash obligations:
Provide additional reserves for legal matters based on
the Company's change in Quaker's estimate of the
amounts required reflecting the Company's plans and
estimates of costs to resolve such matters(c)......... 6,697
Provide for certain costs in connection with the
successful consummation of the Snapple Acquisition and
the Mistic refinancing in connection with entering
into the Former Beverage Credit Agreement(d).......... 4,000
Provide for fees paid to Quaker pursuant to a transition
services agreement(e)................................. 2,819
Provide for the portion of promotional expenses relating
to the period of 1997 prior to the Snapple Acquisition
as a result of the Company's then current operating
expectations(f)....................................... 2,510
Provide for costs, principally for independent
consultants, incurred in connection with the
conversion of Snapple to the Company's operating and
financial information systems(g)...................... 1,603
Sign-on bonus related to the Stewart's Acquisition...... 400
-------
$33,815
-------
-------
</TABLE>
---------
(a) During Quaker's ownership of Snapple, the glass front vending machines were
held for sale to distributors and, accordingly, were carried at their
estimated net realizable value. During the business transition following
the Snapple Acquisition, the Company became aware that these machines were
frequently unreliable in the field. The Company made the decision to
correct the mechanical defects in the machines and to allow distributors to
use the machines at locations chosen by them, without the cost of
purchasing them. By deciding to no longer sell the glass front vending
machines, the Company will not recover from its customers the value of the
machines acquired in the Snapple Acquisition. Accordingly, because the
Company expects no specific identifiable future cash flows, in 1997 the
Company wrote off an amount representing the excess of the carrying value
of the machines over their estimated scrap value given the Company's
decision described above.
(b) In the transition following the Snapple Acquisition, the Company decided
that, in order to improve relationships with customers, it would not
actively seek to collect certain past due balances, disputed amounts or
amounts that were not sufficiently supportable, and provided additional
reserves for doubtful accounts of $2,254,000. The Company's soft drink
concentrate segment sold finished products through MetBev, Inc. ('MetBev'),
a distributor in the New York metropolitan area in which the Company owns a
44.7% voting interest. Prior to the Snapple Acquisition, the MetBev
business was sold to a competitor of Snapple. When the Company acquired
Snapple, it recognized that its efforts to rebuild Snapple would have a
severe competitive effect on the acquiror
(footnotes continued on next page)
F-28
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(footnotes continued from previous page)
of the MetBev business. The Company acquired Snapple with the intent that
Snapple would regain market share it had lost in the New York metropolitan
area. As a result of the Snapple Acquisition and the Company's business
strategy, the Company concluded that the remaining $975,000 receivable from
MetBev would more likely than not become uncollectible.
(c) In the transition following the Snapple Acquisition, the Company decided
that, in order to improve relationships with customers and reverse
Snapple's sales decline, it would attempt to settle as many of the legal
matters pending at the time of the Snapple Acquisition, in particular the
Rhode Island Beverages Matter described below, as quickly as possible.
Accordingly, the Company provided $6,697,000 representing the excess of the
Company's estimate to settle such claims over the existing reserves
established by Quaker as of the date of the Snapple Acquisition.
The Company, through its ownership of Snapple, owned 50% of the stock of
Rhode Island Beverage Packing Company, L.P. ('Rhode Island Beverages')
prior to its disposition in February 1998. Snapple and Quaker were
defendants in a breach of contract case filed in April 1997 by Rhode Island
Beverages prior to the Snapple Acquisition (the 'Rhode Island Beverages
Matter'). The Rhode Island Beverages Matter was settled in February 1998
and in accordance therewith the Company surrendered (1) its 50% investment
in Rhode Island Beverages ($550,000) and (2) certain properties
($1,202,000) and paid Rhode Island Beverages $8,230,000. The settlement
amounts were fully provided for in a combination of (1) $6,530,000 of the
$6,697,000 of legal reserves described above, (2) $3,321,000 of reserves
for losses in long-term production contracts established in the Snapple
Acquisition purchase accounting and (3) $131,000 of an accrual related to
the Rhode Island Beverages long-term production contract included in
historical liabilities at the date of the Snapple Acquisition (see
Note 3).
(d) In connection with the Snapple Acquisition and the related refinancing of
the debt of Mistic, Snapple and Mistic paid a $4,000,000 fee to Triarc on
May 22, 1997 in order to compensate Triarc for its recurring indirect costs
incurred while providing assistance in consummating these transactions.
(e) During the transition following the Snapple Acquisition, the Company paid
$2,819,000 to Quaker in return for Quaker providing certain operating and
accounting services for Snapple for a six-week period in accordance with
the terms of a transition services agreement. Quaker performed these
services while the Company transitioned the records, operations and
management to the Company and its systems.
(f) In the transition following the Snapple Acquisition, the Company decided
that, in order to improve relationships with customers, the Company would
not pursue collection of the many questionable claimed promotional credits
and recognized within 'Charges (credit) related to post-acquisition
transition, integration and changes to business strategies' the $2,510,000
of promotional costs in June 1997 which were in excess of the high end of
the range of the Company's expectations for promotional costs.
(g) In the transition following the Snapple Acquisition, the Company recognized
$1,603,000 of costs incurred to engage various consultants to help the
Company plan for the related systems and business procedure modifications
necessary in order to be able to manage the Snapple business.
As of December 28, 1997 all cash obligations had been liquidated other than
$6,697,000 of the additional reserves for legal matters, which were liquidated
during the year ended January 3, 1999.
The 1999 credit related to post-acquisition transition, integration and
changes to business strategies of $549,000 resulted from changes in the
estimated amount of the additional Snapple reserves for doubtful accounts
originally provided during 1997 (see (b) above). As of January 2, 2000, all of
the other additional reserves for doubtful accounts had been fully utilized to
write off related receivables.
F-29
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(12) FACILITIES RELOCATION AND CORPORATE RESTRUCTURING CHARGES (CREDITS)
The components of facilities relocation and corporate restructuring charges
(credits) in 1997 and 1999 and an analysis of related activity in the facilities
relocation and corporate restructuring accrual are as follows (in thousands):
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------------------------
BALANCE WRITE-OFF BALANCE
JANUARY 1, OF RELATED DECEMBER 28,
1997(a) PROVISION(b) PAYMENTS ASSETS ADJUSTMENTS(b) 1997
------- ------------ -------- ------ -------------- ----
<S> <C> <C> <C> <C> <C> <C>
Cash obligations:
Employee severance and related
termination costs associated with
The sale of all company-owned
restaurants..................... $-- $4,897 $(3,088) $-- $-- $1,809
The relocation of Royal Crown's
corporate headquarters.......... 2,028 500 (1,463) -- (1) 1,064
A Royal Crown plant closing....... 172 -- (173) -- 1 --
Other............................. -- 29 (29) -- -- --
Employee relocation costs associated
with
The sale of all company-owned
restaurants..................... -- 700 (327) -- -- 373
The relocation of Royal Crown's
corporate headquarters.......... -- 637 (894) -- -- (257)
Estimated costs related to the
sublease of excess office space
associated with
The sale of all company-owned
restaurants..................... 382 -- (140) -- (87) 155
The relocation of Royal Crown's
corporate headquarters.......... 110 -- -- -- -- 110
Estimated costs other than severance
of a Royal Crown plant closing...... 300 -- (128) -- (172) --
Non-cash charges:
Estimated write-off of equipment in
connection with a Royal Crown plant
closing............................. 150 -- -- (143) (7) --
Write-off of certain beverage
distribution rights................. -- 300 -- (300) -- --
------ ------ ------- ----- ----- ------
$3,142 $7,063 $(6,242) $(443) $(266) $3,254
------ ------ ------- ----- ----- ------
------ ------ ------- ----- ----- ------
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------------------------------
BALANCE BALANCE
DECEMBER 29, JANUARY 3,
1997 PAYMENTS ADJUSTMENTS(c) 1999
---- -------- -------------- ----
<S> <C> <C> <C> <C>
Cash obligations:
Employee severance and related termination costs
associated with
The sale of all company-owned restaurants...... $1,809 $(1,236) $-- $ 573
The relocation of Royal Crown's corporate
headquarters................................. 1,064 (601) -- 463
Employee relocation costs associated with
The sale of all company-owned restaurants...... 373 (24) (65) 284
The relocation of Royal Crown's corporate
headquarters................................. (257) -- -- (257)
Estimated costs related to the sublease of excess
office space associated with
The sale of all company-owned restaurants...... 155 (53) (102) --
The relocation of Royal Crown's corporate
headquarters................................. 110 -- -- 110
------ ------- ----- ------
$3,254 $(1,914) $(167) $1,173
------ ------- ----- ------
------ ------- ----- ------
</TABLE>
F-30
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<TABLE>
<CAPTION>
1999
-----------------------------------------------
BALANCE BALANCE
JANUARY 3, JANUARY 2,
1999 PAYMENTS CREDITS(d) 2000
---- -------- ---------- ----
<S> <C> <C> <C> <C>
Cash obligations:
Employee severance and related termination costs
associated with
The sale of all company-owned restaurants............. $ 573 $(457) $(116) $--
The relocation of Royal Crown's corporate
headquarters........................................ 463 (158) (305) --
Employee relocation costs associated with
The sale of all company-owned restaurants............. 284 (97) (187) --
The relocation of Royal Crown's corporate
headquarters........................................ (257) -- 257 --
Estimated costs related to the sublease of excess office
space associated with
The relocation of Royal Crown's corporate
headquarters........................................ 110 -- (110) --
------ ----- ----- ----
$1,173 $(712) $(461) $--
------ ----- ----- ----
------ ----- ----- ----
</TABLE>
---------
(a) The facilities relocation and corporate restructuring accrual as of January
1, 1997 resulted from the remaining balances from 1996 provisions and
consisted principally of (1) employee severance costs associated with the
1997 termination of 35 headquarters employees, principally in finance and
accounting, legal, marketing and human resources, in connection with the
relocation (the 'Royal Crown Relocation') of Royal Crown's corporate
headquarters which were centralized with Snapple Beverage Group's offices
in White Plains, New York and 5 operations employees at Royal Crown's Ohio
production facility which was shut down, (2) estimated losses on planned
subleases of surplus subsidiary headquarters and divisional office space
principally for rent and common area maintenance costs for the estimated
period the surplus space would remain unoccupied as a result of the then
planned sale of company-owned restaurants and the Royal Crown Relocation
and (3) the shutdown of Royal Crown's Ohio production facility (principally
for (a) an estimated $150,000 write-off of obsolete steel drums used to
send concentrate to bottlers and (b) estimated cash obligations principally
for an estimated $150,000 for refurbishing the plant and $50,000 for the
transfer of equipment to the Company's other soft drink concentrate plant).
(b) The 1997 facilities relocation and corporate restructuring charges
principally related to (1) employee severance and related termination costs
associated with restructuring the restaurant segment in connection with the
RTM Sale (see Note 3) and, to a much lesser extent, employee severance and
related termination costs of three additional Royal Crown headquarters
employees terminated in 1997, (2) employee relocation costs, which are
expensed as incurred, associated with the RTM Sale and the Royal Crown
Relocation and (3) the write-off of the remaining unamortized costs of
certain beverage distribution rights reacquired in prior years and no
longer being utilized by the Company as a result of the sale or liquidation
of the assets and liabilities of MetBev. The severance and termination
costs in the restaurant segment were as a result of the termination in 1997
of 54 employees principally in finance and accounting, owned restaurant
operations, marketing and human resources as well as the president and
chief executive officer of Arby's. Adjustments to the accrual for estimated
costs related to the sublease of excess office space which were associated
with the sale of company-owned restaurants resulted from subsequent
favorable lease negotiations with the landlord for the divisional office
space. Adjustments to the accrual for estimated costs of the Royal Crown
plant closing resulted from lower than expected actual costs associated
with the plant closing, specifically estimated costs for refurbishing the
plant, compared with the costs originally estimated.
(footnotes continued on next page)
F-31
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(footnotes continued from previous page)
(c) The 1998 adjustments principally relate to the sublease of excess office
space associated with the RTM Sale which resulted from subsequent favorable
lease negotiations with the landlord.
(d) The 1999 facilities relocation and corporate restructuring credits
principally relate to severance and related termination costs associated
with the Royal Crown Relocation and the RTM Sale. Such adjustments
aggregated $461,000 and resulted from relatively insignificant changes to
the original estimates used in determining the related provisions for
facilities relocation and corporate restructuring in 1996 and 1997 which
aggregated $14,863,000.
(13) GAIN (LOSS) ON SALE OF BUSINESSES, NET
The 'Gain (loss) on sale of businesses, net' as reflected in the
accompanying consolidated statements of operations was $(3,513,000), $5,016,000,
$(533,000) and $96,000 in 1997, 1998, 1999 and the three months ended April 2,
2000, respectively. The loss in 1997 consisted of $4,089,000 of loss from the
RTM Sale (see Note 3) less the $576,000 of recognized gain on the C&C Sale (see
Note 3). The gain in 1998 consisted of (1) $4,702,000 of gain from the sale of
Select Beverages, Inc. ('Select Beverages') (see below) and (2) $314,000 of
additional recognition of deferred gain from the C&C Sale. The loss in 1999
consisted of an $889,000 reduction to the gain from the sale of Select Beverages
recorded in 1998 (see below) less $356,000 of additional recognition of deferred
gain from the C&C Sale. The gain in the three-month period ended April 2, 2000
represents additional recognition of deferred gain from the C&C Sale.
The Company owned 20% of Select Beverages until its sale on May 1, 1998. On
May 1, 1998 the Company sold its interest in Select Beverages for $28,342,000,
subject to certain post-closing adjustments. The Company recognized a pre-tax
gain on the sale of Select Beverages during 1998 of $4,702,000, representing the
excess of the net sales price over the Company's carrying value of the
investment in Select Beverages and related estimated post-closing adjustments
and expenses. During 1999 the Company recorded an $889,000 reduction to the gain
from the sale of Select Beverages resulting from a post-closing adjustment to
the purchase price higher than the adjustment originally estimated in
determining the $4,702,000 gain recorded in 1998.
