SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to_________________
Commission file number: 1-2207
TRIARC COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-0471180
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 Third Avenue, New York, New York 10022
(Address of principal executive offices) (Zip code)
(212) 230-3000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if it changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
There were 23,910,296 shares of the registrant's Class A Common Stock and
5,997,622 shares of the registrant's Class B Common Stock outstanding as of
October 31, 1995.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,September 30,
1994 1995
-----------------------
(In thousands)
ASSETS (A) (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 80,064 $ 39,046
Restricted cash and cash equivalents 6,804 4,990
Marketable securities 9,453 7,602
Receivables, net 141,377 158,433
Inventories 105,662 137,605
Deferred income tax benefit 6,023 5,347
Prepaid expenses and other current assets 9,766 9,622
--------- -----------
Total current assets 359,149 362,645
Properties, net 306,293 341,632
Unamortized costs in excess of net assets of
acquired companies 202,797 282,443
Deferred costs and other assets 53,928 75,955
--------- -----------
$ 922,167 $1,062,675
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $ 52,061 $ 43,719
Accounts payable 59,152 59,776
Accrued facilities relocation and corporate
restructuring costs 22,773 6,016
Other accrued expenses 89,019 90,558
--------- -----------
Total current liabilities 223,005 200,069
--------- -----------
Long-term debt 612,118 754,434
Deferred income taxes 22,701 21,112
Deferred income and other liabilities 24,332 29,789
Redeemable preferred stock 71,794 --
Stockholders' equity (deficit):
Common stock 2,798 3,398
Additional paid-in capital 79,497 162,037
Accumulated deficit (60,929) (58,976)
Treasury stock (45,473) (46,015)
Other (7,676) (3,173)
--------- -----------
Total stockholders' equity (deficit) (31,783) 57,271
--------- -----------
$922,167 $1,062,675
========= ===========
<FN>
(A) Derived from the audited consolidated financial statements as of December 31, 1994.
</FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------- ---------------
1994 1995 1994 1995
---- ---- ---- ----
(In thousands except per share amounts)
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Net sales $242,821 $277,362 $756,250 $829,080
Royalties, franchise fees
and other revenues 13,322 14,513 37,381 40,069
------------------ ------------------
256,143 291,875 793,631 869,149
------------------ --------- ---------
Costs and expenses:
Cost of sales 183,238 210,682 561,465 627,354
Advertising, selling
and distribution 32,120 36,067 82,315 95,035
General and administrative 29,330 32,413 89,166 97,027
Facilities relocation and
corporate restructuring 5,500 -- 6,800 --
------------------ --------- ---------
250,188 279,162 739,746 819,416
------------------ --------- ---------
Operating profit 5,955 12,713 53,885 49,733
Interest expense (18,280) (21,266) (53,748) (60,397)
Other income (expense), net 6,780 (959) 9,353 15,873
------------------ --------- ---------
Income (loss) before income taxes (5,545) (9,512) 9,490 5,209
Benefit from (provision for)
income taxes 2,662 3,736 (5,175) (3,256)
------------------ --------- ---------
Net income (loss) $ (2,883) $(5,776) $ 4,315 $ 1,953
================== ========= =========
Income (loss) per share $ (.18) $ (.19) $ -- $ .07
================== ========= =========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine months ended
September 30,
-------------------
1994 1995
---- ----
(In thousands)
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,315 $ 1,953
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization of
properties 25,167 27,912
Amortization of costs in excess of net
assets of acquired companies 5,123 6,116
Amortization of original issue discount,
deferred financing costs and unearned
compensation 8,328 8,979
Gain on sales of timberland in 1995 and
natural gas and oil business in 1994 (6,043) (11,971)
Payments (net of provision in 1994) of
facilities relocation and corporate
restructuring charges (7,049) (3,794)
Provision for (benefit from) deferred
income taxes 3,045 (913)
Other, net (3,312) 3,978
Changes in operating assets and
liabilities:
Decrease (increase) in:
Receivables (13,599) (89)
Inventories 2,825 (18,750)
Restricted cash and cash equivalents and
prepaid expenses and other current
assets 5,839 2,487
Decrease in accounts payable and accrued
expenses (48,807) (20,462)
-------- --------
Net cash used in operating activities (24,168) (4,554)
-------- --------
Cash flows from investing activities:
Business acquisitions:
Accounts receivable -- (18,482)
Inventories -- (13,193)
Properties, net (12,130) (13,109)
Costs in excess of net assets of businesses
acquired (7,287) (85,905)
Accounts payable and accrued expenses -- 23,751
Capitalized leases assumed 6,078 3,180
Other assets, net (1,762) (7,528)
-------- --------
(15,101) (111,286)
Proceeds from sales of non-core businesses
and properties 25,109 17,872
Capital expenditures (34,395) (55,976)
Net proceeds from sales of marketable securities 991 2,054
Investments in common stock of affiliates (7,198) (5,340)
Investment in preferred stock of affiliate -- (1,000)
-------- ---------
Net cash used in investing activities (30,594) (153,676)
-------- ---------
Cash flows from financing activities:
Proceeds from long-term debt 21,199 156,772
Repayments of long-term debt (38,095) (28,753)
Payment of deferred financing costs -- (8,340)
Payment of preferred dividends (5,833) --
Other (937) (545)
-------- ---------
Net cash provided by (used in) financing
activities (23,666) 119,134
-------- ---------
Net cash used in continuing operations (78,428) (39,096)
Net cash provided by (used in) discontinued
operations 6,791 (1,922)
-------- ---------
Net decrease in cash and cash equivalents (71,637) (41,018)
Cash and cash equivalents at beginning of period 118,801 80,064
-------- ---------
Cash and cash equivalents at end of period $47,164 $ 39,046
======== =========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 1995
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of Triarc Companies, Inc. ("Triarc" and, together with its subsidiaries, the
"Company") have been prepared in accordance with Rule 10-01 of Regulation S-
X promulgated by the Securities and Exchange Commission and, therefore, do
not include all information and footnotes necessary for a fair presentation
of financial position, results of operations and cash flows in conformity
with generally accepted accounting principles. In the opinion of the
Company, however, the accompanying condensed consolidated financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Company's financial position as
of December 31, 1994 and September 30, 1995, its results of operations for
the three-month and nine-month periods ended September 30, 1994 and 1995 and
its cash flows for the nine-month periods ended September 30, 1994 and 1995.
This information should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 ("Form 10-K").
Certain amounts included in the prior periods' condensed consolidated
financial statements have been reclassified to conform with the current
periods' presentation.
(2) Accounting Policies
A summary of the Company's significant accounting policies is set
forth in Note 1 to the consolidated financial statements in the Form 10-K.
The accounting policy for its derivative financial instrument, however, as
set forth in the Form 10-K has been clarified as follows:
Derivative Financial Instrument
The Company has an interest rate swap agreement entered into in order
to synthetically alter the interest rate of certain of the Company's fixed-
rate debt. The Company calculates the estimated remaining amount to be paid
or received under the interest rate swap agreement for the period from the
last payment date to the end of the agreement based on the interest rate
applicable at the financial statement date and recognizes such amount which
applies to the period from the last payment date through the financial
statement date as a component of interest expense. The recognition of gain
or loss from the interest rate swap agreement is effectively correlated with
the stated interest on the underlying debt. The payment received at the
inception of the agreement, which was deemed to be a fee to induce the
Company to enter into the agreement, is being amortized over the full life
of the agreement since the Company was not at risk for any gain or loss on
such payment.
(3) Inventories
The following is a summary of the components of inventories:
<TABLE>
<CAPTION>
December 31,September 30,
1994 1995
---- ----
(In thousands)
<S> <C> <C>
Raw materials $26,490 $ 37,513
Work in process 7,803 7,992
Finished goods 71,369 92,100
--------- ---------
$105,662 $137,605
========= =========
</TABLE>
(4) Properties
The following is a summary of the components of properties, net:
<TABLE>
<CAPTION>
December 31,September 30,
1994 1995
---- ----
(In thousands)
<S> <C> <C>
Properties, at cost $515,109 $567,704
Less accumulated depreciation
and amortization 208,816 226,072
--------- ---------
$306,293 $341,632
========= =========
</TABLE>
(5) Other Income (Expense), Net
Other income (expense), net for the three-month and nine-month periods
ended September 30, 1995 consists of the following components:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1994 1995 1994 1995
---- ---- ---- ----
(In thousands)
<S> <C> <C>
Gain on sale of excess timberland $ -- $ 70 $ -- $11,971
Gain on sale of natural gas and oil
business 6,043 -- 6,043 --
Interest income 876 863 3,071 2,707
Equity in loss and writedown of
investment in 1995 of affiliates (87) (1,355) (87) (2,547)
Posner Settlement (Note 7) -- -- -- 2,312
Insurance settlement for fire-
damaged equipment -- -- -- 1,875
Other, net (52) (537) 326 (445)
------ ------ ------ ------
$6,780 $ (959) $9,353 $15,873
====== ====== ====== ======
</TABLE>
(6) Income (Loss) Per Share
The income (loss) per share has been computed by dividing the net income
(loss) applicable to common stockholders (net income (loss) less preferred
stock dividend requirements of $1,458,000 and $4,375,000 for the three and
nine-month periods ended September 30, 1994, respectively) by the number of
common and common equivalent shares below. The common and common equivalent
shares used in the calculations of income (loss) per share were 24,042,000
and 29,906,000 for the three-month periods ended September 30, 1994 and
1995, respectively, and 23,014,000 and 29,715,000 for the nine-month periods
ended September 30, 1994 and 1995, respectively. Fully diluted income
(loss) per share is not presented for any period since contingent issuances
of common shares would have been antidilutive or had no effect on the income
(loss) per share.
(7) Posner Settlement
On January 9, 1995 the Company entered into a settlement agreement
(the "Settlement Agreement") with Victor Posner and certain entities
controlled by him (collectively, the "Posner Entities") as described more
fully in Note 34 to the consolidated financial statements in the Form 10-K
("Note 34"). In connection therewith, all of the 5,982,866 shares of
redeemable preferred stock, with an aggregate book value of $71,794,000 and
which were owned by the Posner Entities, were converted into 4,985,722
shares of the Company's Class B Common Stock (the "Conversion"). Further, an
additional 1,011,900 shares of Class B Common Stock (valued at an aggregate
$12,016,000) were issued to the Posner Entities (the "Issuance") for
consideration set forth in Note 34. As a result of the Conversion and the
Issuance, "Common stock" and "Additional paid-in capital" increased by
$600,000 and $83,211,000, respectively, during the first quarter of 1995.
As part of the Settlement Agreement, all amounts due to the Posner
Entities in connection with the termination of the lease for the Company's
former headquarters were settled resulting in a pretax gain to the Company
of $310,000. In addition, the Company released accruals for (i) litigation
expenses of $773,000 and (ii) interest on the lease termination obligation
of $638,000. Further, pursuant to the Settlement Agreement, Posner paid the
Company $6,000,000 in January 1995 in exchange for, among other things, the
release by the Company of the Posner Entities from certain claims that it
may have and, in accordance with a court order issued on February 7, 1995,
utilized a portion of such funds to make payments aggregating $3,150,000,
all as detailed in Note 34. Additionally, the special committee of the
Company's Board of Directors was disbanded and the three court-appointed
members of the special committee decided not to stand for re-election as
directors of the Company at the 1995 annual shareholders meeting. In
connection therewith, the vesting of such directors' restricted stock was
accelerated resulting in the recognition of previously unamortized deferred
compensation of $1,690,000 during the first quarter of 1995 included in
"General and administrative". As a result of all of the above, the Company
recorded pretax income of $2,881,000 relating to the Settlement Agreement,
consisting of charges, net, to "General and administrative" of $69,000 and
credits to "Other income, net" of $2,312,000 and to "Interest expense" of
$638,000, during the first quarter of 1995.
(8) FFCA Financing
Effective as of May 1, 1995 two newly-formed wholly-owned subsidiaries
(the "New Subsidiaries") of RC/Arby's Corporation ("RCAC", a wholly-owned
subsidiary of the Company), borrowed an aggregate of $37,294,000 from a
commercial lender pursuant to mortgage and equipment loan agreements (as
amended October 13, 1995, the "Mortgage Loan Agreements"). Such proceeds
are being or have been used principally to fund capital expenditures in the
restaurant segment and, to a lesser extent, to pay related fees and expenses
and for general corporate purposes. Outstanding borrowings under the
Mortgage Loan Agreements as of September 30, 1995 consisted of $34,233,000
of mortgage loans (the "Mortgage Loans") and $2,818,000 of equipment loans
(the "Equipment Loans"). The Mortgage Loans and Equipment Loans (the
"Loans") bear interest at 11 1/2% plus, with respect to the Mortgage Loans,
participating interest to the extent gross sales of the financed restaurants
exceed certain defined levels which are in excess of current levels. The
Mortgage Loans and Equipment Loans are repayable in equal monthly
installments, including interest, over twenty years and seven years,
respectively. The Loans are secured by restaurants and equipment with a net
book value of approximately $32,700,000 as of September 30, 1995. In
connection therewith, all of the equipment securing the Equipment Loans,
with a net book value of $2,747,000 as of May 1, 1995, was released as
security for the payment of RCAC's 9 3/4% senior notes due 2000. The
Mortgage Loan Agreements permit the New Subsidiaries to obtain additional
loans aggregating up to $50,000,000 through December 31, 1996 (the
"Additional Loans"), to finance new company-owned restaurants whose sites
are identified to the lender by April 30, 1996, on substantially the same
terms as described above, except that the Additional Loans shall bear
interest at 11 1/4% (subject to adjustment, should the 10-year United States
Treasury Note rate fall below 5 1/2% or rise above 8% at the time of
borrowing, and also subject to participating interest as described above).