(14) OTHER INCOME, NET
Other income, net consisted of the following income (expense) components (in
thousands):
<TABLE>
<CAPTION>
FIRST
QUARTER
1997 1998 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income..................................... $1,671 $3,754 $5,340 $702
Gain on lease termination........................... 892 -- 651 202
Gain (loss) on sales of properties.................. 1,008 502 (202) (6)
Rental income....................................... 894 916 129 --
Equity in income (loss) of investees................ 862 (1,222) -- --
Other, net.......................................... 205 1,348 864 68
------ ------ ------ ----
$5,532 $5,298 $6,782 $966
------ ------ ------ ----
------ ------ ------ ----
</TABLE>
The equity in income (loss) of investees consists of the Company's equity in
the income or loss of Select Beverages (see Note 13) and amortization of the
excess of the Company's investment in Select Beverages over the underlying
equity in its net assets in 1998 of $341,000 through the May 1998 sale of Select
Beverages. The Company did not recognize any equity in the income of Rhode
Island Beverages prior to the Company's surrendering such investment in February
1998 since at the date of the Snapple Acquisition the investment in Rhode Island
Beverages, which was owned by Snapple, was expected to be surrendered in
connection with the settlement of the Rhode Island Beverages Matter (see Note
11).
F-32
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(15) EXTRAORDINARY CHARGES
The 1997 extraordinary charges resulted from the early extinguishment or
assumption of (1) the Mortgage Notes and Equipment Notes assumed by RTM in
connection with the RTM Sale (see Note 3) and (2) obligations under a former
bank facility of Mistic refinanced in connection with entering into the Former
Beverage Credit Agreement (see Note 5). The 1999 extraordinary charges resulted
from the early extinguishment of (1) obligations under the Former Beverage
Credit Agreement and (2) the 9 3/4% Senior Notes (see Note 5). The components of
such extraordinary charges were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1999
---- ----
<S> <C> <C>
Write-off of previously unamortized deferred financing
costs..................................................... $4,839 $10,792
Payment of redemption premium............................... -- 7,662
Write-off of previously unamortized interest rate cap
agreement costs........................................... -- 146
------ -------
4,839 18,600
Income tax benefit.......................................... 1,885 6,828
------ -------
$2,954 $11,772
------ -------
------ -------
</TABLE>
(16) RETIREMENT AND OTHER BENEFIT PLANS
On September 1, 1999 several of the Company's 401(k) defined contribution
plans (the 'Former Plans') merged into one existing 401(k) defined contribution
plan of Triarc (the 'Plan' and, collectively with the Former Plans, the 'Plans')
in which the Company was also participating. The Plans cover or covered all of
the Company's employees, upon the addition of Stewart's employees on May 1,
1998, who meet certain minimum requirements and elect to participate, excluding
a limited number of employees working under certain union contracts. Under the
provisions of the Plans, employees may contribute various percentages of their
compensation ranging up to a maximum of 15%, subject to certain limitations.
Effective September 1, 1999 the Plan provides for Company matching contributions
at 50% of employee contributions up to the first 6% thereof. Prior thereto, the
Plans provided for Company matching contributions at either (1) 50% of employee
contributions up to the first 5% thereof or (2) 100% of employee contributions
up to the first 3% thereof. In addition, the Plans provide or provided for
annual Company profit-sharing contributions of a discretionary aggregate amount
to be determined by the employer. In connection with both of these employer
contributions, the Company provided as compensation expense $1,181,000,
$1,470,000, $1,756,000 and $542,000 in 1997, 1998, 1999 and the three months
ended April 2, 2000, respectively.
The Company maintains a defined benefit plan for eligible employees through
December 31, 1988 of certain subsidiaries, benefits under which were frozen in
1992. The net periodic pension cost for 1997, 1998, 1999 and the three months
ended April 2, 2000, as well as the accrued pension cost as of January 3, 1999,
January 2, 2000 and April 2, 2000, were insignificant.
The Company maintains unfunded postretirement medical and death benefit
plans for a limited number of retired employees of certain subsidiaries who have
provided certain minimum years of service. The medical benefits are principally
contributory while death benefits are noncontributory. The net postretirement
benefit cost for 1997, 1998, 1999 and the three months ended April 2, 2000, as
well as the accumulated postretirement benefit obligation as of January 3, 1999,
January 2, 2000 and April 2, 2000, were insignificant.
Triarc has granted stock options to purchase Class A common stock of Triarc
(the 'Triarc Common Stock') to certain key employees of the Company under
several equity plans of Triarc. Such options include 610,000 granted at exercise
prices below the fair market values of the Triarc Common Stock at the dates of
grant. Compensation expense for the excess of the fair market values at the date
of grant
F-33
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
over the exercise prices is being recognized over the applicable vesting period.
Reversals of prior charges resulting from forfeitures of certain of these
options in connection with employee terminations (the 'Forfeiture Adjustments')
reduce compensation expense. Such compensation expense, which is charged to the
Company rather than Triarc since the key employees who were granted the options
provide services to the Company and not to Triarc, aggregated $144,000 (net of
$325,000 of Forfeiture Adjustments), $287,000 (net of $14,000 of Forfeiture
Adjustments), $88,000 (net of $17,000 of Forfeiture Adjustments) and $12,000
(net of $6,000 of Forfeiture Adjustments) for 1997, 1998, 1999 and the three
months ended April 2, 2000, respectively, and is included in 'General and
administrative' in the accompanying consolidated statements of operations. As of
January 2, 2000 there remained $18,000 to be recognized as compensation expense
in the first quarter of 2000 when the remaining outstanding below market stock
options became fully vested.
(17) LEASE COMMITMENTS
The Company leases buildings and machinery and equipment. Prior to the RTM
Sale, some leases provided for contingent rentals based upon sales volume. In
connection with the RTM Sale in May 1997, substantially all operating and
capitalized lease obligations associated with the sold restaurants were assumed
by RTM (see Note 3), although the Company remains contingently liable if the
future lease payments (which could potentially aggregate a maximum of
approximately $89,000,000 and $87,000,000 as of January 2, 2000 and April 2,
2000, respectively, assuming RTM has made all scheduled payments to date under
such lease obligations) are not made by RTM.
Rental expense under operating leases consisted of the following components
(in thousands):
<TABLE>
<CAPTION>
FIRST
QUARTER
1997 1998 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Minimum rentals.................................... $14,952 $7,463 $6,729 $1,750
Contingent rentals................................. 204 -- -- --
------- ------ ------ ------
15,156 7,463 6,729 1,750
Less sublease income............................... 6,027 4,354 2,986 832
------- ------ ------ ------
$ 9,129 $3,109 $3,743 $ 918
------- ------ ------ ------
------- ------ ------ ------
</TABLE>
The Company's future minimum rental payments, excluding the aforementioned
lease obligations assumed by RTM, and sublease rental income for leases having
an initial lease term in excess of one year as of January 2, 2000 and April 2,
2000, respectively, are as follows (in thousands):
<TABLE>
<CAPTION>
RENTAL PAYMENTS SUBLEASE
----------------------- INCOME-
CAPITALIZED OPERATING OPERATING
FISCAL YEAR LEASES LEASES LEASES
----------- ------ ------ ------
<S> <C> <C> <C>
2000.................................................. $ 53 $ 7,832 $ 3,168
2001.................................................. 46 7,763 2,809
2002.................................................. 19 6,504 2,052
2003.................................................. 15 6,489 1,804
2004.................................................. 12 5,262 1,781
Thereafter............................................ 10 24,167 3,781
---- ------- -------
Total minimum payments............................ 155 $58,017 $15,395
------- -------
------- -------
Less interest......................................... 27
----
Present value of minimum capitalized lease payments... $128
----
----
</TABLE>
F-34
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<TABLE>
<CAPTION>
RENTAL PAYMENTS SUBLEASE
----------------------- INCOME-
TWELVE CAPITALIZED OPERATING OPERATING
MONTHS ENDED LEASES LEASES LEASES
------------ ------ ------ ------
<S> <C> <C> <C>
April 1, 2001......................................... $ 48 $ 7,749 $ 2,945
March 31, 2002........................................ 39 7,723 2,560
March 30, 2003........................................ 19 6,672 1,838
March 28, 2004........................................ 14 6,513 1,745
April 3, 2005......................................... 11 4,882 1,497
Thereafter............................................ 9 22,987 3,593
---- ------- -------
Total minimum payments............................ 140 $56,526 $14,178
------- -------
------- -------
Less interest......................................... 24
----
Present value of minimum capitalized lease payments... $116
----
----
</TABLE>
The present value of minimum capitalized lease payments is included, as
applicable, with 'Long-term debt' or 'Current portion of long-term debt' in the
accompanying consolidated balance sheets.
(18) TRANSACTIONS WITH RELATED PARTIES
The following is a summary of transactions between the Company and its
related parties (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
APRIL 2,
1997 1998 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Purchases of raw materials from
Triarc(a)............................... $17,159 $123,014 $153,930 $32,189
Costs allocated to the Company by Triarc
under management services
agreements(b)........................... 9,417 10,500 10,656 2,696
Capital contribution of Redeemable
Preferred Stock (Note 8)................ -- -- 88,779 --
Other capital contributions(c)............ 30,015 -- 12,056 1,600
Compensation costs charged to the Company
by Triarc for below market stock options
(Note 16)............................... 144 287 88 12
Cash dividends paid to Triarc (Note 5).... -- 23,556 204,746 --
Transfer of deferred income tax benefits
to Triarc as if it were a distribution
(Note 7)................................ -- -- 32,719 --
Dividend of receivable from Triarc(d)..... -- -- 4,954 --
Sale of promissory notes to Triarc(e)..... -- -- 2,000 --
Cumulative dividends on the Redeemable
Preferred Stock recorded but not
declared or paid (Note 8)............... 4,604 7,983 1,192 --
Interest income on notes receivable from
Triarc(f)............................... 230 118 -- --
Interest expense on notes payable to:
Chesapeake Insurance Company
Limited(g).......................... 130 27 -- --
Triarc(g)............................. 1,278 12 -- --
Issuance of Redeemable Preferred Stock
(Note 8)................................ 75,000 -- -- --
Repurchase of $720 principal amount of
promissory notes due from franchisees
from SEPSCO, LLC, a subsidiary of
Triarc, at fair value................... 690 -- -- --
Payments to Triarc for usage of
aircraft................................ 32 -- -- --
</TABLE>
(footnotes on next page)
F-35
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(footnotes from previous page)
(a) The Company purchases certain raw materials from Triarc at Triarc's
purchase cost from unaffiliated third-party suppliers. At January 3, 1999,
January 2, 2000 and April 2, 2000, $18,618,000, $21,543,000 and
$21,639,000, respectively, for amounts owed for such purchases were
included in 'Due to Triarc Companies, Inc.' in the accompanying
consolidated balance sheets.
(b) The Company receives from Triarc certain management services, including
legal, accounting, tax, insurance, financial and other management services,
under management services agreements. Until February 25, 1999 such costs
were allocated to the Company by Triarc based upon the pro rata share of
the sum of the greater of income before income taxes, depreciation and
amortization and 10% of revenues for each of the Company's principal
operating subsidiaries to the aggregate for all of Triarc's principal
operating subsidiaries, except that such costs paid by Mistic through May
22, 1997 were limited to amounts permitted under a former Mistic bank
facility and such costs paid by Mistic and Snapple commencing May 22, 1997
and Stewart's commencing August 15, 1998 were limited to amounts permitted
under the Former Beverage Credit Agreement. In connection with the
Refinancing Transactions, on February 25, 1999 the Company entered into two
(one each with respect to the combined beverage businesses of Triarc
Consumer Products Group (the 'Triarc Beverage Group') and Arby's) amended
management services agreements with Triarc. The agreements provide for
annual fixed fees of $6,700,000 for Triarc Beverage Group and $3,800,000
for Arby's plus, commencing January 1, 2000, annual cost of living
adjustments. As of January 1, 2000 the fixed fees increased to $6,881,000
for Triarc Beverage Group and $3,903,000 for Arby's. Management of the
Company believes that such allocation method through February 25, 1999 was
reasonable. Further, management of the Company believes that such
allocations or charges, as applicable, approximate the costs that would
have been incurred by the Company on a stand alone basis.
(c) In 1997 Mistic was prohibited from paying $625,000 of management services
fees described in (b) above under the terms of its former bank facility
and, accordingly, such amount was accounted for as a capital contribution
from Triarc in 1997. In May 1997, in connection with the RTM Sale, ARHC and
AROC issued 950 of each of their common shares (approximately 49% of the
common stock after such issuances) to Triarc in exchange for aggregate
consideration of $31,999,000 consisting of cash of $6,211,000 and
forgiveness of the then outstanding principal amount of $23,150,000, plus
related accrued interest of $2,638,000, under a note payable by the Company
to Triarc as of May 5, 1997. Triarc's 49% minority interest in the equity
of ARHC and AROC, amounting to $2,472,000 as of January 3, 1999, is
included in 'Deferred income and other liabilities' in the accompanying
consolidated balance sheet as of that date. The excess of $29,390,000 of
the consideration for the stock issued to Triarc of $31,999,000 over such
minority interest of $2,609,000 as of May 5, 1997 was credited to
'Contributed capital'. The 49% minority interest in the losses of ARHC and
AROC for the period from May 5, 1997 through December 28, 1997, the year
ended January 3, 1999 and the period from January 4 through February 24,
1999 aggregated $38,000, $99,000 and $24,000, respectively, and is included
as income in 'Other income, net' in the accompanying consolidated
statements of operations. On February 24, 1999 the Company received each of
the 49% interests in ARHC and AROC previously owned by Triarc as a capital
contribution. Such contribution was valued at Triarc's carrying value of
such investments at the date of the contribution of $2,448,000. Also on
February 24, 1999 a payable to Triarc of $7,765,000 was forgiven as a
capital contribution to the Company. Also during 1999 financing costs of
$1,843,000 paid by Triarc on behalf of the Company in connection with the
Refinancing Transactions were transferred to the Company as a capital
contribution from Triarc. As discussed in Note 3, during the three months
ended April 2, 2000, Triarc made a $1,600,000 non-cash capital contribution
to the Company consisting of the assets of California Beverage.
(footnotes continued on next page)
F-36
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(footnotes continued from previous page)
(d) On March 30, 1999 the Company paid a non-cash dividend to Triarc
representing $4,954,000 of amounts due from Triarc.
(e) In February 1999 the Company sold to Triarc for cash of $2,000,000 (1) an
aggregate $1,950,000 principal amount (original discounted value of
$1,329,000) of promissory notes receivable and (2) options to acquire up to
20% of the common stock of the companies which purchased the restaurants,
both of which the Company had received as a portion of the proceeds of the
RTM Sale. The options were not assigned any value when they were acquired.
Subsequently, Triarc sold the promissory notes and options to an affiliate
of the purchasers of the company-owned restaurants for the same $2,000,000
amount it had paid the Company. Accordingly, the $307,000 excess of the
$2,000,000 of proceeds over the $1,693,000 carrying value of the promissory
notes was recorded as 'Other income, net.'
(f) The Company earned interest income at 11 7/8% on cash advances made to
Triarc under a promissory note receivable.