There were no Additional Loans outstanding as of September 30, 1995. The
assets of Arby's Restaurant Development Corporation, one of the New
Subsidiaries, will not be available to pay creditors of Triarc, RCAC or
RCAC's wholly-owned subsidiary, Arby's, Inc., until the Loans and any
Additional Loans to it have been repaid in full.
(9) Graniteville Credit Facility Amendment
Graniteville Company ("Graniteville"), a wholly-owned subsidiary of
the Company and C.H. Patrick & Co., Inc. ("C.H. Patrick"), Graniteville's
wholly-owned subsidiary, have a senior secured credit facility with
Graniteville's commercial lender, the terms of which are disclosed in Note
13 to the Company's consolidated financial statements in the Form 10-K. On
August 3, 1995 such credit facility was amended (the "Amended Credit
Facility") thereby (i) increasing the maximum credit to $130,000,000 of
revolving credit loans (the "Revolving Loan") and $86,000,000 of term loans
(the "Term Loan"), (ii) extending maturities, (iii) lowering interest rates
by approximately 1/4%, (iv) modifying the related financial covenant
requirements and (v) modifying and extending Graniteville's factoring
arrangement. The amended Revolving Loan does not require any amortization
of principal prior to its expiration in 2000. The amended Term Loan is
repayable in installments of $800,000 in November 1995, $11,600,000 in 1996,
$12,400,000 in 1997 through 1999 and $36,400,000 in 2000. On August 4, 1995
Graniteville borrowed $36,000,000 under the Amended Credit Facility which it
loaned to Triarc. Triarc used $25,000,000 of such proceeds to make a
capital contribution to Mistic Brands, Inc. to partially fund the Mistic
Acquisition described below. On August 25, 1995 Graniteville entered into a
two-year interest rate cap agreement required by the Amended Credit Facility
which effectively caps Graniteville's interest rate on $108,000,000 of its
borrowings by providing for the Company to receive payment of the excess, if
any, of the 90-day LIBOR rate (5.95% at September 30, 1995) over 9% on the
$108,000,000 contract amount. Assuming consummation of the sale of the
textile division of Graniteville (see Note 11), the buyer will assume
$174,400,000 of Graniteville's long-term debt, including debt under the
Amended Credit Facility in the currently estimated amount of approximately
$163,000,000.
(10) Acquisitions
On August 9, 1995 a wholly-owned subsidiary of Triarc, Mistic Brands,
Inc. ("Mistic Brands"), acquired (the "Acquisition") substantially all of
the assets and operations, subject to related operating liabilities, as
defined, of certain companies (the "Acquired Business") which develop,
market and sell carbonated and non-carbonated fruit drinks, ready-to-drink
brewed iced teas and naturally flavored sparkling waters under various
trademarks and tradenames including "Mistic" and "Royal Mistic". The
purchase price for the Acquisition, aggregating $97,000,000, subject to a
post-closing adjustment, consisted of (i) $93,000,000 in cash, (ii)
$1,000,000 of deferred purchase price to be paid in eight equal quarterly
installments commencing in November 1995 and (iii) non-compete agreement
payments aggregating $3,000,000 payable through December 1998 with payments
commencing upon the later of August 1996 or a final settlement or judgement
in the distributor litigation referred to below.
The cash portion of the Acquisition purchase price was financed
through (i) the aforementioned $25,000,000 capital contribution to Mistic
Brands from Triarc and (ii) borrowings under a new $80,000,000 senior debt
financing (the "Mistic Bank Facility") with a syndicate of banks. The
Mistic Bank Facility consists of a $20,000,000 revolving credit facility
(the "Revolving Facility") and a $60,000,000 term facility (the "Term
Facility"), of which $11,500,000 and $60,000,000, respectively, were
borrowed to fund the cash purchase price and approximately $3,500,000 of
fees and expenses related to the financing. Borrowings under the Mistic Bank
Facility bore interest at the prime rate through October 16, 1995 and
thereafter, at the Company's option, at varying LIBOR rates for periods of
one, two, three or six months plus 2 3/4% or a base rate equal to 1 1/2%
plus the higher of the Federal funds rate plus 1/2% or the prime rate. On
November 1, 1995 Mistic Brands entered into a two-year interest rate cap
agreement required by the Mistic Bank Facility which effectively caps the
interest rate on borrowings in the initial amount of $30,000,000 and
subsequently reduced by Term Facility repayments (the "Contract Amount").
In accordance therewith, the Company will receive payment of the excess, if
any, of the 90-day LIBOR rate over 7 1/2% on the Contract Amount. Borrowings
under the Revolving Facility are due in full in August 1999. However, the
Company must reduce the borrowings under the Revolving Facility for a period
of thirty consecutive days between October 1 and March 31 each year to less
than (a) $7,000,000 in the first year and (b) $5,000,000 in the second year
and to $0 thereafter (such requirement has been met subsequent to September
30, 1995 for the October 1995/March 1996 period). Mistic Brands must also
make mandatory prepayments in an amount equal to 75% (for the years ended
December 31, 1996 and 1997) and 50% (thereafter) of excess cash flow, as
defined. Borrowings under the Term Facility are due $1,250,000 in 1995,
$5,000,000 in 1996, $6,250,000 in 1997, $10,000,000 in 1998, $11,250,000 in
1999, $15,000,000 in 2000 and $11,250,000 in 2001. The borrowing base for
the Revolving Facility is the sum of 80% of eligible accounts receivable and
50% of eligible inventory. The Mistic Bank Facility agreement contains
various covenants which, among other things, require meeting certain
financial amount and ratio tests and prohibit dividends. Substantially all
of the assets of Mistic Brands are pledged as security for obligations under
the Mistic Bank Facility and Triarc has guaranteed the payment of such
obligations. The common stock of Mistic Brands owned by the Company has
been pledged as collateral for such guarantee.
The Company granted the syndicating lending bank in connection with
the Mistic Bank Facility agreement and two senior officers of Mistic Brands
stock appreciation rights (the "Rights") for the equivalent of 3% and 9.7%,
respectively, of Mistic Brands' outstanding common stock plus the equivalent
shares represented by such stock appreciation rights. The Rights granted to
the syndicating lending bank were immediately vested and of those granted to
the senior officers, one-third vest over time and two-thirds vest depending
on the performance of Mistic Brands. The Rights provide for appreciation in
the per-share value of Mistic Brands above a base price of $28,637 per
share, which is equal to the Company's per share capital contribution to
Mistic Brands in connection with the Acquisition. The Company will
recognize periodically the estimated increase in the value of the Rights;
such amounts in the third quarter were not significant.
The Acquisition is being accounted for in accordance with the purchase
method of accounting. Preliminarily, the excess of the purchase price over
the assets and liabilities acquired has been recorded as $3,000,000 of
"Other assets" relating to the deferred non-compete payments and as
$83,783,000 of "Costs in excess of net assets of acquired companies"
("Goodwill"). The evaluation of purchase accounting adjustments has not
been completed. It is anticipated, however, that the final determination of
the allocation of the excess purchase price will materially impact only
other intangible assets, with an offsetting reduction to Goodwill.
The results of operations of the Acquired Business have been included
in the accompanying consolidated statements of operations from the date of
acquisition. The following pro forma condensed financial statements of the
Company give effect to the Acquisition and related financing as if they had
been consummated on January 1, 1994 based on preliminary estimates of
purchase accounting allocations for the Acquisition. The pro forma
condensed financial statements are presented for comparative purposes only
and do not purport to be indicative of the actual results of operations had
the Acquisition actually been consummated on January 1, 1994 or of the
future results of operations of the combined company.
<TABLE>
For the Year Ended December 31, 1994
<CAPTION>
The Acquired Pro Forma
Company Business Adjustments Pro Forma
------- --------- ------------ ---------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Revenues $1,062,251 $ 128,786 $ -- $ 1,191,307
============ ========= ========= ===========
Operating profit 68,933 13,765 (i) (6,918)(a) 75,780
Interest expense (72,980) (31) (7,972)(b)
(80,983)
Other income (expense), net 3,566 (1,813)(i) -- 1,753
------------ --------- --------- -----------
Income (loss) before income taxes (481) 11,921 (14,890) (3,450)
(Provision for) benefit from
income taxes (1,612) 175 5,792 (c) (282)
(4,637)(d)
------------ --------- --------- -----------
Net income from continuing
operations (loss) $ (2,093)$ 12,096 $ (13,735) $ (3,732)
============ ========= ============ ===========
Net income from continuing
operations (loss) per share $ (.34) $ (.41)
============ ===========
</TABLE>
<TABLE>
For the Nine Months Ended September 30, 1995
<CAPTION>
Acquired
Business
January 1
to August 8,
The 1995 (Pre- Pro Forma
Company Acquisition) Adjustments Pro Forma
------- ----------- ------------ --------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Revenues $869,149 $83,662 $ -- $ 952,811
========= ========= ========= ==========
Operating profit 49,733 204 (i) (4,210)(a) 45,727
Interest expense (60,397) (16) (5,837)(b) (66,250)
Other income (expense), net 15,873 (64)(i) -- 15,809
--------- --------- --------- ----------
Income (loss) before taxes 5,209 124 (10,047) (4,714)
(Provision for) benefit from
income taxes (3,256) (104) 3,908 (c) 500
(48)(d)
--------- --------- --------- ----------
Net income (loss) $ 1,953 $ 20 $ (6,187) $ (4,214)
========= ========= ========= ==========
Net income (loss) per share $ 0.07 $ (0.14)
========= ==========
<FN>
(i) The results of operations of the Acquired Business included in the above pro
forma condensed financial statements reflect the following significant,
non-recurring charges:
Nine months
Year ended ended
December 31, September 30,
1994 1995
---- ----
(In thousands)
Operating profit
Legal fees and settlement costs
related to distributor litigation $1,743 $ 4,500
Provision for inventory obsolensce -- 804
------- -------
1,743 5,304
Other income (expense)
Costs of unsuccessful initial public
offering 1,347 --
Other -- 300
------- -------
$3,090 $ 5,604
======= =======
(a) To reflect the amortization of (i) the $3,000,000 of deferred non-compete
payments over a life of 3 years and (ii) the estimated $83,783,000 of
Goodwill resulting from the Acquisition over an estimated average life of 14
years. Such average life for Goodwill may be different upon finalization of
purchase accounting for the Acquisition.
(b) Represents adjustments to interest expense as follows:
</FN>
</TABLE>
<TABLE>
Nine months
Year ended ended
December 31, September 30,
1994 1995
---- ----
(In thousands)
<S> <C> <C>
Interest expense on the portion of
additional borrowings under
Graniteville's credit facility
which were utilized in connection
with the Acquisition $2,004 $ 1,433
Interest expense on borrowings under
the Mistic Bank Facility 5,163 3,892
Amortization of approximately $3,200,000
of deferred financing costs related to
the Mistic Bank Facility 805 512
------- -------
$7,972 $ 5,837
======= =======
<FN>
(c) To reflect the estimated income tax effect of the above
adjustments at 38.9%.
(d) To reflect an income tax (provision) benefit on the pretax
income of the Acquired Business at 38.9%. Such provision
or benefit is not reflected in the reported results of
operations of the Acquired Business due to its S
Corporation status prior to the Acquisition.
</FN>
</TABLE>
In addition to the Acquisition, the Company consummated several
other acquisitions during the nine months ended September 30, 1995,
principally in the restaurant and liquefied petroleum gas segments, for cash
of $18,286,000 and the assumption of $3,180,000 of capitalized lease
obligations. In addition, the Company acquired, for cash of $5,340,000,
approximately 12.5% of the common stock of ZuZu, Inc. ("ZuZu"), a Dallas-
based Mexican restaurant chain, as well as options to purchase up to an
additional 37.5% of ZuZu's common stock within the next three years.
(11) Sale of Textile Division
On September 22, 1995 the Company entered into a letter of intent
with Galey & Lord, Inc. ("Galey & Lord") whereby Galey & Lord will acquire
the textile division of Graniteville, including the assumption by the buyer
of $174,400,000 of Graniteville's long-term debt. The textile division
being sold excludes the assets of C.H. Patrick and certain other assets,
principally real estate and a note receivable from Triarc, not directly
related to the textile division being sold. The textile division had
revenues in the currently estimated amounts of $497,000,000 and
$376,000,000, operating profit in the currently estimated amounts of
$21,000,000 and $15,000,000 and net income in the currently estimated
amounts of $3,073,000 and $507,000 for the year ended December 31, 1994 and
the nine months ended September 30, 1995, respectively. Galey & Lord had
revenues of $451,130,000 and $387,787,000 and net income of $17,283,000 and
$9,504,000 for their fiscal year ended October 1, 1994 and the nine months
ended July 1, 1995, respectively.
The letter of intent contemplates the issuance by Galey & Lord of
34.5% of its outstanding common stock, on a fully diluted basis, to the
Company. Using the current number of outstanding common shares of Galey &
Lord and a per share price of $12.50 (the October 31, 1995 closing price on
the New York Stock Exchange), such issuance would aggregate approximately
6,400,000 newly-issued shares with an aggregate market value of
approximately $80,000,000.
The Company's investment in the new combined company will be
accounted for in accordance with the equity method. Since the sale of the
textile division is considered to be an exchange of productive assets, the
investment will be initially recorded at the book value of the textile
division's net assets relinquished (currently estimated at approximately
$72,000,000 as of September 30, 1995) and no gain or loss will be recorded
as the result of such sale. Since the Company will retain a significant
interest in the combined company, the results of the textile division are,
and will continue to be until the closing date of the sale, reported in the
continuing operations of the Company.
Consummation of the transaction is subject to the execution of a
definitive agreement, approval by the board of directors and stockholders of
Galey & Lord and the Company's board of directors, regulatory approvals and
other customary closing conditions. The Company presently believes the
transaction will close during the first half of 1996.
(12) Transactions with Related Parties
The Company continues to have related party transactions of the same
nature and general magnitude as those described in Note 28 to the
consolidated financial statements contained in the Form 10-K.
(13) Income Taxes
The Internal Revenue Service is currently examining the Company's
Federal income tax returns for the tax years from 1989 through 1992 and has
issued to date, principally during the third quarter of 1995, notices of
proposed adjustments increasing taxable income by approximately $66,000,000,
the tax effect of which has not yet been determined. The Company is
contesting the majority of the proposed adjustments and, accordingly, the
amount of any payments required as a result thereof cannot presently be
determined. However, management of the Company believes that adequate
aggregate provisions have been made in 1995 and prior periods for any tax
liabilities, including interest, that may result from the resolution of such
proposed adjustments.
(14) Contingencies
The Company continues to have legal and environmental contingencies of
the same nature and general magnitude as those described in Note 25 to the
consolidated financial statements contained in the Form 10-K ("Note 25").
The following summarizes the significant changes to that disclosure.
In connection with the Settlement Agreement (see Note 7) and as
described in the Form 10-K, the Company received an indemnification from the
Posner Entities of any claims or expenses incurred after December 1, 1994
involving the NVF Litigation and the APL Litigation (both as defined in Note
25) against the Company and certain of its former affiliates. In October
1995 Triarc commenced an action against Victor Posner and a Posner Entity
for breach of the Settlement Agreement. In May 1995 a global settlement in
principle was reached pursuant to which all claims against the Company in
the NVF Litigation will be dismissed and the Company will bear no liability.
This settlement is subject to the approval of the bankruptcy court, which
has scheduled a hearing for November 15, 1995.
On or about June 30, 1995, the Chesapeake Litigation (see Note 25) was
settled resulting in Chesapeake Insurance paying $200,000 to NVF in full and
final settlement.
After considering amounts provided in previous periods, the Company
does not believe that the contingencies referred to above, as well as
ordinary routine litigation, will have a material adverse effect on its
consolidated financial position or results of operations.
<PAGE>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTRODUCTION
The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included herein should be read in conjunction with
"Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Annual Report on Form 10-K for the year ended
December 31, 1994 ("Form 10-K") of Triarc Companies, Inc. ("Triarc" or,
collectively with its subsidiaries, the "Company"). The recent trends
affecting the Company's four business segments are described therein.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1995 Compared with Nine Months Ended
September 30, 1994
<TABLE>
<CAPTION>
Revenues Operating Profit
Nine months ended Nine months ended
September 30, September 30,
----------------- -----------------
1994 1995 1994 1995
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Restaurants $162,441 $198,362 $13,924 $10,588
Soft Drinks 115,735 159,292 12,255 8,781
Textiles 407,147 409,034 24,996 23,290
Liquefied Petroleum Gas 108,308 102,461 13,296 7,164
Other -- -- (438) (330)
Unallocated general
corporate expenses -- -- (10,148)(a) 240 (b)
-------- -------- ------- --------
$793,631 $869,149 $53,885 $49,733
======== ======== ======= ========
<FN>
(a) Includes $6,800 of facilities relocation and corporate
restructuring charges.
(b) Includes $3,000 of gain from reduction of insurance loss reserves.
</FN>
</TABLE>
Revenues - Revenues increased $75.5 million to $869.1 million in the
nine months ended September 30, 1995.
Restaurants - Revenues increased $35.9 million (22.1%) due to
(i) $35.4 million of net sales from an average net increase of
61 (22.9%) company-owned restaurants, partially offset by a $2.2
million (2.0%) decrease in company-owned same-store sales due
primarily to increased competitive discounting and (ii) a $2.7
million (7.3%) increase in royalties and franchise fees.
Soft Drinks - Revenues increased $43.6 million (37.6%)
consisting principally of (i) $22.9 million of revenues from
Mistic Brands, Inc. ("Mistic Brands"), the Company's new
age/alternative beverage business acquired August 9, 1995 and
(ii) $16.7 million of finished soft drink product sales (as
opposed to concentrate) arising from the Company's January 1995
Tribev acquisition (the "TriBev Acquisition"). The remaining
increase of $4.0 million is principally attributable to (i) a
$2.5 million volume increase in private label concentrate sales
resulting from continued international expansion and modest
domestic growth and (ii) $1.3 million of sales from the launch
of Royal Crown Draft Premium Cola ("Draft Cola") in the New York
and Los Angeles metropolitan areas commencing late in the 1995
second quarter.
Textiles - Revenues increased $1.9 million (0.5%) reflecting
higher sales of indigo-dyed sportswear ($22.0 million), utility
wear ($4.0 million) and specialty products ($0.9 million)
significantly offset by lower sales of piece-dyed sportswear
($25.0 million). Selling prices for the sportswear and utility
wear product lines rose reflecting the partial pass-through of
higher cotton and polyester costs. In addition to higher
selling prices, indigo-dyed sportswear was also positively
impacted by higher volume amounting to $12.6 million due to
improved market conditions reflecting the continued turnaround
in the denim market which commenced in late 1994. The decrease
in piece-dyed sportswear revenue was attributable to a $26.9
million volume decrease which resulted from weak demand due to a
poor retail market.
Liquefied Petroleum Gas - Revenues decreased $5.8 million (5.4%)
due to lower volume resulting from the exceptionally warm
weather this past winter, offset slightly by higher selling
prices reflecting higher costs.
Gross profit increased $9.6 million to $241.8 million in the nine
months ended September 30, 1995 due to (i) the acquisition of Mistic Brands
($8.9 million) and (ii) the Tribev Acquisition ($2.0 million). Aside from
the effect of the new soft drink businesses, gross profit decreased $1.3
million due to lower gross margins, which decreased overall to 27.8%
compared with 29.3% for the comparable prior year period.
Restaurants - Margins decreased to 33.5% from 37.2% due
primarily to (i) start-up costs associated with the
significantly higher number of new restaurant openings, (ii)
increased competitive discounting noted above and (iii)
proportionately lower royalties and franchise fees (with no
associated cost of sales) as a percentage of total revenues.
Soft Drinks - Margins decreased to 62.6% from 76.8% due to the
inclusion in the 1995 period of the lower-margin finished
product sales associated with Mistic Brands (38.9%) and the
Tribev Acquisition (12.0%), lower margins associated with the
finished product sales of Draft Cola and, to a lesser extent, a
shift in sales mix toward international sales where selling
prices are lower.
Textiles - Margins decreased to 12.3% from 13.3% principally due
to the higher raw material cost of cotton (which reached its
highest levels this century) and polyester and other
manufacturing cost increases in 1995 which could not be fully
passed on to customers in the form of higher selling prices.
Liquefied Petroleum Gas - Margins decreased to 24.6% from 26.5%
due to higher propane costs which could only be partially passed
on to customers in the form of higher selling prices because of
increased competition as a result of the continuing effects of
the substantially warmer weather this past winter.
Advertising, selling and distribution expenses increased $12.7 million
to $95.0 million in the nine months ended September 30, 1995 of which $5.1
million relates to the soft drink acquisitions. The remaining increase of
$7.6 million reflects (i) $7.1 million of higher expenses in the soft drink
segment due to increased spending in connection with the introduction of
Draft Cola and increased media and promotional activity supporting branded
concentrate products and (ii) $4.1 million of higher expenses in the
restaurant segment primarily attributable to the increased number of
company-owned restaurants and increased promotional food costs relating to
competitive discounting, both partially offset by cost savings of the
textile segment realized upon relocation of marketing functions from New
York to Graniteville, South Carolina.
General and administrative expenses increased $7.9 million to $97.0
million in the nine months ended September 30, 1995 of which $2.7 million
relates to the soft drink acquisitions. The remaining increase of $5.2
million is principally due to increasing costs associated with building an
infrastructure to facilitate expansion plans primarily in the restaurant
segment and other general inflationary increases partially offset by lower
corporate expenses resulting from (i) a $3.0 million third quarter reduction
in insurance loss reserves established in prior years for the former
insurance operations and (ii) the June 1994 closing of the Company's
corporate office in West Palm Beach, Florida and related restructuring.
The 1994 facilities relocation and corporate restructuring charges of
$6.8 million consisted of (i) a loss on the sublease of Triarc's former
corporate office in West Palm Beach, Florida, (ii) estimated relocation
costs of employees formerly located in the West Palm Beach office relocated
during the third quarter of 1994 and (iii) severance costs related to
terminated corporate employees.
Interest expense increased $6.6 million to $60.4 million in the nine
months ended September 30, 1995 entirely due to higher average levels of
debt.
Other income, net increased $6.5 million to $15.9 million in the nine
months ended September 30, 1995. The major components of this increase were
(i) a $12.0 million gain on the sale of timberland, (ii) a $2.3 million gain
related to a January 1995 settlement agreement with Victor Posner, (iii) a
$1.9 million gain on an insurance recovery relating to fire-damaged
equipment and (iv) the minority interests in net income of a consolidated
subsidiary in the 1994 period of $1.3 million. These increases were
partially offset by (i) a $6.0 million gain on the sale of the Company's
natural gas and oil business in the third quarter of 1994, (ii) $1.7 million
equity in the net loss of a Taiwanese joint venture investment made in
August 1994, (iii) a $1.0 million nonrecurring realized gain in the prior
year period in connection with the redemption of an investment previously
written off and (iv) a $0.8 million third quarter 1995 writedown of a
preferred stock investment in a soft drink distributor.
The provisions for income taxes in the nine months ended September 30,
1994 and 1995 represent effective tax rates of 54.5% and 62.5%,
respectively, which are higher than the Federal income tax statutory rate of
35.0% principally due to goodwill amortization which is not deductible for
income tax purposes and the effects of state income taxes, net of Federal
benefit. Such rate is higher in the 1995 period due to the proportionately
greater effect of goodwill amortization in relation to the lower pretax
income.
Three Months Ended September 30, 1995 Compared with Three Months Ended
September 30, 1994
<TABLE>
<CAPTION>
Revenues Operating Profit
Three months ended Three months ended
September 30, September 30,
------------------ ------------------
1994 1995 1994 1995
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Restaurants $58,404 $ 72,838 $ 4,567 $ 4,135
Soft Drinks 38,116 67,115 235 2,547
Textiles 133,474 126,186 8,630 6,602
Liquefied Petroleum Gas 26,149 25,736 (949) (2,020)
Other -- -- (240) (234)
Unallocated general
corporate expenses -- -- (6,288)(a) 1,683 (b)
--------- ------- -------- --------
$256,143 $291,875 $ 5,955 $ 12,713
========= ======= ======== ========
<FN>
(a) Includes $5,500 of facilities relocation and corporate
restructuring charges.
(b) Includes $3,000 of gain from reduction of insurance
loss reserves.
</FN>
</TABLE>
Revenues increased $35.7 million to $291.9 million in the three months
ended September 30, 1995.
Restaurants - Revenues increased $14.4 million (24.7%) due to
(i) an increase of $14.7 million of net sales from an average
net increase of 84 (30.8%) company-owned restaurants partially
offset by a $1.5 million (3.9%) decrease in company-owned same-
store sales due primarily to increased competitive discounting
and (ii) a $1.2 million (9.1%) increase in royalties and
franchise fees.
Soft Drinks - Revenues increased $29.0 million (76.1%)
consisting principally of (i) $22.9 million of revenues from
Mistic Brands and (ii) $5.0 million of sales associated with the
Tribev Acquisition. The remaining increase of $1.1 million is
primarily attributable to sales of Draft Cola. Such increases
are net of the $0.7 million negative effect on branded
concentrate sales due to a decline in sales to the Company's
third largest independent bottler, the Seven-UP/RC Bottling
Company of Southern California, which has been experiencing
financial difficulties.
Textiles - Revenues decreased $7.3 million (5.5%) reflecting
lower sales of piece-dyed sportswear ($10.0 million), utility
wear ($3.2 million) and specialty products ($1.7 million),
partially offset by higher sales of indigo-dyed sportswear ($7.9
million). Selling prices for the sportswear and utility wear
product lines rose reflecting the partial pass-through of higher
cotton and polyester costs. The decrease in sales of piece-dyed
sportswear was due to the $10.7 million effect of lower volume
which resulted from weak demand due to a poor retail market.
The increase in indigo-dyed sportswear, in addition to higher
selling prices, resulted from greater volume ($4.1 millon)
reflecting the continued turnaround in the denim market. Lower
sales volume of utility wear of $5.2 million, reflecting weak
demand and a poor retail market, more than offset the higher
selling prices.
Liquefied Petroleum Gas - Revenues decreased $0.4 million (1.6%)
entirely due to lower volume.
Gross profit increased $8.3 million to $81.2 million in the three
months ended September 30, 1995 due to (i) the acquisition of Mistic Brands
($8.9 million) and (ii) the Tribev Acquisition ($0.7 million). Aside from
the effect of the new soft drink businesses, gross profit decreased $1.3
million due to lower gross margins, which decreased overall to 27.1%
compared with 28.5% for the comparable prior year period.
Restaurants - Margins declined to 31.5% from 36.8% due to (i)
start up costs associated with the significantly higher number
of new restaurant openings, (ii) increased competitive
discounting and (iii) proportionately lower royalties and
franchise fees (with no associated cost of sales) as a
percentage of total revenues.