(g) The Company incurred interest expense at 9 1/2% and 11 7/8% under
promissory notes payable to Chesapeake Insurance Company Limited, a
subsidiary of Triarc until its sale in December 1998, and Triarc,
respectively.
Certain officers and directors of the Company are also officers and
directors of Triarc. See also Notes 3, 5, 8, 9, 11 and 16 with respect to
other transactions with related parties.
(19) 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 $1,947,000 and $1,714,000 as of January 2,
2000 and April 2, 2000, respectively. 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 and environmental matters will have a material adverse effect on its
consolidated financial position or results of operations.
(20) BUSINESS SEGMENTS
The Company manages and internally reports its operations by business
segments which are: premium beverages, soft drink concentrates and restaurant
franchising (see Note 2 for a description of each segment). The premium beverage
segment consists of Mistic and the operations acquired in (1) the Snapple
Acquisition (see Note 3) commencing May 22, 1997 and (2) the Stewart's
Acquisition (see Note 3) commencing November 25, 1997.
The Company evaluates segment performance and allocates resources based on
each segment's earnings before interest, taxes, depreciation and amortization
('EBITDA'). Information concerning the segments in which the Company operates is
shown in the table below. EBITDA has been computed as operating profit (loss)
plus depreciation and amortization. Operating profit (loss) has been computed as
revenues less operating expenses. In computing EBITDA and operating profit or
loss, interest expense and non-operating income and expenses have not been
considered. EBITDA and operating loss for 1997 reflect (1) $33,815,000 of
charges related to post-acquisition transition, integration and changes to
business strategies for the premium beverage segment (see Note 11) and (2)
$7,063,000 of facilities relocation and corporate restructuring charges (see
Note 12), of which $29,000 relates to the premium beverage segment, $1,437,000
relates to the soft drink concentrate segment and $5,597,000 relates to the
restaurant franchising segment. Identifiable assets by segment are those assets
that are used in the Company's operations in each segment. General corporate
assets consist primarily of cash and cash equivalents, deferred financing costs
and, in 1997, deferred income tax benefit (principally resulting from net
operating loss carryforwards of RC/Arby's parent company).
F-37
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
The products and services in each of the Company's segments are relatively
homogeneous and, as such, revenues by product and service have not been
reported. The Company's operations are principally in the United States with
foreign operations representing less than 3% of revenues in 1997, 1998, 1999 and
the three months ended April 2, 2000. Accordingly, revenues and assets by
geographical area have not been presented since they are insignificant. In
addition, no customer accounted for more than 7% of consolidated revenues in
1997, 1998, 1999 or the three months ended April 2, 2000.
The following is a summary of the Company's segment information for 1997,
1998, 1999 and the three months ended April 2, 2000 or, in the case of
identifiable assets, as of the end of such periods.
<TABLE>
<CAPTION>
FIRST
QUARTER
1997 1998 1999 2000
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Premium beverages....................... $408,841 $611,545 $651,076 $140,631
Soft drink concentrates................. 146,882 124,868 121,110 29,994
Restaurant franchising.................. 140,429 78,623 81,786 19,393
-------- -------- -------- --------
Consolidated revenues............... $696,152 $815,036 $853,972 $190,018
-------- -------- -------- --------
-------- -------- -------- --------
EBITDA:
Premium beverages....................... $ 7,561 $ 77,825 $ 79,545 $ 13,851
Soft drink concentrates................. 18,504 17,006 21,108 5,401
Restaurant franchising.................. 31,200 43,180 48,998 10,210
General corporate....................... (149) (11) (85) (17)
-------- -------- -------- --------
Consolidated EBITDA................. 57,116 138,000 149,566 29,445
-------- -------- -------- --------
Less depreciation and amortization:
Premium beverages....................... 16,236 21,665 22,907 6,284
Soft drink concentrates................. 6,340 8,640 6,985 1,500
Restaurant franchising.................. 2,668 2,503 2,168 539
-------- -------- -------- --------
Consolidated depreciation and
amortization...................... 25,244 32,808 32,060 8,323
-------- -------- -------- --------
Operating profit (loss):
Premium beverages....................... (8,675) 56,160 56,638 7,567
Soft drink concentrates................. 12,164 8,366 14,123 3,901
Restaurant franchising.................. 28,532 40,677 46,830 9,671
General corporate....................... (149) (11) (85) (17)
-------- -------- -------- --------
Consolidated operating profit....... 31,872 105,192 117,506 21,122
Interest expense............................ (58,019) (60,235) (76,605) (20,733)
Gain (loss) on sale of businesses, net...... (3,513) 5,016 (533) 96
Other income, net........................... 5,532 5,298 6,782 966
-------- -------- -------- --------
Consolidated income (loss) before
income taxes and extraordinary
charges........................... $(24,128) $ 55,271 $ 47,150 $ 1,451
-------- -------- -------- --------
-------- -------- -------- --------
Identifiable assets:
Premium beverages....................... $586,731 $535,565 $570,813 $581,912
Soft drink concentrates................. 194,603 171,647 175,175 174,824
Restaurant franchising.................. 53,759 52,267 46,116 46,016
-------- -------- -------- --------
Total identifiable assets........... 835,093 759,479 792,104 802,752
General corporate assets................ 18,868 31,491 36,111 18,551
-------- -------- -------- --------
Consolidated identifiable assets.... $853,961 $790,970 $828,215 $821,303
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
F-38
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(21) CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following consolidating financial statements of the Company depict, in
separate columns, the parent companies of each of the issuers of the Notes
(Triarc Consumer Products Group and Snapple Beverage Group -- 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.
F-39
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
CONDENSED CONSOLIDATING BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 3, 1999
-----------------------------------------------------------------
PARENT NON-
COMPANIES GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ 1 $ 71,335 $ 1,456 $ -- $ 72,792
Receivables...................... -- 64,260 612 -- 64,872
Inventories...................... -- 45,446 1,315 -- 46,761
Deferred income tax benefit...... -- 18,934 -- -- 18,934
Prepaid expenses and other
current assets................. -- 7,281 26 -- 7,307
--------- --------- ------- --------- ---------
Total current assets......... 1 207,256 3,409 -- 210,666
Investment in subsidiaries........... 42,865 9,901 -- (52,766) --
Intercompany receivables............. -- 1,077 6,067 (7,144) --
Properties........................... -- 21,543 3,777 -- 25,320
Unamortized costs in excess of net
assets of acquired companies....... -- 268,215 -- -- 268,215
Trademarks........................... -- 261,906 -- -- 261,906
Other intangible assets.............. -- 959 -- -- 959
Deferred costs and other assets...... -- 23,892 12 -- 23,904
--------- --------- ------- --------- ---------
$ 42,866 $ 794,749 $13,265 $ (59,910) $ 790,970
--------- --------- ------- --------- ---------
--------- --------- ------- --------- ---------
LIABILITIES AND MEMBER'S/STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term
debt........................... $ -- $ 9,678 $ -- $ -- $ 9,678
Accounts payable................. -- 36,463 530 -- 36,993
Accrued expenses................. -- 79,724 1,724 -- 81,448
Due to Triarc Companies, Inc..... -- 29,082 -- -- 29,082
--------- --------- ------- --------- ---------
Total current liabilities.... -- 154,947 2,254 -- 157,201
Long-term debt....................... -- 560,977 -- -- 560,977
Intercompany payables................ -- 6,067 1,077 (7,144) --
Deferred income taxes................ -- 9,140 33 -- 9,173
Deferred income and other
liabilities........................ -- 20,753 -- -- 20,753
Redeemable preferred stock........... 87,587 -- -- -- 87,587
Member's/stockholders' equity
(deficit):
Common stock..................... -- 4 526 (530) --
Contributed/additional paid-in
capital........................ 106,269 197,886 9,533 (207,419) 106,269
Retained earnings (accumulated
deficit)....................... (150,732) (154,767) 168 154,599 (150,732)
Accumulated other comprehensive
deficit........................ (258) (258) (326) 584 (258)
--------- --------- ------- --------- ---------
Total member's/stockholders'
equity (deficit)........... (44,721) 42,865 9,901 (52,766) (44,721)
--------- --------- ------- --------- ---------
$ 42,866 $ 794,749 $13,265 $ (59,910) $ 790,970
--------- --------- ------- --------- ---------
--------- --------- ------- --------- ---------
</TABLE>
F-40
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<TABLE>
<CAPTION>
JANUARY 2, 2000
-----------------------------------------------------------------
PARENT NON-
COMPANIES GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ 104 $ 58,779 $ 1,290 $ -- $ 60,173
Receivables...................... -- 76,415 1,061 -- 77,476
Inventories...................... -- 60,033 1,703 -- 61,736
Deferred income tax benefit...... -- 16,422 -- -- 16,422
Prepaid expenses and other
current assets................. -- 6,344 18 -- 6,362
--------- --------- ------- --------- ---------
Total current assets......... 104 217,993 4,072 -- 222,169
Investment in subsidiaries........... -- 11,032 -- (11,032) --
Intercompany receivables............. 7,549 5,033 7,244 (19,826) --
Properties........................... -- 21,540 3,721 -- 25,261
Note receivable from RC/Arby's....... 300,000 (300,000) -- -- --
Unamortized costs in excess of net
assets of acquired companies....... -- 261,666 -- -- 261,666
Trademarks........................... -- 251,117 -- -- 251,117
Other intangible assets.............. -- 31,511 -- -- 31,511
Deferred costs and other assets...... 12,368 24,110 13 36,491
--------- --------- ------- --------- ---------
$ 320,021 $ 524,002 $15,050 $ (30,858) $ 828,215
--------- --------- ------- --------- ---------
--------- --------- ------- --------- ---------
LIABILITIES AND MEMBER'S/STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term
debt........................... $ -- $ 41,894 $ -- $ -- $ 41,894
Accounts payable................. 45 34,779 573 -- 35,397
Accrued expenses................. 12,368 75,473 2,732 -- 90,573
Due to Triarc Companies, Inc..... 72 22,519 -- -- 22,591
--------- --------- ------- --------- ---------
Total current liabilities.... 12,485 174,665 3,305 -- 190,455
Long-term debt....................... 300,000 436,866 -- -- 736,866
Intercompany payables................ 4,357 14,793 676 (19,826) --
Accumulated reductions in
stockholders' equity of
subsidiaries in excess of
investments........................ 177,010 -- -- (177,010) --
Deferred income taxes................ -- 56,643 37 -- 56,680
Deferred income and other
liabilities........................ 54 18,045 -- -- 18,099
Member's/stockholders' equity
(deficit):
Common stock..................... -- 4 526 (530) --
Contributed/additional paid-in
capital........................ -- 43,744 9,533 (53,277) --
Retained earnings (accumulated
deficit)....................... (173,533) (220,406) 1,315 219,091 (173,533)
Accumulated other comprehensive
deficit........................ (352) (352) (342) 694 (352)
--------- --------- ------- --------- ---------
Total member's/stockholders'
equity (deficit)........... (173,885) (177,010) 11,032 165,978 (173,885)
--------- --------- ------- --------- ---------
$ 320,021 $ 524,002 $15,050 $ (30,858) $ 828,215
--------- --------- ------- --------- ---------
--------- --------- ------- --------- ---------
</TABLE>
F-41
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<TABLE>
<CAPTION>
APRIL 2, 2000
-----------------------------------------------------------------
PARENT NON-
COMPANIES GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
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>
F-42
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 28, 1997
-----------------------------------------------------------------
PARENT NON-
COMPANIES GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales......................... $ -- $614,516 $15,105 $-- $629,621
Royalties, franchise fees and
other revenues.................. -- 66,556 (25) -- 66,531
-------- -------- ------- ------- --------
-- 681,072 15,080 -- 696,152
-------- -------- ------- ------- --------
Costs and expenses:
Cost of sales, excluding
depreciation and amortization... -- 322,597 8,794 -- 331,391
Advertising, selling and
distribution.................... -- 178,882 4,339 -- 183,221
General and administrative........ -- 81,060 2,486 -- 83,546
Depreciation and amortization,
excluding amortization of
deferred financing costs........ -- 25,219 25 -- 25,244
Charges related to
post-acquisition transition,
integration and changes to
business strategies............. -- 33,815 -- -- 33,815
Facilities relocation and
corporate restructuring
charges......................... -- 7,063 -- -- 7,063
-------- -------- ------- ------- --------
-- 648,636 15,644 -- 664,280
-------- -------- ------- ------- --------
Operating profit (loss)....... -- 32,436 (564) -- 31,872
Interest expense...................... -- (58,019) -- -- (58,019)
Loss on sale of businesses, net....... -- (3,493) (20) -- (3,513)
Other income, net..................... -- 4,244 1,288 -- 5,532
Equity in income (losses) of
subsidiaries before extraordinary
charge.............................. (18,986) 292 -- 18,694 --
-------- -------- ------- ------- --------
Income (loss) before income
taxes and extraordinary
charge...................... (18,986) (24,540) 704 18,694 (24,128)
Benefit from (provision for) income
taxes............................... -- 5,554 (412) -- 5,142
-------- -------- ------- ------- --------
Income (loss) before
extraordinary charge........ (18,986) (18,986) 292 18,694 (18,986)
Extraordinary charge.................. (2,954) (2,954) -- 2,954 (2,954)
-------- -------- ------- ------- --------
Net income (loss)............. $(21,940) $(21,940) $ 292 $21,648 $(21,940)
-------- -------- ------- ------- --------
-------- -------- ------- ------- --------
</TABLE>
F-43
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 3, 1999
-----------------------------------------------------------------
PARENT NON-
COMPANIES GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales......................... $ -- $719,116 $16,320 $ -- $735,436
Royalties, franchise fees and
other revenues.................. -- 79,599 1 -- 79,600
------- -------- ------- -------- --------
-- 798,715 16,321 -- 815,036
------- -------- ------- -------- --------
Costs and expenses:
Cost of sales, excluding
depreciation and amortization... -- 377,136 10,858 -- 387,994
Advertising, selling and
distribution.................... -- 195,840 2,037 -- 197,877
General and administrative........ -- 89,953 1,212 -- 91,165
Depreciation and amortization,
excluding amortization of
deferred financing costs........ -- 32,765 43 -- 32,808
------- -------- ------- -------- --------
-- 695,694 14,150 -- 709,844
------- -------- ------- -------- --------
Operating profit.............. -- 103,021 2,171 -- 105,192
Interest expense...................... -- (60,235) -- -- (60,235)
Gain on sale of businesses............ -- 5,016 -- -- 5,016
Other income, net..................... -- 4,244 1,054 -- 5,298
Equity in net income of
subsidiaries........................ 29,987 1,988 -- (31,975) --
------- -------- ------- -------- --------
Income before income taxes.... 29,987 54,034 3,225 (31,975) 55,271
Provision for income taxes............ -- (24,047) (1,237) -- (25,284)
------- -------- ------- -------- --------
Net income.................... $29,987 $ 29,987 $ 1,988 $(31,975) $ 29,987
------- -------- ------- -------- --------
------- -------- ------- -------- --------
</TABLE>
F-44
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 2, 2000
-----------------------------------------------------------------
PARENT NON-
COMPANIES GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales......................... $ -- $758,335 $12,608 $ -- $770,943
Royalties, franchise fees and
other revenues.................. -- 83,029 -- -- 83,029
-------- -------- ------- -------- --------
-- 841,364 12,608 -- 853,972
-------- -------- ------- -------- --------
Costs and expenses:
Cost of sales, excluding