Soft Drinks - Margins decreased to 58.0% from 77.0% due to the
inclusion in the 1995 period of the lower-margin finished
product sales associated with Mistic Brands (38.9%)and the
Tribev Acquisition (14.5%), lower margins associated with Draft
Cola and, to a lesser extent, a shift in sales mix toward
international sales where selling prices are lower.
Textiles - Margins decreased to 11.9% from 13.5% principally due
to higher raw material costs and other manufacturing costs in 1995
which could not be fully passed on to customers in the form of
higher selling prices.
Liquefied Petroleum Gas - Margins increased to 16.9% from 15.4%
due to lower labor costs reflecting headcount reductions and
lower casualty insurance costs substantially offset by higher
propane costs which could only be partially passed on to
customers in the form of higher selling prices because of
increased competition induced by substantially warmer weather
this past winter.
Advertising, selling and distribution expenses increased $3.9 million
to $36.1 million in the three months ended September 30, 1995 of which $3.6
million relates to the soft drink acquisitions.
General and administrative expenses increased $3.1 millon to $32.4
million in the three months ended September 30, 1995 of which $2.6 million
relates to the soft drink acquisitions. The remaining increase of $0.5
million is principally due to increasing costs associated with building an
infrastructure to facilitate expansion plans primarily in the restaurant
segment and, to a lesser extent, other general inflationary increases,
mostly offset by lower corporate expenses resulting from a $3.0 million
third quarter reduction in insurance loss reserves.
The 1994 facilities relocation and corporate restructuring charges of
$5.5 million consisted of the same types of charges previously discussed.
Interest expense increased $3.0 million to $21.3 million in the three
months ended September 30, 1995 due to higher average levels of debt
partially offset by the October 1994 refinancing of $49.0 million principal
amount of certain fixed-rate debt with lower, variable-rate debt.
Other income, net amounted to an expense of $1.0 million in the three
months ended September 30, 1995 compared with income of $6.8 million in the
prior year quarter due to (i) a $6.0 million gain on the 1994 sale of the
Company's natural gas and oil business, (ii) a $0.8 million writedown of a
1995 preferred stock investment in a soft drink distributor, (iii) $0.5
million equity in the net loss in a Taiwanese joint venture investment made
in August 1994 and (iv) losses on the sale of properties.
The benefits from income taxes for the three months ended September
30, 1994 and 1995 represent effective rates of 48.0% and 39.3%,
respectively, resulting from the reductions of the tax provisions recorded
in the first half of the respective years on pretax income representing
rates which were higher than the Federal income tax statutory rate
principally due to the effects of state income taxes, net of Federal
benefit, and goodwill amortization. The effective rate for the tax benefit
in the 1995 quarter was lower than it otherwise would have been due to the
catch-up effect of a year-to-date increase in the estimated full year 1995
effective tax rate from 47.5% to 62.5% relating to pretax income of the
first half of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated cash and cash equivalents (collectively, "cash")
decreased $41.0 million during the nine months ended September 30, 1995 to
$39.0 million reflecting cash used in (i) operating activities of $4.5
million, (ii) investing activities of $153.7 million and (iii) discontinued
operations of $1.9 million, all partially offset by cash provided by
financing activities of $119.1 million. The net cash used in operating
activities primarily reflects net income of $2.0 million plus non-cash
charges for depreciation and amortization of $43.0 million offset by (i)
changes in operating assets and liabilities of $36.8 million and (ii) the
reporting of the net gain on the sale of excess timberland of $12.0 million
within investing activities. The change in operating assets and liabilities
principally consists of an increase in inventories of $18.7 million and a
decrease in accounts payable and accrued expenses of $20.5 million. The
increase in inventories is primarily due to higher quantities and higher
unit costs reflecting increases in raw material prices. The decrease in
accounts payable and accrued expenses was due to the timing of payments
including semi-annual interest payments. The Company expects that
operations for the remainder of 1995 will result in positive cash flows from
operations. The cash used in investing activities principally reflects (i)
$111.3 million of cash paid for business acquisitions including $93.0
million for the August 1995 Mistic Brands acquisition and (ii) capital
expenditures of $56.0 million. The cash provided by financing activities
principally reflects borrowings of long-term debt of $156.8 million
partially offset by debt repayments of $28.8 million and payments of
deferred financing costs of $8.3 million.
Total stockholders' equity improved to $57.3 million at September 30,
1995 from a deficit of $31.8 million at December 31, 1994. Such improvement
was due to (i) the $83.8 million effect of the Company's issuances of its
Class B Common Stock in connection with the settlement agreement described
in Note 7 to the accompanying condensed consolidated financial statements,
(ii) net income of $2.0 million, (iii) the recognition of $1.7 million of
previously unamortized deferred compensation and (iv) $1.6 million of other
net increases.
Consolidated capital expenditures, excluding business acquisitions and
including capital leases, amounted to $56.4 million for the nine months
ended September 30, 1995. The Company expects that capital expenditures
during the remainder of 1995 will approximate $16.0 million, of which there
were approximately $12.0 million of outstanding commitments as of September
30, 1995. These actual and anticipated expenditures reflect increased
spending levels over 1994 principally in the restaurant segment in
furtherance of its business strategies, principally for construction of new
company-owned restaurants and remodeling of older restaurants, but reflect a
$16.8 million reduction of previously planned expenditures in the restaurant
segment primarily as a result of the cancellation of certain projects and
the deferral of certain other spending to 1996. RC/Arby's Corporation
("RCAC", an indirect wholly-owned subsidiary of the Company) anticipates
financing its capital expenditures of approximately $10.0 million with
existing cash ($9.3 million as of September 30, 1995), cash flows from its
operations and/or borrowings under the Mortgage Loan Agreements (see below).
The Company anticipates that it will meet its remaining capital expenditure
requirements through cash including $0.7 million of cash restricted for
capital expenditures, cash flows from operations, if any, and leasing
arrangements.
Cash paid for business acquisitions amounted to $111.3 million during
the nine months ended September 30, 1995. During such period the Company
completed (i) the Mistic Brands acquisition (see Note 10 to the accompanying
condensed consolidated financial statements for a detailed discussion of the
acquisition and related financing) for cash of $93.0 million, (ii) the
acquisition of 51 previously franchised restaurants for cash of $10.8
million, the assumption of approximately $2.7 million of capitalized lease
obligations and the assumption of additional leases, (iii) liquefied
petroleum gas acquisitions for aggregate cash of $4.6 million and the
assumption of approximately $0.5 million of capitalized lease obligations
and (iv) the Tribev Acquisition for cash of $2.9 million. In addition, in
September 1995 the Company acquired, for cash of $5.3 million, approximately
12.5% of the common stock of ZuZu, Inc. ("ZuZu"), a Dallas-based Mexican
restaurant chain, as well as options to purchase up to an additional 37.5%
of ZuZu's common stock within the next three years. The Company also made a
$1.0 million investment in a soft drink distributor which distributes Royal
Crown soft drinks and other beverages predominantly in New York City and
Long Island, New York. In furtherance of the Company's growth strategy, the
Company will consider additional selective acquisitions, as appropriate, to
build and strengthen its existing businesses.
On September 22, 1995 the Company entered into a letter of intent with
Galey & Lord, Inc. ("Galey & Lord") whereby Galey & Lord will acquire the
textile division of Graniteville Company ("Graniteville", a wholly-owned
subsidiary of the Company), including the assumption by the buyer of $174.4
million of Graniteville's long-term debt. The letter of intent
contemplates the issuance by Galey & Lord of 34.5% of its outstanding common
stock, on a fully diluted basis, to the Company. See Note 11 to the
accompanying condensed consolidated financial statements for further details
regarding the sale and the textile division being sold. Assuming such
transaction is consummated, the Company does not expect its investment in
the new combined company to be a current source of cash since cash dividends
are not currently paid on the common stock of Galey & Lord.
The Company's principal operating subsidiaries each have various
credit facilities, including revolving and term loans, or senior note
issuances outstanding which are described in detail in Note 13 to the
consolidated financial statements contained in the Form 10-K supplemented by
the disclosure in Notes 9 and 10 to the accompanying condensed consolidated
financial statements of Graniteville's amended credit facility and the
Mistic Brands' bank facility, respectively. At September 30, 1995
Graniteville had $12.5 million of unused availability under its credit
facility. National Propane Corporation ("National Propane", an indirect
wholly-owned subsidiary of the Company) effectively had $4.0 million of
unused availability under its bank facility for general purposes and $30.0
million available to fund, in part, the redemption, prior to December 31,
1995, of the $45.0 million outstanding principal amount of the 11 7/8%
senior subordinated debentures due February 1, 1998 (the "11 7/8%
Debentures") of Southeastern Public Service Company ("SEPSCO"). Mistic
Brands had $4.7 million available under its bank facility.
Effective as of May 1, 1995 two newly-formed wholly-owned subsidiaries
of RCAC borrowed an aggregate of $37.3 million from a commercial lender
pursuant to mortgage and equipment loan agreements (as amended October 13,
1995, the "Mortgage Loan Agreements"). See Note 8 to the accompanying
condensed consolidated financial statements for further discussion relating
to borrowings under the Mortgage Loan Agreements. Outstanding borrowings
under the Mortgage Loan Agreements as of September 30, 1995 were $37.0
million which require principal repayments of only $0.2 million during the
remainder of 1995. Availability under the Mortgage Loan Agreements amounted
to $50.0 million as of September 30, 1995 which is available through
December 31, 1996 and which is restricted to the financing of new
restaurants identified to the lender by April 30, 1996.
Under the Company's various debt agreements substantially all of the
Company's assets are pledged as security. In addition, obligations under
(i) RCAC's 9 3/4% senior notes have been guaranteed by RCAC's wholly-owned
subsidiaries, Royal Crown Company, Inc. ("Royal Crown") and Arby's, Inc.
("Arby's") and (ii) Graniteville's amended credit facility, National
Propane's bank facility, the Mortgage Loan Agreement and the Mistic Brands
bank facility have been guaranteed by Triarc. As collateral for such
guarantees, all of the stock of Royal Crown, Arby's, National Propane,
SEPSCO, Mistic Brands and Graniteville (50% of such stock is subject to a
pre-existing pledge of such stock in connection with a Triarc intercompany
note payable to SEPSCO in the principal amount of $26.5 million) owned by
the Company is pledged.
The Company's debt instruments require aggregate principal payments of
$6.3 million during the remainder of 1995, exclusive of the planned early
repayment of the 11 7/8% Debentures. In connection with the merger of
Public Gas Company and National Propane which occurred in June 1995, the
Company presently intends to cause SEPSCO to repay the $45.0 million
principal amount of its 11 7/8% Debentures prior to maturity during 1995
with proceeds from a $30.0 million revolving loan (due 2000) under National
Propane's bank facility (as previously discussed) and from SEPSCO's existing
cash and marketable securities ($17.6 million as of September 30, 1995).
The Company's program, announced in late 1994, to repurchase up to
$20.0 million of its Class A Common Stock, expired in June 1995 following
the repurchase of 133,700 shares for an aggregate cost of $1.5 million.
The Internal Revenue Service ("IRS") is currently examining the
Company's Federal income tax returns for the tax years from 1989 through
1992 and has issued to date, principally during the third quarter of 1995,
notices of proposed adjustments increasing taxable income by approximately
$66.0 million, the tax effect of which has not yet been determined. The
Company is contesting the majority of the proposed adjustments and,
accordingly, the amount and timing of any payments required as a result
thereof cannot presently be determined.
As of September 30, 1995 the Company's principal cash requirements for
the remainder of 1995 consist principally of capital expenditures of
approximately $16.0 million and debt principal payments aggregating $51.3
million (including the intended repayment prior to maturity of the 11 7/8%
Debentures). The Company anticipates meeting such requirements through
existing cash and marketable securities, cash flows from operations, if any,
$30.0 million of restricted borrowings under National Propane's bank
facility, borrowings under the Mortgage Loan Agreements (restricted to
financing new company-owned restaurants), borrowings available under
Graniteville's and National Propane's credit facilities, and financing a
portion of its capital expenditures through capital leases and operating
lease arrangements. The ability of the Company to meet its long-term cash
requirements is dependent upon its ability to obtain and sustain sufficient
cash flows from operations supplemented as necessary by potential financings
to the extent obtainable.
Triarc
Triarc is a holding company whose ability to meet its cash
requirements is primarily dependent upon cash flows from its subsidiaries
including loans and cash dividends to Triarc by subsidiaries and
reimbursement by subsidiaries to Triarc in connection with the providing of
certain management services and payments under certain tax sharing
agreements with certain subsidiaries.
Under the terms of the various indentures and credit arrangements,
Triarc's principal subsidiaries are unable to pay any dividends or make any
loans or advances to Triarc for the remainder of 1995, except that (i)
SEPSCO may make loans or advances to Triarc and its subsidiaries and (ii)
National Propane may pay a $30.0 million dividend to its stockholders
(Triarc and SEPSCO), which can only be used in conjunction with the intended
repayment of the 11 7/8% Debentures previously discussed, using the proceeds
of a revolving loan under its bank facility. However, the $30.0 million
dividend is restricted to the repayment of the 11 7/8% Debentures.
As of September 30, 1995, Triarc had outstanding external indebtedness
consisting of a $36.2 million 9 1/2% note. In addition, Triarc owed
subsidiaries an aggregate principal amount of $276.8 million, consisting of
notes in the principal amounts of $51.6 million, $111.1 million and $32.7
million to CFC Holdings Corp. (an indirect wholly-owned subsidiary of
Triarc), Graniteville and SEPSCO, respectively (which bear interest at rates
ranging from 9 1/2% to 13%) and $81.4 million of non-interest bearing
advances owed to National Propane. In connection with all of such debt, no
principal payments are due during the fourth quarter of 1995 and only $75.1
million of the notes payable to Graniteville require the payment of any cash
interest (currently 40% of such interest). As of September 30, 1995 Triarc
had notes receivable from RCAC and its subsidiaries in the aggregate amount
of $21.5 million which are due in 1996 through 2000 and which bear interest
at a rate of 11 7/8%.
Triarc believes that its expected sources of cash, principally cash on
hand of $6.7 million as of September 30, 1995, reimbursement of general
corporate expenses from subsidiaries in connection with management services
agreements to the extent such subsidiaries are able to pay and net payments
received under tax sharing agreements with certain subsidiaries, which the
Company does not anticipate having to remit to the IRS due to the
availability of operating loss, depletion and tax credit carryforwards, will
be sufficient to enable it to meet its short-term cash needs.
Subsequent to the consummation of the proposed sale of the textile
division of Graniteville discussed above, Triarc will no longer have the
reimbursement of general corporate expenses by the textile division as a
source of cash and currently Galey & Lord does not pay cash dividends on its
common stock. Triarc expects to compensate for such lower cash availability
through a combination of reductions in corporate expenses, management fees
from Mistic Brands and other financing sources to the extent obtainable.
RCAC
As of September 30, 1995, RCAC's cash requirements for the remainder
of 1995, exclusive of operating cash flows, consist principally of capital
expenditures of approximately $10.0 million to the extent not leased,
funding for additional acquisitions, if any, and principal payments on debt.
RCAC anticipates meeting such requirements through existing cash and/or cash
flows from operations and financing a portion of its capital expenditures
through the $50.0 million availability under the Mortgage Loan Agreements
for new restaurants. The ability of RCAC to meet its long-term cash
requirements is dependent upon its ability to obtain and sustain sufficient
cash flows from operations supplemented as necessary by potential financings
to the extent obtainable.
National Propane
As of September 30, 1995, National Propane's principal cash
requirements for the remainder of 1995, exclusive of operating cash flows,
consist principally of capital expenditures of approximately $2.2 million,
debt principal repayments of $3.5 million and funding for acquisitions, if
any. National Propane anticipates meeting such requirements through the
sale of $2.0 million of receivables to Triarc during the fourth quarter of
1995 and available borrowings of up to $4.0 million under its bank facility
and operating lease arrangements. Should National Propane's cash resources
be insufficient to meet its cash requirements, National Propane may need to
reduce its capital expenditures, negotiate relief under its bank facility or
arrange for alternative financing from Triarc.
Graniteville
The Company expects that positive operating cash flows of Graniteville
and available borrowings, if required, under its amended credit facility
will be sufficient to enable Graniteville to meet its cash requirements for
the remainder of 1995.
SEPSCO
SEPSCO's principal cash requirement for the remainder of 1995 results
from the previously discussed present intention to redeem the 11 7/8%
Debentures by December 31, 1995. The Company expects that SEPSCO's existing
cash and cash equivalents and marketable securities of $17.6 million at
September 30, 1995 (of which approximately $15.0 million is anticipated to
be utilized in connection with the repayment of the 11 7/8% Debentures)
together with the collection of $4.0 million under its notes due from RCAC
will be adequate to meet its other cash requirements.
Discontinued Operations
As of September 30, 1995 the Company has completed the sale of
substantially all of its discontinued operations but there remain certain
liabilities to be liquidated (the estimates of which have been accrued) as
well as certain contingent assets (principally two notes from the sale of
the refrigeration business) which may be collected, the benefits of which,
however, have not been recorded.
Contingencies
The Company continues to have legal and environmental contingencies of
the same nature and general magnitude as those described in "Item 7. -
Management's Discussion and Analysis of Financial Condition and Results of
Operations" ("Item 7") contained in the Form 10-K. The following summarizes
the significant changes to that disclosure.
In connection with the Settlement Agreement (see Note 7 to the
accompanying condensed consolidated financial statements) and as described
in the Form 10-K, the Company received an indemnification from the Posner
Entities of any claims or expenses incurred after December 1, 1994 involving
the NVF Litigation and the APL Litigation (both as defined in Item 7)
against the Company and certain of its former affiliates. In October 1995
Triarc commenced an action against Victor Posner and a Posner Entity for
breach of the Settlement Agreement. In May 1995 a global settlement in
principle was reached pursuant to which all claims against the Company in
the NVF Litigation will be dismissed and the Company will bear no liability.
This settlement is subject to the approval of the bankruptcy court, which
has scheduled a hearing for November 15, 1995.
On or about June 30, 1995, the Chesapeake Litigation (see Item 7) was
settled resulting in Chesapeake Insurance paying $0.2 million to NVF in full
and final settlement.
After considering amounts provided in previous periods, the Company
does not believe that the contingencies referred to above, as well as
ordinary routine litigation, will have a material adverse effect on its
consolidated financial position or results of operations.
<PAGE>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Legal Proceedings
In August 1993 NVF Company ("NVF"), which was affiliated with Triarc
until the Reorganization, became a debtor in a case filed by certain of its
creditors under Chapter 11 of the Federal Bankruptcy Code (the "NVF
Proceeding"). In November 1993 the Company received correspondence from
NVF's bankruptcy counsel claiming that Triarc and certain of its
subsidiaries owed to NVF an aggregate of approximately $2,300,000 with
respect to (i) certain claims relating to the insurance of certain of NVF's
properties by Chesapeake Insurance Company Limited ("Chesapeake"), (ii)
certain insurance premiums owed by Triarc to Insurance and Risk Management,
Inc. ("IRM"), and (iii) certain liabilities of IRM, 25% of which NVF has
alleged Triarc to be liable for. In addition, in June 1994 the official
committee of NVF's unsecured creditors (the "NVF Committee") filed an
amended complaint (the "NVF Litigation") against Triarc and certain former
affiliates alleging various causes of action against Triarc and seeking,
among other things, an undetermined amount of damages from Triarc. On
August 30, 1994 the district court issued an order granting Triarc's motion
to dismiss certain of the claims and allowing the NVF Committee to file an
amended complaint alleging why certain other claims should not be barred by
applicable statutes of limitation. On October 17, 1994 the NVF Committee
filed a second amended complaint alleging causes of action for (a) aiding
and abetting breach of fiduciary duty, (b) equitable subordination of, and
objections to, claims which Triarc has asserted against NVF, and (c)
recovery of certain allegedly fraudulent and preferential transfers
allegedly made by NVF to Triarc. Triarc has responded to the second amended
complaint by filing a motion to dismiss the complaint in its entirety. On
February 10, 1995 the NVF Committee moved for leave to file a third amended
complaint. Triarc opposed that motion. During Transition 1993 Triarc
provided $2,300,000 with respect to claims relating to the NVF Proceeding.
Triarc incurred actual costs through September 30, 1995 of $1,527,000 and
reversed the remaining accrual for claims of $773,000 relating to the NVF
Proceedings in the first quarter of 1995. Pursuant to the Settlement
Agreement (described more fully in "Item 1. Business -- Posner Settlement"
in Triarc's Annual Report on Form 10-K for the year ended December 31, 1994
(the "1994 Form 10-K")), Triarc has been indemnified by Posner and Security
Management Corporation, a company controlled by Victor Posner ("SMC"), for
its expenses incurred after December 1, 1994 and for any liability arising
out of the NVF Litigation. In addition, pursuant to the Settlement
Agreement Posner also paid Triarc in cash for certain expenses relating to
the NVF Litigation, the APL Proceeding (as herein defined) and the PEC
Proceedings (as herein defined). As noted below, Triarc has brought an
action against Posner and SMC for breach of the Settlement Agreement. In
May, 1995 a global settlement in principle was reached pursuant to which all
claims against the Company relating to the NVF Litigation will be dismissed.
Under the pending settlement, the Company will bear no liability. The
settlement is subject to the approval of the bankruptcy court, which has
scheduled a hearing for November 15, 1995.
In June 1994 NVF commenced a lawsuit in federal court against
Chesapeake and another defendant alleging claims for (a) breach of contract,
(b) bad faith and (c) tortious breach of the implied covenant of good faith
and fair dealing in connection with insurance policies issued by Chesapeake
covering property of NVF (the "Chesapeake Litigation"). NVF sought
compensatory damages in an aggregate amount of approximately $1,000,000 and
punitive damages in the amount of $3,000,000. In July 1994 Chesapeake
responded to NVF's allegations by filing an answer and counterclaims in
which Chesapeake denies the material allegations of NVF's complaint and
asserts defenses, counterclaims and set-offs against NVF. On or about June
30, 1995, the Chesapeake Litigation was settled pursuant to an Agreement of
Settlement and Mutual Release ("Chesapeake Settlement") between, inter alia,
Chesapeake and NVF. Under the terms of the Chesapeake Settlement,
Chesapeake paid to NVF $200,000 in full and final settlement of all of NVF's
claims and Chesapeake's counterclaims. On June 30, 1995 the Chesapeake
Settlement was approved by the Bankruptcy Court, and subsequently became
final, binding and non-appealable. Thereafter, the Chesapeake Litigation
was dismissed, with prejudice.
In connection with certain former cost sharing arrangements, advances,
insurance premiums, equipment leases and accrued interest, Triarc had
receivables due from APL, a former affiliate, aggregating $38,120,000 as of
April 30, 1992, against which a valuation allowance of $34,713,000 was
recorded. APL has experienced recurring losses and other financial
difficulties in recent years and in July 1993 APL became a debtor in a
proceeding under Chapter 11 of the Bankruptcy Code (the "APL Proceeding").
Accordingly, during Fiscal 1993, Triarc and its subsidiaries provided an
additional $9,863,000 for the unreserved portion of the receivable at April
30, 1992 and additional net billings in 1993 and wrote off the full balance
of the APL receivables and related allowance of $44,576,000. In July 1993
APL, which was affiliated with Triarc until the Reorganization, became a
debtor in a proceeding under Chapter 11 of the Federal Bankruptcy Code (the
"APL Proceeding"). In February 1994 the official committee of unsecured
creditors of APL filed a complaint (the "APL Litigation") against Triarc and
certain companies formerly or presently affiliated with Victor Posner or
with Triarc, alleging causes of action arising from various transactions
allegedly caused by the named former affiliates in breach of their fiduciary
duties to APL and resulting in corporate waste, fraudulent transfers
allegedly made by APL to Triarc and preferential transfers allegedly made by
APL to a defendant other than Triarc. In March 1994, Triarc, Chesapeake and
National Propane Corporation filed proofs of claim in the APL Proceeding in
an aggregate amount of approximately $40,000,000 based on amounts owed in
connection with the receivables described above plus interest accrued on
such amount up to the date the APL Proceeding was commenced. On June 8,
1995, the United States Bankruptcy Court for the Southern District of
Florida (the "Bankruptcy Court") entered an order confirming the Creditors'
Committee's First Amended Plan of Reorganization (the "Plan") in the APL
Proceeding. The Plan provides, among other things, that SMC will own all of
the common stock of APL and that SMC, among other entities, is authorized to
object to claims made in the APL Proceeding. The Plan also provides for the
dismissal with prejudice of the APL Litigation. In August, 1995, SMC filed
an objection (the "Objection") to the claims against APL filed by Triarc and
Chesapeake. The Objection, as it relates to Triarc's claim, is based upon a
settlement agreement entered into on January 9, 1995 (the "Settlement
Agreement") among Triarc, Victor Posner, SMC and others under which Triarc
agreed to withdraw its claims against APL provided that Victor Posner and
SMC promptly reimburse Triarc for its costs and expenses incurred on or
after December 1, 1994 in the APL Litigation. On September 5, 1995, Triarc
and Chesapeake filed responses to the Objection denying the material
allegations in the Objection. In addition, Triarc and Chesapeake filed a
motion to dismiss the Objection on the basis that SMC is barred from making
the Objection because of the dismissal with prejudice of the APL Litigation
under the Plan. Triarc also filed a motion for summary judgment against SMC
on the basis that the conditions precedent to Triarc's obligation to
withdraw its claims against APL under the Settlement Agreement have not been
met because Victor Posner and SMC have not satisfied their reimbursement
obligations. At a hearing on November 7, 1995, the Bankruptcy Court (a)
granted Triarc's and Chesapeake's motion insofar as it sought to dismiss the
Objection on the ground that the APL Litigation is dismissed with prejudice
and (b) stayed the proceedings with respect to Triarc's motion for summary
judgment relating to the conditions precedent in the Settlement Agreement,
pending determination of various issues relating to the Settlement Agreement
by the Federal District Court in the Southern District of New York, where
Triarc has brought an action against Posner and SMC for breach of the
Settlement Agreement.