depreciation and amortization... -- 399,205 8,503 -- 407,708
Advertising, selling and
distribution.................... -- 199,787 1,664 -- 201,451
General and administrative........ 111 91,434 1,364 -- 92,909
Depreciation and amortization,
excluding amortization of
deferred financing costs........ -- 32,022 38 -- 32,060
Capital structure reorganization
related charge.................. -- 3,348 -- -- 3,348
Credit related to post-acquisition
transition, integration and
changes to business
strategies...................... -- (549) -- -- (549)
Facilities relocation and
corporate restructuring
credits......................... -- (461) -- -- (461)
-------- -------- ------- -------- --------
111 724,786 11,569 -- 736,466
-------- -------- ------- -------- --------
Operating profit (loss)....... (111) 116,578 1,039 -- 117,506
Interest expense...................... (28,079) (48,523) (3) -- (76,605)
Loss on sale of businesses, net....... -- (533) -- -- (533)
Interest income from RC/Arby's
Corporation......................... 23,592 (23,592) -- -- --
Other income, net..................... 1,122 4,824 836 -- 6,782
Equity in net income of subsidiaries
before extraordinary charges........ 27,705 1,151 -- (28,856) --
-------- -------- ------- -------- --------
Income before income taxes and
extraordinary charges....... 24,229 49,905 1,872 (28,856) 47,150
Benefit from (provision for) income
taxes............................... 1,249 (22,200) (721) -- (21,672)
-------- -------- ------- -------- --------
Income before extraordinary
charges..................... 25,478 27,705 1,151 (28,856) 25,478
Extraordinary charges................. (11,772) (11,772) -- 11,772 (11,772)
-------- -------- ------- -------- --------
Net income.................... $ 13,706 $ 15,933 $ 1,151 $(17,084) $ 13,706
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
</TABLE>
F-45
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<TABLE>
<CAPTION>
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) -- -- --
Gain on sale of business.............. -- 85 -- -- 85
Other income, net..................... 1,116 1,946 94 -- 3,156
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>
F-46
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<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) -- -- --
Gain on sale of business.............. -- 96 -- -- 96
Other income, net..................... 4 1,003 (41) -- 966
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>
F-47
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 28, 1997
-----------------------------------------------------------------
PARENT NON-
COMPANIES GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities............... $ -- $ 35,466 $ (26) $-- $ 35,440
-------- --------- ------ ------ ---------
Cash flows from investing activities:
Acquisition of Snapple Beverage
Corp. ......................... (75,000) (232,205) -- -- (307,205)
Cash acquired in other business
acquisitions................... -- 2,409 -- -- 2,409
Capital expenditures............. -- (4,204) -- -- (4,204)
Other............................ -- 3,371 -- -- 3,371
-------- --------- ------ ------ ---------
Net cash used in investing
activities......................... (75,000) (230,629) -- -- (305,629)
-------- --------- ------ ------ ---------
Cash flows from financing activities:
Proceeds from long-term debt..... -- 303,400 -- -- 303,400
Repayments of long-term debt..... -- (79,901) -- -- (79,901)
Proceeds from issuance of
redeemable preferred stock..... 75,000 -- -- -- 75,000
Proceeds from issuance of common
stock.......................... 1 -- -- -- 1
Capital contribution............. -- 6,211 -- -- 6,211
Net borrowings from (repayments
to) affiliates................. -- 3,909 (374) -- 3,535
Deferred financing costs......... -- (11,385) -- -- (11,385)
-------- --------- ------ ------ ---------
Net cash provided by (used in)
financing activities............... 75,001 222,234 (374) -- 296,861
-------- --------- ------ ------ ---------
Net increase (decrease) in cash and
cash equivalents................... 1 27,071 (400) -- 26,672
Cash and cash equivalents at
beginning of year.................. -- 6,223 1,347 -- 7,570
-------- --------- ------ ------ ---------
Cash and cash equivalents at end of
year............................... $ 1 $ 33,294 $ 947 $-- $ 34,242
-------- --------- ------ ------ ---------
-------- --------- ------ ------ ---------
</TABLE>
F-48
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 3, 1999
-----------------------------------------------------------------
PARENT NON-
COMPANIES GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating
activities.......................... $-- $ 58,723 $ 381 $-- $ 59,104
------ -------- ------ ------ --------
Cash flows from investing activities:
Proceeds from sale of investment
in Select Beverages............. -- 28,342 -- -- 28,342
Capital expenditures.............. -- (11,107) -- -- (11,107)
Business acquisitions............. -- (3,043) -- -- (3,043)
Other............................. -- 1,579 -- -- 1,579
------ -------- ------ ------ --------
Net cash provided by investing
activities.......................... -- 15,771 -- -- 15,771
------ -------- ------ ------ --------
Cash flows from financing activities:
Dividends......................... -- (23,556) -- -- (23,556)
Repayments of long-term debt...... -- (14,158) -- -- (14,158)
Net borrowings from affiliates.... -- 1,261 128 -- 1,389
------ -------- ------ ------ --------
Net cash provided by (used in)
financing activities................ -- (36,453) 128 -- (36,325)
------ -------- ------ ------ --------
Net increase in cash and cash
equivalents......................... -- 38,041 509 -- 38,550
Cash and cash equivalents at beginning
of year............................. 1 33,294 947 -- 34,242
------ -------- ------ ------ --------
Cash and cash equivalents at end of
year................................ $ 1 $ 71,335 $1,456 $-- $ 72,792
------ -------- ------ ------ --------
------ -------- ------ ------ --------
</TABLE>
F-49
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 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............... $ 14,165 $ 59,569 $ (157) $ (15,933) $ 57,644
--------- --------- ------ --------- ---------
Cash flows from investing activities:
Business acquisitions............ -- (34,336) -- -- (34,336)
Capital expenditures............. -- (8,516) (9) -- (8,525)
Loan to RC/Arby's................ (300,000) -- -- 300,000 --
Dividends from subsidiaries in
excess of equity in net income
of subsidiaries................ 202,350 -- -- (202,350) --
Other............................ -- (467) -- -- (467)
--------- --------- ------ --------- ---------
Net cash used in investing
activities......................... (97,650) (43,319) (9) 97,650 (43,328)
--------- --------- ------ --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt..... 300,000 475,000 -- -- 775,000
Repayments of long-term debt..... -- (568,532) -- -- (568,532)
Dividends........................ (204,746) (218,283) -- 218,283 (204,746)
Deferred financing costs......... (11,666) (16,991) -- -- (28,657)
Loan from Triarc Consumer
Products Group................. -- 300,000 -- (300,000) --
--------- --------- ------ --------- ---------
Net cash provided by (used in)
financing activities............... 83,588 (28,806) -- (81,717) (26,935)
--------- --------- ------ --------- ---------
Net increase (decrease) in cash and
cash equivalents................... 103 (12,556) (166) -- (12,619)
Cash and cash equivalents at
beginning of year.................. 1 71,335 1,456 -- 72,792
--------- --------- ------ --------- ---------
Cash and cash equivalents at end of
year............................... $ 104 $ 58,779 $1,290 $ -- $ 60,173
--------- --------- ------ --------- ---------
--------- --------- ------ --------- ---------
</TABLE>
F-50
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<TABLE>
<CAPTION>
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>
F-51
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
<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 $(25,021) $ (1) $(645) $(25,540)
---- -------- ------ ----- --------
Cash flows from investing activities:
Capital expenditures.............. -- (7,343) (28) -- (7,371)
Business acquisition.............. -- (47) -- -- (47)
Other............................. -- (138) -- -- (138)
---- -------- ------ ----- --------
Net cash used in investing
activities.......................... -- (7,528) (28) -- (7,556)
---- -------- ------ ----- --------
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>
F-52
<PAGE>
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT TO JANUARY 2, 2000, THEY
ARE UNAUDITED)
(22) SUBSEQUENT EVENTS
Snapple Beverage Group, as restructured (see below), intends to issue a
minimum $100,000,000 of its common stock in an initial public offering. These
shares will be registered pursuant to a registration statement on Form S-1 filed
with the SEC in which these consolidated financial statements are included.
Assuming the successful completion of this initial public offering (the
'Offering'), the Company will be restructured (the 'Restructuring'). In
accordance with the restructuring transactions, Snapple Beverage Group will
be transferred to RC/Arby's, the restaurant franchising business will be
reclassified as discontinued operations, RC/Arby's (parent company) and the
restaurant franchising business are then effectively distributed from Triarc
Consumer Products Group to Triarc and, as a result of a series of transactions,
Triarc Consumer Products Group then effectively merges into Snapple Beverage
Group.
Also assuming the Offering, Snapple Beverage Group will receive an estimated
$178,000,000 capital contribution from RC/Arby's, representing the net
proceeds of a financing of its restaurant business. Snapple Beverage Group
is also expected to enter into a new credit facility consisting of term loans
and a $50,000,000 revolving credit facility. No borrowings under the new
revolving credit facility are expected to occur at the time of the completion of
the initial public offering. The net proceeds of the initial public offering and
the term loan borrowings under the new credit facility, together with all of the
cash and cash equivalents of RC/Arby's and the restaurant business and all but
$2,000,000 of the cash and cash equivalents of Snapple Beverage Group, as
restructured, are expected to be used to (1) repay prior to maturity all
outstanding borrowings under the Credit Facility and accrued interest thereon,
and (2) pay (a) prepayment penalties resulting from the prepayment of the
outstanding Term B and Term C Loans and (b) fees and expenses relating to the
initial public offering and the consummation of the new credit facility. The
early extinguishment of the borrowings under the Credit Facility will result in
an extraordinary charge at the time the borrowings under the Credit Facility are
repaid prior to maturity for the write-off of previously unamoritzed deferred
financing costs and the payment of the aforementioned prepayment penalties, less
income tax benefit, which, as of April 2, 2000, would have amounted to
$12,145,000.
In addition, in connection with the Offering, Snapple Beverage Group
intends to split its common stock at a ratio to be determined.
As a result of the Restructuring, the Company's accompanying consolidated
financial statements are not indicative of the financial position and results of
operations of the ongoing entity, Snapple Beverage Group. As such, the Company's
income (loss) per share is not presented since such data is not considered
relevant.
F-53
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
THE QUAKER OATS COMPANY:
We have audited the accompanying combined statement of certain revenues and
operating expenses (as described in Note 2) of the Snapple Beverage Business
(the 'Snapple Business' as described in Note 1) of The Quaker Oats Company for
the four month and twenty-two day period ended May 22, 1997. This statement is
the responsibility of the Snapple Business' management. Our responsibility is to
express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The statement has been prepared pursuant to the Stock Purchase Agreement
between The Quaker Oats Company and Triarc Companies, Inc. dated March 27, 1997,
as amended (described in Note 1), and is not intended to be a complete
presentation of the revenues and operating expenses on a stand-alone basis of
the Snapple Business of The Quaker Oats Company.
In our opinion, the statement referred to above presents fairly, in all
material respects, certain revenues and operating expenses of the Snapple
Business for the four month and twenty-two day period ended May 22, 1997, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
September 11, 1997
F-54
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
COMBINED STATEMENT OF CERTAIN REVENUES AND OPERATING EXPENSES
<TABLE>
<CAPTION>
FOUR MONTHS
AND TWENTY-TWO
DAYS ENDED
MAY 22,
1997
----
(IN THOUSANDS)
<S> <C>
Net sales................................................... $ 172,500
Cost of goods sold.......................................... 100,700
-----------
Gross profit............................................ 71,800
-----------
Advertising and merchandising............................... 44,200
Marketing and selling....................................... 14,500
Amortization of intangibles................................. 13,500
Other general and administrative expenses................... 14,700
Loss on assets held for sale................................ 1,414,600
-----------
Loss before interest and income taxes....................... $(1,429,700)
-----------
-----------
</TABLE>
The accompanying notes to the combined statement of certain revenues
and operating expenses are an integral part of this statement.
F-55
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED STATEMENT
OF CERTAIN REVENUES AND OPERATING EXPENSES
(1) PRINCIPLES OF COMBINATION
The combined statement reflects certain revenues and operating expenses of
the Snapple Beverage Business (Snapple Business) of The Quaker Oats Company. The
Snapple Business is engaged in the production, marketing and distribution of
beverages under the Snapple trademark and related trademarks and trade names
through Snapple Beverage Corp. (Snapple) and its subsidiaries, as well as
through The Quaker Oats Company (Quaker), a New Jersey corporation, and certain
affiliates of Quaker. Snapple, a Delaware corporation, is a wholly-owned
subsidiary of Quaker. Refer to Note 2, 'Basis of Presentation,' for further
discussion regarding the presentation of the financial statement. The Snapple
Business has U.S. and international operations. All significant intercompany
transactions have been eliminated.
On December 6, 1994, Quaker purchased Snapple for a tender-offer price of
$1.7 billion. The acquisition was accounted for as a purchase and the results of
the Snapple Business were included in Quaker's consolidated financial statements
from the acquisition date through the divestiture date.
On May 22, 1997, Quaker completed the sale of 100 percent of the shares of
Snapple to Triarc Companies, Inc. (Triarc), a Delaware corporation located in
New York, New York, for $300 million, subject to certain adjustments. In
addition, certain other assets and liabilities related to the Snapple Business
were transferred to Triarc or its affiliates.
(2) BASIS OF PRESENTATION
The financial statement has been prepared as of the close of business on
May 22, 1997, pursuant to the terms of the Stock Purchase Agreement (Agreement)
between Quaker and Triarc. This financial statement includes certain revenues
and operating expenses for the four month and twenty-two day period ended
May 22, 1997. In the opinion of management, this financial statement includes
all adjustments necessary to present fairly the combined statement of certain
revenues and operating expenses for the four months and twenty-two days ended
May 22, 1997. All adjustments made have been of a normal recurring nature. The
statement of certain revenues and operating expenses for the four months and
twenty-two days ended May 22, 1997 is not indicative of operating results for an
entire year. In addition, the Snapple Business was not separately accounted for
as a business segment of Quaker as it was operated as a product line of Quaker's
beverages business. Line of business reporting for the Snapple Business prepared
for managerial purposes contained allocations of the expenses of Quaker's
beverages business including supply chain (procurement, production and quality
control), human resource, finance and accounting functions. In addition, certain
other expenses were allocated to the Snapple Business including certain research
and development, information services, human resource, finance, legal and
administrative functions that were performed on a company-wide basis for the
benefit of all operating businesses of Quaker, including the beverages business.