Triarc and its subsidiaries had secured receivables from Pennsylvania
Engineering Corporation ("PEC"), a former affiliate of Triarc, aggregating
$6,664,000 as of April 30, 1992 against which a $3,664,000 valuation
allowance was recorded. PEC and certain of its subsidiaries had also filed
for protection under the Bankruptcy Code in February 1992 (the "PEC
Proceedings"), and accordingly, during Fiscal 1993, Triarc and its
subsidiaries recorded an additional $3,000,000 valuation allowance to
provide for the unreserved portion of the receivables and to take into
account Triarc's significant doubts as to the net realizability of the
underlying collateral. In June 1994, Triarc and certain of its subsidiaries
filed proofs of claim in the PEC Proceedings in the aggregate amount of
$44,231,267 based on the receivables described above as well as other
amounts owed to Triarc and its subsidiaries by PEC and its subsidiaries for
unreimbursed advances, unpaid insurance premiums, contribution under a
construction performance bond and certain promissory notes. In July 1995,
the bankruptcy trustee in the PEC Proceedings (the "Trustee") filed
objections to Triarc's and its subsidiaries' proofs of claim. On July 27,
1995, Triarc and its subsidiaries, the Trustee and other parties reached a
settlement (the "PEC Settlement") that was subsequently approved by the
court presiding over the PEC Proceeding. Under the PEC Settlement, (a)
Triarc and its subsidiaries that filed claims in the PEC Proceedings were
given an allowed claim against PEC in the amount of $9,000,000, (b)
Chesapeake, which held a mortgage claim against a PEC subsidiary, is to
receive a share of the proceeds of the sale of the mortgaged property and
(c) the parties are to exchange mutual releases. Pursuant to the Settlement
Agreement, Posner and SMC have agreed to indemnify Triarc for all expenses
incurred by Triarc after December 1, 1994 in connection with the PEC
Proceedings. As noted above, Triarc has brought an action against Posner
and SMC for breach of the Settlement Agreement.
Environmental Matters
In 1987 Graniteville was notified by the South Carolina Department of
Health and Environmental Control (the "DHEC") that it discovered certain
contamination of Langley Pond near Graniteville, South Carolina and DHEC
asserted that Graniteville may be one of the parties responsible for such
contamination. In 1990 and 1991, Graniteville provided reports to DHEC
summarizing its required study and investigation of the alleged pollution
and its sources which concluded that pond sediments should be left
undisturbed and in place and that other less passive remediation
alternatives either provided no significant additional benefits or
themselves involved adverse effects (i) on human health, (ii) to existing
recreational uses or (iii) to the existing biological communities. In March
1994 DHEC appeared to conclude that while environmental monitoring at
Langley Pond should be continued, based on currently available information,
the most reasonable alternative is to leave the pond sediments undisturbed
and in place. DHEC requested Graniteville to submit a proposal by mid-April
1995 concerning periodic monitoring of sediment deposition in the pond.
Graniteville submitted a proposed protocol for monitoring sediment
deposition in Langley Pond on April 26, 1995. DHEC responded to this
proposal on October 30, 1995 requesting some additional information.
Graniteville is unable to predict at this time what further actions, if any,
may be required in connection with Langley Pond or what the cost thereof may
be. However, given DHEC's apparent conclusion in March 1994 and the absence
of reasonable remediation alternatives, Triarc believes the ultimate outcome
of this matter will not have a material adverse effect on Triarc's
consolidated results of operations or financial position. See "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Item 1. Business" in
Triarc's 1994 Form 10-K.
Graniteville owns a nine acre property in Aiken County, South Carolina
(the "Vaucluse Landfill"), which was used as a landfill from approximately
1950 to 1973. The Vaucluse Landfill was operated jointly by Graniteville
and Aiken County and may have received municipal waste and possibly
industrial waste from Graniteville and sources other than Graniteville. In
March 1990, a "Site Screening Investigation" was conducted by DHEC.
Graniteville conducted an initial investigation in June 1992 which included
the installation and testing of two ground water monitoring wells. The
United States Environmental Protection Agency conducted an Expanded Site
Inspection (an "ESI") in January 1994, and Graniteville conducted a
supplemental investigation in February 1994. In response to the ESI, DHEC
has indicated its desire to have an investigation of the Vaucluse Landfill.
On April 7, 1995 Graniteville submitted a conceptual investigation approach
to DHEC. On August 22, 1995 DHEC requested that Graniteville enter into a
consent agreement to conduct an investigation. Graniteville has responded
to DHEC that a consent agreement is inappropriate considering Graniteville's
demonstrated willingness to cooperate with DHEC requests and asked DHEC to
approve Graniteville's April 7, 1995 conceptual investigation approach.
Since an investigation has not yet commenced, Graniteville is currently
unable to estimate the cost to remediate the landfill. Such cost could vary
based on the actual parameters of the study. Based on currently available
information, Triarc does not believe that the outcome of this matter will
have a material adverse effect on Triarc's consolidated results of
operations or financial position. See "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Item 1. Business" in Triarc's 1994 Form 10-K.
As a result of certain environmental audits in 1991, Southeastern
Public Service Company ("SEPSCO") became aware of possible contamination by
hydrocarbons and metals at certain sites of SEPSCO's ice and cold storage
operations of the refrigeration business and has filed appropriate
notifications with state environmental authorities and in 1994 completed a
study of remediation at such sites. SEPSCO has removed certain underground
storage and other tanks at certain facilities of its refrigeration
operations and has engaged in certain remediation in connection therewith.
Such removal and environmental remediation involved a variety of remediation
actions at various facilities of SEPSCO located in a number of
jurisdictions. Such remediation varied from site to site, ranging from
testing of soil and groundwater for contamination, development of
remediation plans and removal in certain instances of certain contaminated
soils. Remediation is required at thirteen sites which were sold to or
leased for the purchaser of the ice operations, including eight sites at
which remediation has recently been completed or is ongoing. Such
remediation is being made in conjunction with the purchaser who is
responsible for payments of up to $1,000,000 of such remediation costs,
consisting of the first and third payments of $500,000. Remediation will
also be required at seven cold storage sites which were sold to the
purchaser of the cold storage operations. Such remediation is expected to
commence in 1995 and will be made in conjunction with such purchaser who is
responsible for the first $1,250,000 of such costs. In addition, there are
fifteen additional inactive properties of the former refrigeration business
where remediation has been completed or is ongoing and which have either
been sold or are held for sale separate from the sales of the ice and cold
storage operation. Of these, four were remediated in 1994, at an aggregate
cost of $484,000, and two were remediated in 1995 at an aggregate cost of
$160,000. Based on consultations with, and certain reports of,
environmental consultants and others, SEPSCO presently estimates that its
cost of all such remediation and/or removal will approximate $4,910,000, of
which $1,300,000, $200,000, $2,700,000 (including a 1994 reclassification
of $500,000) and $700,000 (including a 1995 reclassification of $300,000)
were provided prior to Fiscal 1992, in Fiscal 1992, in Fiscal 1993 and in
1994 respectively. In connection therewith, SEPSCO has incurred actual
costs of $3,507,000 through September 30, 1995 and has a remaining accrual
of $1,393,000. Based on currently available information and the current
reserve levels, Triarc does not believe that the ultimate outcome of the
remediation of these sites will have a material adverse effect on its
consolidated results of operations or financial position. See "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Item 1. Business" in
Triarc's 1994 Form 10-K.
Item 5. Other Information
FFCA Financing Transaction
Effective as of May 1, 1995, RC/Arby's Corporation ("RC/Arby's") and
its affiliates entered into a series of transactions pursuant to which two
new wholly-owned subsidiaries of RC/Arby's, Arby's Restaurant Development
Corporation ("ARDC") and Arby's Restaurant Holding Company ("ARHC"),
obtained ownership of approximately 53 Arby's restaurants, in the aggregate,
from RC/Arby's and Arby's, Inc. ("Arby's") and borrowed approximately $37.3
million, on a secured basis, from FFCA Acquisition Corp., a subsidiary of
Franchise Finance Corporation of America ("FFCA"). Concurrent with the
closing, ARDC, ARHC, Arby's Restaurant Operations Company ("AROC"), Triarc
and FFCA executed a commitment letter (the "Commitment Letter") pursuant to
which FFCA agreed, under certain circumstances, to lend to ARDC and ARHC an
additional $50 million, in the aggregate, to build new company-owned Arby's
restaurants.
As contemplated by the Commitment Letter, on October 13, 1995, ARDC
entered into an Amended and Restated Loan Agreement (the "ARDC Loan
Agreement") and ARHC entered into a loan agreement (the "ARHC Loan
Agreement") with FFCA pursuant to which ARDC and ARHC may, through December
31, 1996, borrow an aggregate of up to approximately $87.3 million
(including amounts borrowed by ARDC and ARHC from FFCA in May 1995) to
finance new company-owned restaurants whose sites are identified to FFCA by
April 30, 1996.
Each of the ARDC Loan Agreement and ARHC Loan Agreement provides for a
series of 20-year loans (each, a " Mortgage Loan") secured by substantially
all of the assets of ARDC and ARHC, respectively, and a series of seven-year
loans secured by certain equipment (the "Equipment Loans"). Each Mortgage
Loan and Equipment Loan is repayable in equal monthly installments
(including interest) over the term of such loan and bears interest at the
rate of 11.5% per annum, with respect to those Mortgage Loans and Equipment
Loans made in May 1995, or 11.25% per annum (subject to adjustment, based on
the 10-year U.S. Treasury Note rate in effect at the time of the applicable
closing) with respect to all loans made thereafter under the agreements. In
addition, interest on the Mortgage Loans is subject to adjustment, on a note
by note basis, if the gross sales of the related Arby's restaurant exceeds a
specified amount (participating interest). ARDC and ARHC may, at its
option, convert any or all of their Mortgage Loans from a participating rate
of interest to the payment of "additional interest," pursuant to which
interest on each note would increase bi-annually by an amount equal to
approximately 4% of the then applicable monthly loan repayment amount. The
assets of ARDC, which secure ARDC's Mortgage Loans and Equipment Loans, will
not be available to pay creditors of Triarc, RC/Arby's or Arby's until such
loans have been repaid in full.
Triarc has guaranteed, under certain circumstances, payments by AROC
to ARDC under certain leases relating to the Arby's restaurants owned by
ARDC and to Arby's with respect to the applicable license agreements for
such restaurants. In addition, Triarc has guaranteed repayment by ARHC of
each Mortgage Loan and Equipment Loan made to ARHC.
ZuZu Acquisition
Pursuant to a Stock Purchase Agreement dated September 15, 1995 by
and between Triarc and ZuZu, Inc. ("ZuZu"), on September 26, 1995 Triarc
acquired 12.5% of the outstanding common stock of ZuZu (a privately held
corporation that owns and operates a chain of quick service Mexican
restaurants), for a purchase price of $5.34 million. Triarc also entered
into two Option Agreements dated September 26, 1995 with ZuZu. Pursuant to
the first Option Agreement, Triarc acquired an option to purchase an
additional 12.5% of the outstanding common stock of ZuZu for an aggregate
purchase price of not more than $5.99 million. This option is exercisable
between the first and second anniversary of the closing date. Pursuant to
the second Option Agreement, Triarc acquired an option to purchase an
additional 25% of the outstanding ZuZu common stock. This option may be
exercised during a 90-day period commencing on the third anniversary of the
closing, provided that the first option has been exercised. The price of
the shares to be purchased pursuant to the second Option Agreement will be
based upon ZuZu's operating results and will not be less than $14.1 million
or more than $20.3 million, in the aggregate.
In connection with the transaction, Arby's and ZuZu entered into a
master franchise agreement pursuant to which Arby's obtained exclusive
worldwide rights for three years to operate or grant franchises to operate
ZuZu restaurants at "dual brand" locations (ZuZu may continue to operate or
grant franchises to operate ZuZu-only restaurants). Under certain
circumstances, Arby's may extend its exclusive dual branding rights under
the master franchise agreement for an additional three-year period.
All Seasons Propane Acquisition
On August 21, 1995 Triarc, through its subsidiary, All Seasons
Acquisition Corp. ("ASAC"), acquired all of the outstanding shares of All
Seasons Propane, Inc. and Cullum Investments, Inc., corporations engaged in
the distribution of propane gas in Colorado. The purchase price for such
stock was approximately $4.24 million (including the assumption of certain
existing indebtedness), in the aggregate. In connection with the
transaction, the sellers agreed to certain five-year non-competition
covenants. On September 29, 1995 the stock of ASAC was contributed to the
capital of National Propane Corporation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 - Letter Agreement dated November 3, 1995 between
Galey & Lord, Inc. ("Galey") and the registrant
amending the Letter of Intent dated September 22,
1995 between Galey and the registrant.
2.2 - Asset Purchase Agreement dated as of August 9,
1995 among Mistic Brands, Inc., Joseph Victori
Wines, Inc., Best Flavors, Inc., Nature's Own
Beverage Company and Joseph Umbach, incorporated
herein by reference to Exhibit 2.1 to Triarc's
Current Report on Form 8-K dated August 9, 1995
(SEC file No. 1-2207).
2.3 - Letter of Intent dated September 22, 1995 between
the registrant and Galey & Lord, Inc.,
incorporated herein by reference to Exhibit 2.1 to
Triarc's Current Report on Form 8-K dated
September 22, 1995 (SEC file No. 1-2207).
10.1 -Amendment No. 6 dated as of August 30, 1995 to the
Revolving Credit, Term Loan and Security
Agreement, dated as of April 23, 1993, among
Graniteville Company, C.H. Patrick & Co., Inc.,
The CIT Group/Commercial Services, Inc., as agent,
and the other financial institutions party thereto
(the "Graniteville Credit Agreement"),
incorporated herein by reference to Exhibit 10.2
to Triarc's Current Report on Form 8-K dated
August 9, 1995 (SEC file No. 1-2207).
10.2 -Amendment No. 7 dated as of August 30, 1995 to the
Graniteville Credit Agreement.
10.3 -Amended and Restated Loan Agreement dated as of
October 13, 1995 by and between FFCA Acquisition
Corporation and Arby's Restaurant Development
Corporation, incorporated herein by reference to
Exhibit 10.1 to RC/Arby's Corporation Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1995 (SEC file No. 0-20286).