As a result, the distinct and separate accounts necessary to present a complete
separate statement of operations of the Snapple Business have not been
maintained by Quaker since Snapple was acquired.
As a result of the relationship between Snapple and Quaker, the results of
operations are not indicative of the results of the Snapple Business had it been
a stand-alone entity. Additionally, this financial statement is not indicative
of the future results of operations of the Snapple Business. No activity of the
Snapple Business or decisions made by Triarc subsequent to May 22, 1997 has been
reflected in this financial statement.
COMBINED STATEMENT OF CERTAIN REVENUES AND OPERATING EXPENSES
The Combined Statement of Certain Revenues and Operating Expenses reflects
the sales and substantially all of the costs of operating the Snapple Business
in the normal and ordinary course. These costs include direct expenses and
certain shared expenses incurred by Quaker on behalf of the Snapple Business.
Management believes that the methods of allocating shared expenses to the
Snapple Business
F-56
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED STATEMENT
OF CERTAIN REVENUES AND OPERATING EXPENSES -- (CONTINUED)
are reasonable and approximate the costs of actual services provided. Refer to
Note 6, 'Supplementary Expense Information,' for further discussion. Interest
and income taxes are excluded.
ESTIMATES AND ASSUMPTIONS
The preparation of the financial statement in conformity with Generally
Accepted Accounting Principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from these estimates.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMMODITY OPTIONS AND FUTURES
Commodity options and futures contracts were used in the management of
commodity price exposures. Realized and unrealized gains and losses on commodity
options and futures contracts that hedged commodity price exposures were
deferred and subsequently included in the cost of goods sold as the finished
goods inventory was sold.
INTANGIBLES
Intangible assets consist of goodwill, trademarks, proprietary formulas and
distribution network/rights. Intangible assets are amortized on a straight-line
basis over the amortization periods indicated in the following table:
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD
(IN YEARS)
----------
<S> <C>
Goodwill.................................................... 30-40
Trademark -- Snapple........................................ 40
Trademark -- Made From The Best Stuff on Earth.............. 7
Proprietary formulas........................................ 15
Distribution network/rights................................. 10-30
</TABLE>
PROPERTY AND DEPRECIATION
Capital leases and leasehold improvements and machinery and equipment were
reported at cost and depreciated on a straight-line basis over the estimated
useful lives. Useful lives were 3 to 12 years for machinery and equipment.
Depreciation expense for the four months and twenty-two days ended May 22, 1997
was $2.4 million.
ADVERTISING AND MERCHANDISING COSTS
Advertising and merchandising expenses are for amounts paid for media,
production activities, cooperative retailer advertising and in-store promotion.
Statement of Position No. 93-7, 'Reporting on Advertising Costs,' addresses the
accounting for these expenses. The Snapple Business expensed all of these
expenses as incurred except for production costs which are deferred and expensed
when advertisements air for the first time. The amount of production costs
deferred at May 22, 1997 was not significant.
F-57
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED STATEMENT
OF CERTAIN REVENUES AND OPERATING EXPENSES -- (CONTINUED)
FOREIGN CURRENCY TRANSLATION
Income and expenses of the international operations of the Snapple Business
were translated at the average rates for the period presented. Translation gains
and losses were not material for the period presented.
REVENUE RECOGNITION
Sales are recorded when inventory is shipped or delivered.
(4) LOSS ON ASSETS HELD FOR SALE
On March 27, 1997, Quaker entered into an agreement to sell the Snapple
Business to Triarc. Under the provisions of FASB Statement No. 121, 'Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of,' the Snapple Business was then considered an asset held for sale and, as
such, the carrying value of Quaker's basis in the Snapple Business was reduced
to fair market value. The fair market value used in determining the impairment
loss was based on the sale price of $300 million. Accordingly, a pretax
impairment loss of $1.4 billion was recorded and a valuation reserve for the
write-down of the excess carrying value over fair market value was established
in the first quarter of 1997. Upon the Snapple sale completion on May 22, 1997,
an additional pretax loss of $10.6 million was realized and an additional
valuation reserve was established in the second quarter of 1997. This additional
loss, combined with the previously recorded impairment loss in the first quarter
of 1997, resulted in a total pretax loss of $1.41 billion.
Snapple long-lived assets, including intangible assets, were evaluated as of
December 31, 1996, pursuant to the provisions of Financial Accounting Standards
Board (FASB) Statement No. 121, 'Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of.' Estimated undiscounted
future cash flows were compared to the carrying value of Snapple long-lived
assets, including intangible assets. As the estimated undiscounted future cash
flows exceeded the carrying value of long-lived assets, an impairment loss was
not required or permitted to be recognized at December 31, 1996.
(5) RESTRUCTURING CHARGES
The Snapple Business' wholly-owned distributor, Southwest Snapple, was
performing at less than acceptable levels. As a result, the Snapple Business
decided to shut down Southwest Snapple and recorded a restructuring charge of
$16.6 million in September 1996. Subsequent to the restructuring, Snapple
beverages are sold through third-party distributors in certain Texas markets.
Estimated savings from this restructuring action of about $2 million annually
beginning in 1997, of which approximately 90 percent in cash, were consistent
with expectations.
The restructuring charges and utilization to date are as follows (in
thousands):
<TABLE>
<CAPTION>
AS OF
AMOUNTS CHARGED MAY 22, 1997
-------------------------- --------------------
NON- AMOUNT REMAINING
CASH CASH TOTAL UTILIZED RESERVE
---- ---- ----- -------- -------
<S> <C> <C> <C> <C> <C>
Severance and termination benefits(a).......... $ 500 $ -- $ 500 $ 500 $--
Asset write-offs(b)............................ -- 13,700 13,700 13,700 --
Loss on lease and other(c)..................... 2,400 -- 2,400 2,400 --
------ ------- ------- ------- ------
Total.................................. $2,900 $13,700 $16,600 $16,600 $--
------ ------- ------- ------- ------
------ ------- ------- ------- ------
</TABLE>
---------
(a) These changes resulted in the elimination of 102 positions from all
departments of Southwest Snapple.
(footnotes continued on next page)
F-58
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED STATEMENT
OF CERTAIN REVENUES AND OPERATING EXPENSES -- (CONTINUED)
(footnotes continued from previous page)
(b) In accordance with SFAS 121, the assets written-off were for goodwill,
purchased intangibles, and equipment specifically associated with this
distribution business. The amounts included in the charge were for the net
book value of the intangibles and distribution rights at time of closure
and the net book value less estimated selling proceeds for the equipment.
(c) The 'loss on lease and other' component of the charge was for lease
payments that the Snapple Business was obligated to make for the period
after the closure of the facility.
(6) SUPPLEMENTARY EXPENSE INFORMATION
The Snapple Business conducted its operations as an integrated component of
Quaker's beverages business. Certain shared operating and general and
administrative expenses were allocated to the Snapple Business by Quaker.
Management believes that the methods used for allocating these expenses were
reasonable. It was not practicable to estimate what expenses would have been for
the Snapple Business on a stand-alone basis for the period presented.
Selling, general and administrative expenses were as follows (in thousands):
<TABLE>
<CAPTION>
FOUR MONTHS
AND TWENTY-TWO
DAYS ENDED
MAY 22, 1997
------------
<S> <C>
Advertising and merchandising............................... $44,200
Selling and marketing(a)(b)................................. 14,500
Amortization of intangibles................................. 13,500
Other general and administrative expenses(a)(b)(c).......... 14,700
-------
Total selling, general and administrative expenses...... $86,900
-------
-------
</TABLE>
---------
(a) Shared Operating Expenses -- Quaker allocated a portion of shared operating
expenses including broker selling expenses, certain other marketing
expenses, certain other product research expenses, and certain other
general and administrative services to the Snapple Business. These expenses
were allocated to the Snapple Business based on measures such as
percentages of sales, headcounts, and estimates of time requirements to
support the business. We believe that this approximates the actual costs of
services provided. The Snapple Business also participated in Quaker's
consolidated insurance and risk management programs for property and
casualty insurance. The Snapple Business was directly charged for related
insurance costs.
(b) Employees -- Certain employees of the Snapple Business were employed by
Quaker and their compensation was paid by Quaker. These employees also
participated in certain Quaker employee benefit plans. The Snapple Business
was directly charged for actual salary costs and allocated fringe benefit
costs. The allocated fringe benefit costs were allocated based on actual
salary costs. Employees who were primarily employed in the Snapple Business
on May 22, 1997, other than certain nontransferred employees as provided in
the Agreement, were transferred to Triarc on the date of sale.
(c) Corporate Overhead Allocations -- Quaker provided certain corporate general
and administrative services to the Snapple Business including human
resources, legal, finance, facility management and utilities. These
expenses were allocated to the Snapple Business based on the underlying
costs of the expense. We believe that this approximates the actual costs of
services provided.
F-59
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED STATEMENT
OF CERTAIN REVENUES AND OPERATING EXPENSES -- (CONTINUED)
(7) SELECTED CASH FLOW INFORMATION
Due to the relationship between the Snapple Business and Quaker and the
basis of presentation of the financial statement contained herein (refer to Note
2, 'Basis of Presentation'), the selected cash flow information presented below
is not indicative of what the cash flows of the Snapple Business would have been
if it had been a stand-alone entity or indicative of future cash flows of the
Snapple Business (in thousands).
<TABLE>
<CAPTION>
FOUR MONTHS
AND TWENTY-TWO
DAYS ENDED
MAY 22, 1997
------------
<S> <C>
Cash used in operating activities(a)........................ $(25,900)
Cash used in investing activities(b)........................ (1,900)
Cash provided by financing activities(c).................... 23,400
--------
Net decrease in cash and cash equivalents................... $ (4,400)
--------
--------
</TABLE>
---------
(a) Operating Activities -- Cash used in operating activities for the four
months and twenty-two days ended May 22, 1997, was primarily comprised of
increases in trade accounts receivable and inventory of approximately $19
million and $8 million, respectively, and a decrease in accrued liabilities
of approximately $15 million, partly offset by an increase in trade
accounts payable of approximately $11 million.
(b) Investing Activities -- The principal component of cash used in investing
activities is capital expenditures related to machinery and equipment.
(c) Financing Activities -- Cash advances made by Quaker to cover operating
expenses and capital requirements of the Snapple Business are the principal
component of cash provided by financing activities.
(8) FINANCIAL INSTRUMENTS
Financial instruments were primarily used to reduce the impact of commodity
price fluctuations. The main financial instruments used were commodity options
and futures contracts.
The commodity hedge instruments were used to reduce the risk that raw
material purchases would be adversely affected as commodity prices changed.
While the hedge instruments were subject to the risk of loss from decreasing
commodity prices, any losses would be generally offset by reduced costs of the
purchases being hedged. Quaker, acting on behalf of the Snapple Business, did
not trade these instruments with the objective of earning financial gains on the
commodity price fluctuations, nor did it trade in commodities for which there
were no underlying exposures. Quaker's management believes that its use of
financial instruments to reduce the effects of commodity price fluctuations was
in the best interest of the Snapple Business.
Primarily purchases of corn sweetener were hedged for the Snapple Business.
For the four months and twenty-two days ended May 22, 1997, approximately $5.3
million of the cost of goods sold was in hedged corn sweetener. Quaker's
strategy is typically to hedge certain production requirements for various
periods up to 12 months. As of December 31, 1996, approximately 39 percent of
hedgeable production requirements for the next 12 months were hedged. During
1997, Quaker, on behalf of the Snapple Business, entered into an agreement with
its corn sweetener supplier that effectively hedged production requirements by
establishing a pricing cap for 1997 purchases. Subsequent to the agreement,
Quaker closed out of its positions in commodity hedge instruments. Deferred
realized losses related to commodity options and futures contracts were
immaterial as of May 22, 1997. The realized loss included
F-60
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED STATEMENT
OF CERTAIN REVENUES AND OPERATING EXPENSES -- (CONTINUED)
in cost of goods sold for the four months and twenty-two days ended May 22, 1997
was $0.1 million. No open commodity instruments were outstanding as of May 22,
1997.
(9) COPACKER CONTRACT LIABILITIES
The Snapple Business has entered into long-term agreements with certain
copackers (contract manufacturers). These arrangements require the Snapple
Business to purchase minimum volumes over various determined time periods
through 2000. Inventory product costs under these arrangements include a
case-rate packing fee plus a fixed fee, if any, that is incurred if the minimum
volume is not met. At May 22, 1997, an accrual of $1.2 million had been recorded
for fixed fees incurred but not yet paid.
As Snapple volumes declined, the Snapple Business performed a manufacturing
capacity study. As a result of this study, management reconfigured Snapple's
manufacturing network and abandoned certain manufacturing arrangements. An
accrual was established for future guaranteed payments that were required to be
made to the contract manufacturers that were abandoned by Snapple. Because these
guaranteed payments had no future benefits to Snapple, a liability was
established in 1996. The accrual balance related to these fixed fees at
December 31, 1996 was $12.0 million. The amount charged against the accrual
during the four months and twenty-two days ended May 22, 1997 was $5.3 million,
resulting in an accrual balance at May 22, 1997 of $6.7 million. Changes in
assumptions, as well as actual experience, could cause these estimates to
change.
(10) LITIGATION AND CLAIMS
The Snapple Business is a party to a number of lawsuits and claims, which
have been vigorously defended. Such matters arise out of the normal course of
business and other issues. Certain of these actions seek damages in large
amounts. While the results of litigation cannot be predicted with certainty, it
is believed that the final outcome of such litigation will not have a material
adverse effect on the consolidated financial position or results of operations
of the Snapple Business. Changes in assumptions, as well as actual experience,
could cause these estimates to change.
F-61
<PAGE>
[Snapple Logo]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with the
distribution described in this registration statement. The Company has agreed to
pay all of the costs and expenses of this distribution. All fees other than the
Commission registration fee are estimated.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $30,360
New York Stock Exchange listing fee......................... *
NASD filing fee............................................. 12,000
Blue sky fees and expenses.................................. *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Printing and engraving expenses............................. *
Transfer Agent and Registrar fees and expenses.............. *
Miscellaneous............................................... *
-------
Total....................................................... $ *
-------
-------
</TABLE>
---------
* To be completed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware
provides that a Delaware corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employees or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.
Section 145(b) provides that a Delaware corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth in the paragraph above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
under similar standards to those in the paragraph above, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the court in which such action or suit was brought shall
determine that despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to be
indemnified for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit of proceeding
referred to in subsections (a) and (b) or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection therewith;
that indemnification provided for by Section 145 shall not be deemed exclusive
of any other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him or
incurred
II-1
<PAGE>
by him in any such capacity or arising out of his status as such whether or not
the corporation would have the power to indemnify him against such liabilities
under such Section 145.
The Company's certificate of incorporation and the Company's bylaws provide
that the Company shall, to the extent not prohibited by law, indemnify any
person who is or was made, or threatened to be made, a party to any threatened,
pending or completed action, suit or proceeding (a 'Proceeding'), whether civil,
criminal, administrative or investigative, including, without limitation, an
action by or in the right of the Company to procure a judgment in its favor, by
reason of the fact that such person, or a person of whom such person is the
legal representative, is or was a director or officer of the Company, or is or
was serving in a capacity at the request of the Company as a director or officer
of any other corporation or for any corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise (an 'Other Entity'), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees and disbursements). Persons who
are not directors or officers of the Company may be similarly indemnified in
respect of service to the Company or to an Other Entity at the request of the
Company to the extent the board of directors of the Company at any time
specifies that such persons are entitled to the benefits of this provision.
Section 102(b)(7) of the DGCL permits the elimination or limitation of
directors' personal liability to the corporation or its stockholders for
monetary damages for breach of fiduciary duties as a director except for (1) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(2) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law, (3) breaches under section 174 of the DGCL,
which relate to unlawful payments of dividends or unlawful stock repurchase or
redemptions, or (4) any transaction from which the director derived an improper
personal benefit.
The Company's certificate of incorporation limit the personal liability of
directors of the Company to the fullest extent permitted by paragraph (7) of
subsection (b) of section 102 of the DGCL.
The Company also enters into indemnification agreements with its directors
and officers, some of whom are our directors and officers, indemnifying them to
the fullest extent permitted by law against liability, including related
expenses, they may incur in their capacity as directors, officers, employees,
trustees, agents or fiduciaries of the Company and/or its subsidiaries or any
liability relating to their service in any such capacity, at the request of
Triarc for other corporations or entities. The indemnification agreements are
meant to provide specific contractual assurance that the indemnification
provided by the Company under the certificate of incorporation, bylaws, or
directors' and officers' liability insurance of the Company will be available
regardless of changes to the Company's certificate of incorporation or by-laws
or any acquisition transactions relating to the Company. The indemnification
agreements do not provide indemnification (1) for the return by the indemnitee
of any illegal remuneration paid to him or her, (2) for any profits payable by
the indemnitee to the Company under Section 16(b) of the Securities Exchange
Act, (3) for any liability resulting from the indemnitee's knowingly fraudulent,
dishonest or willful misconduct, (4) for any amount the payment of which is not
permitted by applicable law, (5) for any liability resulting from conduct
producing unlawful personal benefit, (6) if a final court adjudication
determines that indemnification is not lawful, or (7) to the extent
indemnification has been provided by the Company under its certificate of
incorporation, by-laws or directors and officers liability insurance.
Determination as to whether an indemnitee is entitled to be paid under the
indemnification agreements may be made by the majority vote of a quorum of
disinterested directors of the Company, independent legal counsel selected by
the Company's board of directors, a majority of disinterested stockholders of
the Company or by a final adjudication of a court of competent jurisdiction. If
the Company undergoes a change of control under the indemnification agreements
all such determinations are to be made by special independent counsel selected
by the indemnitee and approved by the Company, which approval may not be
unreasonably withheld. The Company will pay the reasonable fees and expenses of
the special independent counsel. An indemnitee may be able to require the
Company to establish a trust fund to assure that funds will be available to pay
any amounts which may be due to an indemnitee under an indemnification
agreement.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the
II-2
<PAGE>
Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the period from April 30, 1997, the date of the Company's inception,
through May 31, 2000 the Company issued securities that were not registered
under the Securities Act in the following transactions:
(a) On April 30, 1997, the Company issued an aggregate of 1,000 shares
(subsequently converted into 850,000 shares) of common stock to Triarc for
an aggregate purchase price of $1,000 in connection with a Subscription
Agreement among the Company and Triarc in reliance upon the exemption
provided by Section 4(2) of the Securities Act.
(b) On May 22, 1997, the Company issued an aggregate of 750,000 shares
(subsequently converted into 750 shares) of 10% Cumulative Convertible
Preferred Stock to Triarc for an aggregate purchase price of $75,000,000 in
reliance upon the exemption provided by Section 4(2) of the Securities Act.
(c) From April 30, 1997 to December 28, 1997, the Company granted
options to purchase an aggregate of 76,250 shares of common stock to certain
employees, officers, directors and consultants of the Company in reliance
upon the exemption provided by Rule 701 of the Securities Act.
(d) From December 29, 1997 to January 3, 1999, the Company granted
options to purchase an aggregate of 72,175 shares of common stock to certain
employees, officers, directors and consultants of the Company and Triarc in
reliance upon the exemption provided by Rule 701 of the Securities Act.
(e) From January 3, 1999 to January 2, 2000, the Company granted options
to purchase an aggregate of 4,850 shares of common stock to certain
employees, officers, directors and consultants of the Company and Triarc in
reliance upon the exemption provided by Rule 701 of the Securities Act.
(f) On February 25, 1999, the Company sold $300 million aggregate
principal amount of 10 1/4 senior subordinated notes due 2009 to Morgan
Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette Securities
Corporation and Wasserstein Perella Securities, Inc., in reliance upon the
exemption provided by Section 4(2) of the Securities Act. A placement fee of
$9 million was paid in connection with this transaction.
(g) In October 1999, the Company issued 500 shares of common stock upon
the exercise of existing options in reliance upon the exemption provided by
Rule 701 of the Securities Act.
Unless otherwise stated, in the above transactions no underwriting discounts or
commissions were paid, nor was any public offering involved.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
1.1** -- Form of Underwriting Agreement to be entered into by
Snapple Beverage Group, Inc. ('Snapple Beverage Group')
and the Underwriters named therein.
3.1** -- Form of Amended and Restated Certificate of Incorporation
of Snapple Beverage Group.
3.2** -- Form of Amended and Restated Bylaws of Snapple Beverage
Group.
4.1 -- Credit Agreement dated as of February 25, 1999, among
Snapple Beverage Corp. ('Snapple'), Mistic Brands, Inc.
('Mistic'), Stewart's Beverages, Inc. (f/k/a Cable Car
Beverage Corporation) ('Stewart's Beverages'), RC/Arby's
Corporation and Royal Crown Company Inc. ('Royal Crown'),
as Borrowers, various financial institutions party
thereto, as Lenders, DLJ Capital Funding, Inc., as
syndication agent, Morgan Stanley Senior Funding, Inc., as
Documentation Agent, and The Bank of New York, as
Administrative Agent, incorporated herein by reference to
Exhibit 4.1 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 11, 1999 (SEC file No. 1-2207).
4.2 -- First Amendment dated as of April 1, 2000 to Credit
Agreement dated as of February 25, 1999 among Snapple,
Mistic, Stewart's, RC/Arby's Corporation and Royal Crown,
as Borrowers, various financial institutions party
thereto, as lenders, DLJ Capital Funding, Inc., as
Syndication Agent for the Lenders, Morgan Stanley Senior
Funding, Inc., as Documentation Agent for the Lenders, and
The Bank of New York as Administrative Agent for the
Lenders, incorporated by reference to Exhibit 4.1 to
Triarc Companies, Inc.'s Quarterly Report on Form 10-Q,
dated May 17, 2000 (SEC file No. 1-2207).
4.3** -- Form of Credit Agreement dated as of [ ], 2000,
among Snapple, Mistic, Stewart's and Royal Crown, as
Borrowers, various financial institutions party thereto,
as Lenders, DLJ Capital Funding, Inc., as syndication
agent, Morgan Stanley Senior Funding, Inc., as
Documentation Agent and The Bank of New York, as
Administrative Agent.
4.4 -- Indenture dated of February 25, 1999 among Triarc
Consumer Products Group LLC ('Triarc Consumer Products
Group'), Snapple Beverage Group, Triarc Beverage Holdings
Corp. (f/k/a Triarc Beverage Holdings, Inc.), as Issuers,
the subsidiary guarantors party thereto and The Bank of
New York, as Trustee, incorporated herein by reference to
Exhibit 4.2 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 11, 1999 (SEC file No. 1-2207).
4.5 -- Supplemental Indenture, dated as of February 26, 1999,
among Triarc Consumer Products Group, Snapple Beverage
Group, Millrose Distributors, Inc., and The Bank of New
York as Trustee, incorporated herein by reference to
Exhibit 4.6 to Amendment No. 2 to Registration Statement
on Form S-4 filed by Triarc Consumer Products Group, LLC
and Triarc Beverage Holdings Corp., dated October 1, 1999
(Registration Nos. 333-78625; 333-78625-01 through
333-78625-28).
4.6 -- Supplemental Indenture No. 2, dated as of September 8,
1999, among Triarc Consumer Products Group, Snapple
Beverage Group, the subsidiary guarantors party thereto
and The Bank of New York, as Trustee, incorporated herein
by reference to Exhibit 4.7 to Amendment No. 2 to
Registration Statement on Form S-4 filed by Triarc
Consumer Products Group, LLC and Triarc Beverage Holdings
Corp., dated October 1, 1999 (Registration Nos. 333-78625;
333-78625-01 through 333-78625-28).
4.8 -- Supplemental Indenture No. 3, dated as of December 16,
1999 among Triarc Consumer Products Group, Triarc Beverage
Holdings Corp., MPAS Holdings, Inc., Millrose, L.P., and
The Bank of New York, as Trustee incorporated herein by
reference to Exhibit 4.1 to Triarc Companies, Inc.'s
Current Report on Form 8-K dated March 30, 2000 (SEC file
No. 1-2207).
4.9 -- Supplemental Indenture No. 4, dated as of January 2, 2000
among Triarc Consumer Products Group, Triarc Beverage
Holdings Corp., Snapple Distributors of Long Island, Inc.,
and The Bank of New York, as Trustee incorporated herein
by reference to Exhibit 4.2 to Triarc Companies, Inc.'s
Current Report on Form 8-K dated March 30, 2000 (SEC file
No. 1-2207).
4.10 -- Registration Rights Agreement dated as of February 25,
1999 among Triarc Consumer Products Group, Snapple
Beverage Group, the Guarantors party thereto and Nelson
Peltz and Peter W. May, incorporated herein by reference
to Exhibit 4.1 to Triarc Companies, Inc.'s Current Report
on Form 8-K dated April 1, 1999 (SEC file No. 1-2207).
4.11 -- Form of 10 1/4% Senior Subordinated Note of Triarc
Consumer Products Group and Snapple Beverage Group due
2009, incorporated herein by reference to Exhibit 4.5 to
the Registration Statement on Form S-4 filed by Triarc
Consumer Products Group, LLC and Triarc Beverage Holdings
Corp., dated May 17, 1999 (Registration Nos. 333-78625;
333-78625-01 through 333-78625-28).
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
5.1** -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison.
10.1 -- Triarc Companies, Inc.'s 1993 Equity Participation Plan,
as amended, incorporated herein by reference to Exhibit
10.1 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 31, 1997 (SEC file No. 1-2207).
10.2 -- Form of Non-Incentive Stock Option Agreement under Triarc
Companies, Inc.'s 1993 Equity Participation Plan,
incorporated herein by reference to Exhibit 10.2 to Triarc
Companies, Inc.'s Current Report on Form 8-K dated
March 31, 1997 (SEC file No. 1-2207).
10.3 -- Concentrate Sales Agreement dated as of January 28, 1994
between Royal Crown Cola Co. and Cott -- Confidential
treatment has been granted for portions of the agreement,
incorporated herein by reference to Exhibit 10.12 to
Amendment No. 1 to Triarc Companies, Inc.'s Registration
Statement on Form S-4 dated March 11, 1994 (SEC file
No. 1-2207).
10.4 -- Form of Indemnification Agreement between Snapple
Beverage Group and certain officers, directors and
employees of Triarc Beverage Holdings, incorporated herein
by reference to Exhibit 10.40 to Amendment No. 4 to
Registration Statement on Form S-4 filed by Triarc
Consumer Products Group, LLC and Triarc Beverage Holdings
Group, dated December 10, 1999 (Registration Nos.
333-78625; 333-78625-01 through 333-78625-028).
10.5 -- Amended and Restated Employment Agreement dated as of
June 1, 1997 by and between Snapple, Mistic and Michael
Weinstein, incorporated herein by reference to Exhibit
10.3 to Triarc Companies, Inc.'s Current Report on
Form 8-K/A dated March 16, 1998 (SEC file No. 1-2207).
10.6 -- Amended and Restated Employment Agreement dated as of
June 1, 1997 by and between Snapple, Mistic and Ernest J.
Cavallo, incorporated herein by reference to Exhibit 10.4
to Triarc Companies, Inc.'s Current Report on Form 8-K/A
dated March 16, 1998 (SEC file No. 1-2207).
10.7 -- Triarc Companies, Inc.'s 1997 Equity Participation Plan
(the '1997 Equity Plan'), incorporated herein by reference
to Exhibit 10.5 to Triarc Companies, Inc.'s Current Report
on Form 8-K dated March 16, 1998 (SEC file No. 1-2207).
10.8 -- Form of Non-Incentive Stock Option Agreement under the
1997 Equity Plan, incorporated herein by reference to
Exhibit 10.6 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 16, 1998 (SEC file No. 1-2207).
10.9 -- Triarc Companies, Inc.'s Stock Option Plan for Cable Car
Beverage Corporation Employees, incorporated herein by
reference to Exhibit 4.3 to Triarc Companies, Inc.'s
Registration Statement on Form S-8 dated January 22, 1998
(Registration No. 333-44711).
10.10 -- Snapple Beverage Group, Inc. 1997 Stock Option Plan (the
'1997 Option Plan'), incorporated herein by reference to
Exhibit 10.1 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 16, 1998 (SEC file No. 1-2207).
10.11 -- Form of Non-Qualified Stock Option Agreement under the
1997 Option Plan, incorporated herein by reference to
Exhibit 10.2 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 16, 1998 (SEC file No. 1-2207).