10.4 -Loan Agreement dated as of October 13, 1995 by and
between FFCA Acquisition Corporation and Arby's
Restaurant Holding Company, incorporated herein by
reference to Exhibit 10.2 to RC/Arby's Corporation
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995 (SEC file No. 0-20286).
10.5 -Fourth Amendment dated as of September 29, 1995 to
Revolving Credit and Term Loan Agreement dated as
of October 7, 1994 among National Propane
Corporation, The Bank of New York, as
administrative agent, The First National Bank of
Boston and Internationale Nederlanden (U.S.)
Capital Corporation, as co-agents, and the lenders
party thereto.
10.6 -Credit Agreement dated as of August 9, 1995 among
Mistic Brands, Inc., The Chase Manhattan Bank
(National Association) as agent, and the other
lenders party thereto, incorporated herein by
reference to Exhibit 10.1 to Triarc's Current
Report on Form 8-K dated August 9, 1995 (SEC file
No. 1-2207).
27.1 -Financial Data Schedule for the fiscal quarter
ended September 30, 1995, submitted to the
Securities and Exchange Commission in electronic
format.
(b) Reports on Form 8-K
The registrant filed a report on Form 8-K on
August 14, 1995 with respect to the closing of the
Asset Purchase Agreement dated as of August 9,
1995 (the "Asset Purchase Agreement") by and among
Mistic Brands, Inc., a wholly-owned subsidiary of
the registrant, and Joseph Victori Wines, Inc.,
Best Flavors, Inc., Nature's Own Beverage Company
and Joseph Umbach.
The registrant filed a report on Form 8-K on
October 3, 1995 with respect to the execution of a
letter of intent regarding a merger of
Graniteville Company, an indirect wholly-owned
subsidiary of the registrant, and Galey & Lord,
Inc.
The registrant filed a report on Form 8-K/A on
October 23, 1995 pursuant to which the registrant
filed certain financial statements required to be
filed in connection with its report on Form 8-K
filed on August 14, 1995.
<PAGE>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRIARC COMPANIES, INC.
Date: November 14, 1995 By: /S/ JOSEPH A. LEVATO
----------------------------------
Joseph A. Levato
Executive Vice President and
Chief Financial Officer
(On behalf of the Company)
By: /S/ FRED H. SCHAEFER
-----------------------------------
Fred H. Schaefer
Vice President and
Chief Accounting Officer
(Principal accounting officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated financial statements included in the accompanying Form
10-Q of Triarc Companies, Inc. for the nine-month period ended September 30,
1995 and is qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<CIK> 0000030697
<NAME> TRIARC COMPANIES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 39,046
<SECURITIES> 7,602
<RECEIVABLES> 158,433
<ALLOWANCES> 0
<INVENTORY> 137,605
<CURRENT-ASSETS> 362,645
<PP&E> 567,704
<DEPRECIATION> 226,072
<TOTAL-ASSETS> 1,062,675
<CURRENT-LIABILITIES> 200,069
<BONDS> 754,434
<COMMON> 3,398
0
0
<OTHER-SE> 53,873
<TOTAL-LIABILITY-AND-EQUITY> 1,062,675
<SALES> 829,080
<TOTAL-REVENUES> 869,149
<CGS> 627,354
<TOTAL-COSTS> 627,354
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,397
<INCOME-PRETAX> 5,209
<INCOME-TAX> 3,256
<INCOME-CONTINUING> 1,953
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,953
<EPS-PRIMARY> .07
<EPS-DILUTED> 0
</TABLE>
Exhibit 2.1
Galey & Lord, Inc.
980 Avenue of the Americas
New York, New York 10018
November 3, 1995
Triarc Companies, Inc.
900 Third Avenue
New York, NY 10022
Attention: Nelson Peltz, Chairman and Chief Executive Officer
Gentlemen:
This letter shall set forth our understanding and agreement with respect
to paragraph 15 of the Letter of Intent, dated September 22, 1995 (the
"LOI"), between Galey & Lord, Inc. ("Galey") and Triarc Companies, Inc.
("Triarc") relating to the proposed acquisition by Galey of the textile
related business and assets of Graniteville Company, a South Carolina
corporation and a wholly owned subsidiary of Triarc.
Paragraph 15 of the LOI is hereby amended by extending the Non-
Negotiation Period (as defined in paragraph 15 of the LOI) from a period of
45 days from the date of the LOI to a period of 80 days from the date of the
LOI.
Please acknowledge your agreement to the foregoing by signing and
returning this letter to the undersigned.
Very truly yours,
GALEY & LORD, INC.
By: ARTHUR C. WIENER
Name: Arthur C. Wiener
Title: Chairman of the
Board and President
ACCEPTED AND AGREED TO:
TRIARC COMPANIES, INC.
By: NELSON PELTZ
Name: Nelson Peltz
Title: Chairman and CEO
Exhibit 10.2
AMENDMENT NO. 7
TO
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 7 ("Amendment No. 7") is entered into as of
August 30, 1995, by and among GRANITEVILLE COMPANY ("Graniteville"), a
corporation organized under the laws of the State of South Carolina, C.H.
PATRICK & CO., INC. ("Patrick"), a corporation organized under the laws of
the State of South Carolina (Graniteville and Patrick each a "Borrower"
and, jointly and severally, the "Borrowers"), the undersigned financial
institutions (jointly and severally, the "Lenders") and THE CIT
GROUP/COMMERCIAL SERVICES, INC. ("CIT"), a corporation organized under the
laws of the State of New York, as agent for the Lenders (CIT in such
capacity, the "Agent").
BACKGROUND
Borrowers, Lenders and Agent are parties to a Revolving Credit,
Term Loan and Security Agreement dated as of April 23, 1993 (as amended,
supplemented or otherwise modified from time to time, the "Loan
Agreement") pursuant to which Lenders provide Borrowers with certain
financial accommodations.
Borrowers have decided to change their accounting treatment of
the notes representing the Original Triarc Loan and the Additional Triarc
Loan and as a result of such changes adjustments are required to certain
of the Financial Covenants. Borrowers and Lenders have agreed to amend
such covenants on the terms and conditions hereafter set forth and also to
rectify certain typographical errors and certain provisions of the Loan
Agreement to eliminate confusion.
NOW, THEREFORE, in consideration of any loan or advance or grant
of credit heretofore or hereafter made to or for the account of Borrowers
by Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction or
waiver of the conditions precedent set forth in Section 3 below, the Loan
Agreement is hereby amended as follows:
(a) Section 1.2 of the Loan Agreement is amended by
amending the definition of "Maximum Loan Amount" by adding the words ",
less repayment of the Term Loan" at the end thereof.
(b) Section 2.9 of the Loan Agreement is hereby amended by
deleting the language "plus (iii) the Excess Cash Flow reserve plus (iv)
reserves".
(c) Section 6.5 of the Loan Agreement is hereby amended in
its entirety to provide as follows:
"6.5 Net Worth. Cause to be maintained as of the end
of each fiscal quarter a Net Worth of not less than the
amount set forth below opposite such fiscal quarter end:
Fiscal Quarter End Minimum Net Worth
July 2, 1995 $ 88,400,000
October 1, 1995 50,500,000
December 31, 1995 56,000,000
March 31, 1996 56,500,000
June 30, 1996 59,500,000
September 29, 1996 62,500,000
December 29, 1996 66,000,000
March 30, 1997 69,000,000
June 29, 1997 72,000,000
September 28, 1997 75,000,000
December 28, 1997 78,500,000
For each fiscal quarter end thereafter, the Minimum Net Worth
shall be increased by an amount equal to $5,000,000 for such fiscal
quarter end."
(d) Section 6.7 of the Loan Agreement is hereby amended in
its entirety to provide as follows:
"6.7 Indebtedness to Net Worth Ratio. Cause to be
maintained as of the end of each fiscal quarter a ratio of
Indebtedness of Borrowers on a Consolidated Basis to Net
Worth no greater than the ratio set forth below opposite
such fiscal quarter end:
Indebtedness to
Fiscal Quarter End Net Worth Ratio
July 2, 1995 2.90 to 1.00
October 1, 1995 4.87 to 1.00
December 31, 1995 4.50 to 1.00
March 31, 1996 4.28 to 1.00
June 30, 1996 3.93 to 1.00
September 29, 1996 3.65 to 1.00
December 29, 1996 3.41 to 1.00
March 30, 1997 3.15 to 1.00
June 29, 1997 2.91 to 1.00
September 28, 1997 2.72 to 1.00
December 28, 1997 2.55 to 1.00
and each fiscal quarter 2.55 to 1.00"
end thereafter
(e) Section 6.9 of the Loan Agreement is hereby amended in its
entirety to provide as follows:
"6.9. Interest Coverage. Cause for each four
quarter period ending at the fiscal quarter ends set forth
below the ratio of (i) Earnings Before Interest and Income
Taxes plus depreciation and amortization to (ii) aggregate
interest expense of Borrowers on a Consolidated Basis to be
greater than the ratio set forth opposite such fiscal
quarter end:
Fiscal Quarter End Interest Coverage Ratio
July 2, 1995 2.60 to 1.0
October 1, 1995 2.33 to 1.0
December 31, 1995 2.32 to 1.0
March 31, 1996 2.30 to 1.0
June 30, 1996 2.30 to 1.0
September 29, 1996 2.30 to 1.0
December 29, 1996 2.55 to 1.0
March 30, 1997 2.55 to 1.0
June 29, 1997 2.55 to 1.0
September 28, 1997 2.55 to 1.0
December 28, 1997 2.85 to 1.0
and each four 2.85 to 1.0
(4) quarter period
ending thereafter
In the event that the Mistic Acquisition is not consummated on or before
August 31, 1995 and a prepayment is made pursuant to Section 2.4(b)(iii)
hereof, then Borrowers and Lenders shall, in good faith, negotiate any
adjustments required to the Financial Covenants as a result of such
prepayment and in the event Borrowers and Required Lenders cannot agree on
such adjustments by September 30, 1995, Agent shall, in the exercise of
its reasonable business judgment, determine the necessary adjustments and
reset the Financial Covenants in which event the consent of Lenders or
Borrowers shall not be required."
(f) Section 6.13 of the Loan Agreement is hereby amended
in its entirety to provide as follows:
"6.13. Interest Rate Protection. No later
than sixty (60) days from the Amendment No. 6
Effective Date, deliver to Agent evidence
reasonably satisfactory to Agent that Borrowers
have purchased interest rate protection for at
least $108,000,000 of the Advances covering a
period of twenty-four (24) months from the date
of purchase and providing for a Eurodollar Rate
cap of 9% per annum in the event that the three
month Eurodollar Rate exceeds 9%."
(g) Section 7.7 of the Loan Agreement is hereby amended by
changing the reference to "Section 7.5(f)" to a reference to "Section
7.5(g)" wherever "Section 7.5(f)" appears.
(h) Section 7.10(c) of the Loan Agreement is hereby
amended in its entirety to provide "(c) loans and advances permitted
pursuant to Sections 7.5(b), 7.5(d), 7.5(e) and 7.5(f);".
(i) Section 9.9 of the Loan Agreement is hereby amended by
changing the reference to "7.5(f)" in the last sentence to a reference to
"7.5(g)".
3. Conditions of Effectiveness. This Amendment No. 7 shall
become effective upon receipt by Agent of this Amendment No. 7 executed by
the Required Lenders and Borrowers and consented to by each Guarantor.
4. Representations and Warranties. Borrowers hereby represent
and warrant as follows:
(a) This Amendment No. 7 and the Loan Agreement, as
amended hereby, constitute legal, valid and binding obligations
of Borrowers and are enforceable against Borrowers in accordance
with their respective terms.
(b) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this Amendment
No. 7.
(c) Borrowers have no defense, counterclaim or offset with
respect to the Obligations.
5. Effect on the Loan Agreement.
(a) Upon the effectiveness of Section 2 hereof, each reference
in the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein"
or words of like import shall mean and be a reference to the Loan
Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan Agreement,
and all other documents, instruments and agreements executed and/or
delivered in connection therewith, shall remain in full force and effect,
and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
No. 7 shall not operate as a waiver of any right, power or remedy of
Lender, nor constitute a waiver of any provision of the Loan Agreement, or
any other documents, instruments or agreements executed and/or delivered
under or in connection therewith.
6. Governing Law. This Amendment No. 7 shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns and shall be governed by and construed in
accordance with the laws of the State of New York.
7. Headings. Section headings in this Amendment No. 7 are
included herein for convenience of reference only and shall not constitute
a part of this Amendment No. 7 for any other purpose.
8. Counterparts. This Amendment No. 7 may be executed by the
parties hereto in one or more counterparts, each of which shall be deemed
an original but all of which taken together shall be deemed to constitute
one and the same agreement. Any signature delivered by a party by
facsimile transmission shall be deemed to be an original signature hereto.
IN WITNESS WHEREOF, this Amendment No. 7 has been duly executed
as of the day and year first written above.
GRANITEVILLE COMPANY
By: JOHN L. BARNES
Title: Executive Vice President
C.H. PATRICK & CO., INC.
By: JOHN L. BARNES
Title: Vice President
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Lender and as Agent
By: GORDON JONES
Title: Vice President
BOT FINANCIAL CORP.
By: DANIEL J. LANDERS
Title: Vice President
THE BANK OF NEW YORK
COMMERCIAL CORPORATION
By: DANIEL MURRAY
Title: Vice President
FIRST UNION NATIONAL BANK OF
GEORGIA
By: WINSTON WILKENSON
Title: Vice President
NATIONAL CANADA FINANCE CORP.