10.12 -- Triarc Companies, Inc.'s 1998 Equity Participation Plan,
as currently in effect, incorporated herein by reference
to Exhibit 10.1 to Triarc Companies, Inc.'s Current Report
on Form 8-K dated May 13, 1998 (SEC file No. 1-2207).
10.13 -- Form of Non-Incentive Stock Option Agreement under Triarc
Companies, Inc.'s 1998 Equity Participation Plan,
incorporated herein by reference to Exhibit 10.2 to Triarc
Companies, Inc.'s Current Report on Form 8-K dated
May 13, 1998 (SEC file No. 1-2207).
10.14 -- Management Services Agreement, dated February 25, 1999,
by and between Triarc Companies, Inc., Snapple, Mistic,
Stewart's Beverages and Royal Crown., incorporated herein
by reference to Exhibit 10.28 to the Registration
Statement on Form S-4 filed by Triarc Consumer Products
Group, LLC and Triarc Beverage Holdings Corp., dated
May 17, 1999 (Registration Nos. 333-78625; 333-78625-01
through 333-78625-028).
10.15 -- Tax Sharing Agreement, dated February 25, 1999, by and
between Triarc Companies, Inc., Triarc Consumer Products
Group, Snapple Beverage Group, Snapple, Mistic, Stewart's
Beverages, RC/Arby's Corporation, Royal Crown, Arby's, and
ARHC, LLC., incorporated herein by reference to Exhibit
10.29 to the Registration Statement on Form S-4 filed by
Triarc Consumer Products Group, LLC and Triarc Beverage
Holdings Corp., dated May 17, 1999 (Registration Nos.
333-78625; 333-78625-01 through 333-78625-28).
10.16 -- Amendment No. 1 to the Tax Sharing Agreement, dated April
23, 1999, by and among Triarc Companies, Inc., Triarc
Consumer Products Group, Snapple Beverage Group, Snapple,
Mistic, Stewart's Beverages, RC/Arby's Corporation, Royal
Crown, Arby's and ARHC, LLC, incorporated herein by
reference to Exhibit 10.30 to the Registration Statement
on Form S-4 filed by Triarc Consumer Products Group, LLC
and Triarc Beverage Holdings Corp., dated May 17, 1999
(Registration Nos. 333-78625; 333-78625-01 through
333-78625-28).
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
10.17 -- Amendment to Tax Sharing Agreements, dated as of August
15, 1998, among Snapple Beverage Group, Snapple, Mistic
and Stewart's Beverages, incorporated herein by reference
to Exhibit 10.33 to the Registration Statement on
Form S-4 filed by Triarc Consumer Products Group, LLC and
Triarc Beverage Holdings Corp., dated May 17, 1999
(Registration Nos. 333-78625; 333-78625-01 through
333-78625-28).
10.18 -- Amendment No. 2 to the Tax Sharing Agreement, dated as of
April 23, 1999, by and among Triarc Companies, Inc.,
Triarc Consumer Products Group, Snapple Beverage Group,
Snapple, Mistic, Stewart's Beverages, RC/Arby's
Corporation, Royal Crown, Arby's and ARHC, LLC,
incorporated herein by reference to Exhibit 10.38 to
Amendment No. 2 to Registration Statement on Form S-4
filed by Triarc Consumer Products Group, LLC and Triarc
Beverage Holdings Corp., dated October 1, 1999
(Registration Nos. 333-78625; 333-78625-01 through
333-78625-28).
10.19 -- Amendment No. 1 to the 1997 Option Plan, incorporated by
reference to Exhibit 10.36 to Amendment No. 1 to the
Registration Statement on Form S-4 filed by Triarc
Consumer Products Group, LLC and Triarc Beverage Holdings
Corp., dated August 3, 1999 (Registration Nos. 333-78625;
333-78625-01 through 333-78625-28).
10.20 -- Letter agreement between Royal Crown and John L. Belsito,
dated July 23, 1998; incorporated herein by reference to
Exhibit 10.1 to RC/Arby's Corporation Current Report on
Form 8-K dated November 5, 1998 (SEC file No. 33-62778).
10.21* -- Amendment No. 1 to the Amended and Restated Employment
Agreement dated as of June 1, 1997 by and between Snapple,
Mistic and Michael Weinstein.
10.22* -- Amendment No. 1 to the Amended and Restated Employment
Agreement dated as of June 1, 1997 by and between Snapple,
Mistic and Ernest J. Cavallo.
10.23* -- Letter agreement between Stewart's and Samuel M. Simpson,
dated November 25, 1997.
10.24* -- Amendment No. 2 to the 1997 Option Plan.
10.25**-- Form of Registration Rights Agreement, among Triarc
Companies, Inc., RC/Arby's Corporation and Snapple
Beverage Group.
10.26**-- Form of Initial Public Offering and Separation Agreement,
between Triarc Companies, Inc. and Snapple Beverage Group.
10.27**-- Form of Release and Indemnification Agreement, between
Triarc Companies, Inc., Snapple Beverage Group and the
other parties thereto.
10.28**-- Snapple Beverage Group, Inc. 2000 Equity Participation
Plan (the '2000 Equity Participation Plan')
10.29**-- Form of Non-Qualified Stock Option Agreement under the
2000 Equity Participation Plan.
10.30**-- Form of Confidentiality and Non-Solicitation Agreement.
21.1* -- Subsidiaries of Snapple Beverage Group (giving effect to
restructuring).
23.1* -- Consent of Deloitte & Touche LLP.
23.2* -- Consent of Arthur Andersen LLP.
23.3** -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison
(included as part of Exhibit 5.1).
24.1* -- Powers of Attorney (contained on signature page).
</TABLE>
---------
* Filed herewith
** To be filed with amendment
(b) Financial Statement Schedules
<TABLE>
<S> <C>
Schedule I -- Condensed Balance Sheet (Parent Company Only) -- as of
January 2, 2000; Condensed Statement of Operations (Parent
Company Only) -- for the period from inception,
January 15, 1999, through January 2, 2000; Condensed
Statement of Cash Flows (Parent Company Only) -- for the
period from inception, January 15, 1999, through
January 2, 2000.
Schedule II -- Valuation and Qualifying Accounts for the fiscal years
ended December 28, 1997, January 3, 1999 and January 2,
2000.
</TABLE>
II-6
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK,
STATE OF NEW YORK, ON JUNE 27, 2000.
SNAPPLE BEVERAGE GROUP, INC.
By: /s/ MICHAEL F. WEINSTEIN
..................................
MICHAEL F. WEINSTEIN
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Peter W.
May, Michael F. Weinstein and Ernest J. Cavallo or any one of them, with full
power to act without the other, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments,
including post-effective amendments, to this Registration Statement, and any
registration statement relating to the same offering as this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF
OF THE REGISTRANT AND IN THE CAPACITIES INDICATED BELOW AND ON JUNE 27, 2000.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ MICHAEL F. WEINSTEIN Chief Executive Officer and Director (Principal
......................................... Executive Officer)
MICHAEL F. WEINSTEIN
/s/ RICHARD ALLEN Senior Vice President and Chief Financial Officer
......................................... (Principal Financial Officer)
RICHARD ALLEN
/s/ FRED H. SCHAEFER Vice President and Chief Accounting Officer (Principal
......................................... Accounting Officer)
FRED H. SCHAEFER
/s/ NELSON PELTZ Chairman and Director
.........................................
NELSON PELTZ
/s/ PETER W. MAY Vice Chairman and Director
.........................................
PETER W. MAY
</TABLE>
II-8
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Independent Auditors' Report............................................. S-2
Schedule I -- Condensed Balance Sheet (Parent Company Only) -- as of
January 2, 2000; Condensed Statement of Operations
(Parent Company Only) -- for the period from inception,
January 15, 1999, through January 2, 2000; Condensed
Statement of Cash Flows (Parent Company Only) -- for the
period from inception, January 15, 1999, through
January 2, 2000 (1)....................................... S-3 - S-5
Schedule II -- Valuation and Qualifying Accounts for the fiscal years
ended December 28, 1997, January 3, 1999 and January 2,
2000...................................................... S-6
</TABLE>
---------
All other financial statement schedules have been omitted since they are not
applicable.
(1) Triarc Consumer Products Group, LLC (Parent Company) 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 Companies, Inc. of
RC/Arby's Corporation, Triarc Beverage Holdings Corp. and Stewart's
Beverages, Inc. and their subsidiaries. See Note 1 to the consolidated
financial statements included elsewhere herein for additional disclosures
regarding the basis of presentation of the financial statements. As a
result, the Parent Company had no operations prior to February 23, 1999 and
no prior years' comparative financial statements are applicable.
S-1
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL SCHEDULES
To the Board of Managers and Member of
TRIARC CONSUMER PRODUCTS GROUP, LLC:
New York, New York
We have audited the consolidated financial statements of Triarc Consumer
Products Group, LLC and subsidiaries (the 'Company') as of January 2, 2000 and
January 3, 1999 and for each of the three fiscal years in the period ended
January 2, 2000 and our report thereon appears in Item 8 in this prospectus. Our
audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
accompanying index to financial statement schedules are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements. These schedules are the responsibility of the Company's
management. Such schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
DELOITTE & TOUCHE LLP
New York, New York
March 10, 2000
(June 23, 2000 as to Note 22 to the
consolidated financial statements)
S-2
<PAGE>
SCHEDULE I
TRIARC CONSUMER PRODUCTS GROUP, LLC
(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 2,
2000
----
<S> <C>
ASSETS
Current assets:
Cash.................................................... $ 12
Due from subsidiary..................................... 3,373
--------
Total current assets................................ 3,385
10.33% note receivable from RC/Arby's Corporation due
2009...................................................... 300,000
Deferred financing costs.................................... 12,368
--------
$315,753
--------
--------
LIABILITIES AND MEMBER'S DEFICIT
Current liabilities:
Accounts payable........................................ $ 45
Due to subsidiary and other affiliate................... 215
Accrued expenses........................................ 12,368
--------
Total current liabilities........................... 12,628
--------
10 1/4% senior subordinated notes due 2009(a)............... 300,000
Accumulated reductions in stockholders' equity of
subsidiaries in excess of investments(b).................. 177,010
Commitments and contingencies
Member's deficit:
Accumulated deficit..................................... (173,533)
Accumulated other comprehensive deficit................. (352)
--------
Total member's deficit.............................. (173,885)
--------
$315,753
--------
--------
</TABLE>
---------
(a) These notes mature in 2009 and do not require any amortization of principal
prior thereto.
(b) The 'Accumulated reductions in stockholders' equity of subsidiaries in
excess of investments' include all of the direct and indirect owned
subsidiaries of Triarc Consumer Products Group, LLC. The investments in
subsidiaries aggregate to a negative balance as a result of aggregate
dividends from subsidiaries in excess of the investments in the
subsidiaries.
S-3
<PAGE>
SCHEDULE I (CONTINUED)
TRIARC CONSUMER PRODUCTS GROUP, LLC
(PARENT COMPANY ONLY)
CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION,
JANUARY 15, 1999,
THROUGH
JANUARY 2, 2000
---------------
<S> <C>
Revenues and income:
Equity in income of subsidiaries before extraordinary
charges............................................... $ 27,705
Interest income from RC/Arby's Corporation.............. 23,592
Interest income other than from subsidiaries............ 1,122
--------
52,419
--------
Costs and expenses:
General and administrative.............................. 111
Interest expense........................................ 28,079
--------
28,190
--------
Income before income taxes and extraordinary
charges........................................... 24,229
Benefit from income taxes................................... 1,249
--------
Income before extraordinary charges................. 25,478
Equity in extraordinary charges of subsidiaries............. (11,772)
--------
Net income.......................................... $ 13,706
--------
--------
</TABLE>
S-4
<PAGE>
SCHEDULE I (CONTINUED)
TRIARC CONSUMER PRODUCTS GROUP, LLC
(PARENT COMPANY ONLY)
CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION,
JANUARY 15, 1999,
THROUGH
JANUARY 2, 2000
---------------
<S> <C>
Cash flows from operating activities:
Net income.............................................. $ 13,706
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of deferred financing costs............ 1,141
Change in due from/to subsidiaries and other
affiliate......................................... (13,186)
Increase in accounts payable and accrued expenses... 12,413
---------
Net cash provided by operating activities....... 14,074
---------
Cash flows from investing activities:
Loan to RC/Arby's Corporation........................... (300,000)
Dividends from subsidiaries in excess of equity in net
income of subsidiaries................................ 202,350
---------
Net cash used in investing activities........... (97,650)
---------
Cash flows from financing activities:
Proceeds from long-term debt............................ 300,000
Dividends paid to Triarc Companies, Inc................. (204,746)
Deferred financing costs................................ (11,666)
---------
Net cash provided by financing activities....... 83,588
---------
Net increase in cash and cash at end of period.............. $ 12
---------
---------
</TABLE>
S-5
<PAGE>
SCHEDULE II
TRIARC CONSUMER PRODUCTS GROUP, LLC AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-------------------------
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND OTHER FROM END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS RESERVES YEAR
----------- ------- -------- -------- -------- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended December 28, 1997:
Receivables -- allowance for
doubtful accounts:
Trade...................... $ 2,559 $6,048 (1) $725 (2) $(1,361)(3) $ 7,971
Affiliate.................. 2,551 975 (1) -- (256)(3) 3,270
------- ------ ---- ------- -------
Total.................. $ 5,110 $7,023 $725 $(1,617) $11,241
------- ------ ---- ------- -------
------- ------ ---- ------- -------
Year ended January 3, 1999:
Receivables -- allowance for
doubtful accounts:
Trade...................... $ 7,971 $2,861 $ 32 (2) $(5,313)(3) $ 5,551
Affiliate.................. 3,270 (474)(4) -- (2,796)(3) --
------- ------ ---- ------- -------
Total.................. $11,241 $2,387 $ 32 $(8,109) $ 5,551
------- ------ ---- ------- -------
------- ------ ---- ------- -------
Year ended January 2, 2000:
Receivables -- allowance for
doubtful accounts:
Trade...................... $ 5,551 $2,132 (5) $105 (2) $(2,147)(3) $ 5,641
Affiliate.................. -- (265)(4) -- 265 (4) --
------- ------ ---- ------- -------
Total.................. $ 5,551 $1,867 $105 $(1,882) $ 5,641
------- ------ ---- ------- -------
------- ------ ---- ------- -------
</TABLE>
---------
(1) Includes $2,254,000 of trade and $975,000 of affiliate provisions charged to
'Charges (credit) related to post-acquisition transition, integration and
changes to business strategies.'
(2) Recoveries of accounts previously determined to be uncollectible.
(3) Accounts determined to be uncollectible.
(4) Reversal of provision for doubtful accounts due to recoveries of accounts
previously fully reserved.
(5) Net of $549,000 credited to 'Charges (credit) related to post-acquisition
transition, integration and changes to business strategies.'
S-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
1.1** -- Form of Underwriting Agreement to be entered into by
Snapple Beverage Group, Inc. ('Snapple Beverage Group')
and the Underwriters named therein........................
3.1** -- Form of Amended and Restated Certificate of Incorporation
of Snapple Beverage Group.................................
3.2** -- Form of Amended and Restated Bylaws of Snapple Beverage
Group.....................................................
4.1 -- Credit Agreement dated as of February 25, 1999, among
Snapple Beverage Corp. ('Snapple'), Mistic Brands, Inc.
('Mistic'), Stewart's Beverages, Inc. (f/k/a Cable Car
Beverage Corporation) ('Stewart's Beverages'), RC/Arby's
Corporation and Royal Crown Company Inc. ('Royal Crown'),
as Borrowers, various financial institutions party
thereto, as Lenders, DLJ Capital Funding, Inc., as
syndication agent, Morgan Stanley Senior Funding, Inc., as
Documentation Agent, and The Bank of New York, as
Administrative Agent, incorporated herein by reference to
Exhibit 4.1 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 11, 1999 (SEC file No. 1-2207).......
4.2 -- First Amendment dated as of April 1, 2000 to Credit
Agreement dated as of February 25, 1999 among Snapple,
Mistic, Stewart's, RC/Arby's Corporation and Royal Crown,
as Borrowers, various financial institutions party
thereto, as lenders, DLJ Capital Funding, Inc., as
Syndication Agent for the Lenders, Morgan Stanley Senior
Funding, Inc., as Documentation Agent for the Lenders, and
The Bank of New York as Administrative Agent for the
Lenders, incorporated by reference to Exhibit 4.1 to
Triarc Companies, Inc.'s Quarterly Report on Form 10-Q,
dated May 17, 2000 (SEC file No. 1-2207)..................
4.3** -- Form of Credit Agreement dated as of [ ], 2000,
among Snapple, Mistic, Stewart's and Royal Crown, as
Borrowers, various financial institutions party thereto,
as Lenders, DLJ Capital Funding, Inc., as syndication
agent, Morgan Stanley Senior Funding, Inc., as
Documentation Agent and The Bank of New York, as
Administrative Agent......................................
4.4 -- Indenture dated of February 25, 1999 among Triarc
Consumer Products Group LLC ('Triarc Consumer Products
Group'), Snapple Beverage Group, Triarc Beverage Holdings
Corp. (f/k/a Triarc Beverage Holdings, Inc.), as Issuers,
the subsidiary guarantors party thereto and The Bank of
New York, as Trustee, incorporated herein by reference to
Exhibit 4.2 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 11, 1999 (SEC file No. 1-2207).......
4.5 -- Supplemental Indenture, dated as of February 26, 1999,
among Triarc Consumer Products Group, Snapple Beverage
Group, Millrose Distributors, Inc., and The Bank of New
York as Trustee, incorporated herein by reference to
Exhibit 4.6 to Amendment No. 2 to Registration Statement
on Form S-4 filed by Triarc Consumer Products Group, LLC
and Triarc Beverage Holdings Corp., dated October 1, 1999
(Registration Nos. 333-78625; 333-78625-01 through
333-78625-28).............................................
4.6 -- Supplemental Indenture No. 2, dated as of September 8,
1999, among Triarc Consumer Products Group, Snapple
Beverage Group, the subsidiary guarantors party thereto
and The Bank of New York, as Trustee, incorporated herein
by reference to Exhibit 4.7 to Amendment No. 2 to
Registration Statement on Form S-4 filed by Triarc
Consumer Products Group, LLC and Triarc Beverage Holdings
Corp., dated October 1, 1999 (Registration Nos. 333-78625;
333-78625-01 through 333-78625-28)........................
4.8 -- Supplemental Indenture No. 3, dated as of December 16,
1999 among Triarc Consumer Products Group, Triarc Beverage
Holdings Corp., MPAS Holdings, Inc., Millrose, L.P., and
The Bank of New York, as Trustee incorporated herein by
reference to Exhibit 4.1 to Triarc Companies, Inc.'s
Current Report on Form 8-K dated March 30, 2000 (SEC file
No. 1-2207)...............................................
4.9 -- Supplemental Indenture No. 4, dated as of January 2, 2000
among Triarc Consumer Products Group, Triarc Beverage
Holdings Corp., Snapple Distributors of Long Island, Inc.,
and The Bank of New York, as Trustee incorporated herein
by reference to Exhibit 4.2 to Triarc Companies, Inc.'s
Current Report on Form 8-K dated March 30, 2000 (SEC file
No. 1-2207)...............................................
4.10 -- Registration Rights Agreement dated as of February 25,
1999 among Triarc Consumer Products Group, Snapple
Beverage Group, the Guarantors party thereto and Nelson
Peltz and Peter W. May, incorporated herein by reference
to Exhibit 4.1 to Triarc Companies, Inc.'s Current Report
on Form 8-K dated April 1, 1999 (SEC file No. 1-2207).....
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
4.11 -- Form of 10 1/4% Senior Subordinated Note of Triarc
Consumer Products Group and Snapple Beverage Group due
2009, incorporated herein by reference to Exhibit 4.5 to
the Registration Statement on Form S-4 filed by Triarc
Consumer Products Group, LLC and Triarc Beverage Holdings
Corp., dated May 17, 1999 (Registration Nos. 333-78625;
333-78625-01 through 333-78625-28)........................
5.1** -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison......
10.1 -- Triarc Companies, Inc.'s 1993 Equity Participation Plan,
as amended, incorporated herein by reference to Exhibit
10.1 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 31, 1997 (SEC file No. 1-2207).......
10.2 -- Form of Non-Incentive Stock Option Agreement under Triarc
Companies, Inc.'s 1993 Equity Participation Plan,
incorporated herein by reference to Exhibit 10.2 to Triarc
Companies, Inc.'s Current Report on Form 8-K dated
March 31, 1997 (SEC file No. 1-2207)......................
10.3 -- Concentrate Sales Agreement dated as of January 28, 1994
between Royal Crown Cola Co. and Cott -- Confidential
treatment has been granted for portions of the agreement,
incorporated herein by reference to Exhibit 10.12 to
Amendment No. 1 to Triarc Companies, Inc.'s Registration
Statement on Form S-4 dated March 11, 1994 (SEC file
No. 1-2207)...............................................
10.4 -- Form of Indemnification Agreement between Snapple
Beverage Group and certain officers, directors and
employees of Triarc Beverage Holdings, incorporated herein
by reference to Exhibit 10.40 to Amendment No. 4 to
Registration Statement on Form S-4 filed by Triarc
Consumer Products Group, LLC and Triarc Beverage Holdings
Group, dated December 10, 1999 (Registration Nos.
333-78625; 333-78625-01 through 333-78625-028)............
10.5 -- Amended and Restated Employment Agreement dated as of
June 1, 1997 by and between Snapple, Mistic and Michael
Weinstein, incorporated herein by reference to Exhibit
10.3 to Triarc Companies, Inc.'s Current Report on
Form 8-K/A dated March 16, 1998 (SEC file No. 1-2207).....
10.6 -- Amended and Restated Employment Agreement dated as of
June 1, 1997 by and between Snapple, Mistic and Ernest J.
Cavallo, incorporated herein by reference to Exhibit 10.4
to Triarc Companies, Inc.'s Current Report on Form 8-K/A
dated March 16, 1998 (SEC file No. 1-2207)................
10.7 -- Triarc Companies, Inc.'s 1997 Equity Participation Plan
(the '1997 Equity Plan'), incorporated herein by reference
to Exhibit 10.5 to Triarc Companies, Inc.'s Current Report
on Form 8-K dated March 16, 1998 (SEC file No. 1-2207)....
10.8 -- Form of Non-Incentive Stock Option Agreement under the
1997 Equity Plan, incorporated herein by reference to
Exhibit 10.6 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 16, 1998 (SEC file No. 1-2207).......
10.9 -- Triarc Companies, Inc.'s Stock Option Plan for Cable Car
Beverage Corporation Employees, incorporated herein by
reference to Exhibit 4.3 to Triarc Companies, Inc.'s
Registration Statement on Form S-8 dated January 22, 1998
(Registration No. 333-44711)..............................
10.10 -- Snapple Beverage Group, Inc. 1997 Stock Option Plan (the
'1997 Option Plan'), incorporated herein by reference to
Exhibit 10.1 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 16, 1998 (SEC file No. 1-2207).......
10.11 -- Form of Non-Qualified Stock Option Agreement under the
1997 Option Plan, incorporated herein by reference to
Exhibit 10.2 to Triarc Companies, Inc.'s Current Report on
Form 8-K dated March 16, 1998 (SEC file No. 1-2207).......
10.12 -- Triarc Companies, Inc.'s 1998 Equity Participation Plan,
as currently in effect, incorporated herein by reference
to Exhibit 10.1 to Triarc Companies, Inc.'s Current Report
on Form 8-K dated May 13, 1998 (SEC file No. 1-2207)......
10.13 -- Form of Non-Incentive Stock Option Agreement under Triarc
Companies, Inc.'s 1998 Equity Participation Plan,
incorporated herein by reference to Exhibit 10.2 to Triarc
Companies, Inc.'s Current Report on Form 8-K dated May 13,
1998 (SEC file No. 1-2207)................................
10.14 -- Management Services Agreement, dated February 25, 1999,
by and between Triarc Companies, Inc., Snapple, Mistic,
Stewart's Beverages and Royal Crown., incorporated herein
by reference to Exhibit 10.28 to the Registration
Statement on Form S-4 filed by Triarc Consumer Products
Group, LLC and Triarc Beverage Holdings Corp., dated
May 17, 1999 (Registration Nos. 333-78625; 333-78625-01
through 333-78625-028)....................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
10.15 -- Tax Sharing Agreement, dated February 25, 1999, by and
between Triarc Companies, Inc., Triarc Consumer Products
Group, Snapple Beverage Group, Snapple, Mistic, Stewart's
Beverages, RC/Arby's Corporation, Royal Crown, Arby's, and
ARHC, LLC., incorporated herein by reference to Exhibit
10.29 to the Registration Statement on Form S-4 filed by
Triarc Consumer Products Group, LLC and Triarc Beverage
Holdings Corp., dated May 17, 1999 (Registration Nos.
333-78625; 333-78625-01 through 333-78625-28).............
10.16 -- Amendment No. 1 to the Tax Sharing Agreement, dated April
23, 1999, by and among Triarc Companies, Inc., Triarc
Consumer Products Group, Snapple Beverage Group, Snapple,
Mistic, Stewart's Beverages, RC/Arby's Corporation, Royal
Crown, Arby's and ARHC, LLC, incorporated herein by
reference to Exhibit 10.30 to the Registration Statement
on Form S-4 filed by Triarc Consumer Products Group, LLC
and Triarc Beverage Holdings Corp., dated May 17, 1999
(Registration Nos. 333-78625; 333-78625-01 through
333-78625-28).............................................
10.17 -- Amendment to Tax Sharing Agreements, dated as of August
15, 1998, among Snapple Beverage Group, Snapple, Mistic
and Stewart's Beverages, incorporated herein by reference
to Exhibit 10.33 to the Registration Statement on Form S-4
filed by Triarc Consumer Products Group, LLC and Triarc
Beverage Holdings Corp., dated May 17, 1999 (Registration
Nos. 333-78625; 333-78625-01 through 333-78625-28)........
10.18 -- Amendment No. 2 to the Tax Sharing Agreement, dated as of
April 23, 1999, by and among Triarc Companies, Inc.,
Triarc Consumer Products Group, Snapple Beverage Group,
Snapple, Mistic, Stewart's Beverages, RC/Arby's
Corporation, Royal Crown, Arby's and ARHC, LLC,
incorporated herein by reference to Exhibit 10.38 to
Amendment No. 2 to Registration Statement on Form S-4
filed by Triarc Consumer Products Group, LLC and Triarc
Beverage Holdings Corp., dated October 1, 1999
(Registration Nos. 333-78625; 333-78625-01 through
333-78625-28).............................................
10.19 -- Amendment No. 1 to the 1997 Option Plan, incorporated by
reference to Exhibit 10.36 to Amendment No. 1 to the
Registration Statement on Form S-4 filed by Triarc
Consumer Products Group, LLC and Triarc Beverage Holdings
Corp., dated August 3, 1999 (Registration Nos. 333-78625;
333-78625-01 through 333-78625-28)........................
10.20 -- Letter agreement between Royal Crown and John L. Belsito,
dated July 23, 1998; incorporated herein by reference to
Exhibit 10.1 to RC/Arby's Corporation Current Report on
Form 8-K dated November 5, 1998 (SEC file No. 33-62778)...
10.21* -- Amendment No. 1 to the Amended and Restated Employment
Agreement dated as of June 1, 1997 by and between Snapple,
Mistic and Michael Weinstein..............................
10.22* -- Amendment No. 1 to the Amended and Restated Employment
Agreement dated as of June 1, 1997 by and between Snapple,
Mistic and Ernest J. Cavallo..............................
10.23* -- Letter agreement between Stewart's and Samuel M. Simpson,
dated November 25, 1997...................................
10.24* -- Amendment No. 2 to the 1997 Option Plan..................
10.25** -- Form of Registration Rights Agreement, among Triarc
Companies, Inc., RC/Arby's Corporation and Snapple
Beverage Group............................................
10.26** -- Form of Initial Public Offering and Separation Agreement,
between Triarc Companies, Inc. and Snapple Beverage
Group.....................................................
10.27** -- Form of Release and Indemnification Agreement, between
Triarc Companies, Inc., Snapple Beverage Group and the
other parties thereto.....................................
10.28** -- Snapple Beverage Group, Inc. 2000 Equity Participation
Plan (the '2000 Equity Participation Plan')...............
10.29** -- Form of Non-Qualified Stock Option Agreement under the
2000 Equity Participation Plan............................
10.30** -- Form of Confidentiality and Non-Solicitation Agreement...
21.1* -- Subsidiaries of Snapple Beverage Group (giving effect to
restructuring)............................................
23.1* -- Consent of Deloitte & Touche LLP.........................
23.2* -- Consent of Arthur Andersen LLP...........................
23.3** -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison
(included as part of Exhibit 5.1).........................
24.1* -- Powers of Attorney (contained on signature page).........
</TABLE>
---------
* Filed herewith
** To be filed with amendment
STATEMENT OF DIFFERENCES
------------------------
The trademark symbol shall be expressed as............................... 'TM'
The registered trademark symbol shall be expressed as.................... 'r'