By: CHARLES COLLIE
Title: Vice President
By:
Title: Assistant Vice President
NATWEST BANK, N.A.
By: DAVID MARIONE
Title: Vice President
SANWA BUSINESS CREDIT CORP.
By: PETER SKAVLA
Title: Vice President
CONSENTED AGREED TO:
TRIARC COMPANIES, INC.
By: JOSEPH A. LEVATO
Title: Exeutive Vice President & CFO
GRANITEVILLE INTERNATIONAL SALES, INC.
By: JOHN L. BARNES
Title: Executive Vice President
GS HOLDINGS, INC.
By: JOSEPH A. LEVATO
Title: Executive Vice President & CFO
GVT HOLDINGS, INC.
By: JOSEPH A. LEVATO
Title: Executive Vice President & CFO
GRANITEVILLE HOLDINGS, INC.
By: JOSEPH A. LEVATO
Title: Executive Vice President & CFO
Exhibit 10.5
FOURTH AMENDMENT, dated as of September 29, 1995 (this
"Amendment") to the REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as of
October 7, 1994 (as amended and as the same may be further amended,
supplemented, modified or extended from time to time, the "Agreement"),
among NATIONAL PROPANE CORPORATION, a Delaware corporation (the
"Borrower"), each of the several lenders from time to time parties thereto
(each a "Lender" and, collectively, the "Lenders"), THE BANK OF NEW YORK,
as Administrative Agent for the Lenders (the "Administrative Agent") and
THE FIRST NATIONAL BANK OF BOSTON and INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as Co-Agents.
W I T N E S S E T H:
WHEREAS, the Borrower desires to acquire All Seasons Acquisition
Corporation, a Delaware corporation ("ASAC"), which is currently an
indirect wholly owned subsidiary of the Guarantor, in a transaction
pursuant to which all of the issued and outstanding shares of Common
Stock, par value $1.00 per share, of ASAC (the "ASAC Stock") will be
transferred to the Borrower in exchange for the issuance by the Borrower
to NPC Holdings, Inc. ("Holdings"), a Delaware corporation and a wholly
owned subsidiary of the Guarantor, of 30 shares of Common Stock, par value
$1.00 per share of the Borrower (the "Borrower Stock") (such transaction
hereinafter being referred to as the "ASAC Acquisition"); and
WHEREAS, in connection with the ASAC Acquisition, ASAC has
entered into a Pledge and Security Agreement (the "ASAC Pledge"), dated as
of even date herewith, between it and The Bank of New York as agent for
the Creditors (as defined therein); and
WHEREAS, the Borrower has requested that a financial covenant of
the Borrower contained in the Agreement be amended as set forth more fully
hereinbelow and take certain other measures in connection with the
transactions contemplated hereby; and
WHEREAS, the parties desire to amend the Agreement to reflect
the foregoing.
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein which is defined in the
Agreement shall have the meaning assigned to such term in the Agreement.
Each reference to "hereof", "hereunder", "herein" and "hereby" and each
other similar reference contained in the Agreement shall, from and after
the date hereof, refer to the Agreement as amended hereby.
Section 2. Amendment of Section 1.01(b) of the Agreement.
Section 1.01(b) of the Agreement is hereby amended as follows:
(a) The definition of the term "Permitted Acquisition" is
amended to read in its entirety as follows:
"'Permitted Acquisition' means (i) the acquisition
by the Borrower or a Subsidiary of the Borrower,
of any Person (or any stock or other equity
interests therein) or a substantial part of the
assets used in the business of any Person,
provided that (a) the Person (or the assets) being
acquired is engaged or used in the distribution of
propane gas; (b) such acquisition shall not be
opposed by the boards of directors (or other
person or persons performing similar functions) of
any of the parties to such acquisition; (c) if the
purchase price for such acquisition exceeds
$10,000,000 in cash, property, net assumption of
liabilities for Borrowed Money or otherwise (or
$5,000,000 if such acquisition is to be financed,
directly or indirectly, in whole or in part with
proceeds of Loans), the written approval of the
Required Lenders shall have been obtained prior to
consummation of such acquisition; (d) after giving
effect to such acquisition, the Leverage Ratio
shall not exceed the lesser of 4.25x and the
maximum Leverage Ratio permitted by Section
8.03(b); and (e) after giving effect to such
acquisition, no Default or Event of Default shall
have occurred and be continuing and (ii) the ASAC
Acquisition (as defined in the preamble to the
Fourth Amendment to this Agreement), provided that
the ASAC Acquisition shall be a Permitted
Acquisition hereunder only if (X) the conditions
set forth in subsections (i)(a), (b), (c) and (e)
above shall have been satisfied and (Y) the
Leverage Ratio, after giving effect to the ASAC
Acquisition, shall not exceed 4.75x."
(b) The definition of the term "Restricted
Payments" is amended to read in its entirety as follows:
"'Restricted Payments' means (a) the declaration
or payment of any dividends (other than a non-cash
dividend effected by forgiveness of indebtedness)
or distributions on any shares of any class of
capital stock of the Borrower, application of any
property or assets of the Borrower to the purchase
or acquisition, redemption or other retirement of,
or setting apart of any sum for the payment of any
distributions on, or for the purchase, redemption
or other retirement of, any shares of any class of
capital stock of the Borrower or of any Subsidiary
of the Borrower (other than a Wholly Owned Subsid-
iary) and (b) any payment or other advance made,
directly or indirectly, by the Borrower to any
Affiliate (other than a Wholly Owned Subsidiary)
of the Borrower; provided that 'Restricted
Payments' shall not include any payments made by
the Borrower (i) pursuant to the Tax Sharing
Agreement, (ii) to the Guarantor of the lease
termination portion of the Restructuring Charge in
an amount not exceeding $1,400,000, (iii) to the
Guarantor in settlement of liabilities represent-
ing obligations of the Borrower owing to the
Guarantor for past-due management fees (not
exceeding $1,044,000) and advances for the payment
of the September 1, 1994 installment of interest
on the Subordinated Debt (not exceeding
$3,215,000), to the extent such liabilities are
accrued on the Borrower's balance sheet dated as
of September 30, 1994, (iv) in satisfaction of
Borrower's obligations under employee benefit
programs for employees of the Borrower and its
Subsidiaries, (v) to Chesapeake Insurance Company
pursuant to that certain Promissory Note, dated
June 1, 1994, of the Borrower (without giving
effect to any amendment or modification thereof)
in an amount not exceeding $1,250,000 or (vi) to
the Guarantor in settlement of liabilities in
respect of advances by the Guarantor to the
Company between September 1, 1995 and Septem-
ber 29, 1995, in an amount not exceeding
$2,500,000.
Section 3. Amendment of Section 4.06 of the
Agreement. Section 4.06 of the Agreement is hereby amended
to read in its entirety as follows:
"Section 4.06. Uses of Proceeds. It is under-
stood and agreed that funds provided by
(a) Revolving Credit Loans made and Letters of
Credit issued under the General Purposes Sublimit
may be used for (i) general corporate purposes of
the Borrower and (ii) payments, in an amount not
exceeding $2,500,000, to the Guarantor in settle-
ment of liabilities in respect of advances by the
Guarantor to the Borrower between September 1,
1995 and September 29, 1995, (b) revolving Credit
Loans made under the Acquisition Sublimit may be
used only for the purpose of making Permitted
Acquisitions, (c) Tranche A Term Loans and Tranche
B Term Loans may be used for the purpose of repay-
ing the Subordinated Debt in full, (d) Revolving
Credit Loans, Tranche A Term Loans and Tranche B
Term Loans may be used for the purpose of making
all or part of a Restricted Payment or Payments to
the Guarantor or its Affiliates and (e) Tranche C
Term Loans may be used only to prepay $20,000,000
of the Tranche A Term Loan."
Section 4. Amendment of Section 8.02(e) of the
Agreement. Section 8.02(e) is hereby amended to (a) delete
the word "and" following the semicolon in the last line of
subsection (i) of Section 8.02(e), (b) delete the period at
the end of the last line of subsection (ii) of Section
8.02(e) and substitute therefor the following: "; and", and
(c) add to Section 8.02(e) a new subsection (iii) to read in
its entirety as follows:
"(iii) at any time when (A) the Leverage
Ratio of the Borrower as shown on the schedule
most recently delivered to the Administrative
Agent and the Lenders pursuant to Section
8.01(a)(iii) shall be 3.50x or less and (B) no
Default or Event of Default shall have occurred
and be continuing, the Borrower may elect to
either (i) repurchase shares of Common Stock, par
value $1.00 per share, of the Borrower (the
"Shares"), for an aggregate price which may not
exceed $4,250,000 or (ii) declare and pay a
special dividend in respect of its Shares, the
aggregate amount of which, taken together with any
other dividends that may be declared in respect of
its Shares pursuant to this subsection
(iii)(B)(ii), may not exceed $4,250,000, provided,
however, that no such repurchase or dividend, as
the case may be, shall be permitted unless the
Borrower previously shall have delivered to the
Administrative Agent a schedule demonstrating to
the reasonable satisfaction of the Administrative
Agent that (X) the pro forma Leverage Ratio of the
Borrower in respect of the date of the schedule
most recently delivered as provided herein but
giving effect to such repurchase or dividend, as
the case may be, does not exceed 3.50x and (Y) the
pro forma Fixed Charge Coverage Ratio of the
Borrower in respect of the date of the schedule
most recently delivered as provided herein but
giving effect to such repurchase or dividend, as
the case may be (by including the aggregate amount
of payments in respect of such repurchase or
dividend, as the case may be, in the calculation
of the Borrower's Consolidated Scheduled Debt
Amortization as if such aggregate amount were a
payment of principal as contemplated by the
definition of Consolidated Scheduled Debt
Amortization), does not exceed the minimum Fixed
Charge Coverage Ratio permissible pursuant to
Section 8.03(c)."
Section 5. Amendment of Section 8.03(b) of the
Agreement. Section 8.03(b) of the Agreement is hereby
amended to read in its entirety as follows:
"Period Ratio
From the Closing Date
through December 30, 1995 ....... 4.75x
From December 31, 1995
through March 30, 1996 .......... 4.50x
From March 31, 1996
through June 29, 1996 ........... 4.40x
From June 30, 1996
through December 30, 1996 ....... 4.25x
From December 31, 1996
through December 30, 1997 ........ 4.20x
From December 31, 1997
through December 30, 1998 ........ 3.80x
From December 31, 1998
through December 30, 1999 ........ 3.50x
From December 31, 1999
through December 30, 2000 ........ 3.25x
From December 31, 2000
through December 30, 2001 ........ 3.00x
From December 31, 2001
through December 30, 2002 ........ 2.50x
From December 31, 2002 and
thereafter ....................... 2.00x".
Section 6. Representations and Warranties. The
Borrower represents and warrants to the Administrative Agent
and the Lenders that (a) the execution and delivery of this
Amendment by it has been duly authorized by all necessary
corporate action, (b) this Amendment constitutes the valid
and legally binding obligation of the Borrower enforceable
in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, fraudulent transfer and other
similar laws relating to or affecting creditors' rights
generally and to general equity principles, (c) the Borrower
Stock has been duly authorized and will be duly and validly
issued, fully paid and non-assessable, and the certificate
or certificates evidencing the Borrower Stock will be in
duly authorized form and (d) the execution, delivery and
performance of this Amendment does not violate or contravene
the terms of the Borrower's charter documents, by-laws or
any agreement or instrument binding on the Borrower or its
property.
Section 7. Covenant. The Borrower hereby cove-
nants to the Administrative Agent and the Lenders that all
of the issued and outstanding shares of the Borrower Stock
will be issued to Holdings in connection with the ASAC
Acquisition and no shares of the Borrower Stock will be
issued to any other Person.
Section 8. Section 3.07(b)(iii) Inapplicable.
Notwithstanding anything in the Agreement to the contrary,
the requirements of Section 3.07(b)(iii) of the Agreement
shall not apply in respect of the ASAC Acquisition.
Section 9. Governing Law. This Amendment shall
be governed by and construed in accordance with the internal
laws of the State of New York.
Section 10. Counterparts. This Amendment may be
signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
Section 11. Conditions Precedent. The
effectiveness of this Amendment shall be subject to the
conditions precedent that (i) the ASAC Pledge shall have
been executed and delivered by ASAC and (ii) this Amendment
shall have been executed and delivered by the Borrower, the
Required Lenders and the Administrative Agent.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed as of the date first
above written.
NATIONAL PROPANE CORPORATION
By /s/ Terry D. Weikel
Name:
Title: Sr. Vice President and
Chief Financial Officer
THE BANK OF NEW YORK, as
Administrative Agent and as a
Lender
By ROBERT W. TOWNS
Name:
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By MICHAEL KANE
Name:
Title: Managing Director
THE FIRST NATIONAL BANK OF CHICAGO
By NATHAN L. BLOCH
Name:
Title: Vice President
FIRST AMERICAN NATIONAL BANK
By KELLI HALL-ERNST
Name:
Title: Corporate Bank Officer
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By ROBERT L. FELLOWS
Name:
Title: Vice President
USL CAPITAL CORPORATION
By CRAIG F. BRUZZONE
Name:
Title: Vice President
PILGRIM PRIME RATE TRUST
By KATHLEEN LENARCIC
Name:
Title: Assistant Portfolio
Manager
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By JEFFREY W. MAILLET
Name:
Title: Vice President and
Portfolio Manager
Triarc Companies, Inc., as Guarantor, hereby
consents to the foregoing Fourth Amendment,
TRIARC COMPANIES, INC.
By T.E. SHULTZ
Name:
Title: Vice President and
Assistant Treasurer
